The Option Block

Option Block 280: Pre-Shutdown Put Bonanza

Trading Block: Shutdown fears hanging over the market. Vol surging back into the marketplace, but Bloomberg says realized vol is nonexistent.

Odd Block: Calls trade in Northstar Reality Finance Corp. (NRF), calls trade in YPF SA (YPF), and puts trade in Intrexon Corp (XON)

Xpress Block: How has the potential of a shutdown affected OX customers? More trading patterns!

Strategy Block: A risk management and annuities rant.

Around the Block: The big deadline approaches.

Option Block 279: OTM Fly Breakdown

Trading Block: There was a mild rally today. All Facebook all day at OX.

Odd Block: Calls trade in Juniper Networks, Inc. (JNPR), puts trade in iShares MSCI Australia Index (EWA), calls trade in Hertz Global Holdings, Inc. (HTZ), and risk reversal trades in St. Jude Medical (STJ).

Xpress Block: Biotech, mobile, and hedging activity pouring in. What are the GLD traders trading? Let’s take a look: 1-SPY, 2-SLV, 3-APPL, 4-FB, 5-DUST (daily gold miners bear 3X ETF), 6- JCP, 7- USO, 8- GDX (market vectors gold miners), 9 - GE, 10 – TSLA. What about SLV? 1-SDS, 2- GDX, 3-USO, 4-VXX, 5-SSO, 6-FB, 7-TZA, 8-SCO, 9-TNA, 10-AAPL.

Mail Block: What do you want to know?

· Question from Nocturne: trying to understand OTM butterflies. What’s a use case for an OTM fly vs. a simple vertical or ratio? Very confused.

· Question from “Joe”: I haven’t been trading options for very long so forgive me if I’m out of line. I’ve been listening to your show for the past six months and find it very informative. But I also wonder if many of the concepts you discuss are simply over the heads of the typical retail trader such as gamma, vega, implied volatility, etc. I know I’m frequently confused by some of these topics. Does retail really need to know all of this stuff or is a more straightforward approach (like if you sell this option, your max loss is x, your max gain is y, you have z days until your trade expires, etc.) a better way to reach the masses without scaring them or putting them off options? I hope you read my question but, if you do, to avoid embarrassment please just refer to me as “Joe”.

Around the Block: Debt debate and earnings approaching

Option Block 278: Fading the Shutdown

Trading Block: It was an aggressive day on the street, with a lot of love for Apple, up 20%. Call stupids go up in VIX. Talks of Blackberry selloff continue.

Odd Block: Puts Trade in Xilinx Inc. (XLNX), calls trade in Sierra Wireless Inc. (SWIR), calls trade in Covidien plc. (COV)

Xpress Block: Today’s Xpress Block will feature a guest: Daril Wagner, Product Manager at OX, who will discuss some new tools available to clients - including the Trading Patterns and Options Patterns tools.

Strategy Block: Calendars vs. butterflies

Around the Block: The debt ceiling kerfuffle is back!

Trading Block: A mild day on the street. Watch out! SPY ex-dividend today. Metals hosting a "Volapalooza"

Odd Block: Calls Trade in Zynga Inc. (ZNGA), calls trade in Eagle Bulk Shipping Inc. (EGLE), put buyers in Sealed Air Corp (SEE), and calls trade in Meritor Inc. (MTOR).

Xpress Block: Tesla is still on a tear. CME metal trading very active.

Listener Mail: You have the questions, we have the answers.

