so until next week, there's only one thing i really want you to remember when it comes to your money and it is this. people first, then money, then things. now you stay safe. bye-bye! this is "options action." tonight -- >> there must be some kind of hot tub time machine. >> the sell-off has investors thinking of 1987, but maybe the market's more like 2000. we'll tell you why and how you can protect yourself. >> first internet stocks, then biotech, but you won't believe what sector traders say is next to fall. we've got the setup. knocked down, but not out. >> everybody can change! >> solar stocks have taken a hit, but they're showing signs of getting off the mat. we'll tell you why they could be

a good buy now. the action begins right now. welcome to the nasdaq market site. i'm melissa lee. these are the traders here in times square. the selling on wall street continues for another week. the lousy action in the final stocks was only half the story. dom chu? >> the xlf, the etf that tracks those financials, closed down more than 1%, but the activity in the options pits was feverishly bearish. in today's trade, the biggest one, someone actually bought 30,000 of the april 21st and -- april 21.5 strike puts for $21 each. that's a nearly $1 million bet that it will get better for these financials before next friday's options expiration. next week we're getting the earnings from citigroup, you've got bank of america, goldman

sachs, others, next week, very heavy overall for the banks and reporting season. melissa, could there be more pain for the banks? that's going to be the real key. >> thanks so much, dom chu. how worried should we be as we head into another big week for earnings and specifically bank earnings. let's get into the money and find out now. don has been bearish on financials at large, jpmorgan specifically. >> we did a trade, i think, a month ago. for this expiration. we were looking went the stock was above 59. for me, the company had really guided down. they talked down earnings back in mid-february. and i'm actually very surprised that investors were surprised today by the disappointing quarter. you know, down 6.3%, the one-delay decline was the worst decline in two years for this company. this was a company that has routinely beat. so i don't think the sky's falling here. these are cheap stocks, but one thing that's very important, this was part of my thesis, this is going to be a very tough

year. a lot of cost cutting, a lot of stuff that manufactured earnings over the last couple of years that got these stocks where they are. >> and it's been an underperformer anyway against its peers. >> even if you take a look at wells fargo, the most profitable bank, that's a little bit of a joke when you consider that jpmorgan had a lot of one-time instances. but the thing the that wells fargo's earnings also included a lot of one-time positives. they had big gains on their equity portfolio. >> taxes were favorable. >> they had a lot of these things going on, that obviously is helpful. if you take a look t a what's going on here. a lot of people talk about, if net interest margins normalize, they talk about a steep yield curve being a benefit, but that compresses mortgage demand. and when we take a look at all these banks, they're telling us flat-out, that's a big part of the problem. >> the problem with jpmorgan, and dan mentions this, if you're going to lower expectations, then you better meet or beat them. and when you miss the lowered expectations, you're going to get crushed. now, we've talked about higher rates need to help the banks,

and god knows the banks need some help. the problem is that we've been saying that for a long time, have been saying it for months and months and months. if you look at a ten-year treasury yield, it's not going to help the banks, so they all rolled over and it's going to be ugly until we start making good news on the trade. >> xlf is not a great proxy. these are short-term options. i think this trader most likely was looking at the dollar cheap premium or maybe looking at -- >> why isn't it a good proxy? >> because berkshire hathaway is the second largest component of it and it's not reporting. there are a couple of others that are not reporting in the time period of this expiration. to me, sometimes on days like today, traders scramble to lower their delta exposure. they go in there, their risk manager taps them on the shoulder, what's the cheapest premium i'm willing to lose against some of the longs that i have on a big down day. and that could be what's going on. >> the interesting thing about this trade is that they are almost right there now. this is not a bet that the stock market is going to drop a ton.

it's a bet that the xlf is going to drop a little bit more. >> let's get some more on the financials. call to the charts was the only carter braxton worth? what do you see? >> what's really important is this is the second biggest sector in the s&p after technology. it's held up, but it's not holding up as of now going forward, from what we can see. so here's the best part of the financial. this is the regional bank index, and it is still on trend, albeit it closed right on the trend line today. this is the fifth time we've touched the trend line. and the presumption is this is going to give way. let's look at some others that have already given way. this is the bkx index which picks up big things like wells fargo, jpmorgan, citi. and it's violated a trend once, and today it's definitively a broken trend. let's take it a little bit further. here's a stock i like to pick on. this is morgan stanley. this is not only broken trend,

