money, and it is this -- people first, then money, then things. see you next week, everybody. you stay safe. bye-bye. this is "options action." tonight. google to 700, cohen carter thinks so. they're getting you a giant to just 30 bucks. they'll break it down. plus how would you like to make five times your money in morgan stanley in just one month? it's no bank job. it's ahead of earnings, and he'll show you how to make money too. and game on while. are all those options traitors taking it. the action begins now. live from the nasdaq site i'm melissa lee. who says friday the 13th is an

unlucky date. helping stocks post the best date in jewel. a huge week of earnings coming up. do you believe in this rally? of course, we saw a 200-point move in the dow, a big one, but it was on light volume. should we discount it? >> yes, i think we should absolutely discount it. i think we should discount that, discount jpmorgan's earnings which i think is pretty malleable. i have a rhetorical question. what do you think it would have been if there was no warning? i mean what a joke. as far as the strls are concerned? look. caterpillar is down. meanwhile the stocks that are going up are all the defensive names. this is where people run and hide. so is this really a great rally because those are the stocks that have really been holding the options up? no way. >> smart investors realize what mike is talking about.

the stocks that were up today, all-time highs. walmart, kimberly-clark, general mills is near all-time highs. these are toilet paper and cereal stocks. that's what's in the bull market right now. that's not what is sick clickly sensitive. >> wells fargo came out today as well. wells fargo is probably a better barometer of the financial sether in general and now that we've gotten a bunch of the important financial names, we can look at everything else in the world that matters. one thing i'm going to look at is yum! for china, it's considering to be not that great. one finally thing, vix got killed today. you know, last july the vix was in the low 15s. so don't think it can't go lower. that doesn't mean you can't sell

it but you can't go back. >> i understand what you're saying and i don't want to be poly annaish. those were positive on the broader economy. at the same time we got a china gdp number which was in line and sets up for a possible next round of stimulus there. >> okay. starting with the last part first, i don't buy what's going on in china. that economy to me seems like a tremendously risky situation there. there's a house of cards going on there. do you have a point on the loan growth. the home builders have obviously been on an absolute tearer. you're talking about stocks that have been up. they're coming from all but left for dead schl that a positive sign? that's a positive sign, but it's like someone fluttering their eyelashes and out cold on the sidewalk. >> what's interesting the wells fargo report, i view as genuine.

the jpmorgan report i don't view as genuine. the reason for that, there's a lot of accounting issues that go into making a strong earnings beat that takes a lot of one-time items as gains. i agree wholeheartedly. thing it is very strong and i think wells fargo speaks of that. but the investment banking business is half of jpmorgan's business as a whole and that's an area i tlirng be under pressure and today's report doesn't change. >> let's look specifically at next week's roster of earnings bus nearly 20% will be reporting from tech to financials to consumer financials. as you're taking a look particularly, can we glean a good quarter for morgan? >> absolutely not. >> to the point you were just talking about. jamie dimon just said it was weak for capital markets and all capital markets businesses. it wasn't just equities and

advisories, he said the third quarter started out like the second quarter. europe and asia specifically had been weak. those are the growth investments. moreover morgan stanley has been closely correlated to the banks. deutsche bank made six-month lows. if we look at a five-month chart, you can see it here. morgan stanley are almost 1-1 correlated. morgan stanley is exposed to systemic risks. it's another reason why i think next week's report is going to be important to show that. >> he's buys a put spread tonight. it's always good to review the play book and see how it works. this is a bear strate where you buy one point and buy a lower sell put at the same expiration to reduce your cost. you want to make the money fall. that's also where your profits are capped. walk us through the trade. >> yeah. so today when morgan stanley was

around $14, i bought the 13.11 put spread in august. so what am i doing here? i bought one of the august 13 puts for 40 cents and i sold one of the august 11th puts for 11 cents some of net put, i paid 30 cents, my net risk is 30 cents. i start to make money when the stock is below $12.70. it's great risk reward. morgan stanley is near the lows of the last year, so i certainly wouldn't short the stock, but think the one way to play the theme of investment bank continuing is to buy a put spread that gives you 5-1. >> yeah. the investment banking business is really in the dumps and i really wish it wasn't because we're all working in finance so we would rather see things be better, but it's not a good environment. it's not going to be a good environment for their business. options prices to our eye, your comment to vix could go lower. i don't think it will.

