bye-bye. ♪ this is "options action." tonight, bullion breaks down. >> you mean them little cubes you put in hot water to make soup? >> no, not the lgtsz cubes. we're talking about the big gold bars. could a gold rebound be in sight? we'll break it down. plus, why is mike taking on floyd mayweather? >> i told him may 5th is open. >> this weekend's bout could mean a knockout for your portfolio. does the twitter ipo mean tech? we're breaking it down. the action begins right now.

live from the nasdaq market site, i'm melissa lee. these are the traders here on the desk. while stocks continue to soar, some of the momentum names that led the market are showing signs of fatigue. tesla shares taking a breather. netflix also showing signs of running out of gas as does zillo. is the market losing its mojo? let's get in the money and find out. dan nathan, what do you think? >> i would say, you know, they're taking a pause here. these things have appreciated so much so fast in such a short period of time. to me, i think the fabulous games year to date speak to risk appetite and, you know, there's been a lot of it. we're having one of the best years in the nasdaq and s&p in a while, but these things don't really represent value. to me, it does speak to the fact that people are chasing performance and they know they got it here. there's high short interest in these things. >> what does it mean if they're losing steam? if the fuel higher was the chase for performance? >> my question would be a pause on their way to where? these things -- i don't see how

you could possibly justify getting long these names or committing new capital to these trades at this point especially if the momentum portion is over. every single one of these stocks is really at nosebleed valuations. >> you could have said that months and months and months ago. >> i did. >> you did. exactly my point. >> as a matter of fact, netflix has been up and around the 300 level for a little while now. tesla, obviously, it had a heck of a rally. obviously i thought that was over -- kudos for steven p. grasso. even on valuation basis, listen to elon musk himself. he's not saying it's at screaming buy levels. he's putting a lot of cold water on this as well. >> also what steven p. grasso said today, he took profits in tesla. scott, i'm curious, what are they saying about these momentum names and whether that will continue? >> they're saying people are trying to get some protection. you know, for good reason. a name like tesla has come so far, so fast. the thing about the option market for tesla it's really the only way to short it because

insiders hold so much of it. for momentum names in general, i mean, isaac newton's lesser-known fourth law is that stocks run too far. and then when they run too far, it gets ugly in a hurry. netflix, the amazing thing there is not that it came all the way back but that it came all the way back and people were jumping on board. index traders love to watch the s&p open lower on the day, get all the way back to unchanged and then sell off. and that's kind of what netflix, i think, setting up to do. it got all the way back. now it's going to be ugly, i think. >> what does it mean for the market right here? >> right, market at highs -- >> netflix and tesla, these are companies that had 3, $4 billion market caps a year ago. now they're 18, $20 billion. so i think you're seeing a little bit of a rotation. we've just seen money come back into cyclical names that would benefit. so i think they're coming out of speculative u.s. stuff with high short interest. >> that would seem to me to be a good sign. >> it's positive. >> how does that sit with you,

mr. bear? >> it doesn't sit well for these names that i think, you know, have run out of steam. you know, that's one of the reasons netflix is a great name because it got news this week. it had two downgrades from the sell side. we also had carl icahn on the air earlier this week saying that he hasn't sold a share of it yet. this is a guy who bought it at the dead lows over a year ago at 70. now here it is above $300. >> so dan's got a trade obviously tonight on netflix. he's using a put fly. this one's a little tricky. let's open the playbook. you buy one put and sell two lower strike puts to reduce your cost. but to protect yourself, you then buy one even lower strike put. now, this may sound complicated, but the goal is simple. you want the stock to go to the strike or the puts that you sold. that's where you make the most money. so dan, walk us through this trade. >> the trade exists because of this. carl icahn rang the bell at the bottom. he's not at the top. if you rode his coattails, you're not going to want to wait until you get a press release saying he's out of it. some of the things to me show

the declining momentum, the gaps we've seen are doing so on less volume, short interest is at a two-year low. they've washed out a lot of the shorts. when you look at that chart, it's gone exactly haywire. i did make a short-term bet that the stock will pull back 10% to 20% in the next month or so. i'm using a put fly. i wouldn't short this stock with your money. i'm going to set up a structure where it's a set it and forget it trade. when the stock was about $304, i bought the october 280, 255, 230 put fly for $3. i bought one of the october 280 puts for 685. i sold two of the october 255 puts at 230 for a total of 460 and one of the october 230 puts for 75 cents. that cost me $3. that's my maximum risk. between 277 and 233, i can make up to $22 with my maximum gain

