>> we've got a lot of names moving ahead of the apple one, so we've got your apple playbook. how to trade all these stocks ahead of that big date, september 9th. >> oh, yes. i'm looking at our jon fortt, and i think expectations are getting pretty high. >> and pushing a lot of these stocks to new highs. what do you do at this point, especially if have some huge authority interests. >> over to you. >> "fast money" starts right now. live in new york city's times square, i'm melissa lee. august in the books. wrapping up the month with another record close for the s&p 500, as the index locked in its best august performance in over 14 years. our top story tonight, a big loser in august, crude oil, it's down 5% for the month, and that move actually helped the retailers with the s&p retail etf blocking gains of just over 5%. today, though, a crude surge on oil concerns. what is the oil trade at this

point and could today's gains mean it's time to ring the register on the retailers? where do you think oil's going to go directionally? >> i'll tell you what. it's held up, certainly, by this geopolitical end, and i don't see a really great solution to it. and the problem you have, really, you need to watch iraq in particular, because the kurds have their particular area. it's all about baghdad now. i think that geopolitical bid is going to stay in oil. i know people and i know the term structure saying, we're probably going to get down to 85ish. i'm not sure we get there. >> what is the bid we're talking about? you back that chart up to june, i mean, in june it was trading close to $106 a barrel. >> people have been talking about this bid in crude. and you thought it was going to stay there. so when you're saying this geopolitical bid, i'm with melissa here, but i think the real stability in the price protection here for support is $92. that's what you have to really break. that's the long-term fib from the $140 price down to that $45 price, wherever it traded down to.

i think for now, though, if the s&p is going to rally into the close of the year, which it has done, year after year after year, it's going to be difficult for crude to be under pressure. i think everything rallies. >> what are your trades in oil? >> i guess, i'm with grasso for the most part. you know, crude and stocks have actually been more positively correlated than negatively correlated in the post-crash period, because in part, people have pointed to strong crude prices as kind of like a show of global demand. so if you get strong crude and it's got support here and it sticks around at this level, i wouldn't call it a negative. i think what's most interesting now is, you look at the domestic oil and gas drillers here in north america. they really haven't had a great summer, but in the last five sessions, they're up more than 7%. second best industry group in the entire market. and i think that speaks to the fact that every time we get this kind of consternation in that part of the world, these stocks get a bid. and the thing is, even with that run, they're still selling somewhere between 12 and 13

times earnings. i would continue to buy them. >> we're showing the drones, but the you take a look at the u.s. gear -- >> the shale plays. >> if you add to that the boost of potential consolidation in the space, take a look at something like a whiting petroleum or an oasis petroleum, they're at new highs. >> you mentioned retailers, i go right back to the retailers. goldman sachs has a conference on wednesday, their global retailing conference, starts, i believe, on wednesday. there are a couple of companies to present, not the least of which are kors and macy's. macy's traded up to a 52-week high. and kors had a dicey price action this week, but those are two names you can own. and gap stores u.p.s. continues to -- >> and we're lapping that government shutdown from october. so there's going to be a lot of year over year comps that are easy to jump over, so people respect going to realize when these numbers start to come in, that's something that i don't think the average investor is really putting into their -- >> the easier comps --

>> yeah. >> and the xrt, just the broad retail etf, without getting too technical on each individual name, just in general, nobody expected anything out of these stocks this summer and they've done extremely well. the xrt might be on the verge of breaking out. >> i know you guys hate this, when i talk about the holidays, but if there's going to be a seasonal -- >> i'm with you -- >> -- holiday trade on retailers, you've got to take a look at that now. >> i put my christmas tree up last weekend. >> now you're making fun of me. >> when the holidays come around, it gets cold, and when it gets cold, you need more natural gas. that's where i would look. we're talking about the energy complex. look at chesapeake energy. that's done very well, chk. when we see how much natural gas we have, everybody's saying there's a glut, yet natural gas keeps going higher. that's a trade that i like. look at chesapeake. >> let's talk drones now. google joining amazon in the crowded skies with this new drone delivery program called project wing. the company says it's already begun testing flights in

australia, but now with two internet giants betting on drones for delivery in the skies, could it be the retailers on land that are hit the hardest. let's bring in james temple joining us from san francisco. great to have you with us. you know, you think about drones, you're thinking about google, you're thinking about amazon, thinking about those two going to head to head. but you say it's the traditional retailers that could feel the brunt of this. >> i think the bigger picture here is that google and amazon are both really trying to reinvent the way that distribution happens. and i think to some degree, the biggest thing that's -- the biggest challenge that's remained between physical and online retail is the promise of immediate gratification. and if you get drones to the point where they can ship products in a half an hour, which is what amazon's been saying, or now google talking about delivering something across town in minutes, you know, that really does close the gap between buying something on amazon and driving to walmart to get it that very day. >> hi, james, it's josh brown.

