everybody, but before we go, there's just one more thing i want you to know. sometimes -- a lot of times, actually, we might get ourselves into financial situations that we actually feel hopeless about. we look at how much debt we have. we look how much it costs us to live every month. we look at how much money we have coming in, and we just go, there's nothing we can do about it. so then your solution usually is, i'll just keep going on and charge. why shouldn't i live the best life i possibly can until something happens. i know something will happen, right? listen, you can turn almost every financial situation around. the younger you are when you stand in your truth about your finances, the more of a chance you have to turn it around. don't wait, don't keep postponing. start to deal with your money. honest to god, erin, our "1 on one" guest tonight came on this show knowing there was

nothing she could do. she would never get out of debt. she'd never be able to retire. and we very simply showed her a way to be a millionaire by the time she's 67. if that can happen for erin, that can happen for you. participate on this show with us. come on the show with me. be willing to dive into your own personal finances so that we can change your life once and for all. that is the goal of this show, to touch you so that you can live a life that you want to touch versus a life that's just, you push it away, you don't want to deal with it, and you don't know what to do. now you know. so, until next week, there's only one thing that i really want you to remember when it comes to your money, and it is this, people first, that means you people, you, people first, then money, then things. now you stay safe. bye-bye.

>> this is "options action." tonight, sour apples, the dow makes a run at all-time highs, but america's favorite stock, apple, makes a fresh year low. why is that? what does apple's pain mean for the markets? we are on the case. plus, forget king kong and godzilla, because there's a bigger battle in stocks versus bonds. both have been rallying but only one can be right. we'll show you how you can make money now. and why were all those traders chowing down on mcdonald's calls? scott nations finds the dough in mcdough. the action begins right now. welcome to the nasdaq marketsite in new york city's times square. these are the traders here on the deck. and record denied. dow just points away from its its all-time high. while the market makes a run at the record books, one stock closed on a fresh 52-week low and that is apple.

shares of the tech giant closing on the lows of the day. does apple matter to the market and is there more pain for america's favorite stock? let's get in the money and find out right now. and certainly, dan, the price action on apple not good considering it did close at its lows. >> a new 52-week low. when the dow jones is a percent away from all-time highs. apple in particular is weighing on the nasdaq. the nasdaq has underperformed. it's also holding the s&p back a little bit. at one point it was 5% of the s&p. it's just a disaster. every rally gets sold and there are none for a stock that used to be very product driven. people are the only really argument to be made for the stock, it trades at nine times expected earnings that are not supposed to grow a lot in the next few years. >> so it's cheap. that's the best you can come up with. >> that's how i tried to come up

with it. look how it treated me. i closed out that short put stock. it was up very small on wednesday. the stock seemed like it was getting a little bit of upside, but wasn't keeping up with the market at all. obviously it got sold off right after. that meeting, they didn't say what investors wanted to hear. that was enough for me. i took my losses right there. i think one of the most telling things, if valuation isn't enough to keep a stock up, it does say, if something else loses momentum, you can really watch out because the fundamental valuation won't be enough to save you. it isn't save me in apple this week. >> apple is widely owned, but what is the impact on the broader markets? can't we say the market rally is very strong because it's making these moves despite apple? >> despite a giant company like apple. apple part of the index is just not participating. is important? it's important to all the fund managers who are going to have the best chance to beat the s&p that they've had in years if they stayed away from apple. probably a couple reasons you

might think you want to own it, because it's so big and because it's so undervalued. neither one of those is a great reason to own apple. the fact that you love your ipad is not a reason to love it. i love my tivo, but those guys can't figure out how to make money if they had a printing press. >> some people had misguided expectations heading into the shareholder meeting on wednesday. last year the company did not initiate their dividend there. they did not announce their buyback there. they did a month or so later. so in a couple weeks, if the stock gets washed out, you could see a dramatically raised dividend maybe somewhere between 3 and 4%, and maybe something else that mr. einhorn wants and that could be a catalyst for the stock in the near term. >> in terms of the strength of this rally, are you a believer in this rally? because we've laid out all cases as to why apple's stock will remain lower, yet the markets continue to march higher. >> yeah, of course, they're not really breaking through to new ones, are they? if you look at the new york

