been a buoy to the u.s. markets, especially after the rally we had yesterday. but the a action was downright horrible. you looked up in the early

session. the euro bank stock index down. 4% and 5%. you say, what's going on here. that's a three-year chart of the sx. that's at a technical support level. there's stuff about capital. stuff about greece. a lot of stuff going on here. that's a lot going on here. when somebody is focused on oil. >> u.s. banks have strengthened their balance sheets considerably. and i don't know if the european banks have been keeping up with that at all. and you look at weak economic data. and a lot of credit concerns. and suddenly, you have -- you're sewing the seeds for another potential debacle in europe. >> credit concerns are one thing. but let's talk about capital raising. european banks were much behind u.s. banks here. but they have a lot of room to go here. our banks are in very good shape, for all intents and purposes. it doesn't mean if things are going to bet sloppy, our banks are immune. they have a lot of exposure over in europe. we're going to have a lot of

earnings from our guys. and i can't imagine, the environment where we know rates are not going up anytime soon. and the fed's not raising them anytime soon. this is not the environment you want to be buying banks. >> is it possible to think about the potential exposure they have, to be credit here in europe or in the united states, which could be a liability for that. >> credit related to energy is a big problem. oil prices are continuing to decline. there's been conversations about how much of the high yield market associated with energy. we can look at what the banks are saying. citi are reducing their bonus pool because they didn't have the profits they were expecting at the end of the year. when you look at the banks, the valuation metric that is probably the most important, is how much they are to tangible book value by they were cheap for a long time. but most of them, the money centers is trading over one time there. >> you're looking at the bank

that's early in the calendar. >> we're going to have some of the investment banks. and q-4 might have been good. i doubt it. but looking forward, i can't imagine we're going to get fantastic guidance, especially with all of the fed speak, talking about no rush to raise rates. that's not great for our banks right here. i'm looking at jpmorgan in the next week. they report wednesday morning. the options market is only about a 2% loop. it's not a big mover. but i think the price action has the potential to spill over. this is not something i want to be short into the ecp meeting on january 22nd. big money is trying to force the ecp's hand. this could be the reason we're seeing the volatility. i'm looking at january expirati expiration. you could have bought the january put for $1. that's i think given the volatility we're in, given the

potential for weak forward goins and everything else going on, this is a nice short-term bet. i didn't want to put it on today. it's down 5% on the year. i was hoping for a little bounce before the earnings. >> normally i don't like situation where's you're buying the short data to make bets. because you can say it's 1 1/2%. you can see how that's going to work out in the long run. here, it makes a lot of sense. the market closed poorly today. and they have been staying up there. premiums have been staying up. and that suggests there's more trouble to come. i wouldn't normally do it, but that's the way i chose to play it. >> is there a reason you chose jpmorgan over citi? >> before jamie dimon became a saber of the financial world a few years ago, jpmorgan was at the middle of every crisis around the world. i know mr. dimon was out on medical leave.

i don't see them getting optimistic guidance going forward. in this environment, and the sentiment in the stock, which had been good until a week and a half ago, i think you see the stocks come in another 3%, 4%, 5%. >> banks will give off earnings next week. but results from the tech sector could yield the wrath of the dollar master. we're looking at one widely-held name in particular. carter, what are you looking at? >> qualcomm. but tech as a sector, is the most exposed to a strong dollar. and our bet is that qualcomm is going to suffer here. first, a few currency charts. this explosion since june. a six-month rip, of course. putting context, we're now back to the highs of '05. put it in context, in fact, we are up against the long-term trend line from the peak in '85. now, the stock in the s&p 500,

with the largest exposure, international sales, is qualcomm. a full 90% of the revenue is overseas. asia, europe and so forth. what we're looking at is a divergence, since the dollar started rallying. look what happened to semis versus qualcomm. a lot has to do with currency. let's look at the qualcomm short itself. a massive topping out formation. and drops and gaps all along the way. i lost my charts. but this is not good. underperforming its group, semis. under performing in the market. we any it happens again. sell short. >> sell short, carter says. and not just the dollar that's been an issue. china has been an issue for this company. >> that's true. that's a cause for concern. it was priced in when you look at it fundamentally. this is a company trading at less than 14-times next earning. and it has been a cash-generating powerhouse, with

a 2% dividend yield for some time. you look at the share price. and 30% of that is capped right now. $30 billion on net cash. on a fundamental basis, the market is telling us, there must be some other trouble. you would never be trading at this cheap level otherwise. i'm taking a look at this. and it's the technicals are basically telling us, the price is through the skyline to say all the time. i would normally be a buyer. but i can't try to catch on this one. >> what's the trade line? >> february, 72 1/2. you can pay $1.25. and sell the 67 1/2s against it. part of that is applied volatility. the price is a little higher than normal. at the bottom of that share price is that bucket of cash. it's not going straight to zero. >> the chart, as carter pointed out, on qualcomm looks terrible. then, you look at intel, with

