bye-bye. > this is "options action." tonight, jackpot, vegas gaming revenues are soaring, but we'll tell you the unlikely winner, options traders are betting on. and how you can make money too. >> plus. >> houston, we have a problem. >> the albaba apo. why is the market lagging so badly? it's not that complicated, but we'll tell you what it could mean for the market's rally. the action begins right now. live from the markets, these are the traders here in times

square, and the markets's record setting run continues, what will send stocks higher in the second half? why is the market lagging so badly? it's not that complicated, but we'll tell you what it could mean for the market's rally. the action begins right now. live from the markets, these are the traders here in times square, and the markets's record setting run continues, what will send stocks higher in the second half? let's get in the money. and, dan, how are you looking at the second half at this point? >> well, listen, this week, we got earnings, nike last night was fine, left the guidance in march alone. dupont gave a disappointing outlook, the stock hit hard, and holiday shortened week, and when investors get back, they will be squarely focused. it's q3, and q2, citi stocks, all report in that second week of july, and that's really the first look at what the largest companies in the country are thinking about the outlook for the second half of the year, and we'll get squarely focused on it quickly. >> this is a space, though, where it seems like investors love to hate. if earnings are what they were

focused on, people would probably be buying them hand over fist. look at the xlf, 30% of that is the money center banks, diverse financial institutions that own investment banks that represent 50% of it, that group is trading at less than 13 times trailing 12-month earnings, but the insurance companies are cheaper trading at 11 .5% trailing 12-month earnings. obviously, there's concern. interest rates hurt the insurers, and as far as the banks are concerned, there's so much regulatory risk, that's why people are staying away from them. >> that graph was interesting. see the three money centers down on the year, and investors don't know what to do with them in the interest rate environment. i'll make one other point. this week was significant if you were looking at european financials. the euro closed down 4.25% this week.

if you looked at those, you'd think we'd have a financial crisis coming. >> are they significant? >> they are, but they speak to what mike was talking about on the regulatory front. for some reason the feds in the u.s. think they can go after anything they want. >> $9 billion, and what got barclays in trouble is what they are doing in the united states. the dark pool allegations could apply to all the banks. people could say, okay, they'll be regulated out of the businesses. i think that's the issue. obviously, u.s. regulators are going after them saying, you know, we're not going to go after you for hundreds of millions, but now it's billion. >> let's talk about the trade you're putting on tonight. >> bank of america is 5 perfectly fine company here, no crisis this summer, but they had a couple of black eyes, rejection of the stress test, and the guidance and outlook

of the q1 they gave was not great. here's a thing we know because we are close to this. trading volumes are bad. you are looking at the screens today, nothing happened, okay, that's not great for the bank, there's leverage ratios. >> we know that already. that's why the stocks are down. >> maybe it's as good as it gets here. for bank of america, they have expectations for q2 a little more optimistic than citi group. to me, a stock here i think on a technical level, that chart there broke the up trend in place for two years. i think if you get disappointing earnings or outlook in the report of q2 on july 16th, i think the stock is lower. finance the purchase of puts here. today, the stock was 1535, i actually bought a put calendar. be careful with the strikes here, look at the july 11th weekly, two fridays from now, i sold that at 8 cents and helped to finance the purchase of the august 15th.

that trade cost 24 cents. i'm setting up for the july 16th earnings, financing what i think is a holiday period, could be slow trading, and august options are going to decay if the stock sits here. it's a bearish bet, but i'm threading the needle a little bit here, and i want to be there for that earnings event. >> you know, i really like calendars in an environment like this because we have a situation where you're reluctant to sell options because they seem so cheap, the fact is stocks are not moving. low volumes, trading 12 million contracts a day. if you go back to august of 2011, we were trading nearly double that amount. that's the reduction in volumes we're seeing. this makes good sense. holidays you rarely see activity, and there's a lot of data points that need to come out before things move. i like a trade like this. >> let's wrap this up.

>> stocks versus options, short bank of america? go ahead, but up limited risk as any stock could keep rising. meanwhile, the put calendar giving serious leverage and defines the risk of $24. winner, winner, chicken dinner. dom chu has more. >> that's right, melissa. las vegas strip revenues rose by 17% in may compared to the same time last year. what's really interesting is where we saw the strength coming from. slot machine revenues were down 3%, but it was baccarat revenues that rose by 89%. baccarat is a favorite of high end type gamblers, life blood of the asian gambling mekkah bringing in seven times the revenue that vegas does. we saw bullish options activity in the casino stocks in mgm and outpace trading by a nearly 2 to 1 margin. the hottest calls were in m kbrks m, which some analysts call the best way to play a

vegas resurgence. of the three stocks, mgm is up the most on the year. now, i don't know about you, guys, but i can only see james bond and you, melissa, playing baccarat. for the record, i do not gamele at all, not even penny slots. >> people who play baccarat are the people that go for big events. we had a big event, the floyd-mayweather fight. that probably accounts for the uptick. there's a big influx when there's big events in vegas, and that probably played here. i've been to vegas a couple times each year over the course of the last couple years, and it looks like foot traffic is up significantly, it's harder to get in the restaurants and everything else. seems like they are on the mend. mgm has ties to china. they have a partial stake in that, but they have good

