it is friday that means it is time for "options action. i'm melissa lee live at the nasdaq marketsite in time square tonight as market reverbations from the war in ukraine stronger economic data at home we're concentrating on protective positioning first, carter with stock from international domestic short winds and finally mike khouw uses today's trading hulls as several russian etf as teaching moment to deploy options when market liquidity start to evaporate. let's get to it.

stocks drop as ukraine adds to domestic concern carter, with a stock away from all of worries what is it? >> that's right. sometimes you're on auto pilot if you will. united health care meets all of the criteria let's look at the charts the first one is a comparative two-year rendering of the s&p 500 versus united health you see how their paths are diverging. s&p is rolling over. unh continued on let's look at the same two-year comparative chart and add the health care sector this is really interesting united health care leading the way, beating the s&p, s&p is also beating the sector which means united health care is beating its peers which are lagging in the market. now unh chart, first, one way to draw the lines, the move from the october low 30%, up, versus

the s&p up 12. now this pull back or pause. the second way to draw the lines would be converging lines. either way, the presumption is resolves to the upside a big week for the sector and for this stock and then, let's look at the trend. trend is important here you have coming up a two year that is literally a 45-degree perfect angle. it is a sending in that channel. that's two years how about since the '09 low. look at the next one another 45-degree angle. stock is up and to the right what's not to like it's the definition of stay long, be long. how good is unh? check this out, the next is a comparative chart, this is united health care versus google and apple over the last ten years. it has paced some of the greatest names in the market and final chart, add the s&p into

that comparative chart and see the s&p bringing up the rear, down the bottom, united health care, offensive, defensive, the defensive sector, stay long, be long, get long >> even better actually than google and apple, that's eye-opening. thanks carter. mike you got a trade >> yeah, united health is an interesting stock a stellar performer. a company that has not reported a sequential year over career deline for over 30 years and eps 20% year on year for full year 20202 versus last year and it's a cash flow monster, 23 looking at $40 billion in free cash flow. to put things in perimeter that's go perspective that's more than six-fold increase over ten years. which is definitely one of the

reasons you're seeing the stock track notable names like google and apple, faster free cash flow growth than apple in recent years, trading 23.5 times earnings, not unreasonable given the statistics only thing to give pause is the strong performance the stock has seen recently. i height to do a little bit i hate to do a little bit of stock chasing. implied volatility is relatively high for this name we're seeing short dividend implied volatility is longer the april options more expensive than longer dated ones for those reasons i'm inclined to use call diagonal june 500. april 520. buying june 500. selling april 520. net net -- about the value of four shares of stock an important point the company will report earnings on april 18th and april

expiration is shortened this year because good friday falls on the 15th. so april expiration is 14th prior to earnings but there's still a premium in those options despite that fact. >> tony, what do you think of the trade? >> yeah, so mike refers to his concerns about chasing the stock at all-time highs, i think that concern is valid, but carter's charts the relative charts is what i think is really important here if you look at the relative strength of unh to spy the market or its sector xlv you see unh printed a new all-time high today relative to both that's the signal i think generates why i think unh will break out to new all-time highs though right now it is $10 shy of the all-time highs of a month ago. so if you look at the business itself, as mike said, this is a stock that is loved by pretty much every analyst on the street, trades at a fairly

reasonable multiple considering the revenue and eps growth we consistently see over the past decade or so or even longer as mike was showing you and what you have is a valuation that i think is quite reasonable for a continuation into the high 500s as an upside target. when you think about chasing these all-time highs and concerns mike has is where you two want to use a diagonal spread like this. a diagonal is really the right structure for this up and to the right chart as carter was showing you. and by paying just shy of $20 for a diagonal spread that's 20-dollars wide he's not going to see any losses to the upside if unh does explode to the upside and he is reducing the overall risk on the trade to 4% of the stock's value that's exactly how you want to structure a trade where you are effectively at all-time highs and chasing new all-time highs.