but it's now considerably below trend. and we think this has got more to go. for comparison purposes, take a look at the same chart of morgan stanley versus goldman sachs. goldman sachs, we believe, is leading the way, telling us where morgan stanley is headed. so back to morgan stanley chart. we broke trend today. earlier this week, they closed at $28.50, we would think this is headed towards $25. >> mike, you also agree with a bear stance on morgan stanley at this point? >> it looks like the sector is fairly week. morgan stanley is an interesting case. it's not like it's overwhelmingly expensive. it's trading at less than one times tangible book value right now. obviously, they're weakening in the investment banking space compared to goldman sachs. however, that's not their only core business. they are really big in the asset management business, which tends to be a little bit more stable and has really benefited from rising asset prices. you know, that said, i don't see a lot of growth for them in the immediate horizon. and what's also interesting, they're going to be reporting on the 17th. this is a nape where, in fact, options are relatively cheap

compared to how much the stock has been moving around, which i think is kind of interesting. so i'm going to look to put on a trade that will capture that earnings specifically, i'm looking out to june, and i'm going to put on the 28.25 put spread. you can spend about 90 cents to put on that trade and not risking a great deal of money. and when you take a look at what the market's doing right now, it just seems like it's easy to imagine this thing could move $1 one way or the other. >> let's say the markets bounce next week, what happens to this trade? >> i actually -- >> do you need to believe the markets are going to go lower? >> i think after the week that we had, and when you look at the stock down 15% in the last two weeks alone, it was almost going to make a new 52-week high. i was long some xlf puts into this week. i closed them today. as a trader, you don't like to press things on lows. you could be doing that here. to mike's point, you could see 26 over the next month or two. the activity in the capital markets is really, really bad right now. and i can sigh it from where i am. >> this is a great point. i just pointed out the options

are not that expensive. one of the things is, this is going to come in a lot less if the stock moves up a dollar, especially if that happens next week. otherwise, if the stock was basically at all-time highs and we were facing the same thing, you would probably just buy a put and look to spread it. here we just spread it ahead. >> carter has a target, a target of 25 you can bucks. reduces the cost of the whole thing and reduces the penalty of that soccer ball crush that we talk about once earnings are released. so this is a case where doing a put spread makes a whole lot more sense than just doing an outright put. >> let's now move on to a question every investor has to be asking right now. what will be the next sector to fall? first, it was new internet stocks like twitter and facebook, then the biotech bust, which we called on this show. so what is the next one? dan, what do you say? >> to me, it actually doesn't have a whole heck of a lot to do with some of that real sexy technology stuff or biotech. to me, you know, listen, the world is convinced, or at least the fed is convinced in the investor world that the economy

in the u.s. is improving. i'm not so certain about that. i would rather be a bit skeptical, based on some of the price action we've seen in the equity markets up here. so to me, i want to look at really kind of economically sensitive sectors, like the transports. you know, this is a group, when you look at the iyt, the etf shares on the transport, when it broke out at $100 in early 2013, it went up 40%. you would have thought this thing was a social media company last year. it's not, okay? so to me, when i look at the iyt, you know, we have some big transports, about the top five holdings in that etf make up almost 50% of the weight. and i actually think, it just recently made a new all-time high. to me, this is a sector that i think if we get mildly poor economic data, the market stays the way it is. i think this is the next sector to drop. >> do you agree? >> what's interesting, fedex and u.p.s., these are stocks that are valued, essentially, based on, you know, a recovering economic growth story. these things are not overwhelmingly cheap at current

levels. if you're dealing with a stock that's trading maybe 17 times earnings and you think that's going to flatten out, there's probably more risk to the downside in the near-term. i agree with it. >> the interesting thing about these names, a huge component of their cost. and we also saw that crude oil has been up a ton, has been up a ton recently. rolled over a little bit today, but middle of the day today, crude oil made a new high. that's really going to impact the margins for these names. >> so give us the trade. >> today when the stock was -- when the etf was $132.35, i looked to may and bought the may 130.25 put spread. i paid $1 for that. i sold one of the may 125 puts at 85 cents. that cost me $1.20. that is my max risk, that's three times my money. i like the risk/reward. and i'll make one other point. i targeted these strikes, because $1.130 is a nice level.

