he's a predator. he is preying on people in any way that he possibly can. it wouldn't shock me if he was in prison telling people he was a prince right now. captions by vitac -- happy friday, options actions fans we've got another great show coming up for you. if you're already not planning on shopping, you might not be alone. that's why you should be preparing options trades instead. carter worth will explain why. then -- tony zheng is going to make you sweat and then yell at you to work harder. then turn up the background

music to deafening all from the comfort of your living room. find out why he thinks there's still time to ride peloton. finally, don't let the recent news make you antsy about playing alibaba. profess profess professor e choe helps you "options action"s starts right now. >> let's get right to it broader market by more than 5% as a number of names pulled out earnings beats but our chart master says it may be closing time for the retail space. carter, what are you watching? we know that retailers typically report learning late in the cycle and we heard from almost all of them now and it has been quite good. so the question is, is it a bit too much let's look at a few charts and tables first, of course, the etf(xrt) is the spdr retail

what you can see here is 84 stocks and $3.1 trillion you're talking about the biggest names in there with walmart if there and tiffany, costco, amazon, macy's, urban outfitter, and it goes on and on. look at a few tables first one-month up 7.25% look at the three-month, next table. up 11 1/2 versus the entire sector up six, a double. look at the six-month performance, again here up 51%, almost double the sector up 27 so the question is have we come a little too far too fast? that's the thinking. let's look at a couple of charts no judgments made, no annotations by me.

now, the next chart. what we know is that it had five distinct draw downs, corrections if you will of 10% plus. you can see them there the thinking is we are due for one of those the final chart, it is lines drawn, converging trend lines, which you can see. it is all the same chart three times. now the question is, we're up against the upper band of that internal trend line, the thinking, we pull back towards the lower end. that would be about a 5% plus sell-off from here i think that's is what is coming. >> all right, carter thanks for that. mike, what's the trade based off this >> yeah. so, you know, xrt, as carter was pointing out, is a really broad basket of stocks unlike other things that are heavily cap weighted where maybe amazon or the microsofts of the world basically predominant, this is a larger groups of company and each represents a smaller part of it of course, if you're looking at the multiples, the p.e. multiples, you're going to see 50 times earnings. you have to put that into con text we're in an extraordinar period right now, but i would

point out we are seeing basically all-time highs in this thing. what you have to be thinking about is what is the next step we have obviously had a tough economic environment, but th consumers have been supported by a lot of stimulus and aid. some of that might be running out. in addition to that, we also have a situation where we're seeing an upsurge in cases that can hurt consumer confidence, whether it's concern about their jobs or just about spending in general, all of these things and, of course, we're dealing with a lot of large-ticket items. it is typically a big spending season but i would say i think we are pretty extended here i think what we want to do is if you have exposure to the stocks, you want to hedge them or sell if you are so inclined you might look to take a bearish bet if you are looking at xrt, i was looking out to january the 55 -- 50-foot spread you could spend about 95 cents for that, spending about a dollar for the higher strike and then selling the lower one for 55 cents now, you'llnotice that the payoff here is a little better than 4-1, slightly better than

we normally get. to choose a spread out of the money, we are looking for more bang in the buck even if we only get a 5% decline, even if it don't run to our short strike, this should go up fairly handsomely and the lower strike put will help mitigate a decay of carrying one like this. >> tony, how do you like the trade? >> yeah, i quite like this trade because if you look at the chart of xrt, it has all the classic signs of exhaustion. basically over the last three months as it continues to make higher highs, we're not seeing momentums confirm the higher high we are seeing the negative convergence from momentum, and during that time the market breadth of xrt continues to decline. these are signs we're near a market top and about to see a correction if you look at the retailers, a lot of them have moved their sales earlier in the season, some to avoid black friday crowds in their stores amazon moved prime day to october 15th that will take some of the strength that we typically see going into the end of november and beginning of december.

