Giant for less. The action begins right now. Lets get to it because with the fed rate hike on the table could some of the hottest trades of the last month, namely utilities and staples, be in trouble . Lets get in the money and find out. Dan, what do you think . Could be. Were seeing a lot of pretty interesting action on a day that we saw fed fund futures pricing and near certainty about a rate increase in, you know, on march 15th. We see the dollar retreat the way that it did. Its not something that you might have expected here. When you look at sectors like the utilities they have really kept pace with the s p and it doesnt make a whole heck of a lot of sense. We see theres been a lot of back and forth about valuations in the stock market and let me just tell you relative to their growth if you x out the healed this is a very expensive sector so i would expect if we do go into a ratehiking cycle that the sectors like utilities will cool off. Ive been very perplexed about the pricing of utilities as a group. When youre buying stocks like this, youre kind of selling puts just by buying them because you have a regulated industry which is the upside which seem to be limited. The biggest pressure utilities is things like when you have an industrial slowdown and low demand in the offhour periods. My question about this though is as we see more electric cars coming out, youll see more cars in the garage. I mean, the amount of incremental demand that could create over time. If you have a long view on utilities i wonder if thats one of the reasons they are trading at epically high valuations. You said perplexed, not to say either of you dont make sense, youre saying that the price action in utilities doesnt quite make sense in the face of what we just heard today from the senior central banker and what is presumptively almost a look for interest rates, maybe thats the tell. I think utilities act very, 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 reits and banks the most sensitive area of the market. Look at the breakout the s p just had. Lets see they give a sense that they are kind of one and done here, that could add real 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 parabolick. Weve seen this at the end of bull markets and i dont think you want to be in utilities. We dont talk about this a whole heck of a lot. There was a ton of put buying in the xlu which is one of the reasons they got me talking about it and the backdrop of us talking about higher rates all week long, too. Option prices are pretty cheap in the xlu. So what is the frayed . Im going to ask you. I look out to april expiration when the xlu is trading 51. 5. You can look to buy the april 5147 put spread buying one of the april 1st puts and selling at 0. 20 and break even and make up to 3, between 50 and 47. I like the risk reward. A 31 payout, and if i pull up a chart real quickly, the one year, it seems to have found technical resistance at 52 in the near term. Not a whole heck of a lot. Making a little flag but look at that. Pretty decent support down there at 48. Thats what im really trying to go target as pullback in the etf. When youre looking at Something Like xlu. Its not like this thing is going to gap down by 10 or 15 which is one of the reasons why selling the downside put makes sense and the 0. 20 will decay more rapidly as a percentage of the value than the at the money put spread and i think that makes a lot of sense. The move if there is one wont be that pronounced. The levels that dan said are exactly right. You return to a prior intermediate high and you consolidate what its been doing, but all of us has to think, my gosh, with the states and the sentiment and the temper and tone of the rate environment and whats coming how is it possible that banks are not exploding. The banks peaked relative to the market on december 8thth. Banks have broken on an absolute basis and underperforming the market, thats three months. Utilities act well and staples acts well. Theres something not quite squaring off with what appears to be a lock. They will raise rates. Maybe its a maybe they are reflecting the long end of the curve. Thats what i was going to say. Thats the other issue. Sure. Thats absolutely a good point. At the short end goes higher and especially if it goes up steeply if youre trying to fend off any inflation risk then the long end may not rise sharply. You guys wear jackets on this show and you think youre more special than the other guys . Wheres your jacket . I know, except for this. Thats from the 80s. Women wore jackets in the 80s. Gold is closing out its worst week in december. Despite the move lower the commodity is still higher this year. Just as carter worth predicted back in december. The opportunity now is that, of course, since the bear market low, the exact low, march of 2009, we have this huge divergence, and so what im thinking now at this point its so hated, down 12 weeks, a big run and so forth, that its time to maybe be contrarian. So the gld etf is up more than 8 since then, but chart master, you now say now might be the time to take money off the table. Why . Walk us through. Nice to have a few good ones. Ive got my duds, too, of course. Lets go