call today. cala place for mom. a place for mom. you know your family we know senior living. together we'll make the right choice. happy friday "options action" fans, i'm tyler mathisen in for melissa lee. a big show on deck here's what's coming up. >> announcer: tonight on "options action." >> to 0 infinity and beyond. >> announcer: stocks soar following the jobs report. if you think there's more room to run in the record rally, mike khouw has the perfect way to play it. plus, finding much-needed zen for your portfolio how he's trading lululemon into next week's earnings, and later -- >> you know what can really help

you sort through these important issues >> what? >> orange mocha frappuccino! >> announcer: dan nathan says starbucks is brewing up a big breakout and will lay out how to avoid getting roasted in this piping hot trade it's time to risk less and make more. "options action" starts right now. welcome, everybody get after it here. a big day for the markets. the dow surging more than 330 points the s&p 500 erased its losses for the week the rally following a better than expected jobs report, and there were records across the board including big tech names like apple and alphabet. both of those stocks hit all-time highs adding to the sectors red hot run. betting on a bigger tech takeoff, a way to play it. let's get in the money with mike khouw. take it away, sir. >> you know, interesting we got a payroll report today obviously the markets responded favorably to that, but actually we got clues that we had some

significant strength in the market earlier this week when the trade news which was definitely not positive didn't knock the market down much further. talking about this before we began the show that was news if you consider that was one of the keystone elements basically propelling the market higher and suddenly pulled that away you would have expected the market to get pulled sharply lower. it didn't. in fact, actually it closed all things equal relatively strongly that day then when you add positive news on top of that, and you get some sense maybe that internationally things aren't at weak and everybody said it creates strength in the midst of all this we continue to be, despite this week's movements in a relatively low volatility involvement, options prices remain relatively low. looking at the tech sector on a valuation basis, price for earnings basis, it is getting a little bit heady here but i think if i was worrying about anything look more on a price to sales basis.

trading 24 times i think forward at this point, but i think because options number one are relatively cheap i think because every new high was preceded by new highs. right? that can't be a reason to sell just because we're at new highs and have a lot of optimism going into the holidays here i think you can keep trades in this space relatively simple i was looking out to january you could buy the 88 calls for $1. 65 not down side risk if the markets pulls back define the risk we're taking. not a considerable amount of risk about 2% close to at the money when looking at it earlier today. look, you may very well have an opportunity to monetize this trade even prior to expiration all it takes is for it to rally through that strike a little bit. >> get up above, what? 89.65? >> by expiration runs about 88 meantime you'll see gains on this trades spread it, roll it a lot of things you could do

here. >> saying a lot of optionality there. >> exactly. >> and interesting etf two top holdings microsoft and apple both up on the year considerably both closing basically at all-time highs today followed by visa and mastercard. some think that's a nice fintech play when you think about it xlk is an interesting instrument i think if you like the idea, like the idea playing for continued up side in these mega cap names this is a great way to do it. defining your risk to a couple percent of the etf price the biggest drivers are up massively. i guess some of the fundamental drivers of the stories within it are very much intact. >> guy >> make a cogent argument, yeah, names that are inexpensive, for example, texas instruments to me is the poster child for what's going on you have no earnings growth. you have a couple quarters of a pretty lousy report, yet the stock still commands a 23 times

forward multiple and people seem inp inper veous to the space knock yourself out if you want to continue to buy the stocks, a dan nathan term. we are five or so days away from president trump pulling the rip cord and going forth with these tariffs and you know, a name like texan, trading 122. pete does this december 15th, that stock will be $100 so fast it will make your head spin. amazing people are just turning a blind eye to the negative things out there makes people like me look really stupid on a nightly basis but doesn't mean the problems don't still exist. >> move on now the tech trade may be heating up, but one big coffee stock is on ice for a few months now. starbucks got a caffeine boost to all-time highs over the summer since then the buzz wore off have no fear dan nathan says something could be brewing for this stock? >> mega cap tech names trading