• Question from Buckeye6 - I am a new listener catching up on the archives. On an earlier episode, Mark mentioned the OX platform highlights which options qualify for reduced commissions to close. But I do not see what he is talking about. Where do I find this information? Thank you.
• Question for the Option Block from Luke: "Uncle Mike" has suggested that if one has a spread that has gone in the money, the short leg can be rolled up by at least one strike, with a goal of breakeven or near breakeven. He suggested waiting until the day before expiration, but I have an ITM spread, so thought I would look at it one day early. I have a bear call spread on SPY: Short Sep 170 (sold at $0.59), long Sep 172 (bought at $0.255), when SPY was at about $165. It never reached my 70% profit target, before going ITM this week. With the no taper announcement, SPY has gone to $173.03. Today (Wednesday before expiration) I could buy the 170 call for $3.07, and sell the 172 for $1.30, which looks very far from breakeven, unless I greatly misunderstood what he meant by breakeven in this context. Actually, the spread on the 170 call is 3.03-3.11, but still. Even if these calls went to 0 extrinsic, how could I ever get breakeven here? Or did I just get a really really bad price on my initial short fill? For completeness, the long 172 call is trading for about $0.94. Thank you for a great show!

Around the Block: AKA taper watch

Option Block 275: Predictably CrappyTrading Block: A mild selloff, but gold and silver took it on the chin. AAPL down 30 handles in a dismal post iPhone announcement. Ichan liked it at $500, he’ll love it at $470. Lulu earnings before the open...sheer pants knock the stock down 5%, well off the highs of $82 from earlier this year.Odd Block: Puts trade in Mechel OAO (MTL), calls trade in Wendy’s Co. (WEN), and calls trade in Vera Bradley Inc. (VRA). Alex discloses that he knows way too much about women’s retail.Xpress Block: Lots of questions coming in about AAPL, LULU, and SPX.Mail Block: Question from Contrails.Hi Mark, I really like your talk shows and loving all the humor. Thank you for educating and entertaining me all those night shifts that you guys keep me in company. I have one burning question for you regarding an observation I noticed today as I was following the SPY and SPY weekly options. First off, I am a noober. But i could not find an explanation for what I saw for those weeklys that are expiring in 4 days. So what happened is that the ATM and ITM calls were not following the price of the SPY. So as SPY was fluctuating up and down, the calls mentioned above were higher in price around 1030 AM EST compared with calls corresponding to same SPY price later during the day around 1300. The call price difference was about 15% which is a lot for home gamer like me. Why is that??? By the way I did not check the Puts, I'll look at it later today… Do the weeklys lose time value Theta as the hours go by during trading day? Or is this something related to the all mysterious Vega? But I plotted the greeks of those options on TOS and they were all flat lines, Confusing!!! Please enlighten me more Please don't mention my real name on the podcast. You can call me "Contrails" And please let me know if you get a chance the title of the podcast you'll answer my burning question. Your fan, ContrailsAround the Block: Looking at gold, silver, and oil in light of next week’s FOMC meeting. VIX expiration next week.

Option Block 274: More Buyers than Sellers

Trading Block: All is right with the world again! Most indices up over 1% today after Chinese export data beats expectations. Prepping for the Apple event. How big could this still be? Groupon continues to rally - announced acquisition of travel app Blink.

CITI closing CBOT desks.

Odd Block: Call spreads trade in SPDR S&P Homebuilders ETF (XHB), puts trade in CBOE Volatility Index (VIX), calls trade in Smithfield Foods Inc. (SFD), puts trade in iShares MSCI Emerging Markets Index ETF (EEM).

Xpress Block: Lulu and Apple, as well as many other hot names on the OX desk.

Mail Block:

• Question from Berger Meister - Just to clarify from your last show - A back spread is net long units and front spread is a traditional ratio? Correct? Why such dumb names?
• Question from N. Sanchez - I have heard a lot about volatility smiles, but from listening to your show, it sounds like the volatility skew actually has a downward slope to it. Does the volatility smile still exist or is it limited to odd circumstances such as the "Apple Zealots" that you have discusses on the show previously. Thank you so much for this tremendously informative program.

Around the Block: LULU earnings 9/12.

Option Block 273: Trades to Salivate Over

Trading Block: It was a very mild day on the street. How did the holiday weekend volatility play out last week? It’s that time again - the volume numbers are in! Microsoft buys Nokia.

