hi there. live on the nasdaq after this expiration friday after one weird week. the guys will make sense and try to make you some money. while they are getting ready, here's what's coming up. >> i loved it. >> and so have traders who have been feasting on trashy beaten down stocks, but is the feast about to end? we'll explain and give you the trade. plus trouble on the home front? >> i just want to smash your face in. >> smash my face. >> not that type of trouble, talking about home depot because traders see disturbing patterns emerging ahead of next week's earnings and we've got the trade. ♪ rocket man

>> the original rocket man himself, sir richard branson is ready to reveal his new spaceship that will take you to outer space and will join us in his "options action" debut today. what a week it's been, the best week for stocks in 2016, in the books. one of our guys says it's time to fade the rally in one standout sector and let's get the money and find out what that is. i'm going to pick it off with you, dan. >> yeah. >> i have a hunch these guys will agree a little bit. had a great rally in the market off of very sold condition last week. a lot of risk off, things going on. a little bit of "v" reversal and the s&p failed at kind an important technical level and one of the areas i want to focus on is some of the things that have actually shown really strong relative strength, a year that's been really bad for u.s. stocks in general and that's in material stocks that got hit so hard last year. they were real, you know, ground

zero for what was going on with industrial commodities, and that has a lot to do obviously with the dollar and a lot to do with what's going on with oil and a lot of chemical companies, we know oil is a big input, the strong dollar and exposure overseas offset the benefit, you know, of lower oil so to me i think a lot of the stocks have run, dupont, prax air, air products, run very far very fast, and it's set up as a really good tonight to short what is a massive downtrend from the highs a year ago. >> looking at the sector, most of the gains that happened in teefrls have happened in the past four weeks, versus year to day so it's been a very recent ramp. >> and the most oversold things get the big bounces and here's the thing as it relates to the market. this sector doesn't matter. its weight in the s&p is 1.5% so if we continue to weed the loser and the financials keep performing poorly.

it's probably run out of room. >> dan, i want you -- i want to get to your train and then mike can critique it. >> this is an etf, the xlb, and 50% of the weight of that etf is actually in about five or six stocks. a few i just named and i actually think because you have this countertrend rally it's back at that downtrend. i think you can simply look out to march expiration when the xlp was 4075, buy the march 40 puts paying 90 cents for those. you have proves below 39.10. i think this sets up as a good opportunity. the xlb starts going lower here, implied volatility, the price of options will go up, and you have an opportunity to spread the long puts. >> i would say if you're going to try to press this short, this is probably one way you would want to do it. there's really a very good chance that it could blow through the strike you're spending by a little more than 2%. that's why you do it. i myself not be quite as bearish

on the space as you. >> interesting. will take a quick time-out. maybe not from puts and calls, a very special guest making his "options action" debut. virgin galactic unveiling a brand new spaceship today that could soon take you into outer space. joined by the business titan and the entrepreneur behind the product, the rocket man himself, sir richard branson, great to have you on the program. >> always good to be on your program, thank you very much. >> in erms it of the new spaceship, tell us about it and why it's a significant improvement over the previous one. >> well, 15 months ago i was in the mojave desert and obviously myself and everybody else had tears in our eyes. today, 5 months later having our engineers and technicians work day and night we're all here again and have tears in hour eyes and this time it's literally tears of joy. the spaceship looks beautiful.

it's in the hangar today. just had a wonderful unveiling. it's called the vss unity. tooep stephen hawkins made a wonderful speech, my granddaughter, 1-year-old, broke a bottle of milk on the front. spaceship so she's been christened and will be ready and rare to go quite soon. >> how far are we from actually taking people into space, richard? >> i'm not going to give specific dates, but from tomorrow the spaceship goes out of the hangar. it then starts extensive tests which, you know, will be some months, and once they operate and test pilots say that they are ready, i'll go up and then we'll have other people go up, too. >> sure. now it seems like a lot of you billionaire types like to dabble, if i may say that, in space. we've got elon musk of spacex

