On the social giant for less. The action begins right now. Lets get to it. With the fed rate hike on the table could utilities and staples be in trouble . Dan, what do you think . Could be. Were seeing interesting action today on a day we said fed fund futures pricing near certainty about a rate increase on march 15th and see the dollar retreat the way it did. Its not something you might expected here. You look at utilities and they kept pace with the s p and it doesnt make sense. Theres been a lot of back and forth about valuations in the stock market. Let me tell you relative to their growth, if you x out the yield this is an expensive sector. If we do go into a rate hiking cycle that the sectors like utilities ive been very perplexed by the pricing of utilities as a group. Utilities when youre buying stocks like this, youre selling puts by buying them, you have a regulated industry, the upside is limited. The biggest pressure utilities face is when you have things like an industrial slowdown and you have low demand in the off hours period. My question about this though is as we start to see more electric cars come out, youll see more cars in the garage. The amount of incremental demand that could create over time. If you have a long view on utilities im wondering if thats why they are trading if price action is the final ar bitter and you said perplex, youre saying that the price action utilities doesnt quite make sense in the face of what we heard today from the senior central banker and what is presumptively almost a lock for Interest Rates. Maybe thats the tell. I think utilities act very well suspiciously well in the face of what are high odds of a hike and perhaps there isnt a lot of downside even though they are arguably along with banks Interest Rate sensitive areas of the market. Look at the breakout the s p just had, if you get a sense they are one and done, that could add flame to the fire when you think about what people are anticipating as far as tax reform and that sort of stuff. We could have a move into growth and go parabolic, weve seen these moves in early 2000, that sort of thing, i dont think you want to be in utilities and we dont talk about this a heck of a lot. There was a ton of put buying in the xl you, one of the first reasons got me looking at it and the back drop of talking about higher rates all week long. Option prices are pretty cheap. What is the trade . Ill tell you right now. I want to look out to april expiration when the xlu is trading 51. 5, you could look to buy the april 51. 47 put spread, buying for 1. 20, selling one of the 47 points at 20 cents and break even down at 50 bucks and make up to 3 between 50 and 47. I like the risk reward, 31 payout here. If im going to pull up a chart quickly, the oneyear, it seems to have found technical resistance at 52 in the near term. Not a heck of a lot. But look at that, theres pretty decent support at 48. Thats what im trying to target or pull back in the etf. When you look at xlu, its not like its going to gap down by 10 or 15 , why selling that downside put makes sense. The other thing is that 20 cents will decay more rapidly as a percentage of its value then the at the money put strike you bought is going to and that makes sense, buy the at the moneys because the move is not likely to be that for now. The levels that dan said are exactly right, you return to a prior high and consolidate which its been doing. All of us one has to think, my gosh, with the statements and sent. And temper and tone of the environment and whats coming, how is it possible banks are not exploding. Banks have broken on an absolute basis under performing the markets for three months. Utilities and staples act well. Theres something thats not squaring off with what appears to be a lock maybe they are reflecting the long end. Curve thats what i was going to say sure. Thats a good point as the shortened goes higher and if it goes up steeply to fend off inflation risk then the long end may not rise as sharply. You guys wear jackets on this show. You like that . You think youre more special . Wheres your tie . Thats from the 80s, women wore jackets in the 80s. Zbit the move the commodity is higher on the year. Just as carter worth predicted back in december. The opportunity now is of course since the bear market low, the exact low, march of 2009, we have this hugedy vergence. So what im thinking now at this point, its so hated down 12 weeks big run and so forth its time to maybe be contrarian. So the gld is up more than 8 since then. Chart master you say might now might be the time to take money off the table. Thanks for the leadin. It nice to have a few good ones. Lets figure it out. It has been a good run and at this point im thinking its a little tired and had a bad week this week. Lets look at levels and figure it out. What we know, if you look at these levels ive cited, we were at 130 or 1300 an ounce down to 1050 an ounce then 120. That is a 50 retracement. If you were to draw the lines another way, what we know is we got back quite precisely to a line that has worked four times and it fames. Now if we draw the trend line along the bottom, thats the down trend. This is the new up trend and we violated the little minor uptrend since the beginning of the year. Put the whole thing together, i think thats a Bad Development and the bet is well move lower here and actually i want to make the bet that this is just the beginning of a period of further weakness. Its been good, i would do calls, do something. Mike, what do you think . I think the way too play it this, look out to may, give yourself 70 days until expiration if you put this on money. By the 1. 16, 1. 07 put spread, you can spend over 2 for that. You can buy those for 2. 60 and sell the 1. 07s for 35 cents. It may not seem its worth the 35 cents but that will offset the decay. 1. 07 where it bottomed out before we got into this most pree recent rally. That sets your perimeters the point at which the rally started, sure. This whole thing comes together. You guys obviously have the contrarian thing off the bottom in december, remained bullish into february. When you look at that down trend, i mean it really sets up nicely. It was trading technically as far as strikes really like them. It makes sense targeting that 1. 