(kim) yeah. (grunting) (crew member) there ya go, yeah, yep, it's all good. -and that's a wrap. -that's great. it's friday and it's time for options action the dow and the s&p ended a choppy trading week almost back where they began while the nasdaq continuing to grind lower. tonight we'll dive into the action of the energy patch and see if there's chance to profit betting on staples netflix and tesla. the strategy and options play straight ahead here with us tonight carter worth, mike khouw, and our special guest.

quick thoughts on the week because it has been a crazy wek. carter >> one way to decide any period or day look at the high and the close. the lower low, the lower close, bearish week >> all right, that was simple. what was your take >> i think when you look at the market, yeah, there were some whips action and somewhat bearish as we closeout the wick week i think it's really been all about the ten-year treasuries right now and where that's going. basically by my calculation about every 1%, so when the ten-year sort of ticked above the market got real scared we saw s&p trade down and all of a sudden the ten year reversed itself and the market found ways to rally 4% critical on it ten-year, i think and that's going to govern because if you look back that's

about a high 2010. so if we break through there, it could get scary. it'd be scary for the market >> yeah, 4% really marked the danger zone for the markets today, mike. that's when it sort of turned around when we broke through to the up side. >> yeah, i think it'simportant to remember 4% while it certainly feels high in the context of the last, you know, 13, 14 years we really need to remember that in the 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 then equity prices are going to go lower and if we don't the reason for that is going to we only that we're spiraling into an even worse economic condition than i think some of the bears would

even anticipate. so there really isn't a good out for us here whether rates go higher or low. either way it doesn't really spell anything good i think economically or for equities >> as stocks continue to swing you may be wondering where you can find safety from this volatility and hitting the technicals on one group that could be a driver in this one market carter >> it's the group that's sort of done its job, if you will, energy and it continues to be a great area of the market certainly absolute, but more important relative this is the xle. it's the sector etf that tracks the entire s&p sector. you can see quite clearly we responded to this trend line -- let's get a nice circle on there. look at this bounce, bounce, bounce, i we've bounced again. what we do know we're not at thei l we made new relative highs

energy versus s&p. it depicts relative strength that's what's important. looks like it's going higher what we've got here a very similar course to the xle. it comes down to trend and it bounces, it comes down to trend and it bounces now high how high is the c correlation? it runs in about 80% those are mathematically similar lines. it's an area of the market you want to be in relative to most others >> mike, what's the tradeoff that >> it's tough in a market like this one to try to chase what looked like winners, but i would point something out quickly. 58 1/2 years ago they had roughly comparable revenues as it does now. it had about half the earnings

but had almost twice the enterprise value, so if we go back you can see we're well below. right now it's trading about 15 times estimates which i think given the reduced multiples, of course we've got to advance our oil production that's good for the oil service companies. of course if you don't want to risk too much one way to do that is looking out to december buying the 42 1/2, selling the 50s. that was going to cost about 2 1/2 bucks. the idea you're going to purchase the stockout right. we saw that ipanother name we own, devon, for example. so you're going to see that. options are a way to limit your

risk of course if it does fall pack a bit that would be the time by selling puts but i wouldn't do that again >> what's your take on this trade? >> i do like the options in this and what mike is doing is laying out a trade that actually owns the option to what we call at the money the stock is actually trading. because we've had a lot of whipsaw action a lot of these premiums are paying off. the one thing that's made us cautious here we did see put uptick almost twice as much volume on the up side of schlumberger today i'm looking at energy, consumer staple, looking at health care those are the places where we're

getting this rising interest rate environment and energy may come down, but if they don't this is the up side of that. >> carter, what does integrated versus services versus nat gas, how do they look relative to each other >> obviously they're different areas of the market. if you're just sort of producing oil the way exxon and chevron are. the correlation is so high you're going to get the move good or bad regardless of which one you pick >> let'smove onto a another sector, staples, a group considerably outpacing groups this year. which one are you looking at >> when you look at some of the sectors it's a sector we went overweight so that's an area i want to play to the up side. proctor and gamble is what i'm

