the biggest decision of their lives. deal or no deal? it's -- there is no words to describe what "deal or no deal" is. ♪ hi. we're live at the nasdaq market site in times square the band is back here's what's coming up. >> it's been a wild few months for the market as wall street hopes for a year end rally, dan nathan says there's one group that could be left in the dust plus, athleisure stocks are soaring. later, investors are piling into health care stocks.

and the chart master says there's a key group in this space that could see a bigger breakout it's time to risk less and make more the action begins now. . and we start with the health care rally heating up in november 7% for its best month in more than three years it is the best performing sector in 2018, up about 15% and there is one group in the space that could see a bigger breakout. let's go straight to carter. >> principle defense of alternates are performing relatively we can, staples, health care, utilities, up big today. in many ways, the case for health care is a catch up trade, having lagged so much over the preceding three years. let's look at the charts i want to talk about biotech at the event. xlv, the etf for health care what you have on the top is the

actual one year chart, and you see that xlv like the market sold off in october. everything sold off in october we know it was an alpha generator. it's actually going straight up in the same time frame, mean relative to its peer group, the market, health care doing very very well, kicking in in a very bad october, the worst in ten years. pull in back a little further. this is the part that's interesting. while we are making new high and all time highs, what you see here is that of course this was just a massive period of under performance for health care and what we know, though, is that we have finally gotten above this down trend line best performer of the year, all in the context that was lagging the equity market since 2015 a few more charts. now, it's beta within health care health care is very defensive.

like managed care stocks, unh, it has big sleepy farmer names it's cyclicality, if you will, or at least risk many of them profitless. look at the relationship between ibb over the past year plus, and what we know is that either this is a trap or it's a catch up trade, and i'm going to make the bet that it's a catch up trade this divergence i think is an opportunity you can see very clearly the percentage change. let's move it back a little further. here's a five-year comparative chart. what we know is biotech overshoots, we know that it under shoots, and the bet is that having undershot again, that it can play catchup with the overall sector so a few charts on ibb and we're done no annotations or drawings by me here comes annotations and drawings

next chart look at this, over and over and over, it is literally held the 100 level. precisely, reliably, consistently week after week. draw the lines another way we found this well defined level, we ricochetted nicely off that and i think we're going to continue it's a beta trade within health care ibb on the long side here and now. >> i think one of the reasons it keeps bouncing off the hundred level. one of the rationales, companies trading at relatively cheap multiples and in an environment like that, i feel like that serves as a little bit of a backstop this is a basket of stocks the options aren't overly expensive, given how volatile this has been and other stocks have been recently i think we keep this trade simple i'm looking to january and looking at the 108th and $0.33 strike calls

that seems a little bit strange only because you get these strike adjustments those going to cost you $4 you're risking approximately 4% of the underlying price here to make a bullish bet, and look, one of the things that can happen here is that you have some time until january expiration obviously if it does run, we're going to have opportunities to roll this or potentially spread it there are some things you can do here i think that's a simple way that we can make a bullish bet here >> so it's interesting, the trade that mike's choosing is doing an outright call he's going to a period where we may have volatility. we may see a slow down between christmas, new year's, what i think mike is trying to do here, if you were to see the stock go further in the money with the strike option, you would like to maybe sell something out of the money, turn it into a vertical spread and kind of lower your break even level or your premium at risk. i like the idea of spending

about 2 1/2% of the underlying or what do we got, 3% or so, because if you think about it, if you're wrong on this one, it's going back to a hundred your up side, downside, risking four in the long premium you will be back at 102 if things go south in a couple weeks. >> sure. i think that's the importance, you know where you stand if it's going to be wrong. there's so much authority at that level, it would be very hard to punch through to the downside. >> and if that happened in the short-term, this call isn't going to be worthless in that instance it's going to be considerably less than the 4 bucks it cost. this is slightly in the money as of today's closing prices. the hundred being a $9 drop from the current closing price. you have the opportunity to risk a little bit less here let's move to the banks, seeing a wild month. when you dig into the group it's a case of the good, the bad, and the ugly bank of america and j.p. morgan

up 2%. morgan stanley and citi looking bad, and goldman sachs down 15%. dan says there's one name on this list that is about to go from bad to worse. what are you looking at there. >> i think the scary thing about the graphic is the ugly is down right ugly we're not even throwing ge in there yet. when you're looking at the acceleration of the downside of these household names, and you own them in your mutual funds and 401(k) obviously they caught a bid this week with the news out of the fed. we know that there's another fed meeting on december 19th, and to me, i think you have a situation where some of this initial enthusiasm could wear off over the next couple of weeks, if there's nothing big on the trade front. i think bank stocks close near

