do you really think that's going to help rebecca, or do you think it is possible that she's going to go through that $500,000 before she even knows what hit her? i want you all to think twice about when you are going to be giving a large sum of money to a youngster, a kid, and at 23 years of age, you're all kids, i don't care how you think about this. you should do it via a living revocable trust, and within that trust, you should say they don't get to spend this money till they're 30 or 40 or whatever it may be for their circumstances, but just to give it to them, are you kidding me? now you know. okay, until next week, there's only one thing that i want you to remember when it comes to your money, and it's this, people first, then money, then things. it's killing me, people. it's killing me. but now you stay safe. bye-bye.

this is "options action." tonight, bad dreams. boeing shares fall of tech glitches. but cohen carter says buy now and they're teaming up for a trade that can pay you long shares for the batters aerospace giants. we'll break it down. plus, house of pain? morgan stanley and jpmorgan fall ahead of next woke's earnings. should you be concerned? dan nathan will have the answers. and well liked, facebook shares have surged 17% in 2013, and do you see more upside? scott nations gets social. the action begins right now. from the heart of new york times square, i'm melissa lee, these are the traders. and the rally is showing signs of fatigue with the financials ahead of the earnings.

with the vix at five-year lows and stocks at five-year highs, is this the calm before the storm? we will get into the money and find out. dan, the question is here as we do look at the five-year highs, do we look like we are setting up for a fall? >> we could. here is the thing that we got through some events that had not a whole heck of a lot to do with the corporate earnings and that is one of the big factors to drive the stock prices, and we had a great rally out of the gates. the s&p is up, and the vix is melting, and when we look at the future curve, it is bid up, and when you look at march, it is 17.5 or so, so it is implying we will get the bigger moves going forward especially as we get through earnings season and the debt ceiling. so, to me, you have to be careful of chasing the stocks here as we head into earnings to get a lot of visibility or lack thereof for the first half of the year. >> that is a good point, and the march futures which were between 17 and 18 and what does that translate into? average moves of 12 to 13 points on the s&p each day and we are

not seeing that, but if the options markets forecast anything close to that, then that is a suggestion we are in for a more turbulent ride ahead. that's what i look at. that i would say when the market reacts well to bad news that is obviously a sign that we are probably near to a bottom and when it reacts poorly to okay or decent move, that is a concern for the downside and the wells fargo news was not so overwhelmingly bad, but the market did not respond that well. >> that is the interesting thing, because if this is the best shot that the bears can take at the market, then it seems that the market is never going to go down again and the vix is at 13 and exactly where it ought to be, but on the other hand if you are like me and you think that you cannot always see the train coming, then it is time to buy a little volatility for the reasons that the guys have laid out, because longer term volatility says that the market is going to go back to the bounsz bouncey situation we

had last year and part of what is going on is the fact that financials had done so well and they had come back a little bit and dan does not want to chase stocks but when it comes to the financials, maybe you have to chase them and they will come back to you a little bit. >> and scott makes a point that wells fargo is considered best of breed. certainly one of the highest valuations with the bank stocks. and what is wrong with the wells fargo report is that they were off four basis points and that not a big deal in that everybody was expecting a decline for the quarter. so stocks are managing to rise to five-year highs. >> that is a great point about wells fargo, because last quarter when they reported q3 the net margins were worse and they are incrementally better, and the stocks sold off hard and a heavy tone and so now next week we will have jpmorgan and citigroup and bank of america, and what's the last one? morgan stanley and we will talk about that one, and the thing about wells fargo, they were so leveraged with mortgages and the other ones, we will get a look

into the sales and trading an investment banking and that is what we want to focus on. >> but in context of the markets, are we set up for a fall? are the financials indicative of where the markets will go given the fact that they are smaller percentage of the markets than before? >> well, they needed to become smaller. as gdp the financials topped out at 3% which they do if you get into a bubble and get back to a more normalized situation, you will see them decline as a percentage of the overall market. still, when i take a look at the firms are doing with american express, there is a change in the business that justifies it, and there is layoff and morgan stanley we will talk about and they have seen layoffs, but it to me is not spelling an optimistic future. i actually think that the market is looking stretched here. >> morgan stanley makes you nervous, dan, and why? >> well, this is like when you think back to five years ago when banks were under and getting bought under, morgan stanley was the next one to go, and people don't have that short

