Daily Market Update – September 15, 2014




Daily Market Update – September 15, 2014 (9:00 AM)

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.

After the previous week’s disappointments there isn’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 is ready to begin it appears that there is a very mild downward bias, but those early indications 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.

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.

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.

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.


Dashboard – September 15 – 19, 2014







MONDAY:  A big week ahead appears to have a somewhat negative bias to begin the week, but anything can be in store once the news starts rolling. After last week’s disappointing results there isn’t too much reason to buck thae trend

TUESDAY:     Another day that appears to have no reason for much of anything happening, but that may all change tomorrow afternoon. Hard to imagine anything moving markets strongly forward before the FOMC, as it is for the rest of the week.

WEDNESDAY:  Themarket is taking it easy at the opening, as all eyes focused on 2 PM FOMC statement and then Scotland independence vote tomorrow.

THURSDAY:    The first hurdle for the week has been conquered and all that remains are Scotland’s independence referendum and getting the Alibaba IPO off smoothly. Hopefully, both bring some additional strength to the markets.

FRIDAY:  FOMC? Check. Scotland? Check? Alibaba? Soon and then this week comes to an end, perhaps with nothing having changed, at all.




Today's TradesCash-o-Meter





Sneak PeekPie Chart Distribution








Weekly Summary


Weekend Update – September 14, 2014

Two weeks ago the factors that normally move markets were completely irrelevant. Instead, investors focused much of their attention on the tragic story that ended with the passing of Joan Rivers, while allowing the market to go on auto-pilot.

The fact that economic and geo-political news was ignored during that week wasn’t really much of a concern as markets went on to secure their fifth straight weekly gain.

This past week was essentially another one where the the typical kind of news we look to was irrelevant, at least as far as gaining our attention. This week most of our efforts focused on the unfortunate story of a talented, but abusive football player and the introduction of new products from Apple (AAPL).

There was a time, not so very long ago, when that football player was considered a soft spoken role model. In fact, somewhere is a photo of my wife, in a Baltimore Ravens jersey, and he at a charitable event, one of many that he attended and supported.

Amazingly, as the home Baltimore Ravens played their game on Thursday night, there were reportedly many female fans wearing the jersey of that abusive player, even though there were plenty of offers and incentives to exchange such jerseys in for pizza, drinks and other items.

The memory of the past is apparently more relevant than the reality of the present, sometimes.

There was a time, also not so very long ago, that Apple’s fate was the same as the fate of the markets, except that when Apple went higher, the market lagged and when Apple went lower, the market outpaced in the decline. Now, its ability to lead is less evident and so its place in the week’s news was mostly as a products release event, rather than as a marking moving event.

Those days of past are now irrelevant and Apple’s reality is tied and the market routinely part ways.

Unfortunately, that football player’s brutish actions made the new iPhone 6’s planned publicity campaign appear to be ill-conceived. Equally unfortunate was that this past week’s irrelevancies weren’t sufficient to allow markets to return to auto-pilot and instead snapped that weekly winning streak, as fears of liquidity may have captured investor’s attention.

Weeks filled with irrelevancy are likely to come to an end as the coming week is filled with lots of challenges that could easily build upon the relatively mild losses that broke that successive streak of weekly gains.

In the coming week there is an FOMC statement release as well as the Chairman’s press conference. Many are expecting some change in wording in the FOMC statement that would indicate a willingness to commence interest rate increases sooner than originally envisioned. That could have an adverse impact on equity markets as a drying up of liquidity could result.

Perhaps even more of a impetus for decreased liquidity is the planned Ali Baba (BABA) IPO. Likely to be the largest ever for US markets, the money to pay for those shares has to be coming from someplace and could perhaps have contributed to this week’s preponderance of selling. It’s not too likely that a lot of money will be coming off the sidelines for these share purchases, so it’s reasonable to expect that funds have been and will be diverted.

Unfortunately, the IPO comes at the end of the week, so I don’t expect much in the way of discretionary spending to buy markets before that, unless some nice surprise in the way the FOMC’s statement is interpreted.

