hey there, we're live at the nasdaq market site it is our ten-year anniversary here at "options action. we have a big show here's what's coming up -- >> you did it! congratulations! world's best cup of coffee >> investors have been hot for starbucks. and carter worth says the shares are about to perk up even higher he'll break it down. plus - >> viva las vegas, baby. >> casino stocks are on fire but mike coe says one name in the bunch is about to crap out he'll give us the trade. and -- >> look, up in the sky, it's a bird - >> it's a plane --

>> nope, it's just the transports dan nathan says there's one name that could see an even bigger rally as trade tensions ease he's got the trade it's time to risk less and make more the action begins now. ♪ >> we start tonight with the transports up nearly 3% today and adding to a super rally off the december lows. the iyt transportation etf up 16% since the christmas eve market bottom. and as stocks rise off hopes of a china trade deal, dan here says one name in the group could go even hire let's get in -- even higher. let's get in the money >> yeah, it's constructive to be on names that got beaten up last year because of trade worries specifically i want to talk about u.p.s. here obviously it's one of the biggest components in the iyt and also in the transport sector in general it had a 33% peak decline from the january, 2018, highs it

made it's in line with the market off of its december lows here. interesting chart. i'll let carter speak to it. it caught my eye he was talking about fedex last night. the stock has consolidated it did catch a bid with the headlines yesterday. then again today i think it's important to go back and think about how this stock was trading on december 3rd after the g20 announcement when we supposedly had some sort of trade deal. the way i think about this is four is probably not going -- q4 is probably not going to be great. we saw fedex's results, it was not fantastic. the guidance they gave on the report on january 31st is likely to continue to be murky for q1 there is very little clarity but there's a trade opportunity here in my opinion we know that we have this march 1st deadline it's a self-imposed deadline about further tariffs on chinese goods. i suspect one way or another based on the news we've gotten the last couple of days, there will be an announcement that pushes out further something that works on the trade balance. that should be good for u.p.s.

here's the trade idea that i have -- when the stock was trading at 101.5 today, the idea would be to buy a call calendar. sell a shorter dated call that catches the earnings announcement using the proceeds to buy a longer dated call in march that will capture what i suspect will be an 11th hour, sort some sort of kick the can down the road. that should rely pressures on stocks like u.p.s. here's the trade structure in particular stock was trading at 101.5 today. you could buy the february, march 105 call calendar, pay $1 for that, selling one of the february 105 calls at $1 buying one of the march 105 calls for $2 that costs you $1. this is what you want to do -- in the february expiration, you want the stock to move close to 105. you want of to the february 105 call expire worthless. then you own the march 105 call. to my eye, this thing has some room to run with any good news in late february, early march above that i'm trying to thread the needle. i'm not buying the stock, i'm

creating the options trade that's taking advantage of the events >> mike in san francisco, how do you like the trade >> i like this trade a lot for a couple of reasons. you know, going into earnings, obviously you're going to see elevated options premium dan is trying to take advantage of that by selling that near-dated call. actually the longer dated options in u.p.s. are higher than they have been historically because the stock itself has seen a lot more volatility looking at the stock itself, is it something i would want to own? i think the answer is yes. you know, this is a stock that over the last five years saw a 30% increase in revenues 40% increase plus in ebitda and 50% in earnings per share. it's trading at a three to four turn discount market in the broader earnings if you are thinking about stocks to own, this would fall into the category i think one of the reasons is because people think that there might be headwinds coming from amazon actually i think those concerns are probably overstate and even if there is a threat from their own deliveries, it's probably not going to be something that

happens very, very soon. >> right i mean, there is really identical to the fedex from last night. meaning obviously the two stocks are highly correlated. they have underperformed, have not bounced with the market. and specifically relative to other industrials. what we know is that u.p.s. this week made a ten-year relative load to theipeis if you're looking -- the s&p if you're looking for something with catchup potential, this is as good an opportunities as you will find. >> you don't have to be watching for the full ten years to figure it out - >> we hope you did >> we hope you did the idea is to take the different inputs and create what's in front of us, use options, the higher premiums in front of earnings, and create trade structures i think the likelihood that we have a stock between here and 105 and not much higher in the next weeks is pretty good. i want to sell the short dated premium and set up to own the longer one i'm not trying to catch a falling knife, but i look at the catalysts and think there's a