of a memory and in a lot of ways it is the ugly red-headed stepchild. okay. there we go. the upshot they report next week and the stocks had a massive run and a lot of news in the stocks that they announced 1,600 layoffs and dan lobe took a stake in the last stock in the last quarter here so to me you have the basel three requirement that is are not as stringent and the stock is at an 18 month high so when i look at the expectations for 2013, for investment banks, the analysts expect them to grow 100% this year versus goldman sachs which is to grow 10% and the money centers to grow only single digits. they have a lot of wood to chop to get there and if the visibility is poor on the earnings call on thursday the

stock could come back in. it was trading 19 a week ago and it could go back there next week. >> dan is bearish and he is buying a put, and one of the simplest trades out there, but it is interesting to open up the playbook for those who are new to the show. if you want the stock the go down, you want it to go down below the put that you bought and the cost of the trade and that is where you will see profits, but above that level, you will see losses, and dan, walk us through. >> it is simple and i tried to do something fancy and not much to do and implied volatility is cheap, so look out when the stock is 2020, i bought it for 40 cents so i need the stock to go to 19.60 to break even and below, that i make money. between 19 and 60, i can lose all of the 40 cents which is my max risk. one thing i liked about this is that they report on thursday and i will get a couple of other financial earnings reports before then and maybe an opportunity to sell a lower strike put against the loan before the week, so it gives me optionality so to speak. >> do you like this trade?

>> i do like it, and one of the reasons is that we were talking about it in the beginning that the options are inexpensive and in many instances it makes sense to take advantage of that and not get into something more challenging like a spread. buy the outright option and take advantage of the volatility and if you need a spread and the market moves low, you will have a chance. >> well, generally a fan of the spread, because you can get the maps working for you or change the payoff situation, but dan is right about morgan stanley and part of the problem with the relatively cheap stocks and this one at 20, there are not a lot of spreading opportunities and not a lot of strikes to use, so buying a put here makes a lot of sense. i am not generally a fan to spend 40 cents and saying, it is 40 cents, but the break even is 3% down from here so it makes a lot of cents. >> wrap it up with stocks and options, and getting short of morgan stanley or any of the banks and exposing you to any of the losses has been a painful trade and dan, next week, the earnings offs leverages for the downside of the risks at $40. and let's move to other side of

boeing falling almost 3% after the u.s. government launched a safety review of the dreamliner. it's been anything but a dream for the aircraft maker which has suffered high profile glitches including a battery fire and fuel leak and oil leak, and so let's go to the charts with the original aviator and talking about carter braxtonworth. >> well, that was a long list there. this is a five-year chart of the boeing and what is important is 75 level and 75 level and for three years this has been stuck. when you have a flat top like that, it reflects e quill lib yum and is the dreamliner going to work or not? and everybody knows it is going to work and it will take over the market, and what sets up the tension is this breakout here

and 95 or higher and looking at the same chart over 20 years and the same tension, and basically a stock has gone sideways for three years, 10, 11, 12, and the stock market has been ripping and that is equilibrium and equilibrium always ends, and you can now say that maybe it is going to breakdown and we would bet against it, because we believe it is going to break up. >> carter sees it on a technical basis higher, boeing that is, and mike i turn to you, because a lot of times we look at the headline risk events and look back and see that when the headlines were the greatest and the most profile, that is the big opportunity to buy. >> yes, and the 787 issues have been weighing on this stock for a long time as he illustrated on the chart because of the production delays and contracted a lot of the parts and then sequestration issues and we will face them again with the debt ceiling debate i'm sure, and then all of those problems and you will see the concerns and the stock will sell off, but the longer term cyclical story for the company is positive. 50% of the operating costs for an airline is now fuel costs up

from 25% as many years ago and that obviously means that the way for them to resolve that is newer and more efficient aircraft. this is efficient aircraft and the way of the future, and all we need to do is to see them continue to keep their production up. ten a month is what we are looking for by the end of the year by boeing, a we and we are not seeing cancellations, and airlines are not taking them out of the sky. new aircraft has had these problems and we saw them with the a-80 and those were structural issues with the wing, and that is what would give you reservations about getting on a plane, and that would be it. but they will resolve the problems and this is a pullback to buy the stock. >> and mike is bullish and using a risk reversal, and let's crack open the playbook to see how it works. this is a bullish strategy. buy a call and then sell a put to offset the cost. and so what you want is that you want the call to strike the put, and you with that said, mike, walk us through the trade. >> well, looking out to february

and the 80 puts and collect 70 cents for those and then use the proceeds to buy the 80 puts, and that is a net credit of 30 cents and the stock sold off so that you could do it for a 40 cent credit or 30 cents in that neighborhood is a good way, and the risk i am facing is that i am forced to buy the stock at that price which is coming to me, and that is a possibility and i'm not expecting that it is smooth sailing from here on out, and that is a significant discount and that looked like it would not be a bad place to purchase the stock, and on the other hand, if it rallies, there is a lot i can do with the trade and deal with the turbulence between now and then. >> the turbulence. turbulence. >> i did say that. >> and going back to the wing stuff. >> and the reservations and the turbulence and that kind of stuff. >> what is interesting is the way that the stock has been moving this year, and the point you start out saying is that the best time?

