movie geeks. sports freaks. x1 from xfinity will change the way you experience tv. we're live at the nasdaq market site. guys getting ready behind me. and while they're doing that, look at what is coming up in the big show. >> i'm going to let you in on a little secret. >> one of these stocks is set for a major move next week on earnings. and we'll tell you how to profit. plus -- how would you like to protect your shares of apple for free? it is not only possible, it's the easiest trade out there. and we'll show you how to do it. and -- >> it's so unfair! now i'm getting emotional. i'm a little verklempt. >> that is the talk around starbucks coffee shares.

and we'll tell you why it could get worse. the action begins right now. let's get right to it. all about earnings next week. particularly from the so-called fang stocks, the f. and a., facebook and amazon reporting on wednesday and thursday. we got netflix this week and the stock is lower since. so what can we expect? >> it is interesting. we had a very volatile week and a lot of things going on. early in the week netflix start off with their earnings, you know, it was an eye-popping subscriber number i know a little people were disappointed internationally with the subs. but the point of the matter is the stock gapped up, about $10 from a 107 close. by the next morning it was trading below 100. so me that was an interesting sentiment shift. what goes on in the after market is traders banging stocks around. and what happens on the opening is people repositioning stuff. the fact that netflix closed the week down a few percent and closed just above 100 and really could not get going after the

initial report, tells you there was a sentiment bubble in the high-growth, high-valuation stocks and they could be for sale if they don't put up impressive numbers. >> in the second half of the week, when you consider how the market recovered after the intra week lows and this one never got going. when you consider these are the types of names that were leading the market higher when we were going higher -- >> yeah. >> -- overall, i think what we see here might actually be evidence of what we will see in the market more broadly. because people will start getting concerned about the high-flying names again. >> and netflix has really dragged. if you look at it compared to facebook, compared to amazon, this is the one that has not participated if rolling for a six-month basis. >> right. before the earnings, the only good day that could remember is when the hastings ceo was on stage in vegas at ces and the stock was popping, x that. >> and that is foreshadowed by previous poor relative strength and that is the case here. this is dragging for a while and it was down today.

>> facebook. amazon? >> here's the thing about facebook, is this a massive implied move. this is a $280 billion market cap. the options market is implying a 7% one-day move the next day. they report on wednesday after the close. on average over the last four quarters the stock has only moved about 3%. is this a stock that people feel comfortable about. this is not myspace. it will be around and more valuable in five years from now. >> myspace is around somewhere. >> it is somewhere. but you get the point. to me, i think that there has been a lot of people hiding out in facebook because of the growth. but to me the stock is kind of priced for perfection here. i know that you could talk about the fact that it is trading at a p.e. to growth of one on the adjusted earnings estimates but i'm not so certain in this market environment that it will be picky about valuation and that facebook stock will continue to work before it gets washed out. >> what is your thought on amazon before we get dan's trade? >> you know, i think the interesting thing about amazon is that maybe, finally, they're actually going to start generating a little bit of

earnings. i mean, they haven't needed to for the longest time, but actually people are starting to see their cloud service, aws is a meaningful portion of the marketplace. and the fact is for a long time the people thought that the story would come out of it and that tide i think it turning. but the multiple scares me to a degree. i couldn't see getting long here. >> it is a valuation story. it's always been. >> maybe, if it is, you could never buy it. >> right. >> if you are picky about valuation, don't look there. >> it has a not selloff or a meaningful giveback from 700 to 550. and this little bit of life, if i had to pick a high flyer to sort of stay with, i like this one. >> let's talk about facebook here. today was a really nice rally. the stock was up 3%. it broke down, you know, 105 earlier in the year here. i think we'll get a follow through of the market prior to the facebook results. i think you see the stock north of $100 before they report. but i think it sets up as a really good opportunity to take

vavng the high volatility option prices to either put on protection if you're long or make an outright bearish bet, facebook playing for a take-back to probably the mid-80s here. so today i want to use say trade structure called a butterfly. and i want to use a put butterfly and a february expiration. when today the stock was around 98, you could buy the february 95, 85, 75, put butterfly for $1.70. and one of the feds 95 puts for $3.40 and selling two of the 385 puts at $1 and buying the 75 puts for 30 cents. here's wait you make money on this trade, okay? 95 is the strike that you own. between 93.30 and 76.70 you could make up to 8.30. your max gain is at the midpoint of the butterfly. at $85, your max risk is at $1.70 and that is the underlying stock risk. if you are using it for the range you have protection to the down side where you could have

