only one thing that i want you to remember when it comes to your money, and it's this -- "people first, then money, then things." now you stay safe. ♪ ♪ this is ""options action"" tonight. energy stocks have gone from hot to lost. shut up. but according to the chance, they could be setting up for a huge run higher. we've got a special report. plus -- >> tesla. >> it rose to an all time high. we'll tell you why some traders say it's time to hit the breaks. and will bill cosby save netflix. it could take a streaming did i have into fast forward.

we'll tell you how to play it. the action begins right now. live from the nasdaq market site, i'm matty byrd. these are the traders in times square. hello. this is the big question for this week. do bond traders know something stock traders don't? the ten-year yield dropped to a 14-year low. who's right, safety takers or risk takers. dan, it seems like someone has to be wrong in this? >> that's a great way to put it. on the week if you look at the tlt, 20 year bond it was up 2%. we had the s&p up 1%, nasdaq up 1%. in the world we live in there was a bifurcation. we saw that when we had the taper tantrum last year. when equities came back, bonds continued to go down in the end of the year. there was a long period where people were going to say bonds and equities went up. here's the thing, we're 3 trillion dollars into the bond

buying. almost done. something has to give. at least from where i'm standing, something has to give. >> what was the catalyst of that? for something to give, there has to be a trigger, doesn't there? >> if you see rates going down, what that suggests is there is some global macro economic concern which suggests you'll continue to get a little bit of fuel for the fire for all financial assets. what i would point to is the fact that there is a mild credit upset. they still are on a historical upset less than 350 basis points. it's the fact that the treasuries are trading up. >> carl, you are at the plasma screen. what does this tell you? >> we think rates are going lower. there's relative value in the u.s. compared to everywhere else in the g8. let's take a look at the charts. here's the tlt. you can draw it as a double bottom or textbook bearish to bullish reversal. we think this continues on a year basis around 2.3, 2.4. we think we're going to 215.

take a look at the long-term chart. you can draw the lines. fairly well defined. we got to the top of the channel. we got to the bottom of the channel. by all accounts we failed here. we think we go to the midpoint. that implies about 2% ten year yield or 2.3 now. >> yeah. i think carter makes an excellent point when he talks about the relative attractiveness of u.s. treasury yields. >> no doubt. >> german bonds 1% now. >> to me, given the language that we've gotten to the fed and the fact that they're being to wind down qe with cautious optimism. if yields are 2%, something is terribly wrong in the world. to me, something has to give. i could be totally a moron about it, but it doesn't make a whole heck of a lot of sense that equities makes new all-time highs every week but bond yields go back in a good economic environment. >> mike? >> my view of this is you're not -- buying bonds with yields like this is the same thing of selling exceptionally cheap

putz. i don't see a whole lot of up sides. i see down sides. if we're going to get something that will appeal to equity markets, i would rather be long equities rather than long treasuries. >> what's the phrase we would look at? >> i'll break it down. i want to take the other side of it, at least carter's technical call. i'm going to go by his guidance. if you look at a three-year charter, 120 looks like fairly interesting technical resistance. if we get one more spike, some sort of risk off action and we see the tlt back at 120, i think this is a good level to look the other way. we have this consolidation last week at 115. today i priced it up. when the tlt was 117.80, you could look at the september, november 115 put calendar. what am i doing right here? i'm selling the september 115 put at about 80 cents and i'm buying the november 115 put at 210. what i'm trying to do is thread the needle a little bit.

i'm giving myself some room. i want the tlt to move back to 115. i want the tlt, that 115 put to expire worthless. then i own november. why am i targeting november? we'll have the wind down of qe and the october fed meeting. i think that will be a good opportunity talking about the potential opportunity. maybe that's when the fed is done buying bonds. >> i definitely like trading long calendar spreads. i think this is a smart way to buy premiums, take advantage of the fact that the near options will decay. the other situation here, this looks like the very low premium but actually treasuries are not that volatile. when you're looking at these, why would i sell those inexpensive options. they're not that inexpensive. >> the bottom line before we move on to oil? >> i don't know how you buy them here. if you're buying bonds, you think a whole heck of a lot of stuff is going badly. i don't think the world is going to come to that armageddon situation where we're buying

