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tv   Fast Money  CNBC  June 6, 2014 5:00pm-6:01pm EDT

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we had unusual activity in terms of the option activity. so how should you play it going into monday? >> well, i hope you have your br breathe rides ready? >> thanks a lot. "fast money" starts right now. in new york city times square, i'm melissa lee. tonight is a very special "fast money" because i am counting down my favorite songs, my five favorites. our traders are tim seymour, brian kelly, steve grasso, and pete najarian. they will not have any say in the music we hear tonight. >> so no difference from any other night. >> bingo! >> sorry. there we go. >> get serious here. apple, closing at $645.57 today. on monday each share will be worth $92.22. to our stop story, the return of risk. a strong jobs number this morning sending stocks to record highs. russell 2000 entering positive territory for the year.
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so should investors ditch those safety plays and start adding risk to their portfolios? pete, what do you say? >> well, i think there are certain areas where you could add a little risk. you look at some volatile stocks, whole foods is a great example. it's a $50 stock going into earnings. stock has sold off dramatically towards $37. now it's starting to show a little bit of life once again, mel, and the options have shown us some life. so i think you can go back into this beta name that can move at a huge accelerated pace to the upside much more rapidly than anybody else in the space. for that reason i like it. i still think the indian stocks as well. epi, again, a new high today. i think it's breaking out. i think there's plenty of room to the upside. that's still risky because it's already made such an unbelievable move this year. >> i want to back up a little and get to the underlying premise. it is in fact time to put more risk into the portfolio. would you agree with that statement? >> listen, when we're making new highs, it's difficult to go out and say we're wildly bullish here and it almost makes me
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cringe inside to say that. i think there are places you can take some risk. what the ecb did yesterday was a fairly big move in my opinion. i think you have some kind of upside here. i personally would look towards the emerging markets. pete just brought up india. same situation is going on in brazil. look what happened to the ewz there. poll came out showing there's not a lot of support for it. that made the etf go up. people are thinking they'll get some pro-growth, pro-business government come october. so ewz is the way i would play this. >> this is the way fortress investment is playing it. would you agree? >> this is why pete is into india. they already had that election that brian is referring to. the thing about yesterday with the ecb that's so powerful is the ltro and the liquidity for banks, the big stress on emerging market over the first three months was more concerned that eu banks were clawing back in capital. that was really the capital flow
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risk. it you think there's more liquidity in the system and more risk on, emerging is where you want to be. niece two g these two guys are talking about markets that have had a big run. owning the eem has been a total underperformance move. but if you want to just bet on the asset class, you are now at one-year highs and you are at breakout levels i think we will continue to go through. it's partially because of liquidity. i would like to korea, ewi, the ultimate beneficiary of the industrial element of this move, and then latin america, ech, chile and purr rueru, underperf relative to brazil. >> back to the united states, where would you go? >> you can pla i y it two ways. if you believe this is a risk on trade -- >> do you? not if one does. does grasso believe it's a risk on trade? that's what i want to know. >> i don't believe it so that's why there's two trades. if you did believe it, you wanted to have a really high
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torque trade, it's aci. you go with coal. so that's a really torqued up trade. if you believe that you want a little more consistency, you go into kb homes. >> but the coal -- first of all, i have been long and wrong on walter emergency for the last 15 bucks. but when we've had risk on trades in the past say nine months -- >> it hasn't moved. >> it hasn't moved any of these stocks so why does it move it now? >> i think at this point people are reaching because -- you're getting a little deeper into the year. you're right, it wasn't worked and it's been based on china more or less or global growth. so if you're concerned about global growth, it could still be a problem, but you have a stock that is off drastically, 41%. rallied about 13% recently. i'm talking about a very short window of opportunity in coal. i'm not talking about an extended play. >> would you agree with the coal play? >> it's tough. >> we had a weird coal trade when the epa came out with proposed emissions rules. some of them fell out of bed.
