now, you stay safe. bye-bye. this is "options action." tonight, wipeout. ♪ we'll show you the shocking chart that shows gopro shares could be 15 bucks next week. how to profit. first r netflix, and then amazon. witnessing the death of the cult stock? >> awesome! >> the traders tell you which name is next. talk about unusual. >> it's 106 miles to chicago. we got a full tank of gas, half a pack of cigarettes, it's dark, and we're wearing sunglasses. hit it.

>> well, maybe not that strange, but traders made huge bets on ford today, and you won't believe how hay they see it going. "options actions" starts right now. ooimt melissa levy, and the word is epic, and epic week for tech. apple, microsoft, facebook, adding 77 billion this week alone. are these the stocks to earn with facebook reportings next week? let's find out, dan, why the rush to own these stocks when others fell out of bed? >> that's the key there. bottom line it. those worked all yearlong. they are the best stories in all of tech. why get out now? especially when you see the market come back the way it did off of the lows from last week. to me, you know, we've had apple. those results were stopping. the guidance fantastic. when you think about it, you know, to me, speak with what's working, raise your stop, but

that said on the flip side of it, we saw names that disappointed get punished, and ibm was an example, coke was an example. when you think about it, you know, people think about stock tickers market. i don't know what it means, but stick with what's working and cut losses on what's not. >> this is what it means, and what we talked about before, apple is a place to hide with the volatile markets. it works if the market's going up. they do well. if it's going down, they hold up better. they are not a hold and hope story which other stocks tend to be. they are delivering results. look at other names where they hope something happens, the companies deliver at some point in the future, that's the first place when cracks emerge and people bail out. >> at the same time, if we are to believe the markets will go higher to year's end, isn't the tendency to go where there's more beta so go to the stocks that are not the big tech names?

>> there's a lot of broken stories. pando pandora, a darling this year, now down 50% compared to march. the story is effectively over here. picking a bottom in 3-d printing stocks or social media stocks, that's not the right strategy. to the open, i think stick with what's working. >> look, if people are nervous about a lot of things, they remain nervous. the fact the market was open, ebola in new york city, the futures at 10:00 last night demonstrates confidence, but the only place is confidence where people feel safe. these are the stocks they feel safe in. >> facebook, earnings next week. what's the trade? >> google, not mentioned yet, traded poorly. could be because of the stuff that facebook is doing in mobile ads. remember this, okay, this company's supposed to have $12

billion in sales this year, and that's a 2.09 billion market cap. the earnings, the options market implies a 6.5% one day move in either direction, going down from 80 to 70, and now it's backseat up, closing at a new all-time high today. if you are long, widely held stock here, i think you want to think about how the options market thinks about the event, potentially volatile, that's one, and two, they just made or completed this what's app acquisition, $20 billion. 178 million shares come unlocked next week, days after the report. again, if the theme is to stick with what's working, if you're long facebook here, think about putting a collar on the stock, trying to protect these gains. again, stock's up 47% year to date right now. headed into the event, when the stock was 80 today, look to december and sell the december 90 call at 120 and use those proceeds to buy the december 70

put. what i've done here is created a ban where i lose money with a stock i own against long stock between 80 and 70 and protective low 70, but participate to the upside 80 and 9 o. >> what you find is if you sell puts to protect stock positions that you have a put out of the money more than the call you have to sell. this is the relationship that is setting up well because there's equal distance. i say into catalyst, premiums are elevated. i would consider a put spread here where you buy a closer to at the money put and short a couple more options in this case as a mechanism to protect myself. >> yeah, i mean, that's an advanced strategy, working a lot of legs, have the stock position too. to me, that makes sense and can get closer to the money protection, but why i targeted 70 down because that was the breakout level in july and q2 earnings better than expect the all time highs.

that's why last week was the low also. if, for any reason, there's a disappointment in the guide down, that's the level you want protection. >> flip side to the trade, and that's the upside. what you do if the stock hits nine? >> short the 90 call on the long stock. make a decision, okay. get to december expiration and stock's above 90, and people make the decision on taxes, the stock up 60% of the year, do you book the gain? if you do not, you cover the callback and take a loss there. >> all right. turn to gopro, a disaster, the shares tanking after an initiative under perform rating and argument of $45 a share. he explains the call. ? as gopro pivots away from action capture to life logging, picture and videos of your kids, weddings, et cetera, that's a

difficult market to crack, and, you know, ultimately, we think growth rates deaccelerate rapidly from 2015 to 2016. >> our chart master was correctly bullish, but what do you see now in. >> play it both ways, money upside and then to the downside. time for the latter, the downside. not a lot of history, but there's a stock in a range for two months, june and july, doubled in two months from 45 to 90, and now topping out. draw the lines. there's the trend line. there's without. back to the trend, clearly, we broke trend. you can see the head and shoulders top, and there's the neckline. this is the risk of a violent break. there's the trend line, head and shoulders top, there's the neck

