And alibaba is surging as amazon stalls out but we want to know which is the better buy the action begins right now. Lets get right to it car stocks have been on fire this week despite a mixed bag for sales. Ford, general motors, both up 5 avis is up 15 while hertz is up 22 . Is is it too far, too fast lets get in the money right now. Mike whashg mike, what do you think . Yeah, i think it is a little bit. Im not sure, maybe some optimism coming from the fact that theres going to be some car purchases related to what obviously the disaster going on in houston but the fact of the matter is that the secular headwinds for the rental Car Companies and major auto manufacturers remains intact even know with the stocks having done well this week, multiples tell you this. You wouldnt see them trading at seven, eight, nine times earnings i think they believe we already maybe hit the peak already i typically agree with mike and carter theyre smarter than i am. Look at ford over the last three and a half, four years series of lower low, lower highs on a Broader Market tape thats been effectively straight up in an industry where they were selling cars at record paces my question is, if the stock couldnt go up then, could it go up now . If you want to be in the space for a trade, when shunned it yesterday, autonation is the place to be. Thats definitely going to see a shortterm boost for sure. But you know, one quick thing. Texas is the leading place for pick up truck sales. Its the most profitable vehicle ford sells lets assume youve got a half a million to a million new cars sold its going translate to about 35,000, maybe 40,000 f150s, 350 million to 4 400 million in net profits would be the effect of that, versus 7 billion thats a onetime potential boost. Its not something to trade off of there are moves in principle are enduring, it could be the beginning of something longer lasting and moves that are impetuous, often news related. And the move that simultaneously took ford up the last five, six sessions and gm feels more impetuous than developmental theres an argument that need to be made for the inventory that was the thing dogging this group. We are were talking to adam jonas of morgan stanley, and he said this is mother natures cash for clunkers program. Yes its a huge transfer of wealth from insurers to the consumer and in turn to the Auto Industry but the secular headwinds mike and carter said, the secular headwinds that excited prior to this hurricane, they are not going away they will abate for a brief period of time and you hate trading things on the back of a disaster like this, but this is going to be a one time maybe one quarter, two quarter phenomenon. Yet those headwinds will still exist. So, look, again, these stocks have gone down for a reason. I think if you get a bounce, you sell them. This cash for clunkers represents a at best, 5 of new car sales annually in north america and about a third of a percent of the fleet under the best of circumstances. So, you know, a lot of that fleet. People keep talking about that rolling off. 11. 5 is the average age for the 300 plus million cars that we got. So theres a lot of things you could say would be the reason for a new peak auto cycle, but i dont see it coming. So lets get to the charts. Carter, why dont you show us. Exactly what guy was talking about. Construction over the last three years. I want to start further back here, this truly tells it all. This is a chart that goes back as far as s p 500 sector data will go. Meaning in 1989, 1990, they changed the nomenclature data before that is not the same sector setup as we have now. This is nothing short of outstanding, remarkable or ridiculous what we have in orange is the s p 500 Consumer Discretionary sector one of the parts of the whole, the market of course, its best if the s p if you were to look at the s p, the s p not as good. Now, down here, these are positive numbers look at ford this is a joke so, you actually lost mone since 1989 investing in ford that tells you theres something wrong. More immediately here and now. So, just to put it in context, ten grand. These numbers are clear, yeah . Ten grand. 84 grand ten grand is s p, 61 ten grand, down. Youre down negative numbers this is a joke so is that about to get better with with selfdriving cars and uber and all the stuff no way the longterm chart. I think you can draw the lines anywhere you want. One thing to comes to mind is that not pretty to the here and now. Oneyear chart of ford no drawings, no line, no judgments by me. Heres a line. Thats a pretty straight down trend. It has failed off the line failed off the line. Im going to make the bet that thats going to fail again lets pull it back further twoyear chart no longer or drawings by me. Here comes the line. These are the same thing fails off the line fails off the line fails off the line going to make the bet its going the fail again pull it back more. Guy was talking about the three, hes in the five year putting the lines. A welldefined series of lower lows and so, why are we going to bet anything other than with history . With precedent i dont like it. Sell can i ask carter worth a question of course you know the way i feel about carter hes in the top three of all guests that have ever appeared whats that thing, the one with all the heads and rock, mt. Rushmore yeah. But i have a question y ses, sir. As i have pointed out, the Broader Market has been unbelievable if the Broader Market were to turn to the downside, is there safety in owning ford or will that rollover as well . No, in principle, the things that do the worst in a bad market are two things. Things that have never really rallied with the market then fall out the floor, and the opposite end, things that have been very extended, and people rush to take profits theres also this. People think dividends can help. The 5. 