to remember when it comes to your money and trims, people first, then money then things, now you stay safe. boy bye. this is "options action." tonight, i frenzy. consumers and investers freak out over the new iphone. long lines translate into long term potential for the stock? plus, where are alibaba shares headed? >> hot tub time machine. >> we don't have one of those, but we have a special report. tesla shares are breaking too. not quite like that, but they are selling off, and whether it's a buying opportunity. the "action" starts right now.

live from the nasdaq markets, i'm sarah eisen in more melissa lee. these are a traders on times square. alibaba the biggest ipo of all time. and the two most active stocks today? alibaba and yahoo! while alibaba had a huge day, yahoo! dropped 3%. record volumes. what's going on here. let's get in the money. dan nathan, why the pressure on yahoo!? >> if you were there today, late to the game, stock's been over a hundred percent since 2013. it's well-known it's a way to play expanding value of alibaba over the last few years. stock up 15% in the last month headed into this event. you know, we hear talk all the time on the street, you know, traders say, buy the rumor, sell

the news. that's what you got today. >> options action into today, yesterday, for instance, high volumes. >> that does not surprise me very much. what we can see, also, as yahoo! rose, every bit of that increase in price that we've seen recently was attributed to the rumors where the price for alibaba would be, and as that rose, so, too, did yahoo!. it's an indictment of the strategy. they are not placing value on the business other than the pieces of al alibaba that it owns. what's interesting is net of all of this, net in yahoo! are less expensive now than less than the year. setting up for opportunities if you want to make plays in this. >> no doubt. >> here's the thing with yahoo! and why it's the core business in and of itself, trading for nothing basically is that revenues declined 20% since 2008. they did five and a half billion in sales, expected to do 4.4.

they don't know how to grow sales. they have a quarter market cap in cash, own 400 million shares. >> throw a blackberry valuation on this thing. even if they have declining revenues and earnings on their own, that does not make it a zero. relative to alibaba, it looks -- >> mike, the street is voting that she's a value destroyer not creator. they'll have more and more cash over the course of this thing, buy back stock, and that's how they manage earnings. earnings grow at best for 2% forever here. >> some of the voting, though, is stake holders taking money off the table. you have holders of yahoo! selling. >> what's the upshot? what's the trade? >> i got asked this question ten times today, brian kelly said it. long yahoo! here, think alibaba -- >> now just buy it. >> you could do, but it's going to be volatile.

be honest, this has a $225 billion market cap. not a lot of room for error. yahoo! is trading below core value. look to november, buy a call butterfly. when the stock was 40/60 today, priced up november, 45/50, cost a dollar, buy a november 40 call for $3.20, selling at $2.70 total and buy the far wing for 50 cents. cost a dollar. that's maximum risk. i try to -- if this stock is between 41 and 49 on november expiration, two months from now, i make up to $4. at 45, i make 4. that's 10 %. risk one to make 4 if i get back to the prior highs. >> the four to one pay out is interesting. you'll notice it's slightly in the money right now. this actually does -- you don't have to have a stock move a lot for this to pay off. what i said earlier is actually

in yahoo!'s case, options are not expensive. i don't mind using these. >> 45, why center the fly there? that was, like, the high from bamgs back in the days when microsoft buys them. a great level, a lot of resistance. >> the other big story, apple. after months of speculation, iphone6 released to customers today. we were there all day. josh, how long were the waits and what does that say about the sales? >> well, you know, sarah, remember, tim cook called this the biggest advancement in the history of iphone. looks like a lot of consumers agree with him. today, the lines we saw at apple stores were bigger than any previous iphone launch. they were incredible from coast-to-coast. in new york city, thousands showed up on 5th avenue. it stretched ten blocks. here where i am, i can tell you at 3:00 a.m. local, the fans

were already here in tents, in sleeping bags, joined by a special guest, of course, tim cook was here, shaking hands, taking selfies and welcoming customers in the store at 8:00 a.m. local. who were the customers in the lines? take a listen. >> i've actually been driving here every night, like, a week before launch date before these guys were here in line to see the situation. i've been going to san francisco stanford shopping center and here. >> bigger screen surface, landscape mode, overall, the product looks amazing. >> now, of course, the next big data point for apple investors is iphone sales this weekend. some think apple could sell 10 million phones. that would be a new record. sarah, back to you. >> thank you very much, 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 worth of stern ag. what do charts show? >> all tech, all the time, all the news of late, and it's carried the nasdaq and qqq a long way. it's time to take profits to fade it, but let's figure it out together. the first thing that's important here, the breath in the market is poor. now, take a look at the statistics, no way around this, this is the nasdaq 100 itself year to date. look at the actual performance of the average stock, under performing by 200 basis points. look at the median stock. this is the story of the market. it's being skewed by a few big name, apple, of course, one of them, but many others. do this visually another way. a classic charting technique is breath, looking at the advanced decline line. since we peaked here, the markets continued higher, and yet the breath has not been confirming. it's not made a new high since march. apple's influencing and others