and jeff bezos of amazon. they both have their own space ventures. do you guys talk amongst yourselves and compare rockets? >> well, i'm good friends with elon, and i -- i don't actually know jeff very well at all, but we're all dock slightly different things. our spaceships are not rockets. our spaceships are on wheels and our spaceships have wings which the other two don't have, and -- and which ear trying to do different things in space. i mean, our principal purpose is to try to initially enable thousands of people who never had the chance to go to space to go to space, and then to put a big array of satellites into space so that we can connect up, you know, some of the billions of people that are not connected at the moment to wi-fi or internet access. >> i'm sort of reading between the lines. i hear from you not just our

spaceship has wings and wheels, but our spaceships are better. am i reading correctly? >> i think if elon was doing this interview, he would give you lots of good reasons why his approach is a better one. i suppose the main difference is with our approach we can do point-to-point travel using space so, you know, london to australia or new york to tokyo, and if you just have a big rocket you can't do that sort of thing so that's -- our aims are slightly different than his aim, and there's room for both. >> sir richard, i've got to switch gears and ask you about what's going on in silicon valley. the fbi, the department of justice trying to compel apple to assist them in unlocking this cell phone that was used by the bernadeau terrorists. where do you stand on this? you have a mobile venture. do you believe that privacy of

everyone should be protected? >> i have enormous respect for apple. i must admit i sometimes wonder whether they couldn't do the unlocking themselves and just hand over the information that's needed and maybe that could solve this particular issue because otherwise i think it could back could haunt them and maybe that would be the right thing to do so -- so i think, you know, in extreme situations like this, you know, trying to work out some kind of compromise like that might make sense. >> sir richard branson, our thanks to you and congratulates on your new spaceship. >> thank you very much. >> founder of virgin group. interesting discussion. would you go into space? >> i don't think i'd be one of the first. you know, i'm very happy to be at the forefront of technology

innovation, but maybe not at the front of a rocket. that's -- that's a very dangerous game. best left to the professionals. >> investing of catching the falling knife. >> right. >> i thought were you going to say i'm very happy on earth. >> you know what's so fascinating when you lock at a guy like richard branson, elon musk and jeff bezos, amassed billions of dollars and bill gates who has chosen to go out and fix very specific problems, don't think that these guys are just toying around with expensive sort of hobbies. >> right. >> they are really trying to do something pretty amazing, and you've got to give it to all of him. he says he doesn't know bezos, elon and bezos have gone back and forth. they are doing great stuff and one way in the future humanity will appreciate it. >> we promised you some trades and we'll get to them after this break. if you have some trades, send us a tweet. check out our website, videos,

education material, check it out. here's what's coming up next. >> there's no place like home. >> perhaps, but the housing market is showing signs of stress, and it could mean trouble for one hot dow stock. we'll explain. plus, talk about a bank job. >> one of those big until and put as many 100s and 50s and 20s as you can pack into it. >> dan made a bearish bet on jpmorgan. shares are flat, but he still made money. how? we'll explain when "options action" returns. 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.

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proven retailer that's caught the eye of the resident chartmaster so carter, what are you looking at? >> home depot, not for the feint of heart. we've tried amazon once and disney and been burned going after very strong stocks. this is one of a kind, and -- and you'll eat well if you get it well and you're going to pay -- we'll all pay if we get it wrong. home depot, now the first chart shows you the past two years and, of course, what it shows, of course, is this incredible performance relative to various things that are comparable. all cars. this is an etf that have general motors, ford, honda, nissan, daimler and all related stocks from sherwin william paints and massco compared to, and what we know is this sustainable? here's the really long-term chart and the numbers speak for themselves so what's caught my eye is that just of late the relative strength in home depot

has started to falter. now, the top panel is the absolute chart and the bottom panel is the relative performance to the s&p, and one of the things we know is that when you do bounce off, it should be a while before you get back. it should be a while, but we've come back too closely too quickly. to my eye this looks like it's losing steam and it's about to break on a relative basis. that's the bet we're going to make. here's the long-term charts since 2011 and here's where i would draw the lines and basically we'll come back to trend and the implications are that we'll have something in the order of a 10% move. a couple other things just to keep in mind. long-term chart going back to '86. price per share and earnings per share and they are right on track and often the stock will overshoot and will undershoot so right now they are at parity, but you get these overshoots and you get these undershoots, and i think the stock will undershoot just as it has overshot and undershot in the past, and then we'll end with this. this is your current pe ratio.

