people first, then money, then things. now you stay safe. bye-bye. ♪ this is "options action." tonight, facebook is on fire. >> i don't want my face burned off. >> but could earnings ruin the rally? we'll tell you how to play it with a special report. plus l apple earnings get this guy off this guy's back? >> it's like the old story, the wife keeps begging her husband. >> we'll tell you why the results could give cook cover i don't mean carl. and you won't believe which stock is poised to breakout. >> pick anyone you want. i'm feeling lucky today. >> the action starts right now.

live from the nasdaq markets in new york city's times square, i'm melissa lee. these are the traders here at the desk and there's one name sending a chill down investors backs and that's tesla showing signs of weakness. is this a single story stock or a broader concern for the markets? let's go to the money and find out right now. dan, this is the sort of stock that encapsulates a broader trend of high-flyers and people wanting to find the beta in this market. >> no doubt to your initial question, is this a problem for the market? it is not a problem for the market. the stock is down from 13% from the all-time high on september 30th. and in some ways it is healthy consolidating here above $160. i'm not telling you that means it is all clear to get back in here. they are going to report earnings on november 5th. this is a story, the stock is up 400% this year, okay? and it is not on anything fundamental other than the hope that this story becomes a real player in the automotive industry. and that's going to take years to figure out. >> this is a company that's

trading like a tech stock, but at the end of the day what they do is sell cars. and i think people need to remind themselves of that. i find the evaluation of tesla enormously difficult to understand. when you see this type of a situation, what you're really looking for when you find that the evaluation has no bearing with reality, you're trying to look for a stock that's beginning to break down, but sort of to dan's point here, i'm not sure this is the breakdown you're looking for. what you really want to see is one of the big reversal-type days. huge volume, stock's up. >> it's done that and moved back on many occasions. >> it has done that a couple times from the battery fire and the german magazine report. >> but i do believe that we're going to get another one of these, and that's going to be your exit sign. the big problem is when you have concentrated holders, you get these situations where bad evaluations can remain. we see that in a lot of stocks where a lot of shares are concentrated in a couple hands and they aren't doing anything with it. >> i have not seen anything sort of close to this where you have to step in and buy it and feel good. it's up a ton and has come back

a little. interesting, about as many put calls today, a few more puts, but the only way to short this is to buy puts because you have to define your risk. you mentioned concentrated holders, there's no way to short it because buy guys own all the stock. if there's too big of a shortage, they'll run it in on you and you'll get crushed. volatility is really high but not incredibly high to buy some puts, but given as many calls as puts traded today, i don't think people are going crazy for the stock. >> given the evaluation, stock is the only way to get along stock tonight. >> to scott's point, to go out and buy puts and calls depending on what your directional inclination is, it is going to set you back. you have to get so many things right in this name, implied where it is, meaning the option prices are really expensive. you can buy calls and the stock can go up a lot, but the value of the options is going to go down. >> particularly on earnings. >> right. if you're going to do this, we'll set up a calendar here because for those longs, and we get this question all the time, i think the stock is going back

to $194 on earnings and will break $200. this is the way to do it, you have to finance the purchase of puts. >> so obviously dan is using a call calendar. it's a bullish strategy where you buy a call and to finance the call you sell a near data call the same strike to cut your cost. how do you make money? you want the stock to fall just below the strike of the call that you're short of on the first expiration, but above the strike of the call that you're long on the second expiration. so it requires timing here. dan, walk us through. >> they are going to report november 5th with the weakly expiration, so what i'm looking to do on monday, this is really one of the things i want to set up if i want to own calls. if i want to own calls for the earnings event, i want to sell the november 1st expiration to finance the november 8th expiration calls. so i looked at the november 1st, november 8th 180 call calendar when the stock was $170. that cost $7. you would sell on the november 1st expiration, 180 call at $2

