money, then things. now, you stay safe. bye-bye. . there is "options action." tonight, that pretty much sums up to market this week. but you won't believe the shocking reason why it would get even worse. plus? >> where's my car? >> good question, despite auto sales, ford and gm are plunging, according to one cart the road is about to get even rougher. >> on a painful week, whyr why aren't safety stocks providing

safety? we'll reveal and tell you where you can fooid hide. the actions starts right now. live at fork city's time's square. stocks are suffering their worst woke if two years. they're coming back if a big way, so this is a welcome break from the complacency or a start of a correction? it's start out with our bear. >> i thought you were talking to mike. >> you both are -- >> i'm the resident skeptic. i'll tell you the, for people that watch there sew regularly, we have been talking about the weakness in consumers, in home building. just last week, you guys were talking about the weakness in industrials. all right. in the markets, yes, if you look at those images, they're holding umm. why is that? it's convencentration. the ap ap down 3 ', from the all

time highs it made last week. when you look under the hood, there is so weak ness, you have so much stock, so little performance. that's when have you this cascading of selling. >> 85% of the stocks were leigh lower this woke than left woke. less tan ten were up more than five percent, more than 1 hu00. the other thing looking at what happened to us yesterday and today, it's clear the market is going to take fozzie dive as soon as it anticipates what the fed is going to do, not when the fed articulates it. i think everybody was expecting a better jobs number than we got. they didn't expect the small uptick if unemployment. if we had had i think a 110

downtick, we could have seen them down. last may, last june, we really did have our smoefrt lockoff, if we look at when the feds see qe. when you think about it, maybe it's a pillar that involves speak, it spikes exceptionally fast and hard. everybody is thinking i will have a chance to buy, you probably won't, that's something to bear in mind here. >> carter, water interesting, a week ago, we were close to the record highs. here we are. we have our nickers in a bunch so to speak. are we overreact to all of this? >> not overreacting. stockmarkets got some issues. it's a 84 where despite all the ups and downs, germany you can't

unchange the dow. the russell, the dow, all coming around, here we are august, for the results. here's the real issue. this is the russell 3,000. 98% of your investable xachl as you make new highs, breath has been declining, decline, declineing. that's a problem. two other charts to put it in perspective. right here, number 52-week highs. we are at almost a low for the past 12 months. then the reciprocal number of 52-week lows. we are at a high for the past year. this is a breath problem. it should be the beginning not the end of the sell-off. >> we were saying there was essentially one resident there. it sounds like all of you are skeptical/bullish at the same time. >> i hate the breath thing. i think last couple wex 1.5% of

the nasdaq 100 were at the high of the components while the index was at the high. that's telling you the top peg ga god greiss doing all the heavy lifting. microsoft, intel, google, face b.c., they make up 35% of that entire index. it feels like the entire nasdaq is on the shoulders of the i.6 launch. i have been short. it added to the short today. i'm looking at the qs and out to october. i wanted to find a fairly wide range when the statistic was 94 sfievgs i bought the october put-spread. i paid 240 for that. i bought a put for $3 and sold one at $60 cents. >> that cost pe 2.40. that's my max risk. i like the potential 4-1 payout at the money. there is in the money, here the spread, if you think about over history, september, october, kind of rocky months. we know there is a lot of

anticipation into this iphone 6 launch. this is great news. >> you have given yourself time for there to play out. usually you don't want to go out with spreads. obviously, the payout ratio is very nice. you look to spread when applied volatilitys rise. they have risen this week. >> it sounds like you are a fairish apple. why not do just apple you are also relying on -- >> it has proven to be the fame you don't pick a top. apple would could go up to 100. it could go 10 a 5. i don't know i think there is too much god microsoft and intel, they are up 20%. i think those names come in. google has performed not so fantastic. we know the issues as far as valuation. with the we get a proper large cap sell-off. the kkk is going back. >> everybody on there desk is fet long stocks, so it's a question of lounge you are and

when you want to be a little less long. i think there is a good way to get less long. >> good point. let's talk about auto, they were one of today's worst performing zpris. the good fuse, car sales rose from last year. they have a big discount. if july discounts increased almost 8% per vehicle. ford and gp dropped 1% on the day. they are down nearly 5% on the week. we saw bearish activity on the market. they put if twice tear daily volume. so are all the put-buyers right? will there be more pain for ford and gm? >> carter, what do you see. >> i this i the people going after the sort side are right. let's take a look. we've constructed a xoits here off about -- composites here of

about 20 stocks and the recent break june. these are highly cyclical assets. they are starting to diverge from the markets. the presumption, the autos will fol low. this is a big fail. it's a quality name. it just broke trend. there is no other way to draw it. now, daimler, guess what happened to renault, it just broke trend. guess what happened to porsche? it just broke trend, switch a bit, harley-davidson, it just broke trend. look at general motors it didn't break trend, it broke trend months ago. it's one of the biggest laggards aren't remember the pattern is you can draw your tops 'ways, here the your neckline. this is not cool if itself. >> that's the first. carter saying not cool that

means he must mean business, mike. >> one of the things the autos has had is a strong secular wind. the car sales have been been brock buster, they have been trending from the lower left to the upper right. the other ting to think about her is suvs outsold cars for the first time if years with the post-recent sales reports and also the brick countries, china in particular, general ports does over 14% of the chinese market. the largest auto market in the world, a market slated to grow 34%, bluist trading at below market mus. . the problem is we're close to $100 crude. that could influence suv sales, which is where all the markets are coming from. we had the tail end of low rates. the fear is rates could rise. when you take a look at all of those things in conjunction, the fact that the stock looks cheap, based on the forward stills.

