Wasnt that good tony zheng has updated well intel on intel plus, what is it the kids say again. Maybe we could netflix and grill. Not quite but mike khouw grills you on a way to chill around netflix earnings. Its time to risk less and make more options action starts now. All right welcome back. Lets get do it we begin with the transports like the markets hitting highs Kansas City SouthernNorfolk Southern fedex, Union Pacific, leading the group as earnings season is about to kick off. But carter says one of these names is likely to pop more. He is at the plasma who is the name carter worth. Interesting of course the dow jones Transportation Industry has not made a new all time high but making 52week highs to be determined but railroads its a big part of the transport index. In addition to names like fedex and ups. But here is the Railroad Index names you know like Union Pacific. Norfolk southern, ksu. Lets draw some lines. Is it this it has all the elements of that. But lets do it a few other ways so we plunge 17 , recover 23 . And overs past eight months what weve done is gone up 2. 5 2. 5 in eight months it couldnt be extended if you made no progress despite the straight down and straight back up its all very symmetrical, the time down and up put a line on top and has the elements of a well defined level and breakout you can try the lines so many ways call it a wedge, ascending triangle call it what you want making no progress in a years and thats the important thing Union Pacific the biggest name in the group here is a longterm chart, no lines or annotations by me here i think is how one would draw the lines what we know off the line to the penny, to the penny, to the penny. And we need quailing and Union Pacific on the longside, pretty straightforward setup. Carter, mike khouw, what do you think . Whats the trade here . So this is an interesting situation. We had csx report this week. The results werent phenomenal but the Group Performed well unp up this week alone seeing situations like this frequently if you look to get into a name you might use a risk reversal sell the downside put and buying upside call youre not caught chasing by purchasing the stocks at these levels since they are reporting earnings next week we want to look at the implied move implying a move 3. 5 when the average is about three that suggests the options might be higher price the than otherwise. Im trying to incorporate a calendar element here. The trade if it seems simple with three legs. We are getting to it selling the next weeks 177. 5 put and the 190 calls. Use the proceeds to help finance the purchase of longer dated call, the may 1. 90. Netnet spending 3. 80 by selling the 177. 5 put could potentially put the stock but where i put it at the 177 and a half level thats where it began the week this is how we mitigate the fact that it rallied this week. Of course then the calendar effect if it sits here, that strangle will decay away we debt to essentially finance the purchase of the longer dated call give ourselves a setup to take a bullish bet mitigating the risk to the downside overtime. Lets talk about the trade. Its fairly complex. Its seemingly selling a straddle and buying a call option but i think the best way mike brought it up is selling a put and buying a call calendar allowing to you to buy the stock at a lower price around 177. 5 if it trades lower well below the 180 support level that the stock has. Then if the stock rallies you get to participate to the upside with the call calendar i really like this. One of the things putting it back to technical isnt it identical to hormel and what does spam have to do with railroads . Thats the point great technical juncture do they work always . Of course not but repeat the setups play the cards the same way when the opportunities look the same. You are news agnostic. Thats right. You look at the lines and mikes trade which tony another thing i say you said it was complicated. Is it overly complicated so i just think that its the way you look at it if you break down to short put and calendar those are trades we talk about all the time. But you think of them as selling a straddle and buying a call thats when it seems complex. Mike, how did you come up with the idea. Basically he was looking at a couple of things where did the stock mover up from at the beginning of the week around 178 would i be happy to buy the stock there based on bullish technical thesis carter outlet outlined when you see nearer dated options that are overpriced relatively speaking, these are you want to sell those. Of course buying longer dated options is a good way to hedge the risk we like calendar spreads so essentially being willing to own the stock at 177 was part of it and liking calendar spreads going into earnings was another part of it okay, mike khouw good stuff lets turn now from transports to tech chipmaker intel reporting earnings next week stock though really has been iced out of the red hot rally in tech the stock is up over the year but lower this year. And underperforming the Semiconductor Index basically by half but if you bet on an intel turn around tony zhang has a play on intc. What is it i like the chart setup on intel. Because this stock spent a bit of time below the 53 resistance level and