The Option Block
Option Block 320: Filling Your Britches with Fear
Trading Block: A mild selloff on the street today - a resounding meh! Congrats to Andrew for passing the Series 65 exam! A big day for energy. VXST: Is there any interest there?
Odd Block: Calls trade in Plug Power Inc. (PLUG), calls trade in MeetMe Inc. (MEET), call buyer with stock in Technology SPDR ETF (XLK), and buy-write in Encana Corp. (ECA)
Xpress Block: An update on energy/nat gas trading at OX. A very quiet day; are we in the eye of the storm.
Strategy Block: Uncle Mike Tosaw discusses some things to consider if you want to collect some income while still being long a stock.
Around the Block: Not much on the earnings front. Ukraine. Boeing.
Option Block 319: Why Would Anyone Do That?
Indexes are at the same level as this morning but the S&P 500 could hit another record close. VIX high on the continuing drama in Ukraine. Staples falls on disappointing quarterly numbers. Federal Reserve data released on Thursday. Ukraine and Nat Gas. Jobless claims Thursday - Nonfarms Friday.
Puts trade in James River Coal Company (JRCC), puts trade in CommonWealth REIT (CWH), buy-write traders in MeetMe (MEET) and long close in SPDR KBW Regional Bank ETF (KRE)
Alex clears up the confusion caused by the upcoming dividend of the Qs. Soda Stream lit up the tape late in the session.
Question from J. Charles - My question for the all-star panel is about analytics platforms. I have heard you guys mention a variety of different suites, live LiveVol. I pretty much just use my brokers tools and they work fine for me. I can pull up the options chains, click on the strikes and options I want to trade, click on the option to enter a trade and all that stuff. I can also pull up skews and research. It really does the job for me. What is ti that these other platforms offer you that would be worth paying $200+ a month in extra fees? Sorry but I am no an OX customer - although the show is pulling me in that direction. Hope that does not hurt my chances of being featured on the program.
Comment from Bryan Nic - @Options Just pulled up OB on your app. Hundreds of episodes waiting for me. Thats serious streaming goodness. Commute is covered now. Thx.
Question from Avent - Bought 50 ZNGA Mar 5 calls for $.17 last month. They are sitting around $.60 now. What should I do - sell? Sell half and let the rest ride? Roll to April 6 calls for $.28? Take the stock and then write covered calls against it? I am still mildly bullish on ZNGA, but worried about a near term correction.
Question from Phillip Gregory, Dallas, TX - I like your advice about writing puts to get long stock. But I keep hearing people warning me about gap risk. What exactly are they talking about? Is this something unique to options or are limit stock orders just subject to gap risk?
Option Block 318: The Putin Puts
Trading Block: Putin’s show of force in Crimea spooks the street. VIX cash sails back above the 16 handle. Ukraine and Nat Gas craziness. Alex has a story: Trading firm Jump Trading LLC gives $25 million to medical research project.
Odd Block: Puts sellers trade in Market Vectors Russia ETF (RSX), calls trade in The Fresh Market Inc. (TFM), cpreads trade in EXACT Sciences Corp. (EXAS), and put buyers trade in JC Penney (JCP)
Xpress Block: The dominate trading at OX today was in metals, crude oil, and nat gas - coffee hit a record high.
Strategy Block: Tosaw reaches out to all the eternal bulls, such as himself
Around the Block: What will Putin do? Is Argentina on the back burner for now? Goldman’s big analyst meeting is tomorrow (3/4). Jobless claims on Thursday, and non-farms on Friday.
Option Block 317: The Old Goldman Bait and Switch
Trading Block: A mild rally on the street today. JCPenney on the move, jumping as high as 26%, its greatest one-day percentage gain in least 30 years! Tesla announced on Wednesday its big expansion plans will be partially funded through a $1.6 billion bond issue. Goldman’s investor day study.
Odd Block: Call buyers in American Axle and Manufacturing (AXL), both calls and puts trade in CBL & Associates Properties, Inc. (CBL).
