16 for the first time in two months. all of today's action begging two questions. will the selling continue and which sectors are the most vulnerable. mike, what do you say? >> it's interesting. the vix had the big spike today. if you look toward the end of the year and say, okay, how much are s&p strike puts? how much did they go up in implied volatility terms. ? the bump was nothing like the vix. not like the fear went to the end of the year but people were probably caught by surprise looking at how fast the market sold off at the end of the day. it was an orderly straight down thing not a gap down which might have caused options premiums to go higher. i don't think a 2% or 3% discount is a huge buying opportunity. >> for the last eight weeks or

so the s&p 500 traded in a narrow range with a lot of complacency. positioning was crowded in sectors where people were looking for yield. you have this overnight jump in implied probability for a rate increase that we know won't happen. there are a lot of things that got selling going after a period where people weren't inclined to sell throughout the summer. >> what it really does if you step back into this day, that day, it calls into question as is always the case sort of the cult of equity. it's good until maybe it's not. an investment is a cash on cash return. you have either a renter that pays you something or you bought a bond. you have a stock in principle with no dividend. by definition it is not investment. that means berkshire was never an investment. sentiment is fickle. what really changed? start raising rates that go to 4%? probably not. but more sellers than buyers

today. something changed. it is a fickle game. but nothing particularly. was there a big news event? no. there are business cycles. this is a fairly mature business cycle and it is just a matter of time. >> in terms of what we saw today, the greatest downward pressure on the dividend yielding sectors, utilities, telecom, consumer staples and selling across the board. which sectors are vulnerable? >> i would worry about one of the hardest hit sectors today and that's home builders. the low rates we have seen have reinflated the housing market. we were approaching all-time highs or above all-time highs, speculative activity, building activity. if anybody is saying the party is coming to an end, that's where there is more leverage where more people would be

concerned. >> obviously yield proxies were hit hard. telco, reits and home builders were hit hard. technology has been a safe trade for all intents and purposes. there is old tech with yield. then you have names that are growth stocks powering a lot of the games. you have to think about the xlk, the technology select etf. it is an interesting etf when you look at it. apple is the largest hold. my view on apple if you watch, i don't think the stock is going anywhere. it is going down to the lower right and you have a bunch of names. there are growth stocks there. now you have no growth tech. microsoft, intel, cisco. i think they are deemed to be defensive because of the yield. but they are not particularly expensive with good sheets. one last bucket and this is something people don't think

about. 10% is u.s. telco. verizon, at&t. >> i saw that. >> another 5 to 6% is mastercard and visa. this is cyclical, defensive, yield. it could be vulnerable. the facebook and google names stick out. obviously facebook has tremendous gains. google is near the all-time highs. if you have hiccups between now and tend of the year the xlk had a nice run. it broke hard today. i don't press shorts on a day like today with a move like that. the trade to talk about quickly is targeting the line. that's the breakout level at 45. i want to look at december expiration. it was 46, 65. you can buy the december put spread paying $1.25. that's the max risk. that's very near the breakout level. we have a five-year chart. down near $40. that's what you want to target over the next three months. if you have a pushback away from

some of the defensive stuff, the crowded growth names, utilities and other stuff, the tech fits well. >> you could have picked semis which are steeper and there is a beta trade like tech on steroids. you're not doing a tech call but as a yield call. >> the biggest constituent is apple. one of the things everybody is looking for has been some form of growth. why? we have weak economic growth overall. low cap-ex, declining earnings. chasing facebooks with 20 to 30% earnings growth. the biggest constituent here isn't likely to get it. we have 100% penetration for mobile in the united states and don't have the innovative products for that kind of growth. if you're saying that and microsoft, probably another big growth stock. it is a risk off scenario. those aren't the names to chase. they will hurt it.

>> let's say -- i mean, look. this is a friday. bad things happen on friday. bad things happen on monday. >> is that your prediction? >> yeah. what happens on monday typically after a bad friday you can get a crash-type scenario or you follow through and then all day long they climb back and it follows through but people fight it off. say over time this is the beginning of more trouble. the thing about the xlk is you have at&t in there. you have microsoft. they are fairly low beta. let's say there is trouble. by definition, utilities and telcos outperform. >> you tonight like the trade. >> he was getting at that. >> so with the semis, in the last 16, 17 months we have $125 billion worth of m & a. >> listen, when i look at the

xlk we have four or five stocks, none of them growing more than a couple percent year on year. you have a crowding leek a safety trade. i don't like u.s. telco. there is a potential between now and year end to give some back. i'm risking 2.7% to make up to 10% if it is back by december expiration. >> the bottom line is carter doesn't like your trade. >> to another group of stocks. the home builder etf having the worst session since june of 2013. carter says there could be more trouble for one dow stock in particular. do tell, carter. >> we are seeing the same thing. housing stocks are yields. a lot of them are the same thing. let's single out home depot. to put the numbers in

