now, you stay safe.

it kind of banged around 50 and 40. it's found a bit of ek we bill ree yum. >> in facebook, on the first day of trading was about 63. really high. facebook had rolled over at that point. today on twitter, it was quite a bit lower, not quite 20% lower and in twitter today, put call volume a little to the puts side. somebody was trying to collect a nickel. kind of trade if i made it, they would parachute in and take it away from me. if you ignored that call, the put/call ratio would expect. all in all the market action handled this really well. >> we were talking about this on "fast money" last night. >> we talked about it yesterday

and this is pretty much where we expected options premium to be. that's just a complicated way of talking about how expensive options are. three months at the money puts, about where we predicted where it would be. where dan pointed out, options premium are a little bit lower. take a look at what happened to options prix yum at facebook over time. they fell really sharply. they probably will here, too. anyone thinking about trading options, there are good opportunities with twitter probably won't be found by going out and purchasing them. >> and your trade, dan, captures just that. the people out there, there are many. any retail investor in there is probably looking at a loss. >> i got this question all week, how am i trading the options

versus stock here. i'm kind of nervous. lot of people don't think this that this stock is going to rocketed up. given mike's point to high and volatility, you would want to be a seller of it. it's a straight overwrite. it makes a lot of sense. i'm going to lay it out, with the stock at 44, you can send the december 49 crawl at a $1. you can make $5 in your stock between 44 and 49. if the stock is below 49, you have taken that dollar premium. you annualize that, that's 27% over the year. to me, i think this makes a lot of sense, this is the sort of stock where applied volatility is going to stay high. if you can do this systemically and look to roll out calls 10%, this is going to be profitable

strategy. >> if you start overriding your stock position, you're long at 40, i don't know if i would go that far with the money. those at the money calls, you're discounting by how much you pay at that stock. by 10% or more every 90 days. you can really reduce where you're in the stock. but frankly, i think the upside is limited in the short term, i don't think you're sacrificing a great deal. >> i'm with mike here, the stock is insanely expensive given they don't make any money. particularly what it means, you get called away at the higher price. >> all right, let's move on to the other big story of the day, the barrage of filings indicating what hedge funds were buying and selling in the latest quarter. >> in the latest of these 13

filings, we learned how appealing gold is and that was a huge thing for big-name investors. leon cooperman took a new 2.9 million shares in free port. now when you think of gold, you think of john paulson, he boosted his holdings of anglo gold. that's after selling out of those holdings earlier this year and other managers like of greenlight capital kept their exposure through that. melissa, lot of gold bugs caught by some of these investors. >> domesti, thanks for that. should you buy gold or gold miner. let's call to the charts.

from carter brackenworth. >> it hasn't made a low since june. let's look at the chart. this is well defined down trend in the market. what is key is the move above the down trend that occurred basically four months ago, we visited the line again but held right here and held again, this kind of action, i'm going to get rid of the line, here's the same chart without the lines. it has the look and feel of well-defined bullish to bearish reversal. what's important here, you can down the line here, this is a triple bottom and the presu presumption. we like this here. downside is quite limited. upside potential is very high. >> all right, the technicals look good on this trade, mike,

what's working in favor of the gold miners, oil prices have come down tremendously. >> that is a really great point. very often what happens when you deal with mining stocks they're rising in value that helps them. energy expense are rising right along with commodity prices. expenses are rising with revenues. right now, though, we actually have a glut of oil, we were producing like never before. that was helping to keep a lid on energy prices. freeport is a stock i really like, it's had a heck of a rally off the bottom already. frankly, the mines themselves have been poor eer quality. but, maybe at this point, we might actually be looking at potential turnaround and also, the pain is over for gold to

metal itself. i'm inclined to go with carter on this. >> he's using a call book play reversal. call spread, you want the stock to rise to that short shell. short a put, you must be willing to buy the stock. mike, walk us through the trade. >> specifically the january 22, 25 call spread risk reversal. i'll collect 20 cents for those. to help pufinance the purchase 27 calls. there's a decent amount of volatility, it's deserved actually, one of the reasons i'm looking to be short more options than long. i'm will be forced to buy gdx. that's about a 10% discount to

where it's trading right now. i have 15% worth of upside between the 25 and 28 strike. >> i have a hunch, dan, that you don't like this trade. >> i love this trade. >> you do? no. >> when carter had me at asymmetry. i like the 22 put sell, that's a low, i don't like the 28 call sale, if this thing gets moving. >> i don't like it, though, how's that if i don't like gold. this is not a situation where you're trying to dodge a bullet and not get assigned on the short puts. want to buy gdx. that will cost $24 a share. he could be forced to buy it for