Xpress Block: Some hedging going on: VIX call buying, SPDR put buying. Customers seem to be getting nervous.
Mail Block: The all-stars will take your questions now.
- Question from Concerned Spreader: I have a question for the mail block on the option block program. I would like to know if there is a special procedure for entering ratio-type spreads on the OX website. Whenever I try to enter any spread trade, from the XSpreads ticket, it always defaults to the same size for each leg. When I try to change that, it gives me a popup saying that each leg must be the same size. I wanted to buy some calls but did not have enough capital in my account to also sell the equal number of puts to finance them. So I wanted to trade what amounted to a risk reversal on a ratio. I tried simply adding a leg to my call trade ticket without success. I tried the combo, straddle, butterfly and condor tabs in the XSpreads ticket also with no luck. I suppose my only alternative is to execute the legs separately and then incur multiple ticket changes. Perhaps OX need to ass a ratio tab to the XSpreads ticket? Please let me know if I am missing something obvious.
- Question from NTaleb - Why do you think so much options unusual activity is focused on calls instead of puts? There are just as many negative surprises as positive surprises lurking out there.
- Comment from Chitim - Just used the app to listen to option block during my flight to San Fran. Always had problems streaming your stuff on my HTC One because Android sucks for streaming podcasts. But this worked like a charm! I downloaded it ahead of time and it was ready to go when we took off. Definitely preferable to the inflight movie. Also, why does Andrew always sound so surprised to be on the show? Keep them coming!
Around the Block: There is a disconnect between realized and implied vol. Russian tough talk. SPX closing high…why can’t people accept the market at this level? Is it time to sell S&P? Volatility in the sovereign debt market is astounding. Astounding!
Option Block 316: The Great Put Roll Down
Trading Block: A strong rally on the street. Vol is holding up well despite the rally. SolarCity and Sina today after the bell.
Odd Block: Review from 12-30-13: Call buyers trade in Mattel Inc. (MAT). Plus, calls trade in Nvidia Corp. (NVDA), put spreads trade in WisdomTree India Earnings Fund (EPI), put buyers in New York Community Bank, Inc. (NYCB), and put sellers in Infinity Pharmaceuticals Inc. (INFI)
Xpress Block: Netflix, Priceline, Tesla all lighting up the tape. Facebook has become the new Lululemon.
Strategy Block: Uncle Mike Tosaw discusses how to protect a put spread.
Around the Block: Mobile World Congress may have big announcements in the mobile space. An update on SolarCity (SCTY). Jobless claims on Thursday.
Option Block 315: The Great Iron Fly Vs. Condor Debate
Trading Block: Market up 0.5%, Facebook buys WhatsApp for $19B, and Groupon takes a wild ride after hours
Odd Block: Put buying in Veeco Instruments Inc. (VECO), puts trade in iPath S&P 500 VIX Short Term ETP (VXX), put spreads trade in EcoLab Inc. (ECL), and put spreads trade in iShares MSCI Emerging Markets (EEM) ETF.
Mail Block: Alex wanted another go at Snowbird's question from last week.
- Question from Infimy - What is the ASPs favorite options analytics suite?
- Comment/Question from Hack3 - Bitcoin imploded after you guys trashed it on Options Block. Coincidence?
- Question from John King - @Options Could you discuss preference of Iron Fly to regular butterflies, ICs, etc? Always neutral or OK with one side in money? Timing?
Option Block 314: Late-Night Gamma Scalping
Trading Block: Catching an updraft on the street today. A decent slate of earnings helped bolster the market. New Fed Chief didn't completely destroy the market with her first remarks. WSJ writing about someone purchasing 3200 Feb $15 calls in Magic Jack before big newsletter mention. Big day for Apple.
Odd Block: Put sellers finance call buyers in Mechel OAO (MTL), and calls trade in E Commerce China Dangdang (DANG).
Xpress Block: The classic names were lighting up the OX desk today: Apple, Solar City, Facebook, Tesla, and Priceline. Plus the return of the Ideas Hub game!
