things. now, you stay safe. bye-bye. this is ""option action" tonight. "summer loving had me a blast. >> not this bum u summer. not sure whether you should buy stocks? one indicator says the market went higher him we'll tell you what it is and how you can top it. one trader is betting it will go higher than $4 million. the action starts now.

[ music playing ] welcome to the nasdaq market site. i'm melissa lee. new record highs, one vital part of the economy just can't catch a break. the utility sector by almost 20%. so this vital group is lagging, what does that say about the market as a whole. let's go to the money and find out. dan, this is a big part of the u.s. economy. >> investors don't seem that concerned about it. until last week. we highlighted it last week. there was a buyer of the december puts. a lot of retailers in that. we have 150,000 in the december 26 puts, it's way down side. i don't think it gets that drastic here. you are talking about one of the worst performing sectors. it's down on the year. what does it mean? to me, it means investors don't fwlee to do with housing and a rate this uncertain.

>> one of the things we have to remember is shp was one of the bekt sectors of late 2011. it's up the same as the s&p is over that period of time. the thing you should be concerned about if sanghi these home tradeing stocks at are valuations they had retched in 2007. we are talking about above mark multiples. as you pointed us, the retailers. >> along at supplies, lumber liquidators it's trading at six month lows. whirlpool, an appliance provider rolled over recently. there are a lot of things in there. we had the fed meeting. wherever so slightly the fed chair woman tried to talk rates up a little since then then. we had housing starts, which

were disappointing. i don't know if investors are looking at home builders and saying, okay, if rates go up, because the fed is right, does that kind of put a top on housing? >> or does it provoke people to get into the housing market, more because they are afraid rates are finally going higher? >> we saw that spike last spring up to 3% at the start of this year. you know water happened? housing, stuff has plateaued. >> rising rates affects the affordability of a house on a month to month basis, it's going to affect asset prices, if i'm going to go out and buy the house knowing it will get hit by higher rates, i don't think the monthly pachlts will fuel my decision. certainly not if i'm yup upgrading. i would think concern about rising rates, we saw it once, it helped out a little. yoej it will this time. >> you have a trade on shp? >> your view is that the fed is wrong, the economy isn't improving? they don't think it's going gang

busters, i want to make a bearish bet. i think the underperformance is photoworthy. if we get bad da that i think shp probably goes a bill bit lower. here's the thing, we are are in an amazing low vol environment. i am not in the camp that you will be in the summer, the trade i did when shp was 32, i actually bought a put calendar, i bot the july, september, 31 put calendar, i paid 70 cents for that. what i'm trying to do here is set up to own longer data puts if september for cheaper. i am sell tack for 30 cents. >> that hopefully that july is going to help finance my purchase of the longer data put and let ply thesis play out over a couple months. why did we go into july? things are not moving at all. we have the july 4th holiday, if things move slightly lower, it

should help in the trades. >> we talk about options are cheap. it would seem so. if you look back at july '07, i wouldn't want to be short september. i might push it out a little further and look for an opportunity to roll into a short august if we stay basically right where we are. >> for the people that leak to play along at home. this is a jeff dunnlock trade. this is the exact direction am trade. in terms of a cart, carter, what do you see? >> it's not a very good setup. it is the ultimate discussion of wall street versus main street. you know the stockmarket has maintained all time highs. ousing has not recovered really at all. in fact, there is a well documented phenomenon boom, bust,ic can, what i have here is the s&p home building index, itself, of which the shp tries to track and you will see quite

clearly the boom the peak in '05 and the echo. the importance of the echo is it traded 50% of the decline. here's the real problem. if you were to look at the performance in '06, '07, '08, '10, '11 and '13, they have outperformed. something is not right here at all. we do not leak it. >> the directional carter agrees, there is some debate about itb, shp has a lot more of the retailers, the names if it, the mattress makers and i itv is a play on home builders. >> i like the diversified play. we have seen it in other consumers. there is weakness, underlying weakness. i think there is exhibit a for it. i want to make a broader bet

than specifically the home builders. >> some of the names trading at above market multiples here. >> let's move on here the pain at the pump, gasoline prices are higher, what does that mean for the consumer? morgan, hi. >> reporter: gasoline has risen along side it. the impact can be already felt at the pump. the week gas prices rose to $3.68, that's the national average. according to aaa it's the highest level this time of year since 28. what makes this more disappointing is that in recent years, price tended to drop to almost a quarter per gallon for june, what does it all mean for the economy. americans consume 370 million gallons a day a. rise of 10 cents takes $37 million out of people's wall ets. if prices stay 10 cents higher

