we are live. carter has a wager of the weekend on tap. >> the only thing that we have to fear is fear itself. >> well, maybe not, f.d.r. a collapse in the vix could be signaling trouble in stocks. we'll tell you how to protect yourself. plus it's the one retailer that benefits from higher gas costs. >> please tell me. >> we will. you'll be shocked at how little could costs. . talk about a heist? >> will you rob a bank with me?

>> they found a way to make a killing. the action starts now. >> it was a quiet day for stockings, unless you're talking about apple shares are up about 1% on the day. is apple going to break the s&p out of its tight trading range? let's get to the money and find out. doesn't seem like there's any sort of catalyst here for this move. >> i think the only thing people could potentially be looking forward to is the worldwide developer conference, which we'll get in early june. iphone sales reman very strong. this is a situation also when we're going into a season when of all the spaces that typically do well, you see technology stocks do well and this is one of the few technology stocks, if you look at what it earns, it's not expensive on a fundamental basis. >> it's amazing how the sentiment is getting so bullish at this point. morgan stanley out yesterday,

raising estimates on the iphone, as well the watch. there's still a huge base that have not upgraded to the iphone 6. >> when you look at the option pricing in apple, we've seen a tremendous decline in volatility and -- you've seen a huge drop that's translated into an uptick in the stocks. it's bullish sentiment for any asset class that can continue to push apple higher. >> what do you think of apple, carter? >> it's perfect equilibrium. the price today is the same it was three months ago. it's been tight and range bound. we think it will get out of the range and move up. >> we have the developer's conference.

>> the iphone 6s, they've begun to talk about when that will be released. that's a potential catalyst. the watch, i didn't think initially that could be that big of a material mover for the stock. i do end up going to the apple store, i have to admit, about as often as i go anywhere else. >> do you go there to longingly look at watches? >> not to look at watches but every time i have to go and replace a missing part. it is amazing to me, if you get to the apple store before they open, it is the one store at which to this very day there is always a long line. i live in austin and i can tell you, i can you go g throu, i cah the mall and before the store opens, there is a line waiting to get in there. i think with a company this mature with products this saturated that demand is so high

that people are queueing up outside the store even now. >> let's go to the chart. >> there's an adage news follows price. let's look at the charts and try to figure out which way this is going to get resolved. we think up. so we've got a nice trend line. if you want to see it, can you draw the lines. you've bounced off the line over and over and over and the presumption is we're about to bounce again. so you get these nice moves, no trend, trend, the presumption is up and out. i want to study this tight action right here. so the next chart is a more short-term chart. we are literally the same price as we were exactly three months ago. late february, late may, equilibrium, you can draw the lines like that. we think it gets resolved like that. here's the chart without the lines. can you draw them like this. a flat top, ascending bottoms, we think it gets resolved like that. we're buyers here.

we think up and out should be a good 5 and 6% move. >> up and out, wow. what do you think. >> brian pointed out volatility in apple is relatively low. for the stock to move to the up side, you're talking about an increase that twadwarves the s&. i'm looking to the july 135 call spread. i could buy -- so net-net i'm spend being spending $1.55. i think it's okay to make a bullish bet here but you don't necessarily need to go out and buy calls. for the stock to go up 10%, 15%, i don't think we're going to see it between now and july. >> i like doing a call spread. when volatility has dropped, like mike mentioned, it's tough for the stock to go and race to

the up side. there might be an up side move but i expect it to be a slow moving one. i love that you made the point about the market cap situation. that's when you do a call spread and not an outright call. you say at this level of valuation, i need to be out of the stock or not getting to that strike price. that's a great way to play it. it's a cheap and affordable way to play apple to the up side. you can say i don't know what to do, valuation is high. >> button this up for us, carter. you think apple is going to go higher. >> it's a big stock, it's 4%. i don't think it has to mean that the market is going higher in some meaningful way. i think you have a big stock that is cheaper than the market, that is delivering better results on the market. apple looks higher. >> talk about fearlicious the vix breaking through 12 but given how little we're moving, should it be even lower.

brian, what do you think? today is a little tricky because it's the day before a three-day weekend. >> typically what traders do on a three-day weekend is they take out the option value and you see the vix fall. what's been happening the last couple days is a tremendous amount of up side call buying in the vix in june options expiring in about three weeks here. you look at the june 18s, the june 17 calls, the 20s, especially the june 18s, we saw about 100 calls bought to the up side. traders are looking at the vix down here at 12, the market is up at 5 and find a way to hedge the portfolio in case we have a summer doldrum -- >> or in case something happens the next fed meet persian gulf. >> everybody has dismissed the idea there would be a rate hike?

