hey there, live at the nasdaq market site on what has been a wild day for markets. the guys getting ready for a huge show tonight while they do that here is what's coming up. >> announcer: that pretty much sums up what investors have been doing this month but if you are worried it could get worse, we have a way to buy protection for just $5 plus ♪ after a wild couple of weeks for tech, the fade of the space hangs in the balance of two stocks reporting earnings next week apple and facebook so, will the tech wreck continue to rage on

miep khouw and dan nathan have you covered with the trades. carter worth is on the charts. it's time to risk less and make more the action begins now. >> and we start with that final countdown to the two most important events that could rock the markets next week that would be facebook and apple earnings, the options markets comply huge moves. facebook out on tuesday that could swing 9% either direction. apple could see a 5% move reporting thursday together that's a $100 billion potential shift in market cap all this comes as the nasdaq sinks deep into correction how should you play the stocks head noogt events. let's start with apple and go tragts for the chart master carter braxton worth. >> this is the biggest as everyone knowsive we have the repeating circumstance big supercap mark key names and not acting well post roults.

going up and fading or straight down we make the bet apple will be able to sustain a bit of a pop after its earnings let's low back a a few charts. this is a two-panel chart going back the entire past decade, 2009 to present. the key is this. we know apple has been in the upfriend and been a great performer but actually let me just zoom in here. this of late is only just now apple outperforming the market so take that away. this is relatively performance to the s&p it peaked as far back as 2014 and just now is apple starting to actually outperform the market of which it is the biggest component. we think that's a positive and we make the wet bet apple is going to be okay post earnings in terms of the charts here is a chart, no drawings no judgments. no annotations by me here is the well defined channel in which apple has lived the better part of two years i mean very precisely responding as is so often the case.

makes you wonder why i study the fundamentals my hunchis we are moving to th top end of the range here. and i make that bet. zeroing in on the here and now this is the short-term short again you draw the lines this way i think you can. a lot of tension the bet is we break out of this apex and we make it back to the former high. that would be about a 5% move which would get you back for the high of october 3rd, the all-time high. >> thanks, carter. so mike, how are you trading apple. >> it is interesting you were highlighting earlier that it's implying about a 4.7 move above average. that's extraordinary given short-term 1 trillion company. this is a situation where also we have seen obviously a lot of volatility in the market that has shaken out a lot of stocks and we might use this as the opportunity to try to look for opportunities to sell higher priced options i think that's what i want to do here in apple. what i was looking at specifically out to december, i

could do the 195, 220, 240 call express risk remember versele selling at 195 at 3..50 buying 220 paying 10.50 opinion selling the 240 calls against it at $3 net-net i spend $4 on the trade which is about 2% give or take of the current stock price this is a situation where even if the stock was going to linger right here, the wing options are going to decay somewhat more rapidly particularly after earnings are announced soy don't really need something to happen right away for this to be profitable one other quick point i would make about this is that the month following earnings typically this is not a stock that has moved very sharply to the downside going back 12 quarters about the past three years or so we are not seeing big moves to the downside that said, this is also a situation where the valuation on the apple is maybe a little bi higher than it has historically been or maybe trading about 15 times x cash and so we can look at the

probabilities now of what it would be that the stock might hit that lower 1957 strike it's about a 48% chance given the volatility in the market now that it could touch the strike between now and december expiration there is a 90% chance it hits the 220 call strike that we're long and about a 35% it gets unto the upper one. actually in this kind of a market environment i think a move that much to the upside is maybe even less likely than that. >> yes, what i really like about the trade is if you go longing into this event you know this has better odds to have on a risk adjusted basis for all intents and purposes you could run the asmus any way you want, the worst-case scenario is the stock down a little and you lose 1.5% the very worst chance is that you get put the stock at 195 on december expiration. and that winds up really well with that breakout from the last quarter and that's probably a level -- as long as there is no fraud or anything up to buy apple at 1957 at those levels. and 240 seems like it's between

