Month: April 2014

Daily Market Update – April 25, 2014 (9:00 AM)

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

The possible trades or outcomes today include:

Assignment:  CSCO, Holly Frontier

Rollover:   BMY

Expiration: C, FB (puts), LULU, MA, MOS, VZ

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



Daily Market Update – April 24, 2014 (Close)

There’s only one topic for today, and that’s Apple.

If you haven’t seen it, my take is that Tim Cook has capitulated  and signaled that Apple’s days of growth are over.

It’s no coincidence that Carl Icahn seemed to quietly fade away. You can be pretty certain that he knew what was coming and it was part of his agreement to get to the sidelines.

I wouldn’t, however, count him out, as Apple continues to have large cash reserves and Icahn isn’t exactly a shrinking violet.

What that means for me is that Apple may once again become a regular covered option trade, as it was for much of the previous decade. During the time that it could only go higher it wasn’t a good candidate, but it has also been one for much of the past year and now will trade with a more affordable buying price, even though that is all optics.

Hopefully, some of the good news from Apple will filter through to the rest of the market as the week is in its final stretches. The pre-open futures showed strength although it quickly disappeared in the first 20 minutes.

As the day wore on I think traders just stopped everything they were doing so that they could discuss the pros and cons of Apple’s decisions.

They certainly didn’t do much in the way of trading.

That would be nice and certainly welcome, especially if it leads to some assignments, which have been in short supply lately.

While I don’t really mind not so regularly replenishing cash, at least as long as the bottom lines grows, I do mind.

For starters, I like having a cushion. Not just in the event of a sudden plunge and the ability to pick up some bargains, but because having the cash reserve offers you many more paths to travel if an opportunity does arise.

It’s all about having the flexibility to act when action seems appropriate.

When you feel as if you are getting down to an uncomfortable level you change the way you approach things.

Today will be an interesting day, as Apple hasn’t been a market leader for nearly two years and has been trading with a beta of 1.01. That’s as close as you can get to mirroring the S&P 500, or so it would seem.

Essential
ly, Apple has been the S&P 500, although that has been misleading, because for the past 6 months it has often gone in the opposite daily direction, but the pure math of the metric shows it to be in near perfect concordance.

But it’s good to have it back on my radar, especially as an ex-dividend date nears.

As with most things, you never know what the future will hold, but just as Apple has found its cash reserve to be a mixed blessing, as it has brought in the vultures, I can understand Steve Jobs’ desire to have cash available, going back to the days when he was held hostage by not having the cash when needed.

As opposed to Jobs, I want to have it both ways. I want to spend mine and grow mine in an ongoing cycle.

For the rest of this week I don’t think I’ll be spending very much, but I wouldn’t mind acting like a drunken sailor next week, if only Apple can lead the way and show others the light.

Today, even Apple wasn’t enough to nudge the market away from the flat line, as it traded in as narrow of a range as we’ve seen lately.

Still, not too bad of a day and at least we’re still in the game as the week is coming to its end, once again proving that these meandering weeks can be the best of all worlds.



Daily Market Update – April 24, 2014 (10:00 AM)

There’s only one topic for today, and that’s Apple.

If you haven’t seen it, my take is that Tim Cook has capitulated  and signaled that Apple’s days of growth are over.

It’s no coincidence that Carl Icahn seemed to quietly fade away. You can be pretty certain that he knew what was coming and it was part of his agreement to get to the sidelines.

I wouldn’t, however, count him out, as Apple continues to have large cash reserves and Icahn isn’t exactly a shrinking violet.

What that means for me is that Apple may once again become a regular covered option trade, as it was for much of the previous decade. During the time that it could only go higher it wasn’t a good candidate, but it has also been one for much of the past year and now will trade with a more affordable buying price, even though that is all optics.

Hopefully, some of the good news from Apple will filter through to the rest of the market as the week is in its final stretches. The pre-open futures showed strength although it quickly disappeared in the first 20 minutes.