nxpi, which is at a new high today. a haves and have notes. >> you look qualcomm, the estimates have come down dramatically. earnings supposed to be flat. analysts have been lowering earnings. they've been guiding down, too. you could see this in the semispace. i looked at this company closely, too. it is cheap on a valuation basis. 26% of the market cap is in cash. on the next gap lower, this thing has to be activist-fed. they need to be buying back more. and giving back more capital to investors. that's one. let's talk about intel. these guys lose money in mobile. qualcomm is only in mobile. they should merge. >> would you be long qualcomm? >> the next two quarters, if they do it again and they slash forward estimates enough, you buy. >> management, i think is going

to come in. they will probably initiate a stock buyback. it's the only thing to consider with the cash they have. >> they have to buyback. i think they bought back 4 million shares last year. >> 4 billion shares. they're just -- >> they will come in and say, do something with your cash. >> how about $15 billion to $20 billion. >> when it comes to qualcomm versus the rest of the sector, does qualcomm look worse? i would imagine that semis have a large percentage of sales outside of the u.s. >> semis, particularly qualcomm, most of all. it's an issue of the drops and gaps. the presumption is you're going to get one more. this is a company, in the last six quarters, have missed two or three times. bet against it. >> all right. got a question out there. send us a tweet @optionsaction. we have all of the options, news and videos throughout the week. it is a simply revelation here.

you have to check it out. here's what's coming up next. i will tell you, i don't own any twitter. >> maybe you should, carl. we have a shocking reason why investors may rush into the social media giant. hope you take notes. it's a safety trade no one saw coming. >> that's classified. >> that's true. but we have the answer. we'll tell you what it is when "options action" returns.

a little aggravated when people come out with rumors about me, buying something and getting involved. i will tell you, i don't own any twitter. and i never did. not that i don't like the company. we do twitter and get involved with it. that's a great concept. but i have no real feeling about it. >> that was carl icahn, telling me yesterday on "fast money" he is not involved in twitter. but our dan nathan says e maybe he should be. what's the story here? >> this stock has performed very well after last year being down almost 40%. it's up 10% or more today. there's been rumors about involvement. carl just said it. he gets a little mad. people put it out there that he would take a stake. that's silly. what's going on right here. this is a relatively new company. it's been public for a little more than a year here. people don't like the management. these guys have one of the most

unique social media properties on the planet. they have a great brand. let's get involved, maybe. but what would a carl icahn do? push nick tesla out? i think the bigger reason to buy it is for potential of acquisition of the company. it has a $25 billion market cap. facebook paid $22 million for global messaging app whatsapp last year. they announced they had 700 million active users. twitter has 300 million. twitter is not just a mobile messaging app. it is this tremendously interesting and i believe at very early stages, social media platform. and you know what? mark cuban said this to you, yesterday, also, mel, on "fast money." he said i'm using twitter for real-time search. when you wrap that up together, twitter is an undervalued

property. because of the synergies with a much larger player in the space. and that player to me is google. google should use their cash and buy these guys. that's one of the great reasons why i think you should buy twitter. i bought it yesterday. but i want to tell you how to play it in the options if you don't want to chase it up. it went from 35 to 40. let's look at the charts here. this is the chart since the ipo here. and this was the range coming into the year, between $40 and $30. this was the low back in may, after their ipo lockup. i wanted to catch it in the mid-30s. probably the low-30s. that didn't happen. i bought at 37 1/2. all of this interest in twitter has caused the volatility of options to get back up to levels where it was prior to the last earnings report here. and so, that leaves me to believe, if you want to play it at 40 bucks. if you like chasing stocks, i would look the a risk reversal. try to take vng of the high,

implied volatility. today, when the stock was 40 bucks, you look out to march and sell march the 35 put. that was the support level that i identified at 180. and you can buy the march 45 call for 220. that costs you 30 cents. and your risk is below 35. yu lose, one for one. you could lose the 30 cents. and you have the massive potential upside of 45. here's the thing about this trade. the highest probability is that nothing really happens because it's such a wide range. you put this trade on if you thought an activist was going to get involved or potential for m&a. >> how do to levels look, carter? and how is sentiment? sentiment was negative on this stock. >> it is negative. there's no reason to be. the experience has been hard. about 50% since last christmas. it would take a lot to bring life to this pattern. it's speculative if something is going to happen.

