. hi there live at the nasdaq market site from a rainy times square in new york city where it is expiration friday and the guys are getting ready behind me and while they are doing that, here is what is coming up on the show. >> the bears took down tech this week as the nasdaq plunges into bear territory. if your worried it could get worse, mike kuo has a way to buy plunge protection. plus, as stocks tank, options traders are running for cover in gold and the chart master said it could break out even higher. he'll lay out the levels

and -- a handful of dow stocks are hanging tough among the volatility but dan nathan said don't trust the rally. he'll tell us which is the next stock to drop. it is time to make more. the action starts now. the selloff taking wall street by storm. all of the indices falling 7% or more for the worse week in a decade the nasdaq hit the hardest as tech continues to get mauled, plunging into a bear market now down more than 20% from the high and on track for the worst month, quarter and year since the financial crisis so how much worse could to get let's get straight to the chart master at the plaza. carter. >> it is never too late to sell. some people don't think that is true but if something is ascending for months and years, the truth is just because it is down a bunch doesn't mean it can't go down more

to your chart, a lot of ways to draw the lines let's draw them one way. and on top, fairly well defined. let's follow it another way. a break in trend we bounced off this line repeatedly or close to it and over and over and over and then of course broke this line. and interestingly, after breaking, we threw back one time to hit it and then it read right here so none of that is good. now, put it altogether and we're just at the neckline in a way. we're just started the process a measured move so to speak is considered this kind of thing. so you kind of -- you're that kind of thing. there is potential for plenty more now, let's go since the bull

market began in 2009 and put in drawdowns to put this in perspective. what we have the following peak to trough selloff, down 8, 16, 13, 26 and down 18 and this is down 20. for much higher levels, why can't this come down 25 or 30. it certainly can that is the selloff at 15 and 16 and the presumption is this could go lower and finally talk about the long-term trend line, this is since the '09 low and this is literally, as you see here, there is your financial crisis low and there is your 2015-16 selloff right there and we have just now breached -- take a look at the -- we're below the line not good sell something is wrong i think everybody knows it. >> pretty dire prognostication

mike is in san francisco and so how can traders buy some protection here? >> yeah, under normal circumstances, maybe when we've seen these kind of pullbacks and as carter just pointed out we've seen several pullbacks almost as great over the course of the bull market that we've seen but one of the things that didn't accompany that in the prior declines that we've seen in the last ten years was sort of all of the discussion that we had, are we in a bear market, we were hearing that conversation earlier this week. formally, the cue -- the q's ar in a bear market if you look at threshold. so we could hedge against further declines in the portfolio. we have elevated options premiums and talking about that for weeks now. you still want to take a look at things like put spreads on the broad indices like this. i was looking at the qqq

february 147 and 131 put spread and spend about $4.50 for that and selling the lower strike put for about $2.30 and this is a structure earlier today and this is important for those who are looking at monday, which could also vary -- well not monday but we'll have a short trading day but a very vol a tile day. so if you are looking at a situation like this, pay attention to keeping the first strike to at the money close to the level of the q's and look for a downside put in february these are the prices you are looking to spend essentially wherever those strikes might be. are we going to open at 147 on monday i have no idea. >> the most important chart that carter showed is the ten-year chart and we haven't had the volatility that we've seen in the last few months in that index and the charts line up and show a massive technical break

and i think you should continue to think about on the way up, you bought a good dip and a good buying opportunity and if we are in a bear market, selling rallies is the way to do if you are a trader, use it in a tactical way makes sense, too. so i like the width of the spread that he's got there i don't like walking in monday morning and doing it and i'm sure you would say i wouldn't be pressing a short after a week like this. and i'll make one other point, it is very unlikely we're going to crash next week with christmas and that sort of thing. and it is likely at some point we'll have to have a reflex bounce, a little bit of a bounce and it will give you an opportunity -- >> and i think everyone is wondering, because know one knows the real risk, but we've had an avalanche and things have cascaded and it is hard to final when that is finished but the real risk is there is plenty of people holding on to the end of the year for tax reasons and bank debt that people don't want to market and january could be a

virtual murder there is every possibility that happens. could you get this bounce at the end of the week? but the real risk is when people re-set the clock people who have not wanted to for reasons of year end purposes all take action in mass -- >> mike, what do you see here. >> i agree to see us press shorts coming into the week, i wouldn't be surprised to see a bear market rally in this. put the trade on at that point and slightly higher strikes and you'll be that much better positioned in the event we see further weakness in january. >> it is a brutal few months but dow stocks are hanging tough mcdonald and coke and others standing in this market. dan is look at pg&e. >> they like the nature of the business, being consumer staple

