on computers, mobile devices, servers and the cloud. join the world's leading companies in our mission to defend. cybereason. end cyber attacks. from endpoints to everywhere. happy friday options actions fans we've got another great show first, we'll get some actual utility out of utilities we'll could some oil exploration to see if you can jen rates some reserves and lessons to take away from tesla and why we continue to get a charge out of general motors i'm joined by carter, mike and tony let's get right to it. utility. noun, state of being useful. profitable or beneficial carter worth explains how the economist sector can be all of that and more. right now, carter.

>> sure. well, you know, we -- the thought was let's do something we haven't done in a while, and also something that's maybe an offensive and defensive play we know rateson had a big move got to one spot, 19% and backed off a bit. thinking that maybe rates are stuck now, utilities, which are exhibiting day-to-day relative strength are a place to consider on the long side a couple of charts to get us going. the first is simply talking about the importance of total return this is a ten-year chart two lines. the s&p 500 itself versus the s&p total return you can see the numbers on a ten-year basis, the s&p of 194% total return 263 look at the second chart just to make the importance of yield. this is a 30-year chart. s&p up a thousand.

total return up, too, double over time, looking back at the beginning of markets, turn of the search are i, yield is half your total return. very important let's drill down on utilities. next chart xlu this is the spider select etf that matches or tracks the utilities sector there's a lot of tension here. we're working into the apex of a wedge, standoff, if you will, and the thinking is we're going to get resolved up the yield at 3.42% versus the s&p at 1.56. 2.2 times out of the mark. that's pretty near historical sort of a ratio, if you will but it's handsome in this environment. final chart is a very up close and personal this is only a three-month chart. i wanted to sort of depict the gradual early stage but very real bottoming out day-to-day performance, relative

performance of utilities we like it want to be long. symbol xlu >> all right thank for that, carter mike, what's the trade >> yeah. so let's just unpack a couple of the things that carter was just talking about there. of course, with options, you know, if you buy a stock, you can collect the dividend that's the type of yield you can get when you purchase stock. of course, when you trade options, options don't pay dividends but that doesn't mean there aren't very sfek p effective ways to collect yield. one of the things we want to look at. yes, it's true, rates have gone up but they still remain quite low. sales have been better than expected for the utilities sector, the s&p utilities sector particularly, take a look at what the sector was prior to the march sell awe we were looking at 18 times, maybe a little bit more. take a look are at the price to earning on that sector similarly it's about 18 times or

slightly less. in fact, it has not completely captured the valuation it had before the selloff compare that too the s&p more generally. it is about 26 times now now, one other thing i would quickly point out. like the s&p, this is a space why you are still seeing somewhat elevated options premiums that sets up nicely for yield collecting trades. we want to do a calendar year trade, february-june 63 call calendar you can buy those for about $2.75 when i was looking at it earlier today. net net you're laying out $1.50 in premium when you do these kinds of calendars, assuming that the underlying remains relatively close to where it is, because the near david options are going to decay more rapidly than the longer dated ones that you open. that's essentially how you generate your yield. pretty good yield in this case

what you're going to be looking at in this irch stance is about $1.20 in the course of a month or so relative to the price of xlu. in fact you're taking less risk. if there was a sell off, you'd be laying out $62 and change here you're going to spend about a $150 instead >> i haven't known you as long, but i guess you don't normally trade xlu tame do you like this trade, the structure of it? >> i actually don't trade xlu very often it's more of an investment type sector but more those -- for the reasons that mike laid out and carter laid out, i really like this trade not only from a technical, but also from a financial perspective. if you look at the chart, xlu is trading within the range you have support about $60.50 and resistance around 65 which happens to line up the

break-even price of mike's calendar spread. with ten-year rates at 110 basis points that'sing go to put a bit of up side cap for xlu the yield you're referring to, 3.1% for this sector is going to provide that support for the sector and play that defensive side for those reasons, technically and financially i like the range bound play traditionally when you're looking at options to do so you might sell a straddle to play a range bound. mike has been very creative here, using a calendar spread, look at the risk proposal of that calendar spread it looks similar to a short straddle, but a short straddle requires a high amount of mar zwroip get into that trade versus this calendar, very similar risk proposal, limited risk and you're in this particular case laying out about 2 and a half% to -- 2.5%.

if the february expire worthless he effectively owned the june $63 calls for only about 2.5% of the ets value. for those reasons, i really like this trade >> do you have to have a v that rates or caps in order to be a believer in xlu? >> i was looking at the sequencing rates have that epic low in margin, 30 base points, thereabout we've worked higher ever since the backing away, you don't quickly regain that one-two level. 1 119. rates on sorts of a week over week basis are range bound by my word that's out of the way. >> there is a current running

through our next few seg jms from utilities to ev general motors pulling back. the stock has been ripping as the company pushes deeper into the ev market. tony says there's still money to be made in this one, tony, take it away. >> yeah. so i want to talk about gm here as a play for electric vehicles for a lot of investors that are interested in this trade, a lot of the other startups or big companies in this particular space are trading at what i would consider eye watering valuations investors may have a tough time wrapping their arms and buying their stocks at this type of valuations for those looking for eva, i think gm has a lot more up side. if we look at the chart itself first, over the past ten years post to bankruptcy, the all-time highs for 2k3w78 was ab ababout $46.50

