Daily Market Update – March 25, 2014 (9:30 AM)
Following a pretty flat day to start the week the pre-opening futures were pointing toward another in a long series of steps that have taken this market higher.
As with most things in life it may not make sense to try and understand what is behind reality or to try and dissect out the component pieces in order to better understand or predict the future. Sometimes it’s just better to go along with the flow of things and just take credit for what would have happened without you.
With a handful of purchases yesterday I would like to see some more happen today, especially since there is still a little bit of volatility built into premiums for next week that may make it worthwhile to try and populate the coming week with contracts.
Looking into a sea of green in the 30 minutes before trading, however, that doesn’t seem too likely, at least at the open, as I don’t like following strength and chasing after stocks. They rarely get away for good, almost always coming back.
If anything, I like making a purchase as weakness is developing or at least shares are lagging behind on a strong market day.
If you’ve ever gone to a high school reunion or elementary school reunion the phenomenon of “catch up” is clear, as so often the goofiest of kids becomes like everyone else at some point in their adult lives. By the same token, so often the most fit and able in childhood and in the teens become the most paunchy and tired as adults.
With too much cash still sitting on the sidelines I’d like to add to this week’s positions, but would be happy to simply continue finding cover for under-performing and non-performing shares. My bank account doesn’t really distinguish between the income that comes as a result of having purchased new shares and sold calls or simply sold calls on existing shares.
Following up on some discussion yesterday and in this past week’s “Week in Review” of seeking to generate some income from those laggards, the best time is when stocks are in an uptrend. There’s no better time to sell calls than into strength and there’s no better time to sell puts than into weakness.
Both of those scenarios are really enhanced when the volatility is, as well.
For those that didn’t see it, I wrote an article last night on margin accounts.
Before anyone gets too excited or rushes out to bury themselves in margin debt, don’t do that.
But if you already have a margin account or are considering getting one, the article contains some ideas of how such an account can be a benefit to a covered option trader, without the level of risk that it conveys upon typical individual investors.