(hush my darling...) man snoring (don't fear my darling...) (the lion sleeps tonight.) woman snoring take the roar out of snore. yet another innovation only at a sleep number store. hey there, live at the nasdaq market site on this very busy friday afternoon. here's what's coming up in the show. >> a million dollars isn't cool. you know what's cool? >> you? >> no, what's cool is dance trade on facebook. it can get you long the stock for just 3 bucks. here's what investors in drug stocks feel today. >> i can't take it! i can't do it! >> but one drug stock might be so bad, it's actually good. we'll explain. and how would you like to make money on disney as shares go up, down or nowhere at all on earnings? it's not only possible, it's the easiest options trade in the

book. we'll teach you how. the action begins right now. let's get right to it. because it has been a mixed quarter for the high-flying fang stocks. netflix and alphabet both surging. amazon tanked. what can we expect from the last of the group, facebook, when it reports next week. dan. >> you may be surprised, but i would be very surprised if there was a -- some sort of big -- negative surprise in facebook next week. i think amazon, what happened there, was about spending and it was about conservative guidance going forward. and, listen, i wouldn't put it buy the people at facebook. their stock is up 25% in the year. think about how much market cap it's gained. $100 billion. they have made a lot of strategic acquisitions with that currency here. and they are investing like bezos is for the future. i don't mean to sound bullish with the stock near the all-time highs. i would be surprised if there is something fundamental to their business that takes the stock down. it would be about spend. >> what's interesting to me is, you know -- google deserved to trade higher, if any stock did.

very reasonably priced. it doesn't have an expiration date on their product like apple might. and they had very good results. to me, it just feels like everything is a little bit heavy in this space and i have a hard time believing that facebook is going to gun higher if google could not with the results. >> if you think about google, really didn't trade higher. what you call price impact, which is the percentage change from two days prior to one day after. google had already run up into its earnings. and at that point, today's action, it's unchanged over a four-day basis. the thing we know is this. when the top five stocks in the s&p are equal to the weight of the bottom 250. and that is the case now. both $2.5 trillion from this point forward are a one, three, six-month basis. better to bet on the bottom 250 than it is to bet on the top five. that's apple, amazon, google, microsoft and so forth. so facebook is going to have to be perfect. and the question is, is it priced in. >> so what do you do? >> i actually think it could be. when you think about just the price action today. like i said, amazon down 5% and google barely up. and i think the rask is really

to the down side in facebook. if you're interesting a new long and think the stock could break out to a new all-time high and maybe a new high earlier in the week, i think you want to define your risk. the problem here is the option actions in facebook are very high headed into the print. i got inspiration on butterflies last week. if you want to define risk long, think of it as a stock alternative, maybe take some off the table, want to define your risk into a potentially volatile eve event, it's $22.5 billion, given this current stock price. so i think it does make sense to define your risk. i would use a call, butterfly, looking at november expiration and i want to define the range. 6% to the up side would be about $140 with a stock trading at $131.50. you could buy the november 130, 140, 150 call butterfly. paying $3 for that. here's what you're doing. you're buying one of the november, 130, 140 call spreads and selling one of the november 140, 150 call spreads.

it cost you $3 to do that. your break-even at $133. the stock trading at 130, what i'm trying to do is mitigate some of the potential vol collapse after the earnings event. and i'm selling more options near the money than i am buying. that way, if the stock just does what google did, it's not going to murder me, okay? if it goes down, define my risk to 3 bucks, that's where to me on the charts, you don't want to be long facebook. >> this is actually a fly that sets up perfectly for earnings. number one, you're able to price in such a way you're targeting the average move. the one you're buying for the up side protection, 15 cents, a tenth of the percent. you've got to buy that cover the up side. would be crazy if you didn't. even though it's highly unlikely facebook is going to shoot through 150. they're not in this case. your expiration is shortly after next week's earnings. it actually is setting up very nicely. >> and, look.

