hey there, we're live from the nasdaq markets on this hot summer night while the guys are getting ready behind me here's what's coming up on the show >> announcer: elon musk has been trolling the tesla shorts hold on, they have a way to short the cost for no cost at all. plus >> tropical stohere's no place . there's no place like home >> announcer: actually the housing trade looks like this. but the chalk master says there is one stock in the space that's so bad it's good it's time to risk less and make

more the action begins right now. >> let's look at bank stocks showing life the financials etf down 5% this year, lagging behind the broader markets. let's get into the money now dan, you think this move is a sign of more pain to come? >> yeah, i think it is absolutely disastrous price action if you thought the last two weeks in the bank stocks was bad, i think the pundit class, wall street analysts were really positive about this catalyst saying this was going save them, the under performance this year. but investors kept on selling into it. you got this pop on the opening. it seemed kind of weird to me that it wasn't able to hold and the fact that they closed on the lows is really bad if you want to extrapolate a little what is going on with owe po tensionally the data we're seeing globally, here in the u.s. i have to think the banks is the one sector levered to a growing u.s. economy they obviously benefit from the tax cut 245 went into effect late last year to me it's disastrous.

>> it's a global thing, you look at the country world bank index, a full fledge topping out formation. it's not only u.s. this is where the dream was. you were supposed to be long industrials. it's getting worse, now you're getting the pile on. people are abandoning. people start to look at the charts for the first time, it's not the beginning of the end it's the beginning of the beginning. he dan, which stock are you looking at >> i'm looking at morgan stanley. it's not worse than any others of them. there was some lapping waj that wasn't great for more fwan and goldman. i want to look at morgan back to the 44 level that is the 52 week low. maybe it finds some support. i want to think about the q2 earnings i think all of these stocks, if they can not ral ill into the q2 earnings, it will be the week of july 13th, i think we're going to see new52-week lows on all of them. today in morgan stanley, if you think the stock is going to continue to trade down into that

earnings print, you want to look to the july expiration today when the stock was trading 47.90, you could buy the july 44, 48, paying $1.10, selling one of the july 44 puts at a quarter, your max risk is that $1.10. you can makeup to 2.90, 46.90 down to 44 worst case scenario you're risking a little less than 2% of the stock price. the press is sure, play for a catalyst back to the lows. to me i like the risk reward in this trade it's a 3 to 1 potential pay out. >> one of the things you see is you're looking at what the pay out is, also how much extrinsic premium. that decays away you're looking at a put spread in the money already spending the dollar.10, it's 60 cents in the money

that's 50 cents versus extrinsic premium. that can decay between now and expiration that isn't a lot to spend. a little over 1% of the current stock price. >> it's goldman sachs, too this particular area of the financial sector is especially even more so than banks. citi, problem. >> morgan stanley, equally problematic? >> sure. it's not just u.s., it's global banks. >> let's move on here. home builders on shaky ground, down 10% for the year. many of the biggest names plunging the last three months toll brothers, lennar taking 14 and 10% respectively, d.r. horton down 6% carter says one of these names has a chart that's so bad, it's actually good. so chart master, head over to the plasma. >> it's an opportunity or a trap financials look like they'll get as weak as the home builders have gotten. home builders as an etf down

12 1/2, 13% for the year i thought i'd single out toll. toll has done something it hasn't done in the history of the data going back to 1986, 32 years. it's declined at the end of today, seven months in a row never happened it's had a peak trough decline, 32.3%. compared to home building as a group, down 12 plus. so a three fold wipe out at some point you can be contrarian, i would think it's so bad it's good here is the toll chart over the past ten years since the '09 low. i want to show you an overbought or oversold condition by putting in these arrows. what it tries to depict is a over shoot or under shoot, mean reversion trait is profitable. i'm going to bet 32, 33% decline

is due for some sort of throw back here's the chart without the moving average the notion of support, ready, put in the line. we have sold off two support we've broken support support is not a plywood board or a concrete floor. it's a mattress. so, indeed, we are well into the mattress at some point you sink down to the point where you find support. i think we reached that point by dropping 32 plus percent so the thinking here is that toll, look at this, this is its relative performance to its sector, consumer discretion. we have gone right to the prior low and we just started to turn up if i put the lines in here, you can see this we're treating right at the prior low and i'm going to make the bet that it's actually just going to start to turn here. a very important circumstance and actually the long-term chart shows you that we are literally on the prior low and i think we're going to hold.

