Category Archives: Daily Market Update

Daily Market Update – August 11, 2014 (8:00 AM)

As summer is beginning to wind down there are fewer scheduled economic or potentially market moving events to get our attention. This is another of those very quiet weeks and, so far, at least, it doesn’t appear as if there’s going to be anything substantively new on the geo-political front to begin the week.

Following Friday’s surprisingly strong close there appears to be some additional strength left to get us started as nothing really occurred over the weekend to dampen whatever it was that stoked that sudden enthusiasm.

With some assignments last week and  some additional cash to put to work than I might have expected going into last Friday’s trading, there may be some bargains still to be had, despite Friday’s climb.

This is another week where I won’t be adverse to opening new positions but as good as Friday’s trading session was, am still not overly enthusiastic. However, as is often the case with these bouncing kind of markets, I am definitely more enthusiastic about the bottom line, as those weeks tend to be good in a relative sense and, when also good in an absolute sense, make you hope for more of the same.

Last week didn’t really have any unusually strong performers, yet somehow there was generally some broad strength among existing positions that allowed their aggregate to out-perform the market for the week.

However, to demonstrate just how topsy turvy the world of covered options can be the margin of that out-performance decreased from Thursday to Friday, as the caps imposed by strike levels make it difficult to keep up with 180 point gains.

Nonetheless, bioh relative and absolute constituencies could point to something good, but not readily explainable.

Still, with far too many positions sitting without cover, it continues to be my preference to change that situation, but that has been a difficult task, especially as the volatility continues to remain low, despite some of the recent climb that had everyone marveling.

That climb, however big in relative terms, was still tiny in absolute terms and didn’t do very much to noticeably drive up option premiums. Friday’s surge higher only helped to then knock those premiums down another peg after dashing some hopes for their climbs.

Seeing the morning’s indication of a moderately higher opening is encouraging, insofar as perhaps getting closer to finding some new cover for existing positions, but it doesn’t necessarily add to the desire to spend or recycle money in the cash reserve. Of particular interest this week, though, may be some of those positions that were hit very hard last week, such as Walgreen and Time Warner, that have begun to show some stability and did so even prior to the Friday gain that took most everything along for the ride.

My anticipation is to not be very active with new positions this week, although there are more th
at have initial appeal to begin the week than in a number of weeks past.

The issue at hand though is to decide which market of last week is where the prevailing wind will blow.

The markets of last Monday and Friday or the market of the days in-between?

Very different markets and I may have gotten sucked in by last Monday’s trading, particularly coming off of a week with enough assignments to fuel spending.

This week, especially for positions not really beaten down, or not offering a dividend, I may be a little more circumspect and a little less generous with the outflow of cash.

But for what that concern about outflow is worth, the situation is fluid.

Daily Market Update – August 8, 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: EBAY (52.50), GPS ($40)

Rollovers: EBAY ($53.50), GPS ($42)

Expirations:  C, CHK, LVS, PFE, WFM

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

Daily Market Update – August 7, 2014 (Close)

Following yesterday’s flat trading and flat finish, the morning was awaiting word regarding the ECB’s refinance rate.

With that remaining unchanged, which came as no surprise, the pre-market just continued along the same flat line as it then awaited some word from the ECB president.

In the past he has had a way of moving markets, exactly the same way that the Chairman of the Federal Reserve can move markets, so while the futures were continuing to go no where special after the rate announcement, they could easily have quickly changed direction about 30 minutes later as Draghi began to speak.

The difference has been that when Draghi has spoken his words have largely been the kind that have reassured and rallied markets.

Today he didn’t, nor did he say anything that created any sense of confidence or any sense of anything.

That alone was enough to disappoint those looking for anything to get out of the current state of stupor and passivity.

Even though we’re not even down 4% from the S&P 500’s high levels, as the morning was set to begin, we could use some of that kind of rally, especially heading into the close of the week when it would especially nice to see some likely assignments.

Unfortunately, today wasn’t going to be the day for that. Even though the market started on a positive note once the bell rang, it fairly quickly deteriorated and really had nothing of a positive tone as the day worked toward the close.

Unlike the past few weeks in which trading started fairly slowly and then picked up steam in the final two days resulting in a nice combination of rollovers, new covers and assignments, I just didn’t see a repeat of that pattern in the making for this week and have little reason to expect that Friday will be the day to rescue all.

While flat and down markets are still my favorite environment, it’s a lot better when the rollovers and new covered positions can be established. Even if the stocks are going no where themselves, at least their derivative cousins can do something of value.

So far, this week?

Not so much.

Although there aren’t too many positions set to expire this week, as compared to some recent weeks past, there is still at least some opportunity to see some assigned and some rolled over, as long as the last two days don’t really do anything terribly stupid.

Today didn’t really help in that regard,
although early in the session there was at least some opportunity for one rollover and one newly covered position.

While the past few weeks were able to withstand some weak trading days to end the week and still see those revenue producing trades accomplished, this week doesn’t have very much of a cushion, so it would have be en nice to see just a quiet end to a week of headless wandering and then have the chance to start anew next week.

Instead, today dug the hole a little bit deeper.

