here we go. stand back, everybody. whoa! this is "options action." tonight it's new tech versus old tech. >> what are you talking about? >> as ibm tanks, investors flock into facebook and linknd in. would they be making a mistake? while everyone was watching google -- did you see that -- there's one sector whose undercover rally has just begun. we'll tell you what it is and how you can cash in. >> get ready for a bombshell. >> i am your father's brother's nephew's cousin's former roommate. >> not that kind of bombshell.

we're talking about netflix earnings, and we'll explain why traders expect a huge move on monday. the action begins right now. these are the traders both here on the desk and in chicago and san diego with classy dan. it is the investment equivalent of it is mile high club, talking about $1,000 stock prices. google doing what apple could not, and joining priceline is only one of two stocks in the s&p with a four-digit price tag, begging the we, when will apple join this grand party that is the tech rally? let's start here on the desk, and, mike, to what extent do you think google is benefitting from apple's woes? >> i'm not sure it's benefitting from apple's woes. i think the problem with apple is that people recognize that that's a consumer electronics where a google story i think is camping people by surprise, and, you know, one of the things we keep coming back to with apple is, you know, the large numbers. we keep thinking that that's a problem.

the other potential problem for them is compressing margins. the other potential problem with them is you just suddenly get a trend, and their products aren't hot anymore. with google it's hard to see who would be replacing them, and that's why a lot of us actually get surprise whenned we see performance that we did this week. >> i'm glad you brought up large numbers because you take a look at priceline, dan, and priceline hit that $1,000 mark and managed to hold on to it, but the market capped space between priceline and google or priceline and apple is enormous. priceline is only $53 billion in market cap, give or take a few billion at this point. large, large numbers could be the concern as opposed to the share price. >> i don't find the share prices too interesting, to be honest with you. if you think about google today, it almost gained the market cap of priceline in one day. okay? when you think about apple, i mean, this is a company that, you know, the large, large numbers really hit this company from a sales and earnings perspective, you know, about a year, we're and a half ago. they've been growing so fast for

so long that they just couldn't maintain that growth. you know, this year, 2013, it's going to be the first earnings for apple in more than ten years. we're at the stock right now. it's down about 4.5% on the year. it hasn't been up on the year since january. it's really been in the doghouse. there's been just negative story after negative story. finally we have some big hedge fund honchos really not for the product, but more for a financial engineering trade, and for me the thing sets up kind of interesting here. when you think about the fact that google can gain $45 billion in market cap in a day, and apple can't get out of its own way, i think the next couple of weeks will be very telling for am if it can get it back up on the year and possibly back up towards 555, which was height of the year in early january. >> of course, this coming week there's going to be a big apple ipad event that a lot of investors will be watching. when we got earnings last week from verizon, the ceo made some comments about the 5c, which is the color phone being

overstocked and maybe not enough inventory on the higher end phone, so maybe it is apple not being able to get out of its own way. >> that's right. i think that they said, hey, we're going to sell a bunch of lower margin phones when they should not have done that because it's still a premier product. a stock is not trading at a premier price. on evaluation basis it's about half of that of google, one-third of priceline. dan makes a good point with the financial end sharing because you stripped a mountain of cash out of the company and you look at the valuation, but the company is also having a problem within that investors have memories, and they see that 705 not that long ago, and they're not interested in getting caught up in some sort of apple raceback at 705 because they don't think it's going to happen any time soon. >> i want to look at the charts here. i want to bring in carter worth because back in june when apple hit its low, carter said apple was a buy and would outperform -- do you still like apple?