>> carter, want the to let you get the final word in here i'm wondering, a lot of viewers are thinking to themselves, carter is comparing unh to google and apple does it necessarily mean those two other charts look just as good at unh? >> well, they don't, actually. on a day-to-day basis. if you look at relative strength of unh to those stocks it is also making new highs. here's the point of that exercise who would think that unh has been as good as apple and google over ten years it's that good and i'm trying to hammer home that point >> yeah, that's a good point to make let's get to a different defense from a macro perspective, that is tony, you say implied correlation of stocks rise above 50% you could pick just about anything and short, for you it means time for a broad hedge, what do you mean >> yeah, that's exactly right. in this current market volatility it's time to consider looking at being more defensive and placing a hedge is one of

the ways to go about doing so. if you look at the first chart, this is a three-month implied correlation chart from the cebo index and you see it made a new one-year high. this tracks the implied correlation of the top 50 stocks in the s&p 500 and when you see these levels rise what this certainly means is a lower benefit to diversification and stock picking and increase in terms of systemic and tail risk. this is the concerns that a lot of investors currently have with the overall market this is confirming the concerns that investors have. we look the spy what you have on a long-term weekly chart is a trend line that recently broke over the past couple weeks this is a trend line that's been in place for the past two years. this is showing us that there's some concern here for further down side and if we zoom in to the daily chart we're just testing this 4 25 major level that has been retested multiple times in the past couple months.

my concern is if we break below the key level we're headed to low 400 and high 390 to the down side as a target so the trade structure i want to use to try to protect ourselves against this potential down side is to use a put vertical, going out to april, buying a 425, 390 put vertical spending $15.30 for that april 425 put and collecting $6.40 against it. net net paying $8.90 for this debit spread which is only about 2% of spy's value. so this gives me a down side protection here in the short-term if we start to see some further volatility here to the down side. >> mike, what's your take on this >> yeah, so when tony is talking about implied correlation, really what that is is a measure of the options market prices on index options and etf options like those in spy versus the

price of options on the single stock constituents of those indices or funds when it's high it shows index options are higher relative to the cost of the single-stock options when you see that take place suggests those options are a bit more expensive it's one of those circumstances it makes more sense to use a spread the way he is suggesting than to buy puts outright. i think this is a good trade structure to take a bearish position or to hedge your portfolio while recognizing that if you have been looking, and i'm sure many have, that the cost of ensuring your portfolio right now is relatively high. >> yeah, carter, what's your take on the charts, where we are headed >> well, consider this, the market is driven by the big growth names, we know this and those names are concentrated in the nasdaq 100 and at end of

last year it just completed 13-consecutive years of positive returns. that's never happened in the history of the dow, in transportation going back to 1800s. it's been a great run. the market is in the phase of stalling and presumptively the down side risk is bigger than the upside reward. >> tony, final word on this. >> yeah i couldn't agree more. if we look at the q's you could use the q's as well as a hedge the q's look much weaker than spy, spy is currently holding support level it's cheaper to hedge using sp y than the q's. >> still to come, some taken by surprised, mike khouw with a teaching moment how to use options to cope when lick iddit evaporates around you more "options action" we'll be right back

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♪ ♪ welcome back to "options action." it's been a big market week so we'll start answering your questions early this evening professor khouw highlighting this one still unsure will i be able to sell my rsx puts tomorrow. very good question, i'm sure a lot of people are asking, so mike what's the answer >> yeah so to understand the question first we kind of have to take a step back and take a look at some of the things that have happened since russia invaded ukraine to the markets there and to some of the markets here that are impacted by them so if anybody's been following one of the things we saw early was that the russian stock market closed. so that prevented anybody in

that market from buying or selling the ordinary shares. now of course in the united states we have several etfs that track russian shares, an example is rsx arguably the best known etf who's on theive is to correspond to the 30 russia biggest trading companies this is the most well known additionally the news saw some of the etf's halted periodically by exchanges and they can halt etf trading for couple reasons, for volatility, they want to maintain an orderly market, you will see situations they will halt the trading just to do that other reasons can involve regulatory reasons we've seen some halts, in fact, there was even an announcement by the new york stock exchange after the close today they were going to halt rsx again, several

you halts this week, this time for regulatory reasons another reason we saw in the case of issuers were going to suspend creation of new shares this was the news that prompted a lot of the questions we saw about what was going to happen to people's options during the week so i think we need to understand what the creation of new etf shares is worth. the creation of new etf shares when authorized market participates such as market makers need to create new etf shares they make a market in these things, people buy the etf from them they are getting net short they will buy the etf shares in the local market and deliver the shares to the issuer and swap them for the etf. they can't buy those shares in the foreign market then part of this mechanism breaks so you can't create new shares. it doesn't necessarily mean the etf can't continue to trade. in fact many of those etf's did continue to trade and several

