hey, there, we're live at the nasdaq market site, getting ready behind me, take a look at what's coming up in the big show. >> i'm going to let you on a little secret. >> one of these stocks is set for a major move next week on earnings and we will tell you who you to profit. plus, how would you like to protect your shares of apple for free? it's 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. >> that's the coffee talk around starbucks shares. and we will tell you why it could get a lot worse. the action begins right now.

oh, yes, it does. all about earnings. next week, particularly from the so-called fang stocks, the fa, facebook and amazon reporting on wednesday and thursday, netflix this week and the stock is lower since. so what can we expect? what's your outlook? >> it's interesting. you know, listen, we had a volatile week, a lot of things going on, but early in the week we had netflix start off with their earnings and it was an eye popping subscriber number internationally, people were disappointed with some of the north american subs, but the point of the matter is that that the stock gapped up that night, it was up 10 bucks or something from a 107 close. by the next morning it was trading below 100. to me that was a very interesting sentiment shift. what goes on in the after markets sometimes is a bunch of traders banging stocks around, what happens on the opening are people repositioning that stuff. to me the fact that netflix closed the week down a few percent, closed just above $100. it never could get going after that report tells you there was a sentiment bubble we know in these high growth high valuation

stocks and that they could be for sale if these companies do not put up impressive beat raises. >> i think it's interesting how performing in the second half of the week when you consider how the market recovered over those intra week lows we saw and this one never got going. these are the types of names that basically were leading the market higher when we were going higher, overall what we see here might actually be evidence of what we will see in the market more broadly. people will start getting concerned about some of the high flying names again. >> netflix has dragged -- if you look at it compared to facebook, compared to amazon, this is the one that has not participated on a rolling 4, 6, 1 basis. >> before the earnings the only good day i could remember is when hastings ceo was on stage out in vaccination. x a that. >> x that. weakness is usually fore shadowed by previous poor relative strength. that's the case here. this has been dragging for a while and was down today. >> facebook, amazon?

>> facebook is a massive implied move, $280 billion market cap company, the options parse is implying a 7% move one day. on average over the last four quarters the stock has owned moved 3%. it's going to be around and more valuable in five years from now. >> my space is around somewhere. >> it is somewhere. i think, you know, you get the point. to me i think that there's been a lot of people that have been hiding out in facebook because of the growth, but to me this stock is kind of priced for perfection here. i know that, you know, you can talk about the fact it's grading at a pe to growth of one on those adjusted earnings estimates but i'm not so certain in this market environment that it's going to start to be very picky about valuation that facebook is a stock that's going to continue to work before it gets washed out. >> what's your thought on amazon? >> maybe finally they are 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 manageful portion to their business and the marketplace. for a long time people thought that the story was going to come out of it, i think maybe that tide is turning, but the multiple is something that scares me to daeg. i can't see getting long it here. >> it's not a valuation story. it's always been -- >> i was going to say if it is you can never buy it. >> exactly. >> if you are picky about valuation don't look there. >> it had a nice selloff or meaningful give back from 700 to about 550 and this little bit of life, i mean, if i had to pick a high flier to sort of stay with i like this one. >> so let's talk about facebook here. today was a nice rally, the stock was up 3%, it broke down, you know, about 105 earlier in the year here so to me i think we will get a follow through of the market early next week prior to facebook's results. i think you probably see the stock north of 100 before they report, but i think it sets up as a really good opportunity to take advantage of those high implied 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 a trade structure called a butterfly and i want to use a put butterfly, look at february expiration. today when the stock was around 98, you could buy the february 95, 85, 75, put butterfly for 170. selling two of the fed 385 puts at $1 each and buying one of the february's puts for 75 cents. 95 is a strike that you own, between 9330 and 7670 you can make up to $8.30 your max gain is at the midpoint of that butterfly at $85, the most important point is you are using it for protection you have this massive range to the down side where you can have protection. i don't think the stock is going

