hey there, we are live at the nasdaq market site the guys are getting ready behind me. while they're doing that, here's what's coming up on the show >> oh, you can find me any day at macy's. >> what's macy's >> it's a stock that's lost half its value this year. the chart suggests it's going even lower on earnings next week we'll tell you how to cash in. plus here's what chip stocks have been doing this month ♪ up up and away >> but if you missed the move, we've got a way you can still make money and it's the one name traders see having a huge move next week. want to know what it is?

here's a hint. we'll tell you how to play snap shares into earnings for less risk the action begins right now. and we start the show with deal chatter in the chip space shares of qualcomm soaring nearly 13% on reports it could be a takeover target of rival broadcomm, marking what could be the biggest merger in the chip space ever, broadcomm ending the day more than 5% some stocks are surging more than 100%. now we're starting to fade the move, why the change of heart? >> it's interesting that a mega deal comes back. a lot of viewers understand that qualcomm is already in agreement to actually purchase nxpi, which was another megadeal so this is broadcomm coming in

and kind of shaking that thing up a little bit. m&a was a big driver this sector, 2015, 2016. there was hundreds of billions of dollars in the semiconductor space. the rumor of this deal is kind of interesting especially when the sector has massively outperformed technology as a whole. the etf that tracks the semiconductor sector is up 43% year to date. nasdaq is up the s&p is up 15%. to me, i think you really want to look out to some sentiment, guys nvidia reports next week, the implied move is 8% in either direction. it's $10 million on a stock up 100% year to date. things are getting a little frothy real quickly, we've been talking over the last month, intel is a stock up 30 some percent in two months. this was a stock left for dead, the second largest holdings in the smh. it's setting up for a period when we're going to get consolidation and possibly giveback >> intel is still still cheap, when everything else is going to the moon the nxpi deal, that thing is trading over the deal price.

qualcomm has agreed to acquire them for $110 per share. it's trading closer to $120. some people think they have to bid the price up or not enough people will tender. there's a little bit of wonkiness there. what was a blockbuster deal when announced over a year ago, now is not good enough >> a lot of these stocks, the options market would be perfect. >> that's exactly it etf, like the smh, which is a low vol sort of instrument relative to the underlying, especially in nvidia, look at that breakout, i want to look for a trade back towards that september breakout in the smh which is back towards 90 i want to look at january expiration here. so today when the stock was trading around 102 1/2, at an all-time high, i wanted to buy the january 102 90 put spread paying $3 for that so i'm buying

one of the january 102 puts at 4 $4, selling one of the january 90 puts at a dollar, it breaks down to $99, i can make up, above 102 i lose the three bucks, that's about 3%. i have 2 1/2 months for this thing to play out. the trade is setting up for a stock like nvidia, just cooling out a little bit, cooling a little bit >> you're singling out the steepest area. as a subset of tech, to your point, this is almost egregious. the one thing we've talked about this, it's very hard to -- you yourself say, hard to -- it's the only aggregate that has yet to make a high the nasdaq long ago exceeded its 99 high. we know the tech sector long ago. but the semis are still not there. markets have a way sometimes of reaching for an all-time high. so we're still 5% below. the high was on a friday like this

it was the 17th of march 2000. whether we get a hiccup now or at some point, it's every possibility that we make that stretch for the high >> yeah, i mean, that and one other factor really speaks in favor of this trade. obviously, there is still some - >> hold on >> he said early >> there's some chance that you are. a market rollover will hurt the segment for sure we talk about options premiums being cheaper. interesting in smh, not as much as in the broad market etfs. spy and the triple qs. that's what favors using a put spread in this particular instance more than just an outright, which is what we probably favor if you were going to make a bearish bet right now. >> timing it is hard i don't know what the input is you're basing it on. maybe it's this news >> here's what i'm thinking about. i see a couple of scenarios with nvidia, the stocks sells off, or a bad quarter and the stock gets killed if they put up a beat and raise

