this is "options action." tonight -- that pretty much describes the transport stocks, but we'll tell you why traders could soon be in withdrawal. plus, missing out on the rally? relax, because we have got the tech name that could crush the market in the next two months. >> i like it a lot. >> you sure will, and we'll tell you what it is. and don't let this happen to your apple shares. after a huge run, we've got a way to protect your apple stock for free. the action starts right now.

i'm melissa lee. these are the traders here in times square. today we are playing a game of catch-up. not every stock is participating, so could those laggers be your best bet into the end of the year? let's find out. van is taking a look at facebook. why facebook? >> this is a lagger in the last few weeks, but it's not on the year. it's up 37%. it's got a $210 billion market cap. it's been a massive performer. it's a huge part of the nasdaq 100. but since they reported their q3 on october 28th, the stock has lagged and it's down 6% or 7% in that time period. really for some good reasons. here you have a situation where the company basically guided revenues slightly down, and guided expenses up dramatically. but here's another thing. they just closed that $22 billion acquisition. i suspect -- i think we have a chart here over the last few

weeks here. you look at that gap lower and the stock has really gone sideways. i think there's an overhang from that what's app stock. i think if you see that lifted, at some point you get a cleanup trade. i think you probably see the stock back up towards the highs, filling in that earnings gap. why? because it's a name that's worked. it's not particularly cheap by any means. but it's worked all year. it's up 37%. i think it probably fills that gap the next few weeks. >> i thi >> i don't believe my ears. are you actually making a bullish trade? >> this is a trading show. what we're trying to isolate is support price action recently. >> but would you agree with this notion that an underperformer relative to the index will catch up? that there is such a thing as a catch-up? that that gap will, in fact, be closed? >> in fairness to dan, i have to say it. we've actually said before that some names people are not going to mind having on their sheets.

they're actually going to want to have them. this one actually is a winner on the year. there's a lot of enthusiasm for these types of names. if i was going to be inclined to get long stocks, i've mentioned names like apple before. >> the show is called "options action" and we're not getting long stocks here. we have a couple charts here. if you look over the last four months, the stock traded between 70 and 80. it's at the midpoint of 75 here. closed at the all-time high minutes before. the price of options is actually really low and i'm going to tell you, there's somebody in there buying the stock at 74, 75, and they have sellers. so all of a sudden option prices look really cheap. they're at almost the 52-week lows. what i really wanted to do is look out to december and i wanted to use a call spread. when the stock was about 74.80 today, you could have bought the december 75.82 call spread for

$2, paying about 240 for the december 75 call. your max risk is $2. you make up the 550. really what i'm trying to do here is i'm picking strikes to try to define the range. i'm looking back to that previous high. this is a level if you get that overhang, i think you see a stock fill the gap. >> this is one of those instances where using a call spread makes sense. it's often the case that you don't get to buy them for just a little bit over 25%. the distance between the strikes, which is what he's paying for this one. it's actually struck right at the money. these gains are going to happen only about a couple of bucks. the other nice thing about this trade is that by selling those 82 1/2 calls, the stocks are going to have to break out above all-time highs before you're going to regret selling that thing. actually, the way that he structured this trade actually makes this a good way to play it

into the end of the year. >> is it helped by the negative sentiment in twitter? >> i would also say it could be helped by the fact that alibaba slowed down, too. in that time period since october 29th, alibaba has gained $40 billion in market cap. i think there's a lot of factors at play here. i think if some of them abate, i think the trade setup sets up really nicely. >> the transports had an intraday all-time high, with oil showing sign of why it could be time to take profit. what do you see? >> i guess as we set up for five, six more weeks, the year is over, is this likely to continue going into next year? we would say no. meaning the performance seems extreme. i'm beginning to work backwards. this is the dow. transports versus the s&p, going back to the ronald reagan bull market in 1980. transports have doubled their performance. i'm going to toggle back and forth quickly to another chart. this chart and this chart are the same. there's the original, a comparative. here's the same chart.

