>> i hope you will follow me on twitter and google plus. stay with us. options action begins right now. have a fantastic weekend. this is "options action." tonight, breaking the bank. fear not, we have got a trade on jp morgan that can make you money. and we will break it down. plus too hot. the national heat wave has sent food prices soaring. cornering the commodities market with a trade that could grow your portfolio in a hurry. >> and why were they sneaking a peek at limited calls? limited exposure. "options action" begins now. >> the world's largest equity x

exchange. >> the action more about the u.s. economy or the turmoil in europe? let's go the money right now. the stocks are down about 2:00 where there was a wall street journal headline that qe 3 was still on the table by the fed. >> i would say the interesting thing that i saw today if we look at text stocks. that immediately had an impact on vmc and sales force.com. we have seen the story before on the global recession fears. we saw cat talk about weakness. we saw proctor and gamble.

i see a potential global recessionnary scenario that the market seems too complacent. >> we saw the earnings. >> we saw a lot of negative activity, put buying and call selling. also in eem. i don't know if i'm that negative that a recession is helping. i think that's an opportunity to jump in and buy it. >> i don't think it's all that apocalyptic. the problem with the number is that it was worse than expected. it was no so much worse that everybody could start to rely on

the fed. the vix was in quite a bit today. it was down quite a bit in the middle of the day and there were terrible horrible names like chesapeake and green mountain that were all up today. >> i'm not saying there is necessarily a global recession immediately on the horizon but i do think the market is far too complacent. >> where do you lie? are you walking on the sunny side of the street? i don't exactly how you understand how you can get bad news. i think the vix is way too complacent here. it doesn't matter if we get qe 4 or 5 when one, two, and three are possibly not working.

>> i think we have a very risky situation. one of the most prolonged in 60 years. you have to pay attention to what they're saying. people should look at buying some protection. >> the close last friday, going back to 1990 is 17.6. you can't say that the vix is too low right here. >> to mike's point about weak jobs data, today was the first time that we have had four straight monthly misses to the expectations since 2008, 2009. before that it was june 2006 to october 2007. >> to me, this is a chart that

shows complacency. in december 2007, the market. >> they are saying we're not in recessio recession. >> the fact that the vix was down. >> the vix is cheap on an average historical basis. i think you go ahead and add protection. >> as we mentioned, it is a big

week. on friday we will also get results from the financial sector. kicking it off for the. we got the big london trading loss. as well investigation. >> regular. >> i think not just. it's going result from that. i don't see that given the loss of earnings power. and finally european stresses are still out there. we saw the shield. >> in terms of sector bits, have you been noets noticing sector

bets? >> certainly, you know, the xlf is lagging in the last couple of days. jp morgan is a top holder. >> jp morgan which is much more exposed. a heightened regulatory environment. >> the interesting thing about jp morgan is to look at the quality of the earnings. if they make their number by crawling back a bunch of. two things. there will be a huge surprise and we also will have to find

out where they stand. are they out of it completely? and what's the number. >> i'm curious. once the first of the cohorts report, what happens to the volatility of the rest of the players? >> well, i think it's probably safe to say we will see some of them come in. some of this is a stock specific story. we have not mentioned the fact that there is a power trading scandal in the midst of all of this as well. there is a lot of things and head winds here. i am interested to hear scott reiterate some of those. let's face the facts here. we are dealing with a financial crisis. if it is bad for financials, sit bad for stocks. >> ennis is bearish. usually we buy them. so that would open a play book. to define your risk.

>> i sold the calls at a buck fifteen and i bought the august 37 calls at 57 cents. i collected 65 cents on the trade with a max risk of 1.35 in the stock. on this trade, i need jp morgan to go below 35 the great thing about this trade is i can make money if the stock goes sideways, if it goes up. or if it goes down from here. i think this is a great way to press a short position.

the average earnings is 2% in the last eight quarters. this is a good way to take advantage of that. >> mike what do you think of the trade. >> i deaf niltly think the way to play these trades, you want to fade that. i like making the bearish bets. we like being long. >> like i said, i'm still long the stock and have been selling the calls similar to what is laid out here. >> you have to be kaerful. >> i'm laughing. the book value argument?

