The Option Block

Trading Block: Dow drops amid weak China data and rate fears. Will it be a cold winter? Will that spike energy prices? WTF Fed? Airline earnings

Odd Block: Calls and puts trade in Johnson Controls Intl (JCI), call buyers in Blackstone Group LP (BX), calls trade in Tenet Healthcare Inc (THC)

Strategy Block: Mike Tosaw discusses income strategies.

Mail Block: Listener questions and comments

• Question from TraderOnki Re: ULTA Guidance Increase - Wednesday Close: 238.97 - Thursday morning news: Ulta Beauty (ULTA) announced that is expects to report third quarter EPS of $1.35 to $1.38, up from prior expectations of $1.25 to $1.30. - Thursday Open: 246.35 - Stock traded as high as 266.74 (over 10%) as I write this 13:20 EST Looking at the yesterdays OI and Vol books - Oct 21 240 calls traded 1,066 contracts - Oct 21 230 puts traded 993 contracts - Oct 14 230 puts traded 680 contracts By looking at todays OI things I can say about yesterdays Vol - Most of Oct 21 240 calls were opening trades - Most of Oct 21 230 puts were closing trades - Most of Oct 14 230 puts were opening trades Would you please share some of your thoughts and conclusions about these trades? Do you think it was just a wide long strangle? Why do you think they closed the Oct 21 puts and opened more Oct 14 puts? Were they more certain about the timing of the news and wanted to decrease their insurance by buying cheaper puts??? Thank you in advance for your time.
• Question from Meravol - Interesting piece in current Modern Trader about selling break-even strangles. Have you seen? What are your thoughts of this technique? Is it me or are there new techniques for selling strangles all the time that always tend to blow out? Aren't you better off selling IC or IB due to limited risk?

Around the Block/This Week in the Market:

• Oct 14: PPI, Retail Sales, Consumer Sentiment

Earning Highlights this week:

• Friday - Citigroup, JP Morgan, PNC Financial Services, Wells Fargo

Trading Block: Deutsche Bank says derivatives exposure fears overblown. Twitter shares plunge on report bidders are scarce. TWTR off 11% - back around $17.50. Dow soars as traders await earnings season; Nasdaq near record high.

Odd Block: Calls trade in Energy Transfer Partners LP (ETE), calls trade in Boston Scientific Corp (BSX), and calls trade in Nabors Industries LTD (NBR).

Mail Block/Options #QuestionOfTheWeek:

What is your fav way to trade #Volatility? $VIX? $VXX? $XIV? $SPX? $SPY? Other? DM/Reply with alternatives?

• 42% - VIX Options/Futures
• 29% - VXX
• 18% - XIV
• 11% - S&P Strad/delta-neutral

Listener question:

• Question from Jack Schwartz - RE: Stock Replacement Strategy. Hello Option Block All Stars. My question refers to the Stock Replacement Strategy you advocated on a recent episode (I'm sorry but I don't remember the episode number). The benefits you listed included reducing your capital outlay since equities can only be margined at 50% while options offer substantially higher leverage. So can I assume that I can receive the same benefits from this strategy using a stock future that I can using an equity option? Or are there elements that options provide that futures do not? Thanks. Jack.

Around the Block/This Week in the Market: The Federal Reserve releases the notes from its last meeting. There are several other economic reports worth noting listed below as Alcoa kicks off another round of quarterly earnings.

• Oct 12: JOLTS, FOMC Minutes
• Oct 13: Jobless Claims, Treasury Budget
• Oct 14: PPI, Retail Sales, Consumer Sentiment

Earnings Highlights This Week:

• Tuesday - Alcoa
• Thursday - Delta Air Lines, Marriott Vacations Worldwide Corporation
• Friday - Citigroup, JP Morgan, Wells Fargo

Trading Block: An anemic day in the market. Deutsche Bank does not need a bailout for now, IMF says. DB-$13.50; normal ADV is around 30k, today it was over 65k. Twitter shares plunge on report bidders are scarce. TWTR off 20%.

Odd Block: Puts trade in JP MorganChase and Co. (JPM), calls trade in Wal-mart Stores, Inc (WMT), puts trade in Lowes Companies, Inc (LOW).

Strategy Block: Mike discusses weekend risk.

Mail Block/ Options #QuestionOfTheWeek

What is your preferred way to trade #Volatility? $VIX? $VXX? $XIV? $SPX? $SPY? VIX Options/Futures?

• VXX?
• XIV?
• S&P Strad/delta-neutral?

