hi there, no, you aren't experiencing deja vu you are watching "options action" with mark, dan and guy here's what's coming up. >> shall we play a game? >> maybe not video game stocks are tanking, but dan nathan says one is poised for a bounce. he will give you the setup plus, amazon is now a $2,000 stock. >> good lord that's a lot of money! >> you bet it is, but good thing mike ko has a way to get in the stock for less than $20, and --

it's apple's best month of the decade but if you missed a move, we have a way for you to get long for less it's time to risk less and make more the action begins right now. >> and we start with apple the tech giant posting its best month in nearly a decade the stock soared more than 19% adding $180 billion in market cap. for reference that's about the total size of a company like coca-cola or citigroup if you missed the move, how can you get in now let's get in the money right now. mike >> so, obviously with the stock trading very close or on its all-time high i'm not going to encourage people to rush in and buy the stock here, but the valuation still looks reasonable as long as iphone sales don't take a big downturn.

we do have a catalyst coming up and we have product announcements and that could be a potential catalyst to move the stock one way or the other and people seem to be absorbing the news pretty positively and the best way to do is to buy the call spread and that elevates the premium options a little bit and we have the fall coming up, that also sometimes elevates options premiums a little bit. i was looking to october, the 230, 245 call spread you can spend $6.40 and net-net you're spending about $4.40 for $15 worth of exposure this way or that. if the stock sits about here or rises just a little bit into this announcement, some of that premium is likely to come out and that will mitigate the decay by being a higher strike call. >> i think it's a tough one in front of this event. investors have gotten very used to this whole product cycle thing into september so if you'll be buying at all-time highs in september 12th, it makes sense

this call spread which is $15 wide, trading at levels the stock has never been to before, you're basically risking one to maybe make two if the stock gets to $245 or higher. i think it makes sense as we get through next week in front of the product announcement maybe you get an opportunity to buy this thing a little bit of a pullback to kind of make a call spread what you're trying to do is define the risk to play the further game and i think it's a strong potential that all of the good news about the phones is in the stock. >> that is a very good point because we were just pointing out how much the stock has risen. oftentimes when we look at catalysts like this, we might want to sell a downside put, and i'm not interested in doing that because given how strong this move has been, if there is some form of a disappointment we have a sense of what we can give back and that's the exposure that i don't want to have if i'm making a bullish spread. >> some heady stuff on this show >> one of my favorite shows on the network is "options action," and i watch it religiously and

it's an honor to be here, number one. number two, again, i've said this before. i'm not going to pretend that i'm some bearish, and i've been wrong and i've been right. it's a mile marker and i still adhere to that, but i'll say this, i thought 241 was sort of in the crosshairs for a number of reasons my math was they'll make $13.40 next year and a market multiple of 18 on it and you will get a $241 stock and that's 6% away now. if you want to play for 6%, i think that's great and you'll get to levels to dan or mike's point and it's not a bad time to start to take money off the table. >> to that point, if you're long the stock and that's my view, you can think of it as a stock replacement strategy i don't see another 15% worth of upside inside of the next day, and that would be an extraordinary move for any company, and this one in particular given the maturity of

its products and this market i think you can look at it as a low are risk way to make a bullish bet here >> video game stocks are getting wrecked which, by the way, is what gamers say when someone is losing badly josh lipton is in san francisco with the details hi, josh >> mel, gaming companies appear to be in the kos hairs of chinese regulators the government there now is proposing controlling the number of approvals for new games, implementing an age rating system for games and restrictions on the amount of time minors are allowed to play. there is a fair amount unknown about the new measures and no clear outline on when and how the measures will be implemented and gaming giant tencent was hit hard on that news. hans chung who covers tencen

remains a bull, but he says there is incremental risk for the company and the broader industry, he says that the government there does seem to want to implement more restrictive approval process for new titles looking ahead electronic arts and activision, bank of america, merrill lynch, cutting its rating for both stocks to neutral from buy remember ea got hurt this week after delaying the battlefield 5 game to november 20th and lowering guidance. he's talked about the impact of fortnite and it will likely impact on-line activity and poblgy unit sales and he emphasized that historically, video game stocks have traded less favorably in q4 versus the market. mel, back to you >> thanks josh lipton in san francisco. it sounds like a lot of headwind for video gamemakers how about electronic arts? >> this is very interesting to me in late july when the company reported they did talk about the effect of fortnite and online sales and that was disappointing and the stock sold off after

that, and the stock just last week came down to, i think, we have a one-year chart and it was sitting on the one-year uptrend and we're thinking about it on the show and that was some interesting support, and then they pushed out battlefield 5 and now you have to wait until november 20th. to me, after you have a 25% drawdown in the stock like this that trades pretty cheap, i start thinking about it. right now this stock is down two days in a row, closing on its lows that's like catching a falling knife. so if you want to be a bit contrarian here gives you room on the entry and it's a risk reversal and i'll be selling a downside out of the money put to finance an out of the money call and what i'm really doing is giving myself wiggle room if i'm wrong about the entry here at 113.5. looking out to october expiration when the stock was at 113.40 and that's where it closed, you can look to the november -- excuse me, the