june. what's a sensible way to hedge that? buy some calls in viks -- if you look at that part of the term instruct yes, the same pattern is exited. i think what's going on here is people who are long in the market, they're looking for hedge, pointing to those ca catalysts you just talked about. >> is the vix broken? has it helped anyone do anything over the last many months, except dig down and -- >> as you question his existence. >> no, no. you have expertise in biotech. >> right. >> i have expertise in a lot of things, right? the vix is sort of broken in the sense that the vix itself is just a calculation. it doesn't consider time and decay that happenings to option prices. it doesn't consider actual realized movement in the market. in that sense it doesn't tell you a whole lot of what the

market is doing. it's sort of a forward way of looking and a way to price out fear. there are various other instruments to trade volatility and trade hedge. we do that with our fund. >> for protection what's the trade? >> for protection what i've been looking at is you look in the spy options. i look for the cheapest way to find that protection. when you go out and look at the june 30 date, they're going out in with about a month, i'd look to buy the june 207 put for $1.55 while selling the june put for 1 $1.35. people say $1 put strike, what are you doing? it's a simple trade. it's a bet. i'm betting 20 cents to pay out a dollar. it's a 4-1 payout. if the market drops 3%, i'm going to pay out four times my money. i'm trading in $100 and i'm going to get back $20.

>> that's pretty good risk reward. those are the things we like to look at, what is the relationship between what you pay and what it would be worth. >> i think this makes a lot of sense. when volatility is low, spreads can still make sense, even in that environment. >> carter, you asked that in a pointed way, does vix help us at all. do you look at that? >> never. stick with the prime rip source. >> if you're looking at the s&p, though, in a way you are looking at the vix. the s&p has been extremely range bound. the futures are telling us it will likely remain range bound but expect it to go higher later in the year.

q 3, q 4, that's what they're expecting. >> for everything options action, go to cnbc.com. it's the perfect complement to the memorial day weekend. so what are you kuwaiting for? here's what else is coming up. >> talk about a bank job -- >> put as many hundreds, 50s you can put in there. >> plus oil is surging and that could be good news for one large retailer. we tell you which one and how to profit when "options action" returns. w, 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.

ahh... steve, other than making me move stuff, ces. 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.

welcome back to "options action." put it in the record books, oil closed lower on the day but not enough to kill that weekly winning streak. this marks the tenth straight week that west texas intermediate crude oil has posted a gain. that's the longest streak of weekly gains on record going all the way back 32 years. that's how long these performance numbers have been tracked. wti trud kraded down to-- crud 5 $5 -- down to $59.72. as dollars become more expensive, it becomes more expensive for non-dollar buyers to convert money to buy oil. we did get news on oil front on the rig side today. in the latest data from baker hughes, the number of operating oil rigs fell by only one to

659. it may indicate that industry activity may be stabilizing for now. back over to you guys, melissa. >> thank you. and carter is taking a look at a retailer that sell as lot of gas and reports earnings next week. what is it? >> costco. a very big name. it's up four fold. it's crushed the market. and obviously it is a well defined, ascending channel. we're in the middle of the channel. i want to study this recent dip and tell you what i think is coming. here is the past year or two. what we know is we have a powerful advance up about 45, 50% and then this pullback of about 10%. these little lines i've drawn here, actually, this is what's important. we're up $45 from this period over about 11 months and we've pulled back 15. there's a ratio here. we've retraced 33% of the

preceding advance. and where we started to stop is -- the presumption is that this decline leaves us at a level of support where rebound potential is high. we like costco for a bounce off its trend line going into earnings. >> mike, this lines up with what you're seeing with your very little known stock indicator known as your credit card bill. >> yes. if i looked and saw where it spent its money, i would have ended up in apple and liulu lemn and costco. they are actually a little bit more immune to gasoline volatility than a lot of other retails are because they a gasoline retailer themselves. you get consumers going to

costco when gasoline prices get high. with earnings you sometimes get a slight bump in volatility. i'm going to look at a call spread. i'm looking at the june call spread. can you spend about $1.60 on that call spread, captures the earnings event. you would think retail would be a strong place to be during the summer months. that isn't always the case. technology and health care tend to outperform. we can make a hedged bet going into earnings. >> do you like costco? >> i don't love it from a fundamental standpoint. 8% growth in the coming quarters and a pe of a stock sitting at 27. i'd be leery, how high could costco continue to grow. as long as oil prices stay relatively cheap here and don't

