> this is "options action." tonight, how would you like to buy bank of america for just 15 cents? it isn't a bailout, it's just our options trade on b of a. plus, talk about a blockbuster. we've got a trade on liongate that can turn time into money. not in a theater near you. it's our options trade on the studio giant. we'll tell you how you can make money, too. and just short nike? what's his next move? the action begins right now. live from the nasdaq market site, i'm melissa lee. these are the traders here in new york times square. all three indices reverse losses and finish in the green.

a pause or perilous moments for stocks? let's get in the money right now and find out. if you're bullish on the money you have to like the price action we have seen in the banks this week. it may -- we may have snapped our weekly gains here, mike, for the s&p 500, but banks actually did fairly decently. >> the banks did fairly well. you know, it's interesting to me because, of course, usually what happens if you're in a show like this, you get a situation where the market rolls over a little bit and everybody's sentiment turns negative and positive news sort of feeds on itself. i think everybody was expecting that the market was not going to go up in an unabated fashion without some kind of pull back. some of that i view to be somewhat healthy. the fact the banks were holding up well i view to be healthy. when i look at what's going on and i see implied volatilities in the options market continue to be pretty stable, i don't really see a whole lot of reason to be concerned. people have to focus on the long-term trends for stocks and the u.s. economy. >> i think it is positive, this rally is broadening out. in december we saw some of the risk on type trades, the industrials, materials, energy stocks start to move higher. why?

because people were upping their estimates on gd p growth. when you do that you start to play those types of stocks. we have seen this rally extend. i think that's why the market is sort of transitioning sideways because you saw this rotation into financials. a lot of positive news after the fed reserve had their bank requirements and stocks like bank of america saw nice pops over the last couple weeks. so this rally is broadening out. >> i think this is what a rally looks like. this sort of week and part and parcel of a rally. it's not going to go up all day every day and i think that a lot of people wanted some extra beta. we talk about how i got long some of the banks in the november. i wanted to do a beta play. it works as long as the stock market is going up. you think that the xlf will have done really, really, really well. it's interesting right now all it's done is a big round trip over the last 52 weeks from 16 way down back up to 16. but i actually think there's still good news. monday was kind of tough for bank of america, but that all came back with the market closing almost back at $10.

this is what a rally looks like. it's pretty healthy. >> the other thing is a little bit of strength in treasuries was also needed. we had seen a huge decline, and the other thing we do expect to see somewhat higher interest rates, indicative of a healthy economy. when she shoot up that doesn't help us at all. seeing some stability arrive in treasuries was helpful and look at the stock that started to see weakness, the big beta plays, some of the industrials, names like caterpillar where you have high valuations, great results, of course, but, you know, when you're basically trading on the highest valuations on the highest returns they have ever had, those are the types of things where you say maybe i'm going to do a little profit taking. >> but those moves in interest rates are great for banks. banks have really been punished to by low rates for a long time. this is actually great for them. >> it certainly didn't help that the one data point we got out of banks in terms of earnings was a positive one. jeffrey was a pretty good quarter. it was still another sort of little bright spot within the financial sector. in terms of the xlf activity, have we seen it become more positive or more protective

perhaps in positioning? >> well, what we have in terms of the xlf, we have seen it, and we talked about this rotation and we have seen positive moves into the xl f, but we have seen some bearish activity, especially today. we saw 32,000 puts trade in fxi and we got some quirky little news out of china. some bearish bets out of there on the june 32 puts. it's not all rosy picture. you have to use a little protection out there if you're going to get into this market. i would just be using hedge protection here if i'm going to stay long this market. >> it's gotten relatively cheap because nobody is really hedging. look at xlf put open interest. it's plummeted since over last october. over 6 million contracts thak back then, more than 70% decline since then. more calls than xlf inputs. >> so generally if you're a holder of a bank stock that's run a lot, morgan stanley, bank of america, it's a good time to buy protection.

