i'd hadley gavel, northeast of paris where a massive manhunt has come to a deadly conclusion. two brothers involved in the slaying of the members of the charlie magazine were shot and killed by police in a nine-hour stand off. these guys came out with guns blazing. they are now dead. we know that one hostage was released unharmed. we know that they were not working alone. they were working with a third gunman. that gunman, earlier today in a shootout with police lost his

life in a grocery store in paris. there were casualties in the attack. a fourth suspect is still on the loose. al qaeda and the arabian peninsula said they were involved in directing the attacks according to the associated press. that makes three terror attacks in three days. three gunmen dead and a nation in mourning. now to melissa lee at the nasdaq. >> thank you, hadley. we will continue to monitor the situation and bring you the latest. in the meantime let's turn to the markets. despite a solid jobs report it was a difficult session for stocks and a volatile session for financials both here and abroad. dan, what do you make of the action? >> for all intents and purposes that jobs data today should have been a buoy to the u.s. markets especially after the day we had yesterday. if you looked up early this morning in the u.s. session, you saw the europe bank, euro stock bank index down 4%, then 5%.

you're saying what the heck is going on here? look at that chart. that's a three-year chart. there's a lot of things about capital. there's a lot about greece. there's a lot of things going on here. that's a problem here when everyone is focused on oil. >> yeah. u.s. banks certainly have strengthened their balance sheets considerably. i don't know that the european banks have really been keeping up with that at all. on top of that, we look at weak economic data. and of course a lot of credit concerns and suddenly you have this, i think you're basically sowing the seeds for another potential debacle in europe. >> credit concerns are one thing. european banks were much behind u.s. banks here. they still have a lot of room to go here. our banks are obviously in very good shape for all intents and purposes.

it doesn't mean if things start to get sloppy that when you think about our large money they have a lot of exposure in europe to me. we're going to have earnings. so i can't imagine in an environment where we know rates are going up any time soon. they are not going up on their own. >> it is interesting to think of the potential exposure they could have whether it's credit in european or credit here in the united states tied to energy which could be a liability for them. >> certainly credit related to energy is a big problem. we're seeing oil prices continue to decline. there's been conversations about how much of the market is associated with energy. i think we can take a look at what the banks are saying. look at what citi said today. they are reducing their bonus because they didn't have the trading profits. so it's not exactly like we're seeing good numbers. when you look at the bank, what's important is how important they are. they were relatively cheap for a long time, but they aren't anymore. >> so you're taking a look at a trade on a bank that is pretty early in the calendar when it comes to earnings. >> so jpmorgan is next week.

all money centers are next week. we're going to have some investment banks too. q4 might have been good. i doubt it. but looking forward i can't imagine that we're going to get fantastic guidance especially with all of this fed speak talking about no rush to raise rates. that's not great for our banks right here. i'm looking at jpmorgan into next week. the report wednesday morning, the options market is implying only a 2.5% move. it's not a big mover but i believe the price action has the potential to spill over. this is not something i want to be short into the ecb meeting on january 22nd. i think in some ways big money is trying to force the ecb's hand. that could be one of the reasons that we're seeing this volatility. jpmorgan in particular, i'm looking at january expiration. the stock was 59.5. you could have bought the 59.5 january put for $1. that's 1.7% of the underlying stock price. given the volatility environment we're in, the potential for weak forward guidance and everything else going on, this is a nice

short-term. i did not want to put it on today because it was down a lot. it's down 5% on the year. i was hoping for a bit of a bounce before the earnings. >> normally i don't like situations where you're buying the short dated options to make directional bets. you could say it's only 1.5% of the underlying. if you do that every week, you can see how that's going to work out for you in the long run. the market closed poorly today. and actually vol has been staying up there. options premiums are sticking in. that suggests people are concerned there's more trouble to come. in this particular instance even though i wouldn't normally do it, this is the right way to play it. >> is there a reason you chose jp rather than citi. citi usually the poster child for whatever is wrong in the world. >> listen, before jaime diamond became the savior of the financial world, jpmorgan was at the middle of every major crisis around the world for as long as i was in the business. and i'm not saying -- i know mr. dimon was out on medical leave. i don't see them sticking their