looking at we saw some good earnings and i think that starts to trickle into some of the other staples when you look at year to date what something like the xlp market has done continued outpacing the rest of the broader market it seems every time we've got a bear market value to the up side the run is in consumer staples and health care. this is a name i want to play. it seems like the options market is a little cheap after earnings typically. we're seeing options players are looking for a 3.7 move in proctor and gamble. i want to own a call, and i'm looking right around $4.50 so break even $1.50 on the up side i'm stopped out at $4.50, yeah, that's a little bit expensive as a premium but when we get these

whipsaws i want to own the call if i'm going to play the up side, and it's an easy way to be a little more overweight in the consumer staples sector. >> what's your take? >> it's one of those things that seems a bit counter intuitive. there's a sense people have -- they've gotten too expensive and that's when you want to sart of avoid going out and buying single legs, but actually it's often the opposite that's true and the reason for that is that options premium end up getting range bound because people are anticipating basically a memes reversion in options premium sometimes when it goes down they actually are more expensive on a relative basis because the stocks just aren't moving very much if you want to effect a spread probably the best way to do it is making the moves take place

>> the thing about proctor right now is making three-year relative lows to its sector. it is a massive underperformer that is a problem. we know pepsi put up really good numbers. look at the diversion of those two lines. and pepsi on the top as proctor sort of unwinds over the past four or five months. look at a 20-year chart and what you'll see is the same thing, very much together until this recent sort of whipeout frankly in proctor and gamble. that's my hunch that it's so overdone relative that you make a bet. >> oh, so so bad it's good >> on a relative basis >> brian, you look kind of worried like you're on the ropes until the very end when carter is looking at the charts

>> actually, we looked at that ourselves and that's why added to it because we felt like in that sort of sector area it has been so oversold, and when you're looking at options here, these november options not only do we have earnings next week, we get gdp earnings at the end of november, october a lot of information to digest where this market is going to fly around a little bit and owning a call option that plays something so oversold in my opinion is going to be a leader back to the up side, if there's any kind of rally so that's why i'm buying a call. >> still to come tvs and evs we're diving into two tech bellwethers. and for everything options action check out our website and newsletter there's much more options action right after this

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welcome back to options action, lots of questions in the last few weeks about volatility, so we thought we'd take the early tweets last week one viewer just asked just bought tesla october 240 calls 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, right, because tesla is clearly i think the leader in the ev space we've seen that. it's one of my holly index names. i tend not to lean against the companies she favors because i think she's a better indicator than i am sometimes of what the consumer street interests are. they're under pressure because we see inflation, so that is raising the cost of a lot of things they need, and we also have rising interest rates, and what that's going to do for us is reduce the amount of discretionary income they have and is going to increase the monthly payments if they choose to finance for the purchase of a new car especially expensive cars like teslas, which by the way, have seen some price increases of their own even ignoring the payments and increases going to come with

these rising interest rates. add to that what i think are going to be optimistic trading numbers in 2023 and trading over that number. that seems particularly risky in this environment 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 there's some potential elon if he's compelled to go through this might actually have to sell some of it but i'm inclined at this point i think to actually go the other way. if i had the stock i might look to hedge it. december the 200150 put spread when i was looking at that earlier today that was 13.50 but i do think this is just a tough place to be in this environment, and it's going to remain that way i think for the foreseeable future >> carter, what's your take on

the chart? >> i'm with mike, it's a tough place to be. the very much is the case by my word it hits 415. let's put some lines on. first iteration, so that's the exact same chart, but what we know is having responded to this trend line beautifully we have now, of course, undercut with the red arrow. you see the head and shoulders top, watch this next iteration same thing, and there it is. all the elements of a great winner, 12 to 415. it stalled and losing its way and that red arrow again let's go to the here and now, up close and personal there's the head and shoulders look at the authority of this level. basically we have a huge risk that we undercut and we plunge the down side. final chart, same time frame just drawing the lines a different way, not good.

