live at the nasdaq marketsite. and guess who i found. hey, scott. good to see you. scott and the guys are getting ready. here's what's coming up on the show. ♪ because a collapse in the vix is creating the ultimate buying opportunity. and we'll tell you why. plus google's gone wild. >> flip out. >> but there's another tech name that could see a similar surge. we'll tell you what it is and how you could make money. and -- ♪ bubbling crude too much of it, that is. you won't believe just how far some traders are betting crude will fall.

let's get right to it. because while everyone was focused on google and the nasdaq quie e.lit one tech giant made an all-time high today. that would be facebook surging 5% on the heels of google's blowout numbers. is 100 bucks a share the next stop? let's get in the money and find out. mike, normally this would be the story of the day. somehow nobody was talking about it. >> facebook for a long time was the story of the day whether it was breaking out to new highs or not. i have to say i was a little bit surprised by this. this is a story i was starting to think of facebook as old tech. i actually underestimated the ability of the stock to really rally. i thought vol aswas a little hi in the name. i was selling upside calls in this thing going into all of this. so i was caught a little flat-footed i have to say. sqult core of this is if we're going to rewrite google theoretically we should also rewrite facebook. >> well, maybe, melissa. the thing about google is there was a lot of bear talk about it.

you had them getting into research, nanotechnology, balloons, auto, car, google glass, whatever. a lot of sellers saying they're putting their money to the wrong plaps and as soon as they had a nice surprise that gave a huge pop. facebook tended to follow that. that doesn't necessarily mean -- i think a lot of what fbs afghanistan is doing has already been priced in here. certainly they could have a big earnings day today, when they come up in a couple weeks here. but i think facebook's in a position now where the stock has already rallied a little bit. i don't know how much more it has to go if you look at the earnings picture and what it needs to do this quarter. >> so the onus is on the bulls? >> it absolutely is. much of what we saw in google today was a function of the cfo finally speaking wall street's language. she used a word that you never hear in silicon valley, and that is "discipline." that's great for google. it has nothing to do with facebook. i don't know how facebook is all of a sudden getting disciplined. google's problem was the fact they weren't disciplined. they had this incredibly short attention span. they were like ooh, there's a squirrel, ooh, there's a

driverless car. >> the new technology companies don't need to have discipline. what they need to have is innovation, full stop. in the case of facebook if aw looking at social media one of the reasons people are liking it here is one of the same reasons they're having a hard time with twitter, and that is if you -- i'm an active engaged user on twitter and one of the things i find is when is the last time you remember seeing an ad on there? clicking on one of their ads or recognizing it. if that is the type of monetizing engagement that facebook can actually get that some of the other places can't. i think that's why people like it. they should be focusing on innovation. so this google. and not on cost cutting. >> what is google innovating? they aren't innovate vaiting anything other than they have a new cfo who's been on the job for less than the full quarter and she's using old-fashioned language. >> if the enthusiasm for google is going to happen in part because they're going to recognize that, and they have thrown a lost money at things that haven't necessarily gone that far. that's a little different. they have their own little venture capital firm going on over there and maybe having a financial expert in there would be a good idea. but as far as facebook is

concerned, this is really about innovation. >> so you are looking at facebook tonight. >> yes. you have earnings coming up here on the 29th, right? basically around the corner. it's kind of interesting the move they made today. what got the buzz going and traders talking about it was the announcement of launching an e-commerce on their site here. i don't know how excited i am technically about that. if you're a big boy like a target or somebody like that, you already have your site. so if you're a small guy you need someone like an amazon to do all the distribution of your product for you. you're kind of stuck in the middle if you're some electronic guy, okay, yeah, it's exciting. but having said that, the monetization of basically advertising is what is the big boom. by 2017 analysts expecting $16 billion in this sort of revenue game here. social media marketing. so certainly i'm a buyer of facebook but i think it's a little overextended but i think we can make some option plays that play to the up side. that $100 strike. 20,000 calls traded there today. that open interest is growing. i think that becomes a magnet. >> here you go. if you look at it the july