bonds where the fed says they're done buying. >> the stuff around the world makes the u.s. look better. let's move on to crude oil. bouncing today but only after hitting a seven-month lowe. jackie deang lis is in headquarters. >> jackie, we're seeing oil respond to the headlines. crude prices rising more than 1%. traders telling me that given the fluid situation they have no desires to be short going into the weekend. the broader trends remain bearish as crude lost $10 in two months. the reason for that, geo politics hasn't impacted crude oil supplies and that drop has been no help to the energy stock. either in fact energy the only losing sector this week. back to you, mandy. >> thank you very much, jackie deangelis. let's check in with the top master again, what are you looking at, carter? >> it's interesting. history shows when you get this severe a drop in crude oil over two-month period, energy stocks

out perform looking out 1, 3, 5 months. we know crude has dropped 108 to 105. 12% decline. take a look at these statistics. there have been 200 times, 203 in fact, going back to 1980 where oil has dropped on a two to three-month basis by 15% as stated here. oil drops more than 15%. this is actually the performance of the s&p 500 energy sector on a one month, three month and five-month basis relative to the s&p. it actually out performs. so we think that's an important back drop. take a look at two charts. two year chart of xle. it measures s&p 500 energy stocks. these are the four important intermediate decline. the percentages are remarkably similar. 8%, 9.5%, 7.5%, 7%. the duration, this was 22

sessions. this was 23. this was 22. and this one's been 32. but the principles are that after a selloff you get a bounce, you get a bounce, you get a bounce. we were planning for a bounce here based on this chart and based on what history tells us. now last chart a long-term chart of the xle. this is the all time peak in 2007. this is where support comes in to play. on any further dip both here and any further we think the xle, energy sector, energy stocks are a good bet. >> a moment ago we were saying that we've seen some good opportunity in the pull back in energy stocks. what do we think about energy stocks and whether or not carter has his eye on the money there? >> i like taking a look at bullish bets when everybody is throwing them in the garbage. that's what you look at for a snap back. there are a lot of things that people don't like about many of

the components of the xle. the biggest component of the xle is the integrated oil company, chevron and exxon representing about 30% of that. integrated oil companies which are essentially a basket of their reserves are trading relatively cheap to the market. 12 times earning, about 7.5 ebe. those things are exceptionally cheap. the other thing is there are other subfactors in there that have been under some pressure. some drillers, carl icon is notably in one of them. rig is one of the stocks that's been decimated for quite some time and has been trading relatively cheap. you have areas that have been holding up reasonably well. everybody is fearful that refiners are starting to go down. their track spread has held up nicely. >> so what's the trend on the xle itself? >> very simply, i'm going tout and taking a look at the dietz quarterly. xle was $96. those were $1 in the money already when i was looking at

that earlier today. this is a way that you can spend, look, about 4% of the underlying to make a bullish debt. >> do you agree with that trade? >> i disagree with the setup here. i think momentum is broken. the xle had a 22% rise from the low in february. it just broke, that up trend that's been in place here. to me it looks like you have a broken momentum. i don't want to be long premium in a sector where i think momentum is weaning. >> you were going to say something, mike? >> this is the reason we're trying to trade calls here. this is an inexpensive way to take the bullish bet. viewers, listeners, if you have a question you can sent it to @cnbc options. you can check out the website at optionsaction.cnbc.com. this is what's coming up next. >> coming up, will this man make you big profits on netflix? >> all right.

hit it. >> mike's got the trade and we'll tell you how to cash in. plus? >> how is that going to happen? >> good question, elon. despite the bad news, tesla says they're hitting an all-time high this week. we'll tell you how to play it when "options action" returns. >> announcer: "options action" is sponsored by think or swim, is sponsored by think or swim, by t.d. ameritrade. split-second stats. its so close to the options floor, you'll bust your brain-box. all on thinkorswim, from td ameritrade.

sweater, extra sweater oh and this is the xfinity tv go app. he can watch live tv from over 50 channels and xfinity on demand movies and shows wherever he wants. have fun, make some friends. alright? did i mention his neck pillow? (blowing) ♪

