this is "options action." tonight -- >> look. up in the sky. it's a bird. >> it's a plane. >> no, it's actually one former dow component that's trouncing the market. we'll tell you the surprising name and how you can profit. plus -- >> no. be afraid. be very afraid. >> even as stocks rise, the vix is surging. trouble ahead? we'll give you the set-up. talk about outlandish calls -- >> my style is impetuous. i want to eat your children. >> maybe not that outlandish. we've got the wildest predictions for 2015 and we'll tell you how to profit.

the action starts right now. we are live from the nasdaq marketsite in new york's times square. hello, everybody. i'm mandy drury. we're coming to you from all over the country tonight. happy new year's guys. tesla at one point shares fell as much as 4% today on heavy foot buying. is it time to pull the plug on this high-flyer? let's get in on the movie and try to find out. dan, what do you think is happening here? stock closed down about 1%. >> mandy, the stock actually did make a nice comeback today but the stock is down almost 25% from the all-time highs it made in september. when you think about what the market's done in that time period, we had a big rally off the s&p. to me, going forward some of these "it" stocks -- tesla has been an "it" stock, a story

stock. a lot of positive sentiment around its ceo and founder who is a massive holder. 22% ownership in tesla. he's been a big promotional guy on the name but when you think about it, at $27 billion market cap, it's half the market cap of gm, and they actually have 5% of their sales. so if it is a tech company, you better show us how they get to this giga factory, how they startmakering batteries going forward for the entire electric car industry and beyond that. that's what's going to happen in 2015. one thing i'll say about that waning momentum, i think it has to do with the fact they are going to be raising a lot of capital in 2015 and i think investors are selling in front of that. >> i think that's an excellent point the way you say it's been at "it" stock. mike, what do you think investors really want to see out of tesla in 2015? >> so i think that's a great point. elon musk of course has a big -- one of the things you always want to avoid is shorting stocks that have big concentrated

holders. speaking of big concentrated holders though, elon musk isn't the only one. this was also a big darling among big fund managers like fidelity. these are some of the guys that have been selling into this weak fles. elon musk probably not selling his shares but when you see some of the other big concentrated holdings coming out of the stock it might be a time to say, i'm going to fold my hand here. whole idea this company was going to be revolutionary not just for the car business but also in terms of energy storage. they still have a lot to show us to see that play out. of course, other companies can always step into the void. >> good point you make there. this stock has been trading like it's got no competition whereas in actual fact it's got quite a bit of competition. let's take a look at the chart here. what are you seeing there for tesla? >> this is a fairly classic topping-out formation. it went from $29 to $290, a ten-fold increase. now has started to roll over, at

$219. the presumption is that the weakness of the last seven, eight months is a foreshadowing of further weakness. >> dan, what's the trade on tesla? >> that chart is very interesting to me. that's a textbook $200 being the neck line. the stock has just failed back at the down trend line that's been in place from those september highs. i'll add one other thing. the 50-day moving average is about to cross below the 200-day moving average. that's what some technicians call the death cross. i see this thing if it breaks $200 to the downside, i think you could have a flush lower, somewhere as low as $160, $170, round tripping the whole move. so you are in the mindset as i am right now and you think this is more of a sentiment and waning momentum story in front of some potential headwinds in 2015, i think you make a near-term bearish bet with defined risk. today when the stock was $217.50, i bought the february,

$210, i paid about $5 for that. i bought one of the february $210 puts for $11. i sold two of the february $180 puts at $3.50 each. that's $7 total. it cost me $5 for the structure. that's my max risk. between $205 and $155 on february expiration, i can make up the $25. that's five times my money. above $210 an below $150, i lose that $5. when you think about it, this is not a stock i want to short with 27% short interest. we know it is gappy. but if you think you want to isolate a range back to this really important $200 technical support level and a break below it, this is a way to do it. >> what do you think of that trade, mike? >> this is a high-volatility name. that's one of the reasons why i think dan is looking to a spread like a butterfly to do it. one thing i would probably consider if the stock does rally at all, try to take advantage of the fact premiums are high. >> let's move on from tesla and

take a look at another stock. 2014 was tough for steel stocks and materials in general. but one former dow component is killing the market this year. that could spell opportunity in 2015. with chart masters to break it all down, cotter, what name? >> talking about alcoa. this stock was in the dow for the past 50, 60 years. it was removed in late 2013. in 2014 was the best performing stock if it were left in the dow. here interestingly we think is the set-up for this trade to go short. there have only been four times since 1980, past 35 years, where alcoa has advanced more than 40%. it just completed only the fourth time and every year thereafter trailing 12 months the stock has been down. we're making the bet that it is going to be down again. >> okay. >> now take a look at that unusual fact that here are the

top five performing sectors in the dow last year. if ael doe with a had been left in, it would have been number one at 49%. that's irony. to the charts. here is the material sector versus the s&p. of course alcoa is a component of the material sector. materials are rolling over and diverging from the s&p. we think alcoa will join the rest of its brethren, if you will. alcoa chart, well defined break in trend. then it throws back right to the underbelly of the trend and drops again. this has all the elements of a topping-out formation. now keep in mind this advance that i hav've shown you and put in the context of the longer term. that advance of the last 18 months leaves you right at the tops of a five-year range. very difficult level. finally, not only is it a five-year range, it's the lows of the last decade. so you have overwhelming supply