to be below $75 anytime soon, i think it's back at $90 like wednesday morning. to me let's see how the week opens, look to do this trade as protection. >> the market right now has a valuation window from a week from today that is $40 billion wide, folks, that's awfully, awfully large. that's one of those circumstances where you definitely want to look at trying to sell some options to basically collect premium to finance that directional bet but at the exact same moment when you have a valuation as high as facebook's you want to make sure you're covered to the down side which is why you don't want to do a one by two put spread which is one of the reasons a butterfly makes sense. >> this goes in the amazon category. disney used to be like this, it's not any longer, apple used to be like this, it's not any longer. if i had to be directional i'm betting up on this one. moving on to other big earnings movers seema mody on

what's on deck. >> we're heading into the busiest week of earnings season and traders are anticipating some big moves in four dow starts starting with apple reporting on thursday, option traders are betting on a 6% move in either direction, next up microsoft implying a nearly 7% move, mcdonald's which was a big winner in 2015 could move as much as 5% and then there's boeing which is implying a nearly 5% move higher or lower. we could see a $72 billion shift? market cap next week. we will have to keep an eye on those four dow stocks. >> carter, you're looking at the charts of microsoft. >> we're going to go with heads you win tails you wins. >> you know the stock that killed it today. >> that's right. for a low beta stock it was especially good. a couple charts. let's see where we can go. what's important here obviously this is your absolute chart, but what's important is the relative. the bottom panel here, let's

draw the line so it's clear, this is relative to the s&p. so we know that microsoft has dipped but it is actually rising relative to the market. it's making new relative 52-week highs. outperforming even as it foes down on an 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 was an earnings gap. if you fall back to the level from which you broke out, well, that's the whole point of this. this is a great reaction buy poiptd. we think this is going to rec shay here, it did a little bit, it's already started, it's kind of right here and go on for more. long-term chart since the lows of the financial crisis basically off that line quite nicely, not extended and with a little luck we're going to make a run for the all time high. i like microsoft here on the long side, defensive, offensive

name. >> carter. mike, what's your take and trade? ? from a fundamental standpoint i feel like the stock is dead on fair value right here. if you exclude the wild valuations that we saw back in the tech bubble in '99 and 2,000 and if you exclude the poor valuations we saw in the credit cries us i think it trades 20 times earnings and somewhere between $2.75, 3 bucks in eps. it gets you right in the 52 to 57.5 range. using his technical analysis the way that we play this because the implied volatility in options in microsoft is high, it's implying a move of 6.5% which is way more than it typically moves. this is not a situation where you just run out and buy an option. i'm looking out to april, that's going to give us a decent amount of time before this plays out. 52.5, 57.5 call spread, pay 235 for so and sell the 57.5 against

it. whole thing will cost you 1.65, a little over 3% of the current stock price, i think that's the way that you can make a bullish bet without taking a lot of risk. >> if you're going to play it bullish and the charts line off, that was a nice bounce off of 50. >> closed the gap. >> that was the opportunity to get in there and i think if you're going to make a bullish play into the earnings, you know, i think mike's trade makes sense. mike just said -- >> just say it. say it. >> trading at 40 times earnings. on a forward basis if they hit those estimates it's trading at a market multiple or a little below. we talk about this. apple trading at 9 times or this or what or whatever. why does this company deserve that kind of multiple? the stock has had three 10% moves in the last year after earnings and that tells you that investors -- two times the upside, one to the down side. >> the fact that it had those big moves to the upside is one of the reasons why you want to use options i think. also you can't compare this thing to apple.

this is not a consumer electronics company, this is basically a utility, infrastructure company. >> -- about the health of the pc environment. these guys get half of their sales from overseas, what do we know about the dollar? these are all stories that worked well in 2014, 2015, less so in 2016 -- >> -- as x makes full stock. >> if there's wisdom in price and there is we're taking the wisdom apple worked poor today, what was acting well today, this one. i think you have a limited down side because of that support and with a little luck that outsized no of that might be coming is to the up side. >> if you want to press longs after the rally after the lows this week you probably want to risk a relatively small amount. you could run out and buy stocks right here or you could buy microsoft or turn around and sell it, something i think you would be pretty foolish to do. >> wasn't the weakest spot for intel, it was the data center

