welcome back live from the heart of times square, i'm brian sullivan, the team prepping behind us here. while they are doing, here's what's coming up on the show. >> that's what some traders see happening to big dividends, plus -- ♪ pretty much sums up what rates are doing and you wont believe how much lower the charts say they can go. and talk about a drug deal. >> let's get down to business. >> not that kind of drug deal,

we're talking about big pharma, one is showing signs of a breakout. we'll give you the name. the action begins right now. ♪ >> love the music. let's get right to it. despite a new record for the s&p 500 today, bonds treasuries also continue to rally. u.s. 10-year yield fell back below 1.5% this week. great for realtors but how long can bonds and stocks rally together. let's get in the money and find out. mike? >> take a look at this. you get the gdp data we just got and that's got to reassure any bond bulls out there that we won't get a rate increase any time soon and you have to assume any buyer of financial assets is hoping against all hope that anything cuts off the nice money flowing into the markets. i think they got what they wanted. what's interesting to me, equities i think could have done a little better today on the

heels of big earnings numbers we got and discounts of future rate increase. >> that's probably more a function of a fact it's a friday at the end of july. i know exactly what mike is saying, typically we see the s&p up 15 to 20 handles, but the fact it is a friday in july, people traveling might have something to do with this. i will say this, i have been a bond bull for a long time. i thought yields are going down. i also thought incorrectly that had to correlate with a stock market that would sell off at some point because to me it means global strength is not there. it's meant the exact opposite. >> it's not economic expansion, it's economic exasperation. >> the headlines are the so-called market, s&p 500 maeld a new all time high. if the reference point is the prior high, may 20, 2015, if one made a choice, the worst thing you could have done over the

last 14 months is be in stocks. up 2% since may, treasuries give a total return of 19. real estate, 14, gold 10. that's the problem. >> may have been the worst place but still a decent place to be. that's the thing, what are you going to do? you'll stuff it under the mattress essentially -- >> if it's up 2%, that's not even keeping up with inflation. i mean equities. >> the inflation rate is keeping up -- >> there's no inflation so that's -- >> you'll get my stat. 90% of bond yields are below the dividend yield on the s&p 500. are we going to look back at this time in history and say, wow -- 2016, pretty remarkable time? >> i've always thought that's a bit of a flawed thing, to equate one with the other, you're assuming these stocks are not going to go lower and they are going to stay at the current level. to me, you have tremendous market risk when you try to make that -- it's been the right -- but you have seen days where the stocks themselves lost the

entire dividend plus some. >> that's what's being priced in. the market doesn't believe the dividends are sustainable. >> we know this and rates are low, all know that. we have a chart, carter, that shows that rates could go even lower. >> i think we've got to get long accordingly. treasuries are beating stocks and that's on an absolute basis on a volatility adjusted, killing stocks. i want to start with what we all know. rates are low and the thing is, u.s. rates -- this has been the case, are still a king's ransom relative to what you get elsewhere. you can recognize the flags, there's the u.s., there's italy, 1.16, canada, let's keep going and great britain at .7. you have france at basically flat now germany negative and japan switzerland.

somehow this -- bonds are to be sold and bonds are to be bought. let's look at the long-term yield. what my eye sees is this, and i think we're hovering ominously at these past lows, we have a low of 1.318 and i think we're going down to 1.2, 1.1, pick your number. here's your long-term. we're still in that channel. there is no -- there's no sign that we have come out of this well defined -- it's literally responding over and over and over, these -- if it starts with that, that's tomorrow's lunch, right now you bet with what's happening, yields stay low and treasuries tap perform. here's our bet. draw the lines any way you want. that's what my eye sees, put it back. the key is you broke out and checked back. a check back hike that is excellent and then to go again, you can draw lines this way and

want to play tlt for new highs back to yields or lower. >> you would think looking at those charts, they think of bonds as basically being safe assets, you can see how much the prices moved around. it could go either way as far as i'm concerned, i'm inclined to go along with carter. you want to buy the october 1.40, 1.50 call spread, that is not a long stretch when you consider the duration of the long bond around 1.15. it's very sensitive. >> i've been in this camp for a while thinking yields will go lower. yield wise, 1.75%, if we say 10-year breach that area to the upside then i get worried. to carter's point, until that happens, yields are going down. >> that's where we were pre-b x

pre-brexit. >> mortgage rates should continue to tick lower. >> big oil is less big, reporting disappointing numbers today as crude reports the worst monthly performance since last july. jackie d has more. >> good evening, brian. the problem with big oil's earnings this week was many of the oil majors aren't bringing in enough cash to support the dividend payouts, the trentd has been to flex the balance sheet. how long can that last? look at exxon, payouts were $8.3 billion and that's cap x and dividend combined, that leaves a funding gap of almost $4 billion financed with debt. problems with this approach of course could arise as we're watching oil prices trend back down. raymond james says at $65 or higher, these companies should generate enough free cash flow to fully cover payouts at $50, exxon could do it but probably