but the evaluation state that and proctor and gamble trades about 21 times low single-digit expected earning growth and 0% sales growth and a cash machine but the stock just made a new all-time high last friday. when i think about this, we describe the xlu a couple weeks ago had a bad week even proctor had a bad week. not as much as the market but it had a bad week i look at this on evaluation basis and i look at that chart and i say, when i play for a break-out here knowing what i know about the global economy and the strength of the dollar, knowing about investors focus on valuation, i would say no. and if anything i'm looking down and and looking at that october gap in the low 80s and saying to myself, this is a place where i could spend some premium and make a bearish bet on something where if things go the way carter thinks they will in january and i actually agree with that, i think january could be nasty correlations will go up and a stock like this will go to the

low 80s so today when the stock was trading about 91.80 i would look at january expiration which should catch the fiscal quarter earnings and one january 90 puts at $1.90 and selling at 40 cents and cost me $4.50 and i could make up to $6 between 82.5 and my match risk is that $1.5 less than 2% of the stock price i like the risk-reward here. if the stock goes down to 82.5 and down 10% then i could make four times my money and i like the risk-reward and i don't like the setup in procter here. >> mike, what do you say >> when we've recommended directional trades in premiums like this, the options are so low that an out right call or put makes sense. but actually in proctor's case,

those options premiums have shot up considerably, even though the stock hasn't seen the kind of weakness that we've seen in other areas of the market. to put things in perspective, these are options that put -- that he's buying are probably trading around 25% implied volatility and up from 16% or 17%. so we're talking about options that are 50% more expensive than they would normally be even though the stock isn't trading that far off of its all-time high so that is why we're looking -- looking at a put spread. this is a beta stock and it won't crater, but it is probably trading at a 10%, 15% premium to its historical valuation so you are basically look for a pullback to that historical valuation and that is his put that he's selling. >> how does that chart look. >> it is who you are in the market if you have choice, free will, cash is better than anything and if you are fully invested because that is your preference,

proctor and gamble will win in the event of a market selloff. and the gap that you cite in october, if you look at that day, if you look at any given day the spread between proctor and gamble and s&p and the spread was the biggest one-day spread over the s&p since the crash of october 19th, 1987. that is how big the gap was. do we fill that? there is every possibility. >> and i add one more point, look at that stock it is up 30% off the lows when the stock market was trading very well earlier in the year. so it is the sort of thing if the stock market stabilized it doesn't outperform but if it goes down it will catch up. >> so check out our website at "options action" and sipe -- and sign up for our news letter. here is what is coming up next

♪ ♪ >> options traders are flocking to gold. and mike kuo and carter worth say you should be buying too they'll break it down. plus -- calling all "options action" fans, reach into your pocket, not your phone, and tweet us your request at "options action." if it's nice we'll answer it on air. when "options action" returns. 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. ♪

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welcome back to "options action." the market meltdown sending options traders running for gold this week. dom chu is in the newsroom with more. >> gold is fwlit -- glittering glenn, melissa we have seen a pullback in gold prices, they have posted modest gains on the week as have goldmining stocks. both the underlying commodity and effort leveraged to them are trying to move above the 200 day earning average. options are the instrument of choice for some of the traffickers in this gold trade options trading has spiked when it comes to key exchange traded funds and tied to the spider gold trust, that ticker gld, more than doubled in terms of last week's trading volume same for the contracts tied to the gold miners etf, that ticker

gdx. even skbrjim cramer, getting in the trade, telling investors to seek safety on the metal on "mad money" last night. >> what happened there is a bull market somewhere right now it is in gold. well that is perfect, isn't it that is why i like the rand gold, a nice production growth or the price of gold -- >> and while the trading action has been bullish for gold and miners, about 8% off the highs and gold miners, etf around 17% below so with questions about economic growth and inflation next year if there is any at all, melissa, will gold still be a trade in the new year. back over to you. >> have a great weekend. carter said now marks a golden opportunity to buy the meadow >> some people think it is stupid, a barber's relic, it has its place in the investment

landscape. let's look at a couple of charts first of all, we know what is going on in various equity etf fixed income instruments this is the shy, short-term, one to three-year bonds. it has all of the hallmarks of a bearish to bullish reversal and the key here is that the 150-day moving average is starting to flatten. let's move on. the longer term, tlt is also -- that is shy -- the first one was tlt and also starting to bottom and turn now let's look at gold what we know is the same thing this is all very developmental rather than impetuous. it is when you move quickly to a down trend line at which point you can fail but when you, in fact, move deliberately and bottom like this, then it starts to ultimately turn into something that is actually quite positive. and that is my bet on gold here. now a few things here is gold going back to lows of the 1990s

