right now on "options action", the final frenzy for the last-minute christmas shopping and the flood of sales after santa says so long two retail trades straight ahead. tesla still sliding. finishing down it's so beaten up that it could be time to make you some options to charge up an ev trade. later as the s&p has limped its way through december, gold has been hanging in there quite nicely time to get bullish on bull on

bright and shiny show on tap on a frigid and frightful friday night. i'm frank and here are carter worth, mike khouw and we look at notable stock options. boeing, amazon, tesla. we've had big volume in etfs, representing the s&p, government bonds, industrial sector and high yield corporate bonds let's dive into it as we head into the holiday home stretch. best buy and dollar tree spending the best part of two years diverging but the options market thinks they're about to trade places mike, you have much more on the big trade. >> yeah, there was a lot of activity in both of these names. let's take a look at dollar tree dollar tree traded more than 50% average of put volume. what we saw, 9,000 of the february 145 puts.

some people might think the dollar tree is one of these names that would be a good place to go if inflation went to a retailer this is a company that's true, fresher margins. it seems like somebody sees at least 9% plus to the down side over the course of the next couple of months best buy, i'll get to that real quick. i know carter is going to come pair and contrast these. march 67 1/2, we saw that go 3,000 by 6,000 for $1.45 i think this might be a hedge against a long position. if you take a look at the middle strike, that's essentially representing the lows that we've seen in best buy over the course of the last couple of years. i'm talking back to the fourth quarter of 2018 and also the pandemic lows. this thing is trading at a much cheaper valuation. >> mike, sorry to jump in on you

there. the what do you think about mike's trade >> that's right. we have two diverging circumstances or let's say this now, converging. i think we've got some charts that would depict that quite clearly. in terms of dollar tree, this has been a great winner exhibiting all things one doesn't want it's bearish relative performance is poor if you compare that to all of the retailers that are bottoming, urban outfitter, gap, so on. compare this to betts buy. this is a loser that's emerging. the next iteration, sort of a head and shoulders bottom, but either way one is reversing from bad to good, this one. the proceeding one from good to bad. let's put them together. here's a comparative chart final iteration. you can see how the arrows are drawn. over the past three years one is

up 50%, the other is down 20%. they are stae changing places. i think one bets accordingly. >> moving on to airbnb, losing half the value out of the pandemic pan. into the recession fire. does the options activity suggest this option is cooked, carter >> that's great. you're in the pandemic pan, now you're in the recession -- perfect. that says it all the chart is terrible. it is hovering i would say ominously at its june low and the presumption is it breaks and it breaks hard. >> brian, what do you think? >> it was bearish. it was put buying. right ahead of their earnings -- right after their earnings some of the activity playing to the down side. it moves 13% to the down side. there is a lot of nervous stock. if you are hesitating, best buy

is a quality value name in terms of consumer discretionary plays. airbnb a little riskier. 1600 puts that we talk trade of the 185 puts that expired right after the earnings in february this is a play to the down side. you have to be careful especially as we enter the projection air ri or down turn. >> to your point, if we are heading into a recession, in fact the high yield area, that might be somewhere where we want to do. the high yield would be one of the first areas where the bottom has felled out it's been holding up >> after getting des civil mated. there's no potential for a real bounce since inception but basically

going down those plunges are a moment in time that are clear. the '08-'09 the plunge and then the covid what you'll see is it reverses fairly quickly in '16 and '20 but it didn't in '08, '09. i would not want to be long hyg. >> mike? >> yeah. this is an interesting situation because you take a look at the high yield market. we know why it's been pressured. we've been seeing increases in rates. not a high duration basket of bonds. what we have seen over the course of many years is histo historically, if we do start to see increases in default rates, this is an area of weakness. this is what somebody is betting on we saw some big big trades in

the hyg etf. that thing traded about 100,000 times over the course of the week this is a bond fund so it's not going to move the way you would expect really high volatility stocks do. that costs very little it could be a tail hedge oftentimes it's the credit markets where the ice starts to crack first. we did see that. naturally we saw some other signs of potential economic weakness in xli we saw them pay $1.92 for 145 puts both are areas that we'll see, seemingly elon musk promising he won't sell me more stock until 2024 until the very earliest

>> no, i wouldn't do that. any company saying, i won't sell any stock. what you're not supposed to sell stock. the big thing is this. there is no valuation here the street is all over the place. at some point you do have in any security an over bought or over sold condition we reversed a long standing short on tuesday i think we're seeing a cre hen doe here in the stock's history. the other two times it was 40% below you got a pretty descend bounce. >> brian, any take on this one >> maybe we do and that was about it that was 20, 25% out of the money. you go out to february, to me, we're somebody up to the side

and there are some oversold conditions here. that trade kind of makes sense if there was something more bullish. we are more and a little more cautionary consumer discretionary type stuff. we do it with tesla but on a lower allocation for that area yes, we are due for a bounce here activity that suggests maybe the stock get the pucks here >> mike, final thought from you. >> i wouldn't reach out and buy the stock. still to come, a commodities corner which could return more in 2023, shiny gold or dull iron ore? you might be surprised how we play these for everything "options action",

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they're going across relative to where the stock is going where gold is moving, that seems pretty cheap my math play is up to $1.75 i'm risking $3 to pay 6.

