talk about a scandal -- >> you were naked in bed with your ex-husband. >> no, not that type of scandal. we are talking about a scandalously good facebook trade that can make you money even if shares of the social media giant never go above $38.

dan nathan will break it down. why were all those options traders bidding on this auction house? >> sold. >> scott nations with the reveal. the action begins right now. indeed it does, live from the nasdaq market site, new york's times square, i'm sitting in for melissa lee. these are the traders in times square and san francisco on a very busy expiration friday. forget stocks, folks, the action's all in bonds this chart has wall street really freaked out, the yield, on the ten-year bond and continues to defy gravity. so, how can you protect yourself against rising rates? we want to know. let's get in on the money and find out. dan, i want to get to you first of all, seen investors flee interest rate-sensitive stocks, going to keep on going? >> listen, we have had this really historic rise in the ten-year rate from 16% just to two months ago to now making two-year highs about 290. what we've seen here is a move out of these sort of bond proxies, or companies that are

very interest rate sensitive. we have seen this in utility, seen it in telecoms, the home builders, to me, we have a situation where the data and the fed that's very data dependent, looks kind of dicy, the fed taper in september. who knows. stocks have gotten thrown out baby with the bath water that could be the way to play for the fed not taking their foot off the pedal next month. that's something that, to me, i think a lot of these sectors starting to look interesting, interesting technical levels. >> everyone trying to work out interest rates rising for the right reasons. get to you, mike what level on the ten year do you think will be the baseline for stocks, 3% 3% is it more? >> any of the whole figure numbers seem to have a big psychological impact on investors. i think they will in this case. the only thing i will say is that because everyone is so skeptical of fixed income, everybody is so concerned about rising rates, makes you wonder if the market is one-sided here.

i get a feeling. everybody's so concerned that rates are gonna rise that we could get some news that the fed, for example is not going to take their foot off the gas. remember the reason they would do that are real signs of inflation, real signs of economic growth and i don't know that we really had enough of that yet to encourage them to take their foot off the gas at this point. so think 3% would be a really seikaly damaging number for the markets generally but i'm not 100% sure if we might actually find a little bit of resistance there. >> interesting point. scott what do you reckon? justified in being fearful of rising rates? >> this may be overdone. we know rates are going to go higher. the market is a balance lune and qe is the air in the balloon, some of the air will come out. a long time i thought it was going to be q 4. the market around to that point of view r i don't think many people, lockhart said this week, probably not going to be september and i now think it is probably less than 50/50 happen in september but almost a lock to happen in q 4. and let's look at a bunch of these names that are really

interest rate sensitive, whether it's utilities or the home builders, what these are many of these are bonds stressed up as stocks and they have had a horrible run, particularly the home builders. >> we know it is going to happen, a case of when and not if. dan, u.s. specifically looking at at&t. what do you make of this? >> tell you why i got to at&t, when you look at the home builder, underlying components, the home building stocks, they bottomed yesterday, the market was down a lot, to me, very interesting. at&t is a company that pays a 5.25% yield, down 10% from the recent highs, other than bond aspects of it, has the potential catalyst of the new iphone coming out in september. want to be contrarian, stick my toe in the water, not following buy the tlt yet, one way to do t today, the stock traded at 34, at that big support level, you see on the chart there i want to play for a move back to 36, potentially higher over the next couple of months, went stock was 34 today, i did something really simple, i just bought the

october 34 call for 780 cents, my break even is 3480, above that, unlimited profits, i would probably, get a quick bounce in the next couple of weeks, probably look to sell a higher strike call against it, reduce my break even and have a vertical spread. but to me, this is one way to play for no september taper because i think you would see a stock like this bounce. >> what do you make of at&t? scott? >> i think this trade makes sense for the same reason mike said, probably overdone. now, dan is doing something we talk about low implied volatility stocks, buy outright options, don't have to get cute and use spreads. another thing this is a countertrend trade. the chart says earnings on april 23rd is really ugly. dan is risking a little bit to potentially make a lot. i would not he is tight take a profit if you get a profit in this one. >> agree or disagree, mike? >> no i agree with the trade. this is the time when do you want to use options, when you're making the countertrend trades, if ball is low, that is one of the benefits here, the other factor is names like at&t,

