bye-bye. >> this is "options action". tonight database lick facebook earnings. they expect a huge move when the social giant reports next week and an options trade that can turn time into money. plus talking about a wholesome trade. an options trade on whole foods that can triple your money ahead of earnings. they will show you how. why were all those option traders buying vivus calls. a tale of drugs and money. the action begins now. >> live from the nasdaq market

site the world's largest equity options change, i'm brian sullivan in for melissa tonight. these here are the traders and we're in times square and we'll get to those trades in a second. let's talk macro markets first because there's an epic battle growing between earnings stocks closed near the lose. is there more pain in store? let's get in the money right now and find out. dan, who are you backing in this battle? u.s. earnings, europe? >> i don't think you have to back either. to me what you've seen over the last couple of months you've seen u.s. companies earnings affected by a weakening european economy something that border line recessionary. to me it's connecting the dots in a lot of ways. in the early part of this week we saw better than expected earnings yet we're starting to see the headlines coming out of europe that's confirming what we already know. >> is it more optics because the

dow is the worst performing. dow is comprised of most of the media attention. >> industrials are doing poorly because they are tied to the global macro sector. the part that's doing well in the s&p are the safety trades. the other thing i would point out to dan's point about what we're seeing in earnings we got decent earnings on lower expectation but the revenue side we're not seeing the same thing. 60% of the names of the announced earnings not doing so well. that tells the whole story because that's the thing that ultimately we'll have to live on. >> lowered expectations is where this begins and end but we have an amazing problem with europe. until some big united states corporation announces and disappointed because of what's going on in europe or currency implications and we look at the s&p and we think hey it's the middle of a range but we look at the vix.

the vix is low even though historical volatility says the vix should be at about 20. five points higher. >> the fact that you're seeing the safety names going up and the industrial names coming in that dispersion does reduce the volatility of the index. that's why the index has held in there. if you look at how much stocks are moving, they are moving a lot and people should be -- >> did anybody else bring up the fact the nasdaq is up 12% this year. russell 2000 is up 7%. hardly the disaster some predicted. >> it will lead me to the breadth of the market. the breadth is very poor. when you look at the nasdaq we've seen this movie poor. what i look at like a moynihan july the s&p is flat on the month. this month in this spy so far the lowest volume that they've seen since may of 2007.

they are ex-- chipotle was down 23%. they are seeing sales growing in the u.s. they lost $2 billion in market cap on a $17 million revenue miss. >> we've seen big call buyers. we saw it earlier this week in e-bay. this week we saw a bunch of energy names. people want to be bullish but are scared to be bullish. >> that's being defensive. people don't want to buy stocks but they need to protect themselves. options are cheap. >> all right. another huge week for earnings. and a name that everybody is sure to watch next week, facebook.

the stock could move 10% on earnings. >> there's no history as to stock performance and how it relates to their earnings performance. to me is put your finger up in the air a little bit. when the stock was at 29 today the july weekly next week expiration was pricing 10.5% move. you need that move. heading into this this is a very stock specific story, i don't think it will trade a lot. you don't own facebook for last quarter's earnings. there are a lot of over hangs in the names. >> they are such a big implied move into earnings. when everything that is facebook about what's going to happen. not what has happened. take a look what happened when they said thing are slowing down a little bit, people are baking

that in. they could affirm that, of course, when i take a look at the situation i find it interesting they are applying a 11.1% move. that's a very big change. >> first time that linked in announced and this is the only other name. >> people don't know what's going to happen. >> very likely to underperform because here you have a situation where again it's not about earnings it's really about what the long term, you know, growth for this company looks like and i don't think people will make their mine up. >> you have a trade? >> largely has to do with a couple of factors. next week that implied move is high. i want to sell that. i want to set up in august where it's lower and here's the thing. this is the hook. they have an early lockup expiration. august 16th.

