live at the nasdaq market site on a quadruple witching day. the guys are getting ready behind me. here's what's coming up on the show. >> you're out of hand. >> that's what some traders are saying about the banks. and there's one name in particular that looks vulnerable. plus how would you like to play sprint for a takeout and not pay a dime? >> it's my little way of sticking it to the man. >> we'll show you how. and suddenly nike shares are hot again. >> is it the shoes? >> no, it's not the shoes. it's the charts. and there's something in them that suggests mike shares are going higher. the action begins right now. ♪ friday night i crashed your

party ♪ >> let's get to it. despite the fed rate hike and talk of deregulation financials were down about 1%. morgan stanley, goldman sachs, bank of america saw red. is this the beginning of a bank breakdown? let's get in the money right now. >> i'm going to piggy back something off "fast money" earlier in the week, carter worth had this tour de force about the relative performance of bank stocks versus the broad market and it got me thinking and jeffrey gundlach, a big fan too. >> total shout-out there. >> total shout-out. here's the thing. this group has paused. we obviously know the reasons why they ran up. obviously the hope of deregulation and higher interest rates. i'll let mike talk about net interest. i'll let you talk about the relative performance. one of the issues i think is first and foremost, especially as the new administration is bogged down with obamacare, is the potential for dodd-frank to really change meaningfully over the next few months, is not particularly great. i do think there may be some move towards mid-size and

smaller banks to get things going again in that capacity. the month center banks, the big ones, jpmorgan, bank of america, citibank, they may have a lot of the good news in the near term. i want to look at citigroup. those are the year to date, citi is only up about 2%, jpmorgan up 12%. it's really lagging. that's the one i want to focus on. >> for this week, we can't ignore the fact that there was a real bid higher in bonds, sending rates lower. >> well, i mean, as dan was pointing out, one of the issues of course for a bank is how they make their money. what rate do you lend at, what rate do you borrow at? that's what the net interest margin basically is trying to figure out. the yield curve has flattened since december. from june to december of last year, the yield curve had steepened, that's good for banks. lately it has flattened, not so good for banks. the st. louis fed isn't coming out with lending data and we aren't seeing significant commercial lending growth. we're obviously seeing some distress in the auto lending

space. the one bright spot for citi has been costco. because american express lost their exclusive with costco and they got a million new customers from that. but there are plenty of things that can create pressure for the financials here. >> i mean, all of the things that we've just sort of covered are kind of the problem. in the sense that you -- the first thing is expectations were too high. coming into the beginningful the year, two things were guaranteed. crude was going higher, banks were going higher because interest rates were going higher. neither has happened. interest rates have gone nowhere. it puts these numbers into perspective. s&p 500 up 6.5%. financial sectors up 5.5%. regional banks up 2%. this is an area that's a higher bidder area than market. it's not doing well. what's going to change that? >> you've got a trade on citi? >> because of the underperformance to the other big money centers. also the fact that they report april 13th before the open. the options market, it's a ways

out, but a 4.5% move in either direction. that doesn't mean a heck of a lot about the i want to target a one-year chart, 60 has been a kind of support level here. i suspect as carter's call makes it around the street, i think you'll see downside here, maybe testing that 2016 low in february, near 55.5. so today i want to look out to april expiration where the stock was trading 60, 70. you could buy the april 60.55 put spread, paying $1, buying one of the april 60 puts for $1.15, selling one for 50 cents. your risk that is dollar, breaking it down 59, make up on to $4 between 59 and 55. 55 may be aggressive between now and then. but my play here is simple. that when these banks go to guide for q, 2 they're not going to have a heck of a lot of color as far as deregulation is concerned and they're not going to have too much more color about what's going on with the net interest margins. when you think about it, we haven't had a heck of a lot

happen. especially after that fed meeting where you had a pretty dovish raise. for all intents and purposes. to me i like the risk/award. >> also the problem that it's been the laggard. also it has the problem that it has the biggest global footprint in the sense it's in a lot of areas which are really struggling and/or areas that are being closed down in a lot of big banks. so not great. >> mike, do you like the trade? >> yeah, i do like the trade. dan's point about regulation is a very good one. dodd-frank, which is where they're stuck right now, everything that trump's been doing is basically being pushed out. it looks like deregulation and financial services is going to get pushed out. fit happens at all. obviously if people were banking in that good news, now they're not going to get it, that limits the potential upside. if the market rolls over that's potential weakness for financials as well. >> one outlier is the ceos go on a conference call, say they meet estimates, they can talk about all the animal spirits that are happening within businesses that are creating more business. >> i'm a bit skeptical of that. i don't really see this administration, pro-growth, that