here and there on december expiration it makes a lot of sense. making one point about the expectations are into this quarter. you know, listen, they launched those phones last month then launched a new one this month. it might be messy thp. this stock may side sideways up down up a little bit over the next couple weeks. i don't think it's a disaster. because i think investors say kwhafr they missed in the quarter just ended they pick up in the holiday season. >> the hope always is that they rely on some product other than iphones 62% of revenues. but we are expecting products announcements for i pods and max within the next month or a little bit more. i think that is something else that investors might poepgsly be looking forward to so even if the earnings basically come out as expected that might help the stock hold up a little bit as people are looking forward to that event. >> i look -- i'm making capital commitments before earnings is a binary thing one thing to keep in mind, a gap on earnings, the gaps come in

two or threes we have had two gaps do you get a third earnings beat that's the bet. let's move to facebook the last of the fang trade to report so far it's been ugly for the group. amazon and alphabet reporting last night the stock ending in the red. netflix earnings last week, that stock is down 14% since then with facebook shares down 30% from its high, dan says the stock might finally be finding a bottom walk us through your trade >> it could. there is a chart up. the march lows was 150 we came back and hold tlg a little bit and this week broke through. you know, look at that that's the chart since the ipo it's a nice pretty consistent uptrend there. that it just broke and it went through that recent support. it's a pretty dicey time to try i think to catch a falling knife this this name in front of two events options market implies about a $134 move between now and next friday's close most of that about 8.5% is for that earnings event.

okay and so for a stock that's been as volatile as this year i think it's safe to assume the stock moves 5, 10% after earnings. here is the thing. i think the name is been derisked estimates have km down dramatically trading 18.57 times next year as expectsed earnings only at 13%. the key thing, sales are expected to grow 24% from 5 a billion to $68 billion i think the earnings estimates for 2019 are likely very low here is the set up into next week if they don't guide down again, the stock is not going down. it just doesn't as far as i'm concerned. and if they are able to guide up a little bit i think you have this stock moving back towards recent breakdown level at 160 or so to me what i want to do is set up which selling shorter dated out of the money calls to finance the purchase of longer dated out of the money calls and this is a call calendar. to do the stock closed at about 145. i could do the november, january, 160 call calendar

paying $2.50 for that. what am i doing here i'm selling one of the november 160 calls at 270 and boying one of the january 160 calls for 520. that cost me 2.70 actually that's my max risk what i want the stock to do is mover up to close to the 160 strike between now and november expiration november call spires i covered that and then end up owning the january 160 call what i think is an important technical level then you possibly get investors looking at this name again into the new year, setting up for a bounce maybe back towards the prior highs or getting close to $200. >> it's interesting i think people should pay attention to the fact that november calls call spires on the 16th. that expiration is relatively close. you can still collect 2.5 dlrs for that relative to what you spend for that january option. we were looking at this earlier. i think this sets up nicely. as far as the multiple is concerned, i mean this stock trades as cheap as it has.

we are talking about something that's growing -- the conservative estimate is that it's going tosz year on year eps growth of probably 12% and trading at a market multiple you are not seeing a lot of opportunities like that. and because you are doing this call calendar if it turns out that's unfounded, if there is another shoe to drop in facebook, the risk is very low. >> that's just it. it almost has to be options trade. this is as binary as it gets exactly three months an october 26,th, july 26th dropped and gapped biggest one day drop in the history of investing that defines this for all time the highs are likely to stand forever as far as i'm concerned. >> the highs in the stock forever have been put in. >> i think that's the case. >> wow >> i mean that's a long time. >> forever is a long time. meaning forever does that mean ten years -- in this base o business a year to three that's forever. could it gets back there in five who knows that but not this year not next year

not the year after facebook climbing back through that kind of overhead supply when you have that aggressive rerating now you have the benefit the fact thats plunged 34%. >> you made the most important point. and this show is called "options action." i wouldn't sit here and say you buy this stock into the event. i'm not pounding the table on bullish scenarios but we try to figure out what's more likely to happen i'm targeting 160 about 0% higher than we are we are that's the implied move over the next woke if i get the direction right this options trade where i risk 1.5% of the stock price into an event i have a lot of optionalty and few scenarios where it's a total looser a week from now or november expiration. i like it as an options trade. i'm not saying i short the stock or buy the stock it's binary you are correct. >> everything "options action" check out the website. while there sign up for the news letter 100,000 of you more than have already subzribd. don't be the only one missing out. here is what's coming up next.