broke out above it in october traded higher now and consolidated below the 60 resistance level i see the next weeks earning release as a catalyst it needs to get above the threshold looking from a relative perspective, the stock has underperformed the market and the semiconductor group. However that stabilized the last couple months and the recent relative strength is what i like to see going into an earnings release. Flipping over to the earnings itself i think the bar has been set relatively low on this particular earnings cycle. And if we look at the analyst revisions going into this week things have looked stronger. I do think that this is pointing to potentially a modest beat on intel. The way i look to play this because the implied volatility is high is to sell a shortterm put credit here on this name im going out to february 28, a weekly option to sell the 69. 5, 66. 5 put credit spread selling the 69. 5 for 2. 15 and paying about a dollar for the 66. 5 put collecting netnet 1. 15 in credit on a 3 credit spread get a third of the width the break even price on this strategy is 58. 35. As long as the stock stays above that level im profitable. And if the stock gets a pop on earnings i get to take profit on this by this time next week. Mike khouw in san francisco, what do you think. I like this trade for several reasons. One of them is what tony outlined which is the hurdle is not that high. Look at basically what the analysts say about intel right now. You basically have as many holds as buys. You also have nine sells on the stock. Thats unusually bearish for intel. We know that analyst ratings generally tend to skew bullish but not particularly here. The average analyst target is right where the stock is currently trading. Its trading 13 times forward earnings, about half the valuation of the s p a lot of bad news for intel has been priced in the other thing i like about it goes to the Options Strategy itself, which is we like to sell credit spreads when we can its rare you get an opportunity to sell a downside put spread and collect better than a third of the distance between the strikes, which is actually what tony is collecting here. He gets a 1. 15 on a 3 put spread thats the spread you usually get calling spreads. That stacks up favorably and you are selling a put spread rather than outright puts because there are risks to the stock. And if the announcements after earnings prove negative you are protected by owning the downside put and limited risk that way. One thing positive for the setup is that the stock gapped nicely on the last quarter and gaps typically come in twos or threes. I would expect this to gap again, clear the highs and much better long range. Why do gaps come in twos and threes. You get a gap because the Earnings Results are so much better or worse than the street. Or there is some other material news. Sure fda approval for a drug does it too but rank and file stocks gaps up or down gaps down means the consensus was too low or too high. When the street is behind something they typically stay behind for a while you beat and surprise again. You can only do that about three times. Sometimes move up the estimates so much that you. They figure you out. Exactly. Thats fascinating. It is. I love this show because i learn. There you go. For everything options action, im going to do it tonight. Look on the website. Options action. Cnbc. Com. While there, if you want, sign up for the newsletter. In the meantime here is whats coming up next coming up, some Stranger Things are happening with netflix options. What mike khouw is about to explain could turn your world upside down. Plus calling all options action fans, reach into your pocket, grab your phone and tweet us your question at options action. If its nice, well answer it on air, when options action returns. Options action is sponsored by think or swim by Td Ameritrade and with the sXfinity Stream app, screen is your big screen. Which is free with your service, you can take a spin through on demand shows, or stream live tv. Download your dvrd shows and movies on the fly. Even record from right where you are. Whether youre travelling around the country or around the house, keep what you watch with you. Download the Xfinity Stream app and watch all the shows you love. Its got all my favorite shows turn oright there. Boom, i wish my Trading Platform worked like that. Well have you tried thinkorswim . This is totally customizable, so you focus only on what you want. Okay, its got screeners and watchlists. And you can even see how your predictions might affect the value of the stocks youre interested in. Now this is what im talking about. Yeah, itll free up more time for your. Uh, true crime shows . British baking competitions. Hm. Didnt peg you for a crumpet guy. Focus on what matters to you with thinkorswim. Welcome back another big week for streaming media. And our company cnbc parent comcast raising the curtain on our streaming Service Called peacock. Lets get to Julia Boorstin with all the details. Julia . Thats right. Nbc universal peacock is looking to be a new version of broadcast tv but for the internet age peacock looking to differentiate from the crowded landscape of on demand Subscription Services not just with the add supported option