this is "options action." tonight -- king congress versus godzilla value and momentum stocks are locked in a battle. we'll tell you who's going to win and how you can profit? plus, the face of fear. it's a multibillion dollar bet that the market will plunge 10%. netflix and amazon have dropped around 20% in the last 20 days, but we say one's about to find the floor and we'll tell you which one. "options action" begins right now.

live from the nasdaq marketsite, these are the traders on a day the markets saw plenty of red. a big bet on the vix. lot more trouble to come. >> here's what caught the market's attention, an impressive six calls were traded for every put today, remember, call are upside bets, they're betting on a higher vix, which means lower stock prices. in one of the biggest trades, someone bought 40,000 of the may 1825 call spreads for 61 cents each, put simply that means someone spent $2.5 million betting that the vix could spike to 25 by the end of may. the last time it traded that high was two years ago, when that happened, the s&p lost 10%. melissa, some big money betting against the market today. mike, what do you make of

that trade? >> she pointed out the last time the vix went to 25, that was the smallest decline we have seen since 2009 when the vix got that high, so two other incidents, it got to 25 or higher, we saw declines of 15% and 18% respectively when that happened. basically, what you're doing, if you're thinking volatility is going to increase, that's usually when the market decreases when it goes down. i take a look at this, obviously, it's an ips constitutional player, it's about someone has concerns about the near future. >> let me make the point, they're kind of concerned about the near term, the vix has become a massively liquid product. we have -- i think we have a chart of the futures term structure here, looking out over

the course of the year the futures aren't trading out. long-term average is about 20. >> does that make you feel better the fact that nobody's worried? >> fine. let me tell you this, we all know this, there are smart institutional players out there, who are using it as cheap hedge prediction. they're not making an outright bet that the world is going to end. it's really liquid. >> it's not worrying you. it's not worrying you. >> that trade doesn't worry me. >> dan is right. you might think that this is a bet on the vix. what somebody's trying to do they're trying to hedge their spl portfolio. the interesting level today was 14, very close to where we settled, why? because the last several weeks we have been talking about this 14 level, it was the floor on

the vix. you know, finally over the last few days we got over 14. they said, 14 is where the vix belongs. >> so, okay, take what you may out of this trade, it was horrible when you take a look at the charts. of course, all of this week, all sort of terrible progress nast case. >> the tale has been the rolling selloff in high momentum names. >> the vix may not have been the tale -- >> what somebody's doing, they're using the options market to protect themselves when they're concerned about it rolling over. the good news is, it's relatively inexpensive. >> mike s the sky falling here, buddy? >> you know what, we got the market at slightly above average. it performed terribly today.

we see momentum stocks. >> okay. >> i'm trying to figure out if he's overcaffeinated or worried? >> how should you protect yourself? mike, you have a trade for us tonight. >> sure. it's interesting, the vix is one way to protect yourself, this trade was a fairly levered one. they're paying 60 cents for something that's worth 7 cents. but personally i would actually go further out in time, get something a little closer to at the money, buy insurance inexpensively, give it more time to play out. i'm looking out to the june quarterly. obviously the protection kicks in with the market down 2%.

you don't need to see a huge move. you'll get significantly more time over what that vix trader in terms of protection. vix can spike but also falls. >> it falls quickly. >> on the prices of portfolio. >> right, this is an infinitely better hedge for most of our viewers out there than going out and buying vix call spreads. you will feel that the deltas coming off on your portfolio when the s&p pays off. >> that's the thing, it's easier for a retail investor to understand a spyder trade. this is better way than to what the institutions do and that's buy these call spreads and the vix. >> mike, before we move on here, what's your take where the markets are headed next overall. >> first of all, for the markets to go higher what has to happen?