over the course of a month, that's a hit of over a billion dollars. where will that money come out from? people don't cut being on driving, they cut back on purchases. back to you. >> to help us answer the very question let's check in with the chart master, aka carter. >> i think we should sell short and get out of it if you are long. let's look at a few things that give us a setup. there is a carter of unleaded gasoline. we know there is seasonality. the important thing is we are back to the june highs of exactly a year ago. you could say, okay, big deal. but here's a longer-term picture. despite, of course the collapse associated with the bear market around financial crisis, we have been persistently high here, ultimately, we think this has the possibility of breaking out and exceeding the peak from the prior cycle high. not good as a setup for consumers, restaurants and a few

things, this is a crb. it's got lard, cattle, wheat, soy, oil. this is up substantially over the last six to eight months. we are talking a 40% increase. take a look at a couple other things. here's chicken prices. you are talking about from the '07 low unabated. people say there is no inflation. >> that itself just not true. take a look at cattle prices from the '07 low. basically unabated. there is inflation. look at panera. we know the stockmarket is gang busters. this is not a gang burressers cart. the real risk is that this stock is toying ominously with the prospects of breaking well defined lows and coming out through the bottom. to put this current setup if perspective, take a look at this long-term chart. we know it's been on trend. we know it's been a great winner. look at what has just happened. we have officially broken trend.

not good. panera can be drawn this way, if you like, a huge rounding top. here the bread point anyway you cut this thing or draw the trim line and put it in there. this is not a good set up. if are you long panera, we think this is a short. we think it's a good one. >> well, it's interesting because it seems there is some feel on the street people do want to be sort. you would expect with the stock coming in, maybe some of the short interest, which is relatively high at over 9% right now. you would start to see people covering them. i ticked up recently. it seems there is institutional interest on the short side. valuation, trading 20 times earnings, probably looks reasonable. we had darden's earning, those were miserable. they have lobster and other problems to be sure, one of the other issues with panera to be sure is foot traffic. they have ar $9 bucks t. rising commodity prices, that can hurt what are otherwise fairly narrow

margins. they did even in one of their investor presentations recently indicate they are having a little bit of an issue on a number of transactions that, suggests food traffic is softening. >> walk us lou 84 bear street. >> i'm buying the january one put, paying 9.75 for that. after january, those options are not decaying very rapidly, because there is a sort interest, this is one of the reasons you would not want to short the stock yourself. short interest sets up for a short squeeze. if those people decide to start covering, that's a risk you are short yourself. i think this is a good way to make a play. you can always look for opportunities to spread. >> what do you think, dan? >> i think the thesis is correct. 100%, down 20% like this that has that short interest. i who you would take it another step fuller i. know the january options is not going to decay a whole heck of a lot. it will decay if it sits here at

this level. i think it's a great candidate osell something to finance it over a period of time, try to make some sort of at a list you think it will drop. >> i think this is a great setup for calendars, the obviously thing that made me step away is what happened to darden today the fact that people may be looking at these consumer names. that's the reason, i'm looking at the outright. >> got your own trade idea. send us a tweet at cnbc options. few want a taste of the options world, it happens to be on our website optionsactioncnbc.com. . what indicator is saying stocks are going higher? . >> if i tell you that, i'm afraid i will have to kill you. >> we'll tell you, we won't have to kill you. plus the one name on everyone's list ♪ the name on everybody's lips is going to be roxie. >> it wasn't that, but we'll

tell you what it is and why so many are betting so heavily on it when "options action" returns. [bell rings] .

mystery, drama, intrigue, these are the words everywhere people associate with mike coe.

you have to watch this to find ou out. >> it all started with a high tip. >> we would go short to it it. >> dam, i to the you might just be on to something. but shorting the iyt to transport etf, i have been burned one to many times for. that so i had to act. so i bought a put. want more details? it was december, the 1230er9 strike. i paid $6 bucks. i feed it to fall for more than carry grant. in the case below $134 by december expiration. but $6 bucks. maybe it was the booze talking. maybe i had lost my way. but that was too much money. i searched for answers.

mindlessly walking the halls of cnbc. and then it hit me. >> sell the july 140 put. >> so to reduce my cost, i sold the july 1 sfoert 40 strike but for $2y5i6r7b9ded my put calendar. so water the angle, kid? i spent $6 combux. selected two, cuttingpy cost to $4 bucks. now instead of needing the iyt below 134. i can put dill and in my pocket or 126 by december expiration. so where did it all leave me? since the time of the trade the iyt is up slightly leaving this one an open case. it's just another night in the land of ricking less and making more.

