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!