bye-bye. this is "options action." tonight, who are you calling small? >> i wish i were big. >> small cap stocks continue to make record he's, but there's a big warning sign every investor immediate to watch. brian sutland will reveal what it is. miss the rally on facebook? >> doh, doh. >> relax because scott nations has a way to double your money in just two months. you will like what he has to say. >> why are options traders expecting a bombshell? the special report. the action begins right now.

i'm in new york city's times square. i'm melissa lee. these are the traders here on the desk, and this is the stock that has defied gravity. we are talking, of course, about amazon. despite an earnings miss, the stock is at an all-team high at $3 and change. $400 just around the corner. let's get to the money and find out. it zoomed to an all-time high. >> yeah. it's pretty extraordinary. i think the wall street optimists are looking somewhere in the $270 to $280 a share thing. obviously pretty heavy stuff. you know, i've often said about amazon that i sort of thought this was the wal-mart from 2000. remember wal-mart used to trade -- the company has continued to grow. the stock did not. i think people long the stock might be using the rationale

that that's their backstop. amazon continues to grow. revenue will be higher. ten years from now, mark my words, they'll be a mutt reply. the question is are they ever going to get the margin or the earnings? someday they'll get that. i'm willing to wait. i wouldn't buy it here, but i think that's the rationale. >> they can turn the switch on and deliver more. they can deliver it if they want to. >> he is focussing the business on growth. >> that's right. >> as long as he does that, nobody else seems to be concerned about that margin, and i think that's the thing. the company is $135 billion. >> they had this gigantic revenue, and they keep spending althe money that they should be making off of centers and now they'll do this fresh thing. i think it's a great service. >> answer me this, scott nations. how much do you buy on amazon today versus how much you bought on amazon five years ago because that answers your question. >> we just redid he -- we bought everything on amazon and it all got delivered for free, but the problem is the -- it's a great

service. it's a horrible business, but that doesn't mean it's a good short. that's the problem. >> and they're growing much more. my point about wal-mart comparis comparison, that's true, but the other thing is amazon has become so much more than selling goods. they're trying to turn the corner in the electronic capital of the world. they signed a deal with viacom, and the stock jumped after that deal to get video contact. they find growth. they continue to develop themselves and turn themselves into whatever company is needed by the consumer, and they go -- that's why wall street loves them. >> this is a stock that seems to have no fundamental valuation. >> the chart is important here in the sense that if you were to look at the trend that it's been in since the 2009 level, we have almost a ten-bagger here. it went from 30s to almost 300 -- or 312 in fact from

today's close. you would think that the wrup side is to the top of the channel. that implies another 7% from about 335. the data is relatively strength. it's an important period of momentum, and it will be dangerous to against it. >> dangerous to be against it. can't be much clearer than that, brian. >> it took off and led the market, basically may, june, and was able to stabilize because of the viacom deal. that's what kicked off the stock. now, you look at that chart, it's sort of trading towards the top end of the range, and i think when you look to the options market and you want to play this stock, really that channel there is something to consider because i think the up side maybe somewhat limited, but something if you want to -- >> using a call calendar, it's tricky. it's a bullish drive where you buy one call and sell a call on the same strike to cut the cost. it requires timing. call calendar.

you want the stock to stay below the strike of the first call, blt above the strike of the second call by the second expiration, so brian, walk us through the trade. >> i think if you are going to buy the stock, you have an outlay of cash, so it's risky. to get upside exposure, you use options. you basically use the earnings that is passed, and i want to sell for august end telling end of august and you want the option and the 330 strike. i would go ahead and sell that for $3. i then turn around and use some of the proceeds to buy in october, regular option, 330 call for 750. i've paid $4.50. it limits the cost wrout lay to buy that october call option, and if the stock trades above 330 after october, that's where i get the upside. before then, i want the stock to trend sideways to lower, and let that august call go on, and then i own that october call to get on the upside. a couple of things could go wrong here. if the stock never makes it to $330.