all-time heims, make highs and massively outborm the broader market starbucks, in july, all-time highs, up 55% on the year. tell this story through pictures that chart there is basically january 2019 through late july 2019 that was the day, july 26, stock up 9% all-time high nearly kissed 100 on better than expected global same-store sales. about as good as it could get. right? we also know this stock trades at a premium multiple. what happened over the next few months this chart from the next day july 27th. stock almost had a 20% peak to drop decline from the all-time highs. investors thinking about what is the implicationimplications, fo valuations hitting the stock market back then here's the thing look at the chart now. put them together and you see it just bounced off a couple times

from that up trend from the december lows. now it's approaching what i think was an important technical level on the down side a few months ago, which is is now resistance right below 90 or so looks like a constructive chart to me. so i just think about this with option premiums where they are. not too different than mike discussed, implied volatility price of options short dateded in starbucks nearing 2019 lows what that says to me, people who want directional bets in individuals names like this, this is the way to do it with defined risk much like mike's trade today, starbucks trading 86.30, look out to january expiration and buy january 87 half call for $1.50 breaks even at $89 up 3% risking 2% of stock price and have about six weeks here's the thing even with the stock up 35% on the year, which is pretty remarkable it's outperforming the s&p you could see a push back towards the highs either into

the end of the year or possibly the new year that's my target 100 earnings end of january. i chose january expiration because i think you have a run-up into it if you get a run back to mike's point about optionality owning a call a lot of things you can do spread it, roll it up and out, that thing i like starbucks as a set uphere. a pause here breaking news on the defamation case against elon musk we have details. lightning fast resolution. >> reporter: yeah. only took an hour. elon musk is not liable for defamation wins the case. he said my faith in humanity restored upswor uns worth has an attorney and thinking be filing suit in europe as well elon musk not liable for defaming vernon punworth.

back to you whavg. >> what do you think about the stock outlines >> this is the way to play this. times when selling puts makes sense. entry points you mind attractive options premiums elevated. none of those things are really true the idea, commit new capital to the market, you want to do that buying stocks after this kind of a run, or takeadvantage of the fact options are relatively chief? get near side participation. participation to the upside if it continues to rally, but if it proves to be the zenith for stocks you won't field that bad. risking a relative small amount. >> first break everything "options action" check out our website. and while there, check out our newsletter meantime, here's what's coming up next. >> announcer: shares of lululemon stretching higher this year, and our mike choe and guy adomi teaming up to give you a

way to trade the stock into its earnings next week plus, calling all "options action" fans reach into your pocket, grab your phone and tweet us your question @optionsaction. if it's nice, we'll answer it on-air when "options action" returns. ♪ >> announcer: "options action" sponsored by -- ♪ ♪

beyond the routine checkups. beyond the not-so-routine cases. comcast business is helping doctors provide care in whole new ways. all working with a new generation of technologies powered by our gig-speed network. because beyond technology... there is human ingenuity. every day, comcast business is helping businesses go beyond the expected. to do the extraordinary. take your business beyond.

hows right there. i wish my trading platform worked like that. well have you tried thinkorswim? this is totally customizable, so you focus only on what you want. okay, it's got screeners and watchlists. and you can even see how your predictions might affect the value of the stocks you're interested in. now this is what i'm talking about. yeah, it'll free up more time for your... uh, true crime shows? british baking competitions. hm. didn't peg you for a crumpet guy. focus on what matters to you with thinkorswim. ♪ welcome back every sports dynasty has to deal

with adversity on the way to the top. so has this sportswear stock not all good nike broke out to an all-time high on the heels of an upgrade from goldman sachs another big name is in the athleisure world coming for nike's crown up nearly 90% this year and the company reports earnings on wednesday. so you know what that means. ♪ come on, ty! >> the tag team. we have sent the bad boys over to the corner of the ring. guy and mike at the plasma. take it away. >> in the break listening to eric clapton i know this. he wears lululemon, amongst many men and that's one of the reasons to own lulu. what's going on? growing men's ware swear is in middle talk about china all the time. what they did in china china growth, 68%. 68%, a real number