>> potential merger acquisition of the company does make sense. we're dogging about a company that's probably going to be comfortable. and going to be materially profitable. if you bought the stock and it went back to the may lows, you lo lose 10 bucks. you put on the risk reversal, no harm, no foul. if it drops back, you're risking about $4.5. you want to look at one of the strategies that dan is pr recommending here. >> if it does drop to 35 bucks, dan, do you want to be long twitter at that point? >> here's the thing. these guys were talking about what's going on. the active users and user engagement is bad. i don't believe that the company that has 1 billion users will be the product it is today. when you integrate this into a larger platform like google, that doesn't have a social media strategy, they don't have a

mobile messaging strategy and having problems with real-time search, it works more than that market cap right now. people have having a lot of problems with the user engaging metrics. if this stock was public -- if it was private, we would think that $25 million would be low valuation right now. and it's not. i think that 35 is a buy. could it go back to $30, if there's no activist and it kind of screws the pooch on this one and the next quarter, yes, it could. that's why you trade. you look for the levels. and look for the risk/rewards. >> so impassioned, dan. what is the new safety trade? it may surprise you. we'll explain when "options action" returns.

welcome back. it's time for "total recall" when we look at old trades and figure out what to do now. two weeks ago, carter and mike made a bullish bet on housing. >> we think that 40 is a good bet. based on the breakout, on the here and now.

and we like the xhp. >> i'm looking at the march 34 calls. you can spend $1.20 to buy those. >> it was up today as the market dropped. what are you doing with the trade now? has it become a new safety trade? >> i am not sure i would consider it a new safety trade. if we see rates tick up, that will be poor. i don't think you want to stake in the money calls, either. i would look to sell those. they were trading about $1.80. you look at the march 6s then. you're going to be playing with house money to continue the bullish bet. >> you stood over there on the smart board on "fast money" and said itb. a different instrument. you said itb was the trade. >> right. the premise -- the technical set up is something that doesn't care about crude oil and china slowing down. it's very interesting. and this low rate environment

should continue to favor this area of the market. >> i think you just said, if rates go up, it won't be good for them. if rates stay down, it's bad for our economy. i don't see people rushing out to buy homes, either. this has come back to the prior highs. i don't see the breakout. i don't think it's worth the change. >> a lot of the home builders are trading on valuation on a historical basis. we're going back to 2007 where the things are priced, with lower revenues. for my money, i don't know if they're exceptionally cheap here. >> last month, dan made a bearish bet on tech. here's what he had to say. >> to me, i think there's a really good chance of the strong dollar, emerging market structure, this is going to come back. when the qqq was 104.40, i bought the december 31st quarterly. it expires on the last day of this year. february 101 put spread. >> the first put did expire

worthless. >> it did what it was supposed to do. it reduced the purchase price of the put. when it went to my long strike at 101, i sold a lower strike put. i sold the 95 put. now, i own a $6 wide, 101, 95 put spread. this is what i want to have happen. i want to take one point about the nasdaq 100. it's showing weak relative performance to the s&p. it did not confirm the high that the s&p made in december. it's making a series of lower highs and lower lows. this is one i want to stick with. >> up next, your tweets and the final call from the options pits.

let's take a tweet. richard russell asks us, do you like apple calls into earnings? dan nathan? >> i like them better than owning the stock.

here's a point. this q-1 quarter will report. if you don't know it will be a blowout, you should be in the game. i would make one last point. the stock sold off 8% last year. >> i don't like them because not only do i like the stock right here going in earnings, i don't like the options. they're pretty pricey. >> how's the short? >> the short's pretty good. i would rather have apple compared to the market overall. >> really? but to be clear for richard russell out there, you don't like owning apple in any fashion? >> i actually think it's going to trade $100 before it trades up. >> time for the final call. that's the last from the options pits. what do you say? >> qualcomm, do something about it. >> jpmorgan, if it opens up on monday and you think that you want to take a shot, i think the calls look cheap. >> mike? >> i like the twitter risk reversal that dan outlined. i think they are the new news

outlet for us. traders are using them as a wire. i any i'm actually going to put that trade in my account. >> interesting. our time has expired. i'm melissa lee, thanks for watching. for "options action" check out the website. don't go anywhere. "mad money" with jim cramer, starts right now. >> announcer: think you don't have time to work out? >> my commute is almost two hours a day. >> well, i have two kids, husband, dog. >> i'm working 12 to 14 hours a day. >> 45 minutes is what you need to successfully burn fat and lose weight. >> announcer: now all you need is 25 minutes. >> 25 minutes? it's like before i blink, it's over. 2 1/2 minutes left. >> you're dripping in sweat. >> five minutes into it, i'm already sweating. >> it's brilliant. it's only 25 minutes a day. >> stay in there! you got it! >> i lost 38 pounds and 33 1/2 inches.