essentially nothing. you can't have anything get worse in the ukraine, we can't have something happen in the middle east, we can't have bad economic data and disappointed earnings. lot of things that could get the market to soften up. what will propel it higher? a whole lot of nothing. we have the market fairly valued at best right here. we have had a terrific run. >> all right, let's move on here, one of the big stories of the week, the battle between growth and momentum stocks? check out these two charts. let's go to chart master himself, carter. >> it's important to know the russell was down aggressively today which means all russell value and growth stocks were down. this is a relative chart. then, here is the component that's considered growth and here's the component that's

considered value, and what we have a 4% advance in the value -- my pen's not working. take a look, this is 4% up and this is 4% down. today, these closed. we closed right on the white line. look at the long-term picture, it's just beginning. this is the spread since the bull market began. the probabilities are very high that we get back into something more like this. yes so we're thinking considerably more convergence in this divergent action since the bull market began. >> you know i like to name my charts. that's like the venus fly trap of all. >> listen that was -- that's the story this week, but, you know, if you look back to story of 2014, it's been a series of

rolling selloffs of high-growth things. it started right out of the gate this year, 3-d printing stocks, social media stocks and then o biotech and just this week, cloud play. workday and service now. they were down 10% yesterday. to me, i thought that was healthy rotation for a while, now it's getting panicky and so the last leg of it, you saw money coming out of service now and into microsoft and oracles. these are not high-growth stocks. they're low-valuation stocks. to me, i don't get it. i don't see why these companies are growing the way they are, this exciting at this stage of the rally. all of the money that piled into some of these big cap defensive tactics. >> your big trade is on ort >> caller: >> yes. the stock broke out to 13-year

highs today. a couple of days ago. a month ago, they reported a quarter that missed on earnings and it wasn't that great. to me, i think you probably have a scenario, if you have a failed breakout at this level, i think over the next month or two, you probably see the stock settle back in. so, i put a defined risk trade on it. i just bought a may -- excuse me a june 40.37 put spread. i paid a $1 for it. $1 is my max risk. i can make up to 2 between 39 and 37. what i'm trying to do here is play for a quick move back towards that low strike and i'm going to take it off for a double. >> at the same time, oracle's point action, it was down 7%. >> well, some of these names

have seen -- what he was talking about -- a little bit of rotational money. both microsoft and oracle, these were stocks that were all but left for dead. you know, what happens is, people start to scrutinize everything in their portfolios. some things that scare them a lot and some things that scare them a little. by the way, lit come back if the rest of the market does and you have a little bit of leverage in this. >> the interesting thing here is, dan has a target, he's not being that ambitious, it doesn't make sense to think that oracle is going to zero. the math works out here, this is not a home-run trade. this is the sort of thing that pays the bills.

>> if the stock holds above 40, i would take this off for a loss pretty soon and i made my bet and i know where i'm going to get out on the downside. tonight, scott is taking a look at the industrials. in addition to scott, you'll find great articles, we'll want to check it out. coming up -- a contest with no winners. amazon and netflix are in the race to the bottom, but one's about to find the floor, we'll tell you who we're betting on? plus -- how much do you know about options. our dan nathan call to the streets when "options action" returns. ♪ [ indistinct shouting ] [ male announcer ] time and sales data. split-second stats.

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[ 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.

♪ ♪ free falling, netflix and amazon, have both gotten crush in the past month. last week, carter correctly called amazon's faults. carter, america wants to know, more pain ahead here. >> independent of these. monday is not likely to be a good day. let's take a look at these two stocks. amazon, first, what's important here, amazon is a well-formed heads and shoulders top. if you drew a trend line here, it has broken trend and more importantly, we have yet to fill this gap from october. and so the presums is there's

more to go. netflix is still on trend. and important today's weakness we did fill this gap, so, amazon for of a topping-out formation, more deterioration. an unfilled gap in the case of netflix, still on trend if you will and having checked off the gap has been filled. both stocks will be down presumptionly. amazon looks as though there's more to go on downside. >> based on carter's analysis, a trade on either of the stocks, presumingly long on netflix that's still in trend or shorting amazon? >> i mean, the valuation of both of these businesses, it's kind of hard to get your arms around the issue, the continued faith in amazon, the only way i would