they ran on in the campaign, they don't look that way by their actions. if they can't get some policy instituted over the next few months i think some of these business leaders which have gone and kissed the ring may start thinking twice about how they're going to deploy their resources if they don't see any results. >> let's go to a stock that's gone from worst to first. nike surging 13% this year. making it one of the best-performing stocks of 2017. this after shares of sports apparel retailer dropped nearly 20% in 2016, making it the worst in the dow last year. earnings are next week, chart master said there could be more gain arizona head. carter? >> health care was so bad, then it's good this year. energy, so good last year, now it's so bad. often there is something to say for mean reversion versus momentum. definite strategies. nike sets up well to my eyes. let's just see at least if i can draw the lines that my eye sees. so here's what, 2011, 2017? the first that comes to mind is this.

and the second thing that comes to mind is this. guess what? we're popping out of the top of that formation. that's a nice setup. it's a period of massive underperformance for a large-cap asset. a maurer growth company but still a growth company. so let's drill in on this, what's gone on here. here's the day to day. and there's the line. meaning what's gone on here, we've moved above an important downtrend line. so the here and now chart shows that. now, the question is, of course, where to, how much higher? i think ultimately you have the prospects of moving up towards 65, we're about 56 now. a few other things might be worth looking at. one of the things, opportunity, just what melissa was saying, how bad this was. this tells the story. this is the consumer discretionary sector of which nike is a big part and this is nike. that's a massive spread.

you're talking about 1,100 basis points up and 900 basis points. 2,000 basis points a spread. you'd say, how do we know you're going to catch up? it's already started. here's the proof. let's take those two areas. one week nike versus it's better. one month. two months. three months. meaning you've got a situation that, yeah, it was a laggard, that's the opportunity. now this part here is better than this part here. so you're starting to get the very thing you want. which is outperformance. i like nike higher, i want to be on the long side. >> mike, you've got a simple trade tonight on nike? >> yeah, i mean, here's the thing. options are exceptionally cheap on nike right now. i was looking out to june. you could buy the 57.5 calls. that's when the stock was trading 57.80. these are in the money. for just $2.45. spending $2.15 in extrinsic premium. under 4% of the current stock

price. that's with them announcing earnings next week. this is a stock that typically moves about 5% on earnings. right now the options market is implying a move of 3.7%. and this is a situation where you're buying a stock that's trading at a market multiple, that's had very good top-line growth. they are facing a little bit of margin pressure in competition in the shoe business basically in north america. we are anticipating some margin impression. probably 6% top-line revenue growth year on year, that's faster than s&p earnings are growing. for me i think this is a way to make a cautious but optimistic bullish bet on nike. >> the ceo of adidas on cnbc earlier this week made it clear he was going to go very aggre aggressively after the north american market and compete against the likes of nike around the world. are you worried or do you think this at least for a trade works? >> adidas is clearly on fire. i would say the bigger issue is tax reform and the border adjustment tax. when i look at that technical setup i see what carter sees and

mike's trade makes a lot of sense. when you think of the options market, implying a 4% move in either direction, how much those at the money calls are out to june, that makes a lot of sense to define your risk. if the earnings disappoint or the guidance disappoints the stock's not breaking 50. it may get back to 54.5. if you're looking at this trade and see what he sees, you want to back and fill a little bit, don't do a full position maybe if you really see it. >> that's right, the adidas thing, the key is adidas has been a great performer. up several hundred percent. but that's not so much new news anymore. they've come and gotten their share back so to speak. i think nike's just fine. >> last word, mike. >> very quickly, the street is expecting a small earnings decline sequentially versus last year. so even a match at this point would probably be viewed very favorably. >> got a question, send us a tweet, for everything options action check out optionsaction.cnbc.com. check out our newsletter.

more than 100,000 of you have. so don't be the last one. in the meantime, here's what else is coming up. when you want to make a call, always be sure you have the right number. >> when you're playing sprint for a sale, be sure not to spend any money. we'll show you how. when the money's coming your way you don't ask any questions. >> but there is one question we want to ask. how is dan planning to make money on his netflix long trade? he'll explain 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.

hey nicole. hey! i just wanted to thank your support team for walking me through my first options trade. we only do it for everyone gary. well, i feel pretty smart. well, we're all about educating people on options strategies. well, don't worry, i won't let this accomplishment go to my head. i'm still the same old gary. wait, you forgot your french dictionary. oh, mucho gracias. get help on options trading with thinkorswim,

only at td ameritrade. president trump's push to tee regulate corporate america could he'd to a spree of deal-making in the telecom inty. julia bore sen's in los angeles with the story. >> the new fcr chair is much more relaxed toward mma than his predecessor. the first sign, he decided not to review the at&t/time warner merger. now there's plenty of reasons we could see other telco deals. we could see consolidation as wireless companies struggle with limited growth, price wars, and rising costs. we could see more media deals as streaming video provides valuable differentiation. >> the marketplace right now is extremely competitive, is delivering unparalleled value to american consumers. if you look at the last couple of weeks, some of the national carriers are vigorously competing against each other to give new or expanded unlimited data plans, that's something that's good for consumers.

