well, happy friday options actions fans we have a big show lined up for you tonight. here is what's on deck ♪ ♪ here comes >> all aboard. express train to catch up to the financial sector xlf and -- it's greek to me but strategy to you. tony xang is checking out the delta on delta airlines ahead of the company's quarterly report next week.

and -- boston scientific has had a wicked good run over the last three months, but mike is working on a safer way to play going into both the jp morgan health care conference and earnings it's time to risk less and make more options action starts now. yes, it does and welcome or welcome back, everybody. so let us dive right in. we'll talk about the payment stocks because most cashed in a lot of big gains last year check out shares of mastercard and visa led the pack up 58 and 40% respectively american express and paypal did well square lagging a bit, still up 3% on the year carter says one of these names is about to ring in more money in the new year. carter is going to break down the charts for you carter >> let's jump right in we're looking at amex, the setup here is recent outperformance relative to other financials and

proceeding underperformance. it's a one-two more often than not. the table is very simple over the past six months, yes, what we know is that the bank index has done 13, 14. we know the etf financials have done 11 and amex has done 1.5. that's over the past six months. moving forward, take a look over the past month now, again, that's the chart now take a look over the past month. it's the exact opposite. what's happened is now amex is on top up 6, more than double the financials and much more than double the bank so again, over a longer period of time, six months underperforming, now starting to come to life that's what relative strength is all about. here is the chart in reverse and basically the setup the chart so many ways to draw the lines. one way is something of a minor head and shoulders bottom. that's fairly clear. you also have this working into

and quite perfectly, right, it stops to the penny, it stops to the penny. to the penny here we are yet again. quite right. play for the breakout. so many stocks have already broken out amx is poised to do just that, i'm a buyer. >> carter is a buyer mike, what's the trade >> yeah. take a look at american express. it's pretty interesting. if we look back over the course of the last five years or so, obviously the equity market has been on a tremendous tear. american express is up considerably over the same time, but actually in a valuation framework it has not increased as much as the market has. we're trading roughly around the same multiples now in american express as we were five years ago. some may recall that american express had a couple notable stumbles losing that i finty relationship they had with costco those cost the stock during this rally, but at this point when we're trying to find names that

are trading at reasonable valuations this is trading at just under 15 times forward earnings, this is a place you might look this is also i think a tough time to get long stocks but using options we can find a way to have upside exposure and mitigate the risk. simply what i was taking a look at was an upside calendar spread february and april 130 call calendar spend 1.65 for that. when i was looking at this earlier today, the april 1.30 would cost you $3.80 sell february for 2.15 and the idea here is that axp could migrate up to february expiration or slightly above that level and you're going to make some money as the shorter data options decay if you decided to at that point you could hold on to the longer data calls and use that as your way to take longer exposure. >> i think this trade structure makes a lot of sense right above

that 52 week high collecting almost 50% of the premium of the long leg offsetting your risk substantially. here, this earnings play with risking less than 1.2% of the underlying stock price really cheap way to play. >> there is no real comp you have visa and mastercard of a type you have things like capital one and discover amx is its own creature. amex is a low beta type financial which has catchup potential that's part of what, mike, you were implying. >> right the multiple on american express is nothing like what you mentioned, mastercard and visa sort of more of a study eddy in this space. >> okay. so that's good discussion there on american express. carter likes the charts. he likes the name as well. mike gave you a good strategy. make some money, pay off your

amex bill. from payments to airplanes the stock of delta up 6.5% in the past month that name will kick off earning seasons on tuesday he sews only blue guy skyes ahead and has a strategy for you on delta. >> delta reports earnings on tuesday. i really like the stock out of the pure group between the legacy airlines because delta clearly has -- has built a leadership in this particular space and builds a premium product that leads in this particular space the numbers currently show the leadership that delta currently has. they built a premium product and they're able to charge higher multiples or higher premiums they're charging higher premiums for every seat mile compared to the legacy airlines. and if we look at top line growth for 2019, delta has a 6% growth looking into 2019 versus american airlines and united has only 4%.

and given the fact that we have higher revenue growth, higher margins and a dividend growth that's higher than the legacy airlines, we see delta trading at a fairly relatively cheap multiple at 8 times revenue. so if we look at all of that, i think this stock is relatively cheap compared to its peer group. you look at the ceos speech at ces earlier this week, this company clearly is interested in growing this for the long run. they are interested in building the best possible customer experience for their clients and they're using technology to do so trading at eight times earnings i think this stock will trade at a higher multiple. given the fact that this stock does not trade much on earnings, i'm looking at the january, february $60 call calendar looking to buy the january $60

calls and sell the january 60 calls collecting about 65 cents net net i'm payi ining 89 centsr this particular trade which gives me a mildly bullish outlook going into the earnings cycle and after, i will risk only 1.5% of the underlying stock price. >> i'm sure obviously because you're very cognizant of charts and rely on them, there's the minor head and shoulders and the relative strength. all the other airlines have made no progress. aal unchanged, luv unchanged, united unchanged and delta up 6% that's the setup we want. >> no exposure to the 737, it's the one thing i think i know we're talking options and charts they don't have the max exposure. >> they're an airbus, airline principally united has a lot of 737 exposure southwest has the largest 737 max exposure also interesting when you think

