hey there. no, you aren't experiencing deja vu, you're watching "options action"s mike, dan, guy they're still here getting ready for the show in the meantime, here's what else is coming up. >> shall we play a game? >> maybe not video game stocks are tanking, but dan 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

mike co will tell us how to get into the stock for less than 20 bucks. and it's apple's best month in a decade but if you miss the 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 soaring nearly 19% adding $180 billion in market cap. for reference, that's about the size of a total 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, again, obviously with the stock trading very close to or on its all-time highs, i'm not going to encourage people to rush in and buy the stock right here but the valuation still looks reasonable as long as iphone sales don't take a big

downturn would he have a catalyst coming up we have product announcements. that could be a potential catalyst to move the stock one way or the other right now people seem to be absorbing that news pretty positively the best way to do this is buying a call spread since we have the catalyst that elevates the options we have the fall coming up and that sometimes elevates the options. i was looking out to october, the 230, 245 call spread you could spend 6.30 sell it for two bucks. net net you're spending 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 fixing the short higher strike call. >> it's a tough one. it's a very known event. obviously investors have gotten used to the whole product cycle thing into september if you're buying at all-time

highs into the september 12th, defining the risk makes sense. call spread $15 wide, you're basically risking one to make it two. okay risk reward i think it makes the sense as we get through next week in front of the call announcements. maybe you get a chance to buy this on a bit of a pull back what you're trying to do is define your risk i think there's a very strong potential that all of the news in the stock -- >> you could sell off on the news >> that was a very good point. we were pointing out how much the stock has risen. oftentimes we go into catalysts like this. we might want to sell a down side put i'm not interested in doing that given how strong this move has been, if there is some form of a disappointment, we have a sense of what it could give back that's the exposure i want to give >> i'm very heady. one of my favorite shows on the network is "options action."

watch it religiously it's an honor to be here, number one. number two, one of the things we said, i said this before, i'm not going to pretend i've not been some raging bull. one of the things we said when you hit a trillion dollars, it's not fan fish line, it's a mile marker i thought 241 was sort of in the cross hairs for a number of reasons. my math was going to make close to 13.40 next year that's sort of a market multiple of 18 on it. you get $241 stock that's 6% away if you want be to play for 6%, you might want to get to levels that maybe it's time to start thinking about taking money off the table. >> to that point if you're long the stock and that's your view, you could think about this as a stock replacement strategy i don't see another 15% worth of up side here inside of the next 45 days or so regardless of what the news is that comes out that would be an extraordinary

move for almost any company in a short period of time, but this one particularly given its size and basically given the maturity of its product and market. i think that you could look at this as a replacement strategy as well as a lower risk way to make a bullish bet here. apple may be soaring but there's another group of once hot tech stocks that could be having problems ahead. video games are wrecked. josh lip ton in san francisco with all the details. >> now gaming companies appear to be in the cross hairs of chinese regulators their 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. the analysts say there's still a fair amount known about the measures no clear outline they say on when and how the measures would be implemented gaming giant tencent got hit hard on that news.

hans chung who covers tencent remains a bull but he says there is an incremental risk that the government there does seem to want to implement more restrictive approval process for new titles looking ahead also in the red today, electronic arts and active vision bank of america and merrill lynch cutting its ratings from neutral to buy remember e.a. got hit this week after delaying its key battlefield 5 game to november 20th four weeks later than the initial elite date and lowering guidance they talked about the impact of fortnite which continues to grow and will likely impact online activity and possibly says even unit sales he also emphasized that historically video games stocks have traded less favorably in q4 versus the market. back to you. >> thanks, josh lip ton in san francisco. it sounds like a lot of headwind for video game makers. >> what's really interesting to me in late july when the company reported they talked about the

effect of fortnite on video game sales. we have a one-year chart it was sitting on a one-year trend. that looked like some interesting support here but then they guided down. they pushed out battle field five a - battlefield five and the companies report earnings on october 30th you have a 25% draw down that trades great, chief would he know there's some catalysts out there. right now this stock is down two days in a row. that's like catching a falling knife. the trade strategy i want to talk about if you want to be a bit contrarian gives you a little bit of room it's a risk reversal i want to sell a down side out of the money put to finance an out of the money call. what i'm doing is giving myself a little wiggle room if i'm wrong about the entry at 113.50. looking out to october

