Hasnt done since 2012, and the chart master says it could point to major gains in the year ahead. The action begins now. 2016 is officially in the books, and the worst performing sector goes to healthcare. The Group Falling 4 this year and only sector to close in the red. Should you buy the Group Heading into 2017 . Mike, what do you say . Yes, i think we absolutely should. This is a sector that ran head long into a political storm, and i actually think that with everything that will be happening this coming year, had we gotten the Clinton Administration i think their troubles would only be beginning. I think as it is trump will have his plate completely full, and some of the attention will be off some of these names. There are some that will remain under scrutiny like the mylans of the world, but others like gilead and cell gene we will talk about, these are things that i think the valuations are compelling and people will be looking for places to invest that have decent growth and better valuations than the broad market does. He said in a Time Magazine interview, we are going to bring drug prices down. Thats the problem. The problem is you still dont know what the margins are going to be. Maybe it is not going to be as bad as it was under a Clinton Administration, but you still have this hanging over the head of the healthcare name. For me it is a notouch until you get clarity. Yeah, but, see, one of the reasons i pushed back on that a little bit is because to this whole issue, what drug prices does he actually have direct control over . So, you know, if youre thinking about where they actually have you know, Something Like the epi pen, there was controversy about how it got billed and where the pricing went. But there are other drugs, drugs for unusual diseases, oncology not areas for those that are actually involved with the r d and development of these products, it is not an area we want curbed. Things off patent, you have the device, thats the issue. You have to go with specific names, right . You cant buy the sector because the sector is subject to a tweak. I want to go to the chart master. You think their are gains ahead . I do. Devices versus managed care versus biotech, but as a sector the only one down on the year, the spread is quite wide with some of the winners. I wanted to show you a few charts and make the case for be contrarian here and buying this laggard area of the market. Sorting best to worse, everyone knows the numbers but theyre official and in the bag. Energy financials, tele com top three. Then we move into industrials, utilities, all positive. Bringing up the rear, down on the year. Now, again, a very disparate group. Managed care has been decent, for instance, devices, drugs have been under a lot of pressure, biotech the most. There are services and so on. So healthcare versus financials. Again, i dont make these fit or try to jiggle them. Theyre the official s p 500 sector charts for all healthcare stocks, all financials. Now, that spread, it is about 30 , and thats about as wide as youre going to see. In fact, it has only happened two other times since 1990 since the inception of data. Now i want to add the s p. Just financials in healthcare, put in the s p. One way to look at relative is to freeze the aggregate. Im going to hold the s p and a constant and it is going to expose the relative performance. So that chart and that chart are the same thing. All im doing is holding the s p as a constant. This spread has only happened two other times since 1990, and usually it is quite right to bet for conversion. So i think you want to be contrarian here and buy healthcare, you can use xlv, but i know mike has a trade in particular. Mike, what is the trade . You know, i referenced this before, im looking at cell gene. It is a company with its own drugs, it is basically the whole story, but it is a special drug and unique. This makes it very different than some of the other sort of healthcare stories i think where they were under a lot of political pressure. On top of that, this thing is exceptionally cheap. We are talking about trading 16 times forward earnings, and this is for a company that has double digit revenue growth, you know, 50 eps growth and theyre looking at projecting that growth to 2020. You dont find too many stocks where i think you have what i call that margin of safety because valuation protects you on the down side, but there is a lot of growth to be had. On top of that, it happens to set up fairly favorably as far as options are concerned because right now you can buy the february 1, 2130 call spread. Thats 25 of the difference between the strike. That captures basically the next 10 bucks if it should rally, it was trading around 116. 