november 100, 120, risk reversal paying $2.50. >> actually it's october one of the october and 100 puts and you're buying one of the 120 calls at $4.50 that costs you $2.50 and break even at $122.50 and you can lose the 250 on expiration and below that you put 100 shares per one put that you're short. what this is giving you is giving you the leeway on the entry point and identify it going forward. >> think you may have had it right the first time and it would line up with the november pricing and a couple of things first if of all, a hundred bucks represents essentially the lows that we've seen over the course of the last year if there wasn't a place that you think you might find some

support, and you said you would give yourself a modest cushion and it's actually a pretty substantial one. it's well over 10% to the downside before you put the stock if it runs to that short strike from my perspective, this makes a lot of sense and bear in mind that we're paying for the higher strike call and he's closer to it and the stock is trading at 113.5, and you have 13.5 to get to the lower strike. >> so what's really interesting about a rick reversal like this and i have a couple of months and as the stock rallies, this should gain in value and on the market basis and if it could decline to the short 100 put strike, then you will lose money. that's what it will look like and between the wide range, you're risky about 1.5% of the stock price to have this on, and the november expiration because we know that earnings are going come october 30th and they just guided down twice in five weeks and maybe they're able to beat that previous guidance and guide up again and then we have the

battlefield 5 release. >> but in the meantime, you might wait a week and the puts that you're selling for $2 you might be able to sell for more than that if the stock gets down to levels which is 105-ish which is where we started this year. this stock basically rallied 45% from the beginning of the year and it's given it back and that's classic stairs up, elevator down i don't think the elevator's hit the bottom floor and i still think there's a week where if you wait it may be more beneficial. >> if you do bait, it's not the put twice change and if the stock trads down and it goes down quickly we will see the premiums go down faster and you will put on a 100 and 110 risk reversal at that point and you will have immediate exposure >> let me ask you this about getting long at 100?

>> here's the other thing. >> we were talking about content and when you think about what these guys have as far as content with sports and what they're doing with e sport, i think this is really, really unique content and this is a cheap stock relative to expected growth, $35 billion market cap the fact that it's down 25%, you can buy the thing. a media company can say we can buy it for $150 bucks. >> options traders and this stock is showing volatility. if there is a stock that lines up well to use options, this is it >> what's the best video game? >> we surrounded that -- pong. one of my favorite -- >> i don't think that it exists anymore. >> gallagher when i was in high school we used to go to the pizzeria and put the quarters on top so nobody could --? pinball. >> wonderful >> for everything options action you can check out our website optionsaction.cnbc.com and while

there sign up for the newsletter and makes for a better read better than pong what are you waiting for here's what's coming up next >> wow >> demolition. >> that's what amazon has been doing, as it barrels towards a trillion dollar valuation, but if you missed the move, we'll tell you how you can buy it for less than $20. plus, calling on "options action" fans, reach into your pocket and grab your phone and tweet us your question at "options action. if it's nice we'll answer it on air when options action returns. 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?

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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. ♪ >> welcome back to "fast money," amazon passing a key milestone, rallying past 2,000 and the move has highlighted a growing trend that might make it harder for retail investors to get in on the rally. bob pisani is breaking it down at the nyse. hey, bob >> hi, melissa amazon is the first s&p 500 stock to pass the $2,000 mark. it's in rarified company and there are only three companies in the s&p 500 whose shares are trading over 1,000 and amazon and booking holdings and alphabet the old priceline was the first s&p stock to get $1,000 and followed soon there after by google and these would have been unthinkable a decade ago and that's because companies would

split their shares to make it more affordable to investors the dotcom era drove up the price of tech stocks dramatically and the financial crisis and it's never really recovered. you know they were just over 100 stock puts of 1997 and that was five splits for all of last year and why don't they split the stock as much as they used to? a lot has to do with institutional investors like vanguard those institutional guys have 70% of amazon, and nearly 80% of netflix. investors don't really care if a stock is high priced or not. they may be perfectly happy to have high-priced stocks because it discourages day trading and introduces volatility. for years warren buffett said he has no problems with a company's stock price going up and e he doesn't care about stock splits. for him it's more about the dollar value what this has done is driven up the price of stocks.

