together. but we haven't determined that to be a fact. >> narrator: authorities say just one good tip is all it would take to bring this mystery to an end. >> we're not gonna stop. we're gonna keep looking for him. he's gonna stay on that top ten him. he's gonna stay on that top ten list, and we're gonna find him. it's friday. that means it's time for "options action. this isn't just an ordinary show it's the last options of 2021. here is what's coming up pop the champagne. wall street just closed out a monster year the chart master sees even bigger opportunity bubbling up heading into 2022. the one sector carter worth says it's time to bet on. plus, a high energy trade. tony says this year's best performing sector will continue to rally in the new year

welling' drill down on that call and later professor khouw takes a perfect opportunity to take some protection. he will tell us how. it's time to risk less and make more the final "options action" of 2021 starts right now. >> let's get to it ripping higher in 2021 surger more than 21% outpacing the broader market as you get ready kick off the new year, the chart master says this chip rip has even more room to run carter, take it away. >> before we look at the charts i think it's important to say this, being up 41% big thing, prior year up 35%, prior year up 31 semis have never outperformed the s&p for more than two years in a row this is now a third year my hunch is that we can pull it off one more time.

let's look at a fe charts and figure it out the first is a two panel it's still a catch up trade. the top panel is the sox index we are well above the dot-com '99 high look at the bottom panel we have not recovered the ground loss on a relative basis to the s&p 500. if you look at the second chart it's the exact same chart but there's line and a circle highlighting the point on the relative basis as good as semis have been, they're still not back to where they were relative to the s&p in 1999, 2000 we think ultimately there's a breakout on the relative look at the third chart. this is quite stunning same top panel, semis, but on the bottom is relative performance to the tech sector semis relative performance to t actually peaked going back to 1995 i think there's room to run. certainly relative to some other

areas of the market and the market itself. final chart, just the socks itself very short term you have a nice move you have a big pop you get a consolidation. i think you'll get your next move semis in 2022. >> this is quite a call carter mike, do you have the fundamental story to back this up >> i think what people take a look at the price action here and obviously the big run that we've had oaf the course of the last couple of years, there would be reasons why some investors might be reticent to either get long or to stay long semi conductors. right now as a group i think the index is trading around 32, 33 times earnings that's well above average. here is the thing. we all know that there's been a chip shortage. we know there's high demand. we know that that demand is going to persist we know the chip makers have pricing power. take a look at some of the largest constituent stocks like taiwan semi announcing they will have

10 to 20% year on year price increases. this is the kind of thing that demonstrates that this is a group that's in a very strong position if we're actually going to try to make a bullish case for any sector, i think it's reasonable to expect the business for these guys going forward will be quite good carter pointed out we had this big bump recently. essentially what's going on here is we're seeing a little bit more volatility in the group as we take a look at that, we can try to take an options trade that will take advantage of the dynamic that we're seeing. what we have been seeing is actually, as a group, the volatility has exceeded the implied volatility in the options going out two or three months they don't have march options on the smh so i'm looking at the february i was looking specifically at the 320/340 call spread. that $20 wide call spread would cost just over $5.

very close to the 25% or so we like to spend for at the money vertical spreads if we use debit spreads. i think because we are seeing the bigger moves and because we've had such a run, this is a situation where i actually would not look to do something like a call spread risk reversal where we would sell a downside put i think this gives us a an attractive risk/reward you're limiting the capital to less than 2% of the curren price of smh shares. i think this is way you can play for the rally that we have been seeing to continue into the next year into the third friday in february >> tony, what's your take on this trade and i also wonder what your thoughts about higher rates in relationship to some of the higher valuation names within the sector because some of the stumbles we have seen of late is because of the notion that interest rates were rising >> that's exactly right. especially with the higher interest rates as you said, these stocks are most sensitive, and that's particularly why i like mike's