and you bought at the worst headlines of the week, you had an opportunity to buy the stock at $72 and bounced to $77. things are moving around a little bit and it makes me nervous selling a put that is only $5 lower in an environment where, you know, we talked about how low vol is and potential for the increase going forward. >> and that is an excellent point and i took a look at that, because my expectation had been that the options are on the outright basis would be priced, but implied volatility and this thing has popped on that headline, and it has steeped even as the volatility has risen and that will help the math work for you. when you trade risk reversals like here. >> and that is right, the math is working for you, but if you get the stock put to you, you have to remember why you put it on and it is because you wanted to buy the stock at a discount and if you get the stock put to you, it is a good company and you will own it at a price that is lower than now. >> and the problem with dreamliners might have been less if they used this, one thing about mike's option trade he

could be forced to buy boeing with $70 a share, but with the 30 cents he collected, he would not have a loss until the stock hits $69.70. we will see carter braxton later in the show. got a question, send us a tweet. we'll answer it in the 101 action after the show on our website. it has been revamped. in addition to scott, you will find great trader blogs and educational material and exclusive trades. you want to check that out. here is what is coming up next. >> the man is a regular tech wizard. he traded on qualcomm last month, and should he stick with it or cash in the chips? find out when "options action" continues. time to pump up the volume, if you need a friend, the social networking site will connect you with more than 1 billion people, and action options fans logged on to like the status of the

stock this week making it the most popular in the news feed. what company are we talking about? we will tell you when "options action" returns. [ indistinct shouting ] ♪ [ indistinct shouting ] [ male announcer ] time and sales data. split-second stats. [ indistinct shouting ] ♪ it's so close to the options floor... [ indistinct shouting, bell dinging ] ...you'll bust your brain box. ♪ all on thinkorswim from td ameritrade. ♪

[ cows moo ] [ sizzling ] more rain... [ thunder rumbles ] ♪ [ male announcer ] when the world moves... futures move first. learn futures from experienced pros with dedicated chats and daily live webinars. and trade with papermoney to test-drive the market. ♪ all on thinkorswim. from td ameritrade. where were the options traders pumping the volume this week? facebook, call volume was three times the average daily volume. you just heard the facebook calls have been active and, scott, where do the option traders go to this point? >> well, this is wednesday and

on wednesday we saw big buyers of the january 2014 calls paying $3.55 and that means they expect facebook to be above the $38 ipo by next time this year. >> that would be a huge accomplishment for them to cross over that threshold. take a look at that chart. since the october earnings, it has been a huge run for the upside for facebook. >> yes, and when the stock came back, we talked to a lot of the institutional buyers and they said that $17 is a good place to get into the stock, with but people are waiting for them to explain what kind of earnings we will be seeing when that comes along and that is what everybody is waiting for and hoping for and maybe we will get it. >> we could get it next tuesday, because they sent out the mysterious invitation of something they are building. >> this is dangerous, because amazon used to do this ten years ago to announce something a and people would get excited -- >> you are saying so ten years ago. >> and it is applesque of recent, but sooner or later it

stopped working for amazon and sooner or later, it is going to stop working for apple. this is the first chance for that. if they lay an egg, they have a credibility issue, because the stock has been up 8% to 9%. >> linkedin had a good week, too. >> and all of the social media did. and time for the call, and as we will look back on the previous winning trades, and a couple of weeks ago, don called the qualcomm by making ten times that amount, and here is how. >> on options action, one rule, risk less to make more, and that is what dan did with the bullish bet on qualcomm. dan thought that qualcomm shares were being unfairly punished by apple's pain. >> this is a cheap company and thrown out the baby with the bathwater today and it is worth taking a look at. >> but buying 100 shares is $6,000. so to spend less, dan instead bought the strike call for 90 cents, now to make money, he