Let’s not also forget this week’s referendum on Scotland’s independence. No one knows what to expect and a nervous market doesn’t like surprises, nor sudden adverse shifts in currency rates.

It’s hard to know whether these events will be more relevant than some of the irrelevancies of preceding weeks, but they certainly represent upcoming challenges.

As usual, the week’s potential stock selections are classified as being in Traditional, Double Dip Dividend, Momentum or “PEE” categories.

This is a week that I don’t have too much interest in earnings or in “momentum” kind of stocks, unless there’s also a dividend involved in the equation. Having watched some well known and regarded companies take their knocks during this past week, yet fully aware that the market is not even 2% below its recent high level, there’s not too much reason to be looking for risk.

As volatility rises concurrent with the market dropping, the option premiums themselves should show evidence of the perceived increased risk and can once again make even the most staid of stocks start looking appealing.

With my personal cash reserves at lower levels than I would like, I’m not eager to make many new purchases this week, despite what appear to be some relative bargains.

While the market was broadly weak I was fortunate in having a few positions assigned and may be anxious to re-purchase those very same positions at any sign of weakness or even if they stay near their Friday closing prices.

Those stocks were British Petroleum (BP), T-Mobile (TMUS) and Walgreen (WAG). Although they’re not included in this week’s listing, they may be among the first potential purchases that I look toward completing and may be satisfied being an onlooker for the rest of the week.

Among other stocks that may warrant some interest are those that have under-performed the S&P 500 since the beginning of the summer, a completely arbitrary measure that I have been using for the past few weeks, particularly during the phase of the market’s continuing climb.

^SPX ChartGeneral Electric (GE) is
one of those staid stocks whose option premiums of late have been extraordinarily low. It goes ex-dividend this week and is starting to look a little bit more inviting. Having now spun off some of its financial assets and made preparations to sell its appliances divisions to my old bosses at Electrolux (ELUXY), General Electric is slowly refocusing itself and while not having looked as a stellar performer, it has greatly out-paced the S&P 500 since the bottom of the financial crisis in 2009. In hindsight it is a position that I’ve owned far too infrequently over those years.

Dow Chemical (DOW) and DuPont (DD) have both lagged the S&P 500 over the past two months, much of it having come in the past week. Those drops have brought shares back to levels that I would entertain share re-purchases.

The option premium pricing may indicate some greater risk in Dow Chemical, however both companies have some activists interests that may help to somewhat offset any longer term pressures.

I’ve been waiting for Verizon (VZ) shares to drop for a while and while it has done so in the past week, it’s still not down to the $47.50 level that I my eyes on. However, its current level may offer sufficient attraction to re-enter a position in advance of its upcoming, and increased dividend.

Without a doubt the mobile telephone sector has been an active one of late and I suspect that T-Mobile’s very aggressive strategy to acquire customers will soon show up in everyone’s bottom line and not in the way most would like. However, with strong price support at $45, a combination of option premiums and dividends could help ownership of Verizon shares offset those pressures while awaiting assignment of shares.

While Intel (INTC) hasn’t followed the pattern of the preceding selections and has performed well since the beginning of summer, it did give back enough ground in the past week to return to a level that interests me. On the downside is the credible assertion that perhaps shares of Intel have accelerated too much in the past few months and can be an easy target for any profit taking. WHile that may certainly be true, by all appearances the once moribund Intel has new life and I suspect will be reflected in earnings, should the goal of short term ownership turn into something longer.

As with Verizon, and hopefully General Electric, as its option premiums could still stand to improve, the combination of a strong dividend yield and option premiums can be helpful in waiting out any unexpectedly large and sudden price declines.

Given the mediocrity of performance by eBay (EBAY) over the past couple of years, it may be hard for anyone to find much relevance in the company, except for that potential jewel, PayPal. I purchased more shares last week and did expect that there might be some downside pressure if Apple announced a new payment system, as had been widely expected. Moving higher into the upcoming Apple event shares did go strikingly lower once details of “Apple Pay” became known. The use, however, of an expanded weekly option provided a rich premium related to the uncertainty surrounding the Apple event and time to dig out of any hole.

