now, you stay safe. bye-bye. >> in is "option action," tonight, we're not ll, but there's one sector seen as the best way to play catchup to the market. we'll tell you what it is and how you can profit. plus, facelift. >> okay, doc, enjoy yourself. >> no, not that kind, but facebook shares that jumped on earnings. how high to traders see apple going? >> $10. >> $10 million? >> not that high, but the answer

could shock you. "the action skts starts right now. >> i'm melissa lee, all the traders in time square, and stocks rebound from yesterday's selloff, but there is one name america is watching tonight, and that is google. the search giant up 3% on earnings and now commands a market cap just shy of $400 billion. now, this could have been implications for another big tech company, facebook, and let's go to the money now and find out why. >> yeah, i mean, listen. we know the story here. facebook is the upstart, right? up 150% in a year, and it's because they've been taking share against google in mobile advertising, seeing a lot of gort yore over year, a great story right now, and that's why they are a $400 billion market cap, trading at 15 times sales,

people price it a heck of a lot more growth for it. when you have google up 4% within 2% of the highs made in march, they look to facebook next week and see the share continuing with greater growth. >> sure it does not hurt as well, mike, twitter is not doing as well, down 8%. in comparison, if one is to a lot certain amount of your port foe owe to social media, you could benefit from a decline in twitter stock. >> i think that's true. i think what's most true is google managed to demonstrate and prove itself over time it's not inexpensive relative to the market but its own performance. we're looking at consistent year on year double digit eps growth. when people talk about the stocks, they talk about monetizing mobile. to me, they are focusing too much on what they get for each

of the things. it's a relatively young industry. look for consistent revenue growth, earnings growth, demonstrating they understand the businesses they are in and managing it successfully. >> we want to go to carter worth because they are more correlated than many would think. what do you see? >> that's right. here's what's important. we know the s&p peaked here in early march. we know that -- excuse me -- there we go, s&p peaks here in early march as well as these two stocks, s&p bottoms in jup, and so do these two stocks. google was able to make a run for the past top. presumption is that facebook is going to follow suit. as google, we say so to does facebook play alongside. >> wow. >> you look at the chart, it's a good looking chart, the way google rallied, up on the highs,

four and a quarter percent. you saw the correlations there. if you're a trader, look at the way we slugged off the news yesterday, you bet they'll hold massive trend they've been in for over a year, and facebook up 150% the last years ago and you'd rather play for a new high with an event coming up than a retracement back to the trend line in the market environment. >> i think that's true. one of things to look for is a significant turn in trend to get exceptionally pe lly bearish. this and a lot of names. skepticism, we had it, and we need a turning point, and i don't think it's here. >> i wouldn't buy facebook shars, but those with implied volatility, an interesting trade that caught my eye and will look it before next wednesday.

butterfly, in august, when it was 65-72 half, 82 butterfly. it costs 2.25. it makes money breaking even at 67.25. the stock is at 68. it's in the money. breaking below where the stock is traiding. at 72.5. why? that's the prior high to march. it's a one-day move of 8%. what this does is i have a really wide profitability range between 67.25. i lose that below 65 and above 80. >> it's a thoughtful trade. it works because although option prices in general are low, especially after everything seemed to have bounced back today, this is actually a stock where options prices are not as cheap as they are in other

places, implied volatility, it means you want to engauge in the spreads, and what's happening here is you are collecting money. they are working in your favor if the stock sits here, and there's a little bit juice in the options. you take advantage of the extra premium with a trade like this. >> let's move on here. in a week where rates fell on geopolitical fears, they sought out safety and yield of verizon and at&t. it was not just stocks, but actions and options bids more bullish. they saw high call to put ratios and verizon had three calls traded for every put, and they lagged the market this year, and they report earnings next week. carter, what are you seeing? >> we have big names coming. here's beautiful graphics. look what amanda ddiaz has done.

how much more yield you get now out of s&p, double the 10-year treasury rate much here's a comparative chart, reits, utility, telco. a lot of lag and potential catchup trade is there. longer term picture, same thing, you have teleco lagging, utilities, there's the lag. this is the official chart, and what i see is the following. a well-defined level, 160, 160, and the presumption is that this is setting up for textbook break out, a buy juncture. draw the lines the other way, get rid of them, do it this way, the head and shoulders bottom, call it whatever you want, the neckline, but there's a lot of tension here, and there's a lot

of breakout potential. just a few more. here's the sector versus the s&p. the correlation broken down over the last year or so again, that speaks to the catchup trade, and two more, the stock itself, verizon. a well-defined trend, a lot of tension as you work into the wedge, and guess what's happening now? you see it clearly. we broke out of the wedge, upside, a bullish setup, and finally, the long term trade, you have a fairly important double bottom, all-time high back here at 60 from the 1999 dot-com era, there's the trend line, the wedge, and you throw it back to the high 60. >> it's convincing on chart, but do the fundamentals back up the break out? >> it's interesting. at least from the equity investers' point of view, people are not that excited about them,

