♪ freak out ♪ freak out >> this is "options action." tonight ifrenzy. consumers and investors are freaking out over the new iphone but could long lines translate into long-term potential for the stock? plus, where are alibaba shares headed next? >> hot tub time machine. >> we don't have those but we have a special report. tesla shares are breaking, too. not quite like that but they are selling off. we'll tell you whether it's a

buying opportunity. the action starts right now. live from the nasdaq market site, i'm sara eisen in for melissa lee. we come to you on an historic day for markets. alibaba becoming the biggest ipo of all time. the two most active stocks today, alibaba and yahoo!. while alibaba had a huge day in the market, yahoo! shares dropped almost 3%. record volume in the options. what is going on here? let's get in the money and find out. dan nathan, why the pressure on yahoo!? a little counterintuitive here. >> if you were in yahoo! today, you were late to the game. the stock has been up over 20% since the start of 2013. it's very well known this is a way to play the expanding value of alibaba over the last few years. i'll also mention, the stock was up 15% the last month heading into this event. we hear this sort of talk all the time on the street, you know, traders say, well, you

know, you buy the rumor, you sell the news. that's what you got today. >> if you look at options action going into today, yesterday, for instance, very high volumes and mostly buying calls. >> that doesn't surprise me very much. one of the things we can see also as yahoo! rose, every bit of that increase in price we've seen recently was attributed to the rumors about where the price for alibaba would be. so too did alibaba. i see this as an indictment in yahoo! strategy in general. clearly, they're not placing any value other than the piece of alibaba that. it owns. one thing that's interesting is net of all of this, options in yahoo! haven't gotten more expensive. they're less expensive than the beginning of the year which sets up nice opportunities because they still own a big stake. >> here's the thing about yahoo! and why this business is the core business in and of itself. it's trading for nothing basically is that, you know, revenues have declined 20% since 2008.

they did $5.5 billion in sales and then expected to do 4.4. they don't know how to grow sales. one thing is, all of a sudden now they have a quarter of their market cash and cap -- >> so what? i would say throw a blackberry valuation on the residual piece of this thing. even if they declining revenues and earnings on their own, that still doesn't make it a zero. relative to ally bab back i think it starts to look -- >> mike, the street is voting marissa mayer is a value destroyer, not a valuer creator. they'll have more and more cash over the course of this thing, keep buying back their stock. that's how they manage earnings. earnings are expected to grow at best 2%. >> some of that voting has got to be stakeholders in alibaba taking some money off the table. and i think just like you have people selling into the ipo, you have holders of yahoo! selling the stock into the ipo. >> what's the upshot, dan? what's your trade? >> i got this questioned -- brian kelly just said it, they want to be long yahoo!.

this is a play -- >> now can you just buy alibaba. >> but it will be very volatile. this has a $225 billion market cap. there's not a lot of room for error but alibaba is trading below it's core value. i would look out to november and i would buy a call butterfly. when the stock was $40.60 today, i priced up the november 40.45 call butterfly. i was buying november call for $2.70 total and then buying the far wing, the november 50 call for about 50 cents. it cost me a dollar. that's my maximum risk. what i'm trying to do here, if this stock is between 4 1 and 4 on november expiration, i can make up to $4. that's 10%. i'm ricking one to make $4 if i get -- >> the quarter one payout is interesting. you'll notice this thing is slightly in the money right now. this actually doesn't -- you

don't have to have the stock move a whole lot for this to pay off. the thing i was saying earlier in yahoo!'s case, options are not that expensive so i don't mind using single leg trades to make directional -- >> dan, final word. >> that was the high when maybe microsoft was going to buy them. that looks like a great level. technical resistance. >> turn to the other big story of the day, apple. after months of speculation, the iphone 6 was released to customers today. josh lipton at the apple store all day in palo alto. how long were the waits? what might that say about sales? >> reporter: remember, tim cook did call this the biggest advancement in the history of iphone. it looks like a lot of consumers agree with him. today the lines we saw at apple store were bigger than any previous iphone launch. they were incredible from coast to coast. new york city, thousands showed up at apple's location on fifth avenue. the line stretched at one point

ten blocks. here where i am in palo alto, at 3 a.m. local, the fans were already here in tents, sleeping bags. they were joined by a special guest, of course. tim cook was here, shaking hands, taking selfies and even welcoming customers into the store when it opened at 8 a.m. local. just who were these customers, though, on these lines? take a listen. >>. >> i've actually been driving here every night about a week before launch date before these guys were here in line, just so i could see the situation. identify been going to san francisco, stanford shopping center and here. >> the bigger screen surface, the landscape mode, just, you know, overall the whole product of the i 6 plus looks amazing. >> of course, the next big data point is iphone sales this weekend. some analysts think you could see apple sell 10 million phones. that would be a new record. >> thanks, josh, especially for

