The Option Block
Option Block 297: Talk of Tesla & Twitter
Trading Block: Not a lot to drive the market today. Futures are trading a discount to the cash. Non-farm payrolls.
Xpress Block: Tesla and Twitter were lighting up the OX desk today. Also, the United/American Airlines merger - What happens to those investors?
Around the Block: Keeping an eye on the 10-year and Home Builders earnings.
Option Block 296: Apple Fire Sale
Trading Block: A mild selloff on the street. Some vol has been creeping back into the market ahead of Non-Farms. The Apple zealots are back. Pressure continues on the metals.
Odd Block: Calls trade in Arris Group Inc. (ARRS), calls trade in CME Group (CME)
REVIEW FROM 10/24 - Calls trade in Jive Software Inc. (JIVE)
Xpress Block: Rumors that Fords CEO may be coming to Microsoft? Gold and energies were the hot products today.
Mail Block: Facbook Question comes in under the wire
Question from Dylan Harris - I have a point I would like discussed on the Option Block. Can you guys discuss locking in gains for long premium trades? Do you gamma scalp with stock or sell options against the position? Or is it best to just close the position and save the commission costs? Love the shows, thanks!
Around the Block: Non-Farms tomorrow. But then what? Not much on the horizon for the rest of the year.
Option Block 295: Saving Yourself Some Headaches
Trading Block: Is there any vol on the horizon? Amazon drones - watch your head! Black Friday a resounding meh, Cyber Monday still a question mark. The Tosaw update: GLD, SLV, APPL, etc.
Odd Block: IB Options Brief: Best Buy Co. (BBY), calls trade in Intel Inc. (INTC), combos trade in Sprouts Farmers Market Inc. (SFM), calls trade in Forest Labs Inc. (FRX), rolling puts in Avon Products, Inc. (AVP).
- Question from Mountain Man Tim - This question is for Uncle Mike. How do you typically determine the put level that you purchase on a stock? For example, you have mentioned being long the 460 put in Apple. How do you determine the put level that you/your client uses as a hedge?
- Question from Jon Jones - What is the ASPs take on Twitter? Long calls? Long puts? Other?
Around the Block: What could possibly bring back activity to the market? Non-farms coming up. Farewell Bernanke!
Option Block 294: You’re Soaking in It
Trading Block: Positioning going into the short weekend. Where are the long premiums? Where is the free juice? Are OX clients still trading or are they already on vacation?
ZNGA love - time for Andrew to gloat. TWTR giving up some of the gains.
Odd Block: Hail Mary call buying in The CBOE Volatility Index (VIX), calls trade in Ziopharm Oncology Inc. (ZIOP), and in Titan International Inc. (TWI)
Xpress Block: The Warren Buffet put in Exxon? The success of OX mobile trading.
Mail Block: We’re taking your questions
- Question from Allan Schwartz - Why is open interest still only updated daily? Do we not have enough information now to update that more frequently, if not instantly? If I buy to close 30 calls, that should be reflected in the OI instantly, not the following morning.
- Question from Biz Man - Does OX offer any systems to automate trading? Example - Automatically write a 5% OTM call on XYZ underlying every month/week, etc. It would save some hassle for busy clients.
Around the Block: The holiday approaches. Markets closed Thursday, and half-day on Friday.
Option Block 293: The Gift that Keeps on Giving
Trading Block: A strong rally on the street with VIX futures getting utterly destroyed. Twitter has not been the big vol mover as expected. Tesla continues to take it on the chin. Zynga: the stocky hat keeps on giving.
Odd Block: Yesterday review - Calls trade in Star Scientific, Inc. (STSI), risk reversal trades in the CBOE Volatility Index (VIX), calls buyers in China Life Insurance Company (LFC)
Xpress Block: New technology coming soon to the OX website.
Strategy Block: Uncle Mike discusses the importance of having a variety of different strategies in your trading.
Around the Block: Russell Index is coming back. It will be a race to see who can take down option premiums. S&P taking out 1,800.
Option Block 292: TWTR Is No FB
Trading Block: The first day of trading for Twitter options was very interesting, but yet not the day everyone was hoping for. With these numbers, Twitter will not set a first-day options trading record as Facebook did on its debut. Alex said Dec 50 calls were popular at OX today. CBOE now disseminating VXST every 15 seconds instead of once per day. Interesting article on Barron’s today slamming VXX and other VIX ETPs.