5 when i looked at this. On the down side, if this thing pulls back lets say into the high 90s, you have an opportunity to sell some puts down at that level basically where i think it is probably going to find a floor if it does rollover. So this is one of those situations where a little over 2 of the stock price to make that bet. What do you think of the structure of the trade . I like it. If you look around cell gene in the high 90s, as mike talked about, that seems to be support there. If i were Trading Options i would say thats where i want to buy it. With this structure youre kind of opening yourself up to that type of opportunity. I like it very much. And its been an outperformer relative to the group. Right. But had november 10th that huge heavy line strike and this quiet, gentle pull back, a level of support where rewards are favorable. Is there a danger in that, cell gene is largest component of ibb, which is usually a vehicle that shorts use to express if theres a sniff of drug pricing concern in the air they might go to that instrument and have a disproportionate i mean it is a fair point obviously if you are going to see the whole market sold off on a sector be sold off that the largest components of are going to get hurt as a result. Still, that doesnt stop the fact you want to be in the best name in the space if you want. Were trying to be selective, trying to pick one of the cheaper names. You have a defensive area of the market. It is a pretty good bet. Switching to tech, shares of apple fell 1 today on the force of the tech drive, could slash iphone production next year. Josh has the details. Hi, josh. Reporter thats right. Reporters trying to ruin tim cooks new years weekend saying apple will cut production of iphones by 10 in the First Quarter of 2017. It says the 7 sold more sluggishly than expected, the paper citing calculations based on data from unnamed suppliers. Apple declining comment on that report. Apple stock ended the year firmly in the green, up some 10 though it did slip in todays trade as did apple suppliers like sky works solutions, analog devices, qualcomm and micron. Of course, investors are paying close attention to the health of that iphone franchise which still accounts for some 60 of the companys revenue. Right now analysts think apple will sell 55 million iphones in its march quarter versus 51 million a year ago. Cnbc actually caught up with cook this week and the ceo gave us his take on the holidays as well as the new product the company is now selling. Its been a great holiday. Airpods are a runaway success and were making them as fast as we can. How many airpods are actually being produced . Remember, apple will only say limited quantities. Barclays had estimated initial production of some 15 million units. Melissa, back to you. All right, josh. Happy new year to you. Lets talk apple here a little bit. Are you concerned, mike, about nikkei had the report out using data from suppliers, presumably asian suppliers so relying on the chain for a snapshot of production. I think basically the best bull case i could come up with as far as phone sales for them is what was going on with samsung, right . So basically the note 7 not being there was really the thing. So the fact is at the end of the day we are talking about a onetrick pony hardware company. At some point a threat is going to emerge on the horizon. It turns out it is not going to be samsung. Could it be the pixel . It may well be, but that is not, you know, the reason to sell it necessarily. The stock is still cheap. Oh, guess who showed up to the party here. I hear mr. Dan nathan is joining us. You took the helmet off, youre ready to talk options now . Hi, people. Happy new year. Let me weigh in quickly on the apple situation. You notice what i have in my left ear, the airpods. It is a pretty cool device. With what josh is saying on iphone production, here is the thing, the next identifiable catalyst will be the fiscal earnings in late january. Here is the thing you have to remember, this stock is up 10 in a year that saw its first earnings and sales decline in more than ten years. What that means to me is the stock is kind of discounting some potential good news as we look into early 2017. I think thats actually a pretty difficult setup. Back to the airpods and what they are saying, this is apples second foray into wearables, it is a winner here. This is what people are investing into for innovation, they are on to something. Here is the thing, it is not going to be in the christmas quarter and move the needle at any point in the first half. You have to think about what is going to happen on the january call. The trade simply to me is i think you want to replace stock. You walk in january 3rd here, you have 10 gain on the year, you have 30 gains from earlier in the year. If youre long stock and worried about their guidance, and i think guidance will be poor, you may want to replace stock with a call. Look at the february expiration when the stock was trading at 116 today you could buy [ inaudible ]. All right. Were obviously have difficulties with dans connection. We appreciate his time though and his apple trade. So, mike, why dont you quickly comment. If we can set up the graphic. Yeah, february 120 call and this is, again, sort of like the other story we are talking about, a little over you know, it is 2 of the stock price give or take. I think this trade makes a lot of sense. This is something that moved 10 . Could it fall back that same 10 . Very easily it could. Youre not risking a whole lot. You have maintained the upside and you basically give yourself an opportunity to have the upside exposure and you can play another day. Much like the other trade. If it falls to a level of trade, thats where you could look for puts, puts that cost you two buck goes and basically you can play this and take a profit, but after new years is a good time as well. It is a key element. On top of the graphics it said the key level flap, thats right. We know this stock declined some 35 from its peak last year to its low this year, and ever since it has been carving out a bottom. Its relative strength is good, and the presumption is it works higher. It does exceed the key level dan cited and moves higher. I like it. Yeah. I mean for me this is the second half of the year story. I would like to get it closer to 110, but this isnt about the iphone 7. You dont sell it because of this, this is about the iphone 8, which for those of us north of the border you want to buy the stock in 2017. Got a question out there. Send us a tweet to options action. We have the hottest options news, videos throughout the week and options news. Check out the newsletter. It will be the rage in 2017. Here is what is coming up next. Up through the ground came a bubbling crude oil had its best year since 2009, but if you missed out in the rally we have a way for you to get it. Plus it was all a dream. Investors are pulling back from the socalled trump trades. We will tell you what it is when options action returns. Hey nicole. Options action is sponsored by think or swim, by td ameritrade. 