compelling which is that options

are very close to all-time lows in a lot of places. you're looking at something like an index. >> if you want to express your point of view, then buying outright options when options are cheap, that's the way to do it. i don't agree with this. housing prices have done very, very, very well. i think that's why this space is in good shape, for example, today we saw two calls trade for every put. home depot -- is this as good as it gets? we saw all the major banks tell us that mortgage originations are down massively. mortgage rates are up 1%. >> laid off people. >> i don't see that. >> because everybody in the world has refinanced their mortgage at all-time lows. >> originations scott. originations. if you want prices to increase you need new buyers. >> housing starts are at an annual rate of one million on this. >> i've got to blow the whistle. you guys can argue all night. let's talk about a market

mystery. china's stock market is in the gutter. gaining stocks is one of the surprise winners. don chu is back at cnbc. >> melissa, you want to talk about hitting a hot streak. if you look at some of america's biggest gaming companies and casino operators. on a down day for the markets in some way or show, names like wyn, las vegas sands are heading to the up side. the rest of the broader market is trying to keep above water for the year. these stocks have been on fire. las vegas sands is up 4% year to date. wyn is up and mgm is up around 12. this isn't a vegas story. like you said, it's a china one. these companies all operate asia gaming hubs to operations in macau as well. last year wynn generated 70% from macau. macau hit a gaming record in 2013.

the bullish story is there if the macau story. >> thank you, don chu. the question, will the gaming streak continue. let's go to carter. hi, carter? >> i think the exposure and if you're a short seller, get in motion. two charts. first you have something that's basically gone from 80, almost triple. having been on a well-defined trend, it's now too far above trend. this is a problem. meaning, if you can stay at a 45 degree angle for a long time you can sustain it forever. this is euphoric. it's excessive. we think that's the problem. now the five-year chart or since inception. you can call your patterns anything you want. a lot of people talk about cups and handles. that is a cup and handle. you'll notice from this 150 level, the stock, of course, broke out. there's a textbook thing from the 1930s called a measured move. this level here 150, and this low of 85. sf you take the difference, it's

65 points. if you add 65 points to 150, it's 215. that's exactly where the stock went today. that is exactly where the stock closed today. it has met its price objective for a measured move for this cup and handle. take your profits. >> wow. i love when technical analysis can also marry with history. my favorite two subjects. mike, what do you think in terms of the fundamentals? >> this thing is trading almost 30 times the 12-month earnings. that's troublesome for me. the other thing is macau which is where all these people are making their money, they have 93% plus occupancy. great overnight rates and great table drops. how much better can it really get? this thing is going to grow bps by 10 to 12% over the course of the next 12 years. 30 times earnings is rich. the options are cheap. much like dan, i'm going to go ahead and buy put. >> buy put? >> buy put. >> that's not as fancy. pocket square. a simple trade. >> the put i'm going to buy.

the june 200 r can pay $8.90 for those. i want to give myself some time for those to play out. if this thing comes back, i'm going to look to spread it. right now options are just too cheap to get fancy. >> when you think about it, the shanghai composites like the multi-year lows is hovering this two-year low. that's a bad press on the short side. what's the great press? a company that gets 75% of its sales from macau in a region that if things do go haywire, you're going o it want to short stocks like this. that will imply volatility. owning a $9 option on a two-year stock with time to play out, i like those at all time highs. >> i'd rather wait to see this get ugly before i get in. >> little bit ugly? >> that's right. why do i want to get in front of that freight train. i want to stay the hell away from that. >> we're not shorting stock. we're taking advantage of the stock prices low. that's well. >> the option could cost me $1. if the stock keeps going higher, we're going to lose that dollar. i don't like this because the stock is going higher. mike does make a good point about why he's not doing a spread and what he's going to do if the trade works out.

he's going to spread out of it because implied volatility will jump if that happens. >> you guys are so fiery on our fifth anniversary. five years and you're just duking it out. you guys are boos boosem buddies on the trade. >> got a question, send us a tweet on cnbc options. that's after the show on the website. this week scott explains how you can use options to predict dividends. in addition to scott you'll find trader blogs, educational material and exclusive trades. check it out. here's what comes up next. ackman's at it again. >> we have shorted the stock. we have covered our shares. we believe in -- we have more to come. >> we'll tell you why huge herbalife trade has his fingerprint all over it. plus, why should you be afraid of "the wolf of wall street." because believe it or not, it could signal the top of the market when "options action" returns. [ indistinct shouting ]

♪ [ 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. ♪ [ indistinct shouting ]