expiration when it goes to 113.40, that's where it closed you could look to the november 100/120 risk reversal paying 2.20 it's october it costs 250 you're selling one of the october 100 puts at 2 bucks and you're buying one of the october calls at 1.50. you break even at 122.50 between 120 and 100 you could lose the 2.50. you put 100 shares per one put that you're short. what this is really doing is giving you that leeway on the entry point and identifying the earnings catalyst. >> i think you may have had it right the first time, november it doesn't quite line up with the november prices. let's talk about the trade structures there's a couple of things first of all, 100 bucks represents essentially the lows

that we've seen over the course of the last year or so so if there was a place that you think it might find some support, that would be level you said you're giving yourself a modest cushion it's pretty substantial. it's well over 10% if it runs to that short strike so from my perspective i think this makes a lot of sense bear in mind that although he's paying a little bit more for the higher strike call, he's a lot closer to it it was trading at 113.50 i like the trade. >> what's really interesting about a risk reversal about this i have a couple of months until november expiration, as the stock rallies, this should gain in value and if it declines to that short 100 put strike, then you're going to lose money that's what it's going to look like you're risking about 1.5% of the stock price to have this so one of the reasons i want to be clear again november expiration we know that earnings are going

to come october 30th they just guided down five times. maybe they're able to beat that previous guidance and guide up then we have the battlefield release. >> in the meantime you might wait a week and the puts you're selling for $2 you might be able to sell for more than that if the stock gets down to levels which is 105ish. the stock rallied 45% from the beginning of the year until a few weeks ago and is giving it back that's classic stairs up, elevator down. i don't think the elevator has hit the bottom floor i agree in theory where if you wait you might be able to do the trade more beneficial. >> if you do wait it's not simply the put price change, it's also a strike adjustment. frankly the stock trades down, it goes down quickly, we're going to see the premiums go up faster you'll be able to put on a 100, 110 risk reversal and you'll have immediate exposure. >> let me ask you about being

long at 100. >> we were talking about content, when you think about what these guys vs for content with sports, shooter games and what they're doing with esports, i think this is really unique content. this is a cheap stock relative to expected growth when you put a 25, 30% growth you couldsee a big media company buying e.a the fact that it's down 25%, a media company could say we're going to buy you guys for 150 bucks, there's your 25% premium. >> options traders, volatility traders, this is showing volatility >> what's the best video game? >> we surrounded that. >> pong. >> video game and i don't think that it exists anymore. >> galago -- when i was in high school we used to go to the pizza shop and put your quarters on top. >> pinball. >> wonderful >> for everything "options action" you can check out our

website, "options action" dolt cn -- optionsaction.cnbc.com here's what's coming up next. >> that's what amazon has been doing as it barrels towards a trillion dollar valuation, but if you miss the move, we'll tell you how you can buy it for less than 20 bucks. plus -- calling all "options action"s fans. reach into your pocket and grab your phone and tweet us your question if it's nice, we'll answer it on air when "options action" returns. 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.

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there's (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 rallying above 2,000. but 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. hi, bob. >> hi, melissa this is the first stock to pass the $2,000 mark. there's only three companies in the s&p 500 whose shares are trading over 1,000 booking holdings and alphabet. that was the first stock to hit it in 2013 followed soon after by google. these prices would have been unthinkable that's because companies would typically split their shares stock splits peaked in the late

1990s when the dotcom era peeked it never really recovered. there were just over 100 stock splits in 1997 that compares to just five splits for all of last year. why don't companies split their stock as much as they used to? a lot of it has to do with institutional investors like vanguard and blackrock over the retail investors they own nearly 60% of amazon, 72% of google, nearly 80% of netflix. they 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 that introduces volatility. that's warren buffet's mentality, you know? for years he says he has no problem with a company's stock price going up and he doesn't care about stock splits. for him it's more about the dollar value of what's being bought 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 industries a little more than a year ago it was north of $50 >> thanks, bob pisani. lucky for you, mike has a way for you to get into amazon for less than $20. he's not a magician. he's just an options mave. he's here to show you how. mike. >> we're going to take a look at using a call spread in amazon similar to apple take a look why we're doing this the first is as bob was highlighting the stock is expensive at over $2,000 a share. it would cost you $200,000 for 100 stocks it's expensive on a valuation basis. it has momentum on its side. the second thing is the options are also quite expensive there's two aspects to this. one on a dollar basis they're highly expensive because the stock itself is. usually as stock prices rise