back and figure it out. It has been a good run, and im thinking at this point its a little tired. Had a bad week this week. Lets try to look at some levels and figure it out. What we know is if you just look at the levels that weve cited. At 1,300 an ounce and went down to about 1,050 and and thats essential lay 50 retracement and if you draw the lines the other way, what we know is we got back quite precisely to a line thats worked four times and it failed. Now if we draw the trend line along the bottom, thats the downtrend, and this is the new uptrend, and weve 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 that were going to move a bit lower here and actually i want to make the bet that this is just the beginning of a period of further weakness, so its been good. I would book gains, write calls, do something. Mike, what do you think . How are you trading gold . I think the way to play this is look out to may. Give yourself a little bit of time. A little over 70 days until expiration if you buy on monday. With the put spread you can spend just over 2 for that. I was looking at that early, the 1. 16 puts sell for 1. 60 and kind of like dans trade. It may not seem its worth that 0. 75 but that will offset some of the decare, and the other thing is and you can talk about the levels here, 1. 07 where it basically bottomed out before we got to the most recent rally. That sort of sets your parameters, the point at which the rally started, sure. This whole thing actually really comes together. You guys obviously had the contrarian thing off the bottom back in december and you remain bullish january into february and those lines when you look at that downtrend, i mean, it really sets up nicely and the thing was trading nicely. Makes a lot of sense targeting that 1. 10 level, and carter, if it breaks through 1. 10, isnt it going back to that 2015 low of about 1,100 in the gld . Whats interesting about that, that was almost a 50 retracement of the plunge, and then once you start to break the new uptrend line, the only Reference Point that really does matter is the prior low, the point at which the strength began, so thats quite a ways. There are por else between the this trade and the one we were just talking about. If youre thinking rates are going to go higher that could create a stronger dollar. Other political things going on, let be honest, that could create a stronger dollar if they get any action and a stronger dollar is going to be negative for its proxy gold. Yeah. If youve got a question. Send us a tweet to optionsaction and check out our website optionsaction. Cnbc. Com and while youre there check out our super cool newsletter. What are you waiting for . In the meantime, heres whats coming up next. Oh, snap. Thats what wall street is saying about the snapchat ipo, but if you missed out on the move, fear not. Because 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 , because 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. So we know how to cover almost alanything. Ything, even a truckcicle. [second man] how you doing . [ice cracking] [second man] ah,ah, ah. Oh no [first man] saves us some drilling. [burke] and we covered it, february fourteenth, twentyfifteen. Talk to farmers. We know a thing or two because weve seen a thing or two. We are farmers. Bumpadum, bumbumbumbum 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 to options action. Im dominic chuk. Another week and another record high for the markets and the dow breaks through another milestone marker while were trying to hover around the 2,100 level for the blue chip index and its evident who has been drying the many gains recently l. Since the dow is priceweighted those stocks with the highest prices have the most impact, and as we told you earlier this week and apple, Goldman Sachs and boeing, just three stocks, have made up a third of the game between dow 20,000 and 21,000. Other stocks are pulling their weight. According to our data partners of the 30 dow members 12 stocks are trading two standard day deviations above their average price. In other words, stocks that are considered by many to be statistically overextended above and beyond where they normally trade. Among the names that have rallied up really fast, 3m, up 6 in 2017 and Procter Gamble gaining around 7 year to date and home depot is up near record highs, up about 10 so far this year and throw in boeing, up a whopping 17 . Now, theres not enough room to put all the names up there, but i have tweeted out the rest of the list of twist so check that out, michelle, some traders are wondering whether what were seeing in stocks could be at least the beginnings of a smaller pullback away from some of the overbought levels. Yeah, big question. Thanks, dom. Carter thinks up of those names has come a bit too far too fast. What are you seeing, carter . Just what dom was talking about. The one he ended with, in fact, is what well talk about here. Boeing up 17 for the year. Angle is steep, incorrected and lets even look at some other angles and time frames. 