hi there, live from the nasdaq market site times square on this september, friday, the guys getting rrd behind me while they do that here is what's coming up on options action >> announcer: unindex is surging here is a hint and the chart master carter werth says it spells gains for one lagging industrial stock plus risk one, make three. mike coe has a way to triple money in netflix in one month. stranger things have happened.

and ♪ >> bond. james bond >> and bonds are tumbling. but it's not giving a boost to banks. dan nathan says that could spell trouble. he's got the trade it's time to risk less and make more the action begins right now. ♪ and that is where we start tonight. good evening, everybody. with the bond yield breakout qb the 10-year yield touching 3% the first time since the beginning of august the 3rd. rail has been a key level for rates. typically banks should be ij knowing the ride higher but the financials have been stuck in the mud. the secretarier is flat on the year let's get in the money right now, dan you are playing the banks. >> it's not even just on the year on the we can the s&p closed up 1% xlf, the tracking most major banks was down 1% on the week and there was a newsy week in the banks. decent nows out of goldman decent out of jp morgan, citi,

on the fundamental front opinion the stocks couldn't rally. wells fargo i don't know if you checked this process it broke the uptrend that it's been in from the april lows, the regulators are still all over that jamie dimon gets in a match with the president. >> goldman down ten straight days >> i look at it and say to myself i'm not certain what they're going to be aibl to see on q 3 in october that takes it up i think you define it with put spreads out to november which really catch the bulk of the components of the xlf. and i'll just get to the trade it's a pretty simple option prices are relatively cheap in the xlf today traiting the 2.20. buy it at 28, 26 put spread. paying 40 cents for that buying one of the november 28 points. for the 58 cents telling a november 26s at breaks even at

26.60ic up to 160 between 27.604 to one pay outsnp i like the risk reward you i'll speaking you speak to the the charts and if the fundamental news gets worse, these stocks are going down. >> i mean, look, what we know is the financials are such an important part of the market and it's not so much a rate thing now. whether it's 3.15 or 2.85. the cost of 10-year money at 10%. morgan stanley down 10 goldman sachs down 10. blackrock down 20. ben fringe lynn down 35. asset managers not working. >> are they that important to the market let's take the issue with that at this point. >> second or third biggest by weight in the s&p but in terms of life blood of the system the most important sector by frp and they're not acting well, a plain simple sort of. >> it's incredible the market has been able to do what it's been able to do without virtually any participation from the financials >> there are two components to the success for financials

one which we commonly talk about which is their interest margins which you expect with rising rates would improve. but the other of course is the fundamentals of the business which includes among other things kmerpgs loan growth, the housing market, those types of things the luxury housing mechanic at the least seems in many markets to have peaked a bit you know, those types of weeks o weak viss if sm we reached peak auto that's an area of heavy finance. speaking to that spp to dan's trade out to november right now the implied volatility in xlf is less than 15%. versus probably a 17% average. because it is essentially an index of financial institutions and implied volatility it's a index typically it's low this is lower than ormal making it a good value if you think about hedging exposure to the space or if you think about just a general hedge to the market and if you are looking obviously at making a bearish bet is zblevg the last word. >> when you look at components jp morgan and bank of america are the only two in the group in

the top ten groups they're uppen oh the year. you look at investments banks you mentioned goldman had the horrible strategic morgan stanley, if there is bad news you could get a flush out of those and then kind of get a move back to 10 a in jp morgan you'll have the xlf back if that's the case zplo transports hitting the roo all-time high. check out best performers in the group process united air fedex and for noek carter braksen werth what are you looking at. >> fedex one things we know take the dow jones transports versuses industrial average process the industrial average hasn't made the new high and the transports have. in fact that chart shows you there. what i'm going to do is zoom in. and what you can see is that we have made the new high whereas just keeping in your mind's eye the dow is below the january beat what i-thinking in the area leading now find the lagging

stock. to that end i want to talk about fedex. fedex having not made it to the high as distinct from the transportation average itself, i think this is an opportunity for a catch uptrade. so a couple ways to draw the lines, here is first of all how much it's lagged year to date, the spread, you can see the numbers. 9 of course up two and i think that's the opportunity. so the chart itself of fedex, no annotations or drawings by me. and then here are the lines as i see it and so what we know we have is a well defined reaction to the low. again, and then to the high, to the high, and we are sitting here right in the apex of this triangle, wedge whatever you want to call it. the judgment and see we are going to break out and that fedex will do what the index has already done get back to and exceed the prior high. >> good tough.

