Category Archives: Daily Market Update

Daily Market Update – August 8, 2014 (8:30 AM)

The Week in Review will be posted by 6 PM and the Weekend Update will be posted by Noon on Sunday.

Today’s possible outcomes include:

Assignments: EBAY (52.50), GPS ($40)

Rollovers: EBAY ($53.50), GPS ($42)

Expirations:  C, CHK, LVS, PFE, WFM

Trades, if any, will be attempted to be made prior to 3:30 PM EDT

Daily Market Update – August 7, 2014 (Close)

Following yesterday’s flat trading and flat finish, the morning was awaiting word regarding the ECB’s refinance rate.

With that remaining unchanged, which came as no surprise, the pre-market just continued along the same flat line as it then awaited some word from the ECB president.

In the past he has had a way of moving markets, exactly the same way that the Chairman of the Federal Reserve can move markets, so while the futures were continuing to go no where special after the rate announcement, they could easily have quickly changed direction about 30 minutes later as Draghi began to speak.

The difference has been that when Draghi has spoken his words have largely been the kind that have reassured and rallied markets.

Today he didn’t, nor did he say anything that created any sense of confidence or any sense of anything.

That alone was enough to disappoint those looking for anything to get out of the current state of stupor and passivity.

Even though we’re not even down 4% from the S&P 500’s high levels, as the morning was set to begin, we could use some of that kind of rally, especially heading into the close of the week when it would especially nice to see some likely assignments.

Unfortunately, today wasn’t going to be the day for that. Even though the market started on a positive note once the bell rang, it fairly quickly deteriorated and really had nothing of a positive tone as the day worked toward the close.

Unlike the past few weeks in which trading started fairly slowly and then picked up steam in the final two days resulting in a nice combination of rollovers, new covers and assignments, I just didn’t see a repeat of that pattern in the making for this week and have little reason to expect that Friday will be the day to rescue all.

While flat and down markets are still my favorite environment, it’s a lot better when the rollovers and new covered positions can be established. Even if the stocks are going no where themselves, at least their derivative cousins can do something of value.

So far, this week?

Not so much.

Although there aren’t too many positions set to expire this week, as compared to some recent weeks past, there is still at least some opportunity to see some assigned and some rolled over, as long as the last two days don’t really do anything terribly stupid.

Today didn’t really help in that regard, although early in the session there was at least some opportunity for one rollover and one newly covered position.

While the past few weeks were able to withstand some weak trading days to end the week and still see those revenue producing trades accomplished, this week doesn’t have very much of a cushion, so it would have be en nice to see just a quiet end to a week of headless wandering and then have the chance to start anew next week.

Instead, today dug the hole a little bit deeper.

However, despite that apparently sounding negativity, and certainly without wanting to jinx anything, as the market does trade in a flat manner or even trading downward, the portfolio path is again trending toward out-performance as compared to the S&P 500 as today’s session was getting ready to start.

Without having crunched the numbers at the close, I’m hoping that’s still the case.

But that kind of out-performance isn’t unusual as the premiums are typically the factor that provides the additional performance,

However, while out-performance is always the goal, it’s nice to also couple that with actual increasing portfolio value, as well.

Hopefully those will both continue for the final day of the week although some opportunity to make the trades would really help and make hope unnecessary.

Daily Market Update – August 7, 2014 (8:30 AM)

Following yesterday’s flat trading and flat finish, the morning was awaiting word regarding the ECB’s refinance rate.

With that remaining unchanged, which came as no surprise, the market just continued along the same flat line as it then awaited some word from the ECB president.

In the past he has had a way of moving markets, exactly the same way that the Chairman of the Federal Reserve can move markets, so while the futures were continuing to go no where special after the rate announcement, they could easily have quickly changed direction about 30 minutes later as Draghi began to speak.

The difference has been that when Draghi has spoken his words have largely been the kind that have reassured and rallied markets.

Even though we’re not even down 4% from the S&P 500’s high levels, we could use some of that kind of rally, especially heading into the close of the week when it would especially nice to see some likely assignments.