are we making too much of this drone delivery thing? think back 15 years ago, web van, pea pod, amazon was talking about running a pint of ben & jerry's to my parent within three hours. barnes & noble was going to bring me "war and peace" in case i needed it in a hurry. do we need like flying death machines above us, bringing us thing from the bookstore or clothing retailer, or is this just like billionaires having fun burning money in a -- >> how do you really feel? >> i'm asking objectively. >> you make a great point about the late '90s, early 2000s' attempt to get this immediate gratification by having people ship things across town on bikes or whatever. i don't think this is the same thing. these are really big technological bets that could do things in a more efficient way. i'm kind of comparing it to the internet versus newspapers.

it makes more sense to be able to deliver a product in a, you know, as the crow flies, directly across town to exactly where it needs to be, without having to idle in traffic or anything else, and drop it precisely where it needs to be, half an hour after a person orders it. i think, sure, there's a lot of technological challenges that remain and a lot of regulatory challenges that remain. but if we can get to that point, it could be a really interesting -- it would be very interesting to see how it ends up affecting distribution and logistics in the u.s. >> james, great to have you with us. have a great weekend. >> thanks for having me on. >> here's a question. grasso, if you could have drone delivery of anything and get it in ten minutes, can you imagine a product that you would want, that you would need it in ten minutes? you would need a drone to bring it to you. >> do not say mail-order bride. >> i mean, i guess you could go with clothes. >> really? >> yeah -- >> you need a sweater in ten minutes. >> how many times i need a tux, like every tuesday and thursday, i have a black tie affair to go

with and i want to switch it up. sometimes i want the purple -- >> how quickly can carnegie delhi bring us matza balls. >> that's what you would want? >> that's what i would want. >> he mentioned that he needed -- looks like he got more than a -- i don't know. just me. just saying. >> thanks, guys. >> there's nothing i want -- i'm a tech top person. if i'm shopping, i'm in the car and going to the short hills mall with you. >> we went to the store? >> josh is actually right, though. you want groceries. i have four children. you want groceries, you want stuff from cvs, medicines. you want things that can get to your house quickly. >> we're missing the point on this. >> bottom line. >> the bottom line, there actually is a real use for this. and facebook's talking about it. and that is bringing internet to areas of the world that are underserved at this point in time. you can fly a drone over africa, perhaps, and boom internet. if facebook is able to do that, that's a reason to buy facebook. in light of that, look at avav,

that's your trade. they make drones. if you want to play the trend, that's the place to go. >> coming up next, the countdown to the apple event on september 9th intensifies. we've got your playbook for trading the apple ecosystem ahead of that big unveil after this break. plus, a motorcycle that runs on bacon grease? yes, it is real and we've got the details, next. latte or au lait?

cozy or cool? exactly the way you want it ... until boom, it's bedtime! your mattress is a battleground of thwarted desire. enter the sleep number bed. right now, all beds are on sale. he's the softy. his sleep number setting is 35. you're the rock, at 60. and snoring? sleep number's even got an adjustment for that. you can only find sleep number at a sleep number store. right now save 50% on the labor day limited edition bed, plus 24-month special financing. hurry ends monday! know better sleep with sleep number.

♪ this is -- >> you know, she's really -- >> this is segment producer mike newburgh's favorite song. >> no, it's not! that's so bad. >> totally true. >> really? >> i don't lie to america. that's the truth. >> all right. big gains for tesla, hitting a record high in today's session. that after the company said it signed a deal to build 400 charging stations in 120 different chinese cities. there was also a report in the "wall street journal" that china is considering a gas tax, which could make the case to own a -- >> we had a guest on last night, and i did think that the next -- everyone's looking at it, whether it's a technology company or a car company, if you look at the next leg, the next catalyst was going to be china.

