on on a snowy expiration friday our guys cooking up hottest trades behind me. while they are getting ready, take a look at what's coming up. yeah, that pretty much explains biotech but a glitch in the charts and could mean the breakout is over. plus " - okay. that's a little cheesy by our standards but does tell you what kmomts are doing. will stocks go wild next? it was the big question on wall street. >> the police department? >> no, not that. they want to know why traders

are betting so big on ford. we've got the answer. the action starts now. if you've missed the rally so far, what is the best subject to play catchup with. get in the money and find out. mike and carter you guys are taking a look at the banks, why? >> a couple of reasons why i think financials are a good place to take a lo. a lot are the interest margin, a couple that have been hurt. choppy sector s&p trading 19 times trailing 18 month earnings, two turns more expensive than it is historically. meanwhile you've got banks trading at or below book value, trading 10 or 11 times earnings a lot of sectors weak, equity trading volumes have been weak. bond trading volume and income weak, interest income weak. rising rates could potentially help all of those. why is that? rising rates could fuel increase in volatility in asset classes,

include volumes and margins. >> carter. >> the sector itself has paced the market, big banks have dragged. we think that's the opportunity breakup, catchup potential in certain individuals parts of the financial sector. what i wanted to look at here is actually one stock and it's goldman sachs. what's important interestingly, it's waiting in the dow jones, its weight the bottom five, number one component visa split and apple at a lower price. goldman relative to financial sector, s&p, fairly substantial laggard over this period. really substantial. take a look at a few charts i think matter here. well well-defined tops going back for five years an we're together with the prospects of a breakout out of this sort of consolidation or wedge. now, hold that thought and look at this daily period right here.

this is the daily chart, one year. call it what you want, people like the phrase head and shoulder. that's what it is. you have a well-defined neckline here. the presumption is a breakout. so we're looking for a move to about 210 back to the long-term chart. here is your head and shoulders bottom right in here and it projects up and out. it would complete this formation and it would complete the daily formation and, of course, goldman lagged the group, financials and market. we like it a lot. >> cohen carter dynamic duo, a trade on saks. i'm curious on what your thoughts are on goldman, what the banks looked like leucadia and tepid, fixed income, citing weak issues in the bond market. >> definitely there are some issues there in the bank centers and big money center banks. one thing you've got to look at

when you talk about goldman sachs. each year see profits, they are growing organically, doing a nice job, trailing 11 times trailing earnings. it's got analyst estimates of 8% earnings growth. i think that's not very difficult for them to beat. 8% growth here especially like mikd talked about, if we get interest rates higher, further out on the curve, ten-year or higher, that can be a boost for them, easy to beat those. stock market poised to make a jump if that happens. >> equity trading, interest income of a few years ago you're talking about an increase of $6 billion a year in that income. there's a lot of potential if volatility and rising rates kick in. volatility is also one of the things you want to take advantage of, a stock over $175 in october, february, up to $200. it moves around a little bit. you can still go out and buy july 195 calls for just $7, a

relatively small art 3..5% of stock price for something that moved significantly more than that in much shorter periods of time. >> what does this mean for the dow then? >> it's interesting. the dow is interesting because its price weighted. goldman $90 billion and bottom five stocks are $100 billion, cisco and gulf combined. implies if this judgment is higher, goldman higher, it helps the dow. >> bullish markets. >> i don't know markets but dow and goldman sachs. >> tough to chase on the bull side because valuations have got stretched and not every sector and financials are actually an area where they haven't. let's move on. fear not bigs hitting lowest level. while stocks are calm others are far from it. fear merchant brian, taking a look at what? >> if you look at volatility, look at asset classes and what they have done. when lou at that quite a

conundrum what stocks have done, commodities, treasuries. look right there oil volatility up 170% plus. bond volatility up 20%. gold volatility up 2%, yet stock volatility down 3% today watching vix drop and get pummeled it's down. that's telling me money funneled into the equity market. that's where the liquidity is at. all other places there's a ton of uncertainty, talking about oil markets, where interest rates will go. that type of uncertainty driving up there. i think, however, this is a one-sided trade. all the money funnel into the stocks. you get one hiccup in the stock market and, boom, that snaps back and you can get tremendous volatility pops. >> there's a macrostrategist we talked to very often, a global macroinvestors, extreme volatility in other asset classes have to eventually come to the place or asset class that doesn't have that volatility.

