we're live at the nasdaq we're live at the nasdaq market site and guess who i found? hey, scott, good to see you. well 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. we'll tell you why. >> goog many's gone wild. but there's another tech name that could see a similar surge. we'll tell you what it is and how you can make money. and -- too much of bubbling crude, you won't believe how far some traders are betting crude will fall.

let's get to it. while everyone was focused on google and the nasdaq, one tech giant made an all-time high, facebook surging 5% on the heels of google's numbers. is $100 a share the next stop? normally this would be the story of the day. somehow nobody was talking about it. >> facebook was the story of the day, whether it was breaksing out to new highs or not. this is a story i was starting to think of facebook as old tech. i underestimated the ability of the stock to raly. i would be the first to admit. i was selling upside calls in this thing, i was caught a little flat-footed, i have to say. >> if we're going to rewrite google, we should 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

glasses. a lot of sellers say they're putting their money to the wrong place. that gave me huge pop. facebook tended to follow that that doesn't mean, i think a lot of what facebook is doing has been priced in here. certainly they could have a big earnings day today. when they come up in a couple weeks here. but you know, i think facebook is in a position now where the stock has rallied a little bit. i don't know how much more it has to go. if you look at the earnings picture, what it needs to do this quarter. >> the onus is on the bulls? >> it is. much of what we saw in google was a function of the cfo finally speaking wall street's language, she used a word you never hear in silicon valley, that's discipline. that's great for google. it has nothing to do with facebook. google's problem was the fact was they weren't disciplined. anyway they had a short attention span, ooh, there's a squirrel. >> the new technology companies

don't need to have discipline. they need to have innovation, full stop. if you're looking at social media, facebook, one of the reasons people are liking it is one of the same reasons they're having a hard time with twitter. i'm active, engaged user on twitter. one of the things find is when is the last time you remember seeing a an ad on there? that's the type of monetizing engagement that facebook can get that some of the other places can't. that's why people like it. they should be focusing on innovation, so should google. not cost-cutting. >> google isn't innovating, other than a new cfo that's been on the job the less than the full quarter and she's using old-fashioned language. >> the that enthusiasm for google will happen in part because they recognize that. they've got their own little venture capital firm going on 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 on the 29th, it's basically around the corner. 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 site. i don't know how excited i am. if you're a big boy like a target. you have your site. if you're a small guy, you need someone like an amazon to do all the distribution of your product for you, if you're some electronic guy, it's exciting. 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. so certainly i'm a buyer of facebook. but i think it's a little overextended. i think we can make some option plays that play to the upside. the $100 strike. 20,000 calls traded there. the open interest is growing. >> if you look at it. the july 31st, 100-strike call,

a weekly call, i want to sell that for $1.30. at the same time, i'm looking to buy the august 28th, about a month later, that $100 call as well. for $2. so net i'm buying one call, selling the other, paying 70 cents on the trade. i need for facebook not to rip through 100 after this earnings picture and after that call. i'm expecting facebook to drift up to $100 act as a magnet. that call expire is worthless and now i have all the upside on the august call. it's a cheap way do play a call that i think is overextended. >> i like calendar spreads to take advantage that the near-dated options to that event are going to the koa. we have surprises where the stocks have moved a lot. i'm not convinced that a stock that's reaching to all-time highs as facebook is is necessarily going to suddenly give up the ghost. i'm inclined i think for most of the earnings season going

forward to make directional bets by 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 consider selling calls as a stock replacement. >> it's the ball suck we see in earnings. calendars can be a slightly directional trade. and that's what brian is doing here. using the calendar, taking advantage of the vol suck and he's got a direction in mind. calendar trades aren't just all about erosion. >> to blow through the $100 strike. they're going to have to hit height mark of $54 a share. >> it's had over the course of the last couple of years at least two quarters where they reported and ended up having a gain of well over 10%. that would take you well above $100. let's do a compromise. >> last word. >> if you like this so much by ac an extra august call and an extra pop to the upside.