relatively to some of the components, the etf, the implied volatility, the price options is kind of cheap. so this is going out of the money, but i like the potential risk/reward. >> the great point about the options are cheap on an etf, when the markets start to roll over and correlation rises, that's when you're getting them at a bargain price. >> if there's a problem, it's that these options are vanishingly illiquid, so you have to be really careful about your execution. >> just quickly, carter, because if you're to bet that the transports are going to go down, if you're a dow theorist, then that means you believe the market is going to go down too. >> transports have held up better than most. but in this case, it's a very specific index and what's really kept it up are the big airlines, which have found a spot that is unlike any other in their last 10, 15 years. so i would watch the airlines and use that has sort of an indicator for the group. >> before we go to break, cbs ceo les moonves, compensation

for 2013, nearly $67 million. if you've got a question, send us a tweet. scott's taking a look at a bullish trade on twitter. you'll want to check it out. here's what's coming up next. what do these three men have in common? >> i think they're vain. >> no, it's that they've all made morning calls in the market. we'll tell you how you can protect yourself and after a terrible week, can now be the time to buy solar stocks? a little-known indicator says yes, and we'll reveal what it is when options actions 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. ♪

[ bell ringing, applause ] five tech stocks with more than a 10%... change in after-market trading. ♪ all the tech stocks with a market cap... of at least 50 billion... are up on the day. 12 low-volume stocks... breaking into 52-week highs. six upcoming earnings plays... that recently gapped up. [ male announcer ] now the world is your trading floor.

get real-time market scanning wherever you are with the mobile trader app. from td ameritrade. i think it's very likely that what we're seeing in the next 12 months, an '87 type of crash. and i suspect it will be even worse. >> i think it's not if, it's when. i think there will be a major direction. i can't tell you when. it may be three years, it may be three days. but that's my belief. >> two legendary investors and two men with very thick accents. that was marc faber and carl icahn making very bearish comments to cnbc just yesterday. similar comments at an investor convention this week. three wise men sounding the

alarm here. what do you think? >> for one thing, haven't we also been sounding the alarm? i think we have, but i think it's sounding a little bit shrill at this point. and we haven't seen a huge downturn yet, but it does make some sense, and for all of the reasons we've previously discussed. equity market valuations as a percentage of the overall economy are really approaching highs at this point. valuations, while not overwhelmingly expensive, across the board, are a bit above average. but there are a couple of names where they're off the charts. you have a lot of speculative names, people talk about tesla and netflix, it's hard to get your arms around these valuations. there's a lot of potential room to the downside in those stocks. and if they roll over, they'll take the market with it. >> faber was making comparison to '87, are there similarities in these charts? these are charts that they're sent around the trading floors whenever there's a bill pullback and we see them time and time again. and here they are again. >> every top has a different

characteristic, but they all do have one thing in common. this is a fairly mature bull market. for what it's worth, there have only been six other incidences in history where the s&p has gone five years in a row, consecutively closing higher. and we just saw that at the end of 2013. and i spent some time looking at what happens in the ensuing year. and some of them are up, and some of them are down, but here's what happens every time after a five-year consecutive bull run. volatility increases dramatically, and we are seeing that this year. and the drawdown from high to low in the ensuing year is almost double what you'll see in any given year. and i think you can expect that kind of behavior here in 2014. >> so given that overall market outlook, dan, you think it's going to be worse for the qs. >> the qs make me nervous. the top ten holdings make up most of the weight. it's names that people are hiding out in, in google and apple. if you own these things, you're

not going to sell them, but you might be worried about those crash calls. i think, like i said earlier, i don't think you go in monday morning and start buying puts. it's expensive. i was looking out in the qs, because this is the one i think could be really vulnerable. it's double -- it's down 8% from the highs. it did not confirm the s&p high. the s&p is only down 4%. i think that's where you're going to get the most bang for your buck. and hypothetically, i think you want to do this probably back towards '86. but today i priced it up. when the qs were $84.15, you could buy the july 80.70 put spread for about $1.50. that would be your max risk, the you get protection or bearish exposure from 78.50 down to 70 over the next three months, this could be that period of time. look at that chart, it's right at that breakdown level. to me, i think you want to spend as little as possible to get the widest amount of protection on something like this, because you're really, you know, you're doing this against something you own for the most part. >> scott, what do you say? >> i'm not certain this is where i would go if i was a big bear.

the three big names which are apple and microsoft and google are not particularly expensive. if you go a little bit further down, you get some hideously expensive names that we've talked about like amazon, but i think i would look someplace where the names are actually a little frothier and a little more overextended pip just don't think these names are extended that much. >> those big names you mentioned, the amazons and microsofts of the world don't have a whole lot of upside. >> but they're not going to go down. microsoft is not going to go down. >> it just went from 30 to 40. i think there's a lot of risk in those names, a lot of money parked in it. we've seen this rotation out of the high-growth, high-valuation names. and apple has flatlined above 500 for weeks or months now. if they have two disappointing quarters before the iphone 6 comes out, you could see 450 on this stock. coming up next, shares of solar city have gotten crushed, but is it a ray of sunshine around the corner? find out when "options action" returns. ♪

♪ ♪ ♪ [ tires screech ] chewley's finds itself in a sticky situation today after recalling its new gum. [ male announcer ] stick it to the market before you get stuck. get the most extensive charting wherever you are with the mobile trader app from td ameritrade.