right here. you have all these dead bodies, interested sellers. now holding the stock back. sell old calcoa. >> mike, what's your view? >> the reason i think the stock has been doing well is because people have believed the ceos basically trying to revamp this company and focus on more specialized product rather than just being in the aluminum commodity business overall. but the truth of the matter is that they have a couple of high-profile bets like their deal with ford. if any of these things don't play out, that obviously is going to be a problem. if they do work though, that could introduce competition from other aluminum producers. they are ultimately in the commodity business. 15 times earnings might look like it is cheap but it has rarely done much better than that. so i think one of the interesting things i'm also looking at here is the options premiums are quite rich. we want to be a better seller. normally we might look to a put spread. this time i think i'll look to

sell some options and specifically selling the february 16-17 call spread. you can sell the 16s for 65 cents, then buy the 17s to cover that for upside of 30. you collect 35 cents on the dollar between those strikes. one final point. january 12th is when they announce earnings. only 7 times out of the last 20 has the stock actually gone higher rather than lower. right now traders are skeptical it usually averages closer to 3%. >> when you think about fundamentally, these guys talking about technicals and option prices. when you think about their exposure to emerging markets, to a strong dollar, think of the weakness we've seen in industrial commodities, i don't know how the stock can continue in 2015 if we continue to see the economic data we saw in the global pmis today. to me this trade has a very high

probability of success, much higher than buying puts or buying put spreads. i like the trade and i think it makes sense right here. >> cotter -- final word to you on alcoa. >> after a gain like that, we know statistics suggest that the year that follows is a poor year. if you're looking for a short, this is an opportunity. >> got a question, anybody? send us a tweet t to @optionsaction. check out our website. we have the hottest options news, videos from throughout the week and exclusive trades. check it out, folks. in the meantime, here is what is coming up. future events such as these will affect you in the future. >> you said it, buddy. and we've got the craziest predictions that could actually come true in 2015. plus -- talk about an odd couple. why are the vix and stocks rising together? the answer could make you money. we'll explain when "options action" returns.

so what is wrong with this picture? stocks have rallied, the vix has also surged rising 44% since december. the question is -- does this spell trouble for january? the fear merchant says is the vix is his product. why surge? explain it to us. >> typically the last month of the season, 83% of the time in that santa claus time frame the last week the vix rises. but let's look at this. december the vix rose 44%. that is a huge surge so there has to be more to that. when i look at it, i look at what's going on in oil. i know a lot of americans believe everything is about

twitter, facebook and technology. but oil volatility has been tremendous. that bleeds into the equity markets whether you like it or not. 8% of the s&p is comprised of oil. those stocks depended on oil and commodity prices will feel the pain. we've seen that in the credit markets in oil services. certainly that's leading to more volatility in the markets. that's leading really to the vix going up. >> talking of seasonal trades, what do you think it all means for january? we've been talking about the january effect in the previous show? january effect, obviously most vans are very positive going all the way back to 1997 is the best month of the year for stocks. what do you think what you're saying means for this month of trade? >> mandy, certainly the january effect is an issue. yeah, the markets like to rise in january but to me when i see the markets stagnant or hitting all-time highs and the vix rising like it does, it at least tells me there is some fear out there in the market that a correction could be coming here. the oil services sector is having some volatility. that will bleed into the

financial sector. such a big part of the high-yield market right now, over 20%, is related to oil services. that can trickle in to the economy here and you got to be careful. if the earnings picture is not that great in january, we don't get tremendous earnings, i don't foresee the vix going back down to 12. those days could be gone and we could get a significant correction. a 10% krek is certainly in the cards. it's been so long since we've had one. i wouldn't be surprised if we saw one in 2015. >> i've forgotten what a correction actually looks like, it's been so long. dan, the vix almost at 18. is it too late to buy protection? >> i don't think so. brian made a lot of great points. you think about the january effect, we'll have q4 earnings and more importantly, q1 guidance. think about it. when you look at s&p 500 companies, about half of their earnings come from overseas. so we have this situation where we have the strong dollar, we have bond yields that just won't rise we have have emerging market growth that's really

staeg na stagnant at best here. i think some investors are thinking q1 in 2015 is maybe a re-adjustment after five, six years of torrid equity returns here. i think you have to think tactically. i think you want to pick spots maybe on portfolio, we do plenty of portfolio hejs dges on the s. find some of the cheapest, most correlated etf options. >> we've seen six straight years of gains in the s&p and a lot investors have become very complacent. how often has that happened that we've had that kind of string of gains. >> we were down fractionally in 2011 so it kind of interrupts the six years in a row, but with dividends, six years in a row. it's only happened once or twice. this decoupling. is it real. no. it is unlikely we can continue to decouple from here. >> one thing i would say, look

