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 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, >> smokin' >> 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 its time to risk 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 specialty retailers report lululemon on a tear this year. could see a 9% move in either direction, best buy, tiffany, ulta priced at pretty big moves. let's get in the money. 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 secondly big trading to a lot of other big premium 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 bullish 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 $1.75. 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 should go that way. >> dan, what do you think of the trade? >> interesting trade i don't know if you showed a chart. it spent five years, six years trading between $40.80 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 of a downside move while capturing what's implied to the upside. that's a couple things we don't know yet geographically will they get more overseas sales. >> well, yeah. first of all, my wife has bought me a lot of liu lu and i'm wearing it all the time. i like mike's 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 18 months. under the circumstances a valuation that's not cheap. 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. >> one thing i will say and this

defends dan's position a little bit and maybe yours too. if you have some concerns that it's going to have a pullback it is possible to a portion of a trade, not the whole thing. i happen to think that 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 basically 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 stock market at all time highs. some of the riskier names i think you want to go cognizant of selling puts because if you're wrong you'll put that stock in a much higher level than where its trading. 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. amd 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. for some of the reasons that i was bullish on amd a few weeks ago is why i think it makes sense 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 june

1st, intel, and this was before a whole host of things happened, you know, in june their ceo resigned and then in july they guided q3 down. datacenters sales weren't as much as expected despite being up. 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. here's the thing. the stock has come in 17%, its up 3% of the year. i think analysts have derisked estimates. earnings this year are supposed to grow 20% year over year. next year they're supposed to grow 3%. the stock trades 11 times earning. they have a massive buyback in place. we know that datacenters is 50% of their sales. we think there's a good chance that mobilize starts kicking in. all of these things.

you got to start focusing on their q3 print which is on october 25th. the stock just bounced up support. we have a one year chart right here. 46 bucks. seems like an important level. one of the reasons why if you're going to be contrarian right now, you want to define your risk. i want to bide time here in intel. i want to bide a longer data call but finance it by selling a sorter data one. when the stock was trading at 46.5, you can buy the september/november, 46.5 call counter paying 95 cents for that, selling one of the september 50 calls at 30 cents and buying one of the november 50 calls for a 1.25. your max cost is 95 cents and that is your match risk if it breaks even at 55.95. what i'd like to have do is this stock move gradually over the next few weeks to september

expiration up toward that 50 strike. i own the november -- 50 call for 95 cents and 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. its interesting because by selling that shorter data 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 -- but the flipside of that is, you aren't choosing an at the money call here. the stock will have to run 5% to the upside before you really regret having that and even if that does run that much or a little bit more the decay you'll get out of that short call relative to the one you own is probably going to make some sense unless the stock really guns in the short-term and without the earnings catalyst which you own with november but

do not with september, that actually, you know, there's some reason why you wouldn't expect it to have that strong of a run. we've seen quite a lot of action out of that one already. >> i like the fundamental setup of the dan pointed out the valuations. bottom line, in semis you can either way in the group. they've been suggestling to get above a down trend line. you get to a place with intel, high quality company, second half of the year, the slower growth in data center is well flagged at this point. they've got a product release end of 2019. i think they're competing heavily. i like dan's call. check out our website. while you're there you can sign up for our newsletter. rumor has it, tim has studied it all day in preparation for this show. they're coming up next. pot stocks have been growing

like a weed and mike khouw has a way to get long shares of canopy growth for less than 3 bucks. plus -- calling all "options actions" fans, reach into your pocket, grab your phone and tweet us your question at "options actions." if its nice, we'll answer it on air. 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 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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(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. ♪

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 is holding serious discussions about a possible deal to get into the canadian cannabis industry per sources familiar and that has made it a very constructive cannabis kind of month. here's a look at standouts from america's neighbor north of the border aurora canada has seen its u.s. trade into positive receipts gain by 20%. just month to date. another canadian company that specializes in cannabis inventions is kronos up around

60% this month. canopy 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 canopy 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.

tim, kick it off, what name you looking at >> canopy growth, the name at the center of this wonderful storm which is constellation brands having the ability 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 froth. you've got a situation where m & a is heating up. dom mentioned diageo coming in. multiple nationals straekz, 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 that deal. the cool thing is constellation looks like they stole something here that stock up 21% since they paid a 50% premium to levels that frankly 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 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 canopy 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 i'll fist bump 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 exposure, they're options to make a play here in case you think this will go higher. bearing in mind that as tim pointed out, the valuation of the stock 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 you spend $4 for these 47.5 calls. 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 only been made in

one direction. we're mitigate risk if it's not 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 above 50. we don't definitely look at defined risk 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 @optionsactions. if its nice, we'll read it in the show. 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

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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 buy to cover that upper end call, the 205 call at 70 cents and then i would actuall 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. its basically at the money. i still like risk/reward here. >> dan, i have a quick question, because now that the news is out, you absolutely agree that you should look to take more premium in on this thing. it looks there could be some level of support around 165 or higher

i wonder whether something you could add to that would be a short put of similar duration out there. you have a short advantage on the long call. you'll be collectingmore than you're paying 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 risk other than the long premium that you've already committed to this, and by adding risk selling a downside put, a point in which you would put the stock and have losses below it added on to the premium that would go poof if the stock goes lower. >> 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 benefiting this trade and keeping me in the game a little bit. >> all right up next your tweets and the final call from the options pit. . 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. welcome back to "options action." time to take your tweets a tweet by los angeles who has a message for tim. i thought you needed a coat for this show. tim seymour can at least wear his vest. >> i should have vested up 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. >> that's true. >> time for the final call dan? >> yeah, i like intel call

calendars into the fall. >> mike? >> i also like the intel call calendar. >> and tim. >> this is a smart show. it was great to be here. i hope i'm invited back. >> you will be >> thanks for joining us, tim. that does it for us on "options action." don't go anywhere. "mad money" starts right now >> announcer: the following is a paid advertisement for online trading academy. you've heard it over and over again. if you want financial freedom, you have to invest in the markets. it's true that the wealth created in the financial markets has transformed more people into millionaires and billionaires than ever before. why is it that only wall street and a select few investors get richer and richer while the everyday investor lags behind? how is this possible when both groups are investing in