in this case that would be sachs. >> when you're looking at the picture, s&p, triple qs, a big basket of stocks. one of the reasons you don't see it, oil stocks have been volatile and they have been declining precipitously. we have seen movement in gold miners, also real positives like biotech space. those offsetting factors helped the overall index go up basically at a 45 degree angle. basically what you're seeing because stocks are going opposite direction, in deck is a little more stable. that's an issue of correlation. when rates rise correlation rise and that would contribute to -- >> we have more 1% moves up or down in the last two or three months than we've had in about a year and a half. it's starting. >> right. if it is starting but it's low now, it's a good time to put on trade protection. >> absolutely, melissa. when you're taking a look, vix trading 13. look at this, hey, maybe people

are getting complacent about the market, time to buy protection. i'm looking at a trade not necessarily to lay out cash but zero cost collar on like i like to use here. long stocks, 20 grand of stocks, 100 shares, option trade kind of put on and get protection. looking at the april 214 calls i'd be a seller of those around a buck. at the same time looking to buy 205 put for a dollar. net doesn't cost me anything. i'm called away from a position to spy at 214. my break even on this trade is 205. anything below on the spy, even, feels like market due for 1, 2, 3% pullback. certainly this is a trade i'm looking to put on when vix is low, looking to add protection. volatility creeps up, a trade you want to be protected in case the selloff more than expected. >> look at a trade like this, number one, why do i want to sell any. the other further out in time,

lockhart looking at june, july, april is not going to catch that. what are we going to catch. >> what we're going to catch on this trade is a couple percent pullback, a huge run off 2050 up who here. a pullback here not a question, play for 2, 3% pullback, add protection. that gives you cushion if you want to buy into the market after that point you can. certainly a trade for protection. if you're looking longer term over the course of the year, hey, maybe volatility is going to creep back into stocks, you probably want to go longer dated on this type of caller. >> you see that in the cards? >> you can see that on monday instead of wednesday. that's all sort of mini, micro. >> got a question out there, send us a tweet to "options action," check out our website and sign up for the newsletter. that's what all the cool kids are doing. here is what's coming up next. >> it's the question that

brought you here. >> how high can biotech actually go? we've got a chart you must see. plus -- >> what do you think is more exciting, having sex or stealing cars. >> for options traders, the answer is cars because they made a big bed on ford. we'll tell you how high we think it can go when "options action" returns.

another day another record for biotech, sector up 20% and 300% in the last five years. that's a little too much for our resident chart master. carter, you've been bullish on the sector. what do you see right now? >> this is is the epicenter of the entire market, bullish equity market that never seems to stop. this is the most aggressive part of the s&p, the part of the equity market. take a look. it's the opposite of the goldman trade. here we have the green line. all equities, s&p. then we have health care, which is, of course, beating s&p by 50% since the five-year mark and biotech five times. literally the market. so here is the only thing that's kept up with biotech, apple. you've got to be that good. you've got to be the number one equity in the world to have performed in line with biotech as an aggregate, as a theme. by our work, this is a little bit too much and we would measure that two ways. one, a lot of time with trend. measure that by the average,

smoothing mechanism, we are higher above trend, about 25% above in about six, seven years. also we had a very bad close today. it almost closed in the red having been up substantially higher in a day that biogen was apparently moving towards a cure towards alzheimer's if you will. in any event, now, take a look at this. this is really important. this is the long-term basically a lot of no activity. we get stuck. this epic run. now we're coming out of the top of the channel which marks, of course, this very important period for biotech. we would fade, take profits, do something. >> all right. mike, how are you trading this? >> this is an interesting case. of course, what a lot of people keep talking about is the search for growth. biotechs had provided. take a look at the biggest constituents of by okay tech index, sellgen, gilead, seeing

double digit top line growth, double digit eps. up 60, 70% off one-year lows. that issue gets them now to the same place s&p is. while they were once cheap now fully valued if you take a look at their multiple to grow. i'm kind of in this camp with carter here thinking while it's a very good story in most of these cases the valuation makes it tough to chase. i think what we're going to look for an opportunity to buy a put spread. because biotechs tend to be more volatile than broader market, finance a purchase, looking june -- pay $16 for those, sell 320s for $5.50 dollars. in this instance you're spending just over $10 for that magic ratio we're looking for with these put spreads 25% between the strikes to make it bearish.

>> talking to a couple an lis and their concern is we have these generalists moving into the sector. we were discussing before this is a very technical sector. you really have to understand these drugs and what clinical data are and what phase one means for phase three. >> i have a masters in biotechnology and market made and option stocks because they are so hard to analyze. i think the thing, it is difficult. p e-trading 25 times earnings trailing last 12 months on ibb. that certainly seems a little lofty. we've heard growth could be at 25, 30%. you mention names like gilead trailing 14 times earnings is a great buy in my top 13 i hold out myself personal lichlt there's unique plays in there you can go ahead and buy. yeah, you have to be right about timing, drug releases come out, get to know these companies to know when it's going to hit to play this. certainly mike buying a put spread here, something up to tremendously like ibb over the

last 12 months here makes sense. you aren't the only guy out there on the street, huge put spread buyer ib in april. that's gone up. going along with that side. makes sense here. >> going back to that chart, carter, what level would ib be a buy. >> if you were to fall back just to the milling, middle point, talk about a move to 330, close at 366, we'd be interesting there. >> we're looking to sell 320 put so we actually are giving ourselves a nice 10 plus% mo pet move to the downside and we're comfortable with this. >> we're making the point ibb is down, actually hotter runs over the month on year-to-year basis. >> not liquid. there's 150 stocks that make up the ibb, the top ten names are more than half as with so many. this is the best way to buy it.

