hey there. bad news, it's freezing outside and good news, stocks actually rallied today. these guys are making sense of it all. while they are doing that, here's what's coming up. >> i'm, shocked. >> that's what wall street is saying about the huge move in oil today, and we'll tell you why we may have just witnessed a bottom. plus -- ♪ coke and a smile ♪ makes me feel good >> and the charts will make you feel even better. we'll explain why coke could be on the verge of a major breakout. and market turmoil this week had traders running for cover in safe haven assets, but could these trades be a little overdone. we'll tell you how to protect yourself from the crowded trades. the action begins right now.

>> let's get right to it because the financials just posted their best day since november 30th, 2011. so is the rally in the banks signaling an all clear for the markets? let's get into the money and find out. dan, what do you say? >> i don't think so. it's obviously a very healthy rally. we saw it in the european banks and in the u.s. banks and two pieces of news that caused it. and we started out morning with deutsche bank saying that they are going to buy back some bonds that have been, you know, something that people have been a bit worried about about their capital position and ability to pay interest on the bonds and the last 24 hours had jamie dimon buying 500,000 shares of jpmorgan stock so we've had a massive rally over very oversold conditions with horrible sentiment and to me it sets up for a good fade because if you look at the two pieces of news, they remind me of the sort of news we used to get back in 2008 from financial institutions when things were a bit hairy. i'm not saying any of these are similar situations. the only problem i have is european banks, even after

today's rally still well below the financial crisis lows they were trading at in '08-'09. something stinks here. >> did i miss something? thought the financials were down on the week and fairly significantly? >> every sector except for one. >> actually really amazing. it's very easy to get caught up in the last moment because that's really what it was but the last five days have been pretty crummy for stocks. the s&p is down over 80 basis points, financials down over 2%. you know, even crude's bounce, that obviously dragged a lot of things with it may be but i don't think this was an overwhelmingly positive week. >> terrible week. in fact, if you were to define it, used to ask in the beginning, was it a bullish day or a bearish day? a bullish week or bear? for the week you have a lower high, a lower low and a lower close, it's a bearish week. one sector was up, and the banks are down, even with this rally, down 18% year to date? the bkx index and jpmorgan jumping after having plunged the prior day, all for what? >> by the way, jpmorgan, you know, we've got a guy here who is worth a billion bucks. >> right. >> spends 2.5% of his net worth,

and, you know, lease going to make -- >> buying stock in the company that he runs. >> this is pretty easy. i mean, i would do that every day, why not. that's what he got paid last year. easy money. >> without being too cynical, we know that -- >> too late. >> jpmorgan, it's a best of breed situation. probably one of the best capitalized cheapest banks in the entire planet, okay, an it's run by that guy who is considered to be a bit of a maestro, so to me the way i think of it, here, it's shown a lot of relative strength. the only problem i have though is that this is the only bank on the entire planet and bank stock that's above its august 24th lows, the only one, and i don't get what that relative strength is in the environment that we are. in the rate environment and political environment and regulatory environment, so, you know, to me i think it sets up for a great short entry early next week and get a little follow through and look out to april expiration. i'll tell you why. we have two catalysts coming up.

we have the stress tests, that the federal reserve told them to look like and q1 earnings so to me i think jpmorgan sets up as a good short today when the stock was 57.50, you could buy a put calendar and have you to finance longer data puts and the price of options is really high. so i want to sell the february 19th, next friday, expiration 55 puts for about 60 cents and buy the april 55 puts for $2.60, that costs me $2. that's my max risk. if i get to next friday's close and the stock is above 55, and i own the longer dated april puts for the two events for $2, and then i basically have a bit of optionality. >> when you're giving the preamble to this trade and saying it's one of the best capitalized banks in the world and has relative strength compared to its peers -- >> none of it matters. >> why not? >> why doesn't that matter? >> strength matters a lot, but here's the thing. this is -- this is a news-related issue right now. the stock literally was collapsing the prior day and then it's making back those

gains because of news again. and in fact if you net the two out, it's just as bad as it was as it is it never happened, all right. day-to-day, y a rally compared to bank of america or regionals, but the stock is still -- it has no life. >> what's happening is also the reason why this trade makes a lot of sense because the catalyst is coming up in april. normally these near dated options would be cheaper in terms of light volatility than the longer dated ones. but because of the whipsaw we saw that's not the case. the near dated options are a bid and that's why it makes a good sense to sell. >> i chose the 55 strike, it bounced off there for the last month. it broke, it gapped on massive volume yesterday. gapped above. if you fade that's the level you want to press looking out to april. >> let's get to consumer staples which despite being down on the year still one of the best performing sectors, buying telecom and chart masters, but one of the sector's laggards could be breaking out. >> the same trade as the walmart trade, so a little message there, if we do shorts, we do longs, but if we're going to do

