Daily Market Update – March 31, 2014 (Close)

 

 

Daily Market Update – March 31, 2014 (Close)

Nothing much happened over the weekend and so the markets continue with their non-committal trading in the pre-open to begin this week. That’s a pattern that has been going on for a while, even though as the days have unfolded there have been large, but usually alternating directional moves, including on intra-day bases.

Today was one of those days, but at least this time the cause was readily identifiable.

And better yet, it was higher and never even made a serious attempt at reversing itself. No nervousness, no profit taking. Just everyone going along for the ride.

It was a very dovish sounding Federal Reserve Chairman Janet Yellen, who during the course of a scheduled presentation made it clear that the Federal Reserve was going nowhere and would be a continued partner in assuring an economic recovery.

Otherwise we would have been held hostage to another weekend of no news and nothing to convince the markets of the need to move anywhere.

While Secretary of State Kerry did have an unscheduled and lengthy meeting with his Russian counterpart on Sunday, it seemed that the results of that meeting were the source of any non-committal sentiment this morning. I listened to the press conference and wasn’t really certain of what had been said and certainly there was no suggestion of accomplishment nor failure of those discussions, that could have served as catalysts for this morning.

Faced with lots of positions set to expire this week and coupled with a dearth of assignments last week, I’m a little more reluctant than usual to dip into reserves in order to open new positions. That money is there for real and screaming opportunities and there aren’t many of those, although their beginnings are becoming more evident, despite some advances in  last Friday’s trading. Sitting near all time highs, even with a slight hint of optimism to start the week isn’t enough of a motivator to dig too deeply, at least until seeing some evidence of stability and not the early positive opens that gave way to late morning selling, as we’ve been seeing lately.

Although this is also an Employment Situation Report week and that usually means a net positive for the weekly performance, it’s difficult to take that information and use it as a counter to common sense.

With so many expirations set for this week, this seems to be another week to consider looking for those opportunities that have expanded weekly options in an effort to diversify expiration dates.

As with last week I would like to see additional uncovered positions get their coverage and add to the week’s income stream. Where appropriate, that mean mean more DOH trades, as they have helped of late in having existing positions outperform the weekly market. If your goal is additional weekly premium income then it’s worth the additional attention that’s needed and the aggravation that may ensue when those shares mat suddenly spike. As long as they don’t do so immediately before expiration there’s always hope and even then there may be some.

This morning I planned to continue the strategy of sitting back a bit and watching to see how sentiment develops and where it may take us. As it turned out it took us higher and never looked back.

With cash reserves up to 37%, I was willing to get down to about 25%, which would have meant only as many as 4 tor 6 new positions for the week. However, with the market jumping quickly and early there weren’t too many opportunities to grab much. But having rolled over a nice number of positions last week I’ve already met income objectives for this week, so there wasn’t not as much additional reason to extend the portfolio, certainly not in order to chase income.

Sometimes that’s a luxury to begin the week, but you can’t necessarily blame anyone for wanting even more

 

 

 

 

 

 

 

 

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Daily Market Update – March 31, 2014

 

 

Daily Market Update – March 31, 2014 (8:30 AM)

Nothing much happened over the weekend and so the markets continue with their non-committal trading in the pre-open to begin this week. That’s a pattern that has been going on for a while, even though as the days have unfolded there have been large, but usually alternating directional moves, including on intra-day bases.

While Secretary of State Kerry did have an unscheduled and lengthy meeting with his Russian counterpart on Sunday, it seems that the results of that meeting were the source of any non-committal sentiment this morning. I listened to the press conference and wasn’t really certain of what had been said and certainly there was no suggestion of accomplishment nor failure of those discussions, that could have served as catalysts for this morning.

Faced with lots of positions set to expire this week and coupled with a dearth of assignments last week, I’m a little more reluctant than usual to dip into reserves in order to open new positions. That money is there for real and screaming opportunities and there aren’t many of those, although their beginnings are becoming more evident, despite some advances in  last Friday’s trading. Sitting near all time highs, even with a slight hint of optimism to start the week isn’t enough of a motivator to dig too deeply, at least until seeing some evidence of stability and not the early positive opens that gave way to late morning selling, as we’ve been seeing lately.

Although this is also an Employment Situation Report week and that usually means a net positive for the weekly performance, it’s difficult to take that information and use it as a counter to common sense.