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 about 75, so, you know, things can go further, but there are a couple of things that i would look at that suggest maybe its not going to, all right. One, a long term chart going back to 1990 and what ive got is boeing versus its sector, ge, United Technologies and honeywell and boeing, of course, a part of the sector and then put in the s p, just to put it in context with its own group and with the market. Now lets zero in on the here and now. The point of a moving average whether you use a shortterm moving average or long term is an automated trend line and often can you calculate how far above trend you are before you check back to trend. So heres a fiveyear chart and we can see were fairly above trend, what about the moving average. What if i take it all the way back to 88 and i to wonder or calculate how far above it was 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, and it has only been here about four times in its history, and at this point almost every time it is about where it corrected. So overbought 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 megaphone and people use these as a way to measure where you might end up stopping, and we are right at the top of the megaphone. To my eye thats your next move. If youve got gains in boeing, you have to have gains, its at alltime highs take some province. If you like short selling something thats extended, heres a candidate to it. Too far too fast. Sell boeing. Technical warning signs. Mike, how are you trading boeing . This is an interesting case. Its hard for me to bet against a company thats as wellmanaged as boeing has historically been, but there are some fundamental dynamics going against it here. Number one, they are basically going to be slowing their deliveries of the triple seven and though they are increasing the singleaisle aircraft like the 737s were talking about a significant revenue decline that will come out of that, and theres more competition from the brazilians, for example, on the smaller aircraft and, you know, we are going to see some revenue declines. 19 times earnings and maybe a little bit over average and im inclined to go along with carter here, and the way to do this is by selling april 180, 190 call spread. You can collect about 4. 30 for this. Now the most it can be worth is 10, but if it stays right here youll have some profits and if it declines youre obviously going to see some 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 so this is the way i would look to try to collect a little bit of premium and make that interesting. Think about the dow theyre which is something we do on this show and other programs on cnbc. This was a great lagard last year and its the winner. Its the way it works so its gone too far. Just do something. Got to put it in the context. The stock is up 80 since its 2016 lows in february. We just spent a lot of time talking about snapchat up 30 on a 30 billion market cap. And this is much, much bigger. To me, if youre going to try to big a top and a market of alltime highs and a stock like boeing up 80 that doesnt have a dotcom after the name use its megaphone and put spread because to be honest with you the risk reward sets up very favorably, especially where option prices are and especially when you look at lines and you look at data. I love this trade and i do things monday morning. 100 million in market call. Selling the call spread. And i may do that, too. And the research the of you get taken over. Nobody is taking over boeing. Because the u. S. Government wouldnt allow it. Right. Can i can i be really clear for a second because ive got long put spread on the brain and i understand what youre trying to do. Im actually looking at buying a put spread. Selling an inthemoney call spread a very similar put and look to get the first move. And heres Something Else to consider, right. Their expected earnings are the same this year as two years ago and in a situation where were looking at all these growth situations, this one doesnt have any. It will see top line revenue declines. Coming up next, the one surging Housing Stock that continues to pay hefty dividends. Well tell you the name and if you shut get in. Much more omgss 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 baoptions action. Its time to get called out where we look back at some of our open trades that are not working. Last month dan thought that snaps ipo would help boost twitter. The run up to the snapchat ipo could be good for this relatively valuation, okay, so heres the thing into the print. The stock is trading 17. 70, look for a role reversal. Sul the put at 0. 18 and use the proceeds to buy the june 20th call for 1. 15 that cost 0. 30. Dude works told you to wear the glasses . My idea. Twitter shares have plunged almost 11 since then. Listen, my thesis still stands. Think, you know, twitter is a scarce property and not doing a whole heck of a lot of things right so you have to give them the benefit of the doubt. Lets talk about the trade strike. I didnt think 1750 was a good earnings prior to the trade and sell a downside put and buy an upside call and give yourself some wiggle room and now we have the thing down at 15. 70, short the june 15th put. The trade is a loser by about 2. Would have been 2. Are you comfortable to put the stock at 15 because i think thats kind