things. now you stay safe. bye-bye. this is "options action." tonight -- the new fear gauge. there's a surprising ind indicating spelling big trouble for stocks. drug deal. >> want to waste my time? okay. i call my lawyer. >> we're just talking about the next big pharma takeover. what is next. ♪ turn your love around >> that's what traders have been doing with tesla. how some traders are betting on

an earnings blowout. the action starts now. >> here in times square and austin, texas, the 10-year bond, better than expected jobs report and yield in the 10-year made a new year to date low. the question is is the bond market pricing in big sell-off in equities. tensions in ukraine factored into this but you're a bear so you're loving this. >> i'm a bear. it's funny, we get -- because we're the options guys, it is down on the year here. so there's a lot of disconnects. if you look at a couple of other things, the bonds, up about 10%, xlu up almost 15% and gold is up 8% on the year. there are investors that are reaching for some protection trades in a lot of ways. it's really important to note. this is a week we obviously had the fed confirm they are going to continue their taper and you know what, look at what bonds

did. to me there's a big disconnect. it speaks to the fact that u.s. treasuries are the only safe haven asset on the planet. >> i don't want to get too wonky and i say that to you because you can get wonky. it did dip below and hit 12 but it's not telling us anything. when you look at what's going on in the bond market it's kind of confusing. >> i would agree with you. it is not particularly elevated although equities still are. both stock prices and prices of options are telling us we don't have a whole lot of reason to panic. i'm skeptical of equities here. it could perhaps a turn above average. it doesn't take a whole lot. could it be ukraine? that's one thing. bad or marginal economic data, those could be the cracks. the bottom hasn't fallen out here. the market is sending us mixed

messages. >> some traders would say we saw in the tlt was short covering into the weekend. >> here's the thing, something doesn't pass the laugh test. we have a global recovery and stocks at all time highs in the s&p and fed that's tapering and goldilocks job growth and the cost of money is declining. more out of china being modeled in or politics is about to get worse. >> not so much fear as confusion, that and the fact that japan will have a four-day weekend and they like to buy bonds in front of big four-day weekends even when there's stuff going on that's geopolitical, they do want to buy bonds. i don't think it's fear. i think it's confusion. if you look at the short term, got crushed today and the russell 2000, which led the way down was actually the only major index that was a little bit higher today. i think people are throwing up hands a little bit. don't want to buy protection

because they think the stock market is not going to go anywhere this summer. they are buying bonds as a place to park money not as an investor. >> there's a disparity in terms of how people are determining the bond market but you think this is bad news for equities and expressing your views when it comes to the nasdaq specifically. >> when you look under the hood with equities, there's still going on. there's been a rolling sell-off all year long. but when you think back to 2000, really 1999, the dot com bubble, we saw a run, look at the three names, booster children for the dot com bubble. topped out well before the s&p topped out in march of 2000. we are almost see similar price now, look at those three stocks and amazon will be in every one of these for the next 50 years.

they went parabolic, also poster children for last move. i'm not saying we're anywhere near the bubble in 99 or 2000 but it's kind of interesting. when you think about what we said with the s&p, you want to press weakness not strength. i'll lay it out quickly. i see those similarities. wanted to look out a couple of months here and buy a put -- the price of options is relatively cheap, down a bunch. to me, when the qqq is 87.70, i bought the july 87 put for 240. that's my max risk. what i really want to do. if i catch a move back towards 84, i'm going to look to spread these. i think this is a really good way if you own a lot of tech stocks and trying to hold in here. one big point about the qqq, 25%

of the waiting is apple and microsoft and google. i think these guys are going lower. sooner or later large caps will play and this is a cheap way to catch that trend. >> i think this is the right way to play certainly and the qs are good in smart choice. one of the things that can really elevate the value of puts on an index when all of the names are correlated. you have a relatively small number of names representing the bulk of the index. if those things start to move lock step, you could really get a sharp move to the down stid and when volatility is cheap, it's not the time to look at spreads. you'll have an opportunity most likely if the market does move to sell options at a higher price and that's going to be a better opportunity to do that. >> we're talking about apple being such a huge portion of the q. it had a huge run. you're selling the top to a certain degree in the q if you're buying puts here. i think this is absolutely a trade. i think you have to be very trick on the trigger key or take

a profit if you have one. the p/e ratio is different than they were in 2000. dan makes a good point, if you overwait you buy protection when you cannot when you have to. >> scott makes a great point. chicken you know what way to short cut apple. you were talking about it on "fast money." the only thing that comes out for wearables ear bud, i think the stocks will come in 10%. >> if you had to choose, would you press on apple? >> i thought apple was fine. i thought the financial engineering is the thing that got it up here and they may be buying back stock but i think apple sells back in towards 560. the nasdaq did finish lower but one name did stick out. tesla is shifting back into gear. earnings are out and carter is going to make a bold call tonight. what is it? >> of all of these high flyers, tesla is different.

