things. now, you stay safe. bye-bye.

out, start trading with the desk skeptic. >> skeptic? >> yes, you're the desk skeptic. what do you think? >> all of those names that you had up there before, they have performed fantastically. you think about it. there's been a lot of rotations. rotations are healthy for markets to continue to make new highs. you need to see money flow into new areas. you see that. the names that you had up there have defied gravity.

for the most part. they've become pretty crowded trades. they have had great performance. to me, all of a should now, we have seen a very volatile q1 in 2014, very different from what we have seen over the last year. let's say before that. >> were you expecting that as a risk. or is it taking you aback? >> i think we were due for it. the calendar is concerned, we closed on the tippy-top. of the year at new all-time highs. in 2014, i think a lot of things look different. the growth picture looked different. some of the pressures from outside the u.s. looked different. back to those names, though, i think they're crowded names, i think they have a lot of performance, things are jittery right now. people are looking in the register a little bit. >> of course, scott, we've got one of the poster childs for this sector, green mountain, we just heard a moment ago is going to be joining the s&p 500 on march 21st. what do you make of this? >> i think dan is exactly right, and that rotation is healthy. lot of these stocks, the three we talked about specifically, all are dollar-expensive stocks. if you want to raise a little bit of money you don't have to sell many shares of those. they're natural candidates if you want to raise money, put it

someplace else. i don't think that this portends a bigger selloff than the s&p. s&p still above 1840. . i think what's going on, people are nervous and understandably so, because the market can go down in a big hurry. so, what they're doing, they're buying puts. and we see that in the vix. vix is getting much higher. than it was a couple of weeks ago, 14 obviously a floor in the vix. now, people bidding the vix up above 17. i think that's actually really healthy. there's some healthy skepticism. people want to be long stocks. they also want some protection. >> mike? >> scott, first of all, certainly we did see that skepticism in the vix. the 20 calls, march, may, july, those were all very active. in the vix. i would make one distinction, though, priceline, google, those are a different story than netflix and tesla. all of these are growth stocks. some of them have real growth under them and the multiples aren't crazy. priceline is an example that i would provide ten years of very strong double-digit eps

growth. versus tesla which is basically trading on speculation that they're going to be essentially the second coming in the auto industry. same thing is true for netflix. you're going to see, when it's risk-opt, they'll get hit hardest and hit first. and that -- i don't think we should be even remotely surprised based on the news we saw coming out today. >> tesla's had a few negative headlines being lobbed at it the past week. okay, dan. you've been looking at facebook as the next to fall. what's your trade there? >> i'm not going to say it's the next to just crash, it's a stock that's very crowded, i think people feel really good about their prospects and the company feels good about their prospects. they wouldn't have pinned $19 million out for what's here. but here's the thing, if things are going to get a little bit rockier, i think facebook could see down 10% move in a market that's down 5%. to mike's point about getting hit the hardest. to me, i wouldn't short this stock here. but i like this options trade. let me tell you what it is. i'm looking out to april. when the stock was 67.70.

okay, i bought it at 65. 60, 55, put butterfly. i bought one at 2.20. i bought one of the april 55 put for 30 cents. that cost me 80 cents. that's my maximum risk. how do i make money on this trade? between 64.20 and 55.80 on april expiration, i could make up to 4.20. with my max gain at 4.20 right in the middle at 60, that is the level i had circled on that chart. that is the breakout level from the q1 earnings. i think that is a very interesting target if the stock gets going. here's the thing, this is a risk/reward trade. i'm not showing you the stock. i like the options trade. i think the market that comes in, it will get hit harder. eventually. and this trade has a very good risk/reward with defined risk. >> mike, do you agree that facebook is going to fall? >> first of all, facebook is trading at a valuation that's pretty hard to justify on a number of levels. but what dan is doing makes sense when you consider that it has been exceptionally different difficult to short some of these

