bye-bye.

for every put today, remember, calls are up side bets. so they're betting on a higher vicks which means lower stock prices. in one of the biggest trades, someone bought 40,000 of the may 18, 25 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 -- >> hi. >> what do you make of that

trade? >> she pointed out the last time the vicks went to 25 we had a 10% decline. 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. the vix seems like a complicated product because it's a bet on volatility. if you think that volatility is going to increase, that's usually when it decreases, the market goes down. i take a look at this, obviously it's an institutional 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. i think 700,000 vix calls traded today. the vix wasn't up a whole heck of a lot. i think we have chart of the futures term structure here looking out over the course of the year. the futures aren't trading above

18 anywhere. looking out to december, the long-term average is 20. >> does that make you feel better the fact that nobody's worried? >> hold on. >> the time to worry is when nobody else -- >> fine. let me tell you this, we all know this, there are smart institutional players out there, who are using it as cheap hedge protection. they're not making an outright bet that the world is going to end. they're basically saying i can get this 18 to 25 call spread on for 60 cents. in big size. it's really liquid. >> it's not worrying you. it's not worrying you. >> that trade doesn't worry me. >> the interesting thing is -- and 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. a lot more people doing that. they're all institutions. 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. nobody wanted to sell anything below that.

you know, finally over the last few days we got below 14. they said, 14 is where the vix belongs. >> so, okay, take what you may out of this trade, but in terms of the action today it was horrible when you take a look at the charts. a record high on the s&p 500, close to the lows on the session. of course, all of this week, all sorts of terrible prognostications. that may be an outlier. >> about the tell has been the rolling sell-off in all high momentum names. >> the vix may not have been the tell, but it was the response to the tells that you are seeing. >> what somebody's doing, they're using the options market to protect themselves when they're concerned about it rolling over. that's probably what everybody else should be doing, too. the good news is, it's relatively inexpensive. >> mike, is the sky falling here, buddy? >> you know what, we got the market at slightly above average valuation. that's first thing. it obviously performed terribly today. that's another thing to look at.

we see momentum stocks. >> they're looking terrible. >> a lot of different things. >> okay. >> i'm trying to figure out if he's overcaffeinated or worried? he's excited. >> he's buying protection when he cannot when he has to. >> how should you protect yourself? mike, you have a trade for us tonight. i'm sure a lot of people out there want to listen to this very carefully. >> sure. it's interesting, the vix is one way to protect yourself, this trade was a fairly levered one. when you take a look at the difference. they're paying 60 cents for something that could be worth seven bucks. you could buy near-term put spreads out of the s and ys. 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. and a higher probability that it will provide you some insurance. i'm looking out to the june quarterly. the 189 you can spend two bucks to get that put spread. obviously the protection kicks

in with the market down 2%. you don't need to see a huge move. at two bucks you're playing just a little over 1%. you'll get significantly more time, an additional 40 days over what that vix trader is getting in terms of protection. the vix can spark but it can also fall. >> 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're not going to realize that as far as the vix is concerned. you will feel that the deltas coming off on your portfolio when the s&p sells off. and that spy will help you out. >> that's the thing, it's easier for a retail investor to to understand a spider trade. and also spy options are much less expensive than options on the vix itself. 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 marketses are headed next overall? >> first of all, for the markets to go higher what has to happen? essentially nothing.

you can't have any conflagration in asia, you can't have anything get worse in the ukraine. we can't have something happen in the mideast. we can't have bad economic data and anything go back in the momo stock. 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. if you want to know who will win, check out these two charts. let's go to chart master himself, carter. >> i have some compare attive charts here of the russell 2000. the russell itself was down aggressively today. which means all russell value and growth stocks were down. but this is a relative chart. i have the russell 2000 held as a constant. then here is the component that is considered growth and here's the component that's considered