we are setup with risks that we undercut and drop sharply. it's -- i think it's a dangerous bet to be on here. >> brian, you with the other two guys, a punch lower? >> i am. looking at that chart looks terrible if i'm an investor in tesla. it can searly go into down side. there's so much risk to the down side i want to have my short strike in that put spread a lot lower than where i think the stock can go if you look at pre-covid low off to the high the 61% retracement is right down at like $1.60. so certainly the stock can get down there i can lower consumer discretionary sort of allocation just by simply taking a put spread like this, which is tesla highly correlated to consumer discretionary, put a short bet so to speak and lower my exposure to consumer discretionary very easily rather

than mix everything around we do own tesla and we are way down in allocation in terms of growth and nasdaq and what not, so i would want to take that lower and buying a put spread makes a lot of sense >> we should note mike does not sour into all earnings next week mike, you actually see some promise in netflix >> if i'm going to disparage one of my holly index names and i might as well 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 how bad it has been. one of the interesting things on this down slope, this ski jump we've taken here, wave gone from a high valuation business to actually one not super high anymore. we're talking about a company trading believe it or not about 20 times forward earnings, maybe a little bit less. so this is not priced in those node blood territories we used

to see the other thing is i think we're not going to see a lot of people pairing this when we think about discretionary spending we might think about dining out, a tesla or vacations but if you're not doing those things, if you're going to be spending more time at home and add to that the fact netflix has introduced a lower cost service over those trying to pair all those subscriptions they may may actually have a slot they can fix in options calls are elevated and previously said sometimes that makes a lot of sense in this particular instance down around 190, 195 level i think it's not going to go much further down below that if it does go to the down side >> if tesla is a great one that's stalling this is a great loser that's developing and

making a turn. you can see how precise the trend line is and just this week we started to move ever so slightly above let's draw some lines, though. next iteration is what a reversal looks like. doesn't matter what you call it. it's the process of sequencing it's the word developmental. let's put it all together all three charts and what we've got is a down trend, epic, all the way down here to lows of 100 and then turning like it a lot. >> so, brian, are you going to make it 2 for 2? >> like i said this might fall a little bit more towards consumer discretionary, a little bit too much but to mike's point if the consumer discretionary side is i'm going to try to save some money and stay home, that's where i think the stock has already seen its huge fall so that 190 level when i'm

selling a put i need to pick a level where it's like, hey, if we get down to here i'm okay owning it, and it seems the stock has sort of held onto that level. to sort of finance that call spread to the up side, i think the market conditions are so oversold recently we may actually get a bear market, another bounce if the market goes up, i think netflix participates that way and helping to finance with that put because the level of 190 is where mike wants to get in that makes sense. netflix is maybe one you can kind of play all right, up next we're taking more of your tweets more options action right after this thinkorswim® by td ameritrade is more than a trading platform. it's an entire trading experience. with innovation that lets you customize interfaces, charts and orders to your style of trading. personalized education to expand your perspective. and a dedicated trade desk of expert-level support.

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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 some tweets. our first fan asks what do you feel about an in the money lead put for apple in a 2024 expiration with things expected to get worse next year rian, take that one, please. >> apple is correlated 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 or the vix prices and premium of options are at lows that's a time to pick up a put out. not now. i also think second half of next year i think the fed will be done and the market will really like that. a january 2023 option if that doesn't pay off roll it to february or march at that point, but i would not go out to january 2024 to buy a put. you're right to be bearish about the market >> all right, up next, final call

thanks to avalara we can calculate sales tax on almost anything, anywhere, automatically. avalarahhhhh. what if tax rates change? ahhhhhh. filing sales tax returns? ahhhhhh. managing exemption certificates? ahhhhhh. business license guidance? ahhhhhh. does it connect with accounting? ahhhhhh. item classification? ahhhhhh. cross-border sales? ahhhhhh. what about? ahhhhhh. ahhhhhh. do you have those budget markups? thank you. mmhm. [bubbles]

time now for the final call. carter braxton worth >> all sips point to lower prices for equities. remain abearish individual your play. >> proctor and gamble next week, buying november 125 call put >> mike. >> still like energies including oil service companies and i

think the worst has happened -- is behind us for netflix >> and special thanks to brian for joining us here on options action that does it for us tonight. meantime do not go anywhere. "mad money" with jim cramer starts right now (dramatic music) - welcome to today's program. i'm milton lawrence and with me is dr. wendy walsh. our topic on today's program is the potential health risk individuals and families who have served, worked, or lived on marine base camp lejeune, or marine corps air station new river in north carolina. scientific and medical evidence indicate