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 is macy's? >> it's a stock that's lost half its value this year. and the charts suggest 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. 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. >> we start with deal chatter in the chip space shares of qualcomm soaring nearly 13% on reports it could be a takeover target of rival broadcom, marking what could be the biggest merger in the chip space ever broadcom ending the day higher by over 5% chips have been on fire this year you've been hot for the group, now starting to fade the move, why the change >> here's the thing. it's interesting that a mega deal comes back, i think a lot of viewers understand qualcomm is already in agreement to actually purchase nxpi, another mega deal. so this is broadcom coming in and kind of shaking that up a little bit mna was a big driver in 2015, 2016, hundreds of billions of dollars in deals in the

semiconductor space. this deal happening or at least rumor of it happening right now is kind of interesting, especially when the sector has massively outperformed, technology as a whole, smh that tracks the semi conductor sec tore is up, the s&p up 15% to me i think you really want to look out to sentiment guides invidia reports next week. implied move about 8% in either direction, $10 million on a stock already up 100% years to date think things are getting frothy. intel is a stock that's up 30% or so in two months, this is a stock that was left for dead, one of the second-largest holdings in the smh. i think we're at least going to get consolidation, possibly give-back. >> intel is still cheap, trading 13 times forward earnings, when everything else is going to the map. you mention nxpi deal, that's trading over the deal price.

qualcomm agreed to acquire them for $110 a share, it's trading $120 people think they're going to have to bid the price up or there's not enough to tender there's so much frothiness, what was a blockbuster deal when it was nouned over a year ago is looking like it's not good enough. >> such high-priced stocks a lot of them, options market would be a perfect place? >> yeah, it's exactly it i think looking at it, itf like the smh, a low-vol instrument relative to underlies, especially invidia, i want to take a look at invidia look at that breakout. i want to look for a trade back towards that september breakout in the smh, back towards 90. i want to look to january expiration here. and so today when the stock was trading about 102.5, all-time high, i wanted to buy the january 102.90 put spread paying $3 buy one of the january 102 puts at $4, selling one of the

january 90 puts at $1, that's how i get my $3, it breaks even down at $99, make up to $9 between 99 and 90. above 102, i lose the 3 bucks. when you think about it that's 3% i have 2 1/2 months to play out. the trade is setting up for a stock like invidia, which has been a massive sentiment leader, just cooling out a little bit, then i think it brings the sector down. >> the steepest single area of the equity complex as a subset of tech, to your point, which has been the best area, this is almost egregious one thing that we've talked about this, it's very hard to pick a top right? it's the only aggregate that has yet to make a high from its dot com era. nasdaq long ago exceeded its '99 high the tech sector long ago the semis are still not there. markets have a way sometimes of reaching for an all-time high. we're 5% below the high was on a friday like this it was the 17th of march, 2000

and whether we get a hiccup now or at some point, every possibility that we make that stretch for the high. >> yeah, i think that and one other factor speak in favor of this trade obviously there is still some -- >> whoa, hold on - >> there is some chance but a market roller is going to hurt the sector for sure. what's interesting is we talk about options premiums being cheap in a lot of spaces etfs in particular interestingly in smh, not as much as in the broad market etfs like spy and qqqs. that's what favors using a put spread in this instance, i think more than outright, which is probably what we favor to make a bearish bet. >> timing it is hard i don't know what the input is that you're basing maybe this news. but what is really - >> here's what i'm thinking about. i see a couple of scenarios with invidia, putting up a big quarter and the stock selling off, maybe that starts a steam roll or a bad quarter and the stock gets killed. if they put up a beat and raise

and analyst revise up, all bets are off still. but to me i think you're going to have ultimately maybe to get to your 5% back to that 2000 high, you need to have buying panic or something like that when it reverts this will be right in the money. >> from hot stocks to one in the gutter a number of retail names report earnings and investors will be dying department stores which are all down double digits this the year the options market is expecting some huge moves. jcpenney could see a 13% move in either direction macy's could swing 9%. options traders are expecting an 8% and 7% move from nordstrom's and kohl's carter, there's trouble ahead? >> macy's, this is high-stakes poker, the market implies a big move, what if it's the wrong way, up? i'm betting it's down. just to put this in context, these are performance figures for high sort of touch names

names that peopleknow. look at these numbers. this is something out of a horror movie these are two-year declines that are epic i've picked out some of the most example xwreenlg just ones to put it 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 and i think macy's is at risk just as really all these others are. so just to put this in context, these are declines this is what we're talking about. you're talking about this percentage these stocks are all down 50% to 60%. wipeout. now, this is where it all started to separate. you have here a chart of macy's and the xrt. and we know that basically 2 1/2, 3 years ago, where there was a great correlation, the whole thing has started to come apart. not only consumer in general,

retailers. but macy's specifically. let's zero in on macy's. here's 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. and then what do we have 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 you're just coming out of this formation here plenty to go so not interested, don't want it, if you own it, get out.