explode to the up side as well. there are other ways to play consumer discretionary here. maybe you get a little bling off the charts like carter pointed out. >> he's questioning your charting ability. >> it's only fair if i don't use the vix. >> oh, it's payback. >> there's a discretionary element to this. i it's not as cyclical. >> compare it to a walmart, compare it to target. if you're going to be in a space, you're better off in this someone. >> coming up, talk about money on the banks. they've got a way to make even more cash right after this. here at td ameritrade, they work hard.

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.

if you want to succeed in business, mistakes are a luxury you can't afford.

that's why i recommend fast, reliable comcast business internet. they know what businesses need. and there's a no-mistake guarantee. if you don't like it, you have thirty days to call and get your money back. with comcast business internet, you literally can't mook a mistick. i meant to say that. switch today and get the no mistake guarantee. comcast business. built for business. ahh... steve, other than making me move stuff, ces. 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.

on "options action" it's how we make bank. carter thought the financials were about to take off, but just buying the etf? to make money, mike needs the xlf to rise by more than the cost of the trade or in this case above 2525 by july expiration. >> praise the lord, praise the lord. >> if the xlf does rise, those calls will increase in value faster than the etf will, meaning more money in mike's market. the financials have rallied

nearly 3% meaning this trade is a solid winner. now bankers all over the world are tuned into "options action." they just have one question. what will they do now? carter, do you still like the banks? >> in principal this is a big part of the market. it's done precious little over the year now. certain leaders are starting to catch a bid. we like this on the long side. we would stay. >> mike? >> the segment is called "i want more cash." what do you do? >> if you want more cash, you're going to stay in this trade. what we're going to look for is some opportunity to spread it. you want to collect a meaningful amount of premium. we are not there yet. one of the big reasons for at rally is financial, imso basically we're looking for that at the end of the year. we should sit tight on the trade

before we have an opportunity for a profit. >> and you like the same trade. you're like jp morgan. >> that one is already a winner winner chicken dinner. i think jp morgan is where you want to stick. when correlations are as low as they are, you try to ntd -- you can stay hedge with the spy trade. when you look at the banks and looked at apple like we talked about earlier, those are the names you want to call. >> when you're buying calls or biographical spreads, you're making an implicitly hedge to the up side. we are only risking 1% to make that bullish bet, there's no harm in staying with it. >> it's a pretty diverse group of stock. where do you see the most strength? is it regional bank?

there but not necessarily -- importantly you have online brokers, traditional brokers, you have regional banks, money center banks and other certain insurance stocks are starting to come to life collectively. >> a lot of the financials also were among the cheapest stock you buy. so these are companies that are poised to do well. that's a good come annation. >> reach into that pocket. final call coming soon. stay tuned. hey work hard. 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.

choose, choose, choose. but at bedtime? ...why settle for this? enter sleep number...don't miss the memorial day special edition mattress with sleepiq technology. sleepiq tells you how well you slept and what adjustments you can make. you like the bed soft. he's more hardcore.

so your sleep goes from good to great to wow! only at a sleep number store. save $500 on the memorial day special edition mattress with sleepiq, plus 36-month special financing. ends monday! know better sleep with sleep number. ahh... steve, other than making me move stuff, ces. 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. let's take a tweet. the tweet is i have june 113 hd

calls. should i hang in there or pull the plug? >> this is why we wish we had options action every day. the time to monetize was when the stock him to 116. i would make mine a little longer and push it out to 116 and go for a call spread. >> what do you think? >> if you can push the time out, the pattern is in tact and we think it goes higher. >> hd or lows? >> i would go hd. i think you hang in, push the calls out, a little longer dated. watch the ten-year note. interest rates, if they start to tick up, that should have a negative impact on home depot. i think you got to be watching that. trades at ten year, 225 that could trade all the wave up to 260 on the negative interest rate. >> time for the final call? >> apple long, costco long, choose one, choose both. >> mike?

>> brian, great to see you on the desk once again. >> i would go with the apple call spread, too. i think apple is ready to break out to all-time highs. >> i'm melissa lee, thank you for watching. check out the web site. have a safe, fun memorial day weekend.