Odd Block: Review from last show - Calls trade in Tile Shop Holdings (TTS), put spread trades in Darling International Inc. (DAR), calls trade in Kindred Healthcare, Inc. (KND)
Mail Block: Question from BROB
What do you guys think of put/call ratios? I never hear you mention them on the show. Useful tool or overhyped indicator?
Around the Block: Home Depot earnings before the open tomorrow.
Option Block 291: Twas the Night before Twitter
Trading Block: A mild rally on the street today. A tepid outlook from Walmart, doesn't bode well for the economy. Cisco taking in on the chin post-earnings. Happy Twitter Options Eve! Any client interest in trading twitter options?
Odd Block: Crazy call buyer in The CBOE Volatility Index (VIX), calls trade in Tile Shop Holdings (TTS).
Xpress Block: No Alex today. So it’s time for the Trading Patterns Guessing Game - Special Twitter Edition.
Strategy Block: Uncle Mike Tosaw discusses when to roll up a call on a diagonal call debit spread.
Mail Block: Whacha wanna know?
Question from Ham Shack - I have read some articles that say Twitter options, particularly the put options, will be very wide and expensive on launch day. I can wrap my head around wider spreads for a new issue, but why would the puts cost more? Is it just a question of bears bidding up the volatility?
Around the Block: Will the SPX break 1,800? Could we see the highs of the year next week?
Option Block 290: Keep that Theta Rolling
Trading Block: Twitter IPO released, started at $26. Can't wait to sell the puts. Tesla taking it on the chin, breaking through the 140 handle. Priceline closed down.
Mail Block: Keep those questions coming
- Question from Ian @mategio - Can you please expand on these formation you guys talked about (Apple, buy the guts, sell the wings)? Can I see them in Options Xpress?
- Question from Ed Vangelos - Alex's comment on the Ford collar from last week;s episode disturbed me. He essentially said that selling the stock was better than using a collar to hedge the position, because no one wants to sell the call. So is Alex just not a fan of collars, or does he actually think it’s better to be in cash than to have a hedged equity position?
- Question from Richard D. - Mark and the crew, I am posting my questions in more atomic increments so that you can decide which are worthy to be read, or queue them up for the future. One reason we like options is that we create similar effects to long or short stock positions with less capital tied up and at risk. However, it raises the question of what safe and liquid options do we have for that cash that we keep in reserve?
Around the Block: Update on Priceline.
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Option Block 289: What a Twit!
Trading Block: November 14 is official day Twitter goes public. CBOE earnings on Friday, CME before the open - both resounding "mehs." Apple actually closes around where it started. Blackberry taking it on the chin. Again.
Odd Block: Calls trade in Berry Petroleum Co. (BRY), calls trade in Applied Micro Circuits Corp. (AMCC), calls trade in Marin Software Inc. (MRIN), and calls trade in ValueVision Media Inc. (VVTV).
Xpress Block: Cue the game show music for yet another edition of "The Trading Patterns Game."
Listener Mail: Comments and questions from our audience.
- Comment from Options Curator - Just BTO an $AAPL Feb14 515 Call at $31.20. Let see how #ChristmasHoliday plays out. @Options #options #trading #investing
- Question from BillyMo @b1llmoo - 2nd question. Why does SPY and its options not trade the same hours as /ES and their options? Seems like it exchanges would love it.
Around the Block: Tesla, Groupon and Qualcomm earnings this week. TSLA is very important for OX clientele.
Option Block 288: The Exciting Road to Nowhere
Trading Block: A selloff at the very end of the day. Most major indexes down half a point. Interesting movement post Facebook and Apple earnings. In hindsight, the Apple skew makes a lot more sense post Google earnings.
Odd Block: Puts trade in Ultrashort Euro ProShares (EUO), calls trade in Tile Shop Holdings Inc (TTS), calls trade in Fortress Investment Group LLC. (FIG) and spread trades in Apollo Global Management (APO)
Xpress Block: Facebook displaced Apple is the top 5 most active. GLD has dropped out of the top 10, surpassed by SLV. This has been the most active October on record at OX!
Listener Mail Extravaganza: We have even more mail!
- Question from Herb Slojewski - Where can I get info on how to trade Twitter options, Options guy? What sort of plan do you have for Twitter when it starts trading. Thanks.
