The Option Block

Trading Block:

• The market is tanking on trade war concerns: Trump is at it again.
• Volatility returns - VIX back in the 20s.
• The tech selloff continues - FB closed $185 on 3/16 - traded as low as $163.72 today, down nearly 12%.
• Fed hikes rates as expected.
• US weekly jobless claims total 226,000, in line with expectations
• Earnings: NKE: $65.30, ATM straddle - $3.60, approx. 5.5%

Odd Block: Calls trade in Deere & Company (DE), puts trade in CNH Industrial NV (CNHI) and split ticket calls in TC Pipelines LP (TRP).

Strategy Block: Uncle Mike Tosaw discusses selling naked puts

Mail Block: Listener questions and comments

• Question from Ed Bankert - Debating on using covered calls or short puts. Which is better for a less experienced options trader who wants to make money?
• Question from Scott Somer‏ - WMT now below 100 premarket @Options @OptionPit @OptionVol How is that proposed @CBOE premarket earnings related equity options pilot going?

Around the Block/Economic Reports

• Mar 23: Durable Goods, New Home Sales

Trading Block: VIX is back in the 20's. Facebook is taking it on the chin as Russia fallout continues - down 7% and leading other tech stocks into the toilet. Fed Meeting with New Chairman on Wednesday. Earnings: Oracle - ATM straddle - $2.75, over 100k contracts on the tape.

Odd Block: Call palooza in Olin Corporation (OLN), put palooza in UnitedHealth Group Inc. (UNH), split ticket puts in Criteo SA (CRTO).

Mail Block: Vote in our Options Broker Madness competition each day by going to @Options on Twitter.

Results:

• Interactive Brokers vs. Sogo - Interative Brokers
• TDAmeritrade (TOS) v. Choice Trade - TD Ameritrade
• Schwab (OptionsXpress) v. Tastyworks- Tastyworks
• Fidelity v. RobinHood- RobinHood
• Lightspeed v. eOption- Lightspeed
• E-Trade (OptionsHouse) v. TradeHawk- E-Trade

Listener questions and comments:

• Question from Malthe Have Musaeus:If I buy a call option and afterwards sell it for a profit, I'm not the one obligated to sell 100 shares if that option is exercised later right? How do I close my call option position completely and take my profit/loss?
• Question from The Chazz - What do the option block all-stars think the skew will look like in bitcoin options?
• Question from Jack K. -How do people afford to sell puts in TSLA? In order to do any size (like a 10 lot) you have to be able to put up the cash to buy 330k worth of stock. Even a one lot costs 33k. Maybe we need some minis on TSLA?

Around the Block/Economic Reports:

• Mar 21 - Existing Home Sales, FOMC Meeting
• Mar 22 - Jobless Claims
• Mar 23 - Durable Goods, New Home Sales

Trading Block: Looking back at the week's news:

• US weekly jobless claims total 226,000, in line with expectations
• Dow up more than 200 points, attempts to snap 3-session skid, as Boeing's stock rises
• ToysRUs closing all stores.
• iHeartMedia files for Chapter 11 bankruptcy.
• SNAP tanks due to controversial Rihanna ad on platform.
• Spotify says it will begin trading shares April 3.

Strategy Block: Uncle Mike Tosaw discusses limit orders

Mail Block: Listener questions and comments

• Question from Matt M. - Why does Mark always say that Andrew doesn't understand expiration of vertical spreads in SPX? Is that true or some inside joke I missed?
• Question from Jello Fan - VXX 1-yr 50% OTM puts plus VIX 3 month 15% OTM call verticals - 5 or 10 handles wide. Is that the secret sauce?

Around the Block/Economic Reports:

• Mar 16: Housing Starts, Consumer Sentiment, JOLTS

Trading Block: Discovering the plight of liquidity providers at CBOE RMC today. It's ironic timing since Spot Trading just shut down. Potentially changing tick sizes in VIX futures and options. VIX options breakdown is 90/10 standard vs weekly volume.

Odd Block: Line in the sand puts in Dick's Sporting Goods Inc (DKS). Buying more Tim in Johnson Controls International (JCI). Size put/call kickers in The Western Union Co (WU)

Mail Block: It's madness!

• The Options Insider: It's time for our annual Options Broker Madness Tournament! Reply/DM to nominate your broker to compete in this year's BrokerBattle. 16 firms can enter....but in the end there can be only one. Get your nominations in now & prepare to battle. Broker Madness starts 3/12.
• Question from Scott Somer -VolView The $VIX Apr 29-35 call spread is going for about 40 cents, are you more willing to buy or sell it to open? Comment from Oscar Stanko:Hi Mark. I am an avid listener to your options podcasts and wanted to sincerely thank you for your time and energy you've put into creating this valuable (and often humorous) content!
• Question from BigBlanc -I'm liking the VXX erosion play. Question though - Why does everyone talk puts on this trade? Why not selling calls or call spreads? Or maybe the combo - buying puts and selling calls or call spreads? Any back tests on that?