The bounce back came sooner than expected as some rumors regarding Google’s (GOOG) interest in eBay made their rounds. Whether valid or not, there’s not too much question that the pressure to consider a spin off of the PayPal unit is ramping up and may, in fact, be seen as necessary by eBay if it perceives any erosion on PayPal’s value as a result of a successful Apple Pay launch. In such a case, it’s far better to spin off that asset while it is still in its ascendancy, rather than to await some evidence of erosion. That is known as the “take the money and run” strategy and may serve eBay’s interests well, despite earlier assertions that PayPal functioned best and provided greatest value as an eBay subsidiary division.

While Visa (V) has announced its alignment with Apple, MasterCard (MA) always seems to be somewhat left out or at least not in a proactive position in the changing payments landscape. Yet even while it has ceded much of the debit card arena to Visa, it continues to be a very steady performer trading in a reasonably narrow range and offering an equally reasonable premium for the risk of owning shares. While selling those options also gives up the potential for upside share appreciation, that upside potential has been limited since the stock split. Much in the way as with eBay, the consideration of a covered option trade may be warranted and a means to generate returns from a position that has little net movement.

Las Vegas Sands (LVS) is the lone momentum stock for the week and it has a dividend this week that warrants some consideration. Having been brutalized in the last few weeks as the gaming sector, particularly those with interests in Macao have seen significant price erosion it appears to be developing some support in the $62.50 level. While I wish I knew that with certainty, what I do know with some degree of confidence is that when Las Vegas Sands does find that level of support it has consistently been a very good covered options position.

Finally, I jumped the gun with one of this week’s selections, having purchased shares of Cypress Semiconductor (CY) on Friday afternoon. I particularly like this company for non-investing reasons because it has been a fertile breeding ground for innovation in an number of different areas. However, by the same token, the same broad thinking that allows it to serve as an incubator also has its CEO spend too much time in the spotlight on policy related issues, when all I really want is for its share price to grow and to return to profitability.

In this case I was eager to purchase shares again in anticipation of its upcoming dividend early in the October 2014 option cycle. However, I also wouldn’t mind early assignment, having sold a deep in the money option. EIther way, the prospects of a satisfactory return look good, as even if not assigned early, there is a potential ROI of 2.5% even if shares fall nearly 5% from the purchase price.

The one caveat, if you find such things to be relevant, is that earnings will be released just two days before the end of the October cycle so there may be reason to consider rolling this forward at that point that the November 2014 options are available for sale.

Of course, all relevancy is in the eye of the
beholder and sometimes it is nice to not have any weighty issues to consider. After this coming week we may find ourselves wishing for those mindless days glued to “Access Hollywood” rather than the stock ticker.

Traditional Stocks: Cypress Semiconductor, Dow Chemical, DuPont, eBay, Intel, MasterCard, Verizon

Momentum: none

Double Dip Dividend: General Electric (9/18), Las Vegas Sands (9/18)

Premiums Enhanced by Earnings: none

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.

Week in Review – September 8 – 12, 2014


Option to Profit Week in Review
September 8 – 12,  2014
4 / 4 0 5 3  / 0 2  / 0 0


Weekly Up to Date Performance

September 8 – 12, 2014

New purchases for the week beat the unadjusted S&P 500 by 1.6% and the adjusted index by 1.4% during a week that the market made some wonder whether another of the mini-corrections was being heralded.

As usual, those weeks marked by weakness tend to have the performance of new positions exceed that of the market in general, as the premiums act as a cushion to the declines, even when those declines are severe.

It was a week of little news and little reason to believe that the market would go decisively in either direction, but certainly more reason to be skeptical of it continuing to reach new closing highs, as the market, after a listless performance last week seemed to set itself up in September as a reversal of a very strong August.

While new positions did well, those with exposure to metals and energy followed the market in its decline for the week as commodities were very weak.

Performance of closed positions continued to out-perform the S&P 500 performance by 1.7%. They were up 3.6% out-performing the market by 91.9%. 

Last week the big news was the tragic death of a comedian, while this week the spotlight was shared by an abusive football player and the unveiling of new Apple products.

