happy actions fan, we have a big show coming up >> coming up tonight -- mysteriously, the consumer discretionary factor has been failing to keep up with the rally. carterror withth could solve the mystery. if it wasn't for you darn kids, then -- >> tilting sensation. >> no, not tilt, tlt as he bonds and that strange sensation, that's dan nathan's bullish call, he'll explain. plus >> let's go! >> if you are worried about the

tech giant's results next week, mike ko has a place to run it's time to risk less and make more "options action" starts now. >> before we dive into the show, we got breaking news on boeing and american airline, let's go to phil lebeau with more >> we have a few date when boeing airline will be returning the 737 max. it was january 15th. they pushed it back to march 15th southwest says it is pushing back to march 7ing so once again, we are seeing airlines delaying when they expect to drive this plane again. back to. >> you thank you, phil. the markets may be sitting at sector high, take a look at the yly, consumer discretionary etf showing double digit gain, still lagging behind the market. more than half of the stocks are sitting in correction territory. our chart master carterror

withth says there could be more work ahead break it down for us >> it's an instance of fought acting well. to be fair, amazon itself is not acting well and has a little auto correlation for the sector overall. let's try to figure it out 64 stocks in total 2.8 trillion they represent roughly 10% of the s&p. let's look at some charts so what i have here to start first is the list of those top five names. you can see them there and there is what i am referring to, amazon being such a big weight >> that being said, it is still a subindustry, a sub sector. it does not act well you will see that in a few instances here there's the sector, itself, yly. here's the relative performance to the s&p and what we know, of course, even as it is appreciating, it is under performing and basically at or

near 52-week lows in terms of opportunity cost, or alpha another way, compact same chart, what we have here, you can see very clearly is, we have consistently come to life off this line and now we have broken below that relative line i think what will happen is we break on absolute basis as well. one more chart, no drawings, no line, you can draw it this way, a lot of attention here. my hunch is, this is going to get resolved that way rather than up and note it hasn't made a high since july, the stockmarket makes more and more highs. poor performer >> all right, well, as carter mossy moseys on back what's your trade? >> ylv -- xly, the etf that traction it yly namely amazon,

we're coming into a hot season, home depot is a name i like, starbucks the a name i like. mcdonald's at idiosyncratic stuff this week. overall we can see the market does not particularly like them. so i was taking a look at put on a put spread in the imnevada normally i look at put spreads, one of the reasons it may be elevated they are not in the case of yly. the implied volatility is 15.5%. the longer term average is 16.2. it's actually below. yly because it represents anen decks, there isn't the opportunity really for big price jumps to the downside. that one of the reasons why using the put spread makes sense. i was looking at the january, 121, 113 put spread, that's a $8 put spread, you can sell the lower one for one. that's $2, 25% of the distance

between the strikes. so we're taking what are relatively low cost option and making them lower. one of the things we have to recognize is the market has actually been behaving lately with very low realized volatility it seems like each and every day, if we have any kind of a price jump, it seems strangely enough to the upside i was talking to a guy, over the course of the last month, you have eight days where we gap higher i find this extraordinary period if you look at it if you make a bearish bet, this is the way you probably want to do it. >> what's interesting ability the yly, the option prices are at the low what's interesting, carter put those up there, they got 48% of the weight amazon, home depo and mcdonald's what's interesting ability mcdonald's, we seen them move over, it sold off 15% from those

highs. home depot could set up like that, they could report a good print and start to sell off a bit. amazon like you said is what 10% below it highs if you want to play that in consumer discretionary, the yl way is the best way to do it mike's spread where he is paying a quarter of the width is good to sell off between now and january. >> a stock sells by people who decide to drop by. starbucks lost 20% of its value, has anything changed time statistic a timing tool and it's physical him. just as dan implies that can happen to home depot in one second there's risk here. >> here's something else to think about. okay so xly closed above 121. that's the strike of the put the downside even for this trade is 119, down $2.34 on $120

instrument from where we closed today. that's essentially 2%. this would have to move down 2% between now and the third friday in january what is the probability of that? i think that's one of the amazing things in the options market right now, it is remarkably complacent. it's basically telling us, oh, there is no risk of this happening. i happen to disagree with that >> does that make you suspicious >> it does make me suspicious. i mean, but i will say this we were also talking about this you know i have some fcat put spreads on close of business today the last 30 minutes of trading but i am fighting the tape so i'm willing to admit that when you could have a period where the mark is basically tracking higher. we've had periods much longer than the one we are in the mortgage has steadily mauchld from the lower left to the upper right. it may continue to do that i'm a political anxious admittedly. >> things overshoot. think about december