2 fords cut its dividend 50, 60 times in the history of the company. The dividend is always good as the next six months. Not a value play not anything you know, that is pretty clear, isnt it yeah. I dont think that you could be anymore clear carter than in the past few minutes how do you really feel about this this . Mike, whats your trade here . Selling the october 11, 12 call spread. Stock ended up about 3 , so this could collect more than the prices that i saw when looking at this today. You could sell the october 11 calls for 50 cents, by the 12s against it for a dime, youre collecting 40 to 45 cents for this this is with the stock below 11. 5 you could have an opportunity to make a small profit if is stock sits here. It will profit if it declines. Were protected at 12, just in case by some miracle it happens to break that downward trend line we just identified right does the chart look the same for gm well, gm also rallied hard this week. Gm hasnt been as broken as the ford chart over the consistent fiveyear period, but gm is no party. Theres something wrong with the industry, right . Its things you guys are talking about. Jims been sideways to slightly lower, where ford has been pretty much, that chart illustrated it its been a Straight Line down they both have issues. The worst stock is ford, not that theres any safety in either right now to be honest with you what would cause you concern about this trade anything unlikely were going to see anything fundamental thats going to emerge. If anything would concern me, its the same thats concerning me about every bearish bet ive made this year, which we can identify, you know, caterpillar among them and many others situations where i think there are plenty of reasons why the stock should have hit a top or should be rolling over continuing down trends that would be the one possibility if we get a really strong rally in september, it could lift all boats shifting gears here to another win their week, that would be gold. The medal having its best week since february, but some options traders arent going along for the ride seema mody has more. That is right the precious metal is now up 15 this year versus the s ps gain of 11 golds rally has been fueled by a weaker dollar and its flight to safety amid a rye in geopolitical concerns, but the Options Market does not appear to be as bullish. According to occ data, overall open interest on the gld options is up 0 this month, but the majority of that increase has come on the put side in fact, bets on puts have grown 18 while call interest has only seen a 6 gain this month. If gold were to hold its year to date gains, it would be the First Time Since 2011 that gold has beaten the s p melissa, back to you thank you very much seema mody that wouldnt be bad for this year, guy. Would you buy into that, though . I think theres something going on with gold we had a great conversation with steve liesman, and we asked him, are you concerned about this administration talks about this dollar as much as they do . We had a great conversation. He wants a weaker u. S. Dollar. A weaker u. S. Dollar will be good for gold. Look at gdx. Its now pushing up to levels we saw in january i think theres a stealth rally going on in gold and i wouldnt fade it here sounds like its not because of geopolitical risks. Thats the cherry on top. Its a risk off trade, but we have seen the levels of other commodities rise as well so it clearly would make sense in that context. The Options Market, we are seeing premiums go up. This is not unsurprising oftentimes when commodities rally, they anticipate higher volatility Going Forward thats quite unlike equities it certainly has the ability to move and probably more sharply than it has even so far. Whats interesting, this not randomly is an anniversary we know the peak in gold was in 2011 t was september 2nd it was a friday. Here we are friday, september 1st, 2017 and we came down 1877, all the way to 1129. Now back up to 1330. Its got momentum to it. Whether its because theyre never going to raise again or because people think the missiles are going to fly, whatever, its got momentum. Momentum is one of the most powerful forces both on the way down and way up. Its going higher, i would say chart master likes the gold i like when he pulls the dates out. Its almost like poetic when he compared the highs. Real quick, gold miners or gold generally speaking, the miners do have a little bit of leverage where gold is concerned, but id probabl rather the medal here, if we start to see weakness, cash flows into the commodity, gld is a straighter way to play it. Got a question . Send us a tweet. If its nice, well answer it on the show and check out our website. Got videos, tutorial, winning lottery numbers. You get the picture. Just want to make sure