and i think everything off of the united states turf will be the growth for tesla. and this is nothing but good for them. you have to look at the 268 level. >> on this holiday, the monday holiday being labor day, when everybody's firing up the barbecues, that's when the tax subsidies, tax incentives going into effect in china for ev. that could be another potential catalyst. >> and there's other companies out there. i think you had mentioned once, candy's another one, akandi. ubs had a huge report this week on electric vehicles and the way that they're going to change the electric grid. so all those potentials come in here, but be careful when you start to see it spike higher. that's how it ended back in february. we had that rocket hire in tesla and that was it. watch for that. >> now on to all things apple in your playbook, as we get closer to the tech titan september 9th event. apple hitting another new high in today's session. how do we trade this? historically it is rising to the

news, sell on the news. >> if you're an investor, i think the thing to keep in mind is the street likes this company to do something like 11 to 12% earnings growth on an average annual basis over the next five years. you're only paying a 14 multiple on trailing 12 for that. in the meantime, they're returning a ton of cash to shareholders. almost a 2% yield. even here at an all-time high, which is significantly better than what you're getting elsewhere, while you wait, and quite frankly, when they were coming out with the ipad, nobody thought that anyone would ever need a tablet. they invented a category. the same thing with the phone. whoever would need an iphone? now they're going to come out with wearables and watches. and quite frankly, i'm not excited about that, but what do i know? they may invent a whole new category with wearable technology. they never invented themselves in terms of the technology. >> so you like it? >> they just make it better. >> i think you've got to hold it. i don't care if they sell it off. >> want to get the bottom line. sticking with the apple ecosystem -- >> i have a couple of more things to say. >> in the commercial break, you

can say whatever you want. the dutch shipmaker is working with apple on technology to enable pay by touch in the new iphone. >> it's the nearfield communication. it's the mobile payment system that everybody's talking about, a way to tap into all those itunes users. what i think's interesting, nxp is fine, but from my perspective, within the patent for this, they actual mention virtual currencies, and that's a big thing for bitcoin, which i'm a big fan of. and in this particular era, if you can get apple on board with mobile payments and bitcoin, that's going to be very good for them. there's two trades off of it, one which is bitcoin in general, a great pace to buy it, and number two, silicon valley bank, sib, they service all the bitcoin processors, particularly coin base. and that's the way i like to play. >> and also taking a look at gt advance technologies, a reported supplier of apple, catching a downgrade, but bouncing back slightly in today's session. we had that analyst over at

raymond james. >> you've got to respect his call. it is expensive on valuation and he's putting it out there, which i really like. now, we had a question last night on trade school about head and shoulders patterns, do you recall? and if you go back to basically june, potentially setting up one. you don't get short the stock ever, because there's a 40% short interest. but if it starts to break down through 17 and you've been long, i say take profits and look to buy this stock cheaper. if you're long it, you stay with it. break 17, pull the rip cord. >> here's a question for y'all. >> love these questions. >> ever wonder what to do with all that leftover bacon grease? >> nope. >> all the time! >> never wonder. i know exactly what to do. if you're not josh brown, you can now use it to fuel your -- >> salad dressing. >> -- motorcycle. jane wells has a story about a different kind of hog. >> reporter: this is what makes america great. this motorcycle runs on

america's hottest food right now, bacon. hormel built this bacon bike and brought it here to san diego to the company-sponsored international bacon film festival, yes, that is a thing. the bike runs on 100% refined bacon grease. and i had eric pearson, the biker, tuprove it to me. >> why don't you turn this thing on? >> all right, let me smell. that smells like bacon. that is crazy! pearson rode the bike across the country, even went to sturgis, says he got 80 to 100 miles per hour, it takes about 30 pounds of bacon to make a gallon of bacon grease, and a little more than a gallon of bacon grease to make a gallon of fuel, so it's really not cost efficient. so why a bacon bike? >> it was more like, why wouldn't you do that? >> hormel is hoping to gain share on first-place oscar mayer

from kraft, and the stock has outperformed kraft over the last year. shares are up over 20%. the company beat the street on earrings last quarter, citing strong demand and margins, even as bacon prices remain so high. hormel currently has no plans to market an edible biofuel, this is just a stunt. i did ask, though, about a spam-powered motorcycle from hormel. no word, yet, and i'm not sure how the exhaust would smell. guys, back to you. >> that was jane wells, i think this one of her finest pieces to date. >> josh also runs on bacon. imagine if jane was in studio. >> i'll roll out my sausage studio. >> can we get a quick trade. >> i don't know what to say. >> yes, you do. >> actually, the chicken producers, hormel does fairly well. i think some of the chicken producers, you can look at here, perdue is the other one. still ahead, we are going

back to trade school and answering your burning questions about the markets. stay tuned. sharpen your pencils. you're about to get schooled in the fine art of trading, with the "fast money" back to trade school. the fast money traders are taking your questions to help make sense of the markets. send us a video. >> we would like to know what the heck is head and shoulders. >> post it to the "fast money" twitter page and make sure to use the #back to trade school. >> what is quantitative easing? >> it has to do with money. >> knowledge is good. "fast money" back to trade school class is in session all the week. [ male announcer ] don't just visit hawaii.