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some did okay. >> it will surprise people though. >> coal have a bump. to get a sustainable rally you will need a broad economic rally. that's why the market is going up. we have the goldilocks scenario where rates aren't too high, the economy isn't too strong. it coal starts ripping -- >> do you want to say my thesis? >> go ahead. >> i'm not being a wise guy. do you want to sing it? you can sing it a lot better than i can sing it. we're almost at that point where everybody threw out the airlines. if you bought a basket of airlines, you would have had a couple winners out there. i think we're at a point where you buy a basket of coal. >> what we have here is family dollar up about 7% now, 6.5% in the after hours trade. about 363,000 shares of volume. this after activist investor of activist investors carl icahn discloses a stake in dollar
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store -- family dollar. he intends to seek talks with the board to discuss strategies. again, saying that the shares are undervalued. carl icahn says he acquired the positions in family dollar in the belief they were undervalued. a 9.4% stake in a dollar store. this one family dollar. so, again, up about -- we'll call it 7% in the after market trade. >> thanks so much, dom chu. what is the trade on this one? >> you know, you can certainly just go with carl and go into fdo, but i think you might want to watch walmart is ail lit. walmart has been eating the dollar store's lunch for the last six months or a year. if eye carnoustie comicahn star up, it might be weakness, it's going to take a bit to hurt walmart. >> i would say also that i think what carl is seeing here is these dollar stores have really gotten sold off. when you look at some of the names, where they were and where they are right now, they really have not participated at all in these rallies. so i think he's looking at an
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opportunity here and this was a space not too many years ago where a lot of activists investors were involved. >> what could the strategic alternatives be. >> dollar general also getting a lift. carl icahn acounsennouncing he' taking a 9.4% trade in -- >> everyone was saying the consumer was dead and then they were looking at the valuations here. when we're making the assumption that the stocks can run, either we're saying there should be consolidation because underperformers need to be inspired higher or there's a fundamental reason for buying them. i don't think it's the latter. so i think it's a case where guys think that, look, these are companies that should be in play. >> you look at a family dollar or dollar general and the pes are higher than those of a walmart. is it worth it for that? >> that's why this is one particular stock, but dollar general, dollar tree is the other one and big lots, but big lots has done pretty well.
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>> you shop at big lots, right? >> i'm at big lots all the time. no, i'm not. >> big lots is great. >> i'm just kidding. >> you realize you've offended all -- there's nothing wrong with big lots. >> love big lots. >> we're going to talk apple now. for the first time in more than five years apple will trade under 100 bucks a share. the stock will open at $92.22 on monday following the seven for one split. apple shares have been on a tear up more than 47% over the past year. let's bring in mark newton, chief technical analyst at gray wolf execution partners. mark, good to see you. quite a run. we mentioned the yearly performance but even just since april it's up more than 20-something percent. what do you see now? >> the stock has gotten to nose bleed levels. i don't think it can make much progress before it pulls back. the stock has been up over 25%. current levels there's three reasons to avoid the stock. it's gotten extremely overbought. as overbought as it was in
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september 2012. when you look at weekly bands that control the movement in these stocks, it's up and hitting the higher part of that band. third reason if you look at prior history the stock is split three times and each time the stock has moved up and then sold off 5% to 10% after that split. so based on that we're at levels where clearly the stock has had a very good run. nobody is questioning the long term fundamentals or really even the chart technically on a longer term basis. this is more short-term concern about the stock has moved too far too fast. my thinking is $600 is likely before $700, but after post split, it's only really a move from $92 down to $85. my thinking is that happens sometime in the next couple months and likely coincides with a broader pullback potentially in stocks before we can see much further progress. >> historically though isn't there evidence after a stock split, the stock tends to go higher, whether or not that move is justified because this is just math.
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it's just dividing by seven. doesn't change anything about the stock. sanford bernstein was clear that there historically there is a boost after the split. >> 1987 it was the tail end of the entire move up before the '87 crash. in 2000 a majority of stocks peaked at the end of march and were falling during that time in mid-june. that carried the stock down. 2005 it was a different story altogeth altogether. my thinking is it's just tough. for people initiating new positions, it's going to be difficult to make money in the stock in the near term. i would avoid it short term. >> really quickly because, mark, what do you do with the fact this is such a big cap stock and if you look at the top 100 holders, my understanding is they're around a 2% position. if you're anybody who has a conviction in the stock, that should be a 3.5% to 4% position. maybe some of the technical analysis you're saying, does
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have to be held with a caveat? >> he's saying it's overbought. you're saying it's under owned. >> it's under owned even though guy that is own it, they're underweight a position in a stock that should be bigger for them. >> that's obviously a great point. i think this is apples and oranges. as i said, i don't question the long term longevity of this stock or even the fundamentals. i think it's more short term. the stock has been up $135 within the last 35 trading days, over 25%. so, you know, it's time to take a look at the stock potentially pulling back a bit. i'd love to buy the stock at $600. i agree with you it's underowned. i just don't like it here at -- >> 50% pullback? >> $650 down to $600. i'm a buyer at $600. i like the stock there. >> mark newton of gray wolf. that's a technical view but there's a fundamental point of view and that could be very different. >> it could be different. i still think you probably get that natural $100 on monday. it naturally kind of has a magnet towards $100 and then at that point maybe you get that
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pull back and i think you do buy it at, well, $600 or 85ish on the pullback. >> sorry. you think this event means -- 7 to 1 split means to goes higher because retail gets excited? >> controlled euphoria. >> they have seven shares for every one they used to have. you slice a couple off because it's been a very good run. you have more shares so cosmetically i realize -- >> what i'm -- >> it allows a better entry point for people who are waiting. the other sect of the retail audience. they say this is my time to really buy apple. >> it's easier to be long because the options will be easier to trade. >> absolutely. there's no doubt about it. when you look at what's going on, over 700,000 contracts a day. 2 to 1 calls over puts. mark said nose bleed. i completely disagree with that. i don't see anything about nose bleed. yes, it's gone up fast.
