now, you stay safe. bye-bye. ? "options action", tonight, wipeout, the shocking chart that says gopro shares could be 50 bucks by next week. how to profit. plus, first net politics, then amazon, have we witnessed the death of the cult stock? >> awesome! >> the traders will tell you which name is next, and talk about unusual. >> 106 miles to chicago. we got a full tank of gas, half a pack of cigarettes. it's dark. we're wearing sunglasses. hit it.

>> well, maybe not that strange, but traders bet on ford today, and you won't believe how high they see it going." the action" starts right now. live from the nasdaq market site,ed traders in times square, and the word is epic. adding a combined $77 billion of market cap this week alone. question now is, are these the stocks you need to own, particularly as facebook reports earnings next week. let's get in the money and find out. dan, why the rush to own these stocks when there's other tech names that fell out of bed? >> that's really the key there. i think if you bottom line it, those worked all yearlong, the best story in all of megacap tech. why get out now? especially when you see the market come back the way it did off the lows from last week. to me, you have apple, those results were stunning and guidance fantastic. you think about it, to me, stick with what works, raise the stop

if you're worried in volatile times. that said, on the flip side, names on the other side were punished. ibm and coke were examples. think about it. people talk about stock tickers market. i don't know exactly what that means, but stick with what works and cut losses on what's not. >> what it mean, and we talked about it before, is names like apple are a good place to hide out if the market is volatile and in distress. it works if the market goes up, those do well, and if the market is going down, they hold up better. they are not a hold and hope story which other stocks tend to be. they deliver results. look at other names, they hope something's going to happen, the companies deliver in the future. that's the first place when cracks start to emerge that people bail out. >> at the same time, if we are to believe the markets will go higher to year's end, isn't the natural tendency to go to more beta? go to the stocks that are smaller, beaten up, not the big

cap tech names. >> there's a lot of broken stories. look at pandora, a darling in the beginning of the year, and now down 50% from the all-time highs. the story is over here, you know what i mean? picking a bottom in 3-d printing stocks or social media stocks or web services stocks that were all the rage a year ago, that's not the right strategy. to the open, stick with what's working. >> look, if people are nervous about a lot of things, the fact the market was up today, given the fact ebola was in new york city, trading last night, that demonstrates confidence. the only place there's confidence is in the places where people feel safe. these are the stocks they feel safe in. >> that said, facebook out with earnings next week, what's the trend? >> this is the last megaone. google, that disappointed, traded poorly. could be baufts stuff that facebook is doing in mobile ads.

remember this, the company needs 12 billion in sales this year, and a 2 billion market cap. this is facebook. think about the earnings, the options market has a one day move in either direction. stock from 8 o down to 70 last week, and now it's back up, new all-time high today. if you're long, this is a widely held stock here. i think you want to think about how the options market thinks about the event. potentially volatile is one, and, two, they just completed this what's app acquisition, $20 billion, 178 million shares unlock next week, a couple days after the report. again, if the theme is to stick with what's working, long facebook here, think about putting a collar on the stock. protect the gains. again, the stock's up 47% year to date right now. heading into the event when the stock was 80 today, look to december, sell the december 90 call at 120 and use those proceeds to buy the december 70

put. what i've done here is created a band where i lose money with the stock i own, okay, against long stock, between 80 and 70, protective low 70 and participate to the upside between 830 and 90. >> you look at callers like this, if you sell up to protect your puts, you buy a put that's further out of the money than the call you have to sell. actually, in this instance rs this is one of the relationships that seems to be setting up well bau because there's equal distance. the premiums are elevated. i consider a put spread caller here, buy a closer to at the money put and be short a couple more options in this case as a mechanism to protect myself. >> yeah, that's a fairly advanced strategy, working a lot of legs and have your stock position. you can get close to the money protection. i targeted 70 down because that was the breakout level in july and q2 earnings. that's where last week was the