protection. i don't think it will be below $75. i think there is a good chance it is near 90. that's we it was wednesday morning. to me, i think you want to wait and see how the week opens and let's see facebook has to extend the gains above 100 and then look to do this sort of trade protection as a bearish bet. >> the valuation window from today is $40 billion wide. so that is awfully large. so that is a circumstance you want to look at trying to sell some options to basically collect a little bit of premium to finance that directional bet. but at the exact you same moment when you have a valuation as high as facebook, you want to make sure you're covered to the downside which is why you don't want to do a 1 by 2 put spread which is one of the reasons why i think butterfly makes sense. >> this goes into the amazon category. we are separating. disney used to be like this. apple used to be like this. it is not any longer. this is closer to amazon. if hi to be directional, i'm betting up on this one. >> moving on to other big earnings movers. seema mody back at h.q.

hey, seem seema. >> we're heading into the biggest week and traders are anticipating big moves in four dow stocks, starting with apple reporting on thursday. options traders are betting on a 6% move in either direction. next up, microsoft, implying a 7% move. mcdonald's which was a big winner 2015 could move as much as 5%. and then boeing which is implying a nearly 5% move higher or lower. so if all of those moves play out, we could see a more than $72 billion shift in market cap next week. so i guess we'll have to keep an eye on those four dow stocks. >> seema, thank you so much. carter, you are looking at the charts of microsoft. >> so we are going heads and tails. this is defensive and offensive. >> the stock that killed it today. >> yes, that's right. and for a low beta stock, it's especially good. >> a couple of charts. and lets see where we can go. what is important here, this is

your absolute chart, but what's important here is the relative. the bottom panel here, lets draw the line so it is clear, this is relative to the s&p. so we know microsoft has dipped. but it is actually rising to the mark, making new relative 52-week highs. so outperforming even as it goes down on absolute basis. let's focus on the absolute chart. so that dip, what's so important is, of course, we know that breakouts occur from well-defined tops and you've got that gap. that's an earnings gap. and if you fall back to the level from which you broke out, well, that's the whole point about this. we think this will ricochet and it has started and it is right here and go on for more. long-term charts since the lows of the financial crisis, basically off that line quite nicely. not extended. and with a little luck, we'll make a run for the all-time high. microsoft here on the long side. defensive and offensive name.

>> all right, carter. mike, what's your take and your trade? >> from a fundamental standpoint i feel like the stock is fair on dead-on fair value here. if you see the tech bubble we saw in '99 and 2000 and the poor valuations during the credit crisis, it trades around 20 times earnings. and they're probably going to do somewhere between $2.75, 3 bucks in 9 eps over the coming 12 months. so you throw the multiple on that. where does it get you in. 52 to the 57.5 range. using his technical analysis, the way we play this, because the implied volatility is high, implying a move of 6.5% next week which is way more than it typically moves. so this is not a situation where you typically set up and run out and buy an option. i'm looking out to april that will give us a decent amount of time before this plays out. the 52.5 call spread pay 235 and sell the 57.5 for 70 cents.

that whole thing is going to cost you about $1.65 and a little over 3% of the stock price and that is the way to make a bullish bet without taking a risk going into earnings. >> you like that or not? >> if you are playing bullish, that is a nice bounce off of 50. >> closed good. >> and that was the opportunity get in there. and if you are going to make a bullish play into the earnings, i think mike's trade makes sense. i will say this. trading at 20 times earnings. you know what i'm saying. so on a forward basis, if they hit the estimates it is trading at a market multiple or below. and we talk about this. apple trading at nine times. why does this company deserve that multiple. and i'll make another point. the stock has had three 10% one-day moves in the last year after earnings. >> and that tells you investors are -- >> two times to the upside and one to the downside. >> the fact that it had those moves to the upside is one of the reasons why you want to use options. but also you can't compare this

thing to apple. right? so this is not a consumer electronics company. this is basically a utility now. >> what did intel tell us about the health of the pc environment. these guy get half of their sales from overseas. what do we know about the dollar? these are stories that worked well in 2014 and 2015, less in 2016. >> xbox and gaming and facebook making full stock, right? >> but if there is wisdom in price, and there is, we're taking the wisdom that netflix was acting poorly today. that means something is wrong. and guess what was acting well today. this one. i think you've got a limited downside because of the support and with a little luck that outside move is the upside. >> if you want to press longs after the rally after the low this is week, you want to do it where you are risking a relatively small amount. so you could run out and buy stocks right here or you could buy microsoft or you could turn around and sell it. something i think would you be foolish to do. >> pcs, by the way, wasn't the weakest spot for intel.