and then analysts kind of revise their numbers up, then all bets are off still. but to me i think you're going to have ultimately to get to your 5% back to that 2,000 high, you need to have some buying panic or something like that but when it reverts, this thing will be right in the money >> all right from a hot group of stocks to one that's been in the gutter. a number of retail names report earnings next week and investors will be eyeing the department stores which are all down double digits this year the options market is expecting huge moves. jcpenney could see a move, macy's could swing 9%. options traders are expecting moves from nordstrom's and kohl's >> macy's, this is high stakes poker. what if it moves the wrong way what if it's up. i'm going to make the bet that it's down. let's look at some charts and we'll figure it out from there to put this in context

this is performance figures for high sort of touch names names that people know look at these numbers. i mean, this is something out of a horror movie, right? these are two-year declines that are epic i picked out some of the most egregious ones to put this in context, these names relative to retail itself as an aggregate, down. and the market, of course, up quite a bit. so the issue is, do you short something that's down that much? often the greatest moves come from things that are already down a lot i think macy's is at risk, just as really all these others are just to put this in context, these are declines this is what we're talking about, we're talking about this percentage, these stocks were all down 50% to 60%, wipeout this is where it all started to separate you have a chart of macy's and the xrt.

we know 2 1/2, three years ago, whereas there was great correlation, now it's starting to come apart, macy's specifically here is a long-term chart, a testament to being bullish or bearish with the trend we know that in principle, when something's trending up, you want to be long. when it's trending down, you want to be short when it's trending up, you want to be long when it's trending down, you want to be short like a monkey, stick with trends, charts work. then what do we have here? it's a down trend. unless and until we're starting to turn, why would we bet? no, stay short, get short. all right. here's the long-term picture we know that it broke this trend. but here's the best part look at the lows it was $5.07 we're trading at 18, 19. why can't it go there? so here's the chart. here and now here are the lines i think we're just coming out of this formation here. not interested don't want it.

you own it, get out. >> i mean -- >> what do you think, mike do you put on a trade that helps to go short? >> we're definitely going to do that it behaved terribly today. the market responded pretty positively overall, especially towards the end of the day macy's tailed off towards the end of the day i was looking out to the 18 and a half, 16 and a half put spread you can spend 60 cents for that, 75 cent for the 18 1/2 and selling. what we have is a situation where the stock is probably going to move very sharply one way or the other there are a couple of reasons for that, not least of which i it has a $5.5 billion market capitalization and $5.5 billion in debt. you're getting a lot of leverage in that equity when the stock prices go down, debt levels do not, the equity

debt levels do not, the equity level becomes very levered, volatile that's why we use options. >> i like the fact that you'll target this event. at the end of the day you wouldn't want to -- listen, your charts make total sense. the fundamentals, we all know, are really bad the lower the stock goes the more that we hear about what are the asset values and that sort of thing that was one of the reasons why activists have been involved earlier in the summer, i tried to go long i had a little bounce. i got out. at some point, i got back in i saw everything you guys see and i don't want to do it. this stock is down 60% from its 52-week high mike's trade is targeting the event. if they don't like what they hear, it's going to the 16 1/2 level in the short strike. >> the risk for snapback is always there on a week over week basis, the stock is not down that much. it's down considerably from its high it's consolidated its low for a while. just now, as seen in the chart, it's starting to take out those lows that should gather momentum. >> okay. we have much more "options action" still ahead. here's what else is coming up on the show quick profits. because we've got a way to make money on snap ahead of earnings next week.

we'll break it down. plus calling all "options action" fans reach into your pocket, grab your phone, and tweet us your question @optionsaction. 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. 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. hi, i'm the internet! you know what's dtj! get a job!ting... hi, guys. i'm back. time to slay! heals, heals, heals! yes! youuuu!