low also. i think if, for any reason, you have a disappointment inspect guide down, that's the level where you want protection. >> talk about the flip side, though, r to the trade, and that is to the upside. >> great question. >> what do you do if stocks hit 9? >> you're short the 90 call against long stock. make a decision, okay, you get to december expiration, stock's above 90. do you, and oftentimes people make decisions on paying taxes, the stock up 60% of the year, do you want to book that gain in 2014? if you do not, cover the call back and take a loss there. >> all right. let's go to gopro here, a disaster to be sure today. shares tank after an analyst initiated the stock with an under perform rating and target of 45 bucks a share. on the money halftime report, we explain the call. >> as gopro pivots away from action capture what they are known for to life logging, pictures and videos of the kids, weddings, et cetera, that's a

difficult market to crack, and, you know, ultimately, growth rates deaccelerate rapidly throw 2015-16. >> our own chart master was correctly bullish on the stock on the way up. carter braxton worth, what do you see now? >> you can play it both ways, make money upside and downside, and now it's time to make the money on the downside. there's not a lot of history, but it's clear by my work, meaning, you have a stock in the range june and july, doubles over two months from 45 to 9 o, and now they bottom out. draw the lines. there's the trend line, without the trend line, back to the trend. we broke trend. you can do it this way. you can clearly see head and shoulders top. we have a neckline. this is the risk of a very violent break. here's our trend line. here's our head and shoulders top. here's our neckline.

where does it go to if it breaks, back to the range of which it started. bring it together, there's the range, there's the double, the head and shouters top, the next line, projects to 50 where it started. that's a lot of downside from 71.91. >> negative is what you're saying. >> we talk about hold and hope stocks. this is one of those stories. i mean, we're talking about a stock trading many multiples of sales, so from a fundamental stand point, you have to believe they are going to transform their business, and that's hard for me to understand because this is not necessarily a transformative business they are in. unless everybody starts wearing these on their head, it's hard to figure out from a fundamental stand point how it justifies the price. there is another interesting situation here, though. the stock is heavily shorted right now, 40% of the float is shorted, and the stock is almost impossible to borrow, setting up a couple situations, not the least of a short squeeze.

don't be short this even if you can borrow the shares to sell it. it makes dynamics interesting. the puts are expensive. the strike, a good example, puts twice as expensive as the call at the money, 14 of put, seven bucks worth of calls. you have to pay up. sell options to make the risk and make the short bet. look at the january 60 one by two, send 50 cents to by a structure, buy one of the 60s and sell two of the 50s. this is threading the needle trade on a stock that's scarey. if this blows through 50 down to 45, you're still in the money. if it's down to 35, though, long it 40, and that's a risk. >> you don't like it because you gave me the triangle of death symbol was carter was at the smart board. >> i don't know why he's boycotting the use of that. i would license that to him. >> what a buddy you are.

>> yeah. >> in terms of the trade itself, though. >> i couldn't agree more. i do not like the trade at all. if the guys disappoint when they report, also in this time period, there's a lockup expiration, and if the bottom is out of this, it's back at 40 quickly, and i'll tell you about the trade. mike said threading the needle. this is fantastic if every day for the next month it went down a dollar, slowly. but if it's a straight line, shorting the two puts is uncomfortable at some point. >> that is a reasonable point. for sure if this shot straight to 50, this looks bad on paper. that's the risk you're taking. you're thinking the stock's going to go down to 50, but at 40 i'll own it. you'll be forced to do that between now and january expiration. which is full year 2014 expectations. >> at 40, mike is willing to own it. >> in principle, if you double in quick order, which is what

this is and give back or return all the gains, there's memory at the 45-50 level. at 45- 50, not a bad proposition, certainly being short at that point. >> a question? tweet us @optionsaction, and go to optionsaction.cnbc.com. here's what's coming up next. what do these two people have in common? >> those people have never been in my kitchen. >> not only that, but trade eres think their stocks are way overvalued, and we'll tell you how to play it, plus -- >>. ♪ have you driven a ford >> wow, that was cheesy, but traders piled into ford today and how high they see it going when "options action" returns.

