hey there we're live in times square look who decided to join us tonight. tim seymour making his big "options action"s debut. here's what's coming up on the show ♪ fire >> he 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 hint ♪ >> he will break it down, plus. >> pot stocks are, well, smoking. >> yeah, something like that and mike khouw has a way to get long growth for under three bucks. it's a smoking hot trade and he

will break it down and. >> hey, nikki, show the lady hey, look at us we're browsing >> an with retail earnings continuing next week, options traders smell a bargain in one name in particular it's time to rick less and make more the action begins right now. >> and we start tonight with a raging retail rally taking a breather today still more than 20% from its 2018 low and on track for its best year since 2013 and could get hotter next week when a handful of speblt retailers report could see a 9% move in oorg direction, best buy, tiffany, ulta priced at pretty big moves. mike, are you looking at lulu. >> i am. this has long been on what i call the holly index, one of my wife's favorite brands for sure. i've observed the popularity in

terms of using it as casual wear remains intact but the stock has had -- she has bought me some items because there is now increasingly men's products available at lululemon. the question a lot of people probably have, the stock has had a very large run trading at a big premium to other retail names. that might be deserved though. and i think there are ways that we can look to play the stock going into earnings which is implying a more than 9% move using those elevated options premiums to make a blish bet but trying to avoid the possibility there could be a short term pullback if don't end up hitting on all cylinders i was looking at the september 130, 140, 155 call spread rick reversal, selling is the 130 puts at 225, buying the 140 at 635 and selling is the 155 calls at $1775 the idea is we get participation bob 140, we mitigate the amount

of premium we're spending considerably by collecting $4 on the two strikes we're selling. in this way, we can even if the stock doesn't move that much had although it is implying a fairly big move we'll probably do pretty well and avoid that first eight bucks or so nine bucks based where it closed today if it hud go that way. >> dan, what do you think of the trade? >> interesting trade i don't know if you showed a chard. this thing spent five, six years trading between 40 d and 80 bucks. earlier this year, it's been up in a straight line when makes says you get $8 downside wishy washy room that, makes me a little nervous because of the valuation, because of the move it's had, i think that short put is the most important part of this trade if you're an investor thinking about getting long for this earnings event because this is a stock that could be down 15, 20% on a miss and a guide down that's the most rick

if you're confident and you were going to buy the stock, i prefer this trade structure to buying the stock right here in front of the print. >> that's the idea here is this a way that we can try to get long stock and mitigate the possibility i've downside move while capturing what's implied to the sup side. that's a couple things we don't know yet geographically will they get more overseas sales. >> yeah, first of all, my wife definitely bought me a lot of lulu i like mike' trade for the following reasons. you could have the stock at around 125, that's a level on the stock where we gap to after q1 earnings and a level it probably can hold. there could be significant downside but it is a stock, 75% up in the last six months, $175 in the last months you're playing for a pop on the earnings that get new the range. somewhere at the top end where

you're capped out is probably a great time to get out. >> this defends dan's position a little bit is that if you have some concerns that it is going to have a pull back, it is possible to do a portion of trade, not the whole thing i happen to think options premiums are probably implying a move that's larger which is the reason i'm comfortable selling the downside put if you only want the upside participation and don't need the extra 2% of the sale price, go ahead and buy the calls. if the downside is if the stock goes sideways or has a modest move, that trade is less likely to make money. >> are you optimistic mike, about retail in general? >> we did see -- we have a strong run number two, we saw some weakness late this week from a lot of spaces this is an idiosyncratic name. i wouldn't characterize a specialty retailer where they beak operate at the pinnacle of their product sweep relative to everybody else i look at this a little bit on

its own. >> dan, last word. >> yeah, listen, we're getting complacent the stork o stock market at all time highs some of the rickyer names you want to be cognizant about selling puts if you get it wrong, you'll put that stock in a much higher level than where it's trading after a potentially volatile event. a little caution here. >> from one hot group to another, the chip stocks have gone wild. the smh having its best week in four months. ahd up a whopping 21%. micron up 8% dan, you're looking at one chip stock you think is about to join the party. >> it's intel. one of the reasons i've been very cautious on the semis for a whole host of reasons. a few weeks ago, i detailed a bullish idea in amd. demeanor some of the reasons i was bullish is why it makes tense sense to look at intel again as we look at the back half of the year this stock was up 25% on june

1st. intel. and this was before a whole lost of things happened you know in, june their ceo resigned and then in july they guided q3 down davis centers sales weren't as much as expected despite being up 27% there was a couple other issues with the quarter causing some people to say maybe amd is starting to eat their lunch a little bit because of the delay in the production of the ten clip the stock is up 3% on the year i think analysts derisked at least 2019 estimates considerably earnings this year are supposed to grow 20% year over year next year they're supposed to grow 3%. here's the thing the stock trades at 11 times earnings a massive buyback in place, 2.5% dividend yield davis center will be 50% of their sales. we think there's a good chance that mobile eye starts kicking in, iot, ai chips that you start