mikey, what's the trade. >> i mean federal express is an interesting case of course because like ups they have a secular tail wind. obviously we know that the one maybe dark cloud on the horizon might be that amazon is looking to potentially compete with them process. but frankly that's a long ways off i think. it's going to take a long time for amazonen to get into a place -- it's a capital intensive business for them to compete here we have in fedex's case we have earnings coming up next week just taking a look, you'd typically like to look out 60 to 90 days. if you just look a month out after earnings federal express typically moves 7.5% in the month following erpgs. looking out 60 days we are looking at a fairly considerable move right now with options premiums not being eed, despite the fact it's announcing i was looking out to november. you could buy the 260, 280 call spread, the 260 call spraed chading 7.70 when i was looking earlier. the 280s about $1.80

the idea is we get to capture some of the upside we seen the moves in comparable periods when you have earnings can be significant i mean, take a look at the last quarter. stock fell 9% in the month following earnings a couple quarters before that stock rose about 13.5%. here i'm looking at 10% upside 60 days. because the options seem reasonably priced. you can use options on the long side buying premium in situations like this where they are inexpensive and we expect a stock to move and i expect this to. >> mike is targeting the premium he is paying for the $20 wide getting back to the prior highs about a quarter of the width of the spread that makes sense. on the risk reward basis and giting time out to november makes sense. i wonder here a stock obviously cheap. it is. expected groegtd here but it seems that the lack of performance relative to its peers relative to the broad market is telling you this is one of the names that's kind of right in the mix about are we slow in globally are we slowing here for some

reason trading 13 times ep growth of 15% next year. i don't know why it's tradesing discount to me i'm apprehensive going to into the earnings print next week after a sharp move you could see it not perform. >> when you look at valuation, what is it that the market is seeing that we are not when it's trading at a pretty material discount and it's looking at those growth rates. companies targeting 10% margins, less than that now and about 10% growth you put it together, the thing does seem monumentally cheap but again that's why options make sense in this case. because if injuries reveal the reason it's trading at the discount we are not exposed to a material bit of downside here. but if it turns out the valuation is a compelling buy we are getting to participate on the upside. >> the hedge is this is the thing where in the event that the earnings are decent you get a catch-up trade if they are light the stock at the discount that it's trading probably holds in pretty well. >> okay.

got a question for us send a us tweet to options action and for everything options action check out the website, options action.cnbc.com. while there check out the news letter as well it's what i read every friday night. >> you do. >> okay what are you waiting for? here's what's coming up next. >> announcer: how would you like to triple your money in netflix in just one month. >> that's incredible. >> announcer: no it's just mike coe's options trade. and he will break it down. plus calling all options action fans reach into your pocket, grab your phone and twet us your question @options action if it's nice, we'll answer it on air. when options action returns. options action is sponsored by think or swim by td ameritrade jj, will you break it down for this gentleman? hey, ian. you know, at td ameritrade, we can walk you

through your options trades step by step until you're comfortable. i could be up for that. that's taking options trading from wall st. to main st. hey guys, wanna play some pool? eh, i'm not really a pool guy. what's the hesitation? it's just complicated. step-by-step options trading support from td ameritrade unmotivated? feeling like you can't keep up? maybe you're tired of the same old workout. then you need aaptiv. aaptiv offers incredibly motivating music-driven workouts led by the world's best trainers. plus our classes are audio only, so you don't have to stare at a screen while you're trying to work out. we have music from amazing artists like britney spears, calvin harris, meghan trainor and dj khaled. you'll find classes for everything. from running, to strength training, to meditation, to yoga. we even have programs like weight loss or 5k training. you can work out

at the gym, at home, or even outdoors. aaptiv - real trainers, real music, real workouts. try aaptiv free for 30 days. visit aaptiv.com to start your free trial. oh, and there's the closing bell. (sighs) i hate missing out missing out after hours. not anymore, td ameritrade lets you trade select securities 24 hours a day, five days a week. that's amazing. it's a pretty big deal. so i can trade all night long? ♪ ♪ all night long... is that lionel richie? let's reopen the market. mr. richie, would you ring the 24/5 bell? sure can, jim. ♪ trade 24/5, with td ameritrade.

