this is "options action." tonight -- >> up in the sky. it's a bird. it's a plane. >> it's one former dow component that's trouncing the market. we'll tell you the surprising name and how you can profit. plus -- >> be afraid. be very afraid. >> even as stocks rise, the vix is surging. and talk about outlandish calls. >> my style -- i want to eat your children. i want to eat your heart. we have the wildest

predictions for 2015 and how to profit. the action starts right now. and we are live from the nasdaq market site in new york's times square. i'm sitting in for me slas lee. we're coming to you from all over the country tonight. happy new years, guys. let's start with bearish bets on tesla. at one point, shares fell by 4%. is it to imto pull the plug on this high-flier? what do you think is happening here? the stock closed down about 1%. >> the stock did make a nice comeback today. the stock is down almost 25% from the all-time highs in september. when you think of what the market as done in that time period, we had a big rally in the s&p 500 off the october lows. and the momentum is waning in tesla. it coincides with the fact that going forward. some of the it stocks. tesla has been an it stock.

a story stock. a lot of positive sentiment around its ceo and founder. a massive holder. 22% in tesla. he's opinion a big promotional guy. at $27 billion market cap, it's half the market cap of gm. and they have 5% of sales. thaw better show how they start making batteries for the entire electric car industry. that's going to happen in 2015. about that waning momentum, i think it has to do with the fact that they'll be raising a lot of capital in 2015. i think investors are selling in front of that. >> you make an excellent point. it's like elon musk has been the it guy. what do you think investors want to see out of tesla in 2015? >> that's a great point. elon musk, one of the things you

want to avoid is shorting stocks that have big, concentrated holders. this was a big darling among the fund managers. like fidelity. elon musk probably not selling his shares. it might be time to take a look. the company was going to be revolutionary, not in terms of the car business, but in energy storage. they have a lot to show us to see that play out. and other companies can step into the void. >> good point you make that there. this stock has been trade like it has no competition. in actual fact, it has quite a bit of competition. let's look at the board there's. what are you seeing for tesla? >> you're talking about a stock that went from $29 to 290. has started to roll over.

and the presumption that the weakness is forshadowing on further weekness. >> that's a text become head and shoulders, $200 being the neckline. it has since rallied back. the stock has just failed back at the downtrend line that's been in place since september highs. the 50-day moving average is about to cross below the 200-day moving average. that's what some call the death cross. if it breaks 200 to the downside, you could have a flush lower. 160, 170, round-tripping the whole move. if 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 potential headwinds in 2015, you want to make a near-term bearish bet. when the stock was $217.50. i got the february 210, 180, butterfly.

i paid $5 for that. let me tell you what i did here. i bought the february 2010 at 350 each. and i caught one of the february 150 puts for $1. it cost me $5 for the structure. that's my max risk. i can make up to $25. that's five-times my money. when you think about it this, is not a stock i want to short with 27% short interest. we know it's gapy. 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 the way to do it. >> what to you think of the trade, mike? >> this is a high-volatility name. that's why dan is looking to a spread like a butterfly to do it. one thing i would consider, is to try to take advantage of the fact that premiums are high and get paid to take a short bet with limited risk.

>> let's move on from tesla and look at another stock. 2015 was tough for steel stocks and materials in general. one former dow component is killing the market this year. that could spell opportunity in 2015. the chat master breaking it all down. what name are we talk about here? >> alcoa. there's irony in life and irony here. this was in the dow for 50 or 60 years. it was removed late in 2013. in 2014, it was the best performing stock, if it were left in the dow. look at the long-term and the statistics. here is the setup for this trade to go short. there's been four times since 1980, where alcoa 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 it's going to be down again. look at that unusual fact, that

here are the top five performing sectors in the dow last year. and if alcoa would have been left, it would be number one, 41%. that's irony. to the charts. here's the material sector versus the s&p 500. alcoa is a component of the material sector. the materials are starting to diverge from s&p. and alcoa, we think will join its brethren. a well defined break in trend. and come to the underbelly of the trend and again. this has all of the elements of a topping-out information. putting it longer-term. that advance of the last 18 months leaves you to 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.

you have overwhelming supply right here. all these dead bodies. sell alcoa. >> it's topping out. been a great 2014. 2015, a dud, as well? >> people have been believing the ceos, trying to revamp this company and focus on more specialized product. if truth of the matter is, they have a couple high-profile bets like the deal with ford. if any of these things don't play it, that's going to be a problem. if they work, that could introduce competition from other aluminum producers. they are in the commodity business. 15-times earnings might look cheap. but it has rarely done much better than that. one of the interesting things i'm looking at here, is options premiums are quite rich. we want to be a better seller. normally, look to something like a put spread.