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you can see why people were buying way upside calls. >> green mountain shares spiking. we have the latest details. plus find out why a change in google's search could be hurting -- listen to one of my five favorite songs. "desire." how can a tablet replace start with the best writing experience. make it incredibly thin. add an adjustable kickstand, a keyboard, a usb port, and the freedom of touch. and, of course, make it run microsoft office, with the power and speed to do real work. introducing surface pro 3.
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green mountain getting a jolt this afternoon making it our first top trade. pete? >> you know, this stock right before 2:00 today on the eastern side, when you look at sf the option activity, it really was interesting. these june -- they expire next friday, so june 13th expiring options, the 120 strike, mel, they were buying these for 25 up to 37 cents. towards the end of the day they are trading over $5. there was never anything out there exactly on green mountain, but all we could see is obviously we all know about the short interest. it's pretty high. and you can also see that as the stock was breaking out to the upside, that seemed to be something as well. a lot of people talked about technically. but you look at the options, 11,000, over 11,000 on the day
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traded. something was going on there. >> did you jump in? >> i had to jump in. how could i resist. i'm expecting something to happen. >> next up, ebay falling as an analyst says the company is getting less views on google. >> if they lose 80% of their top rated placement on search it will affect the stock. also losing steam on that pay pal spinoff. that was a catalyst for them. at this point the stock is under pressure. use a $48 stop if you get into it, real tight one. >> time for pops and drops. big movers of the day. pop for humana up 2%. >> a company with some revenue growth. when you look at where it's trading at a pe, it sounds great but like at stifel. i think it goes higher. >> unilever, a drop, 1%. >> investors really questioning the strategy. i think it's one of the best global food companies to get exposure to em but they're
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selling off a lot of brands. >> a pop for arista networks up 28%. grasso. >> this is a younger, more nimble player in the same space that cisco plays in but cisco is trying to transition to what this company already is. the only problem this company has is valuation. that could be a stall if we get back to those bubblicious stereotypes on stocks. i think you're okay for now though. >> pop for gaffe, up 2%. >> their may statemeame-store s came in at 4%. gap is starting to have competition for lululemon. watch out for lulu and the downward facing dog chart of death. >> did you suffer that downward dog problem? >> no, i was able to push out of it until an upward facing dog. >> anyway, i'm moving on. drop for riding your bike naked. >> yeah. >> you won't have to look to the sky to see a full moon this weekend in portland. that's because the annual world naked bike ride is racing to the
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oregon city on saturday. some residents right-hand head over heels about the idea. concerned citizens have voiced bottomless complaints. police recommend staying indoors and closing the blinds. >> is that a roasted nut street vendor? i can't see. >> that's unbelievable. >> that will crack you up. >> terrible. all right. is alan mulally to the rescue again? sears ceo eddie lampert reaching out to mullally for help with a turnaround plan. could the outgoing ford ceo end up in the c suite of the flailing retailer. we hear what he had to say about it. and enjoy another one of my top song picks. "american boy" by estelle. find out my final song choice next.