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. 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. Crude oil was one of the hottest commodities in 2016, posting the biggest yearly gain since 2009. Jackie deangelis at the desk on this. Hey, good evening. To say it was a roller coaster ride is no exaggeration. Let me walk you through the highs and lows. In january we started in high 30s. Then prices slipped down near 26 a barrel in february, and there was nowhere to go from there but up, in fact all the way up to over 50 back in june, summer driving season. But the market got a little ahead of itself and by august crude was back in the high 30s, in october to 50, november low 40s, and wti finished todays session at 53. 72. Yeartodate oil saw 45 increase, marking its first positive year in three, and its largest increase since 2009 where crude actually gained 77 . So the question, of course, now where do we go from here . Well, opus says the theme of lower for longer is here to stay, but going as low as we did this year probably not likely. They warn crudes upside is probably limited from here, but over 60 a barrel definitely possible in 2017. Immediate influences, of course, opecs implementation of its deal. Maybe theyll cheat, maybe they wont. But also u. S. Production. Oil rigs here at home are only 11 less than they were a year ago. Shows you when prices rise rigs come back online, supply goes up and that could be a problem for prices. Melissa, happy new year. Happy new year to you, jackie. Thank you. If you missed out on the rally, dont fear because mike has an under the radar way to get over. He is over with his call to action. Mike. All right. Talk a little bit of strategy and talk about one of the most basic strategies in options, the buy right. It is when you buy stock and sell calls against it. What do you want to look for . First of all you want to be bullish of course on the underlying stock. Youre buying it. Other thing is you will look to try to collect premium by selling options. I look to collect at least 1 per month. If the stock is more volatile, might be more than that, if it is less, slightly less. The other is i want to sell calls at a strike where im leaving potential upside, room for appreciation. We are looking at new field exploration. You can see this is a sixmonth chart. We can see it basically has been bouncing around. The 44 level, today was around 41 bucks. What i was looking at out to march, you could look at buying a stock here and selling the march 45 call, youre going to collect 1. 45 for that. Thats 3. 5 of the current stock price. Nice thing about that, obviously loss the stock stays below the level you keep the premium and the gains on the stock. If the stock declines you are getting a little insulation, 3. 5 to the down side because of the option you sold. This is a situation where you collect a little premium, essentially give yourself a dividend. It is up 4 from here, so it is a way to give yourself upside, collecting a little yield, actually a substantial amount, more than 1 per month, and a little down side protection as well. Whats a technical picture here, carter . Most Energy Stocks have been basically ascending over the last month or two with moving crude but this stock has done the opposite. It pulled back, dropped 20 , 50 to 40, and in that selloff it closed an unfilled gap and is right to a trim line you can see on your screen. So youve got a much more favor riskreward in terms of entry point. I like it here. Yeah, listen, i think oil is going higher at least for the First Quarter of 2017. Opec has finally got everybody corralled, all of the cats herded. If there are cracks in the oil picture, mike, do you start to second guess the oil field . One of the things we can see, you know, we looked how it was trading over the course of the last six months. It was a little lower actually as we saw the ultimate lows we had in oil earlier this year jackie was talking about, but the fact is the amount of down side here is a little more limited now. On top of the better picture for oil prices theres a better picture for capital flows into the energy patch in general. We have seen private equity firms setting up large funds. Theres charter about people around to pick up distressed assets, plus on top of that technological movements are lowering the lifting cost for oil. All of those put together, were in the high 50s, low 60s. I think the oil business in north america will be good. As jackie said, after the rebound off the low we were at 52 in summer driving. Were only at 53, 54 despite the opec news. I think you are buying after 20 selloff gives you a lot of protection. Still ahead, gold just did something it has not done since 2012 and the chart master says it could point to more gains next year. More options action after this. Options action is sponsored by think or swim by td ameritrade. This is my new alert system for whenever anything happens in the market. Kids a natural. But thinkorswim already lets you create custom alerts for all the things that are important to you. Shhh. Alerts on anything at all . Not only that, you can act on that opportunity with just one tap right from the alert. Wow, i guess we dont need the kid anymore. Custom alerts on thinkorswim. Only at td ameritrade. 