>> there isn't a lot of demand and it's a lot less expensive. we often say you want to buy it when you can, not when you have to. >> you're concentrating on bank of america, brian. what's a fundamental take. >> they released data. this is an important key message i think for all of america. they released they're going to potentially run a pilot program that basically ends mortgages, forgives mortgages, people in distressed foreclosure situations and turn them into renters that they could stay in their house. it has a potential to unlock a huge amount, millions of dollars of negative equity and turn them back into the positive, getting them flat. feeling good about themselves, and i think this is why you have seen rallies in consumer discretionary and the financials because of this reason, and bank of america has had a huge run over the last couple weeks. >> this week you're doing a risk reversal. it's good to hit open that playbook. it's a bullish strategy where you buy one call, sell a put

against it to finance the cost. the goal, you want the stock to trade above the call strike price. because you're short the put you may have to buy the stock at the put strike price or lower. >> this is my don't cry about it. we have been hearing guys on the floor saying i wish i would have gotten into bank of america. what you can do is look to sell a may 9 put. that's a level you're comfortable getting in the stock and you want to allocate money to and you roughly would collect 40 cents. you still want the upside. i'm pretty bullish on bank of america, what i do is buy a may 10 call with it for 55 cents. i have only outlaid 15 cents, 1.5% of the value of the stock here. above $10 i have all the upside potential in this stock. and below $9 that's where i wanted to get in anyways, so i'm happy to own the stock at that level. all the volatility between 9 and 10, you can forget about that because all you're outlaying 15 cents. earnings coming up in mid-april so you get a chance to play into that. that's why i went out all the

way to may to have a chance to play on that earnings front. >> would bank of america be the stock that you put this sort of trade on? >> yeah, i think it is. here is one of the things about this, it looks like it's very tight but notice, of course, that it's still 7% -- actually a little bit more down to that lower strike. it seems like they're only $1 apart. in percentage times that's a notable discount. instead of buying a stock, it gives you an opportunity to trade around what happens in the market. if the market does rally, you'll probably have an opportunity to potentially sell an upside call, buy that downside put back and be locked into a trade for no money that gives you upside with limited downside. >> i think the key here is that brian says that he wants to buy bank of america if it gets down to 9 bucks. this makes all the sense in the world and gets the option math in your favor. if you put this on and you end up having the stock put to you, you have to remember why you did it. don't have buyer's remorse because now it makes a lot of sense to get long that stock at 9 bucks. >> let's hit the stocks versus options button on this. want to buy bank of america stock tha stock that will cost you $10 a share. share. b of a a i b of a a is no longer a $5 stuck.

stuck. he could be he could be forced to buy the stock fo stock for $9, which is 10% discount. discount. let's mov let's move on here and talk about "hu about "hunger games," one of the most anti most anticipated movies of the season. season. it's gross it's grossed an astounding $19.7 million in million in one night. the perfo the performance of that franchise franchise and the release of the season's season's "mad men" is propelling shares o shares of lionsgate. but has the but has the move been a little too fast an too fast and furious? only one w only one way to find out and that's call that's calling to the charts. find out w find out with the man who has been prac been practicing his oscar acceptanc acceptance speech since he was 7 years old years old, carter braxton worth of oppen of oppenheimer. >> just as >> just as you say, this has come to li come to life obviously. the issue the issue is has it come to life a little b a little bit too much. so let's l so let's look at it. and what and what a base or what a period of equil of equilibrium, two-year chart. history history shows that this is the kind of kind of thing you look for as a buy junctu

buy juncture when it's look to break to break out. a two-year a two-year base and then explosion explosion. but now it but now it's happened, it's a perfect exa perfect example how you will have a f have a fake out, fall back to the top the top line, and then explode. 8 to 16 th 8 to 16 this week. a double. a double. year-to-da year-to-date, close at 1453. by all ac by all accounts whatever good things ar things are coming for this business business is priced in. take a look take a look at the next chart just to p just to put the context. again, year again, year-to-date, 8 to 16 this week, this week, it backed off to 1453. 1453. we think we think the backoff is the beginning beginning and you're heading down to l down to like 12. now, look now, look at the all-time long-term long-term chart i guess since inception inception, if you will. it shows t it shows the breakout where it occurred. occurred. just fal just falling back to 8 would be a wipeout a wipeout of course. we think we think you fall back to 12. either wa either way sell if you so lucky so lucky as to be in th long sid long side. >> potent >> potentially a fall back to 12. 12.

