The Option Block

Option Block 400th Episode Spectacular

Our favorite episodes, listener questions and memories from 400 episodes of the Option Block.

Listener Mail Palooza:

• Question from Charles B - Great show guys. Congrats on your continued success. I recently stopped trading options on Google and PCLN because the spreads were just too wide. Why do the market makers do this? Is it not in their best interest to provide an incentive for traders like me to actually trade the product? If I cannot afford the spread then everyone loses.
• Question from S Davis - Love all your UA shows on the network including Oddities and the Odd Block on The Option Block. I find this stuff endlessly fascinating. I wonder if you could clear up an issue for me. I do not really understand the rules about insiders and options. I know that an “insider” cannot just sell his stock before a non-public event without a great deal of disclosure. But what are the rules regarding options? Is buying a put considered analogous to selling the stock from a disclosure perspective? Is it illegal for an insider to buy puts ahead of a material non-public event? Thanks for clearing up this very basic question and for creating such great programs.
• Question from Alan Pinkman - Hello Mark along with the Viceroy, Uncle, Lobster and Meatball. I know many of you came from a market making background. But I also note that all of you are “former” market makers. What was it that prompted your exit from the business? Do you think it is even worth exploring that as a career path any longer or is options market making pretty much done as a career these days?

Looking ahead to future episodes: What would you guys like to see on the show in future episode?

Option Block 399: The Gamma Rage Monster

Trading Block: A reversal of the selloff we saw earlier this week. Big Apple numbers. S&P 500 erases 2015 loss, euro weakens on stimulus bets

Odd Block: Puts trade in iPath S&P 500 Short Term VIX ETN (VXX), calls go up in Brunswick Corp. (BC), and puts roll in Vanguard Emerging Markets ETF (VWO)

Xpress Block: What was the most notable change in the business in 2014? And what will that mean for 2015?

Mail Block: Listener Questions & Comments

• Question from Neil Joyce - Hello Option Block crew. It is that time of year. I have some stocks I want to take gains in for 2014, but I do not want to sit on the sidelines for the mandatory 30 days before I get back in. What if I buy a one-month call to cover the wash sale period, then buy the stock again on day 31? Is that legit from an IRS perspective, or does buying the call effectively make the stock trade a wash sale? Great show! Look forward to more fun in the New Year.
• Question from Joseph G: ‏@Options Gamma? Are them those rays that turned Dr. Bruce Banner into the Hulk? lol...Seriously - can you sum up what I need to be concerned about with gamma when selling weekly put options? Mostly OTM with 4-7 days to expiration.
• Question from Mark Brant: @Options AAPL front-week trend trade: Near Mon. close buy the C/P reflecting the day's direction, and TP near Fri. close. +ev over a year.

Around the Block: Employment numbers out Friday.

Option Block 398: Getting Burned By Deltas

Trading Block: A selloff of the market today. Facebook options turning bearish on 2015 after 195% rally. Crude oil falls below $50 a barrel for the first time in 5 1/2 years. OCC announces cleared contract volume up 4% in 2014 and a record year for cleared futures volume.

Odd Block: Calls trade in iShares MSCI Italy Index (EWI), opening call buyers in Lifelock Inc. (LOCK), and puts roll in Lumber Liquidators Holdings (LL)

Strategy Block: Mike Tosaw discusses his current strategies with the S&P 500 and SPY.

Around the Block: What can we expect for 2015?

Option Block 397: 2014 Year in Review

Trading Block: Looking Back at 2014

• The crash in the price of oil.
• The potential for Apple to move.
• GDP growth at 5% in the US.
• The 10-year trading about 100 basis points below expectations.
• Changes in portfolio margin.
• VIX becoming more and more mainstream.
• The Ukrainian crisis of Q1/Q2.
• The October volatility.
• Continuing consolidation in the brokerage community.
• How about the speed of the VIX spikes?
• Despite "low" VIX options, volume still strong in 2014.

Around The Block: What strategies should work well in 2015 depending on market conditions? What to keep in mind for 2015?

Option Block 396: The Most Epic Strategy Block Ever

Trading Block: A shortened holiday week, so not much is moving on the street. Upside move in Taser. Facebook and Amazon.

Odd Block: Calls trade in Cobalt International Energy (CIE), opening calls trade in U.S. Bancorp (USB), and calls going up in Alibaba Holding Group Ltd (BABA).

Xpress Block: Another new tool is being rolled out by OX - IRIS.

Strategy Block: In the spirit of the season, Uncle Mike presents The Twelve Rules of Options Trading!

Around the Block: Have a wonderful holiday week everyone!

Volatility Views 140: It All Starts with Onion Volatility

Volatility Review: The week in vol

• VIX Cash: High - 25.2, Low - 16.07. S&P: 10 day HVOL - 22, 30 day HVOL - 13, Skew Index - 126.4, at the low end of the chart for the past three months.
• VVIX: High - 141.22, Low - 109.4, nearly doubled over the past two weeks.
• VIX Options: Total 4.29m (2.97m Calls, 1.32m Puts), only one day over 1M contracts this week despite significant market movement.
• VXST: High - 25.47, Low - 14.06, another week of anemic volume.
• RVX: 227 contracts OI, still no appreciable volume.
• Oil: Another crazy week for oil - a pronounced selloff followed by a dramatic rally that triggered circuit breakers on ice. 2-3 month vol hovering between 38-50, depending on the product. Putin tell the world to "get ready of $40 oil". Oil slump blindsided bulls that wagered on rout ending.

