that jobs number, right, on the one hand, on the other hand. >> it was not a great jobs report, everybody agrees on that. >> thanks for watching us on "closing bell." >> "options action" starts right now. everyone have a good weekend. this is "options action." tonight, gas's pain, your gain. they're teaming up to get you along valero for under a buck. they'll break you down. >> dan nathan has an option on jpmorgan earnings this ka turn time into money. it's a whale of an opportunity. he'll show you why. and why wi they all joining the mile-high club. the action begins right now. >> the largest equity options exchange. i'm melissa lee. the dow closing now for the third straight day and the make

or break moment. earning season is upon us, so the question is do you stay long into next week? let's get into money right now and find out. before we do that, though, we've got to talk about apple. it looks like there are signs of apple breaking below the 50-day average by moving lower than 2% on days where markets are basically flat. >> yeah. so that headline came out that one of the factories in china where they make the iphone 5, the stock took a leg down. it was weak all day. here's the thing. i think it feels like the momentum has come out of the thing right here. we had this buildup into the iphone 5 release and then obviously the units were a little disappointing. 650 is this huge, huge level here. it was prior resistance. and so, you know, remember here, this thing makes up a disproportionate amount of it. a lot of the portfolio managers are individual investors. at the end of the day this thing

has worked really well. you have a lot of people just taking some profits here into what is likely going to be a disappointing q4. >> mike khouw, the apple's bulls out there, there are plenty of them, will point out to the sellout of the iphone 5 but also the historical pattern that we've harped on so much. the sort of pullback in the stock. do you think that this time it could be different? >> well, i think what's interesting is that we actually had a little bit of a delay, didn't we, in the pullback this time. it actually sort of hung in there a little bit longer than normal. here's the thing about apple. they say it again and again. they have to deliver every six months, products that are going to knock it out of the park. i see high margins relative to their accounts, particularly samsung versus 26. and every single time i look at this thing, i think, well, all it takes is something to go wrong on the margins side or the gross side.

look at all the ones that have come before, all the handset makers that have come before. all of them had their run and lost it. so for me, you know, i don't see any rb to start chasing it here. >> sounds like mike khouw is thinking of research in motion which seems unthinkable given apple's run and the 50% margins that can be found on the iphone 5. >> that's absolutely right but part of the problem with the iphone 5 and dan toucheded on this, they can't fill the demand. i think we've seen this before. but it's different this time. the screen technology is different and they're not able to fulfill all the demand they'd like to. i think it's different for another reason. apple's never really had competition before and in the form of samsung and google, i think they have a real competitor now. >> but the idea for apple is it has to hold 650. are you going to wait? >> they're going to continue to come down. i think the q4 is backward-looking. we know they onto had one week of iphone sales less than

expected. i think we can see a similar setup into the q2 earnings. >> so there will be an opportunity, just maybe not right now. >> i think it breaks. >> speaking of earnings, mike khouw, let's go out do you and talk about this earnings picture, because that could be the next make-or-break moment for this rally here. >> yeah. i'm pretty pessimistic, i've got to say. mine if we take look at some of the earnings that we've already seen, with've had norfolk southern, nike, fedex, all of those things are not basically telling us a very good story. we're going to be talking about another stock soon. hidden in the midst of all that is the diesel demand. down 500 barrel days from its highs. what does that tell you? >> there's less truck travgs less economic activity, and to me that just doesn't bode well. >> just quickly with the volatility lower are you seeing it bought ahead of the earning season in. >> we do.

