Daily Market Update – June 13, 2016 (Close)
The week looked like it may get off to a weaker start as we awaited Wednesday’s FOMC Statement release.
There’s not likely to be any movement on interest rates coming out of that meeting, although lots of attention is also paid to any slight nuances that may come from changed wording.
More importantly, though, may be the tone taken by Chairman Yellen during her press conference later on Wednesday afternoon.
While we awaited those events, the Asian markets were down 3% overnight and oil was down again this morning, as it had difficulty with the $50 level, just as the DJIA and S&P 500 had difficulty with the 18000 and 2100 levels, respectively.
What became very clear today was that oil was in charge, as the market followed it lockstep throughout the day, resulting in a wide trading range.
WIth a few positions set to expire this week, I was just hoping to be able to put them to work if they’re not assigned.
I was surprised to make a rollover trade today, but I decided to keep the Goldminer ETF position set to expire this week, rather than taking a likely assignment. When thinking about it, the risk was that over the next 5 weeks it would have to fall about 16% to become out of the money. In return for that risk I could get an additional 2% premium.
There was a time that I would scoff at 2% for a 5 week period, but these days?
I’ll take it.
For some of those remaining positions assignment seems unlikely, so it may be back to looking at some longer term time frames in an effort to buy time and get paid for doing so.
In the event that Wednesday becomes a non-event, oil may again become prominent in our markets and if the association continues, it wouldn’t be too surprising to see oil take a break, even as summer demand may be increasing.
In the meantime, with each passing day over the next week or so, there can also be lots more attention being paid to Great Britain’s upcoming vote on its EU membership.
There’s lots of hyperbole on that topic and it’s anyone’s guess what that might due to international markets and our own.
With just a little bit of discretionary cash and some uncertainty this week, I wasn’t entirely convinced that I’d be opening any new positions this week, although I was prepared to add an oil position, despite being over-invested in that sector.
I made that purchase, maybe because I didn’t want to go three consecutive weeks without a new position.
That’s a bad reason.
A better reason was, that even if wrong about the near term direction of its movement, the option premium is so large, and the option market generally so liquid, that there may not be too much difficulty riding out any short term storm.
Otherwise, this may be another week of being a passive bystander and maybe just hoping that asset value climbs as the market tries to figure out what is really important.