The Option Block

Trading Block: U.S. stocks fluctuate on earnings a crude oil retreats with gold. CITI before the bell tomorrow. Stock = $45, ATM straddle - $1.40 / approx. 3%. CME traders say chances of April interest rate hike are zero. Earnings: Thursday (all before bell) - Bank of America, Wells Fargo, Delta Air Lines, PNC Financial Services, BlackRock.

Odd Block: Calls trade in Kate Spade Inc (KATE), puts trade in Seagate Technology PLC (STX), and calls trade in Freeport-McMoran (FCX)

Mail Block: Listener questions and comments

• Question from AJ M. - I hope you guys can calm my frayed nerves over this DOL thing. What exactly is going on? Am I not going to be able to sell calls in my IRA anymore? Since the vast majority of my assets are in retirement accounts this would be a HUGE hit to my savings. Please tell me this is not the case. Is there anything I as a retail stock and options trader can do to help prevent this? What if I open an international trading account? Would that do the trick? Help - I need you guys to talk me off the ledge.
• Question from Jeremy M. - Hey Folks: I thought this might be a great question for The Option Block: Would you mind talking about the "Limit Order Display Rule: Exchange Act Rule 11Ac1-4." How it can help the retail investor? How the rule is applied to SPX and VIX options? When reading the actual rule, it can get a bit confusing because its talking about "odd lots" and "block size order," etc. Would be good to get your take on it. Perhaps the Rock Lobster may have an interesting perspective as a former market maker. Great program! Cheers, JM

Around the Block: This Week in the Market

• Apr 15: Consumer Sentiment
• Earnings on Friday - Citigroup

Trading Block: The fear gauge just hit an all-time high. Turbulence for Delta Air Lines, Inc.: Two earnings trades for DAL stock. Under Armor selling off over 5% today, and over 50% since last week. Earnings today after the bell: Alcoa, Bank of the Ozarks

Odd Block: Calls trade in SPDR GLD Gold Trust (GLD), puts trade Avon Products, Inc (AVP), and calls trade in Steel Dynamic, Inc (STLD)

Strategy Block: Uncle Mike Tosaw selling a call spread against a stock you own vs. selling a covered call.

Mail Block: Listener questions and comments

• Twitter Conversation/Question from @4tee7 - Time to heavy my position $UA #masters #jordanspeith #chef #curry #goldenstate #dubnation. ‎‏@jfhotte Apr 8 @4tee7 UA was overbought already before the split. I see the stock @ 38$ next week @4tee7 3h3 hours ago @jfhotte, good call (sold the class c shares before I felt too much pain), get back into class A once the dust settles $ua @4tee7 I do not understand man... My puts premium at 1.5 day before split.. Today stock is down 4.5% and my option is worth 1.4 ...thoughts? @jfhotte I got nothing, you should collecting on that one??? Is there a trade cost (whose the broker)? @4tee7 what I got after split UA1160715P70 (UA1) it is up only 15% today while the stock down 5%, does not make sense.. @sellputs @Options @jfhotte @sellputs @Options let me know when you find out, I am curious
• Question from Fayecuzername - Hey all, quick question. I am a hopium addict at times. Andrew discussed puts and stock, rolling down the put as the stock drops. Is the play to buy stock with the proceeds and dollar cost average or use the proceeds on another trade? This assumes you continue to like the stock. Thanks, you all are my trading methadone.

Around the Block: There is still time to make IRA contributions

Trading Block: Today we are joined by Nick Howard, Founder & CEO of Bantix Technologies, LLC, and creator of QuikStrike. Stocks tumble amid choppy start to April; Dow drops more than 150. OCC gratified by changes to DOL fiduciary rule that benefit users of listed options. Ally Financial jumps into brokerage business. Earnings: Thursday - Rite Aid, CarMax, ConAgra Foods (all before bell).

Odd Block: Calls trade in Crown Castle Inter. (CCI), calls and puts trade in iPath S&P 500 VIX mid term futures (VXZ), and calls trade in PowerShares DB US Dollar index ETF (UUP).

Mail Block: Listener questions and comments.

• March Madness Poll: TradeKing was the final winner. Also, big congratulation to all our contest winners.
• Question from MJHill - Earnings season is approaching. What are your views on using an ATM long straddle as an earnings play? I plan on buying the ATM straddle about a week before earnings and closing the position the day before earnings are released. I am hoping to make some money on the increased volatility that comes immediately before earnings, but would like to hear your opinions.

Around the Block: This Week in the Market: The first full week of April and of the new quarter gets under way as the Federal Reserve releases the minutes from its last session. A new round of quarterly earnings is not far off.

Trading Block: March Madness Poll - Winner: TradeKing, which (beat Interactive Brokers in the finals. Drawing winners will be announced on Thursday's Option Block. An update on March options activity from ISE. OCC cleared contract volume up 4% in March. CME Group notches record ADV in Q1, while FX volumes fall. Stocks to Watch: Apple, Tesla, Alaska Air, Intel, Brocade.