Volatility Voicemail: Listener questions and comments

• Question from Vic Taylor - What is the problem with OVX? USO trades a ton of options, yet OVX averages 100 contracts on a good day. I am looking for a good way to add some oil volatility to my portfolio. Since OVX is DOA, are there other dedicated oil volatility products out there that actually trade? Maybe something listed on the WTI or Brent contracts? Cool show. Love all the commodity focus you have added in recent months.
• Question from Jim Andrade - I know you have mentioned bullish risk reversals in CL as potential ways to play a bullish bet in crude. I have been a little slow pulling the trigger. Is the environment still favorable for this type of trade in CL? I'd consider Brent as well if that is more suitable. In case you cannot tell, I am a bit of an oil bull, but I've been waiting for the worm to turn. I think we may have finally hit that point. What about an iron fly, where I buy ATM sell 5% OTM? Would that be preferable from a volatility skew perspective? Maybe I should throw in a time value of money question also. I like it when Jared gets worked up over futures term structure and roll yield.
• Comment from Mark Brant - The sum of new Friday weekly SPY and VXX ATM calls is lower than each’s range, so bought both calls! 52-wk. +ev?

Option Block 395: Janet Yellen vs. Farrah Fawcett

Trading Block: A very aggressive day on the street. The market is off to the races - up nearly 2% in the session today. Brent triggers a circuit breaker - to the upside? U.S. stocks lead global equities rally on Fed rate policy.

Odd Block: Upside calls trade in ProShares Ultra DJ-UBS Crude Oil (UCO), puts trade in Mylan Inc (MYL), calls trade in Quicksilver Inc. (ZQK), and puts trade in Noble Corp. (NE)

Xpress Block: A review of some of the milestones at OX this year. Also, this is the time to start thinking about taxes.

Mail Block: Listener questions and comments

• Question from Evatar - I would like to know if a surprise rate increase by the Fed in the near term would make rho a more useful or necessary greek going forward?
• Question from Jack - Hi guys. I had 17 BLMN Jan 2015 $20 call contracts. BLMN was (as of 12/17/2014 during the final trading hour) trading in a range between $23.44 and $23.54. The spread on the calls was $3.00-$3.60. It had been $3.00-$3.80, but my order to sell at $3.60 moved the ask, but then sat there doing nothing for almost a half hour. This is my question. Even with BLMN in the $23.52-$23.54 area, I could not sell out of these calls at $3.60, with over a month left to expiration. That is unusual in my experience. Is it just that options on this stock have a crazy low volume? Note: at about 15:50, BLMN jumped to $23.64 and my sell order filled before I could cancel and re-enter it at a higher price. I am still surprised that there was no apparent real, sellable time value left in these calls.
• Tweet from @MarkBrant1KM - Committed to absorbing the entire archive on the app, learning a lot! Thx!
• Question from Ricky - I would like to know about trading on index with option.

Around the Block: Will the market finally slow down and the VIX back off? Or, will there be a lot of activity in volatility? The all-stars discuss.

Option Block 394: Oil Speculators Get Burned

Trading Block: Oil and oil related issues are still dominating trading - crude taking it on the chin. Brent and WTI hovering at crazy ranges. Most recent CFTC data shows increased net long positions. VIX, VXST and VVIX

Odd Block: Golar LNG Limited (GLNG), AGCO Corporation (AGCO), and Neptune Technologies & Bioressources-Ord (NEPT)

Xpress Block: A look at one of the coolest tools OX offers - The Walk Limit.

Mail Block: Listener questions and comments.

Question from Josh B - What is your favorite product to use for an options play on oil?

Question from Elian04 - I think we got a bounce coming in crude back to the 75 handle in the next month or two. Best bets?

Around the Block: Earnings this week: Blackberry and Nike. Fed coming up this week.

Option Block 393: Oil, LULU, Swaps, and More

Trading Block: A mild day on the street. Swap Talk: Why are people fighting over Dodd-Frank and derivatives? Traders hedge oil ETF while energy stocks lure buyers. U.S. oil prices drop below $60

Odd Block: Bullish calls trade in Dex Media Inc., synthetic covered calls trade in Sandridge Energy (SD), and looking for a rebound in Whiting Petroleum Corp (WLL)

Xpress Block: Lululemon earnings and futures volume.

Mail Block: Question from Nico Bellic - There are many options exchanges in the U.S. all trading the same products. How does this affect the way options trade in the U.S.? Is this more of a problem or a benefit to options traders? Anything I need to be aware of there?

Around the Block: OptionsXpress Workshop - Boca Raton - 12/13/2014

Option Block 392: The Great Broken Wing Butterfly Debate

Trading Block: A mild day on the street. Oil futures slide on Saudi price cut to U.S. VIX shunned as few bumps seen for S&P 500 at years end.

Odd Block: Call rolls in Opko Health Inc. (OPK), calls trade in Avago Technologies (AVGO), and calls trade in Adobe Systems Incorporated (ADBE).

Xpress Block: Insight into oil and gas. The Xpresso newsletter.

Mail Block: Listener questions and comments

• Question from Anthony Fields - I was just reading through a book (I will not name them here to give them a free plug) that blamed the crash in 2008 on derivatives. What is your take on stuff like that? Drive you crazy or is there some truth?
• Question from Milano Fan - Hello to all members of the all-star panel including but not limited to uncle mike, the viceroy, the rock lobster, the greasy meatball and the mighty host himself. I am working my way through the back catalog of episodes. I am somewhere around episode 250. I have a lengthy commute and probably a few flights a week so I should burn through the rest in a couple of months. I have heard a number of panelists mention a strategy called a broken wing butterfly on multiple episodes. I am a little confused about this. What exactly is it? Is there a standard construction for this type of strategy or is it more of a number of similar strategies being lumped under the broken wing umbrella? Hope you guys can answer this. It would be hilarious to hear my letter read on the mail block. Last - I am planning a trip to Chicago early next year. Which pizza place should I hit? I know you guys treat pizza like religion in Chicago. Happy trading.