then things. now you stay safe. bye-bye. this is "options action." tonight iphone mania hits america as apple makes another all-time high. dan and mike have two ways to double your money. plus talk about winning the race. part of a nike trade that turns time to money. why are all the options traders giddy? the action starts right now. live from the nasdaq market site i'm melissa lee. these are the traders here in times square. it is official apple mania has swept america.

the new iphone is out. it is faster, sleeker, lighter and there are rumors it can solve world peace. can it make you money? let's get into money and find out. dan, you actually have one fresh from the store as do i. it is pretty sleek and pretty cool. what are your impressions in terms of whether or not this will move the needle for apple? >> it will. we have a situation about smartphone penetration. at this very moment apple has the very best smartphone on the market. you couldn't say that last year. they didn't have 4g. they didn't have the screen that some of the android phones did have. now they do. the thing is the best. don't forget about the ios ecosystem that is tying it all together. that is one of the reasons why after my galaxy stint for a week i'm back to the iphone. >> i like the google maps.

are they cueing up around the block to buy the stock or thinking this is an opportunity to try to cash all of the enthusiasm. >> dan says it is the best smartphone out there. i wonder for how long. dan liked his galaxy for a week. i wonder how long before something else comes out. mike mentions the maps issue. this shows that apple is getting full of themselves. if they are filled then they have to remember we love apple but they are not bullet proof. they could screw this up enough to anger people and people would go to the galaxy or back to the blackberry. >> i have used the galaxy for about a week and a half. it is hard to type on. it is not a great device. it feels like a hunk of plastic

junk. >> die hard apple fans have been camping out since the crack of dawn and days ago itching to get their hands on the latest iphone. jon has pulled an options action trifecta three for three in terms of weeks appearing on the show. what is the latest buzz? >> reporter: three for three. these are the diehard folks. these are regular geeks in line now who want to be there for the first day. they didn't camp out but came on their lunch break. let's talk about what apple really needs to do. wants to see 8 million units over the weekend. 49 million for the holiday quarter. we did talk to a guy earlier among the first to get the iphone in hand. take a listen to what he had to say about why he was here today. >> i would normally not wait in line but bottom line is the phone is a great phone. it's the best phone made.

>> it's the kind of phone designed for idiots like me. >> load it up and just past my old 4. it's fantastic. >> reporter: a couple of things to point out about apple going forward. you talked about maps a little bit. i think that is a key issue. not just maps, take a look at complaints about siri. ipad going forward you want to see a mini ipad. something else about the iphone. china particularly important here. there will be a volume bump with the launch in north america. we need to see china mobile or some other move to keep momentum going because percentagewise china is where the volumes have to be for growth going forward. >> it seems like analysts are more and more optimistic. you mentioned 49 million units. they can keep bumping it higher but they will be strained by the supply of the components and the new screens on the phone.

>> i think part of what happened is months ago in june they started getting parts ready for this. this is when we started to see the parts leak. that is earlier than apple has parts coming out. something tells me they started manufacturing on this earlier than usual. they knew the volumes are going to be huge. a couple of things coming up after the holiday quarter. one is verizon. people who got the first verizon iphone will have contracts coming up. and also in asia the q1 tends to be a little more like q4. there could be a bump there. >> thanks for that report. one noticeable difference is that the iphone has a lack of preinstalled google map app. it seems like this map app has a problem finding certain

locations. this could be the latest symptom in terms of the war between google and apple. apple is replacing parts of google's system with its own. >> this is an issue you will hear as a major tenant of the case in google that the fact that they have been kicked out. when you think about that as far as tablets is concerned it may be a bigger issue because apple has dominant market share. smart phone share is obviously growing. the story is going to be how much is google going to have to pay for search queries in the smartphone and tablet space going forward? apple is trying to keep that at home with their new mapping system. >> so you're bearish google. >> i think this is a story that will catch steam here. there is nobody happier right now than the google folks that

the apple maps app is being panned. at some point this will turn against google because they think they have trouble monetizing mobile search. >> dan tonight is using a strategy called a put fly. it is kind of complicated. we want to break down the trade for you. it is a bearish strategy where you buy one put and sell two lower. it sounds complicated. you want the stock to go to those two strikes that you are short. think of it as threading the needle a little bit. >> it's threading the needle. here is the thing. the implied move for google's earnings in october is already about 5%. that could increase here. the stock is trading about 6 or $7. it is up 30% since early june. i want to make a bet on that

breakout range from august which is 650 that the stock will come in on weaker than expected results. when the box was about 734.5 i bought the october put butterfly for about $5. i bought one october 17 puts for $14.40. i sold two of the october 6 puts for a total of 11.80. to cover my way down side wing i bought one of the october puts for $2. i can profit up to $30 between 710 and 680. that is the guts of this fly. that is my max gain, $30. the profit trails off between 680 and 650 i can make up to $30. my max loss is $5. above 710 i lose the $5 and below 645 i lose the $5. this is creating a huge band to make six times my money.