necks out and giving optimistic guidance going forward. in this environment in the stock which had been very good until about a week and a half ago. i think you could see the stocks come in another three, four, five percent. >> moving on here, banks will kick off earnings next week. it's results from the tech sector that could feel the wrath of the dollar rally. carter braxtonworth is taking a look at a widely held name in particular. what are you looking at? >> qualcomm. tech as a sector is the most exposed to a strong dollar. and our bet is that qualcomm is going to suffer here. first a few currency charts. we know for three four years and then this explosion since june. so a six-month rip, of course, put it in context. we're now back to the highs of '05. put it in context, in fact, we are up against the long-term trend line from the brenton woods peak in '85. now, the stock in the s&p 500 with the largest exposure, the

international sales, is qualcomm. full 97% of their revenues are overseas. a lot in asia, europe, and so forth. so what we're looking at here is a divergence since it started rallying. look what happens to semis versus qualcomm. we think a lot of that has to do with currency. let's look at the qualcomm chart itself. a massive topping out formation and drops in gaps all along the way. i've lost my charts. but this is not good. underperforming its group with semis. underperforming the market with drops and gaps we think it happens again. sell short. >> so sell short, carter says. mike, it's not just the dollar that's been an issue. i mean, china has been an issue for this company which does so much business in china. >> well, i think that's definitely true. i mean, that's certainly a cause for concern. and it's priced in when you look at it fundamentally. this a company trading at less than 14 times next 12 months earning. and it has been a cash generating powerhouse for some

time. when you take a look at the share price, about 30% is net cash. itis got over $30 billion of net cash. on a fundamental basis, basically what the market is telling us is there must be some other trouble. you would never be trading at this cheap level otherwise. so i'm taking a look at this and clearly the technicals are basically telling us, price is truth. i would normally be a buyer but i can't reach out and try to catch a falling knife on this one. >> what's the trade? >> very simply, i'm looking to february to cash that earnings result. the february 67.5 put spread, you can pay $1.25 for that. two bucks against it. part of that is implied volatility is higher than normal. and remember, at the bottom of that share price is that bucket of cash. it's not like it is going straight to zero. >> it's interesting. the chart as carter pointed out the chart looks terrible. then you look at others like intel.

it's like haves and have nots in the sector. >> if you look back at qualcomm, at one time it was trading of about one. this was on a basis of four. those estimates for 2015 have come down dramatically. earnings supposed to be flat. analysts have been lowering. this is something you could see in the semi space. i'll make this point. i've looked at this company closely too. it is cheap on a valuation basis. it's got the dividend yield. let me tell you something. there's no debt. on the next gap lower, i'll tell you this. this thing has to be active. they need to be buying back more shares. they need to give back more capital to investors. that's one. then the other thing is, you know what? let's talk about intel. they lose money in mobile. qualcomm is only in mobile. these two companies should merge. they should take tons of costs outlet. >> so would you be long qualcomm? >> on the next gap lower. if they do it again and they slash forward estimates enough, then i think you buy it. >> management i think is going to come in and are probably going to initiate a stock

buyback. it's the only thing that makes sense when you consider how much cash they have. they've been generating it. and obviously they're going to -- >> they have a buyback. i think they bought back $4 billion worth of shares. >> with $32 billion on the balance sheet. come on. that's just scratching -- >> come in and say do something with your cash. >> how about 15 to 20 billion. >> when it comes to qualcomm to the rest of the sector, do they look worse than the -- i imagine semis have a larger percentage of sales outside the u.s. >> they do. semis particularly and qualcomm most of all. it's an issue of these drops and gaps and that's really the problem. the presumption is you're going to get one more. this is a company in the last six quarters has missed two or three times. revenues as well. we bet against it. >> all right. got a question out there, sent us a tweet @optionsaction. check out our website, optionsactions.cnbc.com. it is simply a revelation near. you have to check it out. here's what's coming up next.

