follow me on twitter and google plus. see you on monday. find me on google plus on twitter. options action begins right now. >> this is "options action," your front so seat to the smart money. tonight, face off. the biggest ipo failing to excite the masses. fear not. dan nathan has an options trade that can quadruple your money in a month. he will explain. plus, talk about breaking the bank. how would you like to buy wells fargo for under a buck. no, that's not a misprint. just colon carter's whale of a trade on the wfc. why were the traders chowing down on restaurants calls? scott nations with the 411. options action begins now. live from the nasdaq market site and the world's largest equity

options exchange. i'm in for melissa and these are the traders in times square and chicago and we will be all over the facebook in a second, but while you were watching the biggest technology ipo of all time, a curious thing happened to the overall market. it sanction. it is now posted the worth week of the year. is it a danger zone to stay away from or is it a huge buying opportunity? let's get in the money and find out and dan nathan, what has you the most scareded or opportunistic? >> what would make me most nervous if i was a retail investor is the fact that the sell off has been very orderly in the last couple of weeks. we have not seen panicked situations. it leads he to believe the smart money and the hedge funs are well-hedged we are waiting to see what the dumber money is doing. the mutual funds are doing. they are buying and will be the ones selling on the first down

2.5, 3% day we v. >> most of the information i got suggested the market was oversold into today and looked right for a balance. why did we not get that? >> you have $100 billion stock and everybody has their eyes on that. a $100 trillion problem. everybody is focusing on facebook and maybe they should pay attention to the other side of the bond. we have 10-year treasuries. is that a good sign? >> if you are a home buyer. >> phenomenal. who has the money for that? that's a great point. if things were making loans to individuals and small business instead of sitting there and saying we are going to buy $100 billion of crappy corporate, maybe jpmorgan would not talk with washington at the same time. that is actually what people are concerned about. can banks continue to make money the same way and there is no question about whether you are seeing scrutiny on that.

that is why the market is here. >> with an earnings yield of 10%. >> the contacts with the big money guys. when you look at what's going on, i'm sure you have other contacts. >> bollinger all at the bottom of their bands that look and bounce and technically we did not get it. >> we are seeing things in the currency markets and overseas and that's the only european index going on. have you seen brazil? things are imblowing all over the world and we are talking about the face box. >> scott? let's talk about-face book. they say no man is an island, but is facebook an island? was it its own thing? important, but isolated and on the other side to mike's point, have greece and g 8 this weekend and jpmorgan. are they outweighing the hoopla over facebook? >> tough to say that anything that has anything to do with

facebook is unlucky, but to a certain degree they are. the market has been sick for the mornth of may. if they were frothy, who know what is would have happened at facebook. linked in, groupon both down a bunch today. given everything that is going on, people buying puts in the spy, people buying the vicks and people buying calls in the vicks, it's tough to see how anybody would get excited about-face book at least past today. >> we needed that name, didn't we and needed to get the retail investor involved interested in the market from the data we got and they were sending teams and it looked like the retail investor did get back into the market. call me old school, but i thought stocks went up when there were more buyers than sellers. >> when you start hearing things like this thing was ten times oversubscribed.

>> i read 30. as late as last night. >> the guy puts in and gets all 5,000 shares. >> a disaster of a deal. it will go lower and break. we should stop talking about it. there more important names in the market that are more indicative about the futures of the markets over the next few months. >> well said. i like the dude comment because i will abide. let's go bowling. let's get down to the elephant in the room. facebook. the most anticipated tech ipo since google was barely able to eek out a slight gain. many consider it to be a slap in the face and expected big gains. the performance stands in contrast to other ipos. i would argue and many people view this as a failure, a fizzle and a flop. i would argue this was a perfect ipo. it should not be designed to have the low float at the under priced offering that will have a

huge spike and convince the market and retail investors it was rigged for the benefit of the insiders and it ended where it began. can we view this as a success? >> i think you can. there was so much hype when you think about the valuation. it doesn't work for a lot of people. i think at the end of the day, it's fine. it's not a disaster or a huge home run, but it's fine for most investors now and they ka k take a look and the company has to rest on their merits. the street will initiate on the name in 40 cal endar day presidency we will compare to google. >> was it more of a disaster for where we are? they got the listing and it will be a big win to come. when i hear trades are put in when execute at 1130 and you did not get a confirmation of where your rate was until 2:00 or later if you got it at all. if you are on a big desk, you will sit back. can we view this as a market issue?

