i don't know if anybody knows -- aside from thompson -- where it went. >> do i think there's other storage units out there? if i was a betting man, i would say i think there probably is. right now on oa, crude's big climb over the last three months, a wti jumping close to 30%, oil now at its highest level of the year is now the time to trade or fade? the energy stocks, the technical take straight ahead. as uaw workers hit the picket lines we will look at the action in the names beyond the big three. how will stocks in the auto complex react to detroit's labor struggles. later, can fedex deliver as it gets set to report earnings,

charting the next move in the airlines and the semitough week for the semiconductor sector. i'm melissa lee, this is "options action." mike khouw, carter worth, and brian stutland on the desk tonight. wti at its highest level, and brent crude $90, helping efts like the xle and oih post healthy gains, chart master is here to tell us if we should ripping or dripping. >> you're getting reports, we heard earnings out for several, and saying, look, forget the labor costs, which are a problem ongoing but we've got a fuel problem. it's just about sequencing, oil was hated, now it's loved. look at this first chart. that's a major break above that down trend. we were at 65 a barrel, now at 92. 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. but what we have, if you look at this, the oldest aggregate of all, a new york stock exchange airline index. it starts before the covid plunge, no lines, no judgments, put some in. look at this trend line. we are down to the penny, to the 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 wing even bounced again. these are terrible businesses. their heavy use of capital. bad business. but that's not sequencing, can we play it for a trade? >> you've got a trade taking off carter's take on the airlines. >> jets, one of the things we should take a look at, and by

the way, when we think about options, one of the earliest sort of technical indicators people used options volumes to look at was the put-call ratio, if you take a look at the industry group it was extraordinarily high. the entire group over the course of the week monday through today traded two times its average daily put volume, well over a million contracts. it's bear sent. . that might be something to take advantage of if that reverses or is reduced slightly, you could get a bit of a bounce here. i don't want to get long, jets, the etf or individual airlines given the risks they face, a really tight call spread might be the way to play this. the 18/19 call spread that expires in november, was going to cost about 40 cents, but bear in mind this is antemoney call spread, slightly in the money but they ended up closing lower at the end of the day.

but this is a way you can risk about 2.3% of the etf's value to make an upside bet that will peak its profits if it rises about 5.5% between now and november expiration. >> brian, your take on this jets trade? >> well, i think one thing that's the kind of neat to point out as carter mentions the jets basically getting that low, playing for a bounce and that's when i want to use long options strategies to play the bounces. if i'm wrong, all i risk is the premium outlay. having a debit to pay, i don't think the airlines run to the upside, that's why you can also sell the upside call that mic talked about, to lower the cost. in that sense the trade structure plays well and it does seem like oil is a bit overextended and if jets, if airlines move opposite to how oil prices are moving, then certainly we could see this reversal turn around and make a nice little play to the upside. >> what is the more convincing trade or convincing chart, oil

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

stoppages beginning at a number of of auto plants automotive stocks all closed today higher. a used car play that's been cruising so far this year. brian, what's the stock, what's the trade. >> well, this was interesting that all the car automative type stocks were up on the day given what's going to take place with uaw. but when you look downstream what gets interesting is sort of taking a look at some of the used car sales type stocks or auto parts stocks. we've held o'reilly in the auto parts side for a while now, nicely to the upside. also names to look at, car max. carmax basically 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. so it is a little dicey to play here. the market was feeling a little sluggish today, obviously, as carter mentioned, distinct started rolling over.