positioning for 2019, you got to start focusing on their q3 print which is october 25th. here's the deal. the stock just bounced off support. we have a one-year chart, 46 bucks seems like an important level. there's an air pocket down to 42 which is one of the reasons if you're con repairian right now when the clips are doing a lot better, define your rick the trade i want to do is bide a little time in intel, buy a longer dated call but finance it by using a cal calendar. today when the stock was trading at 46.5, you could buy the september, november 46.5 fall calendar paying 95 cents for that, selling one of the september "50 calls at 30 cents and buying one of the november 50 calls for $1.25 your max cost is 95 cents. and that is your max risk if it breaks even at 50.95 on november expiration i'd like the stock to move

gradually over the next few weeks up towards the 50 strike i own the november 50 call for 95 cents at that point, i start really thinking about this earnings event in late october and 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 by selling that shorter dated call, usually i don't like to see sales of options that are about a month out that are less than 1% of the stock price. you're collecting 30 cents here relative to an almost $50 stock price. but the flipside of that is that you aren't choosing an at the money call calendar here this is slightly out of the money. the stock has to run 5% to the upside in the next 30 days before you regret having that. even if it does run that much or a little bit more, the decay you get out of that short call relative to the one you own is probably going to make sense without the earnings catalyst

which you own with november but not with september, there is some reason why you wouldn't expect it to have that strong run. amd was a great bullish call you made there we've seen quite a lot of action out of that one already. >> dan pointed out the valuation is attractive. bottom line in semis you could go either way on the group a down trend line from where we were in march. they've been struggling to get bob a down trend line but making higher lows. you get to a place where i think with intel high quality company. second half of the year the slower growth and data center the is well flagged. they've got a product release end of 2019 and competinging in 10 nano. i get worried about being called away at 50 although it's not like you can't protect yourself there. >> check out our website "options action. sign up for our newsletter rumor has it tim studied all day in preparation for this show coming up next >> pot stocks have been growing

like a weed. and micohas a way to get long shares of growth for less than 3 bucks. plus calling all "options action"s reach into your pocket, grab your phone and tweet us your question at "options action"s. if it's nice we'll answer it on air when "options action" returns. see that's funny, i "options action" is sponsored by thing or swim by td ameritrade h 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 tap one little bumper and up go your rates. what good is your insurance if you get punished for using it?

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>> welcome back to "options action" pot stocks have been on fire this month. what is behind all the flower power? dom is breaking it down. >> well, pot stocks have been growing like weed especially today when some of the bigger names in the industry once pretty small have made big upside moves that was due in part to a bloomberg report that british diageo isholding serious discussions about a possible deal to get into the canadian cannabis industry per sources familiar and that has made it a very skukttive cannabis kind of month. here's a look at standouts from america's neighbor north of the border aurora canada has seen its its u.s. trade into positive receipts gain by 20% another canadian company that specializes in dman business investments is kronos up around 60% this month can knowpypy growth another company in canada up around 70%.

there's till ray which is also in the medical marijuana thing north of the border. shares have nearly doubled just in august and up a lot since their july ipo price of 17 bucks apiece it's worth noting a lot of these upside names and the moves associated with them happened on the heels of that nearly $4 billion investment that constellation brands made in can know by for a large minority stake in the company with the ability to take a controlling interest down the line if it chooses and melissa, the hype around these stocks assumes aggressive growth targets in the future now it's whether they can meet it the high investor expectations or not. back over to you. >> high expectations done, thanks how can you get in on this hot pot trade? tim and mike both made their way over to the plaza for an "options action" tag team. take a look at them. >> and what will a duo tim giving his case for one

stock and michael gives us his options trade. what are you looking at. >> con knowpy growth, the name at the center of this wonderful storm which is constellation brands having the built to have 51% of the company so the whole sector is on fire. you have a dynamic year where i think there's a lot to do. options are great way to protect yourself in the middle of the -- frankly as we see here, you've got a situation where m&a is heating up that could be not just constellation brands diageo coming in multinationals strategics no longer is this playing defense probably these guys can playing offense. that means the top three or four players who could be a reasonable takeout are the ones in play. again, valuation challenges absolutely we had valuation challenges before the dial. the cool thing is constellation looks like they stole something here that stock up 21% since they made a 50% premium to levels that made no sense

valuations only make sense if you think this is an international story and that these companies are actually part of a global market which they absolutely are and again, the usa is the next play 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 will be be fully rec within a year and a half new jersey and the east coast about to go. the u.s. market is ten times, possibly 15 times that of canada you want to be in the u.s. what we're seeing cannabis traders do is rotating into u.s. names. that's something you want to take a look at con knowpy has been an ungodly move we've been talking about the stock. this is the move right here from that constellation announcement and from here on in, this is all the last few days. the whole sector is on fire. i'd like to hear what you can do with this. i'll tag you let's do it. >> obviously what we've seen is the stock made this sharp move

