live at the nasdaq market site after a very busy week for the markets. the guys getting ready. here's what's coming up on the show. >> a million dollars isn't cool. you know what's cool? >> buying shares of facebook for just under few of bucks. we'll show you how to do it using options. it's everyone's favorite saying on wall street. >> i am not just another broker no, not that. i was referring to sell in may and go away. and there's something that suggests you might want did take that advice this year. we'll explain. and -- >> loaded for speed, go! >> that's exactly what shares of tesla have done. but if you're worried about next week's earnings, we'll tell you

how to protect yourself. the action begins right now. >> let's get to it. the nasdaq 100 posted its longest monthly winning streak since 2009. and the index hit high after high this week thanks in part to blowout earn gs from amazon and alphabet soaring to record highs. it ain't over yet, next week the big kahunas, apple and facebook, facebook hitting an all-time high today, both stocks implying big moves with potential to spark a more than $40 billion shift in market cap next week. should you continue to bet on big tech, and which is a better buy right now, apple or facebook? let's get "in the money." >> i think earnings we saw last night from amazon, from google, from microsoft, really shouldn't lead you to believe we're going to have any massive surprises next week. the way investors are positioned, we knower that overweighting these things, they're massive gamers, driving that massive outperformance in the nasdaq, the nasdaq is up

12.5% versus the s&p. i hate to be so because say about it. but i think apple, the implied movement is 3.5%, average 5% the last four quarters. i'd be shocked to see it move outside that range. >> first of all, why would people at this stage be looking to offload their winners? it doesn't make a whole lot of sense. in apple's case, it's not ludicrously expensive based on its trailing earnings. facebook is growth story. if anything is poised to move facebook is it, they have a lot to live up to. the expectations are for a 45% increase in revenues year on year, 120% increase in net income year on year for the quarter. obviously that's high hurdle to get over for anybody. >> what it's going to end up being, we know, is this momentum peak for these very crowded, successful names, or are they going to continue to lead? put the current price income

perspective. analyzing a rate of 36%. just to put that in context, that's the biggest annual rate of return except for coming off the '09 low, up 60. then '98, '99, about 75% each year. so the question is how much more can we do? obviously that's what we're going to try to discuss. i've got some charts. >> we're going to first do a round of "would you rather?" if you had to put mork money to work right now. >> both at all-time highs hide go with apple. i think there are catalysts that are identifiable out a year. as far as facebook we don't know. you've got to give them all the credit in the world, they make acquisitions, use their currency, use their cash, and they work out or they have so far. to me they're the ones that have more surprise. apple's going to be more -- you can look down the road and see what's coming. >> straight equity i also would be with you just because i think we are obviously at these very heady levels at this point. i think apple presents significantly lower downside potential risk. however that said, given the

momentum that facebook has had, given the fact that that's really the bigger grower out of these two, if there's a way to play it with options, then i might lean that direction. >> i wonder what kind of trade you're going to have. carter? >> so i'm going to go with facebook, which means it's two to one. let's go look. i want to start with the whole -- we'll do apple and facebook first. first the bigger situation is this maybe how it all ends? apple, what? well -- i think you could draw the lines like that. something of a head and shoulders bottom. the question is has the head and shoulders bottom played out? what's the price objective? typically it's to the high, maybe through the high a little bit. and what you've got here is the breakout. so what i'm thinking at this point is apple has some checkback risk which is often what we see after a stock moves to an all-time high and back through, often you'll revisit. my thinking here day to day, apple has some downside risk

going into its number. contra distinction, look at facebook. this is of course the picture of what an uptrend is. in fact if you put lines on it, it has lived within this quite precise channel. so the question i guess is this. meaning we've been at this low, at this low, at this high, are we getting close? i think we've got a little bit more to go. we're going to stick with the bullish bet on facebook that mike and i are working on a month or two ago. let's pull it back from these two and try to put this in perspective. okay, these are the top big stock in the s&p. they're valued about $2.8 trillion. in fact, it's the same exact value as the bottom 250. top five, bottom 250, worth the same. that is actually not that rare a circumstance. it happens 19% of the time. 1990 to present. so take a look. at these numbers. market cap. top five, bottom 250. cash flow. it's identical. and they're trading at the same valuation. the fundamental guy would say the top five are growing faster,

