the action begins right now. >> let's get right to it because the financials just posted their best day since november 30th, 2011 so as the rally in the banks signaling an all clear for the markets? let's get into the money and find out. dan, what do you say? >> i don't think so. it's obviously a very healthy rally. saw it in the european banks and in the u.s. banks and two pieces of news cause it and we started out morning with deutsche bank saying that they are going to buy back some bonds that have been, you know, something that people have been a bit worried about about their capital position and ability to pay interest on the bonds and the last 24 hours had jamie dimon buying 500,000 shares of jpmorgan stock so we've had a massive rally over very oversold conditions with horrible sentiment and to me it sets up for a good fade because if you look at the two pieces of news, they remind me of the sort of news we used to get back in 2008 from financial institutions when things were a bit hairy. the only problem i have is european banks, even after today's rally still well below the financial crisis lows they were trading at in '08-'09. >> did i miss something i? thought the financials were down on the week and fairly significantly? >> every sector except for one. >> actually really amazing. it's very easy to get caught up in the last moment because that's really what it was but the last five days have been pretty crummy for stocks. the s&p is down over 80 base its points, financials down over 2%. you know, even crude's bounce, that obviously dragged a lot of things with it may be but i don't think this was an overwhelmingly positive week. >> terrible week. >> in fact, if you were to define it, used to ask in the beginning, was it a bullish day or a bearish dare or bullish week? for the week you have a lower high, a lower low and a lower close, it's a bearish week. one sector was up, and the banks are down, even with this real, down 18% year to date? the bkx index and jpmorgan jumping after having plunged the prior day, all for what? >> by the way, jpmorgan, you know, we've got a guy here who is worth a billion bucks. >> right. >> spends 2.5% of his net worth, and, you know. >> buying stock in the company that he runs. >> this is pretty easy. i mean, i would do that every day, why not. that's what he got paid last year. easy money. >> without being too cynical, we know -- >> too late. >> jpmorgan, it's a best of breed situation. probably one of the best capitalized cheapest banks in the entire planet, okay, an it's run by that guy who is considered to be a bit of a maestro, so to me the way i think of it, here, it's shown a lot of relative strength. the only problem i have though is that this is the only bank on the entire planet and bank stock that's above its august 24th lows, the only one, and i don't get what that relative strength is in the environment that we are. rate environment and political environment and regulatory environment, so, you know, to me i think it sets up for a great short ent try early next week and get a little follow through and look out to april expiration. two cat lifts coming up, we have the stress test that the federal reserve told them to look like and q1 earnings so to me i think jpmorgan sets up as a good short today when the stock was 57 been the 50 you could buy a put calendar and have you to finance longer data puts and the price of options is really high so i want to sell the february 19th, next friday, expiration 55 puts for about 50 cents and buy the april 55 puts for $2.60, that costs me $2. moy max risk and if i get to next friday's close and the stock is above 55 and i own the longer dated april puts for the two events for $2, and then i basically have a bit of optionality. >> when you're giving the preamble to this trade and saying it's one of the best capitalized banks in the world and has relative strength compared to its peers, none of it matters. >> why not? >> why doesn't that matter? >> strength matters a lot, but here's the thing. this is -- this is a news-related issue right now. the stock literally was collapsing the prior day and then it's making back those gains because of news again, and in fact if you net the two out, it's just as bad as it was as it is it never happened, all right. day-to-day, compared to bank of america or regionals, but the stock is still -- it has no life. >> what's happening is also the reason why this trade makes a lot of sense because the catalyst is coming up in april. normally these near dated options would be cheaper in terms of the longer dated ones but because of the whipsaw we saw that's not the case. the near dated options are a bid and that's why it makes a good sense to sell. >> i chose the 55 strike, it broke off there and gapped on massive level. gapped above. if you fade that's the level you want to press looking out to april. >> let's get to consumer staples which despite being down on the year still one of the best performing sectors but telecom and chart masters, one of the sector's laggards could be break out. >> the same trade as the walmart trade, so a little message there, if we do shorts, we do longs, but if we're going to do a long need something fairly safe and exexhibiting tremendous relative strength for weeks and weeks. i want to do the setup which is how much it's lagged compared to its peer group and then look tat more recently. what we have here is a five-year chart and obviously the original line coke is a big part of the blue line which is to say this is all s&p 500, from pepsi and philip morris and kraft and so forth so you've got a marquee name, yes, that's underperforming by a lot, on a five-year basis. here is the ten-year basis. again, ten years and coke is really sort of not