- Question from BillyMo @b1llmoo - As I sit here watching Apple go from down 25 to green. Is there any updates on After Hours option trading?
- Question from Richard D - Mark and the brain trust! I have 2 more questions for the queue! I happened to be the temporarily happy holder of a bullish FB diagonal Nov 2 50 / Nov 8 55 call spread that I held through earnings. As I watched the stock very quickly balloon almost 10% to around $54 and change I thought about what I could do in the after hours to lock-in any of this gain, knowing it could likely disappear by morning (yes Alex I love your pressing for evening+ trading hours in all instruments!). If I just owned the call (which I do not do due to the Vol crush), I could have shorted stock, but alas I had a spread with a short in it. I was wondering if there are any options that don't leave me naked any stock to capture any of this after hours gain? I suspect not but I figured I would ask because this has been a topic on your show. I also was not sure if there was a different way to structure the trade to begin that would have afforded me some after hour opportunities with something other than a vertical or bullish time spread like I have? Oddly enough, my broker does NOT count owning a call as a hedge against a short stock position and gives me the full margin position of the short w/out the hedged call, so even a call/short stock after hours move would not work for me (synthetic put :) Is this common? Thank you!
Around the Block: Exchange week coming up. CBOE 11/1 Before & CME 11/4 Before. Disney - 11/7, Groupon - 11/7, Activision - 11/6 and Tesla - 11/5
Option Block 287: Trading Patterns
Trading Block: A mild rally on the street. Everyone is still playing the wait and see game after hours today with Apple.
Interview Block: Guest: Mark Greenstein, CTA with Orchard Grove joins the gang as they discuss metals, rates, as well as the VIX products.
Xpress Block: It is time once again for everyone’s favorite "The Trading Patterns" game!
Around the Block: Still more earnings around the bend. Apple - 10/28, EA Games - 10/29, General Motors - 10/30, LinkedIn - 10/29, Facebook - 10/30, Marriott - 10/30, Take Two - 10/29 & Nokia - 10/29.
Option Block 286: Super Thursday
Trading Block: Another mild day on the street. Earnings-Palooza today! Ford before the bell. A newly revived Microsoft. Amazon surges after hours. Zynga breaks the four handle. Crazy developments in Apple post iPad.
Odd Block: Calls trade in Covanta Holding Corp (CVA), straddle trades in Microsoft Corp. (MSFT), calls trade in Silvercorp Metal Inc. (SVM), calls trade in Jive Software Inc. (JIVE).
Xpress Block: More interesting OX trading patterns. Apple is back!
Around the Block: More earnings around the bend: 10/28 - Apple; 10/29 - EA Games, LinkedIn, Take Two, Nokia; 10/30 - General Motors, Marriott
Option Block 285: Listener Mail Extravaganza
Trading Block: Navigating post-shutdown markets. VIX Cash giving up the ghost post-shutdown. Google, another big after hours more last week. Netflix (aka the Widowmaker) rallying hard pre-earnings. Tesla taking in on the chin.
Odd Block: Calls trade in Orbitz Worldwide, Inc. (OWW), large spread trades in iPath S&P 500 short term futures ETN (VXX), calls trade in Turquoise Hill Resources Ltd. (TRQ), and puts trade in China Ming Yang Wind Power (MY).
Xpress Block: No Viceroy today - Let's play the trading patterns guessing game!
Listener Mail Extravaganza: Whoa! We’ve got mail!
- Comment from Thepostguy “Not surprised by download volume”: Dear Option Block crew - Listening to the latest episode and hearing Mark's comment over the amount of downloaded hours of OB, this doesn't surprise me at all. This show is one of the very few sources of excellent option and industry content that I honestly cannot believe is free. The balance of viewpoints between each panelist brings a unique perspective that gives us great, actionable information. For myself, I work full-time and run a small side business. I managed to blow up an equity account in '08 and came to options as a way to balance the amount of risk to the 'market'. I find myself timing my evening walks to the length of your show content....if that is any indication of how this listener values your programs. When will the store be open that we can purchase our own fedora hats? Regards, Phil.