it is higher than any time in the last ten years and higher than when it was at the top of the housing bubble peak. we're trading about 23 times. there's a lot of room for drawdown there. >> wow. >> 10%. ? >> the last point that he made i think is the most important one because going back to the housing pe, actually this was the first time they saw revenues that exceeded what we saw at the top of the housing bubble. margins are approximately the same now and a little bit bert this. last year is the first time we saw that so you're talking about a high multiple and steering in a peak environment so where do you expect home depot's activity to go from here? take that plus a high multiple and creates the risk to the downside and better than that the options market isn't pricing in as much risk as you have here. you'll announce earnings and the implied move is 3% and that's the same as the historical move and yet in this kind of environment that's when you could see a bigger than expected move so all i'm doing is

something very simple. april 115 puts, spend $3.15. that's your maximum risk and i think it's very easy to see a situation where the stock takes even a minor dip off earnings and can you double your money. >> does seem like the environment in 2016 where some of the blue chip winners from last year are really in question at this point. what are we paying for, and will it keep going? >> a year ago right now if you had said that apple, disney, you know, amazon could have -- you know, that sort of thing, i think you'd say oh, you're crazy and here's the thing. this stock has already had two 10% plus draw dawns, in january and then also in february so to me i like what these guys are targeting. you know, going out of the money into an earnings event you're going yourself a little time here. that's the only thing. the structure is hard, right? think about it. if you're wrong and the stock goes up only a few percent, the april puts are going to lose some value and then you have a well out of the money put. >> this is why we're looking to spend maybe 3% of the current stock price and slightly less

than that and give ourselves a little bit of time. the market could take the stock in that direction even if the news does not. it can't just be we had great earnings. the takeaway from the earnings call has got to be what we've seen over the course of the last couple of years is going to continue. >> not completely tied to home builders, obviously. home builders have really come apart so there's little hope here that that will be part what have we get the draw down on based on an earnings beat. >> as of retailers falling apart. >> up next, our traders say one dow stock is about to retest its flash crash lows. which one. we'll reveal 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 3:12pm 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.

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record this. voila. remotes, come out from the cushions, you are back. the x1 voice remote is here. 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. we've got some breaking news on a. let's get to eamon javers in d.c. >> reporter: fairly significant development here on capitol hill in the apple versus fbi situation. house energy and commerce

committee, the top democrats wa and republicans on that committee have issued letters to apple and the fbi inviting them both to testify at a hearing explaining their positions in this fight over encryption and whether or not the fbi can require apple to help out in its investigation of the san bernardino terrorism attacks. now, a couple things to say about this letter. they say we anticipate this hearing will occur at the committee's earliest opportunity and we're grateful for your cooperation. the committee here is anticipating that the principals will be the ones to testify, that is the director of the fbi himself and the ceo of apple himself. the question is when would this happen? it's at least a week away at this point before they could actually convene this kind of a hearing, but it -- it feels like the expectation right now on capitol hill is this may actually happen. this may be the situation where the director of the fbi and the ceo of apple sit side by side on national television in front of cameras and congress and explain

their positions here in this fight which expect is going to go as long as march 22nd at the late, because that's when the next hearing is scheduled in the overall legal battle here. congress is now inviting the director of the fbi and ceo of apple to testify on capitol hill. >> and we just got comments from apple questioning why the u.s. government wants, to you know, try to force them two times ahead of any sort of formal legal proceeding which would be that march 22nd court date. it seems like they are really pushing for this to be tried in the court of public upon before getting to court. you're saying they could be invited to testify next week, that's well before the first hearing date. >> at least now and a week before they would have the hearing on capitol hill, before the court day. the fbi and doj being very aggressive in their filing earlier today, and now congress is weighing in, wanting to hold public hearings, viewing this has a significant public policy