$22. tonight, scott is looking at yahoo! which continues to make new highs, in addition to scott, you'll find some great trader blogs. here's what's coming up next -- investors are betting big on retail, could they be making a mistake. >> big mistake. big, huge. plus, talk about the trade of the century, in just two months, they made 20 times their money betting on steel stocks. we'll tell you how they plan to make even more money when "options action" returns. [ male announcer ] once, there was a man who found a magic seashell. it told him what was happening on the trading floor in real time. ♪ the shell brought him great fame. ♪ but then, one day, he noticed that everybody could have a magic seashell. [ indistinct talking ]

[ male announcer ] right there in their trading platform. ♪ [ indistinct talking continues ] [ male announcer ] so the magic shell went back to being a...shell. get live squawks right in your trading platform with think or swim 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 was a big week for retail with a lot of big names in the business grabbing their fair share of headlines, the world's biggest retailer walmart didn't help after beating forecasts but lowering its full-year forecast. on midscale department store side of things check out kohl's which missed analyst predictions. nordstrom took a hit when it lowered same-store sales expectations for the full year. now, one bright spot here. macy's, which rocketed higher with better profit sales and same-store sales growth. keep in mind, next week, we get even more retail reports,

including home depot and tjx on tuesday. you have jcpenney on wednesday, and then target on thursday. melissa, back over to you. >> thank you, dom. well, one retailer is raising red flags on this desk. let's head over to carter and dan in what we're calling tonight the bear's lair. >> we're looking at tjx. this is almost 50 billion, top five retailers. take a look at this comparative chart. this is two years, the s&p, as we know up about 50%. then you have the consumer discretion sector of which of course tjx is a parts, which is up 72. you have retail apparel stocks, things like tjx, comps like gap stores up 90, then tjx itself up 112. this is excessive any way you cut the thing. but take a look at a few other ways to cut the picture. well-defined trend line over the past year. and basically, we have blown out through the top. excessive. here's another way to do it. you can look at where the stock

is in relation to its mechanism. when you get this far above trend you're typically looking at some sort of give back. look at the long-term chart, right now we are 18% above trend, if you measure trend the way i do anyway. which is average. that is not a good place looking forward three months. >> i would add some stuff. because i have my own little pen here. listen, we didn't even talk about valuation, the thing is getting kind of expensive. here's a company that is actually executed very, very well in a very difficult environment. obviously, the stock reflects that. so, to me, you know, i start to look at valuation levels here for a company that is really not expected to grow a whole heck of a lot over the next few years. maybe low teens, it's starting to trade, it's at ten-year highs on a pe basis at 23 times trailing, so to me, you know, this is something where the setup into earnings, the implied move in the options markets is 3%. that's how much it's moved.

the stock makes new all-time highs every day. it's gone parabolic. >> should we draw on this? >> let's draw on it. you draw. >> how about like a well-defined breakout which means it's taken place. >> so it's reflecting good news. so what i would say, this company held its analysts' meeting and the stock is up 10% since then. a lot of news is out of the way. when they report next week, if you're looking to make a short term bearish bet, one way to do it implied volatility is really low, just buy near the money put for $1.25 when the stock was 63.40. that put right there gives you a month of exposure to the down side. the break even is at 3% implied move. i like it, it's cheap. i think that makes a lot of sense, if you want to look down at some of these names where you think the stock is priced to perfection. >> i'll refrain from commenting about dan's pen skills, which amount to at best pointing, i'm being kind. do you like this trade? >> i do. look at what happened to kohl's stores earlier in the week we highlighted activity in there.

some of the lower end retailers not doing quite as well as the middle to upper end, like macy's and nordstrom's. as dan pointed out, that's the sector above their historical multiples, that's reflected in valuation, and it's reflected in carter's charts, i would be inclined to lean on the bear side. >> well, not only is this option dollar cheap, it is cheap in relative terms, but the interesting thing is, it's the first out of the money strike, you don't have to go way out in the money and expect the stock to collapse in order to make moneys. >> we'll head to break. dan, i think you need to take lessons from carter about how to use the pen over there. coming up next, talk about a steal of a deal, they made 25 times their money in a month, we'll show you how they did it and how they plan to make more when we come back. [ indistinct shouting ] [ male announcer ] time and sales data. split-second stats. [ indistinct shouting ]

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time now for the upside call we take a look back on a winning trade a couple weeks back they made a bullish bet on a steel stock. the trade has been so successful some are calling it an instant classic.

