Month: September 2014

Daily Market Update – September 11, 2014 (Close)

This morning the futures market showed the kind of conviction that has been missing for a while.

Unfortunately it wasn’t 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 was the surprising increase in jobless claims which was 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, although if mistakes can happen once, why not again?

My hope, not surprisingly, was that the market would move onward from the initial shock of the disappointment, as perhaps someone will take it as an opportunity to again begin some buying.

As it would turn out, the shock didn’t last very long and there was at least some tentative, although not really widespread buying, but it did come in some of the right spots for me.

At this point we’ve become accustomed to the market recovering after drops of about 4 to 5%, but we were still quite a bit from even that level, as the morning began, even after the initial near triple digit drop. Even at the low point of the morning there was still more room to drop before even getting to that 5% level..

There’s wasn’t too much to be done while waiting for the market to find itself or to get on some kind of path. Although I had cash in reserve, it wasn’t 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.

Still, I’d rather have the cash than the theory.

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 and fortunately, despite what would prove to be a loss for the day, it wasn’t very bad at all, especially since there was the opportunity to execute some rollover trades.

One of those, for Las Vegas Sands, was done specifically to have a chance at getting next week’s dividend. Despite shares having been above their strike price the rollover to two weeks away and at a strike level an additional $0.50 higher,
opened the possibility of either getting the dividend or being assigned a week early, but having received two week’s worth of premium, in addition to the $0.50 higher strike price.

In shares that really were hit unduly hard because of adverse news from Macao, I may even want to add more of those shares next week, because there may also be capital gains to be made in the trade, in addition to premiums and dividends.

But as the week winds down 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 monthly cycle 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 now see how tomorrow will go, after receiving a little bit of a reprieve today. With now fewer positions set to expire this week and not being in the more dire position that looked to be developing in the morning, it’s easier to look forward to that final day of trading.

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.

Daily Market Update – September 10, 2014 (Close)

After what seemed to be a fairly predictable Apple event yesterday nothing had gotten a boost of any sort.

Apple itself fluctuated between a gain and a loss and the market accelerated losses, making it the second consecutive day of losses, putting more distance between September and this past August.

With the event now over there’s really nothing left for the rest of the week of any great importance.

Today became reasonably important, however, as after two days of losses and a small spike in volatility, a third day of the same would start getting everyone to begin their whispers about a correction.

Over the past two years there has been some sort of a mini-correction and spike in volatility every two months or so, the last of which was in July and ended in early August. During that time most everyone was pointing toward the 30% spike in volatility, having taken notice of the volatility late in the process of that most recent mini-correction. By the time volatility became noticed and became a topic it was already time for the correction to end, and it did in a very sudden manner.

This morning was giving indications of a higher open, but a very reluctant one, as futures are actually pointing lower, but are still above the fair value.

That means no one was terribly enthused as trading was getting ready to begin.

That described yesterday, as well. Despite some falling prices there really wasn’t anything that gave the message that some bargains were in the process of being created. It was difficult to get enthused about the price activity yesterday which deteriorated as the afternoon wore on, especially in the final two hours of trading.

That kind of deterioration going into the close is rarely a reason to get excited by the next morning’s opening and that’s precisely where I began the day.

It was also a Wednesday, which tends to be a slow day anyway, as the new weekly options for those without expanded weekly options aren’t yet available. That generally immediately cuts the available new position opportunities especially in a low volatility and low premium environment.

However, since next week is the end of the monthly cycle that also means that any position can be rolled over to next week even today.

So while I didn’t expect much action or trading today, any kind of strength that may develop throughout the rest of the week may be an opportunity to secure positions for rollover, if assignment doesn’t seem as likely. Given the weakness thus far this week, until the Apple inspired turnaround  in the afternoon, the hope of finding new call sale opportunities had been waning, so attention has to focus on the ability to create income through rollovers and hopefully replenish cash through some assignments.

Either of those goals would be compromised by further market weakness over the next 2 days, but I’m hopeful for some kind of stability. Whereas the weaknes
s going into yesterday’s close wasn’t encouraging, the strength heading into today’s final two hours was encouraging, by contrast.  In that event I would rather commit to an early rollover, even if those shares move higher by the end of the week and could have been assigned, instead.

It’s generally better to have the cash in hand than to devote too much energy to hoping that favorable events will happen.

But I still hope they will.