suspended creation a long time ago but have continued to trade. that has been good news for u.s. investors, why because where russian investors couldn't buy or sell the stocks they held, u.s. investors who had or wanted exposure to russia still could by trading rs squsq -- rs x as long as its trading options should continue to trade this week we saw a huge explosion in volume in etf shares and the options and it provided liquidity for the u.s. investor here's an important thing, with all of the things going on it it's still possible for exchanges to halt the shares so if you have exposure to it and want to unwind that exposure in the event the etf continues to trade, take that opportunity to unwind so for the person that tweeted that question them obviously made a good bet because it sounds like they bought puts and

rsx has nothing but go lower, if you get the opportunity would make sense to take the profits >> good advice, i would think. carter, your thoughts here >> well, if you think about it, one of the greatest sins in markets, right, you could be wrong, or right, it's il liquidity, you're in a small stock and can't get out, only one thing is worse, it's called closed market. you're limit up. long on commodities, limit down. in this case we have a frozen market and some extent all bets are off. as it relates to the russian stock exchange if you look at rtx the worse decline 1998 it dropped 92%. in the financial crisis it dropped 75%. right now it is down 60. of course it's halted. the presumption is will undercut the lows of 2009. >> pretty dismal tony >> with trading on options

important to understand though the options are halted in trading the right to exercise still remains so if you have an open position you still have risk and it's also a concern for traders who have a short options position because you don't have control over that right to exercise but for traders who have a long position here in options, you still have the right to exercise it is a tough game to try to figure out whether or not to exercise because you've effectively have to guess where you think the stock or et f may resume trading here. that's some of the things important the to understand because the options have halted does not mean that these options simply do not exist any more. >> a thorny issue here up next a look back at round trip consumer trade. more "options action" in two

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about a month ago carter and mike laid out a way to play consumer morris for consumer-related games. >> what we have here is a very symmetrical orderly bottom out process and the presumption is the stock will return to its all-time high. >> i was looking to march, 100 strike puts trading at 2.65 or so when i was looking at this earlier today. you would sell that put, collect 2.66 it turns out, per share, if you sold that. >> since then phillip morris has made big swings and now down % but still in the green for the trade. carter, your thoughts from here? >> that's rye. we got a nice pop up 8% and given that back on a chart basis it is simply returned to the level it was interesting in the first place. if you're not in, i would do some buying. >> so mike, what are you doing now? >> okay, so for those who may have put this trade on, the

first thing is on february 17th you had made virtually 80% of all of the money you could have, that traded to 60 cents or below and probably folks in that situation did the smart thing and covered that short put. if you did so and wanted to reinitiate that trade i would and choose the immediately out of the money strike and go one month out, because more time has past we're benefiting from the fact in the meantime implied volatility as price of options has increased and phillip morris international side of the business may want to smoke em if they got em. >> coming up next, your tweets and the final call ♪♪ ♪♪

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the low 180s, carter what do you say? >> it's tempting but i would resist the temptation, boeing has problems the stock peeked three years ago in march 450 and here it is at 180. something's not right. i'm sure someone would say the debt is bigger or they can't get the planes to operate. doesn't matter something's not right. the chart is bad i would resist the temptation, it does seem cheap or you could think boeing will be around forever, just don't do it. >> our next viewer asks -- my ira does allow covered calls is deep buy same as selling out of the money put, example, amd april 14th 85 strike buy/write basis below 85 my premium similar toll something the put right? anything i'm over looking? tony >> from a theoretical perspective you are correct

because of put call parity when you sell deep in the money call option you have a risk profile that is in theory identical to selling that out of the money put option but practically speaking you will have potentially issues where if you wanted to roll these calls early because the stock has started to move higher you may not have enough cash in your ira because you can't deposit more cash to roll those early and have to hold them until s expiration so some practical considerations. >> mike? >> a agree with tony and if it's a stock to pay big dividend there's potentially auto assignment risk it is a little bit different. >> all right, time now for the final call carter worth >> unh largest stock on the s&p. >> tony zhang? >> concerned about some future

volatility, buying a put hedge on sp 1. >> mike khouw. >> if you have opportunity to unwind rsx do that, unh diagonak "mad money" starts now >> 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 people want to make friends, i'm just trying to make you money. call me at 1-800-743-cnbc or tweet me at jim cramer just when we get an amazing labor report, one that shows excellent job growth, a lot of wage inflation, a dream come true for the stock market,