identified a possible shining safe harbor. >> then. >> akuna matata, no worries. >> announcer: if that's more your perspective we're also getting animated about a way to play the disney quarterly results next week. plus.

>> something about an overdrawn discretionary account. >> that could be one of the market's problems too. but it doesn't have to be yours. we'll explain how to handle the bill coming due. it's time to risk less and make more "options action" starts now. >> welcome, everybody, lets get to it fear gripping with the markets with the coronavirus outbreak shaking stocks this week and today the s&p having the worst day since october. down 58 points or nearly 2%. but the chart master says fear not it's time to turn to one of the oldest protection plays in the book he is at the plasma to break it down carter. >> or fear much and turn to one of the oldest plays in the playbook so utilities are a place to be preponderates are collapsing and

can't just be because a few people have the flu. there is a message going on. gold, utilities, the way things act one has to listen to the message. in any event, a chart of gold the past two years what we know is gold has this tight consolidation then pop tight comstock and pop look at the lines and do it different ways there are many ways to sort of annotate a chart but the point is that after a period of pause and rest, reassertion of strength, pause and rest reassertion of strength i want to look at the current move in relation to the prior move what we know and see while it doesn't have to be symmetrical after the pullback you have a 20% pop. we've had a pullback almost exact same in terms of time symmetry. and this pop now is only 7%. were we simply to achieve a 20% move or how about even 10 or 12, the implications are higher. the chart itself has this kind of cup and handle look all quite good a 20% similar to that would take you to 165 or 1650 an ounce in gold

i think that's as reasonable a price objective as any what with he know is a big move, a consolidation, a big move, a consolidation. a big move, all within the context of what everyone knows, a massive bottoming out formation. that's gold. >> so, mike, the charts suggests says carter the idea that we are at the- in the early innings of a move upward for gold is that what you see and what's the trade. >> yeah, so early inning, i don't know we were at about 1,300 bucks an ounce before the beginning of the summer and now close to 1,600. we have actually had a pretty good move of that. we closed on the highs today for gold basically and that's one of the few things it did, right. it's fairly clear that there is some demand for it the other thing i would point out -- we heard tim on the earlier show talking about reflation trades, oil and copper weren't doing well but something else that didn't

do hot today was the dollar. if you think about gold, it's often a flight to safety it's often an inflation hedge. and for those reasons i think it's a decently safe haven there are people watching the show who may have it in the portfolio. it used to be a standard thing to have in the portfolio but perhaps you don't. and if you are sitting there thinking now it's had the better than 25% run off last year's lows how can i look to get in without being exposed to the potential for a decline of $300 an ounce if it goes back to the lows actually i think with we do a couple things one is take advantage of the fact that commodities often see elevated implied volatility as you see new highs. that's what we see now right now february options in gltd, the etf tracking gold is relatively high. the other thing we have is longer dated options are cheaper. we can look to use options to bet on some further upside while taking relatively little risk. specifically looking at the march 149 february 152 and a half call calendar it's a diagonal spread. buy the march 149s for 260 sell the februarys against it

net-net spending $1.90 profitable if gl the d rises we take advantage of the elevated premium in the near-dated options people often say they don't like gold because it doesn't have cash flow or yield but using options this way it does actually have a little bit. because we are collecting premium in the form of the shorter dated options and mitigating risk because we own the 149 strike calls if it did collapse -- if everything turned around, everything we saw this week suddenly reversed -- it's hard to imagine that happening quickly but if it did you take relatively little risk. >> any reaction to that. >> a lot of -- and also it's worth noting of course that if one wants to be even more aggressive you own the equities which is gdx or gdx the j where you get more torque than out of

the commodity. >> toney. >> i just took profits on my long gld position yesterday morning. but i think you is actually might have convinced me to get back in. partially because 149 resistance struggled amounts level the last few guys part of why i tyco took profits. but the breakout and the fact you take this long position risks 1.3% on the etf underlying price is in my opinion a -- a trade that i would trade. >> yeah, i mean quick thing i would say about this, we are well off the all-time highs in gold so in terms of resistance it's not like i see immediate lines just above us here. >> lets move on here things not so golden for shares of disney this year. the stock is sitting in a correction down more than 11% from the 52-week high. one trader bets on a magical rally when they report earnings next week. toney what you got.

