>> that does it for "closing bell." thanks a lot for watching. >> "options action" starts right now. i'll see you monday. this is "options action." tonight, genius apple trade. how would you like to make money on apple whether the stock goes up, down or nowhere at all? get in on the new mini, but it is my close trade on the battered tech giant. he'll show you how you can make money, too. plus, talk about a deal on wheels. a trade on ford to make three times your money in three months. they'll break it down. why are all of those options traders going postal for aeropostale. scott tells us why they're in fashion. the action begins now. welcome f rom the nasdaq market site in the heart of new york city's times square, i'm melissa levy. these are the trades and stocks closing on the highs of the

today. only stock america is watching right now, apple. it reversed and closed flat for the session, setting up for an apple rally. analysts what did you make of the action? >> i was trading a lot of apple today, you can follow us on twitter and on the site. we were buying call spreads yes, buying more today. we were looking for cap it lags that says, i just want out, painful, painful press action. >> it's a big swoop down. >> this was the largest volume since march, the middle of march on apple. we saw it on a rapid, down $10, up $10, over the course of 30 minutes, a short-term bottom. this doesn't mean happy days are here again and apple is going back to 700. no way do i think apple hits 700 again. but it's a short-term bottom. >> the relative strength in

apple hit the weakest point. we saw a quick 15% rally. apple such a big component of the market, everybody sitting here assuming that the market's movements are just out of the vagaries coming out of washington. i suspect a lot of what we saw later in the day had a lot to do with this stock. people who watch the know know i've never been an enthusiastic apple buyer. but i started watching, my sense was that the market was probably going to start following apple's lead. >> early in the session it was down 2%. if you look at the intraday chart on apple, you can see what the analysts are pointing out in terms of the big swing in the middle of the day. >> i think that was the volume anyway was largely due to fact we had options ex-ppiration tod. i don't think it was the exhaustive selling that defines cap it lags. >> people are hoping, hoping and that's not a great investment thesis that apple will start buying back shares. i don't think this is the sort

of thing where you say, this is the bottom, i feel good about getting long. the s&p hasn't had that kind of a bottom yet. and when the s&p has that kind of a bottom, it's going to be ug ugly. >> would you take your own capital and short that stock right now? i kind of doubt it. i don't understand anybody who would come in and say, i am now going to take fresh money and short this stock right here. the valuation has gotten fairly compelling. a lot of people are looking at it and wondering, once you start seeing that, that is basically a balance of bids and offers. you're not seeing the big gaps, that suggests to me that the stock could be poised to go the other way. >> huge thing, this is a short term call. long-term, app is not the stock it was once. >> there have been a lot of high-profile apple haters. for the most part they've been right. first mark and then doug and then jeffrey gundlach. now he's known as the bond king at least. that's what baron called him.

he's had huch stock calls as well, including the fall of bank of america. what's he doing with apple right now. jeffrey gundlach is the ceo and founder of doubleline capital, an asset management firm that's raised $50 million in three years. >> you're short apple. at what level and where are you going to? >> well i basically recommend to investors, get out of apple. and aggressive investors might think about shorting apple when it was about 610. way back in late april of this year. and it went down at first and it went all the way up to 700. it hit 705 intraday. today dropping down to 505 on a $20 a drop in the morning. i really think that apple is probably going to go higher in the short-term.

>> i think all the markets are at major resistance or support levels in the case of apple and s&p, and likely due higher as we move forward in the next few weeks. i think the whole thing about tax selling. which one of the reasons why, i referenced it way back in may of this year. why i thought a lot of these high-flying stocks would suffer problems would be tax selling based upon capital gains. but year-end tax selling used to be late in december. but these days, in recent years, people have tried to outsmart everybody else and sell a little bit earlier. i think that's what a lot of the selloff has to do with, in apple. and other stocks that are high flyers or dividend payers. i do think the action this morning looks kind of like a classic short-term bottom, with the down and reversal to a modest upper close. it's interesting that the low back in the middle of the year was around 5:25. it would have been very interesting to see apple close below 5:25. the fact that it didn't, and