and buy november 8th 180 calls for the following week at $9. that cost you $7. what you would like to see happen is the stock trickle up a bit toward that strike and have those next week options expire worthless. then what i have is a cheaper option that i would have had to run out and bought two weeks before earnings and then i can spread it and really reduce my break even on the trade. >> i think the best way to play options in the name like tesla is the trade calendars. i probably wouldn't do this one, though, because i'm not bullish on the stock. i have mapped out my view on it, and i would be buying longer data puts and finance them by selling shorter ones. >> we do like calendars on the show, but this is not exactly a calendar because earnings comes between the expirations, so the math we talk about, you often get it working on a traditional calendar not quite working the way it may here, but dan explains why. he wants to own that call for the event. he's not -- the one he's selling, he's not going to own that through the event, so it's

not exactly a calendar but saving a few bucks but selling the short-data call. >> let's move on to the other big story for next week, and that's facebook. the shares have doubled and the social giant sports a $126 billion market cap. so what should investors be expecting? domenick chu is back at headquarters with more on this. >> reporter: investors are gearing up for what could be a crazy week for facebook shares. the world's biggest social network will report earnings after wednesday's close and they are pricing on what could be a greater than 12% move in this stock up or down. now, remember facebook has only been public since may of last year, and we've seen five earnings reports since that time. we've gotten really double-digit percentage stock moves in three of those last five quarters. last quarter facebook shares rocketed higher by nearly 30% after earnings, which is a best single day on record. now on that day the company

gained $14 billion in market value. so you can see why options traders are already gearing up for what could be fireworks, in essence, with facebook. >> all right, domenick, thank you for that. a big move here, 12% up or down. that's like a netflix-like sort of move. >> that's really unbelievable. and it's more unbelievable when you think just how big this company is. what you're actually looking as is the options market suggesting that the value of this company could swing by almost $20 billion up or down. $20 billion would actually put a company with that market cap would be in the top quarter of the rustle 1,000 all by itself. one thing i would say is, looking at the percentage moves, go back to see how much the evaluation change is. it was closer to about $6 billion. so i'm guessing the options market is overstating things a little bit here. i'm probably thinking this move will be a little smaller than that. i do notice, though, that any bit of good news and people seem to want to buy it. like whatever was left out there to sell, those people seem to

have gone away. 55 times earnings, though, this is not a cheap stock. >> mike, what's the trade? >> i'm going to do what dan did here and am looking to do a call calendar. mine is going to be longer data. i'm looking to buy the march 57 1/2 calls and sell them at net 20. the whole idea here is that i think the move is overstated and i get to own calls relatively cheaply. this is my way to play it the next couple months. >> this encompasses the time period which twitter goes public. >> to me i would much rather own twitter, you'll have faster growth. if you bought facebook back on may 2012, you languaged with a company that did not articulate how they were going to monotize their users. twitter will be growing off a much smaller base. i'll tell you this, when people have the comparison of two real social media companies and see the growth that twitter's going to have, i think facebook is going to run up against some difficult sales comps in the next couple quarters, so you

really have to watch their guidance going forward. >> twitter has real money users, if it is priced where it is right now, which is less than 10% of facebook's market evaluation at $12 billion. it definitely seems like twitter is not profitable yet, facebook is profitable. we talked about options in tesla, these are only 10% less expensive. a lot of calls today, two times as many calls as puts. and the last big trade was the big known in the 65 calls. this is a more traditional calendar because they both -- both expirations catch the catalyst, which is what you're looking for in a traditional calendar. >> a little stocks versus options, why buy 100 shares in the social options to set you back near $5,200. mike's call calendar will cost you just over $300. send us a tweet @cnbcoptions.

we'll answer your questions. you can find educational materials and you want to check it out. here's what's coming up next. these two men are fighting over money. >> i get no respect. >> caught in the middle is dan's whipping trade. but can earnings give cook cover from ipod's wrath? plus, which stock is poised to come out next week. >> the answer is i don't have a clue. >> no worries, jack, because we do and we'll reveal it when "options action" returns. [ 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.

