The Option Block

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

Trading Block: August this year was the lowest average daily volume for puts and calls since October 2012.

Stocks to Watch:

• TWTR - Stock off over 5%
• AAPL - World not enthused with new iPhone, stock off nearly 3%
• TSLA - Stock back below $200 - With the combined weight of SCTY deal controversy, cash squeeze and SpaceX explosion.
• SBUX - CEO endorses Hilary, stock off nearly 2%.
• Crude stock drop sparks rally. U.S. crude stocks fell by a whopping 14.5 million barrels last week.

Odd Block: Calls trade in TransOcean LTD (RIG), calls trade in Chesapeake Energy (CHK), and calls trade in iShares FTSE / China ETF (FXI)

Mail Block: Listener questions and comments

• Question from JPMTrader: What is the call and put volume like for expirery for the 110s and 107s in Apple?
• Question from TradeCraft: Is there a correlation between high options OI and high options price levels?

Around the Block/ This Week in the Market:

• Sep 7: JOLTS, Beige Book
• Sep 8: Jobless Claims, EIA Petroleum Status

Earnings tomorrow include:

• The Kroger Company
• Mattress Firm Holding Corp

Trading Block: OCC Cleared Contract volume down 24% in August. Earnings today: (before the bell) Campbell Soup Co., Lands End, Vera Bradley; (after the bell) Lululemon Athletica Inc. Bill Gross says Janet Yellen has "Mastered the art of market manipulation." U.S. stocks turn lower to start September on unsteady footing as energy sinks.

Odd Block: Puts trade in Iridium Communications Inc. (IRDM), calls trade in Chevron Corp. (CVX) and calls trade in Pandora Media Inc. (P).

Strategy Block: Uncle Mike Tosaw discusses a real life collar example.

Mail Block: Listener questions and comments

• Question from Richard Russell: Can you explain in detail how you use the spread trade parameters to predict the anticipated underlying movement at expiration?
• Question from Fred: Can you talk about how you assemble a watch list for options trades? Including individual stocks and options trades.

Around the Block: Reviewing LULU, non-farms number released tomorrow.

Trading Block: Stocks to Watch: Mylan, Herbalife, and Caesars Entertainment.

• Mylan on Monday said it would launch a generic alternative to EpiPen at a 50% discount after being criticized for dramatically raising the price of the lifesaving drug. Shares gained 2.4% to $44.05 in premarket trading.
• Carl Icahn bought more shares in Herbalife on Friday, just days after he weighed selling his stake in the controversial nutritional-products maker. Herbalife shares rose 2.7% to $62.11 premarket.
• Federal Reserve Chair Janet Yellen speaking from Jackson Hole indicated that the U.S. central bank was nearing the point of raising the short-term Fed Funds rate once again, possibly at their September meeting.
• VIX index (13.65%) ticked slightly higher last week trading above 14% Friday, indicating that investors were once again increasing their bids for option premiums.

Odd Block: Reviewing a trade from last week in Big lots Inc. (BIG), MSFT strangle seller, Possible roll of MOMO calls, and breakout calls trading in GNW.

Mail Block: Listener questions and comments

• Question from Hemet: What is the best way to trade diagonals on VRX?
• Question from Jesse: So, I am LOVING The Options Insider, wish I had discovered you a long time ago. You were asking Rock Lobster listener feedback - and you mentioned something like "even though you get all your juice for free..." Was that a pop-culture reference, or is he somehow buying call options for free... or just super cheap that it seems free? Do you mind clarifying? Thanks for the great shows.

Around the Block/This Week in the Market:

• Aug 29: Personal Income
• Aug 30: Consumer Confidence
• Aug 31: Chicago PMI
• Sep. 1: Jobless Claims
• Sep. 2: Unemployment, International Trade, Factory Orders

Trading Block: Earnings today include: Gamestop, Ulta Salon, Cosmetics and Fragrance. Gamestop (GME) is at $32.21, ATM straddle: $1.50, or approx. 4.6%. Stocks to Watch: Mylan, Medtronic, Signet Jewelers, Sears, Guess. Mylan NV responded Thursday to backlash over price increases for its EpiPen emergency allergy treatment by promising to reduce the costs that some patients pay, though the drugmaker stopped short of saying it would roll back prices or limit future increases. Shares rose 2.18% to $44.09 premarket. What to expect from Fed Chair speech at Jackson Hole.

Odd Block: From 8/24) Earnings call buyers in HP Inc. (HPQ), Jan vertical buyers in United Continental Holding Inc. (UAL), call buying across strikes in Goldcorp Inc. (CG), and put spread buying in Big Lots Inc.(BIG).

Strategy Block: Uncle Mike Tosaw discusses trading covered calls, even when they are not paying a lot.

Mail Block/Options #QuestionOfTheWeek:

$USO is trading at $11, up 19% in Aug. The Sep ATM straddle is at $.80, 10 Puts at $.10, 12 Calls at $.09.

Would you:

• Sell the Straddle
• Buy the Straddle
• Buy put/Collar
• Sell Put/Bull Risk Revers

Around the Block/This Week in the Market:

• Aug 26: GDP, International Trade, Consumer Sentiment

Trading Block: The one- year anniversary of the 8/24 flash crash looms near. Yellen speech at Jackson Hole set to dominate mood on Wall Street. VRX continues its roller coaster ride. Up another 8% today - volume 1.5 ADV by 12PM. Calls 1.5 /1 over puts, IV 30 61. Sep. ATM straddle approx. $4, approx. 13%. Confirmed Monday that it has hired Zoetis executive Paul Herendeen as its new chief financial officer.