those estimates pay be wrong. a put spread, the september 33 foot spread, you request buy that for about 75 cents, a quarter, respectively. if there was october options, i probably would have gone out like dan did. i don't want to go out too far, if we get weak inside, which is volatile. >> the percent annual of older vehicles on the road is the highest since 2009, wti, 95 or so. 97, excuse pe, but it seems to be trending lower at this point. >> if gas price is the magic number i think, it's not crude price, if most of the country sees more than $4 gas, people start shiek away from suvz. one thing in defense of gp i have to say is their new large suv which is the denali, exxon, yucon, suburban. whether you like it or not they have had some problems getting these on the lot.

those numbers might be softer just because of the production. >> real quickly on the trade, i lick targeting 30. 30 is a passive technical level. heart's chart. that is a massive triangle of death. i want to say back to ford, too, it was a failed breakout there. the momentum has left the building in this space here, so you pay want to look to adam on lower lows. i don't think this is the spot. >> send us a tweet to cnbcoptions. check out our options fuse, videos, throughout the week and exclusive trades. some have called it a revelation. we simply call it optionsactions.cnbc.com. here's wrats coming up next. doing the safety dance? that's what traders are trying to do this week. we'll tell you why the safety dance isn't working this time. mr. us. >> everybody, get if crash position. >> investors got nervous about

stocks this week. will it explain why the vix could be flashing a boy sign that's when "options actions" returns. ♪ [ 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.

these wifi hotspots we get with our xfinity internet service are with the mobile trader app. all over the place. hey you can stop looking. i found one. see? what do you think a wifi hotspot smells like? i'm thinking roast beef. want to get lunch? get the fastest wifi hotspots and more coverage on the go than any other provider. xfinity, the future of awesome.

when the world moves, futures move first. learn futures from experienced pros with dedicated chats and daily live webinars. and trade with paper money to test-drive the market. all on thinkorswim from td ameritrade. welcome back to "options action." all sorts of characters abound in the square. we told you about the vix

surging, stocks rally three months later, could the time be different? i came over here to the smartboard, dan tell us why there is a difference. >> this is the chart of the vix over the last year. there have been four moves where this last one had 50% or greater off 52-week lows. that's important. in conjunction with the conversation on the top the feds were buying a lot of bonds, 85 billion a month. now they're down to 25. they will be done soon. really what's happened here, investors are starting to think about the world where there is more volatility. after last year we had a 50% move, 80% move, here we are we closed at 17, that's well below the long-term average. when you look at this chart, this is over the last year. this is the s&p vs. the vix. you see the inverse reaction here. you get these vix spikes, a few months later, we're up 10%. that was in a market it was up 30% last year. you see this convergence right

now, this chart doesn't mean a whole heck of a lot. it's showing you, we see the spike and the suvs come in a bit. this is including the financial crisis. look, this is we got all these levels, we haven't seen levels like that. every level has been like this. wove ground to a halt with these trillions of dollars of the fed buying of bonds. then have you this move right here. so what does the tell you about what to do with the s&p? >> right. >> i think that's your big question. this is the s&p 500. the series of higher highs and lower lows, this is grinding higher i would add this. >> which? >> the green one. this is the nice little trend line. so you are asking me what does the 70% spike mean in the year lows. if you are looking, few think take it to the bank when the vix spikes like that, wait until you get to this trend line. that's where the support is. >> which is what level?

>> it's about 1860. that's a good question. that's probably where you want to try to take a shot. not at 1,900. >> mike, do you agree? would you wait, 1860 being the level? >> force i think that's fine. there is one other thing i would throw in here. the vix spikes when there is uncertainty. we get a pause button before we are likely to see this happen again, really, everybody is trying to get ahead of the fed's next move. we won't get that until we have additional data that everybody can front run. i think the technical level is fine him i'm not expecting the market to get excessively volatile from here. i think it will get less volatile next week. >> carter, what do you make of dan's level? >> that is the trend line dan has drawn. are we going to hold trend? most stocks are not, the market won't, we are more in the 1760 not 1860. >> 1760. so even further to the --

>> can i button it up? >> yes. >> when we look over the year when the vix got to 20, 21, they have been great sales of all. they have been good opportunities to buy stocks. i don't have a crystal ball. i don't know where things will go. if are you a dipper, you want to wait until carter says it gets back to the trend line. that's where you should add or pick a bottom here. i wouldn't do it beforehand. >> forget about utilities and telecom, we will tell you what went wrong with the safety trade when "options action" returns. [bell rings] .