Around the Block: What's coming up this week?

Trading Block: Markets unchanged mid-day. VIX back around the 17-handle. A rundown of CBOE RMC.

Earnings: Highlights:

• Friday- Revlon, Big Lots
• A lot of big box retail this week, too - Costco, Target, Kroger, etc.

Odd Block: More Jan 2019 50 "Catastrophe" puts in Tesla Motors Inc (TSLA). Line in the sand puts in Victoria's Secret (LB). Size call fly/roll in Electronic Arts (EA).

Strategy Block: Mike Tosaw discusses rolling SPY puts.

Mail Block: Are you ready for Broker Madness?

• The Options Insider: It's almost time for our annual Options Broker Madness Tournament! Nominate your broker to compete in this year's #BrokerBattle. 16 firms can enter....but in the end there can be only one. Get your nominations in now & prepare to battle. #BrokerMadness starts 3/12.
• Question from CVT -The Rock Lobster suggested other ways to play VXX erosion other than buying puts. What was he talking about?

Around the Block/Economic Reports:

• Mar 9: Unemployment

Trading Block: Today we feature special guest host Lex Luthringshausen founder and CEO of Tradehawk, powered by Option Eyes.

Headlines of the day:

• What trade war?
• SPX up over 1% intraday.
• VIX is back into the teens.

Earnings Highlights:

• Tuesday - Target
• Wednesday - Dollar Tree, Costco
• Thursday - Kroger
• Friday - Revlon, Big Lots

Odd Block: More JAN 2019 50 "Catastrophe" puts in Tesla Motors Inc (TSLA). Trade war sparks put roll in Materials Select Sector SPDR (XLB). Long-term call action in Ultra Petroleum Corp (UPL).

Mail Block: Listeners have their say

• It's almost time for our annual Options BrokerMadness Tournament! Reply/DM to nominate your broker to compete in this year's BrokerBattle. 16 firms can enter....but in the end there can be only one. Get your nominations in now & prepare to battle. BrokerMadness starts 3/12.
• Comment from AlphamakerChris - A lot of people were robbed in their sleep, it's absolutely disgraceful. They should've given several weeks notice, not 1 day. People lost fortunes overnight for reasons not of their own doing.
• Comment from Scott Somer - NO fun if you were long anything accept deep ITM Options on SVXY or UVXY. Highlights unexpected danger of trading options on leveraged products. TVIX TVIZ...Would have caused disorderly option markets if they did during the trading day. SVXY UVXY Shot across the bow if you are trading options on VolocityShare products as well....Wonder how many of them took people to "The Horse"?
• Question from Stifl - Great show. Agree with Mark about the OI change graph in LiveVol it's very useful. Only problem is that it only goes back a few months. Any tools out there that go back farther?
• Comment from DannyBzak - These funds are tracking an index. The index itself was down 96% on 2/5. This is a flaw in index design, not a fund problem. ETP's just can't decide to suddenly not track the index they are mandated to track. Someone needs a better mousetrap to track short vol in index form….Or a more realistic conclusion is that short vol is not a realistically scalable concept in index/ETP form. IMO short vol is something that is better served by active management, not a passive index...Which is the design flaw of thinking one should make an index designed to replicate a short position on anything. In reality someone who is smart enough to be short is smart enough to manage the risks of being short. These indexes have zero risk management built in.

Around the Block/Economic Reports This Week

• Mar 6: Factory Orders
• Mar 7: International Trade, Productivity and Costs, Beige Book
• Mar 8: Jobless Claims
• Mar 9: Unemployment

Trading Block: Trump's trade war is spooking the market. SPX off nearly 2%. VIX is back into the 20s. Equity Markets: It's worth noting that at a forward P/E ratio of just over 17x for the S&P 500, valuations do not appear to be stretched. The great SVXY debacle. The numbers are in for February, and they were good (surprise).

Odd Block: More Jan 2019 50 "Catastrophe" puts in Tesla Motors Inc. Puts roll in iShares S&P 500 Index Fund (XSP). Bullish call love in Salesforce (CRM).

Mail Block: Options question of the week.

There's much debate about SVXY these days. Will it survive 2018? Is it poised for serious upside? We'll table those questions for now and instead ask all of you out there slinging SVXY - what is your weapon of choice? Reply/DM with other suggestions.

• 59% - Naked Long SVXY
• 22% - Long SVXY Calls/Spreads
• 10% - Long SVXY Puts/Spreads
• 9% - Long SVXY w/ Put Hedge

Volatility FlashPoll. Three weeks ago out audience was evenly split on whether SVXY would survive 2018. But the recent changes to its investment objectives have us asking once more - Do you think SVXY will survive 2018?

