it is our ten-year anniversary here at "options action." we have a very big show for you. here is what is coming up. >> you did it! congratulations! world's best cup of coffee. >> investors have been hot for starbucks and the shares are about to perk up even higher. he'll break it down. casino stocks are on fire, but one name in a bunch is about to crap out. he'll give us the trade.

it's just the transports. dan says there is one name that can 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. ♪ and we start with the transports up nearly three percent today and adding to a super rally. the iyt up 60% and the stocks rise off of hopes of a trade deal. dan says one name in the group can go higher sblmpt dei think it makes sense to be constructive on names that you think got beaten up because of trade worries specifically. i want to talk about ups here. it's one of the biggest components in the iyt and the transport sector in general. this stock had a 33% decline from the january 2018 highs that it made. it is up in line with the market

off of its december lows here. interesting chart, but it caught my eye today. the stock has consolidated. it did catch a bid with the headlines yesterday and today. it is important to think about how the stock was trading after the g-20 announcement. q 4 is probably not going to be great. we saw fed ex's results in december. i think the guidance that they give on the report is likely to continue to be murky for q 1 because there is very little clarity. there is a trade opportunity here in my opinion. we know we have the march 1 deadline. it's a self-imposed deadline about further tariffs on chinese goods. i suspect one way or another there will be an announcement that pushes out further or something that works on the trade balance.

here is the trade idea that i have. the stock was trading at 101.5 today. the idea would be to buy a call calendar. it would be using the proceeds to buy a longer call in march that will capture what i suspect to be an 11th hour of kick the can down the road. here is the trade structure in particular. the stock was trading at 101 today. you can buy the february march 105 calendar at $1 buying one of the march calls for $2. this is what you want to do. you want the stock to move really close to 105. you want to have the february 105 call expire worthless and then own the march call. to my eye this thing has room to run with good news. i'm trying to thread the needle here. i'm not buying the stock but

creating an options trade. >> mike in san francisco, how do you like this trade? >> i like this trade a lot for a couple of reasons. going into earnings obviously you will see elevated options. dan is trying to take advantage of that by selling that near dated call. the longer dated options are up higher than they had been because the stock has seen a lot more volatility. just looking at the stock itself, is it something i want to own i think the answer is yes. this stock has seen 30% increase in revenues and 50% increase in earnings per share and yet it is trading at a three to four turn discount tathe broader market. so if you are thinking about stocks that you probably want to own this definitely would fall into that category because people think there might be head winds coming from amazon. even if there is a threat there it is probably not something that happens very, very soon.

>> this is really identical to the fed ex from last night. the two stocks are highly correlate skpd have under performed. specifically relative to other industrials. we know ups this week made a ten-year relative low to the s&p. if you are looking for something that has catch up potential, this is as good an opportunity as you can find. >> you didn't need to be watching the show for the full ten years to figure it out. >> we hope you did. >> the idea is to take the inputs and use the higher premiums in front of earnings and create trade structure. i think the likelihood that we have the stock between here and 105 and not much higher is really good. i want to sell the premium. this is an options trade. i look at the catalysts and i think there is a good opportunity. we have a news alert.

c larry kudlow speaking to reporters about the government shutdown. >> i want to bring you up to speed on commentso far. in response to a question about the economic impact, larry kudlow saying you will get a temporary glitch in the numbers. kudlow insists that the economy is doing very well. he says he will be beat 3% gdp. kudlow painting a rosy picture of the economy despite the fact of the government shutdown. he says the president hates the stories of hardship. he says he wants to get a deal and supports the president and believes he is doing the right thing in terms of pushing for the border wall. he says calmer heads will

prevail. he was asked an interesting question about the debt ceiling which is upcoming later in the year. kudlow suggested maybe we want to get rid of the debt ceiling all the way together. >> no questions on trade >> we asked him about the china tariffs issue. he said the chinese want to negotiate because the economy is weak. i asked about the support for the infrastructure plan. kudlow declining to confirm those reports. >> eamon javers with the latest from the white house. while the year end melt down took down the markets one name managed to stay up, starbucks trading five percent off the all time high and the shares could perk up higher.

>> perk up which has to do with percolating and all sorts of good things like that. look, imagine being down three or four percent in the month of december. starbucks managed to do that, one of the worst decembers on record, relative strength very impressive. starbucks chart, no judgment by me. let's put some in. here we go. so one way to do it is this meaning that gap up right here that you see, 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. not only did it come back to those tops that i drew, it also came right to support. and it has bounced here

repeatedly. another way to draw the lines would be as follows. put in the wedge, a lot of tension and reference points. my bet is this is going to be resolved. this is about 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 once. we got a little bit higher again. we toyed with it again and a lot of tension here. the presumption is that on its next earnings it gaps again as it did last quarter and the stock clears the hurdles. >> what is the trade it looks like you have a pretty simple one here. >> there are too many starbucks

stores. nobody goes there anymore except me apparently. with the higher implied volatilities that we see, this is not one of the stocks that we see elevated options premium. i'm looking out to april. the 65 calls were trading close to the money calls. think about that for a second. you are risking a relatively small percentage of the current stock price to buy a call. you have quite a lot of time for this to play out. from my point of view, could this stock move three bucks one way or the other that is only about five percent of the current stock price i think it could easily. i think we will keep it simple. >> sometimes simple just works. this thing has been consolidating here. it showed really good relative strength. there is a catalyst that you are identifying here. if this starts to move higher

