Category Archives: Daily Market Update

Daily Market Update – September 15,  2015  (8:15 AM)

Yesterday was a rare kind of day if you only look at the last month or two as your guide to what is normal.

Instead of the wild swings that we’ve gotten used to and that have helped volatility start returning toward what we used to consider normal levels, there was virtually no range in trading yesterday. The market traded in as tight of a range as we’ve seen for a while as there was absolutely no reason to get excited about anything.

Despite more weakness in Asia, which continues as we are ready to get started this morning, the market is again looking as if it may be another flat day and continues its moving away from trading in sympathy with Shanghai.

When you think about the fact that Shanghai has now fallen 40% in the past 3 months, we are pretty fortunate to find ourselves down only about 9%, in what is nothing more than what should be thought of as a normally occurring correction, from which recovery is routine.

You can’t necessarily refer to anything about a 40% decline as routine, but it is good seeing that the co-dependence in trading seems to be waning as the realization comes that there’s no better place to be parking your money than in the United States.

With all attention being focused on this week’s FOMC Statement release and Chairman Yellen’s press conference to follow, there’s plenty of anticipation for something big to spring out from the market at that time, so for now, there’s not too much reason to expend much energy when it all may be called for on Thursday.

It’s a little disappointing seeing the morning look as if it will be another flat or down kind of day, as I’d like to see more opportunity to do something with non-performing positions or find some opportunities to roll over those positions expiring this week.

As has been the case for quite a while, although less so now as volatility has been increasing, the relative costs of those rollovers is still higher than I would like. Although I really do dislike not being able to rollover a position, these days I’d rather not do a rollover than do one with virtually no benefit and obliging yourself to assignment.

While it’s perhaps unrealistic to expect that you can have it all, you really can have it all when volatility gets sustained at a higher level, so there may be reason to not rollover positions as a matter of reflex. There’s definitely more and more reason to look at some longer term contracts as long as there’s the chance to lock into higher premiums and get paid to wait out some bounce back in the market.

That is actually the case for a number of contracts expiring this Friday as those were sold as “Hail Mary” kind of sales to generate some income while awaiting some good news. As it is taking longer than we’ve become accustomed to for getting good news to return to the scene after a market dip, that may be the strategy for a while and just trying to grab any premium advantage while it’s available and while in waiting mode.

Today looks as if it may be a quiet day for portfolio trading, but despite yesterday not offering any surprises, it probably doesn’t make too much sense to completely discount the possibility of something popping up to create opportunity even as we may be in a state of suspended animation until Thursday afternoon.

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Daily Market Update – September 14,  2015  (Close)

Last week at least had the good news of our markets disassociating themselves from China.

Even if the Shanghai market goes higher, it’s probably a good thing if we go our own and independent ways.

This morning, as both Shanghai and Japan were sharply lower, our own market is doing nothing as it prepared to begin the week.

That’s not too surprising considering that this is the week that many expect the FOMC Statement release to finally announce an interest rate increase for the first time in nearly a decade.

In all likelihood, at this point there are only two things that would make the market take any news badly.

The first is if no interest rate increase is announced.

Markets seem to have finally matured enough to understand that a rate hike is only a reflection of all of the good and future good things  that are developing in our economy and are ready to move on instead of being paralyzed with fear that a rate hike would choke off anemic growth.

The second thing, though, is the very unlikely event of a rate hike larger than has been widely expected. That means a 0.5% hike, or even worse, a full 1% hike.

That would likely be met with crazed selling.

This week’s FOMC Statement release comes at a fairly inopportune time, regardless of what it may hold.

It will be on Thursday, instead of its usual Wednesday afternoon.

That gives one less day for markets to recover in the event of a quick reaction to the downside.

Additionally, this is the end of the September 2015 option cycle and as is usually the case, that means more than the typical number of expiring positions that could be subject to becoming even less likely to be assigned.

This time, however, that’s not too much of a concern as many of those expiring contracts were written  on positions that were already well out of the money at the time and not really expected to be in contention for assignment.

My expectation this week, regardless of the FOMC Statement was that most of those positions would expire and that we would look for any new opportunity to simply sell calls on them at the first sign of any price strength, trying to take advantage of some higher volatility and getting whatever premium possible while in waiting mode for a price rebound.

This week, with really very little cash and lots of uncertainty about what will be happening, I didn’t expect to be adding new positions, but you never know what mood will strike, especially if a dividend is involved, as turned out to be the case with adding General Electric, once again.

I hope, just as with last week that there is some opportunity to sell new call contracts or get some rollovers achieved, as the number of ex-dividend positions this week is much reduced from the past 2 weeks and it would be nice to get some more income flowing.

With markets set to open the week flat I didn’t know if any of those opportunities would come today. But just as we’ve seen over the past few weeks, if we’ve seen anything at all, its that they’ve been very unpredictable. Even on those mornings that the futures were pointing toward sharp moves, sadly especially when they were higher, those moves often didn’t survive the day.

Today it pointed at minimal activity, but it ended up being a day that flirted with a triple digit loss for much of the day, finally closing 62 points lower on the DJIA.

For now, all that matters is for portfolios to survive the
day and hopefully add some additional income to do a bit better than simply surviving.

Daily Market Update – September 14,  2015  (8:30 AM)

Last week at least had the good news of our markets disassociating themselves from China.

Even if the Shanghai market goes higher, it’s probably a good thing if we go our own and independent ways.

This morning, as both Shanghai and Japan are sharply lower, our own market is doing nothing as it prepares to begin the week.