number. >> i'm just going to say this, listen, i think the point is go facebook and about microsoft, we're 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. 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 their earnings. >> if this stock does sell off, let's say it sells off sharply, okay, well, you know, right around probably high 40s we are looking at a fairly safe entry point. you could also sell some puts, you work your way into a call spread risk reversal. >> send us a tweet at options action. if it's nice we might read it later in the show. for everything options action check out option actions.cnbc.com. new videos, news, exclusive trades. what more could you want? here is what's coming up next. we owe them nothing less than the best protection. >> well, today is your lucky

day, tim, because we can show you how to protect your apple shares for free. plus. >> at these levels, we will back the truck up and buy as much stock as we can. >> but should you? we will tell you what has the bulls running from starbucks when options action returns. here at td ameritrade, they work hard. wow, that was random. random? no. it's all about understanding patterns. like the mail guy at 3:12pm 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.

apple shares having the best day since august 26th. if you're worried the stock will take a hit after reporting earnings on tuesday dan has a way to protect yourself and it's for free. >> we know that the stock has had a tough go over the last few months. today was a brilliant bounce, i know piper jaf reese analysts said the stock could be up 50% between now and the end of the year. i believe investors are in a divergent path with that of all street analysts 46 buys, 5 holds and one sell but the stock is down 25% over the last 12 months. obviously it is a bit of a contentious situation. the stock is -- we know the valuation, the balance sheet, the capital return, all that sort of stuff, we have to get through this earnings report on tuesday night, the options market is implying a 6% move. you may want to think about putting a collar against your long stock. that is selling an upside call, taking in the premium and buying

a put to the down side and you're basically collaring your stock. this is how i get to it and i will give you the trade. this is how i'm arriving at the call strike, 110 level is a break down level both in august and again in december. the stock found a little support at the opening of the august 24th low, just bounced from there the other day, that is the one-year smart. this is the five-year chart. this is important here. look at this up trend. this is also, you know, just kind of working its way right there at $100 that was also the 2012 high of $100 here, the stock is at a kind of important intermediate term spot. this is the big one, this is the ten-year chart from the 2008 lows here, you see this really nice up trend here, again, we have this level here where it's finding some trouble here. i think if the stock is to continue to go lower on weak guidance it probably has an 8 handle in it, that is the long-term uptrend, that's probably in the mid to low 80s. back to the collar. when the stock was around 101

today you could look out to market expiration and sell against 100 shares. one of the march 110 calls at about $1.35, you would use the proceeds to buy one of the march 90 puts for $1.35. that costs you nothing. between 101 and 110 you could have gains up to $9. that's 9%. you have losses in the stock between 101 down to your protection point where you own the put at $90 but you are protected below that. here is the thing, if the stock is going to go down there it could continue to grind or go down in one fell swoop. if you are not worried about the stock fwapg up $10, $15, which i'm not particularly but you think there's down side risk this is one way to finance a down side put. you probably want to take it position off or at least that up side call once the earnings are out. >> what do you think of the trade -- the weirdest thing, it goes from one of the most loved stocks to one of the most converse. >> it's controversial because it's so broadly held and because of its size and everybody buys

their products and every single one of us owns one. i'm not so bearish about apple. every time this stock dips down into the mid 90s i'm a tempted put seller i have to say and i have done that in the past. i was looking to do it today, had a pd to look the other way from my streen. you could have hold the march puts for 3.5 times. i'm taking the opposite side of dan. this thing is a big bucket of cash at the bottom of this balance sheet and they will have another 50, $60 pll in cash a year from today. so from my perspective even though it might not be the growth story is once was i have a hard time seeing as much down side risk. >> it's a stock that easily could have gone down to the flash crash low to 92 and it sets at 102. >> it got close. sometimes you can say that a stock is fair price meaning whether you are doing it fundamentally or technically there is not a key level to look at or suggest some strength or weakness is imminent. that looks to be the case here. we have had a little bit of a

bounce. a stock that's come down 30% from its high and probably belongs just about here. >> up next, back up the truck, that's what that man -- that man said. that's scar bucks ceo howard schultz. that's what he's doing with the company's stock. one of our traders says you may want to think twice before doing that. he will explain why after this. fast goes hollywood. not that hollywood. hollywood, florida, for the largest etf conference in the world. we will give you an inside look into some of the some minds in the industry. live monday, 5:00 p.m. eastern on cnbc. here at the td ameritrade trader group, they work all the time. sup jj, working hard? working 24/7 on mobile trader, rated #1 trading app on the app store. it lets you trade stocks, options, futures... even advanced orders. and it offers more charts than a lot of other competitors do on desktop. you work so late.