Odd Block: Calls trade in Starbucks Inc (SBUX), calls trade in Marvel Tech Group (MRVL), puts trade in General Growth Properties Inc (GGP)

Mail Block/Options #QuestionOfTheWeek:

$USO $11, up 19% in Aug, SEP ATM steaddle= $.80, 10 Put= $.10, 12 Call = $.09.

Would you:

1. Sell the Straddle
2. Buy the Straddle
3. Buy put/Collar
4. Sell Put/Bull Risk Reversal

• Question from Natalie L. - I keep receiving email promotions from an "expert" who says his top rule of trading is that he never buys options. He only sells them. What is this about? Is this a reliable approach to options trading or should I delete these emails?

Around the Block: A look at this week in the market:

• Aug 23: New Home Sales
• Aug 24: existing Home Sales
• Aug 25: Jobless Claims, Durable Goods
• Aug 26: GDP, International Trade, Consumer Sentiment

Trading Block: Earnings today (before the bell): Wal-Mart, Hormel Foods, MSG Networks); (after the bell): Gap, Ross Stores. Wal-Mart closed at $73. ATM straddle $2.75, approx. 3.8%

Options #QuestionoftheWeek: $VRX $26.66 up 7% Monday. IV30 is 63. HV30 is 99. Looking out 1 month would you rather:

• Buy Calls?
• Buy Puts?
• Sell Premium?
• Will not touch $VRX

Odd Block: Calls trade in JA Solar Holdings Co. (JASO), puts trade in iPath SP Crude Oil ETF (OIL), puts roll in Eli Lilly and Co (LLY), and puts trade in Harley-Davidson Inc (HOG).

Strategy Block: Uncle Mike Tosaw discusses long-term collars and bonds.

Mail Block: Listener questions and comments

• Question from RealRK: Speaking about bonds, any better option than buying puts on HYG in anticipation of rate hikes and since it was lagged the price of oil?
• Question from Vegs: Lots of big fat options OI tied to big ES 2200. How do I see this information? Does this mean big traders are betting on 2200? Does that mean pros or retail?

Around the Block: Earnings highlights for Friday include: Deere & Company, Estee Lauder Companies, Foot Locker, Stein Mart

Trading Block: New all-time highs across most major indices. Oil rallies yet again; up 1.5%. VIX cash still below the 12-handle. Earnings Tuesday: BMO. Stock $137. ATM straddle approx. $4/3%.

Odd Block: Vertical put buying in Polaris Industries Inc. (PII), vertical call buying in Energy Transfer Partners LP (ETP), buying calls in Akamai Technologies Inc. (AKAM)

Mail Block/Options Question of the Week: What is your preferred way to trade crude oil? #QOTW

1. WTI Options/Futures
2. USO Options/ETF
3. XLE Options/ETF
4. Brent Options/Futures

• Question from Joe736: Do you think VRX will selloff a buck to open tomorrow?

Around the Block: This Week in the Market

• Aug 15: Treasury International
• Aug 16: CPI, Housing Starts, Industrial Production
• Aug 17: Fed Minutes
• Aug 18: Jobless Claims

Trading Block: Strong earnings, surge in oil power Dow to record intraday high. Earnings today: Before the bell: Alibaba Group Holding Ltd, Kohls Corporation, Macys Inc.; After the bell: Cosi, Inc., Nordstrom Inc. VRX: ATM straddle approx. $3, 13%. So much for put buyers Stock opened $1.50 higher and closed nearly $6 higher - surrendered most of those gains today.

Odd Block: Calls trade in Twitter Inc (TWTR), calls trade in Alibaba Group Holdings (BABA), puts trade in SPDR Retail ETF (XRT)

Mail Block: Options Question of the Week

Options #QuestionoftheWeek. What is your preferred way to trade crude oil? #QOTW

1. WTI Options / Futures
2. USO Options / ETF
3. XLE Options / ETF
4. Brent Options / Futures

• Question from Rpatel117 - Do you guys think DIS cross 100 this week?"
• Question from Matrix - Never sold options before. Why do some people prefer to sell them when they can buy them instead?
• Question from Cucas - What are the best resources for weeklies?

Around the Block: This Week in the Market

• Aug 9: Productivity and Costs
• Aug 10: JOLTS, Treasury Budget
• Aug 11: Jobless Claims, Export Prices
• Aug 12: Retail Sales, Consumer Sentiment

Trading Block: Earnings today include (before): Dean Foods, Sotheby's, Tyson Foods; (after) Hertz Global Holdings, Rackspace, WebMD Health Corp. Options bears descend on Valeant ahead of earnings. Traders are betting shares are due for even more pain. Non-farm payroll brightens the U.S. economic outlook.

Odd Block: Puts trade in Tupperware Brands Corp. (TUP), puts trade in SM Energy Co. (SM), calls trade in Targa Resources Corp. (TRGP)

Strategy Block: Uncle Mike Tosaw discusses money management

Around the Block: Earnings highlights for the week.

• Tuesday: Coach, Exelon Corporation, Tribune Media Company, Valeant Pharmaceuticals, Walt Disney Company, Yelp
• Wednesday: Michael Kors Holdings, JD.com, Ralph Lauren, Shake Shack, The Wendy Company
• Thursday: Alibaba Group Holding Ltd, Kohls Corporation, Macys Inc., Nordstrom Inc.
• Friday: JC Penney Company