economically sensitive. s&p 500 picking up 22 points. thank you so much for being with me. have a fantastic weekend. good night. an options trade that can get you along 30 bucks. we will break it down. it ain't no bank job. and game on. why were all the options traders taking to take two calls. the action begins now. >> live from the nasdaq market site, these are the traders here in times square. who says friday the 13 is an

unlucky date? helping stocks turn positive on the week. do you believe in this rally? let's give the money and find out. we saw a 200 point move in the dow. a big one but it was on light volume. >> i think we absolutely should discount them. i think we should discount that and j.p. morgan's earnings. what does everybody think j.p. morgan's earnings would have been this quarter? would it have been a number pretty close to what we got anyway? what a joke. the stocks that have been performing well, caterpillar is up a little bit today. this is where people run and hide. is this a great rally.

>> it's not the stocks. >> wells fargo came out today and it is probably a better barometer of the financial sector. that's considered a proxy year for china. for china it's considered to be not that great. one final thing, vix got killed today as you would expect when the s&p is up 22 on a friday. don't think it can't go lower.

>> what they said about commercial loan growth and mortgage origination. sets up for a ponl next round of stimulus there. >> i don't really buy a lot of what is going on in china, either. that economy seems like a tremendously risky situation. i think there is a lot of house of cards stuff going on there. on the loan growth mortgage origination, home builders have been on an absolute terror. we're talking stocks up two or three hundred%. so, is that a positive sign. it's a positive sign. someone fluttering an eyelash. >> to mike's point. i think what's is interesting is the wells fargo report i view as

genuine. the j.p. morgan report, i don't view as genuine. making a strong earnings beat on an investment bank. i agree wholeheartedly. i think the commercial banking side is very strong. investment banking business is half of the business as a whole and that is an area that will be under pressure in the future. >> let's look specifically at next week's roster. nearly 20% of the s&p 500 will be reporting. >> absolutely not. exactly to the point that we're just talking about, the investment banking business, di dimon said that it was weak.

he also said that the third quarter is started out like the second quarter. interestingly enough today. if you look at a five year chart you can see right here, europe and morgan stanley are one to one co-related. it's obvious from the chart and that's not we use the structure a lot. it it's. >> that's where you make the most money. that is where your profits are capped. >> so, today when morgan stanley

was around $14, i bought the 13.11 put spread in august. what am i doing here? i bought one of the august 13 puts for 30 cents. i start to make money when the stock is below 1270. my max gain i certainly wouldn't short the stock. i think one way to play the theme just like we spoke about from the j.p. morgan report is to buy a put spread. >> the investment banking business is really in the dumps and i really wish it wasn't.

it makes all the sense in the world. >> in general, people should be insuring their positions. if you don't collect on your life sheerns, are you really going to explain that much? you're only risk a 15% of the width of the spread. we would like to look that relationship. but it also has to fall over 7% to get to the top strike. i'm not a big fan of it. i also think that you don't have the wind at your back here given what we saw today. i think this is a counter trend trade at best. >> i would think with the gain today on the back of j.p. morgan that being bearish is a safer bet than it was. >> you are certainly going to put this on better than you could.

other house in morgan, that carries unlimited risk stocks. they can go up forever. this is put spread risks that could be worth as much as a buck 70. not bad. let's move on $700. 700. google is going in the next three months. call to the charge with carter braxton worth. carter? >> sure, let's have a look at the charts. i have three all the same time frame. so this is a five year chart. and google tops with the market 7 and 750. nice steady up trend. in principle, what is important

is take a look at the next drawing. as you work higher and higher, you also have a flattened top which means there is tension building here at the 600 plus or minus level. the presumption is each time you probe it you are removing more and more supply. same five year chart. on an annual basis. in '07, when they were at all time highs, they made $19.49. in '08, 2320, 2010, 3604. so this is called pe compression. the presumption is the resolution is up. we're going long here. it will be powerful. mike, do you agree? >> i do agree. i was reflecting earlier, this

stock is exceptionally cheap. one of if reasons they have this business is nobody else really competes with them. i don't think anybody else is going to. they have many businesses they are looking at ways to monetize. the droid phones and not really a driver of revenues right now. i certainly do like the stock. >> so mike is bullish and buying a call. do you think options are tricky, this is about as simple as it gets. that's where you see profits. that's all it takes. anything below you will see losses by expiration. what are you doing? >> i'm looking at the september 5.75 calls.