Mail Block: Mark’s favorite segment.
- Question from Anath3ma - How are options stops triggered? Bid? Ask? Mid? If ask, am I then filled on the bid costing me the spread? Seems like it could be costly.
- Question from Snowbird - My friend and I like to by straddles going into earnings, but we often miss a great deal of the move that occurs after the market close. I know you have discussed this in the past by referring to the process known as "gamma scalping." I think I understand how it works - basically trading stock against your options to lock in profits - but I am cloudy on the mechanics. (FYI I am an OX customer). Let’s say I buy a straddle in my account with zero delta (50 delta call and put). Then let’s say the underlying rallies after the close and my straddle now has a 50 delta. I would then need to sell stock against that straddle to lock in my gains, but as far as the OX system is concerned, my straddle closed for the day with a zero delta. Will the system update with after-hours data to reflect the fact that my straddle now has a 50 delta, and if I sell short stock, I am essentially "locking in a profit" as opposed to naked shorting the stock? I suppose the alternative is to simply keep a large amount of free capital in your account on the off chance that you need to trade some stock against your positions in the after-hours, but that seems needlessly wasteful. Perhaps this is why you say "gamma scalping" is not viable for retail?
Around the Block: More earnings.
Marriott on 2/19; GRPN, HPQ, and PCLN on 2/20.
Option Block 313: Yelling at Yellen
Trading Block: A rather quiet day on the street. It has been a strange week for vol/VIX. Does this buyback draw a line in the sand at $500 for Apple? Icahn is dropping his call for expanded buyback program after getting little support. BATS is talking about launching a second options exchange after their merger. Bitcoin taking it on the chin since our last show. An exchange stopped taking withdrawals and it is crushing the price.
Odd Block: Puts Trade in iShares MSCI EAFE Index (EFA), puts Trade in ConAgra Foods, Inc. (CAG), calls roll in AuRico Gold Inc. (AUQ), and calls Trade in Boardwalk Pipeline Partners (BWP).
Xpress Block: Only two names really generated a lot of paper today: Tesla and Apple.
Strategy Block: Uncle Mike discusses gamma combined with a credit spread, a preview of his upcoming webinar.
Around the Block: The last of the earnings: CSCO - 2/12 after, NVDA 2/12 after. Debt ceiling back on the table. First remarks from new Fed chief tomorrow.
Option Block 312: Juicy Buffett Puts
Trading Block: Market up 1%. Is the brief correction over? VIX far below the 20-handle. Twitter taking it on the chin; down 23% off news that subscriber growth is slowing. Zynga back up in the $4.5 range again. Is it risk reversal time again?
Odd Block: Giant collars go up in Zynga Inc. (ZNGA), puts trade in NuPathe Inc. (PATH), calls trade in Global X Uranium ETF (URA), and giant collar trades in TD Ameritrade Holdings Corp (AMTD)
Xpress Block: Big volume in Yelp, Green Mountain, and Twitter. More weeklys in the Ideas Hub
Question from Nick Tate - Do you guys think Bit Coin derivatives are on the horizon? Would OX trade it? What would the call skew look like in something like that?
Question from Inchon06 - Mr. Mass Destruction sure seems to be pretty happy selling puts. Hypocrisy or just taking advantage of "Buffett Premium"?
Around the Block: Whats left on the earnings horizon? Non-farms ahead.
Option Block 311: VIX Drops the Ball
Trading Block: An aggressive selloff today, S&P off 41 handles, NASDAQ down 107 handles. VIX cash passes the 20-handle. A weak start to February. Apple and GLD were the lone greens on the screen today. That makes for a happy Tosaw. The OIC announced today that 389,821,135 total options contracts traded in January, the seventh highest monthly volume ever. TTWO earnings after the bell.
Odd Block: Collars go up in Two Harbors Investment Corp. (TWO), call buyers trade in Powershares DB Agriculture (DBA), and collars go up in Seattle Genentics, Inc. (SGEN)
Xpress Block: A difficult day at the OX desk. All hands on deck after the opening selloff.