so i like the fact that mike is going out to january, giving him plenty of time the implied volatility here is fairly cheap, and he's onl risking 1.7% of the etf's value to take this bet it is a very small risk of the overall etf value. the only thing is when you buy an out-of-the-money debit spread like this, if xrt doesn't move fairly quickly or fairly soon, you do have some paper losses. so as for investors, it is small risk, but be prepared in the short run. you might see losses until this starts to accelerate to the downside >> carter, i wanted to go back to a point you and mike were making about the xrt as an instrument being comprised of smaller real tailers names, not the walmarts, not the targets of the world. so what do you foresee for walmart -- for the walmarts, the targets versus, you know, the

bearish outlook you have if xrt? >> sure. remember, those big names are in the xrt, it is just the xrt is essentially an equal weighted index versus the transferring sector versus market cap weight, the names you are referring to those are also far along let me just say that walmart, target, they've been great, but we know all great up trends typically are punctuated by givebacks, pullbacks, dips, corrections, whatever nomenclature one chooses but to stay healthy you want to have pauses and rests and we're playing for that in xrt. for regular retail to highly discretionary fitness spending, peloton up higher today and up triple digit on the year as americans get their exercise from inside the house. to tony zhang says the stock could still be fit for more gains ahead. tony, what is the trade here >> yeah, i want to take a look at peloton because i think it is a stock that is -- has been misunderstood by some investors

as an expensive spin bike company with a cult following. i think they've really pivoted here over the past couple of quarters into an all-around digital fitness platform i think that's the bigger term opportunity here for peloton if you look at the chart itself, the stock recently broke out above its $100 level in late september, took a big hit after pfizer's vaccine news, down about 20%, but held the $100 support level as -- retested the level as support and holding it and continuing its continuation higher here. i think it is an opportunity to take a new long-term position or a new long position here in peloton. now, if you look at the valuations here, by all means this is an expensive stock so when you look at some of the stats that justify these valuations, some investors will say, you know, this is due to the pandemic, it's not sustainable, 113% subscriber growth versus the same time last year if you look at quarterly revenue, up 170% versus the same time last year but the one step i want to point

investors to that i think speaks to the shift, peleton had over the past couple of quarters, that's the average number of workouts by subscriber per month. for years they averaged 12 to 13 workouts per subscriber per month. over the last quarter it doubled to 24 workouts per month that speaks to the shift that peloton has taken now into -- outside of the spin bike into tread, into yoga, into boot camp, into meditation. this speaks to the fact that the opportunity now is not just here for spin but for overall fitness. i think that is a long-term opportunity here for peloton so the trade structure that i want to use here really reflects the fact that it is trading at a fairly rich val using, and it is at risk that more vaccine news may take a small hit to the stock, but it will likely recover from that. so the trade structure i'm going to use is a put vertical spread because if the stock declines a little bit on some vaccine news and comes back and stays to where the current level is, it can still be profitable at these current levels

so i'm going out to december 31st, and i'm selling the 110, 100 put vertical here, collecting about $9.40 for the december 110 put, collecting about $5 for the december 100 put. net/net here, i'm stil collecting $4.40, which is 44% of the $10 wide credit spread. that's the type of risk/reward that's actually fairly hard to find even though the implied volatility for peloton isn't that particularly expensive. >> mike, what do you think about the trade? what do you think about peloton directionally? >> so, you know, it is interesting. of course, the valuation is hard to get your arms around, but i have to say that i suspect that the secular trend is in their favor. you know, some people who have been watching for some time know i refer often to the holly index, you know, we used to participate in something called orange theory, kind of a social workout sort of thing. it is a very different experience, and i think that trend is here to stay. of course, we can't do that kind o in-person thing, sopel on the is in the right place.