implied volatility comes down. that hasn't actually happened here we're at or slightly above the mean for the last three months or so. finally we're chasing. we are tea chasing the stock at an all time high when you take a look at these three factors, i think using options and a call spread specifically is probably the way we want to take a look at it right now here we are closing the day basically at the all time highs in this stock if you're making a bullish bet here you are basically doing the opposite of catching a falling knife on falling stocks. we're taking a little bit of a risk when we're chasing this at an all time high i was looking out to october you could buy the 2050, $2100 call spread. that's a $50 wide call spread and you would spend just $18 for that times 100 shares that's 1800 bucks which means for 100 shares 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'll have a little more risk by selling the up side 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 slightly below this. there's a 73% chance that happens and there's an 82% chance it will hit or go through the lower strike of our call spread. >> fun fact, 2050. >> as time goes on and your call spread, obviously the probability is going to lessen if the stock doesn't move? how do you manage that trade when you're thinking about it from a probability standpoint? >> that's a really good point. we could about go back to maybe this chart and think about the time we have a little over 40 days to go before this thing is going to expire i think obviously 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, it's about your belief in the underlying stock and whether the momentum is

likely to continue we're going to get some sense of that in the next week or two that's why putting this trade on is a way to rent some of that exposure i probably would not be inclined to carry this to expiration if it looks like the stock is running out of gas. >> the stock $2500 price target. you look at last quarter operating margins were 5.5%. i think the stock can go higher. number two, we've done this a long time together. >> a long time >> little enthusiasm please before the long weekend. i mention that because you know i've never purchased anything on the line. >> yes. >> so the next thing i buy will be the first thing i've just decided to buy based on this entire hit did you happen to notice, pisani was standing in the dark. >> you're going to buy a flashlight >> i'm going to get him those overheadlights i'm going to get on the application and help bob pisani out. he's too long to film something -- >> i feel like that might be a peak in amazon.

>> i wanted one point about that the reason i asked about managing a trade like that when we're talking about probabilities, that's one of the things that gets you in the trade. if the trade doesn't go your way, how do you get out of the trade? mike, i know you've done a lot of research on this. at a certain period of time when the premium that you trade like a call spread drops below 50% of what you paid, the likelihood of it expiring worthless increases fairly dramatically. so when you go into a trade like this and it's not a catalyst driven sort of thing, have you to absolutely have a plan to cut your losses. >> yeah, 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 have pretty good odds of hitting that lower strike obviously if we get halfway there we're going to see those odds declining we have that much time kbf it does decay. >> still ahead, lululemon soaring 13% today hitting a new record high after its earnings report last night and that's great news for our resident

yogi mike he'll tell you why much more "options action" right 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.

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 our open trades. last week mike said lululemon was set to take off on earnings. >> the stock has had a very large run. secondly, it's trading tat a big premium to other names that may be deserved i was looking at the september 130, 140, 155 call spread risk reversal selling the 130 puts at 225, buying the 145 calls at 635 and then selling the 135 calls at $1.75 >> take off, the stocks soaring hitting a fresh all-time high up 13%. how are you trading now? >> if you follow us on twitter you know late today i recommended taking your profits on this trade. the stock has run right to that short strike 155 which we had targeted if you wanted to press a bullish bet you could basically roll out this trade, but i think obviously on this one it's time to take profits because there's

not that much left in it. >> great call. the way you played it was exactly right, right you know, long premium trades into events, you have to be very convicttive. you have to get a lot of things right. the objective, magnitude of the move and all of that there weren't too many names outside of retail and consumer brands even though options prices were very high, it outperformed the move. >> 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. ♪

omar, check this out. uh, yeah, i was calling to see if you do laser hair removal. for men. notice that my hips are off the ground. [ engine revving ] and then, i'm gonna pike my hips back into downward dog. [ rhythmic tapping ] hey, the rain stopped. -a bad day on the road still beats a good one off it. -tell me about that dental procedure again! -i can still taste it in my mouth! -progressive helps keep you out there.

-i can still taste it in my mouth! (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 alex asks i own apple october 190 calls. they're up over 300% i sold half today. should i sell the other half before the new iphones are announced september 12th. >> we already gave you the answer you can sell the calls and buy the 230, 245 call spread that we outlined earlier in the show.

>> time for the final call mike call spreads in apple. >> dan. >> e.a. no risk reversal. >> guy >> thanks for joining us >> i just feel smarter that's it. thanks a lot, gang we'll be back here next friday have a great long weekend. "mad money" starts right now - [announcer] the following is a paid presentation for the power airfryer oven, brought to you by tristar products. we introduced the power airfryer, and it finally became possible to enjoy the crispy crunchy fried food you love, guilt-free. millions were sold, and the five star reviews say it all. people love the power airfryer. now, air frying is taking a quantum leap forward. introducing the power airfryer oven, the full oven that can air fry 75% more than traditional air fryers. air fry chicken strips, wings, and tasty sea salt curly fries, and all made with that amazing fried food taste