(michael) people come up to me and they say, "oh, your father meant this to me." i say, "i just want you to know, he was that way all the time. he was as good a father as he was a public servant." (solemn music) ♪ it's friday. live from the nasdaq market site in time's square. here is what is coming up. >> despite bugged optimism and under concerns still permeates the markets. charter worth tries to keep your portfolios as healthy as possible. starbucks. for some consumers it's discretionary. >> for others, it's a staple. how that is balancing out when

the company reports results next week. in the meantime, a strategy. finally, be like buffett. stock is up for the month. if the equity is too rich for your blood, an option strategy to parallel its place. it's time to risk less to make more. options actions starts right now. >> welcome. before we hit the trades, let's talk about the market action. stocks are higher to close out the fourth week of gains. the dow jumping 800 points on pace for the best month since 1976. s&p jumping about 2 1/2 percent. nasdaq climbing nearly 3%. carter, what do you make of the rally, especially in the face of some brutal earnings action in big tech.

>> one of the things about having a particularly good market which we did, it follows a bad market, the name of the game. when i have conversations, one of the things that comes up is this. we are in the homestretch. we know there is seasonality on our side, year end rally potential and nothing to hit us now. emption are out of the way. sad that we know they will do more, maybe not crazy. let's run this thing. that's not an investment piece. that is just a maybe. >> so, you are not convinced. >> no. >> scott, what about you? >> i'm not particularly convinced either. if you told me that the 10-year yield would fall by 30 basis points in the point of a week, of course you want to be long stock. i'm not that surprised. you pointed out he did so in the face of really unfortunate results from amazon and meta. so, the thing that sticks out

to me is upside calls. 30-day calls have never been as expensive as they are right now when compared to out of the money puts. people are obviously buying calls because they are bullish or they are hoping that the fed will throttle things back. if that news comes out, the rally will be vicious, quick and they don't want to miss it. people are loading up on out of the money calls in the s&p. >> mike, would you buy it? >> so, a couple of things. the first is that, you know, we will see in bear markets very sharp rallies. we had a couple already. this is one of them. but it's one of the most mild. we had two rallies in a declining market this year that have been greater than 10%. this isn't quite as large as the previous two. so, the important point i would

make is that just the fact that we had a good move off the recent lows isn't evidence enough. i would ask people to think about something else, too. as we go through the earnings season and we reflect on the results that are not that great, consider this. the impact of higher rates. the impact of what everybody is concerned about, a slowing economy aren't baked into the results. that is something that we will see in the future. so, i think what we have to see is real evidence of mitigation on the inflation front so that we really can take stock of the idea that the fed is going to pause potentially in the near term future and good cause to. if they don't, if they slow down the pace of their rate increases and reign in supply, we will be right back. that is what happened in the

1970s situation, too. >> then you get into reputational issues as well. sounds like three for three of you say it's a bear market bounce. the chart master is looking at a group that could act as good insurance for your portfolio, carter. >> sure. so, there is managed care. if you think about it, the beauty of this particular area of the market was health care that it is truly domestic, right. managed care stocks, health insurance stocks don't care about putin, oil, the u.s. dollar. they are tremendous long term performers. since inception, managed care doubled the performance of the entire s&p health care sector. it looks like more of the same. look at a few charts. the first is a comparative chart. you can see two lines and colors. one, of course, the top one, the s&p 500 managed care sub industry group. human in a, united health

group. look at the same thing on a five year basis. what you see here is this divergence which is to say that health care, managed care has never really faltered even as we had a bad year and now a bit of a bounce. so, the question is where from here. look at the next iteration. this is the entire bull market, 2009 to present. that is a mathematically perfect 45-degree angle. that is the s&p 500 managed care sub industry group. it's mid range. united health care, the big player in the group. weekend with this. take a look at unh chart. the high today was 553. that horizontal line in april was high in april, 553. it's the same price it was six months ago. not extended. a nice rest.