That’s not too surprising considering that this is the week that many expect the FOMC Statement release to finally announce an interest rate increase for the first time in nearly a decade.

In all likelihood, at this point there are only two things that would make the market take any news badly.

The first is if no interest rate increase is announced.

Markets seem to have finally matured enough to understand that a rate hike is only a reflection of all of the good and future good things  that are developing in our economy and are ready to move on instead of being paralyzed with fear that a rate hike would choke off anemic growth.

The second thing, though, is the very unlikely event of a rate hile larger than has been widely expected. That means a 0.5% hike, or even worse, a full 1% hike.

That would likley be met with crazed selling.

This week’s FOMC Statement release comes at a fairly inopportune time, regardless of what it may hold.

It will be on Thursday, instead of its usual Wednesday afternoon.

That gives one less day for markets to recover in the event of a quick reaction to the downside.

Additionally, this is the end of the September 2015 option cycle and as is usually the case, that means more than the typical number of expiring positions that could be subject to becoming even less likely to be assigned.

This time, however, that’s not too much of a concern as many of those expiring contracts were written  on positions that were already well out of the monet at the time and not really expected to be in contention for assignment.

My expectation this week, regardless of the FOMC Statement was that most of those positions would expire and that we would look for any new opportunity to simply sell calls on them at the first sign of any price strength, trying to take advantage of some higher volatility and getting whatever premium possible while in waiting mode for a price rebound.

This week, with really very little cash and lots of uncertainty about what will be happening, I don’t epect to be adding new positions, but you never know what mood will strike.

I hope, just as with last week that there is some opportunity to sell new call contracts or get some rollovers achieved, as the number of ex-dividend positions this week is much reduced from the past 2 weeks and it would be nice to get some more income flowing.

With markets set to open the week flat I don’t know if any of those opportunities will come today, but if the past few weeks have been anything, they’ve been very unpredictable. Even on those mornings that the futures were pointing toward sharp moves, sadly especially when they were higher, those moves often didn’t survive the day.

For now, all that matters is for portfolios to survive the day and hopefully add some additional income to do a bit better than simply surviving.

Daily Market Update – September 11,  2015  (8:00 AM)

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

The following trade outcomes are possible today:

Assignments:  GE

Rollovers:  none

Expirations   none

The following were ex-dividend this week:  NEM (9/8 $0.025), WY (9/9 $0.31), GM (9/10 $0.36), KO (9/11 $0.33)

The following are ex-dividend next week:  LVS (9/18 $0.65)

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

Daily Market Update – September 10,  2015  (Close)

Yesterday was a really disappointing day, even if your portfolio ended up in relative out-performance.

The idea that we could put together consecutive large moves higher was taken off the table after a tease of an open and then a gradual decline that ended up picking up lots of speed into the close.

There really was no reason for the opening strength nor for the closing weakness.

This morning the futures were pointing to a flat open.

It was hard to know what to make of that and after today’s close, it’s still hard to know what to make of any of it.

After our market’s decline yesterday, overseas markets, first in Asia and now in Europe went into sharp decline.

It’s hard to know whether they did so in reaction to our market or whether they are continuing in being the stick that stirs our markets.

For most of the summer we’ve been in an unusual position of having overseas markets tell us where to go and we haven’t been able to find any reason to return the relationship to the one that we used to know as being more normal.

Maybe the realization that our economy is in good shape and likely to get better while the rest of the world is floundering, and maybe the fact that our markets still offer the best combination of value and safety would be enough to get things back to normal.

But for now, it doesn’t look as if anything will serve as the catalyst to get more rational action going, unless of course the FOMC finally decides to do what they’ve been telegraphing for so long and finally raise interest rates against the advice of nearly everyone outside of the United States.

With only a single position set to expire this week and now just i day remaining, I’m reasonably satisfied with the combination of new call sales, rollovers and dividends for the week and don’t expect to find any reason to spend any money on new positions this week.

I’m especially glad to have rolled over the two Best Buy lots, which go ex-dividend tomorrow. They were each rolled over in the past two weeks, despite being weeks before their expiration dates, simply to squeeze additional time premium in the face of a good chance at early assignment to capture tomorrow’s dividend.

The seep in the money $33.50, now expiring October 23, 2015 has a good chance of being assigned early, but the $37 options may not be, although I’d prefer if they were, at this point.

With yesterday’s action only serving to introduce even more uncertainty I would like to continue a focus on trying to find a way to use volatility to squeeze out some more premium from existing positions and not think too much about adding new positions, even while they continue to look so bargain priced.

Neither of those goals are always so easy, but at least this and last week have offered some reasonable opportunities to take advantage of the market.

Hopefully, that volatility that we’ve been seeing will continue, but will do so in a way that there’s not much in the way of net change in the market. For now, as you often see in the early phase of a volatility spike is that the market declines. It’s in that period where the volatility stays at a relatively higher level and settles into a higher range that there begin to come good opportunities to find attractive premiums and enhanced income streams.

For now, I hope we fall into that narrow range and don’t have the kind of moves higher of the kind of large moves that we’ve seen. Those are just too prone to lead to tumbles and those are just too precipitous to be able to defend against and they leave you in a state of shell shock for far too long.

As is usually the case, there’s something go
od about consolidation in prices. Forming a base that gives the market someplace to return to and stay with some degree of confidence is a good thing. The same tends to be the case with volatility, as well. With volatility having spiked to the 50 level and come down by nearly 50%, a small further climb to the 30 level would be a nice place to settle in for a while. That may still take a small amount of market pain, but could end up being a very good place for a while.