not the others. at the current price level or even less, none of them can. currently dividend yields are relatively high and companies are fighting not to touch them but conco phillips cut last year and the question is who's next? >> jackie, thank you. >> bp, close to a 7% dividend yield in british petroleum, you have to ask yourself, how sustainable is that yield? it's been going higher for wrong reasons, wrong reasons being the stock has been going lower but you've got to worry about bp. i will say this about exxon. i think the last thing exxon-mobil will do is to cut their dividend. but if you see that, that might be the -- >> i want to jump in. i interviewed the ceo of chevron, john watson, looked me right in the eye, not cutting the dividend. that's the reason people bought the stock for decades. >> they don't say not on my watch. >> agreed but there's a difference between not wanting

to and not being able to and not to -- >> you have to have the cash from somewhere, either ultimately sell debt i guess if you had to. >> right now the options market is implying that these names are likely to cut in the same way that conoco already did. you look at exxon implying a 70 cent dividend. that's a good size cut. conoco cut from just over 70 cents before. bp at 40. chevron also looking at probably a 25 to 30% implied dividend cut. the fact of the matter is, once the first one breaks, it kind of opens the door. it's going to be -- to your point, exxon will be the last one that probably falls in this case because they actually have the best access to credit. but that doesn't necessarily protect them. in oil prices stay down here, it's not sustainable. >> that's the problem. and the reality is often we know

when the final guy cuts, that's the time to buy but we're just getting into the cutting process. energy's relative performance basically late april. energy stocks, it's a bad place to be. >> you buy any of these names? >> i don't want any of them. if you're long you want to be under -- >> look, when you're looking at whether you want to buy this, you're buying their reserves. exxon has not been replacing for the first time last year. why do i want to? >> why should you have to? >> and the argument for these guys has been correctly balance sheets, they are not cheap stocks, $45 oil, exxon 21, 22 times forward earnings and not a cheap stock. it anything it's an expensive stock that might get more expensive. >> people think oil must go up but doing a lot of work into this the inflation adjusted

price of barrel of crude oil is about $45 a barrel. this is where oil wanted to live for 30 years. >> but it isn't the only issue, downstream as well and now filling tankers with product. the question is everybody saying maybe go buy the refining businesses but that's not true if you have a glut of product. they are not using up what was produced for the summer driving season. >> folks, do you have a question? send us a tweet @ optionsaction. i just throwing dashes around -- i'm a dash guy. for everything options action, check out optionsaction.cnbc.com. we have the hottest news and video throughout the week and exclusive trades. in the meantime, here's what's coming up next. >> liftoff. >> that's what drug stocks have done. and one is showing signs of more gains to come. we'll explain. plus, calling all options

action fans, reach for your phone and think nice thoughts and send us a tweet to @optionsaction and we'll answer it 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. td ameritrade.

oh hey john, i'm connecting our brains so we can share our amazing trading knowledge. that's a great idea, but why don't you just go to thinkorswim's chat rooms where you can share strategies, ideas, even actual trades with market professionals and thousands of other traders? i know. your brain told my brain before you told my face. mmm, blueberry? tap into the knowledge of other traders on thinkorswim. only at td ameritrade. this was a huge week for earnings. here's what we want, go home and relax this weekend and hug your children and get ready. because next week is nearly as busy and traders are expected sharp moves.

seema has what we can expect. >> the tech earnings rush may be over but we're gearing up for big names to report. linkedin will look to continue the tech success. media will be watching cloegsly with time warner and 21st century fox and the real focus will be surrounding four names in particular. let's start with tesla, the options market predicts the automaker will move 7% in either direction representing a shift of $34 billion. other names reporting dow components procter & gamble and pfizer. and then of course there's viacom, expecting a 6% move higher or lower, leaving us to see how much a toll the internal strive has really taken. all four names together represents a market cap shift of almost 50 billion. not as big as last week, still a

significant week for earnings. >> thank you. carter, you're playing one of these names for a likely breakout, which is it? >> it's pfizer. obviously one of the biggest health care names of all but a couple of charts to put in perspective. what i have is the s&p 500 health care sector itself and the bottom panel is relative performance. we know it's been going up off the lows in february and march. what's key is not only an absolute out or up, we think industrials and materials haven't been performing well and health care very good relative performance. and that's important. so, with this, let's look at one of the bigger names within health care. i have here the sector which we just looked at and now we've got a lagard on a long-term basis. pfizer, it's lagging on a 10-year basis. a lot of this is biotech but a big player not kept up.

it's lagging if you go back to the prior bull market peak of 2000, not even the 2000 -- this spread is appealing to my -- i think we want to be on the pfizer trend here. so here's your pfizer chart the here and now. it's not randomware, this is coiling right at past highs after briefly moving above those eyes. it's a tight consolidation. you can put your lines in this way. that setup after making no progress for a year or month is a powerful thing. we're playing for the breakout that's now and then to put this in context. here's the all time high chart. this goes back to the dot com era, and what my eye sees is this. take it away. put it back. a clear break of the down trend and nice head and shoulders bottom. we think this throws higher and want to be long. pfizer and overweight health care. >> all right, carter thank you

