now you stay safe and honest! people first. then money. then things. now you stay safe and honest. bye, bye. this is options action. tonight -- >> let's make a deal. >> ebay shoots down rumors it's in talks, fwoolg. but traders are betting on an e bay deal. who the other suitors could be. plus -- >> ♪ disco this is how we go baby ♪ >> despite the breakdown this week, why some smart traders are betting big on a bullion bounce. and the hardest stock to short. >> takes a special kind of man to volunteer for a suicide mission. >> two of our traders are up for

the task and well, teal you why. the action starts now. i'm maine lis so lee. these are the traders, and troubling news from the options picks, huge bets on market turbulence. one betting millions that the vick will double by october. lets get into the money right now and find out. and, mike, we have seen the market, and we have the fed meeting, maybe this is not a surprise. >> credit spreads have widened by 30 basis points in just under a week and a half. that obviously shows risk. let's look at the bets in the vix. the buyers of the october 22 calls. that is about, you know, 10 point increase from where the vix was today, maybe nine points. here's one way to think about that, one point up, that's the s&p going down 1%. that's talking about a 9, 10%

decline, potentially, if that actually plays out. when you take a look at this, somebody is willing to make a lot of capital to get the bet. it wasn't my mom doing this. >> you know what i would say? when you think about 135,000, the october 22 calls traded, traded between 44 and 50 cents. think about on a premium basis, if you own a lot of risk assets, and think things are toppy, this is an asymmetric bet. i doubt the buyers, 45,000 traded in the morning at 45 cents, it's like a tail bat in a lot of ways. >> that's fine. but this is not the type of hedge you use systemically. this is the type you use strategically. this is clearly the kind of hedge, where there's a risk of something happening between now and october. this isn't the kind of thing where they're always running a hedge book. this is a very strategy and

specific bet and targeting the next 30 days. >> do you agree with the directional bet? >> absolutely. with every one of the risk assets showing minor cracks, this is the time to do it. not until the vix gets to 20, but still at 13, just over. this is a reasonable place to get over and put the hedges on. >> and seems like a year since the temper tantrum, and what happened to the high-yielding are instruments with the rates off of record low rates. look at what happened with the iyr, that's the index, and talk about xlu. when the ten-year yield gets back to three, volatility. we saw that this week. this is the sort of stuff why you will be reaching for portfolio protection in the near future. we saw sharp declinedeclines. >> and think about it, banks like bank of america and jp morgan hiking it to june from

the third quarter of next year. you have to start worrying about the trades. >> that's a good reminder. if they're raising rates, that's a reason to buy stocks, if rates remained low, that's a reason to buy stocks. but this is telling you the equity markets and all risk markets are going to respond and anticipate the rate increase, and you're going to see a decline in asset prices. >> yielding sectors, utilities come to mind. >> the xef for the utility sector. great performance, up 25% on the year. doubling the s&p 500. and 3.5% dividend yield. but thinking about history and what just happened in the real estate sector this year, to me, the volatility is very low in the xlu despite the increase this year. and with a sustained selloff, at the end of june, the lows in august, the xlu sold off 10%.

it was something today when the etf was 3245. and there was a put spread, the 4240, i paid 60 cents for it. that's the max risk. what i'm trying to do. i bought one of the october 42 puts for 80 cents and sold one of the october 40s at 40 cents. get it between that on expiration, i can make $1.40. and 42 would be a really nice breakdown level, the stock below the 50-day moving average. and 40 was low from august. i like that as a support line. : the irony and utilities are safety trades, but in a rate increase this is the least safe place to be. and the 30 year this week, that's ample evidence of that. there is a tremendous amount of exposure to rate increases. >> i want to go to you, carter, dan's trade doesn't have much time to work out.

this is october. >> if the market selloff continues, anything tight will work. but the important principle is there's a long relationship between yields, interest rates and utilities. and utilities only really start to get in trouble with inflation or the absolute cost of capital is moving. neither of those things are really at play here. look at this chart, this is basically the ratio between what you get from s&p 500 utilities and ten-year treasuries. and over time, this ratio has been about a .82, and double that at .84, 37 versus 26. it's still cheap, takes a while to unfold. we don't think it's a lodge cycle thing. >> he agrees. in terms of other sectors, a similar trade on. consider it for the read index? >> i wanted to do it in the iir. so much down, don't press it.