perspective i started with my percentage change on the day. these are rate and housing related. these are big hits. read the numbers for yourself. household appliances. furnishings, home builders. housewares, real estate and construction materials versus the s&p. even adjusted for beta we know why. there is a move in yields and people are coming out of this. it's at&t as we were talking about in the prior piece. the issue is let's talk about a big name. a popular name. one that will go the way of these. so home depot. a two-panel chart and the top panel is home depot. the second is relative performance to equities, the s&p. even as home depot was able to at least try to make new highs it's been under performing the s&p. of all the things tested, relative strength comes as a top two or three factor.

a stock attempted to make new highs and get under performing asset class. to put the long term situation you have a current situation of under performing. you have the long term circumstance of home depot relative to the sector. home depot is so far above all of it. you have long term performance and now recent performance. not a good set-up. one or two things and let's quit. share price, earnings. price per share, blue line. earnings per share, orange line. look at the multiples. decide whether to pay this multiple. here is a rt cha. some people might say it's a triple top. that's fair. you could also say it's this. same chart. say that it's broken today. it hit here. not good. either way i want to sell home

depot. >> this fits in with vulnerable sectors you were most concerned about. home building. >> actually coming from the professional customers which people don't realize. the november 130 puts. despite the fact that the vix had implied volatilities going to november and december that does capture it. you have the opportunity to spread this. >> it's going to catch the next earnings on november 13. mike is probably buying it. it's cheap and if it continues to go south you have the opportunity to sell a lower strike put and create a spread. this goes back to the xlk. i don't like to press shorts. you have a big down day. we are coming up with bearish trades. these are the strategies if you agree with carter's technical take and mike's fundamentals you

look for a pop next week. something changed that we haven't seen. you look for this opportunity on a bounce to do that. maybe if you got slightly higher prices. >> if you got a bounce i would be interested in doing this in conjunction with selling upside call spreads. i am concerned about the bounce reference. >> got a question about the sell off? send us a tweet. check out the website and while there check out our super cool newsletter. over 100,000 of you have. here's what's next. >> can you hear me now? >> we can but as telecom sells off could they be a buy? >> happiness is a vacation. away from your coffee. >> one coffee stop in particular could be out of gas. we'll give you the name and how to profit when we return. hey gary, what are you doing? 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.

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. welcome back. i'm jackie deangelis. commodities have seen a lot of volatility this year, but there was one trade that has some pep in its step. no surprise, that's coffee. coffee futures are up about 20% year to date, but seeing a 2% pull back today. the story here is all about the crop in brazil. a terrible drought holding back growth of coffee beans and spiking those prices. estimates suggest brazil will see 2006 with yields, right now,

there doesn't appear to be relief in sight. a prolonged drought could put next year's crop in jeopardy as well. it's the beginning of the season and without enough water, the plants won't recover even if it started raining today. a little context here. brazil is the world's number one producer followed by vietnam, where there have been issues. so coffee futures may just have a little more buzz. back to you. >> thank you, jackie. of "futures now" fame. carter over there, you say there could be trouble brewing in one of the stocks, which one? >> i suppose there is only one if you think about it. there is dunkin. this is starbucks and not just about their price of inputs. this is also like home depot, consumers, discretionary stock. it's probably fairly priced or a rich multiple depending on how you see their growth. let's talk about the coffee first.

i mean, what you call this right is a loser that's turning into winner. or i would say bearish. to bullish reversal. up some 40% off its low. a major bottoming out type action in coffee. well, for fun, here is a juxtaposition of coffee. doing this. and starbucks doing this. they pay rents, they are tied to the business sector but this is an important thing. you can't be random. coffee's moved up, starbucks has had some trouble. market s&p 500 sector of which starbucks is a component and a big one and then starbucks itself. so market. and a group or subset of the market underperforming consumer discretion. and under performing its peer group. not a good set up. draw some lines. call it topping out or whatever you want. it has breakdown potential here. making a bet that's where we're

headed. long-term chart since 2010. six years. long-term trend line, we've broken the long-term trend line. want to sell starbucks. >> all right, so mike. >> i think this is a situation where you want to employ a strategy like we did in home depot. partially because the stock has sold off a little bit already. one of the risks because of how much coffee we have in storage here in the united states versus what the producers have, they are down but not down that much. we're talking about 2.5%, probably from 24 to 22ish, a little below. that could pressure them. it might not and you could see rebound. once again the idea here is to spread. if the stock declines what you are looking to do is spread this into a put spread. if it rallies against the trade thesis we have you could look to