all i've done is held the s&p as a constant. exactly the same as that. but the s&p is a constant. this is how extreme this has become. right down here, cisco's worth more than any other company in the world, and nobody wants any transports. underperforming. now it's the exact opposite. everyone wants transports and now it's time to buy there. we think it's time to take your profits here. so here's the chart itself, the dow jones transport. and what's important here is this well-defined level. i mean literally, perfect line. and a perfect breakout, yes? a wedge. whatever you want to call it. so this is the 2013-2014 bull. here's the line. keep your mind on that point. and now let's go to the daily chart. there's this line. that's where this whole thing began. right there. we have reached the top and exceeded the top of the channel since this powerful two-year advance. time to take profits. so here's the iyt. here's the transport itself.

here's the trade. we would say this 20% move this takes you to the top of the channel is excessive and some sort of giveback. take profits, do something. >> pretty scary charts, mike. do you agree? >> you know, has anybody else gotten really tired of the bear case? it was one of these things where i almost feel like giving up on it myself, which is probably the best sign that there is something lurking right around the corner. you know, crude prices may have bounced a little bit, but they are much, much lower. teenage a lo take a look at the components of iyt. every single one of these benefit from lower prices. we're also going into the holiday season. every one of them should theoretically benefit from that. these are all companies that also benefit from increased deliveries to places that have very high populations, like china and india. >> o one of the reasons we've seen these stocks rally is because

there has been a secular tail wind for transports. take a look at valuations. they're about average. so that tells us that we've seen these companies growing. that said, i'm still inclined to make a bearish bet. i'm almost out of gas on this. but i'm going to anyway. >> give us 20 positive reasons. >> do you mind? so what i'm going to do -- and one of the reasons we're going to do this is actually because we've had such a run, because the options prices are setting up very favorably. so i'm looking at the january 160, 150 put spread. i can spend about $2.50 for that. that's one quarter of the distance between the strikes. that's math that we happen to like on these types of things. you're risking a very small amount of the current price of the transports to get into this bearish bet. so it actually is a really good way, i think, to hit the pause button, even if you're going to stay long on stocks. >> carter? >> those positive thing, all of which are quite true, that's the whole principle of markets. can this outperform again in

2015? we say the odds are low. >> so priced in. >> here's something that's not priced in. ups guided down this week. so to me, the market is discounting a whole heck of a lot. when you think about mike's trade, if you are willing -- again, this is a trading show. if you're willing to make a contrarian bet. this strike, again, it makes a lot of sense, if this is your game, if you want to take the other side of it. because listen, who know where is this thing ends. we have a chart -- i don't know if they can pull this up. the s&p this week closed within two points, between 2038 and 2040 on every day. to me, it feels like upward momentum is waning a little bit. so iyt, this is one of the areas if you're a trader, you want to go after. >> a bigger question for everybody is also whether or not you're willing to risk less than 2% right now to essentially hit the pause button through the holiday season all the way to

january expiration. to me that is an inexpensive bet to put a hedge on. so i like the trade. fundamentally, i think the transports have a reason for the rally we've seen over the last decade. >> don't you like how mike says "i like my trade"? it's your own trade. of course you like it. check out our website optionsaction.cnbc.com. we have videos from throughout the week and exclusive trades, so check it out. here's what's coming up next. oh, my god, look look at -- >> the price of apple stock, up 15% in just one month. so is now the time to put on protection? we'll tell you how you can get it for free. plus, quietly amazon shares have been soaring and you won't believe how high options traders see it going. we'll tell you when "options action" returns.

so today i woke up and asked what for many is an existential question. buy protection on apple, and if so, how? in words that i never thought would come out of my mouth, dan, you have the answer for me. >> if you're long apple, fantastic. in the last month, it's appreciated 20%. and i'm just going to show you the chart here. the thing is crashing up right here. 20% equals $135 billion in market cap. that is the equivalent of home dep depot's market cap, a company that's expected to have $80 billion in sales this year. apple is supposed to do about