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"demon" by imagine dragons. which these guys have never heard of. i don't know where they live, but okay. let's go to dom chu. more details on carl icahn. >> i just want to say i know what image dragons are. i just waned to state for the record. >> right up there about sabotage by beastie boys. just to bring you up to speed to let our viewers know, we've broken news about the fact that carl icahn's taken this stake in family dollar. as of this filing he's taken a 9.4% stake in the company. what he wants to do he says the shares he believes are undervalued. they may also determine to seek
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shareholder board representation in these family dollar stores at least in the company if appropriate. also, wants to discuss with the board and management the expl e exploration of possible strategic alternatives. what's interesting about this is he's not the only big name fund manager in family dollar. you have also got big ones like nelson peltz's try in fund. they have a 7.4% stake, 8.5 million shares. also john paulson, paulson and company's john paulson has 6.5 million shares or 5.7% stake in family dollar. carl icahn just the latest name but paulson and peltz were already in family dollar. >> thanks a lot, dom. peltz in 2011 made an offer to buy out family dollar at 60 bucks a share which is approximately where it is right now. that's another interesting aside. let's get some unusual activity here and, pete, you're watching a heavy call activity in ford. >> when you look at the option activity, there was a position
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put on not that long ago in the september 17 calls, 45,000. those were sold today. folks were rolling it up to the september 18 calls, 45,000 more. somebody is taking a little risk off the table but still wants to be involved in ford. they think it's going higher, i do too. >> the question of where ford's ceo could land after his tenure at the automaker comes to an end in july. records say mullally met with sear's ceo eddie lampert. he said this about his future plans. >> i have absolutely two global eicon icons. got a great traem. the strategy is going to stay in place, the management system, the culture. when i graduate on july 1st, i'm going to really think about where i'm going to serve next. >> he didn't say no.
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in mullally ends up at sears would he be able to save the struggling retailer. i don't know. >> he certainly has a great reputation in turning things around. the problem with sears and retail in general, you have a lot of great operators in this field that haven't been able to do anything. perhaps if they spin off some of the real estate, maybe there's some of the parts trading here, but i think it would be a tough road to sled. >> it just seems a little -- this is a guy that has a manufacturing background and this is a major retail conundrum to go through. >> final trade time. let's go around the horn. tim seymour. >> yeah, my final trade -- >> you forgot. there it is. total. >> energy has been the best trade of the year. >> good recovery. brian kelly. apple and google both in the home control area. i like control. >> steve grasso. >> safer weighted, kb homes. >> pit boss? >> i got a better fit for alan mullally. how about ual. i think that fits him better.
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he has his boeing background and ford background. epi. i like the way it's been trading. i think this indian efl is going higher. >> that does it for us on "fast. quti" """options action" starts right after this break. have a great weekend. "fast."""o right after this break. have a great weekend. tdd#opti right after this break. have a great weekend. "options after this break. have a great weekend. : you re tdd#: 1-800-345-2550 you look for what's next. tdd#: 1-800-345-2550 at schwab, we can help turn inspiration into action tdd#: 1-800-345-2550 boost your trading iq with the help of tdd#: 1-800-345-2550 our live online workshops tdd#: 1-800-345-2550 like identifying market trends. tdd#: 1-800-345-2550 now, earn 300 commission-free online trades. call 1-888-628-2419 or go to to learn how. tdd#: 1-800-345-2550 sharpen your instincts with market insight from schwab tdd#: 1-800-345-2550 experts like liz ann sonders and randy frederick. tdd#: 1-800-345-2550 get support and talk through your ideas with our
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this is "options action." tonight -- >> the only thing we have to fear is fear itself. >> you said it, fdr. that's because the vix has fallen to a new eight-year low and that has some traders downright scared. we will tell you how to protect your portfolio. plus, i, chaos. >> assume the crash positions. >> we'll tell you why apple's historic 7 for 1 stock split could cause mass confusion and rare opportunities for you to make money. we'll show you how. and streaming mad. >> i am as mad as hell and i'm not going to take this anymore! >> netflix is lashing out at the
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internet providers but did the premiere of "orange is the new black" just give netflix the upper hand? the action starts right now. live from the nasdaq market site, i'm melissa lee. these are the traders in times square and have no fear, the vix hitting its lowest level since 2007? how can you use the low vix to make money? let's get in the money and find out. you know there might be trouble when the resident bear gets bullish, dan. contrarian indicator here sitting at this desk. >> i think it's hard to look at the vix with a ten handle. we haven't seen it in a long time. and say that all is well. i mean, it is well. the s&p is at all-time highs and we keep grinding higher. so when you look at that chart right there, it shows the inverse relationship between the vix and the s&p. but it doesn't speak to health. it speaks to complacency. that's one of the things that when you talk about how do you use low implied volatility? well, you can put on some
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protection for things you own, things that pay you a nice dividend, things that are working. why get out of it if everything is working. especially the last thing for those trying to pick a top in what is summer trading right now. you know the old market saying, never try to short a dull market. >> the vix is sort of screaming like kevin bacon at the end of "animal house," all is well. when complacency is very high, risk is actually higher than it might otherwise be. think about it this way. if you had a stock with a really high short interest, you often expect that those people who are expressing some skepticism are there to buy the market as it falls. we don't have any of that implied in the options markets right now. right now what the options markets are saying it can only go in one direction. >> vix is not really telling us anything we don't know from the market itself. trading it has been futile just as shorting the market. is there any incremental wisdom in the fact the vix went to new low s?
