Plus, what could be more fun than insurance seriously. This is an interesting situation. Its captivating when captain coe explains how options action starts right now. U. S. Markets rallied for a strong week, but the start master and mike sa there is value to be found across the pacific what are you looking at in japan . Before we get to the charts, what we know is yeartodate, the nikkei is virtually unchanged. The s p is up 8 . First, taiwan versus korea so instead of using the Taiwan Stock Exchange index or the kospi, were using the ewt for taiwan and ewy for korea they are literally neck and neck. Its a perfect set of parallel lines. Now, add in japan, ewz, the i shares for japan. Here you see the divergence. If i were to include the spy, it would look identical which is to say these are all in dollars so we have adjusted out for the currency that comparative chart is the opportunity, japan lagging. And so take a look now at the individual i shares thems seelv. First ewt. Ive circled the pre pandemic high. The plunge, we recovered to it and weve broken out. The index has made new highs we know that the index itself, the Taiwan Stock Exchange index. Now look at korea. Next chart ewy. Same circumstance. The prepandemic high, i have circled it, the plunge and we have recovered to it and broken out. The final chart, ewz, i shares for japan. Ive circled the pre pandemic high, the plunge, but we have not yet broken out. The inference is, japan will. The long trade here is ewz. There is the trade. We are looking at japan using those thanks, carter for that. Mike, lets go to you. How do you execute that particular view . I actually was looking at ewj, actually, which is the msci japan index etf. Theres a couple things i would have us observe about this. One of the things to think about when noticing that japan hasnt kept pace with the s p 500, japan, although it has some big globally recognized names in that index, it doesnt have the same stocks that have lifted the s p. Im talking now about the apples and amazons and teslas of the world. Tesla is not in the s p five hundred, but it represents a big chunk of the u. S. Equity markets and some of the rally that weve seen. But it includes notable names, toyota, honda and sony is among them this is a low volatility etf, but it is slightly elevated like many global etfs. Still seeing a bump, it came in a little bit last week but its slightly higher. I was looking at a calendar spread to the upside. So i was looking at the january 63 calls, about 65 cents and then selling the novembers against it for 20 cents. Netnet you would be making about 45 cents per contract. But overall you will be spending less than 1 of the levels to make this bullish bet. Which will see its peak profits at the expiration of the earlier option if it goes to that strike price, which would remember about an 5 to 6 increase between now and november expiration. And then after, youd benefit from that too. So lets talk more about this. Tony, i think, tony, if youve got this situation where you want to be long longer term, youve cheapened it up a little bit by selling some of those neardated calls. Is this a trade you agree with to make this kind of view . Carter mentioned a few things mike mentioned this is slow and steady type etf. You see the ewj grinding higher and carter mentioned it is lagging behind other countries to me that speaks to the Economic Indicators we are looking at out of japan. They are slowly improving, but not strong in my estimation. The makeup of the etf, as mike said, is dominate with tech names, Consumer Discretionary names. It does have low exposure to sectors like energy and utilities. From my perspective, you look at the chart, i do see some massive resistance at that 6. 5 level. The fact that its lagging behind most of the other domestic equities, from my perspective i think the upside is fairly limited. While i like the structure to have the slow grind higher, i think i would adjust my strikes a little lower because my target prices arent as high. I was looking at the 61 strike what i particularly like about mikes trade here, hes risking less than 1 of the ets value to take his bullish bet. But you can lower that strike price down to 61 and give you a slightly higher probability of profit but risk just over 1 . Taking on a smaller amount of risk, but a little less upside that i see here for ewj. Lets turn back to you, carter, as we look at the charts how exactly timewise do we expect this thesis to play out it could be a slow grind what would you be watching for signal wise about whether this trade accelerates or decelerates . Right. First of all, thank you. Three times i said ewz, thats the brazil etf. We, of course, are talking about japan, ewj. Heres the thing, one can see it as a laggard, which it is. Or, its a laggard and its going to play catchup. Thats kind of the tape were seeing. Were seeing bombed out value names in the u. S. Catching ge we just heard. We are thinking that it is a laggard that will play catchup. A breakout is the definition of momentum. We think you can get at least 6 to 8 if not more. Mike, well give you the las word here. What do you think is the real case here . If you are playing for the breakout, it is 6 to 8 cents im not sure this is the place i would be playing. If it doesnt go that way, youre risking less than 1 so i think were setting our self up for the right trade structure for his thesis. Thanks very much, guys. Lets move ton a more specific part of the market. Investors are getting more bullish on big pharma. As a race for a coronavirus treatment heats up. And tony says there is one name in this group that could have healthy gains ahead. Tony, which drug company are you looking at im looking at eli lilly because antibody treatments have taken a backseatto vaccine news. But with President Trump last week getting the reagainer rgen treatment, thats been pushed back into the spotlight and they both pushed for emergency use this past week. I think its important to understand what youre investing in. Both the regeneron and eli lilly drugs, theyre both moan know clonal antibody drugs. Theyre both only useful for covid19 nationalities have seen less severe cases, and specifically early on. So its important to understand that these are not vaccines. Theyre not useful right now for prevention purposes, even though both regeneron and eli lilly have