it's beaten -- talking about 12 out of 12 quarters in a row. not up post earnings. three of the last 12, actually has traded down, even though its beaten. in terms of the chart, it's obviously important. what -- no one needs to interpret, it's an up trend. up and to the right and steady and relative strength is good. it's not faltering. the market has. you know what, so is amazon, until it wasn't. >> right. and to me, this is really an options trade. not a pound the table, get long facebook before the earnings. but here's the thing. i'm risking three. it's a dollar and a half in the money. okay. so the break-even is a dollar and a half away. i can make up to seven if the stock was at 140. if it blows through 140, i still make money from 140 to 147. so there is a huge range to the up side, if things get out of handled. and like mike said, i don't want to do a call fly too long dated. this is a couple weeks after -- >> you really believe the stock is going to move 6% either one way or the other. you want a trade that -- if you

get your bet right. >> let's move on to biotech. the pain continues with the ivv. closing the day down almost 2%. big phrma got whacked too. so could the stock be a bargain now? meg tirrell has more on this. >> biotech investors hope people think it's a bargain now. if you check out health care for the year, it's been a really tough one. you can see the ibb down 23%. for the year. october was particularly bad, as well, biotech losing 14% for october. as we saw, things like ariad getting a letter from the government over its leukemia drug, epipen still getting scrutiny. of course is the scrutiny over drug prices? we saw the pain in amgen and embril and insulin prices in the united nations. that hurting biotech. the coming election also scaring biotech investors. this fear of a potential democratic sweep. the news today with hillary

clinton maybe making that slightly less likely to happen. of course, california's prop 61 also a big topic. drug industry investors focusing on that would sort of mandate some drug rebates in that state. people in the industry really, really not liking that one. if you check out pe multiples historically for biotech, they crossed over with phrma and the broader market at the end of october around the time martin gel re came out, drawing hillary clinton, the tweet that set biotech stocks downward and continued from there. so biotech, this is a chart from rbc, trading now about 13 to 14 times earnings lower than phrma and the broader market. rbc saying she number 15 times, and should be trading at a premium to the market, given growth prospects in the space. >> thank you so much, meg tirrell. the backdrop not good but chart master says one of the beaten down stocks could be so bad, it's actually good. >> the worst thing you can do. this is like not for the faint

of heart. you're buying -- catching the falling knife. today more destruction, amgen down, mcquestionsen. i want to look at brings tal meyer, its own set of problems. nothing short of a beating this year. but let's look at some setup charts and try to get down to bmy. so just to put it in long-term context, this is one of the parts, that composes the whole. the part being the orange, the hole being the blue. s&p 500 in orange, health care in blue. and what we know is, on a very long-term basis, you've got exactly the same performance. but when you do things like this, absolute, it doesn't tell you relative. just tells you well. wow, they look the same. obviously, they're not. let's look at the relative performance. that is the same chart, same time frame, done a different way. there they are juxtaposed, one to another. and here is the health care sector, and its relative performance to the s&p. what we know is that when health care was going down, of course, in the crisis, it's shocking.

meaning the very definition of alpha. you want to be something defensively. what's happened now, of course, is that while it kept up for most of the bull market and was with the market, obviously, it has been a relative underperformer. what appeals to my eye, we're right back to where we were, and where we were some 12 years ago, meaning there has been no relative outperformance at this point. and i think that based on its valuation, so many things we just heard, this is a point where you want to be contrarian. and now let's look at one of the worst of all. of course, bristol meyer. here is the hole, one of the big parts. health care. and here then is a subset of health care, bristol meyer. now, long-term chart. you can call this whatever you want. a lot of people call it a double top. i put some circles in just to sort of -- now, at this point here, we dropped about 40%. this is about 40%. this is where you get some form

