find out why he thinks there's still time to ride peloton finally -- don't let the recent news make you antsy about playing alibaba. professor coe helps you transfer out of etymology class it is time to risk less and make more "options action" starts now. >> let's get to it retail racking up big gains with the xrtef outperforming the broader market by more than 5% as a number of names pulled out earnings beats but our chart master says it may be closing time for the retail space. carter, what are you watching? we know that retailers typically report learning late in the cycle and we heard from almost all of them now and it has been quite good. so the question is, is it a bit too much let's look at a few charts and tables first, of course, the etf [ xrt ] is the spooitdr retail. you are talking about the bige names with walmart in there and tiffany, coastco and amazon, urban outfitter, it goes on and on look at a few tables first one-month up 7.3%. look at the three month, next table. up 11 1/2 versus the entire sector up six, a double. look at the six-month performance, again here up 51%, almost double the sector up 27 so the question is have we come a little too far, too fast that's the thinking. let's look at a couple of charts here is the xrt, the chart itself, no judgments made, no annotations by me. now the next chart what we know is that it had five distinct draw downs, corrections if you will of 10% plus. you can see them there the thinking is we are due for one of those the final chart, it is lines drawn, converging trend lines which you can see. it is all the same chart three times. now the question is, we're up against the upper band of that internal trend line, the thinking, we pull back towards the lower end. that would be about a 5% plus sell-off from here i think that's is what is coming. >> all right, carter thanks for that. mike, what is the trade based off this >> yeah. so, you know, xrt, as carter was pointing out, is a really broad basket of stocks unlike other things that are heavily cap weighted where maybe amazon or the microsofts of the world basically freedom napredo, this is a larger groups of company and each represents a smaller part of it the pe multiples, you'll see 50 times earning. we are in an extraordinary period right now, but i would point out we are seeing basically all-time highs in this thing. what you have to be thinking about is what is the next step we have obviously had a tough economic environment but the consumers have been supported by a lot of stimulus and aid. some of that might be running out. in addition to that, we also have a situation where we're seeing an upsurge in cases that can hurt consumer confidence whether it is concern about their jobs or just about spending in general. all of these things, and, of course, we are dealing with a lot of large ticket items. it is typically a big spending season, but i would say i think we are pretty extended here. i think what we want to do is if you have exposure to the stocks, you want to hedge them or sell if you are so inclined you might look to take a bearish bet if you are looking at xrt, i was looking out to january the 55 -- 50-foot spread you could spend about 95 cents for that, spending about a dollar for the higher strike and then selling the lower one for 55 cents you notice that the pay-off here is a little better than four to one, slighter better than we no, ma'amally get. to choose a sprid out of the money, we are looking for more bang in the buck even if we only get a 5% decline, even if it don't run to our short strike, it should go up fairly handsomely and the lower strike put will help mitigate a decay of carrying one like this. >> tony, how do you like the trade? >> i quite like the trade. if you look at the chart of xrt it has the classic signs of exhaustion basically over the last three months as it continues to make higher highs, we're not seeing momentums confirm the higher high we are seeing the negative convergence from momentum and during that time the market breadth of xrt continues to decline. these are signs we're near a market top and about to see a correction a lot of retailers moved sales earlier in the season, some to avoid black friday crowds in their stores amazon moved prime day to october 15th that will take some of the strength that we typically see going into the end of november and beginning of december. so i like the fact that mike is going out to january, giving him plenty of time the implied volatility here is fairly cheap and he is only risking 1.7% of the etf's value to take this bet it is a very small risk of the overall etf's value. the only thing is when you buy an out-of-the-money debit spread like this, if xrt doesn't move fairly quickly or fairly soon you have some paper losses so as for investors, it is small risk but be prepared in the short run you might see losses until this starts to accelerate to the down side. >> carter, i wanted to go back to a point you and mike were making about the xrt as an stlumt being comprised of smaller real tailers names, not the walmarts, not the targets of the world. so what do you foresee for walmart, for the walmarts, the targets versus, you know, the bearish outlook you have for xrt? >> sure. remember, those big names are in the xrt, it is just the xrt is essentially an equal weighted index versus the transferring sector versus market cap weight, the names you are referring to