consider it is with options. the long-term growth of amazon remain intact it would take a long time to grow into its valuation. i don't see any reason why it would pile into it. >> some of these stocks are down 20%. the idea of shorting them now, people, they're let ate to the party. you short stocks like these on rallies. >> well, last week based on what carter said, we got long put spread and amazon, a downside target about 300, follow us on twitter, we'll talk about this trade when it gets around there. >> carter makes a good point, if we see overall weakness in the markets, it doesn't matter what the charts, both of these names are certainly going to be down as well. correct? >> yeah, but they're also reaching support levels. amazon bounced off of that 320 level. that's encouraging. i think you see 300 before this

thing is done. these are momentum names. >> that's because they have really ugly bottoms. >> quickly, of the momentum names that have seen tremendous decline, any you say, maybe i pick that up? >> lot of silence here. >> that speaks volumes. >> the i want to step up and buy right now, particularly the way the market acted today. the selloff wasn't horrible, but you know, we made an all-time in the s&p and a low. >> the last time netflix rolled over hard when it was over $300 and that thing went down into double-digits, if that thing comes back 10% or 20%, that doesn't mean trouble is over. it could see a 50% decline. coming up next -- how well do folks in times square know their options? we'll find out when "options

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how well do you know your options? we wanted to find out. this week, dan nathan called to the streets to quiz everyday americans on puts and calls. and the results were interesting. take a look. >> what comes to mind when you think of options? >> women. >> women. >> that's one thing. >> i think i made more money doing options than in stocks. >> what do you like to do trading options. >> a good time to short. >> if i say the word options what does that mean. >> options. >> you would buy a put.

>> a strategy like buying a -- does that sound interesting. >> shoes, clothes. >> would you ever buy something called a call fly. >> a combination you have a call and you strayedle it with buying equity at the same time. >> interesting. that's a good guess. i will tell you. >> what do you think a call fly is? >> i don't think nothing about the situation. >> call butterfly. >> butterfly effect. >> have you heard the term call butterfly? >> is he your boyfriend? >> my boyfriend. >> taken. clearly they haven't been watching "options action." having hosted the show for over five years now, i happen to know what a call fly is.

it's a bullish strategy where you buy one call and sell two higher strike calls against it. the bottom line is this, you want the stock the go to the target. dan, walk us through a situation where you might actually use a call fly. >> i use them a lot. to me, one of the main criteria, i have conviction of where the stock will go over a set period of time. likely to find the range. less premium if i would if i bought an outright call. >> i want to go out and ask people what they think is straddle is? >> it's not that kind of show here, mike. >> a straddle is an options structure. >> what they think is strangle is and they'll want to strangle you. >> we'll test both.

all right, coming up next -- the final call from the options pits. what's your best option? following us on twitter. get trade updates, break news and analysis see what we see in real time so follow us on twitter at cnbc options. [ 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. ♪

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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. we love getting tweets at cnbcoptions. a question we got on twitter tonight. can carter do a chart on facebook, solar city. carter. >> well, again, important, regardless of the security, what's coming on monday is not likely to be good. in terms of facebook, let's do that one. the downside is to 52. the presumption is lower.

>> lower for facebook. dan, would you agree? >> yeah, listen in the near term, here's one point, they have made $1 billion in acquisitions they're not going to put up a lousy quarter in such deals. i wouldn't be short this stock into the earnings deal. to me -- >> lot of speculative looks. here's the thing f these things don't pay off, it's massively diluted. >> our thanks to carter for that. meantime, let's get to final call. scott. >> this week's web extra is risk reversal strategy on xli. >> carter? >> resist the temptation to think the market is oversold. >> buy some put spreads. >> dan? >> you know, in oracle -- carter is saying monday is going to be

bad. you are time has expired. thanks so much for watching. also, check out our daily segment inside "fast money." cr starts right now. have a great weekend. my mission is simple. to make you money. i'm here to left the playing field for all investors. there's always a bull market somewhere. and i promise to help you find it. "mad money" starts now. hey, i'm cramer! welcome to "mad money." welcome to cramerica. other people want to make friends, just trying to make a little money. my job is not just to entertain you, but to educate and teach you. so call me at 1-800-743-cnbc or tweet me @jimcramer. they killed it. no mincing words. they crushed the nasdaq, with the tech-laden, tech-heavy, tech-stinking index falling 2.6%