youre paying tan shun. Check out our super cool newsletter heres whats coming up next alibaba shares have doubled but if you missed the move, relax. Well show you how to buy it for less than 5 plus, calling all options action fans reach into your pocket, grab your phone and tweet us your question optionsaction. If its nice, well answer it on air. When options actions returns s so we can share our amazing trading knowledge. Thats a great idea, but why dont you just go to thinkorswims chat rooms where you can share strategies, ideas, even actual trades with market professionals and thousands of other traders . I know. Your brain told my brain before you told my face. Mmm, blueberry . Tap into the knowledge of other traders on thinkorswim. Only at Td Ameritrade. Steve, other than making me move stuff, im here at the Td Ameritrade trader offices. What are you working on . Let me show you. Okay. Our thinkorswim Trading Platform aggregates all the options data you need in one place and lets you visualize that information for any options series. Okay, cool. Hang on a second. You can even see the anticipated range of a stock expecting earnings. Impressive. Whats up, tim. See options data like never before. With thinkorswim only at Td Ameritrade. Welcome back to options action. If you think amazon has had a good year, check out alibaba lets get to deidre boss in sa francisco with the story hi, diedra hi, melissa thats right, amazons had good year 30 . But alibaba has had a better one. Its shares nearly doubling that puts it within striking distance of dethroning amazon and in the race to half a trillion dollars in market cap over the month, alibaba is up 10 since august 1st on the back of an Earnings Report that blew past estimates amazons rally has halted. Shares falling 1 and down about 100 bucks. Thats from the recent peak. From analysts, alibaba gets more love as well of the 47 brokers that cover the chinese tech giant, not a single one has a sell rating. Its mean target price is 197. 51, about 15 higher than when shares stood today, according to fact set. Amazon has one sell rating of the 44 an wrists covering it, its about 17 from its mean target price now, guys, both dominate ecommerce in their respective markets, u. S. And china and both are expanding into new business, like groceries, original content and cloud, but one of the major differences is that alibaba has the much larger and faster growing Chinese Market and, of course, the middle class some investors see alibaba as a proxy for that growth, and thats part of the reason alibaba has returned more than three times what amazon has this year. Amazon continues of course to dominate ecommerce and cloud here in the u. S. Cloud growth slowing a little in comparison to some rivals and some analysts say uncertainty over the whole foods integration may be giving investors pause these days guys thank you if you missed the big run, fear not. Mike has a way to buy the stock for less mike were going to talk about a structure called a call spread this is a structure you want to make when youre bullish, and this is a structure you want to use when premiums are slightly elevated and finally, this is a trade that helps you minimize your risk, particularly buying the stock as an alternative. Phenomenal forms from alibaba. Were start tog see more volatility sometimes, that can be a warning sign, that could be a good thing or a bad thing reflected in the price of options thats one reason we will use a spread specifically im looking at january, and the 180 and 200 call spread. We can spend 5. 60 for this sell the 200 against it for 4 thats how we get to 5. 60. Thats a quarter of the distance between the strikes. Gives us time for this to play out. As you can tell, 5 on 182, 200 stock, its not a lot to risk when considering making a bullish bet here mike, how does this trade go aw awry it goes awry if the stock goes down, and it wont do hot if the stock trades side ways from here. I think thats unlikely, though. The increase in volatility in the Options Market suggests that well see moves at least of the mag chewed we saw for the firs portion of this year until the years end this is going to profit if the move is upwards. In terms of amazon or baba, which looks better one is better in terms of how its acting, amazon has endured selling of some kind its been under pressure alibaba has been uninterrupted what makes it vulnerable is just that no weakness no ones doubted it, and its the breakout. From the 120 level in june now, its 170, 175 its come a long way stretch in fact, they have risks, i would say these are not cheap stocks. One thing question say is that the Chinese Market is faster growing than this one. It will soon be is at least as big as amazons is. But look, youre doing is, this is a momentum trade, where were mitigating our Downside Risk for that reason, because there are Downside Risks is amazons performance, carter, indicative of where you think f. A. N. G. As basket could go apple has been onto itself and microsoft, super cap, large cap growth, but google and amazon have been quite soft. Their relative performance has stalled for the better part of three months others are not great in that f. A. N. G. Group, but its struggling of the big ones, i think apple is the best. Up next, caterpillar on a tear this past month thats bad