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Daily Market Update – September 11, 2014 (9:15 AM) This morning the futures market is showing the kind of conviction that has been missing for a while. Unfortunately it’s not the kind of conviction that I’d want to see, especially near the end of the week, when I want to see prices hovering around or near their strike prices. The likely culprit this morning is the surprising increase in jobless claims which is consistent with the equally surprising drop in employment numbers that was reported last week and written off by many as being erroneous. Not just an anomaly, but many were saying that those numbers were just wrong. For some reason the market is putting some emphasis on today’s numbers. more so than they normally would be doing, perhaps validating the previous employment statistics. Hopefully the market will move onward from the initial shock of the disappointment and perhaps someone will take it as an opportunity to again begin some buying. At this point we’ve become accustomed to that happening after drops of about 4 to 5%, but we’re still quite a bit from even that level, so there may still be more to come. There’s not too much to be done while waiting for the market to find itself or to get on some kind of path. Although I have cash in reserve, it’s not as much as I might like in the event of any sustained weakness. However, as said on any number of occasions the developing benefit that may be seen is an increase in volatility and then a subsequent increase in those option premiums. In an environment when prices are falling and premiums are rising those DOH trades become more plausible and can help to reduce the impact of any market decline and hopefully leave one, in relative terms, better off than they would otherwise have been when the damage is over. Regardless, my preference would have been for some mild, but continuing market strength at this point in the week. Timing can mean a lot, as expirations are a factor. Any kind of precipitous decline in shares can be looked at as fortuitous or unfortunate, depending on that timing. A strong drop on a Monday may be very welcome, while the same thing on a Friday to end the month can be unfortunate, if leading to the loss of assignments or can be fortuitous if bringing prices that were well above their strike prices much closer to either allow rollovers or even potential re-purchases the following week. So we’ll see how today and tomorrow will go, with quite a few positions set to expire this week and now likely to be in a more difficult position. Fortunately there are still two full trading days to determine those fates.
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