now you stay safe. bye-bye. this is ""options action"." facebook hit another all-time low. fear not. dan nathan can get your money back in just under four months. he'll break it all down. how would you like to buy boeing for just over a buck. it's options trade on the aerospace giant and they will show you how to make some money too and why were those traders on molycorp calls? the action begins right now. and live in the nasdaq market

sight, i'm mandy drury in for melissa lee. these are the traders in times square. the markets are getting a bernanke bounce. the dow, nasdaq, s&p and gold higher on hopes of more qe. but, there was one stock that was really breaking the hearts of retail traders yet again and that would be facebook. is there any hope for this fiasco? let's get in the money now and find out. i believe this performance comes on a day that tech was quite strong. >> it was quite strong. first things first. you were a sight for sore eyes. you thought you were going to have us talk to a chair. >> that's later on in the show. >> listen, we had the bounce and a lot of risk assets. i don't think investors would categorize facebook as a risk asset. right now, it's just risky to own it. the thing closes at all time lows. you have a real sentiment shift. it's getting worse and worse. people had targets in the stock when it ipo'd in may.

somewhere in the mid 40s, targets down to the mid 30s and down to the mid 20s and now the mid teens. the stock can't find the bottom. >> let's get the rest in here. >> i think that there has been a lot of speculation since well below the ipo that this was an overpriced stock but they are not really the issues here. there is just too much stock is really the biggest problem. you can have an overpriced stock for quite some time. if you keep dumping stock on the market there's no hope for it. and people who are in it, they start to bail out, that creates more supply and lock outs expiring. more supply and more lockups down the pike. so regardless of your fundamental outlook you have to recognize when there is more stock for sale than there is to purchase, the stock will only go in one direction and that's lower. >> too much supply, not enough demand, agree? >> an evaluation is still way too high. today, everything was higher except for two things, facebook and the vix. the vix a tiny bit lower. in front of a three-day weekend,

that's essentially the vix being higher. people think the broad market next month will pull a facebook from today. i don't know what turns facebook around. >> i will tell you what turns it around. the sentiment has gotten so bad so quickly. where were the analysts months ago. when they had $43 targets. now $16 targets. the lockups were always well disclosed. a three month and now a six month. >> really just too little too late. >> you always see this. right about the time that everybody was saying sell, you probably want to turn and say you know what? i will take the other side of the trade. this company, they get lumped in with other social media stocks. they make money. revenue is growing. maybe not as fast as everybody thinks, but there is some money there. i heard some people say where is the bottom? zero? i don't think so. you will not take companies that are making billions of dollars in revenue and say that it's worth nothing. that's not the case.

>> i do hate it when analysts put a sell on a stock after it's had a horrible run and you make a great point. that may be the time to buy. there is a bunch of insider stock to sell. already a bunch of insider stock sold. i just don't know who is left to take the risk. >> nonetheless finding a facebook bull, it is like trying to find an apple there. build us the bullish case. >> you know, it's funny. if you look at the chart, there is no technical set up here we do have dates. they will report the second quarters in late october. there is going to be 243 million shares coming on lock. the big one, november 14th, 1.1 billion shares coming unlock. i don't want to pile on the negative sentiment thing. i want to look to the options market and create a trade that's playing off of these events coming up. >> dan, he's buying a calendar

call spread. a strategy we don't use too often. let's crack open the playbook to see exactly how it works. this is a bullish strategy. you buy a call and to finance that purchase you sell a nearer dated call to reduce your costs. how do you make money? you want the stock to fall just below the strike of the call that you are short on the first expiration but above the strike of the call you are long on the second expiration. this requires a bit of timing. with that said, what's the trade? >> i'm not just outright buying calls. or call spread for the stock. i don't think it's a great buy. but the calendar sets up really well. the stock is about 1818. i bought the january 13, 22 call spreads. sold one of the november calls at 60 cents, bought one of the january calls at 1.05, that cost me 45 cents. that is my max risk. on the november expiration, i want to see the stock move higher. i like that november call to expire worthless.

own the january call for 45 cents. i want to own january. once all this lock up stuff gets out of the way, 20% shortage. i think you could have a dog in the dow sort of setup in the new year, where people are like a lot of the overhangs out of the way, let's get long. >> i really do like this trade. there are a couple catalysts that he spoke to. usually it's a situation where the stock would break one way or the other. here you have a situation where there's more stock on the market that creates some head winds. those will eventually be lifted. i also like the strikes, too. i think you want to give yourself a little bit of room in case you get into the short squeeze. in case you see some sentiment shift. this can win regardless of the overhang. >> we like buying calendars. one of the reasons that we like calendars is they can be neutral. their's is pretty bullish.