basically had that big reversal earlier in the day, i think really, it's headed higher in the near term. however, for me, i recommend for the longer-term investor, there's no way i would be a buyer of apple. i think it's going to rally up maybe $50 or something from where it is now. i would view that as a selling opportunity. >> are you covering your shorts? is that what you're recommending investors do at this point? >> it depends on the timeframe. i would not be, i think you, on the panel moments ago someone talked about, i don't think it would be prudent to be putting a fresh short on. i wouldn't recommend that at all. i think investors that were short, if they're short-term traders, covering makes sense, if they're longer-term traders, i would stay with short. but you're probably going to have pain in the near-term, if you're short apple. >> hi, jeff, this is mike. glad to have you on the show. i have a quick question for you, on a fundamental basis, the stock looks extremely cheap. i'm assuming if you're longer-term view is ultimately

bearish, you're assuming this is a company that's going to see some kind of secular decline. is that what you're shooting for in the next six to 12 months? some indications of that? >> secular decline, relative to the overbelief where you were before is almost inevitable. one of the reasons i recommended against apple in april of this year was the basic viewpoint that so many investors seemed to have that apple was somewhat super human and they could do no wrong and take over the world. on a parallel track. it seems like people view the chinese economy that way, that it's superhuman and when it drops down below high single-digit growth in china, that somehow the atocracy can push a button and bring it back to 10%. if they can bring about 8% to 10% growth. why are so many of us running around the united states talking about the merits of free capitalism. if atocracy of 8 to 12% of free

market growth, i'm all for it apple at the beginning of the year had the superhuman type of belief. that was strange to meerks against the fact that clearly some of their products, now that in their fifth generation, are having only very incremental improvements. and a major product innovator as i've said over and over again isn't there any more. a lot of it was well captured in the ad that samsung put up during the first sunday of the football season where they showed the line at the apple store and suddenly depicting apple as so last year kind of thing. and i think people's attitudes toward that are going to move incrementally, but persistently in that direction. that's why i'm a long-term bear on apple. >> jeff, great to get your view on apple. great to have you with us. >> good luck to everybody. >> jeff macke of doubleline. you've been a long-time apple bear as well. >> i've been skeptical. at some point there's a scale issue. but i'm taking history's

examples to us of almost every sort of consumer electronics company that's come before, whether it's rca or sony, look at these types of companies, they have to continuously reinvent themselves and it's almost impossible for any company to do that continuously. in this case, it's doubly difficult. because the company is so tremendously so large. right now the company does look fairly cheap. i think it's a great opportunity to try to take a little bit of premium and make a bullish bet. >> the jeff said a short-term bounce, potentially by $50. mike is bullish on apple and selling a put stred. typically we buy put spreads. this is a bullish strategy where you sell one point, then buy a lower strike put at the same expiration to protect yourself. you want the stock to trade above the short put strike against expiration. that way you can keep the profits you took in. should the stock fall, you will see losses, but the losses are capped at the strike of the put you bought.

mike, walk us through the trade. >> i'm looking to sell the december 520 puts and buy the 510 puts, pay 17, i'm going to take in $4, the stock was trading around 525 when i looked at the trade you're capturing 40% exactly of the difference between the strikes. pay attention to your limits if you're going to execute a trade like this i'm not interested in selling put spreads for 25% or less. this is a little way to take premium. you have the stand if the stock catch as little bounce you'll collect the premium. i'm only looking out to december, my view is short-term. >> mike is doing a counter-trend trade and keeping his spread very narrow and that's what you have to do. >> want to buy apple stock? better have a lot of cash. even with the selloff, 100 shares costs more than $50,000. mike's bullish options trade nets him a credit of $400 and the most he canless is $600, about he can make money if the stock goes up, down, nowhere at all. pure apple genius. moving on, today marks the two-year anniversary of the