mike, fund mike, fundamentally i if you've if you've had the pri seeing "h seeing "hunge i saw it o i saw it on tuesday. i thought i thought it was pretty good. i don't kn i don't know where you stand o the stock. the stock. >> i thin >> i think a lot of shareholder think it wi think it will be well liked an well atte well attended. the expec the expectations potentially for the weeke the weekend coming in was $115 million million which is a very big number. number. and it's and it's especially big when you consider ho consider how much this company actually do actually does in theatrical revenue e revenue each year. we're talki we're talking about in probably $ probably $206 million last year. they're ta they're talking about doing $1 million in million in one $250 milli $250 million to $270 million in the u.s. o the u.s. overall. that's wh that's why people such a fren such a frenzy about you can see you can see that this is one ever thos ever those situation where is if this real this really was a blockbuster it would be would be a material impact to how well how well the company that said that said it's trading valuation valuation. sometimes sometimes in the movie business that's not that's not what happens. you see big you see big numbers and somehow at the end at the end of the day it nev turns out t turns out to have been as profitable profitable as everybody expected. expected. >> so you' >> so you're skeptical.

mike is d mike is doing a put calendar. let's ref let's refresh and hit open the playbook o playbook once more. review thi review this structure. and the str and the strategy you're selling a near dat a near dated put and using that money to bu money to buy a longer dated put of the sam of the same strike. it requires it requires timing. you want t you want the stock to be above the strik the strike of the put you're short by t short by the first e but below but below the strike of the longer dat longer dated put that you're long by th long by the second expiration. walk us th walk us through this. >> what i'm >> what i'm looking at doing here is sel here is selling th puts. puts. i can colle i can collect about 60 cents for those and those and using those to help f to help finance the purchase of the may 13 the may 13 puts which will cents. cents. all in i all in i will spent 30 cents for this trad this trade. what i'm t what i'm trying to do is capitalize capitalize on the frenzy for "hunger ga "hunger games." after the after the weekend i think the price of price of the options drop maybe sharply be sharply because they rose 33% in just the just the lost month. we're tryin we're trying to capitalize on the accel the accelerated decay, the fact that the that the news will be out, and i'm leanin i'm leaning slightly bearish as we indicat we indicated with carter's

charts and charts and that's why i chose the 13 st the 13 strike. >> would y >> would you use -- you own the stock, wou stock, would you be -- >> this is >> this is an outright trade. >> mike an >> mike and i talked about it earlier, t earlier, the relationship between cor between corporate bond market and the p and the price of options. what we hav what we have seen in lionsgate is we have is we have seen the bond prices get bit up get bit up and yields come in hard and hard and strong going from 9.8% to 4.5%. to 4.5%. i see why i see why mike is trying to play this trade this trade, sell some volatility here and pl here and play, you know, a price point some point somewhat beari trade. trade. >> i think t >> i think taes a great point. i think o i think one of the things you have to lo have to look at is the bond market pri market price is risk and puts price risk price risk and they're not agreeing r agreeing right now. >> mike >> mike is being skeptical. good trad good traders have to be skeptica skeptical but i t company h company has changed completely. they're a they're a little like the champ -- clampe -- clampets. they have they have found oil in their backyard. backyard.

