The Option Block

Option Block 310: GOOG After Hours Mania

Trading Block: The “Correction” is over. Earnings Trading Review: GOOG and CME after the bell. FB - ATM straddle went out around $6, traded nearly $3 through that today. F - Announces "best year ever" but closes nearly unchanged on the day. APPL - That $460 put is not looking so outlandish now.

Odd Block: Puts sales trade in Kellogg Company (K), puts buyers trade in Newell Rubbermaid Inc. (NWL), and puts sellers and buyers trade in Overstock.com, Inc (OSTK)

Xpress Block: A big day at OX, driven by all the earnings events. Perplexed by Google.

Mail Block: Question from C_Dog - What is a scenario where you would consider a ratio vertical spread (1x2, 1x3) going into earnings?

Comment from Go Husky - I only trade options around earnings. Am I crazy?

Around the Block: A quick update on Amazon, Google and Chipotle. Upcoming earnings: DIS 2-5, GM 2-6, LNKD 2-6, CME 2-4, ZNGA 2-6, TWTR 2-5

Option Block 309: The Big AAPL Earnings Show

Trading Block: Markets reverse most of today’s slide late in the session. Lots of index volatility, but not many buyers. VIX coming off later in the session. Big Apple earnings after the bell, and right in Tosaw’s crosshairs. The International Securities Exchange (ISE) has not appealed a federal court decision that rejected ISE's attempt in the New York courts to challenge S&P Dow Jones Indices’ (SPDJI) rights to control the use of the S&P 500 and the Dow Jones Industrial Average as the basis of index options.

Odd Block: Puts trade in iShares MSCI Emerging Markets ETF (EEM), calls trade in Time Warner Inc. (TWX), and calls trade in Mechel OAO (MTL)

Xpress Block: Nat Gas and the 10-year very busy on the desk. Apple, MasterCard, Caterpillar, F5 Networks and VIX also very active.

Strategy Block: It’s fruit day! Tosaw also discusses his current position in the Russell.

Around the Block: Apple update, Fed meeting, and President Obama’s State of the Union address.

Option Block 308: The Scale from Smart to Cowboy

Trading Block: An aggressive selloff sparked by weak existing home sales. VIX cash back in the mid-teens. Microsoft after the bell. Netflix tearing it up.

Odd Block: Call buyers in Flagstar Bancorp, Inc. (FBC), closing put buys in Royal Bank of Scotland Group (RBS), calls trade in YPF SA (ADR), calls buyers trade in AVG Technologies N.V. (AVG).

Xpress Block: Alex gets on a soapbox to discuss tax reporting season and understanding how margin works. Netflix, Apple, and Herbalife.

Mail Block: Question from John King: @Options Any comments on this style of option trading: smart, cowboy, or in between?

Around the Block: Google, Chipotle, and Amazon: 1/30 after; Facebook 1/29 after; Ford 1/28 before; EA 1/28 after; Apple 1/27 after.

Option Block 307: Idiotic Upside Calls

Trading Block: A mild selloff early in the session. SPX weeklies up 98% in 2013. SPX & VIX options hopefully getting extended hours in 2014. Best buy taking in on the chin after a poor holiday season. Chuck E. Cheese is worth a billion!

Odd Block: Calls trade in Eldorado Gold Corp. (EGO), calls trade in Amarin Corporation (AMRN), and calls trade in Insmed Incorporated (INSM)

Xpress Block: Intel, Best Buy, and DR Horton were popular on the OX desk today.

Mail Block: Keep those questions rolling in!

