-- question question -- is there a better place to be than right here, right now, live at the nasdaq market site on a quadruple witching session? the guys are getting ready behind me. while they're doing that, here's what's coming up. >> let's make a deal. >> what traders want one big company to say to twitter. we'll tell you which one and how to make a profit. plus, the markets are doing a dangerous dance with greece. ♪ we'll tell you the one sector that could get hit hardest. and talk about instant riches. >> ah! >> some traders have found a crazy way to make millions within seconds. we'll tell you how in a special report. the "action" starts right

now. all right. women, the question is simple. this evening, if greece starts rocking and rolling, which sector do you need to avoid? let's get in the money and find out. dan, you're looking at banks? >> yeah. obvious one. right? really, tim was talking about it earlier. a lot of industrial companies. different sorts of sectors in europe that actually won't feel the pain if there is a default in greece. obviously the banks will. we've seen poor price action over the last couple weeks trickling into some of deadlines here. deutsche bank in particular, a tough time. really massively underperforming. the other banks in europe today were actually trading okay. our banks are starting to take it on the chin today. the large money centers down about 1%. >> we learned last time, the banks felt it, a few years ago during the great crisis. now europe's in a better position and the european central bank has come in. do you have to worry about u.s. banks, mike? >> one of the reasons you might look at u.s. banks, higher than

then. right? fairly crowded trade. two sectors, i think a lot of institutional players are liking nowish the banks financials are one of them. airlines actually are another. when you get crowded trades and get some kind of a setback you can see material pressure on that sector. i think we saw that this week. there's evidence that this is well owned. >> on the fed. >> that's right. well, but that's exactly my point. a little bit of bad news right here for the financial compressions significantly. >> u.s. banks aren't anywhere near at exposed at europe. around $10 billion. issue, this surely will be, if there is some good problem in greece, the most sensitive sector. not staples, not utilities. obviously, that's your thinking dan. yes? >> yeah. listen, seems obvious we have not been in a period seeing systemic risk. during the european debt crisis our banks felt we going down for the count. we don't have leverage issues

they do. a lot of people are out there thinking a lot of european banks are still massively overleveraged, not done raising capital and there is a chance threatt at some point our banks aren't pricing volatility in from external event. if there's even a 20% chance you were a default, we'll get volatility. >> speaking of systemic risk, larry mcdonald, head of u.s. strategy, you think the banks are under pricing the risk of a greek default here? >> yes. a couple reasons why. there's first of all, 860 billion of total debt that's government plus the corporate debt and the banking debt and insurance companies that the world's exposed to, number one. credit default swaps, one of the things we track closely. saw it in 2012, credit leads equities, and the u.s. bank credit default swaps have been underperforming the equities of

late and they're typically a leading indicator. so you've got those issues, and then look back to 2012 when we had the grexic scare, the s&p only down 9%. so the financials are definitely the place to watch. >> yeah, but i guess, larry, the big lesson, the fear back a few years ago, if you stayed with the banks it would have been a really great trade. do you see this kind of reaction, if something goes wrong with greece lasting more than a few days? more than just an initial reaction? >> i agree, but you want to buy fear in the banks. so since lehman you've had four or five opportunities. if you sit in the boat and wait, wait for some real fear, that's where you'll get values in the banks. this shows the perfect show, because you can put on a put spread, buy puts on an etf that has a lot of financials in them. >> thank you, larry. larry mcdonald on the systemic

risk, we're all watches ahead of monday for greece. dan, the trade here, looking at jpmorgan. >>s first things first, larry nailed it. it is the perfect show and we'll put on a put spread. this trade has actually nothing to do with that, but what i'm looking at a outperformance in jpmorgan, up 25% from the lows in january. that's a massive, massive move. a chart here, a one year. look at the steepness, i'm sure carter has a few things to say about it, and the breakout above 64 over the last few months here or just recently, to me i think you have an opportunity into their q2 report and their q3 guidance, reported and the morning of july 14th to actually make a bet that the stock will retrace some of that move back to the breakout level. today when the stock was 6820 i bought the july 67 half, 62 half put spread for $1. bought one of the july 67 half puts for $1.15, sold one of the 62 halves at 15 cents.