>> the final thing is when you're dealing with small cases you do have the opportunity for one of them to have a blowout result, making that bearish a little more challenging. this is more of a broad sector bet with a pullback. >> speaking of biotech at the top of the hour moments from now, cramer has the exclusive ceo of pro then, a up more than 30% today, rising pizza stock and recent jump higher in nike. all that much more top of the hour on "mad money." ford about to kick into high gear? how much higher? we'll tell you when we come back.

mike, what did you see? >> more than three times average daily call volume in ford. all that unusual activity can be attributed to ang sell institutional trade out in june. somebody traded june 17, 18, 19 call butterfly, sounds like a mouthful almost 14,000 times. what does that mean? they bought june 17 calls under 14,000 times, sold 18s almost

28,000 times and bought the 19 strike calls also about 14,000 times. the interesting thing about this trade, can you put the whole package on for less than a dime actually. at current market prices. while we often refer to butterfly trades as threading the needle, this is a situation you're risking little to bet ford will go to that strike, june 18th strike by expiration. >> i think actually it's a crazy trade but one that makes sense. if you look at technicals, if ford can break through 17 mark, it goes to the dollar, settle in at. this kind of trade plays into extreme decline in vol tift above that strike. certainly that will probably the case for ford so you can bust through there. we've seen so many volatile moves down and back up. this is a play things start to settle down, above there laying out $0.10. a cheap way to play, probably the only way i'd be long on

ford. >> biotech master here is treading on your territory. >> beaten up stock nicely off the october low at 13. a well-defined series of lower highs. it's worked to a place where a little bit of a pop, 17 just as you cite, brian, would get you right to 18, which is a 52-week high. >> you like ford? >> this is a stock that's only trading 10 times earnings. in the auto -- you're dealing with something cyclical. they should trade discount to the rest of the broad market, trade discount things like staples. still, if you're looking places cheap, 12 month earning, moving in the right direction. you have an opportunity to use options very inexpensively and get a lot of leverage. the payoff 10 to 1 if you put the trade on and sticks at 18 and lands at $18. >> coming up, your tweets, not the nasty one. plenty of those but not them. and the final call when we come back.

time for some tweets. william asking are facebook options cheap? mike, what do you think? >> you know, actually for a while i thought they were fairly expensive until raselli had a breakout. it's interesting. facebook is one of these situations trades at a high multiple but justified by the growth. range bound kicking back to august or so, i thought covered rights was a good example. actually now if you're thinking about making a directional bet, long calls isn't a bad way to do it. now that we've gotten well above 80 and i should probably refer to the chart master about this, i think that might be a good way to do it. >> other important stock, tech stocks. i would say this is a good bet. >> talking to some of the people in the industry, mobile advertising business i've had conversations with, it seems

like you talk about facebook, you talk about twitter, make of these other guys all mobile generating revenue names they are poised to do very well in the next quarter and quarter after. certainly buying calls is -- >> newly issued stocks volatility high, expensive at first, continues to drift down over time. at a certain point companies become mature, that's when options prices stabilize. i think that's what's happening to facebook which is another reason not -- >> the dax seems extended. i'm long ewg, stay with it or look for profits and a new entry point. carter what do you say. >> ewg doesn't account for move in the currency. big moves since october almost 50%. about 95% is euro. dax hasn't broken out if you had done it in dollars. ewg tries to reflect hedj, wisdom tree hedges for currency, that's right, anyway, if i had this despite the currency i would reduce my exposure.

>> is it a fool's game to even be in the ewg at this point with the dollar trend being what it is? >> obviously the dollar is going to present a headwind. i think it will continue to. there's one other thing i would point out. if you take a look at a long-term track record of growth in the european index like dax versus s&p, it isn't just an issue of currency, we have higher growth rates when everything going on all cylinders. you're not going to see the same growth in index overall. >> listen, i laid out a trade to put zero cost on s&p, selloff which i believe is coming over the next few weeks certainly that will bleed into other equity classes. i think that happens in europe, too, if not harder given how much it's you know up. looking in europe a selloff and break for stocks. >> last call, carter. >> if you have profit biotech, take some and put it into goldman sachs. >> mike. >> i'm with carter, goldman sachs july 195 call record a

fool's bet. >> on. >> time to add some protection to the portfolio especially if you've been long in the market here. certainly the run up a lot, zero cost collar i put on. >> time expired. i'm melissa lee, more options check out website. see you back here next friday 5:30. "mad money" starts now. >> announcer: the following is a paid advertisement for omega xl. >> my name's larry king. a few years ago, i had to have open-heart surgery. when i recovered, i established the larry king cardiac foundation to help people like me avoid heart problems with proper foods, medication, and a healthy lifestyle. well, i recently met ken meares, a man with similar goals. he's the founder and c.e.o. of great healthworks and, for 25 years, hee