so we will recuperate on that, but emotionally, i mean, this was a friend that we trusted. and for him to do this to us, it's really, really shameful. very, very shameful.

my final word to you, beari bearish overrule on banks? >> well, i think actually, over the course of the last couple of months, on many occasions, i've indicated i was actually positive on financials i thought it was a laggard i thought they were due. i thought they were undervalued on a lot of other things on the market, and the issue is not whether or not they deserve to get a bounce but whether that bounce they already experienced in many cases is really material by the way since october and certainly since that late august, early september time frame, some of these things are up 50% or more, it is really whether it will continue and this kind of a trade isn't so much gee, we're going it go back to the august levels, the september level, what i'm saying is i don't think we're going to see an unabated continuous increase over the next 30 to 45 days. >> bank stocks aren't a hot gift

for the holes for you and how about this, the video game trade has been red hot check out the electronic arts. up more than 25% year to date. activision blizzard, up 41%. and another, 25% and game on for one of the names. tony, take it away. >> i want to take a look at electronic arts. i really wish this wasn't the case but the rise in covid cases around the country right now has put lockdown type stocks like electronic arts back into favor here so first, i want to take a look at the chart over the sector, with i is largely a sector that will outperform the market as we go back into lockdown and you can see xlc recently breaking out above the $65 resistance level and coming back to retest that level and starting to trend higher and a communications sector that is starting to show some strength and electronic arts, one of the stronger names within the communications sector, electronic arts has largely been

consolidating here since august, putting in a pretty large what you would consider a flag or a wedge formation but recently breaking out higher and the confirmation of the breakout around 135 and the relative strength to the communications sector, i think that is constructive for electronic arts to continue back up to the 145 highs and if you look at the company itself, there's a lot to look forward to in 2021. x box and play station recently just dropped ea, very strong in the mobile space. so during the lockdown, with mobile games, it has been extremely strong and then you look at some emerging technologies like v r and ar, they're starting to gain some traction here so if you look at ea trading at 22 times earnings is relatively cheap compared to those other two peers that you talked about, activision, and take two, and for those reasons i like ea and the trade structure i'm looking to use here really account for the fact that the markets are in a bit of momentum here and i want to make sure i limit the amount of down side risk that i

have on this particular pride while playing for the upside so i will use a call debit spread and going out to january 29th, and i'm buying them 135, 145 call vertical, spending about $6.55 for that 135 call. and collecting $2.85 for that 145 call, because implied volatility right now, it is a little bit elevated, offsetting that by using the debit spread and paying about $3.70 for this debit spread which is only about 2.7% of the stock's value. and the goal here again, using this type of structure, is to minimize that risk that only 2.7% of the stock's price. >> tony, quick question here is it weird or unusual that ea does not list options for february and what is behind the thinking of going closer to this, as opposed to going beyond february >> unfortunately, the only other option that was listed, going out to march, i thought that was a little too far out at the moment it really comes down to

liquidity. ea is not one of the most liquid names in this particular space but that's why we have a list of options here for february right now. >> mike, what do you make of the trade? >> so, you know, it's interesting, electronic arts is one of those companies where their product offering has better visibility in many respects than some others. we're not dealing with some kind of a trendy short-term thing we're not talking about candy crush here you're talking about madden type games. and i have kids, they play these things they're using digital distribution now and there's additional monetization, i'm sorry to report, for ongoing users, to spend money while they're playing these games, and of course, people are playing more of them. so it isn't just a one-time sale these are companies that i think have much better long-term visibility on their revenues than game companies did in the past so i do like ea. i do like its valuation. i think the short term that tony is using actually isn't just an issue of whether or not the february options, this is

basically a winner or a lose situation going into the holidays, will they do exceptional sales, i think they probably will but if they don't, you will basically have a trade that will pay or not by january. a longer term option spread wouldn't necessarily monetize entirely if it ran up to the short strike i like the trade structure the duration in particular and i like ea. >> don't forget we have a web site, and we have a newsletter, options action.cnbc.com. and we have a lot more coming up in the show. lately facebook has been the poster child for a lot of things starting with the letter m tonight, we will add one more, markets.

♪ ♪ ♪ ♪ ♪ welcome back to options action i want to call your attention to a big mover in the after hours dropbox, jumping more than 9% right now. not exactly clear why. there is not any direct news that would cause the stock to move there is some takeover chatter that was out there this morning. the information putting out a story earlier listing possible takeover targets in the software space and that included dropbox

along with box and amongo db but we are seeing a rise in the stock of 6%. and any other unusual activity in the options market, mike? >> well, it's not unusual activity above and beyond the speculation that was already out there. just a couple of observations i would make first of all, you're dealing with a cloud-based company obviously if there is m&a activity, we've just seen a lot of activity in that space. so that obviously makes some sense there. so synergies, people are trying to exploit that and we're sort of in an m&a happy environment that's the first thing i would say. secondly, with respect to valuation, this thing traded up to 23.70 or so earlier this year one of things you always want to think about when you hear takeover chatter like this, what might the share price be one thing you can probably guess for sure is that the board is not going to go for a price what is below a recent high so that suggests that we would have, if there was a takeover, it is likely going to be higher than $24 a share and when you take a look at the forecasted