Daily Market Update – September 10, 2014 (9:00 AM)

After what seemed to be a fairly predictable Apple event yesterday nothing had gotten a boost of any sort.

Apple itself fluctuated between a gain and a loss and the market accelerated losses, making it the second consecutive day of losses, putting more distance between September and this past August.

With the event now over there’s really nothing left for the rest of the week of any great importance.

Today becomes reasonably important, however, as after two days of losses and a small spike in volatility, a third day of the same would start getting everyone to begin their whispers about a correction.

Over the past two years there has been some sort of a mini-correction and spike in volatility every two months or so, the last of which was in July and ended in early August. During that time most everyone was pointing toward the 30% spike in volatility, having taken notice of the volatility late in the process of that most recent mini-correction. By the time volatility became noticed and became a topic it was already time for the correction to end, and it did in a very sudden manner.

This morning is giving indications of a higher open, but a very reluctant one, as futures are actually pointing lower, but are still above the fair value.

That means no one is terribly enthused as trading is getting ready to begin.

That describes yesterday, as well. Despite some falling prices there really wasn’t anything that gave the message that some bargains were in the process of being created. It was difficult to get enthused about the price activity yesterday which deteriorated as the afternoon wore on, especially in the final two hours of trading.

That kind of deterioration going into the close is rarely a reason to get excited by the next morning’s opening and that’s precisely where I begin the day.

Given that it’s also a Wednesday, which tends to be a slow day anyway, as the new weekly options for those without expanded weekly options aren’t yet available. That generally immediately cuts the available new position opportunities especially in a low volatility and low premium environment.

However, since next week is the end of the monthly cycle that also means that any position can be rolled over to next week even today.

So while I don’t expect much action or trading today, any kind of strength that may develop may be an opportunity to secure positions for rollover, if assignment doesn’t seem as likely. Given the weakness thus far this week the hope of finding new call sale opportunities is waning, so attention has to focus on the ability to create income through rollovers and hopefully replenish cash through some assignments.

EIther of those goals would be compromised by further market weakness over the next 3 days, so I’m hopeful for some kind of stability. In that event I would rather commit to an early 
rollover, even if those shares move higher by the end of the week and could have been assigned, instead.

It’s generally better to have the cash in hand than to devote too much energy to hoping that favorable events will happen.

But I still hope they will.

Daily Market Update – September 9, 2014 (Close)

In a week when there’s not much planned economic news and where it appears as if the geo-political news may be muted, today was destined to stand out.

Instead of anything really important, the driver of news was the Apple’s product releases presentation that begans early in the afternoon.

There was a time, just a few years ago that the market’s daily performance was essentially determined by Apple’s performance. You could have done away with the other 499 companies and just tracked Apple’s share performance day in and day out and you would have had a great idea of how the market performed that day, at least in direction.

Those days are gone, so it’s not too likely that anything coming out of today’s meeting will have much of an impact on the rest of the market. Too bad, because the market could have used some help today, especially as it deteriorated in the afternoon, while Apple was at least able to hold its ground, having alternated between disappointment and satisfaction.

After a mildly negative day yesterday, but without any real sign of  building sentiment, the pre-open trading looked like it would be another day beginning with some degree of indecision. There was really no reason to believe that it would crumble as the day wore on, but I never got a comfortable feeling at any point during the day to part with any money.

After a reasonably busy week of trading last week, I  think that yesterday’s activity in adding new positions may mark the week’s high point, at a time when my cash reserves have gone to a recent low point. In the face of any continuing indecision I would prefer to keep some funds back for the ability to be an opportunist and wouldn’t bemoan missing any unforeseen sudden spike higher in the broader market, as long as it also takes me along for the ride and also brings some of this week’s expiring positions in better shape to either get rolled over or be assigned, preferably the latter.Additionally, going along for that kind of a ride would also hopefully offer an opportunity to be opportunistic with other members of the portfolio that have been waiting for their chance to contribute to the generation of income.

However, today didn’t go that way. So while having already expected a slow day today, like many others I still kept an eye on potential opportunities that may have popped up, but fell into the trap of getting sucked in by the Apple event, even watching the watch the countdown clock that was featured on CNBC.

While not particularly interested in Apple at the moment and not too excited about the hype, there’s also the realization that there can be some kind of trickle down. The Apple event can then bring derivative events, as people smash open the products to determine what’s inside and try to figure out who the derivative winners and losers are, which can include hardware and software makers and this time around, possibly even a service provider, such as PayPal, eBay’s very profitable division.

