hey there. live at the nasdaq market site on first show of the new year. guys are getting ready behind me while they're doing that, here's what's coming up >> as we look as what's going on in china, it's clear the economy began to slow. >> it was the words that spooked apple investors this week. but if you lost money, relax because mike khouw has a way to make it back for free. he will explain. plus. >> give me one good piece of intel and it ain't right here.

>> chill out, dude because intel is soaring and dan nathan says it goes higher he will tell you how to trade it and. >> who let the dogs out. >> the dogs are howling and the chart master says there is a name that could lead the pack this year. he will break it down. it's time to risk less and make more the action begins now. and we start off with the dogs of the dow in the doghouse after snapping a nine-year winning streak in 2018 the dod etf the tracking the highest yielding stocks in the dow sinking the past year but wasn't that bad. top dogs by verizon and pfizer squeezing out gains while exxon and ibm and chevron sank the chart master says a name could lead the pack he breaks it down hi, carter >> dogs of the dow has its sort of critics. but the premises is this that if something has a high yield presumptively the stock has been

a poor performer it's a value approach to investing. but what i thought i'd show you is actually the results of doing the dogs of the dow which are the ten stocks with the highest yield versus the dow going back to 2000. and there has been meaningful out performance. if you wlook at tlook at the te the one i think is the most interesting is verizon again its yield is 4.3%. if a few charts and look at verizon absolute going back to 2014 and you have verizon lagging but the key of course is -- is that as the market sold off which is what you expect a very defensive asset like this was doing well let's pull it back a little further. so here we have next time frame. this goes back to the lows of '09. and again you have potential that the market has prospectively more absolute downside risk and/or relative with verizon trying to narrow the gap. and then on a long-term basis going back even further, well

this looks like the same chart again. but the premise is the same. you want to play for a catch up let me show you some absolute charts and go from there here is the chart itself, has all the look of a bearish to bullish reversal but what appeals to me is the checkback to trend and then the bounce keep that in mind and look at this with relative performance this is the best part. even as verizon was selling off into the end of the year with the rest of the equity complex, its performance of course was straight up. and that's what this is all about. a few other charts and i'm done. look at this setup over the past five years you could draw the lines many ways but one way would be this very successful wedge. and what's critical here is if you do break out to a 52-week high and then you were to fall back to the level from which you broke out, you often get the pivot and go again one more, the long-term chart back to 1990 call it what you

want, one popular is the technical parlance is cup and handle but it's a nice setup great place to be verizon. >> what's the trade mike. >> we have seen obviously tremendous volatility in the markets and that's elevated options premiums considerably in most names, most indices and most etfs. in verizon's case it's a low relatively volatility stock. omgs options premiums are higher but still low. on top of that there is a sharp move in this thing peak to trough it gave back about $8 when i was looking at this to me i think we keep it simple. i was looking out to april the 55 calls traded about $3 when i looked at that. notice the strikes about $5 apart. the stock was actually trading $56. they were already slightly in the money when i was looking at this the idea here is that you are giving yourself a little bit of leverage on an upside bet in the name one of the other things

point out about buying calls in high dividend stocks, like verizon, that does depress the value of calls relative to puts. it's one of the reasons they are as cheap as they are that's because holders of calls don't get dividends. holders of stock do get dividends. but the stock is not going ex-dividend until the ninth of april. you have from now until the day prior to the x date to use this to make a bullish bet and it won't take much oh obviously you're only risking the extrinsic premium really and that's $2. >> what do you think. >> i like the trade, the fact that he is going in the money here so the stock is trading at 56 and change or so looking at the april 55 call here so he is not worried about shifts and implied volatility. the price of options because of that and i think you put it together the defensive posturing in the market, look at the technical setup, you think about a stock like verizon that massively outperformed at&t last year. and they didn't make all the big strategic moves. so this one seems poised to at least outperform and possibly with your technical setup break out. i like the way you play it.

>> you might have heads you win tails you one if the market goes higher verizon presumptive participates it's bounced but it has all the defensive elements of a utility essentially and the stock is on almost all major draw downs an outperformer >> the defense every characteristics i think of this are particularly important if the only thing did you was look at the market levels from one week to the next you might think nothing happened this week or maybe you happened to see how much we had a drawdown earlier in and thought somehow what we have today isn't all clear it does not to me. the more a volatile the lower rates you pay. even though with ha good positive move today i don't know that all much the turmoil is over i think defensive posturing makes a lot of sense from one dow to another intel soaring 6% for the best day in a year after bank of america upgraded the stock to buy raised it $60. nearly 30% higher than where it

it was trading volatility just down 2% over the past three months while the overall market down 10%. dan says it could be part of bigger breakout. >> interesting call out of meryl link today upgrading intel to a buy and downgraded semis like adi and texas instruments. i find those sorts of maneuvering by analysts interesting. and again, you know none of us on this desk buy or sell stocks based on what a sellside analyst is doing when you think about the trade i take a couple shots of intel on the longside on the last year and a half or so to me it's been stuck. a few macroissues. a few company-specific issues, losing the ceo, having a delay on an important chip, market share losses it sounds like we might get resolution to those things the stock is cheap trading about 10 times good balance sheet here. but if some things come together this year -- and i don't mean early this year based on what we heard from apple i wouldn't be

