first, then money, then things. now you stay safe. bye-bye. this is "options action." tonight -- >> i can't do it. >> that's what gold investors are doing at bullion hits a four-month low, but believe it or not gold flashing a secret buy sign. we'll tell what you it is. plus, how high. ♪ how high >> no, not those guys. we're talking about bond prices which continue to go up. we'll give you the best way to cash in now. and tempted to buy apple ahead of next week's worldwide developers conference. >> i am. >> well, before you do, you have to see a shocking chart that tells you exactly what the stock does right after the apple ceo

leaves the stage. the action begins right now. from the nasdaq market site in times square, i'm melissa lee. these are the traders in new york and in austin, texas. another day, another record but beneath the calm surface some troubling signs in high growth land. check out twitter giving up most of this week's gains. wasn't alone. solar stocks like solar city also falling hard and check out sales force.com. the software company off by 3%. is this price action in response to a huge week or maybe it's a sign to sell. let's get in the money and find out. dan, what did you make of this action here? >> you know, it was very reminiscent of a lot of the action we saw in april and early may when the s&p was chugging along, we saw small caps act very poorly and then we saw this rolling sell-off in these high valuation sectors. uj naimed it. it was solar, it was biotech, it was social media stocks, and it was 3-d printing.

when i looked at it today, the s&p is sitting there again at an all-time high yet there's a lot of weak action amongst those sectors. to me it was reminiscent of the price action when people were really scared about a month ago. >> also take a look at some of the big cap names that have been beat down. i'm thinking of apple for instance, mike. when apple turned, that's when the s&p turned as well even though apple got a nice price target hike by goldman. ahead of the world wide developers conference. >> we obviously have expressed a lot of skepticism about the market. today if you were trying to -- you could take a look at some of the sector that is underperformed like energy for example and materials which were the two worst performing sectors in the s&p yet still both are actually at pretty much all-time highs right here. i think the other thing we should be looking at though is the fact that volatility in all of these is at all-time lows. and that really is the opportunity. if you want to be a pollyanna and be glad about something, that's what we should be blood about because that's probably

where the opportunity is right now. if you were looking at the s&p, you could spend $5.50 to buy an at the money call. that's what you're risk from now until the end of december. i would take this as a phenomenal opportunity if i was going to continue to have any kind of a long position in the market to use that to do it. i have not sold any stocks up until now but i will tell you, i'm not committing any new money. >> what's important, of course, is today's action, these were the best performers on the week, and it just shows how tentative and skeptical people really are. you come up to friday and people say, listen, i got a nice bounce and i'm not going to hang around. big sell-offs in names that were big winners. >> all bounces weren't created equal. for everything that looks fantastic, in high valuation land, there was a couple things like priceline and netflix that blew the doors off. really eye popping things but then there's the sales force.coms, the amazons and a host of other that is really had anemic rallies.

to me i think the lack of relative strength, the lack of oomph, is really troubling to me. >> we're actually taking a look at crm. >> i think it's an important one to look at. they reported earnings and on the surface everything looked pretty good. a well managed company in the forefront of a great secular trend within software in computing in general and today the stock opened up. 3% on a deal that they did with microsoft. it's a big partnership that they're launching into, and so this is the sort of stuff you'd want to see. what happened, it immediately got rejected. the first tick of the day was the high of the day. the stock closed down 3.5%. that sort of relative underperformance is what i think you want to lean on rather than s trying to pick stops in strength. when you look at the chart, this is one of the worst charts i have ever seen. it's a textbook head and shoulders with 50 being a massive neckline. i think you want to press this sort of weakness. i think we have a chart, implied

volatility, the price of options versus realized volatility. actions are relatively cheap right here relative to how much the stock has been moving lately. >> you're taking advantage of that in your trade, just a very simple, straightforward trade. >> i want to look out to august, give this some time to play out and really today when the stock was about 5280 i bought the august 50 put. i paid $2 for that. above 50 i risk that $2 and between 48 and $50 i can lose up to $2 but below that i obviously have a lot of profit potential. like i said, implied volatility, i didn't spread this right out of the gate. if the stock moves toward my strike i will turn it into a vertical. of the same expiration. i like my optionality here. >> how does that $48 level look to you? >> i know he's looking at it closely, the $45 level. there's a big gap and i know he's aware of that, and that's ultimately where it looks like this stock is going. good trade. put it on and press it. >> mike, i have a feeling you like this trade as well. you're like three peas in a pod when it comes to bears in momentum names.