While I’m not a very active consumer, I did hope that Apple introduced some kind of new product that gets people excited and digging into their pockets, although it’s not really clear that if they do it would be with anything other than money that may have otherwise been earmarked
elsewhere, as opposed to introducing additional spending into the system.

After it was all said and done I’m really not sure what they introduced that’s new and innovative. As far as their much anticipated “apple Watch” goes, it won’t be hitting the stores until 2015, so any thoughts of a “must have” item in time for Christmas is off the books and won’t be offering too much of a boost this year.

Just as with the stock market and all of the talk about money on the sidelines that may drive shares higher, the retail market needs the same thing as a spur and that could be the sort of thing that would drive sideline investment back to work.

It’s now been a while since I’ve been fully invested and would love to be so, once again. Who knows, maybe tomorrow begins that day, now that today didn’t. But as far as seeing the retail sector expand as all of those people getting back to work start getting back on track for the discretionary spending that really drives everything and fuels this market even higher?

Thanks for nothing, Apple.

Daily Market Update – September 9, 2014 (8:15 AM)

In a week when there’s not much planned economic news and where it appears as if the geo-political news may be muted, today will stand out.

Instead of anything really important, the driver of news will be coming out of Apple’s product releases presentation that begins early in the afternoon.

There was a time, just a few years ago that the market’s daily performance was essentially determined by Apple’s performance. You could have done away with the other 499 companies and just tracked Apple’s share performance day in and day out and you would have had a great idea of how the market performed that day, at least in direction.

Those days are gone, so it’s not too likely that anything coming out of today’s meeting will have much of an impact on the rest of the market.

After a mildly negative day yesterday, but without any real sign of  building sentiment, the pre-open trading looks like it will be another day beginning with some degree of indecision.

After a reasonably busy week of trading last week, I  think that yesterday’s activity in adding new positions may mark the week’s high point, at a time when my cash reserves have gone to a recent low point. In the face of any continuing indecision I would prefer to keep some funds back for the ability to be an opportunist and wouldn’t bemoan missing any unforeseen sudden spike higher in the broader market, as long as it also takes me along for the ride and also brings some of this week’s expiring positions in better shape to either get rolled over or be assigned, preferably the latter.

Additionally, going along for that kind of a ride would also hopefully offer an opportunity to be opportunistic with other members of the portfolio that have been waiting for their chance to contribute to the generation of income.

So while expecting a slow day today, like many others I’ll still be keeping an eye on potential opportunities that may stay pop up, but will probably also fall into the trap of getting sucked in by the Apple event and will watch the countdown clock that is being featured on CNBC.

Of course that event then brings derivative events, as people smash open the products to determine what’s inside and try to figure out who the derivative winners and losers are, which can include hardware and software makers and this time around, possibly even a service provider, such as PayPal, eBay’s very profitable division.

While I’m not a very active consumer, I do hope that Apple introduces some kind of new product that gets people excited and digging into their pockets, although it’s not really clear that if they do it would be with anything other than money that may have otherwise been earmarked elsewhere, as opposed to introducing additional spending into the system.

Just as with the stock market and all of the talk about money on the sidelines that may drive shares higher, the retail market needs the same thing as a spur and that could be the sort of thing that would drive sideline investment back to work.

It’s now be
en a while since I’ve been fully invested and would love to be so, once again. Who knows, maybe today begins that day when the retail sector expands as all of those people getting back to work start getting back on track for the discretionary spending that really drives everything and can be just the fuel to get this market even higher.

If that’s the case, thank you Apple.

Daily Market Update – September 8, 2014 (Close)

After another week of setting records this week is one that doesn’t really have much in the way of scheduled news events.

In fact, if you didn’t realize it to be otherwise, you would have thought that this was the last week of summer, with no one staying around to do their jobs. In addition to a very, very light week of planned economic reports and releases, there’s only a single Federal Reserve Governor giving prepared remarks for the week, whereas most weeks it’ss about 5 or so.

Lately, however, the market has liked these vacuums and insulation from the world of real economics and data. It has just moved higher and higher, especially when there’s been nothing acting as resistance.

During these periods of quiet there hasn’t been a need to decide whether good news is bad or bad news is good. Instead, no news has been the best news. No thought is necessary when there are no inputs coming and even autopilot looks like a genius.