also, margins are improving in this environment operating margin's better than expected comps crazy. up 17% last quarter. i don't mention valuation, because it's very hard to make a cogent argument about valuation, but this is a stock that inner earnings continues to go higher. that said, mr. clapton, tapping in mike khouw. >> yeah. think about the valuation for a second obviously just talking about the stock had a 90% run so far this year and it's obviously very challenging to go out and commit new capital. the stocks that not only have had such a profound move but also are trading at such a high multiple the other thing is, that right now options pricing are actually also pretty high why? earnings are coming up next week the stock imply a move a little over 8%. so going out and just buying call options, the idea we talked about in starbucks probably not working so well right here the other thing in a situation

like this, obviously based on the price action, based on valuation, and based on options premiums we know there are very high expectations. maybe a way to participate on further gains in the stock without risking a great deal what i took a look at. trade the december, january 250 call spread. out of the money call spread buy the january 250 call spend $5 sell the decembers against it for $315 net net spending $1.85 consider that relative to the price of the stock here's the idea. this is going to see the best profits if the stock migrates up to this 2.50 area and actually remain profitable long as it doesn't blow out past 2.83 bear in mind average analyst on the stock about $2.47 representing a pretty good move. talking 2.30-ish where we close today, 8% to upside gets you right into this neighborhood

if it falls below that how much are you risking? $1.65. i think that's the kind of thing that we like when looking at this. >> gentlemen, come on back and assume pigeon pose over here. >> pigeon pose >> in the chair to my left. >> not sure what that means. >> mike says a trade he likes. >> yes. >> i love this trade tell you why mike is using simple and smart math here. basically taking the implied move in the options market between now and next friday about $20. why he's choosing that 2.50 strike and risking less than 1% of the stock price a lot of ways this trade can make money between now and december expiration without mike having to kind of thread the needle the way you might think so so this stock rallied 20% in a month, and now you're giving it another 8.5% room to the upside. if you get that right you'll end up seeing that january call that you own and appreciate i like the trade setup. >> challenging thing in a case like lulu. this is, a lot of people buy the

products my wife, a huge fan of lululemon products the products are fairly pricey the stock is fairly pricey in terms of valuation and pricing stock. run out buy it, 23 grand right? eat contract represents 100 shares but risking $165 to put this trade on. could be significant worth more. on the down side, that's how much you're risking and the whole idea here. with the market having rallied with this stock really having rallied, how can we still participate at this late stage if we think the stock has room to move? >> always the question getting in too late? too late to buy? >> risk less, make more. that's the line -- >> sounds like a line out of "hamilton. >> no it's occupy "options action." they say quickly, barkley initiated november 25th, 257 price target gets there tyler, that's the sweet spot mike just spoke of. >> gentlemen, take a break.

up next, remember that big market sell-off earlier this week seems like forever ago ite? one of our trading spying choppy trading into year-end. we break down that much more "options action" is coming up, next. ♪ >> announcer: pkz pxz responsib"options action" sponsored by -- ♪ ♪ ♪

♪ ♪ ♪ ♪

♪ welcome back to "options action." time to look back at an open trade. last time this show aired, probably last friday well -- >> no? >> we had thanksgiving. >> oh, we had thanksgiving. >> why the show was usurped. two weeks ago, t., well, damn nathan two weeks ago laid out how to put your portfolio into the end of year. >> you enjoyed gains this year and memory of q4 decline last year and how to protect my portfolio and do well before now and year end look out to december 31st expiration options they have them here. call them the quarterlies here and with the stock, the etf trading at 310 today look to buy

