we we are live at the nasdaq on a brutal friday for stocks. these guys ready to give you their best news but first here's what's coming up. investors are starting to freak out about the market. but we'll tell you why that could actually be your flashing sign to buy. plus is green mountain about to get roasted? >> put that coffee down. >> a shocking chart spells big trouble for the coffee maker but we have a way for you to cash in. and. >> you're entering a world of pain. >> alibaba shares got crushed this week and it's about to get even worse for the chinese internet giant.

options action starts right now. >> let's get to it. take a look at this. these are widely held megacap games. what does it mean for the market and who is next to fall? these are pretty major moves. >> let's forget caterpillar but when you look at the two we had, microsoft and procter & gamble these are two stocks widely perceived to be defensive, cheap, they have really good yields. all of the above here. when you look at that sort of decline it has to raise antennas. now the flip side you can come back and say apple was up 6 or 7% but google is also down 20% over the last year. i think apple is an outlier. you want to start thinking about the crowded trades while you own them and you're paying for the growth you're expecting and yield you're expecting. >> certainly there's the fact that a lot of people thought

they were a safe place to hang out. one observation i would make is as yields continue to drop it's hard to figure out why the valuation would be so unreasonable. you cannot have yields continue to go down and say these things are overvalued. there should be a relation shep between the two. >> there's also the issue that in principle if and as there's trouble for the general market you move to health care, staples, and utilities but this time they're very crowded trades and there's nowhere to go if you want to get out but stay in. >> what did you make of the late day sell off today? >> the s&p has been almost a perfect up trent for about two years now and if we have a chart and i believe we do, we asended at a 45 degree angle and bounced 7 out of 8 times. you can excuse that ebola swoon below and back above. we're on a well defined trend

line and the smoothing mechanism and automated trend line and the presumption is that we're going to break. we cannot keep this perfection up. it's too long already. >> and presumably if we are going to break you're going to take a look at names that had actually done well. >> and that's generally not a great strategy. carter would tell us to pick on the stocks that outperformed for a good reason but disney is reporting next week and the implied move in the options market is 4%. it's 1.7% butly tell you about disney it's a very crowded trade. it doesn't have a tremendous yield. it's below 2%. it's trading at about 21 times 2015 earnings. they're only supposed to grow about 8% on mid single digit sales growth. that's kind of expensive. here's the one thing about disney. they do not have the dollar head winds that proctor and microsoft

talked about in their reports last week. it's a fairly domesticated company here and this is also a company you do not want to step in front of. between marvel entertainment and pixar and stuff this is going to be a long-term trade. in november there was disappointing results out of the media and that's primarily espn and advertising. we see a continuation of that. i want a short-term trade. if this stock was back to the october lows i would be a buyer in the low 80s or mid 80s but looking at that earnings event right now options look cheap to me. when the stock was $92 today i bought the february 92 half, 87 half put spread. i told one of the 87.5 puts for 60 cents. i like that risk-reward given the market that we're in. look at how quickly this stock

dropped in the afternoon today. this is the sort of set up that i think these stocks, some of them need a reset. >> carter, do you think it could ceelo 80s? that's $10 from here or so. >> we were talking about this earlier in the show if a stock is in the perfect up trend the only way a good thick can end is it either gets too hot or starts to go limp and roll over. this hasn't got expensive or started to show you it's in trouble so we would say the burden of proof is on the bear here. >> the other thing i would point out is the s&p is expensive but disney is not. this is a company that really has managed to prove itself with double digit growth going on a decade at this point with only one down year. that was 2008 and it was down marginally. they have really strong robust underlying businesses that don't seem they'll be useful. >> you just said they had this

double digit earnings growth. >> as you pointed out. >> here's another thing. i have two daughters and this is a super cycle man. so if you want to get a reset this is the time to do it. lower the guy dance a little bit. you have the stock come in. >> the last observation i would make is to your point options have actually not gone up as much as you would think going into earnings for this and a lot of other names and it's actually a very reasonable bet to make in terms of price. >> moving on, talk about overcaffeinated, green mountain falling 4% but investors could see more pain when reports next week at least according to our chart master. carter, what did you see? >> it's not acting right. this is starting to roll and go limp. let's see if we can figure it out together. i have several charts here and it will make some sense. first the good before the bad. there's a gap here in november.