if there's downside action here there's risk to owning this, this is consumer discretionary middle america kind of play but i like carmax, i just want to protect my stock trade here, protect the position there and i'm looking to buy a put spread to hedge myself. options are relatively cheap right now. owning options, do that through a put spread, go out to october here, buying the 82.5, $75 put spread, to sell and offset the cost of buying a put on the 82.5 strike. i'll own something like a carmax, but i want to protect myself and it's a nice payout, 2-1 when you look at the total reward 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 is they've got a lot of head winds going on. we have higher rates, higher car prices, higher auto loan rejection rates which have actually gotten quite significant and to me that

should bolster somewhat basically the auto parts stores, now i know that auto zone is trying to focus more on pro. the fact is if people can't replace their cars they're going to need to maintain their old ones and we have an old fleet. carmax focuses on used cars and if we do see some kind of supply constraints as a result of broadening of the strike, i mean 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 that makes a lot of sense. >> a bearish to bullish reversal buy. really bombed out, dropped 60% from its high and it's now basing and bottoming. we might have a charter, but if not, again, it's a textbook asset of how a duress asset turns and heals. >> there's much more "options action" right after this. the first zero day to

expiration option etf has launched. it tracks the nasdaq 100. with volatility already high in that arena, will this new product be a boom or a bubble in the making for options investors? we'll break it down for you. plus, calling all "options action" fans, reach into your pocket, grab your phone and tweet us your question@optionsaction, if it's nice, we'll answer it on air when "options action" returns.

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welcome back to "options action," the first zero day launching this week, the defiance nasdaq 100 option income fund tracks exactly that, the nasdaq 100, the goal to have daily distribution with put options, as a refresher, the zero day, expires the same day the contract is entered into. joining us is most of cnbc's etf edge, who better to ask, bob, give us the lowdown here. >> i'll tell you, i'm of two minds about this. i've been covering this a while. the guy making the money on this. i think on one hand 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 nice little dopamine rush. it's a one-day bet. on the other hand, you know, the jack vogel inside of me says do we need to expand the derivatives market, and particularly for retail, which is what this is geared towards. it encourages market times and day trading and we all know 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 delivertives market gets so big the tail starts wagging the dog but those concerns have been around for a long time. more concerns about this, gary gentzler -- he does have a point about this. so i understand why it's growing, it's been a huge hit in the last year for sebo. but let's be a little cautious about encouraging people to jump in today bets on the stock market.

>> well, gary gentzler can speak about gamefication, but the s.e.c. approved this product. >> they did. it's one thing to stand up and say this is illegal and somehow it's not illegal. the derivatives market is, we don't even 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. there's not a legal basis to deny the application for this. i think it's fine. i'm not opposed to it continuing to trade. i'm simply 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 dope mine high, the cash settlement, one-day bet. i think the s&p is up today, the nasdaq is up today, i've got a bet, this is a very easy way to bet. most people lose those bets.

that's the problem i have. i'd like to see more discussions about holding onto it longer. go ahead. >> the point i would make is that day trading is nothing new. people have been day trading stocks well over 20 years and the etf we're talking about is actually seeking to take the other side of that bet. basically trying to collect the volatility risk premium because that's selling those options and doing so systematically day after day. that's actually an interesting opportunity for investors. this isn't a trading vehicle and more investment. why is that? logistical point of view this is an opportunity investors normally wouldn't get unless you have an accommodating employer who doesn't mean you clicking the sell button every day while you're going about your everyday job. the normal, natural sellers of short dated options are companies like citadel. if you invest in an etf like this one, you're getting on their side of the trade. the hazard of course is that

you're selling insurance and, you know, that comes with the risk if suddenly something cracks dramatically in the market. but this way you basically have, you know, every kind of market participant now has a way to play, if you're trying today trade and you want to limit your risk, you can use those zero dt options, if you're an investor and collect that premium, buy this. >> carter? >> just quickly, it's an acceptable adult risk. we've been day trading for 20 years since the markets opened. jess see liver junior more is -- every sports bet is a one-day bet, you're betting for an hour. to each his own. it's not about the government encouraging, if it's approved and it's legal, 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 volatility in the nasdaq, especially the semisector. >> we are, and, you know, mike mentioned this is selling insurance, right, a one-day etf,

selling insurance premium. the one concern i have, 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 level in volatility, if you look at the volatility index on the nasdaq, look at spikes that tracks volatility on spy, the spyder. what we've seen in the past, when these volatility levels, the rubber band gets stretched and you get the snap back effect and get volatility, you mentioned the semiconductor, smh rolling over the last week or so, that's sometimes a telling sign. when we get this rlover, we have a stretch volatility sort of type of environment right now, we're setting up for a big volatile move. these are etfs where you're selling short options premiums. stay away from those when you're looking for these volatility pops which i think we could be coming to right now. i'm looking to add put

