now, you stay safe. bye-bye. . this is option action. tonight. >> what's going to happen? >> something wonderful. >> that's what apple investors are hoping for next week. we'll tell you why they could be in for a big disappointment. >> plus. >> don't dance too much because europe's a mess and that can translate into a big problem for u.s. stocks. we'll explain why and how to protect yourself. and talk about an electric shock. ilan mus being says tesla shares may be overvalued.

why are so many investors betting on more games to come. we'll explain now. >> live from the nasdaq market site. i'm melissa lee. another record for stocks was the euro plunging as the bank tries to revive the stuffed economy. the euro having the worst week since last november. two questions now yshgs don't invest yrz at home seem to care and could this mean trouble for u.s. stocks? let's get in the money and find out right now. it's been a depressing few months in europe for investors. should we here in the united states be worried. >> i think there's been a lot of divergence. they haven't really cared for all intents and purposes. the small caps have not confirmed the highs. so to me, you know, the u.s. is a safety trade. it's kind of the safest block on

a messy street. to the other point, you didn't mention the geopolitical stuff. what it's doing is telling us that we have this liquidity. it will be here in every region of the world until things get better. >> i don't know that liquidity that is provided in europe is going to be enough to fix the problems they have there. everyone has always said, don't fight the fed. can you fight ecb? they have bigger problems than we do. they've got negative growth. st they have far higher unemployment. there is question whether ecb has as much regional power as the fed does domestically. the other thing is to really fix a problem, you have to have a lot of policy and fiscal changes. it's hard to see how this is going to be fixed. what's more astonishing is the european markets are trading at the same multiple it's the u.s. ones. now if you take a look at

equities in germany, they're trading the same as the s & p. >> all right. we're tied basically. but at this point, would that be a head win for a u.s. stocks and tail wind for the european stocks. >> no question about it. the dollar, the move that it's had, makes export tough. you have to think about u.s. multinationals again. they keep making new highs. then there are the underperformers. mcdonald's kment get out of their own way. i just think that i'm going to take issue with what you said. if you don't fight the fed, i don't think you fight the ecb yet. they got european equities and now they're picking up the baton. i don't think you have to pick a top. >> do you see more pain for europe? >> europe is sort of a mess. all the things you talked about

are very real. the banking system is much more prone to trouble there than here. of course, they're basic contracting when we're not. long term chart of the s & p. what i want to point out is we know the high in 2007 and then this powerful breakout. juxtapose that against europe. this is the europe index. france and germany and italy and spain. not all is good long term. it is a high in 2000. it's 2007, a lower high. it didn't even get back. you have this circumstance, europe is not even close. and now not only is the long term not even close, the here and now is starting to diverge. take a look at these charts. this is europe again. this is on a near term basis, the past 12 months. we're starting to get real divergence now. the long term underperforming.

the day to day is starting to come apart. let's drill down into the big player here, germany. this is an etf, ewg which tracks the dax. and look at this lie verge ediv. here's how we would this. here's the track itself. we have thrown back a bit here. we would fade this throwback and i think what you're going to get, here's a line, here's the breaking trend. think what you're going to get is about a 10% decline back into this support. i'd say be careful and consider this a place to be taking profit. >> that's considerable, 10%. >> you can't get short something like this into central bank action like what we're seeing. when you take a look at the german equity indices and the big stocks that are there,

daimler, bayer, these are iment national companies. voekz wagon gets mostst sales from europe. i don't think this is enough to fix it. i'm inclined to take advantage of the fact that generally speaking when you look at an index like this, option prices are less. i look to january to give us time. i'm looking specifically at the january 29 puts. you can pay about $1.10 for those. if you get any pullback, can you look to take profit or you can look to roll a trade like this only if the market continues upwards unabated. only the sort of bull eish move that we've seen when this was announced. >> i'll tell you what i would do. what you look for in an index like ewg, you may look to make it a calendar and finance it. it's not a single stock. you're not going to have the 5%

to 7% down move. it's going to grind. if you do the calendar, it offsets the timing. so to me, you have to be careful with something like an ewg. it doesn't move a whole heck a lot. >> that's a fair point. we're not buying an option that expires next week. these longer dated options, they won't decay quite as rapidly. >> but can you also pick up some premium by selling short option. >> you could. you could do that. >> okay. let's turn to tes l.la. the stock price is kind of high right now. now the options were very active today as well. twice the average daily volume trading. what's interesting is the calls were far more active than the puts. now, of course, maybe the bulls have a reason to keep buying. about a year ago they made similar comments to cnbc saying the market is being very generous in valuing the stock. since then, of course, shares