>> what's next? verizon's lowell mac adam is looking for deals saying the ubs media and communications conference, "we'll look for opportunities and put the money into an area where we think we can scale because in our business your cost structure is absolutely critical to long-term success." mac adam has talked about the value his telco can see in combining verizon with charter. we could see t-mobile look at a potential deal with dish again. we could see the long-discussed t-mobile/sprint merger emerge as an option again. telco analyst craig moffitt says, "the fcc will not me pretend to know more than the market, will take a much more hands-off role as a result." >> that potential merger between t-mobile and sprint has been a hot topic and has sent shares of both stocks surging. if the deal goes through how should you play it? dan's "call to action." >> both of these like you said, a lot of rumors and the stocks have performed very well over the last year because of the thought that maybe they could

merge or maybe be acquire paid different sort of -- maybe a cable company, that sort of thing. so clearly these stocks are in play at the moment. i'm not so certain, let's look at sprint, that you want to chase a stock up 170% from its 52-week lows. but we could use options to maybe construct a trade strategy that would let you participate on a move to the upside and give you a little room on the downside if your long entry isn't great. i want to talk about using a call spread risk reversal. what that means is selling a put to help finance the purchase of a call or a call spread, in this case buy a call spread and sell a put. why would you do that? you're looking to basically have an alternative to stock that's really for a risk management sort of purpose. the other reason i would say is that this finance of the put sale, really what i'm trying to do is create a scenario i'm not paying premium out right now so i have a scenario where if the stock goes lower towards the short put sale, then i'm going to have market to market losses. if the stock rallies closer to

the long calls, i'm going to have gains on a market to market basis. but i'm not paying anything for the i. the last one is to really get leverage for a sharp upside move. so that put sale is helping me buy these calls, not do it for a big premium outlay, giving me leverage to the upside. i want to give an example with sprint. the stock today was trading about -- i think about 8.60 or so. you could sell a downside put. what i want to do is look at this 7 level. this was the breakout level from november. the stock had a big turnaround right after the election as obviously i think a lot of traders thought this thing was in play. it's also support level, that's the 200-day moving average where they meet. sprint was trading 8.60. look down to january. 2018 expiration. sell the 7 put at about 80 cents. then you could it's that 80 cents to buy the january 10, 15 call spread for 80 cents. like i said, costs you nothing. you have the scenario the stock is above 10 and between 15 you

can make up to $5. your max gain $5 over 15. worst case scenario, the stock is 7 or below and you put the stock there, 100 shares per one contract sold short, then you would have losses. i like the fact that i'm giving myself wiggle room from 8.60 to 70, i have a ton of leverage to the upside, $5 wide, a huge percentage of where the stock is. that would only make sense if there was a deal and the stock exploded higher. >> mike what do you think of the trade? >> it makes a lot of sense. right now we have a situation where generally speaking, options are very cheap. we want to be better buyers of them. but at sprint that's not the case. sprint options are actually fairly expensive. so if you were going to try to make a bet buying premium, you're going to pay a hot by selling two options he's taking care of it. the other thing, the 7 strike, if it does decline, represents a 20% discount to the current price. he's giving himself a lot of room. it's actually true that a lot of risk arb guys like to be short upside calls when they think

that there might an deal in the works. so this is actually a play that's consistent with that as well. >> how does the sprint chart? >> it looks good. first of all, one of the these things was left for dead, $2 in january '16. things that are thought to be zero, end up not being zeros, often some of your greatest winners. everyone has gotten out. is it overdone, having gone 2 to 9? it's been backing and filling for so long, it looks quite rested to my eye. i would say that ultimately there's more upside. then this, things like t-mobile act well. then in general, in a consumer-type area and where everything's bad, think how well media acts. whether viacom, disney. media, this kind of thing, is a good area to be in. shares of boeing slipping more than 3% from its all-time high. there's something in the charts that point to more pain ahead when "options action" returns. hey gary, what'd you got here?

this bad boy is a mobile trading desk so that i can take my trading platform wherever i go. you know that thinkorswim seamlessly syncs across all your devices, right? oh, so my custom studies will go with me? anywhere you want to go! the market's hot! sync your platform on any device with thinkorswim. only at td ameritrade i just had to push one button wto join.s thing is crazy. it's like i'm in the office with you, even though i'm here. it's almost like the virtual reality of business communications. no, it's reality. introducing intuitive, one touch video calling from vonage. call now and get amazon chime at no additional cost.

