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Aug 30, 2013

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?