The Option Block

Option Block 371: Talking TSLA, SCTY, YHOO and Alibaba

Trading Block: NOTE: No Alex for the next six weeks. Our thoughts and prayers with him while he undergoes surgery. Alibaba IPO & Yahoo - Barron’s telling people to buy Nov 43-48 call spread to benefit from the IPO. TSLA & SCTY over 10%. A bad day for the wallet of Elon Musk.

Odd Block: Puts filled in The Market Vectors Russia ETF (RSX), puts trade in Commscope Holding Co. (COMM) - newsletter?, calls trade in Itau Unibanco Holding SA (ITUB).

Strategy Block: Ways to defend short premium when there might be a lot of movement in the market.

Around the Block: Andrew thinks that this is the big one re: interest rates. Also looking at YHOO, Brazil, after the Fed, maybe selling some juice. Fed Wednesday: how will bonds react?

Option Block 370: Live Episode Spectacular!

Trading Block:

Apple trading above $100 post iWatch/Mega - any changes to outlook/trading strategy here? CBOE Futures ExchangeSM (CFE) announced today that it plans to launch futures trading on the CBOE/CBOT 10-year U.S. Treasury Note Volatility IndexSM. 9/11 Anniversary - Bin Laden Put Options

Odd Block:

Puts spreads trade in Market Vectors Russia ETF (RSX)

Call Buyers Jump into Control4 Corp (CTRL)

Giant Butterfly Trades in Autodesk, Inc. (ADSK)

Long Term Call Options Rolling in BankAmericaCorp. (BAC)

Mail Block:

iTunes Comment from LivHK - I am a relatively new listener. However, I had to turn the show off after 5 minutes - I am here to learn about option strategies, not listen to Apple hating rhetorics. I get it you do not like Apples platform but at least show you are not ignorant of Apple products if do decide to talk about it...I would love to hear your analysis on valuation, but a baseless claim that “3 years later the stock will definitely be worth a lot less than today?” Such thoughtless comments leads me to seriously doubt the quality of the content on the main topic.

Question from Charlie - I am prepping for my series 7. What should I expect from an options perpsective? Any tips? Sorry I could not be there in Chicago as I would have loved to see the show live. But this is the next best thing. Thanks for all that you do.

Question from Tom: First, huge fan. Second, question about the wheel-o-fun trade: Recently assigned on a short call in a collar position. Monday morning, I was long my protective put (a far-OTM leap), and decided to sell a weekly put that positioned me long about 25 delta. Now, I am wondering how all this will affect my margin SMA. From the margin perspective - is this a put spread, or is this a naked short put? After I put this on, I realized the margin was a bit fuzzy. Since I just rolled out of a covered call, I am obviously cash-secured, but I want to work this out before I find my foot in a bear trap. Thanks guys! Nice hats!

AROUND THE BLOCK

Where will we go from here?

Option Block 369: Short Puts and Ratios in AAPL

Trading Block:

S&P glued to the 2000 handle. Go Pro very active today - Yahoo as well. TLT - blame the Viceroy.

Odd Block:

Puts trade in Valero Energy Corp. (VLO)

Calls trade in Pattern Energy Group (PEGI)

Calls trade in Apple Inc. (AAPL)

Strategy Block:

Good greed vs. Bad greed

Mail Block:

Comment from KaiserDog76 - Oh that Granny Smith tasted sour today! Lol I have to admit I ditched my calls shortly after the open and I am very, very glad I did, It got ugly for "Retail's" favorite fruit. NFLX could not even hold gains after announcing streaming rights to the new "Origins" Bat Man TV show. Yet.....Yet GPRO tacked on another $3...(clearing of the throat)..Ok.Oh, but wait! It gets better, Mobile Eye continues to make elderly and the "Peripherally" challenged excited as now whats the Market Cap? 10 Billion? An even bigger, Ok. I am interested to see how H&R Block HRB trades post earnings. Morgan Stanley looks very interesting to me as well. The Nat Gas export commodity play is looking juicy and unrealized. I had a good day so I have no reason to be surly. I just thought some of you might enjoy my commentary. Thanks for everything you do Mr. Longo. You and the fellow Rouge Scholars are the dose of sanity that this insane Market needs!. P.S.I love the new show! Reminds me of some of my favorite Old School Comics, Strange Tales..... Keep Up the Great work. I am loving all of it!

Question from Catherine - I want to set up an options trading account for my son (who is 23 years old) and I want him to learn to trade options in a risk-managed way - do not really want him to know that he can use options for taking stupid risks (he will probably figure that out on his own soon enough). I contacted the customer services people at my broker (Options Express) to see how an account could be set up to achieve my goals and was told that initially all he could do would be to buy puts and buy calls. Seriously? That is exactly what I do not want him to do. I want him to control his risks better than that and to learn to put on spreads from the git go. Is there any way that my goal can be accomplished? - Cat

Around the Block:

Option Block Live! - This Thursday, Sept 11, 4pm Central @ Bennys Chop House (444 N Wabash) here in Chicago.