>> that's what everybody should probably be worried about. one of the things that dan is doing here is actually in this name, he was talking about how expensive options are relative to how much the stock moves and in general the price of options has actually been incredibly low. kind of like rates and yields. this is one of those situations where you don't use spreads. you have to look at this as an opportunity to buy outright options and then you look into spreads as the underlying moves. i think that makes a lot of sense. what's interesting is next week is june. august actually isn't as far out as we might think. i wouldn't even mind going a little further out. the longer dated options tend to decay more slowly. >> i would make one last point. i'm not trying to pick a top. a couple weeks we said if this fails, jump into the spy. i'm not trying to do that just yet. the jury is still out. this could go up another 25, 50 points before it's all said and done.

when a stock like crm cannot rally on a week like this, this is the sort of action you have to jump all over. >> it did rally but it gave it back. >> what is the risk of the trade of technology going up -- >> really, of course, this gets down to cap weightings. it's so dominant by microsoft and oracle and apple, it's highly unlikely it will collapse. the way a crm can collapse or a pandora can collapse. >> this is not a small company. it's a $32 million -- >> it still speaks to the issue of momentum. >> but those are not momentum stocks, microsoft and apple are dullards, they're practically utilities. they are not extended. they're not overpriced. and that's why. xlk is holding up so well. >> the ferocious rally in the bond market. the yield on the ten-year hitting its lowest level since last june. that gave a boost to rate sensitive stocks. the xlu which tracks utilities, the best performing sector this

week in the s&p. option traders weren't buying this move. a staggering 20 puts traded for each call in the xlu today. nearly 130,000 puts traded on the xlu today. most of that activity centered around the $42 strike. so if option traders are betting against the sector, should you. carter has made it to the smart board. carter, what do you see? >> we know that utilities are the best performing sector today, best performing this week, best performing sector year-to-date up 14% crushing the s&p. the question is, is that likely to continue. let's look at a few charts and see if we can figure out together. here is basically the daily chart over the last year and a half. what's important is basically after a huge move off this low to the high of just a month or so ago, this is an 18% advance and we gave back exactly a third, and importantly guess where that stopped? right at this top. literally in the penny. meaning it found support where

it should. i want to look at longer term where we stopped before we sold off here. watch this. here is the five-year chart. well defined. since the bull market began. and we know that securities respond to trend lines, and that's just how it works. it's not because i say so. history tells us so, and we are likely to approach and even just get back to and exceed a little bit the top of the channel. it implies a move to around 46 would be roughly 10% from here. now, let's put the longer term picture. this is the s&p 500 utility sector and look at where we are meaning the action here right now, strength right here right now, implies a breakout above the 2000 top, the 2007 top. just a textbook conventional buy juncture. just a few other things that might put this in perspective. these are the sectors waiting in the s&p. there are ten that comprise the

whole. utilities are right now at roughly 3% whereas on average since 1990, utilities are roughly 3.75% of the s&p. so this would suggest that utilities to the rest of the market are underweight, and then one other thing that might be relevant, yields. these are bond proxies after all. the current yield on the sector is 3.65%. a ten-year treasury is 2.47%. that ratio is 1.43%. you're getting a lot of yield relative to what history says you should get out of utilities. this is a good place to be. and finally if there's ever a market sell-off, utilities act better than equities in general. >> carter, listen, we've done a million charts together when you look at those uptrends and to me you're trying to get maybe the last buck or two out of this amazing, amazing move. when you think about, it you

