Daily Market Update – July 1, 2014 (Close)




Daily Market Update – Jul 1, 2014 (Close)

Yesterday was a little busier than I had expected, but it was certainly a quiet and uneventful day as the market stayed in a tight range all through the trading session.

This morning the pre-open futures are pointing toward a mildly positive opening.

I didn’t think that was going to result in much as far as opening new positions, but I had hoped and it turned out to be especially nice to see that opening spill over into the regular session and take on some life. That gave some opportunity to wring additional income out of existing positions, although lately you do have to wring harder to squeeze much premium out. To some degree that’s offset if dividends become part of the equation or become sought after, but there is a limit to those opportunities and they are far fewer than the universe of optionable stocks.

In the absence of any news or any obvious catalysts those kinds of large moves are possible when there’s not too much trading going on. If that’s the case, any moves are usually not very well sustained and return back to where they had started in fairly short order.

Today you certainly would have been hard pressed to have identified a reason for the day long and sustained strong gain.

I suppose that with cash still in reserve and the willingness to spend some of that reserve down, I also wouldn’t necessarily mind a sharp, light volume kind of sell-off this week, especially after today’s gains. That would give enhanced buying opportunity and also lead to some increased option premiums.

It’s always strange to suggest that you wouldn’t mind some sort of a sell-off, even if highly qualifying what type would be acceptable, but there are definitely advantages, especially if there’s cash in reserve.

Unfortunately, like so many things in life, what you wish for and what you get can be very different, so even while thinking that a sell-off might be nice, that’s only if rational heads prevail.

When it comes to money rational thinking is often in short supply, whether its greed or fear that’s at fault.

This week the only known challenge will be Thursday’s Employment Situation Report. With three and a half days of markets being closed after the report any unforeseen news, such as might corroborate the revised GDP statistics, could lead to weakness, especially if other events, such as in Iraq, pile on to the nervousness.

We’ll get a little bit of a hint tomorrow as the AD
P statistics are released and any deterioration in those numbers could serve as a precursor for Thursday.

It has been a while since the Employment Situation report really mattered, but this could be one of those times that it does, perhaps exacerbated by the nervousness of staying long through an exceptionally long week-end.

Recent history, meaning for the past two years, however, indicates that traders haven’t really cared too much about weekend exposure, even when there were clear threats, so  the likelihood still has to remain that the event will be another non-event.

I’m still content to watch and wait as the rest of the week unwinds. In the event of any weakness I would likely not be of the belief that there would be anything sustained, so would probably be in the market to add new positions.

As it is, it turned out to be a nice day to watch and to actually pull off some rollovers, on a Tuesday no less, as there’s no better time to sell new options than into the face of a rally. That’s especially true when dealing with such a short week as this one that sees much faster erosion of premiums for this week’s options than for next weeks.

Of course, that doesn’t leave too much left to do for the rest of the week, now with most positions already rolled over, but you still will never know what awaits around the corner and where there may be opportunity to wring those premiums.