bet. >> he's just this iconic type of figure in america of the immigrant who looks like he's making good, but in fact, you know, the whole thing was based on a false underpinning, and it obviously came crashing down. . right now often "options action," the energy trade has been running at low power. the professor is set to make the case that now is the time to get bullish. plus, time to send your investing dollars on a trip abroad in abroad it is friday, and we are taking your tweets. on the desk tonight, carter

worth, mike khouw and bonawyn joins us carter, what are you looking at? >> right, so to your point, sort of a dull week for energy share, the sector, but of course it's the only one that's had a really good year, right, up some 45%. let's look at a few charts and figure it out together the first is a relative strength line or ratio. it's the performance of energy versus the s&p and what we know of course is that energy, having underperformed badly in 2018, 2019, 20'20 has had a big 2021 d 2022 it's all the hallmarks of a bearish to bullish reversal. and i think there's more to go now let's look at energy it ever is next is a five-year chart. it matches the actual sector from standard and poor's

and we are able to break out to new highs. we fell back to trend, and now we're re-approaching the highs and finally, make, again, new highs. and then the here and now chart. this is xle again. and what we know is through a very well-defined minor uptrend in effect since the june-july lull, and we've bounced off that trend line well, repeatedly, and to higmy eye, we go higher >> what's the trade? >> one thing we should say, i think the days of $50 a barrel crude are probably not on the near-term horizon for us when we look at the xle, the eff is a tale of two stocks in particular, exxon, which represents about 24% and chevron, about 21% when we look at exxon, from their most recent results, we see they are operating very well, they are actually

accelerating their buybacks at this point, so i think that's a good sign. when we take a look at chevron, this is a company trying to focus their time and attention pretty heavily on the permian basin. and why that's so important is they don't have the same kinds of permitting problems that the utica and marcella shale do. they can, just being in texas, if they're going to ship out to lng plants on the texas coast. and we take at the overall sector we're getting about 11.5, 11.8 cents. the trade i'm looking at is one that i often look to in situations where i think there could be some down side, potentially, that i don't want to have exposure toch the

november 71-88 with the sale of the 71, and the 88 strike call the idea is to get 10% upside participation between now and november expiration while avoiding for the most part a 10% down side. of course this will behave a little bit like owning the shares of xle would in the near term but as expiration approaches it's going to look more like your screen. >> well, bonawyn, we know how you feel about xle because it was your final trade on tfast money. what do you think of mike's trade? >> again, down 10%, i don't really know how much into a declining market that you believe is going to, as carter said, is going to reverse to that upside makes a lot of sense there. we've talked about a lot of capital discipline all those fundamentals i like the setup >> carter, what does the oil

chart look like? does it rook tlook the same or similar? >> oil has been where the beta has been the spike in oil 130 a barrel. wall street predicts 200 and it goes the opposite way and it collapses. i like oil a lot it's hated now, and i think has a lot of upside potential. >> did you think about putting on an oil trade, an oh trade >> oh is different because it's not as directly exposed to oil we think about the integrated oil companies, they're essentially reserves it is a more direct play rather than taking a look at some of the midstream and downstream companies that have different potential impacts. but i mean, look, the united states is the largest oil pro dip producer, the second largest is russia we've seen transportation demand

down and actually, to some extent, as prices decline we might expect to see some diversion. all of that suggests that it's coming to an end >> u.s. markets have ago three-week losing streak but as bonawyn reminds us, the rest of the world is still gripped by recessionary pressures. bonawyn, what are you looking at >> i'm actually looking at efa there is a tug-of-war philosophically whether people believe we're on the precipice of a new bull market or declining market and you know, what i'm not going to get into the workings of that but what i will offer is if you are in the camp of wanting to own the u.s. market, i would look at a way to kind of balance that out in an area that i don't think there's much debate about whether or not they are in a worse situation. both from an inflation standpoint and a growth standpoint i'm looking at eafe, and what

i'm doing is looking out to the year end, the deck 30th, 60-35 put spread which you can buy for about $1.20. it's going to be closer to a dollar here. but you're going to buy this eafa you're going to spend about $1.21, and what you're getting is protection, and i think we're going to roll over here, what you ultimately are going to get is exposure, down side exposure to all of the geopolitical risks going on in ukraine. and for me, for those that are bullish to the u.s. market, you've got to take chips off the table somewhere, this is a way to hedge your portfolio if you don't want to do it in the domestic u.s. market >> how does this look to you >> to keep in mind, it has been