started Clinical Trials to see the efficacy of using them as a preventative measure. However, the efficacy so far has been fairly strong in both Clinical Trials, so far eli lilly has seen about a 72 reduction in risk, meaning the number of patients that are seeing hospitalizations compared to a control group is 72 less than for regeneron. Its a small sample size, its down 59 . So both of these have fairly strong trials at the current moment. So its important to take a look at this, because the optimism around it right now is the efficacy and, more pouimportant, the speed at which these treatments could get fda approval for emergency use. However, both of these treatments have limited production capacity, so that is one of the limiting upside functions of this of these types of investments so when you couple that with the chart, what were seeing is that eli lilly has been underperforming the broader markets and the Health Care Space for the last few months. But on this fda news, its recently broken out above that 155 level and broken that down trend. And were starting to see a little bit of outperformance here. So when you couple the potential optimism here around the drug and the chart, what im looking to use is a trade structure going out to december to buy myself a little bit of time. I and im going to use a debit vertical spread here. Im going out to december and im buying the 155, 170 call vertical spending about 8. 70 for that december one 55, and collecting about 3. 20 for that december 170 call option, because i have a target price here of about 170 to the upside. And if regeneron if eli lilly does break out substantially higher in the short run in the next few weeks, what i would do is i would try to roll this up a little bit further into that 170, 190 level if we do get a breakout here up to that 170 target. All right. Thats a thats an interesting way to go about playing it. It also, again, cheapens things up a little bit with that. Mike, lets turn to you for the trade structure. Does tonys trade make sense i see getting on the call and cheapening up a little bit. Is this the way you would play lily yeah, i think something people ought to focus on when theyre looking at this call spread is notice that the lower strike that tony has chosen here is in the money by almost 2, actually. So when you think about the decay, thats one of the things you wanted to think about when you use any kind of a debit option strategy going into any potential catalyst, is how much decay youre ultimately going to pay. In this case, youre spending 5. 55 premium, but the decay probably represents only about 3. 65 cen 3. 65 of that. So call it 3 to 1 on vert spreads, debit spreads, here its not as critical because its already in the money. And hes given himself some time, its difficult to play very shortdated catalysts, its a little bit of a coin toss. But if your thesis is in alignment, you can mitigate your Downside Risk because youre only spending 5. 55 versus well over 100 to buy the stock. This is a way that you can make a bullish bet into a period of uncertainty playing off some of the fundamental items that hes just outlined and have relatively good probability profit and relatively low decay. So all of those things, i think, are attractive aspects of this. Cbw, lets turn to you here. Tony pointed out the chart. Its kind of snapped a couple of different trends. Its gotten above where its supposed to in terms of the overall longer term trend ines do you believe the charts here is duet for more upside i think one of the more compelling things on an immediate basis, if you look at the long term big three, america, pfizer, lily, just on a trailing basis, the other two have made no progress. Lily support 46 . Meaning, the market is speaking, the collective wisdom of all participants, whether theyre dedicated Health Care Portfolio managers or generalists, people are favoring lily. That is the very definition of impressive relative strength compared to other. And maybe its because of covid or what have you, but what we do know is that you want to often go with the leader or a laggard. Its something in between that becomes interesting. Lilys the leader. I appreciate that. For everything objections actio options action, check out our website. While youre there, sign up for our newsletter, its free. Heres whats coming up next on the show. Tony just tackled eli lilly, now professor gos going to broaden up this Health Care Class and show you how to capture a move in United Health. Plus, calling all options action fans, reach into your pocket, not your phone, and tweet us your question at options action. If its nice, well answer it on air. When options action returns. 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Welcome back to options action. With all the coronavirus treatments, its no wonder that the biotech trade is red hot these days. But that speculation isnt the only way to hit the health care side of the trade. So if youre looking for a way to find a dose of healthy returns to your portfolio and add that without making your wallet sick, mike is here to write you a prescription for some big gains. Im feeling especially puny today, mike. Were talking about United Health. United health is not a Pharmaceutical Company or biotech. Were talking about part of the managed care sector. They hand that will side of the business, but it is a remarkably wul wel wellrun business, i must say. Im going to throw a shoutout to one of my colleagues who was a huge fan of the stock and had been for a long time since and got me pointed in this direction. I love this company. One reason you might love it, of course, if you take a look at the consistent Earnings Growth that theyve managed to generate, the eps growth has been spectacular over a lengthy period of time in the year is extraordinary, and one of the reasons for that is that health care has just generally been disrupted. A lot of things that might have impacted their operating results, surgical procedures that got delayed, things like that, theres a little bit of idiosyncratic stuff just dealing with the pandemic. But that does not take away from how good and operated this company has been. One of the things thats important to point out, although the valuation is cheap given its growth, there is Something Else that sits on the horizon, of course, for companies in this space. Thats the election. If we look at the implied volatility, theyre going to be reporting earnings, unsurprisingly, we see higher volatility as a result of that. But we also see significant elevated implied volatility due to the election. Of course, one of the reasons for that is that the insurance sector, the managed care space is one of the things that people think about when they wonder whether were going to do get a change in administration and sort of a switch in direction. What im trying to do here is take advantage of that elevated volatility by some of the cheaper volatility i see longer term. I was looking at buying the january 340 strike calls. Those were about 15. 