The Option Block

Option Block 340: Revenge of the Guts Strangle

Trading Block: What will bring back volatility? A black swan event? Russell Rhoads said via MarketWatch that investors are showing a “justified complacency” given that recent VIX jumps don't stay at those levels for long. "One-off events," such as the Ukraine, get investors' attention for a while and then wanes. It's enough for a VIX spike but not enough to sustain it. From a black swan event in the economy and markets, it would have a greater, deeper effect.

Odd Block: Calls buyers trade in Oncothyreon Inc. (ONTY), closing call buyers and put buyers trade in Gastar Exploration Inc (GST) - a closing guts strangle? Closing call sellers trade in Chemtura Corp (CHMT), and calls roll in iShares MSCI Brazil Index (EWZ).

Xpress Block: Alex talks recent news from Charles Schwab (CEO suggests regulators require brokerage firms to disclose payment for order flow), as well as VIX ETNs.

Around the Block: Is the housing market really coming back? The National Association of Realtors will release April existing home sales data Thursday and the U.S. Census Bureau reports sales numbers for newly constructed homes is out Friday. Earnings this week include Home Depot, Lowe's, Campbell Soup and Hewlett-Packard.

Option Block 339: Potential Front Running Activity

Trading Block: Today we have a very special trading block segment from Uncle Mike Tosaw about Russell and RVX vol. Is VIX in a deep sleep?

Odd Block: Combos trade in the iShares MSCI Emerging Markets (EEM), call spreads trade in Travelers Companies (TRV), calls trade in Expeditors International of Washington (EXPD), and calls trade in Chemtura Corp (CHMT)

Xpress/Mail Block: We are mixing it up today with some questions from OX clients:

• Please explain put/call parity.
• A very successful trader friend says ITM debit spreads are superior to credit spreads and I do not get it.
• Can the probability of a calendar be easily calculated?

Option Block 338: The Great Mobile Trading Debate

Trading Block: A strong surge to the upside, Russell leading the charge. Russell 2000 index (RTY) option costs at Feb 2007 levels. Who is playing out in this product? Apple and Beats headphones - two Tosaw favorites.

Odd Block: Combos, rolling short stock position in Denderon Corp. (DNDN), call buyers trade in VeriFone Systems Inc. (PAY), call buyers trade in Hillshire Brands Co. (HSH), and put spread sellers trade in WisdomTree India Earnings (EPI)

Xpress Block: Alex talks about mobile app usage by the OX clientele and market-wide.

Strategy Block: Mike Tosaw discusses covered calls going in the money - and how that is a good thing.

Around the Block: Upcoming economic reports: Retail Sales (Tuesday), PPI (Wednesday) and CPI (Thursday). Still more earnings: CSCO - 5/14 after, COSI - 5/15 after, TTWO - 5/13 after.

Option Block 337: Looking Back on the Flash Crash

Trading Block: Options traders were preparing for 10% swings of Tesla before week's end based on a straddle. On Wednesday, volume in Twitter options increased fivefold, all but erasing value in a series of bullish contracts. ICE reports record Q1 profit. After its June IPO, Euronext plans to be listed on three of its exchanges. May 6 marks the fourth anniversary and it's a reminder that not much has changed.

Odd Block: Put sellers in BBEP, call spreads trade in Cameco Corp., calls trade in DLX, closing put seller in FTR.

Strategy Block: Calendars vs. verticals, part deux.

• Comment from Erik Ruehr re: Mike Tosaw’s survey. I say vertical spreads are better now. Thanks for the show.
• Comment from Tom S.: In response to Uncle Mike’s survey: In general, I’d say vertical spreads trade much better now.
• Comment from LJO: Put me down in the plus column for verticals.

Around the Block: Some earnings left: CSCO, TTWO, CBOE, GRPN. Macro, macro, macro, 10-year, 30-year, the Fed. Will social media/tech stocks hold up?

