bye-bye. . this is "options action." king congress versus godzilla. we'll tell you who is going to win and how you can profit. plus, a fear that the market will plunge next month. how to protect yourself.

we'll tell you what is about to hit the floor. >> if you believe the options market, it could get a lot worse. >> reporter: melissa, here's what's caught the market's attention. an impressive six calls were traded for every put today. calls are up side bets. these traders are betting on a higher vix, which means higher prices. somebody bought 40,000 of the may 18th put, someone spent $2.5 million betting the vix could spike to 25 at the end of may. the last time it went that high, the s&p lost 10%.

>> sima, thanks for that. mike, what do you think of that. ? >> two other instances we saw declines of 15 and 18%. if you're thinking volatility is going to increase, that usually is when the market decreases, when it goes down. when i take a look at this, obviously it's an institutional player, someone with concern about the near term. if you're going to look for a clue, insurance is cheap right now, put some on. >> the vix is becoming massively liquid product. i think 700,000 calls traded today. i think we have a chart of the futures term structure here looking out offer the course of the year.

the futures aren't trading above 18 anywhere. looking out to december, the lon long-term average, as we know, is 20. >> does that make you feel better, the fact that nobody's worried? >> we all know this, there's a lot of very smart institutional players that are using it as protection. saying can get this 18 to 25 cent call and it very liquid. >> it's not worrying you? >> that trade doesn't worry me. >> you think think this is a bet on the vix. somebody is probably trying to hedge their s&p portfolio. a lot more people doing that. the interesting level today was 14, very close to where we settled. why? because for the last several weeks we've been talking about this 14 level, it was a floor in

the vix. finally the last several days we got to 14 and people say 14 is where the vix belongs. >> if terms of the action today, it was horrible if you take a look at the charts. and then of course all this we've had all sorts of terrible prognostications about pullbacks. given the action today, you got to be worried, right? >> but the vix wasn't the tell. the sell was the rolling selloff -- >> this trade may not be the tell but it was the response. >> people are using it to protect themselves when everyone is rolling over.

>> is the sky falling? >> we see momentum stocks. there's a lot of different things that should give you -- >> this guy is either overcaffeinated or he's really worried because he's really excited. >> he's buying protection when he can, not he has to. >> so how should you protect yourself? i'm sure a lot of people want to listen. >> the vix is one way you can protect yourself. this trade was obviously a fairfair fairly levered one. personally i would actually rather go a little bit further out in time, get something a little bit closer to at the money. you can buy insurance inexpensively but you can give yourself a higher probability. i'm looking out to the june quarterlies, certainlically the 185-178 put spread. obviously the protection kicks in with the market down only about %.

you don't need to see a huge move. and the other thing is, the market can pull back, the vix can spike and it can fall. >> it falls quickly, though -- >> but on the prices of your portfolio. >> this is an infinitely better hedge for most of our viewers. you will feel the deltas coming off on your portfolio when the s&p falls off and that spider will help you out. >> spy options are much better. >> mike, what's your take on where the markets are headed next overall? >> first of all, i think for the

markets to go higher, what has to happen is essentially nothing. you can't have anything go wrong in europe, can't have something go wrong in the ukraine, we can't have something go wrong montana middle east, there's a lot of things that can get the market to propel it up. we've had a terrific run. does it not make sense to do a little bit of hjing? >> let's move on here. it was one of the big stories of the week, the battle between growth and momentum charts. let's go to the chart master himself to see what they are. carter? >> yes, i have some charts here. the russell itself was down aggressively today, which means all russell value and growth stocks were down. this is a relative chart. here is the component that is considered growth and here is the component that's considered

value. and what we have is a 4% advance in the value -- my pen's not working. but take a look, this is 4% up, this is 4% down. you're talking about 800 basis points of spread, which is fairly epic. today we closed right on the line. 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 very d divergent actions since this began. >> that's like the venus fly trap of all mother -- >> i thought you were going to see shirley or something. >> seymour. >> oh, good one. >> no, that's the story this week. if you look back to the story of q1 in 2014, it been a series of