with the vix in the 14s, i think you have to buy volatility. you have to buy protection. there's lots of reasons to be worried. mike mentioned several good reasons to be worried. caterpillar lowered guidants. i think it's impressive that they can see out that far. >> as we had mentioned there are a lot of earnings out next week, bun, dan, you're specifically focusing on the bang stock. often it sets the tone for the rest of them that follow. >> no doubt about it. jpmorgan, here's the best of breed. here's a stock that had 33% move. it's been all over the place, but it's also in a space and the leader of a space that's done amazingly well here so a lot of these names are moving back toward these highs. so as we get deep sbeer q4 there's a lot of gains. just like we talked about apple. i think in a lot of ways the stocks really have to hold to keep this market together here. next friday we're going to have wells fargo and jpmorgan and

they're going to be important for the rest of the earnings cycle. >> just quickly on jpmorgan, what's your general view? >> listen. i think company in particular had a lot of self-inflicted wounds this year and i think they probably learned a lot from this option. it's basically shy of the 3% move it's had for the last three trailing quarters. i think this is going to be a quarter that's behind them. i think the guide' is going to continue to be less than stellar and i think the stock stays within this implied move. i want to look to november a little bit. i'll get to the trade in a second, obviously. but to me there's a differential between october and november worth taking advantage of it if obama gets re-elected -- i think there was excitement with romney -- >> i want you to explain the differential to all the audience. but in the meantime we're going to explain the put calendar. we've done calendars of course,

so let's crack open the play book and see how this thing works. in this strat jir you use the money to buy a longer data put. this is a bearish strategy. it does require timing though. below the strike of the longer dated put that you're long by the second expiration. so, dan, walk us through the trade. >> sure. so i did this today. here's the thing. i'm going to do this trade in earnest. like you said, i have to thread the needle and get the strikes right. i chose october/november, when the stock was basically 4 x $2. so what i did was i sold the october 41 put at 50 cents and i used the proceeds to buy the november 41 put for a dollar. and so what i'm doing here is trying to take advantage of the difference between october call, basically four points over november. what i need to happen to make

money on this trade, be i october expiration, which is basically two fridays from now, i want the stock to be higher. then i effectively own these november 41 puts for 50 cents, half of what they're trading for right now. at that point i want to own november. i think november is going to be keep cheep and could be more volatile. at that point i'll hopefully look to spread these. >> you know, one of the things that's interesting about this trade is the fact that the price of options is actually very low right now. that's also true for jpmorgan. what it's doing is it may be understating that implied move just a bit and it may forgive you a tail wind. they're not likely to decay a lot. so i think in some cases, some of these calendars, you might look at them and say, well maybe there's not quite as much here. i tlirk is. i like the trade. >> i don't think jpmorgan has done anything but hit the number on the head. given the turmoil they've been

through recently, i think it's a lock they'll be within a penny or two. that said, i want to point out i'm more bullish these names than dan is. you're only risking 50 cents. the math is working for you and in calendar, the math works for you best when you're doing strikes that are very close at the money, and dan is doing a strike na's very close at the money. >> dan, let me ask you this. if you were included including to make a stock, what happens to the options of the other banks? >> they would probably settle in a little bit. this is one that has been more controversial than some of the others, but then you have the morgan stanleys that imply volatility generally higher, so those will stay until their results. but like a wells fargo would soften a little bit i guess. >> let's bottom line this. want to short jp more gone? that could mean a whale of a loss. on the flip side dan's put

calendar caps his rif tock just $50. let's move on here. the recent refinery outages in california has led to severe pain at the pump. is there fine opportunity. with the all required carter braxton worth of cop oppenheime >> hi, melissa. what keeps it healthy is it keeps checking back to trend and keeps finding support at the line. most kre elementarily this sell off, 35 to 31, that's key. i want to look at the next chartd and talk about that selloff, going from the one-year chart to two-year chart is going to put in context the same move 20 to 35 but it's the selloff, the checkback that takes you back to prior tops which represents support rmt and then put the same move, 20 to 35 of the longer term chart.