[ squeaking ] [ water dripping ] visit tripadvisor hawaii. [ whistling ] with millions of reviews, tripadvisor makes any destination better. i don't have to leave my desk and get up and go to the post office anymore. [ male announcer ] with stamps.com you can print real u.s. postage for all your letters and packages. i have exactly the amount of postage i need, the instant i need it. can you print only stamps? no... first class. priority mail. certified. international. and the mail man picks it up. i don't leave the shop anymore. [ male announcer ] get a 4 week trial

plus $100 in extras including postage and a digital scale. go to stamps.com/tv and never go to the post office again.

the buying movers of the day. orbitz, up 3%. >> the other day, we had a drop for orbitz. it looked like a layup trade, and i almost bought it, but i thought it was too obvious, so i rallied back. i think it's a buy. >> big lots, down 2%.

>> it wasn't a bad report. they basically guided down, i would avoid the stock, i think you'll probably get it closer to fuel. >> another pop for rocket fuel. >> ad retargeting, that was an ipo last year, in the doing that well, but the reports that another company in the space was going to be bought out, it's a lottery ticket here. >> got a pop for splunk, up 19%. >> solid, solid quarter yesterday. second quarter operating margins were outstanding, but up 20% on 11 times normal volume, take your money and run. >> all right. today's a sad day. it's the last edition of our back to trade school series. and for our final segment, we're doing rapidfire with questions for each trader via twitter. first, a question for bk. can you explain how you determine support and resistance lev levels? >> you basically look back and see where there's consolidation in the past or consolidation overhead. i have a chart of fcx, which is a name i'm long. you can see there was consolidation, all the way back

to april, and that's where it broke out. so when it breaks out, that's resistance now becomes support. we have a little minor resistance and after that it's off to the races. >> next up, question from grasso. >> what is the s&p cash flows that grasso refers to? >> it's the spot price versus a future price, when you look at the futures or the cash price. you can look at either one, i just gauge all my technical advice off of the s&p cash. >> so basically, s&p cash, if you're an average investor at home and pull up s&p 500 on whatever, cnbc.com -- >> depends on what time of day you pull it up. >> pull it up during session, you probably get the cash price. >> next question, this is for jb. it comes from steven on twitter. has social media helped democratize trading or just confused realtime investors. >> i think the only way to answer that is to say yes and no. like any other medium, it's not

about what platform the information is being delivered on, it's who you follow and who you choose to tune out. hopefully you've made the correct decision to follow me and it's working out for you. unfollow melissa lee. >> what -- >> and you'll probably do great. >> and everybody say good-bye to josh. this will be the last time he appears. >> thank you very much. >> good-bye, josh brown! >> it's been a good run. all right, last but not least, this one is for guy, greg on twitter asks, what's more important, fundamentals or technicals and why? >> come on, greg, you know the answer to that already. they're both important. a lot of wonks like to be fundamentals, and the technicians say it's all about the tech list. you have to marry the two of them together. you can't look at one at the expense of the other. i believe you have to look at both technicals and fundamentals, and if they line up, that's when you enter into a stock position. >> so if one conflicts with another, you think that it's -- >> sometimes --

>> you just flip a coin. >> or just flip a coin, with trb. >> that's quantitative analysis. >> probability. >> right? >> now people at home are going to think that's crazy. >> how does astrology enter into your process? >> huge. >> it's also the chicken or the egg, right? sometimes you don't know. sometimes you see the technicals fail and a week later, you see fundamentals -- >> i always believe people know something, not that it's inside information, but always -- >> i was going to say that, so, i think fundamentals can lead technicals and sometimes the market's telling you something that's not already public. all right. time for the final trade. let's go around the horn. >> i'll go with verifone systems, pay, pay. if you go to evm technology, at point of sale is going to have to be redone. so pay. >> josh brown? >> the oil stock rally is not over. i prefer ieo, long. >> beakers? >> silicon valley bank, i think

that's a nice way to play bitcoin if you don't want to buy outright. >> guy, ahead of the holiday? >> happy holidays to everybody, right? >> yeah, labor day is very important. >> palo alto networks! plnw. i like the name. >> that does it for us here on "fast." back tuesday at 5:00. but don't go anywhere, we've got a surprise sector that options traders are making huge bets on. we'll tell you what it is right after this break on "options action." have a great long weekend. you, my friend are a master of diversification. who would have thought three cheese lasagna would go with chocolate cake and ceviche? the same guy who thought that small caps and bond funds would go with a merging markets. it's a masterpiece. thanks. clearly you are type e. you made it phil. welcome home. now what's our strategy with the fondue? diversifying your portfolio? e*trade gives you the tools and resources to get it right. are you type e*?

