Monthly Archives: September 2014

Daily Market Update – September 17, 2014 (Close)

While yesterday’s 100 point gain seems inexplicable, given that the uncertainties for the week are all set to begin this afternoon, I suppose that the 3 day settlement time defined when selling would have to end for those needing to raise money to participate in Friday’s huge Alibaba IPO, may have played a role.

That, at least, would have put some kind of a stop to the rampant selling that went on in many high profile positions that had racked up big gains this year, but doesn’t really account for buying that came in yesterday, unless there are still bargain hunters out there, who took advantage of those same decliners the day after.

Still, yesterday was a nice surprise and it would be wonderful if it could continue today up until and then through the actual time of the FOMC statement release.

Yesterday’s rally was said to be related to Jon Hilsenrath, of the Wall Street Journal, stating a belief that there would be no change in the wording of the FOMC statement that would have indicated the possibility of interest rate hikes coming sooner rather than later.

Hilsenrath seemed to have had an inside track into the Bernanke Federal Reserve’s thinking, and his “scoops” could and did move markets, but even then there were some misses.

He hasn’t established his Yellen Federal Reserve credentials yet, but the market acted as if he was the real thing and knew precisely what wording was going to be contained in this afternoon’s statement.

As it turned out, he was right, in what was really a binary opportunity. No one really factored in the possibility of the wording being changed or unchanged, but qualified in some fashion.

That didn’t happen, but it would have really fooled with everyone and created lots of confusion.

Ultimately, I don’t understand all of the concern. It is similar to what occurred when the market was concerned about the time table for tapering to Quantitative Easing. We all knew that QE had to end and we all know that interest will someday begin to rise. The pre-occupation with the difference a month or two can make in the initiation of those increases is about as ridiculous as the worries over whether tapering would be done over 6 months or 8 months.

We eventually did find that Hilsenrath was correct, but the pre-opening futures appeared to have completed its party mode and was back to awaiting something more tangible and then preparing itself for tomorrow’s results of the independence referendum vote in Scotland, which could easily go either way and could easily send markets in either direction and in unknown magnitude.

For the sake of Hilsenrath’s reputation and my stock holdings, I hoped that he would be right about the Federal Reserve continuing on its same path and not giving any hint of an acceleration.

Mostly I cared about my stocks.

As it turned out, the best thing for stocks was Janet Yellen.

Specifically, it was Janet Yellen speaking. While some began wondering why her press conference was running so long, they failed to notice that while she spoke the market liked what it was hearing. As soon as she stopped the market gave up much of those gains.

The timing of this week’s series of events, including Friday’s IPO is somewhat unfortunate as the monthly options expire this Friday and many of the positions could stand to see some strength going into that date, rather than seeing continued uncertainty and ambivalence.

I had been looking for any possible rollover opportunities prior to the 2 PM announcement, but didn’t not want to eliminate the possibility of some assignments by rolling over too early, thereby limiting cash available to begin next week’s trading activity.

Sometimes you have to roll the dice, instead and at least the rug wasn’t pulled out from under the market.

And my stocks.

Hopefully the voters of Scotland will be every bit as mindful of my needs as our Federal Reserve.

Daily Market Update – September 17, 2014 (8:45 AM)

While yesterday’s 100 point gain seems inexplicable, given that the uncertainties for the week are all set to begin this afternoon, I suppose that the 3 day settlement time defined when selling would have to end for those needing to raise money to participate in Friday’s huge Alibaba IPO, may have played a role.

That, at least, would have put some kind of a stop to the rampant selling that went on in many high profile positions that had racked up big gains this year, but doesn’t really account for buying that came in yesterday, unless there are still bargain hunters out there, who took advantage of those same decliners the day after.

Still, yesterday was a nice surprise and it would be wonderful if it could continue today up until and then through the actual time of the FOMC statement release.

Yesterday’s rally was said to be related to Jon Hilsenrath, of the Wall Street Journal, stating a belief that there would be no change in the wording of the FOMC statement that would have indicated the possibility of interest rate hikes coming sooner rather than later.

Hilsenrath seemed to have had an inside track into the Bernanke Federal Reserve’s thinking, and his “scoops” could and did move markets, but even then there were some misses.

He hasn’t established his Yellen Federal Reserve credentials yet, but the market acted as if he was the real thing and knew precisely what wording was going to be contained in this afternoon’s statement.

Ultimately, I don’t understand all of the concern. It is similar to what occurred when the market was concerned about the time table for tapering to Quantitative Easing. We all knew that QE had to end and we all know that interest will someday begin to rise. The pre-occupation with the difference a month or two can make in the initiation of those increases is about as ridiculous as the worries over whether tapering would be done over 6 months or 8 months.

We’ll find out whether Hilsenrath was correct, but the pre-opening futures appear to have completed its party mode and is back to awaiting something more tangible and then preparing itself for tomorrow’s results of the independence referendum vote in Scotland, which could easily go either way and could easily send markets in either direction and in unknown magnitude.

