things. now you stay safe. things. this is "options action." tonight -- ♪ high all the time >> describing the transimportant stocks, but why traders could be in withdrawal. missing the rally? relax. we have the tech name that could crush the market in the next two months. >> i like it a lot. >> you will, we'll tell you what it is. don't let this happen to your apple shares because after a huge run, we have a way to protect your apple stock for free. the action starts right now. ♪ i'm melissa lee, these are the

traders today, and we are playing catch up because the market is at all time highs, not every stock is participating. are they the best bet into the i end of the year. facebook, why facebook? >> lagging in the last few weekings, but not the year, up 37%, a $210 billion market cap here. it's a huge part of the nasdaq 100, but since they reported their q3 on october 28, the stock lagged, down about 6 or 7% in the time period, and, really, for some good reasons, okay. here you have a situation where the company, which has been hitting on all cylinders, guided revenues down, and they guided expenses up dramatically. here's another thing. they closed $22 billion acquisition of the app, and shareholders that they could be selling. i suspect -- we have a chart here over the last few weeks

here -- the gap has gone sidewa sideways. there's an overhang. if you see that lifted at some point, you get a cleanup trade, pulling back, you see the stock back up towards the highs, filling in the earnings gap. why? it's a name that worked, not cheap by any means trading at 12.5 times next year's expected sales, but work all year, 37%, fills the gap next week. >> i don't believe it. are you actually making a bullish case for a stock, for a tech stock up on the year? this is not you as ale. >> it's a trading show. this is a trade. isolate support price action in the recent. >> mike, do you agree with the notion that an underperformer relative to the index catches up? there is such a thing as a catch up, that the gap will be closed. >> actually, you know, in fairness to dan, i have to say, and we've said before that some names people are not going to mind having on their sheets, but want to have.

they are probably going to add to winners, and this one is a winner on the year, you know, there's, obviously, a lot of enthusiasm for the names, but if i was inclined for long stocks, i mentioned apple before. i think facebook is probably -- >> the show's called "options action." there's not long stocks here. we have a couple charts here. the stock traded between 70 and 80, the midpoint at 75 here, have the gap, closing at the all time high on minutes before roorting that q3. i want to imply volatility. the price of actions is low. i'll tell you that's ball dampening. someone is buying the stock at 7 7, 75, and there's sellers in there. all the sudden, they are at a 52 week low. i wanted to look to december. i wanted to use a call spread. i wanted to define the risk. when the stock was 74.8 today, you could have been the december call spread for $2, paying $2.40

for the call and selling one of the 8 2 halves. make up the 550 between 87 and i'm picking strikes to define the range, looking back to the previous high of 81. 24 is a level if you have the overhang of the stock out of the way, it's a stock trying to fill the gap. >> it's an instant where using a call spread makes sense. you don't use them for 25%, the distance of the strikes, paying for this one, and it struck at the money. those gains are going to happen, up only just a couple bucks needing a 3 or 4% gain. the other nice thing is by selling the 82 calls, the stock breaks out above all-time highs before you regret selling that thing. the way he structured the trade and the fact the price is set up this nicely is it is a good way to play at the end of the year.

>> helped by the negative sentiment in twitter? >> could be. great point, mel. also, alibaba slowed down too since october, they gain eed $4 billion in market cap. there are plays here, i think the trade sets up nicely. >> moving on to the transports, intradaytime high today, oil showing signing of life. time to take profits? carter, what do you see? >> setting up for the enof the year, is this going to continue next year? we would say no. i'll work backwards from long term charts. this is the dow, transports versus s&p back to the reagan bull market in 198. transports doubled the s&p. back quickly to another chart. this and this chart are the same. original, comparative, white

line, s&p. another chart, i held the s&p as a constant. same as that, but s&p is constant. that's how extreme this is. cisco's worth more than any other company in the world and nobody mewants transports. now it's opposite. it's time to buy there, take the profits here. here's the chart itself, the dow jones transports, and what's important is a well defined level. literally, perfect line, perfect break out, yes, a wedge, whatever you call it. the 2013-14 bull. here's the line. keep your mind on that point. there's the daily chart. there's the line. that's where this began. right there. that's where it began. the break out. this is that. we reached the top and exceeded the top of the channel since the

powerful two year advance. time to take profits. here's the transports itself, the trade, we would say this 20% move, which takes you to the top of the channel, is excessive and play for give back. take profits. do something. don't buy, stay long. >> scary charts, mike, do you agree? >> you know, has anybody else got tired of the bear case? it is one of the things where i 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. look at the components the iyt. fedex, rails, trucking companies, and airlines, 20 stocks in there. every single one benefits from lower prices. we are going into the holiday season. they should benefit from that. these are all companies that benefit from increased deliveries to places that have very high populations like china and india. that should support the businesses. >> is that a bullish case? >> one of the reasons the stocks rally is because there's a secular tail wind for