they are basically unlocking 200 plus million shares. they did the ipo in mid-may. it was 400 million shares. so to me there's a tremendous opportune for massive overhang. i bought in july, next week expiration, august 27th put calendar. what i did is i sold the july 27 weekly put at 85 cents and i used the proceeds to buy one of the august 27 puts for $1.25. that cost me 47 sense. what i'm heaping to do is for the stock to move lower that 27 strike in july, have that put expire, worthless and then i basically own the august 27 put for 45 cents and at that point i hope to keep that intact. >> this is a trade i really like

for a couple of reasons. number one options traders love to sell that near dated premium. we think it's overpriced. i like the fact he's chosen lower strikes. we were just talking about the possibility they might affirm that slower growth before the ipo started trading. finally the fact is that overhang will depress the stock in the longer term. really it's one of those trades in all the key points. >> we talked about these because we loved the option math of buying calendar spread. shorting an option for one week and only paying a buck 20 for being long in option for four weeks. how does that not work out? >> the point is i'm looking out to the next catalyst, implied move for earnings is too high. this trade hits a lot of the points we just made. >> all right let's move on and hit the stocks versus options button. short the facebook.

that could be equivalent of losing friends. it carries unlimited risk. dan's put gives him leverage bets to the down side and risk just 45 bucks. let's move on. shares of whole foods losing 7% today. investors fearing could it suffer a similar fate to the aforementioned chipotle. both companies are high growth stocks with high valuations that cater to high end consumers. will whole foods follow chipotle when it reports earnings next wednesday. let's find out the high name himself. >> let's take a look. take a look at the same chart over five years. today's sell off well defined lines, parallel lines you can

draw them without subject activity we close at the mid-point of the five year trend. take a really long term trend. this is whole foods, $7, $7, back in the late '90s it touched 7 exactly and has come in a violence way to all time highs. let's look at the same time frame. price her spare versus earnings per share. the overshoot is price. >> the stable line is the earnings. so it's all about if the earnings the stock is not trying to hold the trend. we think you make the bet and rebounds. >> all right. >> fundamentally is a little bit challenging. it is one of the higher

valuation stocks. you know, we have obviously seen recently any disappointment. that's one of the risks. that's one of the reasons the stock was trading lower. that said they have done well in the last eight quarters. there were three times when the stock goes up. super values have terrified everybody in the grocery space a week ago. whole foods will benefit from essentially a shift in the consumer's view of food essentially in the united states and they are riding that trend. that's to their benefit. the other thing is the company has almost no debt. so we're not going to worry too much about the leverage. it's one of those stocks that has a little bit of high valuation to it. >> mike is buying a call spread. let's crack open the playbook. bullish strategy in which you buy one call and sell a higher strike call against i want to reduce the cost. you want the stock to go to that

high strike. that's where you make the most money, that's also, though, where your profits are capped. all right. let's button this up with a little -- what is the trade? >> i'm looking at the august call spread. i'm going to sell the 92.5 for a buck and a quarter. i obviously need the stock to go up a little bit. one quick point. the stock is implying just under 7% move and, you know, this is one of those situations where because of the high basically implied volatility we were talk entities catalyst talking about mostly buying calls and puts this is one of those situations where i want to sell that higher strike call because i'm trying to reduce the premium, the premium that's built in. >> if you have to play these stories and i don't think you have to. you can wait until the earnings call is out of the way. maybe this thing gets back to

$92. define your risk. these high valuation stocks will get slayed. a lot of people hang out in them and it makes me nervous. it makes me nervous about starbucks and panera. >> you want to spend 2%. >> you got to buy a spread because that's going to -- that's going to make the implied volatility not work against you. the thing is whole foods got crushed today just got killed. looks to me it rolled over. carter is braver want took bullish. >> i would make one other point about thing thes. i never fight with my main carter here on the technicals. this stock has been trengd lower for the last couple of weeks even as the s&p started moving back to 1375. it was already showing distribution in the name. >> all right. good conversation on whole foods let's button this up stocks

versus options. do you want to buy whole foods? it's not exactly cheap 100 shares will cost you 9 grand. mike's call spread off ears 3-1 pay out and set you back $160. that's why we talk options and we'll see carter a little bit later on in the show. you got a question send us an e-mail. the address is optionsaction@cnbc.com. optionsaction@cnbc.com. so do check it out. here's what's coming up next. >> search no further we got your winning trade right here. cohen and carter made a bullish trade on google. they are in the money but how can they make even more cash? find out when "options action" returns. it's time for pump up the volume

the names that were heating up. get off that treadmill. if you're trying to lose weight this company's hot new diet drug is the way to go. it's approval by the fda this week was good news for the company and for the 78 million americans estimated to be obese. and options trades ate up the company's calls this week betting the drug will be a huge deal for this growing market. who is it? the answer when "options action" returns. and you don't want to miss it with thinkorswim by td ameritrade. you get knock-your-socks-off tools, simple one-click orders, real-time paper trading to hone your skills,

