hey, there, we're live at the nasdaq marketplace and look who decided to stick around for the show old beakers. brian and the guys are getting ready. while they do that, here's what's coming up. >> you're looking at a small portable computer called the ibm 5100 it's helping people do work more productively. >> ibm shares have helped clients reap productive gains and there's something pointing to a bigger rally. we'll tell you how to cash in. plus, there's one group of stocks that seems poised to a breakout when it reports earnings next week, and here's a hint

we'll give you the name and how to profit. and talk about ingenius trade. we've got a way to get long on apple for just 3 bucks >> no way. >> way and we'll show you how it's time to risk less and make more the action begins right now. let's get right to it because next week is the busiest one for earnings season. we'll hear from 172 s&p companies and 12 dow components, names like mcdonald's, cat perfect ter pillar, boeing, amazon, microsoft, ups you get the picture. roughly 70% of companies think eps and revenue beat should you keep buying stocks into earnings? let's get in the money right now, mike? >> this is interesting we have a volatility paradocks i don't know that valuations are

the precursor to a drop. i see volatility as low as it is i see continued confidence in the market right here. the other thing is that we are seeing some dispersion that is that on these earnings results we see financials which probably did a little bit better on an operating basis. stocks don't move. you see something like materials which basically are otherwise flat, stocks do well stocks not so much stocks are going in different directions that's going to create some steadiness in the market i think market unsteadiness will cause investors -- >> to mike's point, i think we've seen all year long this rotation between different sectors, right if you have this dispersion, then you're going to get active managers back in the space moving between sectors and that's going to give you opportunity. >> dispersion meaning things aren't correlated? >> what we've had is the index funds. now things are not core rated, separating, you have the opportunity. >> well, in terms of the cycle

here and talking about the earnings, the thing that's really important is that the revenue has been better than expected if you look at the blantended average, it's 1.77%, a fairly muted area the top line is exceeding the bottom line. >> it's harder for management to manipulate revenues. you can have share buy backs that can boost earnings per share but revenues, that basically tells the tale if it's growing at a rate that's better than expected, that signals under pinning strength. >> carter, you're taking a look at a sleeper pick. >> i know big names like tech names. let's look at your guests. transports, industrials. huge laggards. ge coming to life. i thought we could drill down ups which has earnings i'm going to make the bet that it's going to be good. it's going up whether it's good or bad

ups versus the markets, it is a market performer the numbers speak for themselves the issue is of late since inception back in '99 ups versus the s&p, it's a dead heat from the absolute low, the 6th of march, 2009, i think this is where it gets interesting. ups, of course, has lagged the market now more immediately take a look at where we are just over the last one, two years. i think, again, this is the opportunity, that ups has lagged it's a big name. we know what's going on in the internet shipping. i think it's a name to play. here's a chart no drawings or annotations by me, but i think what you can see here that's important is that we're right at the prior high. the presumption is that after we back end fill in this high we can exceed this high look at what i draw, put in actual, i think you're going to get this line here you're going to get your breakout here and i'm going to make a bet that ups will make a

high want to be long. >> michael, what's your trade? >> this is an interesting trade. usually earnings are basically large contributors to price movement, but actually in the case of ups the movement on earnings is typically around 2%. what you do often see movement is through the holiday season. they've had operational challenges they've had situations where they've ultimately disappointed in the next quarter. i think the best way to do this with options premiums is to buy the at the money call. looking out to january you can buy the 120 calls. when i was looking at those, they were $3.20. you're spending $3 relative to the current stock price. has to move up 3% between now and january. and i think the chances that it makes a move of that magnitude or larger is very, very good i don't expect it necessarily for earnings. >> what do you think of the trade? >> i'm going to have to disagree with carter a jee jeer andko you have other head winds coming

out. amazon will have their own air fleet. there are other issues out in the last couple of years they've had the operational issues i'd rather take a shot on the short side here. >> don't you think though that what is really going to propel the stock is how holiday season operates for them? they've had some operation aal challenges they seem to have fixed those. they seem to be benefitting from emerging technologies. they're doing some other things with their less than full truck level deliveries that are going to benefit them as well. it's also trading, by the way, at a discount to the historical valuation. >> discount to the market. >> for a reason, right i mean, it's trading there for a reason to me i think there's more risk that they don't hit the numbers, that they don't hit expectations. >> i think the market is going to be higher through january >> do i think the market is going to be higher >> do you think the market is going to be higher through january? >> yeah. >> you think this is going to