those are also far along let me just say that walmart, target, they've been great, but we know all great up trends typically are punctured by give backs, pull backs, dips, corrections, whatever nomenclature one chooses but to stay healthy you want to have pauses and rests and we're playing for that in xrt. for regular retail to highly discretionary fitness spending, peloton up higher today and up triple digit on the year as americans get exercise inside the house. tony zhang says the stock could still be fit for more gains ahead. tony, what is the trade here >> yeah, i want to take a look at peloton because i think it is a stock that is -- has been misunderstood by some investors as an expensive spin bike company with a cult following. i think they've really pivoted here over the past couple of quarters into an all-around digital fitness platform i think that's the bigger term opportunity here for peloton if you look at the chart itself, the stock recently broke out above the $100 level in late september, took a big hit after pfizer's vaccine news, down about 20%, but held the $100 support level as -- retested the level as support and holding it and continuing its continuation higher here. i think it is an opportunity to take a new long-term position or a new long position here in peloton. now, if you look at the valuations here, by all means this is an expensive stock so when you look at some of the stats that justify these valuations, some investors will say, you know, this is due to the pandemic, it is not sustainable. 113% subscriber growth versus the same time last year, if you look at quarterly revenue up 170% versus the same time last year, but the one step i want to point investors to that i think speaks to the shift presidential ton had over the past couple of quarters is average number of workouts by subscriber per month. for years they averaged 12 to 13 workouts per subscriber per month. over the last quarter it doubled to 24 workouts per month that speaks to the shift that peloton has taken now into -- outside of the spin bike into tread, into yoga, into boot camp, into meditation. this speaks to the fact that the opportunity now is not just here for spin but for overall fitness. i think that is a long-term opportunity here for peloton so the trade structure i want to use here really reflects the fact that it is trading at a fairly rich valuation and it is at risk that more vaccine news may take a small hit to the stock, but it will likely recover from that. so the trade structure i'm going to use is a put vertical spread because if the stock declines a little bit on some vaccine news and comes back and stays to where the current level is, it can still be profitable at these current levels i'm going out to december 31st and selling the 110, 100 put vertical here, collecting about $9.40 for the december 110 put, collecting about $5 for the december 100 put net/net here i'm still collecting $4.40, which is 44% of the $10 wide credit spread. that's the type of risk/reward that's actually fairly hard to find even though the implied volatility for peloton isn't that particularly expensive. >> mike, what do you think about the trailed? what do you think about peloton directionally? >> so, you know, it is interesting. of course, the valuation is hard get your arms around, but i have to say that i suspect that the secular trend is in their favor. you know, some people who have been watching for some time know i refer often to the holly index, you know, we used to participate in something called orange theory, kind of a social workout sort of thing. it is a very different experience, and i think that trend is here to stay. of course, we can't do that kind of in-person thing so peloton is in the right place it just so happens it is, unfortunately for most of us, also the right time for them so i think they're in the right business that's first thing i would say about it the second thing is just talking about tony's trade, three things can happen two are good, one is less bad. if the stock goes up you will collect that premium if it just goes side ways you collect the premium. if you are concerned about the valuation and the momentum fails to keep up and it rolls over, you are actually risking considerably less than you would be if you bought the stock and you are taking advantage of the fact options premiums remain relatively elevated. i think the trade structure makes sense, secular trend makes sense. the valuation, look, that's always the situation when you are dealing with story stocks like this one is if you think the secular trend will continue, if you believe it the promise could be real. >> when you said we used to participate in orange theory, do you mean holly used to participate in orange theory >> let's put it this way, she made me go. >> all right. >> it is a social thing but, yes, i did do it too believe it or not, you wouldn't know it to look at me but i haven't gone in a while. >> it didn't seem like your cup of tea per se. carter, what do you think? >> this is a money flow issue. what was up today, zoom, docusign, way fair, poll ton all dropped exactly 35% to 37% peak to trough it is a money flow thing more than anything else check out our website options action.cnbc.com. while you are there sign up for the newsletter here is what is next remember the childhood snack, ants on a log, celery and peanut butter and raisins? let's say you had