- Question from Jeremy - Hey Folks: Great show! Keep up the great work. Now that we have seen the success of Weeklies, do you think we will see Dailies? Or do you know how one could get exposure to daily expiration on such products as SPX? I noticed the CBOE has asked permission to start dailies, but I have not seen any product. I would expect the interest in such a product would be popular as the edge one might need to achieve to expiration can be smaller, but the end result compounded could be greater over a period of time if there are more opportunities to trade that position. Cheers, Jeremy
- Question from Meeshal: I trade index options on the Indian CNX Nifty Index (Bloomberg NIFTY: IND). Two weeks ago, with the Index at around 5300, I had sold 5800 calls expiring on the 26th of September. I did not sell the corresponding puts immediately as the market had run up over the past two days and I thought I could get a better rate if I waited a day or two. Since then, the market has run up some 11% and is currently trading at 5900. Two days ago, at around 5750, I bought back the 5800 September calls and sold the same number of 6000 October calls (expiring 31st October). Since then the price of the October calls has almost doubled. Would appreciate any ideas on how to get myself out of this mess. Thanks. P.S. Will share more details if needed.
Around the Block: Earnings! - Thursday is a big day with Southwest, Ford, Zynga, Microsoft, and Amazon. Apple on 10/28.
Option Block 284: The Tosaw-Giovinazzi Show
Trading Block: Google up $43 after market. How long can the VIX go? Are we looking at the bottom? Gold reacts to the Fed tapering announcement.
Odd Block: Calls trade in Ingersoll-Rand PLC (IR). Unusual activity in Cole Real Estate Investments (COLE). A put sale for income gone wrong in Seadrill LTD (SDRL). Trading all over the board in Real Goods Solar Inc. (RSOL).
Listener Mail: Question from Uncle Al: I've heard the term maker-taker many times in regard to options exchanges. Can you explain what this term means and what traders should be aware of? Thanks for this fantastic program.
Question from Ibn Sayer: I have a question for Uncle Mike Tosaw. He has discussed the problems with annuities several times on the program. I wonder is it possible to construct my own annuity using listed option contracts?
Around the Block: Google earnings, Goldman Sachs. Treasuries making a bit of a rally.
Option Block 283: Kick the Can
Trading Block: A huge drop in VIX cash. Gold also got crushed today. Plus, a very unusual trade in VXX.
Xpress Block: Everything on the equity options desk was active today
Around the Block: Upcoming earnings - Alcoa, Google. Waiting to see if Washington continues to kick the can.
Option Block 282: A Whole New Kind of Stupid
Trading Block: There was a mild selloff on the street today. VIX cash continues to creep north, as the shutdown continues. Did VIX call sellers get out in time? Potbelly to join the ranks of high-flying IPOs? Tesla gain back all of the "fire losses".
Odd Block: Calls trade in eBay Inc. (EBAY), calls trade in Dex Media Inc. (DXM), and puts trade in Miller Energy Resources Inc. (MILL)
Xpress Block: A lot of Washington, rates and the dollar.
Strategy Block: Given the current increase in VIX, how can gamma play a role in an out-of-the-money credit spread?
Question from Destin - I know you guys have discussed the optimal collar construction in the past. How do you guys decided between that construction vs. a more traditional zero-cost construction?
Around the Block: Shutdown...Shutdown...Shutdown
Option Block 281: It’s Time for Histrionics
Trading Block: The shutdown dance continues. VIX cash break the 17 handle. Tesla in a frenzy after car fire. Ackman/Icahn/Herbalife debacle. CBOE glitch causes routing issues for NASDAQ.
Odd Block: Puts trade in Covanta Holding Corp (CVA), calls trade in the SPDR Dow Jones Industrial Average ETF (DIA), collar trades in Consolidated Edison, Inc. (ED)
Xpress Block: A ton of two-sided paper, e-mini activity and Tesla.
Mail Block: Mega mail block, that is.
- Question from @Metegia (Ian) - @Options Great show! Could you please mention the date of the show at start? Intros, trading block, vol, but no context around date (Jun 4). Thanks!