it just so happens it is, unfortunately for most of us, also the right time for them so i think they're in the right business that's the first thing i would say about it the second thing is just talking about tony's trade, three things can happen two are good, one is less bad. if the stock goes up, you will collect that premium if it just goes sideways, you collect the premium. if you are concerned about the valuation and the momentum fails to keep up and it rolls over, you are actually risking considerably less than you would be if you bought the stock and you are taking advantage of the fact options premiums remain relatively elevated. i think the trade structure makes sense, secular trend makes sense. the valuation, look, that's always the situation when you are dealing with story stocks like this one is if you think the secular trend will continue, if you do believe it, the promise could be real. >> when you said we used to participate in orange theory, do you mean holly used to participate in orange theory >> let's put it this way she made me go. >> okay, all right. >> but it is a social thing. yes, i did do it too

believe it or not, you wouldn't know it to look at me, but i haven't gone in a while. >> it didn't seem like your cup of tea per se. carter, what do you think? >> this is a money flow issue. what was up today, zoom, docusign, way fair, poll ton all dropped exactly 35% to 37% peak to trough it is a money flow thing more than anything else >> for everything "options action," check out our website "options action" cnbc.com. while you are there, sign up for the news letter. here's what's next remember the childhood snack, ants on a log, celery and peanut butter and raisins? let's say you had your snack on the playground and the ants fell into the dirt, do you cry? no, because the celery and peanut butter is still a great combination. the professor explains why the same could be said about alibaba. yes, that's a lot to unpack. but it will make sense after the break. plus, calling all "options action" fans reach into your pocket, grab your phone, and tweet us you

question @optionsaction. if it's nice, we'll answer it on air when "options action" returns. "options action" is sponsored by thinkorswim by td ameritrade ♪

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♪ ♪ ♪ ♪ ♪ declining dollar mike showed you how to set up a bullish trade on emerging markets using etm etf he will get to the performance in a minute but it is worth noting that the largest holding

alibaba encountered a slew of headwinds in recent weeks. that's also worth digging into on its own mike, take it away >> yeah. so the reason we were making the trade on eem is definitely sometimes you are dealing with relative trades. you know, do you prefer one market to another, one asset to another? really, i think what it came down to, carter and i were both talking about this last week, that we prefer emerging markets to u.s. markets. the u.s. equity markets had been hitting new all-time highs the emerging markets had not this is despite the fact that the data coming out in, for example, the asian financial results were actually quite strong so we were favoring that, but, of course, you were talking about baba, which is one of the largest con p stastituents of em but it had some idiosyncratic issues so i still favor emerging

markets over u.s. markets. i still favor being short the dollar on balance which was our other trade. what i am taking a look at is buying the february 270 puts, selling the december 285 strike

calls -- excuse me, i said put calls against it net/net you will layout $15. it is a trade that should benefit from the decay of the 285s over time by december expiration and gives you longer term exposure to the upside by having the february 270 calls. so i think this pull back that we've seen in alibaba is an opportunity for that stock specifically i think it is going to ride the larger emerging market trend, which i'm definitely more favorable on than u.s. markets right now. >> all right, mike carter, you've got some charts for us on baba. >> sure. just three simple ones first is just baba, two-year chart. stock is double, 150 to 300. the second is with the 150-day moving average -- excuse me, it might be the one with the drawdowns. the second chart, you will o this had distinct pullbacks, not 10%, but more like 20% in fact, four of them. this recent sell off from 320 to about 250, where has it stopped? last chart, right off the 150-day moving average for a buyer here, it is the biggest constituent of eem and

follow-on trade from last week's eem buy. >> all right given all of that, given the charts, given mike's trade, tony, what's your take >> yes, so i completely agree. just to reiterate what we were saying last week on eem, you know, the exposure you get from a geography perspective and sector perspective looks constructive compared to what we're getting from domestic perspective. the stock has obviously overshot a bit to the down side on the ant ipo news. the fact it held the 260 level, which as carter said also corresponds to the 150-day moving average, i think is very constructive for the long run. as mike said, if you look at the results here of baba, it is pretty much in line with what we would expect from china. from my perspective, baba's growth isn't particularly strong 29% revenue growth is in line with what we're seeing out of the asian countries. the billion dollars in a single day was strong, also 30% growth from last year overall i think the long-term