one thing we talk about is option math. that is less of an advantage. that's kind of the case here. i do like this a lot. the worst thing that could happen is you lose the 45 cents and you have to thread the needle time wise. which is an unusual -- >> is there another way where you can bet on facebook and risk only 45 cents? i'm curious. >> i saw somebody buying the january 14 65 calls. i don't know that i would do that. this makes a whole lot more sense. >> bottom line? >> everyone wants to be negative? this is a low premium way to get upside exposure through the calendar and events. >> you might be thinking if facebook has found a flaw, buy the stock. the answer found playing stocks versus options. want to buy 100 shares of facebook? that would cost you over $1,800.

that's provided of course the insiders have any shares left to sell. will dan's call calendar can turn time into money and will set you back just $45. interesting risk reward. moving on to your next option. okay. the dow has been up. small caps got in on the action here. you know what has lagged? it has been the transports. that has one technical analyst thinking boeing. it is tied to the transports and it could be ready to take off. let's call to the charts with the man always flying first class, carter braxton worth. love the name. what are you seeing on the charts? >> thank you. a bunch of them. the first are bowing and some relative charts. here is the two-year trading action of boeing. the symmetry is higher here. a series of higher lows or lower highs. the moment of truth, apex of a triangle. we think this gets resolved to the upside. in the context of the lower chart, the next chart takes a

look at really where boeing is in relation to its own lows. right on trend since the '09 lows with a series of flattening tops. this is the definition of a debate. the debate comes to an end shortly. some say bear, some say bull. it gets resolved to the upside. and one of the things that is driving this is how much of an underperformer it has been. the next two charts take a look at boeing. this is the dow jones industrial average average, of course, of which boeing is one of the participants and then boeing. it is literally the dog of the dow. worst performing year-to-date. the presumption is that at this point that boeing is actually the place to be, just small caps finally joined the party and things like the semis have joined the party. energy has joined the party. some laggards that haven't are due and boeing is one of them. >> i want to get to the fundamental side of things? do you agree?

>> i like boeing. i've said it several times before. this is a really great company. one of america's best industrials. a lot of secular things on their side as well. go back to 1973, less than 20% of the operating cost of an aircraft was fuel. now it's 50%. that is driving the types of products that airbus and boeing are putting out these days. the 787 is the most important. they had some delays but now they are on track to deliver five of those a month, ten by the end of next year. this is a growth factor for the company. low double digit, trading 6.4 times. enterprise value, ebita. i really think this is a great value. >> let's talk about mike's bullish strategy. he's buying a call for novice investors this is about as simple as it gets but let's hit that playbook again for those new to the show. this is a bullish strategy where you buy the call you want the price to rise above the cost of the call.

that's where you see the profits. however, anything below that level you see loss by expiration. with that said what's the trade? >> i want to buy the 75 strike call. it cost about a buck and a quarter. this is a little bit out of the money. why are you doing? the reason is this is a relatively low volatility stock but entering a high volatility period. september things move around a lot. i think i could see the market move around. i wanted to take advantage and lever that trade a little bit. that's why i am looking at an outright call purchase. the other thing here is, risking a relatively small amount of money. this is a way i could look to spread and i'm not risking a great drop. i may also sell puts.

>> that's what we want. less risk more reward. dan? >> you can't argue with a call purchase especially as we enter september and people are thinking that we get a bit more volatile at the end of the day. it seems like a good way to do it. i would just take a little issue with a name like boeing. when i look at the price action of a stock, like coke recently. also a dividend payer like boeing, 2.5%. more recently, philip morris has sold off a bit. i see these as potential canaries in the coal mine. where this defensive dividend paying trade coming undone. it makes me nervous to be honest with you. >> i agree that that is not the place to be. i think names like verizon, prock-to-& gamble, walmart, are the safety trades, not boeing. which is growing about 10% a year. >> i like the company with mike but i hate the stock. they had a bunch of 787s cancelled this week. they are tied to asia and tied to the dollar. i just don't think the stock will go anywhere.

i think mike is right on, just buy a call. you don't have to get too fancy in a low-volatility name. >> carter jump in? >> one of the most important think it's healthy when you have names too far too fast like coke philip morris, to have money come out of them. found its way back into other cycles of things. when rotation happens it's not a bad thing it's a good thing and people taking profits and putting more risk on cyclical things. >> tie a nice yellow ribbon on this. one more stocks versus options. 100 shares of boeing would set you back over $7,000. mike's call purchase only risks $125 and that is why we talk options. we will see carter later on in the show. thank you very much. now if you have a question you can send us an e-mail. i love to read them. only the nice ones, of course. the address is optionsaction@cnbc.com. we will answer it.