that's a quarterly beat. december, february. 13 weeks later again. 13 weeks later again in june. and the last gap was a quarterly beat but the stock went down. that's ominous. and the share price didn't react. so keep the same chart. if we draw the trend line. we have bounced off trend, bounced off trend and by all accounts we have broken trend. that's an issue so it has this rolling over look which is a sign something is changing. here's the long-term up trend. when the stock was at an epic low, we have gone up from $17 to about 160 and we have broken this trend. that's also not good and then the long-term chart since the ipo. came to life in 93 and we have tracked this trend and we get a little overdone. we get a little overdone and

risk reward, by our work is not favorable. >> so bearish. what's the fundamental set up, mike? >> this stock is pretty expensive. it's about 28 times earnings. that makes it probably 30% more expensive than a name like disney that's expected to have higher growth. this is not a very diversified business and we still need that proof for their new technology. they lost the patents on the old thing. from this perspective it's interesting. that said investors chased this almost every single time. this thing really moves on earnings. over the course of the last 12 quarters, this stock has moved more than 25% on average and ten of the last 12 times that's higher. specifically what i'm looking at

is the april 115, and then sell the 100 against it. you'll spend $3.85 and given the moves this thing has had, think about this, if it moves up you haven't risked that much but if it moves down there's a high likelihood it could move to or through that lower strike. that will give you a nice payoff. >> would you spend 385 on this trade? >> probably not. this is a company i don't understand. before coke got involved i thought it was a total bs company. i thought the product was crappy. coke is a large shareholder in this thing. the lower the stock goes the more they end up buying here. that's an imbedded put there but from a trade set up it looks a bit oversold.

>> this is one way to do it. >> it's not going to be for the faint of heart. we're either going to eat like kings or have a lot of egg all over. >> the coke involvement is one reason why the options prices are setting up like they do. take a look at how this thing has moved overtime. if there's any cracks in the story they might take a breather and wait for it to come to them. >> there's only one place to go you silly rabbit. options action.cnbc.com. here's what's coming up next. >> does it mean it's time to buy stocks? it's strange but true and we have the incredible stats to prove it. >> and baba shares could lead to more pain for shareholders.

we'll explain when options action return. >> options action is sponsored by think or swim by t td ameritrade. you only know in a fire to get out, to escape and now ok you are outside and you are safe but what do you do now and that's where the red cross came in... . we ran out of the house just wearing our pajamas. at that point just to even have a toothbrush that i could call my own was so important... . ...you know it just makes you feel like a person again. every 8 minutes the american red cross responds to a home fire or other emergency.

just just like that the fear is back. closing above it's long-term average of 20 today. in the past this represented a good buying opportunity. will it again? let's bring in brian. what do you see? what's the pattern been? >> well it's really neat melissa. when you're talking about the

markets dan and carter have been bearish about what's going on in the price action. especially what happened today. the first time it actually ticks above 20 ironically over the last two years this has happened 20 times. so what happens to the markets? look at the s&p. investors have been hugely rewarded new bought stocks at that moment. the s&p 500 is up 8.8%. six months out the s&p returned 13.2% from the time it up ticks above 20. i'm looking at this and saying i'm almost near my targeted 22 like i mentioned a couple of weeks ago. maybe it's time for risk-reward basis to start to buy into this market. there's interesting technical levels that give you a mental stop in your head that say we break 1985 on the s&p and then maybe we go lower. i think you can start to step in and dip your toe in the water here melissa. >> the time frame you're speaking of is the chart we were looking at together earlier and it is perfect up trend.

it's been right to go the opposite direction and perfection doesn't lasts. this is probably the time when it's not going to work. >> there was an instance when it went over 20 in late '07. so i think the only reason it really looks that way is because what has often happened is they buy them on the dips and that's caused a reversion in vix but sometimes the rise in the vix is a sign of something a lot worse. do you think that might be happening now? >> mike, i think you have to be worried about that. treasuries are trading like internet growth stocks right now. oil is flying around. oil services names have extreme volatility. so certainly is 20 still 20? is that still viable? i would back off a little bit. my target is 22. you have to keep a tight stop. you make great points here. the market can easily reverse on itself when it's on these trend

lines and collapse. i'm willing to dip my toe in right here. they spike so hard today. >> i want to make a point with the viewers at home. brian has done that well for a very long time. you at home should not be charting the vix. carter spends a lot of time charting individual risk-assets, the vix is not an asset. it's nothing. focus on what's going on in bonds. focus on the rally if golds. focus on the other things that will effect these. when you put it all together it doesn't make for a pretty picture right now. >> brian i'm going to go back to you. in term of spikes and volatility are there certain sectors that look attractive to the overmarkets? >> when you look at the dividend yield paid by the s&p 500 that yield is trading tax adjusted at the 30 year treasury right now. if you think there's going to be growth over the next 30 years

and stocks will be at least in this spot 30 years from now, do you want to own a treasury or something that pays yields and grows their dividends and the stock price is appreciated over that time? i'm a buy and hold guy and quite guy i use this opportunity and pull back to at least dip a little bit and wait and see what happens. >> brian, good to see you, thank you. coming up next, is the worst behind or is the worst ahead for caterpillar and alibaba? we'll discuss when options action returns. >> options action is sponsored by think or swim by t td ameritrade.