>> i will tell you i don't own any twitter. >> well, maybe you should, carl. because we've got a shocking reason why investors may soon rush into the social media giant. hope you take notes. plus it's a safety trade no one saw coming. >> that's classified. >> that's true, but we've still got the answer and we'll tell you what it is when "options action" returns.

a little angry when people come out with these rumors about me buying something and getting involved. i will tell you i don't own any twitter. and i never did. not that i don't like the company. we do twitter and get involved with it and it's a great concept. but i have no real feeling about it. >> that was carl icahn telling me yesterday on "fast money" that he is not involved in twitter. but our dan nathan says that maybe he should be. so dan, what's the story here? >> here's the thing. this stock has actually performed very well after last year being down 40%. it's up 10% or more this year. had a great day today. there's been a lot of rumors. carl just said it right there. it was interesting. he says he gets a little mad. some people put it out there he took a stake. that's silly, right? what's going on right here, this is a relatively new company. it's only been public for a little more than a year here. people don't like the management. well, fine. these guys actually have one of the most unique social media properties on the planet. they have a great brand and

there's a whole host of things that are going to go on there. could activists get involved? maybe. but what would carl icahn do? push dick out? i don't know. that's not one of the great reasons to buy it. i think the bigger reason to buy it is for acquisition of the company. it's got a $25 billion market cap. when you think about facebook paid $22 billion for a mobile messaging app, what's app last year. they're growing like crazy. they announced they have 700 million monthly active users. twitter has 300 million. let's remember this. twitter is not just a mobile messaging app. it's a tremendously interesting and i believe at very early stages, social media platform. and you know what? mark cuban said this to you yesterday also, mel, on "fast money." he said i'm using twitter more for realtime search. and so to me when you wrap all of that up together, twitter is a massively undervalued property at a $25 billion market cap

because of its scarcity value, because of the potential synergies with a much larger player in the space. and that player to me is google. google should buy these guys. and that's one of the great reasons why i think you should buy twitter. i bought it yesterday. but i want to tell you how i think you could play it in the options if you don't want to chase it up. it went from 35 to 40. let's look at the charts here. this is the chart since the ipo here. this was the range coming into the year between $40 and $30. this was the low back in may after their ipo lockup. i wanted to kind of catch it in the mid-30s. possibly the low 30s. that didn't happen. i bought yesterday at 37.5. all this interest in twitter has caused the price of options to get back up to levels where it was prior to the last earnings report here. this leads me to believe if you have to play it at 40 bucks, if you're one of those people who like chasing stocks look to a risk reversal. one of the things we do is try to take advantage of that high

implied volatility. today when the stock was 40 bucks if you look out to march, you sell, the put value at 180 and you buy the march 45 call for 210. that costs you 30 cents and your risk is below 35 and you are losing one for one between 35 and 45. you could lose that 30 cents and you have this massive potential upside above 45. but here's the thing about this trade. the highest probability is that nothing really happens because that's such a wide range. so you'd put this trade on if you thought an activist was going to get involved or there was potential for an m&a. >> how do the levels look, carter, and how does sentiment factor in? sentiment is so negative on this stock. >> it is negative and there's a reason to be negative. the experience has been horrible. about 50% since last christmas and now muddling along the bottom. it would take a lot to bring life to this pattern. as of now, it's all quite speculative to what's going to happen.

>> potential acquisition of the company does make a lot of sense. and we're talking about a company that's probably going to be profitable this year and materially profitable next year. one final point, if you ran out and bought the stock right now and spend 40.5 bucks for it and it went back to the may lows, you're going to lose ten bucks. if you put on the risk reversal, no harm, no foul. that's why you want to look at the strategies dan is recommending here. don't just go out and buy calls when the implied volatility is trading at all time highs. >> if it does drop to 35 bucks, do you really want to be long twitter at that point? >> these guys were talking about what's going on. the monthly active users is really bad. they have about 300 million when they report. i don't believe that the company that is going to have a billion users at some point in the future is going to be the product and it's going to be the company that it is today. i believe that when you integrate this into a larger platform like google that doesn't have a mobile messaging strategy and they're having problems with realtime search,

it's just worth so much more than that market cap right now. so to me people are having a lot of problems with the user engagement and some of these metrics. i think it's nonsense right now because if this stock was public, we would -- 25 billion -- excuse me. if it was private, we would think 25 billion would be very low valuation for this thing right now and it's not. to me i actually think that 35 is a buy. and could it go back to $30 if there's no m&a, no activist, and it screwed the pooch on this one? yes. that's why you trade, look for those levels. i like the risk reversal. >> so impassioned, dan. wow. fired up on a friday night. coming up, the new safety trade that will surprise you. we'll explain when "options action" returns.

welcome back. it is time for total recall where we take a look back at old trades and figure out what to do now. two weeks ago carter and mike made a bullish bet on housing. take a listen. >> either way we think 40 is a good bet based on the long-term charts, based on the breakout, on the here and now. we like the xhb right here.

