ucose levels. without drawing a drop of blood, again and again. the most personal technology, is technology with the power to change your life. life. to the fullest. hi there, we're live at the nasdaq at times square look who decided to join us tonight. tim seymour, while the rest of the gang is getting ready, here's what's coming up on the show >> yeah, that's what chip stocks have been doing, but if you missed the move, dan nathan thinks there's one name you can still buy and here's a hit he will break it down. plus, pot stocks are, well, smoking! yeah something like that, and mike ko has a way to get long canopy growth for under three bucks it's a smoking hot trade, and he

will break it down, and -- >> let's show the lady -- hey, look at this >> with retail earnings continuing next week, options traders smell a bargain in one name in particular it's time to risk less and make more the action begins right now. >> and we start tonight with a raging retail rally and the etf still down up 20% from the 2018 low. it could get even hotter next week when the handful of specialty retailers report and this year, we could see more of a 9% move on either direction, best buy, tiffany, ulta, dollar tree pricing in pretty big moves and should you price in big names here let's go to mike you are looking at lulu. >> it has been on the holly index and it's one of my wife's favorite brands for sure, and

i've observed the popularity about use tell as casualwear she has bum, at li lu lemon, number one, the stock has had a very large run and it's trading at a big premium to retail names. >> i think that might be deserved, though and there are ways that we can look to play the stock which is implying a more than 9% move using the elevated options premium, but trying to avoid the possibility that there could be a short-term pullback if it doesn't end up hitting on all cylinders and the way i was looking at that, is i was looking at the september 130, 140, 155 call spread risk reversal and selling it at 225 and it calls it 635 and telling the 1.55 call at 1.75 and the idea here is that we get

participation above 140. we mitigate the amount of premium we're spending considerably by selecting the two strikes that we're selling and in this way, even if the stock doesn't move that much although it is implying a fairly big move and we will also a first eight bucks based on where it goes today. >> dan, what do you think of the trade? >> i don't know if you just showed a chart here. this stock has gone parabolic and it wastrading between $40 and $80. it's been up in a straight line. so when mike says, you know, you get $8 of down side wishy washy and if you're wrong that makes me nervous because of the valuation and because of the move its had, i think that short put is really the most important part of this trade if you're an investor happeningigetting long for the earning event and this is a stock that's down 15, 20% and that's the most risk,

but if you're really confident and you'll buy the stock, i guess i prefer the trade structure to buying the stock right here in front of the print. >> yeah. i think this is the idea, is this the way kapt you everinging there are a couple of things that you don't know yet. for example, are they going to get more overseas sales? >> well, yeah. first of all, my wife has brought a lot of lulu and i wear it all of the time i like mike's trade for the following reasons and you could have the stock put to you at 125 and that's the level on the stock is where we adapt to after q-1 earnings and at a level that we can hold. and it is a stock, 75% up in the last six months and 175 in the last 18 months and the valuation is not cheap so you're playing for a pop on the earnings to get you up on that range and sometimes the top end of that, and it's a great

time to get out. >> this defends dan's position a little bit and maybe yours, too. it is possible to did a portion of the trade and want the whole thing. i happen to think that options premiums are implying they'll be larger than what we'll get, but if you only want to have the upside participation and you say i don't need the extra purpose stock price. go ahead, you i have the call the downside like that is if it goes sideways. >> are you opportunity ltimisti general? >> this is an idiosyncratic name i wouldn't characterize a specialty retailer where they basically operate at the pinnacle of their product sweep relative to everybody else so i look at this a little bit

on its own. >> dan, last word. >> yeah, i mean, listen, we're getting a little complacent and the stock market is at the all-time high and some of the riskier names and you want to be cognizant about selling puts because in a stock like this, if you get it wrong you'll put it at a much higher level from where it's trading and that's all i'm trying to say. a little caution here. >> good advice from one hot group to another. the chip stocks have gone wild and the s and h leading the names and amd, nvidia surging 8% and taking a look at one chip stock that you think is about to join the party what is it >> well, listen, it's intel and i've been very cautious on the semis for a whole host of reason, but about a few weeks ago i detailed a bullish idea on amd and for some reason is why i think it makes sense to start to look at intel again as we start to think about what the back half of the year looks like.