general motors ipo from bankruptcy. it's been a rough ride, but surprisingly gm has been one of the best-performing auto stocks this year. what about its rival, ford? could that be a better bet going forward? let's call to the charts, find out with the man who has driven a ford lately. carter of oppenheimer. three charts, two of the same timeframe, let's take a look and we're in the long side here. we think things look quite good. minor trend line in effect since the lows, what's important is that the stock has been outperforming the stock market. it's up since september. market is down hard. relative strengths, important. it's right on the trend line. next chart, same timeframe. you can draw the lines a different way. same timeframe, same chart. you can call it head and shoulders bottom it broke out at the neck line. when you fall back to the level from which you broke out, it's a great pivot point to get long. a little bit longer-term, this strength of late, has taken us out of the down trend that's been in effect for the last two years. we think you're headed towards 13. >> all right. so technically, it's setting up

nicely according to carter. ennis, what's your take? >> i think the stock is built ford tough. i think there's three good reasons to buy this stock. one, the housing turn-around is actually reflected in a lot of the housing stocks. but ford is a direct beneficiary of more than 60% of sales are within north america. it's ape, very cheap valuation and it pays a 2% dividend. gm does not pay any difficult. >> ennis disagrees with carter. let's crack open the playbook and renew it once again. here's how it works. a bullish strategy in which you buy one call and sell a higher strike call against it to reduce your costs. how do you make monday sni? you want the stock did go to the high strike, where your profits are capped. ennis, walk us through the trade. >> what am i doing here? i bought the february 11-12 call spread. i bought one february 11 call when the stock was around 10.45 today. i paid 40 cents for the call. i sold one february 12 call at

15 cents. i paid 25 cents for the package. how does this trade make money? i need ford stock to go above 11.25 by february expiration. above that my max profit is at 12 or above, i can make 75 cents on the trade. 3-1 risk/reward. i traded this as a february call spread because ford reports in late january. so this call spread will capture the earnings, they have very strong earnings in the most recent quarter. >> i like the valuation on ford. like their products and i like the fact you're only spending a quarter for that $1 spread. >> the new ford cars have a lot of great options, but they don't have stocks versus options, that you can only get here. one of the ford shares will set you back $1100. and ennis's stocks costs just $25 and has a 3-1 payout.

you'll find great trader blogs and educational material on our website as well. talk about a fashion faux pas, carter and ennis team up for a bearish bet on raffle lauren. will they hold up for gains or just cut their losses? time for pump up the volume, the names heating up options traders sizzle index this week. the hot team retailer gave investors cheerful results ahead of the holiday season. news that go jane.com leading fashionistas and options traders alike lining up to buy a piece. [ male announcer ] the markets keep moving. make sure the news keeps coming with thinkorswim by td ameritrade. use the news links breaking stories with possible breakout stocks,

options with potential opportunity, futures and forex with in-depth analysis. it's an all-you-can-eat buffet for all things trading. thinkorswim by td ameritrade. it doesn't just deliver news. it's making news. trade commission free for 60 days, plus get up to $600 when you open an account. peed 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 are options traders pumping up the volume this week? aeropostale. at one point, call volume was nearly five times the average daily volume. welcome back to "options action." time for total recall we look back at previous trades that haven't panned out and give you the next move. a couple of weeks back ennis and carter teamed up for a bearish trade on ralph lauren. the stock ral idea, but they haven't lost much money and here's why. >> on "options action" it's the one rule that's always in vogue -- risk less, you can make more and that's just what ennis tried to do with his bearish bet

on ralph lauren. carter thought ralph lauren shares were about to go out of style. >> the presumption is ralph lauren is going to do what these have done -- sell. >> no one is more fashionable and carter than his thought, time to sell. taking on the risk of shorting the stock? >> it's the most painful thing in the world. >> that's right, ralph. to define his risk, he set off the december 145 strike put of 5.40. ennis wanted shares of ralph lauren to fall below that strike price, or below $139.60 by december expiration. but paying $5.40? talk about a fashion faux pas. ennis, let's do this for less. >> selling one of the december 135 put. >> now you're modeling good behavior. >> so the spent less ennis then sold the 135 strike for 2.60 and created his put spread. but he did something even