you have a well defined less defined chart of five years and in the long-term chart it puts in context what we're talking about. this is a chart that's gone from 5 to 80, 80 to tell and basically in the process of moving back toward the middle of the range here. so we would guess 40s or better. >> mike out in los angeles, you're doing a little research, boots on the ground. what are you seeing on gas prices and what's your take? >> well, the gas prices obviously have been spiking here. it's amazing. you go to bed one night and come out the next day and drive past a gas station and you're going to see prices up 15 cents a gallon overnight. it's pretty staggering. pretty much that's because there's a couple issues. chevron had a fire and exxon on had a fire in torrance, california. that's put a lot of pressure on the gasoline markets here. that sets up very well for those

that can like va lalero. they do about up to 300,000 barrels day. this is really a great tail wind for them. i actually did a little back of the napkin. i think this added $600,000 a day based on 275 barrels day. the other thing is this company is really cheap. it's trading at 7 1/2 times on the earnings. but i don't tell people to buy stocks that are up 60%. so we're going to have to look for a better way to do it. >> all right. so mike obviously is bullish and instead of buying stocks he's simile buying a call. it's always good to hit the playbook for those who might be new to the show. when you buy call, you want it to rise by more than the cost of the trade. that's where you see profit. that's all it takes.

but anything below that level you'll see losses by expirationing and that's, of course, the tricky part. so mike, walk us through. >> not much to walk you through. it costs about 95 cents. >> you know it's been a few weeks and mike's buying calls not doing trades. since he moved to l.a., he's doing. >> you laid out the fundamentals and like you said i don't recommend people buying stocks up at 60%. if you want to express it that way and laid out volatility is cheap, this is the way to do it. but, remember, you need a big move or otherwise you own a call that's decaying over the next few months. >> mike? >> relatively it's about the cheapest out there. i would look at it differently.

i would sell a put spread and just collect some of this money. you know, mike lays out a case for the stock being cheap and selling put spreads is a great way to take advantage of that. >> let's hit the stocks option. do you want to hit valero. 100 shares will set you back around 3,2$3,200. it will set you back less than $100. we will see mr. worth later on in the show. in the meantime, got a question, send us an e-mail. the address is --. i love to read them. check it out. a "options action".cnbc.com. i'm us and check this sigte out. here's what's coming up next. jack, khouw and carter made a bullish statement. can they find a way to make even more? find out when "options action"

returns. time for pump up the volume. need a vacation? this company jet sets to over 300 destinations worldwide. stocks soared this week while oil took a plunge and options traders jumped on board. who is it? the answer when "options action" 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, plus get up to $600 when you open an account. plus get up to $600 between taking insulin and testing my blood sugar... is this part of your life? freestyle lite test strips?

why, are they any... beep! wow, that hardly needs any blood! yeah... and the unique zipwik tab targets the blood and pulls it in. so easy. freestyle lite needs just a third the blood of onetouch ultra. really? yep, which is great for people who use insulin and test a lot. max and i are gonna run out and get them right now. or you can call or click today and get strips and a meter free. test easy. ends columbus day. inventory clearance sale get 3 years interest-free financing on tempur-pedic. save 10%, 20%, even 35% on a huge selection of simmons and sealy clearance mattresses. even get free delivery! don't miss 3 years interest-free financing on tempur-pedic. the inventory clearance sale ends monday. superior service, best selection, lowest price, guaranteed. ♪ sleep train ♪ your ticket to a better night's sleep ♪

make sure the news keeps coming with thinkorswim by td ameritrade. use the news links breaking stories with possible breakout stocks, options with potential opportunity, futures and forex with in-depth analysis. it's an all-you-can-eat buffet for all things trading. thinkorswim by td ameritrade. it doesn't just deliver news. it's making news. trade commission free for 60 days, plus get up to $600 when you open an account.

where are the options traders pumping up the volume this week? delta. at one time it was over three times the average daily cal volume. back in time for i need more cash. let's face it. who doesn't. let's find a way to get even more money out of it. last week kohouw and carter foud a way. here's how. on "options action" sometimes risking less to make more just isn't enough. sometimes you want more cash and that's a case with khouw and cart 'eers winning trade on the sands. they thought it looks like a sure bet. buy 1g 00 shares of the volatile stock that leaves him more naked than prince harry after a billiards game. so to define his risk 44 strike call for $1.65.