cost me a dollar. break even, $66.40 and make up to $62.50. option prices are cheap in jpmorgan. i sold the put, wanted to offset a little. >> quite a strategy. mike, what do you think? >> this is the strategy. options are relatively cheap, but the critical thing, look to sell strikes where you don't think the stock's going to fall. one of those situations. 62.5 represents more than a 10% decline for a stock otherwise cheap ap catalyst-driven trade, news that will hurt financials, but doesn't necessarily mean the best stocks get sawed in half. right? you want to do that. the other quick point to make, when you sell the inexpensive puts that offsets a lot of decay a trade like this would experience over the course of the next week or two. why they make sense, even though it's only 15 cents. >> last week everyone was loving on a steeper yield curve and higher rates?

>> and hanging in there. the point, not specific to jpmorgan. picking up on a very steep angle, from 54 to 69, up 26%. a general giveback, this participates on the down side. >> final word, dan? >> listen, also the fact you said. you mentioned the fed. talking about greece. that statement was more dovish and the banks rallied ahead of what they thought would be a more hawkish statement. >> still saying the feds will have to raise interest rates eventually helping bank profitability. >> eventually. a stock run in front of it massively outperformed the s&p this year. crude falling nearly 2% according to our resident chart master, that could mean big trouble for energy stocks. carter what are you looking at? >> a bunch of stuff. go check it out on the screens, good charts. the issue, of course, this is a bad area of the market. worst performing on the week, one month, two months, so forth and obviously except utilities worst on the year. what we know is this -- monday is the one-year

anniversary of the peak in energy stocks and we are down on the lows of january, 29%, and as of now, about 25%, because we're still off those lows. what my eyes sees is this -- there's your trend line. and the presumption is having just broken these lows that we are actually going to reapproach the prior low which is 71.70 from january. about 6% lower from here. look at other charts to put it in perspective. bull market move off the '09 low. toying with and in principle starting to break below not only the minor trend line, but the five-year trend line, and then just two more things for fun. this is your forward pe in the period. we are at 27 times for the sector. the highest obviously going back a decade, and for fun, here is a

comparative chart of energy stocks versus crude oil. energy stocks still up here, and crude oil here. meaning crude oil got to come up a lot or by all accounts energy stocks have to come down. we're sellers of the xle. >> interesting, bearish take on the energy firms. mike, how are you trading energy with the dip we saw today? >> interesting. we've tried to time the trade a couple of times in the past. admittedly hasn't worked out every time. the story, when you look at the xle, the two integrated names, exxon and they have not to carter's point come off in terms of valuation as much as crude has. look at the term structure and crude how much that's dropped they have thought dropped enough. some kind of inconsistency here. either crude will rally or these come in. one of the two has to happen. the simple thing to do, looking at xle, out to september, buy the 69 put spread pay $2.70 for

the 76 puts and sell 69s add 80 cents, giving yourself 90 days to make the bearish bet. wouldn't want to short it here. there's been fairly sharp moves. people sometimes go in and think they're bottom fishing in these things. they're not on a valuation basis. you're right, you'll see a spike. >> and saw a a stronger dollar. that helped. >> listen, give these guys credit. they've been right. the timing, all of us know when trading options can be very difficult, but they've been right. sellers of rallies and focused on exxon. from a couple months ago i know, and chevron and driving the train here. so until you're proven otherwise, you've seen crude oil stabilize, but stocks are not. that's bad price action. >> and big integrated, exxon, chevron, half the weight act the worst, lit really coming through the bottom. >> leave it there. if you have a comment, tweet us. great articles on the website.

fabulous tutorials and exclusive trade. economic it out. here's what's coming up next -- >> i bet on sure things. >> some traders found an even beeter way to make money in the market. we'll show you how. plus -- is a twitter takeover closer than you think. behind the massive bet on a big deal when "options action" returns. 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.