a better bet. forget about that, look at this chart. this is a chart of those top five stocks, $2.8 trillion, plotted equal, bounced off this lines perfectly, i think it's a little steep and that you have the risk you're going to come down like this. so this is what's happened going forward when the top five equals the bottom two. the top five underperform. back to the chart. i bet you this is ultimately what's going to happen. we've had the earnings from all of them. if i had to pick apple versus facebook, i'm going with apple. >> mike, you picked facebook with an options trade. >> yeah, the idea here is obviously we have earnings coming up, we wanted to mitigate the expensive buying options into that. i was looking at the may-september 155 call spread. the options market's implying a 4% move. this is a bet that it's going to make that 4 before move to the upside. the premium for that near dated option is going to decay much more rapidly than the longer dated one. essentially we're going to try to use this catalyst to take

advantage of that effect. then your long net longer dated call, sell more calls against the two after may expiration if you chose. >> this is a trade structure we haven't talked in a while, it makes perfect sense, especially for a stock that literally has gone on this leg higher here. listen, this stock going to go up 10%? very unlikely at this point. the idea of selling near dated premium to help finance longer dated premium, let the things consolidate a little bit. that chart of the five stocks, when you look at the move, it's really scary. you know, when you think about it what are you doing when you're dying an index? the collective earnings and the growth and all that sort of stuff, it makes me nervous. i've been saying this a year. i've never seen anything like it. you've seen it late '90s but that didn't independent so well. >> it's happened 19% of the time, in effect, the top five stocks equaled the bottom 250. markets are always biased to a few successful stocks. >> but this one in particular, just because of the basically stellar rate of its growth, is reason why it's -- the reason

it's been doing this well. >> they're all the same type of thing. >> jim cramer makes this the point all time. then pick the stocks. because if you had owned those stocks versus the s&p over the period rather than the etf, you'd have massive, massive alpha generators. >> another stock on the hot streak, tesla, shares hitting a fresh new high, ceo elon musk revealed a glimpse of what the upcoming electric semi truck will look like. he also suggested that the company will likely add four new giga factories later this year, musk telling the audience the semi truck can be driven around like a sports car. this comes as tells la gets ready to report earnings next week. how should you play it? >> here's the thing, the stock is up 45% on the year, up actually 70% from lows in december. i think there was a lot of trepidation among investors that into the election, a lot of the rhetoric of the candidate was not going to be particularly favorable to green stories. he's done a good job cozying up

to them. now the stock has had that massive leg higher. i think there's risk near term back toward that 280 level. i think if you're a holder of this stock you should consider near dated some protection. so today when the stock closed at about 314 you could buy the may 310, 280 put spread, paying $8 for that, buying one of the may 310 puts for 10 bucks, selling one of the may 280 puts at $2. that is your massive risk. you make up to $22 between 302 and 280. think of that as protection. break-even protection to 10%, 11%. if you were looking to make a bearish bet this trade makes some sense. if you thought the stock would sell up, q1 deliveries, shorts have gotten queetsed, maybe add a little bit of a check-back. >> you can't short a stock like this where the short interest as high as it is. it's not trading basically on any kind of trailing fundamentals. and the future is pretty murky

with respect to the valuations. the energy side, it's the size of a duke energy. the car size, the size of general motors. it doesn't make any money. >> which do you think is more vulnerable to the downside? would you say facebook or tesla? if there's trouble? >> facebook. >> both. >> sorry. >> that's good, what do you think? >> it's a good one. i think facebook because it's a $430 billion stock. i think people are going to be left scratching their head. >> you love the chart on tesla not long ago, loved it. >> it's worked. >> and it's worked. what now? >> i think stick with it. >> stick with it, ha ha. what do you like better, tesla or facebook? you gave us the question, i give the question to you. >> that's fair. i think i'll go with tesla. >> interesting. >> facebook for me. >> got a question, send also tweet @optionsaction. check out our website optionsaction.cnbc.com. our newsletter.

here's what's coming up next. go with the perfect storm. >> let's not get carried away. future if you are worried about may, we'll teach you how to protect your portfolio for less than two bucks. let me get a burger with a slice of cheese but no onions hold that please ♪ ♪ m&m and oreos i want everything on the dollar menu ♪ >> that's impressive but not as impressive as mike's options trade which doubled his money in one week. he has a way to make even more cash when "options action" returns. get tomorrows news today with the "futures now" newslett newsletter. realtime trades and a sneak peek at interviews. stay ahead of the headlines and make today's events tomorrow's profits. cnbc.com/futuresnow e-mail. hey gary, what are you doing? oh hey john, i'm connecting our brains so we can share our amazing trading knowledge.