♪ >> risking less and making more. that's what the average american is interested in doing nowadays. and indeed, that is just what mike and carter have done, with their bullish trade on cliffs natural resources. carter worth, let us bet on the mining company. >> you have to be long in a stock like this. >> agreed said mike. but just buying the stock? >> i was wondering how the market closed. >> well, mike wasn't. after all, 100 shares would set him back over $2,000, so to make a bullish bet, mike instead bought the december 24 strike call for $1.40. now, to make money, mike needs cliffs to rise above that $24 strike price by more than the cost of the trade or above $25.40 by december expiration.

but mike, surely you can do better than that. >> sell the december 28 calls. >> so, to spend less, mike sold the december 28 strike call for 45 cents cutting the total cost of the trade down to 95 cents. now mike will make money so long as shares of cliffs rise above $24 by more than the 95 cents he spent. or above $24.95 by december expiration. >> it's delightful. it's exciting. >> but to make his trade even cheaper, mike then sold the december 20 strike put for 85 cents. and created his call spread risk reversal. >> it's crazy music. did you dig -- >> what we're trying to say, is that mike has made making money even easier. and all it took was the ingenuity of simple math. that's because between the $1.40

he spent on the 24 strike call, the 45 cents he's collected by selling the 28 strike call, and the additional 85 cents he's collecting by selling the 20 strike put, mike has now cut the total cost of this trade down to a mere dime. and now, to make money, mike just needs cliffs natural to rise above the $24 by more than the 10 cents he's spending or above $24.10 by december expiration. >> i think this is the beginning of a beautiful friendship. >> it sure is. but remember, the tradeoff, you see, by selling that put, mike will now be obligated to buy cliffs natural at that $20 strike price. even if it falls below that level. but, it's all gravy, because since the time of the trade, cliffs' shares have popped. now, in what hollywood critics are calling the film event of

the century, carter worth and mike khouw star in, how can i make even more money on my cliffs natural resources trade? >> not quite the end yet. all right, before we answer the question, let's see how much money was made. had you bought 100 shares of cliffs at the time of the trade, you would have made about 20%. that's not bad. but mike's options trade required 10 bucks of premium and can be sold today 25 times that amount. that's some serious money here. so, carter, you got us into this trade. what do you make of cliffs and the sector in general? >> in principle, this is early stage. you're talking about a stock that came from 100 down to 15. and in a matter of technique, you don't buy on the way down, we bought on the way back up it was 18, 19, not until it was low 20s, then get involved. this move to 27 is still early stage. by my work anyway we're playing for 35. >> all right, so higher.

mike, where do you go? >> we need to roll this trade up and out. move it out to january, and move up your strikes basically, because we're right now at the upper boundary 27.50 bucks or so very close to the other strike. that's what we need to do. >> coming up next, the final call from the options pits. [ male announcer ] once, there was a man who found a magic seashell. it told him what was happening on the trading floor in real time. ♪ the shell brought him great fame. ♪ but then, one day, he noticed that everybody could have a magic seashell. [ indistinct talking ] [ male announcer ] right there in their trading platform. ♪ [ indistinct talking continues ] [ male announcer ] so the magic shell went back to being a...shell. get live squawks right in your trading platform with think or swim 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. ♪ teaching a panda to make it in the wild could cause pandemonium, staff members at this panda reserve have been wearing panda outfits to get a young panda acclimated to the wild. the panda costumes are coated with panda waste, so human smell doesn't give them away. she has been at the reserve and after 26 months of training, she was loaded into a training and headed to another reserve where she'll be released into the wild. and that is tonight's optional viewing.

time for the final call. the last word from the options pits. mike. >> if you're long twitter sell calls. >> carter. >> if you're long tj, you have to reduce exposure. >> web extra yahoo call calendar. >> dan. >> i'd say names like tj don't pick tops but define risk if it makes sense. >> our time is expired. we'll see you next week. "mad money" is up now. >> announcer: the following sponsored program for the butterball electric turkey fryer is brought to you by masterbuilt. everyone loves turkey. it's an all-american favorite. but preparing turkey can be such a hassle. it takes hours and hours to cook, and you worry about getting it right. will it be underdone, or worse, the dreaded dry turkey. now imagine if you could make the most savory turkey you ever tasted and the turkey was done to perfection in just one hour! introducing the butterball electric turkey fryer, from masterbuilt, the revolutionary