diverge further from the market? even in a rising tide -- >> or that the gap will be filled that the disparity won't be -- >> that's the opportunity. there's a sleeper that's going to surprise. >> now to a stock that was a big winner this week, the ibm. big blue was the mvp of the dow surging 10%. a surprising view given the stock's troubled past. who better than to break it down, dom chu. >> i am here for cnbc and "options action. ibm hasn't been pulling its own weight no secret it's been one of the bigger laggards year to date and last 12 months the earnings report on tuesday afternoon went a long way towards clawing back some performance. by the time the dust settled on wednesday's close, big blue had gained more than 9%. that was the day it gained over 11%. it was also the best post earnings day for the stock going all the way back to 2002 and

according to an investment group it was only the third time in the last 18 orders when the stock got higher after the earnings report. we saw a lot of that action play out in the options market in the first four days of the week. we saw options trading volume for ibm four times greater than average. if you look at the vast majority of that volume, yes, it happened after the earnings report was released so, could this be a turning point in sentiment for big blue? the skeptics say it will take a lot more to get it back on track, the stock at least, but the bulls say this could be a turning point on a stock that many have given up over the last couple of years. that debate rages on. >> we'll take it to the desk dom chu back at headquarters i'll kick it off with you, b.k do you think this was the moment for ibm? >> i do. this is a change in sentiment, a change in the way the company is operating. the way that the market is perceiving that. we've had this turn around story that the market has not believed for a long time.

after this quarter you have to believe in this turn around story. to me, i think they hit all the different areas of the growth areas going forward. talk about this is on the market i think this has much more potential to outperform than the other news we talked about. >> from a fundamental standpoint we've seen this where you've had mature companies, companies like microsoft and so on where people were concerned they were not evolving and taking advantage of new opportunities especially in services, things like cloud, that is at ai, something ibm has been touting a lot of. we have such bad performance coming into this point but if there wasn't actually a big change, we wouldn't have seen this pop. there would have been plenty of ready sellers and there weren't. it seems to me that people are beginning to believe this is going to be it you have a lot farther to go you have a company that had $100 billion in revenues, 15 billion in clouds. >> here's what it is there's no operating business

per se what they've done is they've cut their flow in half they eat themselves. they buy back their shares they've done it more aggressive than any prominent company out there. the issue is, this is a matter of technique and it's quite right. when something caps up, it usually is not an isolated event. you have two down in quarterly misses a quarterly beat that's this aggressive is typically followed by something that's equally aggressive the risk or the chance here is that you get back to those drops of may when it plunged from sort of 170 i think we've got a chart to show that. that's the up side of it >> wow >> yeah. what do you know i agree with them on ups and now i feel bad. >> 3.7 perfecti% dividend is no. >> that's right. if the market gives them a pass in a sense, which i don't think they have quite yet, but to carter's point i think they're going to start giving them a

pass similar to how they give amazon a pass and you believe in the story, the expectations are still too low for this company therefore surprise to the up side. >> take a quick break for everything "options action." optionsaction.cnbc.com sign up for our super cool newsletter it is an absolute must read. what are you waiting for apple's market cap is north of $800 billion. >> good lord, that's a lot of money! >> it sure is. so we'll show you how to buy shares for just three bucks. plus, calling all "options action" pads reach into your pocket, get your phone and tweet us your question at "options action." if it's nice, we'll answer it on air when "options action" returns. >> logical i think it's terrific. your kids go to college and you start trading. >>yeah, 5 years already. 5 years, hmm. you ever call your broker for help? >>once, when volatility spiked... and? >>by the time they got me an answer, it was too late.

>> it sure is. >> logical about your risk distribution. good to know. >>thanks, mike. we got your back kate. >>does he do that all the time? oh yeah, sometimes he pops out of the couch. help from real traders. only with td ameritrade.

well, it'sonce again.eason >>yeah. lot of tech companies are reporting today. and, how's it looking? >>i don't know. there's so many opinions out there, it's hard to make sense of it all. well, victor, do you have something for him? >>check this out.

