Articles from the Experts

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Option Block 273: Trades to Salivate Over

Trading Block: It was a very mild day on the street. How did the holiday weekend volatility play out last week? It’s that time again - the volume numbers are in! Microsoft buys Nokia.

Odd Block: Calls trade in Timken Company (TKR), NetApp Inc (NTAP), Oasis Petroleum Inc. (OAS), and Fastenal Company (FAST).

Strategy Block: What happens when your covered call goes in the money?

Mail Block:

  • Question from Phillip Kay - What is the ASPs take on Tesla skew? Upside still steep and a good candidate for verticals or has that ship sailed?
  • Comment from Mark Clyde Brant @MarkBrant1KM -@Options Tesla and Netflix managers are dumping shares en masse! Sep long Puts in play.
  • Question response from bitcoinbravo - Hedging Bitcoin Mining Investments with Network Difficulty Futures: Part 1 – Hedging Shipment - http://thegenesisblock.com/hedging-bitcoin-mining-investments-with-network-difficulty-futures-part-1-hedging-shipment-delay/ 

 

Around the Block: Non-farms and Syria ahead.

Option Block 272: Presidential Rope-A-Dope, or Bags of Money

Trading Block:  Labor Day weekend is nearly upon us. VIX cash above the 16-handle. Jobless claims are down, as expected.   HFT and algos appear to have had a negligible impact on the vol of major futures contracts.

Odd Block:  Puts trade in Garmin ltd. (GRMN) Calls buyers in Taiwan Semiconductor Mfg. (TSM).

Mail Block: 

  • Question from Mike - I have been watching Dollar General for a while. What do you mean by the seller could be using an up-tick in volatility going into earnings for a better sale?
  • Question from Tim C. - Is it true if I sell a time spread that OX will margin me as if I am naked short the longer-term option? If so I do not understand that? Why wouldn’t they treat it like a spread until the nearer-term option expires?
  • Question from Avega - Why would I ever trade a back spread? Why waste money on a reverse ratio - say 3x2. Then I am just net long one contract - can I just save money and buy the one?

Around the Block: Watch out for the weekend risk! Perhaps scoop some cheap premium on friday. Syrian developments?

Option Block 271: Sabre Rattling Rattles Markets

Trading Block: A mild rally on the street until Kerry started sabre rattling in Washington, sending the markets down. NASDAQ, Goldman and others still facing heat over their tech meltdowns last week. BATS and Direct Edge merging. TABB Group predicts options commissions to shrink of the next few years.  Commodity rundown with Mike Tosaw.

Odd Block: Large buy writes go up in Facebook Inc. (FB), and puts trade in ProShares Short 20+ Year Treasury ETF (TBF).

Xpress Block: Tesla, Biotechs, and Facebook!

Mail Block:

Question from bitcoinbravo: Any thoughts on bitcoin -- especially as the flows continue into this emerging digital currency and we see with futures and derivatives market develop -- currently there is a lot of arbitrage opportunities between the various exchanges

Question from Charles P.: I am an employee of a very large (and widely held) technology firm. As you might expect, a substantial amount of my net worth is tied up in the stock of my employer. However, I am expressly forbidden from trading any derivatives in my employers stock even for hedging purposes. So my question to you is - how do I hedge myself in this scenario?

Around the Block: Glued to the news of Syria. Non-farms next week.

Option Block 270: Looking Behind the Curtain

Trading Block: NASDAQ halts trading today over tech glitch. Many big names were impacted. Goldman Sachs screws up JPM options trading. Question from T_Pal: Should I be concerned about the wave of technology problems impacting the market? Can they impact my trading? Saw Mark L. quoted a lot of this. What's his take?

Odd Block: Calls trade in Express, Inc. (EXPR), calls and puts trade in Accuray Incorporated (ARAY), and calls trade in Uranium Energy Corp. (UEC)

Strategy Block: Uncle Mike Tosaw discusses the situation of a covered call moving in the money and the ways in which to think about it.

Around the Block: A hopefully glitch-free week. Looking ahead to see what may be coming out of Washington.

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.

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