rolling over, good spot to put it on. >> gold, falling like lead this week. jackie is at cnbc headquarters with that story. >> well, it was another tough week for gold by all accounts. the precious medal dropping 3% to end the week at 1230. the seventh down week for gold out of the next nine. a and, of course, is the lowest level since january. it's about the dollar. as the dollar rises, gold tends to weaken. so the massive rally in the greenback has been a serious headwind fore bullion. >> thank you so much. and carter, to you for the chart look. because we have seen a massive rally in the dxi. the biggest gain since november, we are seeing a reaction in the commodity markets. >> that's the opportunity here, to take the other side of this in the sense that it is a massive rally in the dollar, unexpected, just like the huge bump up of rates on the ten-year. we think it's overdone, and you

can catch a fade or a pop in gold. here is the gold etf. and, of course, this massive wipeout is a function of this huge move in the dollar. okay? very clear. gold down, dollar up. longer term pictures here of the dollar. i'm going to switch to red to highlight this. this is the dollar. this is the move that we've just seen. we are simply at the top of a range. you never in principle exceed a range when you first get there. in order to break out from a range, you have to coil more off than not. so our premise here is having reached the top of the range, the dollar is pricing quite a bit of what is coming, and start to back and fill. take a look at this picture here, that's our same lines, if you will, but here another way. basically the rally on the dollar leaves you at a difficult level, and the rally will stop for now on an intermediate basises, meaning that gold, the

resi pro cal, has the potential to pull this. we're looking for the gld to move up about 8, 9% from here, close at 118. we will play for 125. >> 8 or 9% on the gld. mike, what's your trade? >> the simple way to do this, i have never been a gold bug. this is counter -- going this way is a little bit counter than earlier. but options, sometimes you can get a little bit of leverage. i'm looking at the december 121-127 call spread, pay about $1.55 for that, and worth as much as 6. but even if you think it's a 50/50 get bet, up or down, you have a good risk/reward on the up side. even though i don't agree with the sentiment, this is a way to do it with a good outcome. >> this is a complicated trade that the dollar is not just a function of what's going on in the united states and interest

rates, but a function of what's going on with europe and the ecb and japan. >> i think that's the key. and i think we had all these different regions get on the qe band wagon, or think going forward. to me, gold would never go up, and breaks 150 in the glp, it could wash down. if you want to play for a bounce, i think that mike's trade makes perfect sense. i think there's a ton of technical resistance at 125. the dollar move was unexpected and geopolitical news didn't move gold. >> you can't fight the fed and the other central banks at the same time. and deciding to buy gold. we're looking at it in dollar terms, that's what you're doing, fighting the central banks. i'm not crazy, i could see it going to a thousand bucks. >> that's a big call, mike. see if you're right on that. send us ar-tweet to our new

handle #optionsaction. and we have the hottest options news, videos throughout the week and exclusive trades. so check it out. here's what's coming up next. no deal, ebay strikes down rumors of a potential google tie up, but traders see another swooping in. >> you're telling me there's a chance. >> yes, we are, and we're naming names. plus, trouble at home. cowen/carter betting against home depot, but it's heading higher. why they are sticking with it. ♪ when the world moves, 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.

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you'll bust your brain-box. all on thinkorswim, from td ameritrade. check out shares of ebay, surging today on a rumor that google was taking a stake in the tech giant. e bay shot it down, but ended the day much higher, and ebay options traded four times the average daily volume, most on the call side. almost 100,000 calls, with one trader betting it will be above $60 by this january. if google's off the table, this activity is telling us maybe there's somebody else out there. >> off the table today. the statement through reuters said they have not held talks, google. there's a host of people

interested. break down the price action. options volume is four times average. an otherwise quiet day in the internet space. the day chart here, this stock was down on the day. and 10:00 this rumor hit on twitter. it was all over the place. people trying to confirm it, google was going to take a stake in ebay for their paypal unit. karl icahn is the seventh-largest holder, you had a brewing, and he's been quiet about this. this guy has had a hot hand. family dollar, gets involved, they get sold. they're in bidding wars. but that's another story. this price action, declined they were talking to google, the stock came in a couple percent and closed up 3%. that's bullish given the fact they declined that they were talking to google. let's look at this, this is ebay versus the nasdaq. it's a massive underperformer. this is a company that's

actually growing at double digits sales growth. it's a cheap stock and well-run. and obviously they have shareholders that want to see them unlock shareholder value. i bought the stock, didn't do anything in the options market. why did i buy the stock, what am i looking at here? google, they were rumored. but let's say, google is interested, microsoft has to be interested. think about it, we're talking about what apple is doing, the big announcement with apple pay. they are going to have apple pay buttons in app, but throughout the mobile web. and google is a big player, and facebook. this is another one that could be taking a hard look at the paypal asset. and yahoo! just filling their couffers with alibaba cash. and i like the underperformance given the backdrop of the news.