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[ bloop, clicking ] and connect, as a family. just, uh one second voice guy. [ bloop ] huh? hey? i paused it. bam, family time. so how is everyone? find your awesome with xfinity xfi and change the way you wifi. 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." check out shares of snap, surging 5% today

the stock could see another big move when it reports earnings on tuesday. dom chu is in the newsroom with more, hey, dom >> reporter: michelle, get ready for a heck of a roller coaster ride that's what traders are bracing for when it comes to snap earnings the options market is pricing in an up or down move of 14%, which kind of makes sense seeing as how snap has only had two prior earnings reports and the stock fell on both those days by 21% after its first earnings report and then by 14% after its last quarter earnings report. how does that look compared to other social media companies and their early public life reports? well, for twitter, for instance, the story is somewhat similar. after its first earnings report in february of 2014, the stock dropped by 24% the day after earnings and then dropped by 9% in its next earnings report after that things weren't quite so dramatic when it came to facebook, which dropped around 12% after its first earnings release but then surged 19% after its second one. now, for context, twitter's stock had risen sharply after

its ipo. so maybe a bigger downside move wasn't that far-fetched early on after a run like that. meanwhile woe all remember on facebook's fateful ipo day when the stock dropped in the weeks that followed. michelle, there is limited history for snap stock but it won't be surprising to see a bigger swing around earnings especially if it's like some of its social media predecessors. >> good rundown, thank you, come to how should you play snap into earnings mike is at the plasma with a call to action >> we do have a limited history to compare the options value to how much it's moved. as dom pointed out, we have a 14% average expected by the options market right now we have high levels of uncertainty, not just in the options market, but just fundamentally on this company. as we pointed out, options are expensive, so just buying those front dated options is really kind of a challenge. let's look at how this stock has performed. you consider how this year has gone for almost everything this is not a very good looking picture to me. i think one of the fundamental

reasons for that is that they're competing with facebook. facebook was one of the names that actually did well as the earnings progressed because the company was doing well i think they're going to have a much harder time what i'm looking to do is sell those very expensive november 10 weekly 14 puts, collect about 65 cents for those, and then use those proceeds to help finance the purchase of the same strike, the january 14 puts for $1.10. that whole thing is going to cost me 45 cents if the stock basically lingers in here, drips down to that 14 strike, i'm going to be a winner and this is really the way to use those very high premiums that we see in the weekly options going into earnings to finance a longer term bearish bet. >> dan >> it's interesting, this is a company i want to be really constructive about, they're so early in their infancy, you know i think being a publicly traded stock is another story i think twitter has told us that

and even facebook right out of the gate, sometimes it takes some time for investors to get their arms around the story. why is option prices so high and why is mike trying to do this trade because of all this uncertainty? every quarter these guys put up, the less uncertainty there should be as investors get comfortable. i like the idea of a put calendar the only question i ask mike, is 14 strike a little tight because when i look at that chart, if they were really to do a bad job on that earnings call, just communicating with investors, it could go back to that $13 level where it was in august >> that is a very good point the question you should ask yourself, what then becomes of that weekly put option all of the extrinsic value in that option is going to go away. that 14 strike put is going to be worth $1 if it goes to 13 bucks. the difference between the 14 strike and the 13. you'll only have lost 35 cents on that one option where is that january 14 put going to be? the stock will have to move much lower for that trade not to work out to the down side to the up side, if it really takes off, that's where this trade could end up losing. >> talk about high stakes poker,

this is full-on gambling that's not about your picks. no one knows what a stock is when it drops 50% from its ipo and it's trending lower on a relative basis it's still worth a lot of money. i don't want anything to do with it if i had to be directional, i'm biased to the down side. >> you're spending 45 cents in premium on a $15 stock >> but here's the beauty of the put calendar, by selling that short, even if it just goes up a little bit, it's going to hold its value. at the end of the day, mike owns at the end of the day, mike owns a jan side put that is useful, that's valuable. >> if it's twitter, there's plenty more to go. twitter's been even worse. >> all right still ahead, our very own mike khouw tripled his money in baba this week and he's got a way to make even more cash. he's going to explain. plus, don't call it a comeback but starbucks shares closing the day higher by more than 2%, good news for dan's bullish trade on

the coffee giant, when "options action" returns. to college and 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. that's it. i'm calling kohler about their walk-in bath. nah. not gonna happen. my name is ken. how may i help you? hi, i'm calling about kohler's walk-in bath. excellent! happy to help. huh? hold one moment please... [ finger snaps ] mmm. the kohler walk-in bath features an extra-wide opening

