bye-bye. . this the worst is "options action." tonight, there is something to tell you about how to protect yourself. drug deal. >> i call my lawyer. >> whoa, you are talking about the next big takeover. we have the company options trader next. and [ music playing ] >> that's what traders have been doing when it comes to tesla, more love continues into earnings. why some betters are betting on an earnings payout.

on the market side, i'm melissa lee. forget the vicks, the mark has a ten-year bond. they made a new year-to-date low. the question is, is the bond market pricing a sell-off in equities. of course, tensions in the ukraine factored into this. but are you a bear, so you are loving this? >> i'm a bear. listen, it's funny, we get asked about this all the time, right here, so there is a lot of discheck. few mentioned the bonds, the yield is up 10%. sl su up 15% him gold is up 8% on the year. there are investors reaching for some protection trades in a lot of ways. i think it's important to note this is a week we obviously had the fed continue their taper. but, you foe what, listen what's behind this, so to me i think

there is a big disconnect. u.s. treasuries are a safe haven on the planet. >> i want to get to the vick is 13, it hit terrestrial, it's not telling anything, the bond market vs. the vick, it's kind of conzoo fusing. >> the vick at its personal level is not elevated. ing whichties are. actually, stock prices are selling at, we don't have a whole lot of reason to panic. valuations are quite full, perhaps a turn above average. so it doesn't take a whole lot. well, the ukraine, that's one thing, bad economic data, your marginal economic data, especially with job participation. those could be the crash. the bottom hasn't fallen out here, i think the market is sending us mixed messages. >> some traders would say what

we saw it was a short recovery going into the week. >> here's the thing, something doesn't pass the last test. we have stock and the s&p him we have a fed that's tapering. we have a so-called goldilocks job growth. either within of two things, we have more disinflation coming out of china or the geopolitics is about to get a lot worse >> i think what bonds are saying not so much fear as confusion. then you have a four-day weekend. we know they like to buy bonds in front of big four-day weekend. when there is stuff going on they don't control that is geopolitical, they do want to buy some bonds, i don't think it's fear. i think it's confusion. short-term vick got crushed today t. russell 2,000 which led the way down was the only major index a little higher today. i think people are throwing up their hands a bit. they don't want to buy

protection, so instead of buying protection, buying push in the s&p, they are buying bonds to put money not as an investment. >> dan, you think this is bad news for equities in europe, especially when it comes to the nasdaq, specifically? >> i think if you look under the hood, with equity, there is some stuff going on, obviously, there is a sell-off with high valuation names. when you think back to 2000 or 1999 the dot-com bubble, we saw a run in a lot of high valuations. look at those three names there. those are the poster children and all of those stocks topped out well before the s&p topped out in march of 2000. we are almost seeing some similar price action right now. we obviously know the sectors, biotech, 3d presenting. amazon will be in every one of these things the next 50 years. those stocks all went parabolic. a lot have round tripped, not

facebooked just yet. i'm not saying we are anywhere near this sort of bubble we had in '99 or 2000. if you want to draw a comparison, it's kind of interesting. when you think about the vicks and the s&p, you don't want to pick there. you want to crush weakness, not strength. that's why i'm looking at the qqq. i see those similaritys. i want to look out a couple months and the volatility the price of options is relatively cheap. it's down a bunch. so to me when the qqq is 8770 today, i thought the july 87 put for 240. it's about 3% under lying. if i catch a move back towards 84 the low earlier in the month, i will look to spread these. i think it's a good way if you own a lot of tech stocks, you are holding in here. one thing about the qqq 25% of

the waiting is recalled for this, microsoft, apple, in dell, in linkedin, it's horrible. these guys are going lower, sooner or later, large caps will play. >> i think this is actually the right way to play, certainly. the qs are good and a smart choice. one of the things that are really elevate the value of putz on an index is when the names are correlated. as dan pointed out, you have a relatively small name representing the bulk of the index, if those move large step, you could get a downside, when it's cheap, it's not the time to look at spreads, you will have an opportunity to sell at a higher price. >> we are talking apple being a huge portion of the q. it's had a huge run. you are actually teleselling the top if you are buying putz here, i think this is absolutely a trade. i think you have to be quick on the trigger to spread out or take a kyrgios if you have one.

