it's friday, and it's time for "options action. i'm melissa lee. the dow and s&p end a choppy trading week almost back where they began while the nasdaq continued to dive lower. tonight we'll dive into the action see if there's a chance to profit, including staples plus, a tectonic week for the tech titans. tes tesla, a bit of a revival. theother, low battery. the options play ahead here with us tonight, carter worth, mike khouw and brian

cutland. quick thoughts on the week it has been a crazy week carter >> one way to decide whether a day or week is bullish or bearish, you look at the high, low, and close low high, lower low, lower close, bearish week. >> that was simple ryan sutland, what was your take >> i think when you look at the market there was whip saw action and somewhat to the bearish side, but really it's been all about the ten-year treasuries and where that's going because by my calculation, every 1% tick up in the ten-year is 7% to 10% downin the market when it ticked up the other day, the market got real scared we saw s&p trade down 3,500. then the ten-ier reversed itself and the market found ways the rally, and now we're back again at the 4% level. 4% super critical on the ten-year that's going to govern the market going forward, because if you look back, that's about a

high back in 2010. so if we break through there, see a close of 4.25, it could get scary. the ten-year moving up towards maybe 6% could be scary for the market. >> danger zone for the markets today. that's when we turned around, when we broke through 4% to the upside. >> i think it's important that we have to remember that 4%, while it certainly feels high in the context of the last 13, 14 years, we really need to remember that in a longer time scale, 4% really is not a very high rate. but what is high and what we saw this week is inflation, and unfortunately, one of these things has to give and i think we're going to see ultimately that the ten-year rates are going to go higher and equity prices are going to go lower. and if we don't, the reason for that is going to be only that we're spiraling into an even worse economic condition than i think some of the bears would even anticipate.

so there isn't really a good out for us here whether rates go higher or lower. either way it doesn't spell anything good i think economically or for equities. >> as stocks continue to swing, you may be wondering where you can find safety from the volatility, and the chart master is hitting the technicals on one group that could be a key driver in this wild market. >> it's the group that's done its job, energy, and it continues to be a great area of the market certainly absolute, but more importantly, relative. this is the xle, the sector etf that tracks the entire s&p sector we've respond odd this trend line excuse me. that is the wrong color. let's get a nice circumstance on there. look at this bounce, bounce, bounce, bounce, bounce and we bounced again and so what we do know is we're not at the high. but look at this next chart. the next chart is a relative chart.

we made new relative highs it depicts relative strength that's what's important. looks like it's going higher let's look at schlumber. now, how high is the correlation? it runs about 80%. those are perfectly mathematically similar lines correlations 80% or higher look at the returns over the past two years you can go at it many different ways, but it's an area of the market you want to be in relative to most others. >> thanks, carter. mike, what's the trade off that? >> we're long slummerge and halliburton. it's tough in this market to try to chase what look like winners. five and a half years ago,

schlumberger had almost twice the enterprise value we are well below all-time highs. right now, given the reduced multiples we're seeing in the marketplace it in a reasonable place, and of course we've got to advance our oil production. that's good for the oil service companies. if you don't want to risk too much, one way to do that is look out to december. i was looking at the 42.5/50 call spread. that was going to cost about 2.5 bucks. the idea being you're going risk less than purchasing the shares outright in the event that stock along with everything else begins to go lower what we do see in energy names is somewhat higher beta. saw that in another we own, devin, which was one of yesterday's big winners and today didn't do quite as well. you're going to see that there's leverage in the names. options is a way to elevate

risk that would be time for call spread risk reversal but i wouldn't do that yet. >> brian, what's your take on this trade >> schlumberger, i like the options. and mike is lays out a trade that owns an option that we say is at the money. we saw so much whip saw action that premiums are paying off i like the trade in that sense when you look at skhlumberger, we did see upside today, particularly november 42.5 bought but when i'm looking at the market back to carter's side, energy is an area you kind of want to be in. i'm looking at energy, consumer staple, i'm looking at health care those are the safe haven plays

in this environment where you're getting a rising interest rate environment. if you do, energy may come down, but if they don't, this is a sector you want to be in, and this is a cheap bet to the upside. >> carter what does integrated versus services versus gnat gas look >> trailer is the most risky, it's boom bust where, as if you're just producing oil the way exxon and chevron are, i like those better. but again, as you saw in the chart, the overlay, the correlation is so high, you're going get the move regardless of what you pick. >> let's move to another sector, staples. downpacing the s&p this year brian is focusing on one for a pop. >> when you're looking at consumer staples, it's a sector we went overweight in our fund and portfolio management procter gamble is one i'm

