Well break it down. The action begins right now. Lets get right to it. The only thing that matters for your money next week is bank earnings. Financials are the worst performing sector this week. The big question here. Will it get worse when stocks like jpmorgan and bank of america and citi report next week so lets get in the money and find out. Mike . You know, well, i think obviously it does matter. Prices for the banks actually indicate that people are really concerned. I mean, if you take a look at the banks on a fundamental basis right now what youre seeing is what would look like very low valuations. Take a look at a name like bank of america. This is an interesting thing about fundamentals. People like to look at the multiple and say stock is cheap and schlickial stocks typically trade at the cheapest multiples right before fundamentals actually start turning south so if youre looking at banks the same way and youre taking look at the valuations, price to tangible book, they look awfully cheap and what they are telling you the market doesnt believe that the market is continue. We think about next week and have q1 earnings and looking for commentary for the balance. Year, the problem is that expectations arent particularly high at this point and when we think about it already heard from jpmorgan, citi bank and Deutsche Bank and the disastrous corn their included january and february from jeffries. We know that volumes are bad and Capital Markets activity is bad and know that regulation is a real thing right now and know that leverage is down so, you know, its not that investors are particularly excited about bank stocks which makes it kind of a difficult trade when youre thinking about it and then you throw in the context of the Federal Reserve, and what is the rate policy because one of the biggest issues for the banks right now is that net interest margins and they really need to see that yield curve do something other than its done. Its asset managers. Yeah. Its Credit Card Companies and anything in that space, and while reitz of course have done well which are part of the general sector they will be broken out next year but the banks are terrible, terrible in europe and worse in japan and hsbc, new shocking lows, bad space and i would be short with you. To the point though that if we do see a potential bump up in the prospects for a rate increase, and there has been chatter about that more recently, that totally changes the picture so i think what were basically on the cusp right now i think of a situation where they could really break very hard either way. They are cheap if they if you get a rate hike and if you dont. But that comes back to expectations really quickly. Think about it, we know theres basically a zero percent chance and then you go to late june and the fed funds futures are pricing at 6 . If that changes you would see bank stocks rally, okay, and that would be a great opportunity in my opinion to sell them because i dont think the fed, even if they were too, i dont think they are going too frequently in 2016. Whats your trade . Get the real, expectations are low and have you a bunch of earnings next week and bank of america, jpmorgan, citi group and wells fargo and a bunch other ones the following week. I want to look out to september expiration and you need time if you want to make a short on this trade and i want to look at the xlf and the financial sector, etf, when it was trading at 22 today. Look out to september expiration and pay 1. 20 for the sept 22 puts. Those break even, down at 120 with the max risk. Seems like a premium with underlying stock price but you have a lot of time here and the other thing you may want to look to spread them if you get a move in the right direction here. Timing is going to be crucial, but the fact is these are not going to decay a whole heck of a lot. We were talking about this before the show. Premium is not that high when you take a look halt how financials have behaved historically so the valuation of the put, and one other thing to consider, think about selling maybe some may 21 puts, Something Like it. Collect the elevated premium of that expectation of volatility and were seeing higher expected moved in names like jpmorgan. Youll be basically selling that elevated premium. It gets down to rate, and if rates really arent going to move, this is a good place not to have capital and its a risky place in fact if things really get bad because theres beta here and these can make shocking new lows as Deutsche Bank is threatening to do and as hsb is doing. Its not that youre advocating against the trade when you say its not worth the capital, but if youre going to do it, do it this way. Okay. If if there really is problems, the second biggest sector by weight in the market and its the lifeblood of the system, and the way they are acting, not good. Right, right. Just say this, and weve talked about it a lot on this desk. Jpmorgan, talked about the dimon bott tomorrow and the Company Announced the 2 billion buyback after he bought 27 million worth of stocks and the stocks act like garbage. Wont close above 60 which was a really big level for more than a couple of days and the last couple of months so i think relative underperformance, wells fargos chart. You and i talked. Toys a disaster. Want to sell rallies and defining your risk and placing a bet on what youre willing to do the way im doing it i think that makes sense and you buy yourself some time. Number of names in the space getting absolutely slaughtered. Gap shares falling 19 , nordstrom, abercrombie and macys down around 10 and chartmaster sees even more pain for the space. It is bad. So look at the xrt, a very broad etf. Its 98 names and they are equal weighted. Amazon and walmart are in there. The