For the sake of Hilsenrath’s reputation and my stock holdings, I do hope that he is right about the Federal Reserve continuing on its same path and not giving any hint of an acceleration.

Mostly I care about my stocks.

The timing of this series of events, including Friday’s IPO is somewhat unfortunate as the monthly options expire this Friday and many of the positions could stand to see some strength going into that date, rather than seeing continued uncertainty and ambivalence.

I’ll be looking for any possible rollover opportunities prior to the 2 PM announcement, but would not want to eliminate the possibility of some assignments by rolling over too early, thereby limiting cash available to begin next week’s trading activity.

Sometimes you have to roll the dice, instead.

Daily Market Update – September 16, 2014 (Close)

There is so much news packed into the latter half of this week that the market should have considered taking a few days off in preparation.

What really makes this week interesting is that the news is coming from all directions and none of it is additive, although if all pointing in the same direction can end up being very significant.

First, there’s monetary policy news coming from the FOMC. Then there’s political news come from Great Britain and Scotland and finally there’s stock market news coming from the all-time largest IPO offering on Friday and its reception in the secondary market, as well as the manner in which the IPO is executed.

So it’s hard to imagine much of significance happening today as most people wouldn’t want to make any kind of significant commitment in advance of what may be an avalanche of news, any specific bit of such news that could take the market in any direction.

But the market did tack on 100 Dow points today, despite what should have been a day for caution.

Why? Ostensibly because the Wall STreet Journal’s Jon Hilsenrath, who was considered to be the best at divining what the FOMC under Bernanke was thinking, may now have added Yellen to his mind powers.

At least that may be what the market believes as it reacted to Hilsenrath’s opinion that the wording in tomorrow’s statement that could hint at a more speedy introduction of rate hikes if changed, would remain unchanged.

Got that?

At least that deflected some of the Alibaba talk.

Yesterday so much of what was being discussed was how Friday’s upcoming Alibaba IPO could dry up liquidity, although I’m not certain why that was such a late consideration, as it seemed reasonably obvious from the time that the “roadshow” began last week.

As you would expect the money to get shares of Alibaba at or after the IPO has to come from somewhere and it’s extraordinarily unlikely that those who have been sitting on the sidelines with cash are going to be the ones pumping money into those shares. Rather, people tend to take profits first and then just re-circulate the money.

So it shouldn’t have come as too much of a surprise that some of the biggest momentum names, specifically the ones that may have generated some ni
ce capital gains for some people, would be the ones to feel the pressure, especially insofar as you may need settled funds or margin to make the purchase if offered an allocation.

The timing also shouldn’t have been too much of a surprise as it takes three days for settlement and the IPO is on Friday.

Funny how that all worked out.

Having executed two opening positions yesterday I wasn’t too certain that I was going to be actively looking to add anything to that, other than hoping to capitalize on any upward movement on existing, but uncovered positions. As the day progressed there really wasn’t much inviting as far as new positions would go, but I did enjoy the move higher.

Although the morning once again looked as if it would be opening with a downward bias, this time it didn’t last too long, perhaps also helped out by most of the IPO driven selling having been concluded.

While today ended up being more exciting and certainly more profitable than expected, tomorrow morning will likely be sedate as everyone awaits the afternoon’s FOMC release. While awaiting that release the first of the weekly challenges arises as trying to decide whether to attempt rollovers of positions that may have a chance of being assigned on Friday, in an attempt to avoid any nasty surprises.

Part of that quandary is answered by the still relatively high premiums for those contracts expiring on Friday, due to all of the uncertainty and the relatively low premiums for next week, once the uncertainty is history.

For now, that means more of the same. Just sitting back and seeing what direction and sentiment the market takes and going from there while hoping for the best and not feeling guilty if able to capitalize on anything.

Daily Market Update – September 16, 2014 (9:00 AM)

There is so much news packed into the latter half of this week that the market should have considered taking a few days off in preparation.

What really makes this week interesting is that the news is coming from all directions and none of it is additive, although if all pointing in the same direction can end up being very significant.

FIrst, there’s monetary policy news coming from the FOMC. Then there’s political news come from Great Britain and Scotland and finally there’s stock market news coming from the all-time largest IPO offering on Friday and its reception in the secondary market, as well as the manner in which the IPO is executed.

So it’s hard to imagine much of significance happening today as most people wouldn’t want to make any kind of significant commitment in advance of what may be an avalanche of news, any specific bit of such news that could take the market in any direction.

Yesterday so much of what was being discussed was how Friday’s upcoming Alibaba IPO could dry up liquidity, although I’m not certain why that was such a late consideration, as it seemed reasonably obvious from the time that the “roadshow” began last week.