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>> where were options traders pumping up the volume this week? vivus. over seven times the average daily volume. >> welcome back. >> got breaking news here on objections action. jpmorgan chase ceo jamie dimon in a filing saying he's bought 500,000 are shares of the stock, average price somewhere around mid-34s. still looking at a $17 million transaction for jamie dimon into the common stock of jpm. however, basically he sold

preferred stock in jpm for a net gain or i should say maybe not a gain but proceeds of 13.5 million bucks. still 500,000 shares of jpm, $17 million. >> with that preferred sale, you make it sound like it's window dressing. is that what you're suggesting? >> even if you netted out $3.5 million, bullish bet. >> knees the company, he just said this in the call last friday, they reapplied to buy back shares again here. he has got some wind at his back. at the end of the day he has to put his money where his mouth is. >> it's a different position. >> it's never bad to see a ceo buying shares. >> $17 million. this is a guy who makes tens of millions of dollars here. >> and time for i need more cash and who doesn't. how you can make more money from winning trades.

and last week cohen and carter made a bullish trade on google into earnings. the stock moved 6% higher and they made much more. here's how. >> on "options action," sometimes risking less to make more isn't enough. carter thought shares of the internet giant were headed higher. >> going long. we think it can be a powerful break out. >> the search ended. time to get in google. but buying 100 shares? that would cost him almost $58,000. to spend less mike instead bought the september 575 strike call for $29.50. now mike has the right to buy google stock at that strike price or for $575 before september expiration. but in order to make money, mike

needs google stock to rise above the strike of that call by more than the $29.50 that he spent on the trade or above $604.50 per share by september expiration. anything below that level is technically a loss. now instead of spending 60 grand, mike spent just $3,000 to buy that call. that's the most he could lose on the trade as well but it gets better. because if google shares do rise that call will increase in value faster than the stock, meaning more money in mike's pocket. since the time of the trade google shares jumped 6% making cohen and carter winners. now options action viewers everywhere are googling up a storm, trying to answer the burning question, how will the tech gurus make more cash. >> before we answer that question, let's see just how much was made.

if you bought 100 shares of google you would have spent nearly $60,000 and made 6%. not bad. but mike's call purchase made nearly 3 grand but could be sold today for $4,500. that my friends is a return of more than 50%. carter got us in, let's callback to the charts. are your staying long google? >> such a big name and so early in the goings. we think you stay and play for more. >> mike? >> i absolutely agree this is a small move relatively. this company is still cheap. trading about 11 times next year's earnings. what i'm inclined to do you do need to take some money off the call. i'll sell that call for about 45 bucks use the proceeds to buy the 625 call which costs about 15 bucks. what that means is i'll take all the money i put in the trade off the table still now have

unlimited upside, essentially i'm playing with the house's money. >> good. always better to play with the houses money. >> coming up we will get the final call from the options picks. [ male announcer ] trading's like a high-speed train. and you don't want to miss it with thinkorswim by td ameritrade. you get knock-your-socks-off tools, simple one-click orders, real-time paper trading to hone your skills, plus anytime you need it support. ♪ stocks, options, futures, and forex. get your trading on track. thinkorswim by td ameritrade. trade commission free for 60 days, plus get up to $600 when you open an account.

>> this is a view of a gopher who lives under the launch pad at russia's space station. a worker spotted the gopher. he place ad camera next to the hole. russian space agency uploaded the video to you tube, it went viral and that's what we call optional viewing. bill murray has been alerted. time for final call last word from the options pits around the horn beginning with mike. >> if you're going to be in the hole do a call spread. some danger to the down sides. >> i want to set up with calendars in front of facebook's -- >> fantastic. good tease to the webex.

we'll have web extra coming up and follow dan on twitter at risk reversal. there you go. take care. and you don't want to miss it with thinkorswim by td ameritrade. you get knock-your-socks-off tools, simple one-click orders, real-time paper trading to hone your skills, plus anytime you need it support. ♪ stocks, options, futures, and forex. get your trading on track. thinkorswim by td ameritrade. trade commission free for 60 days, plus get up to $600 when you open an account. and waiting in line. i don't have to leave my desk and get up and go to the post office anymore. [ male announcer ] with stamps.com, you can print real u.s. postage for all your letters and packages. it gives you the exact amount of postage you need the instant you need it. can you print only stamps? no. first class. priority mail.

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