Option Block 368: Selling Premium in a Quiet Market

Trading Block:

A mild day on the street today. BP fiasco slaughters everything oil related. Apple had a four point loss. CBOE announces weeklies on SPX

Odd Block:

Calls buyers flood into QuickSilver, Inc (ZQK)

Calls trade in JAKKS Pacific, Inc (JAKK)

Calls trade in Corning Inc. (GLW)

Mail Block:

Question from Mandel - What is a premium writer to do in this market? Any suggestions for good income trades here?

Strategy Block:

Today, Uncle Mike Tosaw discusses the ratio spread

Around the Block:

Non-farms coming up on the horizon.

FDA approves Merck cancer drug.

Option Block 367: Talking AAPL Collars

Trading Block: A relatively quiet day on the street. GoPro and Twitter were the only two names Apple still seems to be reaching new high. How did Tosaw play it?

Odd Block: Big put seller in Wells Fargo & Co. (WFC), puts trade in 21Vianet Group Inc. (VNET), and bullish paper in EZCHIP Semiconductor LTD (EZCH).

Xpress Block: A very quiet day on the OX desk. 3 to 4 leg trade tickets on Street Smart is tentatively scheduled to release on Friday, Sept 5.

Strategy Block: What you can do as a trader if you are not getting filled on your spread? Understanding the rules of risk management.

Mail Block: Listener questions and comments

• Question from Dr. Lawrence - Could you comment on a trade I did that was inspired by your talk about collars. I own apple at split adjusted $26. I bought Jan16 $80 puts for $4.50. I then sold the nov $120 calls for $1.05. I have many months to sell calls to pay for the puts. I really do not want to sell my underlying so I figure I will roll up and out if it goes up 20% in the next three months. I am content with the downside protection and will roll my long put when the Jan 17s are listed. On the upside I figure it cannot go up forever and will roll up and out as long as necessary but will try to continually sell calls to pay for my long puts. I would love to hear your opinions of my strategy.
• Question from Samuel - I am really enjoying your website as a trader. I read it every day. My question is, is there any scanner to show us unusual volume for options on future or FX? As we have one or two on equity, or to show you if the options been bought or sold. Thank you kindly.

Around the Block: Holiday weekend, so keep an eye on decay. Will S&P stay above 2000?

Option Block 366: The Knife Edge of Volatility

Trading Block: Most major indices up today on the street. Vol saw a bit of a rally as well. S&P briefly hit 2,000, but couldn't stay there.

Odd Block: Calls trade in Credit Suisse Group AG (CS), calls trade in H&R Block (HRB), and risk reversal trades in Lennar Corp (LEN).

Xpress Block: What’s new with IdeaHub? Futures side and securities side premium harvesting.

Mail Block: Listener questions and comments

• Question from Seven - With all the talk about exposure fees and excessive customer risk, is there any talk at OX or Schwab about raising the bar for options certification? Perhaps making it harder to qualify for options level 3 or even taking a test to qualify? I know you do not want to put barriers in front of customers but is that not preferable to the alternative?
• Question from Jack Schwartz - On a recent episode, Alex Jacobson from OX said that the OCC would never force a taxable event in the case of a corporate action. However, I am pretty sure I have seen OCC do exactly that in all-cash corporate deals. In those scenarios do the options not essentially expire on the transaction date, and the customer is left with the resulting debit or credit in their account?

Around the Block: Keeping an eye on the 10-year. Interest rates, where will the Fed go?

Option Block 365: The Great Apple $107 Debate

Trading Block: A mild day on the street. Apple finally passes $100. What will Yellen say tomorrow and how will it affect the market? New study show advisors use of options increased 13% since 2011.

Odd Block: Calls trade in Jarden Corp. (JAH) calls trade in China Finance Online Co. (JRJC), and calls trade in Macerich Co. (MAC).

Xpress Block: Free pizza day at every Schwab/OX site today in celebration of the importing of the 3- and 4-leg trade ticket from OX to Schwab which is coming in Sept.

Strategy Block: A strategy of patience. Waiting for the right time to make a move in Apple and gold.

Mail Block: Goldman Fly

Question from Pat - Love the show, it's really great and even though I'm clueless (as is shown by the following). Here's one that might be good for your "could've done the trade better" segment in Options Block. The following is the list of trades that I have made around Goldman. Sorry I don't have the volatilities or any other data from the trades but hopefully you'll be able to explain the error of my ways without them. Once I made the initial trade and GS didn't rebound quickly, I was trying to offset the cost of keeping the calls since I expected that Oct was plenty of time to get back to the 175 area.