those estimates. we'll watch for the news. so, is it too late to buy big tech? let's go to our chart master. carter wurth, what do the scharts show you? >> all tech, all the time, the news of late. it's carried the nasdaq and the qqq a long way. we think it's time to take profits, to fade it. let's figure it out together. the first thing that's important here the breath in the market is poor. this is the nasdaq 100 itself year to date. look at the actual performance of the average stock. underperforming by 200 base points. look at the median stock. this is the story of the market. it's being skewed by a few big names. apple being one of them. many others. you can do this visually another way. a classic check neek is looking at advance decline line. since we peaked here, the markets continued higher and yet the breath has not been

confirming. it hasn't made a new high since march. apple's influencing and others, but not the advance decline line but average. here's the nasdaq. continues higher. this, too, has peaked and is trailing off. less than half of all stocks in the nasdaq compositor are above trend as averaged by 100-day moving average. we're making new highs in the nasdaq right now and yet the new high list is contracting. a guy ver against. a problem. take a look at the new low list. this should be not up here. new lows should be down here. another problem. well, let's look at the qqq ichts. nice trend. nice bounce off trend. nice bounce off trend. now too far above trend. so, play for a selloff. play for a sell off. play for perspective selloff. closed at 100 today.

we think it will print 90, 10% decline. we think you fall back to the middle. about 90 on the qqq. finally, the long-term chart. we are literally up against the prior peak. not quite there but the principle is a big move to a difficult level, too far above trend, play for a correction in the qqq. >> maybe it is too late to buy tech. mike, what's your take on the qs? >> i find it interesting when you see from a fundamental standpoint the news for apple could hardly be any better yet these are the names that helped the qs rise, the whole nasdaq ind index. if they're having a hard time, what's going to propel them higher? i will make one quick point, though. he was just comparing it to the tech bubble top back in 2000. options markets are not suggesting we're quite at that stage. while we could see a little pull

back here, what we saw, then, was there was a general sense in the marketplace that we were getting to a really speculative level. alibaba, as wild an ipo as it was, the valuation isn't even as high as facebook is right now. and i think a lot of investors will look at this and say, we're a little concerned but certainly not panicked. i think we can take advantage of the fact that options in the qs are relatively inexpensive. we can go out to january. actually, these were close to at the money when i was looking at them. the january 99 puts were about $3 and qs were trading 99.50. >> we should mention alibaba is not eligible for the nasdaq 100 because it listed on the new york stock exchange. are you -- is this an outright call or are you hedging? >> this is one of those things -- first of all, almost everyone viewing this is hedging if they put a trade like this on. i am long stocks on balance. unless you're jim chanos, you'll be net long stocks.

this is a hedge if you put this -- >> the probability of having a down 3% move between now and january expiration is very high. there's a very good shot these are going to be in the money at some point. i'll make another point about carter's charts. when you have microsoft up 25% on the year and you have intel up 35% on the year, these are companies that are growing sales at best at mid-single digits. how are they getting to double digit earning growth? selling stocks hand over fist. you may find these sorts of stocks not nearly as -- >> this is going to capture the next thing ahead of the fed. >> i think there's a storm brewing here. i have to tell you, looking at cheap options in stuff -- a small group of stocks that have performed so well-being i think that's the way -- >> bear in mind exactly as dan pointed out, this is a trade you have to keep your eye on because it's probably going to end up in the money. that's an opportunity to either spread or take some profits. >> from options to main stream media, if really was all over

this week and today. if you've got a question, send us a tweet to option action. for everything "options," optionsactions@cnbc.com. here's what's up next -- >> we're sending you back to the future. >> that's the best way to find out where alibaba shares are going next. plus, car trouble? >> honestly, we're out of gas. >> tesla shares have stalled out. we'll tell you why they could soon get back into gear. [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. we hope in next 15 years the

world change because of us. we want to be bigger than walmart. we want to be bigger -- it's not the size. we want to learn from walmart. they changed the business the last century. we hope 15 years later they say, this is a company like microsoft, like ibm, like walmart. they shaped the world. >> that was alibi founder chairman and founder jack ma spelling out his bold ambitions ahead of the ipo on "squawk on the street." what could that say about where the stock will go next? carter, break it down. >> sure. good day, obviously up 38%. and let's look at some stats and maybe try to put it in perspective. this is a table going back ten years and it shows first day of trading performance. keeping in mind, we have a 38% move in alibaba. what's important over time --

>> it's not on your chart. >> it's off the chart, so to speak. what's important is how you come out. not a lot of ipos but in a bad period they don't do well. that's an obvious thing. in a very good year very well. keeping that in mind, let's look at something that's important also. not only is it one particular year but the type of period you're in. in fact, here's 1980, 1989. take a look at average first day performance. not a dynamic period for the economy and the market, if you will. now compared to the big '90 to '98. double the number. of course, much better performance. and then i've isolated one year. and then look at the bubble year. just on its own. you have to combine these two to get the actual figure for the decade. of course, that's the stellar standout. and then of late when we've had some of the past decade, the number diminishes and we get back. over time this has been the