that's a great idea, but why don't you just go to thinkorswim's chat rooms where you can share strategies, ideas, even actual trades with market professionals and thousands of other traders? i know. your brain told my brain before you told my face. mmm, blueberry? tap into the knowledge of other traders on thinkorswim. only at td ameritrade. what if we could bring you by having better values? at blue apron, we work directly with more than a hundred family farms. so instead of spending on costly middlemen and supermarkets, we can invest in the things that matter most: making farmland healthier. cutting down on food waste. and bringing you higher quality, fresher ingredients for less than you pay at the store. because food is better when you start from scratch. get $30 off at blueapron.com/cook

but we've got the get tdigital tools to help. now with xfinity's my account, you can figure things out easily, so you won't even have to call us. change your wifi password to something you can actually remember, instantly. add that premium channel, and watch the show everyone's talking about, tonight. and the bill you need to pay? do it in seconds. because we should fit into your life, not the other way around. go to xfinity.com/myaccount what?pony neighing] 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. the s&p 500 just posted its fifth positive month in the last six. as april comes to a close the stocks set near record highs. should investors adhere to the adage, sell in may and go away? bob pasan at the new york stock exchange with more. >> this is one of the most famous adages. you can argue about why it works but there's something to it. sense since 1950 the s&p 500 has been up .4% may to october, compared to a gain of 7%

november to april. this is according to gale and jeff hirsch in 1986. sounds good but in the past 10 years, they've refined this by layering in two additional factors. a technical signal and a signal based on presidential cycles. the technical signals will get you in earlier than november 1 and keep you in longer than may 1 if the market is trending up. the opposite if the market is trending down. the other signal involves the presidential cycle. don't sell in may in the third and fourth year of the presidential election cycle which markets tend to outperform. the hirschs claim this means you can make four trades every talk years. combining these two signals, the hirschs claim, produces surturbo charged results. an average return of a loss of 0.8% per year for the s&p 500 may to october october, compared to 10% november to april. translating this to money, a $10,000 investment made in 1949 from simply the may to october period would now have $4,500.

that's a loss of $5,400. the same $10,000 invested in november to april would produce a gain of $2 million plus. so you can see why this hoary saw has so much staying power on wall street. >> so if you are worried about losses in may, how can you protect yourself? let's get to the "call to action." mike, what are you looking at? >> talking about insuring your portfolio, one of the things to pay attention to is timing of your hedges. rope is because hedging a port tote i don't comes at a cost, like buying insurance on your car. if you do it all the time it's going to create a drag on your returns. the magnitude that you're trying to hedge, are you concerned about a big decline? or just looking at a potentially modest decline? finally one of the things you want to take a look at is volatility. that means both the volatility of the broad market and also the cost of options. if we take a look here at the s&p, you can see what i was talking about before.

right now you would have made money if you hedged there, maybe here, here, here, and here. that's five times. the rest of the time you would have just been spending some money. that also emphasizes how important it is to focus on that timing. now we're going to take a look at how the market has done so far. just basically over the course of the last year or so. if you can imagine that you're looking for approximately 1% returns per month, then over the course of the next three, maybe you're hoping for 3% to the upside. so what we can do is say, all right, i want to have this much upside. but i want to have protection down there. you can do that with something called a collar. specifically the trade we're looking at here is selling the july 245 call, collect $1.35 for that. then using those proceeds to help finance the purchase of the 230 strike put. important point, looking at spy, they are paying a dividend of about $1.18 estimated in june. net out that dividend, this is going to cost you nothing essentially to insure your

portfolio. 3% to the upside, anything worse than 3% to the downside we got you covered. >> a free hundred, doesn't sound too bad. >> it doesn't. back in the day, long/short equity traders at hedge funds used to slap on a bunch of spy shorts, spy, etf. i prefer the idea of selling an out of the money call which is what mike is doing and using the proceeds to buy a put. that is the collar. rather than just selling spy at the money. you're giving that portfolio stocks or the spy some room to the upside to appreciate if the market does go higher. you also have that disaster protection below and didn't pay a lot for it. rather than neutralizing potential games versus your spy shorts. so i love the idea of a collar. i like it more so on a single stock. but i get why you're doing this. >> insurance is always -- that's something. one wants to go with what bob was talking about, seasonality, there's another reason. also market construction argues for it in the sense there are fewer and fewer stocks holding things up as energy continues to

fall, industrials to the consumer, this crowding into very successful but perhaps overdone growth things. market structure seasonality, it's a good time to insure. >> if the market takes the stairs up and the elevator down, collars let you participate in that mild upside but protect you against the catastrophic crash. so that's essentially what we're looking for here. >> still ahead, mike bringing home the big macs from his bullish trade on mcdonald's, doubling his money in a week, now a way to make even more cash. taking your tweets later in the show, dig deep, pull out those phones, think nice thoughts, send them to us with questions. much more "options action" right after this. hey gary, what'd you got here? this bad boy is a mobile trading desk so that i can take my trading platform wherever i go. you know that thinkorswim seamlessly syncs across all your devices, right? oh, so my custom studies will go with me?

