life in the nasdaq website, i'm melissa lee. here is the action tonight. prince aw walid shocked the world and may have spelled doom for one well-known stock. plus, do you like tech? ♪ >> well, then, you're in luck. next week, it is make or break time for apple, google, microsoft and maybe even "your money." we'll give you the best.

>> talk about funky. look at the vix. >> it is mack or break for technology. we get earnings for apple, microsoft, facebook and ali ba ba. dan, what are you expecting particularly given the run we are having? >> that's a great report. two weeks ago, when we got into earnings season, the news wasn't fan it is tick. the guidance was fine. the mood in the markets was much worse in a way. we seem to be a little bit of a down trending in profit-taking mode. things feel better. obviously, ups put somewhat of a dire note on earnings here. those six stocks that you just mentioned, that's about $2 trillion in market cap. i do believe if we can get some sort of trend out of that, that's probably going to be reflective of the next 5% in the market over the next couple of weeks. >> you just pointed out ups and

fedex probably the best to breed stocks. >> a lot of their peers were you have athe charts high. the down draft was sort of telling. if this is how they feel about the leaders, what are they going to think about the weaker hands. there is some danger if you are trading at the higher end in your space. >> in terms of the nasdaq and technology's resilience. >> the issue is that they are only about 6%, 7% of the s&p. they are 20%, 70% of the nasdaq 100. it is not so much about the s&p. >> some of these will be stock specific stories. microsoft announcing windows 10. i thought it was kind of interesting. the direction they need to go with their products, they actually are going. i think it is going to be very stock specific. >> i want to add one other point. you are talking about the nasdaq 100.

that's equal to about $2.5 trillion in market cap. that's more than the rest of the 90. a lot of these stocks have been doing a lot of heavy lifting for the last year or so. it is going to be important what sort of guidance we get out of these stocks going forward. that will be the trend for the q-1. >> you have a trade specifically on ali baba. >> it would be the fourth largest stock. this is a company that is new to us. they did report one quarter in early november and i think for the most part results were pretty good. there were a couple negatives there. they are seeing some margin pressure. this is a company that's been growing very fast. on that innisingles day in nove, they did $9.3 billion. the quarter they are going to report is probably a big, big quarter for the q-4. they don't give guidance. very few large cap companies that don't give guidance. google is one. they have had a tough run.

investors generally like more information rather than less. this company did a 368 million share ipo on september 18th. an ipo lockup coming on march 18th of 429 million shares. in september, $1.6 billion. there is going to be overhang here. the trade i was looking at for aliba ba, alibaba. looking to catch the earnings report next week. i want to sell and buy a longer dated putt in march. hoping to get in for cheaper. the trade was a february/march, 95 put spread. when the stock was 104, it costs $1. that was my max risk. i sold one at $1 and bought one

for $2. i want to have the stock move back towards 95 in february expiration. then, i own that march put for that lockup. >> i think this makes a lot of sense. for a couple of reasons. when you have a stock, a recent ipo, typically, what happens, a lot of volatility that starts to many could out of the stock. options premiums decline over time. the best to own it is to sell near dated options against it. you wouldn't want to short this stock, even though there is a huge overhang of supply which is going to pressure it. on a fundamental basis, the stock is not immensely expensive when it is growing at 40%, 50%. for a growth stock, not off the charts expensive. finance those longer term puts. >> speaking of insurance, no the a lot of trading history to interpret. no one is quite sure what it is worth or where it is headed.

>> directly, as we go into this big slate of earnings, you are negative. that's what it sounded like. >> one megacap we got was intel. they guided down. you know what the stock has done? it has done nothing. in that space there has been disappointments out of my kron, san disc and clap. i think when you are looking at microsoft also on mon, this is probably not one you want to short short. people like that dividend. >> it seems like the new ceo is doing and saying a lot of things investors want to hear. the oil slide won't hit. it fell closing at the lowest liver until 2009. the saudi prince made news when he said that that $100 crude is in the rearview mirror. >> the point between supply and

demand, the price may fluctuates. however, in the immediate long-term, it is inevitable the price may go up a little bit more. i think we will never see the price of oil again at $100. >> that could be wad nor one component of dow that's said to report next week. >> we are going to take a look at caterpillar. it is not a good look. let's go to the charts and see what is coming bichlt my wor. by my look, what's coming is not going to be good. >> it is not commensurate with the drop in the commodity. >> this is going back some 15, 20 years. the correlation again. a commodity has a lot of data and no valuation to hold it up. the commodity crude overshoots on the upside. let's say it is overshooting on the down side.