let's look at what we know. look at the damage. this is horrendous, down 23, yahoo! down. this is just one after another, year to date. then we have this, a real outlier, tesla. this is growing almost three times the rate of others in terms of revenue. let's go to the technicals. what's important? we had a massive run of $150 off the november low and we've retraced exactly half. $75 down and that retracement leads us right back at these well defined tops. here's the next chart where the line is drawn. 50% retrace. of the move and that's exactly what it did here huge move and 50% retracement. here's the technical setup, we have a well defined series of higher lows, lower highs and you

can call it a wedge or whatever you want to call it. it's tension and gets resolved by news and now you make your bets. we think the resolution is up and out. close today we think you get 125 out of this. >> that's carter's call, 125. >> mike, would you agree? >> this is from a fundamental stand point a little tough to make the case because valuations are a nose bleed category for tesla. the news is get being people extremely enthusiastic there's a lot of plan vanilla funds. if there's nobody around to sell shares, any enthusiasm will see it propelled higher regardless. i think this is one of the situations where it is entirely possible that the stock goes higher despite the fact that fundamentally it's kind of hard to get to the current share price. >> i'm looking up to september. there is not a whole lot in between. this is a situation where the options are expensive so that is

why i'm going to use a spreads. we can spend 12.5 bucks for that. that being 5% of the current stock price is a way to make a bullish bet without risking a whole lot. and this one gets sucked into that vortex. >> everything you are saying, it makes perfect sense except if we were at last year. this is a different year. i think the jig is up with all of this stuff. it's going to break eventually. i looked at it too. if i didn't know what it was, that looks like a great chart but it's a dangerous one too. if there is something for people to shoot at, it is down 50 bucks -- >> the important thing is you know this, of all of the things tested relative strength is number one and what's the stock doing, acting well? this week and last week as other tech names get pounded this thing acts like a champ and the presumption is there's wisdom in that good price action. >> the other thing you have to take a look at, there's big

concentrated holders here. they are not going to bail for the exits any time soon. fidelity is not going to. it's hard to see where the stock is going to crack if you don't have any material sellers. >> that's the interesting thing, nobody is going to sell this because it's held so much by insiders. back to the trade, mike is cutting the cost of this thing in half by doing a call spread that's $40 wide. i'm happy to sell the upside call and cult the trade, the cost of the trade in half. >> everyone was so matter of fact no one is selling it. i want to sell it. >> carter's calls 225. send us a tweet and we'll answer in our 101 web extra after the show on the website tonight. scott has a smart way to get into biotech and hottest options news. here's what's coming up next. drugs and money. after a slew of deals investors

are besting on the next big pharma takeover one name that's seeing unusual activity. dan told you twitter would drop in earnings. ♪ [ 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.

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talk about drug deals, this year we a bonanza. what could be the next big deal and what's driving the action? >> we're seeing a return to these smaller biotech names, some of the run-ups last year, they've gone up in 2013 some of the valuations got really high. in the big farm ma, they have a need for scale and cost cut scales and tax efficiencies. there's industry trends driving the reimbursement challenges and a positive market reaction to these deals. who could be next? i talked to some analysts it's and they are picking names including incyte, $8.7 billion in cancer and inflamation, big data coming. and biomarin working in rare diseases and another one is

shire, irish tax base. in rare diseases and big drug. the another one is puma in breast cancer. the founder sold his last company cougar and they got a jungle cat name play going on there. the last one we talked about before, vertex pharmaceuticals. they have a cystic fibrosis combo. could be a big buy. >> what dealer are options are traders betting on? we go to the sherlock of puts and calls, david ka russo of volatility. >> they mentioned nine potential takeover candidates and four of them i'll mention right now, biomarin and vertex and ale ale.