WIih so many expirations set for this week, this seems to be another week to consider looking for those opportunities that have expanded weekly options in an effort to diversify expiration dates.

As with last week I would like to see additional uncovered positions get their coverage and add to the week’s income stream. Where appropriate, that mean mean more DOH trades, as they have helped of late in having existing positions outperform the weekly market. If your goal is additional weekly premium income then it’s worth the additional attention that’s needed and the aggravation that may ensue when those shares mat suddenly spike. As long as they don’t do so immediately before expiration there’s always hope and even then there may be some.

This morning I plan to continue the strategy of sitting back a bit and watching to see how sentiment develops and where it may take us.

With cash reserves up to 37%, I’m willing to get down to about 25%, which may mean only as many as 4 tor 6 new positions for the week. Having rolled over a nice number of positions last week I’ve already met income objectives for this week, so there’s not as much additional reason to extend the portfolio, certainly not in order to chase income.

Sometimes that’s a luxury to begin the week, but you can’t necessarily blame anyone for wanting even more

 

 

 

 

 

 

 

 

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Dashboard – March 31 – April 4, 2014

 

 

 

 

 

MONDAY:   While High Frequency Trading is a likely topic to start the week and the Employmetn Situation Report likely to end the week, there is little in-between. The morning’s trading looks to be ready to get off to a benign, but positive start. We’ll see if that can last beyond an hour or so.

TUESDAY:     Looking like another postive start to the morning. It would be nice to have another unexpected catalyst like yesterday and just reap the benefits.

WEDNESDAY:  The ADP numbers are in and it appears that using the “weather” excuse is now over. The numbers were “meh” but expectations for Friday’s Employment Situation Report are high. Does that lead to a rare market decline on areport day on disappointment?

THURSDAY:    The ECB has its moment in the sun this morning, but does anyone really care? Although Draghi has helped move our markets in the past with other dovish comments, as today’s.

FRIDAY:  Unless today totally unravels, it looks like another in a long chain of positive weeks in which the Employment Situation Report is released, as well as another positive release day

 

 



                                                                                                                                           

 

 

 





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Weekend Update – March 30, 2014

I’m not really certain what persuaded markets to do as they did this past week.

Given the very wide range of interpretations for what caused the various ups and downs during trading it seems like no one really had any clue of what was going on and influencing trading, although that didn’t stop anyone from trying to explain it all.

With this earnings season having essentially concluded and the new one still two weeks away and with absolutely nothing seeming ready to implode or explode in the world, the market found itself in a vacuum and having to decide its own fate, while simultaneously being sucked along by whatever unexplainable momentum existed on any particular day.

That momentum changed daily and often saw intra-day swings, as well, with optimism being generally something reserved for the mornings and pessimism to end the trading sessions.

Like a child without guidance it’s hard to know what to do when nothing is happening around you other than random events. Add to that some native hyperactivity and you have a formula for unexplainable actions.

I think that may be the source of some of the confusion exhibited this past week. There were simply no guideposts and nothing to react to or against. Not even a Federal Reserve Chairman’s wayward words. When you are left to be alone with your thoughts and you begin to delve into your introspective mode anything may come out from the other end.

Observations, though were easy to make and of course every casual observation led to interpretations and conclusions regarding what each event meant for the market’s future.

Momentum stocks suddenly had the brakes put on them. The observations about momentum stocks was unending, but always led to the same conclusion.

That signals a top.

The NASDAQ, as a result was suffering disproportionately. That signals a top.

The less than successful post-IPO trading of King Digital Entertainment (KING) and others signals a top.

And so on and on. Without a doubt the emphasis was on all of the negative signs being exhibited and the negative outcomes that could be the only possible results to come.

I can’t be accused of being a unrepentant bull and have certainly been more cautious than has been warranted over the past year, but when you hear a cacophony of warnings about being at the top it may be time to see what lies even higher. When one of my favorite CNBC shows, Street Signs, begins the session with a segment “Should your clients be in Momentum Stocks,” that reinforces my unfounded opinion.

In some cases the vacuum leads you to a very specific place and offers no ability for fine tuning your destination to suit your needs or the environment. However, at least next week the vacuum may be disrupted as we do have some potentially market moving events as the European Central Bank chimes in and the Employment Situation Report is released. Both of those have had a recent and more lengthy history, respectively, of being market advancers.