As you would expect the money to get shares of Alibaba at or after the IPO has to come from somewhere and it’s extraordinarily unlikely that those who have been sitting on the sidelines with cash are going to be the ones pumping money into those shares. Rather, people tend to take profits first and then just re-circulate the money.

So it shouldn’t have come as too much of a surprise that some of the biggest momentum names, specifically the ones that may have generated some nice capital gains for some people, would be the ones to feel the pressure, especially insofar as you may need settled funds or margin to make the purchase if offered an allocation.

The timing also shouldn’t have been too much of a surprise as it takes three days for settlement and the IPO is on Friday.

Funny how that all worked out.

Having executed two opening positions yesterday I’m not certain that I’m going to be actively looking to add anything to that, other than hoping to capitalize on any upward movement on existing, but uncovered positions.

This morning once again looks as if it will be opening with a downward bias, but I would imagine that most of the IPO driven selling is now done.

Unfortunately, all of that means that it may be a very boring day today and maybe even for part of the day tomorrow. Part of the quandary that awaits in advance of the first of the weekly challenges is whether to attempt rollovers of positions that may have a chance of bein
g assigned on Friday, in an attempt to avoid any nasty surprises.

Part of that quandary is answered by the still relatively high premiums for those contracts expiring on Friday, due to all of the uncertainty and the relatively low premiums for next week, once the uncertainty is history.

For now, that means more of the same. Just sitting back and seeing what direction and sentiment the market takes and going from there while hoping for the best.

Daily Market Update – September 15, 2014 (Close)

There is so much news scheduled for this week that the beginning of it seems anticlimactic. except that it’s happening before the anticipated events.

Pre-climactic, maybe?

After the previous week’s disappointments there wasn’t much reason to want to start off the week doing much other than being an observer. It’s hard to justify committing much toward new positions, even perhaps being a little less inclined to plow assigned cash back into the market as readily as I normally would be inclined.

With a large number of positions already scheduled to expire this week and with them being at risk for any number of events, beginning with Wednesday’s FOMC statement and ending with the Ali Baba IPO, the most logical approach to the week is to not put too much of available cash reserves at risk. However, if new positions are added there might be at least some good reason to consider option expirations into the October cycle through the use of expanded options, where available.

That’s a little more tenable as volatility is beginning to creep higher as the market has been heading lower and that process was started last week as most of the rollovers bypassed this week’s expiration, taking advantage of a little bit of awakening in forward week premiums.

As the week was ready to begin it appeared that there was a very mild downward bias, but those early indications so often mean very little unless they’re very pronounced. Otherwise the low volume that creates those early indications doesn’t really give an accurate picture of how things will open, much less unfold as the day begins trading for real.

Today, the same could have been said for the entire morning, as it really didn’t foretell of the decent turnaround that was to come in the latter half of the afternoon that forgot to bring momentum stocks along for the ride higher.

This being the final week of the monthly option cycle usually brings some different considerations. While there are some final weeks of a monthly option cycle that I wouldn’t mind seeing a retreat in prices this is definitely not one of them. After last week’s weakness none of the positions set to expire this week were helped out and another week of weakness puts those positions in some difficulty with regard to either rollover or assignment.

So while I like seeing an increase in volatility, this week my preference would be to let that volatility increase take a breather, but I think that the week is destined to provide definitive moves in one direction or another, although the sum total of those moves may not be very impressive once all of the dust settles.

Today was really a pretty fascinating day as the market and volatility went in the same direction and while volatility increased that increase didn’t appear to really work its way into option premiums. Often times when the market and the volatility index travel in the same direction on any given day and do so by more than a small, trivial amount, there’s usually some catch up that is bound to occur quickly, as the volatility ultimately has to obey some adherence to the mathematical definition that underlies it and traders will bring it back to those standards if it deviated under the influence of imperfect humans.

Knowing that doesn’t really help however, as it would be nice to know the direction, but no one will tell me.

With the FOMC really kicking off the potential risks for the weak, followed the next day by results of Scotland’s independence referendum, there may be good reason to look for any rollover opportunities prior to Wednesday afternoon.

That may be possible for any position that has expanded weekly options, just as it will be a possibility for those that have only monthly options available. Trading, therefore, this week, may follow a different pattern than is the norm, in addition to limiting new purchases and preferentially going to forward week contracts for any new positions.

As far as those rollovers go, those that may use the October monthly contract will also have to factor in the beginning of another earnings season, which starts in just a few weeks.

For now I would be exceedingly happy to just create any kind of covered position that I can for anything that remains uncovered. However, like last week, which maintained its downward bias through the entire week, I don’t think there will be too much opportunity to do so, despite this afternoon’s encouraging comeback.

So, as is the case for any of these weeks that have known risks, my plan is to sit back and see what if anything develops, cognizant of the reality that when there are risks there are also rewards possible.

Hopefully the market is aware of that, as well, and there aren’t too many who are anxious to secure their paper gains at any cost and then be content to watch from the sidelines.