a long, it needs to be something fairly safe and exhibiting tremendous relative strength for weeks and weeks. i want to do the setup which is how much it's lagged compared to its peer group and then look at it more recently. what we have here is a five-year chart and obviously the original line coke is a big part of the blue line which is to say this is all s&p 500, from pepsi and philip morris and kraft and so forth. so you've got a marquee name, yes, that's underperforming by a lot, on a five-year basis. here is the ten-year basis. again, ten years and coke is really sort of not kept up with its peers, with its sector. but of late, guess what's happened? it's the exact opposite, so take a look at this. this is three one week, one month, two months, six months and i've got coke, the sector, the market. so who is down or the best, who is the best, who is the best? coke. so in a situation where there's been underperformance we have nascent outperformance meaning relative strength that's

starting to mean something. all right. here's another way to look at it. i've held the sector as a constant and this exposes coke on a relative basis. all the hallmarks of a bottoming out formation. so that chart there is the exact same chart as that, but what i've done is i've held the sector as a constant, okay. now let's go to the breakout. absolute chart itself. to my eye we have a nice setup here. we're coiling and we have the prospects of ultimately breaking out above these well-defined tops, off of our trend line and going for, watch this, an all-time high. we are fractions above that level. the all-time high was 44.88 and closed here at 43 and change and i think we're actually going to manage that. regardless of what the market does, you'd rather be here than almost anywhere else. >> wow, bullish forecast, carter. >> take a look at what happened to rates this week. if you have to buy something for yield, dealing with a corporate earnings yield of about 5% here

and growing with the economy, even if that's fairly slow growth. this is a fairly safe place to be. it's one of the places where you're likely to see a dividend increase sometime soon. i bet you within the next 18 months we'll see a dividend increase in coke. they have nearly 8 billion a year in free cash flow and have consistently have grown their dividends. take a look at what utilities have done. if yields are going lower, these are the kinds of places that people are going to go. >> isn't it expensive, though, coke? >> at 22 times 12-month earnings, trading its average valuation. >> and sales are expected to decline this year 3%. what are you paying for that 5% yield? like the dividend yield and the buyback yield. it makes little sense, agree with the charts. looks like a great technical setup. >> if you're making a buy percent on the money versus 1.5% as a risk free rate, that's the difference. the premiums that you have to worry about. right now the options are extremely cheap right now. the april 43 calls, spend $1.15 for those. that's the way i would play it. no reason to do a spread here. >> now tell him he's wrong. >> if i knew it would be that simple, that's a great trade,

risk $1.15 and play for carter's breakout. listen, you know, you guys are single-handedly picking apart my xlp short i did a couple weeks ago on the show and it's the same chart and i think you kind of said the same thing. buying relative strength to his point. it's something that you back test and it works. i can't get my arms around 22 times negative eps in sales growth. >> soup is trading that way, campbell's, smuckers, so is pepsi and philip morris. in this environment -- in a perfect world, you say i don't want stocks, stay away. regardless, 99% of the capital is long and fully invested, big endowments, mutual funds and so forth. this is what's working, and at this point maybe utilities a little overdone as we've talked about and telco, gone crazy. this kind of thing is unchanged. coke is -- >> none of the sectors broke out to new highs, they were coming off of conditions very difficult. trading 16 months ago at all-time highs.

>> all time high absolutes, 17-year lows relative. >> bond proxies and they have been secular pressures -- >> last word, mike. >> well, that's not what we're seeing. the thing that caused the dollar to rally is rising rates and if rates are falling we could see the dollar stabilize or go lower. >> right. >> which is a tailwind. >> i just think that the staples have actually caught this bid trading where they are given the commentary that they have given and seen it out of pepsi this week. it hasn't been good. >> yeah. that's what makes a market. >> got a question out there. send us a tweet. for everything options action, check out our website, the hottest options news, videos from throughout the week and exclusive trades and it's like you've died and gone to options heaven. here's what's coming up next. >> you can run but you can't hide. >> actually you can and that's what traders did in the treasury market this week, but is the trade becoming a bit too crowded? we'll explain. plus, well, that pretty much sums up what oil did today with

everyone looking for a bottom we've got a safe way for you to play into the energy space after the break. i'm here at the td ameritrade trader offices. 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 and 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. td ameritrade.

