>> if he makes more money at what he's doing, he can pay back more victim investors. i hope what he does for the rest of his life is clean, and he stays out of trouble, because if he ever steps over the line, i want him to know i'll be there to arrest him again. it is friday, and that means it is time for options action. i'm sara eisen in tonight for melissa lee. here's what is coming up despite budding optimism an undercurrent of concern still permeates the markets. carter worth charts out a haven to try and keep your portfolios as healthy as possible then starbucks for some consumer it's discretionary, for others it's a stipple. we'll find out how that balancing out when the company reports results next week. in the meantime scott nations is

brewing up a strategy. finally, be like buffett good old berkshire stock is up solidly for the month. mike khouw has an options strategy to parallel its place it's time to risk less to make more options action starts right now. >> let's talk about today's market action because stocks ripped higher to closeout the fourth week of gains the dow jumping more than 800 points on pace for its best month since 1976, and the tech heavy nasdaq leading the gains climbing nearly 3% carter, what do you make of the rally especially in the face of some pretty brutal earnings reactions in big tech? >> right, i mean one of the things about having a particularly good which we did

is it almost always follows a particularly bad month that's the name of the game. when i have client conversations one of things that keeps coming up is this, hey, listen, we're in that homestretch. we know there's seasonality on our side, post election potential, and there's nothing to hit us now. earnings are out of the fed. fed we know they'll do a bit more, let's run this thing okay, but that's not an investment thesis. that's just a maybe. >> so you're not convinced >> no. >> scott, what about you >> i'm not particularly convinced either, sara i mean, if you told me that the ten-year yield was going to fall by 30 basis points in the course of a week i would say of course you want to be long stocks so i'm not that surprised except for and you pointed this out the fact it did so in the face of really unfortunate results from amazon and meta. so the thing that really sticks out for me is that upside calls

30-day calls have never been as expensive as they are right now when compared to out of the money puts so people are obviously buying calls because they're bullish or they're hoping that the fed is going to throttle things back, and they know if that news comes out, then the rally is going to be vicious and it's going to be really quick, and they don't want to miss it. so people are loading up on out of the money calls on the &p >> the start of fomo effect. mike, would you buy it >> so a couple of things the first is you will see in bear markets very sharp rallies. we've had a comalready and this is one ofthe them. we've had two rallies in a declining market this year that have been greater than 10% this one isn't quite as large as the previous two, so the point i would make is that just the fact we've had a good move off of the

recent lows isn't evidence enough, and i'd ask people to think about something, too as we go through this earnings season and reflecting on things that aren't that great, the impact of higher rates and the impact of what people are concerned about, which a slowing company aren't baked into the results. i think we're going to have to see real evidence of mitigation on the inflation front so we can really take stock of the idea that the fed is going to pause potentially in the near-term future and will have good cause to, because if they don't wre, if they slow down the pace of their rate increases and try to reign in the money supply then ware going to be right back. that's what happened in the 1970s, too that's the situation walter burns faced. >> then you get into reputational issues as well.

19% off the highs, sounds like three for three of you sound like this is just a bear market bounce the chart master is looking at some that could act as good insurance for your portfolio >> sure, there is managed care this particular area of the market within health care it is truly domestic managed care stocks, health insurance stocks don't care about putin or the u.s. dollar, and they are long-term performers since inception manage care has doubled the performance of the entire s&p sector. and it looks like more of the same let's look at a few charts the first is a comparative chart and the top one, that's the s&p 500 managed industry group let's look at the same thing

five-year basis comparative chart and you see here divergence which is to say health care, managed care has never really faltered even as we've had a bad year and we're in a bit of a bounce so the question is where from here look at this 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 subindustry group. it's not even the top of the channel. it's just midrange united health care is a big player in the group. take a look at unh's chart unh's high today was 553 it's the exact same price it was exactly six months ago, not extended, it's had a nice rest that is the precondition more often than not for a breakout. you would play it for just that.