>> i do. my work suggests there's plenty of up side. let's look at the charts. what's important about charts is they're interpretive, just as fundamentals are. some people like apple fundamentally, some don't, and so too it is with chartsz. here's a chart drawn one way. here's another chart. same time frame. e all the same chart, but different drawings, and it all says the same thing. here we go. the main joblgtive is we had a well defined down trend, and when we broke above this down trend and then we went back to we didn't violate that law, that's key, and if you then look that the line and what happened next, that low there is also the low of june, so very important. it happened there. it happened there. that's what that drawing is. he let's do it another way. you can also call this a well defined rounding bottom. the principles are the same. this is how a bearish to bullish reversal takes form, or you can draw it this way. here's the cup. here's the handle.

this kind of resolution where you have a lot of tops here, this emapologize fairly big conclusion. where? this is where i think we're going. this is the plunge. 705 to 385. a 50% retracement would take you to about 545, 550, and interestingly, if you were to draw the trend line from which it broke, here's the next chart. that's exactly where that implies. that you get to about 445, 450. we think you've fwot to be long on apple. >> got to be long. what's the trade at this point, dan? >> i actually agree with carter on the technical setup. next week there is going to be an october 27 ipad event. i think the stock consolidates around that. i think it's going to be an evolutionary product that investors will be dispointed with. what i want to do is do a california dar, and today when the stock was 508, i bought the

october 25th next week expiration, november 1st, the following week expiration 515 call calendar. i sold one of the october 25th 515 strike calls at 350, and i bought one of the november 1st 515 calls for $11. that costs me $750. i want the stock to be $51578 or lower. i agree with carter. slightest bit of good news. i think you get the stock changed on the year or possibly 555, that high of the year. i see about maybe 10% of up side if the company does not disappoint two weeks from now. >> michael? >> first of all, i love calendars. this one is a little bit close on both expirations. typically speaking, i like that long option to beation further out. look, from a fundamental standpoint, carl icon is involved. the affect of some financial engineerings, we're talking about so much cash on the balance sheet, it's pretty

astonishing. it's very hard to be bearish about apple with this going on. >> we do a lot of big companies set to report earnings, but options traders are keying in on high flyer netflix. let's go to kayla at headquarters. >> hey, melissa. netflix is set to report earnings after monday's close. what do traders expect to see? a bombshell. opings prices implaying 11% move, and history predicts an even more dramatic reaction. over the past eight quarters net politics shares have moved an average of 22% off the company's earnings reports. in fact, this this year alone met flicks has seen 24% and 42% post-earnings. both of them to the up side. the only move smaller than 11% came last quarter in a stock dropped accident but only 3.5%. judging by the past, melissa, third quarter could mean a great deal for this stock for traders that are involved. back to you. >> thank you very much. what's your take on net politics? >> i have said this many times. this is a fundamental story that i just can't get behind.

i don't understand it. we were talking about carl icon. icon enterprises is one of the largest shareholders in netflix. i'm not sure what they're up to. before you try to follow them into the stock, bare in mind they started purchasing the stock at much, much lower levels. they had their first big significant -- this thing was below $75, and most of the position was acquired below $100. they've had -- i actually don't -- i would think if thinking they're going to start peeling out of it. think about it. even if they got their topline revenues in their space they have all the content, up to the level that disney has based on their current margins they're trading 25 times that number. >> you're positioning for a downward move. >> i am. can't short the stock because there's big short interest, and carl's involvement. i think the answer many the high volatility stock is make sure you're selling premium. i'm looking specifically at the november 2 5 clip, and i'm going to use the proceeds to help finance a purchase of the march

275 puts at $18.50. bare in mind this looks like it's down significantly, but this is a stock that has moved significantly. the last time the stock got over $300 and then collapsed about 70%, we were seeing moves in a 30-daytime frame in the 20 plus percent move. that's the kind of thing you can expect out of a stock if it starts to fall out of bed. i just want to own puts for the long-term. i immediate to finance them. this is how i want to do it. >> dan? >> i'm not a fan of the story either, and i think the way mike is creating it if he wants to look down, this is the way to do it. i wouldn't short this stock with your money. it's a go go names. there's a lot of momentum behind it. when icon releases that 13 and he is out of the stock, that thing is going to crater. i like this as awe options trade. >> you have to do something to get the math on your side if you are going to make a counter trade like this. with implied volatility at 16%, you have to do something like this, and mike has an opportunity to turn this into a

super calendar once the november put expires. he can sell a november put, and you can sell a -- really make it pay off zoosh got a question. accepted us a tweet@cnbc option wrshz scott is taking a look at the spy. in addition to scott, you'll find great trader blogs, and exclusive trades. check it out. here's what's coming up next. >> talk about being anti-social tsh. >> shut up. >> there's the social jind linked in has tanked of late. plus, which one of these is dying to call into the show? >> but they won't. >> options action is taking your calls when we come back. on ther in real time. ♪ the shell brought him great fame. ♪ but then, one day, he noticed that everybody could have a magic seashell.