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 for the upside call where we take a look back on some of our winning trades. just two weeks ago carter made a bearish bet on boeing as the stock surged to all-time highs. now it labs like mike's trade is about to pay off.

>> on "options," it's how we play offense and defense. risk less to make more. that's what cole and carter did with their bearish bet on boeing. carter thought shares had run too far, too fast. >> to my eye too far, too fast. do something. sell boeing. >> mm, mike thought. maybe carter's on to something but shorting the stock, that could lead to infinite losses. to make a bearish bet mike sold the april 180 strike calls for 630. now to keep all that money, mike needs boeing shares to stay below that 180 strike price. above that profits will trail off. mike won't see losses until boeing rises above that call strike by more than the 630 he collected. or above 186.30 by april expiration. remember there is a tradeoff. because above 186.30, mike could see infinite losses. >> surely you can't be serious. >> we are serious and don't call

me shirley. to define his risk, mike then bought the april 190 call for $2 and created his bear call spread. now between the 630 he collected by selling that lower strike call and the $2 he spent buying that higher strike call, mike still pocket the $4.30. that $4.30 is the most mike can make on the trade. and to keep all of it, mike needs shares of bowing to stay below 184.30. above 184.30, he starts to see losses but they are limited to the difference between the strike or the call that he sold and the strike or the call that he bought minus the credit. >> everybody getting this so far? >> let me make it really simple here. mike can now make money whether boeing drops, stays flat, or even goes slightly higher. and since the time of the trade, boeing shares have fallen 2%, meaning this trade is right in the sweet spot. now "options action" fans all over the world just want to know one thing. what will cole and carter do now?

>> all right, let's find out. mike, what do you do? >> yeah, i mean, this is actually working out just fine. i mean, as long as carter's along with me on this one. these are going to expire before earnings. basically, we're continuing to collect premiums. i think we should continue to collect premium. i don't, despite today's strength, really see the stock going significantly higher from here. >> lower, not much has happened, really. the stock hit a low of 177, back to 180. should be just the beginning of more trouble. up next, your tweets and the "final call" from the options pits. hey nicole. hey! i just wanted to thank your support team for walking me through my first options trade. we only do it for everyone gary. well, i feel pretty smart. well, we're all about educating people on options strategies. well, don't worry, i won't let this accomplishment go to my head. i'm still the same old gary. wait, you forgot your french dictionary.

oh, mucho gracias. get help on options trading with thinkorswim, only at td ameritrade.

hthis bad boy is a mobile trading desk so that i can take my trading platform wherever i go. you know that thinkorswim seamlessly syncs across all your devices, right? oh, so my custom studies will go with me? anywhere you want to go! the market's hot! sync your platform on any device with thinkorswim. only at td ameritrade welcome back to "options action." the first tweet from our very own brian kelly, b.k., who asks mike, is dan's hair real? and is it as spectacular in real life as it looks on tv? mike what do you say? >> it is real. and it is spectacular.

i'm very enviouenvious. >> really spectacular. >> are you serious? this is your opportunity to rag on him. all right. >> i understand. you know, this is coming from a guy who probably needs implants himself and he doesn't, so, you know. >> your hair's spectacular too, mike. our next tweet from our old friend from france. long-time viewer. happy quadruple witching day, with ackman exiting valiant, how do you play it? sell verticals or buy put spreads? >> i'd prefer to be short premium. it's tough. the short interest so is high that basically elevates the price of puts, decreases the value of calls. i almost feel like it's a no touch to be honest, as much as i don't like the stock. >> all right. thank you. time for the "final call." last word from the options pits. >> i want to get long nike or add to it if you're already

long. >> june, 57 1/2 calls nike, a way to play ahead of earnings. >> citi bank, pick on the weakest one, april put spreads. >> thanks so much for watching. check out the website optionaction.cnbc.com. >> announcer: the following is a paid presentation for the nutribullet, brought to you by nutribullet llc. ♪ >> hi. i'm david wolfe. and for 25 years, i've been teaching people, to get the most out of your life, you need to get the most out of your food. all this food is loaded with nutrition, and you don't just need some of it. you need all of it. and the nutribullet is the machine that can get all of it. for a limited time, nutribullet has an incredible offer. when you order today, we will upgrade you to the 900-watt