trade the most first of all, when you use a vertical structure like he's using here right now, you're actually limiting your losses to as small as possible this is extremely important this is a sector that's trading at these relative highs both from a technical and a fundamental perspective from a valuation perspective and that risk that you're talking about with higher interest rates by limiting your risk to 1.6% of the etf's value and getting a three to one risk ratio this is ideal set up or ideal structure for playing for a break out. if you look at the charts here for smh, the break out above that 275 level, not only was breaking out on an absolute basis it also broke out relative to the market and since then it's held that 290 support level which held not only on absolute but also relative basis to the market. all of that in my opinion is extremely constructive for smh personally i prefer to pick

individual stocks in this sector but smh is a great way for investors to get upside exposure to the semis >> carter, i'm just curious what the reaction is from your clients. i read this note this morning, i thought what a call after a banner year, you're calling for it again what was the reaction? >> it was just redoing the call from the first of the year, the january 7th money in motion to bet on semis as outperformers. it worked. can it continue? i think the truth is the whole rate thing is a myth at the end of the day we're sitting here at 1.5% the feds said it's raising and what happens banks are rolling over tech is acting well. i don't think rates are going higher i think semis are not to be impacted by that you start going to 3 and 4%, okay, then the whole market is in trouble >> let's move on here. we're getting pumped up for the ball drop with some high energy at the energy sector roaring back to life in 2021 but the 48% gain and tony expects more gains heading into the new year. tony, what are you looking at?

>> i'm looking at xle, the energy sector etf. looking into the first half of 2022, my expectation is to look for some higher oil prices especially as we have some pent up demand. that's likely going to be a nice boost here for energy stocks going to the second half of next year if we take a look at a chart here of just crude prices, first of all, what we have is a full year of what we would consider higher highs and higher lows this simply points to further upside here next year towards about 85 and potentially higher for oil that's going to be a tail wind for energy stocks. if we look at xle as a etf, one particular level that we're currently trading at is the 55 level. this is a pretty major line in the sand that goes back to 2011. the fact we're back at this level and a point of contention, the question is does it reject at this level and trade lower or does it break out higher that's when we zoom into the xle

chart. recently we've seen a bit of consolidation here on the one-year chart and the pull back that we've seen here due to the omicron variant, i think this sets up for a nice break out going into next year if we look at xle right now, the implied volatility of these options are not particularly expensive but i do want to try to buy upside and go out to the middle of next year. i'm going out to june. i'm buying the $55 call options on xle and against that, i'm going to sell the february $59 call options against it for about 80 cents i'm paying for about 4.5 dollar for the june options collecting about 85 cents here i'm paying about $3.50 that's about 6% of the xle etf that gives me the ability to gain upside exposure on xle going into next year while reducing my cost of buying these call options by selling those february $59 calls against them. >> mike, what is your take on this trade >> a couple of things.

the first is when you buy xle, this is essentially a proxy for oil. why is that? it's because if you take a look, you know, some of th largest constituent stocks you got in here, chevron, exxon significantly smaller, but still probably 5% of it is conocophillips, that's about 50% of the overall xle these are proxies for oil. you can think about these companies as the discount of their reserves essentially i do think that there probably is some support for oil prices here obviously we've had this news about omicron, but there is also some news that we might actually see th far side of this thing sooner than in previous waves if that's true, i think that will continue to spur some demand and we have some supply to make up for it here >> carter, what are your thoughts on the xle? you thought semis would propel higher why not energy after its 48% gain

>> one thing about the xle, of course, and it is so dominated by exxon and chevron, almost half the wait, the xop, which is the spider oil and gas, it's got some 60 names. the biggest is only seven. it's a continual, almost perpetual outperformer of xle chlt i think the vehicle to use would be that. as for oil we've come a long way, 63 to 77.50, i think you get a lot of backing and filling here >> all right check out our website. while you are there you can sign up for our newsletter. here is what's coming up next. is it time to take cover with stocks sitting near record highs, mike sees a golden opportunity to take some protection he'll tell you how plus, calling all "options action" fans reach into your pocket, grab your phone and tweet us your question @optionsaction. if it's nice we will answer it

