The Option Block

Trading Block: Big news today from an options exchange perspective: Nasdaq announced it has agreed to acquire International Securities Exchange (ISE), an operator of three electronic options exchanges, from Deutsche Borse Group. Investors greeted the Nasdaq deal to buy International Securities Exchange, the US options business of Deutsche Borse, with some skepticism on Thursday, sending Nasdaq shares down as much as 3.5 per cent. Earnings: Dollar General

Odd Block: Calls trade in Club Corp. Holdings Inc. (MYCC), puts trade in Peabody Energy Corp (BTU), and calls and puts trade Hilton Worldwide Holdings Inc (HLT)

Mail Block: Listener questions and comments

• Twitter: The Options Insider- With a potential ban on trading options in IRAs looming - Tell us how you trade options in your IRA right now?
• Question from Alex - In OptionBlock503, we agreed that while it is very unusual, the 25D 1Y Cash-secured Put was entered for all the right reasons. The follow up question is then. What are the various practical ways to Risk Manage/Baby Sit a Long Term CashSecured Put under different scenarios of the underlying (underlying is trending up, down or sideways) and for different regimes of volatility? Cheers.

Around the Block: This Week in the Market

• Mar 10: Jobless Claims, Treasury Budget
• Mar 11: Import and Export Prices

Trading Block: Goldman Sachs sees best time in two decades to buy S&P 500 calls. Traders are betting the Federal Reserve will next raise U.S. short-term interest rates about six weeks earlier than previously thought, after the government reported U.S. employers added many more jobs than expected in February. Earnings today after the bell: Shake Shack.

Odd Block: Calls trade in Alcoa Inc. (AA), puts trade in Linn Energy LLC (LINE), and calls trade in VALE SA (VALE).

Strategy Block: Uncle Mike Tosaw discusses getting back into a trade you got out of, that has continued to go your way since.

Mail Block: Listener questions and comments

• Question from FlyGuy - Do I day trade options anymore?

Around the Block: Earnings!

• Tuesday - Barnes & Noble, Dick’s Sporting Goods
• Wednesday - Vera Bradley

Thursday - Dollar General

• This Week in the Market:
• Mar 9: EIA Petroleum Report
• Mar 10: Jobless Claims, Treasury Budget
• Mar 11: Import and Export Prices

Trading Block: Continued relief rally. VIX now has a 16-handle. Huge contango in the VIX. Who blew the all-clear signal? Cage match in junk stocks. CBOE reported that total trading volume in February was 92.9 million contracts. OCC announces cleared contract volume increased in February. OCC announced that total cleared contract volume in February was 338,300,969 contracts. . Why CME would want to buy the London Stock Exchange? Why buy when you can make your own? What is Europe going to do?

Odd Block: Puts trade in Chesapeake Energy Inc. (CHK), puts trade in iShares Barclays 20+ year Treasuries (TLT), and calls and puts trade in Boardwalk Pipeline Partners (BWP).

Strategy Block: In his first ever strategy block, Andrew discusses what makes a butterfly take off.

Mail Block: Listener comments and questions

• Question from Adam - Thank you for your shows. I am wondering if you know where can I get p/c ratio and call sizzle index and out sizzle index history? I use TOS but this info is not available for the past. Thanks
• Question from FutureMD - Is there a directional options strategy that you would suggest for someone who wants to play the 2016 election?

Around the Block: Earnings! Friday - Staples, Big Lots

This Week in the Market

• Mar 3: Jobless Claims, Factory Orders
• Mar 4: Unemployment Report

Trading Block: Traders are now taking the possibility of a Trump presidency seriously. What was once thought to be a flight of fancy is moving ever closer to becoming reality, with one of the real estate moguls rivals, Texas Senator Ted Cruz, declaring that Trump may be "unstoppable" if he dominates the upcoming Super Tuesday contests. Gold allure burnished by Fed outlook as treasuries lag: analysis - U.S. Treasury 10-year futures may continue to underperform gold over the medium-term in a global fixed-income environment punctuated by negative rates as the relative opportunity cost of holding the yellow metal decreases. Stocks mixed as oil prices rise above $33 a barrel - Stocks were mixed in lackluster trading Monday as oil prices rose and global stocks fell after a meeting of G20 finance officials ended without pledges for joint action to stimulate sagging global economic growth.