growth stocks. you know, basically there seems to be no ceiling as to how high they go. this obviously limits the risk. there's something else i like about it, volatility has creeped up, that's when you want to be net short. options or at the very least sell as many as you're buying. butterfly trade does that. the other thing that's excellent about this, he's trading out to april, using april that's a near-date of expiry. that's when these things are going to make the most sense and that's when you're going to get the leverage that's embedded in them to pay off. i think this is a good way to make a short bet there. >> something interesting, we like butterflies. this is a bearish trade. i think you want to take this off before expiration. why is that? the range at which you really realize all that profit or most of that profit at expiration is tiny. it's tiny. if you take it off beforehand, then you get pretty good leverage without spending a lot of money. >> we're going to stay with the theme of what is hot is suddenly not. talking about biotech now. dominic, you're back at cnbc headquarters in england. tell us what's going on with biotech. >> those biotech stocks once the

darling of wall street, to a certain extent they still are. but some of the shine has come off the industry group as of late. vie owe tech was the single worst performing industry group within the s&p 500 today. it was down almost 2% today. but so far this year, they're still up 6% as a group, that's not too shabby. now leading the way higher are alexion pharmaceuticals. they're up 30% in 2014. regeneron is up 20%. biogen up around that same amount. now, valuations are a concern here, all of these stocks have nearly doubled in value over the course of the past 12 months, alexoin trades at 138 times earnings. plain and simple, investors may be taking some profits. that's why you may be seeing weakness this time around. mandy? >> dom, thank you very much. a little bit of background there. now we need to know whether or not we should be concerned about this, what do you think, carter? >> mandy, some of the actions, is concerning. let's try to figure it out

today. here is the set-up, of course, we know how well biotech has performed relative to the s&p. it's five fold increase over the last ten years. with that setup, here's the biotech index. the s&p the official. and what we know is it keeps over and over and over bounces off its well-defined trend line of the past year. but now take a look at one of the leading four stocks in the group. celgene has bounced and bounced. now it's starting to falter. which is to say it's broken below its trend line. that's the first one to do it. that's how trouble starts. one starts, then the next. take a look. here's celgene versus the biotech index. of which it is a big part. here what is we're talking about. this breakdown that's occurred just recently is now -- you're seeing this as a divergence between celgene and its own group. so if we go back to the chart of celgene. now not only do we have the break in the trend, we have a minor head and shoulders top

forming. it's fairly well defined. the neckline is right here and the presumption is that we break. finally, you can look at it this and just rely. just relying on this mechanism. the average is about to go flat. put in your head and shoulders top. put in your break, your trend line. any way you cut this, the presumption is lower. we are a seller of celgene, we think it's a canary in the coal mine for the rest of the group. >> thank you very much, carter, for telling the technical story there. mike, would you press the short here? what is your trade? >> it's interesting. there are some potential catalysts to the down side on celgene, some patent concerns coming up. there's going to be a ruling on april 29th. approval issues they're facing in britain. i'm going to go along with carter. this is not one of the biotechs that's trading at insane multiples. because they do have revenues. they to have earnings. probably five bucks a share this year. i'm going to target that 135 level. basically the direction carter was referencing there. we don't have a whole lot of expirations to choose from. i'm going to go out to july, i'm

going to look to purchase the july 145-125 put spread. you can spend about $6 for that. spending about 9.50. for the 145. selling the others for 3.50. a net debit of 6. usually we're looking to spend between 20%, 30% of the distance between the strikes. this is a way that we can do that and not have that naked short exposure to the upside, which in any kind of a growth sector is going to be dangerous. biotech particularly, where we have seen when they've taken off as a group explosive pops to the upside. you wouldn't want to be short that under any circumstances. >> you know, mike, i would add one thing the charts do look bearish. when you look at the fundamental setup, analysts expect it to grow 23% this year alone. the stock trades at pe to growth at less than that. to me this is a pretty cheap stock -- >> dan, i'm going to have to interrupt you, the analysts are expecting this thing to do 10 bucks a share in 2015, 10 bucks a share, that would be $130 stock, that would be

incredibly cheap for a stock that's growing. but the fact is there are some concerns. as a group there are concerns about valuation. if the whole sector gets thrown out this stock's going to get hit. if they lose that patent issue, this stock's going to get hit. if they don't get approval in britain, this stock is going to get hit. >> i agree with you. i understand the technical setup. it does suggest that. but i would say if you can get this stock at 140, 135, you're getting it on the cheap even if you don't get that 10 number -- >> i don't think you would be short any lower than 124. >> this is interesting, the technical setup sitting on the 200 day moving average, that means that in the short-term this stock's probably in trouble. dan may have a great point long-term. we like buying puts spreads and this one makes a lot of sense. he's risking 6 bucks to make 14. you get the math working for you. i like this. >> okay, guys, back to you professor kohn in a second. you can send us a tweet if you want.