this stock was up 25% on intel and this was before a whole host of things wanted and in june their ceo resigned and data sales weren't as much as expected despite being up 27%. there was a couple of other issues with the quarter causing some people to say, hey, maybe amd is starting to eat their lunch a little bit because of the delay? their next generation. the stock has come up 17% and 3% on the year. analysts have 2019 estimates considerably earnings are supposed to grow 20% and next year they're supposed to grow 3%. the stock trades at 11 times earnings they have a massive buyback in place and 2.5% dividend yield. we know the data center will be 50% of their sales and we think there is a good chance that mobile i will start kicking in and ai clips and all these

different things that you start focusing on the q3 prince. the stock has bounced up support, their 46 it seems like an important level and there is an air pocket down there somewhere, where the chips are doing better the trade i want to do is something we talk about pretty often and i want to buy a little time on intel and i want to finance it by using a shorter dated one using a call calendar. when the stock was trading at 46 1/2 rjt november, selling one of the -- buying those for $1.25. your max cost is 95 cents and it breaks even on 50.95 in a november expiration.

what i would like is if this stock moved up towards that 50 strike >>y a >> i own the 50 calls and, and i possibly sell a higher strike call in november making a vertical call spread reducing my premium at risk. >> i like the structure. it's interesting because boy selling the shorter dated call usually i don't like to see sales of options that are left in 1% of the stock price you're collecting 30 cents here relative to -- >> easy to get overwhelmed, right? >> but the flip side of that is you aren't choosing an at the money call calendar here this, for the upside weth in the next 30 days before you even regret that and the decay that you will get out of that short call relative to the one that you own will probably make some sense unless the stock guns in the short term and without the

earnings catalyst which you own with november, but do not with september, that actually, there is some reason why you wouldn't expect it to have that kind of a strong run and adi and that was a bullish call that we've seen there. >> i like the fundamentals straight up and dan pointed out the valuations and bottom line in semis you can go either way you see a downtrend line and they've done nothing since then and they've been struggling to the trend line and you get higher lows. intel, high-quality company and the second half is in the year and the slow growth and data center is well flagged at this point and they have a product reler re -- and it's not like you can't protect yourself there as pell. >> for everything options action check out our website optionsaction.cnbc.com rumor has it tim has studied it all day in preparation for this show they're just coming up next. pot stocks have been growing

like a weed, and mike ko tells us how to get a cannabis grow. >> tweet us your questions as options action if it's nice, we'll answer it on air when "options action" returns. (indistinguishable muttering) that was awful. why are you so good at this? had a coach in high school. really helped me up my game. i had a coach. math. ooh. so, why don't traders have coaches? who says they don't? coach mcadoo! you know, at td ameritrade, we offer free access to coaches and a full education curriculum- just to help you improve your skills. boom! mad skills. education to take your trading to the next level. only with td ameritrade.

(sighs) i hate missing out missing out after hours. not anymore, td ameritrade lets you trade select securities 24 hours a day, five days a week. that's amazing. it's a pretty big deal. so i can trade all night long? ♪ ♪ all night long... is that lionel richie? let's reopen the market. mr. richie, would you ring the 24/5 bell? sure can, jim. ♪ trade 24/5, with td ameritrade. ♪ >> welcome back to "options action." pot stocks have been on fire what's behind the flower power hi, dom. >> pot stocks have been growing like weed especially today when