Of course, late reports on Friday of increasing numbers of Russian troops appearing on the Ukraine borders may be just the thing to break that vacuum, in which case, maybe all of those warnings about Momentum stocks may turn out to be right, but for the wrong reasons.

Still, right is right.

Interestingly, when the story of potential conflict in Crimea first broke some weeks ago, also on a Friday afternoon, the market ceded significant gains heading into the close. The repeat of the story, with the same timing produced no identifiable reaction going into the close of trading.

Or as the Russian army may say by Monday morning, “Might is right.”

As usual, the week’s potential stock selections are classified as being in Traditional, Double Dip Dividend and Momentum categories, with no “PEE” selections this week (see details).

This past week, while not being one that saw a large overall drop in the market did see some under-performance of the broader S&P 500, which dropped 0.48%, as compared to the narrower DJIA which gained 0.12%. That gap was narrowed considerably by the S&P 500’s strong performance on Friday, bettering the DJIA by 0.10%.

While there was certainly some price givebacks among the higher flying momentum stocks, there was also some selling in more esteemed and established names, such as Starbucks (SBUX), YUM Brands (YUM), L Brands (LB), Lowes (LOW) and The Gap (GPS), among others.

Starbucks, for example, was down about 4% for the week. However, even prior to this week it had under-performed the S&P 500 YTD and could hardly be in the same category as those truly high flying and low earning entities. Yet, in the absence of any meaningful news Starbucks was among those suffering out of proportion this week and returning to a more reasonable entry price for a new position.

Much of the above could also be said about L Brands. A consistent performer in a sector that is consistently challenging, L Brands’ 3.5% drop this past week simply bring
s it back to a more agreeable entry point. While I do like this company as part of a covered option strategy, its available strike prices and having only monthly options available makes me most interested either before a dividend date or when the entry price is close to one of the available strike prices in order to optimize the option premium obtained. While I would like to see shares still drop a bit further the drops this week may be the only invitation forthcoming.

YUM Brands is a perennial favorite of mine and consistently is punished for any news that may be interpreted as rocking the boat. Generally, this has meant any news regarding a downturn in the Chinese economy. However, YUM has shown itself to be resilient, as consumers want to keep consuming, even if the economy falters. Eating can be every bit as addictive as a smartphone game. This time YUM introduced an expanded menu concept for China and the reaction was swift and negative although there was recovery to end the week.

The fact that YUM Brands offers its dividend the following week and has now put some space between the ex-dividend date and its scheduled earnings report makes it an appealing proposition, potentially using the monthly contract rather than a weekly or expanded weekly option.

The Gap has a bad habit of still reporting monthly same store sales, a practice that many other retailers have abandoned. They usually do so near the end of the first week of each month. The stock always seems to react wildly after those reports, alternating between elation and grave despair, but not in a predictable pattern. Too bad, but it’s that seizure like movement that helps to support its option premiums that are often very attractive, particularly as it trades in a price range. Like YUM Brands, The Gap will go ex-dividend the following week and may warrant the sale of a longer option contract.

MetLife (MET) has been getting whipsawed a bit of late as its fate rises or falls along with the direction of interest rates. Like a number of other stocks it has fallen and may represent a relative value, although I would still like to see it still lower. However, its option premium does offer some cushion in the event of further interest rate liability. as interest rate increases become a more near reality, as Janet Yellen may have hinted, MetLife’s fortunes should rise along with rates.

Lowes was the best performing of this group of weekly laggards. It too had a little bit of a rebound in Friday’s trading and could stand to come down some more, but it has been a consistently reliable performer in the $48 range when used as part of a covered option strategy. While at or near that range there aren’t too many headwinds ahead to knock shares out of that trading range.

Bristol Myers Squibb (BMY) slid the previous week along with the more clearly obvious biotechnology stocks. I purchased shares last week that are at risk for being assigned early this coming week due to the upcoming ex-dividend date. While I will still be satisfied with the return if that does occur, I am likely to want to add more shares, both to capture dividend and to capture share appreciation, as selling in shares was really unwarranted and any fallout from Congressional inquiry of drug pricing is still far off. Until then, there is opportunity to recover from that recent drop.

Granted, the preceding were all fairly boring. Despite my belief that “Momentum” may not be as dead as “experts” may have you believe, I’m not even remotely tempted to explore the real high fliers, such as Tesla (TSLA), SolarCity (SCTY) and NetFlix (NFLX), among others. I have my own “Momentum” stocks and they offer me all of the excitement that I need, want or can deal with.