the the company is not what it w last ye last year or the y this may ma this may make a ton of money but i understa i understand why mike is doin it. it. only only spending 30 cents. >> i >> i want to hit the stocks versus versus options you could you could literally ha head spi head spinning as you en the poor the poor house here. mike's put mike's put calendar risked of 0 cents and cents and offers leverage to t downside. downside. risk 60 ce risk 60 cents to make a speculat speculative trade. or run po or run potential ruin. the choic the choice is yours. got a que got a question, send us an e-mail. e-mail. the addre the address is optionsac optionsactions@cnbc.com. we'll we'll wants answer if it in our one-on-o one-on-one web extra af show. you also you also find a educatio educational material there as well so well so you got to check it out. here is w here is what's coming up next. cal call it a slam dunk. two weeks two weeks ago dan made a bearish bet on n bet on nike with the stock down will dan h will dan hold out for more gains or take th or take the money and run? find out find out when "options actio returns. returns.

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welco welcome back to "options action." action." a harsh wa a harsh warning to any investor looking to looking to play volatility through etn through etns.

an ex chang an ex change traded note blew up after it's after it's underwriter said it would cr would create more shares. credit su credit suisse stopped issuing creating s creating shares about a month ago. it it was essentially trading as a closed closed end the problem the problem here is that people will trad will trade these things thinking that it's that it's going to be correlated to the vi to the vix and there isn't much of a cor of a correlation. >> i thin >> i think you have to be very careful. careful. it created it created a whole uproar in the vix optio vix options pit causing vix futures t futures to rise when the market was movi was moving the other direction. really kin really kind of sketchy. credit suis credit suisse said they will start rec start recreating but on a limited bas limited basis, so, you know, it's a toug it's a tough product. >> there >> there needs to be better products products created.

>> it's e >> it's etfs, too, and the issue is these l is these levered products can be very, ver very, very challenging. any lever any levered product may not do exactly w exactly what you think it will. >> we ta >> we take a look back on our winning o winning options trades. a couple we a couple weeks bag dan looked at nike shor nike shores and said just short it. it. he made a he made a lot and here is how. on "option on "options action" there's just one way t one way to just do it. risk less s risk less so you can make more and that's and that's exactly what dan did with his b with his bearish bet on nike. dan though dan thought shares were heading lower but lower but shorting the stock, that could that could cost you. >> $1 mill >> $1 million. >> so to de >> so to define his risk, dan bought the bought the april 105 strike put for $1.80. for $1.80. now, to m now, to make money dan needs nike stoc nike stock to fall below that put strike put strike price by more than the cost o the cost of the trade or in this case below case below 103.20 by april expiratio e but $1.80 but $1.80 you keep spending money lik money like that and he will end up like thi up like this guy. show us how show us how to do this for less. >> i'm sell >> i'm selling one of the april 100 puts. 100 puts. >> well done >> well done. so to spen so to spend less dan sold the april 100 april 100 strike put for 90 cents and cents and created his put spread.

spread. but he did but he did something even better. better. he made mak he made making money easier here is ho here is how. between the between the $1.80 he spent buying one buying one put and the 90 cents he collec he collected selling the other, dan reduce dan reduced the cost of his trade to j trade to just 90 cents. now inste now instead of needing nike to trade belo trade below $103.20, dan can make money make money if nike falls by mo than that than that 90 cents he spent on the trade or the trade or below $104.10 by april ex april expiration. before we before we sign dan to some massive s massive shoe contract there is trade-off trade-off. by selling by selling that put he cost his costs but costs but he also limited his potential p potential profits to the difference b difference between the strike of the put tha the put that he bought and the strike of t strike of the put that he sold. and since and since the time of the tra nak nike s nak nike shares stumbled fall 4%. 4%. now he has now he has to make a decision. hold or jus hold or just get out. "options ac "options action" fans wanted to know jus know just one thing. what will what will dan do now?