exposure to las vegas and also are awaiting approval of anew casino in springfield, massachusetts. the vote on this is deferred right now, but that's another potential area of growth, and, you know, so if i was going to look at the name to play, i think this is the one. >> you is a call calendar, walk us through. >> for the same reason dan looked at doing this, looking further out, i'm looking at the july, january 26 call spread. you can buy the longer ones for two and a half bucks, and sell the near-dated ones for about a dollar and a half debt. i just don't see a lot going on right now throughout the month of july. number of one because of the holiday, number two, waiting on earnings. all of that, i think, put together, this really sets up so you own long data premium in a name that moves when it starts to. >> just technically, this chart acts really, really well. a third of the sales do come from mccowell, two-thirds from las vegas. it's the flip side for wynn. we battled with wynn for a while

here. this chart looks like it's going to break out on the slightest bit of good news where wynn is still in a downtrend. that's a -- >> triangle death stock of yours. >> it could be one of those. >> it could be, so weak. >> i'm battling with that one. let me tell you something. if the tables were to turn, maybe these guys that are levered, maybe the money is moving back to vegas. i like the trade. again, in the low volume environment, you have to finance the purchase of the calls. >> do you like dan's bet? >> the turning tables? >> we could go on all evening. what fun we have on" options action." got a question, send us a tweet and check out our website. we got the hottest options, news, videos from throughout the week and exclusive trades so check it out. here's what's coming up next. ♪ it's thee most anticipated ipo of the year, why the

alibaba ipo could spell doom for yahoo!. it's the one thing on every trader's mind. >> you are not! >> well, that and why ge's underperforming the market so badly. we'll tell you what it could mean for the rally. that's when "options action" returns. [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. welcome back to "options action," we have a change in the

indices to tell you about with the s&p 500. u.s. steel will be removed from the s&p 500 and will be replaced by martin marietta materials, mlm the ticker there. so again, martin marietta who makes the construction supplies, the concrete and stuff into the as falt, they're going in,. it's demoted to the 400, and mln, and they are smaller companies, $6 billion market cap and u.s. steel is a $3 billion market cap. back to you guys. >> thanks, dom, interesting both are plays on the u.s. economy. >> more on the u.s. housing economy more specifically. now, if you think back to the housing boom we had and look at the aggregate makers back then, they were the rock stars of the last bull market. the immediate impact, obviously,

is not positive as you have a switch of flows, as the indexes move from u.s. steel into this one. of the two, i would expect martin marietta to do better. i have more hope for that in the u.s. economy than u.s. steel. it's not an issue for the s&p at all. >> the most highly anticipated ipo since facebook, talking about alibaba, but could that spell trouble for yahoo!? dan, what do you say? >> yahoo owns 24% and likely have to sell 40 to 50% on the ipo. the options traded two and a half average daily volume. and a good chunk were in the calls, taking profits, sold 90,000 of these today, and that activity caught my eye in a week where yahoo!'s was kind of newsy.

we had the news where melissa myers slept through a meeting with ad customers, and also alibaba chose the nyse to list the ipo when it's new. when we get back from the holiday, the chatter leads to the road show for the ipo. a lot of speculation is the ipo comes in early august. talk about yahoo! for a second. 2013 rumored all year long about alibaba ipo. it was ratcheted up and what it met. look at the chart here, okay. the stock up almost a 100% last year, 45-degree angle, bottom left, upper right. this is 2014. it's gone sideways here, okay? the stock is down 15% on the year. here's the year-to-date chart. what's interesting is this circle here, okay, this is when alibaba finally filed their s1 for the ipo. what did the stock do? cratered right here, okay?

spent a little time going sideways here. that was clearly a sell to news situation. the stock recovered, and weeks ago, filed and amendment to the s1, both instances showing slower growth. look at that, bam, okay. the stock bounced today, but in general, i guess the main point i make is that all year last year, it was kind of by the rumor, and this year is sell the news. one last point about the price of options here. even with that big seller in the gm 40s, this is the price of volatility. look how it moves up as of late. that shows you this is a name in a low environment where a lot of stocks have implied volatility near all-time lows or multiyear lows, and yahoo! ticks up, people are worried. marissa meyers is on the clock here once they get the cash, monetize the stake, and investors are basically saying they don't trust she'll make

good decisions with that money. >> she's spent a lot of money ever since being in office, behind little companies. >> and another half a bill acquisition announced today. what people worry about is that the growth story for yahoo! is the investment. something else is interesting going on here, and that is that sometimes companies that are privately held, not publicly traded, their valuations can be very high, but less volatile than publicly-traded companies. go to facebook, and you see, a company value between 80 and 95 billion for a 15-month stretch prior to stretch of the ipo. once this thing starts to trade, they have the cash, disposition of the cash issue with shareholders concerned, and there's the underlying asset of the remaining alibaba stake they hold they don't divest, and that's likely more volatile than the nonpublicly traded value weighs going into this. >> look at what we had, dan, with the notable lockups so far this year, whether it's the remainder of facebook, twitter, you name it, stocks are

extremely volatile on the back of any size of lockup expiration. >> you guys make really good points, and, you know, to me, you know, think back to facebook. i know it was a long time ago, in the spring of 2012. but that was white hot, okay, headed into the deal, and then all the sudden, it was not. okay, for some reason, investors in the private market appointed alibaba, one of the largest market cap companies in the world in an instant, and so, to me, i don't think you can take that to the bank. i think there's smart investors in yahoo! actually considering that, looking at history, and it's not just a layout. >> okay. coming up next, general electric is one of the most widely held stocks, but it's totally missing this year's rally. we'll try to explain why when "options action" returns. [ bell ringing, applause ] five tech stocks with more than a 10%...