31st 100 strike call, this is a weekly call, i want to sell that for a buck 30. at the same time i'm looking to buy the august 28th about a month later, that $100 call as well for $2. ness i'm buying one call, i'm selling the other. i'm paying 70 cents on is this trade. it's a way to get a cheap call the to the up side. what i need to happen is for facebook not to rip through 100 after this earnings picture and after that call, right? i'm expecting facebook to drift up to $100, act as a magnet. now i have all the up side on the august call. it's a cheap way to play the up side, especially for a stock that to me seems a little overextended. >> do you like this trade? >> i normally really like calendar spreads as a way to try to take advantage of the fact those near dated options after that event are going to decay away but we've had a couple really notable up side surprises where these stocks have moved a lot and i'm not necessarily convinced that a stock that's reaching to all-time highs as facebook is is necessarily going to suddenly give up the ghost right mere.

i'm inclined for most of this earnings season going forward being net long options and pick your direction and go with it. >> is that what you would do with facebook sitting at an all-time high? >> absolutely, if i was long the stock i would seriously consider selling had some and buying calls instead as a stock replacement. >> i like the fact this trade takes advantage of the vol we see in earnings but this also points out that calendars can be a slightly directional trade. that's what brian is doing here, using the karnltd. he's going to take advantage of the vol suck but he's also got a direction in mind. and calendar trades aren't all about erosion. >> i think to blow through that $100 strike earnings, basically estimates 47 cents a share, they're going to have to hit the high mark of 54 took through -- >> the average move in the stock is about 8.4%. it's had over the course of the last few years at least two quarters where they reported and they ended up having a gain of well over 10%. that would take you well above 100 bucks. >> let's do a compromise. >> last word. >> if you like this so much, buy an extra august call with that trade i think and then maybe an

extra pop to the up side. >> fair enough. >> wow. good brokering. moving on here, google and earnings were the big tech earnings this week, but it's next week that we really kick into high gear with names like microsoft, apple, yahoo! gopro and amazon. which could be the next name to surge? mike, what are you looking at? there's a lot to choose from. >> i think the one name you ought to look at next week is go. rie. they've only reported four quarters. in each of those four quarters the stol stock has moved at least 12%. it averages a 13.4% move. this is a stock that's up 10% essentially since its lows on monday and it's well off its all chaim highs. this is also a stock which as crazy as this may sound trade 30g times next month's earnings it is growing at about 50%. so if they can continue to demonstrate that they can do that this is actually a company that could rip to the up side. >> what are you looking to do? >> i think very simply, and this is not a trade i recommend very often. i'm looking at the weekly 56 calls. at the time i was looking at it

you could spend $2.56 for that. that was a little less than 5% of the stock price at the time. take a look. even if you just threw a coin at this thing and figured it could move more than 10% on either side, this is definitely the way to play it rather than buy the stock into earnings. if this thing started to trade toyotas growth rate and it actually sustains that by reporting to next week some numbers the street likes, what you're going to see is the stock could be up 10% easy. >> i think this gets to an interesting question that a lot of people are facing with a lot of these stocks, and that is the setup into earnings. you could have made the case for a lot of stocks that reported this week, that the setup has been terrible because you rabb up so hard going into the report. google was in that situation. we saw google blow through. but how do you look at this one? >> if i could just play the technicals and play carter here for a minute since i'm signature over here in his seat, if you're looking at a chart on gopro there's been a lot of resistance in that upper 50s level, i think if you're going to play it to the up side there has within this run-up. it's kind of at the point it's going to run into resistance. it really needs to get a good

earnings move here, good earnings report for looking guidance to break through this resistance. if it does these calls are extremely cheap. i think it's a great trade. if you do want to play to the up side -- >> i kind of remember hearing netflix was going to run into resistance. it's one story after another where -- look, the other thing is bear in mind the market's been through a really rocky period here. elevated volatility wp sort of moving at a very slow or slightly upward motion. this is a point where high-flying stocks should break out. >> mike kuo being bullish. outright bullish. >> this is just a classic long option trade. he's trying to define his risk. it is a little different. it's essentially binary when it comes to earnings. earnings have to pan out or you're going to lose the whole amount of money you paid for this in just a heartbeat. >> do you like ambarella as well? >> i'm not as crazy as ambarella, i have to say, but i also think that this is the way to play it. i think in all of these names this is the way to play it. in many instances as expensive

