si we are live at the nasdaq market on a friday night. carter, welcome back. did you miss us? ? i did. >> of course he did. carter and the guys are getting ready. while they are doing that, here's what's coming up. >> there she blows! we are going whale watching, you won't believe which kmamd hedge funds are piling into. we'll break it down and tell you how to profit. plus what do geno wells and casino stocks have in common. >> i don't know what you are talk being. >> they both just hit the floor and results are down right disgusting. we'll explain why. and how would you like to turn time into money? >> do you know what this means? >> it means you could get rich. so you berlin carefully.

the action starts right now. ♪ next week comes down to just one thing, you the consumer. that's because we get result from walmart, target, home depot and lowe's, plus best buy and more. what can we expect and what will it mean for stocks in general. mike, everybody thought low oil prices would help the retail sector. we haven't seen much evidence of that. >> it's interesting. one of the things that was pointed out this week actually was that some people highlighted the fact that actually more people were paying more when they were submitting their taxes than they have in year's past but actually the average rebates that declined. there was $40 billion that carbon monoxide out of consumer he is a pockets. they are still getting the $2 billion in rebates they usually get. but it seems to me people aren't as confident what we are seeing right now is going to persist. i think that's one of the concerns we have. people have to feel like the good times are not only here right now but they are going to

stay and persist before they start whipping out the credit cards and spending. >> the weakness in consumer has been idiosyncratic. individual names that have not performed because of earnings. but the big names, disney, amazon, starbucks, nike, home depot, these do not show signs of trouble. >> and speaking of not showing signs of trouble we did see yesterday in the xly a put seller out to september, the 69 strike. a bunch of those sold for roughly $1. so certainly that is saying basically they don't expect any sort of downside in the xyl, the consumer discretionary index any time soon. that's safe. when collecting premium, not a heck of a lot of premium, saying hey they are taking some of the risk off. the trade is on the side of the consumer. interest rates still low, good for the consumer. gas prices low. that's good for them. the question is real wages and what mike is talking about, hags real wages gotten better for the economy, has the consumer

feeling better for themselves? that's what is needed. >> gas prices, jeffries had an interesting note out today pointing to the fact in a in the past four weeks since mid april gas prices are higher by $.25 per gallon. even though it is still lower versus what they were paying maybe a year ago they are still high, they are feeling it right now. >> that's a good point because one of the other thing that was brought up when they were taking a look at auto sales is that historically as gas prices went down the purchase of gas guzzlers went up considerably. and actually, in this particular instance, that relationship didn't hold as true. which suggests the consumers thought this particular decline in gas prices was likely going to be temporary. actually it's interesting they would say that because of course that's in fact the case. right now what we have is a short-term gluft crude. we've seen the rig counts drop. consumers might be safier about cod tees trading than you might think. they are not racing out and buying an excursion thinking that gas prices could climb.

>> with all that said carter let's talk about home depot. >> we have charts. it is a big name. what happens here will go a long way to informing what happens in the sector. so i have several charts. and the first is a long term chart and one i wanted to juxtapose here is a stock which is a part of the sector. home depot versus consumer des discretion over if last 15 years since the prior peak. we see here of course that the relationship is quite close meaning home depot hasn't really done much relative to consumer discretion stocks as a theme. take a look at this. that's the same time frame. and i've got three things here, home depot, the sector, and home depot's earnings, however, are up here. meaning this time frame right here is exactly the same -- and i've done it again. but what i've given you is the picture, and then with earnings.

the earnings up 300% versus the stock. if you like that, it would suggest maybe it's not that expensive despite the big run. look at the daily pattern. here is what my eye sees. a well defined left level and a well defined breakout and we are right on trend. yeah? and we know in principle that stocks respond to trend lines. we have come down yet again. our bet is here we bounce yet again and go on to make a new high. we would play it in the long run. if you are long, stay. fur not, get some before the earnings. >> home depot, better than 20% eps growth six years in a row. better than 5.5% revenue growth over a similar time frame. the growth rates suggest it's probably worth it. they are going to be announcing earnings. right now options are relatively cheap compared to how much the stock has historically herbed.

buy the june 113 calls. it has historically moved 3% the week of earnings. this is a simple way to make a bullish bet without risking much. >> i like it for the technical reasons as much as the points carter laid out. typically, what happens those stocks will bounce off the trend lines like carter pointed out and where you get the jump up and the bang for your buck. i'd look to sell something else around it. volatility being so low, who knows how big that move is going to be but certainly this is the right time to make this kind of trade. >> might be the right item seasonally also for home depot to try and be in this trade. >> that's right. historically the home improvement retailers have done well at the tail ends of spring and into summer because of course that's when homeowners go out and buy lawn maintenance items and home improvements. this is the hot season.

