Daily Market Update – November 17, 2014

Daily Market Update – November 17, 2014 (8:45 AM)

Lately the FOMC Statement Release has been the market’s friend. That’s been the case even before the Federal Reserve announced its intention to begin tapering of the most recent Quantitative Easing, about this time last year. It definitely hasn’t changed since Janet Yellen assumed leadership.

There aren’t too many things that are predictable, but lately the market’s move higher to close the week of an FOMC statement has been a pretty good bet, although the ferocity of the moves have been getting less and less.

Because of that pattern the occurrence of the end of a monthly option cycle, which tends to be more active than when weekly cycles end, a couple of days after the FOMC Statement haven’t been very unnerving.

That wasn’t always the case, though.

In the past few years I can recall a number of occasions when the smug belief that positions would be assigned or easily rolled over quickly evaporated as the response to the FOMC was decidedly negative and stayed that way to end the week.

Because of those few times I’m always aware of what could happen and frequently think about trying to execute rollovers, where possible, before the Wednesday afternoon meeting, but rarely ever actually get those trades done.

This week will probably be no different.

However, with 11 lots set to expire this week and relatively few in future weeks due to the low premiums, I never like seeing an over-dependence on a single week. That’s just too much risk and too much at stake on the basis of a report that will take about 10 seconds to summarize and immediately evokes responses before thinking can take place.

Other than the FOMC and some relatively inconsequential earnings reports, but from companies that usually make the process interesting, this week has relatively little to cause much movement in either direction.

However, the FOMC is enough news for one week.

As with most weeks when there is an FOMC Statement release, especially not accompanied by a press conference, which tends to further buoy markets, I’m not very excited about adding new positions in advance of the announcement.

If doing so I’d like to look at the possibility of using some forward week expirations, rather than adding to the exposure this week. Of course that introduces
the problem of not getting very much additional premium for the additional time, as the volatility is just so low.

With some additional cash available for investment this week it’s always hard to resist the temptation to pick something up. The morning’s futures trading looks as if it may be continuing some of last week’s listless trading, which nonetheless offered some opportunities for purchases, new call sales and rollovers, so I wouldn’t necessarily mind a repeat of that scenario.

Still, despite the low volatility and the prospect of it moving even lower if the market goes higher, I would prefer some incremental move in that direction this week, if only to be able to secure some additional assignments and add to the cash pile.

For now, as has become the case for a few months, I will sit back and watch how the market is set to begin the week and would be especially happy to put some stragglers to work even if not adding any new positions.