stock exchange member firm margin balances, they're now approaching the peaks they had on june 29th of 2007. i look at that, it looks like a double talk to me on the margin side and the market. i understand people have good rationales for reasons to be long. i think another one is coming. >> is apple a canary in the coal mine for the markets, or is it that mab the markets are up 6% for the year and if apple makes that move higher, then we could be in great shape here. >> i actually think right now apple is its own animal. it shot too high to the up side. it's going to shoot too low to the down side. doesn't mean you have to own it because you think it's cheap here. it can get cheaper. >> if apple is not an impact -- >> decelerating earnings growth. if there's something you can extrapolate from apple to others. this is a very mature company that grew very fast in a short period of time. you can say the same thing about

the u.s. market as a whole. earnings drive stock prices. at this point, there's been a lot of shenanigans to drive earnings over the last few years. the companies have been buying back a ton of stock. they've been cutting a lot of costs. they've been managing earnings, and that's where we are right now. when you think about equities in the dividend yield and the s&p 500, it's right about at the 10-year treasury. it doesn't look that appealing to me when we're at five-year highs in the s&p. i think we're ready for a pause here. i don't think you put new money to work in equities right here. >> so obviously dan is bearish and he's using a put butterfly option, a play we don't often use. so it's good to crack open the playbook to see how this works. it's a bear strategy. you buy one put and sell two lower strike puts against it. to protect yourself, you buy one even lower strike put. sounds complicated, but the goal is simple, you want the stock to go to the two strikes where you are short. that's where you make the most money. think of it like threading a needle. with that said, walk us through the trade. >> threading a needle. not as complicated as it looks. the professor will explain some of the points why i want to do a ratio.

but today when i was thinking about this, i wanted to buy something that was in the money here and give myself some room and not spend a lot of extrinsic value on this. so today when the spy was 152.15, i bought the april 153, 148, 143 put butterfly and i paid 90 cents for it. so i bought one at the april 153 puts for 360. i sold two of the april 148 puts at 185 each for a total of 370. and then i bought one of the april 143 puts for a dollar. okay, 90 cents is what i paid for it. that's my max risk. my profit, up to 410, between 152.10 and 143.90 with max profit of the 410 at 148. i have losses up to 90 cents between 152.10 and 153 and 143.90 and 140 and i lose all of the 90 cents below 143 and above 153. and here's the thing.

i'm trying to capture a range here and not have this thing be a lottery ticket. i'm in the money. i think there's a very good shot i have 3% to 5% downside. >> a lot of numbers and a lot of stock prices to go through. check it out here. write them down. check them on the web. dan, i got a question. if you believe the broader markets are going down for all of these reasons, decelerating earnings, higher gas prices, et cetera, et cetera, and you believe that apple is weak here, why not put this trade on the cues instead of the s&p 500 where apple is a much bigger percentage, so you get more bang for your buck. if the markets go down, the nasdaq will probably go down as well and apple will have more of an impact. >> i like that. this is called "options action" here, people. i like the exposure, but it's a defined risk play. i like the structure here. but i do -- to your point, that's a great point to investors out there. pick on what's weak here. the nasdaq hasn't got anywhere near a new high --

>> one of the important reasons and i think this is probably why you're choosing to use a butterfly on the s&p, because it isn't the weakest spot. you're making a bearish play, but recognizing that's not what the market's been handing you. the fact that even though the at the money options are cheap, the out of the money puts are not quite as cheap on a relative basis, and that's one of the reason why buying those closer strikes and selling the other ones is something you want to do. on top of all that, if the market really does start to skid out, that's why you're covering that downside strike. when the market isn't handing you what you expect -- >> let's wrap it up in stocks versus options. want to get short the market. think the rally is over? you better be right. dan's put fly offers a 5-1 payout and defines risk to just $90. a rally in both stocks and bonds. ten-year rally again today. now the last time stocks were at this level, five years ago, the yield on the ten-year was 5%.