in oir 101 extra right after the show. we also post updates there. check those out. this, in the meantime, is what's coming up next. >> talk about weakness at tiffanys. last week a bearish bet on tiffanys but the stock looks rock solid on earnings. with plenty of money on the line, can they polish the trade-in time? find out when "options action" returns. >> it's time for pump up the volume. the names that were heating up the sizzle index this week. would you like that cooked rare? this company is a processor of rare earth elements. the stock surged this week after news of starting operation at a new california mine. investors dug into the company's calls on the hopes that with the new mine up and running the company will be in rare form. who is it? the answer when "options action" returns. [ 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.

where were options traders pumping up the volume this week? molycorps. call volume five times the average daily volume. >> it's time for total recall. welcome back everybody. we're going to take a look back at what's happening. we'll look at trades that are neither winning or losing.

give you our next move. connor and carter decided it was time to break fast away from tiffany and make a straightaway on the jewelry maker. the stock has since rallied but they haven't lost any money. here's why. just because you risk less doesn't mean you will always make more. that is what happened with carter's bearish trade on tiffanys. he thought the shares were a little too rich. >> tried to sell into the strength. >> but shorting the stock? it can be expensive. you said it. so to define his risk, he bought the november 60 strike put for $3.40. now to make money, mike needs stock to fall below the put strike price by more than the cost of the trade. or below $56.60 by november expiration. but paying $3.40? >> i never could do that.

>> and neither could we. come on, mike, let's try to do this for less. >> selling the strike put. >> that's the spirit. >> so to spend less, mike sold not one but two of the november 52.50 strike puts for a total of 2st 2$2 know 20 and created his one by two put spread. but he did something even better. he made making money easier and here is how. between $3.40 he spent buying one put and $2.20 he collected selling, mike reduced the cost of the trade to just $1.20. and now instead of needing tiffanys to fall below $56.60 to make money, mike can now see profits if tiffanys falls below the strike of the put by more than he spent on the trade or below $58.80 by november expiration.

relax. there is a trade-off. and since mike sold more puts than he bought, he could be forced to buy at the lower put strike price or for $52.50 even if it falls well below that level. however, even if mike did have to buy at that price with all the money he made on the way down he wouldn't begin to see losses until before $46.20. but since the time of the trade, tiffany's shares have risen 2%, making this trade a loser. now they are barely on speaking terms. they are bitter and angry over a trade gone bad. options actions fans only want to know one thing. what will these socialites do now? sad story indeed.

hopefully this will soften bad feelings. if you shorted the tiffany stock at the time of the trade, would you have faced unlimited list and lost $90. if you bought mike's bearish trade would you have lost nothing. is it magic? no. it's simply options. this is where it gets interesting. the value of the two puts that mike sold have decreased more than the one put he bought. in short by being short options he was able to be wrong on the direction of the stock but still right on the money. so should you stick in this trade? let's call back to carter. what do you reckon. >> i think we will stick with this one. it's very young a week or two old. 2% against us. nothing has happened, so we'll stay on the short side. >> mike? >> you know, this is one of the situations where i have been saying a lot that i would prefer to be long options at this period of time.

of course since i am long, the issue is do you want to take this off? i will be inclined to lean to the short side. i like having those two short puts against it. they are helping to finance the trade in the meantime. if those things get a whole lot cheaper, offered at about 30 cents at the end of the day, you might want to consider covering the short puts. >> i agree with that. to me, this is one of the real head scratchers of the week. i think the trade has been on here. people were focused on exposure. last time they reported they talked about sales in north america, weak on the east coast. sales were not great but the guidance was not as bad as expected. the news still isn't gate but the sentiment got overly bad. >> we talk about how downside puts get juicy and they bailed mike out. >> if you want updates, be sure to follow us on twitter. and dan posts regular updates on twitter.

>> the final call from the options pit right after this break. do not change the channel. 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.

>> it's touted as the world's largest tomato fight. thousands of people in one spanish town are literally seeing red. it's all in good fun. the annual festival kicked off in a small town in spain. the weapon of choice? 120 tons of ripe, juicy plum tomatoes. the fight ended an hour later. revelers used hoses to get clean. it is typically held on a last wednesday in august. >> time now on that happy red rosie note for the final call. we don't have any tomatoes so let's have some fun on options. what's the final word here? >> i think i like dan's trade on facebook. >> i'm not a buyer of facebook. i like the calendar set up. >> fasten your seat belt. >> ben? >> i'm a survivor. when options are cheap, let's buy them for protection or stock

completion. >> it looks like our time has expired. for more go to the website optionsaction@cnbc.com. see you next friday, 5:00 p.m. eastern. "money in motion" up after the break. 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. certified. international.

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