. don't look for safety here. big dividend payers like verizon didn't provide sheller. that was bad news for mike and carter. take a look. on "options action," it's the only way to make a winning call, rick less to make more. that's what coe and carter tried to do. >> i think you throw back and make it back to the high, 60. >> so he called up his best friend mike and told him to make a trade. just buying the stock, c'mon,

mike, don't phone it in. you know the shares of $5,000. >> equipment takes time and money. >> it sure does, not that kind of money. to spend less, mike, instead, bought the january 50 strike call for doctor 2.10. now to make money, he needs verizon shares to rise above $50 by more than the price of that call or above 5210 by january expiration. but here's the best part. because pike is spending less, he can make more and if verizon shares do rise that call will increase in value faster tan the stock. meaning more money in mike's pock. >> yeah! >> you won't believe where i'm calling you from, man. >> now mike's phone is ringing off the hook because every options action fan has the same exact question, what will he do with his verizon trade now? [ music playing ] >> i counted four telephone-related songs in that tape.

fyi. here's what's frustrateling, verizon did surge, before the last two day, it was working out, carter, do you still like verizon? why didn't the safety stocks work? >> as a treatment, it's not so much about safety stocks wornlging, it's about whether there yield play, this bond proxy is a place to be. we like at&t, we like verizon, despite the big surge and give back, if you can has changed on a pattern basis. we have a lot of time and trade. we leak it here. we'd stay the course. for the problems. >> what are you going to do? >> i'm definitely going to stick with this. you know because the price of options rose a bit. despite the stock is below 50. it has declined more than this option. the other thing i'd point out here. this is an inflation proxy, like utilities, rental income. if we see a lot of concern about rising yields, i don't think it will affect the one that much. we have a lot of time.

we have until january to play out. i'd stay with it. >> i think people look at these yield plays, they're like what happened this past week? >> i like it. it was about win and read status and to me for a company as big as verizon and at&t that also saw a huge move and giving it all back arc 7% decline for a stock like verizon is passive. so it was really weird the move up. i got to tell you, i think their thieves isthes thesis is attacked him i think you get back if here. >> i think safety is big tech. contrary to --. >> what? >> you get yield from intel and microsoft. they are basically utilities. >> apple for that matter. >> it's staples that got killed, kraft, kellogg, big tech, sleepy tech old tech is being treated by a defensive trade. >> it's opposite of what dan is saying. >> this has been going on for a long time. to me, you have intel and

microsoft up just in the last six, seven months. it's not the revenue's growth, yes, are you giving this 3% dividend yield. sooner or later people will physical that out. >> when every bubble comes in basically, people throw out the stocks the post-overvalues purse and very often even you know basically the safest stocks tend to decline in those types of situations. they won't decline anywhere near as much. >> i love it, though, carter and dan on opposite sides, excellent. coming up next, the final call from the options pits. ♪ [ 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.

these wifi hotspots we get with our xfinity internet service are with the mobile trader app. all over the place. hey you can stop looking. i found one. see? what do you think a wifi hotspot smells like? i'm thinking roast beef. want to get lunch? get the fastest wifi hotspots and more coverage on the go than any other provider. xfinity, the future of awesome.

when the world moves, futures move first. learn futures from experienced pros with dedicated chats and daily live webinars. and trade with paper money to test-drive the market. all on thinkorswim from td ameritrade. there week the subject has come up a lot. james mcclain asks us, micron seems to be giving mixed signals. they sort of bounced, not

entirely, mike, what do you think of the name? >> based on tear trailing. this is not an overly expensive stock. i think we should be calling regis up. i'm not inclined with these things when i seen a clean triple in a short amount of time. >> ask david longhorn, he is long, he thinks the street is not where they should be on the forward footballs. here's the thing, they had a massive bounce back to profitability. last year, calendar year, 12 billion in sales expected. 6 billion this year, if he's right, it into evidence to continue. the street at a consensus the stock is cheap. but it really, if sales growth lags, you don't want to own it after a triple. >> it closes at 31109 i'd look for 37. >> that's decisive. i like that. the last looking options pits, carter. >> well, if you want to get into autos, stock is up today. forget about general motors.

>> dan. >> i like qqq puts, obviously. >> used put spreads. our time is expired. i'm melissa lee, see you back here at 5:30, eastern time. "mad money" starts right now. ♪ >> a better back and a better body. since 1981 that has been my passion. i created teeter hang ups so people could live healthier, more active lives. i know what it's like to have back pain. when i found inversion, it changed my life forever, and i believe it can change yours. i am proud to present the newest and best teeter hang ups. >> if we wanna live not only a long life, but an active, healthy, pain-free life,