a record setting session. a record setting session. the guys are getting ready behind me, but first here's what's coming up. ♪ up through the ground come a bubbling crude ♪ >> and could it bubble a lot higher? we'll tell you why and how you can profit. plus -- let's. security stocks have been on fire this year so how do you cash in now? we've got the play. and talk about accelerating. >> oh, my! >> shares of ford are up 10% this month and one of our traders says it could go even hire. the action starts now. we want to start the show with

some breaking news on zillow. dom chu has more at the breaking news desk. dom. >> how about a nice little after-hours friday afternoon earnings report before a three-day weekend. zillow earnings per share of 24 cents. that misses average analysts' estimates of 28 cents per share. revenue comes in at $92 million. a slight beat over expectations of $90 million. the shares are up about 2 1/3% in the after-hours trade. 111,000 shares of volume have transacted so far in this late friday afternoon session. zillow also said it expects to close the previously announced acquisition of trulia as early as next tuesday you the 17th, following nouflgs from the ftc th that its closed its investigation. again, an earnings miss. a slight revenue beat. they may close their transaction by trulia next week. and zillow is up about 2% right now in the after-hours trade center. back to you, guys. >> thank you, dom. keeping you busy on this friday

afternoon. dan, was this a mistake? >> no, it wasn't by any means. a lot of traders were actually looking for this. as one of the last internet services companies to report. but the big news here is this trulia news. the closure of this deal. here's a company that's seen the short interest go up dramatically because of the arm spread that's put on. traders were shorting zillow and buying trulia. but they really kind of need to articulate what the cost savings will be. down 35% from the all-time highs last year. but for some reason, i think investors have kind of lost their interest in some of these models that are related to advertising. >> well, spencer has been on the network a number of times. he's got a bullish story to tell. are you a trader here? >> taking a look at it, it's not that surprising that the stock is actually holding up despite the earnings miss. of course, as long as they have a slight beat on the revenue line, any potential synergies is what people are going to wait for. i think what you really need to wait and see and this is what i'm going to wait and see because i think the multiples is a little bit stressed here.

wait for the quarterly earnings announcement after they've actually done the buyout. you can try to see whether they're realizing some of those synergies. because you probably will have an opportunity to, you know, trade this with a little more transparency and how effective that's going to be. >> looks like we got almost a 3% move here. on light volume. brian? >> i think it's an interesting story. zillow i think is at the infancy of the real estate translation into the technology area. yeah, you can search for your houses, you can search for price, but there's a whole lot more that can go into it, making everything along from the time you buy the house and sell it. get rid of the guy that's the real estate agent and tell you what to buy and sell at. use zillow for that. >> the question is valuing it, and dan, is this a real estate stock or tech stock? >> it's not a real estate stock, if you think about it. when you think about linkedin, they're getting paid on multiple sources. it's not yelp where they're just getting advertising revenues. what have we seen just in the last few weeks from pandora and heavily supported ad services? they're not really working right now.

these guys if they can do like mike says, they can capture the combined entity. they continue to have agents paying them and also getting search revenues from people, from consumers going there. >> it is still a show me story. because it is trading at 15 times revenue. an that's not a real estate multi estimate. that the definitely technology. >> let's leave it there. and let's move on on this valentine's day eve. we'll start with the walk of shame. we're talking about stocks, of course. like qualcomm, expedia, and caterpillar which have all bounced back after plunging on disappointing earnings. what's the next oversold stock that can rally? let's get in the money and find out. dan lee, what do you make of this? >> this is something we kind of looked at. there was a whole host of other names that were more early cycle earnings names that saw disappointments. they talked about head winds from the strong dollar, overseas sales, that sort of thing. those names you just mentioned there, they filled in a lot of that earnings gap. the market sentiment has changed a lot in the last couple weeks.

some of these names that had gotten punished in the beginning of the cycle have now started to come back a little bit. which got me thinking about microsoft. microsoft was a darling last year. had the combination of a new ceo telling a slightly different story. that nice 3% dividend yield at a low yield environment. we know they buy back a ton of shares. there was a lot of things going. for the story. not one report sent it down 9%. when you think about that. that was $40 billion in market cap in one fell swoop. when i'm thinking about the market making highs today, it's about other large cap names. it got me thinking about microsoft that this could be the next one to fill in the gap. >> and that was a rough quarter. >> well, it was a rough quarter. and so, here's really quickly what i'm thinking of in the near term. we have this march fed meeting coming up in a little more than a month. if the fed does not signal to raise increases in june, it looks like they're going to, i think stocks party here.