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probably not. we're almost at already rows. it's just, again, it's coincident. it doesn't lead in any way. i don't think there's any information in it. >> that's the good news though because actually one thing is that the vix does get to a basically a floor. so there's always going to be some movement in the market. as long as it's moving a little bit, that is going to essentially create a floor for options prices which means it's a great opportunity regardless of which direction you're looking to play it because they can't get a whole lot cheaper. >> but, carter, in terms of the charts, the s&p chart -- >> the s&p chart is the defer nition definition of xlcomplacency. we've gone 18 months without a correction. not good. >> not just equities. look at bonds. >> everything. >> that's the other thing. this is the worst week for bonds in months, so, you know, complacency is all over the board there. >> let's get to your trade. you're looking at ge. >> you say i'm getting bullish. to me this is a trade. if we're going to go -- if the s&p is going to continue to go, one thing that we have been
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talking about this week, the iwm, the russell 2000, if the small caps join the party, then it's on, you know what i mean? some of this thing is going to start to play catch-up. one of the names i was looking at if part of this whole thesis is global growth is improving, we saw data in the u.s. that looks a little better, then you want to go for some laggards, cyclical names that will improve. ge is one of those. i think we have a five-year chart, it is at the lows here. that chart is the price. to me $28, that's the previous high. that's where it closed on the last tick of 2013. that's what i want to gun for. in july they report on the morning of july expiration, july 18th. options are cheap. the stock looks poised for a breakout. if there's any good news -- joy global this week g-- >> monster move. >> hold on. >> chart boy, take it easy here. >> it's not about the charts. >> it was up 11% in two days.
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it broke out to 52-week highs. this is the same trade. i'm targeting ge's earnings on july 18th when the stock was $27.12 today. i bought the july 18 calls for 16 cents. that's less than 1% of the underlying. if that stock does a joy global and gets back to the highs, if it breaks out you have asymmetric potential. >> carter? >> joy is a $5 billion company. ge is $270 billion. >> short interest. >> all it does is mine and it's a very high beta stock. ge is a gdp stock. they are not performing on -- >> the largest market cap company in the world just went up 15% in a straight line, apple computer. >> there's an opportunity here. first of all, i want to point out something. ge is trading at below market multiple. it's a couple turns cheaper than the s&p. that's the first thing. the second thing is look at how much he's spending on these 28 strike calls. 16 cents. that's just a little over a half a percent of the current stock price. it doesn't need to move very far. here is something else, those
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options aren't going to decay that rapidly. they have earnings coming out that day. there's always going to be a little bit of a bid for optionality going into that event. that's a really, really cheap way. this is the opportunity we were talking about. options are so cheap, i don't see how if you're going to make a bullish bet that doesn't look like a favorable trade. >> to carter's point, ge does not have the same beta as joy global. do you think ge will meet expectations or beat -- >> well -- >> because that's what normally happens. that's as exciting as it gets. >> if we're going to have the s&p at some point later this summer at 2000, stocks will get back to the highs. i'm not saying buy out the money or in the money calls. these are cheap out of the money calls. they're dollar cheap and vol cheap. >> stakes are high in the buffering battle between verizon and netflix. with netflix second season of "orange is the new black" today, so if you get that dreaded buffering sign, who is to blame? julia joins us to explain.