growing essentially with gdp growth, 4% top line growth, etf growth is certainly better. they are paying a great dividend. there's reasoning they look compelling here. veriz verizon, all the revenue comes from the united states. it does not matter whether you're looking for yield, and there's been fallout from the high yield market. if they are looking for yield, this is a place to get it. if they are looking for safety, this is a place to get it. it's perspective. you can buy it two and a half turns cheaper than the broad market, a 2 .5% yield of it. because of the utility-like behavior, options are cheap. >> you have a simple trade to put on. >> for that reason, looking to the january calls, slightly in the money, and you can pay $ 2.10, they are 75 cents in the money already. you only need them to get the

stocks to 52.10 or above. it's a buck and a quarter. >> back at 15-year highs in the name we look at in tech. telecom participated in the tech bubble 15 years ago. looking at 60, it's an interesting call. you can say it's chunky at $2 for a stock that does not move a lot. if it goes par bollic, it's likely to participate, and like mike said, the calls are cheap, looking at verizon with a 4 or 5% dif den yield and find something to sell against it. it's why the trade makes sense. calls do not look attractive to add yield to a long stock position speaking to the fact you buy the calls with it. >> like i said, you're spending 4% of the current stock price with exposure out to early 2015,

you are not risking a lot, and, obviously, if it proceeds the way carter thinks, there's a lot of upside. >> send us a tweet, and we have the hottest options news, videos from throughout the week and exclusive trades, like "people" magazine for those who likes options, and who does not what that? this is coming up next. >> apple earnings next week, and this is how high they see the stock going. plus, microsoft's move impressive this week? >> that's incredible! >> sure was. why a traders making hugely bearish bets against earnings? we'll tell you why when "options action" returns. ♪

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[b♪ll rings] time and sales data.

split-second stats. ♪ its so close to the options floor, you'll bust your brain-box. all on thinkorswim, from td ameritrade. 4%, that's how much traders expect apple shares to move when reports earnings next week. carter and co made bullish trade on the tech giant. before they give us their next move, here's how they made money. on options action, it's how we trade apple like geniuses. risk less to make more, and that's just what they did with their bullish bet on apple. carter said apple shares were looking fine. >> the conclusion is a move back to the high. >> all right, mike said, let's make this happen. >> i think there's no better two

people on earth to do this. >> we agreed, tim cook, but there was one small problem. 100 shares of apple costs the duo $9,000, so to spend less, he bought a call, specifically the object 2014 strike call for 2.50. he needs shares to rise above the strike price by more than the stock of the trade or $96.64 object expiration, but it gets better. as the stock rises, that call gains value faster than apple shares meaning more money in mike's pocket. >> yeah! >> i think there's a huge opportunity here. >> indeed, since that time, shares up, making this a winner. that's options biggest fan with just one more question. what will these two apple fanatics do now? >> who knew tim cook was a fan,

but then again, who isn't. all right, before we answer that, how much money was made? mike bought calls 4.50, now you can buy them for 5, and that's a return of 18%. how are you planning to make even more cash? >> so, you know, this is an interesting situation. we didn't buy the calls hoping to make 18%. we hoped to make more than that because it's giving us a leveraged upside bet in apple, exactly what i think we want going into earnings, and the good news here is because we bought the october options rather than one near data, we will not deal with the accelerated decay in options you often get after earnings are announced. my inclination is i look closely because if the stock was higher it makes sense to roll to the out of the money strike. i don't think we're there yet, a couple dollars away. i'll stay in this thing right now. >> carter, what do you see in the charts? >> sure. there's nothing wrong with the

chart, acting well, and it's the same principles of google or facebook, to say we're approaching past top. like a mag innocent, you get to the top, and that was at a minimum to get to the top, and so we'll stay. >> it's funny, i agree with what they are saying, but what bugs me is that i hate that people think it's got to go back to the prior high because, to me, you know, we talk about the name almost every day, and it's going back to 102, the 702 the high back in september 2012, and everyone's talking about iphone 6. go back two years, guys, they talked about the iphone5, what a massive upgrade that was, and the stock was the talk of the day they release the phone, it was the third friday in september. to me, it works out too perfectly, right? i think you have to be careful. listen, i think with the calls, they play it beautifully. in the near term, if they sell