10 level. Carter, if it breaks through 1. 10, isnt it going back to the 2015 low of about 100 . That is the Reference Point. Whats interesting about that it was almost a 50 retracement of the plunge. Once you break the new up trend line, the only Reference Point that matters is the prior low, thats quite there are parallels between this trade and the one we were just talking about, if you are thinking that raltes are going higher, that could bring a stronger dollar and other political things if they get traction and a stronger dollar is going to be negative for its proxy gold. If you got a question, send us a tweet to optionsaction. For everything options action, check out our website, options action. Cnbc. Com. While youre there, check out our super cool newsletter. In the meantime, heres whats coming up next. Oh, snap thats what wall street is saying about the snap chat ipo. If you missed out, fear not, we have a way to get in. Plus shares of boeing have been surging. We want boeing to make a lot of money but not that much money. Dont worry, mr. President , theres something in the charts that says the stock has come a bit too far too fast. Well explain when options action returns. Hey gary, what are you doing . 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. [ alarm weather. Eping ] [ laughter ] cartoons. Wait for it. [ cat screech ] [ laughter ] [ screaming ] [ laughter ] make everyday awesome with the power of xfinity x1. Hi grandma and the fastest internet. [ girl screaming ] [ laughter ] hey nicole. Hey i just wanted to thank your support team for walking me through my First Options trade. Well, i feel pretty smart. Well, were all about educating people on options strategies. Well, dont worry, i wont let this accomplishment go to my head. Im still the same old gary. Wait, you forgot your french dictionary. Oh, mucho gracias. Get help on options trading with thinkorswim, only at td ameritrade. Welcome back, another week, another record high for the markets and the dow breaks through another milestone marker. Were still trying to hover around the 21,000 mark for the blue chip index, its pretty evident whos been driving the gains recently. Those stocks with the highest prices have the most impact and as we told he you earlier, apple and Goldman Sachs and boeing made up a third of the gain between dow 20,000 and 21,000. A lot of other stocks are pulling real weight as well. Of the dow 30 members, 12 stocks are currently trading at least two standard deviations above the 200 average price. Stocks considered to be statistically overextended above and beyond where they trade, among the names, 3m, up 6 and procter gamble, 7 and home depot near record highs about 10 so far this year and throw in boeing up a whopping 17 . Now, theres not enough room to put all of the names up there but i have tweeted out the rest of the list of 12. Michelle, some traders are wondering whether the breather were seeing in stocks could be the beginnings of at least a smaller pullback away from the overbought levels. Back over to you. Big question, thanks, dom. Carter thinks one of those names has come too far too far. The one he ended with is the one well talk about here, boeing up 17 for the year the angle is steep and uncorrected. This is a oneyear time frame. It is up 52 over the past 12 months versus the market up something in quarter 20. More than double. Heres the twoyear chart, up 145 verse the market at 75. Things can go further but a couple of things that suggest maybe its not going to. All right, one, long term chart going back to 1990 and what ive got is boeing versus its sector, all industrial, ge, united technologies, honeywell and boeing is a part of the sector and put in the s p to put it in context with its own group and with the market. Lets zero in on the here and now. The point of a moving average its an auto mated trend line, you can calculate how far above trend you are before you check back to trend. Heres a fiveyear chart, were fairly far above trend, above the moving average. What if i take it all the way back to 88 and i were to wonder or calculate how far above was it here or here or here compared to maybe here or now . Well, this next chart does that for us. It calculates the percentage that boeing is trading right now above its 150day moving average. It has only been here about four times in its history and at this point, almost every time, is about where it corrected. So over bougt, however you might want to characterize it and then theres this. This is the chart of the past two or three years. This is often called a mega phone and people use these as a way to measure where you might end up stopping. Were right at the top of the mega phone. To my eye, thats your next move. If youve got gains in boeing, you have to have gains, take province, if you like selling short something thats extended, too far too fast, do something, sell boeing. Technical warning signs there. How are you trading boeing . This is an interesting case. Its hard to bet against a company as well managed as boeing has historically been but there are dynamics going against it here. Number one they are going to be slowing their deliveries of the triple 7 and increasing the single aisle aircraft like the 737s, were talking about a significant revenue decline that will come out of that and more competition from the brazilians, for example on the smaller aircraft. Exactly right. Were going to see revenue declines, 19 times earnings, maybe over average. Im inclined to go along with carter here. The way to do this, selling april 1. 80 call slightly in the money, can collect 4. 