Despite their strong performance on Friday, even as the market lost steam in the final hours, I’m ready to look at and possibly own Abercrombie and Fitch (ANF), Best Buy (BBY) and Las Vegas Sands (LVS), again.

After a one week period of ownership of Best Buy, in order to capture its dividend, I’m ready to own shares again as it seems to be comfortable trading at the $26 level. While it’s easy to disparage the company has having lived beyond its useful age and perhaps being an anachronism, it continues to be a significant part of our lives and our spending. It’s recent price drops after disappointing earnings have provided multiple opportunities to find entry points, especially as it trades in a horizontal pattern as it has for the past two months. For anyone trying to generate option premium income there’s no better pattern to do so than the one that Best Buy has recently been following.

Abercrombie and Fitch is a frequent portfolio holding and would be a charter member of the “Dysfunctional Stock Fund.” Somehow, despite everyone saying that it no longer sells anything fashionable and that it has one of the worst CEOs imaginable, it just continues to be a serial profit generator when used in a covered call strategy. It is now trading near the top of the range where I would rush in to buy shares, but if it can give up some of the previous week’s late gains, I’m ready to deal with the dysfunction again. Profits ,make dysfunction much more tolerable.

Las Vegas Sands and its Chairman, Sheldon Adelson are now embroiled in the on-line gaming controversy pitting himself against other major industry players. If not for that subject, surely Adelson would find other controversies for his own entertainment. But this week as he met with political leaders to press his case the entire sector under-performed the market, with Las Vegas Sands running in the middle of that pack. Having fallen about 10% in the past 3 weeks, if I were a gambling man I might take odds that this was about as low as shares were going to go without me on board.

Finally, while so much attention is being focused on Herbalife (HLF) it seems that the real shame should be heaped on the private education group. Whether looking at their graduation rates, student loan defaults or other measures, one has to wonder about their rightful place in society, as long as some deference is given to the occasional successful graduate who can be identified on the basis of appearing in a television commercial touting the wonders of the particular educational model offered by Apollo and others.

But, as with any disdain I may have for smoking, that doesn’t mean that trying to exploit the stock is above me. In this case, an always volatile Apollo Education Group (APOL) and one perennially subject to bad news that may move shares, reports
earnings this week.

With an implied price move of 11.7% a 1% ROI may be generated even if shares fall as much as 16%. That’s the kind of risk-benefit proposition that even Sheldon Adelson may be willing to embrace.

Traditional Stocks: L Brands, Lowes, MetLife, Starbucks, The Gap, YUM Brands

Momentum Stocks: Abercrombie and Fitch, Best Buy, Las Vegas Sands

Double Dip Dividend: Bristol Myers Squibb (4/2)

Premiums Enhanced by Earnings: Apollo

Remember, these are just guidelines for the coming week. The above selections may become actionable, most often coupling a share purchase with call option sales or the sale of covered put contracts, in adjustment to and consideration of market movements. The overriding objective is to create a healthy income stream for the week with reduction of trading risk.

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Week in Review – March 24 – 28, 2014

 

Option to Profit Week in Review
March 24 – 28, 2014
 
NEW POSITIONS/STO NEW STO ROLLOVERS CALLS ASSIGNED/PUTS EXPIRED CALLS EXPIRED/PUTS ASSIGNED CLOSED
7 / 7 4 9 1 / 0 4  / 0 0

    

Weekly Up to Date Performance

March 24 – 28, 2014

New purchases beat the time adjusted S&P 500 this week by 0.2% and the unadjusted S&P 500 index by 0.4% during a week that saw no over-riding theme, pattern of trading nor news. However, before jumping up and down, that beat was only relative, because new positions fell by 0.1% for the week.

The market showed an adjusted loss for the week of 0.3% and unadjusted loss of 0.5% for the
week, while new positions lost only 0.1%.

Only.

By contrast, existing positions significantly out-performed the market by 1.2% for the week, deriving some benefit from rollovers and newly covered positions. That, too, is in relative terms, as in absolute terms existing positions advanced 0.8% for the week. That was an unusually large beat and it’s not the sort of thing that I would get accustomed to seeing, although I could easily get used to it.