now it's just under two. so who is right in this battle royale for your money, and which will be the first to break? let's call to the chart the man who just barely won the battle with new york traffic, carter from oppenheimer. what do you see? >> we'll look at some reads here. but one of them is right and one is wrong, which is to say, either there is traction, housing, job creation, all-time highs, suggesting things are okay, which case, the cost of money has to start to move. or money staying down like this, suggests the market is a fake. it's being propped by the fed and something is wrong. this is the biggest reit we'll talk about. a long-term chart of all reits here. what you'll note, how they made the highs in the housing bubble collapse and we've not gone back to the high. keep that reference point in mind when he look at simon property. now look at yields and we're at record lows, which is to say you're getting precious little

yield while you're taking on quite a bit of risk. this yield is 3.5%, not much more than a 30-year bond, but much more risk. let's look at simon. this is the biggest reit and again as owe pposed to all reit which haven't gone back to their highs, it's well, well above their housing bubble peak high in 2007. take a look at simon against all reits and look at this out performance. this is excessive and we think you fade this. two other charts to put in perspective. this is the short-term. simon is starting to roll over, if you look at a one-year chart. keep this rollover in mind as we look back to the long-term chart. and what you have here is this phenomenon. we think it's in trouble and we're a short seller of simon and reits in general. >> so the question for the desk is, can bonds and stocks continue their rally together, or will reits be the first casualty here? >> i think bonds in particular are an area that are very, very

risky. so for one thing, how high fixed income instruments can go, it's essentially capped by the risk free rate. and that's capped at zero. so we're approaching the extreme levels in the fixed income universe have a lot of risk. you're getting very little return in exchange for that. reits are interesting because they pay like bonds. they have an inflation adjustment component. but basically if you're buying a reit, you're making a bet that rates will probably remain stable and at a low level. that is a risky bet to take here. now of course the other thing we're looking at is a comparison essentially between also what corporate earnings yields and equities look like and what bond yields look like. that's spread. i think it's also artificially created in large part by fed reserve action. so if you feel like there's any chance that they take their foot off the gas pedal, that could create an increase in rates, cause the spread to narrow significantly. it makes reits very risky if that's your belief. you know, for me i just don't see any reason to continue with that.

>> mike has a bearish view. he's buying a put tonight. it's a great trade for those new to options. here's how it works. when you buy a put, you want your stock to go lower, and specifically you want it to fall below the strike of the put that you bought by more than the cost of the trade. but above that level, you will see losses. it is a very simple trade. mike, walk us through. >> yeah, i mean so much like bonds themselves reits have an actually relatively low volatility. i'm not going to play around with complex spreads. i'm just looking to buy the july 155. spend five bucks for those things, it's about 3% of the price. now, this is going out a little bit in time. we don't have tons and tons of expirees in between, but basically the idea is making a bearish bet is not going to decay quickly. if it turns down, i can look to spread. >> i don't know why you would own simon properties in a situation like this, but mike makes two good points. he's buying a put because options are very cheap in this

name. and when you buy options or option spreads, you want to go further out this time. this makes a ton of sense. >> dan, what do you think? >> listen, i think you link into a name like this with implied volatility. if it goes in your direction, employed vol starts to tick up, you spread it and lock in a portion of that appreciation. to me, i think it makes a heck of a lot of sense. >> meantime, got a question out there, send us a tweet, we'll answer it. optionsaction.cnbc has been revamped. so in addition to scott you'll find trader blogs, educational material and exclusive trades. check it out. here's what's coming up next. >> hi-ho, silver. in january mike and carter made a bearish bet on silver that was the talk of options nation. but it hasn't worked out. so how can they fix their trade? find out when "options action" returns. time for pump up the volume.

the names that are heating up on the sizzle index this week. a cheeseburger for a buck. i'm lovin' it. and make no mistake, we're talking about the world's largest restaurant company by revenue. this week the golden arches glistened after announcing plans for expansion in russia. leaving them for an appetite for all the savory items this chain has to offer. 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 this week? mcdonald's. at one point call volume was up almost 40 times the average daily volume. you just heard account and mcdonald's calls were active, what do you make of it? >> this was on tuesday after the monday when the stock did well compared to the market. stock is historically cheap and some people are looking for a dividend increase, they want to buy the 95 calls. >> time now for fix my trade. when trades don't work out, you just want to say, dude, fix my trade. that's what happened with a not so sterling bet on silver. on "options action" just because you risk less doesn't mean you'll make more. and, unfortunately, that was the case with cohen carter's trade on silver. he hated the chart on the silver etf. >> dropping as low as 20. >> if my man hates silver, mike thought i'm selling it too.