Around the Block/This Week in the Market:

• Oct 6: Jobless Claims
• Oct 7: Unemployment (NonFarms Payroll)

Join us NEXT WEEK at Stocktoberfest

• Thursday, October 13 - Saturday, October 15
• Location: Hotel del Coronado, San Diego

Trading Block: It is that time of the month: OCC Cleared Contract volume up 2% in September. Exchange-listed options volume reached 357,041,027 contracts in September, up one percent from September 2015 volume of 354,782,668 contracts. TSLA: Quarterly sales numbers are strong. 70% increase in delivered cars over Q2. Production up 35%.

Odd Block: Puts trade in Deutsche Bank AG (DB), alls roll out in Pfizer Inc (PFE) and calls trade in Wells Fargo Co (WFC).

Mail Block: Listener questions and comments

Last Week Options #QuestionOfTheWeek -How will the election impact $VIX? Are we heading for #Trump-ocalypse or #Clint-astrophe? Share your feelings.

• 43% Spike > 20 - Blame Trump
• 11% Spike >20 - Blame Clinton
• 17% No impact (12-14 range)
• 29% Modest Increase (15-20)

This Week Options #QuestionOfTheWeek - What is your preferred way to trade #Volatility? $VIX? $VXX? $XIV? $SPX? $SPY? DM/Reply with alternatives

• VIX Options/Futures?
• VXX?
• XIV?
• S&P Strad/delta-neutral?

Comments for listeners:

• Comment from Mark Brandt - About last episode, The Sex Appeal of Options: SPX is a hot chick! Liked the put diagonal collar concept for open upside!
• Comment from Charlesturro - @OptionsInsider These are looking good today!! - regarding this activity - 6136 $DVAX Jan2017 18 calls went up on the PHLX marked buy write

Around the Block:

Earnings highlights this week include:

• Tuesday - Micron Technology, Inc.
• Wednesday - Monsanto Company and Yum! Brands, Inc.

This Week in the market:

• Oct 5: International Trade, Factory Orders
• Oct 6: Jobless Claims
• Oct 7: Unemployment (NonFarms Payroll)

Join us at A Leg To Stand On's (ALTSO) Rocktoberfest

Date: Thursday, October 6 2016

Time: 6pm - 11pm

Location: City Winery, 1200 W Randolph Street, Chicago

For more information, please visit the Rocktoberfest website.

Today we have a very special guest co-host, Benjamin Londergan, Executive Managing Director and Head of Options Trading and Technology, Convergex.

Trading Block: Most indices closed sharply lower. That means the VIX closed higher. Was Deutsche Bank the biggest story of the day? The media dropped the dreaded "D" word. Crude is up again. Revisiting the CBOE/BATS deal.

Odd Block: Size PFE time spread goes up, size BHI call buyers and VNDA parity calls and combos trade.

Strategy Block: Uncle Mike discusses the biggest frustrations with collars and alternatives to that.

Mail Block: Listener questions and comments

• What's the deal with PG?

Around the Block: Will the markets move from the election? The post-debate analysis.

Options #QuestionOfTheWeek:

How will the election impact $VIX? Are we heading for #Trump-ocalypse or #Clint-astrophe? Share your feelings.

• Spike > 20 - Blame Trump
• Spike > 20 - Blame Clinton
• No impact (12-14 range)
• Modest Increase (15-20)

Trading Block: Vol begins to head north again after a big selloff in VIX on Friday. The debates are coming! Merkel has no love for Deutsche Bank. Golf loses a king, Arnold Palmer. What can investors learn from his endorsements? Are you seeing Trump in the rearview mirror? CBOE agrees to buy market operator Bats for $3.2 Billion. With a B. Interesting turn into exchange consolidation rather than fragmentation.

Odd Block: Puts trade in EWG, calls trade in TCK and calls trade in DVAX.

Mail Block: Listener questions and comments

• Question from @investor17 - Can you please highlight if PG puts were sold or bought? And give perspective on what these high Oct puts strikes 120 mean? (The information in question came from the Hot Options Report for 9.23.16.)

Around the Block: Have you checked out the OptionsHouse blog? OPEC meeting coming up, and they invited Russia. Deutsche Bank aftermath? The Fed.

Trading Block: VIX apocalypse post-Fed. It looks like we were not pessimistic enough on Vol Views last week! How will next weeks first Presidential debate effect vol? Wall Street extends rally after Fed rate decision. Fed is perilously close to losing its credibility, says economist.