of throwback. and right about like this. i'm going to play for this being an oversold again, catching a falling knife as a matter of technique, terrible. here is the actual five-year chart of bristol meyer. and here is the line that it's down to. i think you get a good bounce here after this selloff. i want to be contrarian and make a bet on bmy. >> and mike, the fundamentals are actually improving, given the last earnings report it posted. >> yeah, we're looking at a company 15% for the year. 22%, i think, to the bottom line. they are in oncology and cardio. these are big areas. so obviously from fundamentally, i think it's a pretty good story. it is trading two times rich irthan the group. so when we start talking about it being a discount to the market, this is only a mild discount and we are trying to catch the falling knife. i'm not inclined to sell downside puts in a situation like this. the way you want to play this is look out to january. by the 52.5 call spread, spend 1.5 to get that, basically think

about it this way. if it does trade down to the mean valuation of the group, that takes it down to $45. you don't want to be short the down side. if it goes up to that level, 56, 57, 60 to 90 days, this is the target we're choosing there. a buck and a half, obviously, only spending small percentage of the current stock price. >> would you do this? >> the stock is down, what, 25% of the year, cut in half over the last year. 3% dip in yield. a great balance sheet. i suspect if they put some of their cash to work, this stock is going to go higher. the idea of actually selling that up side call, so mike buying a call spread makes sense. the implied volatility, the price is elevated and i'm sure that's what you were thinking about. normally sit with a few-month outcall and wait for the move -- >> premiums are elevated because there are some big stories. deafo, their drug that obviously didn't do well, and the lung cancer trials, the big part of the reason we saw that chart fall off. that's really where a lot of the promise lies. there and he will quist.

that's why the volatilities are elevated. that doesn't mean -- >> are there going to be any big cap phrma mergers? do we see some of the big guys come together? i know that was a thing last year. >> they don't just -- >> none of that. >> but what destruction? that's the point. first bristol and today amgen. at some point, you reach a cath at particular selling. i think you're kind of there. >> i get that on a technical basis. but mike, why not wait until -- wait 11 days? and then put a trade on? and see what happens. >> i don't think -- first of all, if something -- if something -- if today's news changes things, that's probably going to be better for this group. i don't think it does. i really think what happened today is going to be -- is going to be blown over by this time next week. >> got a question, send us a tweet to@options action. and check out our website. you'll find our latest trade and videos. and check out our super cool newslett

newsletter. what are you waiting for? here's what's coming up next. here's what's been happening to shares of twitter. >> no! >> we've got a way to get long shares for almost nothing. we'll explain. plus, talk about an oscar-worthy trade. >> i can't deny the fact that you like me! >> we've got a way to make money on disney if shares go up, down, or nowhere at all. we'll show you when "options action" returns. [pony neighing] what? hey gary. oh. what's with the dog-sized horse? i'm crazy stressed trying to figure out this complex trade so i brought in my comfort pony, warren, to help me deal. isn't that right warren? well, you could get support from thinkorswim's in-app chat. it lets you chat and share your screen directly with a live person right from the app, so you don't need a comfort pony. oh, so what about my motivational meerkat? in-app chat on thinkorswim. only at td ameritrade.

hey nicole. hey! i just wanted to thank your support team for walking me through my first options trade. we only do it for everyone gary. well, i feel pretty smart. well, we're all about educating people on options strategies. well, don't worry, i won't let this accomplishment go to my head. i'm still the same old gary. wait, you forgot your french dictionary. oh, mucho gracias. get help on options trading with thinkorswim, only at td ameritrade. 's. welcome back to "options action"s. on the heels of at&t's proposed $85 billion deal to acquire time warner, a number of media companies report earnings next week. julia boorstin joins us with the

latest on ever-changing landscape. julia. >> that's right, melissa. there are two areas to watch. tv trends and m & a. they will be very much in focus as analysts and investors try to figure out where media is going from here. next we'll hear from discovery, time warner, fox, cbs and charter and then from disney the following week. everyone trying to figure out what at&t's historic deal means for the other media giants. whether at&t's vertically integrated behemoth will pose tougher competition, and whether it will prompt more consolidation between content creation and distribution companies. the only media giant to report so far is comcast. it got a boost from the election, as well as the olympics. the question is how much the other big players will benefit from the political ad surge and how much comcast's olympic gains caused viewing losses elsewhere. we can also expect lots of questions about what's underlying the nfl's persistent ratings decline. and whether it will turn around. and, of course, impact espn's