value. what we have is a 4% advance in the value -- oops, my pen's not working. take a look, this is 4% up and this is 4% down. 400 basis points of spread, which is pretty epic. 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. this isn't my chart, but it's his chart. that's like the venus fly trap of all mother -- you know that thing -- >> i thought you were going to say like shirley or something. >> seymour. >> good one. >> listen that was -- that's the story this week, but, you know, if you look back to story of q-1 in 2014, it's been a series

of rolling sell-offs of high growth things. it started right out of the gate this year, 3-d printing stocks, social media stocks and then biotech and just this week, and this crept up on people, it was cloud play. software cloud plays. that's really what got me focused late in this week. you were just talking about it. 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 oracle. those two stocks made 14-year highs. these are not high-growth stocks. they're low-valuation stocks. they're kind of defensive based on their balance sheets. to me, i don't get it. i don't see why these companies are growing the way they are, are that exciting at this stage of the rally. to me that could be the next rolling sell-off. all of the money that piled into some of these big cap defensive techs. >> your trade tonight's on oracle? >> yes. here's one very specifically. the stock broke out to 13-year highs today.

a month ago -- or excuse me a couple days ago. a month ago, they reported a quarter that missed on earnings and sales, and it just wasn't that great. it's not an expensive stock. but it doesn't deserve to be a 13-year high. to me, i think you probably have a scenario, if you have a failed breakout at this $40 level. and that's where it closed here. i think over the next month or two you probably see this stock settle back in between 36, 37, something like that. so, i put a defined risk trade on it today when the stock was 40. i just bought in june, a 40, 37 put spread. i paid a $1 for it. $1 is my max risk. between 39 and 40 i can lose up to a dollar. i can make up to 2 between 39 and 37. really 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. that's my trade. >> at the same time, oracle's price action today wasn't that bad. down 7% compared to microsoft which lost 3%.

>> well, some of these names have seen -- what he was talking about -- a little bit of rotational money. both microsoft and oracle, these are stocks that were all but left for dead not that long ago. have had tremendous rallies since. it isn't exactly as if they got 20% bottom line growth stories going on behind them. 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. these are the types of situations where they come back and say, let me revisit the other things in my portfolio. i can easily see that coming back and it will if the rest of the market does and you have a little bit of leverage. >> microsoft had a great run for first time in something like a decade. dan has a target. he's not being that ambitious. it doesn't make a lot of sense to think that oracle is going to zero. he's spending a little bit of money to make more money. the math works out here, this is not a home-run trade. this is the sort of thing that pays the bills. >> if the market does stabilize and the stock holds above 40,

i would take this off for a loss pretty soon and i made my bet but i also know where i'm going to get out on the down side. >> you have a question send us a tweet. we'll answer it right after the show on the website. 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. here's what's coming up next. coming up -- a contest with no winners. [ 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. ♪ i'm taking off, but, uh, don't worry. i'm gonna leave the tv on for you. and if anything happens, don't forget about the new xfinity my account app. you can troubleshoot technical issues here.

if you make an appointment, you can check out the status here. you can pay the bill, too. but don't worry about that right now. okay. how do i look? ♪ thanks. [ male announcer ] troubleshoot, manage appointments, and bill pay from your phone. introducing the xfinity my account app. [ 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 free falling. that sums up the tech darlings netflix and amazon, have both gotten crushed in the past month. but our own carter says one of them is about to find the floor. you want to listen to him because last week he correctly called amazon's fall. 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 were to draw a trend line here and i apologize for being without a pen, it has broken trend and, more importantly, we have yet to fill this gap from october. and so the presumption is there's more to go. by contra distinction, netflix is still on trend. if you can visualize that with your eye. and important today's weakness we did fill this gap, so, amazon more 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. again, if there is a follow through money, we think there will be, both stocks presummitively will be down. netflix has a better chance of providing some support in the balance here whereas amazon looks as though there's more to go on downside. >> based on carter's analysis, would you put a trade on either of the stocks,