it was the data center number that sort of threw everybody's arms up. >> i'm not for microsoft either. but the point about facebook and microsoft, we are not saying monday morning to go out and short facebook or to buy microsoft. i think you have to let these things breathe a little bit. and for mike's trade, you have to see where the stock is trading. it's probably going to be at 54 bucks by the time they get to the earnings. >> but about the implied volatility, let's say this sells off sharply and one of the big earnings moves that you saw, around high 40s we're looking at a fairly safe entry point. you could sell put and work into a call spread and risk reversal and at that point we haven't lost any money. >> i like the debate. got a question? send us a tweet. we might read it later in the show. check out "options action" at cnbc. optionsactions @cnbc.com. what more could you want. check it out. here is what is coming up next. we owe them nothing less than the best protection.

>> well, today is your lucky day, tim. because we could show you how to protect your apple shares for free. plus -- >> at these levels, we'll back the truck up and buy as much stock as we can. >> but should you? we'll tell what you has the bulls running from starbucks when "options action" returns. i'm here at the td ameritrade trader offices. 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 and 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. td ameritrade.

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. welcome back to "options action." apple shares crossing back above $100. having the best day since august 26th. if you are worried it could take a hit after reporting earnings on tuesday, dan has a way to protect yourself and the best part is, it is for free. for free, danny boy. >> yeah, here's the deal, right? so, we know the stock has had a tough go over the last few months. today was a good day. piper jaffray said it could be up, what, 50% between now and the end of the year. but i believe investors are in a divergent path of that. and there are five holds and one sell. but the stock is down 25% over the last months so investors are not buying what wall street banks are say being apple. so obviously it is a bit of a contentious situation. the stock, we know the valuation and the balance sheet and the capital return. all that sort of stuff. we've got to get through this earnings report on tuesday night. the options market is implying a 6% move. if you are long stock and you are worried you might want to put a collar against your long stock. and what specifically is that? well that is selling an upside

call, taking in the premium and buying a put to the downside. and you're basically collaring your stock. so lets look at stocks and then i'll give you the trade. this is how i'm arriving at the call strike. this 110 level is a big breakdown level both in august and then in december, the stock found a little support at the opening of the august 24th low. it just bounced from there the other day. that is the one-year chart. this is the five-year chart. this is important. look at this uptrend. this is just working its way right there at $100. that was also the 2012 high of $100. the stock is at an important intermediate term spot. and then this is the big one. this is the 10-year chart from the 2008 lows here. you see this nice uptrend. this level, it is finding trouble. if the stock is going to continue to go lower on weak guidance, it has an eight handle on it. that is probably in the mid to low 80s. so back to the collar here.

when the stock was around 101 you could look out to march expiration and sell against 100 shares. one of the march 110 calls, so about $1.35 and use the proceeds to buy one of the march 90 puts for $1.35. that caught -- costs you nothing. between 101 and 110, you could have gains up to $9. that is 9%. you have losses of the stock between 101, down to your protection point where you own the put, at $90. but you're protected below that. and here's the thing. and if the stock is going to go down there, it could continue to grind and go down in one fell swoop. and i think it's the sort of thing if you're not so worried about the stock gapping up, $10, $15 which i'm not particularly, but you think there's downside risk, this is one way to finance a downside put and helps you sleep at night. you want to take this position off or that upside call once the earnings are out. >> what do you think of the trade from -- the weirdest thing is it goes from one of the most loved stocks to controversial. >> well, it's controversial

because it's so broadly held and everybody buys their products and every single one of us owns one. i'm not so bearish about apple. every time it dips down into the mid-90s, i'm a tempted put seller. i was looking to do it today. i happened to look away from my screen. you could have sold the march puts for 3.50 and that is the trade i was going to put on. so, i'm kind of taking the opposite side of dan on this one. this is a big bucket of cash at the bottom balance sheet and they're going to have another $50 billion, $60 billion in cash a year from today. so from my perspective, even though it is not the growth story it once was, i have a hard time seeing the down side. >> it is a stock that could have gone back to the flash crash low to 92, and here it sits at nearly 102. >> it was close. trying to get into that. and you could say that a stock is fair price. whether it is fundamentally or technically, there is not a key level to look at our suggest some strength or weakness is