of 22 at 255. this is a set it and forget it trade. i'm willing to risk three to thread the needle in this case that the stock is down 10%, 20%. >> on the thread the needle trades, it's much harder when you use structures like this out longer in time. this one, because it's in october, this makes a lot of sense to me. the last time netflix hit these levels and then collapsed, it probably wouldn't have worked out. there you would have wanted to be an outright put buyer. here if you're going to try to be more tactical about it, a trade like this can make a lot of sense. >> congratulations, netflix, you're back at all-time highs. so i understand why dan wants to be short. the only argument i would have with this trade is i don't think this is a set it and forget it trade because more time there is to expiration. the larger the band is where this trade makes money. and so i would actually get out of this trade if you have a nice profit for that reason. >> i just have one last point here. in terms of these high-flying

stocks, we saw linkedin. the stock acts very well. you would think that that would be sort of not game over for them, but it would be a setback. how do you weave that into your belief that netflix will go lower when you see such momentum in the stock? >> i think, you know, we had carl icahn on the show last night. here's a guy who's a smart trader here. he's got fabulous gains. i think sooner or later you're going to start to see big holders take profits in this thing. so linkedin is still growing. things are growing really well. it's not nearly as controversial story. >> carl also indicated he wanted to get out of this stock earlier. his son prevented him from doing that. >> there was a wedge in the family. >> you have to think that that conversation is being engaged in again at this point because they've obviously enjoyed some enormous profits. little stocks versus options. want to short netflix? that's the financial equivalent of the lone ranger, expensive and pointless. put fly offers an almost 8-1

payout and risks just 30 0 buck. listen to this. this music can only mean one thing. the fight of the century. tomorrow night floyd mayweather takes on canelo. it's the pay-per-view totals that have the world abuzz. getting warmed up for the fight, dom. >> i'm getting warmed up. this thing is getting seriously billing. golden boy promotions is billing it, calling the fight "the one." it fully expects to break pay-per-view boxing records. richard schafer says he thinks there will be more than 2.5 million homes that will buy this mayweather/alvarez fight. to put it in context, here are the biggest boxing events of all time. first was the mayweather/de la hoya fight back in '07 followed by tyson versus holyfield and tyson versus lewis. we asked him to keep performing

the way he does. >> i stay motivated because the boxing world keeps creating these young, strong monsters in the fight game. the only thing i can do is keep working hard to beat these young guys. these guys want my spot. they want to be at the pinnacle. >> so if you want to watch this fight, guys, it's going to be 6 abu65 bucks for the standard definition feed. if you want to see all those blood, sweat and tears, it's going to cost you 75 bucks for hd action. a big boom for companies like showtime. >> sure is. and i've got to ask you, who you picking in the fight? >> i'll tell you what. i like mayweather. yeah, he's had some problems, a little bit of a rocky past, but he's still pound for pound the best fighter out there. >> dom, have a great weekend. thanks so much. and mike, this really underscores the growing demand for pay-per-view video on demand contest. >> and it's interesting.

despite the fact that you see rising content costs and subscribers at the cable companies haven't been able to grow as fast, their business remains quite strong. these are companies that have quite good returns. 12% on cash. we're talking about companies like the owner of this network, comcast, which is probably my favorite in the space. it's probably going to -- >> mine, too. >> conveniently enough. this is a company that's probably trading seven times next 12 months ebitda. it's consistent eps and free cash flow growth. i think also because it is so consistent, the options are relatively cheap. all i'm going to do is make a simple and straightforward and what i think is an inexpensive bullish bet by buying the april 45 calls, only $1 out of the money. i'm going to try and take advantage of the fact that this is just a stock that's gone up at a 45-degree angle. because of that, the options are relatively cheap. also because of it, i'm not willing to go out and purchase the stock. i don't want to go out and