now mike has a right to buy stock price. but in order to make money on the trade, mike needs the stock to rise above that call strike price by more than 165 he spent on the trade or in this case above 45.65. anything below that level and mike will see losses by expiration. but now instead of spending more than 4 grand to buy 100 shares, mike spent just $165 to buy that call. that's the most he could lose in the trade, but it gets even better. why's that? because if shares do rise, that call will increase in value faster than stock meaning more money in mike's pocket. and since the time of the trade, lvs has surged f% making khouw and carter winners. now these guys are living the high lives, partying with prettyish royalty until the break of dawn, but, hey,

fellows, before you end up in the tabloids let's get back to the trade as "options action's" biggest fans all around the world want to know one thing, how do these two high rollers make even more cash? >> before we get the cash. you'd be looking at a 6% gain. not bad. but mike's call option cost a buck 60 at the time of the trade. can be sold today for 230 and that's a return of 40%. so the question is do you stay long with this name. let's call back to the charts and carter, aka prince harry's muse. do y do you. >> we're going to come out of this one. >> come oust this one. mike, what do you say? >> yeah, i'm inclined to agree. right now this option is pretty close to at the money. it's starting to decay much more rapidly here. we have some profits. it's a nice win. we're going to take the money

and run. >> the trouble is we had it where we came out less than expected. >> and las vegas sands is one of those that leveraged more to. huge portion of the revenue comes from mccow and that has been rt opaque and that's not been very good. we heard again about china. think that's going to be a problem going forward. looking at las vegas they're actually doing better in las vegas. again, that's a small portion of their revenue. >> mike at this point would you foresee betting more heavily on a las vegas leveraged name? >> more interesting i've had to do a couple of conferences and i definitely noticed there's a lot more traffic there year on year versus the ones i was doing a year ago. i don't know that the gaming revenues have picked up quite as much so i'm not overly optimistic. plus some of these names are also not trading at the cheapest possible multiple so you really need to see some aggressive

growth in las vegas to be encouraged to step in at this level. >> mike, conferences? >> i was going to do the same thing. that's what he calls his vegas junkets. our thanks as always to carter braxton worth. a reminder as we head to break be sure to follow us. and dan posts regular updates of his trades on twitter. finally if you're on facebook stay posteded on our trades throughout the week on facebook.com/optionsactions. coming up the final call from the options pit. >> what's your best option? follow us on twitter, get breaking news and analysis. follow us on twitte twitter @cnbcoptions. [ 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. [ 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, options with potential opportunity, futures and forex with in-depth analysis. it's an all-you-can-eat buffet for all things trading. thinkorswim by td ameritrade. it doesn't just deliver news. it's making news. trade commission free for 60 days, plus get up to $600 when you open an account. i was in bangkok myself, but i didn't see you at the disco. which disco did you go to? >> the lowest class. >> i go to the lowest class of all. >> that was marc faber talking to jim rogers on the new line

known as futures now. it's live streaming dedicated to futures trading every tuesday and thursday at 1:00 p.m. the show is also available on demand at futuresnow.cnbc.com. learn what they do when they're at the clubs in bangkok. you would have thought it was a conversation between carter and khouw. >> conference? >> conference in the disco. all right, time now for the final call, the last word from the options pits. mike khouw, why don't you kick it out for us? >> sure thing. i think it's sure hedged way to make a bullish bet. >> scott. >> this week's web extra is all about stock's replacement and app. . we take our first question from facebook. >> and dan. >> follow us on twitter and find out what i use. >> it looks like our time has expired. i'm melissa lee. for more "options action," go to our website. see you back here next friday.

meantime "money in motion" is up right after this. [ 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. 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, options with potential opportunity, futures and forex with in-depth analysis. it's an all-you-can-eat buffet for all things trading. thinkorswim by td ameritrade. it doesn't just deliver news. it's making news.