atomic number of 29. tony zhang has a play that will "cu" through it's time to risk less and make more "options action" starts right now. >> we start with a news alert. let's get to leslie with some of the details. >> that's right. 13 app deadline is not until monday but we've seen a couple of notes hit the third point filing is out. he made interesting moves in the tech world increasing his exposures to some chinese e-commerce plays alibaba, upping that stake by about 26%, worth about $742 million at the end of the third quarter. j.d..com, upping that stake by 37% to about $345 million at the end of the quarter in kind of the faang spaice, increased his space on facebook while keeping in kind of other u.s. tech world, keeping his stakes in microsoft and pinterest at the same level. he also took stakes in two ipos palantir he bought for $21 million and goodrx worth $27 million. as with all of these 13 f filings, the stakes and values are as of the end of the quarter, the end of september and may have changed in the six weeks since. >> leslie, thank you a lot has changed for some of those in particular. i mean, mike khouw, i was thinking about alibaba and how much market cap it lost after the suspension of the n financial ipo. that's how greatly things can change from the end of the quarter when they're filed versus now >> yeah, that obviously was a big hit on chinese stocks. generally the tech stocks, what happened there but it is also a situation where somebody really liked a name, you know, at the end of that quarter, saw that news a lot of those stocks are hard hit. it's possible that they took that as a reason to change direction but it's also possible that they took that as an opportunity to potentially add to positions if they think that the situation could and will change at some point in the next 6 to 12 months >> carter, what's your take on some of those position changes >> well, i think you talked about the best one baba, that's a meaningful give-back, right down to trend it's an excellent entry point if you're not involved if you are involved and you've already taken this hit stay >> all right let's get back to "options action" now. did you know, because of the vending industry and counterfeit currency industry there's a law that prohibits redesigning the $1 bill. that is true but there's also another law that's governing the dollar right now, and that is gravity carter will explain. take it away >> that's right. before we look at some charts, the dollar suris under a lot of pressure, gravity. there's always a reason why. i'm not really in the why business but some say it's because of the ever widening account deficit. and some say the national savings is too low let's look at the charts the first chart, there is your u.s. dollar index. and i have annotated with a double top we had a peak in late '16, early '17 and reapproached that this year and we failed right there look at the second chart another way to draw the lines. it's the same ten-year chart, 2010 to 2020 you have two well-defined formations i've drawn the arrow there there's every indication that we're heading lower. now a long-term chart, this is all data looking at the u.s. dollar going back to the 1970s and you can see here we're working into the apex of this wedge, if you will and this kind of thing usually sets up for something considerably worse so the uup is the trade, but first, here's a short-term chart of the u.s. dollar and you can see again, the breakdown potential. and then the uup which is the etf to put on the trade. we think this is going to break and going to break sharply >> mike, what's your two cents >> yeah, so my two cents will only be worth about one cent, i think, by the time this is all said and done. we had some other symptoms with what's going on. everybody is talking about bitcoin. that's symptomatic of the larger issue. if you look at the secular trends, the current situation we see ourselves sees none of those reversing in the near term there's something you want to pay attention to currencies tend to be low volatility that's good news in one sense. options tend to be low priced relative to the price of the underline. but it makes it challenging when it comes to spreading. if you're looking to sell options out of the money, there's almost no premium there. these trends tend to play out over longer periods of time. i was looking at all the way to march. the at the money 25 strike puts when i was looking at those earlier today, those would cost about 45 cents that's less than 2% of the underlying uup but, of course, bear in mind the 2% moves in a currency basket can be quite considerable. that's the other reason we're looking out a significant amount in time. one other thing i'd ask people to pay attention to. compare those march options to the price of the january 25 strike puts. essentially you're paying only an extra 14 cents to own that option we're giving ourselves some time to revisit the situation between now and march and look for opportunities to potentially spread or roll >> tony, what's your take on this trade >> yeah, so as carter said, we're not in the why business but for investors looking to seek perspective, the one place to extract a view for the dollar is looking at fed policy and the fed for months have been advocating for strong fiscal support with -- in conjunction with the monetary supply or monetary policy to continue the economic recovery here but from the current