That would be nice and certainly welcome, especially if it leads to some assignments, which have been in short supply lately.

While I don’t really mind not so regularly replenishing cash, at least as long as the bottom lines grows, I do mind.

For starters, I like having a cushion. Not just in the event of a sudden plunge and the ability to pick up some bargains, but because having the cash reserve offers you many more paths to travel if an opportunity does arise.

It’s all about having the flexibility to act when action seems appropriate.

When you feel as if you are getting down to an uncomfortable level you change the way you approach things.

Today will be an interesting day, as Apple hasn’t been a market leader for nearly two years and has been trading with a beta of 1.01.

Essentially, Apple has been the S&P 500, although that has been misleading, because for the past 6 months it has often gone in the opposite daily direction, but the pure math of the metric shows it to be in perfect concordance.

But it’s good to have it back on my radar, especially as an ex-dividend date nears.

As with most things, you never know what the future will hold, but just as Apple has found its cash reserve to be a mixed blessing, as it has brought in the vultures, I can understand Steve Jobs’ desire to have cash available, going back to the days when he was held hostage by not having the cash when needed.

As opposed to Jobs, I want to have it both ways. I want to spend mine and grow mine in an ongoing cycle.

For the rest of this week I don’t think I’ll be spending very much, but I wouldn’t mind acting like a drunken sailor next week, if only Apple can lead the way and show others the light.



Daily Market Update – April 23, 2014 (Close)

While this morning looked to be a repeat of yesterday morning’s pre-open market, I’m reminded that yesterday was another in a string of days that the overall tone of the market doesn’t necessarily follow what goes on before the opening bell rings.

It looked to be another quiet trading day and it did turn out to be that way, but what couldn’t be lost is the size of some of the earnings related moves that appeared this week and early on this morning, both good and bad.

On the downside there were large moves in Lexmark, Cree and VMWare, while Netflix, YUM and others had strong gains.Of course, those YUM string gains evaporated very, very quickly with some negative guidance. At one point the turnaround was almost 10%

All of that bothers me, a little, seeing that the individual risk may be accentuated even as the market itself doesn’t appear to have elevated risk.

The key is that the market may not “appear” to have that risk. But since the market is nothing more than the sum of its component pieces, the more tenuous those pieces the greater the likelihood of weakness undoing some kind of foundation. It may not appear weak, but some of those component pieces are really on wobbly legs.

Many markets see their undoing come first with the same kind of exaggerated weakness shown in those stocks that had earlier showed exaggerated strength. We just recently went through a very short phase of seeing “Momentum” stocks under attack and a very strong drop in the NASDAQ.

The key here is that it was very short lived. The question is whether the drop was just a teaser for things to come. While seeing corrections is thought to be healthy for markets and consolidation is thought to be healthy for stocks, no one wants to be the only healthy one in the room. Owning shares of a stock undergoing price correction while everything else around you is going higher usually leads to more selling of an already down position.

That additional selling is one of those things that spooks markets, even though it may really be only germane to an individual stock or sector, such as biotechnology, or type of stock, such as “Momentum.”

The earnings releases from some of the more key components of the DJIA and S&P 500 haven’t been stellar, thus far, yet the market hasn’t reacted in any adverse way. Perhaps the key has been an abiding confidence that the Federal Reserve is still there to see to it that markets have some underpinning. What surprises me a little is that forward guidance hasn’t been reflecting any kind of optimism that might be expected in a growing economy.

While that has hurt those stocks the cynics will believe that companies are just setting themselves up for an “over-deliver” situation at the next quarter, but companies don’t seem to look that far in advance anymore.

With no really important economic news this week all you can do is speculate as to what these earnings mean for tomorrow and further down the road.

For now, at mid-week, and this being another slow week, I still don’t mind watching the bottom line grow, but I would much prefer to be an active participant.