3/27 - buy 2 10/18 170-180 call spreads for $3 debit (6.42/3.42)

4/25 - closed 180 call for $1.75

4/28 - closed 180 call for $1.50

5/1 - sold 175 call for 2.75

5/5 - closed 175 call for 1.60

6/6 - sold 175 call for 2.40 (the first one worked but I think they were both actually mistakes)

7/28 - closed 175 call for 5.37 debit, closed 170 call for 8.53 credit, sold 2 180 calls for 3.16 (each), bought 185 call for 1.65

(Resulting position is 170-180-185 fly) (Now it seems really inefficient)

8/7 - closed both 180 calls for 1.88 (each), 185 call for 0.96

Order currently in to sell 2 180s and a 185 for a 3.50 credit

I have the order in to recreate the fly to reduce the cost of the 170 since I don't think GS will get above 180. Besides discussing what I've done and any suggestions you have, what would be a better way to implement my current view of GS given that I own the 170 call? Thanks for all the help already and the future I'm sure I'll get.

Option Block 364: Dollar General Madness Continues

Trading Block: Rally ho on the street today! German 10-year realized vol was 100%!

The social media trio - FB, LKDN and TWTR mixed today.

Odd Block: Unusual options activity in DG, AMSC, EGHT, and TASR.

Xpress Block: Schwab tools: The 4-legged trade ticket is coming to Schwab the first-second week of September.

Mail Block: Question from Ted Schwartz

• Hi, I'm working my way through the Options Boot Camp and Option Block, learning lots of good stuff. I was wondering what kind of options strategies exist to hedge my 401K mutual funds gains? Would it be practical to use protective puts on some indexes, etc. to offset my risk of fund losses? Thanks!

Around the Block: What can we expect from Yellen and the Fed?

Option Block 363: The Last Train to Pallookaville

Trading Block: The market rallied about half a handle. Putin talks up the street. Bonds: TLT & IEF. Berkshire A crosses $200,000 a share. Red Robin taking it on the chin today.

Odd Block: Some unusual activity in TSRA, NM, and NKTR

Xpress Block: The social networking triplets (Twitter, LinkedIn and Facebook) were all active today. Amazon surprisingly active as well.

Mail Block: Listener questions and comments

• Question from Everett: Really enjoy the show, and find it incredibly useful in helping break down the complexities of more technical trades. That said, is it possible to point to 3 key technical-focused factors that you believe to be the most important factors for consideration when trading biotech options around a catalytic event (E.g FDA marketing approval). I doubt an example is necessary, but to clarify, I don't mean examining the strength of the company’s clinical trial submissions in anticipation of an FDA decision; rather, are there 3-5 stock/options-focused factors (E.g. implied volatility, Delta, Vega, etc.) that you would recommend analyzing in anticipation of trading options around a biotech's upcoming catalytic event? I recognize these factors might be different based on the strategy one chooses to employ, but if possible, what would say those 3-5 factors should be just generally, if I am willing to employ a diversity of strategies? Thank you in advance for your time and consideration, Everett
• Question from Joe: Option Block Question: Greetings. My question deals with order fulfillment on a spread. During the wild few days that TWTR had a few months back the IV shot through the roof, the vol skew went way out of whack, and it was possible to put on long spreads for even money or credit...but I had to leg into the spread because my broker said "I could not get filled for even money on a spread." Which leads to my question, how are the smaller lots (I usually trade 10-50 contract lots) handled on the market with respect to their fulfillment? Logic and the current state of technology leads be to believe that like strike prices are grouped together and sold on the market in order to obtain a better leverage when trying to obtain a sale price. If this is not the case, how does fulfillment take place with spreads?
• Question from MrLami: Hello...What parameters can one use to scan for unusual options activity real-time (OR) what is the thought process behind it (I can use my intellect or practice for how I can start spotting these myself)? Is there a way to receive alerts for "Unusual Activity" section on this website?

Around the Block: Bonds. US global affairs. Ukraine and Iraq.

Option Block 362: You, Too, Can Own a Piece of History

Trading Block: Big momentum days for PriceLine, LinkedIn and Tesla. Zynga rallies. A picture of Alex is up for sale on Ebay.

Odd Block: Diagonal puts trade in Yahoo Inc. (YHOO) ratio call spread buy - Earnings trade goes up in Fossil Group Inc. (FOSL), and calls roll in iShares Dow Jones US Home (ITB) - sell Aug buy Sep.

Xpress Block: Three- and four-legged trade tickets to be released early to mid-September. Premium harvesting in the IdeaHub.

Strategy Block: Finding your happy, comfortable spot as a trader.

Mail Block: Question from the OX community - Hull’s Quant ETF coming, will it change the way folks invest?

Around the Block: Some more earnings left: Cisco 8/13