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with the future of trading. company profile. a research tool on thinkorswim. from td ameritrade. what's wrong with ge with the market up 6% in the first half of the year, one of the biggest, most widely held names is actually down 6%, and that's bad news for our own dan nathan. here's why.

on "options action," it's how we trade like titans of industry. risk less so we can make more and that's just what dan tried to do with the bullish bet on ge. he thought the giant was headed higher. >> options are cheap. the stock looks poised for a breakout. >> but buying the stock 100 shares would set him back almost $3,000. >> oh, right, i'll have the put the question another way. >> so to spend less, dan bought the july 28 call for 16 cents. that gives dan the right to buy ge shares at that strike price. now, to make money, he needs shares of ge to rise above the $28 strike price by more than the cost of the trade or above $28.16 by july expiration. anything below that level, and dan will see losses, but the losses capped to the 16 cents he's spending.

it gets even better. if ge shares rise, the call increases in value faster than the stock meaning more money in dan's pocket. >> yeah! >> but since the time of the trade, ge shares have actually dropped 2%, making this trade a loser. >> and, eventually, we shall succeed. >> and now "options action" fans everywhere want to know, what do you do with the ge trade now? >> before we answer that question, dan, maybe this makes you feel better. if you had bought 100 shares of ge on june 6, you would be down $75. the call could be sold back for 4 cents, a loss of $12 per contract. all right, can dan. what do you do now, and why is ge not participating in the rally? >> interesting, i took a shot. the prior high was 28. i was really playing for a breakout. i didn't want to spend a ton of premium, you go out the money, you spen not a lot, it's a speculative bet.

if i wanted to get some real deltas, get in there, i would have gone after the money. i didn't. the calls i spent 16 cents for, i don't know why it stopped participating. it acts bad. >> i have some ideas. >> there's other industrials, like boeing down 6%, had a good year last year. >> this was not one of the >> this was not one of the growth industrials like boeing was. the growth portion of the business is associated with global gdp, not growing that fast. first thing. second thing is despite the fact they paired the business significantly, it represents about, you know, a third of the revenues, and talk about revenues for a second, $180 billion precrisis, stagnant at 145 billion ever since, earnings are stagnant at a buck-70 a share. that's why it was not cheap, but i liked the trade at the time. it was a cheap bet. >> the earnings are on the morning of the july expirations, they're worth a nickel here now, people. i don't think you sell.

stick with them. the break even now, far out of the money, but as things get back above 27, you have a shot to get out unchanged on the earnings event. >> coming up next, the final call from the" options" pits. ♪ 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. welcome back to "options action," breaking news with regard to american apparel. the founder is in a deal to try to acquire 10% of the stock in the company that he founded. again, dov charney, founder of american apparel now ousted, looking to obtain 10% of stake in the company he founded. he already has a 27 % stake. if the deal happens, that gives him over a third of all outstanding shares. interesting headlines from american apparel. back over to you. >> always interesting to follow. dom, thanks. let's get to the tweets there. we love answering them.

fear trader asks, looking to sell the july zillow, i don't see it going down. mike, what do you say? >> the stock seems to be moving at a 45 degree angle. that's helpful. the options are relatively expensive as well, sell the 125s for two bucks. that's nice. what's not nice, though, is the fact that this stock traded just about 120 or lower earlier this month. this is a stock. so just prepare yourself. this is a stock that can really move. these are the types of trades i like. you might want to consider a put spread. >> what was the quote on the stock? an unstoppable stock? a stock of steel? >> we notice this in april and may with the peers getting slayed. it was fantastic. >> you stand by that? >> yes. >> final call from the options pits, dan? >> thank you. i think there's a tough outlook here, finance puts in july. >> mike? >> you know, i think what we talked about here in zillow is

an example that there's still opportunities where option prices are high and you can sell them. >> all right, our time expired, i'm melissa lee, check out our website for more, and see you back here next friday, and in the meantime "mad money" starts right now. the following is a paid advertisement for starvista entertainment and time life's video collection. ♪ one day at a time, sweet jesus ♪ bill gaither's homecoming concerts have brought us songs of hope and inspiration. ♪ well, it's shoutin' time in heaven ♪ ♪ a sinner once lost is found across america... and around the world, millions have experienced these timeless songs that celebrate our faith. ♪ turn your radio on [turn your radio on] ♪ and now the greatest