mike, do you like pfizer around the earnings? >> i do like it. we're seeing a little top line growth. not a real screaming grower but 2.5 bucks in eps over next year or so it has it trading around 14 times earnings. this is kind of interesting, seema pointed out that the stock is implying a move of about 2% on earnings. but if you take a look from earnings to the 20 days that follow it, generally speaking, this thing moves about 5% and yet if you wanted to make a bullish bet right now you could buy the september 37 calls for just 60 cents, less than 2% of the current stock price. let's review for one second. stock usually moves 5% in the 20 days after earnings. to me, that seems like a no brainer. >> i agree with that. people wrote pfizer off for dead many years ago, everything is coming off patent data and no room for growth. without getting too much into

the weeds as far as products, i'm sure some of the boys on this desk are familiar with one or two, i will say this, pfizer at 13.5, 14 times forward earnings, it's cheap relative to its peers and dividend to me is teflon, 2.75% yield and it has stealthy rally. but the rest of the market i think it goes higher. >> there you go with mike with an interesting calls and no brainer on the option side of fizs. >> amgen hitting a year to date high at today's session. that's making carter worth a pretty happy man. we'll explain why right 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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oh hey john, i'm connecting our brains so we can share our amazing trading knowledge. that's a great idea, but why don't you just go to thinkorswim's chat rooms where you can share strategies, ideas, even actual trades with market professionals and thousands of other traders? i know. your brain told my brain before you told my face. mmm, blueberry? tap into the knowledge of other traders on thinkorswim. only at td ameritrade. welcome back to "options action." time for the upside call, we look back on some of our winning trades. last week mike and carter played amgen for a breakout. take a listen. >> i think you're going to punch out, come out through the tops and make a run for the high. >> if i was going to make a play for next few months, the simple way one could take advantage of this setup is to sell the

october 1.65 put and collect $6.60 for that. >> the stock hit a 2016 high today. carter, still like the chart? >> it still should be a follow through situation. it's just getting going, moving above those tops. good stock, good results and technically looks good so want to stick with it. >> this is an interesting situation because now we've seen profits on short put. you can put 3 bucks in your pocket and if you want to press the long, that's approximately how much the october 1.75, 1.85 call spread cost right now. you could take your profits and put it on the call spread and at that point, you basically get a free ride to the houseside, playing with house money. >> every friday eastern time -- i'm not kidding around of the tune into the show. you get trades like that. i agree, amgen has been under pressure over the last couple of years because people don't believe in biotech, traded 14

times forward earnings and nine out of the last ten quarters they either beat or raised eps and execute well. i think the stock can continue to go higher and for folks playing at home, as long as the ibb stays above the 2.85 level which is critical, biotech goes higher. >> a shout out to josh brown, couple of days ago he said -- i can't remember which day, he said that amgen was the best looking chart and stock in any biotech he had seen in a long time. >> there are not that many places where you get to buy stocks at valuation below market valuations, pfizer is another. i like both to the upside. >> a final call from the options pits. 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.

oh hey john, i'm connecting our brains so we can share our amazing trading knowledge. that's a great idea, but why don't you just go to thinkorswim's chat rooms where you can share strategies, ideas, even actual trades with market professionals and thousands of other traders? i know. your brain told my brain before you told my face. mmm, blueberry? tap into the knowledge of other traders on thinkorswim. only at td ameritrade. time to take some tweets,

not take to the streets. first is for carter, what am i going for 3m puts. >> keep your puts, bad week for teflon. dropped in earnings earlier in the week. stock acts poorly, stay short. >> mike? >> i think you may want to roll them out a little further but i agree to stick with it. they must be buying teflon from dupont i guess. >> just reading about the guy who invented it. is it a good time to buy facebook leaps at roughly 20-21 times forward earnings? >> you know one of the things if i was going to press longs in facebook, longer dated are the way to go. that's a good way to play it. >> i don't know about leaps, that's like for christmas carols and stuff but i will say this, facebook everybody says it's expensive, i don't think it is at 26 times forward earnings. they continue to execute. i think goldman put a 1.75 price target on it? >> had very good results this

week. the price action wasn't that robust but either way, this is as steady an orderly a chart and business i would say as you'll find in the market. stick with it. >> lords a leaping by the way. >> last one is for guy. boxers or briefs? >> i think mel wears boxers but i don't know if that's something we want dif vulg at home. >> you mean what do i wear? >> it came from a viewer and why are there two options. >> there are more than two options? >> better believe it. >> boxer briefs? >> what about the other options. >> a little the of both. >> final call? >> the final call, you should be wearing underwear regardless of what it is, underwear is important for everybody there at home. >> boxer briefs are the way to go during the summer months. >> health care pfizer and amgen. >> won't need to buy gold bond

powder if you treat your body properly. >> joy being with you guys. it's a tough show to do. looks like our time has expired. melissa will be back next week. "mad money" with jim cramer coming up next. (narrator) are you losing your hair? is it getting thinner? when you look in the mirror, is your hair receding? does it take longer to make it look good? we live in a culture where how you look means everything. there are only a few real options. pills and lotions you have to use for life with possible side effects, or expensive and painful surgery. you want to stop losing hair now before it's too late. now there is real hope. a scientific breakthrough now available to men and women that really works by stimulating hair growth