kept up with its peers, with its sector. but of late, guess what's happened? it's the exact opposite, so take a look at this. this is three one week, one month, two months, six months and i've got coke, the sector, the market. so who is down or the best, who is the best, who is the best? coke. so in a situation where there's been underperformance we have nascent outperformance meaning relative strength that's starting to mean something. all right. here's another way to look at it. i've held the sector as a constant and this exposes coke on a relative basis. all the hallmarks of a bottoming out formation so that chart there is the exact same chart as that, but what i've done is i've held the sector as a constant, okay. now let's go to the breakout. absolute chart itself to. my eye we have a nice setup here. we're coiling and we have the prospects of ultimately breaking out above these well-defined tops, off of our trend line and going for, watch this, an all-time high. we are fractions above that level. the all-time high was 44.88 and closed here at 43 and chae and i think we're actually going to manage that. regardless of what the market do, you'd rather be here than almost anywhere else. >> wow, bullish. >> take a look at what happened to rates this week. if you have to buy something for yield, dealing with a corporate earnings yield of about 5% here and growing with the economy, even if that's fairly slow growth. this is a fairly safe place to be. it's one. places where you're likely to see a dividend increase sometime soon. i bet you within the next 18 months we'll see a dividend increase in coke. they have nearly 8 billion a yore in free cash flow and consistently have grown their dividends. take a look at what utilities have done. if yields are going lower, these are the kinds of places that people are going to go. >> isn't text pensive though, coke? >> at 22 times 12-month earnings, trading its average valuation. >> and sales are expected to decline this year 3%. what are you paying for that 5% peeled? like the dividend yield and the buyback yield. it makes little sense, agree with the charts. looks like a great technical setup. >> if you're making a buy percent on the money versus 1.5%, that's the difference, the premiums that you have to worry about. right now the options are extremely cheap right now. the april 43 calls, spend $1.15 for those. that's the way i would play it. no reason to do a spread here. >> now tell him he's wrong. >> if i knew it would be that simple, that's a great trade, risk $1.15 and play for carter's breakout. listen, you know, you guys are single-handedly picking apart my xlp short i did a couple weeks ago on the show and it's the same chart and i think you kind of said the same thing. buying relative strength to his point. something you back test and it works. i can't get my arms around 22 times negative eps. >> soup is trading that way, campbell's, smuckers, so is pepsi and philip morris. in this environment, in a perfect world, you say i don't want stocks, stay away. regardless, 99% of the capital is long and fully invested, big endowments, mutual funds and so forth. this is what's working, and at this point maybe utilities a little overdone as we've talked about and telco, gone crazy. this kind of thing is unchanged. coke is -- >> none of the sectors broke out to new highs, coming off of conditions very difficult. trading 16 months ago at all-time highs. >> absolutes, 17-year lows relative. >> bond proxies and they have been secular pressures -- >> last word, mike. >> well, that's not what we're seeing. the thing that caused the dollar to rally is rising rates and if rates are falling we could see the dollar stabilize or go lower. >> right. >> which is a tailwind. the staples have actually caught this bid trading where they are given the commentary that they have given and seen it out of peps they week. it's been good. >> yeah. that's what makes a market. >> got a question out there. send us a tweet. for everything options action, check out our website, the hottest options news, videos from throughout the week and exclusive trades and it's like you've died and gone to options heaven. >> you can run but you can't hide. >> actually you can and that's what trade ders in the treasury market this week, but is the trade becoming a bit too crowded? we'll explain. plus, well, that pretty much sums up what oil did today with everyone looking for a bott tom. we've got a safe way for you to play into the energy space after the break. i'm here at the td ameritrade trader offices. steve, other than making me move stuff, what are you working on? let me show you. okay. our thinkorswim trading platform aggregates all the options data you need in one place and lets you visualize that information for any options series. okay, cool. hang on a second. you can even see the anticipated range of a stock expecting earnings. impressive... what's up, tim. td ameritrade. 