Strategy Block: Uncle Mike Tosaw expands on his discussion on rolling down puts.
Around the Block: More Earnings-palooza:
CME 2-4 before; RDN 2-5 before; DIS & TWTR 2-5 after; GM, LNKD, and ZNGA 2-6; CBOE 2-7.
Option Block 310: GOOG After Hours Mania
Trading Block: The “Correction” is over. Earnings Trading Review: GOOG and CME after the bell. FB - ATM straddle went out around $6, traded nearly $3 through that today. F - Announces "best year ever" but closes nearly unchanged on the day. APPL - That $460 put is not looking so outlandish now.
Odd Block: Puts sales trade in Kellogg Company (K), puts buyers trade in Newell Rubbermaid Inc. (NWL), and puts sellers and buyers trade in Overstock.com, Inc (OSTK)
Xpress Block: A big day at OX, driven by all the earnings events. Perplexed by Google.
Mail Block: Question from C_Dog - What is a scenario where you would consider a ratio vertical spread (1x2, 1x3) going into earnings?
Comment from Go Husky - I only trade options around earnings. Am I crazy?
Around the Block: A quick update on Amazon, Google and Chipotle. Upcoming earnings: DIS 2-5, GM 2-6, LNKD 2-6, CME 2-4, ZNGA 2-6, TWTR 2-5
Option Block 309: The Big AAPL Earnings Show
Trading Block: Markets reverse most of today’s slide late in the session. Lots of index volatility, but not many buyers. VIX coming off later in the session. Big Apple earnings after the bell, and right in Tosaw’s crosshairs. The International Securities Exchange (ISE) has not appealed a federal court decision that rejected ISE's attempt in the New York courts to challenge S&P Dow Jones Indices’ (SPDJI) rights to control the use of the S&P 500 and the Dow Jones Industrial Average as the basis of index options.
Odd Block: Puts trade in iShares MSCI Emerging Markets ETF (EEM), calls trade in Time Warner Inc. (TWX), and calls trade in Mechel OAO (MTL)
Xpress Block: Nat Gas and the 10-year very busy on the desk. Apple, MasterCard, Caterpillar, F5 Networks and VIX also very active.
Strategy Block: It’s fruit day! Tosaw also discusses his current position in the Russell.
Around the Block: Apple update, Fed meeting, and President Obama’s State of the Union address.
Option Block 308: The Scale from Smart to Cowboy
Trading Block: An aggressive selloff sparked by weak existing home sales. VIX cash back in the mid-teens. Microsoft after the bell. Netflix tearing it up.
Odd Block: Call buyers in Flagstar Bancorp, Inc. (FBC), closing put buys in Royal Bank of Scotland Group (RBS), calls trade in YPF SA (ADR), calls buyers trade in AVG Technologies N.V. (AVG).
Xpress Block: Alex gets on a soapbox to discuss tax reporting season and understanding how margin works. Netflix, Apple, and Herbalife.
Mail Block: Question from John King: @Options Any comments on this style of option trading: smart, cowboy, or in between?
Around the Block: Google, Chipotle, and Amazon: 1/30 after; Facebook 1/29 after; Ford 1/28 before; EA 1/28 after; Apple 1/27 after.
Option Block 307: Idiotic Upside Calls
Trading Block: A mild selloff early in the session. SPX weeklies up 98% in 2013. SPX & VIX options hopefully getting extended hours in 2014. Best buy taking in on the chin after a poor holiday season. Chuck E. Cheese is worth a billion!
Odd Block: Calls trade in Eldorado Gold Corp. (EGO), calls trade in Amarin Corporation (AMRN), and calls trade in Insmed Incorporated (INSM)
Xpress Block: Intel, Best Buy, and DR Horton were popular on the OX desk today.
Mail Block: Keep those questions rolling in!
- Comment from Shane Hamilton: Only on the Option Block does Andrew toss around words like "bereft". #alteredstate
- Trading resolution from Britt Dowd: To finish building my foundation so that I can finally focus on trading options.