. >> not the end yet. before we answer the question, carter brought us the hot tip. so, carter, would you press the short? >> i'm not short much of a hot tip for unchanged. i pri the principles are these, we know the transports are steep uncorrected. they are driven by a few big fames. the top are 40% of the index, union pacific, fedex. fedex gapped up this week. we think this is end stage kind of behavier. so we would stay short. >> this is a situation, it's great, dan was talking about doing a put calendar, himself, this is a situation where we see how these trades can pay off. we had a bet that near data is worthless, we can buy that back and we are roll that into another calendar, as far as i'm concerned, this is one of those situations where doing these calendars allows you to put the short bet on. it's not costing to us do it. >> what would you do, dan? >> i hate the idea of trying to

pick a top. i tried doing that in iyt a month earlier, i got my face ripped off. the etf sold off $5 bucks. this is probably a better shot where it had the chance of being rejected at the higher high. >> this hot name will keep flying, so what's the stock, how can you profit? find out when "options action" returns. ♪ [ 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.

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welcome back, with gas and oil heating up this week, the enthusiasm carried into the options pit today as traders turriously traded kiss a peek energy and tesoro, all those names hit a huge volume. one bet in tesoro caught one of our trader's eye, dan, what did you see? >> it was a bullish call. a trader rolled out of some to have 57.5 calls very much in the money selling 13,000 to close at $6.30, about $8 million in premium. took about half that premium and

bought 19,000 o. august 52.5 calls for 227. that breaks even on august expiration up about 8%. if you look at the cart over here, it's a beautiful breakout here. look at the green line, there is a level that that trade breaks even now. what really struck me is that it took a trade that was in the money, it was longer dated. they rolled it closer. they rolled it up. one of the things, i will go to this implied volatility chart. in the money calls that they closed today were not nearly as sensitive on price move in options. you know what is on those out of the.calls shorter dated that will catch the q 12 earnings report. when you look at this chart, it's three years of implied volatility. if i get chatter of trak i takeover of restructuring possibly any good fuse, if i get the direction right the option prices are so cheap that i'm going to make money here. >> what did you think of this in

the notion that it is the pattern over takeover rumors, we also have concurrently a widening in the spread which is helping the refiner trade overall this week? >> well, it's helping the refiner trade. we seen, we talked about the trade if new field expirations earlier this week. which could be propelled that you will see gas prices finally bump up when you see that lng built inning the. i think what we are seeing is basically a 45 degree angle and a lot of the energy space. we seen it in the integrated space as well. in exxon, the 100 streak, i would probably be inclined to do the same thing as the trader did. you want to take profits and roll out. because the angle that these things are moving seems a little too fast and furious to me. >> which subsector meents the best? >> the big heavy, not so much by sectors, things like conoco and

chevron halliburton is surging. we have a session i think really is people looking for lagers in the group. we know it's the best performing sector with utilities here to date. some like the group, double back and find a lagger like this and try to play it. >> you obviously see the trade. where do you find the value in the energy sector? >> we have been talking about it. throughout the last month, we have seen tons of upside call buying in afadarko, kinder morgan. it's hard to pin point it. it seems like anadarko is attached to exxon rumors. you look at the xle, it's going gone to the moon here. the price in the actions market seems speculative to me. i have to assume at some point we will get some sort of announcement if a name that can cause another name up. i don't like it here. when you see the sort of frenzy, i think you want to create it.

>> final call from the options pit up next. [bell rings] ♪ time and sales data. split-second stats. ♪ its so close to the options floor, you'll bust your brain-box. all on thinkorswim, from td ameritrade.

[b♪ll rings] time and sales data. split-second stats. ♪ its so close to the options floor, you'll bust your brain-box. all on thinkorswim, from td ameritrade. . time for the final call. carter. >> panera, great bakery, great cup of joe, going south. >> mike khouw. >> one of the things we were taking a look at is despite the fact that options prices are low, you are market scent tech, that doesn't pine you can short the market.

can you look at put calendars over time. even if the market stays here, you will last over time. >> we've expired time. i'm melissa lee. see you back here next friday at 5:30. meantime, don't go anywhere, "mad money" with jim cramer starts at the top of the hour. >> announcer: the following is a paid presentation for body beast, the fast, proven way to build muscle, shed fat, and sculpt your best body faster than you've ever thought possible, brought to you by beachbody. >> this is real, as real as it gets. we're gonna learn, we're gonna sweat, we're gonna have fun, and we're gonna see results. >> before body beast, i was just soft and chunky and -- and pudgy, and this is the "after" result. >> it's gonna be amazing. come on. you can do this! >> body beast has completely