matter and an issue that cook needs to weigh in. you're getting republicans and democrats on this committee to sign a joint let we are all four congressional leaders on that letter. that's just something you don't see all that often in washington. used to see it a lot. these days with how strained things are, democrats and republicans, at least on this committee, united in their desire for director comey and ceo cook to come before the committee and explain themselves. >> eamon, thank you. eamon javers in d.c. >> this is getting uglier and uglier it seems by the minute for apple. >> this thing has been handled, first of all, i think in an enormously clumsy way by the fbi, to basically take this into the court of public opinion is a dangerous exercise. i don't see a lot of winners here and apple really doesn't have a good way to come out of this shining, right, because either they have to roll over, or they are going to look back in many people's eyes, and that's a very bad position to be in. >> why -- i'm not for tim cook testifying, don't necessarily think that that's going to be a

positive thing but why would apple be perceived poorly if they are out there defending to the limits the privacy of their customer and say, you know, we did comply with the government in the end. they helped the government and also defended their customers. >> if they can ultimately find a way to get the information that the government needs to them while somehow preserving people's privacy, then obviously that's a win but that should have been done behind closed doors. >> they have to play this part and role initially and event lit government will get their way in some form. you can't roll over right away. isn't it interesting. if this was a small ining is company that had this valuable piece of information, they would immediately go and get it. >> if they were a small company you wouldn't have to worry about people in other countries. >> if facebook decided to do that, we wouldn't know. >> let's talk about the stock for a little bit.

>> yes, please. >> the stock has been range-bound. what's unfortunate for apple here depending on no matter what side you're on here is they have a product event coming up in march here. they will release a new 4-inch phone. i think they are calling it the 7se and then they will update the watch. nothing particularly exciting but the stock should trade normally into these types of events. stock is dead money in the mid-90s and if i was long the stock i might look out to march expiration and look at the 100 strike with the stock around 96. you could sell that call against your stock for about $1. that's 1% of the underlying stock price, and if you think that this stock is going to be range bound. >> it will be range bound. this is going to create a head wind. no reason for the stock to go significantly higher and there is reason for these to be elevated and it is elevated and what you want to do. you can sell puts and if you don't own it sell calls against your long position and even sell both. strangle it is what we called.

>> this has moved into an issue of headwind for the stock. >> yes. >> up next, the final call from the options pit. . 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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depot, a huge list of companies reporting next woke and some could have a critical impact on the whole market. i've got the cheat sheet you need and breaking out the heavy machinery with briggs briggs & stratton. "mad money" is next. there's a robbery. why monitor a problem if you don't fix it? that's why lifelock does more than free credit monitoring to protect you from identity theft. we not only alert you to identity threats, if you have a problem, we'll spend up to a million dollars on lawyers and experts to fix it. lifelock. join starting at $9.99 a month. 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. we've got some time for a tweet. this one is from option action fan paul. he asked after this week's rally how does the panel feel about gdx? >> carter? >> it's great. gold is up 20% off its low and if you want gearing and leverage for the gold trade, this is the way to do it. not a lot of money here in the sense that gold miners are small. there's only one stock in the s&p, newmount and a lot more to run. >> time for the final call. carter in. >> long home depot, made a fortune and take some off the table. sell short. >> mike coh? >> results were dose ent and look forward and not back and right now home depot is trading rich. i'd be a buyer of those puts. >> dan nathan? >> a lot of gold miners in the xlb that i just described, seld

the gdx and the xlp. >> what a show with sir richard branson. our time has expired. i'm melissa lee. for more "options action" check out our website my mission is simple. to make you money. i'm here to level the playing field for all investors. there's always a bull market somewhere. i promise to help you find it. "mad money" starts now. hey, i'm cramer. welcome to "mad money." welcome to cramerica. other people want to make friends. i'm just trying to save you some money. my job isn't just to entertain but to educate and teach you. and put it in perspective. call me at 1-800-743-cnbc. or tweet me @jimcramer. i'll say this. it's better than it's been. how about that for a way to view a market that's no longer quite so