good opportunity the next year and a half we have breaking news from larry cuddly damon? >> larry kudlow speaking to the left i want to bring you up to speed on his comments. kudlow saying in response to a question about the economic impact of the government shutdown, larry kudlow saying you are going to get a temporary glitch in the numbers in terms of the economic impact on the economy, though kudlow insists the economy is doing very well he also says we're going to beat 3% gdp in the fourth quarter when that number comes out kudlow painting a very rosy picture of the economy here despite the fact of the government shutdown. he says the president hates these stories of hardship of federal employees who are going without paychecks. he says he wants to get a deal but he says he supports the president and believes he's doing the right thing in terms of pushing for the border wall he says finally calmer heads will prevail ultimately. he was asked an interesting

question i thought about the debt ceiling, whether the government shutdown portends bad things for negotiation over the debt ceiling kudlow suggested maybe we want to get rid of the debt ceiling altogether frustrating, he's been through that a number of times we could see problems in that discussion, as well. >> no questions on trade to kudlow >> reporter: no. on the chinese tariffs issue, he said the chinese want to negotiate because their economy is weak. he says the president's in the driver's seat on that. and i asked him about reports that the president supports a $1 trillion infrastructure plan, that they're working on that behind the scenes at the white house. kudlow, though, declining to confirm the reports. >> all right thank you for the latest from the white house. moving on. the year-end meltdown took down the markets. one name managed to stay above the fray -- starbucks. up 25% the last six months, and trading off 5% off the all-time high shares could perk up even higher when the company reports earnings next week we'll head over to break it

down >> perk up, has to do with elating and all sorts -- percolating and all sorts of good things. imagine being done 3% to 4% in december, that's an exclusive club starbucks managed to do that on one of the worst decembers on record relative strength, very impressive starbucks' chart no judgments, annotations by me. let's put some in here one way to do it is this, meaning that gap up here that you see, right, that was an earnings beat. what the stock has done is pivoted right back, literally to the point of the beat and has started to come to life. that's one way to draw the lines. let's look at another way. look where it also -- not only did it come back, remember, to those tops that i drew it also came right to support.

it has bounced here repeatedly repeatedly, repeatedly another way to draw the lines -- as follows put in the wedge a lot of tension a lot of reference points. my bet is again that this is going to be resolved up and out. this is about, again, a one-year chart. let's look at the long-term chart and put this in perspective. this goes back all the way to 2006 that also is a lot of tension. we toyed with breaking out wants. we got a little bit higher again. we toyed with it again a lot of tension here. the presumption is that on this next earnings, it gaps again as it did last quarter, and the stock clears all of these hurdles. i'm a buyer. >> all right carter's a buyer mike, what's the trade you've got a pritsetty simple o here >> paraphrasing yogi berra, there's too much starbucks

stores nobody goes anymore except me apparently it's interesting, with the higher implied volatilities that we see and the higher volatility in a lot of places, this is not one of those stocks that we see the elevated options premium we can keep it simple. in april, the 65 calls were trading around $2.50, close to the at-the-money calls think about that for a second, right. you're going to be ricking a relatively small percentage of the current stock price to buy a call that struck almost exactly where the stock is now and you have quite a lot of time, about three months, for this to play out you know, from my point of view, could this stock move $3 one way or the other the course of the next few months, 5% of the current stock price? i think it could easily. we can keep it simple and look for opportunities to spread it if we get a rally. >> sometimes simple just works this has been consolidating here it hasn't participated in the last week and a half i don't find that troubling. it's shown good relative strength there's a catalyst that you're identifying here if this starts to move higher toward the prior highs, the