so, i want to make a bet that it's so bad it's good. >> what's the trade, mike? >> so, this is an interesting situation. sets up really well for options. i'm looking out to september which is going to capture their earnings which is going to be reporting in july. specifically i was looking at the september 38, 42 call spread you could spend $1.75. i was looking at this earlier today with the stock trading 37 1/2 at the time sell at 55 net-net, you're spending $1.20 the idea is if it is so bad it's good, you have about 10% up side is what i'm shooting for between now and september expiration but if it is so bad that it isn't i'm only risking $1.20 it's not a whole lot basically i'm giving myself some time expiration >> lennar had results, the stock was up 6, 7% that morning. the ceo was talking about, okay, we know what the head winds are, rising interest rates. >> right

>> but offset maybe by some tight supply, wage increase, stuff like that. got me thinking about it all the charts looked the same, they're down a lot i think you can do the same with xhb. itb which is more the home builders i like mike's put spread, not too different than the one i was looking at in morgan stanley but here's the thing i don't think this group acts particularly well this week just like the banks didn't. there was some good news lennar is lower than where it was i think in the mid -- >> that's the thing. the itb is down 20 from the peak down 50% more than that. the reason i singled it out, it is so bad -- >> mention the itb that is a predominantly equal wait weighted etf for home builders does the supplier look better? >> that one had a bigger tloe back because you got a pop in lows at home depot which are weights. i wanted to single out the itb for the discussion but zero in

on toll which is straight down with no bound. >> home depot is not so bad it's good it's good. it has been good, right? it's pretty straightforward. and lowe's, too, obviously have we reached a bottom you're trying to catch the falling knife. that's a tricky bit. with options we have an opportunity to make that bet and limit our risk while we're doing t. >> did you think the price action was bad this week to dan's point? >> i think the fact that it ended up flat, we still have yet to see earnings from toll. obviously lennar held on to its gains. we got that pop on monday and held the gains to the end of the week for me given how the price action was in everything else, because you have to figure out that weighs in every single stock. i thought it held up okay. >> for everything "options action," check out our website our super newsletter will give you the chills here's what's coming up next

>> i'm going way too fast. >> and that's what mike is saying about tesla's stock run he'll tell us how he's putting on the brakes for almost nothing at all plus, calling all "options action," reach into your pocket, have your phone and tweet us your question at "options action." if it's nice, we'll answer it on air. when "options action" returns. well, it's earnings season once again. >>yeah. lot of tech companies are reporting today. and, how's it looking? >>i don't know. there's so many opinions out there, it's hard to make sense of it all. well, victor, do you have something for him? >>check this out. td ameritrade aggregates thousands of earnings estimates into a single data point. that way you can keep your eyes on the big picture. >>huh. feel better? >>much better. yeah, me too. wow, you really did a number on this thing. >>sorry about that. that's alright. i got a box of 'em. thousands of opinions. one estimate. the earnings tool from td ameritrade. your insurance on time.

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welcome back to "options action." exactly eight years ago if he is la went public and since then it's become one of the most controversial stocks in the market fill lebeau has that >> did it hit a production rate for the model 3 of 5,000 per week elon musk says, look, those who were doubting his company are in for a rouda wakeening. the company's target is 5,000. the analysts are all over the place. some as low as 3800, some who believed they will hit that rate this is what gives some people a little bit of pause. it is a tent outside of the tesla factory in fremont, california it was erected over the last couple of weeks. elon musk is using it as essentially a third assembly line, so they're trying to crank out the model 3s this worries some people in the auto industry who say that's not

how you 0 do vehicle assembly. we'll see what the numbers are when they report next week elon musk shares of tesla, he was warning one analyst, goldman sachs analyst earlier this week, you're in for a rouda wakeening if you doubt that we are going to hit that production wake. melissa? >> they have been accelerating on the stock a long time phil, thank you. phil lebeau joining us from chicago. mike has a way to bet against the stock for no cost at all. please tell us, mike >> you know, many years ago they used to say you didn't want to buy a car built on a monday. i don't think to buy a car built in a tent. that's just me we're looking at trading a one by two put spread. it's one i really like in this name really the reason we're doing that, there's a couple reasons one is options premiums are really high. we were taking a look at where the at the money august straddle closed it was $60 buying the call on the put was expensive.