50 when i was looking at them earlier today, and then settling november 350 strike call, slightly higher strike for six 6. Net net, spending 9. 50 per contract, 950 in total. Thats not the cheapest trade weve ever seen, but this is not a cheap stock at over 300. This is a way you can take advantage of the fact that we have elevated volatility for earnings, elevated volatility for the election. And the january options which you own are going to capture two earnings and the election. All right, tony, is way you would play this particular scenario . Yeah, absolutely. First of all, i love the stock from a fundamental perspectives for the same reasons that mike said and i think it trades at a very reasonable valuation for all those rbs. But from a technical perspective, you have a stock that just broke out above the major 320 resistance level. Not only has it broken out on an absolute basis, right now if you look at a relative basis compared to the Health Care Space, its on the merge of a multiyear breakout. Im extremely bullish on this particular play on this particular stock. I like mikes trade and i like the fact that on the november calls hes gone all the way up to that 350 giving himself a lot of room to the upside in the short run and then he has that long january 340 call to take advantage of longer term upside. Carter braxton worth, the charts, what do they tell you . Well, first of all, we do know, of course, this is the behemoth, this is up eightfold versus its sector. Its triple the performance of amgen, one of the great performers. Almost fivefold over j j since the sector data begins in 1989. Its been the most consistent, and at fact, at certain points over the last five years its been the single most widely owned stock among many long only players. Its fantastic. We have a chart here. If its up there you can see it. Its been toying with breaking above this ascending line for quite some time. It is now that its likely do it, in my estimation. Keep an eye on that United Health care stock. Coming up next on the show, chairs of caterpillar leaping higher this week. What that means for one of our traders. Weve got more options action coming up with kat after this. Frtion its a thirteenhour flight, thats not a weekend trip. Fifteen minutes until we board. Oh yeah, we gotta take off. You downloaded the Td Ameritrade mobile app so you can quickly check the markets . Yeah, actually im taking one last look at my dashboard before we board. Excellent. And you have thinkorswim mobile so i can finish analyzing the risk on this position. You two are all set. Have a great flight. Thanks. Well see ya. Ah, theyre getting so smart. Choose the app that fits your investing style. A livcustomizeper iquickbooks for me. Okay, youre all set up. Thanks that was my business gi, this ones casual. Get set up right with a live bookkeeper with intuit quickbooks. 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 to options action and a look back now at one of our own open trades. A few weekends back, tony zhang came down with the case of cat scratch fever. Id like to take a look at caterpillar breaking out above that 150 level which happens to be the november, 2019, highs. Recently came back to retest that as support, and i think that this is a potential continuation higher here for a name like caterpillar. Especially if you couple with the fact that this is a stock thats trading at a fairly reasonable 28 times forward earnings, its got a very stable dividend thats fairly covered its fairly well covered by operating cash flows. So this is the type of stock that im looking to play defense in this type of weaker market. Im going out to the october december 155, 160 call diagonal. Im going out to december paying about 10. 30 for that 155 call. And im selling in october 160 call against it collecting about 3. 15. N. Tony, what have you done with the trade in the meantime . Yeah, so this is the diagonal thats worked out fairly perfectly. You can take about 85 gains earlier today so i would take my profits and run. Coming up next, guys, the final call. Im searching for info on options trading, and look, it feels like im just wasting time. Thats why Td Ameritrade designed a firstofitskind, personalized education center. Oh. Their awardwinning content is tailored to fit your investing goals and interests. And it learns with you, so as you become smarter, so do its recommendations. So its like my streaming service. Well except now youre binge learning. See how you can become a smarter investor with a personalized education from Td Ameritrade. Visit tdameritrade. Com learn that selling carsarvana, 100 online wouldnt work. Visit tdameritrade. Com learn but we went to work. Building an experience that lets you shop over 17,000 cars from home. Creating a coast to Coast Network to deliver your car as soon as tomorrow. Recruiting an army of customer advocates to make your experience incredible. And putting you in control of the whole thing with powerful technology. Thats why weve become the nations Fastest Growing retailer. Because our customers love it. See for yourself, at carvana. Com. Welcome back time for the final call. Carter braxton worth, to you. Japan get along with the knee kay 5 smanging alltime highs right now. Ewj, the vehicle. All right. Tony. Playing for fda approval of eli lillys drugs, buying a december call vertical. Mike. Unh call diagonals and earnings. All right. Mad money with jim cramer starts right now. [narrator] the following program is a paid presentation for the oxypure air purifier, brought to you by nuwave, llc. Asthma and allergies are at an all time high, and it seems to get worse every year. Its not your imagination. 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