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herthey work hard.ade, wow, that was random. random? no. it's all about understanding patterns. like the mail guy at 3:12pm every day or jerry getting dumped every third tuesday. jerry: 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. td ameritrade. welcome back to "options action." big day for the energy market as crude oil posted its best session in seven years, wti finishing the day with a more than 12% gain, 29.44 is where we ended.

definitely talk of a bottoming process and traders looking for prices to touch the january lows of 26 and change and they did yesterday. others saying not so fast. today's move was a technical one. buy the dip mentality, also some short covering here. as we head into the holiday weekend. the dollar also playing a part in this. it's come off its highs and a lot of chatter about what opec will or won't do. still no clarify there, of course, and some are skeptical of the headlines that seem to be very interestingly timed. what to watch for next week. well, 28 more oil rigs came offline this week. will that ease production in the u.s. in a more meaningful way? find out on wednesday when we hear from the doe. and also will inventories continue to build? still some concern that we're running out of places to put oil. lots of variables when it comes to this trade. what i can tell you right now, expect this volatility to continue. melissa? >> that's for sure. thank you. if we're near a bottom, what should you do if you're looking to dip your toes into the energy market and don't want to be clipped off?

mike is at the smart board with a way to get long big oil. >> here's the thing. dipping your toe is probably all you want to do, and this chart right here basically tells you the whole story of why crude prices are so weak. this goes and takes a look at crude oil storage excluding the strategic reserve going back over 30 years and take a look at what's going on over here. basically what we're seeing is we've got incredibly high levels right now in terms of inventory and until you see that turn down it's hard for crude to really take a turn up. look at what crude prices have been doing also. what you'll notice here is this is the nominal price of crude oil over that same period, more than 35 year, and you would notice we're not actually quite back down to the previous lows, but on an inflation-adjusted basis actually we are closer to those lows. so the thing that i think you need to do here is rather than looking at crude, i think you need to take a look at a stronger name in space and make a modestly bullish bet. basically trying to dip your toe in. schlumberger, strongest in the

oil space and cash flow positive and this is a company that made very good money, even when they had revenue substantially lower than they do right now. and 2016 forecasting revenues down 15% from the 2014 highs. you can right now sell the march 67.5 put and $2.50 for that, own it at a net price of 65 bucks and to me this is a situation even if it does come into that level, continues to trend down, you can probably sell some calls and basically, you know, tread water. >> all right. >> or tread oil. >> any time anybody goes over the smart board, i always have to get carter's assessments of "a," the performance, and "b," the interpretation of the charts. >> right. you're doing it as a structure that will allow you some wiggle room. buying things in downtrends is a dangerous game and this is clearly still in a downtrend and crude is clearly in a downtrend.

there's something about superlatives, strong, stronger, comparative and we're always getting our best day. the best day in seven years after the plunge. banks had their best day after the plunge, meaning big deal. nothing has really changed in the oil complex. the energy stocks don't act well. exxon, okay, it does, and this is not my kind of thing. if you're going to do it, you got to do it the way mike's done it, but notice he said i'm only going to dip a toe in the water. i'm going to stay on the side of the pool with my drink. >> let's get the specific first. because it is dipping the toe. >> 2.50 bucks, collecting 3% of the strike in one month. if i do own the stock, it will be substantially lower than where it's currently trading. volatility, as jackie was pointing out, will remain bid so you'll have an opportunity to sell more premium. it's very tempting when you see low prices to think that this is my big chance but if you take a look at that chart and you see where inventories are, you realize the only way to do that is very, very carefully. that's the way to play it. >> you've heard mike's case in

this. what do you think? >> about the trade it's really important, want to sell options and the way the underlying commodity is moving around and i do believe if you're going to sell a put you want to do it one month out. you don't want to look too far out. kind of in a crashy market and the only question i was going to ask for carter, you just brought up exxon, it's actually been basing if you think for all intents and purposes. >> procter & gamble. >> looks a lot better. >> ant issue is is it right? guess what that is, the face of fear. energy only dedicated managers who have to have exposure so they are hiding. it's the same thing that's going on -- and the more money that goes into exxon, it's exactly the opposite. people are saying i've got do something and i'm worried. >> those companies are a big bucket of reserves. crude oil prices are low. i don't see them bouncing any time soon. you need a business that's actually making money even with low oil prices and this is a company that's done that consistently over time. >> so here's a question. you said if you had to dip your toe in the markets, and this is

how would do it, would you? >> yes, actually, i would. schlumberger, the only place i would and a trade i was looking at doing today myself. this is one of those situations where there's so much panic that i'm trying to take advantage that have to sell some of the insurance that other people want to buy. >> up next, a heap of selling this year has traders running for cover in gold and bonds but could the safety trade be overdone. we'll explain after the break. here at the td ameritrade trader group, they work all the time. sup jj, working hard? working 24/7 on mobile trader, rated #1 trading app on the app store. it lets you trade stocks, options, futures... even advanced orders. and it offers more charts than a lot of other competitors do on desktop. you work so late. i guess you don't see your family very much? i see them all the time. did you finish your derivatives pricing model, honey? td ameritrade.

steve, other than making i'm here atme move stuff,rade trader offices. what are you working on? let me show you. okay. our thinkorswim trading platform aggregates all the options data you need in one place and 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. td ameritrade.