i'm going to look to sell some options. and spectacularly, the february 16th, 17 call spread. you can sell the 16s for 15 cents and buy that. you're collecting 35 cents between the strikes. this is a way to get paid if it hits here or goes lower. january 7th, they announced earning. 17 times of 20 has the stock gone higher than lower. it's implying a 4% move. >> do you agree or disagree? >> i agrow. when you think of fundamentally, they're talking about the option prices. you think of the exposure, the ford deal. you think about their exposure to emerging markets. you think of the weakness we've seen in industrial commodities. i don't know how the stock can continue in 2015. we continue to see the economic data we saw in the global pmis today. this trade has a high

probability of success. higher than buying puts or put spreads. i like the trade. i think it makes sense right here. >> final word to you on alcoa. >> we know the statistics that suggest that the year that fallows, take profits. >> send us a tweet to @optionsaction. we have the hottest news, videos from throughout the week. and exclusive trades. check it out. in the meantime, here is what is coming up -- >> future events, such as these, will affect you in the future. >> you said it, buddy. we've got the craziest predictions that could come true in 2015. plus, talk about an odd couple. why are the vix end stocks rising together. the answer could make you money. we'll explain when "options action" returns.

what is wrong with this picture? stocks have rallied. the vix have also surged. does this bring problems for january. brian, why the surge? explain it to us. >> well, typically, the last week of the season, 83% of the time, the vix rises.

let's look at this. in december, the vix rose 44%. that's a huge surge. i look at what's going on in oil. i know a lot of americans believe everything is about twitter and facebook and technology. but the world thrives on the commodity business. that leads into the equity markets, whether you like it or not. 8% of the s&p 500 is comprised of oil. those stocks will feel the pain. certainly, that is leading to more volatility in the markets. that's leading, really, to the vix going up, besides just a seasonal trade here. >> we're talking seasonal trades. what does it mean for january. we're talking about the january effect. and the january effect, obviously, most januaries are positive. i think going back to 1997, the best month of the year for stocks. what do you think what you're saying means for this month of trade? >> well, certainly, the january effect is an issue.

the markets like to rise in january. when i see the markets stagnant or hitting all-time highs and the vix rising like it does, it tells me there's some fear in the market, that a correction could be coming here. the oil defenses sector, has some volatility. but that will bleed into the seconder. a big yield of the high-end market, 28%, related to oil services. if the earnings picture is not that great in january, we don't get tremendous earnings, i don't see the vix going back down to 12. those days can be gone. a 10% correction is in the cards. it's been so long since we've had one. i wouldn't be surprised to se one in 2015. >> i've forgotten what a correction looks like. brian, out to you, it's been so long. dan, we have 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 of january and the january effect. we're going to have q-4 earnings

and q-1 guidance. think about it. you look at s&p 500 companies. about half of their earnings come from overseas. we have a strong dollar, bond yields that won't rise, and emerging market growth that's stagnant right now. some investors are thinking of q-1, after a readjustment after five years of torrid equity returns here. you have to think about it tactically. you don't have to buy puts on every stock you own. and you want to pick stocks. we do portfolio hedges on the show here. you try to find some of the cheapest options. >> we've seen six-straight years of gains in the s&p. and a lot of investors had become very complacent. how often has that happen that we've had that string of gains? >> it's happened twice. we were down just partly in

2011. it interrupts dividends six years in a row. the key thing is this decoupling. is it real? no. it's unlikely we continue to decouple from europe. >> what do you think, mike? >> one of the things i have to say, look at valuations. we're looking at the total equity market. that's a very high number. there are spaces in the financial sector, where we aren't at high numbers. some of the publicly-traded private equity firms are a good way to take a look. there will be quite a few of them. >> where are you looking, dan? >> well, listen, financials is interesting, mike. when you think about it, they're cheap. you know why? they have so much less leverage than the last time around. it's apples to oranges. i think there's a lot of things that should do well if the u.s. drags up the rest of the world.