welcome back to "options action." we have changes to the s&p 500. as of june 30th at the close of trading, a drug company and a spin-off of baxter international will be replacing qep researchers, oil and gas production and exploration company in the s&p 500. baxter international will also remain in the s&p 500 and begsalta ink not trading it will trade once these changes take place at the close of trade on june 30th. back to you. >> thank you for bringing us that. twitter today announces it's testing new pages for products. other steps make it easier to buy stuff. cnbc's julia boorstin is live whip a look at twitter the latest move and the social selling trend. julia? >> that's right. another piece of twitter's product overhaul plan today. the company announcing pages for products and places gathering tweets, photos, videos, product information and the option to

buy a product or book a trip. twitter also announcing its inviting over 40 twitter influencers from the disney store to stylist rachel sew to share collections of products and places with the option to buy. now, this comes on the heels of twitter talking about big upcoming changes for the service to address concerns about stagnating growth including curating content around live events. now, twitter's product are writing a social selling wave after it along with facebook started testing buy buttons, instagram announced a shop now button and pin interest a buy button, but the trend is not about diversifying into retail. pinterest like twit sir not charges users or merchants, it's about being more useful to advertisers. hoping to benefit not why improving results keeping users within the service so then the dough have to leave pinterest or

twitter if they want to buy something they just saw a tweet about. back to you. >> thank you for bringing the latest piece in a big week for twitter. who will buy twitter? >> they're addressing thing there's that actually fix the company, fix the product and fix engagement. >> fix the problem. >> they don't have a problem monetizing users. a problem growing users and getting them to be engaged. to me, yes, does twitter make sense within a large property like google and you increase your scale dramatically? no doubt about it. i think buying a stock base and rumors of a potential takeover is probably the worst possible scenario. i think about a trade like this and had a smart tech investor, kicking the tiresen twitter, not for takeover. my response, you need time. buying options time is not your friend. time means money. i detail the trade to him that i think makes sense. look out to december. you need this company to actually have some time to figure out what their new

management, or strategy is or to get taken over. to me, a risk reversal. looking out to december when the stock was 36. you could sell the december 32 put for about $2.50, and use those proceeds to buy the december 42 call for $2.50. here's the thing -- if you have that stock on december expiration between 32 and 42, no harm, no foul. you do not have any losses. mark to market, you will have losses as the stock moves closer to the put strike and gains as a stock moves closer to the call strike. really what you're trying to do, leverage to the upside, not buy the stock where it is now you know it will be noisy over the next few months and you want to define a wide range and get leverage for the up side. >> you're not alone, mike. open interest for calls rising faster than open interest for puts since what? may? early may? >> there's been a lot of speculation about this. one thing i would say about this trade, because dan has done risk reversals in twitter before and timed them very well.

the idea here with that lower strike that he's selling is he's willing to buy the stock, but willing to buy it essentially on its all-time lows. right? it's postipo lows just above $30, a couple situations where the stock collapsed. had brief rallies, then collapsed again. this is essentially what you want to do. essentially saying i'm willing to buy it, only at cheaper levels, more than 10% where the stock is currently trading or if the stock breaks out. either way. >> and what about it, carter? >> it's a mess. so something's got to happen. all of the things you're talking about, or this is just a dead duck that it's been for one or two years. burden of proof on the bull. >> carter, this is not groupon. an important point. not groupon, a massive scarcity value for this property and useful ten years from now. >> scarcity to value and you actually have growing revenues. this is a is growing company and not a lot of places to buy growth in social media essentially close to its all-time lows and this trade sets you up to do that.

>> what you said. the revenue growth. >> there you go. >> all right. up next, we'll tell you how one savvy trader made millions in just a matter of seconds. 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.