looking at saw good earnings news outside of pepsi i think that trickles into other consumer staples when you look at what the etf has done, it's continued to outpace the rest of the market seems like every time we get a bear market, the run is into consumer staples and health care this is a name i want to play. seems like the option market is a little cheap after market earnings what we're seeing is option earnings are looking for a 3.7% move in procter & gamble if he get that move i want to a buyer, own a call, and it's the november 1:25 call i'm looking around $4.50, break even went to $29.50 on the upside unlimited upside potential stopped out at $4.50 that's an expensive of a premium, but in this market condition, where all the volatility in the treasury market seems to bleed into the -- i want to own a call if

i'm going to play an upside, and it's an easy way for me to overweight consumer stapling by playing procter & gamble, but overweight in the consumer staples center. >> mike, what's your take? >> one of those things that seems counterintuitive when the market gets volatile and options premiums go up, there's a sense that when it's expensive and you want the to avoid buying single legs like brian's doing here but it's often times the opposite that's true options end up getting range because people are anticipating a mean reversion in options premium. so when volatility ticks up, sometimes options don't go up as much as they should, and when it goes down, they're more expensive because the stocks aren't moving very much. if you want to affect a spread the best way to do is wait for a move to take place going out and buying a call the way he's identified here makes a lot of sense. >> carter, how does chart look

>> the thing about procter is it right now is making three-year relative lows to its sector. it is a massive underperformer either that's a problem, and has been, or that's the opportunity. we might have some comparative charts we know pepsi put up really good numbers. look at the diversion in those two lines. they're highly correlated and then pepsi at the top, as procter unwinds. that's a two-year charmt look at a 20-year chart. what you'll see is the same thing together until the recently wipeout, frankly, of procter. is question is is this weakness the problem? so far it has been or do you take advantage and say, hey, play this on the long side that's my hunch, that it's so overdone relative you make a bet. >> brian, you look worry like you're on the ropes the whole time until the end when carter was looking at the charts. >> honestly, we look at that

ourselves when we were looking to buy that for clients, and that's why we added to it. because we felt like in that sector area, it has been so oversold and when you're looking at options here, these november option, remember, not only do we have earnings next week, we have gdp readings, the election, the fed meeting s so a lot of news and information to digest. this market is going to fly around owning a call kaul in something that's so oversold is going to be a leader back to the upside that's why i'm buying a call in this still to come, tvs and evs two tech bellwethers that could be head in the opposite directions how to play those names in earnings next week check out our newsletter much more "options action" after this

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welcome back to "options action." lots after questions in the last few week about volatility, so we thought we'd take early tweets one viewer asked just bought tesla. expecting a significant bump going into earnings. do you agree mike, this week you're thinking about the same thing, but not quite in the same way. >> yeah, i mean, this is a difficult one, because tesla is clearly -- i think the leader in the ev space we've seen that it's one of my holly index names. my wife drives the car, loves it, and i tend not to lean

against the companies whose products she favors, because i think she's a better indicator than i am of what consumers' interests are. the problem is consumers are under significant pressure right now. they're under pressure because we see inflation that is raising the costs of a lot of things we need, and we also have rising interest rates. and what that's going to do is reduce the amount of discretionary income they have and increase the monthly payments if they choose to finance for the purchase of a new car, especially cars like teslas, which have seen increases of their own, ignoring the increases in payments that is going to come you add to all of that the fact that even with what i think are going to be optimist, numbers for 2023, trading at over 30 times that number, that seems rich to me, particularly in this environment. so i think if you're going to lean on the long side, calls are probably a better way to do it

than purchasing the stock right here, not least of which of course is because there's some potential that elon, if he's compelled to go through with this purchase might have to sell some of it i'm inclined to go the other way. if i had the stock, i might hedge it otherwise leaning to the short side i was looking to december, the 200/150 put spread when i was looking it was going to cost about 13.5 bucks that's a way to risk a portion of the stock priets if you wanted to hedge or take a bet. i think this is a tough place to be in this environment and is going to remain the way for the foreseeable future. >> what's your take on the chart? >> i'm with mike it's a tough place to be let's look at the charts and see if that is the case. it is by my work what do we have here we know this stock was as low as $12, what, just a couple years ago. it hits $415 there are no lines on here