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>> it's very complicated here. if you're buffering it's hard to know who is to blame. "orange is the new black" traveling through a spider web of connections. netflix sends data to servers and from there to verizon's hubs and then roughly to the 9 million internet subscriber homes where there could be an issue with a wi-fi connection or even the netflix players. verizon along with comcast has an interconnect deal where netflix pays verizon for direct connection to improve streaming. at&t and time warner which don't have a deal have an extra step. their data also goes through a company called a transit provider. this paid deal has paid off for netflix subscribers on comcast. streaming speeds have improved by more than 50% since their deal in february. but verizon speeds have only increased just slightly since their deal was made over a month ago. it can take a while to implement
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changes. this buffering battle, the back around forth between verizon and netflix isn't hurting either company's shares but this weekend the pressure is really on for them to perform and avoid that terrible buffering. >> julia, thanks for that. well, netflix's stock has had a remarkable month rising 25%, finishing up in 18 of the last 21 trading sessions but that's got the chart master worried. so, carter, what's the problem here? >> i think just what you said. that's a lot of sessions up in a row. let's look at the chart and try to figure it out together. so what we have here from this low point is a 45% advance. but it's not so much about percentage. it's where we've returned to. if you were to look at this top and you were to look at where we are now, this is exactly 28 days down, exactly 28 days back. we've returned, if you will, to the scene of the crime. this is where the stock really plunged and now you've returned to where there is memory, which is to say dead bodies. people who bought poorly, endured a lot of losses, and now
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have the chance to get their money back. so the presumption is that ricochet of 45% has reached a level where it stops. we would faded move. here is the same chart. remove the drawings and look at this. broadly speaking, if i were to give you a trend line of sorts, we've come back to the throat, if you will, meaning the underbelly of the trend line. that's also a difficult level. now, finally, let's say ultimately this is going higher longer term and ultimately you were to call this an epic cup and handle, yes? a cup and handle forms and when it gets to the stop it consolidates or backs away a little bit ever ultimately going higher. we think we're at the moment. we would fade this stock. too many sessions up in the row. take your profits and try to sell short if you can. >> carter is very clear about where he thinks the stock is going to go. dan, what do you think? wall street is getting more bullish because of the international component of the story and also, you know, "oranges is the new black" is coming out, another season of
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"house of cards" in the works. >> if you're just buying it on the idea of hits, i don't love that. the international expansion is important but they have to show they're going to get leverage off of it because ultimately in the time now, it just means more losses right now. so to me i'm not a fan here. i have actually gotten turned around. i had my best and worst trade of the last two months both being short the name. i'm out. it's on my banned list. >> at a $27 billion enterprise value, any one hit is probably not going to propel it that much further. this is a name i have long been skeptical about because the valuation has seemed pretty extreme. this is a company that has been seeing about 20% revenue growth and finally looks like there's actually some of that flowing to the bottom line and at a very good rate. still the valuation at 70 times 12 month earnings is nose bleed territory for most companies even those that are growing a the a rapid rate. i'm inclined to go with carter onis. one of the things we were talking about also is the fact that options are cheap. they're not quite as cheap in a name like netflix because there is some skepticism based on the
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volatility. what i'm going to do here is simply put on a calendar put spread specifically the one i'm looking at is the august 380, january 380 calendar put spread. i will buy os longer dated puts. sell the near dated ones for 13.50. if the market continues to do what it's doing, if the stock consolidates, what's going to happen is that near dated options will decay more rapidly. if it stays right here i can win. of course, if it declines, i have ways to win that are much better. if it goes down to that 380 strike the longer dated one will increase in value. >> you have been skeptical. is there something about -- is it just the technical picture that carter lays out that makes you want to put this trade on? we could have made the argument for a similar trade many, many times and we could have lost a lot of money. >> well, you know, actually if you did a trade like this, you probably would not have lost a great deal of money. this is just one of those
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situations where we're actually looking for the market to kind of grind and we're looking for this stock to kind of grind and maybe even go a little bit lower. these are two ways we could win here. the only way you lose is if the stock really rockets from here and i don't really see that happening. >> this is a great trade. if you want to buy puts in a name like netflix, you have to finance it. one thing on the technicals, this came all the way to the prom, is going to probably kiss the prom queen. i think you see $450 in the cards. if you're going to own puts, you have to look to finance it. >> kissing the prom queen. >> never did it. >> not surprised. got a question, send us a tweet @cnbcoptions. we'll answer it right after the show. in addition you will find great trader blogs, educational material, and the most salacious gossip making the rounds in the options pits. some call it the tmz of derivatives. check it out. it's the split heard round the world.
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>> pretty nerve-racking. >> got you, gwen. we're talking about apple's split.'ll bust your brain box. ♪ all on thinkorswim from td ameritrade.
