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Daily Market Update – September 14, 2015 (8:30 AM)
Last week at least had the good news of our markets disassociating themselves from China. Even if the Shanghai market goes higher, it’s probably a good thing if we go our own and independent ways. This morning, as both Shanghai and Japan are sharply lower, our own market is doing nothing as it prepares to begin the week. That’s not too surprising considering that this is the week that many expect the FOMC Statement release to finally announce an interest rate increase for the first time in nearly a decade. In all likelihood, at this point there are only two things that would make the market take any news badly. The first is if no interest rate increase is announced. Markets seem to have finally matured enough to understand that a rate hike is only a reflection of all of the good and future good things that are developing in our economy and are ready to move on instead of being paralyzed with fear that a rate hike would choke off anemic growth. The second thing, though, is the very unlikely event of a rate hile larger than has been widely expected. That means a 0.5% hike, or even worse, a full 1% hike. That would likley be met with crazed selling. This week’s FOMC Statement release comes at a fairly inopportune time, regardless of what it may hold. It will be on Thursday, instead of its usual Wednesday afternoon. That gives one less day for markets to recover in the event of a quick reaction to the downside. Additionally, this is the end of the September 2015 option cycle and as is usually the case, that means more than the typical number of expiring positions that could be subject to becoming even less likely to be assigned. This time, however, that’s not too much of a concern as many of those expiring contracts were written on positions that were already well out of the monet at the time and not really expected to be in contention for assignment. My expectation this week, regardless of the FOMC Statement was that most of those positions would expire and that we would look for any new opportunity to simply sell calls on them at the first sign of any price strength, trying to take advantage of some higher volatility and getting whatever premium possible while in waiting mode for a price rebound. This week, with really very little cash and lots of uncertainty about what will be happening, I don’t epect to be adding new positions, but you never know what mood will strike. I hope, just as with last week that there is some opportunity to sell new call contracts or get some rollovers achieved, as the number of ex-dividend positions this week is much reduced from the past 2 weeks and it would be nice to get some more income flowing. With markets set to open the week flat I don’t know if any of those opportunities will come today, but if the past few weeks have been anything, they’ve been very unpredictable. Even on those mornings that the futures were pointing toward sharp moves, sadly especially when they were higher, those moves often didn’t survive the day. For now, all that matters is for portfolios to survive the day and hopefully add some additional income to do a bit better than simply surviving. |
