live from the nasdaq market live from the nasdaq market site, i'm melissa lee. the traders behind me getting ready to go. here's what we have. >> the money is coming your way, you don't ask any questions. >> well, frank, we have one. how much does "house of cards" matter to netflix? >> how fast are ge shares rising? >> go! >> and you won't believe how high traders see it going by next year. and something really strange could happen to microsoft. not that strange but we have a scary chart that has traders on edge. the action starts now. >> want to know the key to the tech rally, just check out these

four stocks. check out apple, microsoft, google and facebook, the monsters of technology and they are lifting the nasdaq up to near all-time highs. dan, you are starting to see cracks form. where? >> it's not just apple. you just had apple up there. it's 15% of the nasdaq 100. in my opinion, there's a little bit of a sediment bubble going on there. a lot of catalysts coming up and people are focused on valuation they think is pretty reasonable. that makes perfect sense. what i don't like is you have a narrowing breath of the market. the top 10 stocks in the insina that make up 50% of the weight. those stocks make up almost $3 trillion in market cap. you have a small group of stocks doing a lot of the heavy lifting. >> the individual stocks look tired as well. >> that's probably not that surprising. one of the things i'd probably keep an eye on at this point.

we're coming out of earnings season. i'd keep an eye on the vix. what i'm specifically looking at, if i see this drop down around 12, we're looking at a lot more complacency. that's probably the level at which i'd get interested in po that's the level at which i'd tension adly selling. the primary reason you'd sell stocks is because the biggest drivers so far, one is loose quantitative easing. we think june, maybe september. when the vix gets down, that's complacency and probably your time to hit the sell button. >> brian kelly, welcome to the "options action" desk. >> thank you for having me. i tell you. when i look at tech, i am looking at the fact that they have exposure throughout the world and negative exposure to a strong dollar. i talked about texan having 20% of their business in the u.s. the other 80% outside the u.s. in techs. i think techs challenged here. >> i have a few points here. we'll get to a trade. let's button up the apple thing.

we know people are excited about apple. it's raised $130 billion in market cap just this year. there's 30 stocks in the s&p 500 that have $130 billion market caps. that's pretty astounding when you think about it. there's a couple other points. microsoft declined 10% when they reported and guided in january. the stock has come back almost down 20% from the november 15-year highs. it's come back. there's a really disturbing chart that's forming or pattern that's forming in microsoft's chart. the 50-day moving average crosses below the 200-day. we've seen this in a couple of instances. a lot of people don't think it's important. when it happened in google back in september, google dropped 10%. it happened in the russell 2000. the russell dropped 10% after that. this is something i'm keeping an eye on. i had a bullish trade i took it off today and tweeted about it. we'll talk about it later.

microsoft is a massive gainer in 2014. it's not participating this year. we're seeing that also in the semiconductors which were massive gainers. the nasdaq, we're almost at 5,000. i don't believe we're in a bubble. this year the nasdaq is seeing bubblish participation by stocks that weren't participating last year. amazon, netflix. >> right. >> there's a few others. put all those things together, i do not like the nasdaq -- >> what's your trade? >> trade. okay. i think b.k. made a great point about the collar exposure. of course. i want to look out to may. i'm looking at the qqq, the nasdaq 100. today when it was 109 i bought the may 108, 98 put spread. i paid $2 for that. it breaks even around 106. my max gain is at $98. i can make up to eight. that's four times my money. i chose the strikes because the qqq broke out at 106.

i think we'll have a good shot to be at least there. and 98 is the 200-day moving average in the index basically. i think that would be a nice support level. >> i think this is exactly the trade you want to do. the map works nicely. the other thing i'd point out, it's the out of the money puts on indices that tend to be most overpriced, when you look at it. that's where people often go for their insurance. you want to buy a higher strike and sell when a lot of those other folks are buying. i really like the structure. >> i'm always looking at the risk management. that's one thing that's nice about options. you can define that risk from the beginning and be wrong 40% of the time you'd only have to be right and you'll still make money on a trade like this. i like this even as a protection of a portfolio. at least it protects your portfolio if you are long a google or microsoft. frank underwood is back for the third season of "house of cards." that's good news for netflix.

which is just about at all time highs. cnbc's julia boorstin is live. in l.a. for this. what does this mean? >> since the show first premiered two years ago, its stock has nearly tripled as its more than doubled its subscriber base showing the 1 wh0010$100 mn investment in the show has more than paid off. now "house of cards'" third season will be instrumental in keeping viewers hooked and adding new ones. rivals are investing heavily in original content. netflix is facing more competition from amazon upping its ante as it invests more in originals. a stand alone hbo service is in the works. and there's the new sling tv. plus netflix is losing dozens of titles in its library next month. maintaining the buzz of shows like "house of cards" is why the company is ramping up investment in originals, raising an additional $1.5 billion earlier

this month. that's $500 million more than netflix previously announced. >> julia boorstin, thanks for that. mike khouw, they are investing more in originals. and they say they are spending less on making their own content versus licensing from studios. >> the big issue had been concerns about rising licenses costs. when they first started to purchase content they had attractive deals. everybody was concerned, what's going to happen when they actually start paying the rates the studios will start charging them. they've actually mitigated that quite considerably. the thing is, creating successful content isn't easy. and the notion that every single thing that will come out will be a hit like "house of cards" is probably too optimistic. the stock is priced as if they'll hit it out of the stock every time. trading about 100 times what they are expected to make this year. that's pretty aggressive.