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[ bell ringing, applause ] five tech stocks with more than a 10%... change in after-market trading. ♪ all the tech stocks with a market cap... of at least 50 billion... are up on the day. 12 low-volume stocks... breaking into 52-week highs. six upcoming earnings plays... that recently gapped up. [ male announcer ] now the world is your trading floor. get real-time market scanning wherever you are with the mobile trader app. from td ameritrade. one is the len oneliest num but apple shareholders won't have to worry about that now that tlaef done a 7 to 1 stock split. the professor is breaking that down for you. mike, explain what we need to know. >> this is what's going to happen. we're going to see some modifications, some adjustments to the options contracts.
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let's start out with a simple example and assume that presplit you own one january 700 strike call. we know it's going to be a 7 for 1 split. take the number of contracts you have, that's nice writing right there. multiply that by seven. so now that's how many you're going to get. one sometimes seven, seven contracts. the strike is also going to be adjusted. you need to divide that by 7. 700 divided by 7, 100. if you owned one january 700 strike call. after the split, easy, 7 january 100 strike calls. it gets a little more convoluted when you start dealing with some of the strikes that aren't easily di visible by 650. if you owned 1 january 650 call, well, you're still going to have 7 contracts but now you need to divide that by 7 also. that gets you to the number 92.86. what happens? 7 january 98 spot 86 strike calls. the amount of premium you hold
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will be about the same. take however much the options trading for and dwoo i hivide t seven. >> is there a magnet to 100 post split? >> there is. two things, while the stock doesn't actually have any change in valuation after a split, there's a lot of psychology to that so we know in a way it does. two, there is something about past tops. we have a big stock that's acting well. a lot of momentum that's not expensive, however you want to measure that. i would say $700 is in the cards. >> dan? >> i agree. it's back to the old prom thing. it's gotten up here, 8.5% away. i'll tell you this, if it gets up there and they disappoint in the fall on products. they were suggesting an iwatch could be in the offing. if that doesn't materialize and the phone is a dud, that will be the most epic double top you have seen. >> what happens to the cost of premium? what happens to the premium now? is there anything that changes? does it become more expensive at
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all? >> that's a great question. it used to be if you wept back about ten years ago, there was sort of a common sense that lower dollar stocks could move more on a percentage basis. the premium would actually rise. the idea was it was easier for a $10 stock to move $1 than $100 stock to move $10. i think actually investors are a little smarter now than they were and they recognize that the valuation of this company probably shouldn't become a great deal more volatile just because you have increased the share count. so i'm actually expecting it to probably remain just about where it is and that's why i think if you take the premium for your options going out, divide by seven, that's probably where they will be on monday. shares of family dollar surging on news carl icahn has taken a 9% stake in the company. prior to this news we saw a very large bullish options trade. hmm. we will tell you what it was when we come back. [ male announcer ] what if a small company became big business overnight? ♪ like, really big...
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then expanded? ♪ or their new product tanked? ♪ or not? what if they embrace new technology instead? ♪ imagine a company's future with the future of trading. company profile. a research tool on thinkorswim. from td ameritrade.
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♪ [ indistinct shouting ] [ male announcer ] time and sales data. split-second stats. [ indistinct shouting ] ♪ it's so close to the options floor... [ indistinct shouting, bell dinging ]'ll bust your brain box. ♪ all on thinkorswim from td ameritrade.
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welcome back. i'm eamon javers in washington where we are seeing for the first time a large and significant class action lawsuit that's been filed in the united states district court for the southern district of new york. this is a class action lawsuit filed against 13 different stock exchanges on behalf of one customer, a harold lanier. it's been filed by a raft of prominent lawyers, including at least one of the lawyers who was involved in the massive tobacco settlement back in the late 1990s. lanier and the lawyers are alleging in this case that apparently the exchanges violated contracts with their customers by providing high frequency customers preferred access to data. let me raud you a little bit from this complaint which was filed back on may 22nd but is just becoming public this afternoon. they're saying that the subscribers paid hundreds of millions of dollars in subscription fees to the exchange defendants for the provision of data in a nondiscriminatory matter.