here so one of the things we want to do is avoid risk of a move back down warrants which is part of that exposu exposure, they're options to make a play here in case you think this will go higher. as tim pointed out the valuation is extremely high. the valuation of the options also extremely high. so how can we get long the stock and reduce our risk? the way you can do that, i was looking out to october you could buy the 47.5, 60 call spread spend $4 for the 47.5 stocks, sell it for $1.35. you're spending $2.65. you get near upside exposure by selling this high priced option take a note by the way, you're looking at probably 25% worth of upside you can capture from the stock's current price while you're risking call it 6% of the current stock price. that's really risk/reward relationship we're looking at here we've seen the stock can make sharp moves. so far they've own been made in

one direction. we're mitigatine risk if it's nt the same way. >> dan, what do you think? >> don't do drugs, stay in school if it's legal and you're of age, fine, have at it maybe in canada, maybe here in colorado i think it's pretty interesting. the stock's at an all-time high. a lot of news around it. there's a scarcity situation one of the reasons why you're seeing this have a $10 billion market cap over the last month especially with the constellation deal mike just said you could make up to ten bucks between now and october. more importantly this thing breaks even a little bob 50. we don't definitely look at defined rick trades that break even that far out of the money except for a stock that has the ability to move like that. this reminds me of some of the trades we did last year in square reaching a little bit for a story that has so much momentum and there's a bit of 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 this thing is making and not ignoring the risk it might not continue because these parties do end eventually and you don't feel so good usually when the parties do end. >> thanks, guys. still ahead, got a question for one of the traders send us a tweet at "options action" if it's nice we'll read it later in the show. much more "options action" right after this n the show much more "options action" right after this see that's funny, i thought you traded options. i'm not really a wall street guy. 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

does it look like i'm done?yet? shouldn't you be at work? [ mockingly ] "shouldn't you be at work?" todd. hold on. [ engine revs ] arcade game: fist pump! your real bike's all fixed. man, you guys are good! well, we are the number-one motorcycle insurer in the country. -wait. you have a real motorcycle? and real insurance, with 24-hour customer support. arcade game: wipeout! oh! well... i retire as champion. game hog! champion. 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 at some of our open trades. last week dan said alibaba was gearing up for a breakout on earnings. >> down about 18% from its highs. flat on the year down in sympathy with chinese equity sentiment. you could buy the october 175, 205 call spread paying $8 for that buying one of the october 175 calls for 970 and selling one of the 205 calls in october at $1.70. >> while the stock jumped on official report before selling off, dan do you still see a breakout ahead. >> here's the thing. it was more playing for a bounce

off of key support with really bad sentiment. initially the stock's reaction was fantastic after the print but it was down right horrible afterward. this is one of the reasons why it makes sense to define your risk into a very controversial story like this into an event. here's what i do now this spread which was 30 wide right around the same levels cost about $8. today it's worth a little more than $7. what i would do here is i would bile to cover that upper end end call, the 205 call at 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 i'm taking in an additional dollar here reducing the cost of the spread so now it's $20 wide for seven bucks. it's beak at the money i still like risk/reward here. >> i have a quick question for you because now that the news is out, i agree you should look to try to take more premium in on this thing it looks there could be some

level of support around 165 or higher i wonder something could you add to that would be a short put of similar duration out there you have a short advantageal on the long call. you'll be checking more than you're paying day in, day out if you did that. >> that's a great point. it goes back to your trade idea with lulu. it depends how convicted are you at this moment if you're willing to add rick other than the long premium that you've already committed to this and by adding ring selling a down side put, a point in which you would be put the stock and have losses below it, added on to the premium that would go poof if the stock goes lower it depends on conviction the way the stock traded since opening up $10 after its earnings, i'm not so certain you add additional rick right here. >> dan, i like the call. certainly since september, the stock's been in that range you're talking about collecting premium i don't know what the catalyst is are you paying too much here if you're taking in premium that's working towards you

is there something about the nature of what's going on in china that works for you or against you in this trade? >> it's interesting the wall is working for you. if you think about it week on week this trade is down only $1, it cost $8, worth about $7 right now. we have the event. normally after an event you would see premium come out of this sort of thing right now the high vol is keeping me in the game a little bit. >> all right up next your tweets and the final call from the options pit. 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. ♪

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(indistthat was awful.tering) 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. of welcome back toppingses action time to take your tweets a tweet by los angeles who has a message for tim. tim seymour can at least wear his vest. >> i should have vestedup. this is a well dressed crew. i completely missed my call today. i'm embarrassed. >> look at mike with his pocket square and everything. >> i'm a fan of vests too though i've been known for that. >> time for the final call

dan? >> yeah, i like intel call calendars into the fall. >> mike? >> i also like the intel cal calendar. >> and tim. >> this is a smart smoe had it was great to be here i hope i'm invited back. >> you will be that does it for us on "options action." don't go anywhere. "mad money" starts right now - [announcer] the following program is a paid presentation for the nuwave nutri-pot digital pressure cooker brought to you by nuwave, llc. - wow, look at all this food! ribs, veggies, wings, and the seafood looks amazing! - and my favorite, corned beef and cabbage and sausage and peppers. and all of it was done in this, the all new nuwave nutri-pot digital pressure cooker. now the food on today's program is absolutely amazing, and since it was all made in the nutri-pot, i guarantee you, no matter your experience, you'll be able to make the exact same recipes and get great results in your own home. - so don't go anywhere,