The Option Block

Option Block 269: Listener Questions a Go-Go

Trading Block: Another down day on the markets. The 3-year and 10-year are bumping up against levels we haven't seen in a while.

Mail Block: Your questions, our answers

• Question from Lee Patterson - I've been an Option Block listener for a few months and you've inspired me to hedge my retirement plan through my employer. It has been 100% invested in the S&P 500 and unfortunately I cannot use options in this account. My idea is to go to cash in my retirement plan at work while buying 3 month at the money calls in SPY and rolling them when they are 1 month from expiration in my Roth account. To finance these I would sell the weekly SPY about 2-3% out of the money. Does this seem like a reasonable plan to participate in the upside while limiting losses or is there a better way? Thanks for your time. Lee
• Question from @Metegia - Which direction is a Risk Reversal, which is short RR? Descriptions conflict. Thanks.
• Question from A. Jackson - Andrew referenced "double butterflies" on a recent episode of the Option Block. Can you explain a little more about that position - how it differs from regular fly, when/why you'd want to use it, strike selection, etc. Thank you very much Mark for making so much excellent options content freely available to everyone. Your network is certainly one-of-a-kind and I'm glad to see that it is doing so well.
• Question from Richard D. - Hello! In this episode there is a discussion on taking advantage of TSLA skew and using OTM TSLA butterflies on both sides at strike. Could you explain a little more about skew, and if long/short butterflies are best given skew?

Around the Block: FOMC minutes. Keeping an eye on the 3-year and 10-year.

Option Block 268: Commodity Sea of Green

Trading Block: A broad selloff across the board today. Inflation fears spook the Fed and the market. Cisco off 7%, looking at layoffs. Walmart off 3%. A sea of green in the commodities. Record day in the VIX - only 133 contracts short of 1 million.

Odd Block: Review from 7/29 - very well-timed paper in American Eagle Outfitters (AEO). calls trade in SPDR S&P Homebuilders ETF (XHB), and combos trade in Microsoft Inc. (MSFT).

Xpress Block: Single leg WalkLimit goes live!

Mail Block: Website comment from nrlbuild - Enjoyed your show as usual, always fun to have Mr. Sebastian on the air! I feel the need to stick up for Motley Fool a little. I have been a member since around 2000...and been in two of their options services since 2008. They actually have some good stuff with respect to options...I think even you tough veterans would agree if you understood. Unfortunately, the Fool universe is so large and varied, not unlike Seeking Alpha, that there is often as much junk as there is quality...it really depends upon which specific Fool service one subscribes. I have never understood why they don’t control that more carefully? Anyway, if it wasn’t for them I never would have come to options in the first place…and now I’ve found you guys! ;) Carry on! Ned

Around the Block: More earnings? HPQ - 8/21. Keeping an eye on the 10-year.

Option Block 267: Betting Against Yourself

Trading Block: A relatively flat day on the street. A big day for Silver and Apple –both up 3%. It was a good day for Tosaw! Blackberry exploring strategic options with the stock up 11%. Tesla finally sells off.

Odd Block: Review from 7/1 - Air Products and Chemical (APD), calls trade in Sanchez Energy Corp. (SN), combos trade in Rockwell Medical Inc. (RMTI), call spreads trade in Micron Technology, Inc.(MU).

Mail Block:

• Question from D. Adams - What is the best way to express a long-term bullish position using options?
• Question from Terry Russ, Scottsdale, AZ - Can you guys run down the difference between an iron condor and an iron butterfly? When would I want to use one vs the other? Thanks for this great show.

Around the Block: Earnings are still happening. Cisco on 8/14, and Cosi on 8/15.

Option Block 266: Juice and Paper

Trading Block: Commodities rundown featuring Matt - starting with Nat Gas. The ride for Tesla continues. DNDN after the close. NVDA after the bell.

Odd Block: Call buyers in Microsoft Corp (MSFT) and calls trade in Freeport-McMoRan Corp (FCX).

Xpress Block: New single leg options transactions with the WalkLimit!

Mail Block:

• Question from @SouthbayTrader1 - @Options "Juice"? "Paper"? (probably time for an overview of these two terms that we use so frequently on the show)
• Comment from nrlbuild: I have been listening to Option Block for a couple of months now...really enjoy the show. Have been long ATVI since 2009, got in via short puts. Wish I been listening to your show when you were discussing short strangles on it, I was always to scared it would be called away! I really enjoyed Volatility Views...listened to every single episode... and was wondering if it was going to be returning? The VolX site seems to be stagnate.

Around the Block: DNDN & NVDA update.

Option Block 265: The Innovator

Trading Block: Giving back some of the gains on the street today. A surprising pop in Blackberry. Apple touching near-term highs. ALSO GLD, SLV, ETC

Odd Block: Odd Block Review: Dendreon Corp. (DNDN), put spreads trade in DeVry Inc. (DV), put spreads trade in The Chubb Corp. (CB), calls trade in China Automotive Systems, Inc. (CAAS), and call spread roll in Deckers Outdoor Corp (DECK).

Xpress Block: Tesla very active with earnings coming up. CBOE and Alcatel-Lucent active as well.

Strategy Block: The credit spread with benefits.

Around the Block: Upcoming Earnings: Groupon - 8/7, Tesla - 8/7, Disney - 8/6.

Option Block 264: Swimming in a Sea of Green

Trading Block: A sea of green across the board. S&P crosses 1700 mark on strong manufacturing data. Unemployment claims at a 5.5 year low. Activision and LinkedIn earnings after the bell. CME reports a 27% rise in quarterly profits, still down 4%.