Option Block 336: Earnings and the Death of Minis

Trading Block: A mild day on the street. Apple catching a bid. Tuesday’s computer error at NYSE ACRA and NYSE AMEX options markets resulted in almost 20,000 erroneous trades.

Odd Block: Call buyers trade in Nike Inc. (NKE), call sellers trade in Gilead Sciences, Inc. (GILD), put spreads trade in iShares Barclays 7-10 year Treasury ETF (IEF) - closing roll, and closing put buyers trade in NQ Mobile Inc. (NQ).

Xpress Block: Late May/Early June is the target date for enhancements to OX mobile, which will include single-leg walk limits, as well as OSO and OTO orders.

Mail Block: In which Option Pit steals the show.

Website comment from Kaiserdog76: Loved todays Option Block. Especially the focus on Mini Options and their total failure. Mark Sebastian said it best when he talked about the people that really need a break in the Market getting "Bo Didley Squat" when the dust settles. I have all ways hated Minis. Talk about a getting "Stupid" on an option trade. One tenth the size but %100 the commission. Spreads wider than Honey Boo Boo. This product is a total joke and in my humble opinion never really lived. This was dead on takeoff.

Website comment from Meatball-in-training: Great show. The question from one of your listeners about the trade scanner that keeps popping up two standard deviation ITM debit spreads was very interesting. Is it perhaps the case that the scanner is ignoring the cost of carry on the premium itself when looking at prospective trades? That is the sort of thing I can imagine someone overlooking when programming a trade scanner and for wide verticals with lots of time to expiration, it might be enough to make expensive debit spreads look superior to their synthetically equivalent credit spreads. I am one of Mark and Andrews’s students, so if this is all wrong, feel free to blame them.

Tweet from OtC bOuNcEr$ @stevesokol21 - Is there a way to run a scan anywhere to find more stocks with that pattern? Thanks a lot for the help

Around the Block: Still some more earning left out there: ATVI - 5/6, CBOE - 5/6, DIS - 5/6, EA - 5/6, GRPN - 5/6, TSLA - 5/7 & PCLN - 5/8

Option Block 335: The Giovinazzi/Tosaw Spectacular

Trading Block:

A slow day on the market today. TLT was one of the few things to light up the tape. Yellen, the Fed and bond buying. An update of the VIX and S&P with Andrew.

Odd Block:

Call buyers in Auxilium Phramaceuticals, Inc (AUXL)

Call buyers jump into EQT Corp. (EQT)

Call spreads trade in Verso Paper Corp (VRS)

Calls roll in Mechel OAO (MTL)

Strategy Block:

A question/poll for our audience: Given the level of the VIX, is this market a better environment for doing verticals spreads or horizontal spreads?

Around the Block:

More earnings: XOM, LNKD, KRFT and EXPE. The biggest news will come for the jobs report on Friday. Will gold continue to slide? GDP?

Option Block 334: Are Mini Options Dead?

Trading Block:

Close to close is only half the story today. Russell and the NASDAQ lead the way. Stocks that pay a nice dividend are clear outperforming stocks that do not. Three candidates selected to oversee OPRA.

Odd Block:

Puts go up in Diebold Inc (DBD)

A three-way trade goes up in Range Resources Corp. (RRC)

Calls buyers go up in Norhtstar Realty Finance Corp. (NRF)

Put spread sales trade in Bank of America Corp (BAC) - potential roll down

Xpress Block:

A continuing rotation out of momentum into more quality names. Apple, Amazon IBM and Microsoft were all hot on the OX desk today.

Strategy Block:

A two-part strategy block today. First, a few current strategies Uncle Mike is employing. Second, a trade for people who may not have been able to pull the trigger on a selling a bull put spread when the market was down today.

Mail Block:

Question from Jason Kruse - Has probably been asked & answered many times, and I have missed it.. Will $AAPL minis continue to trade after the split?