you know what i love america? fine barbecue, good times and zero heart burn. and that's why i take prilosec otc each morning for my frequent heart burn because it gives me zero heart burn. prilosec otc the number one dr. recomended frequent heart burn medicine for nine straight years. you can beat zero herat burn prilosec otc one pill each morning 24hrs, zero heart burn

this is "options action." tonight, feel like you're the only one missing the rally? >> it's the story about a man slowly succumbing to a kind of nightmarish loneliness. >> hold on, buddy, because we've got three ways for you to play catch-up. we'll tell you what they are. plus -- ♪ freak out >> everyone is freaking out about september. but we've got the surprising reason why you shouldn't be afraid. and are you looking for a bargain? >> if the answer is yes, don't wait another minute. >> we'll reveal the single best trade in the market. the action starts right now. ♪

live from the nasdaq market site, i'm melissa lee, these are the trades here in times square and san francisco. and as the s&p closes up yet another record, growth stocks are continuing to lead the way. are they your best bet for the last four months of the year. let's get into the money and find out. carter, let's start off with you, because growth is where it's been at. >> in many ways, it's more of the same. this unrelenting, uninterrupted bull. but growth stocks really are important here in the sense that there's not a lot of growth in the market. and people are willing to pay almost any multiple for certain growth stocks. things like tesla and of course netflix. but biotech in particular is an area where if you look at certain names, they have the growth that's quite exceptional. and yet you don't pay very high multiples, something like gilead, for instance. we have a table here that shows some of the forward multiples that you'll see available in the market place. much higher, and yet you get the same growth rate out of a gilead than you do the others.

>> and you can see this reach for growth, when you take a look at the sectors. for the month, you can take a look at the russell, for instance, as well as tech, as well as carter mentioned, biotech, outperforming the broader indices. then you take a look at individual names, as you mentioned, gopro. these names are just having monster runs. >> yeah, they certainly are. as soon as the market turned in august, all these growth names started kicking in. we managed a couple billion in our growth sector stock-picking area. and those names, too, all growth names, growth at a valuable price here is what you want, and that's what's going. sometimes you have to do a little research. you don't always have to pick the most no-names like a tesla that seem to have those high p/es. other names are doing well, like net app, other names in pharmaceuticals. some of these names are not as well known names, but growth with the "p" multiple somewhat

suppressed. >> how do you look at this reach for growth in the context of where we are in the market run? >> you know what's really interesting for me, it seems that people are willing to pay for growth in those areas that are the least proven. names like gilead, not only are they trading at a relatively low multiple based on forward earnings, but these are companies that have a long track record of earnings and revenue growth. and you compare that to something like gopro or compare it to something like tesla. you know, tesla has yet to prove itself. this is a situation where obviously their going to sell a respectable number of cars, but if you take a look at those numbers, saying you need $1 million worth of enterprise value per car sold, that's a lot when you compare it to other businesses in the space. biotech, that's not true. you can take a look at these companies, growth companies, versus old state health care companies, like johnson and johnson, these are actually cheaper. >> we're focusing on gilead, and i want to back up a little bit too, we're taking a look at biotech, and not only is there growth in the sector, but also

potential for consolidation. which has moved a lot of these names recently as well. >> certainly for the single name, like, the single-story biotech companies, a lot of those are getting snapped up as the larger biotech companies are looking to make sure that they have a broad portfolio. we were talking about gilead. that is a company that does actually have a pretty decently broad portfolio. obviously, you know, the blockbuster is their hepatitis treatment. but actually, their hiv and cancer treatments as well show a great deal of promise. and the hepatitis treatment, the holy grail there is for an all-oral solution. and that's essentially what i think they're working on. and you know, this is -- that drug alone, had over $1 billion more in earnings over the last quarter than most people expected. so this is a company that's trading at less than 12 times next month's earnings. >> so what's your trade? and i'm sure a lot of people really want to know, because they feel like they completely missed out on this. >> that's the hard part, right? you're looking at a stock. this is the most unbelievable statistic. this company is up 400 fold in the past 20 years.