Commodity rundown: metals, nat gas, coffee, etc. It's number day again - The Options Industry Council (OIC) announced today that total options contracts traded in July was up 5.81%. Average daily volume for the month was up 1.00%. Year-to-date volume up 1.93%. Equity options volume up 4.39%. Average daily volume for equity options in July slightly off of last year’s contracts by 0.35%. Year-to-date equity options volume up only 0.16%.

Odd Block: Calls trade in SPDR Gold Trust (GLD), calls trade in Nvidia Corporation (NVDA), puts trade in iShares MSCI Emerging Markets Index (EEM), and fly trades in Oil States International (OIS).

Xpress Block: A very busy, non-expiration day at OX.

Mail Block: We have such curious listeners!

• Question from MMax - Can you give us an update on mini-options?
• Question from George Roop, Nashville, TN - Can you explain why the hosts take such a dim view of USO? It's really one of the few viable ways for retail to make longer-term bullish bets on oil.

Around the Block: Non-farms in the crosshairs. CBOE earnigns tomorrow before the open. Groupon 8/7, Disney 8/6, Nvidea 8/8, Tesla 8/7 after.

Option Block 263: The Wasted Year

Trading Block: A mild selloff across the board. GLD sells off fractionally on the day. ISE Gemini set to launch Aug 5. CBOE announces new VIX trading hours.

Odd Block: Pre-earnings run in Activision Blizzard Inc. (ATVI), stock replacement in Alcatel Lucent SA (ALU), interesting pre-earnings play in American Eagle (AEO), and was there a hedge in iShares MSCI Japan Index (EWJ)?

Odd Block Review: Looking back to 6/27: Goodrich Petroleum Corp. (GDP) - stock trading $12.90, buying 6,000 Aug 15 calls for $.45. Stock now trading $17.50, calls worth $2.96 - a $2.50 profit = $1.5M. Still 10K open on strike - looks like he hasn't closed these yet.

Xpress Block: "Big data week." It’s a wait and see situation. Nothing can derail the Tesla train.

Around the Block: A full calendar of economics this week. Non-farms Friday.

Option Block 262: Cramer Loves It

Trading Block: Zynga earnings after the close. Someone paid 17% for a one-month straddle! Amazon earnings are also after the close. Facebook! Facebook! Facebook! Commodity rundown - An overview of recent action in futures/futures options. Options "insiders" come forward.

Odd Block: Put spreads trade in Crocs, Inc (CROX), and calls trade in Denderon Corp. (DNDN).

Xpress Block: Questions, anyone?

Question from Tom P. Are we ever going to see Walk-Limit on single leg trades? I'm a teacher so I can't always be there to close out my trades on the open. This is particularly difficult around earnings season. I may miss the only chance to sell my option for a decent price on the open because I'm away from my screens. I would love to be able to enter a target sale price for my options (long call, etc.) and then have OX walk the price down automatically until it hits the actual trading price. This would save busy people like me a lot of time, and potentially a lot of lost profits.

Around the Block: An update on AMZN and ZNGA. TTWO coming up on 7/30.

Option Block 261: NFLX Strangles Children

Trading Block: Netflix earnings are after the bell. Could it be the return of the widow-maker? McDonald's down 3%. It’s never a good sign for the economy when McD can't make money. A follow-up on our good discussion on after-hours options trading from our last show. Is 3pm still reasonable?

Odd Block: Call ratios trade in Skechers USA Inc. (SKX), calls trade in Verisign Inc. (VRSN), puts sold on the World Acceptance Corp. (WRLD), and call sellers in General Growth Properties (GGP).

Xpress Block: Metals and oil predominately featured on the desk today.

Mail Block: The all stars channel their inner therapists, and Obi Wan

• Question from Doc Robbins. I just sold NFLX 240 260/280 July week 4 iron fly at $18 with stock at 259. Am I crazy? Longo would be proud.
• Question from Charles N. I’m looking at Ford July W 16.5-17.5 strangle for $.25. How's that for free gamma pre-earnings?
• Question from Mr_Work. Am I crazy, or is $.21 for Zynga July weekly 3.5 puts a lousy deal
• Question from George Winters. Microsoft July 35-34 put 1x2 for $.10 before earnings: winner or waste of money?
• Question from Joe Rigg. I tried to write the Blackberry weekly 9 put with OX, but the system kicked it out and said BBRY was now on increased margin. Why is that? How is this decided? Is it a decision by the broker or an industry wide decision? How is the new margin level determined? Help me Viceroy, you're my only hope!

Around the Block: Earnings, Earnings, Earnings! Ford 7/24 before, Facebook 7/24 after, Electronic Arts 7/23 after, Amazon 7/25 after, Apple - 7/23, United Airlines 7/25 before, Zynga 7/24 after.

Option Block 260: Doing the Earnings Straddle Dance

Trading Block: Earnings-Palooza: Google, Microsoft and more after the bell.

Odd Block: Combos trade in Rite Aid Corp (RAD), paper buying calls in Covanta Holding Corp. (CVA), and puts trade in YY Inc. (YY)

Xpress Block: This should be a very interesting expiration coming up. A little bit of everything is coming across the desk. Google and Microsoft both missed.

Strategy Block: Mr. Tosaw discusses straddles as this week's strategy.

Around the Block: One last check-in on Google and Microsoft. Upcoming earnings: Apple – 7/23, Zynga - 7/24, and Amazon - 7/25.