♪ right now on oa, crude's big dl climb over the last three months. oil at its highest level of the year. is now the time to trade or fade? the take straight ahead. as workers hit the picket lines, we will look at the action beyond the big three. how will stocks react to detroit's labor struggles? can fedex deliver as it gets

set to report earnings. and a tough week for the semiconductor sector. this is options action live. we begin with an energized week for the energy sector. wti at its highest level since last november. the sharp move higher helping etfs post healthy gains so far this month. the chart master is here. taking a look at the airlines who are so impacted by these rising prices. >> and you're getting reports from the airlines, earnings out for several, saying, look, forget the labor costs, but we've got a fuel problem. the question is, it's just about consequencing. oil was hated and now it's loved. look at this first chart. that's a major break above that down trend. now we're at 92. i think it's right to start to fade this. at least hedge or take profits.

in terms of the airlines, of course, they are now hated as opposed to crude which is loved and we can look at a few airline charts just to figure that out together. what we have -- if you look at this, this is the oldest aggregate at all. it's an airline index. it starts just before the covid plunge. no lines, drawings or judgments. let's put some in. took at this trend line. literally we are down to the penny, to that very well defined line in effect since the covid low. how precise? take a look at these arrows. the point is, we've bounced and i think we bounce again. no one could say, yeah, but these are terrible businesses. 60 airlines filed for bankruptcy. all true. and they're heavy use of capital. but that's not about sequencing. it's can we play it for a trade? >> mike, you have a trade working off of carter's take on the airlines. >> yeah, taking a look at jets, you know, i think one of the

things we should take a look at -- by the way, when we think about options, would have been the early eindicators that they used to look at, if you take a look at the industry group, it was extraordinarily high in terms of put volumes this week. the entire group over the course of the week, monday through today, traded about two times its average daily put volume. well over a million contracts. there's a lot of bear sentiment and. that might be something to take advantage of if that reverses or even is just reduced slightly. you could get a bit of a bounce here. i don't want to get long given the risks that the airlines face. i think a really tight call spread might be the way to play this. i was look at the 1819 call spread that expired in november. that was going to cost about 40 cents, 40% of the distance between the strikes. bear in mind, this is -- it was slightly in the money. they ended up closing a little bit lower at the end of the day.

but, you know, this is a way you can risk about 2.3% of the etf's value to make an upside bet if it rises 5.5% between now and november expiration. >> your take on this jets trade? >> i think one thing that you need to point out, the jets hitting that low, maybe playing for a bounce. that's when i want to use long option strategies to play those bounces. if i'm wrong, all i risk is the premium. buying a call spread here, having a debit to pay and get to the long side makes a lot of sense. i don't think the airlines run away to the upside. to lower the cost, in that sense, the trade structure plays well and it does seem like oil is a bit over extended and if jets -- if airlines move opposite to how oil prices are moving, then certainly we could see this reversal turnaround and make a nice little play here to the upside. >> what is the more convincing trade or convincing chart, carter? would it be oil rolling over

from the levels it's seeing or jets making a bounce? >> the one is much more speculative. there's duress here longer term. my hunch is the better trade, though, is still jets. and here's why, no one wants to do it. and guess what, today was a bad day for the market. united airlines up, delta up, southwest up, they feel oversold. there's no one left perhaps day to day to sell. >> mike, same question to you. >> i would agree. i would also point out, two weeks ago we highlighted a bullish bet in xle and that is profitable as of today. if you think that the move in oil -- that we saw today is in fact a short-term reversal, you want to take your profits on that one too. this is a situation where these are heavily leveraged businesses. they have a lot of debt on the balance sheet. that gives you a little bit of juice i would say if they do catch a bid here. >> all right. now let's get to the uaw strike against the big three automakers. despite work stoppages beginning

at a number of auto plants, the stocks closed the day higher. set to look under the used car play that's been cruising so far this year. what's the stock? what's the trade? >> well, it was interesting that all the car stocks were up on the day given what's going to maybe take place here with uaw. but i think when you look downstream, what kind of gets interesting is taking a look at some of the used car sales stocks or auto parts stocks. we've had o'reilly for awhile now. that's run nicely to the upside. also, names to look at, carmax. carmax basically, you know, is on the used car sales side here. basically trading at valuations that might be a little bit on the high side. all these names kind of in that sort of used car to auto parts trading about 23 to 26 times forward looking earnings. it is a little dicey to play here. the market was feeling a little sluggish today. it started rolling over.

if there's downside action here, there's some risk to owning this because this is the consumer discretionary, middle america kind of play. i like owning a name like carmax. i just want to protect my stock trade here. i want to protect the position there. and so what i'm looking to do is buy a put spread. i think we talked about this here, options are cheap now. we want to be owning options. i want to do that through a foot spread. $75 put spread. and offset some of the costs of buying a put. but i'm going to continue to own something like a carmax, but i want to protect myself and it's a pretty nice payout, basically a two to one when you look at what the total reward would be on the payout to the downside. >> mike, what do you think of the trade? >> so, you know, what's going on right now in the auto sales area, they've got a lot of headwinds going on. we have higher rates. we have higher car prices. we have higher auto loan rejection lates.