I don’t know how many new opportunities may be identified during the rest of the week, but I’m not expecting much to happen, mostly hoping for some assignments to end the week and maybe using all of this unused time to start some kind of hobby.

Maybe photography.

I wonder if there’s a market for screenshots of my watch llst?



Daily Market Update – April 23, 2014 (10:00 AM)

While this morning looks to be a repeat of yesterday morning’s pre-open market, I’m reminded that yesterday was another in a string of days that the overall tone of the market doesn’t necessarily follow what goes on before the opening bell rings.

It looks to be another quiet trading day, but what can’t be lost is the size of some of the earnings related moves that are appearing, both good and bad.

On the downside there were large moves in Lexmark, Cree and VMWare, while Netflix, YUM and others had strong gains.

That bothers me, a little, that the risk may be accentuated even as the market itself doesn’t appear to have elevated risk.

The key is that the market may not “appear” to have that risk. But since the market is nothing more than the sum of its component pieces, the more tenuous those pieces the greater the likelihood of weakness undoing some kind of foundation.

Many markets see their undoing come first with the same kind of exaggerated weakness shown in those stocks that had earlier showed exaggerated strength. We just recently went through a very short phase of seeing “Momentum” stocks under attack and a very strong drop in the NASDAQ.

The key here is that it was very short lived. The question is whether the drop was just a teaser for things to come. While seeing corrections is thought to be healthy for markets and consolidation is thought to be healthy for stocks, no one wants to be the only healthy one in the room. Owning shares of a stock undergoing price correction while everything else around you is going higher usually leads to more selling of an already down position.

That additional selling is one of those things that spooks markets, even though it may really be only germane to an individual stock or sector, such as biotechnology, or type of stock, such as “Momentum.”

The earnings releases from some of the more key components of the DJIA and S&P 500 haven’t been stellar, thus far, yet the market hasn’t reacted in any adverse way. Perhaps the key has been an abiding confidence that the Federal Reserve is still there to see to it that markets have some underpinning. What surprises me a little is that forward guidance hasn’t been reflecting any kind of optimism that might be expected in a growing economy.

While that has hurt those stocks the cynics will believe that companies are just setting themselves up for an “over-deliver” situation at the next quarter, but companies don’t seem to look that far in advance anymore.

With no really important economic news this week all you can do is speculate as to what these earnings mean.

For now, at mid-week, and this being another slow week, I still don’t mind watching the bottom line grow, but I would much prefer to be an active participant.

I don’t know how many new opportunities may be identified during the rest of the week, but I’m not expecting much to happen, mostly hoping for some assignments to end the week and maybe using all of this unused time to start some kind of hobby.



Daily Market Update – April 22, 2014 (Close)

Although the morning appeared to be getting ready to get off to a quiet start the morning started with more activist related news in a suddenly strong pharmaceutical sector that could have served as a catalyst to wake everyone up. With all of the recent negative news regarding high prices for pharmaceuticals, what was clear was that when it comes to discretionary health care, such as Botox and other cosmetic enhancers, no one is threatening congressional investigation into pricing structure.

On top of that today is a busy earnings day from some big names and it is also a Tuesday, which is once again a day that the market seems to want to go higher much more than on any other day.

I don’t recall the statistic, but I believe it was something on the order of more than 20 consecutive higher moving Tuesdays last year that is now finding a match, at least on statistical terms, with this year. While the consecutive streak is safe, at least for now, the likelihood of the market moving higher is as likely this year as it was last year and both years defied logic. Yet they both have created believers who will put aside other, more rationally based approaches, to go along for the ride that they presume will simply continue.

It’s often said that “hope is not a strategy,” yet many who should not be swayed by such things aren’t as dismissive of streaks, despite the fact that they may have as much basis as hope does.

When little is going on that may serve as a potential catalyst for markets, things like streaks, including the recent streak of the S&P 500 moving higher for six consecutive sessions, gets more and more attention.