look back, the prior high on the xlu is 45. if this didn't have that yield, you would be looking to get in on the short side here -- >> i have to tell you -- >> it's all very subjective. you interpret it as a triple top and from my point of view it has epic breakout potential. >> a quick point, you were talking about the ratio of the yield in the utilities relative to longer term u.s. treasuries. i think it might be more informative at times to actually take a look at the spread in absolute terms and it probably doesn't look quite as dramatic in that sense. the only thing i like about xlu as a yield trade is it tends to be inflation adjusted. which the conventional u.s. treasury would not be. i'm kind of with dan in the sense i'm not really enthusiastic about trying to essentially short rates when they're already at epic lows which is i think is one of the things you're doing but you do have that inflation component but we do have something else. in the low rate environment, low

volatility, we can still make a bed with carter without actually taking too much risk. and that's what i'm inclined to do. >> walk us through the trade, mike. >> i'm just going to simply buy the december 43 calls. you can pay $1 for those. they're long dated, not decaying rapidly. if carter is right, you're obviously going to have a lot of potential upside and if he's wrong, you're not risking very much. for my perspective, the reason we'll do this trade is because the market is giving us an opportunity to do so and do it cheaply. >> got a question out there? send us a tweet @cnbcoptions. in addition to that, you will find great trader blogs, educational material and the hottest, juiciest options gossip. it will blow your mind. you want to check it out. here is what's coming up next. last four times apple has held its worldwide developers conference, something very strange has happened to the stock. >> i know it looks to you as if the same thing is happening again, but it isn't. >> we'll tell you what it is and how to profit. plus -- >> crack a whack.

>> and so is gold this week, but we'll tell you why a floor could be in store. that's when "options action" returns. [ 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.

♪ [ 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. who says sell in may? apple shares up over 7% this month but if history is any indication next week's worldwide developer's conference could spell trouble for the stock. dan, what do you see? >> it's interesting. this is a name we've been -- the

investment community has been infatuated with for ten years now, but since that september 2012 top above $700, i mean, sentiment has been getting worse and increasingly worse. we just had this shift right now. the stock is up 13% on the year. the company just made this acquisition for beats. it's a really exciting thing. they're bringing some real creative talent and people seem really excited. i just wanted to take a quick look at how this stock over the last four years has traded into and out of the worldwide developer's conference because one of the things we all know is the company is highlighting their existing products, some new services, a lot of software offerings and in the past they have taken the opportunity to introduce some new hardware. okay. so let's just look at it. last year, june 2013, look at this, this is the ten days prior into the wwc. this is the day. the stock opened up, traded higher, and then it closed toward the lows. if we go back to june 2012. same chart. look at this. down 3% on the day, closed on the lows. look at this.

june, 2011, same thing. it was trading up. as soon as tim cook or in the past steve jobs dropped that mike, all the anticipation, traders sold. there was a lot of pent up demand into the event and then it came right out of it. lastly, 2010. the same thing. so really the way i'm thinking about it is this. the stock has run up about 8.5% over the last 11 or 12 trading days. it's at almost two-year highs here. and look at this. right up until this week implied volatility, the price of options was almost at multiyear lows. this is demand. people were chasing the stock into the conference. so me i think you have potentially an opportunity that during this keynote address when tim cook is giving it, if they get towards the end of this thing and the stock is up and there's nothing new and exciting, i think you sell the stock. i think you could see that 2% to 3% which it's sold off basically from the highs during the conference for the last four years, but remember, people,

that 7 for 1 stock split the following week, that's the thing that a lot of traders are trying to game. i don't think that's important but i think that's going to be the ultimate sell on the news. >> you're going to be watching this worldwide developer's conference on webcast or however you're watching it and as every minute goes by -- at what point do you pull the trigger. for the person at home, how do they do this trade? >> it's a finger on the trigger trade. i would do it with options. it makes options a bit more expensive but i will look at the weeklies and look to buy something near the money, putting, and if that swoons 2%, 3%, you have to get out. it's just a quick day trade. >> you know, this is a very strong stock that is gapping up lately, and there's every indication it's going higher. i think there's a lot of momentum and fighting momentum like this is wrong-headed, but good luck for those who try. >> mike, dan makes a great point in terms of volatility being at multiyear lows. you can easily make a bet and not spend that much money.