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something's not right, lower, bear camp here, breaks the downside. >> now, maybe, we can see not only has that happen, but it's been happening for a while. there's not a lot of confidence in the stock. >> this is the triangle of death. if you have a break here, it could be lights out. could see 250, something like we saw in netflix. >> as you can see, the "options action" game is bearish on amazon and proven right as shares plunged 8 % off earnings. here's a question tonight. between amazon today and netflix's plunge on earnings,

are we witnessing the death of the cult shock? such a shocking question. at the smart board with dan, what do you think? >> money from the sorts of names is healthy for the market because it's going to better stories, you know, than something people have just totally disregarded the valuation the whole way up. let's see what's gone on, amazon, a growth darling, a revenue growth darling for years here. think about what happened, the stock topped out in december and january earlier this year, basically, back in december, you remember when jeff besos was on "60 minutes" talking about drone delivery, that was it. this was the gap missed on earnings. this was the q1 gap and 2 gap. here we are. investers exited the stock. they do not believe the stock like before disregarding valuation, and that brings us to netflix.

this broke last week, talking about amazon to begin with. this was back when they raised prices with a lot of issues about this, had subscriber turn, and the stock went from 300 down to 50. well, this is where icahn got in this thing. look at the volatility this year. then what? raise prices again. bring this up. obviously, the stock came back, but they were self-inflicted wounds by the company, by am seen also in netflix, but investors woke up to certain issues about the financials, brings us to tesla. they do not report until november 5, and i think you'll have a similar situation. not exactly that the stock goes down, it's already down 20% down from the highs in december. there's two gaps here. musk suggested the shares may be expensive, okay, and this one where musk, the ceo and founder of the company, hyped up this product announcement with that -- >> with something else. >> exactly.

here we are. lost momentum. we know the market in the last week. it can't rally here. to me, what i'm talking about, three companies that were cult stocks, valuation disregarded the whole way up, but maybe with self-inflicted wounds by the companies that got investers to wake up. >> dan makes a compelling case, mike, though, i'm curious where each of the cases are. amazon, for instance, entering the seasonally strong period, shouldn't that prepare even in the short term? the decline that he showed us on the chart was q4, a january report, correct? >> amazon's going to report record sales again this year. we can be sure of that. the other thing, of course, is tesla is capacity constrained. not that they have a demand problem for the product ux but you expect it to go into ambitious valuations here, and it's hard to see how quickly you can do that. this is a capital intensive

business. you have to build plants. there are, you know, rs. the other thing is we don't know where middle american demand for the product will be as good as it is on the coast where it's easier to own products like this. i think that's definitely a challenge. netflix, you know, we got hbo announcing that they're going to offer content directly. those are going to provide competition. really, it's not just the hope story. there's other issues that have been identified now in the market place that i think are also lending some concern. >> in terms of the patterns, i mean, there's virtually identical in the sense there's the precondition required for weakness, which is extreme proceeding strength. we know netflix is a great winner, amazon, and, of course, tesla. what troubles the downside is the precondition of having advance for a long time, brought in a lot of people, and then you reverse. reversal formations are real, head and shoulders tops, triangles of death, whatever you want to call them, but they happen and repeat, and it looks to very much be happening here in tesla.

downside is severe. >> all right. let me ask you this here. >> sure. >> over here, the stock was low, right? >> yeah. >> this is a great buying opportunity, how do we know where we are now is not another great buying opportunity? >> well, it could be. tesla's a very different story than the other two. to me, this is a company that could change the world where the other two just made things easier that we were doing already. you know what i'm saying? to me, i love -- >> those were commodity businesses, amazon -- >> yeah. >> and netflix with pricing pressure, and tesla is a luxury goods business. >> it is. here's the problem down the road. i don't know if it's a great buy right here. i'll tell you this. the first time the big auto companies roll out their high end electric models, there's a going to be the moment of truth in the company. we don't know when that happens. >> speaking of autos, have you driven a ford lately? option traders have. as the stock tanked, bulls hopped on board. we'll explain why when we return.