the end of the year. the under performance has been horrendous, not a goldman sacks or a deutsch bank but headlines out of names like those, you're going to see the bad move into the ugly category. city bank is the one i want to focus on they are focussed on valuation, but the thing acts down right horrible down about 20% from its 52-week highs. look at that chart right there 60 bucks, where it just bounced off seems like an important level. goes through that in early 2019. you're going to have a stock in the low 50s. you have a five-year chart what's important to me, look at how it's come back to the prior breakout level from 2017 this is a group that was supposed to benefit from deregulation, and they're not the doing it they're telling you something about how i think how the economy is going to be in 2019 so listen, it's a simple trade

look to december expiration. that's going to catch the next fed meeting. i think you focus on citi group, a move back to 60. when the stock was trading today at 6475 you could buy the december 64, spread for a dollar that breaks even at 63 bucks $1 is your max risk between 63 and 64 and you lose that dollar above 64 risking 1 1/2% of the underlying stock price to make a move that the stock is going to go back to a level it was trading at three weeks ago. >> normally when you look at financials, one of the metrics is the price to tangible book value. when they get to one or thereabouts, or it is under the way citigroup would pear to be, what we're seeing is a real warning sign the book value isn't all you think it is. i think financials have been traded this way. when we hear about concerns of

the end of this credit cycle, that's the thing you have to look at. this is not a dollar bill that you can pick up. the value of that thing is what's at risk, and that's what the price action is telling us right now. i do think this is definitely the structure to put on, and i can understand why you would do that. >> we know it's not as big as tech but it's the most important sector, the life blood of the system, and almost without exception, american express being one, tgroup doesn't act well it's asset managers, broker sle sellers, and we refer to that. this is not a place to be. it never has been. six weeks of alpha after the presidential election, and an underperformer for the past two years even as it has been embraced by the street, and citi bank is one of the weaker ones, it's the right one to go after. >> a lot of financial market

commentators, and analysts and investors, looking at ge, goldman sacs, and deutsch bank, and you know what, i go back and i think about 2007 there was a lot of things that were id o were, i'm not saying that's what's going to happen there's definite potential in 2019. >> check out our web site, sign up for our news letter dan says it's all the rage what are you waiting for here's kwha here's what's coming up. >> investors are loving the athleisure stocks this year. thoracic spine one name look -- there's one name looking a little worn out. he'll give us the trade. grab your phone and tweet us your question at options action. if it's nice, we'll answer it on air when options action returns.

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

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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. action, retail, another loss, third straight month in the red. >> there have been two chapters in the story of 2018 in a little over the first half of this year, strength of the consumer and rising consumer sentiment has really played out

in many parts of that retail landscape. you just have to look at the year-to-date and massive companies like amazon.com. through the latter part of the summer, it was a nice gradual rise and in the last three months a topping out that got embroiled in the market turmoil in october a notable lagging mark of the retail has been on the luxury side of things tiffany is a recent example after shares tanked on the heels of the earnings report this week those shares topped out late summer like michael kors did coach, kate spade and student wiseman tapped out as well the story has been mixed with athletic apparel where undera underarmour has been trending higher nike and lieu lu -- lula lemon.

und now, a key will be lulu's earning report on wednesday after the closing bellme prices implying a possible 11% move in the shares up and down on the heels of the report it may be one of those big tea leaves in determining the next leg for that athleisure trade. back to you guys. >> thanks, have a great weekend. don mentioned lululemon. let's kick it to our resident yoga expert, call to action. mike. >> i don't think they're going to see me in yoga studios too often. i don't think my physique is up for that i am interested in fading that whole play general here, a little bit we're looking at a one by two spread going into earnings as dom just discussed, options

are expensive. it's implying slightly over an 11% move that's greater than average. that suggests that options are more expensive even going into what they normally are the other thing is this is a name i might be able to get at a lower price although it might have to be a considerably lower price given the rally the stock had since the beginning of the year finally, i have a proprietary metric, called the holly indicator. i take a look at credit card statements and if i see a store on there that i basically assuming it's still in favor if i don't, for the first quarter in years, i didn't have any lululemon charges on our express bill, i get a little concerned. it's up substantially on the year down a little bit from its highs. let's think a little bit about how the stock moves on earnings earnings when it makes a move to the downside, that is fairly pronounced, 11 1/2% on average

the worst was during a credit crisis, a decline of 30%, and the second worst was 23% let's keep those levels in mind. i'm looking at a one week trade here, the december 7th weekly. 130, 115, by by two put spread spending $6.50 selling two of the 115 puts for $1.65 each i'm spending $3.20 a share here's the goal, if it declines down to 115, that's where i'm going to see the most profitable profits. so my profits will trail off ooze tas the stock declines and the downside, 130.20, representing a 20% decline from where the stock was currently trading at end of business today. this was a way that you can take advantage of the elevated options premiums, make a barrish bet that will profit on an

