people first. then money. 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. on the tech giant and they'll show how. plus talk about winning the race. part of a nike trade that turns time to money. why are all the options traders giddy? scott nations has the scoop. the action starts right now. live from the nasdaq market site the world's largest equity options exchange, 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? that's the question we're asking. 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 android galaxy stint for a week, i'm back to the iphone.

>> personally i like the bigger phone. >> i like the google maps. i'm hearing complaints about the fact that this one does not. we see people cuing up around the block for these. 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. i'm starting to feel like -- >> 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. >> 3 was launched and the 3g and the 4s and now the 5. >> 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.

>> as mike mentioned, diehard apple fans have been camping out since the crack of dawn and days ago itching to get their hands on the latest iphone. you know who else is diehard? 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 aren't 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. to give it legs. 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. how apple deals with services. they're not very good at it thus far. not just maps, take a look at complaints about siri. remember mobile me? they've got a number of thoings work on there. also, 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. longer term for the numbers to go up, 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. >> jon, a quick question. it seems like analysts are more and more optimistic. you mentioned 49 million units.

they can keep bumping it higher but they will be constrained by the supply of the component and most notably, the new lcds which they're using on this new phone. >> i don't know. 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. maybe a little bit of tim cook's logistics mind happening here. they knew the volumes are going to be huge. a couple of things coming up after the holiday quarter. one is verizon. the verizon changeover date. 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. >> all right, john fort, thank you 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. dan, 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. it's deepening the divide. >> no doubt about it. this is an issue you will hear as a major tenet of t 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. smartphone share is obviously growing. they have tens and tens of millions of users. . 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? will that be a massive increase? 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. i think 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. this could be one of the first legs of it. >> dan tonight is using a strategy called a put fly. it is kind of complicated. we want to open the playbook and break down the trade for you. it is a bearish strategy where you buy one put and sell two lower. to protect yourself, you buy one lower strike put. it sounds complicated. you want the stock to go to those two strikes that you are short. that's where you make the most money. think of it as threading the needle a little bit. tricky, dan. walk us through it. >> 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's pair boll i can. 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. 715, 680, 645 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 $11.40. 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. at 680. the profit trails off between 680 and 650 i can make up to $30. my max loss is $5. this is confusing. above 710 i lose the $5 and below 645 i lose the $5. to me, this is creating a huge

band where i can make six times my money. >> one thing i would say, if someone puts a gun to my head and 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. they don't have to continuously innovate. if you think about the great technology companies that existed i will bring up sony or palm or rim 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 rather own google. i would say you are limiting the risk but trying to take advantage of the ability to sell some of those downside puts. they can be use strategically in situations like this. i don't know there's that much downside risk in google that 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 don't know. >> i think the interesting thing -- i think you're 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. just on a dollar basis. i think this is a low cost way to make a bearish play on a stock that is very expensive. the options would be very expensive. one thing about google options, 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. >> that's a really great point. one quick point. i almost got filled mid market on this thing. you never pay bid ask, okay? >> let's bottom line this. with stocks versus options. shorting google takes a lot of guts. dan's put fly offers a 6 to 1 payoff risk.

decent risk/reward trade. 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. the big question is in which direction? got a call to the man who claims he can beat, yes, beat, bolt in 3.5-meter dash. the always fleet of foot carter braxton at on oppenheimer. >> 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's only up 1% for the year. it is badly under on the market.

on the long term chart it has all the flavor. of a fairly big top end. it bottoms with all equities. it's been impressive. 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. >> i don't know about you, but carter had me at declining smoothing mechanism. are you bearish on nike? >> it's trading up a bit. it could go a little bit lower. the other thing is that we don't see a lot of skepticism. with respect to declining margins, rising labor. adidas, we are hearing negative news from them. some of that is contractual. i think i also would lean to the short side. >> mike bearish. buying a put calendar. >> it is a strategy that we don't use too often. always good to open the play book. see how this works. a bearish strategy. mike buys a put and then sells to reduce the cost. the goal here, 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. mike, why don't you walk us through. >> sure. 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 purchase of the october 92 put for $1.80. a net debit of 75 cents. one of the reasons you notice it is as expensive as it is because of the earnings. the stock options implying 5% move. earnings coming out next week. that is the accelerated decay we are trying to capture here. this trade will make the most money if the stock runs down to just about 92.5. just above that normer would be ideal. that short data put will expire worthless. my longer dated put will probably appreciate >> i like the trade. the company earlier this week announced an $8 million share buy back. a week before the results. it seemed preemptive to me. i think the stock goes lower. >> conspiracy theorist. i like the calendar but i think verticals make a lot of sense. >> want to short nike out there