• Comment from Shane Hamilton: Only on the Option Block does Andrew toss around words like "bereft". #alteredstate
• Trading resolution from Britt Dowd: To finish building my foundation so that I can finally focus on trading options.
• Follow up from Richard: Regarding Jack's question, would these have to be put based front spreads since you'll ultimately have net uncovered short positions? I didn't think naked calls, as you would have in a front spread, would be eligible for use in retirement accounts? Thanks.
• Regard this question from Jack: I know you guys are not tax advisors, and so nothing you say can be taken as certain in any answer to this question. I am a small time trader, and at the moment cannot afford a CPA with trading expertise in options to do my taxes. So I am wondering if you can talk about the potential tax consequences of front spreads, especially when used as covered call replacement. I've had good success with this strategy, and I would like to move it into my margin account this year, instead of just using it in the IRA to avoid the tax headache.
• Question from Luke Davis: Mark, in show 302, you said in answer to a listener question that using a six month or one year LEAP was good for a stock replacement strategy. Is there any reason you wouldn't go further out than that? For example, I am currently using this on Microsoft and Ford, but with the Jan 2016 ITM calls. Keep up the informative and entertaining shows, and happy New Year!

Option Block 306: Crazy Biotech Action

Trading Block: A mild selloff on the street. Still not many bids for volatility, except in select names. VIX due for a spike according to the Wall Street Journal. NPR calls options "The riskiest place to invest outside of penny stocks."

Odd Block: Puts trade in Clovis Oncology Inc. (CLVS), puts trading in Alnylam Pharmaceuticals Inc. (ALNY), puts trade in Five Below Inc. (FIVE), and calls trade in China Finance Online Co. (JRJC).

Xpress Block: A big mover on the OX desk was LULU. Stealth selloff in crude and the 10-year. Beam bought by Suntory today for $16B.

Strategy Block: Tosaw discusses one small piece of trading spreads with 3-4 legs.

Around the Block: Earnings around the block: BAC on 1/15; CITI, GS, and INTC on 1/16.

Option Block: Apple Kills Weekly Volatility

Trading Block: Alcoa kicking it off after the bell. Apple crushes weekly premium by announcing a late earnings date - 1/27 as opposed to 1/23 like many expected. Many weekly options on the 1/24 cycle were cut in half.

Odd Block: Review from Jan 7: Call buyers in Plug Power Inc. (PLUG), puts sellers trade in BlackBerry Ltd (BBRY), calls roll in Cheniere Energy, Inc. (LNG), and calls roll in American Realty Capital Properties (ACRP).

Xpress Block: Alex discusses premium harvesting for futures.

Mail Block: What do you want to talk about?

• Tweet from Ziaur Rahman: what would be a good place to learn about options trading? I’m interested in learning the basics on options trading.stock/index futures, then also discount broker to trade.
• Question from Jack: I know you guys are not tax advisors, and so nothing you say can be taken as certain in any answer to this question. I am a small time trader, and at the moment cannot afford a CPA with trading expertise in options to do my taxes. So I am wondering if you can talk about the potential tax consequences of front spreads, especially when used as covered call replacements? I've had good success with this strategy, and I would like to move it into my margin account this year, instead of just using it in the IRA to avoid the tax headache.
• Question from Ian Getz: I'm curious how you find good options related articles on the general internet with such a generic word as "options"? Any tips? Articles on the general internet with such a generic word as "options"?

Around the Block: Upcoming Earnings: CITI, GS, and INTC: 1/16, BAC 1/15.

Option Block 304: Polar Vortex Be Damned

Trading Block: Another day, another mild selloff. Crazy fat finger print in gold futures. Apple taking it on the chin. Polar vortex = Boom market for snow derivatives?

Odd Block: Put sellers trade in Wyndham Worldwide Corp. (WYN), put sellers trade in iShares MSCI Japan ETF (EWJ), closing call sellers trade in iPath S&P 500 VIX Short Term Futures ETP (VXX).

Xpress Block: Apple, Twitter and Facebook: the three perennial favorites on the OX desk.

Strategy Block: Uncle Mike Tosaw discusses mortgages. "Should I pay it down or keep it for a tax deduction?"