of the factors go into pricing a airline, fuel. delta, going so far to buy their own refinery this is forward looking in is that sense. >> we talk charts and not fundamentals, around boeing and some of these documents about the 737 max, i talked to former airline executive and he said don't be surprised to see delta start advertising the type of plane they fly. >> uh-huh. >> come with delta we have the airbus a 320. a-319 if people are weary of the 737 issue. >> i don't think that was the thing people would advertise in the past but it is now you think about the airlines that are going to benefit from that, they would be one. jetblue could be another. >> the newest fleet of airbuses. any way, really interesting trade on delta airlines. name we are watching thank you very much. for everything options action, of course check out our

website optionsaction.cnbc.com here is what's coming up next on "o-a". coming up, the scientific method to boston scientific ahead of the two big upcoming events for the stock. plus, calling all options action 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. ♪ ♪

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♪ action." the annual j.p. morning chase health care conference is kicking off next week. the event has been known to spark some interesting moves for one group in the sector. meg terrel back at cnbc hx. >> well, jp morgan looks at stocks in that sector going back to 2001 and they found during the week of the conference bio tech stocks outperformed the broader market in all but three years by an average of just less than 2%. the last presidential election was one of the down years. are we in for a tough week again this year? not necessarily. i spoke with jp morgan's global head of health care head said the industry is always in the crosshairs during elections history doesn't necessarily suggest there will be that much disruption his prediction, mna.

we have seen announcements and he expects that could happen again. more broadly analysts are watching stocks for updates next week and we'll have a number of these ceos and others joining us on cnbc. brian? >> meg, thank you very much. sticking with the health care space, by the way, check out this mystery name. serging more than 20% in just the last three months and outpacing the broader health care sector. he has a way to play it. call to action who is it, mike? >> we're talking about boston scientific which is medical device company what we're going to be taking a look at here is trading a diagonal call spread it's a lot like a calendar spread except you're using different strikes and buying a longer data call and selling a shorter data one against it. here are some of the reasons you might look at a trade like that. for one thing, we have what we call an inverted term structure. that is when the shorter dated

options premiums are higher and implied volatility space than the longer data ones that's one of the things we want to look at calendar spreads are also nice you have time on your side the near dated options tend to decay more rapidly than the longer dated options the other thing here is that as you were just pointing out, 20% run in three months, this is one of the situations where you can feel like it's a little bit dangerous possibly to try to go out and chase the stock. here we can see that term structure i was referring to february options obviously trading at significant premium to longer dated mays we're looking at buys. two reasons, one is the conference next week and february captures earnings. 20% off the bottom we'll try to find a way to get some near upside exposure to this without taking risk in case it should find its way back to the october lows

the trade very simply is this, i was looking at the may 46, february 48 diagonal call spread, you would buy the may 46 calls $2.60 pay for those, sell for 60 cents net net you're spending $2. a trade that will see peak profits at 48, at february expiration if you elect at that time you can continue to hold the longer data call which might be in the money or look to roll it. but this is a trade where you have time working for you. you take advantage of the fact that near dated options proceed yums are elevated both for that conference and for earnings. >> okay. mike, thank you very much. tony what do you think >> we're all thinking the same thing with respect to stocks near its all time highs. selling $48 call makes a lot of sense, giving you a little upside, 4% upside but still by collecting that 60 cents only risking less than 5% of the

underlying stock price to take this bullish view on this particular stock i like this $46 level. you get the breakout above it you still got the room to grow up to 48. >> this is what you call an old reliable right? boston scientific is something that doesn't have the epic draw downs you see in so many health care names it's almost five fold relative to xlv on five year and not extended day to day week over week it's been consolidating and yet price higher again. >> what about bio tech or health care in general? boston scientific is a big name. that's a big company, mike they're a bio tech in certain ways, but you know, what about the pure bio teches, right the one where you literally roll the dice and if you hit it, they can win big. if not, it goes down a lot. >> this health care sector has been a big lagger and just starting to show relative performance. it's dominated by huge names but you also got steady eddys like the manage care stocks and some of the very low beta

pharmaceuticals. net net you have the upside potential but you have the defensive element associated with the sector overall. >> obviously some are one-trick ponies working on one therapy if it works they obviously could have tremendous opportunity but if it doesn't obviously disaster could follow then of course you have sort of boston scientific tends to acquire some of the technologies that turn around and sell. that exists in the bio tech space as well when we think about drugs. so you have companies that basically can make acquisitions and that's probably a safer way to play it or ibb or xpi. >> i wonder if buying some of the smaller mid cap one trick ponies is almost kind of like an option >> it's exactly like an option. >> buying an option on the drug working or them getting bought or some combo of both. >> when you buy an option you have limited risk. buying the bio tech, you are taking that unlimited risk nature i don't like that. ibb has been relatively weak