just say just don't do it as shorting stocks carrying unlimited risks. mike's put calendar costs $75 offers big leverage to the downside and of course we will see carter a little later on in the show. got a question send us an e-mail. the address "options action".cnbc.com. 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. here's what's coming up next: >> how about then apple's two weeks ago dan made a bullish bet and now he looks like a genius. with tons of money still on the line, will he exit the trade or take another bite? find out when "options action"s returns. >> time for pump up the volume. sizzle index this week. 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 news of their own buying calls

like crazy. and making this your pump up the volume stock for the second time this year. who is it? the answer when options actions returns. [ male announcer ] trading's like a high-speed train. and you don't want to miss it with thinkorswim by td ameritrade. you get knock-your-socks-off tools, simple one-click orders, real-time paper trading to hone your skills, plus anytime you need it support. ♪ stocks, options, futures, and forex. get your trading on track. thinkorswim by td ameritrade. trade commission free for 60 days, plus get up to $600 when you open an account.

>> where were options traders pumping up the trades this week. at gannett. welcome back to "options action." i'm kate kelly with breaking news.

melissa, we spoke yesterday about the heavy options trading volume going on in anticipation of the spider dividend payout today. the total volume wound up being three times the average. as expected, there was a fair amount of activity of spdr calls. they were then exercised. an activity they called dividend stripping or strategy trading. an unusually large portion of spdr calls went unexercised yesterday, leaving dividends on 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 million this person told me. although there was wide speculations that the losses were near $20 million. that was a back of the envelope calculation. 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. kate kelly. 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. the stock has rallied only 4% but he made ten times that amount. here's why. >> on "options action," it's the height of technological innovation. risk less to make more. that's exactly what dan did with his bullish bet on apple. 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 trade above that strike price 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. come on dan, let's do this for less.

>> sold one of the september 700 calls. >> i like it. so to spend less, dan sold the september 700 strike call for $6.10 and created his call 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 selling the shorter dated one, he reduced the cost of his trade to 10.50. instead of needing apple to trade above 717.60 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 selling the near dated call, dan needs stocks to stay below the strike of the shorter dated call by the first expiration or in this case below $700 but above the second x operation by more than the cost of the trade or in this case above 710.50. since the time of the trade, 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. that's a return of 50%. expiration came today. the question is, how dan will

you manage the longer dated call? >> great question. i thought the stock was pinned to 700. it was. >> 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 actually a credit. i sit here and can't lose money. >> not bad. >> we had not one but two winners on apple. time for the upside call times two. last week as you remember mike bought the january 715 call spread for $20. that trade has not fully 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. looks like higher we're 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. personally, i think, you can only have so many things in your book and i think there are other places i would prefer to play. >> up next, the final call from

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♪ ♪ take a look at this. a petting zoo pig is being hailed as a hog hero. after saving a baby goat from drowning. the young goat had gotten its foot stuck under water but pushed to safety. by the paddling porker. you might want to skip the bacon next time. time for the final call. the last word from the options pits. scott? >> vix stuck between 13 and 20. i want to be long here. >> dan? >> google here there will be a lot coming out of this apple ios and the release and the maps. i want to look for bearish positioning. >> net long volatility. i would like to be short. nike going into earnings. use that calendar spread. >> our time has expired. i'm melissa lee. >> 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. meantime, "money in motion" is up right after this break.

this is the extra edge you need. it's free when you register. visit the member center at cnbc.com. and you don't want to miss it with thinkorswim by td ameritrade. you get knock-your-socks-off tools, simple one-click orders, real-time paper trading to hone your skills, plus anytime you need it support. ♪ stocks, options, futures, and forex. get your trading on track. thinkorswim by td ameritrade. trade commission free for 60 days, plus get up to $600 when you open an account.