that's a pretty astonishing number. you think you can go back and buy this for about a quarter if you look. right now, it looks like it's gone straight up. and it's very hard to get in at a stage like this and purchase the stock. i'll use options to make a bullish bet. i think the best way you can do that is look out to january, look at the 110, 130 call spread. you can spend just over $5 for that or a little over 25% of the distance between the strikes. now, options have been quite cheap, and a lot of names here, it's not quite as cheap as it is in some others, although the stock is. this is a way where you can get some nice upside exposure, looking out over the course of the next few months or so if it continues to rally and you're only risking about 5% of the stock price if it doesn't. >> what do you think of the trade? >> i like the trade. this is the kind of trade you want to look at after stocks have made a run. use a call spread to do that stock replacement. and if you look at the other growth names out there, i think you can apply the same sort of call spread that's slightly out of the money call spread that you're trying to get, get some

value here, and apply those to other growth names too that have had a tremendous run. those who have the same kind of value and wed-roundedness that gilead has. >> does the chart back up? >> it's a steep intermediate move, but not so mature to suggest that it's exhausted. >> so there is some upside? >> we think so. despite the worry around the world, the emerging markets have held up surprisingly well. susan lee is back at options actions headquarter. >> the emerging markets, the etf, it's up some 8% so far this year. and some options traders think it's going to go even higher. so in some of the day's biggest trades that we've saw, some bullish bets there on the emm and brazilian stocks. one trader making a pretty big wager that the brazilian etf is heading up to $60 by january next year, which would be a 12% rally from its current levels.

in the meantime, we also saw a major trade in the emm. basically, this trader is using options to effectively get a long position, going long a million shares on this popular etf. talk about a bullish bet there. as you see, melissa, some big moves in the emerging market space. >> so will the bulls be proven right? let's call to the chart master. carter, what do you see? >> there's a lot to look at and let's try to figure it out together. the first thing is the setup here, which is to say emerging markets have really not participated to the extent that the u.s. market has participated over the last five years. here it is visually. this is a five-year chart, juxtaposing the s&p 500 with emm, and obviously, it's the spread that is quite incredible. meaning, we haven't had the lift that we've seen here in north america. so, is the strength of the past couple of months a foreshadowing of a bit of a catch-up here? we think it is.

let's look at some charts. so standard one-year chart, nice, steady uptrend, tracking its line. and no problems, if you will, yeah? nice channel, if you will. so here's the issue. we're right back to the top. do you break out here or not? this 45 level, keep that in mind, and look at, here's our line again, and look at the weekly chart. well-defined top at 45. well-defined top at 45. and the presumption is, this time, after you probe past the top, you exceed the top. the setup is right not only on the daily, the setup on the weekly. now, keep in this in mind, because we think we're going to hit 50, 52, a nice 10% move here. look at the two long-term patterns i want to show you. now, here's our line, here are our tops, here's the presumptive breakout. take us to this level. now, this level, if and when we get there, it means a very

important thing has happened. same long-term chart with no lines. if we think we're going to do this, we break out above our circles here, we're going to exceed the upper band of this well-defined wedge, important development. we like eem absolute and like it relative to the s&p. >> carter, what is that level that you're pointing to? >> you're talking about the trend line here? >> yeah, yeah. >> this is right where we are now. 45. >> exactly where we are. >> not only is it the key level for -- well, i've lost my chart. it's the key level for the here now, it's the long-term key level, and that gives you a double setup. >> okay, so carter says it looks like there's upside. brian, what's the trade? it's actually a very simple trade tonight. >> and the fundamentals are there for eem to go higher. that's ridiculously cheap if you're looking for value in this market. simple trade, don't have to cry about it, don't worry, well, is it going to get past this resistant? you simply buy a call.

these are cheap, volatility is very suppressed. a 50% discount to what they were at their 52-week high in terms of volatility. so when you go out and look at the october 45 call, what i simply want to do is pay a dollar for that. my break-even now is just $46. that's basically 2% move in the stock to the upside. i think you could almost use leverage here. that way, you get all that unlimited upside potential that carter is talking about. and if we go down, volatility is probably going to rise. those calls will hold that value, because people are looking at these charts saying, it's only a matter of time before we break out to the upside. that's why i like this right now. if it sells off, i still like owning these calls and i think you get the upside, simply buy a call for a buck. >> mike, would you spend a buck on this? >> i think i would. the options are cheap. i think a lot of people look toe merging markets and probably think there's a lot of materials and things like that in there. it might surprise a lot of people to learn that the industries that have the latest waiting and in the eem include names like taiwan and semi and

samsung and a lot of financial. so that valuation that you would like to attribute to caterpillar applies a lot less than you think. that only represents about 10% of the index. i really like this trade. >> carter, the first chart that you showed us showed the s&p 500 and eem and you implied there's going to be a catch-up there. what is it the probability that the s&p 500 that will go down to meet the eem? >> well, it's about relative and absolute. there is that possibility, the convergence is both entities, one moving up, one moving down. the rate of change maeaning the s&p continuing, but either way, we'd say convergence. >> one more point to that, too, i think the reason why eem actually catches up is the strength in the u.s. dollar is weakening those other currencies in those emerging markets. we get strong data out of china, a weaker currency globally. that helps the emerging markets push higher. >> got a question, send us a tweet, and for everything

options action, check out our website, options action.cnbc.com. you'll want to check it out. here's what's coming up next. be afraid. be very afraid. >> traders are getting worried about september, but we'll tell you why it may not be as bad as you think. >> plus, did you know that cars and knishes making money? a surprising and delicious trade when we return. ♪ 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.