disney, fox, cbs, as well as nbc. sports is in particular focus, because those expensive sports rights are considered the glue that is holding traditional tv together that bundle. and with the world series under way and the nba season just getting started, we'll have to see if other sports follow in the nfl's decline. melissa? >> all right, julia boorstin, thank you. the decline in the nfl ratings could hurt one media giant in particular. and that is disney. espn has seen big declines in viewership. so what's a good way to play right now? the call to action. mike. >> okay. so we are going to talk about actually one of the most common option strategies there are. an investment strategy called selling a covered call. you want to do this when you're mildly bullish on longer-term holdings. you want to look for premiums that reward you for sacrificing. and choose a strike for that call that still gives a little bit of up side. let's take a look at disney's

chart. this is interesting. going into earnings, we're looking probably between now and november. at a move of around 4% on average until, you know, next three to four weeks. that's about what we have been seeing in the long-term and over the last four quarters. the way to capitalize, look to the november '96 calls. you could sell those for a dollar at 93.80. still a little bit of up side. notice this breaks even right up there, basically around 97 bucks. targeting that 4, 5% move to the up side. obviously, if it goes down, you will take some losses. but just better off than you would have been by just owning the stock, because you keep that $1. >> all right. so let's talk disney. dan, what do you think? >> if you're long disney, the likelihood of a sharp increase in the stock to the tune of 10%, get it back unchanged, doesn't seem particularly likely given the trends in the space. i like the idea of rolling short-dated calls, take in yield here. one idea, would you take that call premium and maybe buy a put

and dollar it and really protect yourself. because if they were to make a long acquisition, i don't think investors would like that. i think the trading action, if you were just -- do a simple screen, how many stocks of this size, $150 billion or go down are actually up on a rolling 1, two-week basis. markets pounded. disney's day-to-day relative strength suggested a bottom. we know it's about 30%. on a rolling 18-month basis, one of its worst relative periods. and this looks like it's found a floor. i think it's up. >> yeah, slightly over a year ago, basically on this sports thing, we basically -- that was august of last year. skinny bundle comments and basically cord-cutting. that's when a lot of the premium that disney had before that got sucked out. so i kind of think fundamentally it makes sense here. still ahead, twitter shares tanking to the tune of 23% in just the last month. if you're long the stock, we've got a way to get some of that money back. we will explain after the break.

[pony neighing] what? hey gary. oh. what's with the dog-sized horse? i'm crazy stressed trying to figure out this complex trade so i brought in my comfort pony, warren, to help me deal. isn't that right warren? well, you could get support from thinkorswim's in-app chat. it lets you chat and share your screen directly with a live person right from the app, so you don't need a comfort pony. oh, so what about my motivational meerkat? in-app chat on thinkorswim. only at td ameritrade. they made a mistake. the check they sent isn't enough to replace your totaled new car. the guy says they didn't make the mistake. you made the mistake. i beg your pardon? he says, you should have chosen full-car replacement. excuse me? let me be frank, he says: you picked the wrong insurance plan. 'no. i picked the wrong insurance company.' with liberty mutual new car replacement™, we'll replace the full value of your car plus depreciation.

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hey nicole. hey! i just wanted to thank your support team for walking me through my first options trade. we only do it for everyone gary. well, i feel pretty smart. well, we're all about educating people on options strategies. well, don't worry, i won't let this accomplishment go to my head. i'm still the same old gary. wait, you forgot your french dictionary. oh, mucho gracias.