- Follow up from Richard: Regarding Jack's question, would these have to be put based front spreads since you'll ultimately have net uncovered short positions? I didn't think naked calls, as you would have in a front spread, would be eligible for use in retirement accounts? Thanks.
- Regard this question from Jack: I know you guys are not tax advisors, and so nothing you say can be taken as certain in any answer to this question. I am a small time trader, and at the moment cannot afford a CPA with trading expertise in options to do my taxes. So I am wondering if you can talk about the potential tax consequences of front spreads, especially when used as covered call replacement. I've had good success with this strategy, and I would like to move it into my margin account this year, instead of just using it in the IRA to avoid the tax headache.
- Question from Luke Davis: Mark, in show 302, you said in answer to a listener question that using a six month or one year LEAP was good for a stock replacement strategy. Is there any reason you wouldn't go further out than that? For example, I am currently using this on Microsoft and Ford, but with the Jan 2016 ITM calls. Keep up the informative and entertaining shows, and happy New Year!
Option Block 306: Crazy Biotech Action
Trading Block: A mild selloff on the street. Still not many bids for volatility, except in select names. VIX due for a spike according to the Wall Street Journal. NPR calls options "The riskiest place to invest outside of penny stocks."
Odd Block: Puts trade in Clovis Oncology Inc. (CLVS), puts trading in Alnylam Pharmaceuticals Inc. (ALNY), puts trade in Five Below Inc. (FIVE), and calls trade in China Finance Online Co. (JRJC).
Xpress Block: A big mover on the OX desk was LULU. Stealth selloff in crude and the 10-year. Beam bought by Suntory today for $16B.
Strategy Block: Tosaw discusses one small piece of trading spreads with 3-4 legs.
Around the Block: Earnings around the block: BAC on 1/15; CITI, GS, and INTC on 1/16.
Option Block: Apple Kills Weekly Volatility
Trading Block: Alcoa kicking it off after the bell. Apple crushes weekly premium by announcing a late earnings date - 1/27 as opposed to 1/23 like many expected. Many weekly options on the 1/24 cycle were cut in half.
Odd Block: Review from Jan 7: Call buyers in Plug Power Inc. (PLUG), puts sellers trade in BlackBerry Ltd (BBRY), calls roll in Cheniere Energy, Inc. (LNG), and calls roll in American Realty Capital Properties (ACRP).
Xpress Block: Alex discusses premium harvesting for futures.
Mail Block: What do you want to talk about?
- Tweet from Ziaur Rahman: what would be a good place to learn about options trading? I’m interested in learning the basics on options trading.stock/index futures, then also discount broker to trade.
- Question from Jack: I know you guys are not tax advisors, and so nothing you say can be taken as certain in any answer to this question. I am a small time trader, and at the moment cannot afford a CPA with trading expertise in options to do my taxes. So I am wondering if you can talk about the potential tax consequences of front spreads, especially when used as covered call replacements? I've had good success with this strategy, and I would like to move it into my margin account this year, instead of just using it in the IRA to avoid the tax headache.
- Question from Ian Getz: I'm curious how you find good options related articles on the general internet with such a generic word as "options"? Any tips? Articles on the general internet with such a generic word as "options"?
Around the Block: Upcoming Earnings: CITI, GS, and INTC: 1/16, BAC 1/15.
Option Block 304: Polar Vortex Be Damned
Trading Block: Another day, another mild selloff. Crazy fat finger print in gold futures. Apple taking it on the chin. Polar vortex = Boom market for snow derivatives?
Odd Block: Put sellers trade in Wyndham Worldwide Corp. (WYN), put sellers trade in iShares MSCI Japan ETF (EWJ), closing call sellers trade in iPath S&P 500 VIX Short Term Futures ETP (VXX).
Xpress Block: Apple, Twitter and Facebook: the three perennial favorites on the OX desk.
Strategy Block: Uncle Mike Tosaw discusses mortgages. "Should I pay it down or keep it for a tax deduction?"