>> anybody interested in ibb because it hasn't been that great? >> ibb stopped right at -- >> it's going to press higher and make a high. >> you think so? >> yeah. it's reacted to a former level precisely. backed away. i think it's set up to go again. >> might have a future segment there. carter is producing from the chair. i like it. coming up, it was a crazy week for crude oil tensions with iran sparked a wild ride for the commodity up and then no down down down we'll tell you what it all means from one of our traders. plus, do you have a burning question of course you do, probably a lot. keep it to the options market. send it over to our twitter handle and get your question and/or answer on the air as always, live from the nasdaq market time site, we're back after this ♪

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♪ ♪ ♪ ♪ ♪ >> welcome back to "options action." happy friday, by the way it's time to look back at a couple of open trades. last week mike and carter bet on a high energy rally in the xle >> it's waiting now right here

we're back to the level when cisco was worth more than any other company in the world we're below that energy historical waiting is 9.5. we're never going to get there again, i don't think but here at this low level of 4 and change, i think we'll move back to 5.5, 6% of the s&p. >> i was just looking out to april. the 60 spot 21 strike calls. those would cost you $2.65 almost presis lie at the money where xle traded today. >> it's a crude awakening for the energy stocks. investors down 1% after the initial spike earlier in the week mike what are you doing now here >> i'll defer to carter on the technical aspects. one of the reasons we remember buying calls and went out to april is because number one they were cheap number two, gave us upside exposure at limited risk both of those two things remain true i think what surprised a lot of people we didn't see a big spike net of the turmoil the middle east, but that doesn't change. >> surprised everybody, mike. >> it did.

>> follow me on twitter. >> oh, really. i think i do follow you on twitter. i didn't catch that when you tried to stop me from doing this a week ago but here is the thing, actually what we're talking about remains true i would stay with it. >> that's right. listen, popped, gave it back, we're down a percent conceptually you had a lot of news thrown at the sector. it's held up and i think you should stay. >> you think so? >> i think so. we're talking about a week in the life of an oil trade is like a gnat, right? the market is deep ward. we are seeing opex cuts start to work late bit. u.s. oil industry is starting to slow down. rig counts continue to come down this trade and the xle you might longer term, even medium term might be right i'm not making a call because that's not my job, this is my sector i see -- i can feel a little bit of that sort of the feeling change among investors by the way, high yield debt this week mid stream equity partners

and etp issued huge blocks of debt gobbled up according to my sources. there is some appetite for risk and energy. >> mike's trade is going all the way out to april a lot of times a lot to happen between now and april. the only thing i can say is if you want to redice your risk little, sell a little upside calls here to reduce the cost here. >> what would you sell what would you do? >> i would look out to very short dated february on xle looking at 61, 61, 62, collect little premium you can do this over the next couple months as xle goes higher. >> good stuff. a lot of people are hoping mike is right in that space. tony said the party in the pantry might be over for one consumer staples name. >> looking at here in late october this stock broke below its 200-day moving average not only did it break between the long-term moving average, relative basis started to deteriorate. however, it has recovered back

up to the 200-day moving average but got rejected i'm going out to february and looking at $70 and buying that $70 put purposefully buying a put in the money to help offset some of the high implied volatility >> kol gate jumping about 3% this week. with few weeks to go before the trade expires, how do you manage it >> this trade has not worked out the way it expect it to, however it's still below the 200 day moving average down 35% moves another 40 cents against us, cut losses here where i lost about 50%. >> good stuff there. up next, your tweets in 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. ♪ can be a sign your feeling digestive systemhed down isn't working at its best. taking metamucil every day can help. its psyllium fiber forms a gel that traps and removes the waste that weighs you down. it also helps lower cholesterol and slows sugar absorption, promoting healthy blood sugar levels. so, start feeling lighter and more energetic by taking metamucil every day. take the metamucil two-week challenge, lighten up. just take metamucil every day for two weeks. available at your local retailer.

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 all right time now for your final cart carter >> american express, we think it breaks out. >> boston scientific diagonal spreads gives you upside, limited risk to the downside.

>> tony? >> delta clear leader out of the legacy airlines. buying a call calendar going into earnings. >> thank you very much good discussion on a lot of levels that does it here for us on "options action. we'll be back friday at 5:30 p.m. eastern time. "mad money" with jim starts next (male announcer) up next, how would you like to get the celebrity secret for ageless skin? (female announcer) find out how in this paid presentation for meaningful beauty. (male announcer) as cindy crawford unveils her newest youth activating breakthrough. (female announcer) and watch what happens when cindy invites grey's anatomy star ellen pompeo to try the evolutionary secret that's kept cindy's skin looking so youthful for so long. when you see the pictures of cindy at age 31 and then now at 52, her skin actually looks more radiant now than it did then. so, you know, whatever she's doing, i'm down to try.