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from td ameritrade. ♪ we're back on "options action. "want to know how to make over 60% of your money in apple in just over a month? that's what dan did with his bullish bet on apple and here's how. on "options action" it's how we trade like legends. risk less to make more. and that's exactly what dan did with his bullish bet on apple. dan thought up ale shares were going higher, but buying 100 shares of the stock would set him over $50,000. so to spend less, dan bought the apple november strike call for $25. now to make money, dan needs apple to rise above that call strike price by more than the cost of the trade, or in this case, above $525 by november

expiration. but $25 -- >> the whole situation was, in my mind, a complete travesty. >> you said it, carl. show us how to do this for less. >> i sold two of the november $550 calls at $9. >> genius. so dan sold two of the november $550 calls for a total of $18. but he did something else, he made making money even easier and here's how. between $25 he spent buying one call and the $18 he collected selling the other two higher strike calls, dan reduced the cost of his trade to just $7. >> we feel pretty good. >> and now instead of needing apple to rise above $525, dan can now see profits uh if it rises above the $500 strike call by more than the $7 he spent on the trade, or above $507 by november expiration. but, there's a tradeoff. by selling more calls than he bought, dan will get short apple stock at that high call strike

price, or in this case, above $550. beyond that point, profits trail off and eventually dan will face infinite losses. >> good lord! >> reporter: so to protect himself against just that, dan then bought the november $600 strike call for $3 and completed his call butterfly for a total cost of $10. now dan's protected, but since he spent more, he won't make as much. and now to see profits, dan needs apple to rise by more than the $10 he spent on the total cost of the trade, or above $510 by november expiration. and since the time of the trade, apple shares have rallied 6%. now dan and these two guys are unlikely partners in a winning trade in a battle for apple's cash court. but with earnings just around the corner, "options actions" biggest fans just want to know one thing. what will dan do now? before we get to that answer, let's see how much money was made here.

had you bought apple stock at the time of the trade, you would have made 6%. that's not bad. dan's cost was $10 and could be sold for $16. that's a return of over 60%. two quick questions here, what are you doing with the trade and will earnings actually give cook cover from icon? >> i think it could. if you have this trade right where you want it with this event coming on the 28th, you want to stick with it. i think that i chose the strike's 500 and thought that was an interesting resistance level on the upside, that should be support right now. 550 in the middle is basically the high of the year, the second day of the year the stock traded 555. i think that would be a very reasonable target, but the stock hit into technical resistance about 532 in the last couple of days and fell back from there. so as far as earnings are concerned in icon, he's basically rallied that board around tim cook. i think they should probably say mr. icahn, you should be happy with your investment here and we're taking your opinions but -- >> i don't think earnings gives him cover at all.

that's not the issue. carl isn't criticizing the management of this company in terms of earnings. >> he loves tim cook. >> what he's upset about is the management of their balance sheet and what they're doing with the excess cash. if they blowout earnings, they're only generating more cash and more should be returned to shareholders. carl is absolutely right, think about how the buy-back would be. we are talking plenty cash flow. $60 a share on $150 billion buy-back on earnings based on the next 12 months of earnings. i do think carl is probably spot-on in this one. >> it may actually help mr. icahn's position in the stock. >> and every other shareholder. >> i don't think he's worried about every other shareholder but he's worried about his position. people have been talking about apple and this everest of cash they have for months and months and years, and the company is not incentive to give it back. that's just not what they want to do. one thing about this trade that's working, you want the stock right at 550. that's where it pays off

perfectly. so if the stock gets up there. then you want to start thinking about taking it off. one final thing, this week's web extra is about apple options, long debated apple options because the stock is expensive and options we do are elongated. both options get extremely expensive so you can use mini options. >> we'll talk about the 550 level because right here you are at 525, 532 is where apple entered the year and that's where we are seeing resistance. >> if you look at earnings in technology, the stuff that's worked has continued to raise all year. the stuff that hasn't worked is the ibms and the e-bays. they are disappointed on the earnings and didn't go up. this is an interesting test because the sediment has changed a bit in apple, but if they come in with the in-line quarter, the stock is up 15% since early september when they introduced the new iphones, you could set up for disappointment. back to the trade, i was originally risking 10 to make

40. if they do something slightly better than expected, you see a new high on the year. >> it could be next week's mystery breakout stock. we come back, our traders reveal the name they think can really takeoff. back right after this. [ indistinct shouting ] ♪ [ 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. ♪

