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and carter's charting was an itb. do those charts look at dire as it's provided quite a bit of defense. xhb has only been down about 4% this week, actually up significantly today while the markets were flat. so i'm not as bearish here on

this particular sector but i do like mike's trade here. because even if the sector drifts sideways, as mike says, he can actually still remain neutral on the sidelines with this particular trade. i like the strike prices too the fact that he bought the $50 strike price, that's slightly out of the money that means that he's risking less capital on that january 50 put. and by selling that october 48 put, he's actually collecting a fair amount of premium that even if this trades sideways, he's not going to necessarily take on a loss >> mike, last word >> yeah. i think one other thing to remember is that those january options capture a lot of things that the october options lbt, which is not just the last upcoming earnings that we're seeing, but of course ones that we're going to be reporting in january and the election so owning those january options but finding a way to finance them probably makes some sense >> this week was a huge one for general motors and electric vehicle upstart nikola

there was a $2 billion investment in nikola and both stocks floored it alleging fraud against nikola. the company has since dismissed the allegations but they have not been shaken off just yet tony is grabbing his toolkit and opening up the hooed on gm so, tony, what's your take, what's your trade? >> there was a lot of news this week that drove volatility in both gm and nikola i want to look past the noise here and i want to take a look at gm's focus on their future. and perhaps harvest some of it using options. if we start by looking at the gm chart here, the stock has really underperformed over the years. but it recently broke out above that $30 resistance level on the news of this deal.

it recently obviously retreated back on the short seller piece back to that $30 support level but that's actually the attractiveness that i see for a long opportunity here, the fact that $30 has held. now, whether or not nikola is a sham or not, i'm not here to -- i don't really have any insights into that. but i don't really see that as in the long term negative for gms as a business. what i really want to focus on is it speaks to gm's investment into alternative power trains for their vehicles in the long term if we look at gm's portfolio here for the next four years, as you can see, their portfolio for electric vehicles is roughly double what their competitors are about to put out here over the next four years. and they're really focusing on those high-margin cars for their business so, this is one that i really quite like my view here for gm here is for the long term, if nikola turns out to be a success, i do think that gm is a safer way to

potentially play for that particular upside. so i like the stock in the long run and i want to utilize options to take advantage of that elevated and applied volatility the strategy i'm using here is going out to october and i'm selling $30 put options. that's collecting earlier today about $1.55. that actually represents a little over 5% of the underlying stock price. and if gm is actually below $30 in october, i'm able to purchase these shares for an effective price of about $28.45. that's about a 10% discount from the price from the news from when the deal was actually announced. >> mike, what do you think of this trade >> i think tony's right about one thing. and that is that obviously all of the news is going on around nikola that may have some impact on general motors, but it's not the key story for general motors' success. one of the things i also like is that put selling is really a good investment strategy when you take a look at things that

you can do recurrently to generate some yield to buy stocks that you want to purchase at lower prices so those things all make sense to me obviously general motors has been trading at a discount for quite a while. and one of the things they are facing is they have a lot of debt but at the moment they have sufficient cash to cover their needs. and the put that he's selling, expiring as it does in october, actually expires prior to the next time they announce earnings, which will obviously be the big and major catalyst that could potentially move the stocks sharply so i like the strategy if i was forced to try to say would you rather, nikola or general motors or tesla, general motors is probably the stock that i would choose. >> i'm excited to get to carter's take. because if you take a look at the ten-year chart, gm shares have gone really nowhere they're actually lower than they were ten years ago >> that is the irony we're coming up on the ten-year anniversary of obviously the equity went to zero. bailed out by the government

it was november 17th, 2010 so in a month and a half we'll be there and the ipo price was 33 and on the news of the nikola partnership, the stock popped to 33 so it's been a decade. and think about obviously with inflation. i mean, i think it's a very defensive way to be bullish. if you're really bullish you buy calls, selling puts, i get it. it's sort of a muted way to get bullish. but here's the thing this is a long-term dud. >> oh, that's it [ laughter ] so direct, carter. a long-term dud. okay we're going to leave it there. for more "options action," check out our website optionsaction.cnbc.com while you're there sign up for our newsletter when hunting for yield, make sure you don't accidently shoot yourself in the foot plus, calling all "options

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♪ ♪ ♪ ♪ ♪ welcome back to "options action." in a topsy-turvy world where a selloff can strike at any moment, can we at least get some yield for crying out loud? unfortunately, the answer is largely no but if you find yourself yearning for that sweet, sweet yield, mike has got a dividend trade. mike, take it away >> yeah.

so this is a tough situation obviously for yield-starved investors. they tend to scream for stocks that have high dividends and if you've done anything like that for sure two names will have probably popped up on your list and those names are at&t and verizon. at&t right now has a dividend yield north of 7%. and verizon's dividend yield is north of 4%. all of that while a ten-year treasury is going to yield you about 0.66%. the thing is when you see very high dividends like this and we've talked about this in the energy space as well as we've talked about it in this one, when you see very high dividends, you should try to be a little bit skeptical for one thing, are those dividends supported by the company's cash flows and the other thing you should be keeping an eye on, is there any land mines that might be lying ahead? as we take a look at these two companies, it's interesting at&t specifically had targeted reducing their net debt this