but early access to late night shows and live breaking news and exclusive access to universal films starting with the studios 2020 slate. Now, analysts are largely bullish on the peacock focus on growing demand for digital video ads and offering an alternative to subscription overload wedbush analyst says says we guggenheim with the buy rating saying we believe comcast strategy of offering premium content sets it apart from the peers. But guggenheim points out the product could have a negative impact on the linear or tv subscription business. Now Nbc Universal forecasts between 30 million and 35 millio active peacock accounts by 2024. Thats less than hbo max is forecast at 50 million global subscribes and disney plus of 60 million subscribers worldwide by then. Put in context netflix has 160 million global subscribers. Well have to see when they make that move overseas netflix reports earnings tuesday afternoon after the bell the company is expected to grow revenue 30 and earnings per share by 74 brian. All right what are some of the key numbers we want to watch from netflix next week. With netflix we are always watching subscriber growth the key number is the company has held forecast that it would add 7. 6 million subscribers and 600,000 of those would be here in the u. S remember, a couple of quarters ago, netflix showed declining subscribers in the u. S they are doing u. S. And canada together this quarter that number will be in focus. Julia boorstin, thank you very much. If you think netflix is moving higher on the results mike khouw has a way to play it with the call to action. Mike take it away from san francisco. Yes looking at netflix, the king of sort of the streaming video on demand services, you know comcast looks cheap, rolling out a product that could obviously be promising for them. Disney is certainly cheaper than netflix. If you own netflix something you might consider is substituting what im talking about here for the long stock you own here is why. We look out to next week we see options are cheaper than they usually are into earnings. How much cheaper only two times in the last ten years weve seen options as cheap as they are right now, that was in 2014 and last year when they reported the Second Quarter results. Both instances saw a steep drawdown in the stock. 20 in 2014. 10 when they reported the Second Quarter results last year if you look at thats a risk you have the thing is also that the stock has moved very sharply off the recent lows. We have seen increase in the price of about 30 plus. And finally looking at earnings, moves of less than 3 or so are quite uncommon in the stock. Lets just look at the distribution of results in this thing giving you a sense of movement this basically shows the kind of price action we have seen over the course of the last decade. You can see there have been declines as much as 15 . Increases close to 20 when you see that movement that is when optionality kicks in specifically the trade i look at was going out and buying the weekly 340 calls this isnt a strategy we usually look to. Because that is kind of sensitive in most cases. And in this case the options arent cheap they are 11. 75. But consider that in the context of 340 stock price and the moves we have seen its rare you get the opportunity to basically mitigate your risk if you make a bullish bet going into earnings on a stock thats as volatile as netflix. And of course its seeing competition. They have the highest content spend. If you consider it, you know, the news could be good it could also be bad we could see big moves this is a which to make a bullish bet not risking a lot of the current price. A big move on netflix what do you make of that im surprised options are this cheap on netflix into the earnings i like the setup show. We talked about the streaming wars and concerns about netflix towards the end of year. When they sold off, but i think that resolved itself after the disney launch and netflix haves having the Price Movement the last few weeks and months. I think this stock can blow it out of the water in terms of earnings at least fill the gap up to 360. With a call option easy way to play it. Tony is referring to a substantial drop in gap in the chart. News related and often gaps are filled. What we do know is that there are considerable overhead supply above. So that youve got almost six months of trading where people who bought poorly who then sustained losses if given the chance to be made whole would like to take their money back. Thats the definition of overhead supply. Were you get to the get you get considerable oversupply but you dont have to get there. So the burden of proof for now is on the bull the bears have to point thats a relative dog for a while. Good stuff. Netflix numbers out next week. Coming up, one stock surging this week and making one of our traders very happy well tell you about it. And do you have an options question you are dying to ask tweet us options action you might get your answer on the air. Live from the Nasdaq Market site and were back right after this. Options action is sponsored by think or swim by Td Ameritrade and welcome back to options action. It is time now to look back at one of our open trades last week both mike and carter said that shares of American Express were likely to move higher listen. You also have this working into and quite perfectly, right. It stops to the penny. It stops to the penny. To the penny here we are again. Quite right. More to the breakout so many have already broken out. What i was looking at is a upside calendar spread, the february april 130 call calendar you could spend 1. 