♪ we're back on options action at&t launch agnew app and ramping up competition in the hotly contested streaming space. dominated right now by netflix julia boorstin in l.a. with more details on the app what it could mean for netflix hey, julia. >> scott, at&twarner is launching into the streaming wars where, for the comic book brand called d.c. universe costing $8 a month the same price as netflix basic service or $75 annually. you get access to thousands of hours of movies and tv seers featuring superman and batman. plus access to thousands of comic books a community for fans and exclusive merchandise. in addition to library content warner brothers is producing original series for the service. the first is called titans launching next month this is more of a neech subscription service for

superhero fans it's entering a crowding mechanic. at&t warner media, plus netflix, hue lieu, amaze on prime video among others next year disney is launching its own streaming service that will feature rival superhairs, marvel content along with disney branded shows appear mofrs film from lucas film, pixar. now kroer bob iger says that will cost less than netflix and less than d.c. universe. the d.c. ufrps pricing makes it a true test whether neech over top services can work. and how welcome they can market the offerings from the acquisition. at&t ceo randall stephenson talked about the value he sees in direct to consumer distribution saying the warner brothers catalog is not put to work and the many company is looking for a direct to consumer model later this year. when it comes to competition with netflix stephenson said his

hbo is tiffany to netflix's wal-mart. >> thanks so much. mike is not only betting the streaming giant survives the competition he sees netflix returning to highs at the plasma with a call to action, mike. >> we are talking about netflix obviously. this is the 400 pound gorilla in the room 80 oh pounds, whichever. we are looking at making a bullish bet. here is the thing. first of all the stock is in a bullish trend. and secondly we have an identifiable catalyst coming up in the form of earnings which ner announcing in october. we have something that could make the stock move sharply. and finally, looking at those moves what we noticed is that the current price of ongss is implying a move low are than that which we've experienced it's implying a move about 7% on earnings actually over the last 8 quarters averaging about 8%. right now options are looking like a decent value. what we target essentially with the prior highs. we are trying to avoid basically

a return to these level if that's what we look at looking at the trades specifically, i'm looking to capture that october catalyst, i was specifically looking at the 375, 415 call spread, these were 18.60 looking at those earlier today. and i could sell these 415 calls against it for $6.15 net-net, i spend just under $12.50 for this call spread. looking at why i'm selling thatup side call despite the fact that the options premiums are lower. the reason for that is to improve the odds of success. you notice that the chances that the stock gets to 387 which is the break even on this call spread steam are sometime between now and october expiration is 70%. reaching that higher level if i didn't sell that only 55% and the 415 calls i'm selling there is only about a 40% chance between now and october expiration the stock reaches the strike price by using the call spread we

mitigate the decay but opt myself seeing progress between now and october. >> you want to comment on this trade first. >> sure, i mean just in terms of the stock itself, sometimes -- quite a bit of the time, a stock is fair fries priced you think about the trajectory that netflix traveled, great assent peaked in june of and then plunged to august low of 312 down 26% maybe an opportunity there but it's rebounded up 20% back to the 365 it's exactly at 50% retracement from the peak in june, 425, a low of 312 at this point a lot of energy is expended already i think it's range bound stuck and it will be time that will maybe help higher. but on a week over week basis, even out a month or two i don't think it's going anywhere. >> fifen the expectation this has has had a history of moving sharply on earnings, over the last 8 quarters probably 8%.

just the day following and over the period immediately prior to and immediately following, a more substantial move than this, do you think that earnings won't be a catalyst at all given that move. >> that would make sense but there is also again -- it's about a setup. if we were closer to the low you would have the energy to follow through. i think you might have used up some of that fuel despite the statistics that say it should move a lot on its own. >> on the trade, you know, so the first call spread you did on fedex you were targeting basically a quarter of the width of the spread. when you look at a trade like this that has a high ability of being in the money over the life of the trade, you know this trade has a higher prblt probability of being in the money than the fedex one but you richk more to make less. in this situation you risk one to maybe make two, 2.5 sort of thing. to me with the high probabilities, you know, you are also ricking more. if you get the direction wrong on this one you're employing to have higher losses, 3, 4% of the stock price. >> that's true of course one of the things that the historical move in the stock tells us if you reached out and

buy the stock maybe for the reasons it expended a lot of the energy that you you goed, maybe because over the course of the last eight quarters it mass moved sharply on earnings that's the risk you take. you buy 100 shares of this stock you spend over $30,000 so one call is going to cost you $1245 bucks you have possess jur to 100 shares. and this zends on your view. but one important thing you use a call spread or calls onto express a bullish view you also express skepticism about the downside risk. you are trying to mitigate otherwise buy the stock. one of the other reasons we use options options to not face the same downside. >> you are right, the stock on earnings generally moves sharply one way or the other. >> yeah. >> i mean if you play the trend, it's cc going to do that again. >> but i want to. >> you got to get the direction right. >> that's right. >> after the 20% advance. >> on options. >> no julia setup was interesting. all of a sudden competition is getting crowded. when you think about netflix

with 160 billion market cap, equal to disney market cap one thing she didn't say about the competition is disney is pulling all content off netflix. once you see that by more of the competition, the trend may start to be lower lows and lower highs in this thing because we really haven't seen the competition come yet. >> that's why they are coming up with their own content every streaming content wants proproprietary subscriber growth is what it's all about. >> good you have stuff up next cloud stocks they've been floiing high this year good news for one trader who made a big bet on one name life at the nasdaq in times square on this friday more options action ever this break >> announcer: options action is >> announcer: options action is sponsored by think or swim by td

amerrade we offer free access to coaches and a full education curriculum- just to help you improve your skills. boom! mad skills. education to take your trading to the next level. only with td ameritrade.