i don't think it will. i see it very cheap. i think options are cheap. they should be insuring their positions or be using them to make bearish bets. it makes all the sense in the world. >> it's like having life insurance. if you don't collect on your life insurance, are you really going to complain that much? back to this trade, yeah, you're only risking 15% of the width of the spread. but it also has to fall over 7% just to get to that top strike. so i'm not a big fan of this because i also think that you're kind of -- you don't have the wind at your back here given what we saw today from both wells fargo and jpmorgan. i think this is a countertrade i would think with the gain in morgan stanley shares, the bean bearish is a safer bet than it was -- >> you're certainly going to be able to put this -- you're going put this on better than you could friday -- friday of last week. >> and the one point to add to that, morgan stanley five weeks ago was at $12. so it's certainly had a

significant rally to this point. your entry is not bad at all. >> a lot of ground was covered on that jpmorgan two-hour call this morning, everything expect stocks versus options. want to short the other house of morgan, they can go up forever and this is put spread risk. $30 can be worth as a buck 70. that's more than five times your money. not bad. let's move on here. $700. $700. that's where they say going sl going in the next three months. the options prices are implying a 6% move on this event. let's find out why. a call with the charge to the one and only carter of braxton oppenheimer. what do you see? >> it's all the same time frame just with different lines and arrows. so this is a five-year chart. google tops the chart. bottoms of the market 250. and you have this nice steady early up trend, '09 to 2012. in principle what's important

about this trend, take a look at the next drawing, same five-year chart. you have a flattened top which means there's tension building here at the 600 plus/minus level. and the presumption is each time you show it you're showing a high. mike's going to touch on this. same five-year chart. just for fun, juxtapose the company's earnings on an annual basis. in '07 when they weral all-time highs. they made 19 preside$19.29. 2010, $36.04. so on and so forth. this is called p.e. compression. at some point it gets resolved and the presumption is the resolution is up. we're going along here. we think it can be a powerful move and 700 is the breakout objective. >> powerful rebound. that's what carter says. do you agree?

>> yes. this stock is actually exceptionally cheap. if you take out the $50 billion that they have in cash, this thing is trading at less than ten times estimates. that's especially cheap, especially for a stock that's consistently grown in both earnings and revenues. they own their space. one of the reasons they have this phenomenal business is because nobody else really competes with them. i don't think anybody else is going to. the other thing is they have many businesses and they're looking at ways to monetize. thing at some point we're going to see the droid phones. it's not really a driver of revenues right now. so i certainly do like the stock fundamentally. >> mike is bullish. he's buying a call. if you think options are tricky, this is about as simple as it gets. you want the strike to be more than the call by the strike of the take. anything below that level you'll see losses by expiration, so, mike, what are you doing? >> i'm looking to pay 29.50 for those. there's a couple reasons why i'm

using a strategy. for one thing, the options market is actually implying a lower move than the stock has averaged over the course of the last eight quarters. i thank you may have opportunities to spread this into the future. i mean a $29.50 up move which is essentially what you would require seems like a lot. but in the scheme of what google can and has done in the past, it isn't much. >> interesting point for google because as mike and carter point out, they're looking to get into new businesses which are largely commodity businesses which -- in which they can face margin compression and sift competition from the likes of apple. >> right. we've heard from them, glasses -- the next sus tablet. but more than that, facebook, i think, showed us that people are very nervous about the weakness in display advertising which is

their core business. i think google is a cyclical business, advertising is a cyclical business. i think google options are too cheap but i'm not a buyer of google. >> one of the most options trading was buying outride google a couple years ago. one thing that i think is interesting here is that as google gets in the new businesses, these earnings surprises are going to come in. that is you will not have as big an earning surprise as they get more diversified. that's probably a good thing but for some of you buying a call, man, you're begging for an earnings surprise. >> no question. that is a very good point. there efforts to get into anything hardware related, i'm not sure what i why they go back to doing it. that doesn't take away if the fact they have cop sis tent performance regardless and that's really what we're buying here. >> okay. one more time on the stocks versus options button. i think mike's call is

expensive? how about buying 100 shares of google? that's almost $600,000. mike's while pricey costs under $3,000 offers significant lefrmg to the upside. our thanks as always to carter braxton worth. got a question out there. we'll answer it after the show. we do love to get e-mail. don't be shiechlt also find a lot of educational material there so check it out. here's what's coming up next. >> talk about a morgan mishap. last weekend they made a bearish trade on jpmorgan but the stock has soared on earnings. so what's his plan tore getting his money back. find out when "options action" returns. time for pop up the volume. grab a controller, hit video games are the company's bread and butter. it's always got that must-have stocking stuffer. options traders firing up