- Mega Question from Richard D - Mark and Team, First let me say I LOVE your podcasts. I'll even listen to outdated episodes of the option block because in addition to the knowledge I can gain, you guys also have a great rapport with one another and are very humorous! Great job starting all this Mark! I wish you continued success. Now for my post (this is my 2nd post. My first post was on skew.) I've been trading options as a retail investor for about 2 years now. Its been an interesting experience. I generally trade vertical spreads in lieu of stock positions or occasionally directional calendars or diagonals. Although I have had some success with verticals I don't feel I am "optimizing" my positions. For example, I'm not always sure how far out to make the short position or keep the short closer to the long and trade more quantity. Also, sometimes I've put on verticals that are 3-4 months to expiration, only to find the underlying make a large move in my direction but the vertical not performing nearly as well! This not do to a major volatility change but more because it seems that they are so far out from expiration. I'm also not clear when a vertical is a "good deal" vs just going long the call or put. I have heard you comment many times about the skew in the OTM options making options look attractive, for example I think in this episode you mentioned Facebook. I have still not gotten to the point to recognize how to identify these. So my questions are:
- 1. Could you give an example using let's say Facebook, yahoo, or tesla on what a vertical looked like in the past and one that looks more attractive now?
- 2. Could you talk about tools that can help identify when verticals or even time spreads look "favorable"? Having a full time job and not having the money or time for a coach makes those options out of the questions. Now this being said, the spread may look favorable, but unless you hold to expiration it seems your short could remain at that skew quite a long time or even become more skewed, so I am not sure this is a great vertical strategy (I guess you'll let me know!). Tools for the retail investor could also be a good idea for a show, either the bootcamp show or another one. Thanks again, Richard
Around the Block: More shutdown nonsense ahead - all eyes on Washington.
Option Block 280: Pre-Shutdown Put Bonanza
Trading Block: Shutdown fears hanging over the market. Vol surging back into the marketplace, but Bloomberg says realized vol is nonexistent.
Odd Block: Calls trade in Northstar Reality Finance Corp. (NRF), calls trade in YPF SA (YPF), and puts trade in Intrexon Corp (XON)
Xpress Block: How has the potential of a shutdown affected OX customers? More trading patterns!
Strategy Block: A risk management and annuities rant.
Around the Block: The big deadline approaches.
Option Block 279: OTM Fly Breakdown
Trading Block: There was a mild rally today. All Facebook all day at OX.
Odd Block: Calls trade in Juniper Networks, Inc. (JNPR), puts trade in iShares MSCI Australia Index (EWA), calls trade in Hertz Global Holdings, Inc. (HTZ), and risk reversal trades in St. Jude Medical (STJ).
Xpress Block: Biotech, mobile, and hedging activity pouring in. What are the GLD traders trading? Let’s take a look: 1-SPY, 2-SLV, 3-APPL, 4-FB, 5-DUST (daily gold miners bear 3X ETF), 6- JCP, 7- USO, 8- GDX (market vectors gold miners), 9 - GE, 10 – TSLA. What about SLV? 1-SDS, 2- GDX, 3-USO, 4-VXX, 5-SSO, 6-FB, 7-TZA, 8-SCO, 9-TNA, 10-AAPL.
Mail Block: What do you want to know?
· Question from Nocturne: trying to understand OTM butterflies. What’s a use case for an OTM fly vs. a simple vertical or ratio? Very confused.
· Question from “Joe”: I haven’t been trading options for very long so forgive me if I’m out of line. I’ve been listening to your show for the past six months and find it very informative. But I also wonder if many of the concepts you discuss are simply over the heads of the typical retail trader such as gamma, vega, implied volatility, etc. I know I’m frequently confused by some of these topics. Does retail really need to know all of this stuff or is a more straightforward approach (like if you sell this option, your max loss is x, your max gain is y, you have z days until your trade expires, etc.) a better way to reach the masses without scaring them or putting them off options? I hope you read my question but, if you do, to avoid embarrassment please just refer to me as “Joe”.
Around the Block: Debt debate and earnings approaching
Option Block 278: Fading the Shutdown
Trading Block: It was an aggressive day on the street, with a lot of love for Apple, up 20%. Call stupids go up in VIX. Talks of Blackberry selloff continue.
Odd Block: Puts Trade in Xilinx Inc. (XLNX), calls trade in Sierra Wireless Inc. (SWIR), calls trade in Covidien plc. (COV)
Xpress Block: Today’s Xpress Block will feature a guest: Daril Wagner, Product Manager at OX, who will discuss some new tools available to clients - including the Trading Patterns and Options Patterns tools.
Strategy Block: Calendars vs. butterflies
Around the Block: The debt ceiling kerfuffle is back!