$200 billion in sales. on the year, it's gained $280 billion in market cap. that's the equivalent of alibaba. so really, listen, the thing has been a one-way trade and it's been fantastic. you've seen these consolidations. feels like it's incorporating a lot of really good news. we know apple is going to own the holiday season. to me, there's to reason to get bearish on apple right here. continue to work. it's working right here. i just want to make a point that the increase is really doing a number on options prices. it's depressing. >> that's amazing, actually. >> so it's back towards 52-week lows. so to me, listen, i'm just kind of actually trying to add late bit of prudence here. people have a lot of games. they don't really want to sell stocks that are up, but i think it makes sense, when you think about it, to add a little protection. options prices are very cheap right now. so to me, what i would do is -- i wish i was long apple, but with the stock at 114 today, you could buy the january 110 puts

for $2.20, 2% of the underlying stock price here. >> that's nothing. >> it's nothing. and you have protection, you know, below 108 essentially for all intents and purposes. the stock was trading there four trading days ago, so this is really what i'm trying to do here. if you own apple, fantastic, it's been a great trade. but remember, all trees don't grow to the sky. we remember back in september 2012, the stock had a 45% drawdown, and nobody saw it coming then, too. so these are the sort of tactical trades to put on stocks that you own just to add a little protection. >> i feel like i'm dealing with a whole new dan nathan here. >> just being rational here. >> sort of on the bullish side. >> i think the theme between facebook and apple here is they've been working, why would you get out right now? we're in a raging bull market. this is the opposite of facebook in a way, you're just looking to add some protection. >> carter, how does apple look? >> well, what's interesting is these are very similar, just talking about facebook and apple. each is up between 8% and 42% on

the year. but apple is steep. that's dan's phrase of tactical and trade. because it is just that in the sense that you've got to be quick if you get a drawdown. but structurally, apple is a very intact situation, whereas facebook is not. facebook has a recent drop in gap. and we kind of like the opposite side of both of these trades longer-term. >> here's the thing. apple is cheaper than the market, but compared to its historical multiples, it's at least a turn and a half rich. meaning if it was trading the way it has historically, what you'd be looking at is a stock that's probably 10% lower than it is right now. if you're long the stock, which is something i've actually advocated by buying this put, essentially that gives you a cheap call through the holiday season. and, you know, at the price that this put is trading right now, it's unlikely to decay a great deal. because that's when you take those risks. when options premiums are high, they can decay even if the stock just sits there. but really, day-to-day isn't going to cost you very much. you can spread out of it or monetize it. >> i think a lot of people might

take a look at the stock that you traded in terms of the 20% crash up, as you like to put it. and they also take a look at the low price of options. would you use calls to try and get into apple since they are cheap? >> i think the sentiment has gotten a little out of whack and that's really what we're talking about right here. i don't think you chase it right here, but i keep seeing this on twitter. people are saying apple's going to 200. that's the sort of sentiment that makes me a little nervous. just remember, things change and they don't exactly change, you know, for good reasons. they just sometimes change over time. this sort of thing, it's just getting a little bit extended. i would expect to pull back, somewhere maybe possibly as low as 100 when the dust settles. >> i really like what you were just saying, though, because if you were sitting here on the side loo sidelines and wondering whether now is the time to get into it, actually taking advantage of those premiums, by buying a call to make your bullish bets is actually the way that you want to play. so i actually think that is what

you want to do if you're inclined to be long apple through the holidays right now because options are giving you a really inexpensive way to do that. >> one really good point i would just say. because of those options prices, if you want to try to do this for free, really meaning no premium that you're going to pay, you can actually sell an upside call and look to buy some put premium and collar your stock. but remember, when you collar your stock, you're also giving up potential upside. coming up next, why is this man smiling again? it's because amazon shares have been on a tear. we'll tell you which way traders are betting now when "options action" returns. [ male announcer ] eligible for medicare?