especially buy slightly longer call option, pay the big dividend, a tendency for the upside calls to be relatively cheat it is a rate trade, rates move violently, the stock could move with more volatility which you expect which subjects a trade like this can make a lot of sense. >> again it is contrarian here, define your risks. scott made a point, volatility is low, you buy that outright, call, define your risk and see what happens here. >> let's wrap this up with a little stocks versus options then. want to buy 100 shares of at&t? going to set you back about $3400. dan's call purchase gives him big leverage to the upside and will only set him back $80. move on, guys, look what gold was up to this week, a huge week, in fact, rising 4%. according to some trader, move is just getting started. jackie deangeles, host of the web sensations called "futures now" what have people been staying in. >> a week that saw gold shining

a little brighter you could same the yellow metal, of course, breaking out above that key 1350 level, rising to a two-month high and three reasons why some gold experts think that the move has just begun. first, hedge fund whales exiting the position. in the second quarter, george soros got out of position in the gold etf and paulson cut in half his massive stake in the gld, may sound like bad news but mean's ton of overhead supply no longer weighs on the market. second reason for the move higher, mandy, physical demand. gold purchases by chinese and indian consumers jumping 71% and 87% compared to last year a lot of the buyers appear to be bargain hunters. the technicians through the think the consumers could be right here, at least in the near term that bring us to the third reason. that's the speeds of this move. gold may have simply fall toon far too fast as bank of america, merrill lynch's mcneil curry point out to me own futures now,

said "this trend has gotten way too stretched, like a rubber band and now, we are snapping back." so, how much higher can we go from here? well, according to curry, this move could take gold to 1450 in the near term that's almost another 100 bucks from here, man kim. >> thank you very much for that, jackie deangeles. i want to get more on this now with mike. what do you think about gold? go higher from here sore this bounceover done? >> well, certainly, there's technical factors in any financial asset. i am not a gold bug as a long-term investors, gold doesn't generate any free cash flow, it is a proxy in the long term for some financial value. there was a study by duke that said a roman centurian was paid the same as a u.s. army captain is today when you look at it in gold terms a way to hit the pause button if you're concerned

about issues like inflation. all of the volatility we have seen in rates suggests that people are concerned about inflation so they might be looking to run back into gold at this point on many of these factors. wouldn't surprise know see it bounce here, i don't look for it as an investment. volatility gold very high. i'm looking to take advantage of that volatility by buying a call spread in this particular instance because options are also elevated. >> a little financial advice and also some roman history thrown in. thanks very much, mike. okay. s here the deal. spike buying a call spread as he said. similar to dan's call purchase but a little trickier. so let's crack open the playbook and see exactly how it works. a strategy in which you buy one call and sell a higher strike call against it to reduce the cost. you want the stock to go to that high strike, that's where you make the most money. that's also where your profits are kept. okay, mike, with all of that said, give us the trade. >> i'm specifically looking at the november 135145 call spread that higher strike actually dark telling the the 1450 level in

gold that jackie was just talking about going to spend $4.50 for that lower 135 strike, sell the other one against it for $1.70. a net debit of $2.80 so i'm paying just over a quarter of the value of the spread. i am spreading because the price of options, as we have been seeing all the volatility in rate, seeing all the vol knit gold, those prices have gone higher what i'm trying to do is mitigate the cost of that call purchase. that said, when things are this volatile and we did see gold, you know, spike up quite sharply here and looking like it's testing some sort of a relative strength index to the upside that's one of the reasons i want to use options, in case it pulls back a little bit and this is overenthusiasm. >> hedging your risk. what we like. what do you think of the trade? >> it is okay. i'm not a fan of gold and i don't see inflation any time soon, to me, not something i would commit capital to. carter nailed this one a month or two ago at 1200. you know, my comment at the time, i think when mike got long it then, i think you can have a very interesting technical support level at 120, resistance level at 140 in the gld and

getting near there. i don't really have an edge there. but the trade makes sense if that's your view. >> if you have a question, by the way, send us a tweet at options -- sorry, at cnbc options. going to answer in our 101 web extra. oh also, scott has a trade on the vix, check it out at the same time n addition to scott, you will find great trader blogs, educational material and exclusive trades. go check it out. the meantime this is what a's coming up. talk about saving face, shares of the social giant, facebook, are stuck below $38 a share. that suits dan just fine because he has got a way to make money if the stock goes up, down or nowhere at all he is going to show you how. plus, it's a secret buy indicator every investor could use to make money. and it's right at your fingertips. what is it? we'll reveal when "options action" returns.