cozy or cool? exactly the way you want it ... until boom, it's bedtime! your mattress is a battleground of thwarted desire. enter the sleep number bed. right now, all beds are on sale. he's the softy. his sleep number setting is 35. you're the rock, at 60. and snoring? sleep number's even got an adjustment for that. you can only find sleep number at a sleep number store. right now save 50% on the labor day limited edition bed, plus 24-month special financing. hurry ends monday! know better sleep with sleep number. [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. after a nice august, a september swoon ahead.

that's something a lot of traders are starting to worry about, but brian has found some surprising statistics that suggest otherwise. so we want to hear it, because that's all we've been talking about as we go into labor day. >> normally, you head to september and hear about the markets typically being down in september and certainly that's the case. the question is, does that always happen in the vix? when you look back historically, really it's only about a 50/50 chance when you go all the way back to 1991, that the vix is actually up. one thing that's interesting even in the last decade, that's a lot less. you really only had two major spikes in the vix and volatility in september, the rest of the years, you can see, in this market, that we actually saw the vix go down. certainly, it's kind of a conundrum on whether you want to start owning volatility. i think the key point when you look at this and look at any of these sort of spikes, they are hard, they are sharp when they happen. and sos that why traders like buying volatility, headed into these fall months, because when it does happen, it gets very difficult. >> so walk us through just here what we're seeing in terms of, what we're seeing here in the s&p 500 and also what you saw in the vix.

>> so typically when you look at the vix and the s&p, they're negatively correlated. meaning what typically happens is when the market sells off, it sells off a lot faster than it does when it's rising here. when you look at these financial crises, and i'd even call this september 11th a financial crises, whether it was europe or our debt downgrade, when credit deteriorates, these spikes happen. so when you get into the fall months where there's a lot of pent-up nervousness, you can find these spikes in the vix happen very sharp and hard. that's basically what you're seeing in these markets and you're seeing in the s&p a market that sold off very hard. >> i think there will be some people out there who say, brian, you trade in volatility, but what you've been seeing recently is that the vix has been dampened. if you take a look at the chart, you actually see a rising pattern or even a middling pattern going into these big spikes. here, you know, we've sort of settled down. >> yeah, we have. and when you look at the central banks in the world and the federal reserve bank and the ecb, all of that liquidity that

has come into the system, has really played a part into this dampening on the downside here. what's basically happened, when you get liquidity and monetary policy, the mark's just not moving, folks. you're looking at an s&p that's moving half a percent a day. there j't volatility. there's no reason to buy a put option, because if it doesn't pay off, you spent that money, it didn't pay off or finish in the money. but obviously, we have seen sharp spikes in september before. that can happen if we have a sell-off. obviously, we're coming off of all-time highs here in the s&p, very, very low levels in the vix. you've got to be careful of a quick little spike. >> i think that's a great point that brian makes in terms of the role of central banks around the world really dampening volatility. mike, what does this mean for you? >> first of all, i think that's exactly the point. all of these central banks have been giving puts to the financial markets for free. so therefore, the price of going out and purchasing them in the open market has declined significantly, basically a huge cushion of liquidity every time the market starts to soften a little bit.

i want to point out one thing, that is when options prices are low, and they are low right now, even if you think the probability of success is less than 50/50, the amount that you can make if a volatility spike occurs is going to vastly outweigh that. so your expected pnl is actually going to be profitable. i think that's something important to remember. when options are very cheap, the amount of leverage you get to upside really makes it beneficial to own them over time. so this is a situation where i would absolutely not be short volatility in general. not in index and not in single stock. >> and carter, i want to go to you and talk about seasonality and this notion that september has not been a good month for stocks, but that we are, overall, in the ra last quarter of the year, going into a seasonally strong period. is that what you see? >> that's right. and the seasonality studies are quite clear and the data is well known, obviously, this next six to eight weeks is where some of the great market collapses have occurred. the month of september being the worst of the 12 months. in fact, it's the only one since 1896 that is down more than half