>> i'm looking specifically at the march 34 calls. you can spend $1.20 to buy those. >> that trade has been working out and the xhb was up today even as the market dropped. mike, what are you doing with this trade now? holding on? and has this become the new safety trade? >> i'm not sure i would consider it a new safety trade. if we see rates tick up, that's going to be poor. i don't think you want to stick with in the money calls either. i would look to sell those. they were trading about a buck 80. you can look at the march 36s which were about 75 cents. you'll be playing at house money at that point to press a bullish bet. >> you think it's a safety. i mean, you stood over there on the fast board the other day which is a different instrument than xhb. you said itb was the trade. >> and they're both very house related. the premise is this. the technical set up is very good. you also have something that doesn't care about crude oil. doesn't care about crimea. doesn't care about the euro. it's very domestic. and this low rate environment should continue to favor this

area of the market. >> yeah. but to me i think like you just said if rates go up it's not going to be good for them. i think if rates stay down, it's bad for our economy. really bad for our economy. i don't see people rushing out to buy homes either. i think this has come back to the prior highs. i don't see the breakout. to me, i don't think it's worth the chase. >> a lot of home builders are trading at high valuations. we're going back to 2007 now in terms of where these things are priced and with lower revenues. for my money i don't know they're exceptionally cheap here. >> also last month dan made a bearish bet on tech. here's what he had to say. >> to me i actually think there's a good chance that the strong dollar, emerging market exposure, all this stuff is coming back to roost in q1. today when it was 104.40 i bought the december 31st quarterly. it expires on the last day of this year, february. 101 put spread. >> dan, the first put did expire. what do you do with the second

half of the trade. >> it reduced the purchase price of the longer dated put. to me when the qqq went to my long strike at 101 just a couple days ago, i sold a lower strike put. i sold the 95 put. i created a spread. now i own a $6 wide 101, 95 put spread for like 40 cents. this is exactly what i want to happen. i want to make one point about the nasdaq 100. it's showing weak relative performance to the s&p. it did not confirm the high the s&p made in december. it's making a series of lower highs and lower lows. this is one i want to stick with. >> up next, your tweets and the final call from the options pits.

let's take a tweet. richard russell asks do you like apple calls into earnings? dan? >> i like them better than owning the stock. find your risk. here's a point.

this fiscal q1 quarter they're going to report. if you don't already know it's going to be a blowout, you shouldn't be in this game. i would make one last point. stocks sold up 8%. >> my answer is no, i don't like them. not only not like the stock going into earnings but don't like the options. they are pricey. i don't think that's the way to play it. >> how's the chart look? >> chart's pretty good. i'd rather have apple against the market. >> really? >> i think this is a safety area to be in. >> but to be clear for richard russell out there, you don't like owning apple in my fashion. >> i think it's going to trade $100 before it trades up another $11. >> time now for the final call. carter, what do you say? >> qualcomm, do something about it. make profits or sell short. >> dan? >> jpmorgan. if it opens up on monday and you want to take a shot on the earnings, i think they are cheap. >> mike? >> i like the twitter risk reversal that dan outlined. i think they are the new news outlet for us. traders are using them

essentially as a wire. i think i'm going to put that trade in my own account. >> interesting. all right. looks like our time is expired. i'm melissa lee. for more "options action" check out the website. meantime don't go anywhere. "mad money" with jim cramer starts right now. >> announcer: the following is a paid presentation for body beast, the fast, proven way to build muscle, shed fat, and sculpt your best body faster than you've ever thought possible, brought to you by beachbody. >> this is real, as real as it gets. we're gonna learn, we're gonna sweat, we're gonna have fun, and we're gonna see results. >> before body beast, i was just soft and chunky and -- and pudgy, and this is the "after" result. >> it's gonna be amazing. come on. you can do this! >> body beast has completely transformed my body. swimsuit season is here, and i've never been more ready. >> i was i