The Option Block

Originally posted on February 19, 2016

Trading Block: Welcome to our 500th episode. Today's special panel includes: Mark Sebastian, Mike Tosaw, Andrew Giovanazzi, and our most beloved former panelist Alex "The Viceroy" Jacobson. They discuss:

• How many exchanges are too many exchanges?
• Options Insider question of the week
• The SEC
• Citadel
• Transaction fees
• Talking free of compliance issues
• And so much more...

Odd Block: Rolling calls in Coca-Cola Company (KO), calendar spreads trade in Time Warner Cable (TWX), and put sellingHess (HES)

Mail Block: Listener questions and comments

• Question from TennisGr8: I've been hearing a lot lately about gamma scalping. How does it work, and who should use it? Is this second-order greek becoming the new options darling?

Around the Block: Are the bulls back in force? Always be prepared for a downturn.

It's all strategy in this abridged episode of the Option Block. Today, uncle Mike discusses what you an do when you're not connected to your computer, including:

• Take your mobile device with you
• Have the phone number for the trading desk
• Contingent orders and alerts
• Why not to have a limit order on a contingency
• Setting alerts

Trading Block: Wall St. boosted by tech stocks, rebound in oil prices; Bitcoin Tumbles to Lowest Level in More Than a Week

Odd Block: Put buying in Darden Restaurants (DRI), put spreads trading in iShares MSCI Taiwan Index (EWT) and puts trading in Iridium Communications (IRDM)

Mail Block: Options Question of the Week 1

Everyone is talking about #Bitcoin #Volatility these days. Where do you stand on #Bitcoin after last weeks aggressive downturn?

• Too Volatile, I am out
• I am still bullish
• I want #Bitcoin #Options
• I am sick of #Bitcoin

Options Question of the Week 2

Let's get back to basics. #Options are great way to get long (bullish) exposure to stocks & futures. What's your fav way to go long?

• Long Call/Call Spread
• Short Put/Put Spread
• Stock(Future) Replacement
• Bullish Risk Reversal

Listener Questions and Comments

• Comment from FContangotrader - I cant wait to start trading options on bitcoin.
• Comment from Mrs Wartsoff - Paper trading does not count!!!!
• Question from Jeli - Can I buy longer term options than LEAPs?
• Question from Andrew Freeman: I know mike is out of AAPL but if he had to make an options trade out there now what would it be? Theres no bid on the 70 puts and they only list December puts down to 80 where they are bid for nine cents.

Around the Block/This Week in the Market

• Jun 27: Consumer Confidence
• Jun 28: International Trade
• Jun 29: Jobless Claims, GDP
• Jun 30: Personal Income, Consumer Sentiment

Trading Block: Taking the weekend out of the market. Biotech and the effect of the AHCA bill. Crude and the energy section taking it on the chin.

Odd Block: Puts trade in Plains All American Pipeline, L.P. (PAA) call spreads trade in Praxair, Inc. (PX).

Strategy Block: Mike discusses trading size and closing positions.

Mail Block: Listener Questions and Comments

• Question from Frank C. - Can you do a review of second order Greeks and when to use them? Thanks.
• Question from ZX45 - Is now actually a good time to become a market maker? I read in Barons that there are not many of them left, so there is not much competition. And how did Mike get in it if he was not a trader?

Around the Block: Bargain shopping for a sub-10 VIX close.

Trading Block: Green screens. Did we turn a corner? Channeling Don S. Do we have a lack of shellac? AMZN needs WFM to grow? Everyone wants to be everything. Mike's disclosure moment.

Odd Block: Puts trade in Marriott Vacation Club (VAC), puts roll in Alerian MLP (AMLP) and put buying in Pattern Energy Group (PEGI).

Mail Block: Options question of the week

Everyone is talking about #Bitcoin #Volatility these days. Where do you stand on #Bitcoin after last week's aggressive downturn?

• Too Volatile - I'm out
• I'm still bullish
• I want #Bitcoin #Options
• I'm sick of #Bitcoin

Listener Questions:

• Comment from Production One: SPX and VIX are far more fun
• Question from Ejh4isu: What qualifications do I need to work in the industry as a professional, i.e. as a trader? Is that a career path I'd even want to consider?

Around the Block: Watching tech. 2500 on the S&P, 8 on the VIX?

Trading Block: The Federal Reserve announced a quarter-point rate hike Wednesday as expected. The market keeps shrugging off news about Trump. The news deluge, with its quasi facts, is making people numb.

Odd Block: Puts trade in Tesla Motors (TSLA), puts roll in Yamana Gold Inc (AUY) and puts trade in Accelerate Diagnostics, Inc. (AXDX).

Strategy Block: Uncle Mike Tosaw discusses closing out long SPY call spreads

Mail Block: VIX Limbo

Last Month 40+% of you said $VIX wouldn't break 9 in 2017. But recent events have us asking again: How low will $VIX get in 2017?

• Still Won't Break 9
• Won't Break 8.5
• Won't Break 8.0
• Lookout! 7 Handle in '17

Listener Questions and Comments:

• Question from Sal06 - Hello, Just wondering if you could help me I have a $100 call strike for Shopify at a average of 5.88 I bought a week ago. Do you think I have a chance for it to recover?
• Question from NanFran - Tomorrow is a triple witching hour. What does that mean for options?

Around the Block/This Week in the Market:

• Jun 16: Housing Starts, Consumer Sentiment

Trading Block: What is up with VIX today? NASDAQ sells off, S&P not so much, VIX pops. How low should VIX go? Are you in the Goldman camp or the Barclay's camp? Gaming segment hot today. Big news out of the E3 show.

