hey, mr. jones and my friends in el paso, texas, i'm going to be seeing you soon! now all of you, stay safe this is "options action." tonight, about face. can earnings save facebook? >> trap the gun. just facebook. >> brian stutland says yes and he has a way to get long for just under a buck. he'll break it down. plus, talk about a magic trade. dan nathan has a way to make money on disney if the stock goes up, down or nowhere at all. ♪ >> it ain't no fairy tale. but it is his trade on the mouse house and he'll show you how you can make money, too. and gamble on procter?

scott nations has a trade to quadruple your money the action begins right now. >> i'm melissa lee. these are the traders here in times square. stocks continue to flirt with all-time hikes but the options action desk has a bold message. don't believe this hype. this rally is masking some pretty troubling signs. let's find out why and what they're thinking about and let's start with the desk skeptic, who made a nice little wardrobe change, little -- you put a little clark kent action, with the jacket. >> super strength here. hey, you know, it's interesting. you know, one of the words of caution as we're heading into earnings season was the preannouncements. they were coming in hot and then we also had at that time a lot of macro fears. but the market hasn't cared. the s&p is 1% from the all-time highs. we had the gdp print this morning that was obviously disappointing. next week, next friday, that

nonfarm payroll number, that was the thing that got people worried in early april because of the march number. this is the thing, as we head out of earnings season and really see what the u.s. economy is looking like, that could be the reason that causes that 5% correction that everybody's waiting for. >> yeah, i mean, i think the troubling thing from a bearish perspective would be that so many stocks going into earnings season are at or close to 52-week highs. i want to bring carter in, because you've been taking a look at some of the stocks and how they are reacting once they do report. >> sure. in the sense, there's no such thing as positive or negative news. positive or negative earnings. what there is is news and how the stocks react. what you'll see is we're getting a lot of stocks actually that are beating consensus estimates, 75%, but 3 to 1 they are dropping. so, the response, if it's a beat or not, is that shares are being sold into the news. even if it's a so-called beat. this is not a good tape. >> all right, so, how do you protect yourself? >> well, you know, certainly is a volatile market.

we saw in a little microsecond this week, we had that fake news out on ap news wire and the markets collapsed just like that. only to pop back up because there was no warnings, or such bad news about it. they were able to recover there. but that little microsecond gave you insight about how the market could sell off, if we have any big sized ordered that want to start taking profits here. i think you have to use some protection, if you are going to sell calls against your long stock positions or use this vix level here to buy put protection here that we've seen the small caps have their 4% selloff. the question is, does the s&p, is that next and maybe a 3% to 5% selloff, that's when i'd want to sort of reup and get back in this market. >> i think the amazon story is a one off in that we've waited for amazon to take a big header for a long time. and it finally did today, down 7%. but even today, more amazon calls than puts traded. so, i think there are people who were looking for a chance to get in a lower level, so, they bought some calls so they wanted to define their risk.

p&g took a step back despite decent numbers but it just made a 52-week high at 82 bucks. the exception that proves the rule for me would be netflix. netflix did really well despite the fact that a couple years ago -- >> total outlier. >> amazon was an outlier. >> i want to go with carter. i think it's the velocity of the moves. woo mentioned them before. the procter & gamble and the bristol and the way these things have gone down from 52-week or all-time highs. that's what scares me on volume. >> right. and consumer discretionary, the same case. and dan, you are looking at disney. >> yeah, listen. disney, i'm not going to sit here. the stock is 1.5% from its all-time highs. i'm not going to tell you things aren't going well. things apparently are going very well there. when they reported a couple months ago, the problems they had in the ad market at abc and espn have gotten better. there's goond demand -- good demand at their parks, the movie studios are looking better. things are really good. but it comes down to a situation

where the stock is up 24% year to date. this is a company that's growing at low teens and trading at a five or six-year multiple high. it's where can it go? i'm not going to commit premium here. they are going to report on may 7th. i think if the quarter is good, i think it's in the stock here. so, i want to use options, i want to sell premium and take advantage of the potential for the stock to consolidate or go longer and i'm not that worried about a meltup at all-time highs. >> dan is selling a call spread on disney. usually we buy them, so, here's how the structure works. it's i bearish strategy. you sell one call and then define your risk by purchasing a higher strike call of the same expiration. you want the stock to trade below the strike of the call that you're short that way you can keep the profits. above that level, you will lose money, but your losses are capped at the strike of the call that you bought. dan? >> when the stock was at $61.85, i sold the may 62 half call spread. i took in 75 cents of premium. i sold one of the may 62 half calls at $1.10. i bought one of the may 65 calls for 35 cents.