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, time for total recall where we look back at some of our open trades. Last week cohen carter thought gold was about to shine. Number one, so despite all of this the best single thing you could have done is to pick s p 500 gold. I was looking at the february 108, 114 call spread. You could spend about 1. 95 to buy that. Well, gold just posted its first positive year since 2012. Carter, what do you say . We have to stick with this. You know, i mean first it all it is abhorred right now. No one wants to talk about it so it is usually a good thing. Let it ride. Yeah, look, it has done well in a week that was kind of sideways to poor. You know, we have a lot of time until february to let it play out. My inclination is to let it ride. Yeah, gold is up at the same time the u. S. Dollar is up. An unusual situation but it happens every couple of years. So you ride this one out. I think gold will be a good investment in 2017 as well. If you think theres volatility in january because of the Upcoming Events we mentioned, not to mention the inauguration, is it going to be a good place to park money you think . Being long call spread certainly is a good place because increased volatility, there is a chance it will be viewed as a safe haven, you know. I think it could very potentially be. Everyone has given up on all of this in your bit coin, you can do that as well. I hope not because i would like more buyers to come in. Coming up next, tweets and final call from the options pit. Options action is sponsored by think or swim by td ameritrade. 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. Still trying to find how ara good site. Going . They all. Want. To. Charge me. Have you tried credit karma . Credit karma doesnt do taxes. Does credit karma do taxes . Yeah, and theyre totally free, so theyll never take any of your refund. Oooh, credit karma. Huh . We. Probably still want those. Yeah, good call. File your taxes for free with credit karma tax. Guyhey nicole, happening here . This is my new alert system for whenever anything happens in the market. Kids a natural. But thinkorswim already lets you create custom alerts for all the things that are important to you. Shhh. Alerts on anything at all . Not only that, you can act on that opportunity with just one tap right from the alert. Wow, i guess we dont need the kid anymore. Custom alerts on thinkorswim. Only at td ameritrade. Welcome back to options action. Before i let you go start the new years celebration we have some tweets here. First from matt who asks how would you play vix options into the new year . Happy new year, cnbc. What would you say. Vix is the deep end of the pool for options trader. It is tricky because you have tangles to deal with as well as high options premiums, however a lot of the futures are lower than a month ago despite the increase today. Call spreads might be the way to go. Otherwise i like puts in spy or spx. B. K. . I think when volatility is low and you want to protect the portfolio, puts in spy is better way to play it. Next tweet, this one asks what is your outlook on nvidia in 2017. The ceo has been selling while everybody has been buying. Carter, remember this is a stock that citron said he was short. Right, a good call. Think about this, you are talking about a stock in the last three days has traded 115 million shares on a total of 105 million outstanding. 27 of the flow has turned over. A great run. Highly unlikely it is a big performer next year. Im a seller. Next tweet, ryan sutton wants to know does carter have a voice coach to keep that smooth, silky baritone. Thats funny. My grandmother used to say it was quite nasally. Well see. Thank you for that. Anyway, smooth and silky. Comes naturally. Time for the final call. Carter, what do you say . I like catch up trade xlv. I like cell gene, buy call spreads. In 2017 think about what is going to happen. The fed is going to remove more volatility, suppression of volatility. Watch it go higher in 2017. Looks like our time has expired. Im melissa lee. Thank you for watching tonight, and for all of 2016. For more options action check out our website, and check out our daily segment inside pass. Well see you friday. Have a healthy and happy and safe new years. Happy 2017. Pisode of secret lives of the super rich. Step inside the most expensive mansion in sin city, where the owner spent millions to build a monument to high fashion and bring the Italian Riviera to the desert. Its divine, exquisite, perfect. [ clicks tongue ] hitch a ride with the guy whose redesign of this incredibly rare racecar might make it the most valuable porsche in the world. Its such a privilege for me to be able to work on one the most significant porsches in porsches history. Then cruise on over to a members only island that only the ultra rich and super famous can afford. Membership would run you 250,000