i think you see all the major averages break out. i think microsoft will fill in that gap. microsoft, it was trading around $43.65 today. the march calls you could buy them for 62 cents. you break even at 44.62. that's up about 2.5%. implied volatility. the price of options is really cheap. you're risking 1.5% of the underlying stock price to make a play for that gap. >> mike? >> options premiums have dropped significantly. with central banks pumping in so much liquidity, every time we think to ourselves can there be any more multiple expansion, the answer is actually if yields everywhere continue to drop, yes. a place like microsoft is probably a reasonable place to make a bullish bet. especially if you think that rates can remain depressed. >> i like that microsoft on qe. >> yeah. >> that's a new one. >> that's actually -- that's how you justify equity valuations and all financial assets, as a matter of fact. they're all related. >> everybody else is ramping it back up. >> exactly. >> brian. >> just to touch back on that gap, when you look at the microsoft on the chart there, a little above $45 a share. that's what mike is talking

about. i think it has a destiny with that target there. that's why that call play makes sense. because you can get a quick pop. that stock moves to $45 -- boom, you're in the money. having said that, i don't typically love microsoft all that much. i'd rather play the semiconductors. i think they're actually ready to break out to new all-time highs. basically trading right there. i like names like taiwan semiconductors. i like they'd lead the charge higher as we move to all-time highs. >> final word. >> i would just add one point. if this stock does approach that, that's where it fell off from after earnings. there's a couple catalysts looking out. first thing's first. on that call that was disappointing a couple weeks ago, they're going to accelerate to $31 billion. in buybacks that they have left. that could help out. the stock has recovered a little bit. they're probably in the market buying. then on april 29th, they're going to host an analyst day. and i'll tell you, if something hasn't really improved on the earnings report fundamentally,

i'll bet there's going to be a lot of calls for these guys to do a special dividend, put it to work. >> all right. it's all about putting the cash to work with those names. here's something you do know. oil prices are rising off their los. energy stocks just turned positive on the year and are crushing the s&p 500. so can the bounce continue? of course we're talking about the big etf. i don't know. mike, what do you think? it is sort of surprising to see it rebound like this. >> it is a little bit. i'm going to do my best carter impression over here and take a walk to the smart board so we can take a all right look at what's going on. as a lot of people have followed, we have seen quite a significant bounce in crude oil. it's bounced easily 30% off of its dead low for wti and brent. but if you take a look at the longer term picture, in fact, it's still down about 47% on the spot price. let's look at how xle has been since crude fell. which was right back here. you notice the xle is down approximately 20% in that time frame. actually if we took a look at crude prices, in fact, long

dated crude was about $88 a barrel before all of this started to happen. now about $72. a comparable decline. so, the next question is, are we trying to see a breakout? is this actually going to bounce back? in fact, we crossed the hundred-day moving average today. i think one of the most interesting things for people who have been playing in the energy space is the fact that the counts dropped so quickly. it showed that the producing community is responsible. here's something else that's interesting too. here's a look at the short interest in the energy stocks going back to 2008. and if you think about what's a good time to buy securities, it's when everybody is basically throwing everything out. that would have been a great time to get long energy back in 2008. we're starting to see levels and short interest we haven't seen since back then. and let's finally take a look at options premiums. this also is another way we can think about how concerned investors are. and you can see how elevated this is. obviously fallen somewhat as energy stocks have rebounded. but i think this is an indication that there's still some concern.

that gives us a little bit of a potential boost to the upside. i think very simply because we're not sure whether it's completely over, we can take advantage of options to see whether this rally might continue. and the way i'm going to do that is by buying the june 82 calls. i can spend about 5% of the underline. that way if we do get a bounce and there's a long way for this to potentially go, remember where this came from. that's a win. and of course if it goes down, i'm only risking 5%. >> all right. do you like the trade, dan? >> well, you know, he talks about only risks 5%. he talks about defining his risk with options. implied volatility, price of options still high in the space. the underlying stocks in this etf are moving around a whole heck of a lot. about 30% of this etf is chevron and exxon. you're making a bet on a lot on those two names. so to me i don't really love the risk/reward here. especially after the xle has bounced 15% off the lows. his break even is at the