get help on options trading with thinkorswim, only at td ameritrade. welcome back to "options action"s. we take a look back at some of our open trade. this hasn't cost much, and here's why. on "options action"s, it's our motto, in less than 140 characters. risk less so you can make more. and that's what dan tried to do with his bullish bet on twitter. he thought the social media stock was going higher. >> i don't think this board can sell this company for less than that 2013 ipo price at 26. >> but buying 100 shares could set dan back nearly $2,000. so dan instead bought the december 24 strike call for 65 cents. now in order to make money, dan needs twitter shares to rise to the strike of that call by more than the cost of the trade. or in this case, 24.65 by

december expiration. spending 65 cents to bet on twitter -- >> surely, you can't be serious. >> i am serious. and don't call me shirley. >> the cut cost 65 cents and created his risk reversal. he did something else. he also made it easier to make money, and here's how. between the 65 cents he spent buying the call, and the 65 cents he collected selling the put, dan was able to put the trade on for nothing. >> nothing? >> yep. nothing. and that means if twitter shares take just one penny above the 24 strike call, dan will make money. but nothing is free. and because dan sold that put, he could now be obligated to buy twitter's stock at that put strike price. for in this case, $16. even if twitter falls well below that level. since the time of the trade, unfortunately, that's exactly what has happened. with twitter shares down 9%. and now with no deal on the

horizon for the social giant, twitter is in a rage, calling foul and they all have the same question. what will dan do now? so here's it is at 16 bucks. >> here's the thing. at the time, the rumors had abated, the stock at 1970. i said i wouldn't buy the stock, but i want to get the stock in december expiration. down at a level where i think there is a lot of valuation support. and also give leverage to the up side. when i think about this trade, the stock down $2. i like that. given the news flow and everything like that. just quickly on the stock. i think it's trying to find a bottom here in the high teens. >> look, if you take a look at buying a stock at $20 on all of that chatter and then you think about the risk of it falling to its all-time lows around $14 if something fell through, that's a 30% decline, the risk you were taking by buying the stock there. by selling the 16 put, your risk to the absolute lows was so% of

the stock price. where it would be put to you. if you're going to try to make a bet to the long side, after it's already had a big run like it had -- i like the trade at the time. and i think it still makes sense. >> it's a gambling chip. it came out 50 at the ipo. it's 17, going straight down since the day it was born. i've never seen anyone come out so quickly, person to refute, disavow, reject. no, we're not interested. who is going to buy it? we're talking about rumors. >> the only thing i'm going to say quickly, i think it might have shown some stable sgrags. so we might be finding a bottom. >> next, the final call from the options pits. [pony neighing] what? hey gary. oh. what's with the dog-sized horse? i'm crazy stressed trying to figure out this complex trade so i brought in my comfort pony, warren, to help me deal. isn't that right warren? well, you could get support from thinkorswim's in-app chat. it lets you chat and share your screen directly

with a live person right from the app, so you don't need a comfort pony. oh, so what about my motivational meerkat? in-app chat on thinkorswim. only at td ameritrade.

upgrade your phone system and learn how you could save at vonage.com/business hey nicole.

hey! i just wanted to thank your support team for walking me through my first options trade. we only do it for everyone gary. well, i feel pretty smart. well, we're all about educating people on options strategies. well, don't worry, i won't let this accomplishment go to my head. i'm still the same old gary. wait, you forgot your french dictionary. oh, mucho gracias. get help on options trading with thinkorswim, only at td ameritrade. it's that time for a tweet. this one for dan. the retail trader says gold, what is it good for? >> i don't know. >> jewelry. >> i think enough gold is a currency and a very important investment and you should have some. >> all right. time for the final call. from the options pits. carter? >> bristol meyer, catch the falling knife. for a rebound. >> mike coe.

>> one of the best investment strategies you can avoid, disney in november 96 if you already own the stock. >> dan nathan. >> do it with a defined risk. i like the november call. >> looks like our time has expired. i'm melissa lee. thank you for watching. we'll see you next friday for more options action. "mad money" starts right now. 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. other people want to make friends. i'm just trying to make you some money. my job is not just to entertain but to educate and teach you. so call me at 1-800-743-cnbc or tweet me @jimcramer. you want cross currents? you want people making instant decisions about everything from e-mails to earnings? then you loved today's session where