better -- he made making money easier and here's how. between the 5.40 he spent on one put and the 2.60 he collected selling the other, ennis cut the total cost of his trade to just 2.80. now instead of needing ralph lauren shares to fall below 139.6 to to make money, he sees profit if it falls below the strike price or below 142.20 by december expiration. >> this is a joy. >> you could say, but there's a tradeoff. by selling the lower strike put ennis capped his potential profits between the strike of the put he bought and the strike of the put that he sold. since the time of the trade, ralph lauren shares are basically flat. leaving ennis and carter with a choice -- should they close out the trade or hope it falls into fashion? that's the big question. now "options action's" biggest fan only wants to know one thing -- what will these two fashionistas do now?

>> before we answer that you might be thinking, if ennis were bearish, why didn't he just buy a put and keep it simple? the answer is down by playing options versus options when we drill down on why the strategies save you money. had ennis bought the put he would be looking at a loss of $230. his put spread was about $280. and can be sold for $200, a loss of $80. decline in the value of the put that he bought, versus the decline in the value of the put that he sold. do you close out the trade? ack to him and call to trade. the charts. carter, what do you see? >> i think you press here. one of the great tells in markets is when something does pop on news it can only stay there a day or two. exactly what happened with ralph lauren. went up on the news, maybe news not that good, gives it all back and sitting right where we started, the trade is still on. >> all right. ennis, what do you do? >> i'm leaving this fraytrade.

this is is a name that had good earnings support. we've seen a number of stocks in the market that had strong earnings report and pulled back. coach did something similar. i think investors are taking individual news and say that's not going to play out six to nine months. i would look to close it out on any break below 145. >> what's your sin on high-end retail, whether it be ralph lauren or others approaching year end. the farther we get on the year without getting any resolution to the fiscal cliff issue that could make consumers more hesitant closer to the holiday shopping season. >> which is dangerous place, the last thing they need is hesitance at this time of the year. probably any other time of year it would have been all right. but right now it's dangerous. anybody who is concerned about having higher tax bills, concerned about the fiscal cliff. concerned about their businesses will be concerned when they go to shop. >> i think a lot of charts for the high-end retailers they have this big ominous rounded top which is not be good. don't add to a loser, ennis is

right to stay with the trade. but that doesn't mean you have to be stupid and add to a loser. >> if you look at the rally, to your point retail was one of the underperformers on the way back up. people are not looking to buy retail. >> and the caveat to any sort of trade that expresses short direction, directional view that is short, if the fiscal cliff does get resolved. those trades are the most at risk to upside surprise. >> i certainly wouldn't be shorting ralph lauren to your point. i still like the put spread. but outright shorting stocks right now. i think that's the s&p is down 100 points, it's due for a bounce. >> our thanks to carter of oppenheimer. if you want updates on our trades, be sure to follow us on twitter. and facebook.com/optionsaction. coming up the final call from the options bids. what's your best option? follow us on twitter. [ male announcer ] the markets keep moving.

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take a look at this. your ankle's worst nightmare. it was head over heels action as men and women competed in a stilletto race in the philippines. rules stated each runner had to wear pumps of at least three inches as they dashed around a 500-meter course. ouch. that's tonight's optional viewing. time for the final call, the last word from the options pit. scott? >> this week's extra is what do do if you're worried about the broad market. >> apple made a short-term bottom, i wouldn't stick around too long. >> i agree, that's why i'm using december short puts to do it. >> thanks for joining us, for more "options action," check out our website, "options action" at cnbc.com. money motion is up right after this. [ male announcer ] the markets keep moving.

make sure the news keeps coming with thinkorswim by td ameritrade. use the news links breaking stories with possible breakout stocks, options with potential opportunity, futures and forex with in-depth analysis. it's an all-you-can-eat buffet for all things trading. thinkorswim by td ameritrade. it doesn't just deliver news. it's making news. trade commission free for 60 days, plus get up to $600 when you open an account. peed 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.