hi there, live from the nasdaq market site i 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: one index 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 your money in netflix in just 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 the 10-year yield touching 3% the first time since the beginning of august, the third rail has been a key level for rates. typically banks should be knowing the ride higher but the financials have been stuck in the mud. let's get in the money right now, dan you are playing the banks. >> it's not even just on the year on the week, 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 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 was down for like ten straight days. >> i look at it and say to myself i'm not certain what they're not going to be able to say on q 3 earnings 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 pretty simple here. option prices are relatively cheap in the xlf today trading at 28, 20, buy it at 28, 26 put spread. paying 40 cents for that buying one of the november 28 points. for 58 cents, selling november 26s at breaks even at 26.60ic up to 160 between 27.604

that's a four to one payout. 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. basically, the cost of 10-year money is stuck at 3% and financials, big ones morgan stanley down 10 goldman sachs down 10. blackrock down 20. ben franklin investment down 35. asset managers not working. >> are they that important to the market i can almost take issue with that at this point >> sure. they're the second or third biggest by weight in the s&p but in terms of the life blood of the system, the most important sector by far. 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 commercial loan growth, the housing market, those types of things. the luxury housing market, a the least seems in many markets to have peaked a bit you know, those types of weeks, on auto, if we reached peak that's an area of heavy finance. speaking to that s&p to dan's point, the 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 normal. 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 making a lot of sense. >> i'll give you 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 up at the end of 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 road, all time high. check out best performers in the group process united air fed ex and norfolk, 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 peak what i'm thinking is, in the area that is 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 catchup trade. 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. it's very clear, right 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, t the high, and we are sitting here right in the apex of this triangle, wedge whatever you want to call it. the judgment is that we are going to break out and that f fedexwill do what the index has already done get back to and exceed the prior high. >> good tough.

mikeky, 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 amazon 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 earnings looking out 60 days we are looking at a fairly considerable move right now with options premiums actually not being elevated, despite the fact that it's going to be announcing, i was looking specifically out to november you could buy the 260, 280 call spread, the 260 call spread about 7.70 when i was looking at this earlier today the 280s about $1.80

the idea is we get to capture some of the upside we've seen the moves in come rabble 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 a little over 60 days. and just because the options seem very reasonably prizced, yu know, you can use options on the long side buying premium i 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 getting that time out to november, makes sense. i wonder here a stock obviously cheap. it is. expected groegtd here but it expected growth 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?

and for some reason trading 13 times ep growth of 15% next year. i don't know why it's trading at such a discount. to me i'm apprehensive going to into the earnings print next week after a sharp move you could see it not perform. >> that's really a good point. when you take a look at valuation, what is it that the market is seeing that we're 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 those two together, the thing does seem monumentally cheap. but again that's why options make sense in this case. because if earnings 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 kind of thing where in the event the earnings are decent, you get a little bit of a catchup 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 a tweet to options action, and

for everything options action, check out our website, optionsaction.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. see that's funny, i thought you traded options. i'm not really a wall street guy. 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 on your wild west vacation... guarantee you'll find gold but we can guarantee the best price on that thar rental cabin or any hotel, home, boat, yurt, whatever. ♪ just don't get carried away with the wild west thing. hey guys. get the best price on homes, hotels and so much more. booking.com, booking.yeah

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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 launching a new 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&t warner is launching into the streaming wars, this one for its comic book brand called d.c. univers 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 nich subscription service for superhero fans it's entering a crowding mechanic. at&t warner media, plus netflix, hulu, amazon prime video among others next year disney is launching its own streaming service that will feature rival super heroes, marvel content along with disney branded shows movies film from lucas films, pixar. now, bob iger says tha will cost less than netflix and less than d.c. universe. the d.c. pricing makes it a true test whether niche top services

can work and how they can marke 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 company is look in 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 800 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 do have a identifiable catalyst coming up in the form of earnings which they're going to be 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 options i 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 it's averaged about 8%. right now options are looking like a decent value. what we target essentially with these prior highs, and we're trying to avoid basicall 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 when i was 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 that upside call, despite the fact that the options premiums are slightly 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 sometim 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 some of that decay but also 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 priced you think about the trajectory that netflix traveled, great assent peaked in this june at 425, and then plunged to august low of 312, down 26% maybe an opportunity there but it's rebounded up 20% back to the 365 level being expended already, and i'm thinking that it's sort of 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. >> given that expectation, though, and this is a stock that that has had a history of moving fairly sharply on earnings, over the last eight quarters probably an 8% move 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 whole spread, right when you look at a trade like this that has a high probability of being in the money over the life of the trade, you know, this trade has a higher probability of being in the money than the fedex one

but you risk 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 have suggested, maybe because over the last eight quarters, the thing ha 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 exposur to 100 shares. and that's the important thing on your view but you us 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 option to make bullish bets is to not face the same down side >> 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 likely 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. >> julia's 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 competing stream marketing service, is that 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. it's coming up in 2019 >> that's why they are coming up with their own content every streaming company wants their own proprietary content. subscriber growth is what it's all about. they want to make sure they get that >> good you have stuff up next cloud stocks they've been flying 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

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clarity, and protection. together in a single lens. essilor ultimate lens package. purchase the essilor ultimate lens package and get a second pair of qualifying lenses free. essilor. better sight. better life. 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 of our 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 which is slightly in the money this closed around 23.20 so about 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 worth of further upside here and with that risk 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, dan sai cloud stock box could be setting up for a move higher >> last week box reported earnings that kind of disappointed us, the stock sold off a little bit, they pushed out the $1 billion revenue annual 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 one of the january 2019 expiration 30 calls for 95 cents >> okay. the stock rallying nearly 2% since the time of the trade tried what do you do no now. >> the 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 spreads and the put to the down side call to the upside. to me, as the thing moves to the high 20s, you want to cover that down side put and keep that january 30 call on >> up next we'll get to your tweets, and, of course, the final call oh, and there's the closing bell. (sighs) i hate missing out missing out after hours. options action is response soed by think or swim by td ameritrade . 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. ♪

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♪ (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 our first, jay asks, what do you think about selling short the september 170 strike call for head hat into earnings next week dani, we'll give you that. >> 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. >> we have 20 seconds for final

call you're up first. >> 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 next friday at 5:30 p.m don't go anywhere. because "mad money" with jim kr kramer is next - [announcer] the following program is a paid advertisement for the nuwave brio digital air fryer, brought to you by nuwave, the makers of the nuwave oven pro and the nuwave precision induction cooktop. we all love fried food. french fries, wings, onion rings, fried chicken. but who wants to deal with the mess and added calories? deep frying food has been linked to high cholesterol, heart burn, acid reflux, kidney problems, and even cancer and alzheimer's. now, you can have all the fried food you love without the added fats and oil. introducing the revolutionary nuwave brio digital air fryer.