Odd Block: Calls trade in Timken Company (TKR), NetApp Inc (NTAP), Oasis Petroleum Inc. (OAS), and Fastenal Company (FAST).

Strategy Block: What happens when your covered call goes in the money?

Mail Block:

• Question from Phillip Kay - What is the ASPs take on Tesla skew? Upside still steep and a good candidate for verticals or has that ship sailed?
• Comment from Mark Clyde Brant @MarkBrant1KM -@Options Tesla and Netflix managers are dumping shares en masse! Sep long Puts in play.
• Question response from bitcoinbravo - Hedging Bitcoin Mining Investments with Network Difficulty Futures: Part 1 – Hedging Shipment - http://thegenesisblock.com/hedging-bitcoin-mining-investments-with-network-difficulty-futures-part-1-hedging-shipment-delay/

Around the Block: Non-farms and Syria ahead.

Option Block 272: Presidential Rope-A-Dope, or Bags of Money

Trading Block: Labor Day weekend is nearly upon us. VIX cash above the 16-handle. Jobless claims are down, as expected. HFT and algos appear to have had a negligible impact on the vol of major futures contracts.

Odd Block: Puts trade in Garmin ltd. (GRMN) Calls buyers in Taiwan Semiconductor Mfg. (TSM).

Mail Block:

• Question from Mike - I have been watching Dollar General for a while. What do you mean by the seller could be using an up-tick in volatility going into earnings for a better sale?
• Question from Tim C. - Is it true if I sell a time spread that OX will margin me as if I am naked short the longer-term option? If so I do not understand that? Why wouldn’t they treat it like a spread until the nearer-term option expires?
• Question from Avega - Why would I ever trade a back spread? Why waste money on a reverse ratio - say 3x2. Then I am just net long one contract - can I just save money and buy the one?

Around the Block: Watch out for the weekend risk! Perhaps scoop some cheap premium on friday. Syrian developments?

Option Block 271: Sabre Rattling Rattles Markets

Trading Block: A mild rally on the street until Kerry started sabre rattling in Washington, sending the markets down. NASDAQ, Goldman and others still facing heat over their tech meltdowns last week. BATS and Direct Edge merging. TABB Group predicts options commissions to shrink of the next few years. Commodity rundown with Mike Tosaw.

Odd Block: Large buy writes go up in Facebook Inc. (FB), and puts trade in ProShares Short 20+ Year Treasury ETF (TBF).

Xpress Block: Tesla, Biotechs, and Facebook!

Mail Block:

Question from bitcoinbravo: Any thoughts on bitcoin -- especially as the flows continue into this emerging digital currency and we see with futures and derivatives market develop -- currently there is a lot of arbitrage opportunities between the various exchanges

Question from Charles P.: I am an employee of a very large (and widely held) technology firm. As you might expect, a substantial amount of my net worth is tied up in the stock of my employer. However, I am expressly forbidden from trading any derivatives in my employers stock even for hedging purposes. So my question to you is - how do I hedge myself in this scenario?

Around the Block: Glued to the news of Syria. Non-farms next week.

Option Block 270: Looking Behind the Curtain

Trading Block: NASDAQ halts trading today over tech glitch. Many big names were impacted. Goldman Sachs screws up JPM options trading. Question from T_Pal: Should I be concerned about the wave of technology problems impacting the market? Can they impact my trading? Saw Mark L. quoted a lot of this. What's his take?

Odd Block: Calls trade in Express, Inc. (EXPR), calls and puts trade in Accuray Incorporated (ARAY), and calls trade in Uranium Energy Corp. (UEC)

Strategy Block: Uncle Mike Tosaw discusses the situation of a covered call moving in the money and the ways in which to think about it.

Around the Block: A hopefully glitch-free week. Looking ahead to see what may be coming out of Washington.