and that's really the bet. if you own the s&p right now, that's what you're betting. all of this weak data, in europe and emerging markets, is going to play catchup to what the u.s. is doing. i don't see it. u.s. corporate earnings are probably going to be strained in the first half of this year. >> i'm not asking people to buy money center banks here. some of the private equity firms, names like kkr, are the types of entities that will run into the oil patch and start tapping up assets. and those are the places you'll find bargains. >> my thanks to brian. and we'll get back to the other boys in a second. up next, raise your hand if you said oil would hit 50 bucks this year. or the dollar would surge. far-out predictions that are likely to come true, 2015. back after this.

sis boom bah. >> sis boom bah. >> describe the sound made when a sheep explodes. >> well, even the amazing car knack could not have predicted

$50 oil, or the dollar surge over the past year. begging two questions -- what crazy stuff is going to happen in 2015? can we begin to predict it? i'm going to try, guys. what's your biggest, baddest, boldest prediction for this year? go big or go home? >> here's the thing. we usually see mna at the top of a cycle. there's some tech companies that need to make mna for strategic purposes. google, one of the largest market cap companies in the world closed down last year. people are starting to see the fact, that it's great to have a lock on desktop search. but competition's increasing. i think they'll use the $65 billion to start making acquisitions. i'll tell you who they should buy. i don't know if they will. but it's twitter. you think of twitter, with the public market cap and the fact that facebook paid $22 billion

for whatsapp at had no revenues, this needs to get snapped up. google has a search problem. they don't have a social media strategy. and i think twitter, inside of the google enterprise would make a lot of sense. >> i have to say, this is the first time i've actually heard that. and i think it makes a lot of sense. a lot of people talk about twitter. and their difficulty monetizing the thing they're doing. they think they're socially relevant, which is what google has struggled to create. this is a way to become socially relevant versus facebook. i think an acquisition of this type would be guede for them. >> it does make a lot of sense. i asked for bold. i'm going to come back to you another day, for an even bolder prodiction. carter, what's your trade of the year? >> japanese equities will have a bad time in the year ahead. the facts we know, they're struggling.

two quarters of contracting gdp. and q-4 is no better. retail sales is declining. real wages dropped the most. and the nikkei, over the last two or three years, up almost 100%. that's because of the yen. if you do it in dollar terms, it's up 20. all of the currency oomph has run its course. now, the facts are not there. we're betting in a nikkei, the japanese equities are a bad place to be in 2015. >> that's an interesting call, carter. the u.s. is out of the q.e. game. and a lot of people are pricing in that we're going to raise rates. china had a massive move in japan. the ecb, who keeps jawboning to the fact. i believe with the u.s. out of the q.e. game, i think the lesser countries are going to be less successful. and i like carter's call.

>> take the money out of the nikkei and put your money into russian equities. there's a lot of things that people will understand about that space that has been obviously working against them. weak ruble. weak oil. and the questions about what putin might be on top of massive economic sanctions. but all of those things, you take a look at the valuation for russian equities, versus their economy, which actually has been growing, you have to say to yourself, those things might be bottoming out. it's one of the larger values out there. if you can overcome any one of the hurdles, they can go higher. >> mike, question on russia. how high is the chance do you think of a default? >> the default issue is the sovereign debt issue, which i think is significant. we should separate that from private investments in equities where they're not going to have the same problem. that would hurt the ruble further. what we should look at is what happened the last time we got into this.

i was in the markets in 1998. i can remember. i think what people should be taking advantage of the is facts this so much concern and distress there. there's not anybody that has a favor on russian equities. >> dark et just before the dawn. why do you think the street got 2014 so wrong? on a number of levels. things like the bond market. what do you think went wrong there? >> i'm not so sure it's a question of going wrong, per se. it's very hard to predict the future. there's been seismic shifts in commodities, in kucurrencies. when you have that epic movement, it's hard to find someone that's pinpointed the outcome. >> yeah. a lot of people got caught flat-footed. up next, the final call from the options picks. stick around.

time for the final call. carter? >> sell alcoa. >> sell call spreads. >> dan? >> tesla put flies. >> our time has expired. "mad money" is next. fit, feel great, and be healthy, because this is a paid presentation for p90, brought to you by beachbody. we all reach a point when we look in the mirror and want to change. >> i want to get rid of this. i want more definition in my back. >> this needs to be gone. i want to be able to wear a bikini, walk down the beach, and feel completely great and comfortable in my own skin. and i finally decided that's it. >> announcer: but lately it seems like fitness has gotten hard, extreme, and downright painful. >> aaah! >> at my age, they're just -- they're just too hard on my joints. my hips hurt. >> well i've tried an intense