you can see also it's been a really tough stock to short on valuation in the past. we've seen within the course of the last two months what's that can do. 10% short interest. my inclination is we're getting very close around the all-time highs in the stocks. i'm probably in favor of leaning on the short side. but i couldn't short the stock. >> what do you do instead? >> look at selling up side call spreads. names like this, the down side puts are expensive. we'll look out to april. we'll sell the 485, 505 call spread. you can sell the 485s for $19.50 and buy the spreads for about 12 bucks. you'll collect that money if it goes down. and even if it goes up, it's not going to go to the full value of the distance between those strikes. >> i think mike makes a lot of good points about what to do here. the price of options are always expensive in netflix. for a stock that's traded

between 300 and 500 like it ain't no thing, for the last year and a half, i think if you can find inflection points, and there are fundamental catalysts. the moves have been massive after earnings. so i would just say, here's a company that mike says the stock traded 100 times earnings. some day they may show leverage. on these investments. they may never like amazon. here's a company that's only growing sales about 20% a year. i'm more worried about the competition from the likes of hbo. so if you see a meaningful downgrade in sales growth at some point that's when you get in and short the stock. >> the hbo thing, that's the catalyst that told me the story is -- their business model is breaking if not broken. sure they'll be able to create content. you have enough money you can create content. but the fact was for a long time they had a monopoly on that delivery system. hbo wasn't doing it. cbs wasn't doing it. now they have competition. that's a problem for a stock that's 100-plus times earnings. >> a couple of things you want

to focus on. if you're going to sell premium try to do it right near where you think it might begin to roll over. this is the upper edge of the range. the other thing is that april earnings come out after this expiration. if you are looking for the catalyst like dan was saying, you'll have an opportunity to look at it then. >> got a question out there, send us a tweet @optionsaction. for everything options. check out our website. some called it the catcher in the rye of derivatives. while you're there, sign up for our newsletter. here's what's coming up next. $7 million. that's how much one trader bet on ge today, and you won't believe how high they see it going. plus, microsoft's about to do something it hasn't done in a while. >> we're going streaking! >> not exactly but the charts point to short-term pain. we'll tell you why.

welcome back. it's been a huge month for general electric. the stock is up 9% in february. some traders see it going higher. today seven times the stock's average daily call volume traded. one big bullish bet stood out. dan, what's did you see? >> a big bullish bet and long dated out in january 17. in april expiration, someone looking at the april 26 call bought those 50,000 time.

shall wag of -- that was on wednesday. this was the biggest trade in the options market. when the stock was 25.93, a trader bought 125,000. that expiration is almost two years from now. the 30, 35 call spread. that's $6.5 million in premium. here's the deal. this trade breaks even at 30.50 on january 2017 expiration. the maximum gain is that 35. that's up 35% from the current level. if the stock is 35 or higher in two years, $55 million. here's the thing. i want to go to the chart and talk about what's going on here. listen. a lot of you like to chase unusual activity. you do not want to be buying leaps when you think a stock is going to turn. i suspect this was a leveraged trade to a person who is very

long in the stock and looking to get cheap up side leverage in dollar terms looking out a couple of years. the stock has had a really nice run here. not something you want to chase. you think about it, this is 26 bucks. some of the calls bought earlier in the week are in the money and doing very well. we talk about laggards here. ge has traded very well off the lows. it's outperformed the s&p. from 2009. when you look at this thing this is a very long basis. the stock underperformed in the last year and a half. you think about the break evens of this trade are in two years, who knows where the stock is going to be in two years. it trades about 15 times expected earnings. it's only supposed to grow about 5%. we are talking about the dollar exposure. they have a lot of exposure in emerging markets. to me, when you think about a trade like this, the traders out there, you don't want to be buying 18% out of the money calls. you want to look at shorter stuff, identify some catalysts

and play it that way. >> what do you think? do you think this is a ge specific story or part of a chase for the doggy dow stocks at a time when we're at or close to record highs? >> this is one of those that is trading at a discount to the broad market although it has managed to grow eps in five years. one quick point about trading that far out is if you are only going to spend 50 cents they'll not decline by 50% tomorrow, next month or even next quarter. you actually are going to have a long long look at this before these start to decay materially. that's one of the reasons looking at those leaps. you're not likely to get a clean double. this is a way if you think there's going to be some outsized performance, there's a way you can do so without spending a lot of money. >> anybody is looking at any stock that might be -- ge has underformed. that puts it on the list.