Around the Block: Jan 6: Factory Orders, ISM Non-Mfg Index. Jan 7: International Trade. Jan 8: ADP Employment Report, EIA Petroleum Status Report, FOMC Minutes. Jan 9: Jobless Claims. Jan 10: Employment Situation
Option Block 303: Wither Single Name VIX?
Trading Block: Most of the major indexes selling off about 1%. A lot of put activity on the street. The numbers are out for 2013!
Odd Block: Puts trade in SPDR S&P 500 ETF Trust (SPY), puts trade in Yahoo! Inc. (YHOO), review from 11/25: Ziopharm Oncology Inc. (ZIOP), also Titan International Inc. (TWI), review from 10/24: Jive Software Inc. (JAIV), also Covanta Holding Corp. (CVA), review from 06/27: New York Community Bancorp, Inc. (NYCB), also Goodrich Petroleum Corporation (GDP), and review from 10/03: YPF SA (ADR)
Strategy Block: We have a special guest for today's strategy block, featuring Andrew Giovinazzi. He discusses some vol structure and strategies ahead of the Bernanke announcement.
Around the Block: What to watch post-Fed? Alcoa 1/9.
Option Block 302: Looking Forward, Looking Back
Trading Block: Predictions for 2014
- Mark - I wish they could finally get the Minis right. Hopefully someone wiIl figure out how to aggregate spread flow across exchanges to improve spread execution, less exchanges, less fixation by retail on VIX/ETFs and more migration to futures/futures options.
- Andrew - I like a VIX low print prediction. Where the market is going and the forgotten sectors in 2013 and how they will fair.
- Alex - Cash settled equity options (that would be pretty sweet). Hope the tax folks don't pass mandatory mark to market. No transaction tax. After hours trading. Five year Leaps. Adjust maker/taker to discourage HFT. An industry standard for delisting zero open interest series. Electronic trading for the options on the big SPU.Predictions: More consolidation - I was wrong about this occurring in 2013.
- Tosaw - Another big year for SPX. Waiting to see Apple earnings tomorrow before I can give a prediction for 2014. I would like to see more volume in the jumbo SPY. Feeling "straddlish" for 2014.
- Mark - I predict more exchanges, something occurs to clip the wings of this rally in 2014, not much appreciable Vol in the marketplace until the next big government debate at end of Q1.
Xpress Block: Twitter was the only big name on the desk. A very important discussion on the 1256 issues.
Mail Block: Tell us what you want to hear.
- Question from Jason KruseRUSE @Jkruse81- @Options thought about a strategy of maxing out margin to buy a lot, then selling a deepish ITM covered call. Is there a name for that? -@Options or have you guys talked about something like that where I could get a better idea of risks?
- Comment from Gary Barisi - That much action because they got a $50M insurance claim!?
- Question from Jack @Itrumpdoom - Option Block Front or Back? I apologize if this question has been covered in the last year and I missed it, in dealing with ratio vertical spreads, will you please explain what makes a front spread front, and a back spread back? Thanks
Option Block 301: Twas the Day Before Christmas
A strong rally on the street on the back of a strong consumer sentiment - A sea of green. Everyones favorite fruit company, Apple up during the day.Some substantial moves in CBOE. VXX hits a low for the year.
Call buyers trade in Meritor Inc. (MTOR), put sellers trade in Ambac Financial Group, Inc. (AMBC), call sellers trade in Select Sector SPDR Financial (XLF) and huge rolls in Hercules Offshore, Inc. (HERO)
Apple, CBOE and social networking were all seeing a lot of action today.
Question from Dylan, Fort Nelson, British Columbia: I have a question on diagonal spreads today. Is there a good way to capitalize on the long vega these spreads generally have without actually selling the long vega option? I've been looking at using the premium gained in the option in a Vol pop to buy "free" puts in VIXM or VXZ and extract some of this premium instead of just watching the Vrol grow and then go away. Maybe a good one for Uncle Mike as I know he's a big diagonal fan. Thanks,