the pe ratio is very different than they were in 2000. so this is a trade if you, dan makes a good point, if you are overweight in main, you buy protection when you have to. >> scott makes a point, it's a chicken one way to sore apple. you talked about it on "fast money." an ear bud will be a disaster. the stock will come in 12340r9s next couple months the this is a good by a to do it. >> if you had to press, you you'd choose apple? >> i thought the quarter was the great. they may be buying back stock right here. i think apple settles in towards 560. as you know out there, one name sticks out, tesla, momentum stocks, tesla is shipping back into gear. earnings are out next week, carter will make a bold call tonight. what is this? >> of all these high flyers, tesla we think is different. let's look at the damage, this

is horrendous, right? down 38. down 2003. yahoo down, one after another, year-to-date, year-to-date. then we got this, that's a real outlier, tesla outperformance. this thing is growing three times the rate of the other. let's go to technical. water important? we had a massive run of $150 off the november low. we've retraced right now exactly how. $150 off, $75 down. that retracement leads us right back at these well defined toms. in fact, here's the next chart where the line is already drawn him we have a 50% retracement of the preceding move. that's exactly what it did here. a huge move and a 50% retracement a. huge to have and a 50% retracement. here's the technical setup. we have a well defined series of higher lows, lower high, you call it a wedge, you call it

what you want to ul call it. it's tension, the news is earnings. we think the resolution is up and out. closed today, we think you get 125 out of this. >> that's a part of call 125. mike, would you agree? >> this is from a fundamental standpoint tough to make a case, they're in nose bleed territory. tesla the factory news is getting a lot of people enthusiastic. there is a lot of vanilla funds along this plains, they're not selling it. any enenthusiasm will see it higher regardless of those sixes where it is entirely possible that the stock goes higher despite the fact that fundamentally, it's hoard to get to the current share price? water your trade, mike? >> i'm looking out to september. there is not a whole lot of explorations between 215 call spread. this is a situation where the calls are excessive. you can spend about 12.5 bucks

for that. that being the current stock prices, a way to make a bullish bet without risking a whole lot. dan pointed out somehow they get stuck into that vortex. >> everything you guys are saying, it all makes perfect sense except if it were last year t. jig is up with all this stuff. the may be the last media stock to break. don't be fooled by the charts. i looked at it, too, i would say, that looks like a great, great chart. it's a dangerous one, too. if there is anything for people to shoot at, it's, you know, this thing is down 50 bucks in a quick. >> the important thing is you know this, of all the things that have been tested, relative strength is number one. what's the stock doing? acting well. this week, last week, as other tech fames get pounded, this thing acts like a champ t. presumption is there is wisdom in that price action. >> you know the other thing we have to take a look at i was talking about before, there is big concentrated holders there,

those guys will not bail for the exit, fidelity is not going to, so it's kind of hard to see where this stock is going to crack if you don't have material sellers. >> that's the interesting thing. nobody is going to sell this it's held by the pencers. back to the trade, mike is cutting the thing in half by doing a call spread, 40 bucks wide, i'm happy to call that upside call and cut the cost of the trade in-and-a-half. >> you guys, everyone was so matter of fact that everyone is selling it, i want to sell it. >> carter calls 225. that's not correct. got a question out there? send us a tweet. we'll answer right after the show on our website tonight. stocks are a part is way to get into biotech, educational material the hottest options news so you want to check it out. . here's what's coming up next. trucks and money. after a slew of yields,

investors are betting on the big pharma take joseph. we will tell you one fame seeing unusual activity. plus, fans told you twitter would drop on earnings. now we'll tell you why there could be more pain next week. that's options action returns. ♪ .

talk about drug deals,

biotech bo fan za with valiant, pfizer tikeing to take astro seneca, what can be the federal government big deal? >> thanks, melissa. what we are seeing is eventually a return to these smaller biotech names. the runups are gone up. the valuations got really high, in the bigger buyers, they have a becker scale. they want to potentially reincorporate overseas. now, there is industry trends driving it. reimbursement challenges. there is a positive market reaction to these deals. so who could be next? i talked to some analysts today, they are pecking namt, insight, a valuation of about $8.7 billion. biomarin, working in rare diseases, another is shire, it has that coveted tax base and

another one is puma if breast cancer. it's built to be sold. their founder sold the last company cougar to j & j. they got a jungle cat name play. vertek pharmaceuticals has a huge binary event. that's another one people say could be a potential buy. so what dealer options traders are betting on? to answer that question, we go to one man to david caruso. mike. >> it's pretty interesting. you know, in the beginning of the year, ubf mentioned then potential takeover candidates. four of them i will mention right now. biomarin, insmed, lexion and

vertex. pharma, if general, has seen quite a lot. one of the names did stick out, vertex. several days or after we saw above average volume. now they did announce earnings. you might think that's what this is about. except what we were seeing is a lot of activity in the july 80 calls. we are talking a nearly 30% move to the upside on a stock that usually moves 3% on earnings. it isn't clear that's what they were betting on. they are going out further. it seems if anybody is betting on an upside move on these, it looks like vertex is the one they are using now. >> do you use unusual activity as your did to the next target? >> in space like this, it can be. most investors will never know what the dates are and the probabilitys of a binary event happening on one of these names. you know, a lot of times, you

know, investors don't care what they're paying as far as implied volatility. it is important to keep an eye on. i don't chase it at all. >> coming up federal government, a huge event for twitter. we will tell you why when options action returns. ♪ [ bell ringing, applause ] .