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[ bell ringing, applause ] 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 to "options action." it's a name both our traders see going higher, e-bay, but they disagree how to profit from that move up. they agree on the option but not on the trade. dan, quick it off. >> e-bay caught my eye last week, they were disappointing with pretty sour commentary about the e commerce environment for the fourth quarter heading into the holiday season. the stock got nailed. when you look at this chart right here, this is interesting because this is a company that's a clear market leader here. and i'm just going to draw this line right here, look at this,

this is $50. and this is that going back a year. how many times has it bounced off this level here? and every single time it's had almost a 10% run. this is why the stock has kind of caught my eye and i've been trying to figure out a way to play with defined risk. i don't want to buy the stock here and really only see 3 or 4 bucks on potential upside from the bounce from this level. and that gets you to here, 55. so the trade that i came up with was a call fly. and we just went over one in apple, but i think it's important, let me go through it. what i'm trying to do is isolate this $50 support level. so here's the trade, okay? i want to look out to december expiration. we'll have black friday and have that whatever monday thingy, amazon keeps going on up. at some point you may see investors look for a lagger like this. so i looked at the december, 50, 55, 60 call butterfly. when the stock was about 51.60 today, that cost $1.60, okay? i'm buying one of the 50 calls

for $2.80. i'm selling two of the 55 calls at $7 each or $1.40. then to cover myself on the upside, i'm buying one of the way higher calls at 60 for 20 cents. the stock is basically trading at the money. i set my stock on the downside and think it will get to the level of 55. >> can we get back to -- how about that? this is a really interesting situation. there aren't too many stocks we can take a look at this year where you have an opportunity to buy it essentially at the same price. but not the same evaluation because this stock is growing. this is a company growing and their top line almost 14% over the course of the last five years. revenues going from $9 billion to $16 billion. this coming from the payment side of the business, before 30% and now close to 50%. if you're looking at this trade, though, i don't understand premiums are low. we think we are at the lower end of the range, what you aught to be doing here is going out to buy calls. wait for the stock to rally and

spread out a bit. i would go further out than december, actually. i may go out to january or march. buy some calls, look for an opportunity to spread. >> can i tell you n a low-ball environment, we have the mix of 13.50, we made this mistake numerous times as traders, you buy cheap calls here and what does that do? it's just going to erode over time if you don't get the move you want. i'm basically establishing an active money position with a hard 50 stock. >> that's buried by december, but if you go to march, you'll have plenty of opportunity. >> we have to get the verdict here from scott. what do you say, which trade do you like better. >> i like dan's trade as he's buying the 50.50 call spread and paying for it by selling the 60.50 call spread. i like it because he has specific spots on the chart that he likes. >> all right. good job, guys. coming up, the final call from the options pits. found a magic . 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.

♪ [ 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 3-year-old french sheepdog has been officially verified as the fastest four legs on wheels. that's right, norman the scooter dog propelled himself 100 feet in just over 20 seconds at a charity event in marietta, georgia, and on friday the guinness book of world records verified this. norman bounces himself on the scooter with two front paws and uses one hind paw to push himself forward. it's only the latest trick for the established norman who can also ride a skateboard and pedal on the bike with training wheels. does somebody take their time out of their day to train this dog. >> she was pulling him, that doesn't count, does it? >> cheats! time now for the final call from the options pit. zmod. >> we talked about butterflies, be careful on the executions. >> dan. >> apple, if you have defined risk plays that target 550 to the upside in the near term, that makes sense here. >> michael. >> as long as carl ikahn is

involved, there's support for apple and i think the stock has found support here. >> our time has expired. i'm melissa lee, for more options choices, go to our website. and you can watch "fast money" every day at 5:40 eastern time. meantime, "mad money" starts right now. >> announcer: the following paid program for the shark sonic duo is brought to you by euro-pro. [whirring rapidly...] >> both imitate: zzt zzt zzt... [whirring...] >> zzt zzt zzt... [whirring...] >> i have never seen anything like it! >> oh, my gosh, i love the shark sonic duo! the carpet's like new again! >> my kitchen floors are cleaner than they've ever been. [whirring...] >> it's the best cleaning system i've ever used in my home. zzt zzt zzt... [laughs] >> announcer: bright, beautiful carpets, rugs and floors make your home look amazing. but no matter how much you vacuum or mop, you get