simple trade gives you the opportunity to maybe spread it by selling a higher strike call in april expiration and making a call spread. so i like this trade idea. it is simple it's less than 4% of the stock price. you have months for it to work out. >> we're talking about just the fundamental story when it comes to the earnings story, mike, right? if there is a china trade deal, this is potentially a stock that could also get a little bit of a boost on the back of that given the presence in china. >> it could get a little boost we think of this as a fairly mature business. if we look at the fundamentals, bear in mind this is a company that has more than doubled its eps over the course of the last five years it is still a growing business although maybe not as fast as it once did when you look at the multiple, probably 24, 25 times forward, it's justified by the kind of growth that we're seeing obviously if we had a catalyst like that, that could propel it even further >> carter? >> look, as patterns go, in is a well-defined setup break out, the pullback, the

wedge, all odds point to higher after its results. >> all right for everything "options action," check out optionsactioncnbc.com. sign up for our newsletter curl up by the fire, read it while you're snowed in this weekend. here's what's up next -- ♪ viva las vegas investors are hitting the jackpot with casino stocks mike coe says one is about to bite the dust. he'll give us the trade. plus, calling all "options action" fans we're celebrating ten years on the air. and more than 50,000 twitter followers. so all hands on deck, and reach into your pocket grab your phone, and tweet us your question at optionsaction if it's nice, we'll read it on air. 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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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 "fast money. casino stocks winning the jackpot. all up double digits over the last month with las vegas sands earnings next week, should investors keep betting on the stocks? let's get the "call to action" with mike. yeah, this is an interesting situation. there may be no sector that better sets up for using options than some of these names i was looking at las vegas sands. this is a stock that over the course of about three years plummeted a little over 20%. over the ensuing three weeks rallied back more than 20% it's obviously moving around

very, very sharply we have earnings coming up they're essentially the first one to report. i think one of the big unknowns for a lot of these names, and las vegas sands despite the name las vegas actually gets most of its revenues from mccallen that's the unknown story here. now, when you're looking at options trades in something like this, we're going to look at a put spread we often talk about the earnings move and we often talk about it as a one-day move actually, i'm looking at how much this thing has moved in the month around earnings. and why is that? because we just had an options expiration the next will be in february that's going to be approximately the length of the trade. and the average move for las vegas sands around earnings in that month is about 10% or more going back about ten years you know, the next thing i would mention here is that this is a situation where we obviously have seen the stock rebound very sharply off of its lows. of course, the market has done exceptionally well but unlike some of the names we talked about earlier this show, this isn't one that's seeing growing revenues and again, we have this unknown in mccall.

finally because of the volatility, options premiums are quite expensive. so i think the way to play this is i was looking out to february, the 57.5, 52.5 put spread, i could spend $1.30 on that's that's -- on that that's a little over the quarter spreads. the number we're looking for the question to ask yourself -- is this a stock that could over the course of the next month move 10% around earnings, that's typically what it does do. and i think maybe it's come a little too far too fast. >> all right so dan, what do you think of the trade? >> i like it so he's defined the range in which it kind of came back to. so 52.5 on the downside target makes sense. then if you're thinking about the trade structure costing just a tad more than a quarter of the width of the spread, i like that, i like targeting the event. so to me i think this makes a lot of sense i think it's important to remember, though, when you're doing long premium trades into events, you got the to get a lot of things right to make money here i think what's important that mike also said is that he's targeting the next month

not just the event i like the way this sets up. >> here's the thing -- action this week was not impressive lvs, wynn, mgm, all underperformed the market. that's not what you want as a setup going into earnings. i think this is a dull group, and i'd rather take my shots elsewhere. on the long side >> yeah. obviously we're talking about the china trade war. those groups in general, mike, really unduly -- not duly, they are influenced by what is going on with every headline >> yeah. i mean, and actually this isn't -- not the trade war, not the only headline. one of the things that really hit these casino stocks in mcco is they were putting pressure on vips they've had to look for alternate signs of revenues. they're trying to go to a mainstream gambler that has higher margins but lower revenues it's a real question mark whether or not that's actually going to translate to a better bottom line for them as they try to transition after seeing basically pressure from china to prevent a lot of the vips going