the nasdaq, but the average stock is not preparing. another way to look at breath, not the advanced decline line, but the percentage of stocks above their own moving average. here's the nasdaq, continues higher. this, too, peaked and is trailing off. less than half of all stocks are above trend as measured by the moving average. look at this. this is new highs, new highs in the nasdaq right now, and yet the new high list is contracting. a divergance, a problem. look at the new low list. this should be not up here. new lows in the nasdaq should be down here. another problem. well, let's look at the qqq itself. nice trend. nice bounce off trend. nice bounce off trend, now too far. play for a sell off, play for a perspective selloff. close at a hundred today, prints 90 at 10% decline.

you're above trend? fall back to the middle. that's 90 on the qqq, and, 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. >> yeah, maybe it is too late to buy tech. mike, what's your tech on the qs? >> it's interesting when you see from a fundamental stand point the news that apple could hardly be better than it is, and yet these are the names that help the qs rise the whole nasdaq index. and if they have a hard time mitting highs now, what's going to propel the qs higher 1234 that's a challenge i see. one quick point, though, you know, we was just comparing it to the tech bubble back in 2000. options markets are not suggesting we're at that stage. while i could see a pull back here, what we saw then was there was a general sense in the

market place was a speculative level. as wild an ipo it was, the valuation was not as high, and investors say, you know what? concerned, but we're not panicked. i think we can take advantage of the fact that options in the qs are relatively inexcept ipensiv out to january, buy -- these were close to at the money when i looked a the the january 1999, $3, when the qs traded 99 .5. >> alibaba is not eligible for nasdaq 100. are you outright? are you hedging? >> well, this is one of the things, first of all, almost everybody viewing this is hemging if they put a bet like this on. i, like most people, are actually long stocks on balance. unless you're jim, chances are that you're net long stocks. this is a hedge if you put it on. >> think about it this way.

the probability of having a down 3% move between now and january expiration is very high. there's a good shot they are in the money at one point. another point about carter's charge here. listen, when you have microsoft up 25% of the year and intel up 35% of the year, companies grow sale at best at mid single digits. how do they get double digits, buying stocks hand over fist. if stocks tick up in the last week, you find these stocks not as they were before. >> this is going to capture the next fed. >> there's a storm brewing here. looking at cheap options in stuff like this so levered to a small group of socks performing well, that's it. >> bear in mind, this is a trade to keep your eye on. it's probably going to end up in the money. that's the opportunity to spread, roll, take profits. >> pr app options to media, it was all over this week and today. if you got a question, tweet us

to @optionsaction. for everything options, check out the website, optio optionsaction .cnbc.com. here's what's next. >> sending you back to the future! >> because that's the best way to see where alibaba shares are going next. car trouble? shares stalling, but why they could get back into gear 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

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from td ameritrade. weapon hope the next 50 years the world change because of us. we want to be bigger. we want to be bigger. it's not the size. we want to change the business the last century. the -- we hope 15 years later, they say this is the company like microsoft, like ibm, they change, shape the world. >> that, of course, was alibaba, founder and chairman sharing bold ambitions ahead of the ipo this morning on "squawk on the street," but how does the performance stack up to previous ipos, and what does that say where the stock goes next? carter, break it down for us. ? sure. good day, obviously up 38%. look at stats and maybe try to put it in perspective. this is a table back ten years

showing first day of trading performance so keeping in mind what you get, we got a 38% move in alibaba. what's important overtime -- >> not on the chart. >> right. off the charts so to speak. what's important is where you come out. notice how feeble, not a lot of ipos, but in a bad period, they don't do well, and in a good year, very well. okay. keeping that in mind, let's look at something that's important also, not only one particular year, but the type of period you're in. in fact, here's 19 8 0, 1989. the average performance, that's not a dynamic period for the economy and for the market, if you will, and now compared to the big bowl phase, 90 to 98. double the number, and, of course, much better performance, and then i isolated one year, and look at the bubble year, just on its own, you have to combine the two to get the actual figure for the decade,