Around the Block: Jan 6: Factory Orders, ISM Non-Mfg Index. Jan 7: International Trade. Jan 8: ADP Employment Report, EIA Petroleum Status Report, FOMC Minutes. Jan 9: Jobless Claims. Jan 10: Employment Situation

Option Block 303: Wither Single Name VIX?

Trading Block: Most of the major indexes selling off about 1%. A lot of put activity on the street. The numbers are out for 2013!

Odd Block: Puts trade in SPDR S&P 500 ETF Trust (SPY), puts trade in Yahoo! Inc. (YHOO), review from 11/25: Ziopharm Oncology Inc. (ZIOP), also Titan International Inc. (TWI), review from 10/24: Jive Software Inc. (JAIV), also Covanta Holding Corp. (CVA), review from 06/27: New York Community Bancorp, Inc. (NYCB), also Goodrich Petroleum Corporation (GDP), and review from 10/03: YPF SA (ADR)

Strategy Block: We have a special guest for today's strategy block, featuring Andrew Giovinazzi. He discusses some vol structure and strategies ahead of the Bernanke announcement.

Around the Block: What to watch post-Fed? Alcoa 1/9.

Option Block 302: Looking Forward, Looking Back

Trading Block: Predictions for 2014

• Mark - I wish they could finally get the Minis right. Hopefully someone wiIl figure out how to aggregate spread flow across exchanges to improve spread execution, less exchanges, less fixation by retail on VIX/ETFs and more migration to futures/futures options.
• Andrew - I like a VIX low print prediction. Where the market is going and the forgotten sectors in 2013 and how they will fair.
• Alex - Cash settled equity options (that would be pretty sweet). Hope the tax folks don't pass mandatory mark to market. No transaction tax. After hours trading. Five year Leaps. Adjust maker/taker to discourage HFT. An industry standard for delisting zero open interest series. Electronic trading for the options on the big SPU.Predictions: More consolidation - I was wrong about this occurring in 2013.
• Tosaw - Another big year for SPX. Waiting to see Apple earnings tomorrow before I can give a prediction for 2014. I would like to see more volume in the jumbo SPY. Feeling "straddlish" for 2014.
• Mark - I predict more exchanges, something occurs to clip the wings of this rally in 2014, not much appreciable Vol in the marketplace until the next big government debate at end of Q1.

Xpress Block: Twitter was the only big name on the desk. A very important discussion on the 1256 issues.

Mail Block: Tell us what you want to hear.

• Question from Jason KruseRUSE @Jkruse81- @Options thought about a strategy of maxing out margin to buy a lot, then selling a deepish ITM covered call. Is there a name for that? -@Options or have you guys talked about something like that where I could get a better idea of risks?
• Comment from Gary Barisi - That much action because they got a $50M insurance claim!?
• Question from Jack @Itrumpdoom - Option Block Front or Back? I apologize if this question has been covered in the last year and I missed it, in dealing with ratio vertical spreads, will you please explain what makes a front spread front, and a back spread back? Thanks

Option Block 301: Twas the Day Before Christmas

Trading Block

A strong rally on the street on the back of a strong consumer sentiment - A sea of green. Everyones favorite fruit company, Apple up during the day.Some substantial moves in CBOE. VXX hits a low for the year.

Odd Block

Call buyers trade in Meritor Inc. (MTOR), put sellers trade in Ambac Financial Group, Inc. (AMBC), call sellers trade in Select Sector SPDR Financial (XLF) and huge rolls in Hercules Offshore, Inc. (HERO)

Xpress Block

Apple, CBOE and social networking were all seeing a lot of action today.

Mail Block

Question from Dylan, Fort Nelson, British Columbia: I have a question on diagonal spreads today. Is there a good way to capitalize on the long vega these spreads generally have without actually selling the long vega option? I've been looking at using the premium gained in the option in a Vol pop to buy "free" puts in VIXM or VXZ and extract some of this premium instead of just watching the Vrol grow and then go away. Maybe a good one for Uncle Mike as I know he's a big diagonal fan. Thanks,