>> looking at disney i like it broke out above the 143 level on last quarter's earnings trading up to 153 but the last few weeks it pulled back to 135 breakout level now the pullback the last few weeks is concerning to me. the weak relative strength into earnings but lacking at the analyst revisions the last few weeks it's currently pointing towards a modest beat into earnings next week and looking at options here, one of the concerns that i have here is the fact that i'm looking for an upside move fairly quickly. normally i'd like a call option to place this type much trade. however if you look at the implied volatility of options for disney it's very high. and if you look at the term structure one of the ways i can decrease the implied volatility or the cheapness of the options i pay is to go out to march. i'm looking at a fairly simple structure here using a call vertical trading a 135/150 march call vertical paying about $6.90 for the march 135 calls and collecting about 1.60 on the march 150 calls net-net paying about 5.30 on the $15 debit spread allowing me to basically

take a fairly large directional upside move in disney while risking only $5 to the downside. >> how much could you make on it. >> almost $10 on in particular trade if you get the jump over -- above 145, 150 on disney. >> we often talking look being at vertical spreads you are buying about how much of the distance between the strikes you pay. and usually that's because we are talking about vertical spreads completely out of the money. that's not what toney is doing the calls buying 135s are well in the money closed 138.30 today. those are $3.5 in the money almost that's important to think about. because by selling the upside call and us eyeing in the money call options he is getting more immediate exposure to the stock and also reducing the decay this is paying. using the in the money options is another way to seek to mitigate the high cost of options here i like the trade because i'm not

really in favor generally of fading stocks that have done well in preceding earnings events one with of the things we know is that generally a company's fortunes aren't dictated every 90 days. if we see good traction and we have with disney plus we think there is reason for. >> this bounced off the trend line four times. and the relative strength issue is really an issue if you have a bad stock. but the absolute pattern is good and the presumption is that the earnings cause it to go up not down. >> all right for everything "options action," check out or website, "options action".cnbc.com and there sign up for the news letter here is what's coming up next. >> announcer: stocks rocked on wall street. but we found a rare green arrow in food's sea of red what it is, and why one of our traders says enjoy the good times while they last. plus calling all "options action" fans, reach into your

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up the xly finishing the day in the green. why? well basically because of amazon's monster earnings beat last evening making up 25% of the etf but if you think amazon's arms are getting tired holding up the sector mike and carter have a why way to play it tag teeming the "options action." >> there is this thought what do you mean it's a thought. it's actual. consumer discretion is outperforming. what i have here is the consumer discretionary sector as we know it influenced by 25% amazon, not to mention mcdonald's, nike and so forth here is the equal weight index and the story of the consumer. what's happened is this made no progress in the better part of two or three years if we move forward here. >> all right, gentlemen could i cut in we have breaking news i'll get back to you on the impeachment trial and vote taken place in the senate.

ylan mui >> the senate voted against calling witnesses in the impeachment trial of president trump. the vote was 51 senators against 49 senators in favor along largely party lines. and the senate is now heading into recess as they try to figure out how to wrap the trial up now earlier today there were several senators who said they expected that final vote on the articles of impeachment would not happen until some time next week likely on wednesday. but now it seems that time line is up in the air we saw majority leader mitch mcconnell and minority leader chuck schumer huddling on the floor a while ago as they tried to hash out a compromise now they are going back to the respective caucuses to try to talk some more and figure out a way to land this plane as one senator put it and we will have to wait and see

how the final chapter of this saga plays out. >> the final vote here ylan was 51-49 with romney and collins the only republican breaking ranks. >> that's exactly right. that was the vote whether to call witnesses but the final vote on acquitting the president, that has not happened yet we are waiting to find out when it might be scheduled >> ylan mui thank you very much. ylan at the capital. i'm sorry to interrupt you but that was important news. carter, mike go back in the argument and recap. >> three lines at this point we have the s&p in the middle. the naught is that consumer discretionary is outperforming but equal weight, you are

underperforming the market that's the real subject. so moving forward, another way to look at it, the sector has ascended but its relative performance is descending lets keep that and make it equal weight on top. look at the bottom line now. this is the true performance of consumer discretion if you don't have the overinfluence of amazon and other names. and stuck with no results the better part of two years in any event, the chart itself of xly, well defined trend line put it in. and i think it's only amazon

that that is keeping it from breaking we heard from amazon and now i suspect it gives way just as so many other things have given way. >> mike. >> you know, interesting we'll keep it up one second. you'll notice basically that trend line runs almost exactly to 125 in the xly. that's the level i look at and the trade we are looking at is a relatively simple one for a couple of reasons. right now, despite the fact we have seen the turmoil in the market and some options premiums have gone up as a result, in xly they remain reasonable we see a chart of that right now we remain relatively close to all-time highs. and the point i make looking at longer dated put gives as you great deal of flexibility. you can do things like go into a vertical spread or near nearer dated options again it