year down to about two and a half times ebitda. verizon seems to have basically hit fewer snafus in the midst of all of this, they have slightly lower debt to ebitda ratios. and it does seem like their plan is realistic going forward here. they just got their results from the most recent spectrum option. they picked up quite a lot and that's one of the things that investors can be looking forward to, which is 5g. that's obviously a potential growth area for both of these companies. i think if you're looking at using at options, the price of dividends is incorporated in them i think if you're looking at verizon, you could look at selling the october 60 puts. when i was looking at those earlier, ukt collect about $1.80. you're not going to get the dividend, but the idea is you are going to be collecting it in

the forms of options premium if you do have the stock put and that's kind of the idea here, you're going to get to own it at a slight discount. it was trading at just under $60. this is kind of like owning the stock and selling the 60 call, which is exactly what i would propose you do if you have the stock put to you you can then look to sell upside puts the stock is already at quite a run. i think dan nathan was referring to that earlier in the week when looking at these companies i think this is a way that you can look to collect some yield this is a relatively stable company right here this is one of those investment strategies and once you have the stock put to you, look to sell additional premium against it >> tony, what do you think about this trade >> so out of the three telecom companies, i definitely like t-mobile the best. but as far as verizon goes, the chart itself is fairly constructive you have a breakout. and i think this is a good

opportunity to potentially get long if we look at the stock itself, the debt and the dividends are well covered by cash flows and we really have out of these three verizon is by far the highest margin and probably the most boring. which for this type of investment is actually a good thing. i like mike's trade because he's selling an in the money put. he has a higher probability of owning the stock and he's collecting about 3% of the stock price to sell this put option. so he's getting about a 3% discount on the potential stock purchase here of verizon i like the stock long term and i like the trade itself. >> carter, what do you think about this run for over ezon >> obviously you're always going to have muted returns in an area like utilities but on a total return basis, this has been a tremendous winner versus the s&p long term. the issue for the stock right now on a sort of long-term

tentacle basis is it's just returned to its 1999 peak. in principal this consolidation is healthy action. and i think ultimately verizon breaks out to new highs finally eclipsing its dot com peak >> we have a news alert that we want get to on merck they have begun testing in humans and taking a look at the shares we do see a little bit of a pop i think. actually, i see it down about a quarter of a percent but this is something we're clearly watching as the markets react, up a half a percent to every little bit of vaccine news coming up next, shares of apple turning sour amid the tech selloff. we will tell you what that means for one of our traders send us your questions we will answer some of them on air. we are back right after this i have an idea for a trade.

oh yeah, you going to place it? not until i'm sure. why don't you call td ameritrade for a strategy gut check? what's that? you run it by an expert, you talk about the risk and potential profit and loss. could've used that before i hired my interior decorator. voila! maybe a couple throw pillows would help. get a strategy gut check from our trade desk. ♪

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financials over the past couple of weeks tony was actually talking about that in morgan stanley last week even though there's a good valuation story here and even though i think the momentum is starting to turn in financial's favor, i also believe it's going to be a little bit of a grind. 26/28 call spread, buying the november 26 and selling the october 28 when i was looking at that earlier today, you could spend about $1 to do that trade. >> the financials held up well compared to some of the other areas of the market this week. so, mike, what are you doing with this one? >> one thing people could do is the october calls were traded down to almost nothing and you could cover those. i think it would cost you only 5 cents to do it so i'd cover that. and the reason we used calls of course was because we recognized there was some downside risk tony said it wasn't too

early to give up on big tech just yet >> i believe that this selloff is going to be contained here with the volatility we've seen over the past couple of days if we look at apple and we're really using apple here as a proxy here for the nasdaq 100 index, there's no question about this chart relative to the technology sector, relative to the market and arguably one of the stronger fundamental outlooks within the tech sector. i'm looking to sell the 115/105 put vertical here, collecting about $8.60, paying about $4.45 for that 105 put i'm collecting about $4.15 net >> the trade is hanging in there by the skin of its teeth so, tony, what are you doing now? >> so admittedly i think i was probably a week early for this particular trade but my original thesis that the selloff was going to be fairly contained that we weren't going to see a further acceleration to

the down side i think still holds. the fact that this trade still hasn't hit any of my stop loss targets yet, i think it's time to hold onto this if they break below 270 or if apple breaks below 110. >> apple is down this week so where do you see it going >> right i think in this instance, there is more downside risk. it's so popular. it was bit up so much. it did have the split that drew in yet so many more and incremental people i think the risk is still to the downside up next we've got your tweets and the final call. i'm searching for info on options trading, and look, it feels like i'm just wasting time. that's why td ameritrade designed a first-of-its-kind, personalized education center. oh. their award-winning content is tailored to fit your investing goals and interests. and it learns with you, so as you become smarter, so do its recommendations. so it's like my streaming service.

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♪ ♪ welcome back to "options action." time for some tweets what spreads would you use in an iron condor for tesla expiring the friday of battery day? battery day is this upcoming tuesday, september 22nd. >> so the immediate options that expire there after are the ones that expire on september 25th. this is a volatile stock so you need to choose your stocks fairly carefully selling iron condors, look to sell about 30 delta. that's going to be around 420 or so based on the closing price for the up site. and then you just get some outside wing options to cover that >> final call, carter?

>> icb or xhb short. >> tony? >> look past the noise of nikola into the future. sell puts on gm to potentially acquire the shares with a significant discount >> "mad money" starts right now.