too optimistic about too many semi conductor chips but the main story of this is that they're not ex-posed to consumer smartphone market as some others and the focus of the upgrade i that they are exposed to data center exposed to cloud and ai that sort of thing i think it's hard to go out an buy stocks or calls on upgrades especially in a market moving around like this with the headwinds we see but if you have optimism about the call and things slowdown a bit on the downward volatility you ma i want to look out six months and look to position yourself for that move maybe towards the high 50s about six or seven months ago. today the stock traded about 47.50 look out to july expiration the july 50/60 call spread could be bought for $2.40. buying one of the july 50 calls for $3 selling one of the july 60 calls at 60 cents. cost you 2.40.

i make up to 7.60. i'm risking about $2.50. i believe i have one chart a five-year chart. i think there is good technical support in the mid-40s but i don't want to be long this stock below that look at where the breakout level is from 2017. there is a gap down to $40 i'm basically making a bet and willing to risk a few 4% of the stock price for the move back to the prior highs but capping my risk at what i think is the point where there is support >> right, i mean that breakout level has authority. and sometimes they are like magnets you get drawn back to that level on the day to day basis or week over week month over month the key for this semi versus the stocks and see the stocks as is the case with the markets makes the low in october and new low in december and intel never made the new low that's a very defensive and inherently positive day to day data point. >> i also think this is an interesting structure. you know, we were just talking

about how the price of options in verizon had not elevated that much off the lows. that's not true in verizon which is probably one of the reasons you look at a call spread here you know, looking at over the last 12 to 18 months complied volatility the price of options on intel is about double what the low was. so significantly more expensive. 50% more expensive than the verizon options and double the low on intel options looking at the spreads you get a good distance here. one of the things i would say the 60 cents you collect, looking at about one fifth of the premium you spent for the option you are buying. that's probably the cheapest option i would typically sell in a call spread. you know one thing to remember for everybody looking at this, you know, if that cheap option gets you know significantly cheaper, it's really not going to be such a huge deal but you can look to cover that if it gets down to 20 cents or so. >> the last point here if you are trying to be constructive amid uncertainty, the idea of defining your risk and put something bets out there a few

months makes some sense. >> for everything "options action" check out the website. while there sign up for the news letter carter here loves it so much he reads it to his children every night before bed and they fall asleep promptly. here is what's coming up. >> apple. >> apple. >> apple. >> apple. >> apple sinking deeper into a bear market this week. but if you lost money on the stock mike khouw has a way to make some of it back plus, calling all "options action" fans, reach into your the pocket, 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 in't easy. 12 hours? 20 dogs? where's your belly rubs? after a day of chasing dogs you shouldn't have to chase down payments. (vo) send invoices and accept payments to get paid twice as fast. (danny) it's time to get yours! (vo) quickbooks. backing you.

i am a techie dad.n. i believe the best technology should feel effortless. like magic. at comcast, it's my job to develop, apps and tools that simplify your experience. my name is mike, i'm in product development at comcast. we're working to make things simple, easy and awesome. (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 to "options action." apple taking investor on a ride after ceo tim cook shocked wall street about with a dire warning about earnings later this month. the stock was up more than 4% today. it's down nearly 40% from the high if you lost money on the trade don't fret mike khouw has a way to the money back with a call to action. >> mike. >> we are talking about a 1 x 2 call spread which you can use against a long position which many people own apple this is called a stock recovery strategy a way for you to basically boost the profits you make if the stock recovers somewhat. it doesn't need to get back to

prior levels to recover more than you lost on the way down. how does it work first of all, it's against a long stock position. one of the things it will do is between a range of strikes it's going to double your profits and finally -- this is an important one -- when people see stocks like apple pullback they might naturally ask themselves should i commit additional capital? that's a dangerous thing to do not one i'm encouraging. we can take a look and we can see obviously how poorly apple has done since reaching the peak over here. more recently we look at the last month and this is mostly the result of that essentially preannouncement news, which was quite a disappointment i think an $8 billion short fall we can see the sharp decline this is essentially what we are going to try to recover. let's take a quick peek at where we are right now also. just under 150 you can see that about a month ago up around 180. i think it's important to think about where the stock might recover to let's look at the structure

here what you're going to be doing is buying one march 150 call, spending $7.50 against that. and then in turn selling two of the 160 calls for about 3.75 each net-net because you collect 3.75 twice you are not spending additional capital on the trade. but the idea here is that obviously if the stock goes up to 160 from approximately 147.5, you make $12.50. what's the downside because you are short the calls you have the stock called away from you but the thing to think about is that you're actually no worse off unless the stock goes above 170. if we think about the news that we have just gotten, i think in near-term move above 170 at this point is pretty unlikely the other reason we look at strategies like that is when you see the sharp declines markets as volatile as this, options premiums get elevated that's

where we look to spreads selling one or two options against the one you bought. >> what do you think of this, dan. >> i like the strategy and specifically in a name like apple. a lot of the holders or especially people watching are the never sell apple it's a special stock the idea of trying to get that money back near-term can be -- the only gripe i have about this is that i think mike's strikes on the duration of the spread two months now or a little more is a little tight. because we all know how this stuff works. right when you think it's never back above 170 two months out it could be -- i guess a great example would be facebook last year it imploded early in the year. and i would have told you i would have bet my left pinky it was never making a new high or at least not this year it did and cratered again i'd be looking at maybe march or a maybe a wider spread and give myself more room to the upside. >> there are a couple of things you could do the important -- the educational portion is understanding the structure. there are two things you could widen the strikes.