presumably 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. even if you can imagine that the long-term growth of amazon remained intact, it would take an awfully long time for it to grow into its valuation. that sets up for a poor risk/reward. i don't see any reason why it would pile into it. >> some of these stocks are down to-30%. the idea of shorting them now, people, they're late to the game. we may be going into down trends after such long up trends. you short stocks like these on rallies. you don't press them when they're down like this. >> well, last week based on what carter said, we got long put spread on amazon. he's got a downside target of 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 did bounce off that level today. that's encouraging. i think you see 300 before this thing is done. these are momentum names. when they bottom out, you want to catch the rally because they can move 10%. >> that's because they have really ugly bottoms. they make really ugly ka pit u la tory bottoms. >> of the names that have seen tremendous declines, any of you say maybe i pick that up? >> lot of silence here. >> that speaks volumes. >> the only thing i can think of that i want to step up and buy right now given the way the market acted today, the sell-off was not horrible but an all-time high in the s&p then a new low. >> i want people to remind themselves what happened the last time netflix rolled over hard. it was over $300 and that thing went down into double digits. even 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're going to head out there and find out when "options action" comes right back. ♪ is it just a dream ♪ ♪ ♪ ♪ [ 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 ] [ 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. ♪

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. okay. that's one thing. >> i think i made more money doing option than i did just in stocks. >> what do you like to do generally when you're trading options? >> well, it's time to start shorting. >> if i say the word "options," what does that mean to you? >> that's ambiguous, options. >> you would buy a foot on

facetime. >> what does that sound to you when i say i buy a call fly. >> shoes, clothes. >> would you ever buy something called a call fly. >> a combination you have a call and you straddle it with buying equity at the same time. right? [ ding ding ] >> 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. so let's break out the playbook here. it's a bullish strategy where

you buy one call and sell two higher strike calls against it. but to protect yourself you then buy an even higher strike squall. the bottom line is this, you want the stock the go to the two strikes that you're short. that's the target for the stock. dan, walk us through a situation where you might actually use a call fly. >> i actually use them a lot. to me, one of the main criteria, if the implied volatility of options is high. i have conviction of where the stock will go over a set period of time. and i like to define the range. and i'm actually doing it for less premium if i would if i bought an outright call. that's why i use them a lot. usually has to do with the price of options. >> i want to go out and ask people what they think is straddle is? >> don't you want to do that. it's not that kind of show here, mike. i don't know what kind of responses you'll get. >> a straddle is an options term. >> we know that, obviously. >> you'll ask them what they think a strangle is and they'll want to strangle you. >> we'll test both. coming up next -- the final call from the options pits.

what's your best option? following us on twitter. get trade updates, breaking news and analysis. see what we see in realtime. so follow us on twitte twitter @cnbcoptions. [ 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. we love getting tweets @cnbcoptions. so we are going to answer a question that we got on twitter tonight. can carter do a chart on facebook, solar city and the s&p. thanks. carter, help kunal out. >> 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. close at 56.75 or thereabouts. so the presumption is lower. >> lower for facebook.

dan, would you agree? >> yeah, listen in the near term. here's the one point i want to make. 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. >> facebook actually did well. >> to me, i think they're horrible. >> you've got a lot of speculative. looks like you're trying to throw what you can begins the wall and see if it sticks. if 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 que like on xli. >> carter? >> resist the temptation to think the market is oversold. because it is not. >> buy some put spreads. spy. >> dan? >> you know, in oracle -- carter is saying monday is going to be bad. i think you wait for a bounce to do some of this stuff. get your put spreads.

>> our time has extired. thanks so much for watching. also, check out our daily segment inside fast every day. see you next friday. don't go anywhere. "mad money" with jim cramer starts right now. >> announcer: the following is a paid presentation for the nuwave oven pro, brought to you by the makers of the nuwave precision induction cooktop. [♪...] professional chefs create great-tasting meals from years of experience and by using professional equipment. and now you can too, with the nuwave oven pro, the number-one countertop oven in america! no more defrosting or preheating that giant oven-- the nuwave cooks all your meals faster, better, healthier and easier, guaranteed. the nuwave oven is not a microwave oven, but uses conduction, convection and infrared power