you often see a lot of hiring around this same time. right now it seems to me this is the time to make a trade i can this one. let's do whale watching. investor stocks showing which stocks hedge funds are focusing on. >> let's focus on the financials on our final update on options action. let's talk about the banks. bank of america and city. there is two way traffic. that's what makes a market. an loosa takes a new stake in bank of america. 650,000 shares. then there is a mutual fund, bruce berke bits and farrah homothey future cut their stake in bank of america by 20%. meanwhile when it comes to citi. omega boosts to 4.3 million shares. dan loeb eliminates 5 million shares but held on to a be in of

warrants for citi stock. of financial merit is a ig. this is not a bank but we bring it up because john paulson has this as one of his big new shakes. 14.6 million shares of aig, worth around $800 million a. decent call, sizable from aig on the long side from the likes of paul johnson. >> thanks don. seaberg? >> omega took a stake in j.p. morgan as well uppering their stake to over $1 billion n. doing so they cut their position in apple. last week on "options action" we talked about the change in leadership. it might be coming from the bank. when you look at this and the xlf and the financials as the ten year treasury has risen the steeper curve in the treasury bill is good for the banks. sometimes it's hard to know what's going on inside the banks, where their risk is. certainly an increase in that ten-year note the steepless in

the trsry, that bodies well in the banks and i think that's why you are seeing them taking bigger stakes. >> what's your trade. >> the july 67.5 call. purchasing that. and at the same time selling the july 62.5 net put. i only make a nickel for this trade. when you look at the stocks it look like it has made a breakout. when i'm behind the curve i want to play to the upside i do the risk reversal trade buy the down downside call, and place a put. if it breaks below 62.5 i'm long j.p. morgan i'm okay. >> one time's tangible book value, trade being ten times next 12 month earnings. j.p. morgan is not particularly expensive. a more important point, even though implied volume tilts, the price of commodities here in the market and prices are low. one thing we were talking about, the puts have remained well bid. some of the downside puts there

are people buying that downside protection. that's why they set up with favorable risk reward. >> what is the chart. >> it broke out with a gap. had to be news related. filled that gap, fell back to the pivot foin and was gone again. has the cover of course of other big banks agenting well. regional bank act well. swa schwab is agenting well. online sites, insurance stocks, aig, the group is in play and it's rate related. it looks good. >> do you think financials could be the next leadership in the market. >> they almost have to be. as the second biggest sector by weight. the most important sector they need to come to life for the market to finally get out of this range. >> if not jpm which individual stock would you have chosen. >> wells fargo would be a good play we are looking for ones that isv a decent bit of exposure to the net interest margins, doing consumer leonning assuming there is enough consumer lending demand.

>> got a question, send us a trooetd tweet at "options action." if it's civil we'll read it in the show. for everything "options action" run to our website, option auction.cnbc.com. white hot options news. what are you waiting for? check it out. here's what's coming up next. >> like sands through the hour glass, so are the days of our lives. >> but those days could be turned into money, and we'll show you how with a simple options strategy. plus, yes, sir gotta love this town. sne >> well, you might be the only one, especially after we show what you casino stocks and dirty carpets have in common. i'm here at the td ameritrade trader offices. ahh... steve, other than making me move stuff, what are you working on? let me show you. okay. our thinkorswim trading platform aggregates all the options data

you need in one place that lets you visualize that information for any options series. okay, cool. hang on a second. you can even see the anticipated range of a stock expecting earnings. impressive... what's up, tim? for all the confidence you need. td ameritrade. you got this.

here at td ameritrade, they work wow, that was random. random? no it's all about understanding patterns like the mail guy at 3:12 every day or jerry, getting dumped every third tuesday. this happens every third tuesday. we have pattern recognition technology on any chart, plus over 300 customizable studies to help you anticipate potential price movement. there's no way to predict that.