11 1/2% decline, we'll see that and not risk a great deal in terms of the premium. >> interestingly for the one by two, and mike just said, worst case you get here, that's not the point of the trade the point of the trade by selling two downside puts, what i like is that he's doing it as a one week trade the probability of that stock being down at that 103 level, worst case scenario where you have losses and all that is very slim, especially over the course of this one week but to me, what's really interesting, that 103 level would be fill in that gap from june. >> that is actually the most important part you have a triple, 50 to 165 and in that assent over past year, you have had three quarterly beats. you typically get two or three it's very hard to get a fourth

beat because obviously analysts move their numbers up. at some point, even if it's a good quarter, it's not good enough to beat the newly revised or continually revised price target the risk is a downside after a great ascent, after a great selloff, and then now it's kicked back of late, back to sort of a declining trend line there's much more downside risk. >> much more downside risk% wha what's the downside level that you would look for >> you can fill all three graap if you want to get excited tiffany being an instance this week, an easy 10, 15% drop >> what carter is saying is valuable intelligence too. if you're thinking i want to make this barrish bet, i'm unconfidentable dou uncomfortable down at 103. you could consider selling one of those that would eliminate the possibility of losing money if

the stock did decline that much. again, those types of declines in the stock have been very very rare 30%, 20% that's the most we have seen to the downside in earnings that's the worst we have seen so far. >> still ahead, caterpillar, one of the best performing dow stocks up a whopping 11% is it nothing more than a dead cat bounce we will explain. plus, got a question for the traders, yeah you do send a tweet at options action if it's nice, we'll read it later in the show. live at the nasdaq, much more options action right after this. what do you look for when you trade? i want free access to research. yep, td ameritrade's got that. free access to every platform. yeah, that too. i don't want any trade minimums. yeah, i totally agree, they don't have any of those. i want to know what i'm paying upfront. yes, absolutely. do you just say yes to everything? hm. well i say no to kale. mm. yeah, they say if you blanch it it's better, but that seems like a lot of work. no hidden fees. no platform fees. no trade minimums. and yes, it's all at one low price. td ameritrade.

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so lionel, what does 24/5 mean to you?rade well, it means i can trade after the market closes. it's true. so all... evening long. ooh, so close. yes, but also all...

night through its entirety. come on, all... the time from sunset to sunrise. right. but you can trade... from, from... from darkness to light. ♪ you're not gonna say it are you? welcome back to options action, time to look at open trades earlier this month, mike and carter said shares of caterpillar were headed for a break down. >> my hunch is after this ricochet cat fails, could they bounce a day or two, sure, but this is the point i would take the money and run. >> at the time i was looking at this, you could collect about $1.65 which is approximately 1/3 the distance between the strikes. >> the stock has rallied, sold off, to right around your break

even what are you doing >> i will say this, if you haven't taken this trade off yet, i think you stick with this i think there could be weakness. and that's effectively what you're in. >> the initial selloff is the primary thing. the recovery is secondary. >> also earlier this man, dan said cloud stock adobe was looking a little gray. >> look at it sitting on 235, down about 15%, it is in correction territory this is an expensive stock, about ten times its sales and 30 times it's expected earnings i see some kind of gap down to 200. you could buy the december 235 put spread, paying $8 for that by for 10 bucks, selling one of the 200 puts. >> the stock initially tanked around 13% in the days following the trade but has since rallied back what do you do >> it's not only rallied back,

it's $10 above and it went quickly down to 207. that put spread at 1 point was worth about 22, 23 bucks, originally paid $8 for it. when you have a move that quickly to basically your strike to the downside, you kind of have to take it. the trade was initially targeting earnings at this point it's worth about $3.50. it originally cost 8 you have to be very careful here just a little further and this thing is going to be worthless even before you get to the event. up next, final call. i don't know what's going on. i've done all sorts of research, read earnings reports, looked at chart patterns. i've even built my own historic trading model. and you're still not sure if you want to make the trade? exactly. sounds like a case of analysis paralysis. is there a cure? td ameritrade's trade desk. they can help gut check your strategies and answer all your toughest questions. sounds perfect. see, your stress level was here and i got you down to here, i've done my job. call for a strategy gut check with td ameritrade. ♪

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 time for the final call sfl. >> ibb, for the catch up trade. >> i think you should by calls in ibb in january. you don't have to wait until expiration you can roll or spread those trades when you put them up. >> you can do all those things,

mike, the bank stocks, everybody wants to defend them i don't see any reason to own them you keep selling rally, and citi bank is the one in the near term that makes sense. >> for more options action, catch us next saturday at 5:30 don't go anywhere, mad money with jim cramer starts right now. the following program is a paid commercial presentation for total gym fitness. [music] everybody work out. feel the energy. build a better body. the best you can be. another body easy as 123. oh. ahh. better body as easy as 123 with total gym. i feel f