Daily Market Update – August 11, 2016 (Close)


This morning’s futures, although only mildly higher, were already showing more of a move than the cumulative absolute value moves in the 3 previous days of this week.

When it was all over, all 3 of the major indexes closed at record highs.

When the morning started there was a chance that the move higher could grow if only retailer earnings that were set to begin in the morning could give some sense of hope that all was well on the consumer side of things.

With 2 big ones before the market’s open being interpreted as having been good news, despite word of 100 store closures at Macy’s and decreased guidance at Kohls, the market never looked back and was even buoyed by a bounce in oil later in the session.

As far as the news of the day goes, those retailers continue next week and oil is a potential issue day in and day out.

After we received reports from 3 key national retailers today, we also get the official retail Sales Report tomorrow morning.

The reasonably strong earnings reports today, even though not fueled by really positive guidance, could still be more meaningful to investors than tomorrow’s official numbers.

Even if earnings aren’t wonderful, if those upcoming retailers start to paint a brighter future for the quarters ahead, that guidance will likely be far more important than anything the government may have to report tomorrow, that will only be backward looking.

Strong guidance would give investors the belief that the FOMC is going to have more of a reason to raise interest rates sooner, rather than needing to wait until December, as is increasingly the consensus.

While yesterday was another in a series of flat days, wouldn’t you know it, the one position that did rally was the one going ex-dividend today?

I did get the opportunity to roll over that position for another month. The goal in that transaction was to get at least a premium as large as the dividend, in the event that the position would still be assigned early.

That was achieved and a bit more, as well, as the additional ROI for the rollover was about 1.3% versus an almost 1% quarterly dividend.

I actually would mind neither the prospect of an early assignment, which didn’t appear to be the case in the morning and was reported by no one as having been the case, or keeping the position alive and just adding to its cumulative ROI, even as the underlying security hasn’t gone very far. 

In this case, if the position does get assigned next month, the 10 month holding will yield an ROI of almost 19%, half of which is from dividends and premiums, while the comparable S&P 500 move was 3.6%, exclusive of dividends.

That’s the way it’s supposed to work, but those opportunities have been rare as the goal had been for shorter term holding periods. However, as markets have increasingly moved the strategy toward longer term holdings, the dual sources of income, dividends and premiums, have become increasingly welcome news.

With the one expiring position for the week that happens to be a short put, I do want to take assignment of shares as the position is ex-dividend on Monday.

Hopefully, if that does happen, there will be a quick and easy opportunity to sell some calls and then exit that new position or even continue rolling those calls over, as had been the case with some other recent new positions, whether short calls or puts.

Today, I actually came close to rolling the puts over as even factoring in the lost dividend, the net premium was pretty good
. if that position continues to hover around the strike price, I may try it again tomorrow.

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