breakdown level from december. when you look back at that chart. to me i think it's kind of like risking one to make one in a lot of ways. but i don't have the conviction on oil right here. i expect that we see it test the lows later this year. >> brian, you see the options market telling you we've seen a floor for crude. >> well, i think it's actually kind of interesting what's going on in crude oil itself, right? when you take a look at the oil volatility index, it's trading almost of the s&p 500 vix. so tremendous amount of volatility in oil. to me that's not sustainable. yes you see that commodity or asset class decline in such a situation as we saw oil decline, oil volatility explode. i don't believe that kind of volatility is sustainable. if i believe that volatility is going to come off those highs, if i'm going to believe in what mike kind of showed on the chart with implied volatility on the xle. i love seeing that chart where you actually saw volatility make a lower high as the xle made a lower low. that's a sign that people went in, sold puts, took a chance, put their money to work, took

some risk. i think i start to become a buyer from oil. any sort of pullback below $50 a barrel, i'm a buyer. >> you know, if this is a dead cat bounce, and that is entirely a possibility and that is the reason you want to use options to make your bullish bet here. i don't mind being long equities in the rate environment as i previously discussed. but i certainly wouldn't go out and start buying energy stocks with both hands. >> and your point about baker hughes, that index comes out on friday afternoon and has become so closely watched. are falling rig counts enough of a bullish reason to buy oil? >> that depends on which rigs. you have a situation that, you know, we're looking at marginal rigs and marginal wells. they may not actually have as much of an impact on our overall production. but i want to leave you with this one thought. and that is, that globally, demand for oil continues to increase. even if in the developing world it does not. and all of that production has come over the last five years from the united states. so this can't go away entirely. and our marginal production cost

is going to be where oil prices are. >> and figuring out supply and balance. >> i'll leave you with this. i've been in this business now 17, 18 years. i've never seen the fever pitch, when global oil overshot the downside, i've never seen so many pundits call the low and get the low. i think we see a retest of the low low we saw a couple weeks ago at some point this year. >> all right. putting it out there. got a question? send us a tweet @optionsaction. for everything options, check out our website optionsaction.cnbc.com and while you're there be sure to sign up for our newsletter. here's what's coming up next. do your own thing. >> but not before you hear what our trader has to say about the stock. because he doubled his money in a week and has a way to make even more. and bust out your smartphones because we're taking your tweet. but only if you're nice. the action returns after this.

it has been a great week for it has been a great week for chip stocks. the semiconductor etf, the smh is up almost 5% this week. but one big options trader appears to be skeptical. thanks to a massive trade we saw seven times the daily average put volume trade in the smh today. dan, what does that tell you? >> yeah, it wasn't just today. it was yesterday also. yesterday there was a buyer of 45,000 of the march 54 puts when the stock was about 55.5 or something like that.

today another buyer of 50,000 march 55 puts. here's the thing about unusual activity. we quote it all the time. we cite it. you never know exactly what it is. is this an outright bearish stock? this person may own so many semiconductor stocks that this looks like the cheapest short of protection to them in a lot of ways. we don't make decisions just on unusual activity. but it got me thinking about the performance of some of the names. in the etf. massive outperformer last year. it was up 60% of the year. you know what? this year it's down 9% of the year. it's lagged the chart. i think we have it. momentum is waning here. i know there were some large hedge funds behind this story. one of them, green light capital, had cut that stake as of end of september. they cut it by a quarter. they owned 40 million shares at one point. to me this is a stock that i think you can take a shot at on the downside if you are not in brian's belief. he's going to get a word in here. i actually think as the smh, as the semiconductor index is breaking out, this stock is

acting very poorly. to me i looked at it when it was 31.75 and you could buy the april 31.26 put spread for 1.30. you break even on the downside, 29.70. you can make up the 3.70 down at 26. that was support from a couple months ago here. i think this is actually a good risk reward set up here. for a stock that's acting very poorly. >> yeah. i like the trade. and i also like the play on the sentiment. one of the reasons the stock has been so weak is because these big holders are offloading their had shares. i think this is probably the beginning of a larger unwind. that's the kind of thing you want to get ahead of. and so, to me, that makes a lot of sense. >> brian? >> this market has such a huge run-up. i said it earlier, i like the semis. definitely, mike had a great point. it has been a laggard. so i don't like micron that much as much as i mentioned taiwan semiconductor. there are other semis out there