• 50% - Yes
• 24% - No
• 26% - I'm done with inverse VIX
• Comment from Matt Thompson - Everyone say thank you to ProShares for de-levering SVXY for a day like today.

Around the Block/Economic Reports:

• Mar 1: Jobless Claims, Personal Income
• Mar 2: Consumer Sentiment

Trading Block: Earnings Highlights

• Monday - Fitbit
• Tuesday - Macy's, Lumber Liquidators, Priceline.com, Weight Watchers, Papa John's
• Wednesday - Valeant, Lowe's, Mylan, Crocs
• Thursday - Best Buy, Kohl's, AMC Entertainment, Barnes & Noble, Nordstrom
• Friday - JCPenney, Foot Locker

In other news:

• Warren Buffett: 'We've bought more Apple than anything else' in the last year
• Nearly half of 2017's Cryptocurrency 'ICO' Projects Have Already Died

Odd Block: More Jan 2019 50 "Catastrophe" puts in Tesla Motors Inc. (TSLA), size "line in the sand" in Dicks Sporting Goods Inc. (DKS), bullish risk reversals in American International Group Inc. (AIG), and size calls in Regions Financial Corp. (RF)

Mail Block: Options question of the week

There's much debate about SVXY these days. Will it survive 2018? Is it poised for serious upside? We'll table those questions for now and instead ask all of you out there slinging SVXY. What is your weapon of choice? Reply/DM with other suggestions.

• Naked Long SVXY
• Long SVXY Calls/Spreads
• Long SVXY Puts/Spreads
• Long SVXY w/ Put Hedge
• Comment from Vixland‏ - Tight Covered Calls !!!!!!!!!!!!

Listener questions and comments:

• Question from Mark Brandt - Has OIR discussed Peter Thiel buying $240M of SVXY puts days before the vol spike? He is smart but that smells fishy.
• Comment from Matt Williamson - @OptionVol $431 outlay ($430 for the covered spread, $1 for the put) to make $69.69/431 = 16% less assignment fees (likely just a few in large blocks) and commissions.
• Comment from CheeButter - We've been waiting for this day - RE: VIX EXPLOSION LAST WEEK
• Question from Allanc - What are the odds of a reverse split for SVXY?

Around the Block/Economic Reports:

• Feb 26: New Home Sales
• Feb 27: Durable Goods, International Trade, Consumer Confidence
• Feb 28: GDP
• Mar 1: Jobless Claims, Personal Income
• Mar 2: Consumer Sentiment

Trading Block:

• Half-time report for earnings:
• INTU - $173, ATM straddle - $10.50, approx. 6%
• GDDY - $55.45, ATM straddle - $4.30, approx. 7.8%

Odd Block:

• More Jan 2019 50 "Catastrophe" puts in Tesla Motors Inc.
• Puts roll in iShares S&P 500 Index Fund (XSP)
• Size 1x2s in ILG Inc. (ILG)

Strategy Block: Mike Tosaw discusses the 1x2 ratio call spread

Around the Block: What are we looking at for the upcoming week?

Trading Block: Is the VIX "Whistleblower" just more noise or it there some teeth this time? Volatility's awakening spurs record long position in VIX futures.

Strategy Block: Discusses legging into OTM vertical call spreads

Odd Block: More JAN 2019 50 "Catastrophe" puts in Tesla Motors (TSLA), long-term put love in Community Health Systems (CYH), and calls trade in Radian Group Inc. (RDN).

Mail Block: Options question of the week

It's been a rocky week for the markets. People are understandably scared and confused. That raises the question: Which product are you most concerned about over the next 30 days? Which product would you not touch with a 10-foot pole?

• VIX
• SVXY
• SPY
• Bitcoin: XBT, BTC, etc.

Listener questions and comments:

• Comment from Matt Williamson - Good guesses and discussion. It's much simpler. $5 covered calls trading for $4.30. Again, why? How? Buy the $5 put and arb for 15% ROI!...Sure. I bought some 15s, some 20s, some 5s. Guess no one is concerned about a 97% correction over the next year...
• Question from J3dingle - Hi Mark, In yesterday's Option Block, you said you personally took an options position in SVXY. I was curious, if you could say, what kind of position a pro takes. Thanks, Joseph
• Comment from Scott Somer - Another day another day with a very large sell off heading into the start of the Option Block and an up move in the S&P Futures during the "Trading Block" #OptionInsiderRadio #OptionBlock #GreasyMeatball #RockLobster...If we get a Rule 80B Sell off, that will finish off $SVXY unless second month VIX Futures are north of 40.
• Comment from MrMagoo‏ - There are no regulators working under Trump. It's a free for all with HFTs eating retailers for lunch.

Around the Block: How will VIX run going forward? S&P closed three points above the 200-day moving average. Can we make another run at the all-time highs?