buying stocks that are basically at 52 or all-time highs. >> take a look at disney. what a great week after announcing its buyback. >> what did they say, they're going to buy up to $18 billion worth. comcast is a unique one. it's a slow and steady one. it's up 18% on the year. if the markets are going to make new highs, then comcast is likely to make a new high. mike's option will number the money. he'll have the opportunity to spread it by selling it at a higher strike. this is a cheap option on a cheap stock that's doing a lot of things. >> this is as much a proxy as almost any we do. you don't want to sell that upside call. mike is buying an outright call so he's going really long dated. and that makes a lot of sense because that long-dated option is not going to erode very much until, say, the end of the year. >> comcast is the owner of nbc universal and cnbc. got a question? send us a tweet @cnbcoptions. scott's got a way to buy

facebook for just 20 cents. also check out our educational material and trader blogs. here's what's coming up next. mike's got a bullion problem. >> houston, we have a problem. >> that's because his bet on gold has gone bust. but with time left in the trade, could he still be sitting on a gold mine? plus, could the announcement of the twitter ipo mean the top is in for social media stocks? we'll break it down 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." time to get called out where we take a look back at some of our losing trade. last month mike made a bullish bet on gold. that trade has not worked out. in fact, it went so wrong, it's already become a cautionary tale on wall street. >> fame. >> close to $18 billion. >> the markets. >> power, fearlessness. >> people are concerned. i am looking to take advantage of that volatility. >> and above all else -- >> we need to believe that that story is, in fact -- >> risking less to make more. zbl you're the one that has the problem. >> i don't think anyone could have predicted that kind of success. >> this is the story of mike's gold trade. this is the true wall street story. >> reporter: growing up, mike had never been too interested in gold. >> i am not particularly a gold bug. >> reporter: but in august, all of that changed. the shiny stuff suddenly had a

magical allure. >> so it wouldn't surprise me to see it bounce here. >> reporter: but just buying 100 shares wouldn't be enough for mike. he had to have more, more leverage. so to make a bullish bet, mike bought the november 135 strike call for $4.50. now, to make money, he needs shares of the gold etf or the gld to rise above $135 by more than the cost of the trade or above 139.50 by the november expiration. but when he told his friends he wanted to spend $4.50 just to bet on gold, they couldn't believe he was serious. >> my jaw fell to the floor. >> reporter: that's when they staged an intervention and helped him turn a costly trade into a thing of options beauty. >> sell the other one against it for $1.70. >> reporter: that's right. mike sold the november 145 strike call for $1.70 and turned this trade into a call spread.

and in so doing, he kickeded his addiction to risking more. that's because between the call that he bought and the higher strike call that he sold, mike is now simply paying $2.80 on the trade. and now instead of needing the gld to rise above $139.50, he simply has to see it rise above that $135 strike price by more than he's spending, or above $137.80 by november expiration. >> he was at the top of his game. >> reporter: but there was a problem. and mike was now forced to contend with a serious tradeoff because by selling that 145 strike call, mike capped his profits to the difference between the strike of the call he bought and the strike of the call he sold, minus the 2$2.80 e spent. and since this now classic trade, what's happened? well, gold has moved lower, meaning this trade hasn't worked out. so what's mike going to do now? will he keep trying to cash in on gold? or has that moment already

passed him by? that's something fans around the world are trying to figure out. but while they do, they'll still remember when mike changed the face of options trading forever. >> can you win a nobel prize for that? >> all right. perhaps this might offer some solace. had you shorted 100 shares of the gld at the time of the trade, you would have lost about 600 bucks as gold has gotten whacked. but if mike were to close out his gld trade today, he'd be looking at a loss of about 155 bucks. certainly not great. november is a ways away. there's a crucial fed meeting next week. so mike, what are you doing at this point? >> you know, one of the reasons we were using options, i think i said before, i'm not a gold bug, but if i was trying to play for a bounce, one of the things i wanted to do was try to risk less. at this point, this is trading for about 1% of the value. i'm not going to take it off. i still have a little bit of time. keep an eye on that higher strike call. a little over 40 cents. if it starts coming in much more, you may want to ride the other one.