>> it was for sure and that did affect how the stock traited and maybe they should ton tact them and know how not to do it. here the thing. if you are not getting a fill, does that mean you can bit thinking you have gotten the sell off? were you a buyer at 39? did that leave you trying to protect them? i don't know how many people decided they would not be in there when they were trying to trade around. >> scott, i have to ask you, the whole thing today is that all the underwriters came in and said no way, no how are we breaking the $38 floor. they trait the at $38 and not below. do you believe the banks said throw whatever you got and don't let it go below 38. >> they have an interest in keeping it above the price and i think that your point before that it was a fair ipo and it was well done is important. compare it to groupon.

with this tiny, tiny float that is perverted in the market and groupon and groupon options, groupon options are a crazy situation right now. still because of the tiny float. i think what facebook did was looked at groupon and said we don't want to do that. >> flattery will get you everywhere. plus one to you. dan, what does google have in common with facebook besides being a widely used part of the interweb? >> i will lay this out. this is a trade i am looking at. i posted on my site and the stock dropped 3% in the afternoon sell off. the trade may look less attractive and you may want to wait for a bounce and wait until july options are listed, but one thing i said looks interesting is 40 days you will have all the underwriters and they will initiate research coverage on facebook and start to see this issue that will get pounded in. monitization of mobile search. this is a problem for google and facebook going forward.

it's about as third as profitable as on the desk top. when i look at google, it looked like people were selling google to buy facebook. i was a couple of hours ago when the stock dropped 3%, you may want to wait for a bounce. i was thinking about a short-term structure in google. >> a put spread. >> a put spread. dan is using a put spread and for those new to the show or trading, it's a fairly common strategy, but always good to crack open the playbook. this is a bearish strategy where you buy 1 and reduce the cost by selling a lower strike put of the lower separation against it. the goal is simple. you want the stock to fall to the low put strike that. is where you make the most money. that is where your profits are capped. i am looking at june expiration because i think the market has the potential to go to 1250 and google is under performed all year. i am going to isolate the low in

january. what i wanted to do with the stock is by the june put spread for 650. 650 is the max risk. the max gain is 1950. i bought one of the june 555 puts and sold one of the 560 puts at 750. between 579 half and 560, i can make up to 1950. below i make the full 1950. that's about 3.5 times my money. losses, max lost. i said $6.50. between 579.50 and 585. >> there things about this trade i like and things that i don't like. the first thing i think is challenging is while the train looks weak and everything it getting thrown out, google is a relatively cheap stock. that's one of the things i think could be a back stop here. a put spread is the best way to play it. if you are going to make a

bearish bet, implied volatility is high and skew is high. this is not a levered company. the price declined that is. the fundamentals you can't just flow out. >> why do you say it's cheap? >> as dan and i talked about or dan talked about, there is a lot less real estate on this. mobile is harder to monitize. >> they have mobile. >> the adds are fewer. >> they have google wallet and droid, but they are making money and a lot of it. do you care about a company that is trading at 12 times? i do. it has $50 billion in cash. if they spend half. >> i think they are going to spend half on twitter. the investment community may at first may not take this so kindly and they can catch up. facebook highlights that and twitter is blowing up and serving as a big competitor. i think you can see twitter $25

billion and google swoops in and i don't think it will be investor friendly. >> i will buy another at 20 times revs instead. are you kidding me? >> those promoted tweets. google it all you want, but place to find stocks versus options. right here, son. do you want to short google? you better get a lot of cash on hand. shorting stocks carries unlimited risk. stocks can theoretically go to infinity on the upside. done's put spread defines the troisk $650 and offers a potential for a 4 to 1 pay out. that's an interesting risk reward. moving on to the other big story of the day, the week, the month and depending on where it goes, the year. that is jpmorgan. you had a lot more coming out in the story. the stock is hammered again today. reports the bank losses could be greater than originally reported.

shares the bank negative on the year. mary thompson has been all over the story from the beginning and she is back with the latest on jpm. >> the losses could agree to $5 billion, but a spokesman declined comment on what he called guesses estimating the final loss and the focus on wall street. derivatives expert said giving jpmorgan is really the only that ultimately knows. jamie dimon said the $2 billion in trading loss could grow by a billion more. risk of trades some fear rival bank engaged in two with similar losses lurking on their books. citi's liquidity is the chief investment office with government-backed securities. morgan citily ceo said the firm's annual meeting, his firm runs its own risk profile and

doesn't take that positions like jpmorgan did on improvement in corporate credit sending an earlier hedge that protected it in an earlier event. >> thank you very much. the troubles at jpm create an opportunity at a different huge bank. at least they said the next guest. let's get the call to the charts. the man with the three names. >> approximate are so wells fargo and several charts. let's jump right in. a two-year chart and when a stock sells off aggressively which it does and returns back to that level, you usually respond to the prior top. the people from here, unhappy people sell. having lost money, they got the money back. as long as you hold trend, this is a perfect reaction. it is outperforming and doing better than other financials. take a look at how this level s. 35, 35, 35. after you probed around for the third time, you removed as much