view on baba is constructive and the trade structure mike is using, the diagonal spread, is suitable for what we consider a more stable growth here to the upside the only small adjustment i might make to his diagonal spread is he's using the december 285s. i would adjust it a little bit higher to the december 290s because you have a gap fill for baba up to the 290 level i think that by december you could tag that level and potentially just be shy of that 290 level by december. mike, were you laughing at tony nitpicking 29% revenue growth >> yes, i was, actually. i mean that's remarkable growth. it's one of the largest growing markets. it's a company that if you're keeping pace with one of the fastest growing economic areas in the world, that's pretty good, and 30% revenue growth is pretty good. i would ask people to think about one other thing, too this is a company whose valuation is about half of that of amazon in rounding numbers. think about the opportunity here if amazon is worth $1.5

trillion, where's baba going to be five years from now ask yourself that question and then decide how you feel about the valuation and those growth numbers, which i think personally are pretty phenomenal. >> all right up next, you ask, we are answering. the options traders are standing by to take your video tweets on air. don't go anywhere. much more "options action" up next "options action" is sponsored by thinkorswim by td ameritrade before we board. excellent. and you have thinkorswim mobile- -so i can finish analyzing the risk on this position. you two are all set. have a great flight. thanks. we'll see ya. ah, they're getting so smart. choose the app that fits your investing style. ♪

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♪ welcome back to "options action". time to take some of your tweets elijah in california is wondering if boeing shares could take flight in the next week >> hello i'm fairly new to options trading so i thank you guys for everything you do over there at "options action" i have a quick question. i have a call option in boeing that expires on nov it a

longer term one than short-duty options. >> with covid cases on the rise, neil in california is looking out to option plays. >> with covid cases at all-time highs i'm looking to see which company can duplicate stellar earnings from last quarter, pintrest or snapchat which one do you like better, and what's the play? >> well, snap shares posted a gain of 54% since the company's last earnings report in late october while pintrest is up about 27%. tony, would you rather snap or pintrest

>> i think between the two i certainly would choose snapchat over pintrest. as you said,the stock's up 54% since the last earnings announcement i think it's a tall order for it to continue rising especially after the next earnings announcement. but the next earnings are not until february 2nd so i think you have a lot of time to wait and wait until early february before you have to make a decision as to whether you want to enter a new position. >> carter, would you rather based on the charts pintrest or snap >> i like them both. i'm not going to play. they're fantastic. the strength is the number one factor that's ever been tested in the models around the world this is the definition of this is the definition of relative strength, pins and that's why td ameritrade designed a first-of-its-kind, personalized education center. s.n.a.p. award-winning content is tailored to fit >> wow all right. up next, "the final call." "options action" is sponsored by -- s recommendatio.

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there were tsunamis fourtin the world. and once they happened, we were in a major hurry to get to those regions to provide aid and support. it was very humbling to be able to help out all those people. it's my dream now to go into clean energy and whatever the next new fuel source is, that's where i want to be. i want to be on the front lines of implementation. as amy first jober, is to care for derek. everything i do is for him. when i moved to this apartment after six months, we need to connect with the world. i use the internet to keep him in the language,

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carter >> short, retail, xrt, baba. >> tony zhang? >> peloton it will revolutionize the way we work out, selling a december put vertical spread. >> mike khouw. >> long xrt put spreads, along the diagonals in baba. >> that does it for us we're off next friday after thanksgiving see you the following week "mad money" starts right now - [narrator] the following program is a paid presentation for the oxypure air purifier, brought to you by nuwave, llc. asthma and allergies are at an all time high, and it seems to get worse every year. it's not your imagination. allergy season continues to get longer and more intense as temperatures rise and airborne viruses are becoming an epidemic problem worldwide. with the changing environment and unseen dangerous air pollution surrounding all of us, you need clean air more than ever. if you suffer from mold, dust, pet dander, smoke, odors or sleeping problems, discover the nuwave oxypure air purifier,