your snack on the playground and the ants fell into the dirt, do you cry? no, because the celery and peanut butter is still a great combination. the professor explains why the same could be said about alibaba. it will make sense after the break. plus, calling all "options action" fans reach into your pocket, grab esur phone and tweet your qution @optionsaction. if it is nice we will answer on air with "options action" returns. "options action" is sponsored by thinkorswim by td ameritrade ♪ ♪ ♪ ♪ ♪ ♪ ♪ just last week based on a declining dollar mike showed you how to set up a bullish trade on emerging markets using etm etf he will get to the performance in a minute but it is worth noting that the largest holding alibaba encountered a slew of headwinds in recent weeks. mike, take it away the reason we were making the trade on eem is definitely sometimes you are dealing with relative trades. you know, do you prefer one market to another, one asset to another? really, i think what it came down to, carter and i were both talking about this last week, that we prefer emerging markets to u.s. markets. the u.s. equity markets had been hitting new all-time highs the emerging markets had not this is despite the fact that the data coming out in, for example, the asian financial results were actually quite strong so we were favoring that, but, of course, you were talking about alibaba which is one of the largest constituents of eem but it had some idiosyncratic issues so i still favor emerging markets over u.s. markets. i still favor being short the dollar on balance which was our other trade. what i am taking a look at is the specific situation of one of the largest constituents, alibaba. of course, alibaba, despite the fact we have seen good, significant strength in a lot of emerging markets names, hasn't seen it. why? because of the ant ipo which hit the stock fairly hard. what i would ask people to think about is their results, alibaba's results still are very good i think some of the issues might ultimately get sorted out. so i think that actually what has happened here is this is presenting an opportunity for people who had not gotten into long positions in alibaba to now do so at a significant discount to what we were seeing before. of course, because of all of this implied volatility is relatively high so we need to structure a spread that will permit us to take advantage of the situation. specifically, i was looking at a diagonal spread, i was looking at the february 270/december 285 call diagonal, buying the february 270 puts, selling the december 285 strike calls -- excuse me, i said put. calls against it net/net you will layout $15. it is a trade that should benefit from the decay of the 285s over time by december expiration and gives you longer term exposure to the upside by having the february 270 calls. so i think this pull back that we've seen in alibaba is an opportunity for that stock specifically i think it is going to ride the larger emerging market trend, which i'm definitely more favorable on than u.s. markets right now. >> all right, mike carter, you have some charts for us on baba >> sure. just three simple ones first is just baba, two-year chart. stock is double, 150 to 300. the second is with the 150-day moving average -- excuse me, it might be the one with the draw downs. second chart you will see, this had distinct pull backs not 10% but more like 20%. in fact, four of them. this recent sell off from 320 to about 250, where has it stopped? last chart, right off the 150-day moving average we're a buyer here, it is the biggest constituent of eem and follow-on trade from last week's eem buy. >> all right given all of that, given the charts, given mike's trade, tony, what is your take? >> yes, so i completely agree. just to reiterate what we were saying last week on eem, you know, the exposure you get from a geography perspective and sector perspective looks constructive compared to what we're getting from domestic perspective. the stock has obviously jofr shot a bit to the down side on the ant ipo news the fact it held the 260 level, which as carter said also corresponds to the 150-day moving average, i think is very constructive for the long run. as mike said, if you look at the results here of baba, it is pretty much in line with what we would expect from china. from my perspective, baba's growth is not particularly strong 29% revenue growth is in line with what we are seeing out of the asian countries. the billion dollars in a single day was strong, also 30% growth from last year overall i think the long-term view on baba is constructive and the trade structure mike is using, the diagonal spread, is suitable for what we consider a more stable growth here to the upside the only small adjustment i might make to his diagonal spread is he is using the december 285s. i would adjust it a little bit higher to the december 290s because you have a gap fill for baba up to the 290 level i think that by december you could tag that level and potentially just be shy of that 290 level by december. mike, were you laughing at tony nitpicking 29% revenue growth >> yes, i was, actually. i mean that's remarkable growth. it is one of the largest growing markets. it is a company that if you are keeping pace with one of the fastest growing economic areas in the world, that's pretty good 30% revenue growth is pretty good i would ask people to think about one other