over there and some of the admittedly sketchy things going on ahead, netflix falling after its earnings report last night and after a nearly 30% rally in the first few weeks of the year. is there a bigger drop ahead 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." time to look back at a couple of our open trades. last week dan said net netflix's run might be coming to an end. >> up since new year's eve, up on the year. the stock actually topped out way back in late june and had a 45% peak to drop decline there you could buy the february 330, 270 putter put spread -- put spread paying $15 for that >> it was lower on the back of earnings, but higher at the time of trade what do you do >> the stock closed last friday at 338 this week, 339 the put spread, $60 wide, was $15, a quarter of the width spread with the event out of the way, the option premiums come in, and the stock is at the same spot. we lost one week and value because of the earnings event. it now it's worth a little more than $10

we say this all the time and need you to focus on this -- when you have a long premium trade go below 50% of what you paid for it depending upon how much time is left, the probability dramatically increases that it becomes a total loser. at some point between now and maybe like $7, $7.50 you have to make the decision cut the trade and move on. next on the "look back list," mike and carter bet that financial earnings could fall after bank earnings this week. >> in a down did -- downtrend and you walk along the line, once you break that line, rallying back to said line is an inherently difficult level i'm a seller of xlf. >> hedge your bets a little bit. i was looking at the march 24-22 put spread you could buy them for 67 cents when i was looking at them earlier. sell at 22 against it, 22 cents. >> the xlf ending the week up around 6%. mike, you have time for this to

play out what do you do >> it's interesting, goldman sachs blew this trade up for us this week. i like what dan is saying, when the trades go against you, you need figure out how to stop yourself out this trade now, if we sold it, we paid 45 cents for it, it's worth about 12 i'm not going to sell a $2 put spread for 12 cents in this market, thank you very much. i'm going to stick with this h. we still have time to play out if this rally comes a little undone, this may yet pay off >> carter? >> that's right. obviously this is what the word drubbing is, but walloping, beating, battering, we got murdered, straight up. the bet was short. at this point, you just hang in and see if you can get relief. >> all right 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.

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welcome to the premiere of "options action," your front row seat to the smart money. i'm melissa lee. here's where the action is tonight. >> we were short that put we said we'd be comfortable buying the stock. >> reverse split, ten for one. >> the stock's up $1 on $106 stock. >> as soon as something hits, you sell first and ask questions later. >> just buy, put - >> buy, put -- >> here's the price of options' implied volatility at lows for 2015 >> time to look back on some of our winning trades >> looking at the trade, i think you can buy the 925 call >> oracle versus its sector. one-year chart >> we're live t nasdaq market site on the first show of the new year let's squeeze in one tweet from our line producer, bri. happy ten-year anniversary yes, our ten-year anniversary on "options action. she asks, what was your first options trade. mike, do you remember? >> i do. i bought puts on an insurance

company while in college many thanks to a tip from my roommate at the time. that got me started. >> what a start. dan? >> i was like you guys at home i was an equity trader and trying to get leverage i used options a lot and did it poorly until i figured out that the -- the rules to the game here >> you know, mine was a tractor company, massey ferguson bought calls. the market is one of the few places where first you get the exam, then you get the lesson. you learn after the mistakes you make >> but it is amazing to think that ten years ago we started the show about options trading and who thought that it would be in existence today, and as popular as ever? >> i did not think so. >> max meyers. >> that's right. time for the "final call." let's go around. mike, what do you say? >> april 65 call, starbucks. >> carter? >> starbucks and have some gold, too. gld. >> dan nathan? >> yeah. we've got to give shout-outs to max meyers and -- wait, amanda

diaz how did we forget? they've been amazing producers to me, u.p.s., i think this sets up as a kind of thread-the-needle trade the next two months that does it for us on "options action" on our ten-year anniversary. see you next friday at 5:30 p.m. eastern time with plenty more trades don't go anywhere. - [voiceover] the following is a paid presentation introducing the new dermawand pro, brought to you by ictv brands. introducing the new dermawand pro, 50% more powerful than regular dermawand for even more exciting results. also, dermawand pro is thinner, lighter and with soft grips, easier to hold and use. and anytime during this show you can call to upgrade to the new dermawand pro. now here's lisa. - hi i'm lisa varga, i'm 40 years old. i've never had cosmetic surgery and i'm not afraid of high definition cameras. bring them in closer guys.