>> that's exactly right and that's what i think you should do. that's the opportunity is to use options because there's an old saying in trading and we've heard it a million times and it probably applies here, sell the news is what dan is talking about, but selling it on such a strong stock might be risky. use the options to do it and you might be able to get some gearing on the downside. >> we're kind of in uncharted territory. everybody is looking back up at the 700 level. i think it's a difficult scenario to try to pick a top. i'm trying to identify a couple catalysts. i'm looking at the fact options are cheap and i will play it with defined risk. i'm not making a big bearish risk on apple right here. >> all right. coming up next, gold very close to giving up its gains for 2014. carter is long gold. we'll tell you why he's sticking with that trade when we come right back. stay tuned. ♪ [ bell ringing, applause ] five tech stocks with more than a 10%...

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before you get stuck. get the most extensive charting wherever you are with the mobile trader app from td ameritrade. a brutal week for gold bugs as bullion hit a four-month low. this is particularly painful for cohen carter and here is why. an "options action" just because we risk less doesn't always mean we make more, and sadly that's

just what happened to their bet on gold. carter was into the shiny stuff. >> we play it on the long side. >> all right mike said, let's try to strike it rich. but just 100 shares of the gold etf? come on, mike. you know that would set us back $13,000. to spend less, mike stead bought the june 130 strike call for $3.50. now to make money he needs the gld to rise above $130 by more than the $3.50 he spent or above $133.50 by june expiration. but it gets better. because if the gld does rise, then that call will increase in value faster than the stock, meaning more cash in mike's pocket. translation, since he's spending less, mike can make even more. >> that's gold, jerry, gold! >> but actually it's a good thing he did spend less because the gld has plunged more than 6%

since the time of the trade making this trade a loser. and that leaves prospectors everywhere with just one more question. how will mike and carter fix their trade? before we answer that, perhaps this might make us feel better. had you bought 100 shares of gld at the time, you would be looking at a loss of 900 bucks. mike's call is basically worthless, but he's capped his losses at $345. carter, would you stay long? >> we do. we like gold. a tough week down 3% on the week and almost as cited here back to where it started on the year but the real issue is is the bottoming out action of the past two years legitimate or is it the stall before the next down leg. we think it is the former, it is bottoming out action and the presumption is you have an asymmetrical moment. not a lot of downside risk but upside potential. we would stay in the trade. >> mike, is carter using the royal "we" or would you agree?

>> you know, i have never really said that i was a big gold bug but i think the options markets give us a little bit of an opportunity here and i'm not the only one that's saying it. there was an institution long the july 29 calls. it looks like they rolled down to the 124s. so they are giving themselves a chance to make their money back. on the june 130s we probably can't do that but we can go further out in time and get some lower strike calls and i think we probably will get an opportunity to either spread out or sell those at a profit if we get any move to the upside. i think that's probably the way to play it here. >> i'm too dumb to know why anybody would own gold. i don't know the reasons. i don't get it, but i'll just tell you this, you're talking about gld at $120. when you look at $1,200 in the commodity, i have to tell you, that is the multiyear low. that's that support that carter is talking about. i have to assume there are massive stops all over the place there. so this is not something i want to be long.

keep an eye open the commodity. >> on "mad money" tonight cramer is going for the gold with sage kotsenburg. olympic gold meddlist. and the ceo of quintiles is joining jim. coming up, the final call from the options pits. [ 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.

♪ [ 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.

>> ults, be there. >> mike. >> d 33. >> that was the best fast mp. crm. >> i'm melissa lee. see you back here next friday at 5:30 eastern time. the following is a paid advertisement for starvista entertainment and time life's video collection. ♪ one day at a time, sweet jesus ♪ bill gaither's homecoming concerts have brought us songs of hope and inspiration. ♪ well, it's shoutin' time in heaven ♪ ♪ a sinner once lost is found across america... and around the world, millions have experienced these timeless songs that celebrate our faith. ♪ turn your radio on [turn your radio on] ♪