to you, a will is not going to help you. a living revocable trust, which does bypass probate, by the way, isn't just to bypass a court procedure, it's to protect you in case of an incapacity, as well. so if something happens to you, who is going to pay your bills? who is going to write your checks for you? a living revocable trust with an incapacity clause in it will do that for you. so if you are out there and you're thinking about coming on the how am i doing segment or you're wondering how are you doing when it comes to your finances, if you do not have a living revokable trust, you aren't doing very well at all. do you hear me? you best get yourself one. now you know. until next week, there's really only one thing i remember you to remember when it comes to your money and it's this -- people first, then money, then things. now you stay safe. bye-bye.

>> this is "options action." tonight, take a bite. apple shares have been rotten but can earnings right the stock? dan says yes. he's got a trade that can make seven times your money in one week. he'll show you how. hang up on nokia, shares of the cell phone maker have been on fire. a flashing warning sign. we'll tell you what it is and how you can make money. and why are all those traders betting on jetblue calls? the action begins right now. in the heart of the new york's

times square, i'm melissa lee. if you checked your portfolio, do it now. strong earnings pushed the dow and s&p 500 to five-year highs. will the good times last? let's find out. dan, it will be a big week for the markets and big week for technology and apple. >> technology is really interesting. as a whole it's trading well and trading like some of the better acting sectors of the s&p approaching five year highs. when you think about the action today, what we saw today, financials continue to run on very good earnings. we saw some industrial stocks well off their 52 highs reacting well to the chinese gdp number. to me there's a really interesting set-up as we approach next week's tech earnings that we have things that haven't gotten back to those highs acting very well. >> i think one of the paints you were making with financials doing well, they haven't gotten close to where they were when the market was at these levels before. there were three things i thought were interesting.

what do ann taylor and intel and chipotle have in common? it might seem like nothing but what they have are narrowing margins, intel increased cap backs and ann taylor talked about excessive discounting narrowing their margins. we have just seen expectations of ever widening corporate margins and this earnings season is far from over. completely unrelated names and maybe that's the first tip of the iceberg. >> it's interesting you mention margins, amazon, the story there has been margins. they are my nis kul to begin with and if they go negative, they lose money and it will get pummeled. >> all of these examples there is always the example of the general electric which delivered and then some on margins and projecting a good 70 basis point increase. for every ann taylor and chipotle there is another stock in a general electorate.

with better margins. >> that being said, these companies are managing costs well and buying back a lot of stock. that's helping margins here. in some ways, to me, to mike's point, intel could be the thing as we think about technology going back to the original discussion here, technology is the one where there's so many people focused on the sector here. i think this is going to be one of the worst performing sectors of the entire s&p as we look at q4 and visibility -- >> some technology has done well. ebay did well and dell did well for different reasons. you mentioned intel, they got crushed. if you're a shareholder in intel you're thinking about calling fema because it's a disaster. down 6% today. in technology there's something for everybody and something for bulls and bears, but technology will rely on google this week. >> let's talk about apple. it's interesting how the market conversation this week has really changed compared to past ones where we're touching 5-year highs in the s&p and the dow and doing it without apple. not too long ago we had said it

was key to the market and it's not there. >> that's definitely true. one of the things that's interesting is because this is taken so long to play out, people have had an opportunity to take a look at other names, which i think is interesting. what is also interesting, every single time we get a new little tid bit on apple it seems to be negative. we were talking about margins before, there's none better than apple's margins. if you start to see them come in, i don't think -- >> you just said it. for the broad market this is one of the most bullish things, the fact apple can't get out of its own way. they continue to make 5-year highs and we're seeing the breadth and it get better. this is one of the things that most of last year i was keying on. there was a small handful of stocks taking up this market, apple was one of them, up 75%. it's down 30% since the highs and down on the year and this market keeps going higher without it and that's a positive sign for the broad market. >> how about for apple? >> to me it is a stock specific story and overowned story and