transports. that's one of the reasons. valuations, about average. that tells us that we've seen these companies growing. that said, i'm still inclined to make a bearish bet. almost out of gas, but i'm going to anyway. >> 20 positive reasons anyway. go ahead. >> do you mind? >> one of the reasons we do this is because of the run because the options prices are setting up favorably. this is january 160, 150 put spread, spend $2 .50 of that, one quarter of the distance between the strikes, that's math we like on these kinds of things. risking a small amount of the current price of the transimportants to get into the bearish bet. it's a good way to hit the pause button even if you stay long in the stock, which you will. >> positive things, all of which are true, that's the principle of markets. they discount those things. they are well known. markets look forward. can this out perform begin in

2015? odds are low. >> here's something that's not priced in. you didn't mention the danish shipper this week lowered the outlike for global growth. ups guided down this week. to me, the market is discounting a lot. when you think about mike's trade, if you are willing, it is a trading show, willing for a contraryian bet, this 160, 150 strike, again, you know, it makes a lot of sense. if this is your game, if you want to take the other side of it, because, you know, listen, who knows where it ends. we have a chart. i don't know if they can pull it up. the s&p closed within two points, five days in a row, closed up 30. to me, feels like upward momentum. look at that. it's waning a bit. this is one of the areas if you're a trader, go after. that's the spot. >> 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

pause season through the january expiration. it's an inexpensive bet to put ahead, john. i like the trade even if fundamentally the transports have a rally for the reason over the last decade. >> don't you like how make likes your trade in of course you like it. tweet us @optionsaction, and going to cnb cnbc .optionsaction.com. here's what's coming up next. oh, my god, look at -- >> the price of apple stock, up 15% in just one month. is now the time to put on protection? we'll tell you how you can get it for free. plus -- >> don't call it a comeback. >> but quietly amazon shares soar, and you won't believe how high they see it going. we'll tell you when we return.

so, today, i woke up, and i asked what, for many, is an existential question. buy protection on apple, and if so, how? words that i never thought would come from my mouth, dan, you have the answer for me. >> you got to hear it. if you're long apple, fantastic. if you think about it, in the last month, appreciated 20%, okay? show you the chart here, the thing is crashing upright here. 20% equals 135 billion dollars

in market cap. that's the equivalent of home dep depot's market cap, expected to have $80 billion in sales this year, and apple is composed to do $2 00 billion. on the year, gained 280 billion in market cap, the equivalent of alibaba right now. >> wow. >> listen, it's a one way train, fantastic, seen consolidations and break outs, incorporating good news, apple is going to own the holiday season. to me, listen, no reason to get baeshish on apple right here. continue to work. it's working right here, you know, and i just want to make the point that the increase is really doing a number on options prices. it's depressing. >> amazing, actually. >> back to 5 2 week lows. to me, listen, i'm adding prudence here. people have gains they don't want to sell stocks up 42% on the year, end of the year, but it makes sense. think about it, to add

protection. option prices are very cheap right now, to me, what i would do is -- listen, i wish i was long apple, not hating them right here, but the stock at 114 today, buy the january 110 puts for $2.10, that's the underlying price that's nothing. there's protection below 1088 essentially for all intents and purposes. this is what i'm trying to do here. if you own apple, great, it's a great trade, but remember, all trees do not grow to the sky. remember september 2012, there was a 45% peak to trough draw down nobody saw coming. these are trades to put on stocks you own to add protection. >> i feel like you're a new dan nathan tonight. >> being rational. >> but on the bullish side, airing towards bullish. >> i think the theme of facebook and apple here is they are working, why get out now? raging bull market, and this is the opposite of facebook in a

way. you look to ad protection. >> carter, in terms of the charts, how does apple look? >> very similar, talking facebook and apple, up on the year, but apple is steep. yes, day-to-day, and that's dance's phrase of tactical and trade because it is just that in the sense you have to be quick for a draw down, but structurally, apple is a very in tact situation whereas facebook is not. there's a recent drop in gap, and we like the opposite side of both of the trades longer term. >> here's the thing, apple is cheaper than the market, but compare to the historical multiples, it's a turn and a half rich meaning if it trades the way it has over the past several years, you're looking at a stock 10% lower than right now. long the stock, something i advocated, by buying the put. essentially, that gives you a cheap call through the holiday season, and, you know, at the price this put is trading right now, it's unlikely to decay a great deal because that's when you take risks, when options

premiums are high. they decay if the stock sits there. right now, the protection really, day-to-day, is not costing much. comes in, spread out of it or monetize it and stay long your stock. >> people might look at the chart you provided, dan, in t m terms of the 20% krach up, but would you use calls because they are cheap? >> that's the sing. the sentiment got out of whack. people say apple's going to 200, why buy a 110 put, this, that, other whatever. that makes me nervous. remember, things change, and they don't change for good reasons. they just sometimes change over time, and so this sort of thing is just getting a little extended. i expect a pull back somewhere maybe possibly low as 100 when the dust settles because we know a lot of good news is in the stock market. >> mel, i like what he's saying, though, if you sit here, on the

