This episodes co-hosts are:

• Matt Amberson, Principal, Option Research & Technology Services
• Chris Hausman, Portfolio Manager, Managing Director of Risk, Swan Global Investments
• Jon Cherry, Global Head of Options, Northern Trust Capital Markets

2018 Options Year-In-Review

Tricks of the Trade: Advocating for the value of options to clients

The Buzz: Barron's names top 1,200 advisors of 2018

Office Hours: Listener questions and comments

• Question from Liam Hardy - Thoughts on options sellers hedge fund blowing out from recent nat gas spike? Is this just another example of getting greedy selling options without appropriate risk management?
• Question from Neville T. - What are your predictions for the options market for 2019?

Options 101: Replicating Equity Exposure using Options

The Buzz: What do informed financial advisors need to know?

• FINRA Proposes Higher Position Limits for ETF Options Contracts
• Nine ETF index options contracts have been selected for a doubling of position limits if SEC approves FINRA's proposal.

Office Hours: Listener questions and comments

• Question from Charles Vera - Greetings AO crew (Mark, Chris, Matt, Eric and new entrant John). Love the show and have been listening for over a year and have caught up on most of the back catalog. I have two questions - one options related and one somewhat off topic but I just wanted to pick your brains. 1.) How much capital should I plan to set aside when selling puts for my clients? I'm looking at selling 5-10% OTM spy puts on a monthly or tri-monthly basis? But it seems like the margin requirements for this strategy are all over the place. Do they just vary by broker or is there some rule of thumb I should consider when tying up capital to sell puts? 2.) Do you think the recent market volatility will cause the Fed to reconsider its roadmap for raising rates in the near future? There aren't too many other developed economies that are putting the brakes on like the U.S. right now. Thanks again. Really appreciate all that you guys do.
• Question from Steve Giannakopoulos - Seems right that you can write 1 put option when you already own 100 shares of the underlying stock. Brokerage can lock and keep the 100 shares as collateral instead of holding cash as collateral. It doesn't happen though. Why? You could have your long 100 shares forced sell at the put option strike price if it's ITM and you get assigned. I read what you said, I just don't understand it. Thank you though.
• Question from SX78 - Now Trump is weighing in on this earnings call thing. Does this suddenly have legs? What will this mean for volatility going forward?
• Question from Liznder - If you had to start over with learning about and trading options what would you do differently?

The Buzz: The Return of Volatility Redux

Volatility is back again!

• What are your thoughts on the current volatility landscape? What should advisors be doing right now to manage this volatility and their client's expectations? What are you hearing from advisors right now?
• Financial Services Committee Unanimously Passes Hultgren's Options Markets Stability Act
• Will Bonds Protect in the Next Bear Market?

Office Hours: What do you want to know?

• Question from Andrews S. CFA - I know that in most trading accounts brokers will allow you to write puts with somewhere between 20%-50% margin kept in reserve. But am I correct in assuming that you cannot do this in IRA accounts - only cash secured puts? That dramatically increases the capital cost associated with this strategy. Since most of my clients are in IRAs I don't think I will be pursuing this for them. Do you think this limits the utility for RIAs since I'd imagine a large number of advisors fall into this category?
• Question from Mr. Bodine - What are the three main options strategies used by advisors?
• Question from TronS6 - What's your suggested minimum account size before I consider putting a client into options?
• Question from Matt Simpson - Are there any of the larger advisory firms that you feel have better understanding of options than others? I want more than someone who can just do 60/30/10. Maybe a nice covered call or collar plus a few speculative plays like verticals?
• Question from Misf3t - After all your data and research are you still hesitant to recommend any particular strategy for trading options during earnings season?
• Question from Douglas Tilley - Hello!--Regarding long stock substitution: 1. With call options, are deltas additive? I.e. why are (2) 40-delta calls so much cheaper than (1) 80-delta call? This seems like buying equivalent total delta for about half the cost. 2. For more accurate stock substitution, do you ever use the technique of buying an ATM call while selling an ATM put? (vs. buying calls for a desired total delta). What are the pros and cons (or nuances) of the 2 methods? I do notice that the 2nd method definitely requires more buying power, due to the short put. Thanks for all the education--D Tilley.

OCC Rebranded: OCC recently rebranded as part of growing role as a SIFMU, influential thought leader and steward of the US exchange-listed options industry. Through OIC, we are the leading educator of exchange-listed options to the investing public.

Options 101: The Wheel Trade revisited

• Why: Get paid to enter the orders that you're already entering in the stock market.
• How: Substitute cash secured puts for your limit stock buy orders and covered calls for your stock sell orders.
• Benefit: Increase income revenue from your existing trade.

The Buzz: What's the word?