>> good brokering. moving on here. google earnings where the big tech earnings this week. but it's next week that we really kick into high gear with names like apple, microsoft, ibm, gopro and amazon all reporting. 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 gopro. they've reported four quarters in each of those quarters the stock has moved at least 12%. it averages of 13.4% move. this is a stock that's up 10% essentially since its lows on monday. and it's well off of its all-time highs. this is also a stock which has crazy as this may sound, trading at 30 times next 12-month earnings, it's growing at about 50%. if they can continue to demonstrate that they can do that, this is a company that can rip to the upside. >> what are you looking to do? >> very simply, this is not a trade i recommend very often, i'm looking at the weekly 56 calls, at the time i was looking you could spend $2.56 for this.

take a look, even if you just threw a coin at this thing and figure it could move more than 10% on either side, this is definitely the the the way to play it rather than buying the stock into earnings. but you know if this thing started to trade to its growth rate and it actually sustains that by reporting next week numbers that 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 stocks, the set-up into earnings, you could have made the case for lot of stocks reporting this week, set-up has been terrible because you ran up so hard going into the report. gopro is the same situation, google was in that situation, we saw google blow through. how do you look at it? >> if i can may technicals. if you look at a chart on gopro, there's been a lot of resistance in the upper 50s level. so i think if you're going to play to the upside, there has been this run-up. it's been at this point it runs into resistance, it needs a good

earnings report. forward-liking goodance to break through the resistance, i think the calls are extremely cheap. play to the upside, much better way to play the stock. >> i was hearing, bear in mind the market has been through a rocky period. we had elevated volatility. we were moving at a slow or slightly upward motion. >> mike ccomikecoe is being bul. >> he's trying to define the risk. 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 a heartbeat. >> do you like amberella as well? >> i'm not as crazy about it. but i think this is the way to play it. in all of these names this is the way to play it in many instances, as expensive as the

options are, they're cheaper than they have been and they're implying moves that are smaller than what the stocks have been historically reported. >> what's gotten into you, mike? maybe it's the facial hair that's different. got a question out there about options about mike's facial hair. who doesn't after all, there's only one place to go, options action.cnbc.com. the hottest news. here's what else is coming up. no need to be scared, because the collapse in the vix could signal a massive buying opportunity, we'll tell you ha has traders so excited. calling all options fans, we're taking your tweets, so tweet us at optionsaction. 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. welcome back. so call it a volatility crush. just when you thought things were in the market really going to start haywire because of greece, china, it all fizzled out and it happened really fast. so take a look at this one-month chart of the vix that tracks the volatility in the s&p 500. it got as high as 20 on july 9th as all the macroevents came to a head. but then it faded and faded fast. closing around the 12 mark today. that means that what many call the fear gauge dropped by about 40% in five days.

mkm derivative strategist says the sharp decline in volatility means that stocks could be set up for a rally in the next few weeks. the drop in volatility could be a sign of market complacency that means nobody is adequately prepared for a real market shock. other says let's use the volatility to buy future protection against market decline. the steep drop in volatility has been one of historic proportions so the vix is something that a lot of traders have been watching, especially given all the stuff with greece and china. >> one man who has been watching it, brian sutland, our resident fear merchant. what does the vix plunge tell you you about stocks. >> we did have a 39% plunge in the vix at the close on thursday. some analysts say that means the market will rally over the next few days. it means it can rally over the next three and six months so we start looking at some numbers here today. what we found was something

interesting, ever since we've been in the 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, fear coming out of the market. look what we found, huge moves in the next three months. and then it fizzles out and you get a little growth in the s&p over the next six months. maybe a little back-end filling. the next three months, a big bullish timeframe for the s&p. here's what happens. is any of these big huge plunges here, right. you get a nice bounce off the lows. 100-day and 200-day moving averages that the market bounces off and the rally continues. the only time if i were to draw a line right here and this is basically where the fed maxed out their qe. that was the last basic timeframe where qe went in

place. any plunge in the vix 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 had to wait a good year before we climbed back to the position that you're in before. so time is saying if you're in ball market and you get a big vix plunge, it's people saying i have a ton of confidence in what's going on in the market. i want to be a buyer. you want to be a call buyer in the s&p. volatility is cheap, that means options are cheap. i would be a call buyer and play to the upside. >> the sweet spot according to brian's analysis. big gains, do you bike that, mike? >> i do. if you take a look at what's been going on, the market has been tracking sideways, we haven't breached the may highs because of all the international concern, including greece and china and including things like earnings, which seem to be coming up 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 has only one direction to go, that's higher. >> i think it has something completely different going on. one is in january, but one is in october. >> it's all about the calendar, if you were to tell the volatility trader, i want to you buy a bunch of volatility in the middle of july, he would look at you like were you talking nonsense. volatility traders do not want to be long in july and august. another thing it's all about the bond market. >> highest point. so this is how you have to look at it. yes, can you get the summer doldrums when the market chops around. here i spoke it out, right. three months out, that's what you're looking at. i would go three months out, september, october upside call. i would be a buyer of that, when you get hectic in the market