For positions closed in 2014 and only one such position was added this week, performance exceeded that of the S&P 500 by 1.6%. They were up 3.6% out-performing the market by 87.4%. SO far, that wide beat has continued, although I continually expect that margin to decrease and will do so once the market strings together a few strongly positive weeks.

For a week that really had nothing going on it was fairly busy and confusing for most everyone.

While much was made of the air being taken out of the higher flying momentum stocks, for three of the days this past week the S&P 500 trailed the Dow Jones by quite a margin. The market was weaker than many would have guessed based simply on the most common measure. It wasn’t only those high fliers that took a beating last week. Basically anything that had shown a recent gain was fair game and the price corrections were fairly large when they did take place and were also fairly indiscriminatory.

The markets kept looking for direction and there really wasn’t any to be found. Whatever optimistic tones there may have been on some mornings as trading started basically dissipated as the trading sessions wore on.

It could be because we’re just at that awkward time of the year when there’s nothing much going on and we’re still also a few weeks away from the beginning of the next earnings season.

The market really doesn’t like being in a vacuum. It needs something to bounce off of or to react to. Leave it on its own devices and nothing good can come of the situation.

Yes, there’s an ECB meeting next week and there’s also next Friday’s Employment Situation Report, but there’s really not much going on and neither of those should offer any real surprises.

While the market did give up most of its gains to close the week, it was still impressive that it was able to ignore the late news coming out of Ukraine, suggesting that Russia has amassed even more forces along the Ukraine border.

When the Crimea news broke at the same time of the day on a Friday three weeks ago the market gave up a very significant rally in fear of the unknown.

Not so today.

Anyway, each week leaves me with some disappointment, even if the net result s positive.

This week it’s that only one position was and 7 new positions were opened. Since I’ve been actively trying to reduce the total number of positions, that is a set back, but as far as set backs go, I can deal with this one.

It does, however, also put a little bit of a crimp into how much I’m willing to spend next week on new positions. When trading closed on Thursday, on the downside, I was seeing what looked like lots of bargains awaiting on Monday.

In a way, I was glad to see a number of them become less appealing by taking on their gains on Friday, particularly since I won’t have quite as much in reserve when trading begins next week.

When it’s all said and done my cash reserve will likely settle in at about 37% and I will be willing to take that down to 25%, or about 5 or 6 new positions for next week.

While maybe not trading quite as much next week, I would be happy to see the same kind of results with next week’s expiring positions occur as we saw this week.

What was positive for the week, besides the bottom line, was the ability to rollover 9 positions and find new cover for an additional 4 positions.

Every little bit helped this week, including those aggravating DOH trades, for those of you playing along.

With a fair number of positions set to expire I would certainly like to see some of those assigned and the rest rolled over, but as you’ve probably noticed by now, there’s really very little likelihood that any one week is like the one just past or the one next up.

 

 

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This week’s details may be seen in the Weekly Performance spreadsheet * or in the PDF file, as well as as in the summary.below

(Note: Duplicate mention of positions reflects different priced lots):



New Positions Opened:  BMY, CMCSA, COH, EBAY, FDO, HFC, MA

Puts Closed in order to take profits:  none

Calls Rolled over, taking profits, into the next weekly cycle:  APC, EBAY, FDO, GM, MOS, MRO

Calls Rolled over, taking profits, into extended weekly cycle:  AIG (4/11), CSCO (4/25), VZ (4/11)

Calls Rolled over, taking profits, into the monthly cycle:  none

Calls Rolled Over, taking profits, into a future monthly cycle: none

Calls Rolled Up, taking net profits into same cyclenone

New STO:  CHK, CSCO, FCX, LULU

Put contracts sold and still open: none

Put contracts expired: none

Put contract rolled over: none

Long term call contracts sold:  none

Calls Assigned:   COP

Calls Expired:   C, FDO, TGT, WFM

Puts Assigned:  none

Stock positions Closed to take profits:  none

Stock positions Closed to take losses: none

Calls Closed to Take Profits: none

Ex-dividend Positions:  PM (3/25 $0.94)

 

 

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For the coming week the existing positions have lots that still require the sale of contracts:   AGQ, C, CLF, FCX, FDO, GM,  IP, JCP, MCP, MOS,  NEM, PBR, PM, RIG, TGT, WFM, WLT, WY (See “Weekly Performance” spreadsheet or PDF file)



* If you don’t have a program to read or modify spreadsheets, you can download the OpenOffice Suite at no cost.