and we're back, and it's time for the outside call. take a look back at the open trades. last month dan thought things were going to get volatile in the markets, and he made a bullish bet on treasuries. take a look. >> i think you can look to sell puts. the april 120 put at 1.70 when the etf was at 125 and use the proceeds to buy the april 130 call for 1.70. that costs you nothing between 1.20 and 1.30 on april expiration you don't make or lose and you have an asymmetric payout to the upside. >> well, he was right and the ten-year fell to its lowest level since 2012. dan, this week did you stick with the trade? >> no, i didn't. i took it off. minimum waged the trade and took off a put and the thing was a nice winner with. we had that winner.

mel, you just said the ten-year yield went down to 155. it just felt a bit panicky to me. i took it off yesterday and it's reversed. so i'll look for an entry back into the tlt towards 130 now. i think the direction remains up. >> where do you think the yield goes? >> catch a move to the 1.5 on the ten-year. a little steep, a little overdone. bad day today and on any further pullback it's time to re-up because it looks like it goes lower, all the things in play for a while. >> we'll breech the 2012 july lows. >> i think it's possible going down to 1.25. >> 1.25. >> why not. >> i guess if you marry up his view on the s&p 500 that makes sense. >> jives. >> and the utilities act and gold act and credit. >> okay. >> and you'll want to be long coke, by the way. >> water. >> last month carter said general motors shares were about to stall. listen. >> i think you'll go as low as 20 on general motors, i'm a seller. >> selling the 29 for 1.40 and

collecting 85 cents which is a little more than 30% of the difference between the strikes. >> shares are down more than 4% since then. so carter, is a breakdown still in the charts? >> this is a very heavy stock, right. not acting well. didn't get a bounce when the market was bouncing. something wrong here. i think lower. i don't know about the trade. we'll have to roll it out. >> we probably want to -- this is proof positive that you can't drive by looking in the rear view mirror. if you're trying to figure out where general motors should have been priced and take a look at what they have done rather than what they will do which is obviously pricing the stock right now you would have said this is ludicrously cheap. turns out not so much. the thing is we've actually made most of the money that you can make on this spread. you can buy it back for less than half of what we collected essentially so my view here is try to catch another catalyst where we see bad news on the horizon. i'd probably roll it out to june, but i'll wait a bit before i do that. >> thoughts on gm? >> i don't like it and haven't liked it a while and now we're hearing about subprime auto

loans and stuff like that. so, to me t feels like the autos, peak autos and i don't see the uptick in overseas demand. i like your trade. >> your tweets and the final call from the options pit. i'm here at the td ameritrade trader offices. 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 and 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. td ameritrade. i'm spending too muchs for time hiringnter. and not enough time in my kitchen. (announcer) need to hire fast? go to ziprecruiter.com and post your job to over 100 of the web's leading job boards

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welcome back to "options action." time to take some of your tweets. the first one, what do you guys think of sprint? mike what do you think? >> sprint looks pretty bad to me, i have to say. it really does. i mean, sure, it got a pop here, but the stock itself is an option and that's how bad it actually is. you know, if i was going to make a play in this thing, maybe i would buy some calls in it, try to sell some near dated ones if i can find some premium, but this is kind of a no touch as far as i'm concerned. >> next up, this one from jeff irwin, thank you for writing in. how will risk reversal, that

will be dan, play the visa trade with the square news, favorite show of the week. dan? >> i think carter picked a great one here. in a downtrend, but coming up against that massive uptrend that's been in for years. the trade is right where you want it. down a little bit on the week. had a bounceback today. it was the june 75.50 put spread for three bucks. i like it here, i think you stick with it. >> throwing back a little bit, but the crack is the primary data point, the throwback being the secondary. >> okay. got your answers out there. time now for the final call. the last word from the options pits ahead of the three-day weeker. carter, what do you say? >> understanding a lot of people have to be long or want to be long, i think coke's as good a place to do it as anywhere. >> mike? >> if you're going to try to catch the falling knife in oil, the only way to do it is to get paid so that's why i was looking at the march 16.50 puts. >> dan? >> jpmorgan, it's not a mock the flame thing. actually the thing acts well here. but for traders who want to make a defined risk bet, i

like the put calendar out into april. >> looks like our time has expired. i'm melissa lee. thank you very much for watching. check out the website, optionsaction.cnbc.com. have the a great three-day weekend. happy president's day. stay tuned. "mad money" is up next. >> the following is a paid program for life alert life alert. >> sirens wailing, truck honking. >> i can't believe how quickly the fire spread. >> our house, everything we owned went up in flames. >> "mom." it was really, really scary to see her lying there helpless and nobody could help her. i couldn't even do anything. >> you had an intruder? >> it's scary and i had this sense of real fear. >> i think it was the most frightening time of my life. i've never been through anything like that before. >> will you be ready if st