Category Archives: Daily Market Update

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.

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

Expirations:  BX, 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.

Daily Market Update – September 11, 2014 (Close)

This morning the futures market showed the kind of conviction that has been missing for a while.

Unfortunately it wasn’t the kind of conviction that I’d want to see, especially near the end of the week, when I want to see prices hovering around or near their strike prices.

The likely culprit this morning was the surprising increase in jobless claims which was consistent with the equally surprising drop in employment numbers that was reported last week and written off by many as being erroneous.

Not just an anomaly, but many were saying that those numbers were just wrong.

For some reason the market is putting some emphasis on today’s numbers. more so than they normally would be doing, perhaps validating the previous employment statistics, although if mistakes can happen once, why not again?

My hope, not surprisingly, was that the market would move onward from the initial shock of the disappointment, as perhaps someone will take it as an opportunity to again begin some buying.

As it would turn out, the shock didn’t last very long and there was at least some tentative, although not really widespread buying, but it did come in some of the right spots for me.

At this point we’ve become accustomed to the market recovering after drops of about 4 to 5%, but we were still quite a bit from even that level, as the morning began, even after the initial near triple digit drop. Even at the low point of the morning there was still more room to drop before even getting to that 5% level..

There’s wasn’t too much to be done while waiting for the market to find itself or to get on some kind of path. Although I had cash in reserve, it wasn’t as much as I might like in the event of any sustained weakness. However, as said on any number of occasions the developing benefit that may be seen is an increase in volatility and then a subsequent increase in those option premiums.

Still, I’d rather have the cash than the theory.

In an environment when prices are falling and premiums are rising those DOH trades become more plausible and can help to reduce the impact of any market decline and hopefully leave one, in relative terms, better off than they would otherwise have been when the damage is over.

Regardless, my preference would have been for some mild, but continuing market strength at this point in the week and fortunately, despite what would prove to be a loss for the day, it wasn’t very bad at all, especially since there was the opportunity to execute some rollover trades.

One of those, for Las Vegas Sands, was done specifically to have a chance at getting next week’s dividend. Despite shares having been above their strike price the rollover to two weeks away and at a strike level an additional $0.50 higher,
opened the possibility of either getting the dividend or being assigned a week early, but having received two week’s worth of premium, in addition to the $0.50 higher strike price.

In shares that really were hit unduly hard because of adverse news from Macao, I may even want to add more of those shares next week, because there may also be capital gains to be made in the trade, in addition to premiums and dividends.

But as the week winds down timing can mean a lot, as expirations are a factor. Any kind of precipitous decline in shares can be looked at as fortuitous or unfortunate, depending on that timing.

A strong drop on a Monday may be very welcome, while the same thing on a Friday to end the monthly cycle can be unfortunate, if leading to the loss of assignments or can be fortuitous if bringing prices that were well above their strike prices much closer to either allow rollovers or even potential re-purchases the following week.

So we’ll now see how tomorrow will go, after receiving a little bit of a reprieve today. With now fewer positions set to expire this week and not being in the more dire position that looked to be developing in the morning, it’s easier to look forward to that final day of trading.

Daily Market Update – September 11, 2014 (9:15 AM)

This morning the futures market is showing the kind of conviction that has been missing for a while.

Unfortunately it’s not the kind of conviction that I’d want to see, especially near the end of the week, when I want to see prices hovering around or near their strike prices.

The likely culprit this morning is the surprising increase in jobless claims which is consistent with the equally surprising drop in employment numbers that was reported last week and written off by many as being erroneous.

Not just an anomaly, but many were saying that those numbers were just wrong.

For some reason the market is putting some emphasis on today’s numbers. more so than they normally would be doing, perhaps validating the previous employment statistics.

Hopefully the market will move onward from the initial shock of the disappointment and perhaps someone will take it as an opportunity to again begin some buying.

At this point we’ve become accustomed to that happening after drops of about 4 to 5%, but we’re still quite a bit from even that level, so there may still be more to come.

There’s not too much to be done while waiting for the market to find itself or to get on some kind of path. Although I have cash in reserve, it’s not as much as I might like in the event of any sustained weakness. However, as said on any number of occasions the developing benefit that may be seen is an increase in volatility and then a subsequent increase in those option premiums.

In an environment when prices are falling and premiums are rising those DOH trades become more plausible and can help to reduce the impact of any market decline and hopefully leave one, in relative terms, better off than they would otherwise have been when the damage is over.

Regardless, my preference would have been for some mild, but continuing market strength at this point in the week.

Timing can mean a lot, as expirations are a factor. Any kind of precipitous decline in shares can be looked at as fortuitous or unfortunate, depending on that timing.

A strong drop on a Monday may be very welcome, while the same thing on a Friday to end the month can be unfortunate, if leading to the loss of assignments or can be fortuitous if bringing prices that were well above their strike prices much closer to either allow rollovers or even potential re-purchases the following week.

So we’ll see how today and tomorrow will go, with quite a few positions set to expire this week and now likely to be in a more difficult position. Fortunately there are still two full trading days to determine those fates.

Daily Market Update – September 10, 2014 (Close)

After what seemed to be a fairly predictable Apple event yesterday nothing had gotten a boost of any sort.

Apple itself fluctuated between a gain and a loss and the market accelerated losses, making it the second consecutive day of losses, putting more distance between September and this past August.

With the event now over there’s really nothing left for the rest of the week of any great importance.

Today became reasonably important, however, as after two days of losses and a small spike in volatility, a third day of the same would start getting everyone to begin their whispers about a correction.

Over the past two years there has been some sort of a mini-correction and spike in volatility every two months or so, the last of which was in July and ended in early August. During that time most everyone was pointing toward the 30% spike in volatility, having taken notice of the volatility late in the process of that most recent mini-correction. By the time volatility became noticed and became a topic it was already time for the correction to end, and it did in a very sudden manner.

This morning was giving indications of a higher open, but a very reluctant one, as futures are actually pointing lower, but are still above the fair value.

That means no one was terribly enthused as trading was getting ready to begin.

That described yesterday, as well. Despite some falling prices there really wasn’t anything that gave the message that some bargains were in the process of being created. It was difficult to get enthused about the price activity yesterday which deteriorated as the afternoon wore on, especially in the final two hours of trading.

That kind of deterioration going into the close is rarely a reason to get excited by the next morning’s opening and that’s precisely where I began the day.

It was also a Wednesday, which tends to be a slow day anyway, as the new weekly options for those without expanded weekly options aren’t yet available. That generally immediately cuts the available new position opportunities especially in a low volatility and low premium environment.

However, since next week is the end of the monthly cycle that also means that any position can be rolled over to next week even today.

So while I didn’t expect much action or trading today, any kind of strength that may develop throughout the rest of the week may be an opportunity to secure positions for rollover, if assignment doesn’t seem as likely. Given the weakness thus far this week, until the Apple inspired turnaround  in the afternoon, the hope of finding new call sale opportunities had been waning, so attention has to focus on the ability to create income through rollovers and hopefully replenish cash through some assignments.

Either of those goals would be compromised by further market weakness over the next 2 days, but I’m hopeful for some kind of stability. Whereas the weaknes
s going into yesterday’s close wasn’t encouraging, the strength heading into today’s final two hours was encouraging, by contrast.  In that event I would rather commit to an early rollover, even if those shares move higher by the end of the week and could have been assigned, instead.

It’s generally better to have the cash in hand than to devote too much energy to hoping that favorable events will happen.

But I still hope they will.