the options market is implying a lower move. this is costing me give or take about five% of the stock price. you may have opportunities to spread this into the future. a $29.50 up movement seems like a lot. in the scheme of what google can and has done in the past, it is not that much. >> an interesting point for google. all of these things line up. they are looking to get into new businesses which are largely commodity businesses where they can face margin compression. >> we have had various businesses exactly. more than that, facebook, i think showed us that people were very nervous about the weakness in displayed advertising which is their core business.

that's their go-to. google is a cyclical business. i like the fact that it's an options trade and not a stock trade. i do think that google options are too cheap. >> one of the most profitable trades is mike suggesting buying an outright call on google a couple of years ago. i do think it is interesting. as google gets into the new businesses, the surprises are going to come in. you will not have as big an earnings surprise . >> okay. one more time -- that's almost

$60,000. mike's call purchase costs just under $3,000, offers significant leverage to the upside. our thanks as always. got a question out there? the address is options action at cnbc.com. we will answer it on the show. we do love to get e-mails to don't be shy. also find a lot of educational material there so check it out. here is what is coming up next. >> talk about a mishap. last week a bearish trade on j.p. morgan but the stock sored on earnings. what's his plan? find out when we return. time for pump up the volume, names that were heating up this week. controller hilt video games with titles like max pain and grand theft auto, that must have stocking stuffer.

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>> call volume is up almost seven times the daily value. >> melissa, russel was just in court after having quite a week. he was wearing -- looking somewhat haggard wearing a blue polo shirt and jeans. prosecutors saying they plan to seek additional charges in addition to the charge and criminal plaint of lying to regulators. they plan to argue that he is a flight risk.

to potentially argue for bail. but a damning suicide note that sounds like a con investigation. i guess my e fwmpb o was too big to admit failure so i cheated. russel in custody here in iowa. >> last week, a bearish trade on jp morgan. he could still make money and here is why. on options action, it's now we make out like bandits. risk less so you can make more. thought jp morgan was in for a whale of an earnings disappointment.

>> don't risk your life. don't try and be a hero. >> let's stick to the options. to make a bearish trade, the august 35. to keep all of that money, he needs them to stay below $35. above $35, profits would trail off. rises above by more than the 1.15 he took in. meaning that he can make money whether j.p. morgan goes up, down, or nowhere at all. >> sorry. is this a robbery? >> not quite. there is a trade off. if j.p. morgan trades above $36.15, he will be on the hook for iniffinite losses. so he bought the august strike call and completed his bear call

spread and here is how it makes money. and the 50 cents he spent buying the cheaper higher strike. in order to keep all of it, he needs j.p. morgan stock to stay below $35 by august expiration. above that, losses kick in, but they limited to the difference of the strike of the call that he sold and the strike of the call that he bought minus the credit. and since the time of the trade, shares have rallied 6%, making this trade a loser. now options actions biggest fan s just want to know one thing. what will he do now? >> wfr we answer this, had you shorted last week you would have lost about $200.

ennis collected $60 on the sale and if he closed it out today he would have a loss of about $40. if stock can stay below $35, he can keep all of the money. he can be wrong on the direction but still right on the money. this is why some traders like to be short some premium. >> in this case, going into the trade i actually was not t so confident that jp morgan was going to go down a lot. >> that's why it goes hand in hand. a general belief that financials are december tinned to go lower. >> that's right. you don't get out of your trades immediately when something does not work out. you have to look at the trade. this is something that time is

working for you. then you stick with it. >> volatility got crushed. earnings came out. he is better off. i think the name is going higher so i am getting out. you have done pretty well on this if you shorted the stock. >> i am curious. next week is a big week for earnings. but it's also ben bernanke testifying on the hill. will what he says influence whether you keep the trade? i would imagine that could be a huge possible catalyst good for the stock. >> i'm relative ly bearish. i think we have a lot of recessionnary forces. >> coming up next, the final word from the options pits. [ male announcer ] the markets keep moving. make sure the news keeps coming with thinkorswim by td ameritrade. use the news links breaking stories with possible breakout stocks,

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sport together. we're sure he will be the sentimental favorite in any competitions and that's what we call optional viewing. truly optional. >> wow. >> all right. time now for the final call. the last word from the options pit. >> i like mike's google trade but spread it out because that's a lot of dough to lay out. >> financials were not as pull bullish. >> if you are going make a bullish bet, a name like google is the way to go. >> for more options actions, you go to our website. see you back here. in the meantime don't go anywhere. moneyin motion is up after this break. [ male announcer ] the markets keep moving.

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