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 don't 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." paying day for the energy market as crude oil posted its best session in seven years, wti finishing the day with a more than 12% gain, 29.44 is where we ended, definitely talk of a bottoming process and traders looking for prices to touch the january lows of 26 and change and they did yesterday. others saying not so fast. today's move was a technical one. buy the dip mentality, also some short covering here. as we head into the holiday weekend. the dollar also playing a part in this. it's come off its highs and a lot of chatter about what opec will or won't do. still no clarify there, of course, and some are skeptical of the headlines that seem to be very interestingly timed. what to watch for next week. well, 28 more oil rigs came offline this week. will that ease production in the u.s. in a more meaningful way? find out on wednesday when we hear from the d o', and also will inventories continue to build? still some concern that we're running out of places to put oil. lots of variables when it comes to this trade. what i can tell you right now, expect this volatility to continue. melissa? >> that's for sure. thank you. if we're near a bottom what should you do if you're looking to dip your toes into the energy market and don't want to be clipped off? mike with a way to get long big oil. >> here's the thing. dipping your toe is probably all you want to do, and this chart right here basically tells you the whole story of why crude prices are so weak. this goes and takes a look at crude oil storage excluding the strategic reserve going back over 30 years and take a look at what's going on over here. basically what we're seeing is we've got incredibly high levels right now in terms of inventory and until you see that turn down it's hard for crude to real take a turn up. look at what crude prices have been doing also. what you'll notice here is this is the nominal price of crude oil over that same period, more than 35 years, and would you notice we're not actually quite back down to the previous lows, but on an inflation-adjusted basis actually we are closer to those lows. so the thing that i think you need to do here is rather than looking at crude, i think you need to take a look at a stronger name in space and make a modestly bullish bet. schlumberger, strongest in the oil space and cash flow positive and this is a company that made very good money, even when they had revenue substantially lower than they do right now and 2016 forecasting revenues down 15% from the 2014 highs. you can right now sell the march 67.5 put and $2.50 for that, own it at a net price of 65 bucks and to me this is a situation even if it does come into that level, continues to trend down, you can probably sell some calls and basically, you know, tread water. >> all right. >> or tread oil. >> any time anybody goes over the smart bond, i always have to get carter's assessment of, a, the performance and, b, the interpretation of the charts. >> right. you're doing it as a structure that will allow you some wiggle room. buying things in downtrends is a dangerous game and this is clearly still in a downtrend and crude is clearly in a downtrend. superlatives, strong, stronger, comparative and we're always getting our best day. the best day in seven years after the plunge. banks had their best day after the plunge, meaning big deal. nothing has really changed in the oil complex. the energy stocks don't act well. exxon, okay, it does, and this is not my kind of thing. if you're going to do it, got to do it the way mike's done it, but notice he said i'm only going to dip a toe in the water. i'm going to stay on the side of the pool with my drink. >> let's get the specific first. because it is dipping the toe. >> 2.50 bucks, collecting 3% of the strike in one month. if i only stock it will be substantially lower. volatility, as jackie was pointing out, will remain bid so you'll have an opportunity to sell more premium. it's very tempting when you see low prices to think that this is my big chance but if you take a look at that chart and you see where inventories you are realize the only way to do that is very, very carefully. that's the way to play it. >> you've heard mike's case in this. what do you think? >> about the trade it's really important, want to sell options and the way the underlying commodity is moving around and i do believe if you're going to sell a put you want to do it one month out. don't want to look too far out. kind of in a crashy market and the only question i was going to ask for carter, you just brought up exxon, it's actually been basing if you think for all intents and purposes. >> procter & gamble. >> looks a lot bert. >> ant issue is is it right? guess what that is, the face of fear. energy only dedicated managers who have to have exposure so they are hiding. the same thing that's going on and the more money goes into exxon, it's exactly the opposite, people saying i've to do something and i'm worried. >> those companies are a big bucket of reserves. crude oil prices are low. i don't see them bouncing any time soon. you need a business that's actually making money even with low oil prices and this is a company that's done that consistently over time. >> if you had to dip your toe in the markets and this is how you would do it, would you? >> yes, actually, i were, schlumberger, the only place i would and a trade i was looking at doing today myself. this is one of those situations where there's so much panic that i'm trying to take advantage that have to sell some of the insurance that other people want to guy. >> up next, a heap of selling this year has traders running for cover in gold and bonds and could the safety trade be overdone. we'll explain after the break. here at td ameritrade, they work hard. wow, that was random. random? no. it's 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. there's no way to predict that. td ameritrade. i've got a nice long life ahead. big plans. so when i found out medicare doesn't pay all my medical expenses, i got a medicare supplement insurance plan. 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[ male announcer ] you'll be able to visit any doctor or hospital that accepts medicare patients. plus, there are no networks, and virtually no referrals needed. see why millions of people have already enrolled in the only medicare supplement insurance plans endorsed by aarp. don't wait. call now. 