use it as a hedge against the discretionary components in the portfolio. looking at that questioner taking a quick peek here this is how the june 125 puts were priced at the beginning of the week and at the end of the week you can see that although we did have a dip in the middle in terms of implied volatility, essentially right back where we started not expensive. very simply go out to june, the 125 puts trading about $4.35 when i was looking at this earlier today. and like i said you can buy this against a long portfolio you can spend it as base country a speculative bet to the shortside if you choose. and if you look to try to take advantage of nearer higher dated premium you could look for

calendar spreads and things like that as well. >> as they work back toney what do you think of mike's trade. >> i like it from the perspective he is buying optionality all the way out to june a lot can happen between now and june if you look at the constituents of the sector there are names that look ugly right now starbucks, broke below the 200-day moving average has a lot of exposure to china gm or ebay broke below major support levels the last couple days these are not -- this is not a sector i particularly like at the moment and given the fact that if you look at 2019, the economy was driven predominantly by the consumer. >> absolutely. >> and if you look at the numbers i've been following closely, the spending has been still been very strong but if you look at employment, wage growth, payrolls these are ticking lower and some of the things -- the cracks i'm starting to see. >> yeah, i mean there are a couple of things going on here much more "options action" right after this >> announcer: "options action" is sponsored by think or swim by td ameritrade. welcome back to "options ♪ ♪ ♪

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♪ welcome back to "options action." it's time now to look back at a couple of our trades that remain open last week toney said ge could power higher after earnings. >> i like the stock because it broke out in january above that $11.5 resistance level and it's re-tests that as support it's starting to outperform the secretary are. not only do i like that relative strength into earnings, the industrial sector itself having spent most of 2019 going sideways broke out in november i'm going to march and looking at the 11 x 13 call vertical buying the march 11 calls for about 1.0 a and selling the other calls by. >> look what happened ge up more than % since the trade how are you managing this. >> this trade i took profit on this the day after the earnings announcement if you did that you would looking at 70, 80% gains but if you were holding on it's pulled back a bit still up 33, 34% i do recommend taking profits on this trade.

>> any reactions guys. >> also because industrials are themselves are in trouble, right. industrials making new seven-year leans ge grab it when you get like that. >> the manufacturing number out of chicago confirms the manufacturing sector remains weak and mike cho said tesla might put the pedal to the metal in earnings but don't expect the gains to stick around long. >> we have seen some large, large moves. actually where we see the significant concentration of the moves is right here. and that is representing a move

of down 10 to 15% from friday to friday capturing the week where they report earnings. we are targeting that price right there. and the trade that we're looking at here is a diagonal calendar i was looking at buying the june 475 puts, about 350.50 looking at that earlier today. and then selling the weekly 500 strike puts for 11.40. >> and what happened with tesla? well, they soared double digits, the stock on earnings report this week. now up more than 13% since that trade what are you doing, mike. >> this is an interesting situation. because obviously my expectation was not that tesla was rocketing to new all-time highs. but using the diagonal spread we

spent about $23 to put that on right now president puts we own closed about $20 we're fairly close to unchanged in terms of the total value. the things is 475 is a remarkable decline here. two things you could do. just take the trade off right now. and say that you're not interested in speculating on tesla one way or the other because it seems to be demonstrating so much strength the other is you sell some nearer dated puts. maybe the march 50 oh strike. >> also universally stocks gapping up such as this gave back gapped up today. that alone is a testament to credible relative strength and implications are more to come. >> all right we're taking a quick break. up next, our final call. >> announcer: "options action" sponsored by think or swim by td ameritrade 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 to "options action." we have some i guess you call it breaking news out of europe. you are looking live at london at number 10 downing street. there is a countdown clock a minute and 46 seconds until the uk officially leaves the european union after years of the negotiation. brexit officially happening at the top of the hour. midnight london time the saga of brexit will end.

lets turn back to options time to take tweets viewer says eem took a hit is a long call a good play, carter >> it's not took a hit, copper, oil, high correlation with commodities in the eem and looks like more downside. >> i think if you were making a bullish play on this calls would be the only way to do it the good news is implied volatility around the 2-year average not overly expensive >> tony, quick thought. >> i wouldn't mind a stab at this and see if you get a quick bounce using call options. >> lets go to final calls lead us off. >> speaking of commodities, gold, long gold. good place to be. >> good place to be how we began the show mike. >> i like gld diagonal call spreads making that bullish bet in gld and long puts in xly with the flexibility. >> toney be last word. >> disney.

i'm looking for disney plus to give us another big earnings announcement here. looking to buy a call spread on disney >> all right thanks guys. really appreciate your being with us tonight. that does it for "options action." we'll be back next friday at 5:30 p.m meantime back to london. the last 20 seconds of the uk in the european union "mad money" starts 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, (crunching) but yuck! (sizzling) 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! (slamming) 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