Odd Block: Calls trade in Nike Inc. (NKE), calls trade in KKR & Co. (KKR), and calls trade in Reynolds American, Inc (RAI).

Strategy Block: Uncle Mike Tosaw discusses the importance of knowing your exit in a trade before your entrance.

Mail Block: Listener questions and comments

• Question from Bruno - Unusual activity in CPD puts. The customer bought and the stock rallied the next day. Does UA actually predict anything?

Around the Block: Earnings!

• Tuesday - Walgreen's, Darden Restaurants, International Speedway Corporation
• Wednesday - Bed, Bath & Beyond, Constellation Brands, Monsanto Company
• Thursday - Rite Aid, CarMax, Con Agra Foods

This Week in the Market:

• The first full week of April and of the new quarter gets under way as the Federal Reserve releases the minutes from its last session. A new round of quarterly earnings is not far off.
• Apr 4: Factory Orders
• Apr 5: International Trade, JOLTS
• Apr 6: FOMC Minutes
• Apr 7: Jobless Claims

Trading Block: March Madness Poll - Vote today for TradeKing or E*Trade to find out who will go to the finals against Interactive Brokers, who beat OptionsHouse to make the final round. Stocks higher as the end to a rocky quarter nears. Yellen killed the strong dollar rally.

Stocks to watch:

• Tesla – new electric Model 3 unveiled today. A modest rally for Tesla – up only 5% intraday.
• Lululemon – earnings announced yesterday and stock looks good, trading up about 10% post-earnings.

Odd Block: Calls and puts trade in Dynavax Technologies Corp. (DVAX), calls trade in SPDR Homebuilders ETF (XHB), and calls and puts trade in Pure Storage, Inc. (PSTG).

Mail Block: Listener questions and comments

• Question from Gabe Rich: Mark, this is weird; huge buys for $INTC Apr 33 calls and the IV goes down?! I thought the market makers will push the price up when more buyers are around demand/supply. Thanks, I thought you might explain this since you are a former $INTC market maker.
• Question from 777 - with commodity based ETF options - anyway to trade roll risk?
• Question from Flyguy - If I sold a put $1 on Jan 16 with a current trading price of $.50 and stock goes to $5 -what happens and what is my risk?

Around the Block: What's coming up in the week ahead?

• Thursday - The USDA Prospective Plantings report will provide the official estimate on what farmers across the United States are planting this year.
• Friday, April 1 - The biggest economic release of the month, the Employment Situation Report, will hit newswires before the market opens on Friday.
• Earnings: Blackberry

Trading Block: A bull market in the S&P 500 goes AWOL as history rewards patience. Could Jan. 1, 2018 become the next "Perfect Banking Storm"? Appeals court upholds determination that CBOE patents are invalid. Stocks to Watch: Pandora, Avon, GameStop, Cal-Maine

Odd Block: Selling paper in The CBOE Volatility Index (VIX), Aug call buyer in iShares FTSE/Xinhua China 20 ETF (FXI), and strange seller in Pinnacle Foods Inc. (PF)

Strategy Block: Uncle Mike Tosaw discusses diagonal call spreads.

Mail Block: Listener questions and comments

• Question from Mike G. - Hello, Mike here. My father got me into selling covered calls by keeping me interested in his trading as a child. Recently, I started learning about other strategies and started listening to programs on the options insider radio network. Thanks. I recently convinced my father to use collars as opposed to simple covered calls, and I am starting to use long deep in the money leaps instead of stock to cover my calls. I have two questions. Given that I can use calls to cover my calls, is there any benefit to owning the underlying? Thanks a lot.
• Comment from Fayecuzername - Listened to episode 509 today. The listener question about Viceroys favorite Andrew butterfly answer is from episode 389. In the mail block I asked about a fly on expiration date and Andrew set me straight.

Around the Block: Earnings!

• Tuesday - Dave & Busters
• Wednesday - Lululemon Athletica, Micron Technology, Carnival Corporation, Paychex.
• Friday - BlackBerry.

This Week in the Market:

• Tuesday - Janet Yellen speech to the Economic Club of New York
• Thursday - The USDA Prospective Plantings report will provide the official estimate on what farmers across the United States are planting this year.
• Friday, April 1 - The biggest economic release of the month, the Employment Situation Report, will hit newswires before the market opens on Friday.

It may be a trading holiday, but you still need your Option Block fix, right? We dug through the archives to bring you some of the best of Option Block. This episode was posted in November, 2015.

Trading Block: The most up-to-date result of our March Madness Poll. Stocks to Watch: Valeant, Tesla, Starwood, Marriott, Markit, IHS. Stocks dip, dollar advances in wake of Fed comments.

Odd Block: Bullish call action in iShares Dow Jones US Homebuilder ETF (ITB), upside call buyer in Kraft Heinz Co. (KHC), and christmas put tree in US Steel Corp (X).

Strategy Block: Uncle Mike Tosaw discusses out-of-the-money call buying.