same weight as tiffanys, ralph lauren, pick your poison. Its a big index, and i want to start with just the recent action in two names. Last night in japan, this is the biggest retailer in japan, and youre talking about a massive drop in gap guiding down in a terrible way and what happened today . Fast forward in north america gap stores, no pun intended, gapping down like this. Again, apparelrelated, but bad action for a while, not recovering are the market and then yet shock new lows. Whether its japan last night, biggest weight in the nikkei, biggest single weight in the index and then gap stores here so this is the longterm picture of xrt. Its, again, a broad etf and what we do know. Not because i say that because this retells us this, when you do have a welldefined trend the odds are high that you stay on trend, and when you do break, thats a problem, so now after this perfect ascent for essentially a multiyear period, after breaking weve attempted to throw back and now were struggling so were going to stud they right here now this period. Heres our throwback, so, again, the break in trend and were going to look at this throwback. This throwback right here huge move and whats key is were starting to hook back down again. Id draw the lines again and well hook back down to the line and youre talking about a 5 to 7 move. Not good. I mean, retailing, action like that in a market like this has been straight up somethings wrong. So its all bad. Mike . To his point. There are a lot of names in the xrt etf and the story isnt same. Netflix and names like walmart and target so its really broad etf when you look at it the that way and whats interest, unlike the banks where you are have a bifurcation situation where the stocks look really cheap and can make them break either way. On the whole the stocks do not make them look cheap. Even the nogrowth stocks like the targets and walmart, trading 16, 17. 5 times forward earnings so this situation going into sense, a situation where you can definitely play that kind of move. Looking simply at the make. 43 and 41 put spreads. Spend 50 cents for that. We like the math. Its the first out. Money strike and youll capture earnings and will spend small relative to the amount of the in exwhat do you think naff . Im there. Costco yesterday, missed their samestore sales and when you think of what gdp is tracking to for q1 and how consumers led and where the gdp is and its way below expectations. To me you have a real loom being disaster for u. S. Consumer stocks. And all this with gasoline where it is. And people keep moving the goal posts about when thats going to be effective. Sure. One. Things you started to see, probably saw this data point this week and taking a look at defaults on auto loans, some of the worst news weve seen since 2008, the bottom tranche of consumers that hey lot of retailers depend on are hurting. You agree with the direction. Do you like the trade itself . I think have you to get the trades my time and you node things to materialize and we keep talking about on the desk every friday afternoon is going two short dated and long premium and really get in the timing right. Going to be hard. Needs ways to finance it or mitigate decay. Thats what were talking about here, options. Weve seen it and saw it with gap stores and saw it in names that are disappointing. Going to move, now is the time they will do it between now and may. Thats when we get the bulk of the efforts. Very prominent on retail and nike acting eightmonth relative low to the market and the earnings were a bust. I mean, compared to what was expectations. Not good. Got a question out there. Send us a tweet to at options action. Trades, winnings numbers for tonights lottery. Are you listening out there . All there. Sign up for our exclusive newsletter. Heres whats coming up next. Thats whats going on with the japanese stock market, and it could get a lot worse. Well explain and give you the trade. Plus, bullying is breaking out. The little cube you put in the hot water to make soup, talking about gold and why it could go even higher when options action returns. Im 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. Whats up, tim. Td ameritrade. You wont see these folks they have businesses to run. They have passions to pursue. How do they avoid trips to the post office . Stamps. Com mail letters, ship packages, all the services of the post office right on your computer. Get a 4 week trial, plus 100 in extras including postage and a digital scale. Go to stamps. Com tv and never go to the post office again. This cit added this other level of clean to it. It just kinda like wiped everything clean. My teeth are glowing. They are so white. I actually really like the two steps. Everytime i use this together it felt like leaving the dentists office. Crest hd, 6x cleaning, 6x whitening. I would switch to crest hd over what i was using before. Herthey work hard. Ade, wow, that was random. Random . No. Its 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. Theres no way to predict that. Td ameritrade. Welcome back to options action. The yen is surging and hit more than a oneyear high against the dollar this week. Typically the yen rallied in times of trouble. Should that make investors worried . Carter is at the smart board with more. Thats right. Big move and biggest sorry of the week really, the move in the yen but i want it to focus on following on what we saw about the retailer and the largest component of the nikkei. Fast plunging like that. Look at this comparative chart. One year, exactly 12 months of lets call it american exsis, s p versus the nikkei 225 and obviously the optics are quite clear saying we know everything started rebounding quite nicely but the rebound that took place and then