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we're carvana, the company who invented car vending machines and buying a car 100% online. now we've created a brand-new way for you to sell your car. whether it's a year old or a few years old. we wanna buy your car. so go to carvana and enter your license plate answer a few questions. and our techno wizardry calculates your car's value and gives you a real offer in seconds. when you're ready, we'll come to you, pay you on the spot and pick up your car, that's it. so ditch the old way of selling your car, and say hello to the new way at carvana. welcome back to "options action." it is lonely at the top. the s&p 500 sitting near the all time highs made earlier this week closing out 2021 with a 27% gain, but do you know why it's so lonely at the top because gold hasn't come along

for the ride it's 3% in the red in 2021 despite consistent inflation fears and a whole host of other would be catalysts despite this disappointmen the chart master is betting that 2022 could be a golden near. carter, walk us through. >> sure. three identical charts and one at the end that's different. first one, no drawings, no lines. no judgments by me the chart of gold. >> the second chart, it's the exact same thing but some lines drawn. you can clearly see it is working its way into the apex of this formation which is to say it's almost stop trading. something comes along to resolve all set ups and many people would say it's going down, carter my hunch is otherwise. third chart, same chart again. i've drawn arrows. it's very precise. is it random that it's touched that bottom line to the penny over and over. is that a p/e and dividend discount model no, it's charts.

i think it's going to get resolved up. look at the final chart that is sort of the up close and personal chart we know that gold peaked back in august at some 2063 an ounce it dropped some 20% a year plus ago. now we're sitting here any strength from here would be a new sequence you'll see the lows are higher i think we'll get it some would say wait for it to start to break out below that line i think that's good technique. i think you jump the gun and go now. >> you have way to make up profits without getting burned what are you doing >> yeah. this is one of those situations where if you've decided to get long, what you're doing is essentially as departer is suggesting, anticipating the move rather than waiting for the breakout to confirm essentially the direction you're taking, that's a place where using options can really come in handy. of course, if you buy calls you're limiting risks to how

much you spend for them. in this case, i think we're going to talk a bit about one of the first strategies that almost everybody who is knew to options should probably consider typically, covered calls are way where people can take a core holding and then sell upside calls against it to collect some premium. now, a trade like this has a risk/reward payoff that is very similar to selling cash-covered puts you have a limited upside. you do have fairly extensive exposure to the down side because you could own the security so you have the benefit becaus you're collecting income of a higher probability profit but the down side is that the profits are capped and your debt that you see a significant decline. if we don't get the break out that carter is looking for, you have significant downside risk we can look though to get creative and in this case, since we don't want to sell naked calls that carry unlimited risk, what we can do is we can sell

calls rather than against a long stock position instead using longer dated call options. that's what i think we ought to be looking at here specifically the trade i was looking at going out to january buying the gld january 2023, so more than a year out, the 171 calls, those are essentially at the money calls and then selling $10 out of the money near dated march 1 81 calls that entire trade is structure would cost the equivalent of about $10 a share, $1,000 to put the whole trade on because of course each call option represents 100 shares. the idea here is that if gld does rally through 171 up to that 181, we can roll those short calls out and continue to finance this protected long position that that gld leap provides us. >> tony, what's your take on this trade >> if you look at that chart on gld, we peaked back at that

august 2020 level, we've seen that down trend ever since it had a failed breakout here in november trying to break out in november we're seeing that second attempt here i do think carter is right now is the time to jump the gun and potentially get ahead of that the strength in the dollar we have seen over the past couple of months starting to see some exhaustion could be the head wind for gold to rally higher from here. to mike's trade here, you know, the call calendar he's using where he's using the january 2023 call options to replace 100 shares of gld, sometimes we call that a poor man's power paul that will require about $17,000 versus the call option he's purchasing only requires about $1,100, about 6.5% of 100 shares of ets value so he's reducing his risk and the capitalout lay when you look at the gld chart over the past year, 181 is pretty much the top end of the