at valuations. we are lookingality the total equity market capitalization versus gdp. that's at a very high number. multiple of earnings is at a very high number. there are some spaces in the financial sector where we aren't at surprisingly high numbers. what i'd probably be doing is try and look at some of those value plays. some of the privately traded equity firms i think are good places to take and look because those are the companies that are going to be taking advantage of distressed situations and i expect there will be quite a few of them. >> where are you looking, dan? >> financials is interesting. they're cheap. you know why? they have so much less leverage than they did the last time around. to me, i think it is apples to oranges. to me, there are a lot of things that should do well if the u.s. drags up the rest of the world. if you own the s&p right now, that's what you're betting that all of this weak data in europe and emerging markets is going to play catch-up to what the u.s. is doing and i just don't see it. i think u.s. corporate earnings will probably be strained in the

first half of this year. >> i'm not asking people to go out and buy money center banks leer. i'm specifically saying some of the private equity firms -- names like kkr -- are the types offe entities that will start snapping up assets at very dispressed prices. they'll find lots of bargains. >> and lots of places. up next, raise your hand if you said oil would hit $50 this year. or the dollar would surge. well, when we come back, far out predictions that are likely to come true this year, 2015. we're back after this.

sis boom ba. >> sis boom ba. >> describe the sound made when a sheep explodes. >> even the amazing karnak could

not predict $50 oil, the rally in the 10-year or the dollar surge over the past year begging two questions, which crazy stuff is going to happen in 2015 and can we even begin to predict it. dan, i'm going to mike you try. what's your biggest, baddest, boldest predict for this year? go big or go home. >> yeah, sure. here's thing. we see usually crazy m and aa the top of the skcycle but some companies need to make some m and a for strategic purposes. google closed down on the year last year and i think people are starting to see that, yes, it is great to have this lock on desktop search and mobile search but margins are going down and competition is increasing. i think they'll use that $65 billion of cash on their balance sleet to make some acquisitions. they should buy twitter. when you think about twitter with the $23 billion public market cap and you think about the fact that facebook paid 22

billion mr. for what'sapp that had no revenues, this thing needs to get snapped up. google has a real-time search problem, they have a social media pledroblem, meaning they don't have a social media strategy. >> i have to say, this is the first time i've actually heard that and i actually think it makes a lot of sense. a lot of people talk about twitter and their difficult monetizing the things they're doing. they think they're socially relevant which happens to be what google has struggled to create, even though they have so much other things going for them. they have a lot of cash. this is a way for them to become socially relevant versus the facebooks of the world. i think an acquisition of this type would be good for both of them. >> it really does feel like it would make a lot of sense. i don't think that's particularly bold. i asked for bold. i'll come back to you another day with an even bolder prediction. what's your contrarian trade? >> we think japanese equities will have a tough time in the

year ahead. two quarters of contracting gdp and apparently q4 is no better. retail sales declining, industrial production declining, yet the nikkei over the past two, three years, up. we think all of the courtesy umf has run its course. we believe the nikkei and japanese equities are a very bad place to be in 2015. >> i think that's a really interesting call. when you think about it, the u.s. is out of the qe game. a lot of people are starting to price in the fact we're going to start to raise rates. what does it mean when we still have china with their stimulus, we had that massive move in japan earlier in the year, the ecb who basically keeps jaw boning to the fact but i think the u.s. out of the qe game, i think some of these lesser countries are going to be less successful and i don't think it will have the same impact and i

like carter's call. >> take the mrn out of toney ou nikkei and put your money into russian equities. that's my contrarian call. weak ruble. weak oil. cl what putin might do amidst all of those economic sanctions. their economy has been growing but you have to say to yourself, these things might be bottoming out. it is probably one of the larger values out there. if you can overcome any of those hurdles they'll go higher. >> how high is the chance of a default on russia? >> the default issue is the sovereign debt issue which i think is probably somewhat significant. i think we should separate that from private investments in equities where they aren't necessarily going to have that same problem. that would hurt the ruble further but i think what we should take a look at is what happened the last time we get

into this. i was in the markets in 1998 so i can remember. but i think what people should be taking advantage of is the fact that there is so much concern and dispress here. there isn't anybody i know that has a favorable rating on russian equities. i think that's probably what makes them a buy. >> it is darkest just before the dawn. carter, why do you think the street got 2014 so wrong on a number of levels? not necessarily equities but on a number of levels, things like the bond market. what do you think went wrong there? >> i'm not so sure it is a question of going wrong per se as it is very hard to predict the future. there have been some seismic shifts in commodities, in currencies. when you have that kind of epic movement, it is very hard to find someone who's pinpointed the outcome. >> lot of people got caught flat-footed. thank you very much, guys. up next, the final call from the options pit. stick around.

time for the final call. carter. >> sell alcoa. >> mike. >> sell call spreads. my mission is simple, to take you money. i'm here to level the playing field for all investors. there is always homework and i promise to help you find it. "mad money" starts now. hey, i'm cramer. welcome to "mad money." welcome to cramerica. other people want to make friends, i'm just trying to make you money. my job isn't just to entertain but educate and teach so-call me or tweet me at jim cramer. tonight i want to talk to you about the big picture, about building wealth in general and not just owning stocks in particular because stocks are one part absolutely