>> if someone says do you want to own google or apple, shut your eyes five years and wake up i would say google over apple because apple is a technology company. every six months they have to come up with something new. google is not that. if you think about the great technology companies that existed i will bring up sony or motorola for example what you see is a pattern. they knock it out of the park, everybody has to have their device and suddenly something else comes along. when does that day come for apple? i'm not sure. i would say you are limiting the risk but trying to take advantage of the ability to sell downside puts. they can be use strategically in situations like this. i feel like i need to cover that. >> my first thought is that there is microsoft and yahoo. you could have said the same thing about them in terms of

being comparable to where google is at. >> i think you are absolutely right. yahoo has had a lot of trouble. one thing about this is that google is dollar expensive for the stock. when stocks get expensive the options get expensive, as well. this is a low cost way to make a bearish play on a stock that is very expensive. the options would be very expensive. the bid spread gets really wide. if you did this thing on legs and sold the bid you would pay almost $7 for this. you have to use limit orders to execute the trade. >> one quick point. i almost got filled mid market on this thing. >> let's bottom line this. shorting google takes a lot of guts. the put fly offers a 6 to 1 payoff risk. let's move on to our next trade. there are other stocks out there.

the horror. one important one reports earnings next thursday. we are talking about nike. options traders are reporting a 5% move. in which direction? got a call to the man who claims he can beat, yes, beat, bolt in the dash. >> so two charts and one short term and one long. here is the first issue if you will with nike. this quite ominous drop in gap of several months ago. the point is when stocks go down badly like that and recover you have usually overhead supply. there are a lot of trapped people from here who did not dump there but want out. now that they want their money returned to them are interested sellers.

it is badly under on the market. on the long term chart it has all the flavor. it bottoms with all equities. we have seen a lot of gross stocks that start to show trouble. often that first drop in gap is the foreshadowing of more to come. we are sellers here. >> carter had me at declining smoothing mechanism. are you bearish on nike? >> it could go a little bit lower. the other thing is that we don't see a lot of skepticism. adidas, we are hearing negative news from them. i think i also would lean to the short side. >> it is a strategy that we don't use too often. always good to open the play book. mike buys a put and then sells to reduce the cost. you want the stock above the put but below the put you are long by the second expiration.

there is an element of timing here. >> what i'm looking to do here is sell the september weekly. i'm going to collect $1 and use those proceeds to help finance the october put for $1.80. one of the reasons you notice it is as expensive as it is because of the earnings. the stock options implying 5% move. that is the accelerated decay we are trying to capture here. it will make the most if it is just about 92.5. that short data put will expire worthless. >> i like the trade. the company earlier this week announced an $8 million share buy back. i think the stock goes lower. i like the calendar but i think verticals make a lot of sense. >> want to short nike out there

just don't do it as shorting stocks carrying unlimited risks. we will see carter a little later on in the show. got a question send us an e-mail. we'll answer it in our one-on-one web extra right after the show on our website. you will also find a ton of education material there so you want to check it out. two weeks ago dan made a bullish bet and now he looks like a genius. will he exit the trade or take another bite some find out when options actions returns. time for pump up the volume. this media company is all about telling you what's going on in the usa today. and read all about it. a ubs analyst says its introduction of pay walls is working better than expected. so options traders make some

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welcome back to "options action."

melissa, we spoke yesterday about the heavy options trading volume going on in anticipation of the dividend today. the total volume wound up being three times the average. as expected, there was a fair amgt amount of activity of spider oig calls. an unusual large portion of spydr calls went ufrn exercised yesterday leaving dividends off the table. the result of what one source described to me as an operational error, the missed opportunity cost the firm no more than 10 millions. this person told me although there was wide speculations that the losses were near $20 million. that might not sound like a big loss but in this corner of the market that missed opportunity can be significant.

>> thank you very much. and it is time for the upside poll. we look at our winning trade two weeks back before iphone mania. dan made a bullish trade on apple. >> it's the height of technological innovation. two weeks ago dan made the call that apple shares were heading higher. >> i think there is excitement for the stock. >> 100 shares cost nearly $70,000. to spend less dan bought the october 700 for 16.60. to make money dan needs apple stock to drop by more than the cost of a trade by october expiration. paying $16.60 if we were interested in that kind of money we would head here. let's do this for less.

>> sold one of the september 700 calls. >> i like it. so dan sold the september 700 strike for $6.10 and created his calendar. he also made making money easier and here is how. between the $16.60 he spent buying the longer and the $6.10 he collected he reduced the cost of his trade to 10.50. instead of needing apple to trade above 17.60 to make money he can make it by more than the 10.50 he spent on the trade or about 710.50 by october expiration. it gets even better. because of the value that dan sold will decrease faster than the longer that he bought allowing dan to pocket the difference and do something not even the new iphone can do, turn time into money. there is a tradeoff.

by trading the near call dan needs stocks to stay below the shorter call by the first expiration or in this case below $700 but above the second expiration or above 710.50. apple shares have risen 3% making dan a big winner. now "options action" fans are in a frenzy. they are camping outside the nasdaq all night long and want to know the same thing, what will dan do now? >> before we answer that let's see how much money was made since the time of the trade. apple rallied about 4% to make another all time high. pretty good stuff but dan's call calendar cost about 10.50 and can be sold for more than $15. expiration came today. how will you manage the longer call? >> i covered the september 700

call and sold a higher strike call in october against the one that was long. now i have a call spread on for a credit. i sit here and can't lose money. >> we had not one but two winners on apple. last week as you remember mike bought the january 715 call spread. that has appreciated and got more room to run. carter suggested this trade. let's get back to him. what do you see here? >> not a lot happened over the last five days. we would stay in. we are still playing for 800. >> this is a coin toss. if you are comfortable staying long in apple and you want to keep your money committed that is fine. you can only have so many things in your book and i think there are other places i would prefer to play. >> we have the final call coming up next.

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take a look at this.

a petting zoo pig is being hailed as a hog hero. the young goat had gotten its foot stuck under water but pushed to safety. you might want to skip the bacon next time. time for the final call. >> vix stuck between 13 and 20. i want to be long here. >> google here there will be a lot coming out of this apple ios release and the maps. i want to look for bearish positioning. >> net long volatility. i would like to be short. nike going into earnings. >> thanks for watching. for more options action go to our website. we'll see you back here next friday at 5:00 eastern here on cnbc. "money in motion" is up right after this break.

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