you guys have been a wonderful help. because it's true, that's the whole point. and it works in my favor, so i'm excited about that. congratulations. and it all happened on the money court, just like that. right now on "options action," the final frenzy for the last-minute christmas shopping and the prepping for the flood of sales after santa says so long we'll break down the 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 it's now time to get bullish on

buillo 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 better part of tw 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, and actually recently is starting to put up some pretty good numbers

>> 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're changing places.

i think one bets accordingly. >> moving on to airbnb, losing half its value during the last year now out of the pandemic pan but possibly 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? >> well, the options activity we saw was bearish. it was put buying. right ahead of their earnings -- right after their earnings some of the activity playing to the down side. look at the last earnings on airbnb and it moved 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.

it makes sense there are these put buyers 1600 puts that we talk trade of the 185 puts that play expired right after the earnings in february this is a play to the down side. you have to be very careful that continues to the down side 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 decimated there's no potential for a real bounce look at an all data chart to put it into context. since inception but basically going down those plunges are a moment in

time that are clear. the '08-'09 the plunge the industrial recession of 2016, and then the covid what you'll see is it reverses fairly quickly in '16 and '20 but it didn't in '08, '09. and this is more analogous to that it's down and staying down, and i think that's the problem 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 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. the april 66, 60 put spread that

thing traded about 100,000 times over the course of the week. now, this is a bond fund so it's not going to typically 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 >> we'll finish out with tesla seemingly in the headlines all week long and yearlong carter, you say now would be the time just to kind of nibble at this thing >> well, i wouldn't do it based on that.

imagine if you have a company or 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 it's not working the stock's down further i think we're seeing a crescendo here in the stock's history. the other two times it was 40% below you got a pretty decent 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 option activity. buyers are pausing on the up side that suggests maybe the stock get the pucks here but i'm still a little cautious about the stock. >> mike, final thought from you. >> i think you go out to february to play 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", check out our website after this

>> calling all "options action" fans. reach into your pocket, tweet us without that when "options action" returns. they're going across relative to where the stock is going where

you ok, man? the internet is telling me a million different ways i should be trading. look! what's up my trade dogs? you should be listening to me. you want to be rich like me? you want to trust me on this one. [inaudible] wow! yeah! it's time to take control of your investing education. cut through the noise with best-in-class education resources that match your preferred style of learning. learn your way. not theirs. td ameritrade. where smart investors get smarter℠. all right, welcome back to options action can they bring the same value to your portfolio

let's find out brian, you're up first >> yeah, gold has been an interesting story the last few months, the ten-year trading lower relative to where the fed fund wants to go gold has sort of been in play. if you look back historically if we are headed towards this recession or people feel like that might happen gold has been the one that bucked the trend first and started to rally we keep interest rates artificially lower where they need to be so gld has been to the up side i am long the stock gld itself, but i'd rather rotate. they're pretty cheap the call spread i was looking at the jan 166 call

that seems pretty cheap because my math play here is all the way up to $1.75. so i'm risking $3 to make $6 i think gld and cold in the interest rates they've so much subdued at least out to 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 >> 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. but in principle one wants to be expose, i think very exposed to precious metals. >> mike, any thoughts on 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 as they do that, we're obviously seeing a big increase in covid cases, a big surge there and of course there's a lot of leverage in their system, but that of course is supportive for ore, and we've actually seen that in ore prices which is up 30% recently

another thing that's kind of interesting is this is relatively cheap we're talking about a company trading in the mid-single digits in terms of multiples here 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 because the options on this are not all that expensive. as you can see here about a dollar for the at the money call that's because these thingsten to move around a bit and we're collecting 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 all the elements of a bearish to bullish reversal, bottoms before the market and 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 sort of made higher lows, so to speak. the up side seems to be clear. if china does some sort of stimulus on top of what ear they are' doing with the covid reopen vale, 65% of the revenue comes from china that's going to be relative. 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 alchemy trade. coming up our feature trader scott nations joins us to lay out a modestly hopeful way to play the broader market heading into the new year without risking anything and 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 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. that will push you to be even better. and just might change how you trade—forever.

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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." time for this week's call sheet. for that we bring in scott nations. the kicker here, it doesn't risk very much at all scott, happy holidays. what could possibly be a trade in this environment that doesn't risk very much >> well, you know, we like to use options to get directional exposure we love to use options to get leverage but it real value, the best way to use options is to create absolutely risk/return profiles, the sort of thing we could

omcreate using options let's do that. let's do that in the most important option underlying in the market that's spy, the s&p etf. we're going to create a unique profile that will generate some value. , if spy rallies into the new year, which 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 earlier today at 382.25, i bought one of the march 390 calls. i did that at $13.75 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 at 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 at 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 suppressive historically that's been a positive sign of making a bottoming process. a little more in carter's camp, bearish about the market we are short some options for clients as well. in march, april options going out and even future options. 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 right now 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, so does the rest of the market so we've got to be careful >> mike, what are you thinking >> if you are selling the 405

calls you're not that optimistic 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 don't be long the spy shares or things like that 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 profile as an investor this is the way to be using options, not to get leverage. >> scott nation, thank you for that. up next, your tweets and the final call stay with "options action.

all right. welcome back to "options action." time for the tweets. first, how would you trade the msos advisor shares pure u.s. 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 do well. will you please share your thoughts what's your take, mike >> it is interesting that pattern that you identified turned out 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're feeling aggressive, tesla for balance. >> brian >> gld call spread play to the up side. >> mike khouw. >> vale, call spread, same thesis >> happy holidays, for everybody out there. that does it for "options action." great to be with you back next friday at 5:30 p.m. eastern. "mad money" with jim cramer

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