>> you think so? it's an enormous company. okay. i'm sorry. >> i would say it puts it at the bottom of the list because ge is a huge company and it's going to be difficult for somebody to be very active in that. that being said, i know this is further out. if you look at ge's underperformance versus the nasdaq, the trade you guys made earlier on it, this may not be somewhat of a bad pairs trade. the nasdaq is going to come in and everybody is going to start piling into ge. that way you take a little bit of your market risk out of it. >> what do you think of the pairs trade? >> i think this is a cheap call on equity evaluations continues to go higher after we've had quite a stellar run for equities. especially with concerns it could turn the other way. i actually like the trade. >> dan? >> when you think about a trade like this that has a potential 10 to 1 payout in two years, it's more like a lottery ticket. this is likely against a long stock position, someone who is

already a big holder. if they get the move over this period of time, they anticipate be very happy with that and probably be freed up to sell some stock because they can consider it stock replacement. it moves toward that stock they own. how do you make a golden call even better? find out when options action returns. hey mom, you want to live by the lake, right?

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you're not just looking for a house. you're looking for a place for your life to happen. zillow call it a golden trade. call it a golden trade. two weeks ago, mike and carter-worth got in on it. take a listen. >> we think we ricochet here and miners go the way of the biggest miner for a buy er of gdx. >> i'm looking at the 26 call spread that carter has identified. >> as you may have noticed, carter is not here today but he did drop us a note. no change to the judgment that gold bullion and gold mining stocks are in the throes of bottoming out. stay long gdx. do you agree with carter, stay long? >> i do. we gave ourselves time for this

to play out. we should do that. this isn't one we'd make a play for one week. we were probably looking 60 to 90 days. let's see how this plays out. >> you've said quite explicitly you believe the dollar will continue to be stronger. therefore is this trade not going to work out? >> no, no. here's the deal. with gold, there are periods of time where it correlates exactly with the dollar. we're headed into one of those periods of time. if you look at like a three month correlation of gold and the u.s. dollar over the last 10 to 15 years, you see six months to a year period where these two correlate one not negatively and we're just starting to switch over. i think this trade works out no matter what the dollar does. >> last week dan made a bullish bet on microsoft. >> to me, what i'm thinking about the market making new highs today i'm thinking about

some of these gaps being filled. it got me thinking about microsoft that this could be the next one to fill in the gap. microsoft would trade $43.65. the march 44 calls. buy them for 62 cents. it'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 fill. >> now clearly you do not still stick by this. >> i didn't. today i sold it. the stock has appreciated a little bit but it's not been able to get anything going. it's below the 200-day moving average. i mentioned the death cross. that isn't pending. it wasn't able to establish a new range above 44 so i'm out. i'm taking a small loss. here's a thing about timing. if i sit around and try to be patient these could be worthless very soon. or near worthless. when i'm trading long premium directional options trades i want to avoid as much as possible. i'll take the small loss. i don't like the technical setup. i think the momentum is poor. with hewlett down the way it was.

i don't like large cap options. >> seeing that there's a looming death cross in microsoft, would you put on the negative trade on hew's or microsoft? >> both. >> doubling down. >> i will see how it plays out. >> they made a point to talk about how good sales are with microsoft products and the synergies they are seeing there. i guess put to it the desk then. does that mean i sell short crm? is that a better trade than microsoft? >> that breakout was epic this week. they're doing everything they need to do. that's where people want to be. they want to see this licensing growth. i think that there's probably better for sales force than for microsoft. >> either running into resistance or rolling over is one thing i would look to. the other thing is dan made a great point. you don't need to hold options until they expire. when you're thinking about how much risk you're taking, it's not the premium you spent. it's how long you hole it. if you change your thesis, change your position. >> are you negative microsoft? >> i'd call myself neutral on

microsoft. it needs another catalyst. we had the big run of the pc refresh cycle, xp expiring. now, what do you do? i think you can hold on to it and pick up the dividend. >> to the dividend is great. you may see an increased capital return. they'll meet in april. that could be the catalyst if investors get unhappy with the price. they may say, we need more cash back. coming up on "mad money," cramer has you covered. he'll took the ceo of popeye's louisiana kitchen and blackhawk network. and his take on rally in popeye's foods. all that and much more top of the hour on "mad money." coming up next, we're taking your tweets. send them in @optionsaction. but be nice.

we love getting your tweets we love getting your tweets and answering them. here's one. quite a long time ago, dan and mike played put up or shut up on herbalife. where do they stand now? >> there seems to be no good news for this company. i don't know where it comes from. there's no incremental buyer. that's a big problem when we know someone is dug in on the short side. i'm not certain how mr. icahn, the second largest shareholder how he gets out of this thing. he has a lot of board representation. this is a no, no touch. it certainly is not an $80 stock any time soon. >> i never trusted their business model. i think many people, i'm one of them, have suggested ackman would be right in the long run. the way carl gets out is hits the bid. >> perhaps he does that. i think herbal life is such a tough name to trade because you have 2 very strong personalities there. you don't know what either one are going to do. i would stay away from them completely. >> the premiums are off the charts expensive.

you can sell verticals. we want to acknowledge the death of leonard nimoy best known for playing spock. he died today at the age of 83. it is a reminder that we should all strive to live long and prosper. that's it for us. see you back here next week on friday and on monday on "fast." "mad money" is up now. brought to you by universal studios. (universal studios theme music) ♪ (intense dramatic music) ♪