• MSFT: $69.71 - .8%. Company too big to move much on gaming news.
• Sony (SNE): Unchanged. Slight adv pop - about 2.5X
• EA: $108.90 - off over 1%
• TTWO: $73.83 - Off 2%
• ATVI: $56.76, off 2.2%

Odd Block: Puts trade in Technology Select Sector SPDR Fund (XLK), calls trade in United Parcel Service, Inc. (UPS) and calls trade in SBA Communications Corp (SBA).

Mail Block: VIX Limbo!

VIXLIMBO: Last Month 40+% of you said $VIX wouldn't break 9 in 2017. But recent events have us asking again: How low will $VIX get in 2017?

• Still Won't Break 9
• Won't Break 8.5
• Won't Break 8.0
• Lookout! 7 Handle in '17

Listener questions: What's on your mind?

• Question from Sal06 - Hello, Just wondering if you could help me I have a $100 call strike for Shopify at a average of 5.88 I bought a week ago. Do you think I have a chance for it to recover?
• Comment from Lillith - I agree that the options market would benefit from more American options since the assignment process is confusing and risky.

Around the Block/This Week in the Market:

• Jun 13: PPI
• Jun 14: CPI, FOMC Meeting
• Jun 15: Jobless Claims, Import and Export Prices
• Jun 16: Housing Starts, Consumer Sentiment

Trading Block: Comey talks before the Senate - the markets shrug. VIX still in double digits, barely. Silver and Alibaba.

Odd Block: Puts trade in Tesla Inc. (TSLA), calls trade in CIT Group Inc. (CIT).

Strategy Block: Mike discusses the importance of having different strategies for different underlying, in similar scenarios.

Mail Block/Options Question of the Week:

Weird Fact: #1 $TSLA position= 26,760 Jan 2019 50 P. Weird Fact #2: 10k OI added in last 2 months (200 today). Why buy these puts?

• Extreme Catastrophe Hedge
• Newsletter Recommendation
• Model S Extended Warranty
• Only an idiot buys these

Comments on the QOTW:

• Comment from BeardfistMcfist - Tesla bond holders
• Comment from Gabe Rich - That's Elon Musk buying? Insider buying?
• Comment from WallStChef - Because the company will be out of business in 2018?
• Comment from Option Drone - Agree, although other alternatives seem even more head scratching

State of the Union:

• Comment from John King - #Fired #FBI director completes televised #Testimony negative for sitting #president & #VIX DOWN .41 to 9.98. Just plain crazy. @Options #USA

Listener Question:

• Question from Butcher Boys: What options trading strategy would you say is best suited to people with absolutely zero knowledge of options?

Around the Block: Comey swing and miss. British elections. Will we make a new all-time high? Fed news conference next Wednesday.

Trading Block: VIX at 960! The VIX is back to flirting with its lowest levels ever. Keep an eye on APPL. The World Wide Developer Conference begins this week. The year-to-date performance of Apple, Amazon, Netflix and FB is +34% right now.

Odd Block: Calls trade in Cenovus Energy Inc. (CVE), puts and calls trade in Dynavax Technologies Corp. (DVAX) and calls trade in MSCI Hong Kong Index (EWH) , update from 4/3/17.

Mail Block: Options Question of the Week

Weird Fact: #1 $TSLA position= 26,760 Jan 2019 50 P. Fact 2: 10k OI added in last 2 months (200 today). Why buy these puts?

• Extreme Catastrophe Hedge
• Newsletter Recommendation
• Model S Extended Warranty
• Only an idiot buys these

Listener questions and comments: What do you want to know?

• Comment from Fed Zeppelin - Shorts are learning there's a better option than getting squeezed via equity…
• Comment from Option Drone‏ - Short CDS or an OTC put in the name.
• Question from Adam Linlan - Whats up OB? Thinking about getting a model S. It is not a small purchase (about 85k) so I am a little concerned about the future of Tesla motors. Will it be around to service my pricey vehicle in 3-5 years. So I thought I should purchase some insurance. The longest listed puts are Jan 19. I do not want to pay through the nose so I am thinking about picking up the Jan 100 puts for about $4. By my math if TSLA goes bankrupt I will be sitting on a cool 96k, more than the cost of my car. If it does not happen then I will probably roll about six months out so it will cost me a little more but all in all I do not foresee spending more than $1000 during the life of the car. Am I crazy for thinking about doing this?
• Question from Parallelism - What site are you using paper on? I would like to learn options using paper.
• Question from GiddyFranciscan - Sell in May and go away. What option strategy benefits from the profound market malaise that occurs over the summer?

Around the Block/This Week in the Market:

• Jun 5: Productivity and Costs, Factory Orders
• Jun 6: JOLTS
• Jun 8: Jobless Claims

Trading Block: Today we welcome guest co-host Matt Amberson from ORATS. AMZN finally hits $1000. Who is next? Google? Do we need to bring back mini options with all of these high-priced stocks? The crude rally continues.

Odd Block: TSLA Options Tracker: Guess what the number one position in Tesla is right now? Calls trade in Taubman Centers (TCO).

Strategy Block: Mike discusses his SPY diagonal spread trade put on last week.

Mail Block/Options Question of the Week:

AMZN just hit $1000. Will GOOGL do it next? The GOOGL $1000 call expiring Friday = $4, $1000 Put = $8. How would you trade?

• Sell $1000 Call for $4
• Buy $1000 Call for $4
• Sell $1000 Straddle: $12
• Sell $1000 Put for $8

Listener Question: What's on your mind?

Question from GuruHawk -How do you know the shares were purchased as well? I see the volume on the option... But to know workings of intent?

Around the Block: What is going on in the June 16 SPY contract? Market reaction to the decision to pull out of the Paris Climate Agreement. Non-farm payrolls. How low can VIX go? What else will hit the $1000 mark?