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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.

certainly over this last year it's fair to say that the overall u.s. retail restaurant industry has been very flat on sales and actually negative on transactions the fact that we were able to build over 2,000 starbucks stores globally that are perfect at higher annual unit volumes than prior generations in an era where retailers are closing stores at a record pace gives us confidence there's affinity for the brand. >> that was starbucks' ceo kevin johnson on "squawk on the street" earlier today. it ended the day higher by 2%. dan made a bullish bet on the stock next week. what do you do with that trade now? >> i said you really want to look out to december, i didn't want to play the event because it was very binary at the end of the day you had this reversal, i think it

reversed 10% after-market lows >> it had been down four bucks >> crazy move. i would love to hear what carter has to say about it. this trade looks out to december it's at break even it's up a little bit i want to stick with this thing and see if we get a gap. >> clearly reversal, you have a moment where something is very weak and people are selling based on news. and then within moments, maybe, because of the cost, they start to revise that, and think maybe it's not as bad. the reversal would be perfect if it had closed on the high. the fact that it gave back so much and closed in the middle of the range leaves some of the torque off it. >> based on that, my trade management, if you do have the stock go back towards like 55 1/2 or something, you get out, maybe you try to get out for even, that sort of thing keep an eye on the ability for it to hang in there. >> and keep an eye on asia, that will be a big play >> alibaba, shares up more than 100% this year last year mike made a bullish bet on the stock into earnings >> basically what i'm trying to take a look at here, if it's going to move 6% to the downside, that's the risk essentially i'm trying to avoid.

if it moves 6% to the upside, that's what i'm trying to capture. looking at the weekly options, i could buy the 175 calls that expire on friday, sell the 180, 2 1/2s for 270, and sell the 160 1/2 puts for 165 1/2 puts for 125 >> shares have pulled back slightly great call, mike, the trade expired at 4:00 p.m. today how do you manage the trade into exploration? >> we posted an update on this trade this week, we took that off early. the reason we did that, i saw some early selling pressure as became of the news came out, the first moments of the trading day. we ended up tripling the investment we made despite the weakness that we saw today, i think call spreads might be a way to make a play into next january. i mean, it's a phenomenal growth

story. it was then, still is. >> and that initial pop is what's key you did get those new high the pullback was on light volume, it was controlled. i think higher >> okay. up next, tweets and the final call from the options pits don't move 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. welcome back to "options action." it's time to take your tweets. our first fan says, hey guys, how can i best protect shares of square ahead of earnings next week love the show, thanks. dan, what do you think >> here's a stock up 170% on the year it sounds like you're long, you want to protect profits into a potentially volatile event i would look to a zero cost collar, against 100 shares of stock you sell one of the november 40 calls at 80 cents

and use those proceeds to buy puts, it costs you nothing, you have gains up to 40, but you're protecting below 34, obviously you have losses in the stock down to 34 >> options premiums are really high in square you've got to do some offset, that makes a lot of sense. >> the fact that this person is asking a cautious question, that being said, every single stock in this position, meaning excessive winner, has gone higher, without exception. >> okay. our next fan has another question, david says, i have nice profit in microsoft january 80 calls do i take the money and run or roll up and out? >> in the money options, you're still getting the decay but none of the benefit of the stock comes in four bucks you're going to pay for it. go to the 85s in january >> you have the cap up in january. >> no comment. >> no comment. time for the final call, the last word from the options pits. carter >> macy's. i'm a seller >> put spreads, 18 1/2, 16 1/2 for that

>> i like looking out to january, i like put spreads. >> a very hot sector right now, specially with all the m & a news i'm michelle caruso-cabrera. "mad money" begins - [announcer] the following program is a paid advertisement for the hd mirror cam, brought to you by inventel products, llc. yep, they're out there, driving recklessly, causing accidents, and driving up your insurance rates. this is a show about car accidents ... (dramatic orchestra music) classic cars ... and the hd mirror cam, the personal security camera for your car. this is accidents caught on camera with the hd mirror cam. today we're going to hear from people