the time. and on average, september is down about 1.1%. and that is an outlier. but another data point that's very important, and it affects the statistics a lot, is, what kind of august did you have? and that's important. meaning, the worst septembers typically occur when you've had a pretty bad summer. we've had a fairly decent august, as we know, a nice ricochet in response to the very bad july. so to some extent, it's not the setup here now for cataclysmic september, if you look at data as it relates to the proceeding month of august. >> brian, i want to go back to you. no reason to own volatility. at the same time, flip side is that options bets are even cheaper to make going into the last quarter. so how do you use this information? >> i want to go back to mike's point, too, because i think he makes a great point. right now, i am long volatility, married against a long equity portfolio. so whether you buy a call on that to the upside or buy a put against long stock or you just

own volatility at some point, i think it makes sense. i would rather marry stocks with volatility or stocks with bonds or any other asset class. i think it makes sense, buy stocks, buy a put, they are very cheap. if not, i've seen the markets significantly higher. you'll win that way too. >> coming up next, how could one of new york's most classic foods make you money. find out when "options action" returns. ♪ [ 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.

cozy or cool? exactly the way you want it ... until boom, it's bedtime! your mattress is a battleground of

thwarted desire. enter the sleep number bed. right now, all beds are on sale. he's the softy. his sleep number setting is 35. you're the rock, at 60. and snoring? sleep number's even got an adjustment for that. you can only find sleep number at a sleep number store. right now save 50% on the labor day limited edition bed, plus 24-month special financing. hurry ends monday! know better sleep with sleep number.

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. welcome back. while people may love "options action" all around the globe, but some of our biggest fans are height here in new york city, and one of our fans happens to own a classic new york restaurant. take a look. hi, my name is ellen. this is the grand daddy of all

knishes. that's a yiddish word for dumpling. it wasn't only the first that came to the united states, it was invented from this family. this is a spinach knish. it's my favorite, potatoes, onions, spinach, and spices, wrapped in a very thin dough, ground and bake. this is $3.50. do you have any options that are cheaper? >> a very good question. and a very delicious-looking knish, by the way. carter, have you ever had one, by the way? >> i like potato pancakes, but that looked good. >> i'm going to put the question to you, mike. do you have an option cheaper than a knish, $3.50? >> yes, i think i do, on a stock that i also happen to like, ford motor company. right now we've got lower gas prices, that's going to help sales of f-150s, which is great, but even if those gas prices go back up, they just started rolling out the new mustang and a lot of other very good small cars as well, like the fiesta

and the focus. one of the things you can do is go out in time. we've talked about the fact that options are cheap and look out to those january 17 calls with the stock a little over 17 bucks. you could buy those for $1. that is obviously a lot less than $3.50. okay, in fairness, that represents $1 per share. there are 100 shares per contract, so in fact, you'll spend about $100. but we'll look at this on a per-share basis and i think that's pretty good value for money. >> the question now becomes, brian sullivan, would you rather own this call or one third of a knish? >> i think i actually would go with the knish, to be honest you. >> well, it looks delicious. >> mike makes a good point, the value is there, the stock is a value play, look at the pes here, what ford has done, but in this market, i think the value on ford, i would rather look for other places. i think the airline industry is over to the car industry is in better position here, given where gas prices are, and something like a southwest airlines or something like that. i think there's some other

better plays out there than owning ford matter company. i don't know. the stock looks like a momentum to the upside, but i don't love it. >> this is cheaper than southwest air on a multiple basis. we have a very old car fleet in this country. we can see what can happen to the airlines when things go pear-shaped. and by buying this call on a well-loved stock, we get to participant if the thing goes up, but we're not taking that much risk if it goes down. the premium, only about 50 cents on a standstill basis. >> carter, quickly, the charts? >> not a great pattern. most auto dealers have rolled over. >> coming up next, the final call from the options pits. [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.

cozy or cool? exactly the way you want it ... until boom, it's bedtime! your mattress is a battleground of thwarted desire. enter the sleep number bed. right now, all beds are on sale. he's the softy. his sleep number setting is 35.

you're the rock, at 60. and snoring? sleep number's even got an adjustment for that. you can only find sleep number at a sleep number store. right now save 50% on the labor day limited edition bed, plus 24-month special financing. hurry ends monday! know better sleep with sleep number. [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. time now for the final call. last word from the options pit. mike khouw? >> why worry and the you use

calls, you don't need to. >> brian sullivan? >> i like eem. >> i like eem technically and like it also relative to the s&p. >> our time has expired. thanks so much for watching. see you back here next friday at 5:30. in the meantime, don't go anywhere. "mad money" starts right now. have a great weekend. my mission is simple. to make you money. i'm here to level the playing field for all investors. there's always a bull market somewhere and i promise to help you find it. hey, i'm cramer. other people want to make friends, i'm trying to make you a little money. my job is not just to entertain you, but to teach. call me at 1-800-743-cnbc. tonii'