as these options are they are cheaper than they have been and they are implying moves stronger than not only these stocks have historically reported but what we're seeing this earnings season. >> i don't know what's gone into you. >> it's hysteria. bullish hysteria. >> got a question out there about options, about mike's facial hair. who doesn't? only one place to go, optionsaction.cnbc.com. exclusive trades. so what are you waiting for? here's what else is coming up. no need to be scared because a collapse in the vix could signal a massive buying opportunity. we'll tell you what has traders so excited. plus, calling all "options action" fans. we're taking your tweets. so tweet us at "options action" and hopefully we'll answer your question. >> logically. >> that's when "options action" returns. i'm here at the td ameritrade trader offices. ahh... steve, other than making me move stuff, what are you working on? let me show you. okay. our thinkorswim trading platform aggregates all the options data

you need in one place that lets you visualize that information for any options series. okay, cool. hang on a second. you can even see the anticipated range of a stock expecting earnings. impressive... what's up, tim? for all the confidence you need. td ameritrade. you got this. that's a good thing, but it doesn't cover everything. only about 80% of your part b medical expenses. the rest is up to you. so consider an aarp medicare supplement insurance plan, insured by unitedhealthcare insurance company. like all standardized medicare supplement insurance plans, they could save you in out-of-pocket medical costs. call today to request a free decision guide. with these types of plans, you'll be able to visit any doctor or hospital that accepts medicare patients. plus, there are no networks, and virtually no referrals needed. join the millions who have already enrolled

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for all the confidence you need. td ameritrade. you got this. 40% in just five days. mkm derivative strategist jim krueger says that means stocks could be set up for a nice rally over the next several weeks. meanwhile others point to the drop in volatility as a sign of

market complacency. that means nobody's adequately prepared for a real market shock. still others are saying hey, let's use this drop in volatility to buy cheap protection against future market declines. regardless of your view here the steep drop in volatility has been one of nearly historic proportions. the vix certainly something a lot of traders have been watching especially given all the stuff with greece and china melissa. back over to you. >> thank you, dom. one man who's really been watching it brian sutland. he is is our resident fear meche. what does a vix plunge tell you about stocks? >> it's really interesting because like dom said we did have a 39% plunge in the vix on the close on thursday and what's interesting, some analysts saying hey, that means the market's going to rally over the next few days. it actually means it can rally over the next three and six months. we start looking at some of these numbers here today. and what we found was something really interesting ever since we've been in this bull market. there's been a handful of days here, the last three times in fact where the vix plunged over

30% in a five-day period. that's a very fast drop in vix and volatility. it's fear coming out of the market. look at what we found here. huge moves in the next three months. then it sort of fizzles out and you get a little bit of growth or whatever in the s&p and the next six months. maybe a little of back end filling. but the next three months certainly a big bullish time frame here for the s&p. when you take a look at it here's basically what happened is any of these big huge plunges here, you get a nice sort of bounce off those lows. these had all been 100-day and 200-day moving averages that the market bounces off us. and the rally continues here, folks. right? really the only time if i were to draw a line right here and this is basically where the fed maxed out their q.e., that was the last basic time frame or so where q.e. went in place. ever since then. any big plunge in the vix three months out you want to be a buyer. the only time before then, the last big plunge in the vix where it failed to set up as a bullish statement was back there march