>> go ahead. >> this is a stock trading at a reasonable valuation. great company not higher on the year. two names on the list that dan showed us that i think should be off the table. wouldn't consider microsoft and yaho yahoo!. we were thinking about it to see if they would float, looking and speaking to google. especially in light of the apple news. do the best possible thing with paypal and a fit with google wallet makes sense. trying to find the right dance partner, if they hadn't been in talks, they probably should be. >> i love talking about potential deal activity. that would be speculative on the hunch that it's taken over. >> and that's the only thing that could save this thing. >> are you saying that as a technical analyst? >> september to now, s&p up 40%? it's a dud. it's a gambling chip. people are speculating.

look elsewhere, i would say. >> dan? >> i would say not look elsewhere. tell you why. no one was thinking about paypal as partnered up with google, who is all over the web. you think about google wallet, has the potential to be massive, but don't have the traction. you put the units together. not even an outright merger. but the infusion of cash where investors feel good bout this thing unlocking value. >> revenues have increased by 30% and eps up 50%. >> you like it by itself, e bay. >> the market does not like it. if they were good, which they are -- >> carl likes it. >> he's not moving it. >> sometimes it pays to be a con trarn. i'm with dan on this one. >> and home depot the unshortble stock. they have said no, but lost money trying to make the bet. your they sticking with it?

they'll explain 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.

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action. despite news of a serious data breach, home depot has been one of the strongest components over the last month, and that's bad news for cowen carter, and here's why. on options action, because we risk less doesn't mean we make more. that's what happens with cowen/carter's bearish bet on home depot. carter said they were about to collapse. >> i would call it a well-defined bullerish to bearish reversal. >> all right, let's do this. but just going short since home depot or any stock can technically keep ridsing foreve, that could mean infinite losses. so to define the loss, bought the november strike put for $3.50. mike needs home depot to fall below $75, below $71.40 by

november expiration. but it gets even better, because if home depot shares do fall, that put will gain value faster than the stock loses value, meaning more money in mike's pocket. >> that's the spirit. >> but unfortunately, since the time of the trade, home depot has actually risen more than 10%, making this trade a loser. and now every options action fan wants to know, how will these two handy men improve their home depot trade. before we answer that, cheer you up with stocks versus options. shorted that, that was $3.50, now almost worthless. but only sets you back $300. you are still bearish, why? >> this is wrong. we have been clobbered. if a stock that rolls over breaks out, it's a first loss, best loss. see the gap up out of the range.

you have to clear out. just move along. >> move along, mike. >> i'm inclined to agree. the jab was the beat on earnings, and the guide higher was the hook that knocked this out. that's not really what you want to see. that is not consistent with the bearishness we had not a whole lot of premiums. see how these things trade next week, and possibly the market pulls back, and the premium, sell them and take what's left and move on. >> i would say that the beat was the knife going in and the guide higher was the twist of the knife in the gut. >> i don't think you want to do that to them. i want to tell you, when this stock broke out of that huge range, it got me thinking less skeptical. it was so violent. i'll say this, if the breach take this is back to the low 80s or the breakout level, gets oversold there and probably a good entry on the long side to consolidate in the low 80s. >> as a principle, fill a gap

after breaking out, there is something to say for trying to catch the bounce. >> coming up next on mad money, cramer has one event he expects to dominate trading next week. stick around for the game plan. coming up next, the final call from the options pits. ♪ when the world moves, 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.

[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. let's take a tweet here. daniel craig. you might think of 007, of course. but daniel craig tweets and asks, how can we use options to bet on a continued rise on the dollar against the yen? mike? >> the good news about currentlies is the options premiums are low. they have risen in light of the recent moves. but look to the etfs, uup, go out to december, get something close to at the money. a lot of people, you might look

for the leverage on the really cheap options. small moves are big moves when it comes to current sis. that's the best bet. >> in terms of dollar/yen, dollar is at a six-year high. >> we think of the moves, aggressive and quick are quite extreme. it's better to play for mean reversion. not do what this tweet is asking to do. but, you know -- >> that's why you would use calls. because if it does revert, you're risking much less. >> beware, 007. and the last word. carter. >> well, if you have utilities, i wouldn't quite get panicked yet. stick with the xlu. and you have the stomach for it, try a little gld on the long side. >> dan -- >> and you are a trader and looking for opportunities and good setups, the iyr, the action there, could be a continuing trend. i like this trade that i put on. your defined risk, risking less

than a couple percent to make maybe magnitudes. >> shorting it, it's a hard press. looking a the home depot, the smart thing to do, completely different story, out. >> our time has expired from options action. go to our website, see you back here next friday at 5:30. have a great night. >> 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