td ameritrade aggregates thousands of earnings estimates into a single data point. that way you can keep your eyes on the big picture. >>huh. feel better? >>much better. yeah, me too. wow, you really did a number on this thing. >>sorry about that. that's alright. i got a box of 'em. thousands of opinions. one estimate. the earnings tool from td ameritrade. welcome back to "options action." apple unveiling its new flagship store in washington today. hey, josh. >> melissa, actually, the governor of illinois just walked into this apple store right behind here. the mayor of chicago, ram emmanuel is here take a look at this line melissa, this is a line of people waiting to get into this store which will open its doors at the top of the hour also on hand was apple ceo tim cook who talked about why he thought it was important to be here for this opening. >> our very first flagship was

right here in chicago in 2003. now 14 years later we are here in this beautiful store with a great connection to the community in a larger way than ever it's got all of our latest innovations in the store in a connection to the community that's deeper than anything we've done before. so it feels fantastic. >> so apple, of course, isn't the only big tech company opening new brick and mortar stores there are others, for example. amazon is, too but apple retail chief angela aaron's told me she isn't worried about that. >> i don't think about that frequently i've read they're ininvestigates, google is going to invest billions and open stores i have read that honestly, i think it's great i think it's great for the economy, employment, and i think it reinforces that physical retail is not going away, that

there is a purpose people want the human connection they want a place to pick up their products, et cetera. i think the great news is, as you said, we're nearly 500 stores ahead of them the tenure of our employees is unbelievable we have an over 80% retention rate in america alone so i think it will take them a little while too catch up >> and more stores are on the way including washington, d.c., paris and milan. melissa, thank you. >> josh lip ton in chicago. apple shares have been under pressure after unveiling the next generation iphones. the stock down 4% since the debut. with earnings and release of the iphone 10, how should you play it mike is at the plasma with the call to action mike. >> we're going to talk about using a calendar spread in this case one of the things we would expect if we're going to put a trade like this, the stock is not going to move that much at the near term. looking at near term consolidation. the other thing you're looking at is you're boog a dated option is a longer term catalyst.

you might say we have earnings coming up the first week in november the catalyst is going to be holiday earnings, not so much the earnings event finally, oftentimes options premiums get elevated. i want to sell that premium and buy the holiday move we can take a look at the stock price here and we can see basically what's been going on sideways slightly. its i'm not expecting good earnings out of this for the reason this is the trade pretty easy. for $3 we can by the november/january call spread you can by the januarys for $5.85. you can sell the novembers for $2.85. i don't expect them to decay that much. this is the money you're hoping to collect but you're only risking 2% of the stock price to do this trade. >> do you like calendar spreads? >> i like this trade in this particular case because you have two catalysts, right when you're looking at that, then i think this works out very, very well. and we all know that this apple

story is about the iphone 10, it's not about the 8 it's the holiday season that matters. i like it a lot. >> how do the charts look? i get nervous when somebody pulls the chart and starts drawing lines. >> no, listen. chart is just a pictorial representation of the collective judgment of our participants i think if one were to take that and look at this chart here maybe, what we know is that apple has broken trend it's on a big break, massive rollover, but the performance is sluggish we think that's what the word dorm mants is about. it's what you're trying to do. the stock is the same price as late may think of where the market is versus late may. >> the trade that we're making is it's going to be in the same price after earnings what people want to know is are their products going to sell really well? are these new stores, like the one in chicago, not going to be a destination for people to go and look at product but for people to actually buy it. they have very retail sales per

square foot. that's not the only answer for this company we're going to need to see ver strong holiday sales for it to go higher. >> this will be a tricky setup we will get little data points here and there about howell the pre-orders have come in. >> that's what data points were made a week, two or three weeks ago. >> always these things lurking. >> that's exactly why this trade is great, right? i don't think much is going to lap. after that in the holiday season i suspect josh lip ton will be showing us the lines lines are big, apple goes higher lines are small, apple goes lower. >> we like situations where we can sell some premium into events it's very hard when options premiums are low here we're buying dated and we're selling. that's the way you can find some ways to collect. up next, intel hitting the highest level in nearly 17 years today. the charts are pointing to more gains. we will break that down. if you have a question for one of the traders, you can send us a tweet if it's nice, we'll read it

later. much more "options action" straight ahead rific. your kids go to college and you start trading. >>yeah, 5 years already. 5 years, hmm. you ever call your broker for help? >>once, when volatility spiked... and? >>by the time they got me an answer, it was too late. td ameritrade's elite service team can handle your toughest questions right away- with volatility, it's all about your risk distribution. good to know. >>thanks, mike. we got your back kate. >>does he do that all the time? oh yeah, sometimes he pops out of the couch. help from real traders. only with td ameritrade.