imminent, and that looks to be the case here. we've had a little bit of a bounce. that is a stock coming down 30% from the high. and now what? it probably belongs just about here. up next, back up the truck. that's what that man -- that man -- said. that's starbucks ceo howard schultz. that's what he's doing with the company stock. one of the traders said you may want to think twice before doing that. he'll explain why, after this. >> "fast" goes to hollywood not that hollywood. hollywood, florida, with the largest etf conference in the world. we'll give you the inside look to some of the top minds in the industry. live, monday, 5:00 p.m. eastern on cnbc. >> announcer: "options action" is sponsored by think or swim by td ameritrade. he mail guy at 3:m every day or jerry getting dumped every third tuesday. jerry: 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. td ameritrade.

steve, other than making i'm here atme move stuff,rade trader offices. what are you working on? let me show you. okay. our thinkorswim trading platform aggregates all the options data you need in one place and 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. td ameritrade.

welcome back. i'm julia boorstin in los angeles. breaking news on the lawsuit against sumner redstone. a judge has ordered a medical examination of redstone, but denied the request to depose him. this is the latest in a lawsuit filed by his ex girlfriend man weherzer.

claiming that the chairman of cbs and viacom is incapacitated. judge said a doctor hired by her zer could examine him for one hour in the presence of his nurse and speech therapist. sumner redstone's attorney released a statement saying that we are gratified that they discredit his attempted to depose mr. redstone. we have reached out to her zer's attorneys and have not gotten a comment back yet. but certainly a win for her camp today. back over to you. >> julia, thanks. and shifting gears now. take a listen to what the starbucks ceo howard schultz said to jim cramer this morning on cnbc. >> give us the magnitude of how much more stock you are buying back here than you were a year ago? >> we think the stock is undervalued relative to creating long-term value for shareholders so we will -- at these levels, we'll back the truck up and buy as much stock as we can. be very thoughtful and disciplined about it. but the stock is undervalued relative to our performance and the long-term view we have about the world. we're opening 500 new stores a year in china. >> yeah, well, despite the

bullish comments and an earnings report, the starbucks stock was flat today. you've been bearish the name. you've been short. >> well, we put on a put spread ahead of earnings because we thought if there was any risk, it would be to the downside. a lot of people pointed to china but i think actually regardless of whether the economy is strong there, it is migrating in the direction of a more mature sort of service-based economy. that's obviously helpful for starbucks. it is not helpful for a bearish bet to have them come in and say we're going to start buying back even more shares. this has been a very tough name to short. i tried it once or twice before. >> at your peril, right. >> at your peril. and spilled the coffee in my lap, i've got to say. >> it is a managed story. if you look 12 quarters, three years, they beat by a penny or matched the earnings. it is what citibank used to do. it is not bad or good but there is not going to be any surprises here. they know what their guiding on the street and it will hit that again and again. >> it was an interview-driven tape today with starbucks.

the stock was down. sentiment was negative. schultz comes on cnbc and certainly spun it as positive as you could, and you saw the reversal. >> you know, here's a company that's obviously executed very well over a lot of different environments and different geographies over the last few years here. so when you hear him say we'll back up the truck, i don't know if that is disingenuous but it does trade at 31 times earnings and it is not cheap. i don't know too many guys that are -- >> here's the good news, okay? so, i'm going to take howard's side of this bet. same store sales growth and adding more stores. >> but for the second quarter in a row they did miss the china comps estimates and how it will be long-term. so to me it is not a layup and not back up the truck time. up next -- final call from the options pits. >> announcer: "options action" is sponsored by think or swim by td ameritrade. okay. our thinkorswim trading platform aggregates all the options data

you need in one place and 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. td ameritrade.

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spread. >> dan, the man. >> facebook. wait for a bounce to put on a put. >> it is an interesting week. a lot of earnings. going to drive the market. fed meeting and more. that is it for us. we'll see you next week. "mad money" begins right now. >> announcer: the following is a paid presentation for cize, brought to you by beachbody. >> get ready to cize it up. [ beat drops ] [ people cheering ] are you ready to dance? 5, 6, 7, 8! >> ♪ on my way in i'ma take it ♪ ♪ walk straight i'ma put it on a playlist ♪ >> my name is shaun t. welcome to cize, the program that's gonna teach you how to dance. >> ♪ girl, jump with the rhythm ♪ >> in 30 days, i'm going from a non-dancer to being able to do six routines. and i would say i'm a dancer now. >> i was not a dancer when i