that's fantastic to the up side. gld and gold, you the out part of the curve gold will be the first thing that starts to move so that's one item i'm sort of looking to play to the up side here in the market and sort of rotate out certain asset classes and into one like gld >> interesting theory there. carter, any thoughts on the trade or gold in general be? >> gold has done its job we know the s&p is down 20% for the year gold miners are down 10 and gold is down 2. that says it all but there are opportunities within gold whether it's an individual miner or the gdx or gld. one wants to be exposed, very exposed to precious metals. >> any thoughts on gold or this trade in particular? >> i am long gold. i am long xlv as well. you know, i mean, these are both ways i think to sort of make the

same play if the increase in rates slows, then we would expect there to be some support for precious metals. this is essentially the way you're going to play this. as carter pointed out, this has been a position that held up on a relative basis very effectively. >> let's stick with the commodity quarters for a minute. mike, you're taking a look at iron ore and the iron ore name >> i was looking at bali we have a lot of crosscurrents going on here. china is reopening they are the biggest consumer of iron ore we're seeing a big increase in covid cases, a big surge there there's a lot of leverage in their system that is supportive of ore which are up well over 30% recent lip. another thing that's kind of interesting is that this is relatively cheap we're talking about a company that's trading in the mid single digits in terms of multiple here's

i think the way to play this, we have seen a good bounce be in ore and bali, the stock is up quite significantly. it's to use a trade that's not unlike the one brian is looking at february the 17-19 call spread 65 cents similar risk-reward dynamic. this is being used the options are not all that inexpensive as you can see, a dollar for an at the money call. these type of things tend to move around a bit and we're collecting 1/3 by selling the upper 19 strike call this is the way you can play for a little more up side if ore continues to go higher and be if we do see china reopening and industrial production up there doing well >> big if there, mike. >> carter coming over, what are the charts on vale >> they're excellent vale is the iron ore, it does it

all, copper, aluminum, gold. it has a bearish to bullish reversal exhibits relative strength ever since. i like it a lot. i think the formation is clear and the way is higher. >> brian, do you have a take on this one >> well, i mean, to carter's point, not only is the formation clear, but when you look at something like vale, 2008 that thing got shellacked all the way before the recession and after the recession. it turned the corner, it had higher lows. the up side seems to be clear. if china does some sort of stimulus on top of what ear they a are' doing with the covid reopen, vale, 6% comes from china. get the play to the up side. before you make the move, there's bullishness in the stock. i love the structure of the trade and the play on vale. >> i'm going to call it the al

c alchemy. >> scott neighbors joins us for a modest way of playing the broad jest market. here's a live look at bismarck, north dakota, where it is currently minus 8 degrees. it is 8 below there. stay warm in front of the tv you do not want to go anywhere "options action" will be right back

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welcome back to "options action." time for this week's call sheet. scott nation is bringing us a trade. scott, happy holidays. what could possibly be a trade in this environment that doesn't risk very much is. >> well, you know, we like to use options to get directional exposure we love to use options to get leverage but the real value, the best way to use options is to

create absolutely risk/return profiles, the sort of thing we could only create using options. let's do that. that's spy, the s&p etf. we're going to create a unique profile that will generate some profile if spirallies into the new year like i think it's going to once we get the year past us we can do this by buying calls we can do a better job the better way to do that is to -- against a long position in spy use a one by two call spread with spy at 382.25, i brought one of the march 390 calls i did that at 1375 i don't want to just pay for a call, i want to actually generate this without any premium so i did that by selling two of the march 405 calls, collective $7.20 for each of those. so i'm collecting a net of 65

cents. the important thing here is the unique payoff profile above $3.90 we get some leverage that slows 405. you can see that cap on appreciation of 420 the important thing here though is that we never weather the down side. we never get leverage to the down side. the best relative outcome, 405, that's usually the case that the short strike we're not just creating leverage and directional exposure, we're actually creating a better risk/return profile. >> thanks a lot, scott carter, what's your take >> well, i think this is just, as scott said, a testament to using alternative approaches than just being long or short. i myself don't like the market i think we have a better chance in even money that we're going lower in the new year and immediately, but this is a way where you take in money and you sort of play it smart rather than just betting long or short.

>> brian >> yeah, when you look at spy, despite volatility index, it's pretty oppressive. historically that's been a positive sign of making a bottoming process. a little more in carter's camp, bearish about the market in march, april options going out and future option. so certainly selling options that far out i do like we'll just see if we can hang on here with volatility down 20, vix down to 20, it seems like an opportunity whether it's going to be a big mover. almost like people have gotten too complacent i fear once we turn the page, this market is ripping significantly higher or this is the beginning of the end and the start of a recession which can certainly happen things go sour, hyg and that's with bearish activity. if that goes south, the credit goes south >> mike, what are you anything.

>> if you are selling the 405 calls you're not that optimisti considering the spy was at 405 this is going out three months if you are bullish on the market, you could buy the 405 strike calls i'm kind of in carter's camp as well. >> scott, give you the final word on this one >> i'm going to be long spy because i'm an investor and this is the way to create a better risk/return as an investor this is the way to buse ing options, not to get leverage. >> scott nation, thank you for that. up next, your tweets and the final call stay with pgs os action.

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etf. brian? >> 10% pre, that seems too good to be true seems like enron situation whatever is going on inside the etf. >> our next tweet, i notice when the dollar index drops, companies like boeing does well. can you please share your thoughts mike >> it is interesting that you have identified that to be true. i would look out to february you can buy 30 delta calls there to make this play and i think that's a way to do it with limited risk. >> time for the final call carter, you're up first. >> if you are defensive, hold. if you are defensive, tesla for balance. >> brian >> gld call spread play to the up side. >> mike khouw. >> vale, same thesis. >> happy holidays.

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