[ indistinct shouting ] ♪ [ indistinct shouting ] [ male announcer ] time and sales data. split-second stats. [ indistinct shouting ] ♪ it's so close to the options floor... [ indistinct shouting, bell dinging ] ...you'll bust your brain box. ♪ all on thinkorswim from td ameritrade. ♪

[ cows moo ] [ sizzling ] more rain... [ thunder rumbles ] ♪ [ male announcer ] when the world moves... futures move first. learn futures from experienced pros with dedicated chats and daily live webinars. and trade with papermoney to test-drive the market. ♪ all on thinkorswim. from td ameritrade. welcome back to "options action," time for total recall, we look back on some of our winning traced two weeks back, dad made a bullish trade on facebook, the stock has gone, well no where, still made a lot of money. in fact, it was such a genius move, it is already the stuff of legend. let's take a look.

>> fame. power. fearlessness. and above all else, risking less to make more. >> i have never seen anyone get that rich that quickly. >> this is the story of dan's facebook trade. this is the true wall street story. we begin two weeks ago, that's when dan's love of facebook grew to the level of crazed obsession. >> they are doing things well. >> but simply buying the stock wouldn't satisfy his craving. he needed more. more leverage. so, to make a bullish bet, dan bought the october 38 strike call for $2.50. now, to make money, he needs facebook shares to rise above $38 by more than the cost of the trade or above $40.50 by the

october expiration. but obsession came at a cost and spending $2.50 just to bet on the social network shocked even his closest friends. >> he had gone too far. i saw it and everyone around him saw it. >> but then, just as all hope appeared to be lost, dan found the way to risk less and had his greatest breakthrough yet. >> i sold one of the august 38 calls. >> that's right. brilliantly, dan decided to sell the august 38 strike call for $1.20, turning his trade into a call calendar. >> he was at the top of his game. >> and that made it easier for dan to cash in. how? well, between the longer dated call that dan bought and the nearer dated call he sold, dan cut the cost of his trade to a mere $1.30. so now, instead of needing facebook to rise above $40.50, dan makes money if facebook

shares rise above $38 by more than the cost of the trade, or above $39.30 by the october expiration. >> sometimes, the pieces of the puzzle justify the. and that's exactly what happened. >> but what no one told dan at the time was that there was a major tradeoff involved and in order to make the most money, dan needs facebook shares to stay below that $38 strike price at the first expiration, but then rise above $38 by more than the cost of the trade by the second expiration, or, in this case, above $39.30 by october expiration. and since that epic trade, what's happened? well, facebook has stayed flat. that means that the august call has expired worthless and dan now has a great shot at cashing in. so, what's next for dan? america waits for that answer,

but while they do, they still marvel at his abilities. >> when you're a star, you're a star and he shines brighter than anyone. >> oh what can i stay in what can i say? options trading doesn't work out for you you dan, you can become a star of e true hollywood stories. >> i want tyler mathisen to narrate my life like that. that is awesome. options trade you 38 ipo price was going to be near term resistance, a lot of overhang there what i did was i sold the next week, august 23rd expiration, 38 call for 40 cent he is, further reducing my break even and i really want the same thing to happen, i want the stock to stay right here. >> what do you reckon, scott? >> why we like calendars, the math working for you, now that dan has sold the weekly, he gets the math really working for him. i like to call those super calendars, the thing is these calendars can be bullish, bearish or neutral, sort of neutral because you wanted it to go where it did. >> mike, want youed to be a star like dan, would do you the same?

see facebook trading above 38 bucks any time soon, for example? >> you know, i have to say the move we have seen on facebook did take me a little bit by surprise, i thought more skepticism would greet the rally, i thought that was great trade. these are great trades in general actually, calendar spreads, especially when you think there is some opportunity for the market to become more volatile in the coming weeks or months and selling the short dated options, ahead of labor day, a great trade and i like what he is doing to handle it, too. >> vind cakeses, dan, vindications. up next from facebook to twitter, well, this week, carl icahn sent a tweet and add 40 billion to apple's market cap. very nice. thank you, twitter. how can you use social media to make money in stocks, too? [ indistinct shouting ] ♪ [ indistinct shouting ] [ male announcer ] time and sales data.

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. >> my mission is simple, to make you money. i'm here to level the playing feel for all investors. there's always's bull market somewhere and i promise to help you find it. "mad money" starts now! hey, i'm cramer. welcome to "mad money." welcome to cramerica. other people want to make friends, i'm trying to save you money. call me. 1-800-743-cnbc. up down, flat day, there is something you need to understand. investing can be a lot like comedy in both disciplines,