• The Collapse of Lehman Brothers: A decade later. Takeaways, lessons and memories.
• OCC cleared contract volume up 10% in August. Overall exchange-listed options volume reached 426,237,903 contracts in August, up 12 percent from August 2017.
• FIA releases half-year report on futures and options volume. The total number of futures and options traded worldwide in the first half of the year reached 14.9 billion contracts, up 19.7% compared to the first half of 2017. Open interest, which measures the number of outstanding contracts, was 850.7 million contracts at the end of June, roughly unchanged from a year ago.

Office Hours: Listeners weigh in

Options question of the week: Some people look to analysts for their market outlook. We prefer to analyze actual #options positions. This week we're letting you join the fun. What do you think is the largest #options position in $SPY right now? No cheating! What does your gut tell you?

• SPY Mar 255.0 P
• SPY Oct 272.0 P
• SPY Dec 31st 320.0 C
• SPY Sep 300.0 C

Listener questions and comments:

• Question from LaRocha - My client fund are primarily in SMAs in the 20k-50k range. What is the best option strategy for these types of accounts? The time horizon for most of these accounts is at least 20 years with a long equity bias and fairly high risk tolerance. Thanks again. Just discovered the show and I'm learning a lot.
• Question from Liznder - If you had to start over with learning about and trading options what would you do differently?

Options 101: A review of the fundamentals

• Short Calendars
• What is it and why use it?
• Any other thoughts on the short calendar?

The Buzz: What do informed advisors need to know?

• The Dow just registered its longest stint in correction territory in nearly 60 years- failing to move 10% above the closing low hit earlier in the year.
• The majority of fund managers expect the next recession to begin in the second half of next year or the first half of 2020.
• Exchange-listed options mean opportunity for pensions and endowments.
• Best& Worst BDs for Advisors: J.D. Power — 2018
• Average satisfaction score - 726, up from 719 a year ago, on a scale of 1 to 1,000.

Office Hours: Options question of the week

We're talking about #Crypto #Derivatives at the @BlockchainVoiceConference. So this week we want to know which #Crypto product you'd like to see listed on a major venue next.

• 68% - Bitcoin options
• 8% - Ripple Options/Futures
• 18% - Ether Options/Futures
• 6% - Litecoin options/Futures

Listener questions and comments: What's on your mind?

• Question from Allen T. - Does it count as a calendar if it's on two different underlyings? Or is that more of a pairs trade?
• Question from Gall - How many options are actually traded by RIAs?
• Question from D Riley:I have a general question because I'm struggling with hedges. Do most people buy calls or put options as hedges? Do they hedge in, at or out of the money?

The Buzz: What do busy financial advisors need to know?

• Coffee with Cott from the Options Industry Conference.
• Earning Season and Options Trading
• ORATS Earnings Volatility Analysis

Options question of the week: Trading options during earnings season can be challenging. Some live for it while others avoid it. Do you hold options positions through earnings announcements? If so, what is your approach? Or do you prefer to trade just before/after the event? Or is it all too risky?

• 28% - Yes, Short Premium
• 20% - Yes, Long Premium
• 25% - No,Too Risky
• 27% - I trade around the event

OIC'S Annual Summit on Fundamental and Technical Analysis

• OIC recently hosted its annual Summit on Fundamental and Technical Analysis.
• How did that go?
• What was the reception for your panel?
• What is an important takeaway?

Office Hours: Listener questions and comments

• Question from Options Knight - Loving the AO show. Great stuff as usual from OI network. Was surprised to hear a whole episode about calendar spreads. Are there a lot of advisors out there doing calendars for their clients? Or is that more of an educational piece for the bleeding edge of the advisor space who are looking for something a little more compelling for their high-end clients? Either way I loved the episode and think more advisors should be doing this stuff. Just wondered what you boots-on-the-ground guys thought about the actual reach of the strategy.
• Question from FlyGuy - Hey what do you guys do with your long calendar spreads? Do you close out the short leg if the stock doesn't move then keep the long leg or just close the whole spread out?
• Comment from DaLegit - Great show on calendars. I'm still working up to that level. Not sure I'm ready yet but when I am you guys will be the first to know.
• Question from Teal C. - Can you do a show on short calendars? Why use? Pros/cons vs. long calendars? Maybe a cool backtest or two?

Options 101: Calendar & Diagonals

• This strategy combines a longer-term bullish outlook with a near-term neutral/bearish outlook.
• Variations?
• Profit/Loss and breakeven
• Volatility, time decay and assessment risk
• Calendars vs Diagonals - when should you use one over the other?
• Using long dalendars during earnings

The Buzz: What news do informed advisors need to know?

• OCC cleared contract volume increased 8% in May.
• Google search data reveals options trading search interest is roughly half of what it was in 2004.

Office Hours: Listeners weigh in

Options question of the week: Google Trends is full of interesting, and surprising, data. When you analyze the "options" search data you uncover some surprising results. Which brings us to this week's question: Which "sub region" is currently ranked 1 for overall "options" interest by Google?