i profit, my max profit is 75 cents, okay? that's not a fantastic risk/reward when you think about it, but i laid it out here. i think there's a good chance the stock is going to consolidate. my max gain is the stock is below 62 1/2, i take in that 75 cents. i'm likely to cover it before then. i'm not going to wait for it to happen. and then my max risk is $1.75 between $63.25 and 65 to the upside or above that. the question here is, first of all, do you like the trade structure and would you choose disney of all the stocks you could do this on to do this on? >> well, i think the trade structure itself, receiving option premium here is a good move. we've seen that get bit up more than normal into an earnings play on disney. that's a nice sell there, take in premium. i would caution a little bit. i rather wait a little bit here. you have, you know, you have "iron man 3" coming out next weekend. that could be a billion dollar movie for disney. i think the stock runs up into that, maybe on the monday following. i'd rather sell that call spread

into that and look to maybe initiate a trade like that. certainly disney is a great overlay type stock to do -- >> i don't particularly like this. and dan makes this point fairly. you're risking a lot to make a little and i'm not a big fan of that. that said, you don't own the stock, you can't sell to make the calls. you got to sell a call spread. and so, if you don't own the stock, that's what you have to do. one thing, the call that he is buying tends to be that far out of the money, sends to be the cheapest, or the cheapest option on the board, so, the math is kind of working for you here. >> just to broaden this out, what other types of stocks would you put this trade on for? other people are thinking, i feel the same way about a lot of the pharmaceuticals names -- >> that's a great question. what i'm doing here, i'm trying to be neutral. i'm not trying to commit a lot of long premium to this. i talked about it just before in johnson & johnson. i own those 82 1/2 puts. they evaporated in may. i had to roll them up. this is not what you want to do, trying to pick tops here. this is a great strategy that

keeps you in the game, it defines your risk and you're not long this premium. >> yeah, good point. let's wrap this up. hit a little stocks versus options. bet against the mouse house and get short disney, that carries unlimited risk. dan's call spread defines his risk to $175 and can make money if disney shares go up, down or nowhere at all. let's go to everyone's favorite stock not named apple. what is it? facebook. shares of the social media giant getting a 3% boost thanks to an upgrade today and just within the hour, the company announced that venture capitalist jim breyer will step down from the board. but will investors like the stock when it reports earnings next week? cnbc's well-liked media reporter julia boorstin is here to break down what investors need to know. julia? >> well, thank you, melissa. the big question for facebook is all about mobile. is it making more money from users on their mobile devices. wall street analysts expect more than a quarter of revenue is expected to come from mobile. that percentage number and quarter over quarter revenue

growth are key. other hot topics include the success of new ad formats in drawing more ad dollars and if facebook is generating higher margins from users outside the u.s. than it has been. analysts expect revenue to grow 36% to $1.44 billion. on earnings of 12 cents per share. as you mentioned today, raymond james upgraded the stock to strong buy from outperform, anticipating ad strength in the quarter. while goldman sachs says it expects it to speed up. on new ad products. of course, melissa, everyone will be listening very carefully to mark zuckerberg's comments on the call, looking for insight into new potential business down the line. >> hang on there. brian has a question. >> you have heard anything about the facebook home page, how successful will that be, will that drive ad sales here in their mobile devices, drive revenue to the company? >> well, it's still too soon to be seen. obviously we would love to hear reports on how successful it's been.

when it launched in android, the reviews on the android store were not great. they were kind of mediocre. but it's only been available to a limited number of people. so, i think that we'll see what happens when it rolls out to more and more users. they are making some of those features available to iphone users, but i think at the end of the day, anything that makes its mobile services stickier, more appealing, is probably a good thing for facebook. >> julia, thank you for that report. okay, so, brian, you've got a trade. what is your fundamental take on this stock? >> well, if you look at facebook long-term, i don't like it. a company that's, you know, multibillion dollar valuation, it hasn't had any earnings, people are just waiting for it to catch up in the game of ad sales revenue. and i think it needs to actually transform itself as a company to get to that next level, to get through $30 a share here. but short-term, if you look at the stock, it's held at this $25 level. it's bounced off of there. it feels like it's been oversold. maybe heading into earnings, if they have good things come out on the conference call, that's