investors are now peeling out of it a little bit. it has a little bit of a transition. this is a value story. some of the biggest catalysts, bulls on the stock are identifying, share buy backs and dividend increases for a stock growing at 25% plus for years and years. it is a $200 billion revenue company and won't grow like that anymore. >> in terms of sentiment, for you, this change in sentiment is bullish? >> i'm a little contrarian. >> everyone is negative. >> i think the set-up is treacherous. everyone wants to game it and play it. here's the risk. they are expected to have the first q1, the quarter just ended declined since 2003. that is their holiday selling season. expectations are very bad. aside from that, you have a situation here where people don't want to own the stock. so to me the sentiment shift

sets up for a pop in the stock. i think the pop is sold and the stock does not see new highs for a long time and probably stuck somewhere between 400 and 550, 575 for a while. >> for a trade dan is bullish and using a call butterfly or call fly. this structure is tricky but can offer a big payout. you buy one call then sell not one but two calls against it to reduce costs. to protect yourself you buy an additional higher strike call of the same expiration. this may sound complicated, but the goal is simple. you want the stock to go just below the strike of the two calls that you're short. that's a sweet spot. you can make money if it goes above or below that level. with all of that said, walk us through. >> listen, this is actually a tiny little structure here. vertical spreads are very expensive, outright call purchases are expensive and implied volatility is near 52-week highs.

you can't do it. it's going to be hard to make money on a directional basis. the call fly makes sense. what i bought today when the stock was $500. i bought the january 25th, next friday's expiration, $525, 550, 575 call butterfly. i bought one of those 525 calls i sold two of the january 25th, 550 calls against it. covering my wing, i bought one of the 575s that cost me $3. that's my max risk. here is how i make money in this trade. i need a stock to make a big move. the implied move is 7%. the average over the last four quarters has been 5% and market is expecting a big move. i think if there's any sort of positive surprise to get the 7% and this is why the trade sets up well. i'm risking three. between 525 and 528, i lose up to three, below 525, i lose all three, above 575, that's where i lose $3. here's my sweet spot, between

528 and $572, next week on expiration, i can make 22. i like the risk reward here. it is contrarian implied, i'm prepared to lose all $3. i think there's a chance if they totally lights out, the stock is back up. >> the options going into this are about as expensive as they have been going into earnings in a long time. you're not likely to make money getting long short dated options trying to make a directional bet in the stock. one thing about a fly, you feel you're trying to thread the needle this is short dated so there's a better chance this takes place. for my money, it's either going to be a trade like this or calendar trade or short strategy that will play off. >> short fall. >> you try to you know, make a bet by buying calls into this number and i think you'll get burned. >> one of the problems with apple and amazon options and google, because it is so

expensive, the options get expensive and dan is right. the stock has to giddy-up. he does a great job of pointing out that the expected move is 7%. if it's higher, that would put the stock at 535 and you'll make money. >> hopefully one day, someone will make an app for it. for now, you can only get it here. one will set you back $50,000 or price of a mid-sized mercedes, dans call you can make seven times the money and risk $300. let's move on and stick in technology. it is shares of nokia and rim that have been the better trade so far. nokia took a hit on speculations that it will cut its dividend when it reports next week. there's a time to hang up on the nokia rally. let's call to the charts, the man who counts mr. telephone man among his favorite songs. carter. >> just as you point out, the winners have been the losers and here's the one-year chart.

it is running about 95%. they obviously have been the winners since july and apple has been the loser. at this point we think some of these moves to the garbage to gold is overdone. take a look at the chart -- this is the same chart one year but take a look. 5, 5, 5 stock drop gaps in 200 million shares and now rallied from 163 all the way back to under 5. the problem with doing that, you have a year of dead bodies who lost a lot of money and had money returned to them want the money back. the long term is a disaster fade the rally, so -- >> carter says sell. mike, what do you say? >> i have to be honest, i didn't realize nokia paid a dividend. a company in this state, 5.7% yield. >> the options market isn't sub subscribing to that theory this time. they would actually pay it out in may. the options market forecasting a better than 50% chance that there is no dividend this time.