what was the reason to have a 27% collapse in the russell 2,000 where the s&p is developing almost 20 you can overshoot the downside to your point you can tick higher at some point they are reconciled. bond are having a breakdown, treasury yields nearing 2% for the first time since july on a back of a potential deal from the u.s. and china to roll back tariffs. >> that sent bonds tunneling no the lowest if you think the yield yo-yo has gone too far too fast. >> the ishares 20 years etm. this was really interesting. we were talking about applied volatility is generally keep in instruments like this. we seen a lot of volatility interest rates the big thing on wall street was the move up in yields. we saw the ten year u.s. treasury yield bounce back to

that breakdown level i think that's really important there, just below 2% because that's when the fed just cut interest rates for the first time july 31st in ten years. we saw that move lower in the ten-year treasury yield had to do with concerns about global growth, concerns about trade all those issues, throw brexit in there they seem to have abated in the last few weeks now we had this move back in rates, if you are watching charlotteer's rate before, he thinks we may see resistance there maybe they get to 220, 221, i don't know, maybe you could be a seller there, this is the instrument in which i would play a rate decline here i look to benefit from bonds going higher look at that intersection between the breakout level from the summer at 135 in the tlt and the uptrend put in place since the december lows. we got there today 135, that was the level here if you are thinking of being

contrainer and saying you know what i think rates have gone too far too fast, i want to look into 2020 where everybody is really positioned bullishly here now with a lot of complacency as you just mentioned, this is a great contrainer trade, large by because the price of options, you see there is an uptrend there, they were much higher than earlier in the year when the prices of options and tlt go up. it's this year which is obviously contrary, often times you see when stocks are going down, you see implied volatility people reaching for topgss for the options to go up i want to look at that time tlt trading at 135 you could buy the march 135-150 call spread $3.50. at money calls for $4 bucks selling one of the march 150 calls at 50 cents, that's costs you 350.

two-and-a-half breaks even at 138.50 up 2.5% on march expiration you can make up to 11.50. 150, why am i talking that mike will say, why are you selling that call? that was bakal will i the high earlier this year. i like this risk-reward risking 350 to possibly make 1150 over the next four months if this thing is 11% of the few months. >> i don't know if you should put words in my mouth. it's true when options are low, i will sometimes say why are we selling this cheaper option. however in this case, it's not a naked option, if you are selling a $100 stock it's a same situation if you buy a call spread, the way to think about the premium are you selling is in the context of the premium that you are buying. when we look at it that way, i can clearly see why you are buying a line in the sand at 150. >> that makes plenty of sense.

do i think it's imperative to make that call not necessarily, i don't think it will break through that level either it's probably found money. >> well, you know where i stand. we discussed this, the charts are the same way do you the tlt or underlying bond in chicago this point is that things do overshoot we get, collapse, end of world at 145 now, all of a sudden we've gone the other way. it's come a little too far i think you bet against it >> all right last word, dan >> yeah, i think this is been p an interesting setup the ball is cheap, options are cheap. if you look at something ahead in a bullsh equity environment this is as cheap as we get we have a lot of time to march expiration. >> for anything everything "options action," check out cnbc.com you can check out our cool news letter coming up, cisco earnings out next week, mike ko has a

systematic way, especially if you don't think this networks. plus, calling our "options action"s fans, reach in your pock on your phone and tweet us your question on "options action," if it's nice, we'll answer it on air when "options action" returns. . >> announcer: options action is sponsored by - ♪ ♪ ♪

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check out cisco, stock up 12% since january. one of our traders is taking a look at a catch-up play for when the stock reports earnings next week mike is over at the plaza. >> yeah, so i'm not 100% sure whether i think about it as a catch-up play or as a way where you can have you know a modestly neutral-to-bullish bet in a name that hasn't necessarily been behaving that well lately. obviously, we've identified a catalyst that's in the form of wereings we've also probably identified one of the reasons the stock hasn't done as well. >> that is that cisco happens to rely heavily on enterprise spend spending you know we've spent the last couple minutes talking about directionary spending. discretionary is an area where there is any global mark

macrouncertainty, if we look at the price chart in cisco year-to-date one of the things we can see is how this grossly under performed the market of late this is an area, we were looking at this earlier, if you look at the october lows the s&p alone is up about 7% in the lows in that first week. this obviously, even though it's had a bounce lately is certainly under performing the market over a similar time frame the trade we were looking at is the november-january 50 call calendar, we will be buying the longer dated january call and selling the november 55 call, net-net you are spending 70 cents to put this trade on the idea here is you will profit in this region right in here i just want to talk quickly about whether it makes sense to sell a call for 55 cents here's one way to think about it this call is going to expire in two weeks. right now it represents about 1% of the current stock price if you think about selling

options, sometimes a good way to think about it is is how much am i checking as a percentage of the current stock price over what time frame? this is quite a lot when you consider we are dealing with a longer expiration. if the stock lands in this region, you will have the opportunity potentially to go ahead and sell a december call against it as well, so the idea here is that we are not expecting anything too spectacular. the market is implying about a 5% move. that's in line with what the stock has typically done we know the reasons why it may not be that spectacular, the reason is enterprise stend spending >> i like the idea there is a couple gaps in that chart over the last few months or so. i think one of the reasons is because of the genes they gave in early august. it came out of left field. so if you think they're going to put good if you have quarter up, the stock stays range bond this