Earnings today:

• Crocs, Inc. (before)
• Hertz Global Holdings (before)
• AMC Entertainment Holdings
• Icahn Enterprises
• Lumber Liquidators Holdings
• Tribune Media Company

Odd Block: Calls trade in Charles Schwab (SCHW), calls trade in Enbridge Inc (ENB), and calls trade in Signet Jewelers Ltd (SIG)

Mail Block: Listener questions and comments

• Question from Alex - Mark, Thanks again for covering my question. I agree that I am not capitalizing on the Theta curve as much (although $5.3/per day is also decent). However my intention was more to capitalize on the Vega Surface where Vega tends to be much higher at longer maturities and it was especially bloated during the earnings date when volatility spiked to the highest ever level. Given that the Volatility levels are at its highest then Vega itself is expected to be at its highest ever. That said I am not really set-and-forget strategy and collect on theta premium. I just have to wait until the volatility normalizes for LNKD and collect on a decent Vega premium. In a sense I am shorting both Volatility and Vega. Hence further out months give richer Vega to short. And if i were to write shorter maturity puts, then Vega would have lost its juice in a month or two. As a side note, I entered into a CashSecuredPut, I do not trade on margin yet. Yield is approximately 15%. It would be a separate exercise to compute the Vega surface for LNKD. Maybe this question is an overkill for the show but at least this were some of my reasons why I shorted a 1-year put. Cheers, Alex
• Question from JM - 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.
• Question from 777 -Do I trade Eurodollar futures options? what drives massive OI?
• Question from TradersOM - Can a trader make a decent living buying calls and puts - or do you have to get crazy with the complex stuff like iron condors?

Around the Block: Earnings!

• Tuesday - JD.com Ross Stores
• Wednesday - Costco Wholesale Corporation, American Eagle Outfitters, Goldman Sachs, Tribune Publishing Company
• Thursday - Kroger, Alamo, Barnes & Noble, Burlington Stores
• Friday - Staples, Big Lots

Trading Block: Gold goes for a ride. SeaWorld earnings today after the bell and taking it on the chin. Off approx. 9%.

Odd Block: Calls and puts go up in Restoration Hardware Inc. (RH), call spreads go up in Marathon Petroleum Corp. (MPC), and puts go up in Cypress Semiconductors (CY).

Mail Block: Listener questions and comments

• Question from Matt M1000 - Hello Mr. Longo and All Star Cast. I have been enjoying The Option Block and Volatility Views shows for years. You guys are the best! Keep up the great work! I would like you folks to discuss the "put-call ratio"...its use and merits as a tool. I have always discounted this metrics value, since both put and call options could be either bearish or bullish depending on how they are being used (i.e. purchased or sold). So what logic I have leads me to believe a put-call ratio would be pointless. Set me straight on this please. -Beanbag.
• Question from SkyTrader - If I see a trend, what spread works best for capturing that spread - straight vertical or calendar?

Around the Block: Earnings!

• Friday - JC Penney Company, Hilton Worldwide

This Week in the Market

• Feb 26: GDP, Consumer Sentiment

Trading Block: Options market sees 50% chance of massive S&P plunge. Stocks may have rebounded from their recent lows, but the option market still implies a big chance that stocks plummet anew before the year is out. Earnings today after the bell: Fitbit, Inc., ATM Straddle: $2.90 - 18.3%, calls 2/1 over puts; stock nearly hit $52 last summer: Now a pale shadow of what it used to be. Earnings today before the bell: Dean Foods.

Odd Block: Puts trade in Zoetis Inc. (ZTS), puts trade in Rio Tinto PLC (RIO), and puts trade in Prospect Captial Corp (PSEC).

Strategy Block: Tosaw dicusses ways to construct a wheel trade.

Listener Questions: Listener questions and comments

• Question from Alex - Thanks Mark for the funny intro of me and featuring my question. I felt honored to get my simple question dissected so well. I loved it! You started the discussion with "there are not that many scenarios to short long term puts as a way to enter into equity unless there is some extreme volatility distortion where the 1 year put is extremely bid from a volatility perspective". My follow up question is then: Does the 1 year LNKD Implied Volatility not qualify as a such "extreme volatility scenario distortion". Check attached screenshot from OptionXpress below. The highlighted region is when I shorted the 25 Delta Put and ATM Implied Vol is at its highest ever. Definitely I would suggest a boot camp on commission fees and slippage costs and why even with those it is still better to do shorter term vs longer term dark side trades. Cheers, Alex
• Putting it concisely: Vega, Theta, low commissions and slippage costs are working for me in this one.

Around the Block: Earnings!

• Tuesday - Home Depot, Avis Budget Group, Caesars Entertainment, Coca Cola, Dreamworks, Macys, Office Depot
• Wednesday - Target, Salesforce.com
• Thursday - Best Buy, Sears, Anheuser- Busch, Gap, Gogo Inc., Herbalife, Kohls, Marriott Vacations Worldwide, SeaWorld Entertainment, Starwood Property Trust, Weight Watchers
• Friday - JC Penney Company, Hilton Worldwide

It is fairly a heavy week as far as economic reports go including GDP and Consumer Sentiment. The market looks to keep the bullish rally going.