However, despite that apparently sounding negativity, and certainly without wanting to jinx anything, as the market does trade in a flat manner or even trading downward, the portfolio path is again trending toward out-performance as compared to the S&P 500 as today’s session was getting ready to start.

Without having crunched the numbers at the close, I’m hoping that’s still the case.

But that kind of out-performance isn’t unusual as the premiums are typically the factor that provides the additional performance,

However, while out-performance is always the goal, it’s nice to also couple that with actual increasing portfolio value, as well.

Hopefully those will both continue for the final day of the week although some opportunity to make the trades would really help and make hope unnecessary.

Daily Market Update – August 7, 2014 (8:30 AM)

Following yesterday’s flat trading and flat finish, the morning was awaiting word regarding the ECB’s refinance rate.

With that remaining unchanged, which came as no surprise, the market just continued along the same flat line as it then awaited some word from the ECB president.

In the past he has had a way of moving markets, exactly the same way that the Chairman of the Federal Reserve can move markets, so while the futures were continuing to go no where special after the rate announcement, they could easily have quickly changed direction about 30 minutes later as Draghi began to speak.

The difference has been that when Draghi has spoken his words have largely been the kind that have reassured and rallied markets.

Even though we’re not even down 4% from the S&P 500’s high levels, we could use some of that kind of rally, especially heading into the close of the week when it would especially nice to see some likely assignments.

Unlike the past few weeks in which trading started fairly slowly and then picked up steam in the final two days resulting in a nice combination of rollovers, new covers and assignments, I just don’t see a repeat of that pattern this week.

While flat and down markets are still my favorite environment, it’s a lot better when the rollovers and new covered positions can be established. Even if the stocks are going no where themselves, at least their derivative cousins can do something of value.

So far, this week?

Not so much.

Although there aren’t too many positions set to expire this week, as compared to some recent weeks past, there is still at least some opportunity to see some assigned and some rolled over, as long as the last two days don’t really do anything terribly stupid.

While the past few weeks were able to withstand some week trading days to end the weeks and still see those revenue producing trades accomplished, this week doesn’t have very much of a cushion, so it would be nice to see just a quiet end to a week of headless wandering and then have the chance to start anew next week.

However, despite that apparently sounding negativity, and certainly without wanting to jinx anything, as the market does trade in a flat manner or even trading downward, the portfolio path is again trending toward out-performance as compared to the S&P 500.

That’s not unusual as the premiums are typically the factor that provides the additional performance,

However, while out-performance is always the goal, it’s nice to also couple that with actual increasing portfolio value, as well.

Hopefully those will both continue for the next two days although some opportunity to make the trades would really help and make hope unnecessary.

Daily Market Update – August 6, 2014 (Close)

With another morning getting ready to get off to a negative start, there were some significant events that could have been causes for concern today.

The first two were really pretty unusual. Both 21st Century Fox and Sprint had withdrawn their buyout bids for Time Warner and T-Mobile, respectively.

There can certainly be a myriad of reasons for having done so, but it just doesn’t happen that often. Pfizer did so recently, but that was very complex, including a reluctant target, British regulatory factors and potential backlash from its planned tax inversion.

Usually once a company sets its sights on another company there’s a battle ahead if the target expresses reluctance. You don’t often see the suitor just walking away.

In the case of the Time Warner deal it’s entirely possible that Rupert Murdoch isn’t interested in what could have been a prolonged battle. After all, how much longer would it then take for him to even see benefits from such a deal? All the money in the world may not buy you time when “natural causes” is staring at you.

In the case of T-Mobile, Sprint may have realized that while with a merger they would have gotten the talents of John Legere, on the negative side they would have gotten John Legere.

That may have been enough.

Much more ominous would be the realization by both potential suitors that their targets were already fully priced. It can’t be entirely lost on people that Murdoch’s previous large acquisitions have come at precise market tops.

Then there’s the matter of Italy slipping into recession. Although it’s not as if they have had the most dynamically growing economy over the past 25 years,  a recession is good for no one.

Meanwhile, Germany has announced a cancelation of a defense deal with Russia and Russia has blocked sales of some Brown-Forman products, such as “Jack Daniels,” due to “sub-standard quality.”

So that was the backdrop for this morning, as we came off another large loss that followed what may have been some illusory gains on Monday.

Yesterday’s decline saw some disagreement over the root cause.

There were those that said the decline was due to comments from the Polish Prime Minister regarding the prospects for an imminent Russian invasion of Ukraine.

Others believed that the decline was due to technical factors with the S&P 500 breaching support at 1926 and immediately dropping 6 points as algorithms started selling programs.

Of course, no one thought that maybe the interplay of the two was at hand, because that would be giving credence to others and other ideas.

The hope was that today might ignore the early signs that pointed toward a negative day  and look at the bright side of lower prices as it has done on so many previous occasions over the past 20 months.

Well, one for two isn’t bad.

At least the early drop was largely ignored, although there were some really large droppers, today. But as far as taking advantage of some of the even further depressed prices, neither I, nor anyone else seemed to be in that sort of mood.

Tomorrow? Maybe, but first we have to see what the ECB does and we will likely take some cue from them at least to start the morning.