What it hasn’t liked has been external events, but lately it has turned a deaf ear to what has been going on around the world, not really letting much get in the way of its continued climb higher after a very brief and shallow downturn in July.

After a bit of a buying spree last week and the spending down of cash reserves that saw only 3 positions get assigned, I may be in a more cash preserving mode as this week begins. Unlike last week when the week started with only a single position set to expire that week, this week is much more broadly populated with expiring positions.

The same is true, and even more so, for next week’s monthly expiration.

With volatility continuing at such low levels that means that the likelihood is that for any new positions opened this week the focus will be on weekly expirations, as much as I would like to expand the holdings on the basis of expiration date, but we all know how those plans go, sometimes.

As has been the case for a while I would gladly trade off some new positions for the opportunity to find cover for existing positions and the ability to put those back to work. Not only could that preserve cash it could share in any potential market climb while not adding to the risk that might be associated with any market decline.

Unfortunately, that’s been more of a dream than a reality, but you can’t blame someone for continuing to dream. Today, though, wasn’t the kind of day that was meant to see dreams come true.

With no real direction noted in the pre-open, as has been the case for a while, I was very likely wait to see if there was any prevailing tone being established before committing much in the way of reserves, but some early weakness dictated otherwise and in hindsight, I wish I had not waited at all.

Although I’d especially like to add some technology, healthcare or finance in order to better re-establish some diversification, I wasn’t likely to just wait for one of those specific opportunities to come along, instead using
the “best athlete” model and going for that opportunity, if it appears. So instead, it turned out to be more energy and more consumer sector positions added today.

Hopefully the week will be one of calmness inside and outside of markets, allowing some of the week’s positions to be assigned and replenishing cash, with an eye toward getting ready for the cycle’s end and beyond.

Today was nothing more than a step to get us one day closer to this Friday and the next and with nothing else very memorable or consequential. However, I’m not certain that I will be very inclined to add too much more in the way of new positions unless feeling significant certainty that a fair portion of this week’s expiring positions are likely to be assigned or rolled over.

Unfortunately, today’s market didn’t do much to encourage that feeling of confidence.

Daily Market Update – September 8, 2014 (9:00 AM)

After another week of setting records this week is one that doesn’t really have much in the way of scheduled news events.

In fact, if you didn’t realize it to be otherwise, you would have thought that this was the last week of summer, with no one staying around to do their jobs. In addition to a very, very light week of planned economic reports and releases, there’s only a single Federal Reserve Governor giving prepared remarks for the week, whereas most weeks is about 5 or so.

Lately, however, the market has liked these vacuums and insulation from the world of real economics and data. It has just moved higher and higher, especially when there’s been nothing acting as resistance.

During these periods of quiet there hasn’t been a need to decide whether good news is bad or bad news is good. Instead, no news has been the best news. No thought is necessary when there are no inputs coming and even autopilot looks like a genius.

What it hasn’t liked has been external events, but lately it has turned a deaf ear to what has been going on around the world, not really letting much get in the way of its continued climb higher after a very brief and shallow downturn in July.

After a bit of a buying spree last week and the spending down of cash reserves that saw only 3 positions get assigned, I may be in a more cash preserving mode as this week begins. Unlike last week when the week started with only a single position set to expire that week, this week is much more broadly populated with expiring positions.

The same is true, and even more so, for next week’s monthly expiration.

With volatility continuing at such low levels that means that the likelihood is that if any new positions are opened this week the focus will be on weekly expirations, as much as I would like to expand the holdings on the basis of expiration date.

As has been the case for a while I would gladly trade off some new positions for the opportunity to find cover for existing positions and the ability to put those back to work. Not only could that preserve cash it could share in any potential market climb while not adding to the risk that might be associated with any market decline.

Unfortunately, that’s been more of a dream than a reality, but you can’t blame someone for continuing to dream.

With no real direction noted in the pre-open, as has been the case for a while, I will very likely wait to see if there is any prevailing tone being established before committing much in the way of reserves. Although I’d especially like to add some technology, healthcare or finance in order to better re-establish some diversification, I probably won’t just wait for one of those specific opportunities to come along, instead using the “best athlete” model and going for that opportunity, if it appears.

Hopefully the week will be one of calmness inside and outside of markets, allowing some of the week’s positions to be assigned and replenishing cash, with an eye toward getting ready for the cycle’s end and beyond.