2011. you actually had to wait a good year before we climbed back to the position you're in before. so time is basically saying if you're in a bull market and you get a big vix plin plunge it's basically people saying i have a ton of confidence in what's going on in the market right now, i want to be a buyer, and & to me that sets up basically, folks, you want to be a call buyer in the s&p. volatility's cheap. that means options are cheap. i'd be a call buyer and play to the up side here. >> the sweet spot according to brian's analysis the next three months. big gains here. do you buy, that mike kuo? >> do i. and here's the reason. if you take a look at what's been going on since may the market has basically been tracking sideways. we haven't even breached those may highs and the reason was because of all the international concern including greece, including china and including things like earnings which seem to be coming up pretty well. if you happen to believe as the options market does that most of that is behind us at least for the near term then the market only has one direction to go and that's higher. >> i disagree. i think it has something completely different going on.

the first two moves you saw one was in january, one was in october. we know how october generally worked out for the for the stock market. it's all about the calendar. if you were to tell a volatility trader i want you to buy a bunch of volatility in july, he would look at you like you're talking gibberish. volatility traders done want to be long in july and august. and another thing, it's all about the bond market -- >> you would love to have been long volatility in august of 2011. >> what does a volatility trader say about that? >> this is how you have to really look at it. yes, you can get some summer doldrums where the market kind of chops around and it's really hard to be long volatility, but here. i spoke it out, right? three months out. that's what you're looking at. i would go three months out. let's look at a september or october call. i'd be a buyer of that. some volatility into the fall time, you get a little heckness. you buy that call. maybe a few months out a higher strike call. i'd be playing the up side. these are very strong case when's you see the volatility -- >> let me make this very simple.

you can make the call right now. labor day do you think the s&p is higher or lower than it is today? i and think the answer is it's going to be higher. >> we're trading volatility. >> we're trading options. >> people are punching down option premiums every chance they get. why? because you can own the ten-year treasury and get 2.53% for 12 months. or you can sell an at the money put in the spider and get guess how much, 2.53% for 11 weeks. which would you rather do? >> i'm just telling you long the s&p to labor day. that's it. >> good to have both sides of this trade here. coming up next, crude is getting crushed, almost falling below 50 bucks a barrel. but that's how kuo and carter tripled their money. we'll show you how when we come right back. i'm here at the td ameritrade trader offices. ahh... steve, other than making me move stuff, what are you working on? let me show you. okay. our thinkorswim trading platform aggregates all the options data you need in one place that lets you visualize that information

for any options series. okay, cool. hang on a second. you can even see the anticipated range of a stock expecting earnings. impressive... what's up, tim? for all the confidence you need. td ameritrade. you got this.

here at td ameritrade, they work wow, that was random. random? no it's all about understanding patterns like the mail guy at 3:12 every day or jerry, getting dumped every third tuesday. this happens every third tuesday. we have pattern recognition technology on any chart, plus over 300 customizable studies to help you anticipate potential price movement. there's no way to predict that. for all the confidence you need. td ameritrade. you got this. ouch. energy stocks getting crushed as crude oil logged its third straight week of losses. but that's good news for kuo and carter. here's why. on "options action" it's how we

strike it rich. risk less so we can make more. and that's just what kuo and carter did with their bearish bet on the energy etf, the xle. carter thought crude was sending a warning to energy stocks. >> crude oil's got to come up a lot, where by all accounts energy stocks have got to come down. we're sellers of the xle. >> hmm, mike thought, he might be on to something. but just shorting the space could lead to infinite losses. so instead mike bought the september 76 strike put for $2.70. now to make money mike needs the xle to fall below 76 by more than the cost of the put, or below $73.30 plus september expiration. but paying 2.70 just to bet against energy? >> i don't need that kind of problem right now. >> so reduce his cost mike sold the september 69 strike put for 80 cents and created his put spread. but he did something even better. he made making money easier, and here's how. between the 2.70 he spent on

that higher strike put and the 80 cents he collected on the low yes strike put mike cut the total cost of his trade down to just $1.90 and now mike sees profit if the xle falls by the reduced cost of the trade or in this case below 74.10 by september expiration. >> a millionaire. >> not so fast. keep in mind tl there is a trade-off and by selling that put mike has capped his profits to 69 bucks. and since the time of the trade the xle is down nearly 5%, making this trade a quick winner. and now "options action's" biggest fans have just one question. what will kuo and carter do now? ♪ >> as you probably noticed, carter's off today but he did send us a little love note. he sent us a postcard. greetings from my daughter's summer camp in vermont. xle is my thinking. hovering ominously at multiple well defined lows of the past year. the presumption is we break to