before we before we answer that questio let's see let's see how much money was made. ma had you sh had you shorted nike two weeks ago you wou ago you would have made 2%. dan's put s dan's put spread today can be sold for $ sold for $1.10. that's a that's a return of more than 20%. 20%. so even be so even better. now, dan now, dan is obviously off the desk. desk. he's actu he's actually at the beach, but the caribb the caribbean queen was gracious enough to enough to call in and give u his next m his hey, dan, h hey, dan, ho >> hey, gu >> hey, guys. you know, you know, i was called a muppe last week last week and now i'm a caribbean caribbean queen? >> is th >> is that an upgrade? i don't i don what's y what's your next move? >> the stoc >> the stock was actually up in the prema the premarket. it sold o it sold off, it was down at one point 4%, point 4%, 4.5%. to me the to me the issues here, and this is why we is why we entered the trade, the stock was stock was near all-time high the time. the time. material material costs, labor costs, freight c freight costs are going up. they said they said inventories were high in emerging in emerging markets. a lot of t

a lot of things that to go well to go well here for this stock. 4% off the 4% off the all-time highs, you know what know what i mean, to continue to go up. go up. so to me i so to me i think you n a consoli a consolidation or a re this move. this move. so i'm st so i'm still sticking to that $100 level. $100 level. i think we i think we see it over the n couple we couple weeks. i think i i think it's going to be really importan important for u.s. multinat multinationals to demonstrate that inp that input costs are not hurting them, tha them, that currency head winds are not hu are not hurting them. i think we i think we will see next coup next couple weeks. >> the tes >> the test is whether or not we see that see that consolidation. we have car we have carter braxton worth. what do what do you see in the chart? >> 100% wi >> 100% with dan. it broke it broke badly today on heavy volume news volume news related, earnings th earnings that were quite good but not go but not good enough. in principl in principle one day did you s not make t not make the end of this shoul this should deterior time. time. stay short. stay short. >> stay short. >> stay short. now, a whil now, a while back didn't you on a bear on a bearish bet on nike? the timin the timing was off but the fundamen fundamental reasons were pretty much the s muc >> right. it was a li it was a little premature.

i'm glad h i'm glad he revisited the story opportunist opportunistically as he did. i'm in th i'm in the same camp. typically typically when you see stocks roll ove roll over you get a few days for it to pla it to play out. you neve you never want to try to say i'm going to going to cut and ru first d first day. i think y i think you continue to lean on the short the short side. >> dan, wh >> dan, what would be the one thing you w thing you would be looking at in terms of ni terms of nike in the next couple weeks? weeks? >> well, te >> well, technically like what carter jus carter just said, the one of th one of the biggest volume days since the since the fall, and to me this could kind could kind of be the signal. i actuall i actually was taking a look at oracle ear oracle earlier in the week. they beat, they beat, the stock opened up, down about down about 8%. it's closed it's closed down the last three days since days since a beat an raise. raise. so to me i so to me i think you want to see a a continuation of this weak and and i think you impress it, but about about 100 i think with the catalyst t catalyst the company has laid out with out with the olympics and european european soccer champions in the summer, i summer, i think you want to look to to cover the shorts around >> i woul >> i would probably cover because ti

because time is worki you now. you now. this is st this is still out of the money and now t and now time is just cut this e cut this every day. >> okay. dan, have dan, have a great vacation. see you ba see you back here hope we week. our thanks our thanks to dan if you want u if you want updates, b follow us on tw follow us on twitter @cnbcoption @c don't go an don't go we've got we've got the fin that's up that's up next. what's what's your best option? following following us on twitter. get trade get trade updates, breaking news and analys and analysis. follow us follow us on twitter @cnbcopti @cnbcoptions.

time n time now for the final call. the last w the last wort from the opti pit. pit. scott? scott? >> you mi >> you might want to use some of these these volatility find that u find >> rather >> rather than owning america, b america, buy a put. my hung my hunger play is to put that put s that put spread on, pay 30 cents. cents. >> thanks f >> thanks for watching. for more for more "options action" go to our websit our website optionsac optionsaction@cnbc.com. we'll see y we'll see you back here next friday. friday. don't go a don't go anywhere. "money in "money in motion" is up right after this after this break.