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. and we're back, and it's time for the outside call. take a look back at the open trades. dan thought things were going to get volatile in the market and he made a bullish bet on treasuries. take a look. >> i think you can look to sell puts. the april 120 put at 1.70 when the etf was at 125 and use the proceeds to buy the april 130 call for 1.70. that costs you nothing between 1.20 and 1.30 on april expiration you don't make oil lose and you have an asymmetric playout to the outside. >> well, he was right and the ten-year fell to its lowest level since 2012. dan, it will still have the trade? >> i took it off. minimum waged the trade and took off a put and the thing was a nice winner with. we had that winner. mel, you just said the ten-year yield went down to 155. it just felt a bit panicky to me. took it off yesterday and it's reversed. i'll look for an entry back into the tlt towards 130. now i think the direction remains up. >> where do you think the yield goes? >> catch a move to the 1.5 on the ten-year. a little steep, a little overdone. bad day today and on any further pullback it's time to re-up because it looks like it goes lower, all the things in play. >> we'll breech the 2012 july lows. >> think we're possibly going down as low as 1.25. >> 1.25. >> why not. >> i guess if you marry up his view on the s&p 500 that makes sense. >> and the utilities act and gold act and credit. >> and you'll want to be long coke. >> general motors were said last month they were about to stall. listen. >> i think you'll go as low as 20 on general motors, i'm a seller. >> selling for 1.40 and collecting 15 cents which is, you know, a little bit more than 40 boston of the difference between the strikes. >> shares are down more than 4% since then, so carter is the breakdown still in the charts? >> this is a very heavy stock, right. not acting well. didn't get a bounce when the market was bouncing. something wrong here. i think low, i don't know about the trade. we'll have to roll it out. >> we probably want to -- this is proof positive that you can't drive by looking in the rear view mirror. if you're trying to figure out where general motors should have been priced and take a look at what they have done rather than what they will do which is obviously pricing the stock right now you would have said this is ludicrously cheap. turns out not so much. the thing is we've actually made most money that you can make on this spread. you can buy it back for less than half of what we collected essentially so my view here is try to catch another catalyst where we see bad news on the horizon. probably put it out to june. >> thus on gm. >> i don't like it and haven't liked it a while and now we're hearing about subprime auto loans so to me it feels like the autos, peak autos and i don't see the uptick and i liked the trade. >> your tweets and the final call from the options pit. i'm here at the td ameritrade trader offices. steve, other than making me move stuff, what are you working on? let me show you. okay. our thinkorswim trading platform aggregates all the options data you need in one place and lets you visualize that information for any options series. okay, cool. hang on a second. you can even see the anticipated range of a stock expecting earnings. impressive... what's up, tim. td ameritrade. 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 don't 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." time to take some of your tweets. the first one, what do you guys think of sprint? >> sprint looks pretty bad to me, i have to say. really does. i mean, sure, it got a pop here, but the stock itself is an option and that's how bad it actually is. you know, if i was going to make a play in this thing, maybe i would buy some calls in it, try to sell some near dated ones if i can find some premium, but this is kind of a no touch as far as i'm concerned. >> next up, this one from jeff irwin, thank you for writing in. how will risk reversal, that will be dan, play the visa trade with the favorite trade of the week? >> carter picked a great one, in a downtrend and actually coming up against that massive uptrend that's been in for years. the trade is right where you want it. down a little bit on the week. had a bounceback today. it was the june 75.50 put spread. i think you stick with it. >> throwing back a little bit, but the crack is the primary data point, the throwback being the secondary. >> okay. got your answers out there. time now for the final call. the last word from the options pits ahead of the three-day weeker. carter? >> understanding a lot of people have to be long or want to be long, i think coke's as good a place to do it as anywhere. >> mike? >> if you're going to try to catch the falling knife in oil, the only way to do it is to get paid so that's why i was looking at the march 16.50 puts. >> dan? >> i think for traders who want to make a defined risk bet, i like the put calendar out into april. >> looks like our time has expired. thanks so much for watching. checks out the wednesday ice, optionsaction.cnbc.com. have the a great three-day weekend. happy president's day. stay tuned. "mad money" is up next. my mission is simple. to make you money. i'm here to level the playing field for all investors. there's always a bull market somewhere. i promise to help you find it. "mad money" starts now. hey, i'm cramer. welcome to "mad money." welcome to cramerica. other people want to make friends. i'm just trying to save you some money. my job isn't just to entertain but to put it in perspective and teach you. so call me at 800-743-cnbc. or tweet me @jimcramer. these weeks have gotten too crazy even for this veteran. i can handle a lot of crazy. what the heck is going on that we get such volatility and not