needs qualcomm to rise above $92.50 for the price of that call or by january expiration, but spending a buck to get long of the chip maker, and dan, chip down the price of the trade. >> i sold one of the jan 65 calls. >> there we go. to cut costs, dan sold the january strike call for 35 cents and created his call spread. but he did something better. he made the profits come quicker and here is how. between the 90 cents he spent buying the lower strike call and the 35 cents he collected by selling that higher strike call, dan cut the costs by 2/3 to 55 cents and now instead of needing qualcomm to hit $63.40 to see profits, now dan can make it by $60.05 by january expiration. >> brilliant, brilliant. >> there is a tradeoff and by selling the higher strike call, he has capped the difference of the strike that he bought and

the strike of the call he sold. it has worked out beautifully, because since the time of the trade, the qualcomm shares have risen 8% making this trade a winner. now fans around the world are glued to the show and they only want to know one thing, what will dan do now? before we answer that, let's see how much money was made if you had bought qualcomm at the time of the trade you would have made 10% and not bad, but dan's trade of $55 can be sold for just over $2 which means he has tripled the money. so, the expiration is next week and the question is are you cleaning up the trade and what is the outlook at this point? >> well, this is a good example of not catching a falling knife with the stock. the stock was getting nailed on big volume and i decided a call spread and picked up the strikes to where the stock could go to on a reasonable bouncebook and

the thing was worth double a couple of weeks ago, i sold half of it and i am long half of it and i have a week to go and at this point, i am i risking $2 to make 50 cents so i will likely take it off before expiration and tweet it out. >> and one thing that is vertical before short dated you can monetize the difference of the strikes quickly. if the stock goes your way, you can trade out of it and if you have dated verticals, it is more challenging, and so it was well timed. >> when we talk about qualcomm and broadcom,and the chips maker, people are holding out to make $600 one day? >> well, this is the big player in the room. the issue is this, sometimes the best tradeses are the ones you never make. right now the resurgence over two to three years and the epic plunge and now bouncing around to 520, you are going to lose. if you get long or short, and this is a chop job now, and leave it long. >> a chop job, and does that mean the way to play the smartphone is through qualcomm or broadcom or specific smartphone makers?

>> it could be. here is one of the examples. i bought it because of apple's weakness that day in december and apple is up only 3% and qualcomm is up 9%, so you will get more data other places. apple will make 900 and i don't want to step on the chart boys over there. >> chart boys! wow. >> and if it happens in front of earnings, you want to time it in front of the catalyst. >> but hope is a lousy investment thesis. >> really? >> and people are hoping that apple recovers and this week's web extra is what if you are long apple stock, and need to get stock rehab. >> well, hope should be needled into a pillow somewhere. it is a wise word. and our thanks to carter braxton from oppenheimer. if you want more advice, you can tweet us, and dan will tweet his trades as well. keep posted on facebook.com/optionsaction. coming up the final call from the options pits.

[ indistinct shouting ] ♪ [ indistinct shouting ] [ male announcer ] time and sales data. split-second stats. [ indistinct shouting ] ♪ it's so close to the options floor... [ indistinct shouting, bell dinging ] ...you'll bust your brain box. ♪ all on thinkorswim from td ameritrade. ♪

[ cows moo ] [ sizzling ] more rain... [ thunder rumbles ]

♪ [ male announcer ] when the world moves... futures move first. learn futures from experienced pros with dedicated chats and daily live webinars. and trade with papermoney to test-drive the market. ♪ all on thinkorswim. from td ameritrade. ♪

>> oh, the classic case of mistaken identity, the police in virginia say they have three separate calls that a baby lion, a baby lion was prowling the streets. the ferocious beast was charles the monarch, a labradoodle shaved to look like the king of the jungle and now it is a little guy with thousands of followers. baby lions do not have manes. all right. i had to say it. time for the final call from the options pit. scott? >> not just morgan stanley, but puts are in the whole space. >> dan? >> there you go. we would never agree on that. i like taking a defined risk in the earnings. >> mike? >> and i have expressed skepticism on the market, and so i like that trade adds well. >> looks like the time has expired, check for the optionsactions@cnbc.com, and in the meantime, don't go anywhere. "money in motion" is coming up next. [ indistinct shouting ]

♪ [ indistinct shouting ] [ male announcer ] time and sales data. split-second stats. [ indistinct shouting ] ♪ it's so close to the options floor... [ indistinct shouting, bell dinging ] ...you'll bust your brain box. ♪ all on thinkorswim from td ameritrade. ♪