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, applause ] live squawks right in your trading platform 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. everyone who wassing onling google, a huge rally going on in steel stocks. what does that mean for the market, and what names are worth checking out? we'll go to the charts with the man some call the pick awes wroe in the y and x axis, and that's greg oppenheimer. >> what we have going on is something important.

>> once in a do you understand trend, you stay in the down trend. unless you stay back above it. when you revisit, he that's the key. it hits that line, and it doesn't go back below it. it's the same circumstance of a down trend that now we've moved above that trend, and we have all the hallmarks of what i would characterize as a bearish to bullish reversal. just to put this down trend in context longer term and the move above it, take a look at the long-term chart. there is the same down trend, and there that's the key. we've now moved above what has been a well-defined disaster,

frankly, for quite some time. then here also what's important, notice how that is happening at the 2009 lows. take a look at the charts. this is very important. the fact that this action here over the last six months is happening not randomly at a past low and in breaking the down trend line. that's big stuff. >> got to be long. >> mike, the put story really winds up and that's, for instance, out of china. back at the growth story. also some of the earnings reports we're getting from industrials like ingersoll rand that also hit new highs. >> one of the situations going on in scale is there's a bull debate going on here, but it does look like things are bottoming out. this is a heavily levered name, which what that means is small changes of what the whole company is worth, translate to huge moves potentially in the equity, and i think a very simple thing you need to do is especially when opings are expensive as they are in stocks

like this, it is just go ahead and make sure you're not laying out a lot of premium. i'm trying to take a look at the low that it bottomed out at, so all i'm going to do here is put on a call spread risk reversal, and we do that, and then you're buying a call spread and helping the purchase by selling a put. the one that i'm looking at specifically is the december 20, 24, 28 call spread. i'm going to sell the december 20 puts and buy the december 24 calls, spend $1.40, and sell the december 28 call. that's a net debit of 10 cents. i'm looking for it to shoot up to about $30, and on the down side, of course, i'm using that lower strike where the stock actually bottomed out. bare in mind, this is a stock that's made about $45 earnings over the course of the last ten years, and it's there is a lot of potential up side. >> coming up next, it is a battle royale for your money. old tech versus new tech. our buck rogers versus irobot,

in case you are confused by the video. [ male announcer ] once, there was a man who found a magic seashell. it told him what was happening on the trading floor in real time. ♪ the shell brought him great fame. ♪ but then, one day, he noticed that everybody could have a magic seashell. [ indistinct talking ] [ male announcer ] right there in their trading platform. ♪ [ indistinct talking continues ] [ male announcer ] so the magic shell went back to being a...shell. get live squawks right in your trading platform with think or swim from td ameritrade. where will it send me... one call to hoveround and you'll be singing too! pick up the phone and call hoveround, the premier power chair. hoveround makes it easier than any other power chair. hoveround is more maneuverable to get you through the tightest doors and hallways. more reliable. hoveround employees build your chair, deliver your chair, and will service your chair for as long as

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♪ 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.

welcome back. time for total recall. these are trades that have yet to pan out. colin carter made a bullish bet on linked in, but shares of the social giant have fallen. he didn't lose any money, and here's why. >> options action is how we stay connected. risk less and make more. that's what they tried to do with their bullish bet on linked in. carter thought they would see an up side. >> you see the stat here. it's benign, and we think that's an opportunity to take action. make the play for the third down. >> "mad money". mike thought he might be on to something. he bought 100 shares of the professional network, and it sets you back more than $25,000. >> what a predicament. >> he sold the november $250 strike put for $19. in order to keep all that money,

mike needs linkedin shares to stay above the strike that he sold by expiration, or in this case above $250 by november expiration. if shares do fall, mike won't see losses until linkedin drops below that $250 level by more than that $19 he collected, or below $231 by november expiration. but there's a tradeoff. he says by selling that put, mike could be forced to buy linkedin stock for $250 a shirin if it falls well below that level. >> you guys really are cowboys. >> that's right, iceman. to protect himself from just that, mike bought the november $240 strike put for $14.50, and he created a spread. he did something else. he put the odds in his favor. that's because between the money he collected on the higher strike put and the money he spent on the lower strike put, mike took in a credit of $4.50, meaning he did something even the most connected can't do.