the principle here is that the caterpillar cannot withstand this pressure from crude. caterpillar, crude and reverse. you have a perfect 30% advance and a perfect 30% decline. the risk here is that we are hovering right at these well-defined lows. put this in context of the long-term chart. you have something of a triple top. you have this well defined level and the bet is that caterpillar is going to break it. a bad break here implies something along the order of 75 or back to the lows of 2011. sell your caterpillar if you have it. looks to us as if there are down side risks. >> mike, what do you think? how does it set up? >> a lot of people have been making the commodity super cycle argument about caterpillar. they have been bearish nfor a long time. >> part of what you are seeing is a correlation to commodities.

they have a lot of exposure like materials and mining. it is hard to figure out how this one is really going to impress us on the 27th when they announce earnings. the other nice thing about this situation is that the options aren't ridiculously expensive to play that catalist. looking at a 4 plus move, it is not implying a move that big. we can take a short punt by buying some short-dated options. that's what i was looking to do today. earlier, when the market was a little bit higher, you could buy the february, '86 puts and that will give us a little time to make that bearish bet. that's one way you can risk a relatively small amount of the stock price and make a bearish bet. management has had a real credibility issue in terms of guidance. >> in the last year, they have done $4 billion in accelerated buybacks. when you looked at that chart

and saw that rally in the first half of last year, that was the company buying their own stock. it is really tough as you get closer to 80. what carter shows is mass i have is support at 80. i would rather take a look at deer. >> something else here. this is very tied to copper. copper is not doing anybody any favors either. it keeps getting weaker. >> the thing i like about the deere trade, also, all of these, you are contending with falling currencies in other places. these are multi-nationals. cat t caterpillar has more multinationals than deere does. >> got a question. send us a tweet at options action and for everything options action, head to our website. options action.cnbc.com. one word. here is what's coming up next.

>> what could that mean for stocks? the fear merchant, brian stutling will break it down. >> it is a bird, a plane. >> it is actually the dollar. you won't believe how high some traders see it going. options action is sponsored by think or swim by t.d. ameritrade.

have no fear, the vix and stocks are down for the year. what does this mean? >> let's bring in brian

stutland. what happened today in the vix? what could it mean for stocks? >> a lot of interesting action today. we saw puts trade three times that of the calls. february 14 put, over 230,000 contracts were purchased. certainly, vix traders betting that the stimulus will drive the vix lower. that's why we have seen the vix drop. it starts to get really interesting here. i think when the vix starts to trade below 16 in this year of 2015, i think that's an indication that the market is reaching a top. it is time to look for hedges and buy puts on your portfolio. the low range likely is 13 or 14, given all the volatility here and the oil markets and the high valuations in the stock market. i would be looking to hedge when the vix gets below 16. when you see it pop above 16, up to that 22 level, that's a time when you put cash to work and get into the stock market.

this range, 13-22, is how i would be playing the vix even though you have seen this huge put buying volume. >> a lot of folks at home don't deal with volatility or want to trade the vicks. in terms of implementing the strategy, what would you choose to buy on, s&p 500 or nasdaq? >> the simmeplest way would be buy. i would issue one bit of caution. it was a huge mistake to try to hedge too much when the fed was a busy buyer here in the u.s. if the ecb is going to be buying. let's remember that central banks create a put in the market all by themselves. when when they are buying, you have to be careful. i would wait for it to go well below 16 before i become an aggressive buyer. >> the multiples are going to

expand. rates are going to go lower. what drives it from here z here is what happens next month. so it is going to be $60 billion this month and next month. >> it has done so. it has done so over the last five years. let's just remember. they can always ratchet it up. they have given us a backstop of how much they are going to buy. >> let's pretend i'm an investor in european stocks and i am thinking they are going to inflate stocks, assets, price ns general. would you hold on to that and buy protection against those positions. >> with the vix at 17, it is a little different. last year, it would be at 12. we have a much-higher level. today, 200,000 of the february 14 puts that were bought for 15 cents. big institution, big money. they were selling down side puts to buy upside calls. now, it is kind of interesting.