Around the Block:

A lot of economic news this week, including the Fed two-day FOMC meeting. On Monday, pending home sales and Dallas Fed manufacturing. More earnings: TWTR, MAR, CME & LKND

Option Block 333: AAPL, AMZN Earnings Roundup

Trading Block:

A mild rally on the street today. Apple earnings play-by-play with Uncle Mike Tosaw. A very boring Apple earnings - will this become the next Microsoft? What is the future for Apple? What is the future of the Minis? Will 7 to 1 be the death nail?

Odd Block:

Strangles, calls and puts trade in Eagle Rock Energy Partners LP (EROC), closing call buys trade in SandRidge Energy Inc (SD), closing call buys in iShares MSCI Japan ETF (EWJ), and put buyers trade in AmerisourceBergen Corp. (ABC)

Xpress Block:

A very busy day at OX, but one that is not represented in the numbers. A lot of paper in FB and APPL going into earning.

Mail Block:

Question from Nick Snow - Hey Mark. Second time writer here. I was recently scanning brokers out there and have listened to almost everything on options insider. I found one that is highly regarded by barons and some there's for price and technology recently. One of their "proprietary scanning" functions is meant for spread traders. I opened a virtual trade account and played with it and it is all out of the money low Vol 2 standard deviations debit spreads. Is this not a complete love your broker trade? Is there something more that they can build in a spread debit trade that I do not know?

Question from George - You posted a chart recently on Options Insider and unfortunately I do not know what "P/C" mean. Would you please explain it for me? Many thanks. Your site is very interesting and readable.

Question from A. Berger - When are futures options going live in Idea Hub? Thanks and I love the show. P.S. - Can OX add a caps lock indicator to the website like they have in iTunes? It would make it easier to log on since I am always forgetting about my caps lock.

Question from Doc Phil - Why do so many options traders fall to the “dark side?” You do not see many short sellers in equities. Is premium selling just more attractive or is there something about options traders?

Around the Block:

A final look at MSFT, AMZN and APPL after the bell.

More earning on the horizon: MAR - 4/29, NOK - 4/29, TWTR - 4/29, LNKD - 5/1 & CME - 5/1.

Option Block 332: How to Waste a Good Hedge

Trading Block: Back to rally mode on the street. Vol retreats yet again. Names before the bell: Haliburton (HAL), Hasbro (HAS) - After: Netflix (NFLX)

Odd Block: Put sellers trade in SBA Communications Corp. (SBAC), call buyers trade in Merrill Lynch/Market Vectors Semiconductors ETF (SMH), review from 3/27/14 - calls trade in Ares Capital Corp. (ARCC) (this was a loser), and a review from 3/24/14 - call buyers jump in Quest Diagnostics Inc. (DGX) (possible winner).

Xpress Block: Apple and Facebook dominate trades, though, a lighter than expected day today.

Strategy Block: This week Uncle Mike talks about expiration day risk - just in case some of you got burned last week.

Around the Block: Earnings season shifts into full gear. On tap for this week:

APPL - 4/23, FB - 4/23, F - 4/25, GM - 4/24 before, MSFT - 4/24 after, UAL - 4/24 before & AMZN - 4/24 after.

Option Block 331: Maximizing Your IRA

Trading Block: It was a pretty slow day, with all major indices basically unchanged on the day. Expiration issues prompted many phone calls to the optionsXpress desk. Earnings aren’t running over premium sellers like the last time. Pit trading helped out the CME last week. HFT narrative still active in the market.

Odd Block: Big call buy in Wal-Mart Stores Inc., May call spread trades in Western Digital Corp. (WDC), put buying in Target Corp. (TGT), and closing out a huge position in Lloyds Bank of London (LYG).

Xpress Block: Frenzy about a shortened expiration week, particularly with indexes.

Mail Block: Listener questions drive the conversation.

• What to do with a losing position?
• Day trading commissions and tax implications.
• Maximizing a Roth IRA.