that has not worked for a long time. >> that has not helped citigroup or morgan stanley. >> obviously the banks are struggling. if they are losing money that nobody knows about. >> to wrap this up, i think jp morgan is a sell. 65 cents and defines the risk. got a question out there? send us an e-mail. we will answer it. right after the show on our website. check it out. here is what is coming up next. >> too hot. the heat has wreaked havoc on crops across the globe. we are heading down to the farm for a trade that puts some of

that money back in your pocket. that's when options actions returns. >> time for pump up the volume. this retailer is best known for its hush hush apparel brand. it is really not much of a secret. the answer when options actions returns. [ male announcer ] trading's like a high-speed train. and you don't want to miss it with thinkorswim by td ameritrade. you get knock-your-socks-off tools, simple one-click orders, real-time paper trading to hone your skills, plus anytime you need it support. ♪ stocks, options, futures, and forex. get your trading on track. thinkorswim by td ameritrade. trade commission free for 60 days,

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plus get up to $600 when you open an account. >> welcome back to options. this happened on thursday. just after the company announced that same store sales were up more than expected. and we saw people reaching to buy calls. up about 7%. obviously people really reaching to buy calls a lot more. >> record heat pretty much across the whole country. and that has led to an increase across the whole area. how much longer will the heat wave last? todd is with the weather channel. any relief in sight?

>> yes, melissa. that's the easy answer to the thing. when you look at it, that will bring in some of the cooler temperatures. we have a lot of areas. in some cases, warnings in the darker colors here. that's 25 states plus dc. there is still a number of spots within there and dealing with a lack of power. quick look at a few spots that will see some improvement. you will start to feel some of the relief. places like st. louis eagerly hoping for that relief. here is a look at saturday.

105 in dc. it will get worse before it gets better. could see some severe thunderstorms. so that cooler air will come at a little bit of a price. a good stretch of the heartland. 106 for saturday. sunday is your next chance to top off below the 100 degree mark. there is looking to monday. the region getting temperatures much closer to what you would see this time of the year. i did want to close the numbers. those areas today as far as the severe potential. i know a lot of viewers head out for the weekend. keep in mind saturday may be the best chance to see see veer storms. we will start to see cooler air that will last through. >> our thanks to todd of the weather channel. if 95 is relief for chicago, my heart goes out to you.

let's go to the charts. what do you see? >> a perfect lead in to the whole story. crop conditions are declining rapidly because of elevated heat. the issue is this. there is a record number of acres sold in corn and soybeans. those two things are in contact. corn and soybeans being the two biggest crops in the united states. we are talking about at or near all time highs. basically drought scares, the price action usually starts to top off before the crop declines. so here is what we're looking at. it's the dba, etf, which picks up a lot of commodities.

this rally leaves us at a very difficult level. same chart drawing the lines. the trend this has been in for the better part of 18 months. it's a big move to a difficult level. commodities we know have spiked. this is well ahead of itself in that point of view. >> being long corn is like being long drought. >> we are expecting reports that will tell us a little bit about crop yields and soil. but a lot of people are baking in, pardon the pun, reduced crop crop yields.

in terms of the amount of acres of corn planted. there you have got rain. we have got the dollar strengthening. the other thing is the demand side. very extended droughts. you start getting a much higher feed cost. >> mike, today you're buying the put. it is always good to open the play book and see how it works for those who are new to the show. you want the stocks to fall by more than the cost of the trade. that is where you see profits. above that you will see losses. mike? walk us through. >> i was just looking at the august 29 puts.

we have not seen as much of a pop in the applied volatility. you are only spending about 2.2% of the price. it is a great way to make a bearish bet. >> options are cheap in the august options. i purchased the august 28 put myself. you can get it definitely falling down. carter talked about the spikes. i'm bullish on the dba, i'm bullish on corn and soybean prices. it's been hot as all heck out there in the midwest. if you go out and look at the farm fields, they are not doing

well. yes you have a big planting season out there. we need rain out there this next week. >> i was surprised when i looked at how expensive these options are. they are not very expensive. speculating on whether moderating on the big east. that's fine. i will say that eight calls in dba traded today for every put that traded. when they have to get out oift, they are coming to me. >> one more time. want to fade the rally and food prices by shorting the dba. you could be betting the farm. defines his ris tok just $65. our thanks as always to carter brax on the. coming up next, the final word.

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>> bear protection. you got to buy some here. >> our time has expired. stay tuned for "money in motion." [ male announcer ] trading's like a high-speed train. and you don't want to miss it with thinkorswim by td ameritrade. you get knock-your-socks-off tools, simple one-click orders, real-time paper trading to hone your skills, plus anytime you need it support. ♪ stocks, options, futures, and forex. get your trading on track. thinkorswim by td ameritrade. trade commission free for 60 days, plus get up to $600 when you open an account.

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