Unlike the past few weeks in which trading started fairly slowly and then picked up steam in the final two days resulting in a nice combination of rollovers, new covers and assignments, I just don’t see a repeat of that pattern this week.

While flat and down markets are still my favorite environment, it’s a lot better when the rollovers and new covered positions can be established. Even if the stocks are going no where themselves, at least their derivative cousins can do something of value.

So far, this week?

Not so much.

Although there aren’t too many positions set to expire this week, as compared to some recent weeks past, there is still at least some opportunity to see some assigned and some rolled over, as long as the last two days don’t really do anything terribly stupid.

While the past few weeks were able to withstand some week trading days to end the weeks and still see those revenue producing trades accomplished, this week doesn’t have very much of a cushion, so it would be nice to see just a quiet end to a week of headless wandering and then have the chance to start anew next week.

However, despite that apparently sounding negativity, and certainly without wanting to jinx anything, as the market does trade in a flat manner or even trading downward, the portfolio path is again trending toward out-performance as compared to the S&P 500.

That’s not unusual as the premiums are typically the factor that provides the additional performance,

However, while out-performance is always the goal, it’s nice to also couple that with actual increasing portfolio value, as well.

Hopefully those will both continue for the next two days although some opportunity to make the trades would really help and make hope unnecessary.

Daily Market Update – August 6, 2014 (Close)

With another morning getting ready to get off to a negative start, there were some significant events that could have been causes for concern today.

The first two were really pretty unusual. Both 21st Century Fox and Sprint had withdrawn their buyout bids for Time Warner and T-Mobile, respectively.

There can certainly be a myriad of reasons for having done so, but it just doesn’t happen that often. Pfizer did so recently, but that was very complex, including a reluctant target, British regulatory factors and potential backlash from its planned tax inversion.

Usually once a company sets its sights on another company there’s a battle ahead if the target expresses reluctance. You don’t often see the suitor just walking away.

In the case of the Time Warner deal it’s entirely possible that Rupert Murdoch isn’t interested in what could have been a prolonged battle. After all, how much longer would it then take for him to even see benefits from such a deal? All the money in the world may not buy you time when “natural causes” is staring at you.

In the case of T-Mobile, Sprint may have realized that while with a merger they would have gotten the talents of John Legere, on the negative side they would have gotten John Legere.

That may have been enough.

Much more ominous would be the realization by both potential suitors that their targets were already fully priced. It can’t be entirely lost on people that Murdoch’s previous large acquisitions have come at precise market tops.

Then there’s the matter of Italy slipping into recession. Although it’s not as if they have had the most dynamically growing economy over the past 25 years,  a recession is good for no one.

Meanwhile, Germany has announced a cancelation of a defense deal with Russia and Russia has blocked sales of some Brown-Forman products, such as “Jack Daniels,” due to “sub-standard quality.”

So that was the backdrop for this morning, as we came off another large loss that followed what may have been some illusory gains on Monday.

Yesterday’s decline saw some disagreement over the root cause.

There were those that said the decline was due to comments from the Polish Prime Minister regarding the prospects for an imminent Russian invasion of Ukraine.

Others believed that the decline was due to technical factors with the S&P 500 breaching support at 1926 and immediately dropping 6 points as algorithms started selling programs.

Of course, no one thought that maybe the interplay of the two was at hand, because that would be giving credence to others and other ideas.

The hope was that today might ignore the early signs that pointed toward a negative day  and look at the bright side of lower prices as it has done on so many previous occasions over the past 20 months.

Well, one for two isn’t bad.

At least the early drop was largely ignored, although there were some really large droppers, today. But as far as taking advantage of some of the even further depressed prices, neither I, nor anyone else seemed to be in that sort of mood.

Tomorrow? Maybe, but first we have to see what the ECB does and we will likely take some cue from them at least to start the morning.

Daily Market Update – August 6, 2014 (8:30 AM)

With another morning getting ready to get off to a negative start, there are some significant events that may be cause for concern today.

The first two are really pretty unusual. Both 21st Century Fox and Sprint have withdrawn their buyout bids for Time Warner and T-Mobile, respectively.