♪ [ 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. ♪ we shorted the stock. we have not covered our shares. we believe in what we -- and we have more to come. we believe it's a pyramid scheme. >> who could forget that moment. that was bill ackman wagging war on herbalife and carl icahn. this week herbalife shares have fallen. investigate gators are speculating that ackman was

speculating a put on herbalife. >> this was when the stock was above $80. this was before the new skim news. the activity caught a lot of people's attention on january 9th. the stock puts was above 80. the next day they bought 20,000. the break even was 50 cents from here. this is how much premium that buyer bought. this became the single largest line of open interest in the name, that's why there was speculation. that's why there was an interesting short position. when you think about it, that's where the stock was. that's where the puts were. the break even was down here. 4281. that's a big, big move. let's look at what that did with the implied options. wow, look at this spike right here. that person went in there. they bought all these options. it jacked the price of options back up to the levels where the stock was cratering below 40.

now where the break even is. if we look forward here, look at what's going on. let's look at the technicals quickly. i don't have my carter hat on so much here. this is the $60 level. the stock closed at about $71. it was $81 a few days ago. it was down 15% on this nu skin stuff. the 200 day momentum indicator happens to line up right here at 60 bucks. that was a big support resistance line here. i think as a trader that's a line that i want to play for. i think the momentum is broken. i think there is a new player here and maybe they're doubling down. today when the stock was $71, i did something that is a trade that you would do if you think implied volatility is very high, which it is, and you want to play for possibly a move where implied volatility, the price of options comes in. you want to make a directional bet. what i did is i bought a butterfly. what i wanted to do is get near the money a bearish bet near the money. so i bought the february next month 70, 60, 50 put butterfly.

i paid $7.05 for one of the feb puts. i sold two of the february 60 7. i sold two of the february 60pu. i sold two of the february 6 pu. i sold two of the february 60 puts at a total of 744 and i bought one of the way down feb 50 puts. that cost me $1.50. when you think about it, that trade breaks even between 68.50 and 51.50 in the next month. if you get a massive downdraft you'll make multi-at this pointless. above 70 i risk that 150. look at what the risk at put. 71, you could never do that. the margin for error is very low. >> there's a couple of issues i want to deal with, the trade, but also whether or not you really think ackman went back in. >> i don't know who else it could possibly be. who's going to spend 10% of the price of the stock to make a bearish bet of that size? there's probably ten people on earth who might do that trade and one of them has already tipped his hand. it's got to be him. >> he's already had his head handed to him by shorting the stock so he wants to define his

risk. he said he thinks the stock is going to zero. anybody else in the world would buy a put spread if you think your stock's going to zero and bill ackman's the only guy in the world who thinks that. you buy the outright one. >> if it is he, it's doubling down. that's aggressive. as the chart goes, just the line that you drew, dan, the 60 level is a lot of support. i would say there's not that much downside. a quick trade to 60, but maybe not much more than that. >> there was also this "new york post" article saying that ackman was going to present his notion of how herba life does business in china. >> it's interesting the timing and this coming out possibly in a presentation. >> the fact that you saw these two big trades before the nu skin news is interesting. whatever he's got, i think he's throwing every kind of smoke he's got at this trade and he's really clinging to life. all right.

coming up next, fear of the wolf. "wolf of wall street" was made a picture oscar. could that actually be though a warning sign to investors? we're talking movies and markets when "options action" returns. ♪ [ bell ringing, applause ] five tech stocks with more than a 10%... change in after-market trading. ♪ all the tech stocks with a market cap... of at least 50 billion... are up on the day. 12 low-volume stocks... breaking into 52-week highs. six upcoming earnings plays... that recently gapped up. [ male announcer ] now the world is your trading floor. get real-time market scanning wherever you are with the mobile trader app. from td ameritrade.

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.

greed, for lack of a better word, is good. greed is right. greed works. >> of course that was the classic moment from oliver stone's "wall street." but there is a curious relationship between hollywood's relationship with wall street and the stock market. carter is the star of his own chart. he's got more on this. carter? >> sure. so the setup here is there's an old time indicator called the magazine cover indicator when mass media or broad media picks up on something, typically that thing is reaching end stage. you see this for "time magazine" when they put bull and bear and so forth. this is now an adaptation of that as it relates to the movies from portfolio manager john stevens. this is quite interesting. this is of course that clip we just saw. this is the 1987 peak and the movie "wall street" with michael douglas came out. the movie "boiler room" was

issued in 2000 at a market peak. the rerun of "wall street," "wall street: money knows no sleep," at or near top in '07. here we are, "the wolf of wall street" leonardo dicaprio, certainly this is not a bottom. this title itself, "the wolf of wall street" appeared once before, 1929, there was a movie with exactly that time, "the wolf of wall street" issued by paramount in the beginning of '29, mid '29. there's some rhythm here, some rhyme and then we've got this. this is borrowing from all member firms, customer accounts. you have margin peak, you have a margin peak. this is 2000, this is 2007. we now have record borrowing on the part of retail customers across wall street to purchase.