the nikkei, of course, has faltered and started to roll over. The stock 600 in europe also looks like this. This is a problem meaning i ultimately believe the s p will go that way as well and either way forget about the s p and this is a bad thing to be in and it got a lot worse in the sense that the biggest component at 7 was dropping and gapping like that, so here are a few charts. This is the cheek you can use to trade, it an etf, ewj and basically, you know with basically down and up and down and up we know we have something of a downtrend line and the issue is are we going to falter here again and go down two or even through the lows. Thats my bad and lets look at longterm charts. Here again is the same thing on a oneyear basis which is what weve studied here and the presumption is that were precariously close to hoveringed a well defined lows at a common level and are we going to break those levels. Head and shoulders or a big rounding top and thats not a good setup and more often than not its reserved lower and heres the yen. Obviously the yens strength is a lot of the reason for this, but this is a clear break in trend and we think the yen, too, strengthens more or on the chart or moves lower. Brakes in trends all over the place. How are you trading japan. Obviously we have to use ewj. This is one of those situations where i also do think we can get Something Like we have in the banks. It can break both ways and ewj is not a hedged etf so its very sensitive to movements in the yen so if youre going to make a directional play on this you have to be aware of that. Looking resimply at the june 12 put spread. This is interesting because with the underlying, with ewj at 1135 when i was looking at this. You can buy the put spread for just over 50 cents. Pay 77 for the june 12 puts and sell the june 11 and paying 51 cents for that spread. The reason thats interesting is because you notice this put spread is already 67 cents in the money at that price, okay, so basically if it stayed right here youre actually going to make money so time is on your side. 50 cents is a max risk on this trade and if you sit here it goes lower and its going to be profitable. Heres the thing. May not achieve the goal. Have a high probability of small success, right, and then you have the potential that if you got it wrong you can lose more than you potentially make. Its pretty much a coin toss though its already working in your favor. In other words, you flipped the coin and can you see its on its edge. Saw the heads and thats what you see. The way i seat charts and no charter worth here, if im going to play north big one and play for the break i would look down at that 11 strike and i would see the ten as massive support and maybe you can look in jian and buy the 11. 10 put spread. You can look at the chart and see its going lower. Of course i do. Lets go with your thesis for one second and say that the 11s are the ones you want to buy and you can say, okay, i can buy two 11s for the price of that one spread and that might actually be a rational alternative way to pull t. Selling your 10s is not the move because those things are essentially worthless because youre electing no money no do it. Percentage of the 11s that youre buying to. Me its a matter of conviction and what you think the magnitude of the move will be over the time period so to me i dont love the reward of your trade and i like the direction of it and i like the charts so it depends how convicted i am, if i thought i was breaking 11 i would want to own the 11. Own the 11s and dont sell the 10s and its a sevencent option. Last word. In terms of the nikkei and japan, second biggest player here, of course, is toyota. All theo is up terribly and talking with that earlier and toyota chart looks like this and this may be a black swan that kicks the s p to the downside. Japan is not in good shape. Thats my view. A big call. Gold posted its best week in more than a month and if you missed it on the rally fear not because theres a way for you to get in and well explain after the break. Im 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. Whats up, tim. Td ameritrade. This cit added this other level of clean to it. It just kinda like wiped everything clean. My teeth are glowing. They are so white. I actually really like the two steps. Everytime i use this together it felt like leaving the dentists office. Crest hd, 6x cleaning, 6x whitening. I would switch to crest hd over what i was using before. We rise above our differences. The right amount of garlic reigns supreme, and what separates us is mostly whether were chopping or frying. Food is a language we all speak. When we cook together, we find harmony in the kitchen. We make more than a meal. Enjoy fresh ingredients and healthy recipes, delivered to your door each week. Subscribe today, at hellofresh. Com great time for a shiny floor wax, no . Not if you just put the finishing touches on your latest masterpiece. Timings important. Comcast business knows that. Thats why you can schedule an installation at a time that works for you. Even late at night, or on the weekend, if thats what you need. Because you have enough to worry about. I did not see that coming. Dont deal with disruptions. Get Better Internet installed on your schedule. Comcast business. Built for business. Here at the Td Ameritrade they work all the time. Sup jj, working hard . Working 24 7 on mobile trader, rated 1 trading app on the app store. It lets you trade stocks, options, futures. Even advanced orders. And it offers more charts than a lot of other competitors do on desktop. You work so late. I guess you dont see your family very much . I see them all the time. Did you finish your derivatives pricing model, honey . Td ameritrade. Welcome back to options action. Can the rim for total recall when we look back at our open trades. Cole and carter thought last week gold was ready to shine. Take a listen. Today we close at or near the house and bounced quite well and closed almost at 117. This is an opportunity by more work. We would get long gold if youre not already there. Go out to june and buy the 117 and call spread and that will cost you 2. 