well, it'sonce again.eason >>yeah. lot of tech companies are reporting today. and, how's it looking? >>i don't know. there's so many opinions out there, it's hard to make sense of it all. well, victor, do you have something for him? >>check this out. td ameritrade aggregates thousands of earnings estimates into a single data point. that way you can keep your eyes on the big picture. >>huh. feel better? >>much better. yeah, me too. wow, you really did a number on this thing. >>sorry about that. that's alright. i got a box of 'em. thousands of opinions. one estimate. the earnings tool from td ameritrade. welcome back to "options action." time to look back on some of our open trades. three weeks ago carter and ko said home depot was about to

break out. >> that's a heck of a setup. so the presumption is a breakout from these well-defined tops i think that's an opportunity. >> specifically what i'm looking at is the $1.65 october/january call spread. i could buy the januarys and sell them at $1.05 >> well, it's been a bit of a wild ride for the home improvement retailer rallying to an all-time high before pulling back mike, the first leg expires today. what do you do >> that one expired worthless. that's what we want to have happen we're still long the longer dated call now the real question is do we think the breakout is going to happen otherwise i'll sell the november $1.65. >> we have this breakout and it's fallen back if you can buy some more time, the presumption is home depot goes higher. >> we have the time. that's why we had the calendar. also three weeks ago, dan bet that the intel spreads were

going higher he bought them expiring next week intel shares are up already more than 6%. you may have noticed dan isn't here with us today, but he did send us a message from an undisclosed, apparently wooded area in upstate new york to tell us how he is managing this trade. >> hello, "options action"s viewers. sorry i can't be there i wanted to give you an update on the intel trade the stock was 38 i was targeting earnings this coming week at the time it was the october 27th weekly 38 calls for 80 cents at this point i think we're going to roll them up a little bit to the october 40s those are also about 85 cents right now and the stock was trading at $40.30. thanks a lot good luck. >> very, very undisclosed. it was like when you do the blurry part. >> he could be at a home depot in the back. mike, what would you do here >> i agree with him on this. that was a great trade

it was one of these situations where options premiums were simply too low you had the calls trading what they were worth the day before earnings weeks before earnings. now he's looking at the 40 strike calls they're only trading very slightly above parity. i think that's a good way to make your bullish bets. >> 17 year high on intel wow. >> i like this trade i'm curious what dan is hiding from he's whispering in the woods creepy. >> it seems like he's on the lamb. >> on the lamb, exactly. >> for sure on the lamb. >> this is a classic sleeper trade. semis have been hot. intel has been lagging this is what you can get if you get a catchup. >> up next, your tweets and the final call from the options pits i think it's terrific. your kids go to college and you start trading. >>yeah, 5 years already. 5 years, hmm. you ever call your broker for help? >>once, when volatility spiked... and? >>by the time they got me an answer, it was too late.

td ameritrade's elite service team can handle your toughest questions right away- with volatility, it's all about your risk distribution. good to know. >>thanks, mike. we got your back kate. >>does he do that all the time? oh yeah, sometimes he pops out of the couch. help from real traders. only with td ameritrade.

well, it'sonce again.eason >>yeah. lot of tech companies are reporting today. and, how's it looking? >>i don't know. there's so many opinions out there, it's hard to make sense of it all. well, victor, do you have something for him? >>check this out. td ameritrade aggregates thousands of earnings estimates into a single data point. that way you can keep your eyes on the big picture. >>huh. feel better? >>much better. yeah, me too. wow, you really did a number on this thing. >>sorry about that. that's alright. i got a box of 'em. thousands of opinions. one estimate. the earnings tool from td ameritrade. time to take your tweets our first fan says, hey, melissa lee. it's a nice tweet. please read it

just did just did moving on. our next fan asks what's the options play leading up to microsoft earnings next week mike >> volatility again has been so low. this stockstill looks pretty good to me i think you want to make that basically looking out to january. >> that chart looks pretty good. >> something so good, never in its history has it gone this long without having a check back to the 150 day average. >> is that good? >> so worriedly good >> b.k., is the tesla double top played out what are your views into earnings >> certainly i think it will break three forty-five you want to be aggressively short. double top is in and going lower. time for the final call? are the kaer >> long ups into earnings for 5, 6% move to 125. >> mike ko. >> buy january calls into ups to play. >> brian kelly thanks for joining us. >> thanks for having me.

it was a lot of fun. look for the vix protection on your portfolio on the low volatility portfolios. >> i'm melissa lee thanks for watching. for more "options action" check out the website optionsaction.cnbc.com or tweet us. "mad money" with jim cramer starts right now - [narrator] the following is a paid program for the kitchenaid artisan stand mixer and attachments. stay tuned for the newest offer to try the kitchenaid artisan stand mixer and select attachments in your home, risk free. if you're passionate about preparing, enjoying, and sharing great food, if you love being creative in the kitchen, then come along with us for the newest addition of every day with kitchenaid. today, we'll visit the kitchenaid culinary center showcase events in cool and vibrant southern california, soulful, spicy new orleans, and the tropical paradise of florida. come watch along with other passionate home cooks like you