thing, too this is a company whose valuation is about half of that of amazon in rounding numbers. think about the opportunity here if amazon is worth $1.5 trillion, where is baba going to be five years from now ask yourself that question and then decide how you feel about the valuation and those growth numbers, which i think personally are pretty phenomenal. >> all right up next, you ask, we are answering. the options traders are standing by to take your videtwts oo een air. don't go anywhere. much more "options action" up next it's a thirteen-hour "options action" is sponsored by thinkorswim by td ameritrade 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. ♪ and sweetie can coloryou just be... gentle with the pens. okey. okey. i know. gentle..gentle new projects means new project managers. you need to hire. i need indeed. indeed you do. the moment you sponsor a job on indeed you get a short list of quality candidates from our resume database so you can start hiring right away. claim your seventy five dollar credit, when you post your first job at indeed.com/home. but before we sign i gotta ask... sure, anything. we searched you online and maybe you can explain this? i can't believe that garbage is still coming in. that is so false! frustrated with your online search results? call reputation defender today to join tens of thousands who've improved their online reputation. get your free reputation report card at reputationdefender.com or call 1-877-866-8555. i feel like we're forglet me check.ing. xfinity home gives you peace of mind from anywhere with professionally monitored home security built around you. no, i think we're good. good. so when you're away, you don't have to worry. the tent. we forgot... the tent. except about that. xfinity home. simple. easy. awesome. hey look, i found the tent! get xfinity home with no term contract required. click or call today. 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 take some of your tweets elijah in california is wondering if boeing shares could take flight in the next week >> hello i'm fairly new to options trading so i thank you guys for everything you do over there at "options action" i have a quick question. i have a call option in boeing that expires on november 27th for a strike price of $215 i was hoping with the approval of the 737 max that, you know, it would go up a couple of points but instead, as we know, it has taken quite a hit i am wondering if it is worth it for me to keep that call action until close though the expiration date or should i cut my losses and move on to the next trade >> elijah was spot on in terms of the pull back, down 5% since wednesday when the faa cleared the 737 max to fly again mike, what are your thoughts on boeing >> sometimes your first loss is your best loss and you might want to get out of this one. boeing has some problems we usually talk about an order bag, they have a white tail parking lot full of airplanes and it is not clear to me that approval of the 737 max is sufficient to go up against it right here if you are going to make a foolish bet in boeing make it a longer term one than short duty options. >> with covid cases on the rile, nerile -- on the rice, neil in california is looking out to option plays. >> with covid cases at all-time highs i'm looking to see which company can duplicate stellar earnings from last quarter, pintrest or snapchat which do you like better and what is the play >> well, snap shares posted a gain of 54% since the company's last earnings report in late october while pintrest is up about 27%. tony, would you rather snap or pintrest >> i think between the two i certainly would choose snapchat overpintrest as you said the stock is up 54% since the last earnings announcement i think it is a tall order for it to continue rising, especially after the next earnings announcement. but the next earnings are not until february 2nd so i think you have a lot of time to wait and wait until early february before you have to make a decision as to whether you want to enter gna new position. >> carter, would you rather based on the charts pintrest or snap >> i like them both. i'm not going the play they're fantastic. the strength is the number one factor that's ever been tested in the models around the world this is the definition of relative strength, pins and snap. >> wow all right. up next, "the final call." "options action" is and lo oh. their award-winning 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 it's like my streaming service. well except now you're binge learning. see how you can become a smarter investor with a personalized education from td ameritrade. visit tdameritrade.com/learn ♪ ♪ ♪ ♪ ♪ ♪ ♪ time for the final call. carter >> short, retail, xrt, baba. >> tony zhang? >> peloton it will revolutionize the way we work out, selling a december put vertical spread. >> mike coe. >> long xrt put spreads, along the diagonals in baba. >> that does it for us we're off next friday after thanksgiving see you the following money" st. >> my mission is to make you money. i'm here to level the playing field for all investors. there is always something somewhere. i promise to help you find it. "mad money" starts now ha hey welcome to the show. i'm trying to make you money my job is to educate and teach you. call me 1-800-743-cnbc the markets in the grips of two issues it's the virus

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