some of the bigger names in the industry that was once pretty small have made some big upside moves. that was due in part to a bloomberg dnn report that diageo is holding serious discussions to get into the canadian cannabis striend a cannabis trend, and here's a look at some of the standouts from the neighbor north of the border aurora cannabis has seen its u.s. trade the depository receipts game by 20% month to date another canadian company that specializes in cannabis is cronos and up around 70% and then tilray also in the medical marijuana thing north of the border shares have nearly doubled just in august and are up a lot since their july ipo price of $17 a piece. it's worth noting, a lot of

these upside names and the moves associated with them have had them on the heels of the nearly $4 billion investment that constellation brand made in canopy with the stake in the company with the ability to take a controlling interest down the line if it chooses and melissa, the hype around the cannabis stocks have had aggressive growth targets in the future and now they can meet the investor expectations or not. >> high expectations >> dom chu in the newsroom how can you get in on this hot pot trade? tim and mike have made their way over to the plaza for an options action tag team. take a look at them. ♪ ♪ >> what a duo, and michael tag in, kick it off. what are you looking at. >> >> canopy, the name at the center of this wonderful storm and to have 51% of the company and the whole sector has been on

fire you have a dynamic year where i think there's a lot to do and options are a great way to protect yourself in the middle of the froth where as you see here, m & a is heating up and that could be constellation brands, and bottom line, multinationals and it's playing offense and that they're the ones that are in play. valuation challenges, absolutely we'll have that before the constellation deal constellation looks like they stole something here that stock is up 21% since they paid a 50% premium valuations only make sense if you think that this is an international story and they're part of a global market which they absolutely are and the usa is the next play and let's be clear. what's happening right now is not only is this market beginning to fast forward on the

legislative front. new york, i think,i will be fuly erect and the east coast is about to go. the u.s. market is ten times possibly 15 times that of canada and you want to be in the u.s. and what we're seeing cannabis traders do is they're rotating into the u.s. names and that's something that you'll ultimately want to take a look at this has been an ungodly move and we've been talking about this stock on the show and this is the move right here from that constellation announcement and really from here on in this is the last few days and the whole sector is on fire. mike, i'd like to see what you can do on this i'll tag you i'll fist bump you >> the stock has made a really sharp move here and one of the things i want to do is a risk of a move right here. >> it wasn'rrants their optionsd as tim pointed out, the valuation of the stock is

extremely high the valuation of the option is also extremely high. how can we get long this stock and reduce our risk and i was looking out to october and you can buy the 47 1/2, and spend the calls and spending $2.65 and exposure and take a note, by the way, you're looking at 25% worth of upside that you'll be able to capture from the stock's current price while you're risking call it 6% of the current stock praise so that's really the risk/reward relationship we're looking at here and we're seeing that the stock can make these kinds of sharp moves and this way we're mitigating the risk if it doesn't go the same way. >> ground zero for pot in the u.s. what do you think, dan >> don't do drugs. stay in school, but here's the deal, and you're of age, fine, have at it maybe up in canada, and i think it's pretty interesting and the

stock's in an all-time high and there's a scarcity situation and one of the reasons why you're seeing it have a $10 billion market cap especially with the constellation deal mike just said you can make up to ten bucks and they break even that far out of the money except for the stock that has the ability to move like that. it reminds me of the trades we did last year in square. mike did a couple of them and reaching a little bit for a story that has so much momentum and there's scarcity and they seem to work as long as the music's still playing. >> mike, last word >> the idea here is essentially you're trying to capitalize on the hockey stick move that this thing is making and not ignoring the risk that it might not continue because these parties do end eventually and you don't feel so good when the parties do

end. >> thanks, guys. >> got a question for one of the traders and send us a tweet on options action and if it's nice we'll read it later in the show. we're live at the nasdaq in times square much more "options action" after this 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.