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he doesn't get my room. he's only going to be here for like a week. like a month, tops. oh boy. wi-fi fast enough for the whole family is simple, easy, awesome. in many cultures, young men would stay with their families until their 40's. i'm not really a, i thought wall street guy.ns. what's the hesitation? eh, it just feels too complicated, you know? well sure, at first, but jj can help you with that. jj, will you break it down for this gentleman? hey, ian. you know, at td ameritrade, we can walk you through your options trades step by step until you're comfortable. i could be up for that. that's taking options trading from wall st. to main st. hey guys, wanna play some pool? eh, i'm not really a pool guy. what's the hesitation? it's just complicated. step-by-step options trading support from td ameritrade we're back on options action it's time to take a look back at some open trades last week mike and carter said the beaten

down energy space was gearing up for a rebound. >> i mean, you can literally see how precise these lows are and it's my bet that we are going to snap back a bit here. we are going to throw back to a level where you are likely to make it back towards this downtrend line. >> i was looking out to october, the 21, 23, 25 call spread this closed around 23.20 20 cents on the money you could spend 50 cents for that package. >> and they were correct the oih oil services etf jumping more than 3% since the time of the trade. so what are you doing now. >> well we only trade from settlement and this obviously makes the most money at or you know 25 bucks after that your gains are capped. we're at 24.20 as of today's close. that means you've only got 80 cents at best worse of further upside and with that rick. because we are in the money call

spread my inclination would be to take profits. >> 100%. very much looking for a po bounce, a trade short term thing in the down trend. we had had that walk airway. >> also last week can't dan said cloud stock box could be setting up for a move high sfleer last week box reported earnings that kind of disappointed the stock sold off pushed out as the 1 billion revenue annual revenue target about a year and a half or so. the stock sold up. i think it makes sense to look at it it right now the stock wanting at 24.65 i could sell the january 2019 strike 20 put way out of the money. stocks at 24.65 right now. i could sell it at 65 cents. and i could buy a january 2019 expiration 30 calls. for 95 cents >> okay, the stock roll rallies nearly 2% since the time of the trade tried what do you do no now. >> the centsment space is good that's why we wanted to look at the smaller names. i think this is clearly a takeout candidate if you look

how much adobe in market cap moved last week it's moved box's market cap this is a tuck in sort of acquisition for no shortage of larger software companies. and that's which we looked at january expiration that's why we have the wide spretsds and the put to the down side call to the upside. as it moves to the high 20s you want to cover that downside put and keep that january 30 call on. >> up next get to the tweets and of course, and of course the final call oh, and there's the closing bell. (sighs) i hate missing out missing out after hours. not anymore, td ameritrade lets you trade select securities 24 hours a day, five days a week. that's amazing. it's a pretty big deal. so i can trade all night long? ♪ ♪ all night long... is that lionel richie? let's reopen the market. mr. richie, would you ring the 24/5 bell? sure can, jim. ♪ trade 24/5, with td ameritrade.

♪

(indistthat was awful.tering) why are you so good at this? had a coach in high school. really helped me up my game. i had a coach. math. ooh. so, why don't traders have coaches? who says they don't? coach mcadoo! you know, at td ameritrade, we offer free access to coaches and a full education curriculum- just to help you improve your skills. boom! mad skills. education to take your trading to the next level. only with td ameritrade. welcome back it's time to take the tweets the first friend jay asks what do you think about selling short the september 170 strike call for red hot into earnings next week. >> dan give that you. >> mike and were talking about during the break we don't like it against long stock. we don't like it 8:30. 10 dealt of an option. high probability of risk. >> wb dubs up piers.

>> fedex. >> fedex fedex long. >> didn't mean to stump you there. >> call spreads. >> xlf. >> good stuff guys thanks for watching have a great weekend does it for us on options action back nex don't go anywhere. "mad money" with jim cramer is next my mission is simple -- to make you money i'm here to level the playing field for all investors. there's always a bull market somewhere. and i promise to help you find it "mad money" starts now hey, i'm cramer. welcome to "mad money. welcome to cramerica other people want to make friends. i'm just trying to make you some money. my job isn't just to entertain but to teach you call me at 1-800-743-cnbc. or tweet me @jimcramer here we go begin, as soon as we get optimism about the low level trade talks with china the president comes out and lowers the boom telling his mignons t