After all of the recent concern about the market dropping, we’re now just 1% way from its high.

When the session was over, after having spent most of its time in tripe digit territory, we cut that distance from the closing high by nearly half.

That’s a pattern also, although not as newsworthy as consecutive streaks, but the market has just continued to be incredibly resilient regardless of what kind of news comes its way. That’s something that you can believe in. The market goes up to a new high, then begins a half-hearted correction and then moves on to another new high.

RInse and repeat.

I don’t know if any of this has meaning for me today, tomorrow or for the next generation of Tuesdays.

All of these discussions are fads of the moment.

By the time you jump onto the pharmaceutical ship, it will have sailed. The broad paint brush is usually only used right after some news breaks. After that there’s lots of luck involved in getting it right when a choice is made trying to find the next likely company to be a target of activism or takeover.

When it comes to betting on streaks, by the time you figure out how to reposition yourself to take advantage of any obvious streak it is just as likely to come to its logical conclusion.. Yet we get fascinated by these momentary blips and factoids, thinking that they offer great insights into what awaits down the road.

Clearly something had everyone fascinated today. I had only one trade that I tried to make all day and within seconds of entering it the price sailed higher, which is definitely not something you want in a Double DIvidend trade, which in this case would have been Bank of New York. Instead, I was happy to just watch most everything move higher, but still disappointed in being unable to sell calls on uncovered positions.

If today was not a Tuesday there would be no reason to believe that much was in store as even with earnings news coming out from those big names there isn’t too much impact. The market itself has little to move it in any direction at the moment, other than discussion of completely irrelevant streaks and statistical momentum that really doesn’t exist as anything other than wishful thinking.

Which is the same as hope.

Unfortunately, Tuesdays are followed by Wednesdays when the market is as likely to go up as it is to go down, just as it is during the three other days of the week.

Still, there’s probably something that can be hoped for as a short lived Tuesday has run its course.

I don’t know what that is, but I’m content to let the market get lifted higher by whatever mechanism it can use, but staying flat for the rest of the week would be especially nice.

Is asking for nothing extra asking for too much?

I hope not.



Daily Market Update – April 22, 2014 (10:00 AM)

Although the morning appears to be getting ready to get off to a quiet start the morning started with more activist related news in a suddenly strong pharmaceutical sector. With all of the recent negative news regarding high prices for pharmaceuticals, what was clear was that when it comes to discretionary health care, such as Botox and other cosmetic enhancers, no one is threatening congressional investigation into pricing structure.

On top of that today is a busy earnings day from some big names and it is also a Tuesday, which is once again a day that the market seems to want to go higher much more than on any other day.

I don’t recall the statistic, but I believe it was something on the order of more than 20 consecutive higher moving Tuesdays last year that is now finding a match, at least on statistical terms, with this year. While the consecutive streak is safe, at least for now, the likelihood of the market moving higher is as likely this year as it was last year and both years defied logic. Yet they both have created believers who will put aside other, more rationally based approaches, to go along for the ride that they presume will simply continue.

It’s often said that “hope is not a strategy,” yet many who should not be swayed by such things aren’t as dismissive of streaks, despite the fact that they may have as much basis as hope does.

When little is going on that may serve as a potential catalyst for markets, things like streaks, including the recent streak of the S&P 500 moving higher for six consecutive sessions, gets more and more attention.

After all of the recent concern about the market dropping, we’re now just 1% way from its high.

That’s a pattern also, although not as newsworthy as consecutive streaks, but the market has just continued to be incredibly resilient regardless of what kind of news comes its way. That’s something that you can believe in.

I don’t know if any of this has meaning for me today, tomorrow or for the next generation of Tuesdays.

All of these discussions are fads of the moment.

By the time you jump onto the pharmaceutical ship, it will have sailed. The broad paint brush is usually only used right after some news breaks. After that there’s lots of luck involved in getting it right when a choice is made trying to find the next likely company to be a target of activism or takeover.