if the stock explodes over the next month, you could miss out on the upside and get a short stock on the august call. it could be a little bit -- i think it's a trade that makes sense. >> one of the things about this is that being, you have the accelerated data and working for you you have that going for the rest of the summer. the timing of trade like that, i like, because the market sort of goes sideways from here, and then you'll capitalize on that. i wouldn't buy the stock. i mean, i just wouldn't. i tend to look at fundamentals. this is hard to explain, but, you know, the options trade actually fundamental standpoint does make sense. >> you are going to do something like this, have you to do it active managed. the problem with being short amazon all the way up is you have lost five to ten times what you could ever make. i think the stock is actually -- that's the netflix -- the company will make a mistake. it's going to come all unwound in a hurry. they're going to change the business or do the data services thing that you suggested, and then the stock will be often the rails. >> just imagine how successful

amazon would be if it had a little stock versus options. want to buy 100 shaurz of amazon -- the calendar offers a big potential payout risk. just $450. let's move to what will be a big event for both wall street titans and retail investors alike, and that is herbal life earnings. the nutrition supplement company will report earnings after the bell on monday, and according to cnbc's herb greenberg, investors will be looking at more than just profits. herb is back with cnbc headquarters with the latest. herb. >> herbal life reports monday after the close, but the real news comes on the earnings call tuesday morning. if you take a look at the chart, there is no question that investors are betting this will be a really good quarter, but here's what you need to watch and listen for. first and foremost, any indication of a slowdown in sales. herbal life recently lost the second of several big long-time distributors. it says the impact will be minimal, but still, this could impact growth, especially if i'm

a big distributors leaving. second, in the wake of recent controversies, herbal life is changing the way is it does business. that's a good thing, but will it impact revenue growth? third, in recent days, stories have been circulating that bill ackman, who is shorting herbal livestock, and the company itself are lobbying members of congress whether to investigate herbal life. in the end that may trump everything else. melissa, back to you. >> all right. thank you very much, herb greenberg. how big of a move is the -- >> well, it's pricing at a big one. you take a look at the august options. this one didn't have -- it's one of the things that we're seeing august options are trading around 68, 70. these are big, big moves that it's basically expecting. it's the short options are highly inflated. it's interesting because earnings aren't really what's going to drive it. stocks trading 12 times -- it's trading at less than the market multiple. the real issue is the controversy whether or not the

company is a pyramid scheme. i think there's some good chance that it is, but i don't think that's going to matter between now and, you know, august expiration or september expiration. they're going to continue to deliver similar results. the company is trading cheap. i got to go with icon versus ackman. >> he used it to sell. >> what is the trade? >> i'm looking at doing the same thing, actually. i'm trying to take advantage of the fact that those near data options are very inflated. specifically, i'm looking at the august, november 65 fall calendar and five to 65, november 65 to 575, sell the august against two and a half. that's a net debit. $3.25. this is a situation where those 65 calls are obviously very inflated based on the earnings, based on all the news in the stock, and i think a lot of that is going to come out. you only have one day. that's monday before. >> in terms of herbal life, the

multiples are compelling. i think the sales -- you talk about they're still growing sales. fundamental that would be the buyer of the stock. the multiple is so strong because of all the controversy around the stock, and that's why it's that case. mechanics point, if they never do something about this, you talk about this in agreement before. are they going to -- is the government going to take down the hedge fund to short this thing. i don't know if that's going to be the case. this is a good buyle stock, and you hear calls -- >> that is what's really moving the stock around, so it's really adult swim. you have to be careful. you have to define your risk. buy in this calendar does that, but i'm not certain that the stocks really going to do well. i think it's heavier than most people think. >> it is amazing because if these two are not in the stock, we probably would not be talking about it tonight. >> no. >> i mean, have you ever traded the stock prior to -- >> actually, believe it or not,

where he. several times actually in the past. one of the reasons that we did that was exactly the fundamentals we're talking about. the controversy that ackman brought up has linger. it has with many multi-level margareting organizations, and that headwind has made it look very cheap, and i think that's one of the reasons that a lot of fundamental investors, including us back in the day when i was looking at the hedge fund, we were buyers in the stock. they just looked cheap. we had to weigh the question about whether or not it was a pyramid scheme. we got out with some profits. s we were happy about that. >> meantime, got a question. cnbc options, we'll answer web extra. that's after the show on our new website. stock has a trade that can double your money in facebook. we'll also get traders loss as well and you want to check it out. here's what's coming up next. >> this is gold, mr. bond. >> the bouillon made bucks of money. they have a way to make even more. plus, he spotted out last week, and now he has a big warning