new lows. signed carter braxton worth. so mike, what are you doing? >> supply-demand picture has not gotten much better in crude. private equity firms are throwing money into the energy patch which could throw a floor on the rig cap and we could see it grow. that hurts the supply and demand picture even more. that said this spread is now well in the money. we're long the 76s, down around 72. my suggestion is keep your bearish stances on and roll down and out. >> roll down. you see more down side for xle? >> i do. and i think it follows along with crude. i outlined on futures now basically that i think crude goes below 50 at this point. sort of teetering at 58 to 62. we broke that level. i think it has to go test the $45 area and that probably pulls xle down. >> the fundamentals for crude oil are just way out of whack. why is carter hanging out at his daughter's summer camp? >> to visit her. isn't that sweet? >> sounds a little weird to me. >> i don't know. i think it's sweet. >> scott wouldn't put -- he wouldn't bring his kids to camp.

he'd just put them on a bus, have a good time. >> i would drive them there. i would slow down. >> we've got the final call after this. i'm here at the td ameritrade trader offices. ahh... steve, other than making me move stuff, what are you working on? let me show you. okay. our thinkorswim trading platform aggregates all the options data you need in one place that lets you visualize that information for any options series. okay, cool. hang on a second. you can even see the anticipated range of a stock expecting earnings. impressive... what's up, tim? for all the confidence you need. td ameritrade. you got this.

here at td ameritrade, they work wow, that was random. random? no it's all about understanding patterns like the mail guy at 3:12 every day or jerry, getting dumped every third tuesday. this happens every third tuesday. we have pattern recognition technology on any chart, plus over 300 customizable studies

to help you anticipate potential price movement. there's no way to predict that. for all the confidence you need. td ameritrade. you got this. time for a tweet. this one is on apple. "should i sell a 124-120 put spread that expires next friday?" brian. >> i think if you're looking at weeklies and selling put spreads i don't really love those because they're kind of cheap and if they blow through the strike you're a loser on it it's hard to make a play. apple trading around 130 i think it's a critical point where it's going one way or the other and it's going to break out kind of big. i actually would be a call buyer if i'm going to play to the up side. mike has been a big fan. talking about up side calls. scott, he'll probably say down side put. but i would be an up side call buyer here in apple rather than just selling some premium on a put spread that's expiring and probably doesn't have a whole lot of value. >> viewers will remember that

this was a stock that dan had mentioned was going to be range-bound for a while. selling the july 125-35 strangle was a great trade but i also feel like this stock is poised to make a move one way or the other. earnings could be the catalyst and selling those put spreads probably p the way i'd lieplay it. i'd be more inclined to buy calls to make a directional play here. >> just for fun, are you bearish app snl. >> no. the key reversal when they made the new high was unfortunate. but it's a new business and they make a ton of money and they have a ton of money. >> here's another tweet. is it better to play leaps into earnings to minimize losses? scott. >> no. i don't really like leaps. they're not really options. they're not really stock. trade something that's going to expire a little bit shorter term because leaps get really expensive bid-ask spreadwise. >> time for the final call. brian sutland. >> i'd be a buyer of calls or call spreads in the s&p 500. i think you buy volatility and you buy stocks together because i think the market's poised to move higher significantly. >> mike kuo. >> i agree wholeheartedly with

that. right now the vix is low, options are cheap, the market's going higher, you buy calls. >> scott. >> vix is low for a reason. >> that's it? >> that's it. >> looks like our time expired. i'm >> 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, welcome to cramerica. it's my job not to just entertain but to teach. call me at 1-800-743-cnbc or tweet me. in the face of declines, rallies and plain jane garden varieties in this market we must always guard against our own human