>> three very convincing bullish charts, mike what's the trade >> so, this is a company you can really get behind. it's hard to imagine you can't actually create a chart where you can compare the earnings growth of united health care to the s&p because it would diverge so radically you wouldn't actually see the earnings growth in the s&p since 1980 or so at all. it is that profound a difference in fact the stock is up 5,000 bagger since the stock was in 1987 it's a space economically insensitive and a portion of the economy that grows more rapidly than the economy itself. that said it is, of course, at all-time highs, and it presents a challenge. it's also an expensive stock, one share is $550. so i think something can be done in an environment like this if you're speaking generally speaking equity pull backs and

you want to risk less purchasing than a big block of stock i would actually look out to december and buy a call spread when i was looking at this earlier today, i was looking at the december 550, 600 call spread at that time you'd spend about 17 buck and some change to buy it of course you have to remember when you're buying options you have to consider the multiplier so the actual purchase price of this is going to be about $1,750, but that is a little more than the purchase price of three shares of stock. i'm not suggesting that's the way you should think about the risk here but the $1,750 outlay is the most you could lose if the stock doesn't break out. you'd have much more exposure than the three or four shares it would otherwise get you. >> other stocks are outperforming but nice on the record highs scott, what's your take on the

name >> i like all the businesses you have to own. and let's face it you have to own companies like united health care they're a little insulated from one of the problems in the broad market and that is labor cost. labor costs in health care have gone up 30% in the two-years since theened of covid, that's a problem for providers. and that's not really a problem for an insurer to mike's trade, in the past we've talked about the cost of the spread versus the width of the spread, and this makes tremendous sense in that regard because he's getting on call right where the market is, he's paying about 35% of the width of the spread, and given, again, that that first call is right at the money then this makes a lot of sense >> we're going to switch gears now and look at starbucks because the stock has seen some jitters over the last few months the coffee chain is outperforming the broader market in that time frame, but scott's

not so sure this latte stays hot as investors gear up for earnings next week why not, scott >> well, starbucks right now has more problems than most companies. it's a discretionary purchase. i think it's absolutely a discretionary purchase that's one of the problems the other problem is the company has had substantial executive turnover in the past month the fact the head of training, the head of the supply chain has left, their coo has left, and they're not even going to replace that person. they're going to do away with that business. i'm not sure how you do that in a business so client based i mentioned labor costs when it comes to health care labor costs are going to be a real problem for starbucks as more stores unionize and then let's talk about china. they have a tremendous presence in china and we all know that covid is shutting down everything in china. they have 6,000 stores there of the 35,000 stores they have total, so about 17%.

so given that the stock is expensive to begin with in 2018 forward looking i am bearish on starbucks given all of these challenges and all these problems i think the way to express that bearishness is in the december expiration to buy the 85, 75 put spread when i put this together in the middle of the day you can buy that for a net of $2.55, so about a quarter of the width of the spread, and that means minus what you pay break even is, but your max profit almost 7.50. >> the discretionary point is interesting because on the last show we were having a discussion why courtney likes the stock because tim k. is ever higher price for his latte i think it's $5 and considers a staple. what's your take

>> that's right. look, i think it's a fantastic chart. that's what makes a market starbucks has all the hallmarks of a bearish to bullish reversal what we know to some it's an unbelievable staple. it's a drug. you have to have it. and some people think it's discretionary, i'm going to get the coffee elsewhere as patterns go, that is the definition of something that's made a turn and reversing. >> mike, we've got a bull and a barrier. >> in the middle of the day in california where i am you have to get up pretty early around noon, 1:00 in the afternoon i'm getting a little laggard and what usually happens is i will run to a nearby starbucks. i haven't thought of any other place to go to get my coffee i understand the pressures of china so i'm a little bit torn here i have no position on the stock

but i haven't stopped buying the product. i buy quite a lot of it, actually so as far as i'm concerned i think it is a little bit of a stamal still to come, winning like warren, tried and true berkshire hath away is the biggest tech name in the s&p and up more than 10% in the last month. and for everything options action you can check out our website and newsletter stay with us >> calling all options fans reach into your pocket, grab your phone and tweet us your question if it's nice we'll enter it on-air, when options action returns. rswim® 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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technology solutions that put you ahead. get started with fast speeds and advanced security for $49.99 a month for 12 months. plus ask how to get up to a $750 prepaid card with a qualifying bundle. 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 a lot comes to mind when you think of warren buffett's berkshire hathaway, but did you know in the top six names out of the s&p 500 it's the only one not tech and the only one not down dramatically this year, in fact it's up 10% for the month how can we all be like buffett here >> i think that's a question everybody who's a long time investor would like to ask themselves look, there are no living investors other than charlie monger and warren buffett here who have been at it as long and successfully as those two have

and seen bear markets as long as those two have and managed to navigate successfully. i think we need to look at both the good and the bad let's start with the good first. first of all it is as you pointed out a diversified company so they have diversified streams of earnings and not tech related per se although they do have a big chunk of apple. we think of them as industrials and things like that i think it's safe to say they do have exposure to tech as well. the other thing is take a look how the company did manage to do it and they've been quite profitable in a tough environment and they have a massive pile of cash on the balance sheet. all those things are good especially when you consider they need to invest and they're now going to be investing at more distressed prices it's not all sunshine and roses. we can take a look at some of