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welcome back. take a look at shares of amazon, because they're on fire. up 9% in just about a week and that hasn't escaped the notice of options traders. they're actually up 17% since october lows hit off of

earnings. so what are you seeing? >> options have actually -- this is always a fairly active stock as far as options are concerned. usually starts about 100,000 contracts a day. call volume was almost 400,000 times the average. also, people are looking further out as well and they were buying next week's 330 strike calls, paying a little over five bucks for that. on bets essentially that this bounce is going to continue. and it's interesting to me, too, because actually when you consider how much it has moved in such a short period of time, the fact that you can purchase at the money calls on a $330 stock for about five bucks, right, is pretty amazing. because things move 9% this week, it could do that in a day. >> it's not just short dated stuff. we talked about this the other day. there was a buyer january 2017, two years out, somebody about 7,000 of the january 2017 thr30 calls. that breaks even at 372.

up about 17.5%. $51 million in premiums. basically what they're doing is i want to basically have long exposure to amazon over the next two years. i'm basically stopped out at 250, which is a big technical level a couple years ago. so to me, it seems like short data, long data, they've got it everywhere. >> are we hitting resistance there? >> we are. there is a support level, it found that level, the may low. but really, this has been a disaster this year. a decent year for equities. we think the burden of proof is on the bull. the bear doesn't have to say much other than .2. it's not worked. it's come up a lot. it's going to be a hard fight. >> i think that's probably the reason why you're seeing unusual options activity. because after the bulls have proposed their case, if you're inclined to bet that way, it permits you to make that bet without actually taking the risk that it falls back to that support level. >> here's a company that is supposed to do 20 $30 billion in

sales. you know what their net income is posed to be? $500 million. i don't think he cares. >> didn't care for a long time. >> they didn't until this year. so the point is at some point if they actually decide to pull some of these profitability levels, if they exist, the stock could go much higher. >> i know, there is some pre-cash flow. i think that's what investors are probably betting on. >> tonight on "mad money," cramer's chipping away at lam research. all top of the hour. coming up next, the final call.

we love getting your tweets and we're going to take a couple tonight. kunal says, i'm confused. understand oil is down. what do the charts say about both? thanks. mr. chart master, what do they say? >> they're not great charts, for starters. if you're going to be contrarian, you've got to find something that is so bad, it's good. bombed out. like for instance crude oil or maybe gold, something that's absolutely horrific. these are not so horrific yet to suggest that one should step in. we would avoid the temptation to buy. >> i would say one thing on solar city. it's really held this $50 level for a long time and 70 seems to be a really interesting resistance level. if you wanted to define your risk and put some speculative loe level out there. i was looking at january. that break even is a ways away, but if it's one of these things you want to set it and forget it and you think solar can explode at some point, that's probably an okay speculative trade. >> all right. jorge asks, gld or gdx breakout?

>> if i was going to make a play, it would have to be in the commodity, just on a speculative bounce here. if you were going to use options to do it, you want to use call spreads because the premiums have bumped up. the minors, i would absolutely stay away from it. doesn't seem like that's a group of companies that can figure out how to make money when gold is high, when gold is low. there's always something going on with these guys. i would always stay away from them. not a gold bug, but i am absolutely despising the minors. >> it sounds, though, like you would not even place a bet in any way, shape, or form on gold. >> no. an important thing that people need to remember -- and you can go back actually to previous bear marngts in gold. and this is usually the way it plays out. it could go a lot lower. >> time for the final call. >> if one thing would perform again the way recently, we would say no chance.

>> facebook, if you think it has a chance going back to the highs, i like december falls. >> looks like our time has expired. thanks for watching. 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. "mad money" starts now. hey, i'm cramer! welcome to "mad money." welcome to cramerica. other people want to make friends. i'm just trying to make you a little money. my job is not just to entertain you, but to educate and teach you. so call me, or tweet me. be civil. @jimcramer. will the benign bull market