>> mike has a little company. yesterday somebody bought 28,000 of the october 131/135 call spreads. so somebody is playing for a bounce. >> i think when you're in a trade that's not working, you bail, you pull the plug because then you can take a step back and reevaluate. next, the ipo of the century. that might be overstating the case, but could the twitter ipo signal the massive rise in internet stocks? we'll discuss that when "options action" comes right 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. ♪

it's the first pure social media ipo. >> what is this thing going to be worth? >> 10 to 10. >> 10 to 120. yeah, that's what people have been saying for a while. >> that was cramer talking to the coo of buzzfeed saying twitter could fetch as much as $20 billion when it finally goes public. year to date performance of some of the new internet stocks nothing short of remarkable, but could a twitter ipo signal the end of this torrid run? the question here is first of all does twitter suck the oxygen

out of the room in terms of money that can be allocated to some of these other stocks? >> first of all, the amount of money already committed to these, when you look at the market cap in the tech space that's so enormous, on the margins, could it? i think it certainly could. don't forget even if it does fetch a $20 billion valuation, that doesn't mean they're going to float $20 billion right off the bat. let's assume you'll have $3 billion, $4 billion worth of stock sold. >> look what just happened to facebook. facebook just doubled in market cap. it went from $55 billion in market cap to $107 billion. to me, i think there's money coming out of other areas. they think this is the next growth phase in technology. think about all these companies you've been invested in as far as technology is concerned with no growth, and you don't really get great returns. and now all of a sudden you have these things -- >> i think facebook and twitter and linkedin really are unto themselves in this space. i think twitter -- the interesting thing is they already know how to monetize mobile because they do it better than any of those other two.

i think twitter may do really well. certainly better than facebook. >> it's extremely sticky. you were mentioning before, content is king. twitter has become a key source of content especially people trying to follow news in realtime. even for traders. i don't know too many that don't have twitter up because sometimes you'll look at your wire, you hear something's going on. >> can i tell you what you should do? >> and it spreads. >> facebook filed on february 1st, 2012, went public on may 18th, 2012. we have months before twitter's going to go public. we may see a binge in the private markets. this may get things like stock twits, people may find some of these more nichy sort of players because maybe they're the next ipo or next stage of growth for a twitter to me. that's something that's kind of interesting. but, you know, listen. twitter is a pure play here. >> going back to your trade on netflix, sort of the whole take on that space, take a look at these growth stocks. when they say i need this allocation to social media, they say i need this allocation to

growth. therefore would you be concerned at the margin will this put downward pressure? >> we talked about it last night. facebook, the first year it was public, had over $5 billion in sales. right now the s1 that they filed means they have less than $1 billion. they're expected to grow sales 100% a year. putt-putt a that's really great growth and that's what real growth and tech investors are looking for. >> 15 to 20 multiple on the revenue number. i think that's what's interesting. >> well, don't worry. there won't be any earnings for a while. >> exactly. particularly if you're yelp. i think there's plenty of oxygen for all these players given the valuations right now. >> speaking of twitter, follow you us @cnbcoptions. if you're on facebook, stay posted on our trades from throughout the week at facebook.com/optionsaction. coming up next, "the final

call" from the options pits. >> get more with 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.

♪ [ 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. ♪ passengers landing at prague's airport could catch an unusual sight near the runway. a beekeeper has set up six apiaries. it's used to test for pollution. really? they dissolve the honey and test for harmful substances. scientists say they've gathered valuable information about the condition of air, but there's an added benefit that they produce high-quality honey that's presented to visitors at the airport. who knew? i didn't. that's tonight's "optional viewing." time for "the final call."

the last word from the options pit. scott. >> check out this week's web extra. >> dan. >> netflix designed risk bets. >> looks like our time has expired. check out our website. see you back here next friday. "mad money" is up next. program for the shark steam & spray mop is brought to you by euro-pro. >> i've been using the shark steam mop for years to clean and sanitize my wood and hard floors. >> i've always thought that to get tough cleaning jobs done right, you need a strong chemical cleaner. >> i do wish i had more help with tougher, greasy, stuck-on messes. >> i'd love to be able to sanitize all my wood and hard floors without harsh chemicals. >> both: wouldn't it be great if -- >> hey. shark added a spray cleanser to my steam mop. >> no, shark addedhe