make money whether shares of a social giant go up, down, or nowhere at all. in order to keep all that money, mike needs linkedin stock to stay above $245.50 by expiration. below that level he will see losses, but they are capped with the start of the put that he bought. >> smile, boys. we're about to retire. >> not really because since the time of the trade linkedin share have fallen more than 3%, making this trade neither a winner or a loser. now the fancy friends are disconnecting them from their social circle. ioning then at spago's, and turning a blind eye on the red carpet. options stands all over the world just want to know one thing. what will they do now? >> a late day rally helped this trade, and now linkedin shares are about flat from the time of the trade, mean if anything the stock can stay here throughout expiration, mike and carter would, in fact, be winners.

carter, what would you do at this point? >> stick this one out. it hasn't taken out a september high. we think linkedin has legs here. >> this is where the trades map is working for us, and i would stay with twrsh. >> dan, i want to get your take on this notion of old tech like ibm doing so poorly while the new internet stocks seem to be on fire. >> yes. i think you want to avoid a lot of the these layingers, like even the ibm. it can't get out of its own way. i am not a fan of all this crap like the ultimate zillow and groupon. i think a lot of people on evaluation basis love linkedin there, but linkedin has a good business model, and it continues to grow. to me it's a different story. i would avoid anything with a y or a z. >> coming up next, brad pitt is back at it trying to call into options action, but you know what, brad, we've got an bigger star up after the break, and he is making the call when "options action" cams right back. [ male announcer ] once, there was a man

who found a magic seashell. it told him what was happening on the trading floor in real time. ♪ the shell brought him great fame. ♪ but then, one day, he noticed that everybody could have a magic seashell. [ indistinct talking ] [ male announcer ] right there in their trading platform. ♪ [ indistinct talking continues ] [ male announcer ] so the magic shell went back to being a...shell. get live squawks right in your trading platform with think or swim from td ameritrade.

pplause ]get live squawks right in your trading platform 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.

welcome back. time for you to make the call where options action takes your questions, and tonight weave got a very special guest. it's not brad pitt. perhaps next week. we do have mat a wroe. he is a student, and he is watching options action. >> thank you, melissa. hi, melissa. thanks for taking my call from france. i love you. i love your show, melissa. that's why -- >> i'm blushing, mateo. we got to get to your question. >> well, my question is about -- i would like to put down a bullish bet on the s -- i can

be -- i'm looking at the december one for five, one for sech pull spread. paris just wants to know one thing. is it a good trade or perfect logic? >> give paris its answer. >> that's a good trade, but fxc options are incredibly cheap. emreplied volatility is a hat side. rather than buying a spread, i want to buy outright options at a decent 135 call or a decent 136 call and pay $1.20. that's how i would do it. >> thank you for calling in. the last word from the options desk. scott. >> web extras about a good call spread. >> i like playing apple along with the risk in the earnings. >> carter braxton worth. >> long and short against the s&p. >> mike coe. >> calendar put spreads and knelt flicks are a way to buy puts and finance them. >> looks like our time has expired. for more opings action, options objection.cnbc, and check out

the daily segment inside fast money every day at 5:40 p.m. eastern time. have a great weekend. mad money with jim cramer is up next. >> [ echoing ] it's about time. the number-one people have for not working out is they don't have time. >> i have four kids. >> i work 60, 70 hours a week. >> i don't want to work out for no hour. are you kidding me? i don't have the time. >> announcer: no time to work out? no problem. introducing focus t25, the breakthrough in-home fitness program guaranteed over an hour's results in only 25