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we take a look back on a trade that felt so good, but went so wrong. a couple weeks ago, mike and carter decided to get into solar city. here's what happens next. on "options action," just because we risk less doesn't always mean we make more. and unfortunately, that's just what kevin and carter found out when they bet on solar city. carter says the charts were forecasting good things for the solar company. >> this is a great time to buy the stock, we like it a lot. >> and mike was picking up what carter was putting down. but just buying the stock, 100 shares would set him back over $6,000. so to make a bullish bet, mike instead sold a strike put more $5. now to keep all that money, mike needs solar city shares to stay above that $60 strike price through may expiration. but mike is now obligated to buy solar city shares for $60, no matter how far they fall.

so mike then bought the may 57.50 strike put for $4 and created his bold put spread, but did something else, he put the odds in his favor, and here's how. between the $5 he collected by selling one put and the $4 he spent on that other put, mike took in a credit of $1. that's the most he could make on the trade. but by taking in that dollar, mike can now make money whether solar city goes up, down, or nowhere at all. and even if the strike drops below $60, mike doesn't see losses until it falls below the put spread price by that buck he took in or below $59. below that, mike will lose money, but by buying that lowing with he's protected himself. since the time of the afraid, solar city shares have fallen nearly 10% making this trade a loser. and now "options action" fans all around the globe are asking the same thing. >> how many earths do you think would fit inside the sun? >> actually, bill nye, what

they're asking is this, what will mike and carter do now? >> carter, what do you do now? >> we're going to stick this one out. a big decline, 40%, 88 to 54, back to where it started on the year. we still think the rebound potential is high. stay long. >> rebound potential is high. what do you think, mike? >> this is a situation where our options trade, which has obviously worked against us, has set up with more leverage to the up side. i wouldn't close it. the spreads are a little wide. you have 5 to 1 leverage if you hang tight. so stay with us it. >> what do you think is going to happen to the stock near-term. these are stocks that have gotten massively crushed. >> they deserve to have been. let's listen, we've been talking about high-flying names. this certainly fits the category. >> this one in particular. >> how many of us have man crushes on elon musk? >> i guess you do. >> well, once you start losing 10, 20, 30, 40% -- >> that crush goes away.

>> it kind of does. i think a better entry for this stock would be 40. >> coming up next, the final call. [ 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. ♪

[ bell ringing, applause ] five tech stocks with more than a 10%... change in after-market trading. ♪ all the tech stocks with a market cap... of at least 50 billion... are up on the day. 12 low-volume stocks... breaking into 52-week highs. six upcoming earnings plays... that recently gapped up. [ male announcer ] now the world is your trading floor. get real-time market scanning wherever you are

with the mobile trader app. from td ameritrade. coming up on "mad money" tonight, up in smoke, cramer talks to the ceo of njoy. meantime, time for the final call. carter? >> after the weakness in biotech and tech and high-flying casino names, they go lower, there's no wisdom in that. watch financials, the they start going lower, it's going to get a lot worse. >> scott nation? >> options are the only tool to try to pick bottoms. this week's web extra is how to do that sensibly. >> i would also add to carter's point, transports. you see some stable sectors like that breaking, you don't care. >> mike? >> this is one of the situations where it's tempting to run out and buy puts. the market is down a little, and

vol is a little bit higher, so use things like the put spread we're talking about in morgan stanley. that mitigates the impact of that vol pop that we've seen. >> looks like our time has expir expi expired. i'm melissa lee. for more, check out optionsaction.cnbc.com and watch "fast." see you back here friday. in the meantime, "mad money" starts right now. paid presentation for derm exclusive instant anti-aging, brought to you by beachbody. [ cheers and applause ] >> wow. hi, everybody, and welcome. i'm deborah norville -- journalist, author, wife, and mom -- and today i am joined by grammy-winning music superstar chilli of tlc. woo-hoo! [ cheers and applause ] and television phenomenon turned entertainment reporter mindy burbano stearns. [ cheers and applause ] now, what do i have in commo