the other thing is we have catalysts including production numbers which can propel the stock in one direction or another. a final thing which is a structural situation that has to do with the fact the stock has a short interest that short interest can actually create a possible level of downside support and that's important when you're going to put on a strategy like this. we can see essentially where the stock is the height is right above 380 and we had this swoon down here. i think a move to that magnitude to the downside is somewhat unlikely let's look at the structure we're doing here i was looking out to august. when i was looking at these today, you could sell two of the 295 puts against it for 10 1/2 dollars each net-net you're actually not laying out any premium to put this trade on. the idea here is obviously you want the stock to go down below that 330 strike that you're long those are going to start

drifting off those profits as the stock continues lower. net-net you would effectively get long the stock at 265 if it drops down because you're short two puts as we look at this, this is a strategy i've used several times. i had one that expired last week these options are actually going to decay a little bit faster than the one that you're long. in the intermediate period if the stock doesn't go anywhere you might see profits here as well >> what do you think of this trade? owe for the reasons mike laid out, tesla is a perfect one to buy one, sell two. it's hard to own them. i think mike's ranges are good i'll let carter talk to that the only thing i'll say is they may hit that 5,000 target and they may miss it next quarter. and then they also said they don't need to raise capital and they may so this is one of the ones mike said worst case scenario you get long 265, it's a scenario where you better be prepared to have

losses or buy it down there. >> i think they will need to raise capital. i think 30% of the float is short in this thing. so if this thing does drop, call it 80 bucks from here, right, down to call it 270-ish or something like that. you are going to see some people covering those shorts for sure in fact, actually when the stock was trading around that level it was about 22% shorted. so we have some sense of who has shorted it since and who would be buying it if you made a move back down to those levels. >> sort of put this year's low is 250, right? happened in april. just to put that level in perspective, eight years ago it comes out and it's dormant, nobody cares then it was march of 2013, it was 25 bucks and march of 2014 it was 250 it went up ten fold in that one-year period. and hit 250 in 2014 and essentially that's where we are now. we hit a low this year of 250, meaning all the action was an aggressive repricing of an asset and that's the fascinating nature of markets. they were ahead of all this. the question is this door manrm

was it priced in, 350, 220, that's my hunch, we're just stuck. if the stock is fair price, it belongs there as it continues to grow -- >> can you walk through the chart? often you put up a dhart and say this period of dormancy is building a base. the longer the base the higher the break out. >> or the more authority -- the level of more authoritative the resolution there is a big dee he bait but the debate is still on i don't think the debate is going to be resolved >> one quick thing. ee london is -- i love what he's doing. i love the products those cars that he's building the real issue is i think he's going to need a capital raise. people are going to get shaken out of this thing once or twice more before it's all said and done that's essentially what we're saying we're not saying the stock is

going to zero. >> i was on the 101 from sfo into san francisco tuesday i saw two trucks loaded with model 3s heading up to san francisco. all those venture capital guys need their model 3s. >> did they put eight or nine of those things >> it wasn't a caravan >> we'll get the delivery numbers next week. we'll see. for more on tesla's performance since its ipo eight years ago you can go to cnbc.com nike shares is going parabolic. that's bad for one of our traders, we'll explain why much more "options action" right after this see that's funny, i thought you traded options. i'm not really a wall street guy. what's the hesitation? eh, it just feels too complicated, you know? well sure, at first, but jj can help you with that. jj, will you break it down for this gentleman? hey, ian. you know, at td ameritrade, we can walk you through your options trades step by step until you're comfortable. i could be up for that. that's taking options trading from wall st. to main st. hey guys, wanna play some pool? eh, i'm not really a pool guy.

what's the hesitation? it's just complicated. step-by-step options trading support from td ameritrade to me, he's, phil micwell, dad.o golfer. so when his joint pain from psoriatic arthritis got really bad, it scared me. and what could that pain mean? joint pain could mean joint damage. enbrel helps relieve joint pain, helps stop irreversible joint damage, and helps skin get clearer. enbrel may lower your ability to fight infections. serious, sometimes fatal events including infections, tuberculosis, lymphoma, other cancers, nervous system and blood disorders, and allergic reactions have occurred. tell your doctor if you've been someplace where fungal infections are common, or if you're prone to infections, have cuts or sores, have had hepatitis b, have been treated for heart failure, or if you have persistent fever, bruising, bleeding, or paleness. don't start enbrel if you have an infection like the flu. since enbrel, dad's back to being dad. visit enbrel.com and use the joint damage simulator to see how your joint damage could be progressing.

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five days a week. that's amazing. it's a pretty big deal. so i can trade all night long? ♪ ♪ all night long... is that lionel richie? let's reopen the market. mr. richie, would you ring the 24/5 bell? sure can, jim. ♪ trade 24/5, with td ameritrade. ♪ welcome back to "options action." it's time to take a look back at some of our open trades. just last week mike said nike's run was overdone, going into earnings >> more often than not the stock moves 4% or less and then a few times it moves a lot so the structure i'm taking a look at is selling the july 75, 76 call spread i could collect $1.65, pay $1.25 for the up side. the chance it gets above the higher strike is going to be less than 40%, actually only 33%