• Illinois
• California
• New York
• Maine

Listener questions and comments

• Comment from TMal - So I have this exact thing going on right now, put diagonal with different futures underlying. 90-day difference, the Vegas act totally different, throw some futures spread risk in there, hard to quantify exactly what's causing the changes in the P/L, futures spread? Vol spread? Net deltas? Net thetas? It's complicated stuff. Nuances indeed holy cow. Plant the seed and let it grow naturally.
• Comment from AKeats - Just discovered the radio show, and I am absolutely hooked! Great content!
• Question from Brad K. - I'm learning a lot from you guys - particularly about the value of hedging. I also took your advice and switched to an advisor who uses options much more actively. Now I'm starting to spread my wings to the commodities particularly crude oil. I want to hedge my oil exposure with WTI options. Does the Swan DRS on crude use WTI or USO options? Also I would please like to know the panel's thoughts on trading options on commodities vs. equities. Any major differences I should be aware of? Thanks again and please keep the education coming our way.

The Buzz: Hot off the heels of the Swan CIO Summit

Highlights included:

• Making Vol Great Again
• Perspectives on Risk Management
• A Strategy to Define Risk
• Where Hedged Equity Fits
• Many Optiosn with Options

Office Hours: What do you want to know?

• Question from Allan Tullman - There was a lot of research last year regarding selling put options to harvest risk premium. Now that volatility is back is this an ideal time to harvest premium via put selling or does the increased volatility increase the probability of getting whipsawed?
• Question from Charlie C. - Quick Q for the show: What's the weirdest thing you've seen in the options market?
• Question from Seveny - When can we expect Swan Crypto? Sure would have been nice in the recent selloff.
• Question from Dajakal - Is there a good rule of thumb for when to use a ratio spread and how much of a ratio to use? 2X? 3x? More? Also what is best time or scenario for ratios?
• Question from Duffy - How do you handle the fixed-time aspect of trading options? Most of my client strategies have a 1-2yr time horizon so trading a 1 month or 3 month option doesn't really suit my needs.

Office Hours: It 's all listener questions today

• Comment from Avery - Interesting piece about when to fire your financial advisor on the street today. Your thoughts? https://www.thestreet.com/story/13747897/1/5-justifiable-reasons-why-you-can-and-should-fire-your-financial-advisor.html
• Question from B. Goldberg - I have a large number of SMAs with smaller balances (typically $5,000 - $10,000) from new clients. Most are younger clients willing to try their hands at newer products beyond stocks including options. What are some good options use cases for these types of smaller accounts?
• Question from Leslie Necing - Morningstar has an option-based category for their funds. But it includes everything from volatility funds to overlays so it 's hardly useful for comparison purposes. What categories should they include to provide more meaningful comparisons for people looking for options funds?
• Question from Scott Somer:How would movement to treat capital gains to FIFO for the underlying stocks be good or bad for the options market?
• Comment from Papa Scalp - What 's scary is how many "advisors" don 't have a clue, not even for portfolio protection or insurance.
• Question from FKnight67 - Is there one position or strategy that you feel applies best to the vast majority of financial advisors and asset managers.
• Question from Mark Clyde Brant:Will rising vol persist all year? VIX above 20, VXX above 40, half the time? What is the current version of the Swan process? Someone should back test how often fading the skew, by buying the cheaper options, wins.
• Question from Allan Tullman - There was a lot of research last year regarding selling put options to harvest risk premium. Now that volatility is back is this an ideal time to harvest premium via put selling or does the increased volatility increase the probability of getting whipsawed?
• Question from Nevos - There are a ton of tickers for the Swan DRS. Are they pretty much all the same or is there a primary fund that I should look for?
• Question from Bill T. - Is there a platform you recommend for advisors looking on onboard more options clients?

Tricks of the Trade featuring Special Guest Co-Host: Jon Cherry, Head of U.S. Options, Northern Trust - Capital Markets.

• Looking back at the recent tariff-induced market volatility.
• We've seen violent selloff and equally violent rallies.
• What are your thought on the recent market volatility?
• How can options be implemented on behalf of clients in these types of markets?

The Buzz: What do informed advisors need to know?

• The numbers from OCC are in for February - and they were good (surprise).
• U.S. options-based funds grow in number despite volatility lull: study, Reuters

Office Hours: What is on your mind?

• Question from Ed Bankert - Debating on using covered calls or short puts. Which is better for a less experienced options trader who wants to make money?
• Comment from Tom -Let's be honest. If any of us had size bitcoin we would have sold out ages ago and probably be kicking ourselves right now.
• Question from JohnnyBananas -Quick question, if you buy a put option and the strike price is $5 and the stock drops to $3, is it still worth $ even if it's 3$ under - even though my strike price is 5$?? So if the stock price is $7 drop to 5(strike), but end up going to 3, my option is worth ~$4? So I don't have to sell if I reach my strike price? Is this the same with call options? What confuses me is the strike$. #learning