may have to spend a bit of premium. you could choose two higher strikes if you're going that far out and not lay out additional capital. or shorten the duration look to february 150 and 160 calls listed in february as well but i think a question that everybody holding the stocks right now might be asking themselves is well, look, if i had th opportunity to sell the stock right now at 170 would i do it betting there are a lot of people out there that would. >> carter, what do you think it seems apple behaved sort of well after that tremendous drop. >> right had the big heavy volume database the news and then the one or two-day recovery i would try to figure out -- a overshold is it cheaper things are more oversold as they get cheaper. if you look at apple in relation to where it is versus it's 150-day moving average -- use the 200, whatever you like it's trading farther below and at any time except for two other

instances, one after the dotcom boom and bust, ie apple in 2001 and then after the financial crisis in 2008 so this is as oversold so to speak two other instances epic one a financial crisis, the other a dotcom, the biggest speculative event in the past 50 years. in a way if you believe oversold and you want to find something so bad it's good this is not a bad idea. >> so bad it's good at this point. wow, i guess that's endorsement mike on the trade you are putting on >> well, you know, i mean i think another question we might ask, we had severe market pull backs and other instances that carter was talking about this is a idiosyncratic story we got a bit of disappointing news from tim cook. that isn't necessarily what we had in the past instances. that's one of the reasons why even if i thought it was rebounding and what we are playing for, i'm not exiting additional capital or buying stock or calls outright. >> coming up gold posting the

third week ofgains as volatility rocks the market. got a question out there you're in luck because we are taking tweets later in the show. hit us up at "options action" we will do our best to answer 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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welcome back to "options action." last month mike and carter bet that gold was getting ready to shine. and shine it did here is how the trade worked out. >> on "options action" it's how we shine bright risk less to make more and that's exactly what khouw and carter did with the bullish bet on cold. charter thought the yellow metal was about to break out. >> right into the apex of this stand off. i suppose you could bet it's breaking the downside not the bet i make i would say it resolves up and out. >> hmm, mike khouw. >> melissa, mind if i take it over. >> take it away, mike. >> carters charts as good as gold with all the volatility not a place to buy out but 100 shares

of the gold put me back 12 grand i understand i put the february call do make 2.15 i need to rice above the strike price more than the cost of the trade. in case above 121.15 but spending 2.15 to bet on cold. >> i love gold. >> i don't love it that much so cut cost i sold the february 129 strike call for 30 cents and created my call spread here is how it works between the 2.15 i spent on the lower strike and the 30 cents i collected selling the higher strike call i cut the total cost of trade down to just $1.85. now i need the gld to rise above the 119 strike by the reduced cost of the trade or above 120.85 >> sing it b. >> it's gold it's gold. it's gold. it's gold, baby. >> but remember, there is a

trade-o trade-off. and since i sold that call my profits are capped at 129. how do we do on this melissa. >> good stuff mike because since the time of the trade gold rallied 3% and now "options action" gold bugs all over the world want to know what thing what will khouw and carter do now? >> that was a great call and i didn't know mike was a beyonce fan either you learn new things every day i have to defer to you because we talk about the options structure in a second. >> if one thinks that somehow this little blip up in gold is over, i would bet against that this is something that's lagged a long time. look at the s&p gold ratio there is implications for higher prices for gold. ultimately, yes up 10% off the lows of six months ago gold has a lot of beta when it wants. and this could do anything the imagination will allow you want to be long. >> we're in the money on the lower strike call and there is little extrinsic premium essentially there is not much decay. my view is if you want to maintain a bullish position and

you have this on stay put. >> you have to believe the markets are going to remain volatile and/or go lower >> yes it's so funny because sometimes gold is related to the dollar inverse. sometimes it's not sometimes it has to do with fear. it can take on a life of its own as anything can we know. and i suspect this is more close to the beginning than the end of what's just happened, the move. >> up next, the 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 mark this on your calendars. monday 9:30 a.m. squawk on the street do not miss the interview with the ceos of bristol meyer and celgene. their first interview since the deal was announced this week that's monday 9:30 a.m. eastern time time for the final call. carter >> bull, verizon defensive things. >> mike. >> verizon stock and options are cheap i like the april 55 calls. >> dan.

>> the intel near term could be rocky, but locking at long-term call spreads >> check us next friday at 5:30 mta p.m. eastern time. "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.