and to me, that should bolster the auto parts stores. i know that auto zone is trying to focus more on pro. but the fact is if people can't replace their cars, they're going to need to maintain their old one and we have an old fleet. carmax focuses on used cars. if we see some kind of supply constraint as a result of broadening of the strike, right now, it's relatively, you know, constrained in terms of its size, that could support used car prices. that would improve margins for a company like carmax. if you want to own it and hedge it the way that brian is describing, i think that makes a lot of sense. >> a bearish to bullish reversal. really bottomed out which is now basing and bottoming. again, i think it's a textbook example of how a really duress asset turns, cures and heals. >> for everything options action, check out our website and letter. there's more options action right after this.

ave >> announcer: it tracks the nasdaq 100. with volatility already high in that arena, will this new product be a boon or bubble in the making? we'll break it down for you. plus, calling all options action fans. aboupoetto yr ck. gr your phone and tweet us your question at options action. if it's nice, we'll answer it on air. when options actions returns.

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welcome back to options action. the first zero day to expiration

etf launching this week. the income fund tracks exactly that, the nasdaq 100. it's goal is to generate a daily distribution by selling options. joining us now is bob pisani, host of cnbc's etf edge. give us a lowdown here. >> i'll tell you, i'm of two minds about this. i've been covering about this for awhile. the guy who is making all the money on this. i think on one hand, i think it's great. there's new ways to play the market. and the appeal to retail is very obvious. it's a one-day bet. you win or lose the same day. it's cash settled, that's the key. cash settlement, and you get this dopamine rush. it's a one-day bet. on the other hand, the jack bogle inside of me says do we really need to keep endlessly

expanding the derivatives market which is kind of what this is geared towards. it encourages market timing, it encourages day trading and we know that people make a lot of mistakes when they trade excessively. i don't think there's as much systemic risk out there right now. there is some concerns that the derivatives market gets so big that the tail starts wagging the dog. but the concerns have been around for a long time. gary gensler calls it gamification. he's been writing about it for awhile. but he does have a point about it. i understand why it's growing, it's been a huge hit in the last year. but let's be a little cautious about encouraging people to jump into day bets on the stock market. >> well, gary gensler can speak out about gamification of the markets and yet they approved this product, right? >> they absolutely did. look, it's -- it's one thing to stand up and say, oh, this is

illegal, and somehow it's not illegal. look, the derivatives market, we don't know how big the derivatives market is. it dwarves the underlying market. there's nothing illegal about it. the question is, whether we want to keep endlessly encouraging it. it's not what we're going -- there's a legal basis to deny the application for this. i think it's fine. i'm not opposed to a continuing to trade. i'm trying to raise a flag here and say, look, there are aspects of this that make it very, very easy for market behavioral economics if you study that to get people involved. that dopamine high, the cash settlement, it's a one-day bet. you get up in the morning, i think the s&p is going to be up today. i think the nasdaq is going to be up today. it's an easy way to bet. and we know most people lose those bets. that's the problem i have. i would like to see more discussions about holding it on longer. go ahead. >> yeah, i mean, the point i would make is that day trading is nothing new. people have been day trading stocks for well over 20 years now. that part is common.

and the etf is seeking to take the other side of that bet, trying to collect the volatility. because it's selling those option and is do so systematically day after day. that's an interesting opportunity for investors. this isn't really a trading vehicle but more of an investment one. why is that? from a logistical point of view, this is an opportunity that investors wouldn't normally get unless you have a really accommodating employer who doesn't mind you clicking the sell button every day while you're going about your regular job. this is something that only professionals have engaged in. the normal sellers of these short-dated options are companies like citadel. if you invest in an etf, you're getting on their side of the trade. the hazard, of course, is that you're selling insurance. and that comes with the risk if suddenly something cracks dramatically in the market. you have every kind of market participant now has a way to play. if you're trying to day trade,

you can use those options. if you're an investor and you want to collect that premium, you can buy this. >> carter? >> just quickly, it's an acceptable adult risk. we've been day trading since the markets have opened. every sports bet is, what, a one day bet? you're betting for an hour. to each its own. it's not about the government encouraging. if it's been approved and legal, it's no different than alcohol is legal. you make your own choices. >> bob, thanks for joining us tonight. >> all right. pleasure. brian, you noted in our call today that this new etf is coming as we're seeing an increase in the nasdaq, especially the semi sector. >> we are. and this is selling insurance. the one concern i have is something to be careful for investors if they were to get into this etf side of the business and selling short option premium, we're at pretty low levels in implied volatility and option premium.