the simple trade gives you the opportunity to simply spread it and making a call spread. i like this trade idea. it is simple. >> we are talking about just the fundamental story here when it comes to the earnings story. if there is some sort of china trade deal this is potentially a stock that could get a little bit of a boost given their presence in china? >> it could get a boost on that. we think of this as a fairly mature business. if we are going to take a look at the fundamentals bear in mind this has doubled the eps. it is still a growing business even though maybe not as fast as it once did. when you look at its multiple it is justified by the kind of growth that we are seeing. obviously, if we had a catalyst like that could propel it even further. >> as patterns go, this is a very well defined setup, all

odds point to higher after earnings results. >> check out our website. while you're there sign up for our newsletter. you can curl up next to the fire. here is what is coming up next. ♪ >> investors are hitting the jackpot with casino stocks, but mike says one is about to bite the dust. he'll give us the trade. calling all options action fans. we're celebrating ten years on the air and more than 50,000 twitter followers. all hands on deck. reach into your 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. "options action" is sponsored by think or swim by td ameritrade. d, 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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20%. it is obviously moving around very sharply. we have earnings coming up. they are the first ones to report. i think one of the big unknowns for a lot of these names and it gets most revenues from mccow. when you are looking at options trades like this, we will look at a put spread. we often talk about the earnings move as a one-day move. i'm taking a look at how much this thing has moved in the month around earnings. we just had an options expiration. the next one is in february. that is approximately the trengt of the trade. the average move for las vegas sands is about ten percent or more going back about ten years. the next thing i would mention is this is a situation where we have seen the stock rebound. the market has done exceptionally well. unlike names we talked about, this one isn't seeing growing revenues. we have the unknown.

because of this volatility options premiums are quite expensiv expensive. i think i was looking out to february, the 57.5, 52.5 put spread. i can spend 1.30 on that. that is usually the number we are looking for. the question you have to ask yourself is is this a stock that would move ten percent. i think maybe it has come a bit too far too fast. >> what do you think of the trade? >> i like it. he has defined the range. 52.5 on the down side target makes sense. if you are thinking about the trade structure costing a tad more, i like that. i like targeting the event. i think this makes a lot of sense. it is important to remember when you are doing long trades you have to get a lot of things right to make money here. i think what is important is

that he is targeting the next month not just the event. i like the way this thing sets up. >> action this week was not impressive. they all under perform the market. that is not what you want as a setup. i think this is a dull group and i would rather take my shots elsewhere. >> we are talking about the china trade war. these groups in general are influenced by what is going on with every headline. >> this is not the trade war as the only headline. one thing that hit the casino stocks is they were putting a lot of pressure on v.i.p.s and have had to look for alternate sources of revenues and are trying to go to a mainstream gambler. it's a real question mark whether or not that will translate to a better bottom line as they try to transition after seeing pressure from china to prevent a lot of v.i.p.s

going over there. >> still ahead, netflix falling after its earnings report. after a nearly 30% rally is there a bigger drop ahead? we'll explain. 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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last week dan said netflix's run might be coming to an end. >> the stock is up 26% on the year. i think it is important to note that this company or this stock actually topped out way back in late june and had a 47% decline. you can buy the february put spread paying 15 bucks for that. >> well, the stock was lower on the back of earnings today but higher since the time of the trade. what do you do in. >> the stock closed at 338. the put spread cost $15. that was a quarter the ridth of the spread. with the event out of the way the options premiums come in and the stock is at the same spot. we lost one week and we lost value because of the earnings event and now it is worth a little more than ten dollars.

we need you to focus on this. when you have a long premium trade go below 50% of what you paid for it depending on how much time is left the probability increases. at some point between now and maybe $7 you have to make a decision to cut this trade and move on. next on the look back list, financials could fall on the heels of big bank earnings this week. >> when you are in a down trend and you walk along a line, once you break that line, rallying back to said line is an inherently different level. >> hedge your bets a little bit. i was looking at the march 24 put spread. you can buy those for about 67 cents. >> the xlf ending up around six percent. you have time for this to play

out. what do you do >> goldman sachs blew this trade up for us this week. i like what dan is saying, you need to figure out how to stop yourself out. this trade if we sold it, we paid 45 cents for it and it is worth about 12. i will not spread for 12 cents. i will stick with this. if this rally becomes a little undone this may pay off. >> this is what the word drubbing is all about or walloping. the bet was short. at this point, you just hang in and see if you can get relief. your tweets and the final call up next. 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. >> we said we would be comfortable buying the stock. >> reverse split. >> the stock is up a dollar on $106 stock. >> you sell first and ask questions later. >> here is the price of options. it's obviously at lows for 2015. >> time for the upside call. we look back on some of our winning trades. >> i think you can buy the 925 calls. >> oracle versus its sector. >> we're live at the nasdaq market site on the first show of the new year. >> let's squeeze in one tweet. it's from our live producer who says happy ten year anniversary. she asks what was your first options trade? mike, do you remember? >> i do. i bought puts on an insurance company while i was in college

many thanks to a tip from my room mate and that is what got me started in the business. >> what a start. >> i was probably like you guys at home. i was an equity trader. i used options a lot and i did poorly until i figured out the rules to the game. >> mine was a tractor company that bought calls. first you get the exam then you get the lesson. you learn after the mistakes you make. >> it is f is amazing to think that ten years ago we started a show about options trading. whee thought it would be in existence today and as popular as ever. >> max myers did. >> time for the final call here. let's go around the horn. >> april 65 calls starbucks. >> starbucks and have some gold. >> we have to give shout outs to max myers.

amanda diez. ups. i think this thing sets up as a thread the needle trade. >> that does it for us here on "options action" on our ten year anniversary. we'll see you next friday at 5:00 p.m. eastern. mad money 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 fabulous and when you