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oh hey john, i'm connecting our brains so we can share our amazing trading knowledge. that's a great idea, but why don't you just go to thinkorswim's chat rooms where you can share strategies, ideas, even actual trades with market professionals and thousands of other traders? i know. your brain told my brain before you told my face. mmm, blueberry? tap into the knowledge of other traders on thinkorswim. only at td ameritrade. time for the look back at winning trades. mike got hungry for mcdonald's and made a killing. here's how. it's how we headache famake fas. risk less to make more. mike thought shares of mcdonald's were going higher. but just buying the stock, 100 shares would cost more than

$13,000. so instead mike turned to the options market where he could buy shares of mcdonald's for less than the cost of a big mac. >> how do you do it? what's your secret? >> it's simple, mr. president, here's how. to make a bullish bet, mike bought the september 135 call for $3.40. that $3.40 is the most he could lose on the trade. but to make money, mike needs max donalds shares to rise above the strike of that call by more than the cost of the trade, or in this case above 138.40 by september expiration. it gets even better. if shares rise that call will increase in value faster than the price of mcdonald's stock. meaning more money in mike's pocket. since the time of the trade mcdonald's shares are up 6%. meaning mike's trade is right in the sweet spot. >> there's still plenty of time the clock. >> there is, m.j. but "options action" fans all over the world want to know what will mike do now?

>> you might be asking if mike thought mcdonald's was so great, why didn't he buy the stock? stock versus options. had you bought shares of mcdonald's last week you'd be up around 6%, that's not bad. the 135 strike call for 340 is worth 740. that is a return of nearly 120% in just one week. so mike, to you keep this trade on? >> it's interesting. the day this news came out we sent a tweet about it. the stock trading $141 at the time. what i suggested was taking the money. the advantage of options is the fact that you're risking very little and you have that upside. in this case, now that option is worth about $800 bucks at the time. i said you could take a poring the profits and roll out and up to another one if you wanted to basically continue to make a pullish bet on mcdonald's. i think we've basically gotten the move here. >> big breakout, news related, take your money and run. >> we can't all be winners. that's the case with dan's bearish bet on tech. >> i want to look out to july.

you could put a pretty wide put spread on today. etf trading 132 half, buy the july 132, 120 put spread, pay $2.50 for that. >> we were talking about this earlier. apple and facebook report next week. how are you managing this trade? >> this is one that i'd like on an outright basis. think we're going to get a pull-back at some point. the concentration in five stocks make up 40% of the qqq. to me at some point they can't keep growing like this or this much higher. to me the trade was put for 250, broke even at 129.50, the stock at 136, worth 140 right now. makes sense to use a 50% premium stop on long premium directional trades. >> we have catalysts that could get the market rocked. we're looking at this as insurance also, that's the way to think of it. >> up next your tweets and the final call from the options pit.

[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.

hthis bad boy is a mobile trading desk so that i can take my trading platform wherever i go. you know that thinkorswim seamlessly syncs across all your devices, right? oh, so my custom studies will go with me? anywhere you want to go! the market's hot! sync your platform on any device with thinkorswim.

only at td ameritrade time for tweets. vance asks, what are your thoughts on using out of the money put ratio spreads -- out of the money ratio put spreads -- to minimize or eliminate the cost of protection? >> you know in a situation like this i think it's a pretty risky proposition, actually. normally i love this strategy but the problem is, selling more puts than you're long means you're essentially short puts. do you want to sell puts in this market or own them? >> or turn it into a butterfly, a put butterfly. >> that would be a better way. >> selling to the guts and buying one on the down end, that takes care of the margin implications too. >> time for the final call. >> next week i would use calendar spreads on facebook for a modest upside bet. >> we talk about directional put strategies. to me the tesla is great

protection for a long holder to enjoy big gains. >> our time has expired. i'm melissa lee. check out optionaction.cnbc.com. it's the ultimate game at white heart lane. over 3,000 tom enham g