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Daily Market Update – March 28, 2014

 

 

Daily Market Update – March 28, 2014 (7:30 AM)

The Week in Review will be posted by 6 PM and the Weekend Update will be posted by noon on Sunday.

 

Today’s possible outcomes include:

 

Assignment:

Rollover:  COP, MOS, TGT, VZ

Expiration:  AIG, C, FDO, FDO, WFM

 

Trades, if any, will be attempted to be made prior to 3:30 PM (EDT)

 

 

 

 

 

 

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Daily Market Update – March 27, 2014 (Close)

 

 

Daily Market Update – March 27, 2014 (Close)

Interesting day today that ended up being much busier than I would have expected and in a good way, despite a market that basically did nothing all day.

With the day starting off with the discovery that my Walter Energy puts were assigned to me early. it wasn’t exactly a good start to the day, but I was still focused on news from the day before.

It’s not often that I end the day and then begin the new one being upset about things, but I’m still seething about yesterday afternoon’s news that Citigroup failed its banking stress test.

It’s not that I have a large position in Citigroup. It’s just a position, really no different from others in terms of overall proportion. I usually have either one, two or three lots of any stock and generally fairly well balanced, other than for speculative kind of positions, which are under-represented.

In this case, I have two lots of shares and was expecting that one would be assigned this Friday.

That seems much less likely right now.

That wasn’t supposed to happen and  I doubt that any apologists will step forward with anything to say other than it was pretty inexcusable, given that they had the precise guidelines of what needed to be done.

It was bad enough that nearly everybody else passed the test and started to immediately announce share buy backs and raised dividends. But what was really bad was that this stress test was the equivalent of an open book test.

How do you fail one of those?

While unwritten, there was a sort of social contract between investors that these “too big too fail banks” would pass their imposed stress tests and get back to their usual dividends and efforts to keep stock prices higher, through buy backs. In turn, investors bought shares.

Vikram Pandit, the previous CEO of CItigroup, was said to have been fired after not passing the previous stress test and criticized for not having been a “banking guy,” as he came from the hedge fund world.

His replacement, Michael Corbat, was known as a no nonsense guy with a reputation of delivering troubled banks to health.

Maybe not so much this time, although there’s still 30 days to appeal the decision.

Or, there’s always next time.

I probably wouldn’t advise using that in their next ad campaign.

This morning doesn’t hold much promise for moving the market higher and Citigroup isn’t helping things.

With less positions looking as if they may be assigned this week keeping some of the cash back may have been an unintended positive thing, as there is also suddenly less of a positive aura around the market.

It seems to simply be looking for direction.

I’m content to let it try and find its way and sit back while it goes through those efforts. At least in a couple of weeks an entirely new earnings season will be ready to begin and then we’ll have something a little more tangible to be basing decisions upon, rather than the vacuum of the past few days.

As it would turn out there really wasn’t much in the way of self-discovery today, but at least there were plenty of opportunities to generate some revenue through rollovers and outright call sales. That also makes for a less hectic day tomorrow and provides more opportunity to think about next week and the week after.

Hopefully, some of you have been following along and making the DOH trades and the less adevnturous, “mini-DOH” version trades. Sometimes they are a little bit of a nail biter kind of trade, because you really don’t want to see positions get assigned at a strike lower than the entry level, but bya and large, those premiums will and do add up. For me, at least, it’s worth the added anxiety.

Besides, I could use a few more gray hairs.

 

 

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Daily Market Update – March 27, 2014

 

  

 

Daily Market Update – March 27, 2014 (9:30 AM)

It’s not often that I end the day being upset about things, but I’m still seething about yesterday afternoon’s news that Citigroup failed its banking stress test.

It’s not that I have a large position in Citigroup. It’s just a position, really no different from others in terms of overall proportion. I usually have either one, two or three lots of any stock and generally fairly well balanced, other than for speculative kind of positions, which are under-represented.

In this case, I have two lots of shares and was expecting that one would be assigned this Friday.

That seems much less likely right now.

That wasn’t supposed to happen and  I doubt that any apologists will step forward with anything to say other than it was pretty inexcusable, given that they had the precise guidelines of what needed to be done.

It was bad enough that nearly everybody else passed the test and started to immediately announce share buy backs and raised dividends. But what was really bad was that this stress test was the equivalent of an open book test.