i guess you don't see your family very much? i see them all the time. did you finish your derivatives pricing model, honey? td ameritrade.

herthey work hard.ade, wow, that was random. random? no. it's all about understanding patterns. like the mail guy at 3:12pm 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. yeah! ahh...

you probably say it a million times a day. ahh... ahh! ahh... ahh! but at cigna, we want to help everyone say it once a year. say "ahh". >>ahh... cigna medical plans cover one hundred percent of your in-network annual checkup. so america, let's go. know. ahh! and take control of your health. cigna. together, all the way. welcome back. i'm julia boorstin in las vegas. breaking news on the lawsuit against sumner red stone. a judge has ordered a red cal examination of red stone but denied the request to dispose him. this is the latest in a lawsuit filed by his ex-girlfriend claiming that the chairman of cbs and vie come is incapacitated. the judge says a doctor read, a doctor who is hired by her zer

can examine him in the presence of his nurse and speech therapist. they are saying we are grat tied that the court continues to reject the dis ingenious attempts to dispose mr. red stone. we have reached out to manuella's attorneys but have not gotten a statement back. shifting gears now, take a listen to what starbucks ceo howard schultz said to jim cramer this morning on cnbc. >> give us the magnitude of how much more stock you're buying back here than you were a year ago. >> we think the stock is undervalued relative to creating long-term value for our shareholders so we will -- at these levels we'll back the struck up and buy as much stock as we can, be thoughtful and disciplined about it but the stock is under valued relative to our performance and long-term view in the world. we're opening 500 new stores a year in china.

>> despite the bullish comments starbucks stock was flat today. you've been bearish the name, you've been short. >> we've put on a put spread ahead of earnings. if there was any risk it was probably going to be to the down side. a lot of people had pointed actually to china but i think actually regardless of whether the economy is strong there it's migrating in the direction of a more mature sort of service-based economy, that's obviously helpful for starbucks, it's not helpful for a bearish bet to have them come and say we are going to start buying back even more shares. this has been a tough name to short. >> at your peril. >> at your peril. i spilled the coffee in my lap i have to say. >> it's a very managed story. 12 quarters, three years, they either pete by a penny or match the earnings. meaning it's what citi bank used to do, it's not bad or good but there is not going to be in i surprises here. it's going to hit that again and again and again. >> it was an interview driven tape today as well with starbucks, stock was down,

sentiment somewhat negative, schultz down on cnbc certainly spun it as positive and it could and you saw the reversal. >> this is a company that has executed very well over a lot of difficult environments and difficult geographies over the last few years. when you hear him say we are going to back up the truck, the stock does trade at 31 times earnings and it's not cheap. i don't know too many guys who are -- >> every ounce of their cash flow to do this. >> they had same store sales growth and they're adding more stores. >> but for the second quarter in a row they did actually miss their china comps estimates and they're talk being how it's going to be a long-term thing. it's not a lay up and not back up the truck time. up next, final call from the options pits. 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.

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. time now for final call. carter. >> microsoft long. >> michael. >> use the april 52.5 call

spread. >> dan the man. >> facebook, wait for a bounce to put on a put. >> it's interesting to be an interesting week. a lot of earnings will drive the market, fed meeting and a lot more. we'll see you next week. "mad money" begins now. >> announcer: the following paid presentation for cooper chef is brought to you by tristar products incorporated. are your kitchen drawers starting to look like a bad garage sale -- steamers, rice cookers, roasters, slow cookers. and just how many pots and pans does one kitchen really need? and every time you cook, cleanup's a disaster. scraping, scrubbing -- what a chore. what if you could replace all this with one single, nonstick pan? and what if this pan was innovative in design and made of the highest-quality craftsmanship? and what if you could cook with it on the stove and in the oven? introducing copper chef, the nonstick, all-round square pan with ceramitech. it's a breakthrough in technology. copper chef with extra-deep