@cnbcoptions. let us know what you're feeling. we'll answer it in the web extra. scott has a bullish trade on apple. in addition to scott, you can find great trader blogs in educational material because we always want to learn more. and this is what is coming up next. ♪ talk about suspicious activity. why were so many traders betting against herbalife before the bombshell ftc news? we'll tell you how they made money. twitter shares have plunged this year. we'll tell you why some traders are betting on a big turnaround. and that's when "options action" returns. ♪ ♪ ♪ ♪ [ tires screech ] chewley's finds itself in a sticky situation today after recalling its new gum.

[ male announcer ] stick it to the market before you get stuck. get the most extensive charting wherever you are with the mobile trader app from td ameritrade. [ indistinct shouting ]

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...you'll bust your brain box. ♪ all on thinkorswim from td ameritrade. ♪ you know, they say you can't win them all, and unfortunately our dear friend dan learned the hard way. two months ago he made a bullish bet on twitter. well, the stock has plunged. but he hasn't lost too much money and here is why. >> on "options action" just because we risk less doesn't always mean we make more and sadly that is exactly what happened with dan's bullish bet on twitter. dan thought that shares of the social stock were set to fly. but buying the stock 100 shares would set you back more than $6,000. to spend less, dan instead the march 65 strike call for 7

bucks. to make money, he needs twitter shares to rise above 65 by more than the 7 he spent on the trade. or 72 bucks by march expiration. do we want to spend 7 bucks just to bet on twitter? >> no! >> so, to spend less, dan then sold the march 75 strike call for $3.50. between the $7 he spent on that lowest strike call and the $3.economy he collected by selling the highest strike call, dan has reduced the total cost of his trade to $3.50. that means, instead of needing twitter to raise $72, dan sees profits as long as it rises above $72. >> i like it very much. >> we like it, too. ♪ >> but, he's not done yet.

>> you can sell the march 55 put. >> that's right. to make the trade even cheaper, dan then sold the march 55 strike put for $3 and created his call spread risk reversal. sounds tricky, right? let's do some simple math to make money. between the $7 he spent on the 65 strike call, the $3.50 he collected by selling the 75 strike call, and the $3 he collected by selling the 55 strike put, dan is spending just 50 cents on the trade. that means instead of needing the stock to rise above $68.50 to make money, dan now sees profits if twitter rises above just $65.0 by march expiration. just $65.50 by march expiration. the only problem, if he didn't sold that put, he'll be obligated to buy the stock for $55 even if it falls well below

that level. sadly, since the time of the trade, twitter shares have fallen more than 15%, meaning, dan might have to buy that stock. "options action" biggest fans have take on the twitter. they only have one question, how can dan fix his trade? now, dan, the segment is called "fix my trade." how are you fixing it? >> this was billed as a long stock alternative trade. what it's doing is taking advantage of the high levels of implied volatility. the price of options at the time before the event. to me the stock was 55, now it's 52. this is much better than being long the stock at 65. that's really what we were trying to do here. so you think about this now, you're shot that 55 put. you are long on the stock there, you have a weak expiration, you have to make a market call where you think the stock is going between now and then. >> i've got a really fundament question for you guys and i hope you guys can answer it. why has facebook done so much better than twitter this year? what do you reckon, scott? >> i think people believe that twitter is done.