of the supply as you need to. this is a good set up for what should be a very important break out here. then i want you to look at long-term charts to put them in perspective. citigroup versus the earnings over the last 20 years. share price gets way ahead and falls back. next one. take a look at jpmorgan. share price versus earnings. basically trendless, going nowhere. look at wells. this is a much different story. consistently improving earnings stream. this is the best in breed. it acts better than other banks right now. i think you can go for it right here. >> thank you very much. mike, your trade? >> 80% of the revenues come from the u.s. and they have less exposure and they have the business congress wants trading at 1.25 tangible earnings. the way to protect yourself, i look and i can see the stock hitting 30 before it rallies up. it is simply by a call and the

way you can make a bullish bet. i'm looking at the july 33 spending 95 cents. >> are they a better bank? >> when you look at the xlf, this is one of the -- >> s&p financial. one of the top five holdings. i can't disagree more. it looks horrible and it will break 30. you were thinking about selling puts. the wrong time for retail. >> pushing wells? i wasn't thinking about that ever. >> a quick call from scott. scott? >> the one thing about this. in a situation like this, you want to risk a little to make a lot. mike's trade does that and the problem with mike's trade is he mentioned how expensive implied volatility was with goggle. it's more expensive. i wouldn't want to buy an out right option. the stock has to rally 10% in two months for the thing to

break even. i like the name, i don't really like the strategy. >> i have to correct myself. they were not selling puts. they wanted to define the risk. >> fair enough. let us hit the stocks versus options button one more time. do you want to buy 100 shares of wells fargo? you are convinced by carter's charts. 100er shares cost you over $3100. mike's call purchase will set you back less than $100. that's why you gotta love stocks versus options. do you have a question? send us an e-mail. the address is "options action" at cnbc.com. that's after the show on our website. also post trade recaps there as well. do please check it out. here's what's coming up next. >> now that's a good deal.

last month coal and carter made a bearish bet on priceline. they saw their profits skyrocket. how did they do it? find out when "options action" returns. rns. and on small business saturday bothey remind a nations of the benefits of shopping small. on just one day, 100 million of us joined a movement... and main street found its might again. and main street found its fight again.

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welcome back to options action. welcome to the upside call where we show you how to manage the winning options trade. a couple of weeks back, colon

carter united to make bearish call. the trade has been nothing short of priceless. here's why. on options action, there is one way to get to where you want to go. risk less so you can make more. that's just what coand carter did on priceline. carter thought the booking company shares were preparing for their decent. >> we go short. >> shorting the stock you might as well take a trip on this. so to define his risk, they bought the june 750 strike put for $38. to make money, mike needs priceline shares to fall below the put strike price by more than the cost of the trade for $712 by june expiration. $38. i thought we were looking for bargains. show us how to do this for less. >> sell the 700s.

>> mike sold the june put for $20 and completed his put spread. he did something better. he booked a ticket to easy profits and here's how. between the $38 he spent buying one put and the $20 he collected selling the other. he cut the cost to just $18. now instead of needing priceline shares to fall below $712. mike can see profits if the stock falls by more than the $18 he spent on the trade or below $732 by the june expiration. there is a trade off. by selling that put, mike capped the gains to the difference of the strike of the put he bought and the strike of the put he sold. since the time of the trade, priceline shares booked a flight down south to 12%. making coand carter winners. now "options action" fans are watching the show and only want to know one thing.

what will the two frequent flyers do now. >> before we answer that, let us see how much money was made. had you shorted priceline stock at the time of the trade, you would have made a bundle. the put spread costs $18 and can be sold for $45. that is a return of 250%. here's where it gets interesting if 250% didn't interest you. there was a great deal of money left in the trade if priceline can stay below $700 by june expiration. the question is will priceline stay there. let's go back to the charts of the man who made the original call. carter. stay in the trade. you are part of the wonder twins. do you agree? >> it's okay to remain short. this is the money at this point that you will need to adjust the strikes. i would take them off the table and take a portion of that and roll down. >> any quick view on priceline.

the best performing stock this year. >> the fever is broken and the offering price, apple is down from the highs and at the end of the day the fever is broken. >> take a quick break and back with the final call after this.

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>> time for the final call. the last word from the options pit. >> facebook started trading may 29th. [inaudible] . >> for you will buy a financial, you have to use calls to do it here. >> well said. our time expired. for more "options action," go to "options action".cnbc.com. 51y in motion with moi is up after the break.