have call spreads at higher levels. this is a way to trade around this. regardless of what the market's going to be giving us. >> starbucks goes lore. i think it finds support here at 54. it has the relative performance. if you guys at home can take anything away from carter at charts, when he says, this stock is down 15%. it doesn't participate with the market. there is some you know, there are investors scrutinizing the value and growth prospect. you have to remember, when they reported in october, they missed comps in america, europe, china for the second thing. there could be something going on with this business. howard schultz goes on cramer's show after every call and paints a nice story about it, but the stock has not been going up after those calls so, to me, you have a scenario where the stock is oversold. i think you wait for a bounce. it sets up as great short and the headlines around that earnings report. they were talking uncertainty here in america. they were talking international

uncertainty. that wasn't that bullish to me. >> and the level you're citing in terms of maybe oversold. that's the whole point of the wedge. when you get to the bottom of the wedge, you can hover there or respond to it. but the set-up ultimately implies if you make lower highs -- >> just wait for a bounce. that's all i'm saying. >> we have a lot of strategies to try to continue to get growth. including increasing the ticket size and things they sell, even selling liquor in some of their stores. these are unproven though folks. >> still ahead, apple shares falling to the lowest level in more than a month, but great news for dan nathan. we'll tell you why when "options action" returns. hey gary, what are you doing? 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.

are you or your spouse saved enough for retirement? 62 or older? a government-backed reverse mortgage enables you to turn the equity you've built into the retirement you deserve. with over 20 years in the mortgage business, lendingtree allows you to compare free reverse mortgage offers with no obligation. just go to lendingtree.com or call now to get started. live in your home and get the steady income you need. enjoy your family. your home. your life. lendingtree: when banks compete, you win.

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. welcome back. time for total recall. we look back at open trades. dan thought apple stock was about to stall last week. >> want the sell the next week, but use the sale of options and look to november. you can think of it as a protection trade if you are long financing puts in november expiration that will catch their fiscal q-4 earnings. when the stock traded 107.50 you

could sell one of the september 105 puts at 75 cents and use the proceeds to help finance the purchase of one of the november 105 puts for $3.50. >> what do you do, dan? >> i was right and wrong. i was right on direction, wrong on the magnitude of the move. this is why trading directionally can be difficult into events. i wanted to use the calendar. yesterday we tweeted it and i rolled it above the 105 strike trading at 105 1/2. it was up there this morning before it fell a couple of dollars here. i covered the short september put. i'm still long the november 105 and i sold the november 95 put. i made money on the role and now i'm defining my risks to the premium spent for the vertonghen put spread and i think the stock sees a hundred in the coming months. >> underwhelming iphone event.

>> look, you really need to see something pretty exciting happen, i think, to continue to see the iphone sales you have had. one of the issues and it doesn't just affect them. also subsidies for the phones, the way they are changing the structure of purchasing could be an impact. it doesn't seem like a growth story to me. >> just fair price, sitting here doing nothing. >> do you think it will fill in the gap? >> it has risk. if equities are going lower it will participate in that. there are more interesting things to do. this is a slow-moving animal. >> right. up next, the final call for the options bid. hey gary, what are you doing? 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.

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. welcome back. let's get to some tweets. first up rupp wants to know what's happening in sky works and nxpi. are there sufficient volume in options to take a position? carter?

nxpi. >> semis have been a big part of the move in tech generally. the weighting of semis as a subset of tech is the highest in six or seven years. to my eye nxtpi trades lower. >> and sky works? >> one thing about nxpi, these are not particularly expensive. there is bad news baked in. vol took a big pop-up and there was a lot of put trading. when you see a lot of puts trading people are getting ahead of themselves on the bearish press. i wouldn't be surprised to see a bounce even if the longer term is lower. >> these are pretty liquid. sky works is pretty liquid and nxpi a little less so. liquidity is there. i think sky works is probably okay and in a basket of names that could get acquired by larger players. >> time for the final call. carter? >> sell short home depot, starbucks, pick one or both.

>> use the at the money puts to do it and look for the spread. >> in the xlk, don't press a short. look for a little bit of bounce. >> looks like our time expired. see you friday for more options action. meantime "mad money" starts now. >> announcer: the following is a paid advertisement for the shark rocket deluxepro from sharkninja. >> [ british accent ] this is me new dyson v6 cordless vacuum. >> and this is shark's next-generation rocket ultralight upright -- the shark rocket deluxepro. >> ooh! next-generation. fancy that. i suppose you're gonna tell me shark made the rocket even better. >> boy, did they! this rocket has improved hard-floor cleaning, a removable dust cup for easy emptying, and with two times the dirt capacity, plus l.e.d. headlights on the floor and on the hand vac so you can see anywhere dirt hides. >> is that all? >> no. it deep-cleans carpets bett t