At least next week has an FOMC statement and even a Federal Reserve Chairperson press conference.

But this was another week where there wasn’t much materially to move the markets, other than perhaps some jobless statistics. Those initially moved the market and were taken far more seriously than were the prior week’s Employment Situation numbers that were essentially written off as being in error.

Otherwise, there was nothing this week that really could have accounted for the weakness that prevailed all throughout the week. Maybe it was simply an issue of everyone being in a bad mood from having returned from their beach homes.

With only four new purchases for the week, including one late in the day on Friday, I feel fortunate to be able to see three positions get assigned and having been able to roll over 5 positions. Much of that good luck was thanks to the market’s comeback from deeper losses on Thursday, but unfortunately that momentum couldn’t be continued to end the week. Although rolling over early tends to cost more, despite being offset by the additional day’s worth of premium received on the sale side, it’s often far better to make those trades when there is opportunity, because you never know what tomorrow will bring.

And today was tomorrow and we all know how that went.

Of course, even with some good news, that still left two positions expired and without cover to add to that list and there were no new covered positions created during a week that essentially only saw downward pressure.

On another positive note, there was some ability to bypass next week’s monthly cycle ending when rolling over most of the positions this week, creating a little bit of diversification by time. Not much, but a little.

As volatility did increase this week that provided some of that opportunity to look forward in time a little, rather than being so heavily weighted with expirations on a single day. Most of us have seen how quickly a market can turn, even if just for a day, so it’s better not to have all of those positions exposed to one of those kind of days.

Next week Wednesday, for example, could be one of those days, as there’s lots of speculation that some of the wording of the FOMC statement could be changed, indicating an earlier start to the rise in interest rates.

That’s something to keep in mind, especially for those positions that do have extended weekly options available to be traded, thereby possibly avoiding any unpleasant surprises.

As if that’s not enough the very next date we may know the fates of Scotland and England, which could have some surprises awaiting us, at least in the short term.

Beyond that, there’s also the matter of the much anticipated IPO of Ali Baba which should suck lots of liquidity out of the market, as it is probably likely that lots of money will be chasing that position that may have otherwise gone elsewhere.

With cash at a fairly low level I don’t expect to do too much new position buying next week, although admittedly, some prices do look enticing, including all three of the positions assigned this week and a number of others that have been regular parts of the portfolio in the past.

Still, despite this really poorly performing week, the market isn’t even down by 2% from its recent August highs.

If the past is any indicator, we could still be at risk for about another 3% on the downside if this is another of those mini-corrections in the marking.

That is another reason why I may not be rushing in to spend down whatever cash is available.

In other words?

Relax and enjoy the weekend, because next week may be interesting.




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:   BP, CY, EBAY, WFM

Puts Closed in order to take profits:  none

Calls Rolled over, taking profits, into the next weekly cycle:  EBAY

Calls Rolled over, taking profits, into extended weekly cycle:  HAL (9/26), IP (9/26), LVS (9/26), WFM (9/26)

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:  none

Put contracts expired: none

Put contracts rolled over: none

Long term call contracts sold:  none

Calls Assigned:  BP, WAG

Calls Expired:  BX, EBAY

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 PositionsGMOH (9/8 $0.30), NEM (9/9 $0.025)

Ex-dividend Positions Next Week:  LVS (9/18 $0.50)



For the coming week the existing positions have lots that still require the sale of contracts:   AGQ, BMY, BX, CHK, CLF, COH, FCX, GM, JCP, LULU, LVS, MCP, MOS,  NEM, RIG, TGT, WFM, WLT (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.

Daily Market Update – September 12, 2014




Daily Market Update – September 12, 2014 (8:30 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:

Assignments:  BP, WAG

Rollovers:  GM, TMUS

ExpirationsBX, EBAY


The week’s dividends were General Motors (9/8 $0.30) and NEM (9/9 $0.025).

Next week Las Vegas Sands is ex-dividend (9/18 $0.50)


Trades, if any, will be attempted to be made prior to 3:30 PM EDT.This morning the futures market showed the kind of conviction that has been missing for a while.