that everybody that's going to use twitter has already signed up for it. how do they have growth and how do they sell ads? >> what do you think? do you agree with that? do you think twitter might be done? >> no, i actually -- first of all, i'm a big user of twitter. i think there's valuable information there, it's delivered in real time. i think the content is probably better. the real challenge for twitter is simply valuation. take a look at where they finished up last year. $35 billion market capitalization, $665 million in revenues. that's a lot to live up to. i think that's his biggest problem. not what its promise is. it could have great promise. it's very difficult to grow into a valuation like that. >> and to cheer you up, you get the final word. >> i think twitter is in the first inning. i think some of the user engagement and growth they've shown or lack thereof is going to change very quickly. much like we saw out of facebook right out of the gate. if you can get this in the 40s in the few months, i think it's going to be a good buy. >> don't turn a trade into an investment. and if you hang on to this just because you think it's going to eventually go higher, you're

turning a trade into an investment. >> okay, guys. that's the word on twitter. up next, did someone find out about the herbalife ftc investigation just ahead of the news? we've got our ear to the wall. we'll tell you about this week's fairly suspicious activity. [ 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. ♪

[ 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.

it's been quite the strange ride for herbalife investors. first the federal trade commission retweeted a question that asked "why have you not shut down pyramid schemes like herbalife, nuskin and others? what is the ftc waiting for? then on monday a big "new york times" piece detailing bill akerman's tenacious attempts to take it down. then wednesday we finally got news that the ftc will be opening an investigation into herbalife. dan, you've got your ear to the wall. does it look like maybe someone got that news early? >> possibly. this is battle ground stock, obviously we know the story here. this is the action on wednesday. this is prior to the halt of the stock with the company releasing the ftc letter. this is after. look at this move. this is almost 20%.

let's look at what happened in the options market. this had traders buzzing about. prior to the 1:15 p.m. halt, there was a lot of activity in the april 55 puts. a bunch of them were bought. 71 cents up to a dollar. you know where they are right now? 335. they traded as high as 640 on wednesday. what's interesting about that, you know, people have their eye on this 50 strike. we talked about that on this show back in january. the largest line of open interest is the jan 50 puts. people think that's where this is going if the ftc digs in. >> they certainly feels suspicious with that action going on. scott? >> i don't think it's suspicious at all. i think someone got lucky. we talked about someone buying puts. as a way to express your bearish point of view. they don't want to be short. bill talked about the fact that he's spun out of his shorts and bought puts --

>> he got lucky. >> how many times do we see big put volume when the stock doesn't strike? >> scott, there was no open interest in the april 55 puts and 5,000 traded before the halt. it's ludicrous. >> let me just say this. >> okay. >> there should be a takeaway here. let's assume there is some market asymmetry as far as information is concerned. some people are going to have a better sense of what's going on. some are going to have less. so the way to take advantage of this is monitor unusual activity. you can that. those can be the footprints in the snow for other investors. in the same way carter takes a look at the charts. this is another tool you can have in your quiver to keep an eye on what's going on. >> this is a gambling chip. look at the debate going on here. 50 is the key level. when the news broke in 2012 that's where the stock dropped to. got as low as 25, as high as 80. 50 looks like where we're heading now. 58 as of now, 50 is where we think this is going. >> it's all very interesting. debate is what this market thrives on. coming up next, the final call from the options pit. ♪

♪ ♪ ♪ [ tires screech ] chewley's finds itself in a sticky situation today after recalling its new gum. [ male announcer ] stick it to the market before you get stuck. get the most extensive charting wherever you are with the mobile trader app 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. ♪ it's time now for the final call, the last word from the options picks. mike, you go first. >> options premium has ticked up. use puts spreads. >> what about you, scott? >> this week's web extra, spreading out of a trade. >> dan? >> i wouldn't short facebook here. i'm long on april put fly. >> on that note, it looks like our time has expired. see you next friday at 5:30 eastern and have a fantastic weekend, everybody. thanks for joining us tonight.

paid presentation for derm exclusive instant anti-aging, brought to you by beachbody. [ cheers and applause ] >> wow. hi, everybody, and welcome. i'm deborah norville -- journalist, author, wife, and mom -- and today i am joined by grammy-winning music superstar chilli of tlc. woo-hoo! [ cheers and applause ] and television phenomenon turned entertainment reporter mindy burbano stearns. [ cheers and applause ]