i think are better plays. the market had a run-up. i think guys are out there probably adding protection. it makes sense. the volatility index. below 16 here. i think you look for areas to put on hedges. i think we're due for a pullback. ultimately 30, 60 days from now, i think the market reaches all-time highs. improving a lot higher from here. but certainly i think in the next week or two, i could definitely see a selloff coming. and certainly buying a spread or put outright here on these names and lag versus the rest of the names in their sector. i think that makes sense. >> the final thing i would say is some of this put buying could be a hedge. you know you're going to unwind a large semiposition. this is a good way to get ahead of it in case you can't offload your pigs quickly enough. 60,000 puts is a big piece. notionally that's about comparable. that's entirely consistent. i don't have any evidence that's the case. it couldn't surprise me if that's what that was. >> i want to make a final point. >> all right. final word. go ahead. >> intel is also 18% of the smh too. they've been a laggard. it's down 5.5%. i'd almost put intel into that

camp as we were talking about microsoft earlier in the show. pays at 2.8% dividend yield. so you never know. maybe this person is loading up on intel shares and they see this as cheap protection. to me i like focusing on the weak ones. >> cypress, the one that jim cramer always talks about, non-apple touch screen chips. that's his favorite for the year. we'll leave the conversation there. up next, coke beat on earnings. but now the stock is fizzling. we'll tell you how to profit now when "options action" returns.

it is time for the upside it is time for the upside call where the guys tell us how to make the good trades even better. last week dan kicked the tires on ford. have a listen. >> to me if you want to buy ford, if you think it's going to participate with increasing wage inflation over the next few months and increasing sentiment towards some of these sorts of plays, then i think you look at the may 16 calls. they were basically 70 cents. >> well, the stock is up pretty nicely this week, dan. what do you do now? >> stock rallied 2.5%. i think the stock was 15.90.

it's 16.30 today. i'm really playing for a move back to the prior highs which is 18. if the stock gets to 17, i think what you do is look to sell some 18 calls against the 16 you own. and you have the 16-18 call spread. you offload the premium you have on this trade. and you have this nice few month trade for playing for the previous highs. >> mike, what do you think of it? >> i think a roll would be one way to play it as well as potentially spreading out the way he did which is probably the way i would go. i don't like to carry my options too far into the money. i'm still bullish on ford here. i think this is the right way to play it. >> interesting. given everything that played out of general motors this week. also last week mike and carter worth bet against coca-cola. here's what they said. >> to me this looks like a fairly major topping out formation. i think we break this trend. i'm a seller of coke. >> i think this is a secular headwind as people move away from some of the core products. i think what we're seeing technically is an indication

that people think that the fundamentals are likely to follow suit as a result of those secular headwinds. my trade there simply is to look to april, by the put spread. >> carter's in london this week, but he did send us a postcard by sticking by his call. and it says, the stock hasn't changed and as such our thesis hasn't changed. a bearish chart pattern, plain and simple. and speaking of bearishness, it is telling in a strong week for the s&p 500 coke is virtually unchanged. not good. mike, you agree with your friend carter? >> yeah, absolutely. i was surprised by the positive result to the earnings which i thought were tepid at best. i mean, really what you were hoping for was some kind of a turnaround in a fundamental score that was working against coke. we didn't see that. >> we did see them beat expectations. >> lower expectations. what we continue to see, though, is low, no, or even negative top line growth. selling products to people no longer wanted to buy. i compared them before to the same problem mcdonald's finds themselves in. this is not a cheap stock. why would you pay 24 times

earnings for a company seeing negative growth. >> some people like the monster bets and green mountain. analysts for the most part are bullish on that. i think we've got to leave it there. anyway, they're not. the options traders are not. up next, the final call from the options pits when we come back.

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time now for the final call. time now for the final call. the last word from the options pits. >> if there's a weak link in the market, coke is it. i'd stick with that put spread that carter said. >> absolutely. buy the s&p at many times discount to coke right here. >> dan. >> i would say if you think the market is going to broaden out here, we have new highs. i would expect microsoft to participate. i think they're buying back a lot of shares. >> all right. thanks, guys. looks like our time has expired. i'm sara eisen. for more "options action" go to optionsaction.cnbc.com.

check out our daily segment. check out "fast money" every day president we'll see you next friday at 5:30 eastern time. have a great long weekend and happy valentine's day. >> happy valentine's day. nd applause ] >> announcer: the following is a paid advertisement for the revolutionary 21 day fix, brought to you by beachbody. >> thank you! [ laughs ] hello there. i'm tom bergeron, and this show is about transforming how you look and feel, starting right now. >> announcer: are you struggling right now to lose weight? >> i've struggled with my weight my entire life. >> i really want to... lose this. >> i didn't want to walk down the aisle weighing 220 pounds. i need to do something, and it needs to happen right now. >> announcer: now there's a breakthrough new way to lose those pounds and inches, and it happens in just 21 days.