perspective, a large fiscal policy, a response, is likely unlikely and the fed is left open for more qe and that's a net negative here for the dollar when you take that into account in conjunction with the technicals and you look at uup as an etf, it's been largely range bound since mid-july and you have a potential breakdown below this $24.80 support level here and a breakdown below this range projects all the way down to about 23.50 to the down side substantial down side for uup. so for those reasons, i really like mike's trade and the fact he's using a straight put and going out to march, buying himself quite a bit of time because i see if we get the breakdown below 24.80 you'll see a quick and fast move and a straight put allows you to take full downside exposure here on uup to the down side >> let's play this all out and look at the impact of the dollar so, carter, what's the next logical step what emerges next? >> so emerging markets and before we look at the charts, let's discuss that if you have a weakening dollar, we know many emerging economies are debt heavy they've borrowed in dollars. weakening dollar deflates their debt we also know that many emerging economies and countries are commodity exporters. a weak dollar helps commodities. of course, also many of them are dependent on foreign investment and a weak dollar helps as well. so just a handful of charts. the first is the etf that tracks emerging markets no judgments on that chart next chart, well, we have a well-defined break out to think that the s&p has yet to really clear its september high eem is on its way. and then the final chart, you can draw the lines this way. a well-defined level from which we're breaking out, and a well-defined up trend. so we've broken out above the apex of the triangle free to move higher. >> mike, how do you trade emerging markets from here >> yeah, so taking a look at eem. one quick point, this is a follow-on to the conversation about the dollar and that's particularly true of eem because eem is not a currency hedged etf. we had some data coming out of china. their export data for october. that looked relatively strong. we have this sort of dichotomy going on right now also with the pandemic are we going to see follow-through on good news of the vaccine or are we going to see some pressure as a result of an upsurge in cases. in any case, what's good for china is good for emerging markets, etfs generally. the way to play this is with options because we've come so far, so fast and any bit of bad news is going to affect that as well i was looking out to january the 49-51 call spread. spend about 61 for that. selling at 51 against it for 40 cents that's a net deficit of 50 cents. that's a little more than we like to pay for vertical spreads. i think that's well justified here because, number one, we have, as we just pointed out, seen such strength already and sometimes paying a premium is justified. i think it is here >> tony, you like this trade >> i do. and because if you look at eem here, to understand the strength, you have to understand a little bit as far as what you're getting exposure to in eem and something important for many investors when investing in the etf to understand that we look at eem from a geography aspect, two-thirds is exposed to china, taiwan and korea which collectively have about 1.5 billion in population. those three countries predominantly, life is going back to normal here. if you look from a sector perspective, half of this index is consumer discretionary, technology and financials. three sectors we think are going to do fairly well through this recovery when you couple that with the breakout of eem above a major resistance level, you couple that with a weaker dollar that we just pointed out, the exposure you get in this etf, i think eem can be psubstantially higher while i like mike's trade, i understand he was trying to reduce his risk and the $51 call options is reducing the risk of the overall trade by roughly 40% compared to just outright buying the january $49 call options but from my perspective, because i believe there's substantial upside, i'd prefer to take a little more risk take on a little more delta or go out to february and spread this to about 49-53 to the upside or buy the january 49 call >> mike, you want to give a quick comment on tony's alternative trade? >> yeah, i think that's a good play i'll tell you why i chose that 51 strike call to sell actually and that's probably more tony's domain and carter's than it is mine i was looking at technicals and it seems to me we fell off a level right around 51 in eem not that long ago and generally speaking when you have that situation in my experience, you will run into some overhead supply that isn't a long-term bearish or resistance type of a thing, but we're only looking out to january here i was looking at that level as a potential pause point. that was the reason i was willing to sell that call. don't forget our options action newsletter and website. here's what's coming up next >> conduction, construction, wires and plumbing copper could be thought of as the most precious of metals to the global economy if the world needs it, then you should want it, too. and tony has a play to help you start shouting mine, mine, mine. plus, calling all options action fans. reach into your pocket grab your phone and tweet us your question @optionsaction if it's nice, we'll answer it on air. when "options action" returns. ♪ ♪ ♪ there were tsunamis fourtin the world. and once they happened, we were in a major hurry to get to those regions to provide aid and support. it was very humbling to be able to help out all those people. it's my dream now to go into clean energy and whatever the next new fuel source is, that's where i want to be. i want to be on the front lines of implementation. ♪ ♪ ♪ ♪ ♪ welcome back we started broadly with a dollar focused down on the impact on emerging markets and let's narrow this funnel to something more elemental on the periodic table. the atomic number 29, symbol cu, obviously it's copper. tony, let's "c" what "u" got >> i want to look at freeport mcmoran which for those investors who didn't chase this who are being patient, you have an opportunity to seek some long exposure if we look at a chart here, i have a chart of the copper to gold ratio this is a two-year chart we see that copper is largely underperformed gold for the better part of that. since the march lows it started to stem that underperformance. if we zoom into a six-month chart, we've started to see the copper to gold ratio break above the moving average and just this week on the vaccine news, break out above a major resistance level. this solidifies for me the underperformance and now the outperformance of top copper to gold this gives me confidence in the shape and the recovery of the global economic recovery from covid-19 so when we look at a chart of fcx here, this is a chart, a stock that's all over the place. this stock peaked at around 2014 of about $40 declined 90% down to $4 in less than two years and now is one of the strongest stocks in the s&p 500. and it's just on the verge of a massive breakout here above the $20 resistance level so from my perspective, i see an up side target of about $24 in the next two to three months so if the trade structure that i'm looking to utilize here reflects the $24 upside target that i have here for fcx and the fact that implied volatilities are relatively low here, only bat 10% over the past 52 weeks the trade structure i'm looking to use is going out to february, giving me about 90 days worth of time and i'm buying the 20-24 call vertical here spending $2 for the february $20 call options and collecting 75 cents for the february $24 calls. net/net here paying about $1.25 which gives me about a 6% move to the upside in order to break even here for fcx on this trade. >> mike, i feel like tony didn't like the periodic table humor, but i think you appreciated it what do you think of this trade? >> i did appreciate it and i do like the trade, too you know, this is an interesting situation because when you look at a stock like this one, where basically it's just appears to be going straight up, it's important to remember that sometimes that doesn't necessarily make it expensive. this one isn't particularly actually it's trading at eight times less value ebitda you have valuation that don't look too stretched to me despite the big rally, i think that actually this is still a good entry point of course, given all the things we've talked about, options are still the right way to do it >> carter, quick thought >> the incredible thing is on the low, pandemic low, it was below its financial crisis low and now it's come up smartly but it's nowhere near where it can go much higher. coming up, keeping up with the global theme, we look back on our trade on japan and the other big story this week, the race for a covid vaccine we map out a math path on moder, next it's a thirteen-hour flight, that's 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 i'm 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. we'll see ya. ah, they're getting so smart. choose the app that fits your investing style. ♪ a livcustomizeper iquickbooks for me. okay, you're all set up. thanks! that was my business gi, this one's casual. get set up right with a live bookkeeper with intuit quickbooks. it's 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, it's got screeners and watchlists. and you can even see how your predictions might affect the value of the stocks you're interested in. now this is what i'm talking about. yeah, it'll free up more time for your... uh, true crime shows? british baking competitions. hm. didn't peg you for a crumpet guy. focus on what matters to you with thinkorswim. ♪ welcome back to "options action." time to look back. keeping the global theme alive several weeks ago we laid out a bet on japan >> this is a low volatility etf. that sets up well for making directional bets but it is slightly elevated like many global indices we're seeing implied volatility surrounding the election largely. seeing a little bump there i was looking at the january 63 calls on ewj about 65 cents when i was looking at those and then selling the novembers against it for 20 cents. net/net you'd be laying out 45 cents per contract >> since then, this trade has worked out so, mike, what's your move now >> yeah, this went right to the strike that we basically put on. what you want to do with those short calls is cover those you can hang on to the longer ones and that same thing actually applies to all of the calendars and diagonals we recommended in november cover the short calls if they're in the money up next, the other big story of this week the promise of a covid vaccine big news out of pfizer and j&j we'll drill down on another major player in the space. 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