that is the precondition before a breakout. >> three very convincing bullet charts. mike, what is the trade. >> this is a company that i think you can get behind. it's hard to imagine that you can't create a chart where you can compare growth to s&p because it would diverge so radically that you wouldn't see the earnings growth in the s&p since 1987 at all. that profound a difference. the stock is a 5,000 bagger since the last quarter of 1987. it's a well managed company, in a space that is economically insensitive and a portion of the economy that grows more rapidly than the economy itself. that said, it's at all time highs. that presents a challenge. it's a fairly expensive stock. one share is 550 bucks. one of the things that can be done in an environment like this, equity market pull backs,

concerned about chasing stocks, risk less than purchasing a big block of stock would, i would like out to december and buy a call spread. so, when i was looking at this earlier today, the stock was below 550. the december 550-600 call spread. at that time you would spend about 17 bucks and change to buy it. when you buy options you have to consider the multiplier that each contract represents 100 shares. the actual purchase price is about $1,750. that is a little more than the purchase price of three shares of stock. i'm not suggesting that is the way to think about the risk but that is the most you could potentially lose. you would have exposure to much more than the three or four shares that the capital would get you. >> uh is up. scott, what is your take on the

name. >> i like all the businesses that you have to own. let's face it, you have to own companies like united health care. the interesting thing is that they are a little insulated from the market labor cost. labor costs for health care went up 35% in the two years since the end of covid. that is a problem for providers. that is not really a problem for an insurer. to mike's trade, in the past we talked about the cost of the spread versus the width of the spread. this makes tremendous sense in that regard. he is getting the call right where the market is. he is paying about 35% of the width of the spread and given that the first call is right at the money, then this makes a lot of sense. >> we will switch gears and look at starbucks because the stock is seeing jitters the last few months. the coffee chain is

outperforming the broader market but scott is not so sure that this latte stays hot as investors gear up for earnings next week. >> starbucks has more problems than most companies. it's a discretionary purchase. absolutely discretionary purchase. the problems are the company had substantial executive turnover in the past month. the fact that the head of trading, the head of the supply chain have left. the coo has left. they are not going to replace that person. they will do away with that business. i'm not certain how you do that in a business that is so client facing. labor costs when it comes to health care. labor costs will be a real problem for starbucks as more stores unionize and then let's talk about china. they have a tremendous presence in china. we know could have individual shuts down everything in china. they have 6,000 stores there of the 35,000 stores total, about

17%. so, given that the stock is expensive to begin with, ember rush on starbucks given all the challenges and problems. the way to express that bearishness is in the december desperation to buy the 85-75, you could buy that for 2.55, a quarter of the width of the spread. that means makes loss what you pay break even 8245. max profit almost 7 1/2 dollars if we get the break in starbucks prices that i expect. >> on the last show we were having a discussion about why courtney likes the stock because tim k. is an ever higher price for his latte, five bucks and considers it a staple. what is your take.

>> grass so didn't like it. look, i think it's a fantastic chart pattern. that's what makes the market. starbucks has the hall marks of a bearish reversal. to some it's the unbelievable stable, a drug. some think it's discretionary. if it gets to 5 bucks i will get coffee elsewhere. as patterns go, that is the definition that made a turn reversing. >> mike, thoughts? we have a bull and a bear here. >> so, in the middle of the day, in california, which is where i am, you have to get up early in the morning. so, around noon, 1:00 in the afternoon, i'm getting a little lagered. what happens i will run to the nearby starbucks. i haven't thought of any other place to go frankly to get my coffee. valuation troubles me a bit. i understand the pressures in

china. i'm torn here. i have no position in the stock but i have a stock buying the product. i buy quite a lot of it actually. so, as far as i'm concerned i think it's a bit of a staple. >> still to come, winning like warren. tried and true. birk shore hat that away is up 10% for the month.

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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. welcome back to options actions. a lot comes to mind when you think of berkshire hathaway. out of the top six names in the s&p 500, it's the only one that is not tech or down dramatically this year. it's up 10% or so for the month. mike, is there more to this and how can we be like buffett here? >> that is a question everybody who is a long-term investor would like to ask. there are no living investors other than charlie and warren buffett who have been at it as

long as successfully as those two have and seen as many bear markets they had and managed to navigate them successfully safe to say. as we look at berkshire hathaway, we need to think about the good and bad. the good first, first of all, it's as you pointed out, a diversified company. they have diversified earnings and not tech related per se. they have a big chunk of apple. we don't think of them as a tech company but insurance, industrial, things like that. they are the largest shareholder in april so they do have exposure to tech as well. take a look how the company did the last couple of years. they are quite profitable in a tough environment. they have a massive pile of cash on the balance sheet. all of those things are good, especially when you consider that they need to invest and they will be investing at more distressed prices. it's not all sunshine and

roses. there are bad things, too. we can take a look at those. inflation does create some pressures for the business. it's an input cost in many of them. railroads are a good example. railroads are tied to the economy. they are facing higher costs and potentially lower revenues. that is a challenge. they have passed through some fuel costs. the other thing, a big reinsurance. that will be hit by things like hurricane ian. when you put all of these things together, though, what we can expect is fairly modest moves going forward. this is not a company that moves a great deal on earnings. the average deal off earnings is 1.8%, one of the lowest meaning that most people look at -- they priced in the activity already. the way to do this, it has a relatively low volatility already. look at a low calendar spread.