an underperformer relative to the s&p, but if you look at the five-year ba five-year basis, it runs about 80%. it's developed market, europe, austria, asia, far east. is it, is it better or worse? and on that score, it is worse >> bonawyn, what would you sty that say to that. >> typically, the u.s. market has outperformed over anytime frame you look at, i agree with kaert. carter >> any economic pressures that you think the united states is facing right now, europe is facing them far worse. that's just the reality. and actually, in developed asia,

they actually have some problem, too, just demographically. if you're going to be short any market, it's not the u.s. market you'd want to be as a hedge against a long u.s. trade i like it a lot. >> still to come, a powerful rally over the last few months in the utility can you profit from this power play stick around and find out. and for everything "options action," check out our website and our newsletter there's much more "options action" right after this

welcome back to "options action." despite headlines of power shortages out west, utilities have had a decent run. and is there a longer run to plug into, mike? >> jest lust looking at what's on in the markets generally, if we are in a rising rate environment that means you probably want to be in what we call short-duration equities, and utilities qualify in this area they are a higher yield, buy and large nearly double the dividend yield for the s&p. that's an attractive element another thing, we're entering a typically volatile time of year, and the market is exhibiting significant volatility as well, and utilities tend to have lower volatility that make them an interesting place to invest.

our power situation in the united states is transitioning and it is transitioning to renewables it is transitioning to electric vehicles as we think about that from an economic standpoint in terms of capital investment, tax. utilities are the space that are most ideally positioned to take advantage of that. now looking at xlu, which is the proxy for utilities that i'm taking a look at now, i am bullish, but of course it's kind of difficult i imagine given the outperformance that we've seen for people to chase it here, and for that reason, i was looking at using a call spread i was specifically looking out to november, and i was looking at the 75-82 call spread you'll notice that this one is slightly in the money. what that means is that you're going to have less of a stand still rate of decay, because that 75 strike is actually away from the current level of xlu. one quick point i would remind everybody of is that if you own

xlu you get the dividend and if you own call option, you do not this is a way to pay for price action rather than yield if you own xlu could you consider selling those 82 strike calls against it as well >> carter, last night on fast money, you floored us with your stat on utilities versus spx over time. >> sure, that was fun. let's look at some charts, and we can talk about that stat again. so i have some xlu charts. we can roll through them fairly quickly. they're what you have seen before but they make sense at least to my eye here's the first one no chart, no drawings. if you see the second iteration, i don't know if we have them there. but basically, utilities are toig w boying toying with the prospects of breaking out whether you call it a held and

shoulders, it has all the elements of something that is poised to break out. utilities are generally boring, low data, conservative, safe, defensive. they have allowed rates of return and government controls them but the incredible thing is that if you were to go back to 1997, not arbitrary, 25 year, the s&p has doubled the performance of the utility sector but fu lif you look at the total return s&p and total return sector utility, they're dead end, which is very humbling for us trying to pick winners and finding actionable things when riding utilities has done as wells a the s&p. >> can you imagine, just put it all in utilities >> set it and forget it. >> and not to mention all the commissions, the fees that you're paying to trade bonawyn, what are your thoughts

on utilities in general and mike's trade specifically? >> well, i'll also add risk-adjusted returns are probabl probably better as well. i think mike's trade makes a lot of sense you look at risk-reward, you say i don't like to look at one to three, one to four type of payouts. but you gave two disclaimers the fact that you have that in-the money call, i think it's a pretty compelling risk-reward. it's cash flow positive, dividend yield positive situation thaw t you want to be particularly in this environment. >> mike, last word >> that's really getting to it, which is over the past 25 years, this is not really a sector that we thought of as having much growth opportunity, but there is no question that we are going to see a transformation in the way energy is delivered this this country, and this is really the industry that's going to be at

the forefront of it, and regulated or not, it's going to be a net beneficiary >> up next, with their week's iphone event behind us, we're calling in our apple trade from a few weeks ago, what to do with it next?