have nearly doubled. so what do you expect this time? a repeat? >> here's the thing. he's made funny comments over the last year or so. the stock is up since he made that comment. and listen, the stock is amazing. if he has half the picks he has as steve jobs dshgs he's going to be a major player in technology for decades to come. the stock up like this, it's up 1,000% in the last few years here. it's not something that i think you have to go out and buy every time you hear a good headline. i would just make one other point, the company is very smart. they raised a lot of cash along the way. since the ipo, they did three seconds airies. they raised $2 billion in convertible notes. they know this is going to cost them billions and chart a different course for the company. that being said, when you hear a

guy like musk make a comment like this, you should listen. >> he is rather understated. this thing is valued at approximately $1 million enterprise. they're going to do 30,000 cars versus $7500 valuation. that is pretty extraordinary. there's a lot of good news in this thing. probably outside even the car industry itself that people are looking to when they take a look at thing and the $30 billion price. >> you would have said that $50 you would have said $100. >> yes. >> exactly. the chart has proven you wrong. chart master, what do you think? >> i think valuation can't even be discussed here. this is in the future. let's look at the chart and see if we can figure this out. the most important thing is despite all the percentage gains that we might refer to, it's no progress in six months.

virtually unchanged since february. and so in that sense, it's not extended at all n principle this is a well formed process. a nice response. backed off today from the. the principle i would say is backing and filling. then after responding to the prior top, exceeding the prior top. we like this long. >> all right. i'm going to take the other side. you see that nice line from the february highs? it had a failed breakout. the stock did breakout. the comments cause it to fail. when you look at this chart dhshgs is not something you want to press oun a don a down day. i think can you consolidate towards that 265 level. i just want to make one other point. in the last year, the stock has had two 30% plus selloffs from the highs here. if you have this sentiment

shift. this is a good shot if you get an opportunity early next week to put a trade on to isolate or consolidate back to 265. the trade a look at today, the stock was. >> pete: -- was $267. i look at the september/october 265 calendar. that cost $5. that is selling one of the september puts at $3 and buying one of the october 265 puts for $8. $5 is my max risk here. use the next two weeks to get the stock to inch lower back towards that breakout level. con s consolidate. >> there is no trade here? >> you're trying to get -- you kment get short the stock itself. it is a company i can see doing $20 billion in revenues. that's where it's priced like it's going. that is $4 billion. i don't know. eight times that number.

i do think dan has the right track. >> you keep saying momentum break. these are the words of the ceo. prior to that, tesla is doing just fine. >> they've don't capital raises every year since the ipo. they have to raise more capital. if they bring a deal soon this is kind of potential catalyst here. why wouldn't you bring a deal when the stock is at the all time high? they sold stock in 2011. they sold it at $92 in may of 2013. why wouldn't you sell stock at $276. >> let's see how the stock reacts. right? that's the key. >> when they sold stock in may 2013, musk bought $100 million. i don't think he's a buyer here. >> got a question? send us a tweet. go to #optionsaction. check out our website. in addition to top videos and

exclusive stradz trades, it contains the secrets of leaving a long and happy life. here's what's coming up next. >> that's huge. >> you have no idea, paris. that's because options traders are expecting a $26 billion move for apple shares next week and we'll give you the best play. plus, talk about a bank job. >> this is too much. >> mike doubled his money in less than two weeks in bank of america. and now he's got a way to make even more. we'll explain how when options action returns. [bell rings] ♪ time and sales data. split-second stats. ♪ its so close to the options floor, 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. $27 billion. that's how much option traders think apple will move next week. a lot of traders say the stock is cheap except the one to my left. that is mr. dan nathan. why not? >> listen, let's walk through this charts here and get into the most important thing at the end. as we head into this event, it's really important to remember, this right here, that was the much anticipated iphone 5 launch in 2012 when the stock was at the prior highs. what did the stock do? it ran. therecy s. a huge rotation into the stock this year because the product launch. when you look at this i mean tesla may be a nice thing for a breakout. i'm not sure for the largest

market cap company in the world where you have this massive sentiment shift into the event. let's look at what is going on. you mentioned a $26 billion move priced in for next week alone. look at this. this is the price of options. it is higher when the company reported their fiscal q-3 earnings in july already. it is treating this like a massive, massive event for the stock. here's one last thing. talk about valuation. listen this was that september 2012. this is the stock trading at 16 times trailing earnings on a pe basis. here's the thing we know they have a ton of cash, all right? ex-cash, it is cheap. there is a market multiple. this is when the company wasn't buying back stocks. so everybody wants to quote pe, that's fine. to me, i think you want to look at a couple different things. fiscal 2012, that's when the iphone 5 was released. this year, they're expected to have $6.34 earnings. fine. sales up is 15%.