[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. okay. welcome back, everybody. don't look now, but tesla has

just hit another all time high this week. i was so surprised, dan, i had to walk over here to check it all out myself up close and personal. i guess it's going to work out. once it hit its all time high, does the run continue or does it stop? >> here's the thing. one of the things that was interesting to me, "consumer reports" came out and gave a wishy-washy sort of review of the car. >> and edmonds. >> 15,000 miles on that. generally they're pretty enamored with it. investors didn't seem to care. when you look at this chart right here, this is kind of interesting to me. when you look at it for one year, it looks like it's like this right here. this was the bounce that got off the giga factor. it's come here and stalled out a little bit. i guess you could say there's reason to pause. this could be a fairly epic double top. if i was looking to get back in on the long side if you thought about taking profits, this could be a good level. 200 day moving average. that would be a momentum indicator. >> right. >> that could offer support.

there's those traders out there love to play the momentum, they love to play breakout. if there's any good news that this stock breaks out, 33% short interest in the name and that's why you have gaps like this and that's why you have gaps like this when there's good news. we talked about short interest. this is a well owned stock, meaning it's in very good trust. elon musk owns 23%. these shorts keep getting tripped up, they have to cover, that creates buying opportunities, new shorts coming in. new stocks come up? >> he has the muskeon touch. what i want to know, if you've got negative reports from the cars like edmonds and "consumer reports." if bad news like that doesn't knock this off its momentum, what is going to? >> here's one of the things that's interesting to me, there's large capital pools that own this thing. looking at the options market, the highest levels of open

interest, they're all in strikes that are 50, 100, jan 15 that were put on long time ago. 10, $30,000 contracts. when you look at what's near the money, there's not a whole heck of a lot of options activity. one thing that says to me is that the stock is in such good hands, like i said before -- >> right. >> -- people are not nervous. they're kind of complacent. this is implied volatility of tesla. it's at two-year lows. my conclusion is i'm not going to tell you whether i think it's going up app or down. i don't know. my crystal ball isn't working. >> they've obviously been exceptionally bullish and they were right to be so, but at the end of the day the valuations here are at such a level that whatever their thesis is, they have to be thinking about taking some profits and if they start to do that, that's when the bottom falls out. the only thing that can hold it up is the short interest.

>> you can't even use the valuation on a stock like this. there is no value wakes, right? it's just momentum. it's just a dynamic situation. the truth is it's right at a past high. it's 265 on february 26th. if you're long, stay and enjoy. >> i would just add one more point back to this chart with implied volatility. i would actually expect a $32 billion market cap, company up 75% on the year. i would expect implied volatility. if you're starting to get nervous, you can think about using options and do stock replacement trades or buy protection. that's what the chart tells me here. it's about as cheap as it's been. >> you're saying you don't know whether it's going up or down. the krystal bacrystalirystal ba is netflix trying to eat hbo's lunch?

we'll discuss it when "options action" returns. >> announcer: "options action" is sponsored by think or swim by t.d. ameritrade. ♪ 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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futures move first. learn futures from experienced pros with dedicated chats and daily live webinars. and trade with paper money to test-drive the market. all on thinkorswim from td ameritrade. well, talk about a net gainer. netflix continuing its

incredible run with a 2% bump today, but that's not such good news for our friends, co and carter. and this is why. >> on "options action" it's why we're internet super stars. we know how to risk less and make more. carter thought the stock looked like a house of cards. >> take your profits if you're long, try to sell short. >> all right, mike thought, i'm in. but just going short? >> i will not do that. >> and neither will we. look what happened if you shorted netflix two years ago, so to define his risk mike and carter bought it for $3.50. to make money mike needs it to fall below $380 by more than the cost of that put or below $349.50 by january expiration but, wait, you're spending 30 bucks just to bet against netflix? >> maybe you should have thought