if you look at something like volq that tracks it, those are sitting at levels low over the last five years. what we've seen in the past, when these volatility levels get really low, that rubber band gets stretched and what tends to happen, you get some volatility, we talked about -- you mentioned the semiconductors rolling over over the last week or so. that's sometimes a telling sign. when we get this rollover, we have a stretch volatility sort of type environment right now. we're setting up for a big volatile move. these are etfs where you're selling short options premiums. i would stay away for those when you're looking for the volatility pops which i think we can be coming to right now. i'm looking to add protection right now, buy puts, buy put spreads to protect my portfolio for the next three to four weeks. because things are stretched to the upside right now. >> volatility has been so low.

the risk-reward may not be there, mike. >> well, yeah, i think that's a very fair comment. we're talking about your perspective on a structurelike this as a long-term investment trying to collect premium and then the market dynamics in which we currently find ourselves. the most important thing people can think about when they look at a structure like this is, what is the level of implied volatility. if it's high, you're collecting more. if it's low, you're not getting much. and i happen to be long put spreads. in terms of my expectation for volatility near term, that is evidence that i think we could get some. >> all right. up next, fedex out with earnings next week. we'lsh yl owou how to think inside the box with the options play. back in two. >> announcer: options action is sponsored by think or swim by itd ameritrade.

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three months. with fuel costs rising and labor costs too, the question is, where is the stock headed next? let's get to mike for the trade. mike? >> yeah, so fedex, this is a name that we own, actually, in our long fund. right now i have to say that if we get through earnings without a whole lot of movement, i'll be pretty happy after the fairly disappointing earnings that we saw late last year. i'm hoping that that basically has priced in all of the surprises now for fedex over the course of the coming, you know, weeks and months. so, you know, one thing you can do when we were just talking about selling volatility, a way to do that while mitigating your risk is by selling in iron condor. it is one that can give you basically a positive probability of profit, better than expected, probability of profit, and you can limit the risk. i was looking specifically to the october regular expiration. the 230, 240, 260, 270 iron

condor. you're selling the 240, 260 strangle and you're buying the 230, 270 strangle. the stock can only be where it is, between it, up or down, as of expiration which means that the most value that this can have at expiration is $10 and you're collecting more than five by selling this. if it stays between the short strikes, you collect all the premium. this is a strategy that you can use whether it's on a single stock or an index to try to collect a little bit of premium while limiting your risk. >> carter, what do you think? >> for starters, it acts poorly. let's just say that. it's starting to show the elements of a rollover. you can see on the screen, we're just breaching that up trend line over the past year. but it's also not specific to fedex. u.p.s. is under more duress, there's something wrong with the space. you can call it two-stock index.

my hunch is to be careful here. >> brian? >> yeah,i think there is some risks to the downside just in general for the whole stock market. fedex is such a big player in terms of indices, could participate to the town side with the rest of the market. there's some bankruptcies going on in terms of the shipping area where places like a fedex or a u.p.s. is actually picked up some shipments and so we're starting to see analysts upgrade that. fedex might come in to the upside here. it moves about 4 to 5% on an after-earnings report. if that happens, then you glet o win on that. from the standpoint are options priced too high and then you collect this premium and win on that, i think there's a high probability, just that if the market starts to get volatile, istorobly participants to the downside with everybody else. >> all right. up next, answers to your questions and the final call. options action is back in two.

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welcome back. it's time to take some questions. our first fan asks, eli lilly has recently been overbought. it is right for a mean reversion trade. 580/560, bear put spread be a good options play here? brian, what do you say? >> it's not a bad trade. i know eli lilly, their run-up is based on their medicine pipeline. anything that's had an extended run, we could see it in the coming weeks. it makes a lot of sense. is toast a good call spread opportunity? mike? >> it always feels a bit risky to get long something called tost. it has very high options premiums and deservedly so. this thing moves. this is a company that a lot of

people are expecting to turn profitable and it's really going to move around. i think call spreads are the way to make your long bets rather than buying the underlying. >> we have time for one more question. carter has been correctly calling a berish to bullish reversal for the past two months. does he see the same for the ung? >> given that we're going to want to back away for oil here, i would point out that christmas nat gas contracts made new 52-week lows. i would hold on. >> mike, if we think that oil is going to pull back or stall, how about xle? >> yeah, we were long xle. now might be time to take some profits. >> generally reduce your exposure to energy stocks and crude oil. >> brian? >> i would be protecting positions in carmax by buying a put spread. >> mike? >> hedged way to make long bets

is with call spreads. i think you can look to jets for an opportunity there. we'll be back next friday. meantime, do not go anywhere, "mad money" with jim cramer starts right now. have a great weekend. my mission is simple. to make you money! i am here to level the playing field for all investors. there is always a bull market somewhere, and i promise to help you find it. mad money starts now! hey, i am kramer, and welcome to mad money. my job is not just to entertain, but to teach you. sometimes a rally