gross margins are down 5%. there is pricing pressure from competitors. some of the products that are coming out, great, we get that. here's the kicker. net income. look at this. the earnings look flat. the stock is back up here. the company bought back $55 billion in stock in the last two years. that's taking shares off of the market. that makes this number the pe number much higher. look what happened here. the net income is going down. that's what you people should be looking for. if this product cycle comes and goes and all the people that bought it, i think you have to keep a track on sent. and net income number. if all the people that bought the stock for this product cycle and net income continues to decline. the company has to use that money to buy back that stock. >> so you're skeptical overall. how critical is the joovervalue

piece of the equation? >> i'm sure mike has an opinion on this. that $165 billion on their balance sheet should not trade. if you think about it. it's just cash. they may need that cash to continue to manage earnings. if they flap on the i watch and the new service things and the iphone 6 is an okay release. they're going to have to really invest in r & d. that cash is going to be important. two-thirds of that cash is off shore. they raised $30 billion in debt so they can continue to buy back stocks. >> one of the biggest justifications is we're going to see a multiple expansion. one is revenue growth. other is the key thing that dan is pointing out here, income growth. we're talking income growth at a gross level. can you poll people by doing thins like share repurchases. we do not expect this year we're going to see quarter on quarter higher net income than we did

then. we'll see marginally higher revenues, i keep my eye on the revenue number. i don't see why they will expand at all. >> how do the charts look? >> the principles are the same. you respond to the top. april sl responding. we think it's responding well. all right. coming up next, what a d.z. a famous deli and a bank have in common? ♪ 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.

[b♪ll rings] time and sales data. split-second stats. ♪ its so close to the options floor, you'll bust your brain-box. all on thinkorswim, from td ameritrade.

[b♪ll rings] time and sales data. split-second stats. ♪ its so close to the options floor, you'll bust your brain-box. all on thinkorswim, from td ameritrade.

insmiration comes in many forms, something that mike coe learned on his winning trade on bank of america. on "options action" sometimes risking less to make more is not enough. sometimes we wand more cash and that's the case with mike's winning trade on bank of america. mike was stuffed with an idea. he went to his favorite deli for inspiration. >> yes! yes! yes! >> no. not that kind of inspiration. something more like this. >> do you have any option that's

are cheaper? >> mike thought an option that is cheaper than $18. perhaps more delicious than a cat's pastrami sandwich. then it hit him, bank of america. >> can you buy the september 16 call and those cost only 15 cents. >> so mike bought the september b of a call for 15 cents. now at cat's deli, a pastrami at rye goes for over $18. but in options, each controlled 1 hundred hn shares of stocks meaning mike's bank of america call for 16 cents actually costs $15. making it cheaper than the famous sandwich. >> i'll have what she's having. >> before you do, keep in mind that in order for mike to make money, he needs bank of america shares to rise above $16 by more than the cost of the trade or above $16.15 by september expiration. but it gets even better. that's because if b of a shares rise, that call will gain value

faster than the shares will, meaning more money in mike's stomach. >> yeah! >> since the time of the trade, shar shares have risen 7% making this a quick double. and now option fans have one question. >> what are you saying? >> get your head out of the gutter, billy. all they really want to know is it how mike can make more cash. >> and before we answer that, we've got a little surprise for mike. now today is mike's birthday. so we got him his pastrami sandwich. mike, you don't like a day over 80. happy birthday. >> i don't feel a day over 90. >> now what do you do with this trade? >> we're right at the money. this is a little atypical. he would have gone for a longer dated option. but we're right here. my inclination is we stick it with. we didn't do this for a pastrami sandwich. i'm content.

>> how excited are you about this? >> i'm very excited. cats is the best. as far as bank of america is concerned, the stock can't really get out of its own way for all intents and purposes. it really settled back in here. i'm not a huge fan. >> i don't know. it's come to life. some of the big banks recently, it's regional banks struggling. >> blow the candle out. >> happy birthday. next, "the final call" from the option 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.

time for the fim call. carter? >> if you have any exposure to germany, reduce it. >> tesla, love the story, love the stock. i want to play for consolidation. >> i like puts in ewg. for the calls you still own, stay with them for the u.s.

equity markets. >> our time expired. check out the website. also, of course, we have a daily segment inside fast every day. we'll see you back here next friday 5:30 p.m. eastern time. mike, happy birthday. and now to the pa stram ji sast sandwich. >> this is phenomenal. >> ♪ saturday in the park ♪ ♪ i think it was the 4th of july ♪ >> ♪ whoa-ooh-oh ♪ listen to the music ♪ whoa-ooh-oh ♪ listen to the music >> ♪ even the nights are better now that we're here together ♪ >> in the earl0s