sidelines, not purchasing the stock and wonder if now is the time to get in it, take advantage of the premiums, not long the stock, making a call is the way to play. i think that is what you want to do if you're inclined to be long apple through the holidays right now because options give you an inexpensive way to do that. >> one really good point i say because of the options prices, if you want to try to figure out a band and do this for free, really meaning no premium you pay, you can sell an upside call and look to buy put premium and caller your stock, but remember, when you caller your stock, you're giving up potential upside. >> up next, why is this map smiling again? well, amazon shares have been on a tear. which way traders bet now when "options action" returns.

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>> this is a fairly active stock as far as options are concerned, trades a hundred thousand contracts a day. today, traded over 300,000 contracts. call volume four times the average, and what we were seeing was a lot of near dated weekly call buying, but also, people are looking further out as well buying next week's 330 strike calls, pays a little over $5 on that on bets that the bounce continues. interesting to me too because when you consider how much is moved in such a short period of time, the fact you purchase money calls on the stock for five bucks, right, is pretty amazing because things moved 9 % this week, in a day. >> it's not just short, but there was a buyer. ready for the january 2017, two years out, somebody bought 7,000 of the january 2017 300 calls, that breaks even at 73 372, 51 million in premiums.

what they are doing is, i want to have long exposure to amazon over the next two years, basically stopped out at 250, which on the chart is a technical level years ago, so, to me, you know, short data, long data, it's everywhere. >> hitting resistance here? >> we are, that's just it. there's a support level at 285, found that pree siesly, but this has been a disaster this year. decent year for equities, this has not participated. burden of proof is on the bull. the bear just has to point to, it's not worked, come up, overhead resistance as suggested. going to be a hard fight. >> probably while you see unusual options activity because the bulls have to prove their case. if you bet that way and the fact the premiums are not great, that permits you to make the bet without taking the risk that it falls back to the support level. >> they are supposed to be $30 billion in sales over the holiday season. you know what the net income should be?

$500 million. there's no profit there. i don't think jeff cares, putting up earnings disappointments, guide lower -- >> the street didn't care. >> not until this year, okay. >> yeah. >> the point is that some point, if they actually decide to pull some of the profitability levers, if they exist, the stock could go much higher, which may be the reason for the long dated call buying we saw. >> i know. there is ef tau here and what they bet on if they bet furbish now. >> cramer chips away at land search, and the wall street war over $3 stocks. that's all top of the hour. up next, the final call from the options pits.

we love getting tweets. we'll take a couple tonight.

i'm confused on sol low city, understand oil is down, but what do the charts say? thanks. >> they are not great charts for starts. this is a testament, if you're going to be contrary, find something so bad it's good, bottomed out like for instance, crude oil, gold, something horrific. they are not horrific yet to step in. avoid the temptation to buy. >> they held the $50 level for a long time, and 70 is an interesting resistance level. if you want to define the risk and put speculative capital out there for stock that moves a lot, the january 60 call spread is a 1 .50. that's a ways away, but if you want to set it and forget it and think solar will explode if oil comes back, that's a speculative

trade. >> gld/gdx break out? >> if i make a play, it's in the commodity just on a speculative bounce here. if you use options to do it, use call spreads. premiums have bumped up as this bounced off. the minors i say away from. it does not seem like that's a group of companies who figures out how to make money when gold is high, when gold is low. always something going on with these guys. stay away from them. not a gold bug, but absolutely despising the minors. >> sounds like you would not place a bet in any way, shape, or form on gold? >> no. you know, an important thing to remember, go back, actually, to previous bear markets in gold, and this is usually the way it plays out. hit the highs, falls sharply, could go lower. >> time for the final call. carter? >> if one thing, transports perform as they have recently, no chance. >> if there's a shot back to the

highs, i like december call spreads. >> mike? >> iyt put spreads is inexpensive. good way to hedge. >> our time expired. i'm melissa lee. for more go to optionsacti optionsaction .cnbc.com, and check a out here at 5:30 eastern time, but "mad money" starts right now. >> announcer: the following is a paid presentation for body beast, the fast, proven way to build muscle, shed fat, and sculpt your best body faster than you've ever thought possible, brought to you by beachbody. >> this is real, as real as it gets. we're gonna learn, we're gonna sweat, we're gonna have fun, and we're gonna see results. >> before body beast, i was just soft and chunky and -- and pudgy, and this is the "after" result. >> it's gonna be amazing. come on. you can do this! >> body beast has completely transformed my body. swim s