rolling selloffs for those high growth things. it started right out of the gate, 3 d printing stocks, social media stocks and biotech and this week it crept up on people but it was cloud plays. you guys were just talking about it, workday. these things were down 10% yesterday. i thought this was healthy rotation for a while. now it's getting panicky. the last leg of it was you saw money coming out of service now and into microsoft and oracle. to me those two stocks made 14-year highs. these are not high valuation stocks. i don't see why these companies are growing the way they that exciting at that stage of the rally. and all of the money that piped into some of these beg cap defensive -- >> so your trade tonight is on oracle in. >> yes.

the stock broke out to 13-year highs. a month ago they reported a quarter that missed on earnings and sales and it wasn't that great. it's not that great but it doesn't deserve to be the 13-year highs. i think over the next month or two you'll probably see the stock settle back in somewhere between 36, 37, something like that. i put a defined risk on today when the stock was 40. i just bought a june put for it. i paid $1 for it. between 39 and 40 i can lose up to that dollar. above 40 on lose that dollar. but i can make up to two between 39 and 37. i'm trying to play for a quick move back toward that low strike and i'm going to take it off for a double. >> at the same time, oracle was only down 0.7% compared to

microsoft, which lost 3%. >> he's talking about rotation money. but both microsoft and oracle were left for dead and have had tremendous rallies since. you know, what happens is people start to scrutinize everything in their portfolios. there are some things that scare them a lot, some this evenings that scare them a little. these are the situations that they're going to come back to you and saying let me revisit this in my portfolio. >> you mentioned microsoft. microsoft actually had a great run for the first time in, i don't know, a decade. but the interesting this evening here is dan has a target, he's not being that ambitious. it doesn't make a whole lot of sense to think oracle's going to go to zero. he's spending a little money to make a little bit more money. the math runs out here. this is not a home run trade, it

holds the money. >> i would take this off for a 30, 40, 50 cent loss soon. >> if you have a question, send us a text. tonight scott is taking a look at the industrials. in addition to scott, you'll found great articles and educational materials as well. . here what's coming up next. >> coming up, a contest with no winners. amazon and netflix are on a race to the bottom but one as about to found the floor. we'll tell you who you're betting on. >> and a return to the streets when our "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. i must begin my journey, which will cause me to miss the end of the game. the x1 entertainment operating system lets your watch live tv anywhere. can i watch it in butterfly valley? sure. can i watch it in glimmering lake?

yep. here, too. what about the dark castle? you call that defense?! come on! [ female announcer ] watch live tv anywhere. the x1 entertainment operating system, only from xfinity. ♪ [ 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. ♪ ♪ free falling >> free falling, that sums up netflix and amazon. last week he correctly called amazon's fall. carter, america wants to know, more pain ahead here? >> monday is not likely to be a good day. just keep that in the back drop. let's take a look and these two stocks. amazon first. what's important here is that amazon is a well-formed head and

shoulders trap. the presumption is there's no to go. by contra distinction, netflix is still on trend and we did fill this gap. amazon more of a topping out deterioration, an unfilled gap. netflix still on trend, if you will, and having checked off the gap has been filled. again, both stocks presumptively will be down but we think netflix has a better chance of providing some support in a bounce here, whereas amazon looks like there's more to the down side.