. a miserable week for twitter, serious questions about user growth that acceptt the stock diving and here's how dan cashed in. >> on "options action," it's the reason we're internet rock stars. we know how to risk less and make more. that's why dan bet against twitter. he thought twitter shares were about to lose altitude. >> if this party is over, people are definitely going to sell. >> is it a good idea to go short? >> i have a different perspective. >> he has a point, shorting twitter or any stock for that matter can expose you to infinite losses. he says sell quick for $2.55.

but spending $2.55 to bet against the social network? >> down. >> so to cut costs, dan then sold not one but two of the may 30 triput for a total of 60 cents and reduced his costs to $1.25. he needs to fall below that $1.95 he spent or 30.05 by may. >> it's that simple. >> it isn't really, if twitter falls below the lower strike put, he could be forced to buy the stock. >> that put strike price or in this case for $30 bucks even if it falls below that level. so to protect himself against that, dan bought the may 24 strike put for a physical el. and now between the $2.50 on that strike put and the 60 cents

on selling the lower streak put and the five cents on the lower strike put, dan is spending a total of $23, that means he will see profits if twitter fallings $2 bow low the $40 level or below $38 bucks, about 10%, macing the trade a winner. >> yeah! >> now the twitter audience is out in full force asking us the same question. what will dan do now? before we answer that the question, here's my question, all of that block of exploration, if you back out, the share is owned by top execs and early investors because they see they're not going to sell, it could potentially at the mark. >> i think now it will be a bit more muted than i thought at one point. the stocks did not trade horribly, when you think about the first quarter that reported if february. the stock was down 24%, down 8,

9%. i think some people in the know think there will not be a whole heck of a lot to physical out. i got to figure it out on pond, those shares come out on monday. one of the interesting things about the trade, if i just bought that 40 put, i got the direction right. the prices are so high. that's why i sold all those downside options. what will i do on pond? i will take a close look at this thing. if it doesn't come in hard, i will take it off, take the small win and move on. >> meek. >> this is one of those cases we were talking about tes louisiana twitter because you pointed out will have the lockout. this is one i can imagine will have pressure on. you can stay with us. >> dan is not the only one betting against momentum stocks. if march, carter came out to make a bearish bet against amazon, more downsize? >> at this point it's a round six months, when you say this is

fair money, debt money so leave it alone. >> what do you do, scott? how do you manage the trade? >> this is why you have to follow twitter. we tweeted out on wednesday we would be offering half of this position. where was amazon? right at $300, which it's not an accident that that was carter's target. so we wanted to sell half. at least half of that put spread. it's now up at 3.08. i would be watching this. ♪ [ cows moo ] [ sizzling ] more rain... [ thunder rumbles ] ♪ [ male announcer ] when the world moves... futures move first. learn futures from experienced pros with dedicated chats and daily live webinars. and trade with papermoney to test-drive the market.

♪ all on thinkorswim from td ameritrade.

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[ cows moo ] [ sizzling ] more rain... [ thunder rumbles ] ♪ [ male announcer ] when the world moves... futures move first. learn futures from experienced pros with dedicated chats and daily live webinars. and trade with papermoney to test-drive the market. ♪ all on thinkorswim from td ameritrade. . >> time now for the even iffal calm.

>> i know, the first thing i would say, dan was right about these biotechs. the options might be quite pricey. you might look at selling, tow. >> carter worth. >> consensus is to be short, tesla, indeed, a third of the flow is short. we could be contaxpayer yarng take the road less traveled. play it on the long side. >> it's music to my ears. in this week's web extra, we talk about my favorite options strategy, if you don't get to fly it, you get paid for your trouble. what is the under line? ibb the biotech etf which had an ugly cart. if you miss it, you got a chance to boy that bottom again. >> dan, what bearish trader? >> this is unacceptable. with the s&p chart, it looks look it will break out. >> that is the safety trend. what i want to do is press the

weakness, in the qqq the options look cheap, i believe if we see the pricing action limpgdin this week. >> check out the website "options action"@cnbc doak. >> announcer: the following is a paid advertisement for the 21 day fix, brought to you by beachbody. this time, you'll lose weight, get in shape, and stay that way. >> welcome, welcome. thank you, guys. thank you. have a seat. thank you so much for joining us today. as someone dedicated to health and fitness for my entire life, i am so excited to share this amazing program with you today. it's called the 21 day fix, and, believe me, it works. it worked for me. it's gonna work for you, no matter what your fitness level. if you're struggling right now to shed those last few pounds, if you don't think you'll ever be in that bikini again or if you're even dangerously overweight, today is the day to stop thinking abit