those. first of all, inflation does create some pressures for the business it is an input cost in many of them railroads i think are a good example, and railroads are tied to the economy so they're facing both higher costs and potentially lower revenues and that's a challenge, although they have been able to pass through some pure costs. the other thing they have a big insurance business and that's going to be hit by things like hurricane ian. when you put all these things together, though, i can we can expect fairly modest moves going forward. this is not a company that moves a great deal on earnings in fact it's average move off of earnings is about 1.8%, which is one of the lowest meaning most people look at this thing and priced in a lot of the activity already. i think the way to do this and of course it has a low volatility already is look at a call calender spread, looking at the january, buying the at the

money 300 strike calls, those were about $14 when i was looking at that earlier today. selling the calls, i generally don't like to sell options on stocks especially in this circumstance for less than 1% of the stock price. so you'll notice here we're collecting more than 1%. this is going to give you peak profits if the stock gravitates slightly north they do capture earnings, but as i pointed out this isn't a company that moves a great deal on earnings, and your absolute risk is going to be limited to the total amount of premium you spent, but you're not going see those total losses if the stock does climb after earnings even down to that lowest level immediately following earnings inasmuch. >> also really good point about the large exposure to apple in terms of its holdings. carter, what do the charts say in. >> you know, from why seat this

is what a pair of twos is. it's not particularly bearish, not particularly bullish, which is to say you don't bet big when your hand is not big i've got three identical charts. you can draw the lines any way one wants, but my eye sees this. we're basically stuck at the top of the range, if you excuse that blow out the top in late 21, 22. the other would be converging trend lines and finally same chart again and using his moving mechanism, we rallied right to it and i think we're likely to be range bound here and likely to be nonevent. >> scott, well, that's not very sexy what's your take >> we all love warren buffett, we all love the company. i love this sort of trade structure because the fall crush

is likely to come as soon as earnings are released in the option that he is selling. one thing you do have to think about when it comes to earnings and berkshire is the dpoofy way they now have to report earnings meaning that given the nature of the business the earnings are not indicative of the success of the business, so don't may attention to big unrealized losses in their stock portfolio, as warren buffett would say he loves to have the stock market lower because he's got all that money to invests, and i bet you he invests a bunch this year >> in what >> well, and that's done really well you can think of the sorts of businesses he likes to buy why isn't he buying some of the big industrial machinery names like caterpillar or deere? he no longer has to take those companies over he can buy a huge portion of that and put a huge portion of

his free cash to work and own wonderful, wonderful businesses. >> all right, we'll pass the word along up next we're taking a look back on scott's energy trade. "options action" back in a moment what's it like shopping on carvana? it's a car buying process that lets you shop tens of thousands of cars 100% online so you can buy, sell or even trade your car from anywhere it's getting as soon as next day delivery or picking your new ride up at one of our sleek car vending machines.

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welcome back to options action time to update you on a past trade last month scott laid out. >> while crude oils 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's fantastic and if you look at the names, for example, exxonmobil, that stock is back in the middle of the range and it's enjoyed for most of the year by selling an iron condor. let's not get too flummoxed by the terminology. we do that in november by limiting our risk by buying a 75 strike put and a 100 strike call >> so that trade hung out in the green for a while, but then

exxon's gains pushed it into the red, scott, so what do you do now? >> well, sara, this was a gut punch when it came to russia -- russia and the saudis cutting back oil production. that just lit a fire under all the energy names this is now way past that 100 strike call, so there's really nothing to do here there's no way to rejuvenate the trade or rehabilitate the trade. you know, this is the reason we use options. we use a unique trade setup, a unique strategy to limit risk, and we've done that. >> all right, up next "fine call." stick with us on "options action."

time now for the final call. carter, we'll start with you >> manage cash stocks. they're offensive and defensive. united health care poised to break out. >> you, that was a beautiful

chart. scott, what about you? >> a $5 latte is a luxury. buy put spreads in starbucks >> so says you mike, what about you >> call nh >> mad money with jim cramer starts now - [presenter] the following is a presentation sponsored by trusted luminess. - i have a lot of problem spots, redness, fine lines, dark spots. and now with the breeze, all that's changed. the breeze advanced foundation is amazing. it gives you skincare and makeup all in one. it's like a thin veil, but it has extraordinary coverage. at my age, all the other makeups made me look older. it was uneven, you'd have to layer them yourself. it never quite came out the way i wanted it to. the great thing about the breeze is it does your blending for you. i love the way the luminess smooths out my rough skin texture.