the december 31st 310, 2.95 put spread paying $3 for that. >> market seen big swings since that trade s&p falling hard to kick off the week before serurging back towad all-time highs today plenty more time for volatility before this trade expires. so, what are you doing >> yeah. exactly what you kind of put this trade on for. this sort of price action we had this week. interesting that that decline, 2.5% a lot of declines over the last 18 months from all-time highs steeper to the tune of 5%. really what this trade was targeting. for me i think you hold on to it lost one-third of its value. be careful here that you don't let it just all erode and put a preem jum stop at some point on a trade like this. some of you may have different views? >> yes ask one right now. dan, joining us, xp investments managing director, who is, the

market handed in a big week. what do you think of what dan is proposing? >> a few referred to it as insurance. think about it like that insurance. watch his eyes roll. no one likes to play insurance premiums but it is a cheap way to ensure your portfolio and i like it. well thought out. >> two things to think about near-side protection what dan is getting here or for disaster protection looking for disaster protection sometimes looking for cheaper optionality that has a bigger payoff, but isn't going to provide you near-term insurance. this one provides very near-term insurance. 3.10 strike very close. >> what do you expect by end of year, bottom line? >> a binary situation and we have the trade deal overhang a lot of other news coming out either we continue to grind higher or i think we actually see down side risk here. i would think about maybe moving

the strikes around here to mitigate that. >> yeah. if the higher tariffs go into effect, what is it a week from now? >> make as really good point about moving strikes talk about these trades hedging insurance sort of trade. do it tactically not frequently. one thing i say is today, you know, with the stock near 3.15 or so. about $5 out of the money right now you want to hang out a little bit but to his point, if you thought there would be downward volatility you may want to move the strikes and get yourself in a position to basically get the maximum sort of insurance. >> another quick point, too. you have a trade, bear this in mind drawdown, put spreads on took them off. if you follow us on twitter you should i mentioned i took some off and since put moor back on again a situation like this, get a market pullback, especially a lot of things propelling it higher don't be afraid to take profits when you have them and

look for other tactical opportunities to reinitiate. especially spreads don't pay off big if the market goes much lower. >> guy >> i don't want to getinto the 400 series of options. but this was a perfect week. watch this, dan. to trade your whip a great opportunity this week to trade against that initial put position that's inside baseball stuff, but dan's not in his -- they know what i'm talking about. folks at home, go to the oa website and read about it. >> i have to do that. folks, a quick break appreciate you being with us have a great weekend. when we come back, we'll have the "final call." this piece is talking to me. >> announcer: "options action" is sponsored by -- believable op. 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 and welcome back to "options action." guy, big week ahead? what's on your radar

>> next week is interesting. next sunday, the 15th of december when the potential for these tariffs come into play all next week i think you'll see tweets pro, tweets con i think, listen, volatility in this environment is way too cheap and i think the down side risk still outweighs upside tower. my opinion i've been wrong, though. >> ever gone into a fed week with more anticlimactic fed week than this one? >> i don't think the fed's the issue now. to your point. no, i don't think that's the case i don't think people are watching that at all people are watching to see what the trade headlines are. >> final calls dan? >> talking about cheap premiums. listen, if you thought you wanted to look at december premiums, move stripes up. >> mike, next. >> thinking a lot easier to buy lower risk in this environment. >> and mr. -- last word. >> and tuesday -- >> see you tuesday i think it's tuesday yes. >> not here monday. >> not going to be here monday. >> and my "final call" we talk a

lot about trading. enjoy the weekend. so few and far between, ty go grab scotch right now that's my final call. >> all-in on that. >> lululemon, call spread cost. >> does it for "options action," back next friday at 5:30 don't go anywhere. "mad money" right now. - [announcer] the following program is a paid advertisement for the nuwave brio digital air fryer, sponsored by nuwave. live well for less. we all love fried foods, but yuck that means scoops of grease, blobs of butter, or gallons of oil just to fry. this adds up to a lot of unhealthy fat in your diet year after year. stop! now you can cut out all the added fat, and still keep all the flavor with the new brio digital air fryer by nuwave, the world's first digital air fryer with flavor infusion technology. coming up next, you'll see how brio's compact design makes mountains of crispy wings