average for history. now, some big names -- >> names we've seen in the last few years. >> the outlier, first day performance and then one year for microsoft. of course, amazon. look at this. this is we know they mispriced that ipo. they kept moving up the price before the day. it would be a good number but they blew it and there you have the results. but baba in there, plus 30%, in line, in line, not quite as good as twitter but fairly normal -- >> it's interesting to see what happens over a year despite the ipo pop and whether that has anything to do with it. >> now, these are particularly good results. on a three-year basis, most ipos are underperforming the market on relative basis. i've picked some prominent names. but in aggregate, because of the first-day move, going forward stocks underperform. >> very interesting. dan, what are your thoughts on

buying ibpos in general? >> let's talk about baba. there's a certain scarcity value and a lot of hype. as henry blodget said before the famous facebook ipo, he said buying this stock near $100 is muppet. it's a dangerous risk asset to get involved with right now at this stage of the game. i wouldn't be doing it. you know, i know there's a lot of really smart hedge funds and mutual funds out there that bought on the deal at $68 and keep buying. they have to. they have a much longer time horizon. i think the margin for error is dangerous. >> i'm often a skeptic on these type of things but i think in some fairness to baba here, it's interesting what jack ma was talking about, 15-year horizon. the guy is on third base already. he's 75% the size of the market capitalization of walmart where he stands right now and a company trading at a multiple that's significantly cheaper than facebook. do i think they're going to get say chance to buy the stock at a better price? i do.

interestingly, compared to names you just talked about, twitter, for example, facebook, for example, i actually think this is a better value. >> yeah. and allot of guys on the floor were talking about how it looked like the '90s down there. an interesting discussion. up next, after a tough week for tesla, is it time for investors to get behind the wheel? we'll break it down when "options action" returns. ♪ 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 we do? i took the trash out. i know.

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[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. we're back. and a tough day for tesla. the stock down almost 2%. this after gold man sanction said the carmaker may need $6 billion to build its giga factory so what does that mean for dan's bearish trade on the stock? have a look. ♪ >> on "options action" it's how we trade like true innovators. risk less so we can make more.

that's what dan tried to do with his bearish bet on tesla. dan thought tesla shares were about to pause out. but going short? what if tesla shares double again? so to define his risk, dan instead bought the october 265 strike put for $8. to make money he needs tesla shares to fall below $265 by more than the cost of that put. or below $257 by october expiration. but spending 8 bucks just to bet against tesla? >> why don't we do better? >> dan, listen to the man. so to spend less, dan then sold the september 2.65 put for $3 and created his put calendar but he did something even better. he made making money easier. >> dreamer he is, with the courage to elaborate and improve. >> between the $8 he spent on that longer dated put and the $3 he collected by selling that

shorter dated put, dan cut the cost of his trade to just $5. and now to see profits, dan just needs the stock to drop more than $5 below that strike price or below $260 by october expiration. but it gets even better. >> ding dong, folks. >> because the put dan sold will decrease in value faster than the put that he bought. that means he can do something traders of the past can only dream of. turn time into money. >> we're about to take off on the highway of tomorrow. >> but there is a tradeoff. because he sold that nearer date put, dan needs tesla shares to stay above $265 through the september expiration but below that level by the second expiration. and since the time of the trade, tesla has dropped a bit too quickly, putting the whole trade in jeopardy of losing money. now every future thinker wants to know the same thing, what will dan do with his tesla trade now?

so, dan, enlighten us. >> to be very frank, this was a great directional call. it was a horrible trade, to be very honest. in hindsight i sold the 265 call that expired today, you know, i sold that at 90 cents. it was a bad idea. i tried to thread the needle a little too much. sometimes it makes sense to think about your thesis. my thesis is almost exactly what goldman laid out today but i wanted to finance the trade. >> to raise capital? >> yeah. for the giga factory. have you to take -- well, i already did take it off for a small profit. >> directionally you had right but concern in the stock started to brew and that affected the underlie options. sometimes you can use that as your cue and making a bet on the short side stood up in this case. >> how does tesla look to you, carter? >> technically, it's intact. >> despite the slippage, it's a healthy chart, by my work. >> is it healthy when you have a ceo of the company saying shares

look a little overvalued like elon? >> the stock has gone up since. maybe that's the best thing they can do, if they're trying to defend it, they protest too much. >> up next, the final call from the options pits. [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.

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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. ♪ happy birthday to you >> it wasn't just the iphone drawing crowds. "options action" fans are wishing happy birthday to dan. >> 30 years old. >> you only look 20. >> it is time now for the final call. the last word from the options pits. carter, you first. >> sure. if you have some qqq, good time to reduce your exposure. >> yahoo! i'm not a buyer. >> cheaps in the qs. >> looks like our time has

expired. i'm sara eisen catch more "options action" next friday 5:30 p.m. eastern time. have a great weekend. >> my mission is simple -- to make you money. i'm here to level the playing field for all investors. there's always a bull market somewhere and i promise to help you find it. "mad money" starts now. hey, i'm cramer! welcome to "mad money." other people are trying to make friends, i'm trying to make money. my job is to educate and teach you so call me at 1-800-743-cnbc. or tweet me at jim