is the way to do it. mike is in a bullish trade in the short dated short strikes. i leak it. i also think if you think their guidance the about to get better, you will want to own this thing on its way back to 55. >> i mean i think that's just it, it is sort of range bound. right? sometimes range bound persists a lot longer than it is wanted or hoped for. my hunch is it is going to stay in the range you won't get something to quite make it worthwhile that's why you have to buy the stock and get it stuck in a dormant position. >> the most common options trade for people getting into this is they own stocks and will sell calls against them or they will buy a stock that would be a buy right in this case, buying cisco, would i do that here no, i don't think so the reason, of course, is the thing that you have that exposure to the downside, sick inially greater than the 70 cents, you are trying to thread the needle you get the favorable

characteristics of that buy right or a covered right without the you know exposure you get if things turn out much more disappointing and you get that negative guidance. have you 9% of a $50 stock is considerably more, 4.5 bucks for the 70 cents we are spending for this. >> a one time unicorn locked in lows we'll tell you what that means for our traders. it is friday, tweet us your burning answers on "options action". "mad money" we should note, a big show at the top of the hour as cramer pays tribute to our veterans >> amazing show. you got to keep it going ♪ ♪ ♪

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♪ ♪ ♪ ♪ ♪ welcome back to "options action". time too take a look oolt our open trades. dan said it might be long disney ahead of the earnings and the launch of the streaming service disney plus. >> i think this is a name as you head into 2020 that you want long exposure for. once investors are able to modem out what subscriber growth looks like and the profitability of this business could look like as

they get through tense of millions of subscribers, i think the stock goes higher. today the stock was trading 132-and-a-half you can buy the january 120140 rick reversals, selling a put at 1.20 and buying the january calm at 220. >> dan is wearing a tie that day. he was all business and it was a successful trade disney is up about 6% since then so what are you doing? >> 83, i think if you like the idea last week, you like it more this week. the stock had a big pop. it closed at 138-ish or so here's what you managed this trade. you were short a january 128 put you covered that it's offered at 50 cents, you cover it take that risk off the table. now are you left long a january 140 call and there is a lot of things you can think about doing there. you can spread it, turn it into a vertical call spread, sale e sell the january 145 call, basically you have a call spread on for free that gives you a couple months now of exposure in

a pretty wide range to the upside >> next up, mike found a way to lock into games into uber's lock-up expiration >> it could create pressure on the stock from insider selling you could create support for short covering so those two things might actually mean the stock could move less than a lot of people anticipate here. you can spend $2.10 to buy the january calls, sell the ones that expire in one week for $1.80. that net outlay of $1.30. >> uber has plunged 13% since then hitting new all-time low ace long the way so what do you do, mike? >> first, the options we sold is clearly worthless. earlier we saw this trade was worth $1.20. it's now considerably less i will say if you are inclined uber it's only via options i might sell near dated stuff against it, i don't think things will turn around any time soon.

>> what does that chart look like >> not inclined. long >> is it just dead, is it follow is it -- >> we can talk about i. when you come out of the gate, your first day is your best day, in life that's called a stillborn, that's not good, are you making new lows here. there is something wrong, don't do it. >> up next your tweets and the final call this piece is talking to me. yeah? so what do you see? i see an unbelievable opportunity. i see best-in-class platforms and education. i see award-winning service, and a trade desk full of experts, available to answer your toughest questions. and i see it with zero commissions on online trades. i like what you're seeing. it's beautiful, isn't it? yeah. td ameritrade now offers zero commissions on online trades. ♪

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 welcome back time to take your tweets, one fan asked if it's better to buy a call in via com or cbs ahead of calls next week. >> i would say the options seem more elevated. i would be more inclined to call risk reversals. >> they're dent cam, so bad they're good, i'd do either one. >> time for the final call >> consumer directionary xl line the short side. >> i'm also worried, i'm looking

at cisco in the earnings >> dani >> tlt, i like playing it in market call spread. >> that does it here on "options action". see you next friday. don't go anywhere. a special edition saluting our veterans, "mad money" starts right now. [ music playing - [narrator] the following is a paid advertisement for the hoover smartwash. when your throw rugs need cleaning, you toss them in the washing machine, easy. if only you could do the same for your carpet. instead, here's what carpet cleaning looks like for many of us hauling around heavy, bulky rental machines. they're a hassle. and do you really want to bring someone else's dirt into your home? and then there's all the mixing, soaking, waiting forever for your carpet to dry. no wonder we sometimes give up and call in a pro, but that's a whole other level of pain. they're all over your house. you're left with a damp carpet and it costs a fortune.