>> we saw one other big trade this week. we saw big call buying in ewg. a weakening euro could be good for german multinationals. it might mean buying calls in something like ewg to make a bet without exposing yourself. >> you are still taking the tailwind of the currency. so while the tax is up 600% in eye v ivax, it is not the games it would appear on the surface. >> in terms of positioning, ahead of a very big week of earnings, what is are you seeing out there? >> with the greek elections, we saw them reverse themselves. there is still a little bit of fear out there. earnings have to hit on all cylinders. basically, valuations are above historical numbers. it may bleed into the stock market here. that's why i think the vix getting about he low 16 tells

me, hey, let's look for some hedges. stimulus packages can suppress that. put the put in the market like mike mentioned. we need some solid earnings in the next couple of weeks. we'll see how that goes. brian, thank you so much. last word, dan? >> i would say this, really importantly. when you think about what's going on here in the u.s., at least its earnings and we had it with ups. we just talked about. i think investors are shooting first and asking questions later. the one name that was up massively is an outlier. we have seen very strong bounces after earnings. it may make sense not to buy protection. you think about stock replacement strategies to give you that long economic exposure. you are not wasting money on the down side. >> treasure yields continue to plunge. we will give you one way when options actions returns.

time for total recall. we take a look back. >> the markets are going to price lower than people think. i bought the march put spread, $2. if we get better wage inflation and ecb qe, i think bonds go lower. >> we did get ecb qe. rates continue to fall. what is the move now? >> we were talking about volatility. the morning that that was introduced, the tld was trading at 131 and today 135. that's a massive move for a bond etf. this trade is down 50 cents. i specifically look to march, because i want some other things

to play out here, jobs data and a fed meeting next week. i think you stay put here. i think the strikes are the right strikes here. i like owning this march 130 put. >> we made record lows this week in the 30 year treasury. ten years bouncing around at 1 #. i think it is a money flow issue, spread, blends. it is tough for u.s. rates to move higher when the rest of the world is so much below. >> we assume they can only go higher from here. don't forget, the ten year was lower than it is right now. there is room for those yields to drop further. when you keep pushing money in, that will yield the suppression. >> it just today put its head up above the top of the line and closed at 83. the implications are here to

catch up. a 10%-15%. it is a big name, a liquid name and would be aggressively long. i am looking at the 85, 90 call spread. you c you can spend about $1.5 for that. >> if the objective is to play for the breakout and you have gotten the breakout, the question is, do you exit or let it run? >> in principle, i would let it run. >> that's my inclination too. i don't see that this is the reason to try to go short the thing right here. the thing about our call spread is that it is now well in the money. originally, with he were risking $1.50 to make $2. take your profits, use some proceeds and buy some upside calls. >> beautiful breakout. the input was the technical setup. when you thought about this, this is a stock that underperformed the market for most of last year. >> and most restaurant stocks. >> the call was a work of art. it sounds like things are hitting on all sill enders. don't chase things on runaway

brokeout. it's just not my deal. coming up on "mad money" jim has a triple threat of exclusives. all that and much more ahead on "mad money," top of the hour. coming up next, your tweets and the final call from the options pits.

stamps.com is the best. i don't have to leave my desk and get up and go to the post office anymore. [ male announcer ] with stamps.com you can print real u.s. postage for all your letters and packages. i have exactly the amount of postage i need, the instant i need it. can you print only stamps? no... first class. priority mail. certified. international. and the mail man picks it up. i don't leave the shop anymore. [ male announcer ] get a 4 week trial plus $100 in extras including postage and a digital scale. go to stamps.com/tv and never go to the post office again.

. time for a tweet. nathan asks us, what do you you think about a straddle for google's earnings this upcoming week? >> dan, all right, my brother, let's talk about this. they have the money straddle for next week is about $24. that's a really tough way to make a living, buying that and hoping for a 4.5% move. that's not how i want to play

it. if you have a drexel bias, you look to it. if you see this back in the 200, take profits. >> it has not been a performing stock for the past year. can you get a netflix type pop on its earnings. >> recently, it has been pretty good. >> we would stay away. >> frank asks, what makes options cheap or expensive? that's perfect for mike. >> the simple way to think about this is take a look at how far out the options are and how much that straddle and option costs you and compare it to how much that stock has moved over a comparable period of time. stocks like johnson&johnson don't move around, 7% in three months. other stocks are more volatile. that's how you figure it out. does it seem like it makes sense. other more complicated ways to think about t we are not going to bother with that. >> final call. >> if you have some caterpillar, one has reason to be cautious and careful. do something. get out. >> mike?

>> you take advantage of cheap options prices and maybe buy calls on ewg on the easy bi. the ali baba put calendar could be cheap protection against long stock. >> our time has expired. i'm "mad money" starts right now. >> 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 want to make friends, i'm trying to save you money. not just to entertain but educate and teach. call me. or tweet me at jim cramer. the good guys, they just keep winning. that's how i feel after a day