ebitda, it is not totally out of reach, it's not like the multiples here are so out of step with reality. so is it possible? yes, it is certainly possible and with the price north of $24. where it is currently trading, i think so. >> let's move on here. today's market sell-off and tech's recent volatility has us thinking about volatility and the vix is relatively low compared to preelection levels there is something under the surface that has investors spooked. should it spook you? not one, but not two, and all three of the option actions traders are looking at the volatility vexation, try to say that five things fast and let's kick it off with a call to action mike >> so we've been talking a little bit about what the options markets have in store for us in the early and maybe into the middle part of next year and what we are seeing is somewhat elevated volatility so right now, the qqq, which obviously is a fairly tech

heavy, the six month volatility is about 40% above its ten-year average. if you look at xlk which is obviously an even more tech heavy etf, it is 45% above the ten year average and combine that with the fact that the nasdaq 100 index in terms of the multiple to earnings, whatever, 37, 38 times earnings, that is about 70 plus higher than its long-term average. translate that into what's going on so we're not at that total red panic zone am and we're not at the fully complacent zone, as far as the options market is concerned. we're kind of in this cautious little area. we have higher implied volatilities and traders should be aware. you can expect to see your portfolio bouncing around significantly more than we traditionally would. >> all right, thanks for that, mike carter, you're the chart master. what you are looking at? >> -- what are you looking at? >> a couple of things. but one thing, evaluation is not, valuation is not a good

typing tool but when valuation does stretch, it is the circumstance that does set on drawdowns. in terms of the month of january, we might have some stats here on the screen, i mean basically it is the fourth best month of the year, and the odds of being up are around 63% and you can see the median, mean, there around 1.5%. and i would point out though that some of the greatest drawdowns of all time have also occurred in the month of january. the 73, '74 bear market in january is when it started and then most recently consider, this the drop in january, 2018, two years ago, the ten session plunge, was the steepest ten-session drop ever reported, including any ten sessions, and big drop occur in january. something to keep in mind. >> tony, what's a trade that can wrap this all up >> yes, so the one stock i wanted to take a look at was

facebook, because as technology shares start to underperform the market, especially compared to what we saw earlier this year, in terms of momentum, for investors here that are holding facebook stock, news this week hasn't been particularly strong here with the anti-trust suit this week coming out. i think it this has spooked some investors. but if you think about this the news event here, the anti-trust suit in itself doesn't necessarily mean it is a good time to necessarily sell your stock. the risk of a break-up here at the moment here is still relatively low and it's likely to drag out in the court force the next two to three years. so for investors that are currently holding facebook stock, i don't think it is a good time to initially go out and sell your stock but due to the high implied volatility that mike was referring to, and the fact that you have potentially limited upside here for a name like facebook, it's a great opportunity to potentially sell some covered calls and with the elevated implied volatility right now, you can collect quite a bit of premium so the best practices for selling covered calls generally speaking is to go out 45 days

from expiration and sell about a 30 delta call. so for facebook that translates to the january 29th weekly expiration and selling about the $300 call option which koerpds with the recent all-time highs here, and selling that call option here, will collect 2.5% of the underlying stock's value over the next 45 days and that's quite a bit of premium that you're able to collect here so i particularly like this. because for the stock to get it right, facebook has to get to new all time highs back by the end of january. >> a nice juicy option carter, what do you make of that level? >> it is a great level because once you sort of stall, to the extent that a stock like this is stalled, remember the stall is a post-condition of proceeding strength. and facebook off its march low, much more than the stock market, up, quite extended and now the stalling, whether it's the pause and the rest before going higher, or the stall that ens up being a rollover, selling premium above, great technique

>> mike, what do you make of it all? >> yes, two things about it, when implied volatility is high, it's hard to shield your portfolio by buying options, because they're suspense in. and instead of shielding, you should be looking at yielding, and that's what this one does. you're collecting about 2% of the share price over a relatively short period of time. and that, by the way, in a very low yield environment, generally, and as both of these guys were pointing out, the worst thing that could happen to you, if you own facebook, right now, and you do this trade, versus not doing it is, that you will be compelled to sell the stock 1% above its all-time high which isn't a bad outcome for any shareholder. whether you bought it today, last month, last year, or several years ago. >> instead of shielding, you should look to yielding. that is a winner up next, we are taking your tweets you can send us your questions at optionsaction and we will answer some of them on air we'll be right back after this it's a thirteen-hour flight, that's not a weekend trip.

fifteen minutes until we board. oh yeah, we gotta take off. you downloaded the td ameritrade mobile app so you can quickly check the markets? yeah, actually i'm taking one last look at my dashboard 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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reached an all time high this week, and quite a few unusual option calls expiring in december with a strike price of $96 to 103 tony, do you have an answer? >> the breakout of above $90on the chart looks fairly constructive and it may seem like it could reach that 96 breakout high to 103 but the one thoi thing to point out is the relative performance of amd to t the semiconductor chart is concerning to me. >> we think most are extended and i don't think there is enough time to pull off a 96 to 103 strike >> okay. up next, we have the final call. stay tuned 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,

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visit tdameritrade.com/learn ♪ ♪ final thought time carter >> $8.5 trillion in the market,

in you're worried about the market, sell your -- >> i like electronic arts. >> mike? >> black rock. >> mad money with jim cramer starts right now - [announcer] tg program is a paid advertisement for nuwave oxypure smart air purifier sponsored by nuwave llc, featuring deborah norville on award winning journalist and new york times bestselling author. - we are all living in strange and unsettling times. never in history has everyone on the planet been challenged by the same thing. covid-19 has changed the way we work, the way we interact and we're all still trying to figure out what it means for our future. amidst the uncertainty, all of us are trying to take care of our families as best as possible. i've lost track of how many masks i've made and we've all been wiping down door knobs and surfaces.