>> i feel like twilight zone. >> we put that together with some of this stuff, i don't know. >> a big part of investing is risk-reward and the risk-reward relationship in the market right now seems really questionable. we have options premiums, we have the market trading at a very high valuation. we have a lot of liquidity. some of which could dry out. as much margin debt as he was indicating. i just feel -- >> i want to duck and cover and get under the desk and cover my head after i see that. "wolf of wall street" has the same movie in 1929? listen, mike makes the point that options are really cheap. we said before, buy protection when you can, not when you have to. and buying -- buying puts on spy is very cheap right now. i'm going to -- i'm going to eat my own coat, and i'm going to wait a little bit. we saw a couple days this year so far where it looked pretty ugly, the market bounced back. i would be pretty quick to pull the trigger if things started happening. >> mike mentioned liquidity. what do we have? we had a taper tantrum. the markets sell off 7 1/2%.

the fed has taken their foot off the pedal a little bit here. that's going to infuse some volatility. >> five months at the money protection in the s&p for about 3.5%. that to me just seems like a very cheap hedge. >> coming up next, what do these four shows have in common? the answer will shock you. we'll explain after the break. [ indistinct shouting ] ♪ [ 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. ♪

[ indistinct shouting ]

♪

[ 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. ♪ ♪ happy anniversary, baby happy anniversary, "options action." you don't look a day over four. >> a little known fact. a little more than five years ago one of the executives at cnbc came to me as "options action" was on the drawing board and said, tyler, what do you know about options? for once in my life i answered honestly. i said, nothing. absolutely nothing. thank goodness you, melissa, and the whole team at "options action" do know something about it. congratulations on your fifth anniversary.

>> as someone who's been in tv longer than i'd like to even think about, i do know that five years can be a lifetime, so way to go, "options action." happy fifth anniversary. wow. i can't believe it's been five years. thanks to all of my cnbc colleagues. happy anniversary "options action." yes, five years ago. look at those pictures. we were so young and innocent then. "options action" made its debut. night owls out there will remember back then we aired at 11:30 p.m. we've got a better time slot and a much brighter show. the heart of the show remains the same. although you may have noticed our fancy new graphics package, most of us here, i want to thank you for joining us every friday to risk less and, of course, make more. you've got to be surprised, that we're still on. >> i am. you know, it's extraordinary, but i'm glad that people are learning about options, i have to say. if you've learned anything, right now is a time to hedge.

options are cheap and the market is high. that's the last thing i've got to say. >> he's usually got to wrap into a trade. we're celebrating five years together, bonding. >> you can't have thought this was going to last five years. that's why you agreed to do it. >> i thought it would be a few months of friday night. here we are five years later. it's amazing. this mimics the explosion of options trading overall especially amongst the retail investors. no surprise really that we are still here. thank you all for watching. time now for the final call. the last word from the options pit. scott nation? >> this week's web extra is a little geeky but it's a great lesson. options are the only way to look into the crystal ball and find out what the world thinks. somebody, some companies dividends stream is going to be going forward. >> dan? >> herbalife, we have no idea who bought those puts last week, but to me i think in the near term basis there was a lot of opportunistic guys that got on the stock on mr. ackman's behalf. if they come out, you'll see the stock at 60 very soon. >> if you're putting money into the market, have you to hedge. puts are cheap, spy.

>> looks like our time has expired. thanks for watching. thanks for watching for the last five years. here's to the next five. go to optionsactioncnbc.com. we'll see you back here next friday 5:30 p.m. eastern. meantime, "mad money" starts right now. >> announcer: the following is a paid advertisement for wise company gourmet emergency food. before disaster hits, before an unforeseen event turns into a life changing crisis, ask yourself, are you prepared? will you be able to provide for your family? >> what are we gonna do for food? we have, maybe, a three-day supply. what are we gonna do? >> we're one storm away from the unknown. you have to prepare for this stuff. >> if you want to survive, you have to have a plan. there's no two ways about it. >> if you don't prepare for yourself, there's no guarantee someone's gonna take care of you. >> announcer: coming up, disaster survivors and survival