>> translator: the markets are having the worst month in nearly a decade but don't be scared. because mike khouw has a way to buy protection for cheap he will explain. plus, calling all "options action"s fan reach into your pocket, grab your phone and devote us your question@"options action." if it's nice, we'll answer it on air. when "options action" returns. i don't know what's going on. "options action" is sponsored by think or swim by td ameritrade i've even built my own historic trading model. and you're still not sure if you want to make the trade? exactly. sounds like a case of analysis paralysis. is there a cure? td ameritrade's trade desk. they can help gut check your strategies and answer all your toughest questions. sounds perfect. see, your stress level was here and i got you down to here, i've done my job. call for a strategy gut check 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 to "options action." it has been a wild month on wall street as the dow dropped nearly 7% dom chew is in the newsroom to

break down the brutal october. hey, dom. >> well, the worst october in a decade, melissa. that's what it is shaping up to be to be for the s&p 500 and the dow and nasdaq as those things stand. each of those berms have the worst percentage drop since 2008 worst october since the financial crisis, meanwhile, the tech heavier nasdaq composite having the worst month period since november of 2008 at least in terms of percentage declines now, the market turmoil has been broad based with losses heaviest in the cyclical and economic le sensitive materials. energy, materials, industrials and consumer staps and consumerer state your namer outperformers .hot spots in play with industries like banking home construction and of course semi conductors still on sharp downward trends. this month's losses also mean that both the dow and the s&p 500 are back to around flat for

the full year. volatility is also back at a pretty big way the c bow or vix is eed at levels well above the average over the last 50 days during various points this month the vix was at the highest level since the market selloff back in february ties to the fears of the fed and rising inflation it's safe to say melissa, the traders and investors out there are very in tune and aware of thedown are downside risks in the market back to you. >> dom have a good weekend dom in the newsroom. if you are worried things get worse before they get better how do you protect yourself in professor khouw over at the plasma with the call to action. >> so we look at using a put spread why might we do this? the first and obvious thing the market is whipping around. if you think okay maybe this is the tupt to short stocks i would be cautious doing that because when you short stocks you take an unlimited risk to the upside. buying puts of course is a nice way to limit the risk. but as dom just pointed out we

see the vix as o at levels we haven't seen in a while. options premiums are elevated. nice thing about a put spread it's a way to reduce the costs of the trade we can just take a quick look over here at where we have come from now one of the points i would quickly make we are going all the way back now to the 2016 election that's -- we have another election coming up that's kind of what we are looking at if you are long a basket stocks that represent mri indicates the s&p you're not down on the year you are likely flat net of divides. maybe up a bit you mayan thanksgivingsing this is getting worse i might want to put on a hedge let's look at one of the hedges i looked at today. look out to january buy by the january spy 260 puts those are raiding 7.907 tell the 2.35 points net-net, this is a $25 widespread spending $5. that pays four to one. something else to think about. $5 is actually less than 2% of

where spy traded when i was looking at this earlier. so this is a way it might seem like with the vix at the elevated levels it might seem it's still too late to put hedge on but actually i think it isn't. i mean it's easy to imagine that the s&p could move five or ten peppers between now and january. probably more. >> yes, dan what do you think of the strategy >> i like the trade. i like the width of the strikes. i like the fact that it's a put spread especially like mike said implied volatility of the price of options elevated during in period of heightened volatility. i will make this one point right now we are down 11% from the highs. peak to trough decline from yarn to february also about 11% if there is a growth scare and other things i would expect it to be deeper that's why mike suggest this is trade. when you think back to january, february we in a re-test of the low that came in march when you look back at the prior bout of volatility in q 1 of