the options market is not seeing it. implied dividends of 8 cents, should be paying 20. they are not releasing it. when you look at the company fundamentally you're looking for stable to growing top line and good margins. this company has neither of those. the only thing you might hope for would be great product offerings which could turn that around. i don't subscribe to that either. i don't see good reasons to get into the stock and it had a heck of a run off the bottom. the only thing is everybody recognizes the flaws in the stock and the street hates it. to short it, any good news you could see a sharp upward for me the only way to play it on short side is buying a put. >> this is a great beginning trade for those new to options. here is how it works. when you buy a put you want your stock or etf to go down and want the stock to fall below the strike of the put by more than the cost of the trade. that's where you see profits. above that level you'll see losses, it's that simple. mike, what are you doing?

>> i'm buying the february $4 put and buying 15 cents. don't need a lot of explanation. i will say in general you don't want to simply make short dated option buys to make directional bets of stock because in general they don't usually pay off. this is one of the situations where if you make a short side directional bet it's the only way to do it. you can't short the stock here. we're choosing the nearest right out of the money strike on the down side. it's the only way to make a bearish bet on it. >> in terms of what the market says about cutting the dividend. is there any indication in terms of activity that this will happen sooner rather than later? with the earnings release, it will announce the cut? >> well, the way you try to figure that out. you have to look at options that are longer dated than when the dividends get paid -- the near ones won't reflect that. we were looking at july options. take a look at this. there isn't that much activity reflecting it but you can see where the dealers are pricing it and that's the more informed market participants anyway. if you look at the prices,

it was a tight market and supposed to make 20 cents. >> this is an interesting -- you asked a good question about the fundamentals of the company. they've got a tremendous amount of momentum off the bottom. it reminds us of rim where you have products coming out and rallying in hope of the future products. we know how this ends and the blackberry and lumias will not be successful products. one of the reasons the balance sheets looked impaired and it was trading at $1.50, they have swung to an earnings loss. how quickly is that balance sheet going to deteriorate. i like the idea of buying puts here but at the time dangerous to be short the momentum stocks. look at rim. >> that's true. let's do one last time on stocks versus options. we want to get to nokia, a $4 stock. the most you can make is $4. you face unlimited risk because stocks can go up forever. mike's split purchase defines his risk to $15.

that's why we talk options. we'll see carter later in the show. you have a question? send us a tweet and we'll answer in our one on one web extra after our show on our new website. that's right. it has been totally revamped. you'll find great trader blogs and exclusive trades. you'll want to check it out. here's what's coming up next. guess it wasn't a dream trade, last week a bullish bet on boeing but dreamliner nightmares still hurting the stock. does this give the guys a new way to cash in? find out when options action return. time for pump up the volume. the names heating up the opgszs trader index this week. come fly with me is a company in airline space. this week they got good news. passenger miles flown increase by 6% last year. options traders flew into the stock making big bets that the

company is cleared for takeoff. who is it? the answer when "options action" returns. ♪ [ 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.

♪ [ 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. ♪ where were options traders pumping up the volume? jetblue. ♪ welcome to the premier of "options action."

your front row seat to the smart money. i'm melissa lee. here's where the action is tonight. as you saw there, it is our four-year anniversary here at "options action" we thank you for bringing us this far and learning more about options along the way. we hope we have served you well. we look forward to another four years and much more. let's talk about the story of the week here and that continues to be the nightmare that is boeing's dreamliner. the faa grounded the troubled new aircraft after the latest technical glitch led to an emergency landing. carter made a bullish trade on the stock and it has moved lower but they haven't lost money and here's how. on "options action" how we trade like high flyers and that's just what they tried to do with their bullish bet on boeing. carter's shares were heading higher. >> it breaks apart.