it gets to the higher strike >> nike soared hitting a fresh all-time high, 8% since the time of the trade what are you doing now >> if you follow us on twitter i said to cover this trade today here's an interesting tidbit i took a look the last ten years. whenever the stock is gapped up the day after earnings, it's below the preearnings level. those two times were september 2008, december, 2008 those are not trades you want to stay short in. >> when a principal stock gets cheaper, it gets more expensive when it gaps down. it was reset, something was said and you go with it >> this doesn't feel like a short squeeze. this feels like people have not been in the story and are piling it in. barring some sort of trade situation, global market sell off, this thing is going to stay above 70 in my opinion >> would you look to put a trade on that's positive >> i would rather be positive than short that's definitely the case

look, we have positive news coming out of china. it's fairly clear. always with the benefit of hindsight. we were looking at the times going in somebody had a good sense of what was going on overseas and now we're learning >> all right earlier this month dan said shares of philip morris were about to light up. >> we know that this is one of these stocks where it had fundamental head winds, but also the issue of rising rates over the last year or so. that 5.5% dividend is looking interesting when the stock was trading around 79.10 the july 80, 87 1/2 call spread that cost you $1.50 that breaks even at 81 1/2 to the up side. >> and they did. the stock rallying more than 4% since the trade. so, dan, what are you doing with pm now a it's really still consolidating. i'll let carter speak to that. options prices were cheap. the stock is cheap it moved into the money as far as the trade is concerned here just below $811.

one of the things i was targeting was earnings before july expiration. here's what i'd do the next thing if the thing floets up a little bit you may want it take profits when you have a double on half the position because then you're going to be riding this into an event who knows what's going happen. or off be times i'll roll that up a little bit if i'm expecting a sharper pop. >> dan did us so bad it's good trade. it was down 40% from its peak, and you know what, at some point even if philip was going out of business, you have rallies even in down trends you made money >> it did well this week utilities not necessarily in the same category, but that's sort of the way i look at it. there is little downside from here >> in a right environment where we keep saying everyone is so convinced they're going much higher earlier in the year, now they're stuck at best, 5.5% dividend yield >> not bad >> up next we have your tweets and calls from the option pits well, it's earnings season once again. >>yeah. lot of tech companies are reporting today. and, how's it looking?

>>i don't know. there's so many opinions out there, it's hard to make sense of it all. well, victor, do you have something for him? >>check this out. td ameritrade aggregates thousands of earnings estimates into a single data point. that way you can keep your eyes on the big picture. >>huh. feel better? >>much better. yeah, me too. wow, you really did a number on this thing. >>sorry about that. that's alright. i got a box of 'em. thousands of opinions. one estimate. the earnings tool from td ameritrade. [ horn honking ] [ engine revving ] what's that, girl? [ engine revving ] flo needs help?! [ engine revving ] take me to her! ♪ coming, flo! why aren't we taking roads?! flo. [ horn honking ] -oh. you made it. do you have change for a dollar? -this was the emergency? [ engine revving ] yes, i was busy! -24-hour roadside assistance. from america's number-one motorcycle insurer. -you know, i think you're my best friend. you don't have to say i'm your best friend. that's okay.

you don't have to say i'm your best friend. (indistthat was awful.tering) why are you so good at this? had a coach in high school. really helped me up my game. i had a coach. math. ooh. so, why don't traders have coaches? who says they don't? coach mcadoo! you know, at td ameritrade, we offer free access to coaches and a full education curriculum- just to help you improve your skills. boom! mad skills. education to take your trading to the next level. only with td ameritrade.

welcome back to "options action." it's time to take your tweets. first tweet is from brian who asks, how would you play i pay pal break out to 90? dan. >> good question, brian. this one has kind of been in this range now for most of this year it acts pretty well, though. if you're going to target a break out you may want to target an earnings event. it should report before july expiration i might consider selling it down side and buying up side call kind of doing it free of the money. we call out risk aversal like mike's one by two, if you're going to sell it down side, be prepared to buy the stock at that level. you may want to consider buying an 80 put. not a whole heck of a lot of premium. i like that as a break out trade. >> time for the final call the last word from the options pits carter >> it's so bad at it's good. moving to 10% plus >> use call spreads in toll brothers to make the play.

if you're inclined to make a modestly short put, one to two spread is the way to do t. >> dan >> i want to expand on the tesla comment. if you're long on tesla, it could be a hedge against your long >> looks like our time is expired. i'm melissa lee. meantime, "mad money" starts right now. the following is a paid program for traeger wood fired grills. sponsored by traeger. but be warned, it contains footage of delicious, wood fired meats, seafood, vegetables and desserts. you may find your stomach growling, your mouth watering, or that you have an uncontrollable urge to order your own traeger wood fired grill. what is traegering? traegering is this, that and those. traegering is fire and smoke, roast and grill, bake and barbecue. it's the rich flavor