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where are options traders pumping up the volume this week? take-two reactive. i want to go to scott cohn with p&g's best. >> he was in court. after having quite a week, he was looking somewhat haggard wearing a blue polo shirt and jeans, the founder of p&g best tried to commit suicide earlier this week. his firm filed for bankruptcy this week on tuesday and it appears that the scandal is just beginning. prosecutors say they plan to seek additional charges in addition to the charge -- the criminal complaint of lying regulators or making false statements to regulators and an indictment could follow. they plan to argue he is a flight risk. a hearing on that scheduled on wednesday in which at that time wasendorf plans to get his

high-powered attorney from chicago out here. a suicide note, it sure sounds like a confession, relieased, h said i guess my ego was bigger and i cheated. he's in custody here in iowa. melissa? >> thank you very much, scott cohn for that update. i want to maneuver on. it's time to get called out. last week they made a bearish trade on jpmorgan. the stock has since surged but he can still make money and here's why. on "options action," it's how we make out like bandits, risk less to make more and that's what ennis tried to do. he because in for a whales of an earnings disappointment. >> they're up 25%. i don't see that. >> but shorting the stock. >> thank of your families.

don't risk your life. now to keep all that money, enis needs them to stay below. above $35, profits will trail off. but enis won't see losses until jpmorgan rises above that call strike price by more than $1.15 he took in or above $30.15 by august expiration which means he can make money whether jpmorgan goes up or down or nowhere at all. not quite. there is a trade-off and if jpmorgan stock trades above $30.15, enis will be on the hook for losses. >> wow, you're blowing it, man, you're breaking your own rules. >> so to lessen his risk, he completed his bear call spread

and here's how it makes money. between $1.15 he collected selling the more expensive lower strike call and the 50 cents he spent buying the cheaper high call he pocketed 65 cents. that 65 cents is the most he can make on the trade, but in order to keep all of it, enis needs jpmorgan stock to stay below $35 by august expiration. above that losses kick in but they're limited between the difference of the strike of the call that he sold and the strike of the call that he bought minus the credit. and since the time of the trade, shares have rallied 6% making this trade a loser. now "options action's" biggest fan fans just want to know one thing. what will enis do now? >> all right. before we answer that, perhaps this will make us feel better. had you shorted 100 shares of jpmorgan last week you would have lost $200.

enis collected $60 on the sale and if he closed it out today he'd be looking a at loss of $40. here's where it gets interesting. if jpmorgan stock can stay below $35 by august expiration, enis can keep all of the money. this is an example of why some traders like to be short premium. >> in this case i actually going into the trade was not so confident that jpmorgan was going to go down a lot but i was confident it was not going go above. i still like the trade. i'm not touching it. i think jpmorgan will end. and the best part is time is on your side at this point. >> right. that sort of goes hand in hand with your bashish view, a general belief that your investments are going to go low stheer that's right. you don't necessarily get out of your trades immediately. you have to take a look at the trade. do you still believe in it. this is something that time is working for you.

if you're still bearish on it, you stick with it. >> earnings came out. he's better off than he would have been if that ball hadn't happened. >> and enis, i'm curious. next week is a big week for earnings but it's also ben bernanke testifying on the hill. will what he says actually influence what you do? i imagine that could be a huge possible catalyst, good for the stock i thing it's going to be a huge catalyst, including jpmorgan. i'm relatively bearish. i think a month from now we're going to see stocks lower than where they are now, jpmorgan included. >> coming up next, the final words from the options bids.

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together. no word on whether he'll enter surfing competitions but we believe he'll be the sentimental favorite that's what we call optional viewing. >> time now for the final call. the last word from the options pit. scott, kick it off. >> go ahead and spread it off, but that's a lot to spread out. enis. >> i think they're going next month. >> mike khouw. >> if you're going to make a bullish bet, they'll make a call. >> it looks like our time is expired. i'm melissa lee. we'll see you back here next friday at 5:00 eastern time. don't go anywhere. "money in motion" is up right after this break. like a high-sp.

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