• Feb 23: Consumer Confidence, Existing Home Sales
• Feb 24: New Home Sales
• Feb 25: Durable Goods, Jobless Claims
• Feb 26: GDP, Consumer Sentiment

Trading Block: Welcome to our 500th episode. Today's special panel includes: Mark Sebastian, Mike Tosaw, Andrew Giovanazzi, and our must beloved former panelist Alex "The Viceroy" Jacobson. They discuss:

• How many exchanges are too many exchanges?
• Options Insider question of the week
• The SEC
• Citadel
• Transaction fees
• Talking free of compliance issues
• And so much more...

Odd Block: Rolling calls in Coca-Cola Company (KO), calendar spreads trade in Time Warner Cable (TWX), and put sellingHess (HES)

Mail Block: Listener questions and comments

• Question from TennisGr8: I've been hearing a lot lately about gamma scalping. How does it work, and who should use it? Is this second-order greek becoming the new options darling?

Around the Block: Are the bulls back in force? Always be prepared for a downturn.

Trading Block: TSLA: Options traders are betting on a 16% move in Tesla shares in either direction through the end of the week. Four of the five most traded Tesla options on Wednesday were put options, but it was not clear whether investors were buying or selling them. It has been a rough year for Elon Musk - off $3.3B between TSLA and SCTY. Earnings today: Before the bell: Nokia, PepsiCo, After the bell: Activision Blizzard, Groupon, Pandora Media Group.

Odd Block: Calls trade in SPDR Gold Trust (GLD), calls trade in Yamana Gold Inc., and calls trade in IAMGOLD Corp (IAG)

Mail Block: Listener questions and comments

• No love for daily options - Twitter poll has 40% of respondents saying heck no to dailies!!
• Comment from KDDiddy - Position Delta is a stupid term you must learn to get an Options license in Canada. Sure, we rule the hockey world, eh? But we are the Jamaican bobsled team of the Options industry. On behalf of all Canadians, I apologize for the term and, for the Montreal Exchange. Perhaps you hosers could suggest some reading on the subject of Delta. After Andrew pulled my jersey over my head and lobster clawed me with "Beta weighted to SPY" and "Extra curvature," I thought I better grab some books 'n start givn'er in the library."
• Question from Michael - @Options $15 put Twitter drops off the map; yet the premium still has been declining. Can you explain?
• Question from Alex - Insider Trading, What are your thoughts on Shorting 1Y 25 Delta Puts on LNKD midday today (LNKD is at 105 as I write this message)? Puts are quite juicy right now with quite acceptable break even points. I am very interested in hearing your feedback. Cheers, Big Options Trading Podcast fan, Alex.

Around the Block: Reminder: No show on Monday, February 15 due to the market holiday. Next show on Thursday, February 18 is our live 500th episode spectacular!

Trading Block: Stocks take another beating: Dow down 400. Gold tops $1,200 for first time since June on economic woes. Earnings today after the bell: Yelp - $16.17, down nearly $2 - over 10%; Before the bell: Hasbro, Loews

Odd Block: Calls trade in Market Vectors Gold Miners ETF (GDX), calls trade in Goldcorp Inc. (GG), calls trade in iShares MSCI EAFE Index fund (EFA), and calls and puts trades in Paypal Holdings Inc. (PYPL)

Strategy Block: Tosaw discusses when he is going to get back into this market.

Around the Block: Earnings!

• Tuesday - Walt Disney Company, Coca-Cola Company
• Wednesday - Time Warner, Cisco Systems, Tesla
• Thursday- Nokia, PepsiCo, Activision Blizzard, Groupon, Pandora Media Group

Trading Block: Today we have guest co-host Dan Cook from NADEX. LNKD after the bell. ATM straddle: $22, approx. 11.5%. Wall St. fluctuates as equities track oil prices. Is oil driving the stock market - and should traders care? As energy rout deepens, CME, ICE reap benefit from record volumes.

Earnings today - Before the bell: ConocoPhillips, Intercontinental Exchange.

Odd Block: Calls trade in SPDR S&P Metal and Mining ETF (XME), calls trade in Market Vectors Gold Miners ETF (GDX), and calls and puts trade in BHP Biliton Ltd (BHP).

Mail Block: Listener questions and comments

• Question from KDDiddy - Hey guys, Getting back to the great Stupid debate....I wrote in a few weeks ago regarding the use of a put stupid to hedge a stock 2% below market. You mentioned there is a better way using position delta. I understand position delta and delta neutral but sadly, although I have tried for a couple of weeks, I am too stupid to figure this out! Is there a formula? Would you explain? Regards, Mr. Not So Smart Sent from my iPhone

Around the Block: Upcoming activity in non-farms product on NADEX. Earnings on Friday for CME Group Inc.