what i'll be watching to see if zuckerberg makes any indication about this mobile revenue generation here. maybe short-term we could get a pop. >> so, brian is bullish. at least in the short term. he's doing a call spread. a good beginning strategy. bullish strategy once again, when you buy one call and sell a higher strike call against it to reduce the cost. the goal? you want the stock to go to that high strike. that's where your profits are capped, though, so, what's the trade? >> well, i'm looking at the regular may expiring here. if you look at the may 28 calls, i want to purchase those, at the same time, i'm going to sell the may 31 call. so, net on this trade, i was looking -- i put this on earlier today, paid a little over 70 cents, it closed around 70 cents today. this is sort of a bet, i'm risking one to make three here. i like the payout here. if you look at facebook, it's moved 10% on earnings. over the past couple quarters. so, some stocks have been a little bit, they're movement's been a little dampered here. vix is low, volatility is low. if we get a pop up, it's a great

payout. and you are only risking 70 cents. if i'm wrong, i'm out of the trade. i don't want to hold this stock if the picture turns out bad. that's why i'm sitting with a call spread. taking a shot for the upside here. >> so, let's connect the dots here, dan. if you didn't like disney because you are worry about ad spending -- >> then i hate facebook. >> all right. >> what brian's doing with a call spread, it makes sense. this company is going to have so many fits and starts and there is so much supply here. so, to brian's point, the least bit of bad news, the stock is going to break 25, it's a massive support level. this is a stock that's massively underperformed. this year, it's flat on the year. i think you want to define your risk. i don't really see it going higher any time soon. >> one more time here. stocks versus options. want to buy facebook, 100 shares will set you back just under $3,000. brian's call spread offers a three to one payout and sets him back just $70. got a question out there? send us a tweet. we'll answer it on our web extra, right after the show, on our new website.

and scott's got a trade on procter & gamble that can quadruple your money by july. you want to check that out. here's what's coming up next. after a massive rally, is gold the greatest short of all time? the charts say yes. find out why. plus, talk about a bank robbery. dan's bearish bet on goldman sachs looked as good as gold but then the shares staged a speedy recovery. how can he cash in now? find out 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. ♪ welcome back to "options action." it is official. gold has gone wild after its worst drop in 30 years. largest two-day gain in 15 months this week. take a look at this chart that's no commodity. that's a painting, folks. $1500 an ounce is a battle line for gold. you get it. if gold can break through there. investors believe a floor could be in place. so, what's behind bouillon's breakout? several factors including short covering, slightly weaker dollar here. let's call to the charts here and get to carter with his outlook on gold. >> sure, this is a fairly well defined moment in time and let's look at it very carefully. the first chart i have is a chart of gold in the short-term and of course, what you see is the well defined level from which it broke. and these are direct quotes from

1930s. anything stock, currency, commodity index that breaks from well defined level and throws back to said level. that's what we've done now. we ricocheted violently. almost to the underbelly here. that's an excellent reshort. look at the long-term chart. it's the same line in the sand. the reason why it's an excellent reshort is because once something plunges, you have all these people that are trap and they don't want to dump it at the low but they want to get out. when it rallies back, they become interesting sellers. you have a lot of dead bodies up above, you are into overhead supply, sell gold. >> all right, we should note that carter was right the last two times gold broke down, so, that's why we want -- there are many reasons why we want to listen to carter, but in particular, on the gold trade, he's dead on. >> i'm trapped by his genius on the charting of that. so, you guys asked me to do this. if you want to play that reshort that carter just mentioned, i have no view on gold right here, but the technicals, i agree. i think that 140 level is huge.

if you want to look for a defined risk way to play with options, they're expensive, straight up puts are expensive and verticals are expensive. i want to look at a butterfly in july. to express a bearish view. i priced this up today, when the gld was at 141, the july 140, 130, 120 put butterfly cost $2. buying one of the july 140s, selling two of the july 130 puts at a total of $3.60 and one of the july 120s on the back end for 80 cents. so, between, here is the break evens. between $1.38 and $1.22, you can make up to $8 and you are only risking two. above 140, that's a dollar away from the money. that's where you loss the two. i think 120 is a massive, massive long-term well defined support level. >> i think the interesting thing here is if you look at that chart, going back to october, since then, gold has made lower lows and lower highs. it's bounced back almost to that trend line. it probably is a good place to get short, but dan is in good company. implied volatility in gld today was up 10%. there are plenty of people that thinks there are more down side.