40 and getting long the 117 strike right along the level he was identifying. Best week in more than a month. Still like the charts . On a percentage basis it sounds real good but obviously if gold has had a structural multiyear runup the three year collapse and now a bit of a ricochet. If this ricochet is real, we believe it is. Theres much more to come so we want to stay. We spent 240 and its worth three bucks and its gone right and well through the strike that were long. The idea is well roll the long strike and consider rolling them up to the 119s and collect a dollar when youre doing that. Keep the 126s on it and its helping to offset the decay and now youre only in the trade for 1. 40 and still maintaining the upside. Do you like gold . The momentum players are there and those who believe the hedge thats there for inflation. They keep rolling the calls out and thats the activity weve seen all year long and gone back to when we heard mark cuban with the momentum play and seen the strikes when they come into the money and as mike just said rolled up and out. Dan said tesla shares had come too far too fast so take a listen. That i had when the stock was trading about 235. That was off of, you know, it opened up 8 and closed up 3. 5 . I think you want to sell april options and look down to the 210 strike and you can sell the april 210 puts at 2. 50 and look out to june and buy the june 2. 10 puts for 2. 50. The stock was up 5 this week but theres still time. This may surprise you, like you, i do some bonehead things and that was a little early on this trade and monday morning the stock old up at 255 and before you know it the stock was at 250. I live by trading rules and i got 50 premium stop that i have in my head and i panic the. Basically at the highs earlier in the week but the trade is still intact. The only problem right now is the 210 strike. Kind of too far out in the money and we talk about rolling. Probably want to roll it up to something that looks like the 2925. Structural if it was at the v, ricochet already too far even got worse and today was weak so i think if you can roll it out, stick with it. We are at nosebleed valuations in this can. I understand the enthusiasm and the numbers that came out of it. That hasnt mattered forever. Valuation hasnt mattered forever. People dont know or care about valuation. Let me tell you something about valuation. Enterprise valuation, General Motors sold 10 million cars last year. Just got 325,000 orders for model threes which weve yet to see when and how and if they are going to deliver these things. Valuationwise, this thing has got it all baked in, folks, just telling you that right now. I think the comparisons for gm are a little faulty to. Compare how many vehicles. Began motors made 8. 5 billion. I get that. This company lost almost 700 million. Didnt make a good trade. As enthusiastic are were talking value sglags they were pessimistic about it in february when it was trading 145 and sentiment is a pretty cool metric. I might have panicked at the top, a lot of people might have panic the at the bottom and a lot of people thought it was a consolidation play back near the 200day moving average. Up next, your tweets and the final call from the options pit. Here at Td Ameritrade, they work hard. Wow, that was random. Random . No. Its 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. Theres no way to predict that. Td ameritrade. Steve, other than making im 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. Whats up, tim. Td ameritrade. Welcome back to options action q. Lets get to some of your tweets. First question, could the traders explain how they determine expected move of a stock in a certain date or time frame. We are always talking about implied moves, professor mike. How do we calculate that . There are two ways to do that, one hard, one easy. Well stick with easy and all you need to do is take a look at the weekly straddle which should be priced at the mean expected move for the following week so all have you to do at the money call and money put, put them both together and divide them by the stock. And theres a very book called options edge. Just a love fest on the options action desk. Next up from options action fan brett. Any thought on uso puts at these levels, dan . A really you have to instrument so youre looking at something thats trying to track oil and theres a big drag on it and june options are trading at 10. The june 10 put us offered at 7. 5 of the underlying stock price. That seems like a pretty fat premium youd probably rather buy than sell. I dont like the uso. Time for the final call. Carter . Retailing, we want to be short that or underweight that or take your profits in that and then japan which is big in retailing because neocan a the biggest component is fast. Want to short that. Use put spreads for both. Dan . Xlf, if you get a pop, thats when you lay my mission is simple to make you money. Im here to level the Playing Field for all investors. Theres always a bull market somewhere and i promise to help you find it. Mad money starts now. Hey, im cramer, welcome to mad money, welcome to cramerica. Other people want to make friends, im just trying to make you a little money. My job is to not just entertain you but educate and teach so call me at 800743cnbc or tweet me jimcramer. Theres the Federal Reserve gauntlet, will they keep chri