i was looking at a november, january call category, about 14 bucks when i looked at that earlier today. selling the 307 1/2 calls against it in november, collects about 3.65. a quick point, i generally don't like to sell options on stocks, especially in this kind of a circumstance for less than about 1% of the stock price. you will notice we are collecting more than 1%. this will give you peak profit if it graph takes slightly north. some decay in accelerated options because they capture earnings. this isn't a company that moves a great deal on earnings. the absolute risk is limited to the amount of premium that you spent but you won't see the total losses if it declines after earnings even down to the lowest level immediately following earnings. there is some time to go on the january side. >> large exposure to apple in terms of the holdings. what do the charts say.

>> you know, from my seat, this is what a pair of twos is, not particularly bearish or bullish. you don't bet big when your hand is not big. it's not a great moment. i have three identical charts. you can draw the lines anyway one wants. my eyes see this. we are basically stuck at the top of the range. if you excuse that blow out in the top late '21 or '22. another way is converging trend lines. at the apex we are like neither fish nor foul. then the same chart again, we rallied right to it. i think likely to be range here sort of a nonevent. >> scott, that's not very sexy. what is your take. >> we all love warren buffett and the company. i love this sort of a trade

structure. mike uses the fall crush that will come as soon as earnings are released in the option that he is selling. one thing you have to think about when it comes to earnings at berkshire is the goofy way that they have to report earnings means that given the nature of the business, the earnings are not indicative of the success of the business. so, don't pay attention to big unrealized losses in the stock portfolio as warren buffett would say. he loves to have the stock market lower. he has that money to invest. i bet you he invests a bunch this year. >> in what? >> well, the thing is -- you can think of the sorts of businesses that he likes to buy. why isn't he buying some of the big industrial machinery names like caterpillar or deer. he doesn't have to take the

companies over. he can buy a huge portion of that and put a portion of his fresh cash to work and own a wonderful, wonderful businesses. >> all right. we will pass the word along. up next, we are taking a look back on scott's energy trade. 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. we're carvana td ameritrade. the company who invented car vending machines and buying a car 100 percent 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 want to buy your car so go to carvana enter your license plate answer a few questions and our techno wizardry calculates your car's value

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welcome back. time to update you on a trade last month that was laid out on exxon mobile. >> crude oil had a tough time. in general, energy prices have stabilized. we saw what happened in gasoline prices early in the year then they came back down. that is fantastic. and if you look at the names, for example exxon mobile, that stock is back into the middle of the range that it has enjoyed for most of the year. let's not get too far by the terminology. we do that in november by selling an 80 strike put and 90 strike call and limiting our risk by buying a 75 strike put and a 100 strike call.

>> that trade hung out in the green for a while. exxon gains pushed it into the red, scott. what do you do now? >> sarah, this was a gut punch when it came to the -- russia, russia and the saudis cutting back oil production. that lit a fire under the energy names. this is way past that 100 strike call. nothing to do here. no way to rejuvenate the trade or rehabilitate the trade. this is the reason we use options. we used a unique trade set up. unique trade strategy to limit risk and we have done that. >> up next, final call, st stick with us.

time for the final call. carter? >> managed care stocks.

united health care poised to break out. >> beautiful chart. a $5 latte is a luxury. >> so says you. >> mike. >> unh. >> that will do it for us. we will be back next friday. mad money with jim kramer starts right now. - [announcer 1] the following is a paid advertisement for plexaderm skincare. - [announcer 2] watch this. it's all 100% real. witness what happens to this woman's bags under her eyes in an actual time-lapse, in just minutes. nothing has been doctored or tampered with. the very real problem will disappear before your eyes and hers with a revolutionary topical formulation that works in just minutes and the effects will last for hours and hours. over 1 million people are successfully using this topical technique to visually reduce puffiness and bags. it works on sagging jowls, even fine lines and wrinkles on the face and forehead. introducing plexaderm, from sheer science.