on april 9th they traded six times their average daily call volume. yesterday kben, three times the average call volume. you might think advanced earnings is what this is about. what we were seeing is a lot of activity in the july 80 calls and those are about $9, a 30% move to the upside on a stock that usually moves about 3% on earnings and pretty clear that isn't what they were betting on and going out a little further than the earnings date. it seems if anybody is betting on an upside move, it looks like vertex is the one. >> do you use unusual activity as your guide to what could be the next target? >> in a space like this, it can be. most investors at home never know when the dates are or what the probabilities of some sort of binary event happening and

it's not takeover sort of stuff. investors don't care what they are paying as far as i am employed volatility of options. it is really important to keep an eye on them but i don't chase it at all. >> coming up next, a huge event could spell more trouble for twitter. we'll tell you why. ♪ [ 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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a miserable week for twitter with questions about user growth. here's how dan cashed in. >> it's the reason we're internet rock stars we know how to risk less to make more and that's what dan did when he bet against twitter. he thought twitter shares were about to lose altitude. >> i think the growth has stalled. if this party is over people are definitely going to sell. >> is it a good idea to go short? >> i have a different perspective. >> dan has a point, shorting twitter or any stock for that matter can expose you to infinite losses. he instead bought for $2.55. he needs twitter shares to fall

below $40 by more than the cost of the put or below $37.45 by may expiration. spending 2.55 just to get against the social network? so to cut costs he sold not one but two of the may 30 strike puts for a total of 60 cents. he needs twitter to fall below the 40 put or below 38.05 by may xpiration. >> it's that simple. >> well it isn't really. because he sold more puts than he bought. if twitter falls below the put, he could be forced to buy stock and for $30, even if it falls below that level. to protect himself against that he bought the may 20 strike put for a nickel. between the 2.55 he spent on the

higher strike put and the 50 cents by selling the lower strike puts and 5 cents on the even lower strike put, dan is spending a total of $2. that means dan will see profits as long as twitter falls more than $2 below the $40 level or below 38 bucks by may expiration. since the time of the trade they dropped 10%, making this trade a winner. now the twitter raz zi is asking at risk reversal the same question. what will dan do now? >> before we answer that question, here's my question. what will next week's lockup expiration mean? if you back out the shares owned by top executives and by early investors because they say they are not going to sell, 313 million shares could hit the market? >> i think it's going to be more muted than i thought at one point. the news was out and stock did not trade horribly for all

intents and purposes, down 24%, down 8%, 9%, i think some people in the know think there's not going to be a whole heck of a lot of stock to be sold. you have monday to figure this out and those shares come unlocked on monday. one of the interesting things about the trade, if i just bought that, i would have been unchanged and got the direction right but the prices were so high. that's why i sold the downside options. what am i going to do on monday? i'm going to take a close look at this thing. if it doesn't come in hard, i'm going to take the small win and move on. >> this is one of the cases we're talking about twitter because they are going to have the lockup, this is one that's there's going to be a little pressure and you can stay with us. >> dan is not the only one betting against stocks, time for the double upside. scott and carter teamed up to make a bet against amazon. the call has been spot on. carter, what do you see in the charts here? >> it's sort of roundtrip and we

say this as fair money dead money, not actual short and buying here is gambling. leave it alone. >> you have to follow us on twitter, on wednesday, amazon was stronger than rest of the retailers we tweeted out that we would be offering at least half of this position. where was amazon then? right at $300, which not an accident that that was carter's target. we wanted to sell at least half of that put spread. now up at 3.08. i would probably leave it alone hoping it settles down to 300. i would be watching this. >> the final call from the options. ♪ [ 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.

♪ ♪ ♪ [ 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. time for final call, mike?

>> dan was right by the bioteches, this is a spek you lar place to play. you may look at selling options in the bigger names that have a business. >> carter? >> consensus is to be short and tesla a third is short. take the road less traveled and play it on long side. >> music to my ears in this week's web extra we talk about my favorite options strategy which helps you buy a stock at the discount. if you don't get to apply it you get paid for your trouble. what is the underline? ibb, the biotech etf which had a really ugly chart has found a bottom and come back. and if you miss it, you get a chance to buy it at bottom again. >> what bearish trade? >> with the s&p chart, it looks great and looks like it's going to break out. what i want to do is kind of

press the weakness in the nasdaq. the options look cheap and i believe if we continue to see the price we saw this week, it's going to spill over to the big caps and looking out to july. >> our time expired. for more "options action" check out optionsaction.cnbc.com. see you next friday. >> 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,