lain. where does it go if it breaks? back to the line where it started. bring it together. there's the range, there's the double, here's the head and shoulders top, here's the neckline, projects right to 50 where it started. that's a lot of down from 71.91. >> so a negative. what do you see, mike? >> we talk about hold and hope stocks. this is that story. this is a stock trading at many multiples of sales. from a fundamental stand point, you have to believe they are going to transform their business, and that's kind of hard for me to understand because this is not necessarily a transformative business they are in. unless every starts wearing them on their head, it's hard to figure out how it's necessarily going to justify the price. there's an interesting situation here, this stock is very heavily shorted right now. 40% of the float is shorted, and the stock is impossible to borrow setting up a couple situations, not the least of

which is a potential short squeeze. don't short it even if you could sell it. that makes the dynamics of the options challenging as well. puts are expensive. look at the 72 strike, good example. the puts are twice as expensive as the call. 17 for the call, situation you pay up. sell options, make risk for the short bet. i'm looking at the january 50.60 one by two, spend 50 cents to buy one of the 60s, sell two of the 50s, and target that 50 strike. this is the threading the needle trade on a stock that's scary. jumping off a cliff, blows through 350 to 45, you're in the money, at 35, though, you long it 40 and that's a risk. >> i know you don't like gopro because you gave me the triangle of death soymbol. >> i don't know why he's

boycotting that. >> what a buddy you are, but within the trade itself, though? >> i do not like the trade at all. i think if these guys disaappointment when they were poor, also in this time period, there's a six month lockup. if the bottom is out of this thing, it's back at 40 quickly, and i'll tell you about the trade. mike said threading the needle. this works out every day for the next month if it went down a dollar slowly. if it's down in the straight line, short 250 puts is uncomfortable. >> that's a reasonable point. for sure if this thing shot to 50, it looks bad on paper. that's the risk you are taking. what you're thinking is the stocks go down to 50, but at 40, willing to own it. that's what you are forced to do if it gets down there between now and january expiration. that, by the way, is 40 times 2014 earnings expectations. >> carter, what do you think of the expectations at 40 mike is willing to own it in. >> well, in principle, if you do double in a quick order, which is what this is and return or

give back all of those gapes, there's a lot of memory at the 45-50 level, and there, not a bad risk-reward proposition. >> got a question? tweet us @optionsactions, and go to optionsaction .cbnc.com, and rumor has it george cloone yerks reads it. be like him. >> not only that, but traders think stocks are overvalued. how to play it. plus -- >>. ♪ have you driven a ford >> wow, that was cheesy, but traders were piling into ford today. we'll tell you just how high they see it going when "options action" returns.

something's not right, lower, bear camp here, breaks the downside. >> now, maybe, we can see not only has that happen, but it's been happening for a while. there's not a lot of confidence in the stock. >> this is the triangle of death. if you have a break here, it could be lights out. could see 250, something like we saw in netflix. >> as you can see, the "options action" game is bearish on amazon and proven right as shares plunged 8 % off earnings. here's a question tonight. between amazon today and netf x

netflix's earninplunge on herea dan, what do you think? >> money from the sorts of names is healthy for the market because it's going to better stories, you know, than something people have just totally disregarded the valuation the whole way up. let's see what's gone on, amazon, a growth darling, a revenue growth darling for years here. think about what happened, the stock topped out in december and january earlier this year, basically, back in december, you remember when jeff besos was on "60 minutes" talking about drone delivery, that was it. this was the gap missed on earnings. this was the q1 gap and 2 gap. here we are. investers exited the stock. they do not believe the stock like before disregarding

valuation, and that brings us to netflix. this broke last week, talking about amazon to begin with. this was back when they raised prices with a lot of issues about this, had subscriber turn, and the stock went from 300 down to 50. well, this is where icahn got in this thing. look at the volatility this year. then what? raise prices again. bring this up. obviously, the stock came back, but they were self-inflicted wounds by the company, by am seen also in netflix, but investors woke up to certain issues about the financials, brings us to tesla. they do not report until november 5, and i think you'll have a similar situation. not exactly that the stock goes down, it's already down 20% down from the highs in december. there's two gaps here. musk suggested the shares may be expensive, okay, and this one where musk, the ceo and founder of the company, hyped up this product announcement with that

-- >> with something else. >> exactly. here we are. lost momentum. we know the market in the last week. it can't rally here. to me, what i'm talking about, three companies that were cult stocks, valuation disregarded the whole way up, but maybe with self-inflicted wounds by the companies that got investers to wake up. >> dan makes a compelling case, mike, though, i'm curious where each of the cases are. amazon, for instance, entering the seasonally strong period, shouldn't that prepare even in the short term? the decline that he showed us on the chart was q4, a january report, correct? >> amazon's going to report record sales again this year. we can be sure of that. the other thing, of course, is tesla is capacity constrained. not that they have a demand problem for the product ux but you expect it to go into ambitious valuations here, and it's hard to see how quickly you can do that. this is a capital intensive business. you have to build plants. there are, you know, rs.