that all the way through. >> mike, your move. >> sell the near dated ones for about $13.50. >> so to cut costs he sold it $13.50 increasing his put counter. he did something even better. he made making money easier. here's how. between the $30.50 he spent and the $13.50 he collected by selling that shorter data put, mike has cut the cost of his trade down to $17 even and now instead of needing netflix to fall below $349.50 to make money, mike needs the fall below the strike price by the $17 he spent or below $363 by january experfeiratio expiration. it gets better. it will decrease in value faster than the put he bought meaning he can turn time into money. >> that's what i'm talking about. >> but there is a tradeoff, and because he sold that nearer data

put, mike needs netflix shares to stay above $380 through the first expiration but go below that level by the second expiration, and so far netflix shares have only risen making this trade a slight losers. >> his achilles isn't as strong as his heel. >> but with pleasant bey of time left in the trade, all the "options action" bing watchers want to know, what will co and carter do now. >> before we even get to that, let's play some options versus options to explain why we use all these strategies. if mike had simply bought that january 380 strike put you'd be looking at a loss of 60% but since the nearer data put that mike sold is working today, he's looking at a loss of 25%. not great, but you know what, better than the alternative. carter, would you keep on betting against netflix? >> we like that bet. the principle is this. the stock has returned to a difficult level and is finding a bit of difficulty in the sense if you look at how it's

performing for the last three or four weeks relative to the market, it's a real lager. we think this is the stall of the sign. given the amount of time we have, i'll buy the stat. >> the exercise was that we realized this was a momo stock that was on the move. the other thing is that netflix, the biggest knock against it for the longest time was that they were going to see increasing content costs. they solved that problem by deciding they were going to start creating their own. some of those turned out to be incredibly successful. kevin spacey said the show he was on never would have been created without something like netflix. they are changing the game here. the valuation is what we're betting against, but it's hard to get naked short and buy outright options. i'm declined to stay with this for another opportunity spread. >> we're talking of changing the game. dan, what do you make of this including one with bill cosby. >> not only are they coming out of hbo, they're going out of their playbook.

hbo pioneered this, having the exclusive events. here's the thing. when you talk about house of cards, orange is the new black, there's tremendous costs in producing these sorts of shows. you know what, there's not a whole heck of a lot of costs in doing? producing one man comedy shows. it makes sense. we'll see a lot of this with netflix as they have to broaden out their original programming. bill cosby, you can see him here, there, you can see him on youtube. >> i have a two-way bet on netflix. 90% of content on television other than cnbc is off of netflix but the valuation is something i can't stomach so i don't mind having a cheap bearish bet as well. coming up next, the final call from the options pits. >> announcer: "options action" is sponsored by think or swim by t.d. ameritrade. 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.

sweater, extra sweater oh and this is the xfinity tv go app. he can watch live tv from over 50 channels and xfinity on demand movies and shows wherever he wants. have fun, make some friends. alright? did i mention his neck pillow? (blowing) ♪

[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. ♪ ♪

okay, everybody. unison, awwwww. >> awwww. >> this week our executive producer max meyers and sarah had this beautiful baby. 6 pounds 8 ounces. we were told his first words were brisk risks to make more. they will -- >> i'm very happy for max and sarah. i feel a little jealous. i feel like i was his tv baby. he brought us into the world. now we have competition. don't you feel the same way, mike? >> i think robert has max's hair. >> he has more hair than max. >> that's a picture of a leap. >> okay. time now for the final call. the last word from the options pits. carter, over to you. >> big time trader here and bet that crude weakness is a setup for strength in energy stocks. >> mike? >> you know, falls like those in xle r an inexpensive way to stay long in a market? >> dan.

>> if the fear trade pushes tlt higher, you can use that strength to sell it and i think you do it with defined risk and you do it through this. >> on that word it looks like our time is expired. for more "options action" go to optionsaction.cnbc.com. "fast money" every day. see you next friday. have a great weekend. >> announcer: the following is a paid presentation for the nutribullet brought to you by nutribullet llc. special tv offer. stay tuned to find out how you can get the nutribullet superfood nutrition extractor free! that's right. get the complete nutribullet system free! details just ahead. >> my muscle aches, my back aches really started to decrease significantly in one week. >> first night that i actually used the nutribullet, i actually slept really well. that was exciting. that was phenomenal. >> the bad cholesterol which was