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all right. turns out options traders have been making a killing on deal chatter. mike, how are they doing it? >> you know, interesting. we've seen several deals this year. i'm going to use two examples. the first one i'll look at, a deal basically the news hit the wire back in march. we saw on march 27th, on that day a whole lot of options trading, people bought thousands of the april 36 and 37 calls, they spent less than $200,000 to do that by the end of the day over $4 million what they were worth. interesting about that, when did that trade? actually -- right here. in fact, the news came out, and within one second, somebody digested it and actually bought the bulk of those options. so the entire profits were made within just minutes. let's look at another one more recently. yesterday in martha stewart living omnimedia, the same thing. a lot of short dated june 5 and

july 5 calls bought. they spent about $129,000 to buy those things. by the end of the day, take a look. it almost tripled their money. so this is really fast trading. you can take advantage of the fact that some of these options especially when there's only a week or so to go will be exceptionally cheap. if you happen to catch the news early, you might be able to take advantage of a trade like this. a lot of professionals are using machines to do it. >> i was going to say. thanks, mike. what do you think? this is -- it's legal. right, you can do this. >> totally. >> this is what they do. >> calmed fast fans. mike said those people who bought them i suspect they're machines and a lot of sophisticated algorithms that track news and go and take options, because that's the most, the quickest thing they can do. so to me it's not likely. >> in stock trading before deals are announced a lot of times unusual volume and activity, the plem is premise, sniffing out opportunity. >> interesting, in the martha stewart case, two days before this news came out, there

actually was a story online, buy martha stewart before somebody else does. so. >> wow. >> for those keeping your eye on the news, these were done by a bot for sure. newswhy were comes out, trading them. keep watching the news, you'll see those as well. >> getting into options, how do you compete with that? >> a horrible strategy when you see a headline, go out and try to take options. think about what you're doing. all of a sudden when the news is out, the bid asks, the spread widens, volatility goes up. the prices you're paying, it's not a high probability event that you're going to make money. >> i disagree with that actually. in the case offing a tara, interesting. that happened quickly. all of those options traded in 130 milliseconds. an eighth of a second. the stock didn't halt for a period of time there. >> hourch dow often does it hape that? the stock goes up 25%? that's the point. you get a 3%, 5% move, retail

driving it up the last percent and smack down. >> trading weeks from the deal. >> my point is you yobviously have to look at it on a case-by-case basis. there was time in martha stewart. gotten ahead of the headline. and altara, a window of time before it stock ended add traded dollars higher. >> that's the reality were all of the computers. coming up, making it rain with amber ella trade. what their next move is after the stock took a beating today. that and the final call, next. 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.

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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. ambarella shares fell more than 6 prsz percent today. good news for khouw and carter. should you stay short? a scathing not on this company. >> i didn't see that. happily i stay away from that stuff. just the facts. the issue is this, that we have something of a reversal day.

record volume at or knnear 10 million. closing on an absolute. panicking to get in. we would stay. >> yeah. a situation where we basically wanted to try to take a bearish position while limiting risk, why we were selling at call spread to do the trade. one of the things we looking for, a catalyst, though. we touched on the valuation issues. the fact the stock looks like a hockey stick. i think what we do, we have until july. sit with the trade now. >> take a tweet. steve says, awesome show. ho do you feel about july 125, 130 versicle call spreads in the iwm. >> interesting you choose iwm. more than doubles than the s&p. worried about external things in greece hitting the s&p then you basically small cap u.s. should be less affected. that's the way to play if you play for breakup. >> quickly, time for the e

"final call." carter? >> energy. be careful. watch out. >> mike? >> use put spreads. >> dan? >> twitter risk reversals instead of long stock. >> that was quick. i'm sara eisen. go to our website for more. have a great weekend. happy father's day. see you next week. >> announcer: the following is a paid presentation for the nutribullet rx, nature's prescription nutrition extractor, brought to you by nutribullet llc. >> my stomach issues literally went away. >> my acne has cleared up. >> my hot flashes have subsided. >> i'm saying goodbye to diabetes. >> my shoulder pain has gone. >> i was able to sleep better at night. >> i've lost 100 pounds. >> announcer: over the last two years, all across the country, an astonishing 10 million people, at a rate of 15,000 a day, have joined the nutribullet healing revolution, using the power of nutrition to completely transform their health and