30, the most it can be worth is 10 but if it stays here youll have profits, if it declines youll see profits and even if it did continue for whatever reason up to that strike in the short term, its not going to go to the full value of this 10 spread. This is the way i would collect a little premium and make that and think about the dow theory, something we do a lot on this show and other programs on cnbc, this was a great lag gard last year and its gone too far. Do something. The stock is up 80 since the 2016 lows in february. We just spent a lot of time talking about snap chat, up 50 on a 30 some billion dollar market cap. This is much bigger. If you were trying to pick a top and stock like boeing thats up 80 that doesnt have a dot com after its name, use this mega phone and put spread because to be honest with you, the risk reward sets up very favorably especially where option prices are and when you look at his lines and that data. I love this trade, may do it first thing monday morning. 111 billion in market cap. Sell the call spread. Sorry, may do that too. Nobody is taking over boeing. No. The u. S. Government wouldnt allow it. Can i be clear, i got long put spread on the brain. I understand what youre trying to do im looking to buy a put spread. Buying a comparable put spread very similar risk reward. Look to get the first move heres Something Else to consider. Their expected earnings are the same as they were two years ago and in a situation where were looking at these gross situations, this one doesnt have any right now. Its going to see top line revenue declines. It is the one surging Housing Stock that continues to pay hefty dividends, well tell you the names and if you should get in. Much more options action right after the break. [pony neighing] what . Hey gary. Oh. Whats with the dogsized horse . Im crazy stressed trying to figure out this complex trade so i brought in my comfort pony, warren, to help me deal. Isnt that right warren . Well, you could get support from thinkorswims inapp chat. It lets you chat and share your screen directly with a live person right from the app, so you dont need a comfort pony. Oh, so what about my motivational meerkat . Inapp chat on thinkorswim. Only at td ameritrade. And the wolf huffed like you do sometimes, grandpa . Well, when you have copd, it can be hard to breathe. It can be hard to get air out, which can make it hard to get air in. So i talked to my doctor. She said. Symbicort could help you breathe better, starting within 5 minutes. Symbicort doesnt replace a rescue inhaler for sudden symptoms. Symbicort helps provide significant improvement of your lung function. Symbicort is for copd, including chronic bronchitis and emphysema. It should not be taken more than twice a day. Symbicort contains formoterol. Medicines like formoterol increase the risk of death from asthma problems. Symbicort may increase your risk of lung infections, osteoporosis, and some eye problems. You should tell your doctor if you have a heart condition or high Blood Pressure before taking it. Symbicort could mean a day with better breathing. Watch out, piggies child giggles symbicort. Breathe better starting within 5 minutes. Get symbicort free for up to one year. Visit saveonsymbicort. Com today to learn more. 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 to options action, its time to get called out where we look at our open trades that are not working. Last month dan thought that snaps ipo would help boost twitter. The runup to the snap chat ipo could be good for the relative valuation. The stock trade 17. 70, you could look to a risk reversal, sell the down side, sell the june 15 put at 80 cents and use the proceeds to buy the june 20 call for 1. 15 and cost you 35 cents. Dude, who told you to wear those glasses . That was my idea. Twitter shares have plunged almost 11 since then. Listen, my thesis still stands, twitter is a very scarce property, not doing a heck of a lot of things right. Lets talk about the trade instruct structure. I didnt think 17. 50 was and it trades horrible. Sell a downside put and give yourself wiggle room. Now we have the thing down at 15. 70, short the june 15 put and the trade is a loser by about a dollar. You would have been down two i think that was the thesis, right, im with you. I think you let this play up. What makes it go up from there . Well, ill tell you what, at some point snap chat with a 35 billion market cap people are going to look at enterprise value of twitter and ive been saying this for two years and wrong about it but i think it is a squars property. It needs to be bought by google or facebook and maybe will happen in 2017. Its only 11. 5 billion. Now to lows, last week mike thought Home Improvement giant would sink on its earnings report. The trade im look the at doing is sell the march 77. 81 call spread, collect a dollar and then buying against it for 30 cents. This is a bet that will hold below the 77 level and breaks even around the 78 level. Since then, lowes is up more than 7 . Surprise. How about this stock rallied 9. 5 after earnings. It hasnt done that in ten years. 40 quarters we havent seen a run like that. That was a pretty epically bad call on my part. Interesting that it ran up to the long strike, which, its kind of a tough one on there, but its weve done a home depot long trade and that might have worked, it did, the thinking was it wasnt that big a move in home depot and perhaps lowes, the weaker player, if he couldnt get a pop on the home depot news it was maybe going to do how about the chart . It gapped right back to its prior high. The high was 83 in june of 16 and the earnings related pop puts you back at the gap, stop dead cold now back nor importantly than that, what do you do with a short call spread at that upper strike exactly. This trade needs to be managed to some degree. The short answer is you cover it. Actually right now time is working against you. Before we had time on our side. Now we dont. In the vein of the rolling stones. Your tweets and the final call from the options pits. Hey nicole. Hey i just wanted to thank your support team for walking me through my First Options trade. Well, i feel pretty smart. Well, were all about educating people on options strategies. Well, dont worry, i wont let this accomplishment go to my head. Im still the same old gary. Wait, you forgot your french dictionary. Oh, mucho gracias. Get help on options trading with thinkorswim, only at td ameritrade. So we know how to cover almost alanything. Yt