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 and it's gotten nicy. >> volatility has been so low so the risk reward may not be there, mike. >> yeah, that's a fair comment. we're talking about, you know, your perspective on a structure like this as a long-term investment, trying to collect premium and then the market dynamics we currently find ourselves and obviously the most important thing people can think about when they look at a structure like this is what is the implied level of volatility, if uh it's high you're collecting more for that insurance you're selling, if it's very low you're not getting much. the risk reward changes. i happen to be long put spread. in terms of my expectation that is evidence that i think we could get some. up next, fedex out with earnings next week. we'll show you how to think inside the box with an options play. back in two.

welcome back to "options action." fedex, 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 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 an iron condor. this is not a structure we've spoken about all that often but it's 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 out to the october regular expiration. the 230/240/260/270 iron condor, what's going on here, you're

telling the 240/260 strangle and buying the 230/270 strangle. you're short that put spread and short that call spread. 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. you're collecting more than 5 by selling this. of course if it stays between those short strikes you collect all the premium. this is a strategy you can use 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. it's showing the elements of a rollover, you can see here on the screen, we're just breaching that up trend line over the past year. but it's not also not specific to fedex. ups is even under more duress. there's something wrong with the space, call it two-stock index is space, my hucnch is to be

careful here. >> brian is this. >> i think there is some risk to the downside just in general for the whole stock market, and fedex is such a big player in terms of indices and stuff like that could participate to the downside with the rest of the market. there's some actual bankruptcies going on in terms of the shipping area where places like a fedex or ups has picked up shipments and we're seeing analysts upgrade that. when you look at earnings it moves about 4 to 5% on an after earnings report. that maybe puts you in between those two break even points that mike talks about. if that happens you get a win on that. i think from a standpoint of our options priced, you know, maybe too high, and then you collect this premium and win on that, i think there's a pretty good high probability, just that if the market starts to get volatile this stock probably participates to the downside with everybody else. >> up next, answers to your questions and the final call, back in two.

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welcome back to "options action." it's time to take some questions, our first fan asks eli lilly has been recently overbought after touching 600. is it right for a mean reversion trade when at the money 580, 560, bear put spread be a good options play here, brian, what do you say? >> yeah, it's not a bad trade. i mean, i know eli lilly basically their runup is based on their medicine pipeline, but anything with an extended run, protect long stop populasitions makes sense. >> is tost is good call spread opportunitisome. >> it feels risky to get long something called tost. but this has high options premiums and deservedly so. they're reporting earnings in november, a company 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 long bets rather than buying. >> carter has been correctly calling a bearish to bullish reversal in oil prices past two months, does he see the same for ung? >> given we're going to back away from oil i would point out that christmas net gas contracts made new 52-week lows today, hold off on ung here. >> mike, is that -- i mean, if we think that oil is going to pull back, or stall, how about xle? >>. >> yeah, so we were long xle, i think now might be a good time to take some profits if you are in that call spread. >> all right, it is time now for the final call. on the options pit. carter braxton worth. >> reduce your exposure to energy stocks and crude oil. >> brian stutland. >> be protecting positions in carmax by buying a put spread. >> mike khouw. >> a hedged way to make long bets is with call spreads, i thinking you can look to jets for an opportunity there. >> that does it for us here at

"options action." we'll be back next friday 5:30 eastern time. do not go anywhere, "mad money" with jim cramer starts right now. have a great weekend. have you ever felt leg pain, restlessness, cramps, tingling, swelling, numbness, itchiness or coldness? if ever experienced the warning signs of bad circulation or you sit or stand every day for long periods of time, then you need the new clinically proven legxercise pro, the natural circulation booster that uses continuous automatic leg movement to soothe pain and promote healthy circulation the natural drug free way.