Odd Block: Calls trade in ETSY Inc (ETSY), from Monday, calls trade in Bank of America Corp (BAC), calls trade in Encana Corp (ECA), and calls trade in Pandora Media Inc (P).

Strategy Block: Mike Tosaw discusses call spreads vs. put spreads.

Mail Block/Options #Questionoftheweek:

1. Where will $VIX close after FOMC decision on Wednesday 9/21?
2. Between 15.51 - 16.50
3. Between 14.50 - 15.50
4. Below 14.50
5. Above 16.50

• Question from Sean O - Are there any options that had lopsided trading to one side - either puts or calls - leading into the Fed announcement?

Around the Block/This Week in the Market:

• Sep 22: Jobless Claims, Existing Home Sales

Trading Block: AAPL! It is no longer the Feds market, it is now Apple's market. Last week Apple essentially carried the S&P 500, Dow, and NASDAQ, having one of its best weeks ever climbing 12% in only 5 days, or more than $75B in market cap! NASDAQ: The NASDAQ is now less than 1% away from hitting fresh all-time highs - The current all-time high is 5,287.61.

Odd Block: Calls trade in Infoblox Inc (BLOX), calls trade in Etsy Inc. (ETSY) and calls and puts trade in Plains GP Holdings LP (PAGP)

Mail Block: Listener questions and comments

• OptionMonster question of the week: What is the difference between buying a debit call spread versus selling a credit put spread?
• Question from Richard Russell: To clarify my question, at 14:00 of episode 553 you state that a $6 straddle was pricing an 8% move following earnings. is this just the current ATM straddle?
• Question from Fred: I have listened to some of your broadcast and they were over my head. Which one should I focus on to listen to as a beginner?

Around the Block/This Week in the Market:

Sep 20: Housing Starts

• Sep 21: EIA Petroleum Status, FOMC Announcement
• Sep 22: Jobless Claims, Existing Home Sales

Earnings for the Week:

• Tuesday: Adobe Systems Corporation, FedEx, KB Home, Lennar Corporation
• Wednesday: Bed Bath & Beyond, CarMax, General Mills, Herman Miller
• Thursday: Rite Aid

Trading Block: Volatility is coming back! Wall Street gains on Apple, dimmer chances of rate hike.

Odd Block: Calls trade in Lending Club Corp (LC), calls trade in Infoblox Inc (BLOX), and calls trade in Technology SPDR (XLK)

Mail Block: Listener questions and comments

• Question from Yukoner: Do you ever do spreads in LEAPS? Why and how? So I used trade the LEAPS rather than guy the stock. Is that s good use case?
• Question from Trader Shawn: What is the difference between USO and UCO?
• Question from Vegs: I am seeing lots of big fat options OI tied to the big ES 2200 strike. Does this mean big traders are betting that the S&P will rally past 2200? Can all of this open interest have the net effect of forcing the S&P to that strike at expiration? Do you view this open interest solely coming from pros, or are retail reflecting there as well?

Strategy Block: Uncle Mike Tosaw discusses vertical LEAPS rolls.

Around the Block/This Week in the Market: Sep 16: CPI, Consumer Sentiment

Trading Block: Dow rebounds 130 points amid rate hike debate. Vol explodes higher and the bulls' confidence is tested. TSLA: Shares of Tesla Motors Inc. fell in pre-market trading but was slightly higher after the open. SSNLF: Shares of the world's biggest smartphone maker plunged 7% Monday.

Odd Block: Calls trade in Gold Fields Ltd (GFI), calls trade in Southwestern Energy Co. (SWN), puts trade in HCA Holdings Inc. (HCA).

Mail Block: Listener questions and comments

• Question from JDiggs - What is up with Uber IPO? They crapped away over $1B in the first half of this year already. I can't wait to buy puts on them! Although I guess those puts would probably be pretty pricey since I can't be the only one who think these numbers are crazy.
• Question from Begs - When ES shoots up and at an all-time high in summer, farms are slow. It was very likely Monday would be thin in the market. Is it possibly to sell premiums when this happens, and make money on quiet Monday?

Around the Block/This Week in the Market: It is a heavy week as far as economic reports go with Thursday at 7:30 CT being exceptionally busy for reporting. In addition, quadruple witching expiration takes place on Friday.

• Sep 13: Treasury Budget
• Sep 14: Import and Export Prices
• Sep 15: Jobless Claims, PPI, Retail Sales
• Sep 16: CPI, Consumer Sentiment