the average s&p 500 stock is now $115 that's the highest in history according to s&p dow jones indices. a little more than a decade ago it was north of $50. that's a big difference. back to you, melissa. >> bob, thanks >> bob pisani at the nyse. lucky for you, mike has a way for you to get into amazon for less than $20. i was going to say musician. he's not that either he's not a magician either and he's at the plasma to show you how and a call to action >> we're using a call spread to amazon similar to the structure that we used in apple. the first is as bob was just highlighting the stock is expensive at over $2,000 a share. if you were going to buy a round lot, and it's expensive on a valuation basis and we're okay making a bullish bet here. the second bet is the options are also quite expensive and two aspects to this and one on the dollar basis, because the stock itself is, but also usually as stock prices rise the implied

volatility of options comes down that hasn't happened here. we're at or sitely above the mean for the last five months or so finally, we or chasing the stock at an all-time high. so when you take a look at these three factors, using options and the call spread specifically, right now you can see here we are closing the day basically at the all-time highs in the stock and if you're making a bullish bet here, you are basically doing the opposite of catching a falling knife on falling stocks and we're taking a little bit of a risk when we're chasing these at an all-time high. how can we do this for a lot less money i was looking out to october and you can buy the 2050, the $2100 call spread and you would spend just $18 for that times a hundred shares that's $1800 which means for 100 shares worth of exposure to the upside you're spending less than a single share of amazon would cost you bearing in mind, of course, that if the stock moves 5% or 10% you will have a little bit more risk

than the options, but what are those risks looking like by selling that upside call which only has a 61% chance of being hit between now and its expiration, we're improving our odds because we only need now to get up to 2070 and slightly below this there's a 73% chance that that happens and an 82% chance it's going to get hit or go through the lower strike call spread >> fun fact, 2050 and we need $1 trillion in market cap >> how do you think if call goes on with the call spread. the probability will lessen if the stock doesn't move and how do you manage that sort of trade when you're thinking about it from a probability standpoint. >> that's a good point and we can go back to this chart and think about how much time will pass >> we have 40 days to go before this thing will expire and one of the things we have to think about is do we think the stock has run out of gas it's not just about the probabilities and it's about the belief in the underlying stock and whether the momentum will continue. we'll probably get some sense of

that over the course of the next week or two. that's why putting this trade on now, i probably wouldn't be inclined to carry this all the way to expiration if it looks like it's running out of gas >> for me it's about options and i would up the $2500 price target on higher margin businesses and you look at last quarter, operating margins were 5.5% and the street was basically half of that so i think the stock can go higher. number two, we've done this a long time together. >> a long time >> a little enthusiasm, please, before the long weekend and i mention that because you know i've never purchased anything on the line. >> yes true >> the next thing i buy would be the first thing, based on this entire hit if you happen to notice pisani was standing in the dark. >> buying him a flashlight >> i'm going to get him the overheadlights and i'll get on the amazon and help bob pisani out and he's been here too long to film something in the dark. >> i want to make one point

about that and the first thing i asked about talking about probabilities and one of the thing that's important if the trade doesn't go your way is how do you get out of your trade at a certain period of time in the right time of the trade like a call spread drops below 50% of what you paid, the likelihood it expire expires happens. you have to have a plan to cut your losses. >> that's exactly right. the probability of hitting a given number from where you are right now goes down as time passes right now we've got pretty good odds of hitting that lower strike if we get halfway there, we'll see those odds declining >> still ahead, lululemon soaring 13% today, hitting a new record high. that's great news for our resident yogi. is that how you say it

mike, he'll tell you why more "options action" after this (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.

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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 time to take a look back at

some of the opening trades lululemon was set to take off on earnings >> the stock has had a very large run. secondly, it's trading at a big premium to a lot of other retail names. i think that might actually be deserved, though i think there are ways that we can look to play the stock going into earnings. i was looking at the september 130, 140, 155 call spread risk reversal, selling the 130 puts calls at 1.57. >> and take off it did the stock soaring today hitting a fresh all-time high up 30% since the time of the trade. mike, how are you trading lulu now? >> if you follow us on twitter you know late today i recommend taking your profits on the trade. the stock has run right through the short strike and 155 which we had targeted. if you wanted to press the bullish bet, you could basically roll out the trade and on this one it's time to take profits because there's not much left in

it >> great call and the way you played it was exactly right, right? the long premium trades into events and you have to be convicted because you have to get a lot of things right and first and foremost, the direction, magnitude and the timing, and there weren't too many names outside of retail and consumer brands that actually performed this way and even though options prices were high, it outperformed the move so good job on your part >> up next, your tweets and the 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. ♪

(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 time to take your tweets and alex asks, i own apple october 190 calls. they're up 300%. i sold half today. should i sell the other half before the new iphones are announced september 12th >> we gave you the answer. you can sell those calls and buy the call spread that we outlined earlier in the show. >> time for the final call now mike

>> call spreads on apple >> dan >> ea, no risk reversals >> guy, thank you. >> thanks for joining us >> i just feel smarter >> you should. that's it? all right. thanks for watching! we'll be back here next friday and have a great long weekend. "mad money" starts right now - [announcer] the following program is a paid advertisement for the nuwave brio digital air fryer, brought to you by nuwave, the makers of the nuwave oven pro and the nuwave precision induction cooktop. we all love fried food. french fries, wings, onion rings, fried chicken. but who wants to deal with the mess and added calories? deep frying food has been linked to high cholesterol, heart burn, acid reflux, kidney problems, and even cancer and alzheimer's. now, you can have all the fried food you love without the added fats and oil. introducing the revolutionary nuwave brio digital air fryer. the nuwave brio uses super-heated, cyclonic air