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welcome back to "options action." in the middle of last month, carter turned sour on apple, not even expecting this week's apple event to deliver much of a pop so mike and carter, what do we do here? carter, how dot c the charts lok at this point? >> it's kind of in no man's land if it does drop to the extent it has you really buy it just because it's dropped that's an old technique. at the same time, stay short, it's come down a long way. i will say it's important that

yet again on a week over week basis, apple underperformed. while it was up 1.2, 1.3 prgs on ton on the week. my hunch is to just leave apple alone. it's not at a juncture where making a big bet makes a lot of sense. >> mike, what do you think >> the trade we were looking at for apple was a put spread, and it actually has run down to a level where it's fine to take money off the table with that put spread you know, i would say that the stock's performance this week, given the announcement they made is pretty poor you would think something like that would propel it to outperformance, it didn't. so i wouldn't be a buyer here, despite the fact that it's been tough to bet against this company for a number of years. >> i mean, a lot of investors think apple is the end all be all when it comes to defensive

stocks it's got a lot of cash on the balance sheet, an executer in terms of delivering, bonawyn, and here we are. it's like it's an apple-specific problem relative to big tech this week. >> sure, no arguing against any of those points that you've made i'm probably going to agree with him but probably from a slightly different lens here. if you're owning the index, the s&p overall, you're already quite long a bit of apple. so adding to that exisposition y going overweight the name doesn't really make a lot of sense. i don't need to tell you that i think that the market is headed lower i've been that way for quite some time now. i like apple a lot more than i like other pockets of the market but, again, that's a relative value. if i were to buy it, i'd be selling something else but here, just looking to own apple, i don't really see a compelling reason to own it at this level or at these

valuation. >> mike? >> that's the other thing. in terms of valuations, this name, and i think we've previously mentioned companies like microsoft that for a long time and undeservedly traded at big discounts to the market overall, it no longer does and you really need to continue to see them execute, which the company does very, very well but they do sell expensive product, and consumers have been stretched. we are seeing some rising delinquencies in some places it suggests to me, the capacity for consumers to go out and buy the latest and greatest is not unlimited. and it is possible we could see a disappointment, maybe that's one of the reason we see it priced the way they did. >> so goes big tech, so goes s&p 500? >> there's a bit of that, 7.2, 7

th7.3%, not so good for tech th week if you look at the equal weight s&p technology sector versus the actual, it underperformed, the actual tech is just not a place i think you want to be overweight. >> pockets, though, of tech bonawyn? are there pockets in tech that you like at this point >> sure, i mean, i would say, you know, if you look at defense, certain cloud names i mean, but here's the thing the thing that will save you in tech right now in terms of performance is also the thing that can hurt you the most take a docusign for example. that stock was down 50%, 60% year-to-date before it got, you know, revisioned in terms of guidance or reaffirmation of guidance, when people really thought this thing was going to roll over. so i'm not a proponent of going out and playing the highest beta pockets of the market. yes, though, on the flip side of

that is where you are seeing these one day to one-week moves that can actually make your entire year. but that is a game of roulette, and we're here to make investment and trading decisions based on fundamentals and technical assistance and i don't think that's the pocket of the market that presents the most opportunity. with reward comes risk, and i'm unwilling to take that piece of the risk the risk up next, we're taking your it's an entire trading experience. with innovation that lets you customize interfaces, charts and orders to your style of trading. questions.d your perspective. and a dedicated trade desk of expert-level support. that will push you to be even better. and just might change how you trade—forever. because once you experience thinkorswim® by td ameritrade ♪♪♪ there's no going back.

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now. y urea, fossphosphate, all very hh i do like the space, despite the fact i think prices are going to have to come down a little bit >> next, key levels to watch for on the s&p 500 carter >> so many levels. they're all key, i suppose, but i would cite the following there's an unfilled gap above it at 4,2'118, and an unfilled gap below. both are quote in play those are levels both to the upside and down side that i'd be very aware of. >> all right, final call time, bonawyn, kick us off >> i think eafa puts are pretty compelling hedge for trade >> carter?

>> i want to buy xlu utilities and energy, xle. >> mike khouw. >> i like both of those, and i think you can use call spread risk reversals or call spreads to make those bets >> that does it for the world cup sevens comes around every four years. and this time it takes us to cape town south