first it ration. that's the exact same chart. what we know is having responded to the trend line, we have now undercut see the head and shoulders top watch this next chart. same thing all the elements of a great winner, $12 to $415. stalled and losing it way. put that red arrow in again. let's go to the here and now there is the head and shoulders. look at the authority of this he'll. basically, we have a huge risk that we undercut and plunged the downside final chart, same time frame just drawing the lines a different way. not good we are set up with risks that we undercut and drop sharply. it's -- i think it's a dangerous bet to be long here. >> brian, are you with the other two guys a bunch lower? >> i am. that chart looks terrible if i'm an investor in tesla

it can seriously go to the downside basically a 25 put spread normally i wouldn't do that, but there's so much to the downside i want to have thinkm i strike in that. if you look at precovid low, if you're a fib that chi geek, the retracement is $350. here's the cool thing about this trade. i can lower consumer discretionary allocation by taking a put spread like this, tesla highly coordinated to consumer discretionary, put a put spread, and lower my exp exposure we do own tesla for clients and they're way done in allocation in terms of growth and nasdaq. i would want to put that lower and this put spread makes sense. >> mike is not sour on all big

tech you see promise in netflix >> yeah, well, if i'm going to disparage one of my holly index names i might as well try to support another one, and that's netflix. this is a name that's been under considerable pressure. i don't think i need to tell any viewers just how bad it has been but one of the interesting things is on this downslope, this sort of ski jump that we've taken all the way down here, we've gone from a very high valuation business actually to one that is not super high anymore. we're talking about a company that's trading, believe it or not, at about 20 times forward earnings, maybe a little bit less, so this is not price in the node bleed territories i think we're not going to see a lot of people paring this. when we think about discretionary spending we might any of dining it or a new car or

vacations. we add to the fact that netflix introduced a lower cost service that is going to introduce ads for those trying to peare the prescriptions they have, they have a slot they can fit in. this is a situation i was taking a look at a call spread risk reversal the reason i was looking to that, number one, options premiums are elevated and as we said, sometimes that makes a lot of sense but in this particular instance i'm willing to get down the stock, not much further below that if it does go to the downside. >> carter? >> if es la is a great winner that's stalling, this is a great loser that's developing or making a turn. you see the chart here you can see again how precise the trend line is. just this week, started to move ever slightly above. let's draw some lines, though. next it ration it's what a reversal look like doesn't matter what you call it,

cups and handles, heads and shoulderless it's the sequencing it's the word developmental. let's put it all together, all three charts, and what we've got is a downtrend epoch -- 700 all the way down here to hit lows of 100, and now turning like it a lot. >>, so brian, are you going to make it 2 for 2? >> this might fall towards consumer discretionary, but to mike's point, if the consumer discretionary is i'm going the stay at home, at this time stock has already seen this huge fall, so that 190 level, when i'm sell a put, i need to pick a level. if we get down to here, i'm okay owning it. seem like the stock has held on to that level. financed the call spread to the upside i think the market conditions are so oversold recently we may

get a bear market bounce tried to push to 3,700 on the s&p earlier. if the market goes up, i think netflix participates that way, and help me to finance with that put because the level of 190 where mike wants to get in, that makes sense to me. in that sense i like this. i'm not a fan of consumer discretionary, but netflix is one you n caplay. up next, we're taking more of your tweets more "options action" after this good luck. td ameritrade, this is anna. hi anna, this position is all over the place, help! hey professor, subscriptions are down but that's only an estimated 15% of their valuation. do you think the market is overreacting? how'd you know that? the company profile tool, in thinkorswim®. yes, i love you!! please ignore that. td ameritrade. award-winning customer service that has your back.

welcome back to "options action." it's time to take am some tweets our first fan asked, what do you feel about an in the money lead put with things expected to get worst next year. brian, take that one, please. >> if i'm expect to it guess worse, apple is correlate to the s&p 500, so it probably will get worse, but i only like buying lead put options after markets are at all-time highs and

volatility priced to the premium of options are at lows that's the time to pick up put option, not now. i think second half of next year, the fed will be done be the market will like that. i like a play on apple coming january of this year, 2023 option if that doesn't pay off, roll it to february or march, but i would not go out all the way to january 2024 to buy a put. you're right to be bearish about ame market i worried, so -- >> up next, final call

time now for the final call. carter worth. >> all signs point to lower prices for equities. remain a bearish individual if you're playing. >> brian stutland. >> procter & gamble earnings next buying buying at 125. staples upset. >> mike khouw. >> still like energies,

including the oil service companies like schlumberger and i think the worst has happened with netflix, behind us. >> special thanks to brian for joining us that does it for us. we'll be back here 5:30 eastern time done go anywhere i'm here to level the playing field for all investors. there is 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, my job is to save you some money call me 800-743-cnbc or tweet me @jimcramer. there ya go, another