>> i mean, the name -- >> what do you think, mike do you put on a trade that helps you go short >> we're definitely going to do that it behaved terribly today. i think the market responded positively overall especially towards the end of the day. not so much macy's, that thing tailed off toward the end of the day. i was looking out to next week's weekly options specifically the 18.5, 16.5 put spread spend 60 cents for that, 75 cents for the 18.5, selling the 16.5 for 15 cents when i was looking at that today. what we have is a situation where the stock is probably going to move sharply one way or the other. there's a couple of reasons for that, not least of which is has a $5.5 billion market capitalization, $5.5 billion am debt, so a lot of leverage in that equity. that's what happens when the stock prices go down, debt level dozen not. the equity becomes very levered, volatile, that's why we're going to use options. >> i like the fact that you're just going to target this event. at the end of the day you wouldn't really want to put --

your charts make total sense, thefundamentals are really bad i think 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 in the summer i tried to get long, i got out. at some point i got back in. i said to myself, i saw everything that you see, and i didn't want to do it if you're going to press short, this stock is down 60% you have to define your risk mike's trade is targeting an event. if they don't like what they hear, it's going right to your 16.5 level, the short strike. >> the risk for snap back is always there when you press something. but on a week over week basis, the stock's not down that much it's down considerably from its high but it's consolidated its low for a while and starting to take out those lows. that should gather momentum. >> much more "options action" ahead. here's what's is coming up on the show >> quick profits we've got a way to make money on snap ahead of earnings next week we'll break it down.

calling all "options action" fans reach into your pocket grab your phone. tweet your questio 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! no, i have a long time girlfriend.

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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. check out shares of snap they're surging 5% today and the stock could see another big move

when it reports earnings on tuesday. dom chew is in the newsroom with more. >> get ready for a roller coaster ride when it comes to snap earnings. as of this afternoon the options market is pricing in a possible up or down move of around 14%. which kind of makes sense seeing as how snap has only had two prior earnings reports and the stock fell by both those days by 21% after its first earnings report then by 14% after last quarter's earnings report. how does that look compared to other social media companies and their early public life reports? for twitter, for instance, the story is somewhat similar. after its first earnings report in february 2014, the stock dropped by 24% the day after earnings, then dropped by 9% in its next earnings report after that things weren't quite so dramatic when it came to facebook, a drop around 12% after its first earnings release then surged 19% after its second now for context, twitter 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, we all remember what happened on facebook's fateful ipo day when that stock dropped in the weeks that followed michelle, there is limited history for snap stock but it wouldn't be surprising to see a bigger swing around earnings, especially if it's like some of its social media predecessors >> good rundown of the history, thank you. how should you play snap into earnings mike a call to action, mike? >> this is an interesting case, of course. we do have a limited history to compare the options value to how much it moves. it has moved a lot the two times we've seen as dom pointed out, 14% average expected by the options market right now. high levels of uncertainty, not just in the options market but fundament fundamentally. options are expensive so just buying those front-dated options is really kind of a challenge. take a look at how the stock has performed here consider how this year has gone for almost everything. this is not a very good looking

picture. one of the fundamental reasons for that is 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'll have a much harder time. what i'm looking to do is sell those expensive november 10 weekly 14 puts i could collect 65 cents and use those proceeds to help finance the purchase of the same strike, the january 14 puts for $1.10. that's going to cost me 45 cents. if the stock lingers in here, if it drips down to the 14 strike, i'm a winner this is really the way to use those very high premiums we see in the weekly options going into earnings to finance a longer-term bearish bet. >> what do you think >> it's interesting. it's a company i want to be really constructive about. i think they're so early in their infancy. 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 time for investors to get their arms around the story why is option prices so high, why is mike trying to do this

trade, because of all that uncertainty? every quarter these guys put up the less uncertainty as investors get more comfortable with it. i like the idea of a put calendar the question i ask, it's 14 strike a little tight? here's the thing, when i look at that chart, if they were really to do a bad job on that earnings call, communicating with investors, it could go back to that $13 level where it was -- >> that is a very good point and i think 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. the 14 strike put is going to be worth $1 if it goes to 13 bucks. the difference between 14 and 13 you'll only have lost 35 cents on that one option where's that january 14 put going to be? the stock's going to have to move much lower, much lower, for that trade not to work out on the upside, if it takes off, that's where this trade would probably end up losing >> i use the expression high-stakes poker, talking about macy's this is full-on gambling