>> but buying the stock 100 shares cost $7500. so to spend less, mike instead bought the call for 40 cents. he needs boeing to rise above the strike price by more than the cost of the trade or above 80.40 by february expiration. mike, 80 cents? >> into the bones -- >> you're making as much sense as that guy. show us how to do this for less. >> sell the february 70 puts. >> well done. the 70s strike put for 70 cents and recreated his risk reversal and made the trade an instant winner. here is how. between the 40 cents he spent by buying the call and 70 cents by selling the put, he is managing to put on the trade for a 30 cent credit. that means he can make money whether it goes up, down or nowhere at all. >> shirley you can't be serious. >> i am serious and please don't call me shirley.

there is a trade off. because he short the put, he could be forced to buy at the $75 strike price even if it falls well below that level. after a volatile week, boeing shares are flat leaving mike and carter with a tough choice, stay in the trade or just close out the position. and now options fans the world over are tuning into the show and want to know the same thing, what will mike and carter do now? the headlines have been out fast and furious all this week but the stock miraculously has more or less been pinned between the strike of the call that mike bought and the strike of the put that he sold. now with all of this new bad news, the fear for anyone who did the trade is that boeing will fall below $70 a share and you'd have to buy the stock there. how likely is that? carter got us in. let's go back to the charts. what do you see, carter? >> the stock is unchanged on the week which is remarkable given the news and bearish put activity is at a record. i can speak to that.

that's when you want to go against it. we're long and we like it. >> long. what do you think? >> people in the trade had a pretty wooly week. i have to tell you. >> yes. >> very early after we put the trade on it was up money. then they grounded the fleet. we were down money. now we're right back to even. the real question is, where do we go from here. it will take more time to play out on the upside. you can cover this trade for even money, which is what i favor doing and going out further in time and looking to the may 80 calls x you can pay $1.40 for those things. that is the way i would play it. we have a low volatility environment, not that expensive, make it last a little while. we can stay on a bullish trend, i can agree on that. but we'll mitigate the downside risk. >> i agree with mike, it will take weeks for this thing to play out and the stock has reacted amazingly well this week but it's early on in the story. would you even bother continuing on with a trade like this? >> my comment last week was low ball environment we're in and

boeing is not particularly a high ball name although it ticked up with the news -- i think you express this bullish view. i'll stay consistent with that. >> i think the interesting think, we like risk reversals because we want to get long in the stock if it drops or rallies. i don't see this rallying very much. it wont rally above the call strike if it takes a long time to play out. given that, i don't think the risk reward relationship makes a lot of sense if keeping it. >> if you want to own if it rallies or falls. in this case if it falls, you probably don't. why? what's going to drive it below 70? more disastrous news. the real reason it might fall below the strike -- i'm saying at this point in light of what we've seen, maybe it wouldn't be. i'd rather own the call and roll out further in time and reduce the risk with my long bet. >> the other thing about the particular defense sector, in today's session, this is a sector people want to own in

2013 despite the sequester, the looming fear of a sequester, i should say. >> no doubt about it. that is one of the issues and the market seems complacent about it. the one thing i would say about boeing, if they did see dreamliner cuts -- as far as what their expectations -- earnings are expected to grow 4% in 2013 and expected to grow 20% in 2014. that's something that if you just look at this thing as a single digit grower for next few years, you probably won't pay the multiple you are now for it. >> thanks to carter of oppenheimer. if you want updates, be sure to follow us on twitter at cnbcoptions. if you're on facebook, stay posted on the transfer throughout the week facebook.com/optionsactions. up next the final call. ♪

[ 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.

♪ [ 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. ♪ final call, scott. >> nokia puts make a lot of sense. >> dan? mike? >> nokia. >> money many motion starts after this.

following the closing bell tonight. ♪ [ 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.