the other thing is we don't know where middle american demand for the product will be as good as it is on the coast where it's easier to own products like this. i think that's definitely a challenge. netflix, you know, we got hbo announcing that they're going to offer content directly. those are going to provide competition. really, it's not just the hope story. there's other issues that have been identified now in the market place that i think are also lending some concern. >> in terms of the patterns, i mean, there's virtually identical in the sense there's the precondition required for weakness, which is extreme proceeding strength. we know netflix is a great winner, amazon, and, of course, tesla. what troubles the downside is the precondition of having advance for a long time, brought in a lot of people, and then you reverse. reversal formations are real, head and shoulders tops, triangles of death, whatever you want to call them, but they happen and repeat, and it looks to very much be happening here in tesla.

downside is severe. >> all right. let me ask you this here. >> sure. >> over here, the stock was low, right? >> yeah zb. >> this is a great buying opportunity, how do we know where we are now is not another great buying opportunity? >> well, it could be. tesla's a very different story than the other two. to me, this is a company that could change the world where the other two just made things easier that we were doing already. you know what i'm saying? to me, i love -- >> those were commodity businesses, amazon -- >> yeah. >> and netflix with pricing pressure, and tesla is a luxury goods business. >> it is. here's the problem down the road. i don't know if it's a great buy right here. i'll tell you this. the first time the big auto companies roll out their high end electric models, there's a going to be the moment of truth in the company. we don't know when that happens. >> speaking of autos, have you driven a ford lately? option traders have. as the stock tanked, bulls hopped on board. we'll explain why when we return.

tough day for ford today, shares of the auto maker in reverse after earnings, but mike saw traders making contrary

bets. what did you see, mike? >> ford saw two times average daily call volume today, and what we saw were people who affected bullish bets in the stock rolling out to next week, buying next week's 14 strike calls, paying 13 cents for them, buying in good size. if you do that, that's a short term bet that the stock could actually rebound off of this sort of bad response that we saw from earnings, which i didn't think were that bad. >> yeah, carter, what do you see in the charts? >> well, this is a mess. >> i can tell by the way you looked over here. >> it's almost, like, and general motors, the nasdaq auto trust, some 80 different manufacturers, nissan, honda, toyota, global index, it's a free fall. spilling over to parts now. this is not good. i mean, buying this, i think, is just speculating. >> i think it's odd, too, this happens when we have oil with a seven handle on it, everything like that. >> why is it weird? if oil's a barometer for growth,

why is a weird? >> well, to your point, why is the s&p now 2.5% from the all time highs? to me, isn't this a tell? that's what i don't get. i just don't get it. >> weigh in, carter. i can tell you full of opinions. >> peak auto sales, come a long way, and there's price action leads the facts. >> they didn't look like a mess to me, but why aren't people extrapolating the weakness in the most important business in america. >> what's that mean for home builders and the housing market? pickup truck sales are a leading indicator for housing. >> not great. one of the reasons it's not great is that a big part of the support in the housing market that was fueled by quantitative easing came in the form of invs.ers investing in housing. consumers, the people that live in these things are not racing out to buy new houses. i think what we're seeing is softening there. evidence in this is in a lot of

markets. >> lumber liquidators, there was a new 52 week low. they pile into home depot and sell the heck out of lumber liquidators. >> next the final call.

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let's live on the edge and take a tweet. with the end of october being historically active, what's wrong with buying november five puts? >> one thing is when the market is up and premiums come in, that is a great time to buy puts to hedge the portfolio, but don't look to november. first of all, we're close to expirations, january options are cheap, and look out further. i'm right now, if the mart's not down today, hard to see why you count on that next week, and that's essentially all your buying. >> forget the spot. look at the dia, the diamonds of the etf on the dow. i'm long december puts. that's where the biggest disasters are right now. the biggest disasters on the week, disappoinments, ibm, coke,

mcdonalds on the dow. i don't like large multinationals. >> in terms of the chart, which is worse, dow or s&p? >> big uptrends, breaks in trends, and rallies back to difficult levels. gets short this way or any other way is the right thing to do. >> good point about the disasters on the dow. >> well, that -- well, one of the things i don't like to do is diffuse bonds already going off, and that's why a lot have been. i think if you look at the spy, look at the s&p 500. if the market does crack, that's the barometer to look at, not the one where we've seen so much trouble. >> time for the final cord. carter? >> what we could have done is rally 120 points to where we should have down, down another 120, and rid of the comply sen si. now we just set the problem up again. >> i agree with him. everything he said. but i tell you this, if you have facebook and longing it, there's huge gains, look to hedge it with callers out to december. >> mike? >> i think stocks like apple are

safe to hide out. the way to play it, buy puts. >> i'm melissa, and thank you for watching, optionsaction.cnbc.com for more, and meantime, don't go anywhere. "mad money" with jim cramer starts right now. >> announcer: the following is a paid presentation for body beast, the fast, proven way to build muscle, shed fat, and sculpt your best body faster than you've ever thought possible, brought to you by beachbody. >> this is real, as real as it gets. we're gonna learn, we're gonna sweat, we're gonna have fun, and we're gonna see results. >> before body beast, i was just soft and chunky and -- and pudgy, and this is the "after" result. >> it's gonna be amazing. come on. you can do this! >> body beast has completely transformed my body. swimsuit season is here, and