sign for small cap stocks. brian stutland will explain what it is when options action returns. ♪ [ cows moo ] [ sizzling ] more rain... [ thunder rumbles ] ♪ [ male announcer ] when the world moves... futures move first. learn futures from experienced pros with dedicated chats and daily live webinars. and trade with papermoney to test-drive the market. ♪ all on thinkorswim. from td ameritrade.

♪ [ 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 ] ...you'll bust your brain box. ♪ all on thinkorswim from td ameritrade. ♪ welcome back. there are good trades, great trades, and then there are blockbuster trades. in a couple of weeks that's exactly what brian carter had with gold. it was so good it's been made

into a movie. here's a preview of it. ♪ >> it was a town that with just one rule, risk less to make more. one brave man came to find one thing. gold. >> the chart is excellent. >> he knew it was a road he couldn't travel alone. he needed a partner. >> well, i think carter makes a lot of great points. >> two men on a path toward profits, but the quest for gold came at a price. 100 shares of god costs almost $12,000, but brian had another plan. >> what i do is i purchase the july 1, 13 call. >> they bought the god strike call for $5.90. now to make money, these two

need it to right above $113 by more than the 590 they spent on the trade, or above $118.90 by july expiration. but seven words changed their lives forever. >> i can sell it july 1 at 215. >> so to spend less, they sold the july 121 strike call for $1.40 and created their call spread. but they did something else. they made mining profits easier, and here's how. between the 590 they spent on the lower strike call, and the 140 they collected by selling at higher strike call, brian and carter cut the total cost of their trade down to just $4.50. that means instead of meeting the god to soar above the $118.90, they just need to see it rise above the $113 strike

price by more than the $4.50 they spent on the trade or above $117.50 by july expiration. >> can't plan it any better than this. >> well, actually you can because in exchange for reducing their costs, these two also capped their gains to the difference between the strike of the call they bought and the strike of the call they sold. since that time of the trade, the god has climbed 10%, leaving these two prospectors at stuck at rich in what time has called the most momentous options event of the summer. brian, carter, and john wayne, if he were alive, star in "more gold more money." rated pg13 for general audiences. >> pg13? before you start buying, take us on fandango.

at the time of the trade you would have made 10%. that's want bad. brian's trade expired last week, and that was the return of almost 80%. not bad. this was a big week for gold. jobs report and the fed. should you hold gold going into next week? let's follow the charts. the man who made the golden call in the first place. carter, what do you si see for gold? >> like it long here. let's look at the charts. so this is the last year or so. we know that gold has plunged down to a low of 1180 where we've seen this ricochet. what's key here is it really got ugly, and really dropped basically 15% in about three days. $170 an ounce and now we've had that ricochet. you will in principle spend a little bit of time stuck here contending with these people who are now happy to get their money back. they didn't dump here, but now they've gotten their capital back, and they're wanting to get out. after some time, though, you

remove the supply. you can then advance further. we think ultimately second chart where we're going is up back to the channel that it was in before the really ugly stuff started. we think $13 the 5, $1,400. at that point off the $11.80 low. >> what would you do? >> we run up macroeconomics for our clients, and basically it's aiming to reduce some of the position. about 56% allocation and so i still think there's room to move higher. i'm still long gld. short after money calls against it. you have to take a little off the table after this great call and a great call it was by carter, and carter and i -- just wanted to clear that up. >> that was a good call, and it was interesting because of that call i've actually had a short bet on and recovered it because of that. i think we put that out on twitter. it's hard to understand because it's not -- the fundamental is

not there. you don't generate cash with this kind of a trade. personally i'm not a beg fan of owning it, but i think what carter is saying makes a lot of sense. >> the big gains this year have been in small caps, but there is a big red warning sign on the horizon that you only hear from this desk and it's right after this break. ♪ [ cows moo ] [ sizzling ] more rain... [ thunder rumbles ] ♪ [ male announcer ] when the world moves... futures move first. learn futures from experienced pros with dedicated chats and daily live webinars. and trade with papermoney to test-drive the market. ♪ all on thinkorswim. from td ameritrade.