range. technically speaking selling call options near resistance levels makes a lot of sense but also the 181 strike priceis about a 20 delta, that means by the march expiration there is only about a 20% chance gold will be above 181 and those are the types of low delta's that we like to sell going into using cover call strategies using low delta like a 20 or 15 delta or so. >> you said xop was the outperformer i'm wondering if gdx would be the outperformer to the gld. >> remember there's leverage in operating business versus a commodity. commodities actually don't move very much, even though you will see big moves in lumber, it's why they give you so much leverage in the futures market because they're kind of boring actually the stocks will always outperform the underlyin commodity in the big run >> the chart looks just as good to you >> yes coming up, a big update on a health care trade.

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welcome back time for a check up on a health care trade a few weeks back carter and mike gave us the down low on centene >> is this stock worth more or less than it was three and a half years ago as an enterprise, as a business. in principle more. when you consolidate like this it represents multiple compression and at some point it gets too cheap and it breaks out. i think that's exactly what's going on here. >> i was looking at the june 80 calls those were about $7.10 when i was looking at those and then selling of january 85 calls against it collecting about a $1.15 net-net spending about $5.95 for this >> since then, the stock is up more than 10%. carter, what are your thoughts on this one? >> i'll break out. the question is after break out like this is that it i would say, no, it's such a big base from which it is moving

higher stay long, be long. >> mike, is that what you're going to do? >> yeah, i think so. and the other thing is notice it got very close to that 85 strike that's going to be expiring next month. my inclination is to stay in this thing and of course once that short call roll off and we can look to sell more calls against the one we own up next, we got your tweets and the final final call of 2021 my hygienist cleans with a round head. so does my oral-b my hygienist personalizes my cleaning. so does my oral-b oral-b delivers the wow of a professional clean feel every day. (announcer) carvana's had a lot of firsts. 100% online car buying. car vending machines. and now, putting you in control of your financing. at carvana, get personalized terms, browse for cars that fit your budget, then customize your down payment and monthly payment. and these aren't made-up numbers. it's what you'll really pay, right down to the penny.

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heartburn doesn't stand a chance - day... or night. excess stomach acid can cause heartburn. prilosec otc works differently by preventing excess acid production. so don't fight heartburn, block it. prilosec otc. one pill in the morning blocks heartburn, all day and all night. welcome back to "options action." we're celebrating the new year doing what we love, answering your tweets. first up roxy asks is sofi ready to bounce off support if so, what's the bullish option strategy? mike, what do you say? >> okay. well, the first part of that question is really a technical one so i will probably defer to carter, maybe he will have a quick answer for you on that as far as the options are concerned, they are really, really pricey in sofi. the march at the money straddle is about 30% for the current stock price.

if you buy call, it's tough to see profits. even if you buy call spreads for example, the 1517 call spread is about 40% of the distance between the strikes not the kind of the math we typically like if you do believe it's going to bounce i'd be more inclined to buy the stock and sell some upside calls against it >> so it would be a really expensive options trade. carter, would it even be worth it what do you say in the technical front? >> it has found support. the bounce so far is a bit feeble i think it's sort of fair money/dull money here. >> feeble is a descriptive word. i love it. we have a question on the payment stocks visa and mastercard are up from december 1st lows. is there more upside tony, what do you tell beau? >> unfortunately, i think both of these charts look fairly challenged i think there's limited upside unless visa gets above 220 and mastercard above 370 i think the relative performance on these stocks relative to their sector is extremely poor

and that's why i think there's further down side. >> all right quick final call carter >> semis and bulls >> tony. >> call calendar on xle. >> mike. >> call spreads on smh to play that bullish semi play >> we'll see you in the new year next friday. meantime, your money 2022 starts right now. do you make frequent trips to the bathroom... suffer from urgency... hesitancy? do you get up more than once a night? can you even sit through a movie? or, worse, have a diminished sex drive? if so, chances are you have an enlarged prostate. fact -- 30 million men now suer from an enlarge prostate. fact -- every other man now