come september, you buy the call a few months out. i would be playing the upside. these have been very strong cases when you see the volatility suck. >> you can make the call right now. labor day, do you think the s&p is higher or lower than it is today. >> we're trading volatility. >> we're trading options. >> people are punching down option premiums, every chance they get. why? because you can own the 10-year treasury and get 2.35% for an entire 12 months. or sell an at the money put in the spider and get 2.35% for 11 weeks. which would you rather do? >> i'm telling you long the s&p until labor day, that's it. >> good to have both sides of this trade here. >> coming up next, crude is getting crushed, falling below $50 a barrel. that's helping colin carter triple their money. 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. thousands of hotels when ywith travelocity,off it means you can also afford to get up to 50% epic-er epic rides. making it the place to find a place for summer escapes. go and smell the roses. hey mom, you want to live by the lake, right?

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strike it rich. risk less to make more and that's what coe and carter did with their bearish bet on the energy etf, xle. crude oil is going to come up a lot or by all accounts, energy stocks have got to come down. we're sellers of the xle. >> 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 by september expiration. but paying 2.70 just to bet against energy? >> i don't need that kind of problem right now. >> so to 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 the higher strike put

and the 80 cents he collected on the lower strike cut. mike cut the total cost of his trade down now to just $1.90. now mike sees profits if the xle reduce reduced price trade. not so fast, keep in mind there is a tradeoff. and by selling that put, mike has capped his profits to $69. since the time of the trade, the xle is down nearly 5%, making this trade a quick winner. and now options action biggest fans have just one question -- what will coe and carter do now? >> as you probably noticed, carter solve but he did send us a love note. greetings from my daughter's summer camp in vermont. the s&p 500 energy sector is hovering right at multiple well-defined lows of the past year. the presumption as we break to new lows, signed carter braxton. what are you doing?

>> supply/demand picture has not gotten much bet anywhere crude. private equity firms are throwing money into the energy patch which could create a floor in the rig count. and we could see it grow. that hurts the supply/demand picture even more. this spread is well in the money. we're long the 76s, down to 72. my suggestion is keep your bearish stances on and roll down and out. >> i outlined on futures now, that i think crude goes below 50 at this point. we sort of teetering at 58 to 62, we broke that level. i think it has to sest the $45 area. >> the fundamentals for crude are way out of whack. why is carter hanging out at his daughter's summer camp. >> to visit her. >> it sounds weird. scott wouldn't put, he wouldn't bring his kids to camp. he would throw them on a bus, have a good time. >> i would drive them there and i would slow down before i threw

them out of the car. >> coming up, your tweets, if they're nice. we've got the final call right 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.

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that is what i'm talking about. baby. call and upgrade to get x1 today. ♪ 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. a> time for time for a tweet. this one is on apple. should i sell at 124-120 put spread that expires next friday? >> if you're looking at weeklies and selling put spreads, i don't love those. they're kind of cheap and if they blow through the strike you're a loser. when you look at apple trading around 130, i think it's at a critical point. it's going one way or the other and it will break out big. i would be a call buyer if i'm going to play to the upside. mike has been a big fan talking about upside calls, scott will say sell down side puts, i would be an upside call buyer here on apple. rather than selling on a put spread that's expiring and doesn't have a lot of value.

>> viewers will remember this was a stock that 125-135 strangle was a great strayed. i feel like this stock is poised to make a move, apple. earnings could be the catalyst and selling the put spreads probably not the way i'd play it i would play for a move and i'd be inclined to buy calls for a directional play. >> are you bearish apple? >> the key reversal, the key reversal when they made the new high was unfortunate. it's a neat 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? >> i don't like leaps, they're not options, they're not stock. trade something that's going to expire a little bit shorter term. because leaps get real expensive bid spreadwise. final call. >> i would be a buyer of calls or call spreads in the s&p 500. i think you buy volatility and you buy stocks together. i think the market is poised to move higher significantly. >> i agree with that right now the vix is low, options are

cheap. the market is going higher, you buy calls. >> vix is low for a reason. >> that's it. >> that's it. >> looks like our time is expired, i'm melissa lee, thanks for watching, see you back here next friday at 5:30 for options action. "mad money" starts right now. >> announcer: the following is a paid presentation for the nutribullet rx, nature's prescription nutrition extractor, brought to you by nutribullet llc. >> my stomach issues literally went away. >> my acne has cleared up. >> my hot flashes have subsided. >> i'm saying goodbye to diabetes. >> my shoulder pain has gone. >> i was able to sleep better at night. >> i've lost 100 pounds. >> announcer: over the last two years, all across the country, an astonishing 10 million people, at a rate of 15,000 a day, have joined the nutribullet healing revolution, using the power of nutrition to completely transform their health and