and, of course, that's the stellar stand out, and as of late, when we had the troubles of the past decade, the number diminishes, and, again, we get it back. overtime, this is the average for history. now, big names put in perspective, and what the outliar, first day performance, one year for microsoft, obviously, amazon. 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 results, put baba in here, you got plus 38%, making it a real -- in line, in line, not as good as twitter, but fairly normal. ev >> interesting to see what happens. >> right. on a three year basis, ipos under perform the market on a

relative basis. in agagregate, stocks under perform. >> interesting, carter. dan, what are your thoughts? >> talk about baba here, that's all anyone cares about here. there's a scarcity value to the name, no doubt about it, just as was famously said before the facebook ipo, i think buying near a hundred dollars a muppet bait. it's a risky asset to get involved with right now at this stage of the game. i wouldn't be doing it. there's a lot of smart hedge and mutual funds, bought on 68, bought, they have to. a longer time horizon. i think the margin for error with a $225 billion market cap is dangerous. >> i'm a skeptic, but i think in fairness here, it's interesting what jack was talking about, 1 15-year horizon. he's on third base already.

75% the size of walmart, trading at a multiple that's cheaper than facebook. do you get a chance to buy the stock at a better price? i do. interestingly, compared to the other names you talked about, twitter, for example, facebook, for example, i think this is a better value. >> yeah, and a lot of the guys on the floor talked about how it looked like the 1990s down there. interesting discussion. up next, tough week for tesla, time for investors to get behind the wheel? breaking it down 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.

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we're back, and a tough day for tesla, the stock down 2% after goldman sachs says the car maker may need $6 billion to build a gigafactory. what does that mean for dan's bearish trade on the sock? have a look. on "options action," trade like true innovators. that's what dan tried to do.

thought shares were about to stall out. >> maybe you do take it. >> just going short? >> we know better. >> we certainly do. after all, what if tesla shares double again? so to define his risk. dan, instead, bought the october 265 strike put for were 8 dollars. he needs shares to fall below the cost of $257 by october expiration. spending $8 just to bet against tesla? >> why don't we do better? >> dan, listen to the man. to spend less, dan sold the september 265 put for $3 and created his put calendar. he did something even better. he made making money easier. >> dreamer he is, then, with the courage to elaborate and improve on the past. >> between the $8 spent on the longer dated put and $3 corrected by selling the shorted data put, cut the cost of the

trade to just $5, and now to see profit, he just needs to to drop in october, but it gets better. >> that's the ding dong truth, folks. >> the put dan sold decreases in value faster than the put he bought, so he can do something traders of the past could only dream of, turn time into money. >> taking off on the highway of tomorrow. >> there is a trade off because he sold the nearer date put, he needs shares to stay above $265 through the september expiration, but below that level by the second expiration. since the time of the trade, tesla dropped too quickly, putting the trade in jeopardy of losing money, and new every future thinker wants to know the same thing, what will dan do with the trade now? >> so, dan, enlighten us.

>> to be frank. that was a great call, it was a horrible trade. in hindsight, i sold a call that expired tea. you know, i sold that at 90 cents. that was a bad idea, threaded the needle too much here. sometimes it makes sense to think about what the thesis is. it was almost exactly what goldman laid out, but i wanted to just finance the trade. >> to raise capital? >> for the gigafactory. >> well, i already did take it off for 5 small profit. >> directionally, you were right, but concern in the stock brewed, affecting the price of the underlying options. sometimes that's the cue when you make a directional bet and make a bet on the short side actually stood up in this case. >> how does it look to you? >> in tact. despite the slipping this week, it's a healthy chart by my work. >> healthy with a ceo of the company saying that the shares look overvalued like musk? >> well, look what happened the last time he did this?

. stock went up. maybe that's the best they can do, sitting there to defend it, they protest too much. >> all right. we'll keep an eye on. up next, final call from the options pit. ♪ 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. well, it was not just the iphone drawing crowds today. options actions fans gather around the nasdaq to wish dan a happy birthday. >> wow. >> happy birthday, dan, tomorrow, right? >> 30 years old. >> only look 20. >> look amazing. >> yeah, sure. >> time call, carter, you first. >> if you have qqq, reduce exposu exposure. >> dan? >> not a buyer of stock, but look at defined risk. >> mike? >> puts are cheap in the qs. that's what you want to buy. >> time expired. i'm sarah eisen, more options

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