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nonetheless, the exchange defendants breached the contracts by depriving the subscribers of the value for which they had contracted. they did this, they say, by engaging in side deals with preferred data customers to provide faster advance access to market data that breached the subscribers' contracts and was designed to enable to the exchange defendants to use their data monopoly to generate profits for themselves. it could be a significant new front in the battle over high frequency trading now that we have what appears to be a significant and large class action lawsuit. we've called all the exchanges but this is just breaking right now and we're getting our first look at it as we speak. >> eamon, thanks a lot for that. family dollar shares surging in the after hours session on news that icahn took a stake in the company. carl took to twitter and says disclosed a 9 prts position in family dollar. hope to continue our streak of value enhancement. the news was preceded by some unusually bullish option trades
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in the pits. almost 2.5 calls traded for every put. so, mike, what stood out to you. >> first of all, unusual volume always stands out. that's why we call it unusual. the fact that somebody -- >> thank you, professor. >> the fact that somebody is buying a 5,000 lot of the 61 strike calls. i think that's pretty interesting. dan was pointing out the expiration -- >> let me just say this though. we love to make it sound a lot more mysterious than it is. let me tell you really what happened here. it was a roll. most of the volume today happened in one roll where a trader sold 4,000 of the june 60 calls to close. they were already long and they rolled them out to july 25th expiration and bought 5,000 of the july 61 calls for about i think it was about 205. so really what was happening, this person already had this bullish bet on and they extended the time. the company is set to report july 10th -- >> enlarged it a little. >> but it's not -- when you see a roll -- if you had just seen 100, 100, people picking at
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these sorts of things, you wouldn't go do it in a big block if you knew this sort of news was coming out today. let's be frank. >> you wouldn't do it like they did it in clorox and stuff look that? look, it was a large trade. it was a bullish bet. they were bullish before and they continue to be bullish. >> and the stock has been acting. . if one tries to figure out how a stock bottoms, this has been going on for several months. >> let's talk about some other unusual options trades. let's take a look at green mountain. we saw a big spike in the afternoon trade and we saw a weird trade on the options side. >> in general motors, pete was talking about the ford trade earlier. what happened in general motors earlier is much of the same kind of activity. people are taking advantage of the fact that options premiums are low. in many cases they've made profitable bets. they're taking the profits and extending their bets out. what we saw in general motors specifically was a buyer -- a substantial buy of the 3943 call
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spread going to september. it seems in many instances these guys are going after the previous highs which in that case in general motors's case was $41.50. >> he doesn't hear so well at his age. >> i was like i said green mountain keurig. >> but gm is very fascinating. >> that's also fascinating. >> the gmcr at 2:00 the stock took off. options volume ran massively. traded at 59,000 calls to 18,000 puts. most of that options activity took place in the last couple hours of the day. no news. >> all right. coming up next, final call from the options pits. [ indistinct shouting ] ♪ [ indistinct shouting ] [ male announcer ] time and sales data. split-second stats. [ indistinct shouting ] ♪
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it's so close to the options floor... [ indistinct shouting, bell dinging ]'ll bust your brain box. ♪ all on thinkorswim from td ameritrade. all on thinkorswim humans. even when we cross our "ts" and dot our "i's", we still run into problems. that's why liberty mutual insurance offers accident forgiveness with our auto policies. if you qualify, your rates won't go up due to your first accident. because making mistakes is only human, and so are we. we also offer new car replacement, so if you total your new car, we'll give you the money for a new one. call liberty mutual insurance at... and ask us all about our auto features, like guaranteed repairs, where if you get into an accident and use one of our certified repair shops,
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frequent heartburn medicine for 8 straight years. don't just visit rome. visit tripadvisor rome. with millions of reviews, tripadvisor makes any destination better. [ bell ringing, applause ] five tech stocks with more than a 10%... change in after-market trading. ♪ all the tech stocks with a market cap... of at least 50 billion... are up on the day. 12 low-volume stocks... breaking into 52-week highs. six upcoming earnings plays... that recently gapped up. [ male announcer ] now the world is your trading floor. get real-time market scanning wherever you are with the mobile trader app. from td ameritrade. final call time. carter? >> any given day you don't need to monitor the vix ticker.
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>> ge upside calls are cheap. >> mike? >> options remain cheap, buy them. >> our time has expired. i'm melissa lee. thanks for watching. see you next friday. have a great weekend. stay tuned because "mad money" starts at the top of the hour. . my mission is simple to make you money. i'm here to level the playing field for all investors. from is always a bull market somewhere and i promise to help you find it. "mad money" starts now! hey, i'm kramer. welcome to "mad money" him welcome to cramerica. other people want to make friends. i'm just trying to make you money. my job not only to entertain you but to teach you. call me or tweet me@jimkramer. when you get an orde


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