especially when you couple that breakout here above 46 with the relative strength outperforming the s&p 500. i think you have a lot more up side for gm. what will i like about the business here is that most of the other electric vehicle startup companies have single differentiators of their companies for electric vehicles, whether that's battery technology, whether it's autonomy, hydrogen fuel cell what i like is they're a established player and they've secured partnerships across all these technologies and they're looking to launch 30 new electric vehicles by 2025. i think gm has the up side potential for a much larger revaluation in the multiples that it's currently trading in not at 30, 40, 50 times sales that these other startups are trading at for those reasons, i like this substantially. now, i mentioned gm back in

early september when it was trading at $30 now that it's trading above 50,ity think that there's still up side. i'm going to use the same trade structure that i used back here in september i'm going out to february and i'm selling the $49 puts here. that will collect about $2.55 here for those puts, which allow me to potentially purchase this stock at about a 5% discount of gm trades before $49 at that february expiration. and the goal here is to allow mow to gain exposure for gm in the short run, especially the fact that it pulled back 3% today, i think that's the opportunity to sell a put here >> what do you think of the chart, carter? massive levels achieved this week >> sure. i mean, a big, big move. >> right >> this is why you have to do it through options. we have 16%. typically you will back and fill or back away after a rerating, a one-week rating such as that

the one thing is a lot on the come, so to speak. it's peak earnings for what it's worth where it was $62.60. the analyst community says in 2023 we'll earned $6.65. 6.62 to 6.652017 to 2023, no change in earnings it's got to deliver on the hope at this point. >> that's the thing, mike. you have to believe in order for you to believe in this rerating that it's got to have a little bit of the valuation that a tesla or some of the other, you know, staks in the ed space are getting at this appointment. what do you think of tony's trade? >> yeah, a very little bit of the valuation that some of these others in the space might have consider the valuation specifically yes the stocks had a pretty strong run, but just take a look at the valuation where it is if it was going to trade, say, 10 times the anticipated $6.62

that gets you to 66 bucks a share and change which is up side from where we are currently. you look at the skraulgs of industrials is the value to ebita. this is on a $72 billion enterprise value if this was a completely stable business that was only growing with the economy, this would be one thing. but the thing is they've demonstrated that they actually can build electric vehicles, very good ones the chevy bolt, for example, is an excellent car they had some before that. they have an investment in cruise, the autonomous driving technology company they have a lot of things going on they're moving the company in the right direction. they have free cash know it's trading at an attractive valuation. yes, it has had a good run if you think it's going to pause, that's why the trade might make some sense. why? if its pulls back, you're going to buy it at a skoumt.

we've discussed valuation seems reasonable i like the trade >> all right we've got some news out of berkshire hathaway berkshire, 24.9% passive stake in ew strips according to an s.e.c. filing. scrips is topping a 3.5%. more car talk. time to talk a little tesla. a big update on that trade which expires today. don't forget, for everything options. check ouopont tis action.knsd.com. we'll be right back.

we're excited to do business with you but before we sign i gotta ask... sure, anything. we searched you online and maybe you can explain this? i can't believe that garbage is still coming in. that is so false! frustrated with your online search results? call reputation defender today to join tens of thousands who've improved their online reputation. get your free reputation report card at reputationdefender.com or call 1-877-866-8555.

♪ ♪ ♪ ♪ ♪ weather back to options action before the break, we used

utilities as a market hedge. let's continue with the theme and do something similar with oil. check out the move in crude oil since october 30th up now almost 45%. that's been huge for some of the biggest trading vehicles in the trading space. this one nearly doubling the xo of 70% and the xle broader energy etf up 50%. there's another fund making big moves. mike is about to tell you how to take advantage he's here with the call to action mike >> yeah. so we're taking a look at uso, the united states oil fund now, of course, what a lot of people are following the market will notice is that wti, for example, if we take a look where it was priced right before the severe selloff, those closed negative for the first time in

history in 2020. you'll notice we're close to the precrash lows. uso, zbiend to track the price of oil has not recovered to the same extent. one of the reasons is pause that fund is essentially purchasing rolling futures and forward contracts on oil and when you have these big dislocations in the term structure of oil prices, that can actually i am pair the price uso hasn't recovered as much but it's indicative of the up crease we've seen in crude oil prices now, kind of like just trading options generally, if you buy a barrel of oil, it doesn't pay you any yield. you don't get any dividend for that, but we are seeing elevated options premiums if you are one of the people who, seeing those lows in oil in 2020, now we're seeing oil back close to where it was. prior to all this. what do you do now one thing you could do is look to sell recovery calls this is when the uso was trading

for around 35 bucks, a little bit more i was looking to the march 27 calls. you can collect about a dollar twenty for those when you sell cover calls, you're in an investment strategy you hold the stock and repeatedly go out and try to collect some yield by selling calls against i would. that's how you can generate consistent yields. carter discussed earlier how that benefit your returns over time the other thing this does it improves the probability of profit why? you still have some up side. in this case if it rallies through the strike price, even if you have the uso called away, that's still 8% up side. if not, you're going to collect more than 3% stand still yield over the course of the next two months of course, this also serves as a little bit of a ufr be to a downside move. if uso drops one to 3%, that's going to be off set.