and that's not about your picks, it's just about no one knows what a stock is when it drops 50% from its ipo, essentially, and it's just trending lower on a relative basis it's still worth a lot of money. i don't want anything to do with it fy had to be directional, i'm biased to downside. >> this is the situation you're spending 45 cents in premium on a $15 stock >> here's the beauty of the calendar, by selling that short dated one, even if it goes up a little bit, it's going to hold its value. at the end of the day mike still owns a jan downside put that could be use envelope a lot of different scenarios. to me, i love the trade structure. >> think about what dom was talking about, if it's twitter, there's plenty more to go. twitter's been even worse. >> cap size. >> yeah. still ahead, our own mike khouw tripled his money and he's got a way to make more cash. don't call it a comeback but starbucks closing higher over

2%, good news for dan's bullish trade on the coffee giant. 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. 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 and a low step-in at three inches,

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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.

over this last year in the u.s., 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 performing at higher annual unit volumes than prior generations, in an era when retailers are closer 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." company reporting earnings and the stock initially fell to the chagrin of our twitter followers, however, it ended the day higher by about 2% dan made a bullish bet on the stock last week. what do you do with that trade now? >> at the time i said you want to look to december. i didn't want to play the event in and of itself because it was binary so at the end of the day you had this reversal. i think it reversed 10% from after-market lows. >> it had been down 4 bucks.

>> a crazy move. i'd love to hear what carter has to say when you see that sort of reversal, i think a near-term bottom is in it's at break-even, it's up a little bit, i want to stick with this thing. >> clearly reversal, those are important, which is to say you have a moment where something's weak and people are selling based on news. then within moments, maybe, they start to revise that maybe it's not as bad. the reversal would be perfect if it closed on the high. the fact that it gave back so much and closed in the middle range leaves some of the torque off it. >> so based on that, my trade management is if you do have the stock go back towards 55.5 orring something that looks like it's giving up, get out, maybe try to get out for even, that sort of thing. keep an eye on the ability to hang in there. >> keep an eye on asia, i think that's going to be a big play. >> ali baba ba, mike made a bullish bet on the stock into earnings. >> basically what i'm trying to take a look at here is i don't want to take, if it's going to move 6% to the downside, that's

the risk i'm trying to avoid fit moves 6% to the upside, that's when i'm looking to capture when i use something like a call spread risk reversal weekly options i could buy 175 calls that expire next friday for $5.70. sell the 180, sell the 162.5 puts at 125 -- >> since that time shares rallied to a new all-time high but have pulled back slightly. great call, mike the trade did expire at 4:00 p.m. today how do you manage the trade into expiration >> so first things, everyone should really be following this on twitter for sure. we actually posted an update to this trade midweek, we rolled it into a call spread and took that off early. the reason is i saw early selling pressure as basically the news came out. the first moments of the trading day. we ended up basically tripling the investment that we made. i still actually, despite the weakness we saw today, i think call spreads might an way to make a play into next january. you know, it's a phenomenal growth story it was then, still is.

>> that's right, that initial pop is key you did get those new highs. and the pull-back was on light volume, it was controlled. i think higher. >> up next, 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. welcome pack to "options action." it's time for 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? >> so here's the stock around $37. up 170% on the year. sounds like you're long, you want to protect profits into a potentially volatile event i'd like to do a zero cost collar against 100 shares of stock, sell one of the november 40 calls at 80 cents, use those proceeds to buy one of the november 34 puts for 80 cents, costs you nothing. gains up to 40 between now and

november expiration. you're protected below 34, obviously losses of the stock down to 34 but i like that way to do it. >> options premium really high, you've got to do offset, that makes a lot of sense. >> the fact that this person's asking a cautious question that said, every stock in this position, meaning excessive winner, has been higher without exception. >> okay. our next fan has another question david says, i have nice profit in microsoft, january 8, do i take the money and run or roll up and out >> roll up and out having the in the money options you're getting decay but none of the benefit, if the stock comes in at 4 you're going to pay for it, go for the 85s in january. >> time now for the final call the last word from the options pits carter >> macy's, sell. >> put spreads, 18.5, 6.5. >> these guys, they got me a little nervous

i might be a little early in the smh but i like looking out to january, to me the january 102. >> a hot sector especially with all the mna news looks like our time has expired. melissa will be back next week t for viviscal. you know that confidence you get when your hair feels good and looks great? you feel absolutely beautiful! sadly, that confidence can be quickly shattered when your hair starts to show signs of thinning. thinning can be the sad reality of over-processing, over-styling, and aging for all hair types. what are the problem signs so many of us experience? thinning, dryness, brittleness, breakage, frizzing, lack of luster, loss of bounce, and an inability to style.