here is the well defined tension. we're right into the apex of this standoff. i suppose you could bet it will break the downside, not the bet i would make i would say gold resolved this standoff up and out. and then in terms of whether gold is a real thing or a barber's relic or a joke, let's look at three time frames. this is the absolute high, october 11th, 2007, from the prior bull market peak and here is gold versus the s&p call it even money so no joke here. gold has paced the market. how about if we go to the 2000 high now look at this gold blows away the market but you could say, well what about dividends. watch this here is -- with dividends reinvented, gold is a serious thing. it is a winner in cycles when it needs to be and i think gold is stepping up to do something interesting here. >> so mike, what is the trade? >> so it is interesting, with gold because of course the other thing we have to think about is

simply supply and demand and the framework for stronger gold prices one of them is if you are long gold you are short the u.s. dollar and then a long-term sense i think it would be very easy case to make that maybe one should be short the u.s. dollar. it is a short-term trade where we are actually hearing the opposite and now because the fed is basically being backed up against the wall, you might argue that case has also been hurt the other thing is capex in the miners has been dropping and the quality of the metals out of the ground has been declining. >> that means you'll be supply constrained in gold. both of those things are strongly supported so what i was look at was the february 119, 129 call spread and spend $2.15 for the lower strike call and then the higher strike against it for 30 cents and net-net spending $1.85 for a $10 wide call spread with debit call spreads, we don't get to buy at the money

call spreads for this kind of risk-reward relationship but because gld is underpinned by a commodity, they see out of the money calls where equity see out of the money puts trade premiums and you get this dynamic with a better than four to one payout at the higher strike and also i would quickly point out we're not really spending a great deal of premium relative to the underlying price in gld right now. i like gold. this is a trade i'm going to be putting on i also like this trade structure because i think you're spending relatively little to make a bullish bet after the increases in the price we've seen recently. >> does dan like gold? >> i don't like gold. >> i knew you would say that. >> i don't have a good reason not to like it this is making a bearish bet on equities on a global market crisis and you think back to the time at its highs in the last ten years it was 11, 12, when europe and sovereign debt crisis was a thing and trading at 180 so if you are looking at this market and mike just said my

proctor options puts it expensive. these calls are really cheap and he's getting list -- less than 20% of the width of the spread to have the exposure and if you are bearish, this is a good call. >> it is not whether you are bearish. this is a trading show fast money can you make a bet on this -- >> your chart is the best. the tension after a five-year consolidation. >> so a great high in 2011, a collapse, which was 50% and now working in tighter and tighter something gives. and now you say, carter will give to the down side. i don't think so >> okay. still ahead, the selloff this week taking no prisoners as even the so-called safety sectors tank and the charts point to a bigger breakdown ahead plus got a question about the markets or stuck in traffic or bored, either way send us a tweet to at "options action" and we'll try to answer it later in the show we're live at the nasdaq market

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the open trades. earlier this month dan said the utility is looking at danger. >> if you look at xlu, into the past market corrections or market crashes, ultimately it follows suit not too long after either. when it was traded at about 55.5 you could look at market expiration by the march put spread paying $1 for that. >> the xlu just had the worst week in a year so dan, what do you do with this >> so this is a pretty consistent theme we're looking for cheap vol and to see what is going to happen when this thing goes down. so this stock is down -- or the etf is down close to $2. this trade is worth double of what you would have paid for it when it was 55.5 and i think you stick with it. you have until march and a wide range of profitability to the down side and i'm targeting a move back towards 50 but

remember when you have a double in a position like this, sometimes it makes sense in a volatile mark to take off half and let the profits run on the other half. >> again, you have to know who you are in the market. we heard it is the worst move in a week for xlu the worst move in ten years or more for the market. so everything goes down and if it is going down and if you have to be invested, some people do, you want to be invested as long but if you want to get out and have cash, be prudent. >> up next, your tweets and the 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.

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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. mike khouw. >> i'm not a gold bug but i like gold here. i think february call spreads are the way to play it merry christmas, everybody. >> carter. >> i think from time to time you could be a gold bug so long gld and short qqq. >> dan. >> i think the theme is find

some cheap vol and put it on january could be ugly but don't press things on a holiday week and happy holidays, everybody. >> and that does it for us here on "options action." see you back here next friday at 5:30 eastern time. merry christmas, everybody "mad money" starts next. 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 fabulous