tough day for ford today, shares of the auto maker in reverse after earnings, but mike saw traders making contrary

bets. what did you see, mike? >> ford saw two times average daily call volume today, and what we saw were people who affected bullish bets in the stock rolling out to next week, buying next week's 14 strike calls, paying 13 cents for them, buying in good size. if you do that, that's a short term bet that the stock could actually rebound off of this sort of bad response that we saw from earnings, which i didn't think were that bad. >> yeah, carter, what do you see in the charts? >> well, this is a mess. >> i can tell by the way you looked over here. >> it's almost, like, and general motors, the nasdaq auto trust, some 80 different manufacturers, nissan, honda, toyota, global index, it's a free fall. spilling over to parts now. this is not good. i mean, buying this, i think, is just speculating. >> i think it's odd, too, this happens when we have oil with a seven handle on it, everything like that. >> why is it weird?

if oil's a barometer for growth, why is a weird? >> well, to your point, why is the s&p now 2.5% from the all time highs? to me, isn't this a tell? that's what i don't get. i just don't get it. >> weigh in, carter. i can tell you full of opinions. >> peak auto sales, come a long way, and there's price action leads the facts. >> they didn't look like a mess to me, but why aren't people extrapolating the weakness in the most important business in america. >> what's that mean for home builders and the housing market? pickup truck sales are a leading indicator for housing. >> not great. one of the reasons it's not great is that a big part of the support in the housing market that was fueled by quantitative easing came in the form of invs.ers investing in housing. consumers, the people that live in these things are not racing out to buy new houses. i think what we're seeing is softening there. evidence in this is in a lot of markets. >> lumber liquidators, there was a new 52 week low.

they pile into home depot and sell the heck out of lumber liquidators. >> next the final call.

let's live on the edge and take a tweet. with the end of october being historically active, what's wrong with buying november five puts? >> one thing is when the market is up and premiums come in, that is a great time to buy puts to hedge the portfolio, but don't look to november. first of all, we're close to expirations, january options are cheap, and look out further. i'm right now, if the mart's not down today, hard to see why you count on that next week, and that's essentially all your buying. >> forget the spot. look at the dia, the diamonds of the etf on the dow. i'm long december puts. that's where the biggest disasters are right now. the biggest disasters on the week, disappoinments, ibm, coke, mcdonalds on the dow.

i don't like large multinationals. >> in terms of the chart, which is worse, dow or s&p? >> big uptrends, breaks in trends, and rallies back to difficult levels. gets short this way or any other way is the right thing to do. >> good point about the disasters on the dow. >> well, that -- well, one of the things i don't like to do is diffuse bonds already going off, and that's why a lot have been. i think if you look at the spy, look at the s&p 500. if the market does crack, that's the barometer to look at, not the one where we've seen so much trouble. >> time for the final cord. carter? >> what we could have done is rally 120 points to where we should have down, down another 120, and rid of the comply sen si. now we just set the problem up again. >> i agree with him. everything he said. but i tell you this, if you have facebook and longing it, there's huge gains, look to hedge it with callers out to december. >> mike? >> i think stocks like apple are safe to hide out. the way to play it, buy puts.

>> i'm melissa, and thank you for watching, optionsaction.cnbc.com for more, and meantime, don't go anywhere. "mad money" with jim cramer starts right now. you are watching "the better memory show" hosted by cyndi edwards with special guest mark underwood. we will be discussing practical ways to improve your memory, and we'll be giving you tips to support your brain. the program you're watching is a paid advertisement for prevagen sponsored by quincy bioscience. the statements made in today's program have not been evaluated by the food and drug administration. this product is not intended to diagnose, treat, cure, or prevent any disease. well, when i first heard about prevagen, it was from my friends, and they were all saying, "wow, "this can really make you sharper, make your brain sharper," and i thought, "well, okay. i'll give it a shot." and i went through the testing