Daily Market Update – June 24, 2014 (Close)
There wasn’t too much that gave any reason to think that the market would behave much differently today than it did to begin the week.
My hope was that wouldn’t extend itself into my personal actions, because I can’t really recall the last time a week started without a single trade of any kind being made.
With the appearances of another flat start to the trading day it was hard to see where the contrast to yesterday was going to come from.
Any one who has a reason to give for the strong sell-off that materialized and then picked up steam in the early afternoon is just making it up. Nothing changed, although someone will surely point to some obscure signal on the charts and try to make everybody believe that they are idiots.
Ultimately the ending market change for the day isn’t very significant, as it’s what transpired in-between that has much in the way of importance. Yesterday was one of those days where there wasn’t much going on in-between the opening and closing bells.
Today was one of those days when there was lots of intra-day movement. If you’re selling options your favorite scenario is when there’s lots of movement but you don’t really go anywhere, especially if it happens all in the same day and you also happen to be lucky enough to have timed it just right.
When talking about volatility it also is not simply a case of looking at the beginning and at the end. It is really a measure of the variation that takes place in going from Point A to Point B. Yesterday was one of those days when the distance between those two points was nearly a straight line and with very little variance from the path.
Part of the reason that it was difficult making any trades yesterday was the lack of clarity regarding any short term directional move. Directly related to that was the extremely low premiums that were being offered for contracts of any kind. Neither call buyers nor put buyers had any real commitment or strongly held belief in their thesis and they surely weren’t willing to pay and put their money where their silent mouths used to be.
Trying to seek out decent premiums by looking at expanded weekly options, such as for next week’s shortened trading week, didn’t really offer anything worth pursuing, although news like an 8% drop in Dubai overnight could have some trickle down effects, such as necessitating sale of US assets in order to meet Dubai asset margin requirements.
But that’s pretty farfetched for the moment, although it could increase the uncertainty that feeds premiums.
Not that I want to be the guy that offers a reason for today’s sell-off, but that’s at least something to consider. It’s not an obscure technical, but it’s the best I could do.
For the remainder of the week I’m still hopeful that something will occur or at least some opportunities will make themselves known, but it may end up being an unusually slow week from every perspective.
Having money to invest makes it difficult to accept that fact, although as long as the portfolio does well it’s a little easier to have some patience when it comes to deploying that cash, although I and many others do like the flow of income that’s generated from activity and won’t simply generate itself, other than from the occasional dividend payment that finally gets credited to the account.
While no trades were made yesterday I still had my eyes on both Deere and Dow Chemical in order to capture those dividends. Unfortunately, my preference would have been looking at the July 3, 2014 expiration, but neither offered expanded weekly options and the monthly options weren’t offering the kind of reward that warranted the 4 week commitment. In fact, if bullish and shares do climb in value, those low premiums could end up being costly while awaiting expiration or a chance to close the positions early.
More unfortunately the market decided to accelerate its losses after the purchase of Dow Chemical shares, but there’s still tomorrow and many days after.
So with today in the books and it being a rare one sided day to the downside it will likely begin all kinds of speculation as to whether this is finally the correction that we’ve all been waiting for.
I for one really don’t want to hear any potential retreat in prices being referred to as “healthy,” at this point.
Even with lots of cash still looking for redeployment, I’d rather see some lack of health as long as that translated into a growing bottom line. If today was healthy I really don’t want any part of it.