Daily Market Update – June 16, 2014 (Close)

After a few weeks of little happening, this week has lots to come. If there was a vacuum last week, it is in the process of cracking this week as external and internal events are in focus.

The first event was actually brewing over the weekend and despite the continued loss of stability in Iraq and the likelihood of greater conflict, disruption of oil supplies and whatever other things might be tangentially related, the market appears to have ignored those events as it got ready to start a new week.

After the first full day of trading there was absolutely no evidence that anyone really cared about what was going on in Iraq, even as oil prices reacted and escalation seemed likely.

In addition to that continued uncertainty we have the monthly FOMC statement due on Wednesday, Janet Yellen’s ensuing press conference and a quadruple witching on Friday.

With some big merger news to begin the week the market was still looking to begin with a mildly weak opening and other than for a brief moment when it was down about 50 points it never really wavered from the flat line for most of the day.

Not having replenished cash reserves this past week and having lots scheduled for expiration this Friday, the likelihood is that I won’t be looking to open too many new positions, but where possible would want to look at an expiration using an expanded weekly option.

With so many positions set to expire as the monthly cycle ends I’m especially wary of Wednesday’s FOMC event. That’s really the case as this week starts off with many of the expiring contracts appearing to have good likelihood of assignment.

A flat or mildly positive week this week would be ideal for being able to get a nice combination of assignments and rollovers, but that’s just not the way things work. While I never give up on hoping or trying to mentally will the market to move in a specific direction, I’m not certain it really helps.

As for about the past 6 months there’s not much reason to suspect that there would be anything substantively different in the wording of the FOMC statement, but you never know how the market will react for the remainder of that day and for the next day, as well.

Compound that with the press conference to follow and you have increased possibility of a significant reaction, especially if there are any misplaced comments or fuzzily communicated thoughts. So far, that has happened only once during Yellen’s tenure and she does tend to speak in a very deliberative manner, but it is a two way street. It’s not just what she says but it’s also in how the words are parsed and interpreted. Reality may be a bystander when it comes to the interpretations.

Because of that potential risk there may be some reason to look at rolling over some positions, if the opportunities pres
ent themselves, prior to the FOMC statement release.

That’s something that I consider doing before each such FOMC but rarely actually do, especially as the forward week’s premiums are usually insufficient to offset whatever still remains on the current week’s premiums and make the trade itself worthwhile.

That, too, is something that would change with an increase in volatility.

For yet another week I would be very happy to generate the week’s revenue from selling calls on currently uncovered positions, but last week was a disappointment in that regard, even while the rest of the week went nicely, despite the market’s weakness.

Hopefully the opportunity to do so will present itself but that would require a turnaround from the early morning futures and pre-open trading. AS it turned out at least two opportunities did appear, but they were small premiums as the market isn’t pricing in any kind of movement.

Otherwise the plan is to stick to relatively low risk new positions or those not too likely to be influenced by international conflict and keep some fingers crossed.

The purchase of additional shares in Las Vegas Sands was entirely for a chance to get its dividend and in the belie that iraq won’t have too much of an undue impact. The Lowes purchase was more in the line of perceived low risk, especually after a recent 5% decline from where shares were last assigned just a week ago.

We’ll see what tomorrow may bring.

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