How do you fail one of those?

While unwritten, there was a sort of social contract between investors that these “too big too fail banks” would pass their imposed stress tests and get back to their usual dividends and efforts to keep stock prices higher, through buy backs. In turn, investors bought shares.

Vikram Pandit, the previous CEO of CItigroup, was said to have been fired after not passing the previous stress test and criticized for not having been a “banking guy,” as he came from the hedge fund world.

His replacement, Michael Corbat, was known as a no nonsense guy with a reputation of delivering troubled banks to health.

Maybe not so much this time, although there’s still 30 days to appeal the decision.

Or, there’s always next time.

I probably wouldn’t advise using that in their next ad campaign.

This morning doesn’t hold much promise for moving the market higher and Citigroup isn’t helping things.

With less positions looking as if they may be assigned this week ke
eping some of the cash back may have been an unintended positive thing, as there is also suddenly less of a positive aura around the market.

It seems to simply be looking for direction.

I’m content to let it try and find its way and sit back while it goes through those efforts. At least in a couple of weeks an entirely new earnings season will be ready to begin and then we’ll have something a little more tangible to be basing decisions upon, rather than the vacuum of the past few days.

 

 

 

  

 

 

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Daily Market Update – March 26, 2014 (Close)

 

  

 

Daily Market Update – March 26, 2014 (Close)

Another day of no news and another day of an upward pointing market to get us started. Who knew that the market would later decide otherwise in the absence of any reason to have reversed direction?

With little in store for the rest of the week there wasn’t too much reason to think that this pattern of upward movement wouldn’t just continue, particularly since next week is another Employment Situation Report and that has had a long standing record of being the conclusion to positive market weeks.

It’s that kind of confidence and certainty that can get you into trouble.

This week has so far been a mildly positive one on all counts, but I would take “mildly positive” week after week, as opposed to some of the alternating and unpredictable big moves that can come our way.It certainly hasn’t been a very exciting week, but excitement can be over-rated. While I like to trade, all of that excitement is long in the past and forgotten once I look at the changing bottom line at the end of each day and especially at the end of each week.

The bottom line trumps everything. I can always use that bottom line to help get the excitement I crave in other ways.

The manner in which the market behaved today didn’t do much to bring a solution to the lack of market related excitement, but it did help erase some bottom line related excitement.

At the mid-way point for the week I wasn’t actively looking for or expecting any new purchases, although as next week’s expiring options become available for more positions starting tomorrow and still having cash to spend, the story may have been expected to shift a bit, but it never really did, as I just couldn’t get much of a level of comfort with today’s trading.

In the meantime any opportunities to find additional cover would have been appreciated, but they never really materialized. While I continue to want to create additional streams, even at the expense of greater maintenance need for positions, such as Cisco, which was the object of a “mini-DOH” trade, yesterday, thre market just didn’t offer the opportunity. Those come best when shares are trading into price strength, rather than retreating from strength..

Fortunately, there’s still a couple of more days for traders to come to their senses and try to understand why they drove up those shares by about 3.5% on a day when there was no news for a stock that tends to trade with very low volatility except in the absence of news, such as earnings.

As with the DOH trade of Target about a month ago which suddenly shot up beyond the strike and is now looking as if it is coming to an end after some rollovers, the extra maintenance may turn out to be worth an additional 1.5% or so, while waiting for its return to its original strike price.

Today, as has been the case for the past week or two, most of the attention was focused on today’s IPO, this time of the maker of the fad game, Candy Crush. With mos
t of its revenues based on a single game and a valuation in excess of $7 billion, it’s hard to keep a straight face as the market is set to embrace the debut.

In what can’t be a good sign, despite the vain and pitiful attempt to spin it as good news, trading opened at almost 10% below the IPO price.

That valuation is one thing, but the announcement of Facebook’s purchase of “Oculus” the maker of a virtual reality head piece for $2 billion, just a couple of months after a second round of funding valued it at about $250 million, is an attention getter.

Maybe, just maybe, that was partly responsible for Facebook’s terrible day today and helped spread it through to other momentum stocks, as there may be people wondering whether the market is getting a little too ahead of itself and reminding some of an ear of sock puppets.

For some reason, and I may not be justified in thinking this, I’m reminded of the movie line “Be afraid. Be very afraid.”

  

 

 

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