it's kind of strategy that almost anybody who holds stocks can engage in and will generate some additional yield for your pow portfolio. >> they're pricing let's say all the news, whether it's the saudi news or what have you. it's a classic instance of taking the road less traveled, fading something when all are embracing it consider the fact that on the nigh mex, double dank crude is up ten of the last 11 weeks. that's only happened a handful of times going back for decades, and it's not particularly good in the 12th feed, in the 13th feed meaning it's a time to fade it energy stocks, big wig, best performing sector, they, too, took it on the chin told this is a perfect instance where option selling is a strategy that will be likely hugely

profitable >> tony, your thoughts on this trade. >> yeah. i quite like this, because if you look at crude, $53 level that it's currently trading cup against is a major resistance level. it core responds with the 200 week moving average here there are classic signs of exhaustion you have a higher of highs in the crude pricing. we're not seeing momentum confirming those new highs for all o those reason action, i think mike's cover call here specifically using the $37 call option, being a little more tactical here, being a little more aggressive, collecting more yield here is suitable normally, when i'm selling these types to cover calls, we like to go further out in terms of strike prices. the kt fa that mike has adjusted it down reflect the more neutral or slightly bearish future i think there is an adjustment for cover call investors not only should you look at how much of a premium are you

collecting over the lifetime of the cover call, but also how much premium are you collecting per day of that cover calm i'll suggest one slight adjustment for investors who are perhaps seening a little more yield or a little more time decay in a faster fashion is to actually sell the february $37 calls. you're going to collect a little over 70 cents, which is over half of what mike's trade was collecting and you're limiting yourself but only over the next 35 days versus over the next 60 days for the march options you're giving yourself actually a little more up side for a shorter amount of time and collecting less premium for it >> up next, one retailer, sea already seeing electric gains. plus taking your tweets. send them on in at options action we'll be back after this turn on my tv and boom, it's got all my favorite shows right there. i wish my trading platform worked like that.

well have you tried thinkorswim? this is totally customizable, so you focus only on what you want. okay, it's got screeners and watchlists. and you can even see how your predictions might affect the value of the stocks you're interested in. now this is what i'm talking about. yeah, it'll free up more time for your... uh, true crime shows? british baking competitions. hm. didn't peg you for a crumpet guy. focus on what matters to you with thinkorswim. ♪♪ last night's sleep, interrupted by pain? tonight, silence it with new zzzquil night pain. because pain should never get in the way of a restful night's sleep. new zzzquil night pain. silence pain, sleep soundly.

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. ♪♪

welcome back to options action our most rebound tesla trade expired today. in december mike speculated that it was time to hit the brakes on tesla as it entered the s&p 500. >> given the fact that the short interest has dropped considerably, the stock is trading at all-time highs, we've seen the boost that comes from the split, we're seeing the big boost that came from the entrance into the index that maybe there isn't as many things lying around to basically continue to propel the stock to new liheights, so i was inclined to take a short bet on tesla the stock closed close to 700, about 670 when i did this trade. i decided to sell the january 700-720 call spread. >> since then, well, that's why it's called speculation. that's the first lesson to take away if you are going to speculate, using options, it's almost always the safest way to

do so. mass the next lesson here? >> yeah. no i think that's exactly right here's the situation when you're trying to either lean against continued rallies or even make short bets in highly valued companies like tesla, very hard to draw a firm line in the sand and actually short the stock. your risk then would be unlimited. take a look at where tesla has gone since then, about $150 since then they would have been buying a put spread you limit your risk considerably that's the only way you can tactically bet against companies like tesla it was really a bet against the stock's price, which i thought has become stemmed couldn't to use options and allocate sll aun omamotsf capital when you make bets like that one >> up next, the final calm 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. well except now you're binge learning. see how you can become a smarter investor with a personalized education from td ameritrade. visit tdameritrade.com/learn ♪

we're excited to do business with you but before we sign i gotta ask... sure, anything. we searched you online and maybe you can explain this?

i can't believe that garbage is still coming in. that is so false! frustrated with your online search results? call reputation defender today to join tens of thousands who've improved their online reputation. get your free reputation report card at reputationdefender.com or call 1-877-866-8555. ♪♪ ♪♪ ♪♪ back for the final call.

carter >> utilities will serve you well here buy xlu. >> tony. >> sell puts on gm >> mike. >> cover calls in uso. >> all right thanks for watching. have a great long week see you back here next friday for more my mission is simple, to make you money i'm here to level the playing field for all investors. there's always a bull market somewhere and i promise to help you find it. "mad money" starts now. >> hey, i'm cramer welcome to "mad money. welcome to cramerica other people want to make friends, just trying to make you some money my job is not just to entertain but to teach and to put it in context so-call me 1800-7 43-cnbc or tweet me @jimcramer last night the presi