for all the confidence you need. td ameritrade. you got this. here's a question for you, what's more disgusting a new york city subway or a floor in the casino? jane wells is in l.a. with the answer. jane? >> reporter: both? you know, here's the thing about carpeting as opposed to a subway. well, carpeting really takes a beating and it holds onto the stuff. that's why this corporate carpeting like we have here is usually dark and textured and eventually has to be replaced. casinos take it to a whole other level. the pa changa resort and casino, which is the largest in california, has 100,000 square feet of carpeting it has been pulling out. rather than just throwing it away, they are sending it to a recycler to be turned into carpet pat padding. >> if you can understand how much carpet is in one of these

casinos, basically, just to do the main floor down there, it would be like an average house of say 150 yards. you can take 1,000 of those houses and go dump them in the landfill. they don't do that. >> now, unfortunately, the new carpeting which goes on top of the pad and is also made of recycled materials still has the same seizure inducing patterns you so often see at casinos. when i asked why is that? the pa changa folks said we don't know why the carpeting looks like that. they are all kinds of theories, some are that the carpet is so wild you can't look down and so you will keep looking up to play the slot machines or poker games and certainly it will hide just about anything. back to you. >> i don't want to know what that anything is, jane, wells. way to enit for us on a friday. thank you. the only thing worse than vegas carpet is the chart of many of the casino stocks. carter, are you doubling down?

>> this is unhappy stuff, obviously. and there is no reason to be ever long on a stock in a down trend. this is a testament to that. weakness begets more weakness. las vegas sands, wynn. it has been going on for some time. here is the established down trends of the past two years. take that look and jeks juxtapose the shanghai capacity. if you can't get a bid when the chinese equities are doing this, what's coming next? we think the next down leg is at hand. daily chart, you can draw the line like that, head and shoulders, top, call that a neck line, but what you can do is put in your pattern here. head and shoulders, top, here is our first neck life. we are covering at a break level yet again and we are betting it's going to break. sell las vegas sands if you have it. if you are a short seller try

some. >> mike? >> the primary driver for the casinos has been mccow. every seines they had a crockdown on the revenues the revenues were hurt. in the las vegas sands you are looking at a top line revenue decline of 20%. this is not what we like to invest in. and it's not like it's terribly cheap when it's trading around 19 times what it's expected to earn this year. watch out, you don't want to short a stock like this, it was $60 in april. that's not the way to play it. buy the 50 put spread and they will the 45s for 65 septsds. in this manner you are going to rivlg less than $2 to make a bearish bet, a move it could make easily in a much shorter period of time and obviously try to press a short. this is really the only way to do it. >> great point. i mean you don't press a short with just outlaying capital and being short and caught off guard

a. put spread makes sense here. i would say the casinos have been beaten down so much it looks like technically there is one more leg down. i think after that valuations get compelling. i mean you still have potential growth in mccow in term of the sheer number of people who can visit those casinos when you talk about the population of china and the middle class that continues to grow there. i like the put spread temporarily for now. but later on in the year if we get one more plunge down here in the casinos i like the valuations. i don't buy stocks for dividend yields only but the dividend looks attractive. at that point you take a shot. >> you want to monetize if you get the down leg. but it made the upside calls cheap with the dividends. you will want to flip and it do another options trade and not get long on the equity. >> when you have an individual stock that's weak that's one thing. when you have a group that's weak you have more assurity that the trade is real.

>> does wynn look different than the rest of las vegas? it dropped and gapped again. >> coming up next, facebook shares falling in today's session. get this, mike has a way to make money if the stock goes up, down, or nowhere at all. he'll explain after this. i'm here at the td ameritrade trader offices. ahh... steve, other than making me move stuff, what are you working on? let me show you. okay. our thinkorswim trading platform aggregates all the options data you need in one place that lets you visualize that information for any options series. okay, cool. hang on a second. you can even see the anticipated range of a stock expecting earnings. impressive... what's up, tim? for all the confidence you need. td ameritrade. you got this.

just because i'm away from my desk doesn't mean i'm not working. comcast business understands that. their wifi isn't just fast near the router. it's fast in the break room. fast in the conference room. fast in tom's office. fast in other tom's office. fast in the foyer [pronounced foy-yer] or is it foyer [pronounced foy-yay]? fast in the hallway. i feel like i've been here before. switch now and get the fastest wifi everywhere. comcast business. built for business. here at td ameritrade, they work wow, that was random. random? no it's all about understanding patterns

like the mail guy at 3:12 every day or jerry, getting dumped every third tuesday. this happens every third tuesday. we have pattern recognition technology on any chart, plus over 300 customizable studies to help you anticipate potential price movement. there's no way to predict that. for all the confidence you need. td ameritrade. you got this. one of life's greatest mysteries, time. when did it start. when will it end and how does it affect the prices of put and call options? >> that's fore real. that was mike explaining how time impacts options prices in an "options action" tutorial. mike you have a strategy that puts time on your explain. >> it's time to explain it. here are three things to take a look at. first of all if you are going to sell a put to try to collect