2016 also a double bottom. and then in q 3 -- so double bottoms seemed to happen timing the hedges makes sense opinionen opinion and it's hard to press loies on a day like today after we have been down so much. >> let's put it all in context to try to say is this an average or more important decline? there have been 2185% plus selloffs in the market you reason you start with 5% a lot of risk managers say you got to pull the book in. if you look at all 2185% plus. the many average klinec is 11.9% and lasts 40 sessions. this selloff is 10.6 and 25 pegs think about 10.6 now versus average of 11.9. 25 sessions in the maki typically 40 nothing out of the ordinary about this the question is whether the way the markets act or whether industrials, financials small cap growth leading the market is down 18 is there more to go

makes it worships. >> still ahead, netflix shares in the free fall down 10% this week alone but that's great news for khouw and carter we tell you why. plus a question about the crazy market moves we have you covered. send us a tweet@options axe we will read it later much more "options action" right after this what do you look for when you trade? i want free access to research. >> announcer: "options action" sponsored which think or swim by td ameritrade. i don't want any trade minimums. yeah, i totally agree, they don't have any of those. i want to know what i'm paying upfront. yes, absolutely. do you just say yes to everything? hm. well i say no to kale. mm. yeah, they say if you blanch it it's better, but that seems like a lot of work. no hidden fees. no platform fees. no trade minimums. and yes, it's all at one low price. 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." earlier this month mike and carter bet netflix shares were et heading for a breakdown process. boy did they fall. here is how the trade worked out on "options action" it's how we extreme ahead of the competition risk less to make more and that's what kmo and carter did on the bearish et net bet with netflix. carter thought it looked dicey into earnings. >> we are coming back to trend, the head and shoulders top is in effect that would take us don it looks like nothing but that's another

10, 12% to get done to that level. >> hmm carter is good looking and. >> take it away mike. >> carter didn't like the looks of netflix but just shorting the stock could lead to infinity losses. instead i died to buy the november 3.25 strike put for $17 now to make money i just need netflix shares to fall plea below the 3.25 strike or below 308 by november expiration but spending $17 just to bet against netflix, cue the dramatic movie clip to cut costs i decided to sell the 275 strike put for $5 and created my put spread here is how it works between the 17 i spent on buying the higher strike put and the 5 i collected by selling that lower strike putty cut the total cost of my trade down to just

$12. and now i see prochts of netflix shares fall below the 325 put by the reduced cost of the trade. or in this case, below 313 by november expiration. roll the celebration clip. don't get too excited. because there is a tradeoff. and because i sold that putty capped my profits at 2.75. so how did with he do on this melissa. >> well mike since the time of the trade netflix shares are down 10% and now "options action"s biggest fans want to know one thing what will khouw and carter do now? >> do we stand. >> how are they trading netflix, mike what do you say. >> i will tell you how i trade to do today. i had a put spread i took it off today. we hit exactly the number you were talking about on the trend line down about 10% from whatever 335 which is where it was trading what are your thoughts. >> that's the price objective has been met we also just for keeping score we got bailed out i mean it

printed really against us obviously on the -- in the might market huge beat but that's the problem with the bad tape doesn't matter how good you are things go down overnight that was looking bad after earnings we had a really sharp spike but traded badly overnight, opened even more poorly and then traded badly the whole day. >> which is always a tell of something supposed to go up and initially does fades it's that much worse. >> it's the biggest tell if the correction is deeper than it was right now. i want everybody to report this is at 56% on the year despite down 30ers. >> 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.

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i've done all sorts of research, read earnings reports, looked at chart patterns. i've even built my own historic trading model. and you're still not sure if you want to make the trade? exactly. sounds like a case of analysis paralysis. is there a cure? td ameritrade's trade desk. they can help gut check your strategies and answer all your toughest questions. sounds perfect. see, your stress level was here and i got you down to here, i've done my job. call for a strategy gut check with td ameritrade. ♪ back with the final call carter worth. >> apple is making the wet it's going to be okay long. >> mike "options action" elevated i'll use a call spread to make the bull he shall bish. >> i like mike's boy you put on

the. excuse me facebook november, january call calendar. >> that does it for us on "options action. see you back here next friday at 5:30 p.m. eastern time meantime time don't go anyerwhe. "mad money" with jim cramer starts right now 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. welcome to cramerica other people want to make friends. i'm just trying to save you some money. my job is not just to entertain but to educate and teach you so call me at 1-800-743-cnbc or tweet me @jimcramer. tough days don't last forever, but when they come along, you need to know how to respopd. you need a game planned totall