Daily Market Update – August 11, 2016



Daily Market Update – August 11, 2016 (7:30 AM)

This morning’s futures, although only mildly higher, is already showing more of a move than the cumulative absolute value moves in the 3 previous days of this week.

That may become an even greater move as retailer earnings begin to get released this morning and continue after the day’s close to trading.

Those reports will also continue through next week.

After we receive reports from 3 key national retailers today, we also get the official retail Sales Report tomorrow morning.

Strong earnings today, coupled with strong guidance would likely be more meaningful to investors than tomorrow’s official numbers.

Even if earnings aren’t wonderful, if those retailers start to paint a brighter future for the quarters ahead, that guidance will likely be far more important than anything the government may have to report tomorrow, that will only be backward looking.

Strong guidance would give investors the belief that the FOMC is going to have more of a reason to raise interest rates sooner, rather than needing to wait until December, as is increasingly the consensus.

While yesterday was another in a series of flat days, wouldn’t you know it, the one position that did rally was the one going ex-dividend today?

I did get the opportunity to roll over that position for another month. The goal in that transaction was to get at least a premium as large as the dividend, in the event that the position would still be assigned early.

That was achieved and a bit more, as well, as the additional ROI for the rollover was about 1.3% versus an almost 1% quarterly dividend.

I actually would mind neither the prospect of an early assignment, which doesn’t appear to be the case so far this morning or keeping the position alive and just adding to its cumulative ROI, even as the underlying security hasn’t gone very far. 

In this case, if the position does get assigned next month, the 10 month holding will yield an ROI of almost 19%, half of which is from dividends and premiums, while the comparable S&P 500 move was 3.6%, exclusive of dividends.

That’s the way it’s supposed to work, but those opportunities have been rare as the goal had been for shorter term holding periods. However, as markets have increasingly moved the strategy toward longer term holdings, the dual sources of income, dividends and premiums, have become increasingly welcome news.

With the one expiring position for the week that happens to be a short put, I do want to take assignment of shares as the position is ex-dividend on Monday.

Hopefully, if that does happen, there will be a quick and easy opportunity to sell some calls and then exit that new position or even continue rolling those calls over, as had been the case with some other recent new positions, whether short calls or puts.