off when they report next week, the stock gets bought because, looking for the same reason, it's dangerous, remember the psychology. >> if you go back to two years ago and what the high represented, you buy higher etf on per share basis now because of the buybacks. you're -- even if you own the stock up to the previous high, it was cheaper even if you held it at the price before. ? intel popping on earnings, mi o microsoft poppingen earnings today, then you bet against apple? >> what you are saying is not mutually exclusive. you can't have a magnet on 100 plus, and expect -- >> all i'm saying let's not have too short of meanings. >> i don't people it's the same. there's not as many hate tweets and hate letters when i say

anything to be construed slightly negative on apple. it's true. >> also, we have two catalysts between now and when these things are going to expire. earnings is one, iphone6 is potentially another. this is actually a nice time to be in a long options position rather than outright along the stock. >> if it goes past, what's your prediction on how it holds it? >> even google approached the high, and when you get to past top, you deal with memory. there are people from the top who say wonderful, i'm back to where i was. i'm out of this thing. you return to a level of supply, and you contend with the supply. you get there more often than not. >> listen, it's a product-driven story, we'll get to the september launch event very, very quickly, after labor day, and then it's wearables and stuff again. the higher the stock, potential for disappointment the phone is not what everyone thinks it is,

and then you can have a phase where it comes back in. >> microsoft added $16 billion in market caps, why did some place a huge bet if the stock falls next week? we'll explain when we come back. [bell rings] ♪ time and sales data. split-second stats. ♪ its so close to the options floor, you'll bust your brain-box. all on thinkorswim, from td ameritrade.

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with the incredible runs in intel and microsoft, some think we're living in a 1999 time warp. they hit the highest levels since march of 2000. some think the run could be over. we are braeaking down the trade at the smart board, dan? >> interesting they broke out to the 15-year highs, and today what was interesting, stock was up in sympathy with intel up 8% at one point, but microsoft settle in a bit, and, today, the stock underperformed the market, nasdaq up 1.5%, and the options block ran high, two times average daily. there was a trade in the morning what looked like a buyer of 12,000 of the august 48 calls. this is when the stock was 44 .5.

it was a bullish trade, but them 23,000 of them traded and closed 14 cents. it could have been a seller. there was a lot of options activity, like i said, hard to tell, but if you think about it, you know, that could be a holder looking for yield, saying the stock is not going higher. you see the move, just this week, had a massive breakout to the 15-year highs, kept going, and them it came back. there was a lot of news in it. when you look at it, i remember this. this was total mania town here, people, okay, the stock broke out here, and i expect it to consolidate, there's new management there. when you look at this, this is intel over 15 years, again, this is maniaville here, but intel had an amazing long base here. this is one, that in some ways, earlier in the week, looking at guidance, i was less optimistic about it, but if people go for stocks with really nice yields, really nice valuations and

really good balance sheets, and you look at that, that basis is something you want to buy on breakout. it's further away from the prior highs of microsoft, but i would favor intel here. >> i love while dan is going through charts with carter here because i like his reactions. >> he's facile with the whole thing. >> wow. that's quite a compliment. >> this is nowhere comparable to the 1999 work. it's a 15 -year base, we just broke out. the fundamentals, the pe was 75 in 1999, and it's 16 now. they are not analogs. i like the stock. >> mike? >> i can't be that enthusiastic. going into earnings, do we expect some kind of, you know, blow the doors off earnings result after they make an announcement in the nokia

division there's a post of 18,000 layoffs? it does not smell good from mother perspective. this is not a growth stock. i'm not crazy about their products. it seems like we could be potentially in the midst of app enterprise switch away from them. it's hard for me to be enthusiastic. >> all right. good work, dan, quite facile. up next, final call from the options bid. ♪ when the world moves, futures move first. learn futures from experienced pros with dedicated chats and daily live webinars. and trade with paper money to test-drive the market. all on thinkorswim from td ameritrade.

[b♪ll rings] time and sales data. split-second stats. ♪ its so close to the options floor, you'll bust your brain-box. all on thinkorswim, from td ameritrade. zblmplgt time for the final call, options pits, carter? >> we have earnings from verizon and at&t next week. be there. >> for those looking to make a bet with facebook next week, makes a new high after, look into money calls, that's a good way. >> mike? >> other than facebook, names are cheap. earnings season, and stock substitutions make a lot of sense to buy at the money,

longer data calls. >> that's all for us, our time expired, i'm melissa lee, and for more go to optionsactio optionsaction .cnbc.com, and see you next week at 5:30, for more fast, don't go anywhere. and "mad money" is coming up next. >> the following program is brought to you by supple, the new, revolutionary health regeneration drink by supple, llc. >> hello, and welcome to the smart medicine show. i'm dr. monita poudyal, and we have a great show today. if you have pain or know someone that has pain - joint pain, back pain, bone pain, muscle pain, or if you suffer from arthritis, osteoarthritis, rheumatoid arthritis, fibromyalgia or even weakness or fatigue, then you need to stay with us for the next half hour. we're going to be discussin