but just going short, hunt brothers and that could mean unlimited losses. so define his risk. bought the strike for 85 cents. now mike has a right to sell at that strike price or for $28 by march expiration. that 85 cents is the most mike can lose. but in order to make money, mike needs slv shares to fall below that $28 level by more than the 85 cents he spent on the trade or below 27.15 by march expiration. but it gets even better. why is that? because if those shares drop, that will increase in value faster than the slv will lose value, meaning more money in mike's pocket. since the time of the trade, silver has fallen 4%, not quite enough to make this trade a winner. now "options action" fans the world over have one question. >> where are all the musicians? >> no, not that question. they want to know how these two will fix their trade.

before we answer that, let's look back at mike's trade. now, the slv has declined. so you might be asking, why hasn't the trade worked out? well, the answer is because the direction has gone right, their timing is off. with expiration around the corner, the time value is seeping out of the options. now, silver and gold have been falling and expiration is three weeks away. so could this trade, in fact, still work out? let's call back to the charts, check in with carter. what do you see? >> in terms of silver itself, quite broken. considerably lower. stay short. in terms of structure, turn it over to mike. >> so considerably lower. that marries what's going on elsewhere in this complex -- i mean copper today broke its 200-day moving average. so industrial metals aren't doing well. gold is not doing well. >> gold looks terrible and silver looks terrible, and i'm inclined to say short here as well. i just don't want to stay short vis-a-vis with this option. we're basically at the money and running out of the little bit of time.

what i would do is sell this and trade a risk reversal alt this point. for those that don't want to be naked short the metal, i would advise a call spread reversal. take a look at where it opens. if it's around 85 cents or where it closed at 70, sell this and stay short, but try to get to a premium neutral way. i'm going to press my short on the slv for sure. we're only down about a dime and it's working our way. we just -- the premium got a little -- >> going back to what we were talking about at the start of the show, slv, gld, these things act like apple here. there's no rally in them at all. and to me these were crowded trades for a long time that worked very well and also had certain mania aspects to them. so to me, i think this is something that probably makes lower lows and know continues to do so for the time being. >> i think you stay short slv, only about 15 cents from its three-month low. it's really week but as you point out a lot of these things are having a tough time.

uso, the oil etf, crude oil etf had a horrible month. >> it certainly doesn't help that for instance today we had pmis around the world that came in in a disappointing fashion. upi came in, missed by a mile. in terms of economists consensus. swung back. china came in at a five-month low here. so really the net consumer of a copper, for instance, not necessarily there. >> no, that's a great point. because what we were talking about earlier is about concerns about the fed taking their foot off the gas. if they do that, that's one of the reasons you would want to own these. so there's hardly any reason on the horizon why you would want to own it right now. i just don't see why you would want to take a foolish bet. it's kind of like doing what i did last week on apple. grabbing a falling knife, you're going to get stabbed. >> our thanks to carter from oppenheimer. reminder as we head to break, if you want updates on the trades,

follow us on twitter @cnbcoptions and dan posts regular updates of his trades. you can stay posted on facebook.com/options action. final call from the options pit, that's next. ♪ [ 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. ♪

♪ you're as cold as ice >> all right. take a look at this. talk about freezing in the headlights. a pair of deer trapped on an icy nova scotia lake were recently blown to safety thanks to a resourceful helicopter pilot. it started when a doe and her offspring wondered onto the ice a pilot used the chopper's downdraft to blow them to safety. that is a nice addition to "optional viewing." nice, happy ending for a friday. time now for final call. >> i like dan's put, but let's

not set it and protect it -- set it and forget a protection. you have to do something with that. >> i mean, listen, this is one that's in the money. i think you're looking to stay in the game on this one. i think you have some time to wait it out. >> mike? >> spg is a proxy for bonds, and i don't want to own bonds here. so i'm going to buy puts on spg instead. >> very good. looks like our time has expired. i'm melissa lee, thanks for watching. for more "options action" check out our website. we'll see you back here next friday. meantime, don't go anywhere. "money in motion" is up right after this. >> get more "options action," our newsletter packed with exclusive information and analysis. this is the extra edge you need. it's free when you register or visit the member center at cnbc.com. ♪

[ 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.