65 for that. They nailed it shares of American Express jumping 3 since the call mike and carter, congratulations both so mike what are you doing with the trade now . Yes, well obviously we have to defer to carter for technical view i mean this has been a pretty orderly melt up in the stock we have seen. The thing i point people to is the fact that it remains relatively cheap talk about a stock trading less than 15 times full year earnings one of the things we wanted was drifting up to 130 and slightly beyond it has done that in the short time since last week i might be interested in buying back the february call its actually not going to basically cost us anything to do that and just hanging onto the longer dated call at this point. Things are working in our direction. The thesis is looking good so far. And i think this is a way that we can actually hold a bullish bet for a longer period of time. Right so a couple of things. One its early in the goings three if you think about the stock being at 131 relative to where it was in july at 128 hasnt moved much in eight months cant call it extended. Part of the premise was this was a catch up trade with the market in general and its a dow jones 30, heads you win, tails you win. If its playing catch up it does and we think that happens. And offer defensive characteristics in the event the market encounters trouble. I like buying back the short call and holding the long call for moves on American Express. Because i particularly like the payment space. If you look at other Payment Providers like Global Payments you know, amex is actually quite similar to that from the perspective, unlike visa and master where they make 70 to 80 of money on interest American Express predominantly makes money on payments. Similar to i think American Express could trade at a higher multiple. Mike final comment to you. Yeah, i mean, the other thing i would point out master card and visa trading at richer multiples. Thats generally true in the payment space. American express to the extent they have credit risk they have better creditworthy borrowers. I like American Express. Like buying stocks that are cheaper than the market overall. Of course you are catching up to a market that wont stop just owning the longer dated call is a risk mitigated way to mold a bullish bet here. Up next, your tweets and the up next, your tweets and the final callg to me. Yeah . So what do you see . I see an unbelievable opportunity. Openings action sponsored by think or swim by Td Ameritrade and a trade desk full of experts, available to answer your toughest questions. And i see it with zero commissions on online trades. I like what youre seeing. Its beautiful, isnt it . Yeah. Td ameritrade now offers zero commissions on online trades. Im not really a, i thought wall street guy. Ns. Whats the hesitation . Eh, it just feels too complicated, you know . Well sure, at first, but jj can help you with that. Jj, will you break it down for this gentleman . Hey, ian. You know, at Td Ameritrade, we can walk you through your options trades step by step until youre comfortable. I could be up for that. Thats taking options trading from wall st. To main st. Hey guys, wanna play some pool . Eh, im not really a pool guy. Whats the hesitation . Its just complicated. Stepbystep options trading support from Td Ameritrade welcome back time to take your tweets last week, tony talked about delta. This is similar to the American Express trade we talked about. Earlier this week, i bought back my short call because i have an extended bullish view on delta i want to take advantage of that in my long call. The only thing i will say, if you expect that move to happen over a longer period of time, you might want to roll that out to march or april. All right, time for the final call mike, well start with you out west. Netflix options are cheap going into earnings. Thats a way to risk less, making bullish bets. Okay. Carter American Express, stick with it Union Pacific, get with it. Get with it a new position youre bullish, optimistic. Yes. Tony . Intel, looking to sell high elevated implied premium going into earnings. Look for a breakout. If it gaps, i learned something, if it gaps once might get a second, often do. Or maybe a third. Thank you very much. Thank you for watching today see you next week. Mad money with jim cramer starts now male announcer the following is a paid program for crepe erase. female announcer americas number one selling antiaging body treatment system for dry, crepey skin just got even better. male announcer new crepe erase advanced gives you even faster results and is clinically shown to give you smoother, firmer, younger looking skin. female announcer on your neck. male announcer chest. female announcer arms. male announcer legs. female announcer and hands. Sponsored by body firm and featuring jane seymour, courtney thornesmith. male announcer and dorothy hamill