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find out today why ziprecruiter has been used by over 250,000 businesses. they even offer a 100% satisfaction guarantee. and right now, you can try ziprecruiter, for free. go to ziprecruiter.com/free30 looks like our guys made it through the tough week. mainly because they were bearish. in fact, here's what carter said about one of the biggest misses this week. caterpillar. >> caterpillar cannot with stand this pressure from crude. caterpillar is going to break and a bad break applies something along the order of 75 or back to the loes of 2011. >> you could buy the february 86 puts. those were costing $2.10.

that's going to give us time to make that bet. it will capture those earnings. >> so carter, 75, still in the cards here? >> we're not quite there yet. we would say there's more down side and the long-term structure here is a massive run over 20 or 30 years. >> mike, what are you doing? holding on to the puts? >> i'm going to sell the puts and roll down and out and we're not going to have that much gearing in the options right now. take some of the profits and apply them to a lower strike put. >> i was a little skeptical of pricing. it was a great, great call. >> fantastic call. >> the stock did find a home at 80 this week and it didn't budge much from 82. i'm hard pressed to think the company back $4.2 billion and i have to assume they get back an start buying again. maybe that gives support between 75 and 80. >> a few weeks before that they bet against qualcomm?

are you staying in this trade? >> it's so aggressive. all the pay came at once and we would say declare victory and walk away. >> yeah, the biggest disappointment was we didn't just buy puts outright. that it moves this fast came as a surprise to me and that's a time to take profits. especially to the good side. >> i actually think 60 is an interesting level. i said it at the time the guys made the call but at some point these guys have so much cash and no debt and they buy back a lot of stock. i think activists get involved at some point in this name. it's a very cheap stock. they misexecuted on a lot of levels here but i think at least activists are going to get in and push them around and i think intel should buy them. >> interesting. >> last week dan made a bet against alibaba. not because of earnings. here's what he said.

>> the trade i was looking at alibaba is looking to take advantage of the implied volatility option prices that's going to catch the earnings report next week and i want to sell an option there and i want to buy a longer dated put in march that's going to capture the lockup and hoping to get in for cheaper. >> all right well dan got the direction right but maybe a different structure could have worked out better for you. >> a lot better. this is a disappointing trade. my thesis has been bearish on alibaba. i was trying to thread the needle a little bit and sometimes it makes sense to just get in there and make a move like these guys did last week in cat and buy a put and let it ride. >> what do you think of baba? >> we did highlight on fast money the bearish activity we saw on yahoo! and baba going into this and for those following the twitter feed you should. here's another situation where options were cheap going into

some catalysts that could really move them around and they paid off. we'll see more of that because earnings season isn't over. >> it's important point to manage the trade. the stocks 89. the worst case scenario is the stock continues to go lower and you lose the dollar premium you risked on the trade. i closed it for a small gain. if the stock does fill in the gap and go back for the next couple of weeks that's what we wanted to happen. i'm not sure it has much of a bid here. >> not much of a trading history for baba. >> you're supposed to look at a one year chart or longer but that being said the drop in gap t problem is its not about whether it impose lower but it's trapped and can go higher. up above are millions of angry people. so you have overhead supply. >> all right. coming up on "mad money" big brother is watching you and it's name is arrowsight. the digital security company

that keeps an eye on your company's productive. you don't want to miss this one. >> you at home pick you have your phone and tweet us at options action. after the break we're taking your tweets. so be nice out there. >> options action is sponsored by think or swim by td a merk td ameritrade.

andrew out there asks what's your take on cmg? it seems there's wiet a bit of bullish talk surrounding the stock. >> restaurant stocks have done well. the last one to go is starbucks. we think this is held back. hasn't moved like dennys and wendy's and burger king. unchanged the last two weeks. go with the long side. >> bullish. are you? >> no. >> no you're not. he never is. >> this is a burrito company

trading at 40 times expected earnings. it can't last forever. the chart is fantastic. so if you own it don't sell it but i don't know if you have to chase it. this is the sort of stock that you have to wait and see if there's any signs of deacceleration. it will drop 20 or 30% quickly. >> why always buying premium when it's so high to sell a spread? >> well it can seem expensive at times and cheap at other times. right now we're right in the middle of earnings season and a lot of the trades are long because we're expecting the stocks to move more sharply. that's when they'll pay off. however, selling vertical spreads in a high implied volatility environment is a good strategy. >> time for the final call. >> if you have green mountain coffee we recommend selling it. >> i would use put spreads to do that. they're cheap. >> collaborative final call.

>> i'm actually favorable on the company. buy it down 5 or 10% but into earnings it's a nasty set up if you get a little bit of a bounce. i like shorting it 92.5. >> our time has expired. see you here next friday for options action. meantime mad money starts right now. ouncer: the following is a paid presentation for p90x3 brought to you by beachbody. [ bell tolls ] [ clock ticking ] [ dramatic music plays ] >> announcer: do you wonder what it would be like to be in amazing shape? [ pulsing ] do you look in the mirror and wish you had a six-pack? don't you want a body that can perform like this and look like this at least once in your life? [ air rushing ] well, now, you can get that body... faster than ever before. you don't need a gym membership or fancy equipment, and you don't need a lot of time.