>> would you put a put on netflix as long or shorting amazon? >> it kind of hard to get your arms around the businesses. the issue is a continued faith with amazon, the obl way i would do it is with options. the it would take an awfully long time for it to grow into its valuation. i don't see any reason why i would pile into it here. >> on a near-term basis, some stocks are down 20, 30%. in terms of shorting, you're late to the market. you short stocks like these on rallies, you don't press them like this. >> carter has a down side target of about 300. follow us on twitter. we'll talk about this trade when we go afrd there. >> we if we see weakness in the

markets, both of these names are going to be down as well, correct? >> amazon did bounce off that 320 level today. but i agree, you'll probably see 300 when they're done. they can move 10% in the quick. >> that's because they make really ugly ka pitch latori bottoms. >> there's nothing i want to step up and buy right now, particularly the way the market acted today. the selloff was not horrible but we made an all-time high in the s&p and then a new low. >> i want people to remind themselves of last time netflix rolled over hard. just because the thing coming back, 10%, 15% or even 20%, that does not mean that the trouble

is over. when something is trading at a high multiple, it could see a 50% decline. >> coming up next, how well do folks on the street know their options? we're going to head out there and we'll be right back. [ 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.

how well do you know your options? we wanted to find out. this week our own dan nathan called to the streets to quiz every day americans on puts and calls. the results were -- interesting. take a look. ♪ ♪ >> what comes to mind when you think of options? >> women. >> women. okay, that's one thing. >> i think i made more money doing options than i did just in stocks. >> what do you like to do generally when you're trading options? >> well, now might be a good time to start shorting? >> if i say the word options, what does that mean to you? >> options? >> yeah. >> it's kind of ambiguous. >> you would buy a put? >> what if i said buying a call

fly? does that sound interesting to you? >> no, that's not my interest. i'm interested in things like shoes, clothes. i'm a fashionista. >> would you be interested in a call fly? >> that's where you have a call and you straddle it with buying equity, i think, at the same time, is it not? >> that's a good guess. >> did you ever hear a call fly? >> what do you think a call fly is? >> i don't think nothing about the situation. >> call butterfly. >> butterfly effect? >> have you ever heard of the term a call butterfly? >> cnbc rocks. >> is he your boyfriend? >> no, there. >> okay, taken. >> clearly they have not been watching "options action" but having hosted the show for five years, i happen to know what a

call butterfly is. the bottom line is you want the stock to go to those two lines where you're short. that is your target for the stock. dan, walk us through a situation where you might use a call fly. >> i use them a lot. to me, if the price of options is really high and i have conviction over where i think the stock will go oaf a set period of time and i'm doing it for less premium than i would if i just bought a call. usually has to do with the price of options. >> i want to go out and ask people what they think a straddle is. >> you don't want to do that. it not that kind of show here, mike. >> a straddle is an option action. >> i know what it is. >> you can ask them what a strangle is and they're going to

want to strangle you. >> coming up next, the final call from the options pits. ♪ ♪ ♪ ♪ [ 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.

[ male announcer ] it's here -- xfinity watchathon week, your chance to watch full seasons of tv's hottest shows for free with xfinity on demand. there's romance, face slaps, whatever that is, pirates, helicopters, pirate-copters... argh! hmm. it's so huge, it's being broadcast on mars.

heroes...bad guys... asteroids. available only on mars. there's watching. then there's watchathoning. ♪ ♪ [ 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 love getting tweets at cnbc options. so we are going to answer a question we got on twitter tonight. can carter please do a chart on facebook of solar city and the s&p 500? thanks. carter, help kpunal. >> sure. important, what's coming on monday may not be good. facebook, the presumption is lower.

>> lower for facebook. dan, would you agree? >> these guys have made $22 billion worth of acquisitions in this quarter. they are not going to put up a lousy quarter in the face of such controversial deals. i think it probably goes lower. i wouldn't be short this stock -- >> why are they are controversial deals? facebook did well after that? >> i think it's horrible. >> looks like you're trying to three it against the wall and sticks type of business. >> let's get to the final call. scott? >> risk reversal strategy we like on xli. >> carter. >> resist the temptation to think the market is oversold. presumptively it is not. >> dan. >> oracle, cart ser sayier is s

monday is going to be bad. get your put options on it. >> check out our daily segment "inside fast" every day. see you next friday. meantime, don't go anywhere. "mad money" with jim cramer starts right now. have a great weekend. 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 ] now, what do i have in common with these two talented ladies? >> we are almp