>> my model that we run is right at 138 on the gld, so, certainly there could be down side here. we've gone ahead and sold some in the money calls against our long gld exposure. in case gold falls back down lower. so, that's interesting that the 138 break even level, we probably are going to be due for that, to hit that level, maybe go further and that's where dan's trade would pay off. shares of goldman sachs have been on a mini-rally. in the last two weeks. could now be the time to get short the banks? we'll debate it when we come back. ♪ [ 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. ♪

welcome back. time for total recall, where we take a look at the trades that have yet to work out. now, a couple weeks back, dan made a bearish trade on goldman sachs. the stock has since moved against him, but he hasn't lost any money. and here's why. on "options action," it's the one rule you can bank on. risk less so you can make more and that's what dan tried to do with his bearish bet on goldman sachs. dan thought gold man would stumble. >> i think it could be vulnerable.

>> but just shorts the stock? >> that's living in denial. >> it sure is, because shorting any stock exposes you to infinite risk. to make a bearish trade and define his risk, dan bought the may 145 strike put for $5. now, to make money, dan needs goldman shares to drop below 145 but more than the cost of the trade or below $140 by may expiration. but paying five bucks just to bet against the bank? >> snap out of it! >> dan, let's do this for less. >> i sold one of the may 135 puts. >> so, to cut his cost, dan sold the may 135 strike put for $2 and created his put spread. but he did something even better. he made making money easier and here's how. between the $5 he spent buying that one put and the $2 he collected by selling the other, dan chopped down the total cost of his trade to just $3. and now instead of needing goldman to drop below $140 to

make money, or $142 by may expiration. >> you're good. >> but remember that there's a trade-off. and by selling that put, dan has capped his profits to the difference between the strike of the put that he bought and the strike of the put that he sold, minus the cost of the trade. and since dan put on the trade, goldman shares did slip, but they eventually came back, meaning that his trade is now neither a winner nor a loser. now, fans around the world want to know one thing. what will dan do now? before we answer that, you might be wondering if dan is so bearish, why didn't dan just buy a put? why mess around with all this put spread business? let's play options versus options here. where we explain how the strategies make money. had you simply bought the may 145 strike put, you'd be looking at a loss of $160. dan's put spread cost 300s the

and can be closed out today with almost no loss. is this some funky bank trick? no, it's actually just a simple math of options. the decline in the value of the put that dan sold offset the decline in the value of the put that dan bought, meaning this trade right now is basically a wash. so, what do you do with this? >> here's the thing. as you are going to enter the twittersphere on monday, if you people do that, too, and you follow the show and me, we update our trades, okay? i took this thing off at 140, the stock held after earnings, okay, it was down 7.5% following the earnings and i took it off for a nice gain here. so, at this point, i'm really neutral. i think the stock has the ability to test 150 on the upside again. and so i think you probably take this one off and you move on. >> all right. coming up next, we have the final call from the options pits. ♪ [ 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. ♪

♪ the king of pop is helping liven up rush hour in one thailand community. a construction worker in northern thailand spends his free time as a traffic volunteer and if his gestures look familiar, they are modeled after michael jackson. the man said he volunteered for the job because traffic officers not being there led to accidents in the past. that is tonight's optional view. he needs the sequined glove. all right, time for the final call, the last word from the pits. scott nations? >> p&g has pulled back from 52-week high. now below the average. in this week's web extra, all about how to protect yourself. >> dan? >> want to make cautiously bearish trades here, not all long premium. be short premium for consolidations. >> brian? >> i wasn't the only one buying that facebook call spread. big institutional trades going up on that. i'm a buyer of that call spread. >> all right, i'm melissa lee. thank you so much for watching. our time has expired here. i can't believe i'm going to say this, but on monday, find me on twitter.

i'm going to start on monday at 5:00 on "fast." check out our website, as well. see you back here next friday at 5:30 p.m. eastern time. "mad money" with jim cramer starts right now. [cc] [♪...] >> announcer: power... precision... cutting edge... the two-in-one worx gt is both a powerful grass trimmer and a precision edger. the new lithium-powered worx gt, for a perfectly groomed lawn every time. >> hi, i'm van potter. >> and i'm robin hartl. >> if you own a home, you know how much time, effort and equipment it takes to maintain a well-groomed lawn all season long.