premium. expiration. we want to look for short dated options. that means less than about 90 days. strike. now, remember, this is where you could be compelled to purchase the stock if it drifts lieu the strike. you want to look for an attractive entry inpochl usually lower than where the stock is currently trading. premium. if it is a one monday option i'm looking for 1% a month. that works out to 12% annualized. do we have a trade that fits this criteria. we did. look at facebook. it has been trading between $75 and $85. it dropped a little bit today that provides an opportunity for a put seller. i'm looking at the july, 77an 5 puts. 60 days away. you collect $1.65 that works out to a yield of 2% over that time. hits that 12% annualized mark we were looking at. and this is the effective purchase price of the sock. $7585 if the stock is put to

you. so if you are looking to collect premium in a name like facebook over the next couple of months, july 77.5 puts might be an attractive sale. >> carter what do you say on facebook? >> perfect equilibrium. the bears and bulls are matched up equally. there is no character to the trading. you could say this is about to break out or break down. this is not showing any of those signs. et cetera a exactly where it is a trading right now. fair money, dull money. >> flat. >> they will close the market and they won't trade this one. >> kind of like the rest of the broader margaret this year. >> like the rest of the market. >> in the broader market the s&p has not moved more than 2% up or down all year. 1.8 to start the year and that was about it. facebook represents the broader market right? here's an opportunity where there are some premiums and puts to collect. you want to own facebook down there. there has been little to no tail risk in this marvegt.

those are times when you want to sell a put. how long this continues? i don't know, seems like maybe another month or two here where you will get the compression and volatili volatility. maybe it picks up in the latter part of the year if interest rates rise or whatever. >> mike when you are sitting to that stool did you realize that the sun was rising behind you? >> i had no idea. >> amazing. >> the sun king. >> crazy. so poetic. >> i think if morgan freeman is looking for an understudy mike might be the guy. >> the sun rising behind me was green, i think, if i remember how that went. >> catch the full version of mike's ground breaking tutorial on monday specifically on "options action".cnbc.com. >> coming up, checking the score with the cofounders of draft kings fantasy sports with real money. plus, meet the threat to paypal. the ceo of clarna talks to jim about the evolution of

e-commerce. that's coming up at the top of the hour. coming up your tweets and the final call from the options pit. i'm here at the td ameritrade trader offices. ahh... steve, other than making me move stuff, what are you working on? let me show you. okay. our thinkorswim trading platform aggregates all the options data you need in one place that lets you visualize that information for any options series. okay, cool. hang on a second. you can even see the anticipated range of a stock expecting earnings. impressive... what's up, tim? for all the confidence you need. td ameritrade. you got this.

here at td ameritrade, they work wow, that was random. random? no it's all about understanding patterns like the mail guy at 3:12 every day or jerry, getting dumped every third tuesday. this happens every third tuesday. we have pattern recognition technology on any chart, plus over 300 customizable studies to help you anticipate potential price movement.

there's no way to predict that. for all the confidence you need. td ameritrade. you got this. time for a tweet. dennis asks, thoughts on wells fargo and ibm? berkshire boosted their holdings. we talk about financials a lot. let's do ibm. >> i understand the wells fargo. ibm i don't get. i'm not sure where he is coming from. this is a situation where the company haas hasn't demonstrated a good plan. declining revenues sequentially again and again. i wouldn't get involved. >> time for the final call the last word from the options pit. carter? >> if you have any money left in lvs take it out and put it into home depea. >> mike. >> june 113 is the way to play home depot on the long side. >> brine, what's your final call. >> money center banks i love,

j.p. morgan is the one to play. it is a breaking up. play it to the up side and get long financials here. i think the ten year plays well for them. >> our time has expired. i'm melissa lee, for more, check out "options action" web. my mission is simple, to make you money. i'm here to level the playing feel for all investors. there's always a bull working somewhere and i promise to help you find it. man "mad money" starts now. hey i'm cramer. welcome to "mad money." welcome to cray america. other people try to make friends i'm trying to make you money. my jot no only to entertain you but to he had katy and teach you. call or tweet me. this market has to be experienced the single most debilitating rally i've ever seen. we keep going higher, but higher with different oc