i'm not really a, i thought wall street guy.ns. what's the hesitation? eh, it just feels too complicated, you know? well sure, at first, but jj can help you with that. jj, will you break it down for this gentleman? hey, ian. you know, at td ameritrade, we can walk you

through your options trades step by step until you're comfortable. i could be up for that. that's taking options trading from wall st. to main st. hey guys, wanna play some pool? eh, i'm not really a pool guy. what's the hesitation? it's just complicated. step-by-step options trading support from td ameritrade welcome back to options action time to take a look at open trades alibaba was gearing up for a breakdown on its earnings. >> baba is down 18% on its highs and it's flat on the year and down in sympathy with chinese equity sentiment you can buy the october 175, 205 call spread and the 175 calls for 970 and selling one of the 205 calls in october to 170. >> the stock did jump on the initial report before selling off. do dom, do you see a breakout ahead? >> the bounce off of the key

support was bad sentiment. i have to tell you initially the stock's reaction was pretty fantastic after the print and it was downright horrible afterward. this is why it makes sense to define your risk as a very controversial story like this into an event. here's what i do now this spread which is right around the same levels cost around $8. today it's worth a little more than $7. what i would do here is i would buy to cover the upper end call, the 205 call and about 70 cents and then i would actually roll it down a little bit and i would sell the october 195 call at $1.70 so i'm taking in an additional dollar here and reducing the cost of the spread. now it's $20 wide for seven bucks and it's basically at the money. i still like the risk reward here. >> dan, i have a question for you because now that the risk is out, you should take more premium on this thing. it looks to me like you could take a level of support around

165 or slightly higher i wonder whether something you could add to that would be a short put of similar duration out there. you would have a short string on the long call. you'll be collecting more than you're paying day in and day out if you do that >> that's a good point, mike and it goes back to your point with lulu >> it depends how convicted you are at this moment and if you're willing to add risk other than the long premium than you've committed to this and by adding risk and selling a downside put, a point at which you would put the stock to have losses below it and add it on to the premium that would go poof it depends on conviction and i'll just say this the way the stock traded since opening up $10 after its earnings, i'm not so certain you add additional risk right here >> since september, the stock's been in that range and collecting premium and i don't know what the catalyst is. are you paying too much here that's, woi working toward you,t is there something about the

nature that's going on in china that works for you or against you in this trade? >> it's working foryou if you think about it, week on week, this trade is down only $1 it's worth about $7 right now. you would see premium come out of this sort of thing and right now the high val is keeping me in the game a little bit >> okay. up next, your tweets and your final call oh, and there's the closing bell. (sighs) i hate missing out missing out after hours. not anymore, td ameritrade lets you trade select securities 24 hours a day, five days a week. that's amazing. it's a pretty big deal. so i can trade all night long? ♪ ♪ all night long... is that lionel richie? let's reopen the market. mr. richie, would you ring the 24/5 bell? sure can, jim. ♪ trade 24/5, with td ameritrade. ♪

i'm not really a, i thought wall street guy.ns. what's the hesitation? eh, it just feels too complicated, you know? well sure, at first, but jj can help you with that. jj, will you break it down for this gentleman? hey, ian. you know, at td ameritrade, we can walk you through your options trades step by step until you're comfortable. i could be up for that. that's taking options trading from wall st. to main st. hey guys, wanna play some pool? eh, i'm not really a pool guy. what's the hesitation? it's just complicated. step-by-step options trading support from td ameritrade welcome back to "options action." we have a tweet from los angeles who has a message for tim. tim seymour can at least wear his vest >> you know what i should have fessed it up this is a well-dressed crew, by the way. i completely missed my call today. >> look at him with his pocket square >> i'm a fan, too. i've been known for that >> time for the final call >> dan >> i like intel's calendar into

the fall >> mike? >> i also like being on the calendar >> and tim this is a smart show it was great to be here and i hope i'm invited back. >> that does it for us here on options action, don't go anywhere "mad money" starts right now.mow >> 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. my job is not just to entertain but educate and teach you. so call me at 1-800-743-cnbc tweet me @jimcramer. one thing remains true if you put up better than expected numbers, your stock will go