♪ [ 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 ] ...you'll bust your brain box. ♪ all on thinkorswim from td ameritrade. ♪

it has been the hottest trade of the year. talking about small cap tops. the russell 2,000 continues to make all-time highs, but one trader has spotted a little watched warning sign that could carry big implications. what are you watch sng. >> when you look at the list, it has a tremendous move. up 24% this year year-to-date already. what happened here basically we would like to use fear as an indicator. what we saw is basically the red sea part for moses here. as volatility started contracting and basically fear subsiding down here, the russell began a huge bull market, and we just saw that thing separate. russell making new successive highs, and the russell blips making new successive lows. that's what you want to see in a trending market. when we look at the tail end of this, there's concerns to be had here. let's take a look at what

happened the last three or four months in the russ l right now. what you are seeing are those things move together xshgs that red sea is starting to close, right, because what's happening here is the russell basically is starting to move up. as the russell is making new highs. we like to see fear subside during those moments in time, and look right here. march 15th when the russell made a low, and the russell is making high, it's now at a higher level than it was in march. the russell itself is significantly higher. it means basically they're out there buying foot protection protecting themselves in case this market goes over. >> you have a trade on the iwn, which is the etf that attracts the russell 2,000. >> i'm looking by september quarterly put the 97 strike for $1.15. that means option prices have gotten cheaper. $1.15 to spend on this index here. it seems pretty cheap to me. it's about 1% of the value of stock, and that gives me exposure to the down side below that $97. i get some protection from the down side, and it's a great way to end there. edge of portfolio or take a

short boat a market that's trading high ever. >> we can't let stella do all the charter here. carter is still in the house. you have your own chart. >> that means there's actual work. the russell has achooed the level now which is in principle suspect. if you were to look at the chart since its inception, we have now attained the internal trend line, which is to say you connect the highs of 2,000 or the highs of 2007 and we are just now approaching that level. it is also, of course, analyzing 45%, and the recent angle of the last month is 130%. this is just a -- >> i agree with that. look, the best time to buy insurance is when the market is up, and the price of insurance is down. you have a phone. i think that's absolutely the trend maker. >> coming up neck, we have the final talk from the options desk. ♪ [ cows moo ] [ sizzling ] more rain... [ thunder rumbles ] ♪

[ male announcer ] when the world moves... futures move first. learn futures from experienced pros with dedicated chats and daily live webinars. and trade with papermoney to test-drive the market. ♪ all on thinkorswim. from td ameritrade.

♪ [ 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 ] ...you'll bust your brain box. ♪ all on thinkorswim from td ameritrade. ♪

a salon in tokyo has rolled out awe nigh treatment that's getting second looks. beauticians put snail on a customer's face in the belief that the snail slime removes dry patches and moisturizes your skin as well. >> a customer can fall asleep with their mouth open, and then they can only service one customer a day. the price of the five minute snail treatment $105, and that is tonight's edition of optional viewing. time for the final thoughts. >> if you miss the spike in facebook and you still have to get long, there's extras about how to do that sensibly. >> here in rising its shawl caps. you take some profits, rotate, do something with your money in small caps. you have to be careful here.

mroo personally i city with escargo. >> eat them. not on your face. >> let's start. i'm melissa lee. thanks for watching for more options action. options action.cnbc.com. "mad money" starts right now. having a great-looking butt? >> my butt is definitely high and tight. i love my butt. >> i look [bleep] awesome! >> here's my booty. [ laughs ] >> announcer: higher. >> it just sits up now. >> announcer: tighter. >> here it is, and it's pretty high and tight. >> announcer: firmer. >> i feel like i have that butt. i like these. >> announcer: well, the truth is, you can do squats and lunges for hours a day and never get a hot-looking booty. >> i can't even tell you how much money and time i've spent on trainers.