Mail Block: Listener questions and comments

• Question from Groose - Regarding Eurodollar futures options, are there different quirks between the months?
• Question from Trunghi Nguyen - Hey, hello Options Insider. Big fan of al of your work - listen to your shows all the time. Many Option Blocks ago, (around the Viceroys last show before he left, may have been his last show) he mentioned a past show where the Rock Lobster discussed how to trade a butterfly at expiration, and Alex thought it was pure gold. I cannot recall what type of butterfly trade it was, i.e. standard, iron, or broken wing, but Alex seemed impressed by Andrews explanation. Unfortunately, I have not been able to locate which episode this was aired on. Any chance you can find out and let me know? Love your work - when it comes to Options Insider, I go long.
• Comment from Joseph A. - Good morning Options Insider. Wanted to stop by and say thank you for providing me and many others with a free source of invaluable knowledge. I hope you do not mind, but I shared your page with a couple of trading groups that I am a member of. Thank again - happy trading!

Around the Block: Earnings!

• Tuesday - Nike, Krispy Kreme Donuts
• Wednesday - General Mills
• Thursday - GameStop (after bell), Signet Jewelers (before bell), Cosi (after bell)

Trading Block: U.S. crude options volatility sinks as prices bounce off Feb lows. CBOE to list options on FTSE 100 and China 50. Options traders prepare for "worst of all worlds".Fed scales back rate-rise forecasts as global risks remain. Earnings after the bell: Adobe Systems Inc., Aeropostale

Odd Block: Calls trade in iShares MSCI Emerging Markets ETF (EEM), calls trade in Genesis Energy LP (GEL), and calls trade in Technology SPDR (XLK)

Mail Block: Listener questions and comments

Question from Alex - Mark and the Options Block Dream Team, I have to keep it going in the same spirit since this is extremely educational and I am still not converted to shorter term selling. I was unfair to ask such a broad question so I will try to be as specific as possible. Let's revisit why I shorted 1y 25d (cash-secured) Put Option Vol was at its 2 year high (~57%). Vega($70/bp) further out is much higher than shorter term. Example: 14bp drop in 1 year Vol would result in an easy $1000(6% yield) profit in my strategy where 15% yield is if the option expires worthless. A similar kind of theta($5.55/day) premium of $1000 would require around 180 calendar days. Clearly theta premium collection is not interesting in my strategy (yet). Gamma is virtually 0 and hence the underlying needs to both trend down and Gap sharply (30%+) before I need to start worrying. Most likely the next time the underlying will GAP down significantly is during earnings. Hence I can either avoid the period around earnings (close prior to earnings and reopen after) or gamble and keep my position through and essentially taking a risk of becoming a 'long term' investor with the underlying being in high 70s and then do a Wheel of Fortune kind of strategy on it. Speculation aspect of my simple strategy - 1) Volatility will mean revert down 2) I strongly believe that this is a Side-Ways year for the entire US Market including the technology sector. Hence I believe I can capitalize on this speculation if I extend further out in my short selling. Regarding Baby Sitting question. I can do some low frequency rolling on the Delta. I have done once already. I agree there is nothing much else to do here. Lets forget about Shorter Term Selling and Theta Premium for a second and its nice exponential properties near expiry. The follow up question is which is hopefully more particular: are there any practical ways of locking in on Vega Premium for a longer term Short Puts? Vol dropped 7bp since I entered but there is room for much more. I understand that drawing a line in the sand (say I close when vol drops to 40s or 30s) is a very good and practical way. But are there any other ways to lock in some Vega premium without fully closing on the strategy? My background. I am a hardcore Quant guy who understands the theoretical part of Options valuation and Greeks inside out including some very exotic derivatives structures(calendar year asian options, swaptions, generation assets etc). That said, ironically, most folks like me are not very good with the practical aspects of Options trading so I hope I am not dumbing down the show with my impractical questions smile emoticon. Cheers, Alex.

Around the Block: Earnings on Friday in Tiffany & Co.

Trading Block: ICE would keep London Stock Exchange if it bought LSE Group. Fed to sit tight on rates at March meet, hint at hikes to come. Earnings today before the bell: 3D Systems Corp.

Odd Block: Put buying in Banco Bradesco SA (BBD), 1-by-2 put spread in CarMax Inc. (KMX), and calls trade in Delta Air Lines Inc (DAL).

Strategy Block: Uncle Mike Tosaw discusses short put spreads.

Listener Mail: Listener questions and comments

• Question from Bob - I have heard pros say that when too many retail jump into a trade, then do the opposite - Does that apply to options as well?
• Question from 777 - What are the industry sectors least positively correlated to the major indexes? Are there any quirks to trading those using options?

Around the Block: Earnings!

• High expectations for Adobe earnings, not so much for Oracle.
• Tuesday - Oracle Corporation, Constellium, DSW, Gerdau, HD Supply
• Wednesday - FedEx Corporation, Williams-Sonoma
• Thursday - Adobe Systems Inc., Aeropostale
• Friday - Tiffany & Co.