When it comes to betting on streaks, by the time you figure out how to reposition yourself to take advantage of any obvious streak it is just as likely to come to its logical conclusion.. Yet we get fascinated by these momentary blips and factoids, thinking that they offer great insights into what awaits down the road.

If today was not a Tuesday there would be no reason to believe that much was in store as even with earnings news coming o
ut from those big names there isn’t too much impact. The market itself has little to move it in any direction at the moment, other than discussion of completely irrelevant streaks and statistical momentum that really doesn‘t exist as anything other than wishful thinking.

Which is the same as hope.



Daily Market Update – April 21, 2014 (Close)

After two weeks of really unexpected action that began with Janet Yellen introducing a sense of optimism that restored market confidence, that itself was abruptly lost the following day, the market appeared at an impasse as the week’s trading was set to begin.

While today turned out to be a sea of calm, in-between Janet Yellen’s push forward there was an immediate reversal and then a sustained rise higher and anything but calm.

In essence, none of the past two weeks had made any sense, at all, as it all came in the absence of news. Even the sudden rise after Yellen’s dovish comments, that turned around the initial weakness of two weeks ago, shouldn’t have really engendered much of a reaction.

Where was the surprise? Where was the news?

But trying to dissect what may have been irrational behavior and is now long in the past is probably even more irrational and certainly pointless. If your strategy is to understand irrational behavior and then plan for its repeat, your logic may be terribly strained.

Watching the pre-open futures showed a slow deterioration from its earlier very modestly high levels making you believe that it may be waiting for some real news before making a committed move in either direction, or just taking a brief moment to assess where it is at and where it is heading, as there’s no signpost.  Since there’s not much on the economic front this week, that may have to come from earnings, although many of the heavy hitters have already announced, but certainly others, such as Microsoft, later this week, can still move markets.

As the day came to an end it was clear that the impasse won as the market stayed in a very tight range through almost the entire day, other than a short time below the break-even point.

After a couple of weeks with very few assignments, at least there were some rollovers to fuel cash flow, but not much added to fuel new purchases. At about 28% I am willing to get down to about 20%, which means perhaps 4 new positions to start the new monthly cycle. After the day was over that might leave only one trade left to go for the week, but I don’t like to commit to being restrained as events may still unfold.

Until proven othgerwise for another week I’m still primarily focused on the hope of obtaining cover for non-income producing positions and entertaining the fantasy of reducing the total number of existing positions by week’s end.

As with recent previous weeks, with volatility still fairly low, there hasn’t been very much justification for using expanded options, so this week has lots of expiring positions. Ideally, new positions would try to utilize an expanded weekly expiration, if available, just to add some diversification into the mix, but that generally becomes a secondary goal to act
ually generating the option income.

Like a lot of things in life, the intention may be there, but the execution is sometimes lacking.

AS the morning may get off to an ambivalent start, this will probably be another week to sit back and see how the market sustains itself. Last week the market broke from a nearly two month pattern and didn’t see early trading gains evaporate after the first hour.

Somehow, I don’t think we’re going to see the same kind of upward movement that gave us last week’s gains, that were the best in almost a year. Treading water to start the week may be a healthy market reaction to feeling lost. On the other hand, it does appear as if the pattern of teasing with a correction and then quickly bouncing back and creating new highs is still intact, as last week began that correction to the failed correction process.

Of those two, I’d much rather see a lost market tread water for a while, consolidating gains and having orderly and sporadic profit taking. For most of 2014 that’s been a very good formula for personal growth, even while the market hasn’t necessarily kept up.

Since I’m not really my market’s keeper, I care only about the personal growth side of things so I would definitely welcome a quiet and lackluster kind of week that has most other people complaining or bored.

I live for that kind of boredom and after last week would welcome its return.

Today was a good start toward that goal.