news for one of mikes trades. Got an options question for our trarsd traders or our special guests today, guy adami well read the best ones on air. More right after this. Rading de so that i can take my Trading Platform wherever i go. You know that thinkorswim seamlessly syncs across all your devices, right . Oh, so my custom studies will go with me . Anywhere you want to go the markets hot sync your platform on any device with thinkorswim. Only at Td Ameritrade oh hey john, im connecting our brains so we can share our amazing trading knowledge. Thats a great idea, but why dont you just go to thinkorswims chat rooms where you can share strategies, ideas, even actual trades with market professionals and thousands of other traders . I know. Your brain told my brain before you told my face. Mmm, blueberry . Tap into the knowledge of other traders on thinkorswim. Only at Td Ameritrade. Welcome back to options action. Time to look at our open trades two weeks ago, ko and carter said caterpillar surged way too fast theyre a miracle or going the same way i bet theyre going the same way. Im a seller im inclined to go along with carter here. Im going to buy a put spread to do that. The october 15, 100 put spread, you coul spend about four and quarter for the october 1 sell for 60 cents, spending 3. 65 for that. The cat scratched the back. The stock rallying 4 since then mike, what do you do we have until october for this and the value of the trade has declined on the meantime on caterpillars recent strength. My thesis, certainly the fundamental thesis that i had remains intact this is one of those situations where we used to have Big Industrial names like this we were talking about it earlier. Cyclicals, you would see the pis drop they have not, now, basically, it trades at a market multiple, they dont deserve to. It is not earning the money it used to. And the principle being of this fairly uncorrected advance over such a long period of time, leaving us at a difficult level, guys going to talk about it, but we want to stay with this. We got lots of time. This is so much. Can it eke out gains yes, but can it collapse yes. I agree if you go back five or six years, youre setting up for a potential for major double top in caterpillar valuation in my opinion is extraordinarily expensive. Its not near lit company it was ten years or so ago. If you think cat is going higher from here, ive said it for a while and corrected, you got t believe that every hole thats going ton dug over the next year is is going to be one of those big cat tractors with one of those hooks on the back aint happening, sister, back to you industrials as a whole up 8 so far this year and theres real stellar performances. Take a look at general electric. Just this week just today, in fact, up 2. 4 that happens when youre slipping, going on a fiveyear slide like ford. Ge is a disaster it peaked at 33. Stocks up 24 stock. Losers pop their head up weve got a new ceo though. Theres a reporters report saying theyll cut staff, slim down, and do the Options Market made a big bearish bet. Using the strength we saw as an opportunity to sell. Up next, final call from the options pits im here at the Td Ameritrade trader offices. Steve, other than making me move stuff, what are you working on . Let me show you. Okay. Our thinkorswim Trading Platform aggregates all the options data you need in one place and lets you visualize that information for any options series. Okay, cool. Hang on a second. You can even see the anticipated range of a stock expecting earnings. Impressive. Whats up, tim. See options data like never before. With thinkorswim only at Td Ameritrade. Hthis bad boy is a mobile trading desk so that i can take my Trading Platform wherever i go. You know that thinkorswim seamlessly syncs across all your devices, right . Oh, so my custom studies will go with me . Anywhere you want to go the markets hot sync your platform on any device with thinkorswim. Only at Td Ameritrade welcome back to options action. Time to take your tweets our first asks if youre confident, want to buy call, deep in the money or at the money. Mike, what do you say . I would say at the money. You are paying more extrinsically, more decay, but theyre just buying stock. Time for the final call last word from the options pits. Carter 11. 35 bet its going lower back to where it was pre harvey. Mike. If youre bullish in baba, its better to play to january than the stock. Guy, it was fun dan wilson. Whos dan whos dan . Just kidding hi, dan. Energy stocks next week if they dont turn next week, they aint turning looks like our time has expired. Thanks for watching. Im melissa lee. For more options action check out the website, optionsaction. Com. Have great long labor day weekend. Mad money starts now announcer the following is a paid advertisement for tai cheng, brought to you by beachbody. Two minutes, mr. Van dyke oh, hi im Dick Van Dyke. You know, back when i was doing the Dick Van Dyke show, audiences would laugh every week when id come in and tumble over the ottoman. Today, that wouldnt be so funny. A fall like that can mean broken bones, loss of mobility, loss of your independence, or even worse. So, if the aches, pains and, you know, that funny balance thing are slowing you down, keep watching this show because ive discovered an incredible program