There can certainly be a myriad of reasons for having done so, but it just doesn’t happen that often. Pfizer did so recently, but that was very complex, including a reluctant target, British regulatory factors and potential backlash from its planned tax inversion.

Usually once a company sets its sights on another company there’s a battle ahead if the target expresses reluctance. You don’t often see the suitor just walking away.

In the case of the Time Warner deal it’s entirely possible that Rupert Murdoch isn’t interested in what could have been a prolonged battle. After all, how much longer would it then take for him to even see benefits from such a deal? All the money in the world may not buy you time when “natural causes” is staring at you.

In the case of T-Mobile, Sprint may have realized that while with a merger they would have gotten the talents of John Legere, on the negative side they would have gotten John Legere.

That may have been enough.

Much more ominous would be the realization by both potential suitors that their targets were already fully priced. It can’t be entirely lost on people that Murdoch’s previous large acquisitions have come at precise market tops.

Then there’s the matter of Italy slipping into recession. Although it’s not as if they have had the most dynamically growing economy over the past 25 years,  a recession is good for no one.

Meanwhile, Germany has announced a cancelation of a defense deal with Russia and Russia has blocked sales of some Brown-Forman products, such as “Jack Daniels,” due to “sub-standard quality.”

So that’s the backdrop for this morning, as we come off another large loss that followed what may have been some illusory gains on Monday.

Yesterday’s decline saw some disagreement over the root cause.

There were those that said the decline was due to comments from the Polish Prime Minister regarding the prospects for an imminent Russian invasion of Ukraine.

Others believed that the decline was due to technical factors with the S&P 500 breaching support at 1926 and immediately dropping 6 points as algorithms started selling programs.

Of course, no one thought that maybe the interplay of the two was at hand, because that would be giving credence to others and other ideas.

Hopefully today will ignore the early signs that point toward a negative day  and look at the bright side of lower prices as it has done on so many previous occasions over the past 20 months.

Daily Market Update – August 5, 2014 (Close)

This is possibly going to be the slowest news week of the year, at least as far as planned economic news goes.

That may be a nice change from the previous week when along with all of the unscheduled news we hit the peak in earnings reports and had an FOMC statement and Employment Situation Report to round things out.

I’m tired from even typing all of that out.

As the week will come to its close hopefully I’ll be in a position to also say that it was nice, for a change, to have started a week as was done this week. Coming off last Thursday and Friday’s sell-offs it was relatively easy to not be very hesitant in establishing some new positions to begin the week.

It seems like an eternity ago, but that used to be a fairly regular pattern with some weeks having as many as 10 new purchases and often little else for the rest of the week until Thursday or Friday.

Lately, though, the dynamic has been changed as bargains are harder to find. But the dynamic has also been changed by the increasing availability of expanded weekly options. That has meant that while a stock with a weekly option might not look so appealing for purchase and call sale on a Wednesday, the same stock with an expanded weekly option might look good with an expanded option.

Too bad that the forward week premiums have been so low, though.

While part of me would love to see that volatility continue rising, especially since it does so at a multiple to the market, there is also the realization that the generation of increased premium income comes at a cost. That is the fact that the market generally has to be in a decline in order to drive up the volatility.

Today turned out to be another good example of that as the market more than erased yesterday’s bounce back and more than erased the drop in the Volatility Index, as well.

I guess that’s what they mean by “bittersweet,” but if you’re not the kind that frets too much about the illusory bottom line then the reality of the income offsets the illusory decreases that typically work their way back.

Watching this morning’s market deteriorate somewhat from a mildly lower level in the early futures trading I don’t mind seeing some trading days that will help to form some kind of a resting phase for the market, even if that phase is lower. However, today was a bit too much,

With a number of trades already made for the week I wouldn’t have said “no” to any other potential new position opportunities, but would have been happy with those already made, especially if those other income producing trades could be made during the rest of the week. As it would turn out there were more opportunities today, but just as suddenly I wasn’t so happy now about the trades yesterday and the appearance of new opportunities may themselves be illusory as the market isn’t necessarily on firm ground.

Since my hope had been for some chance to make some opening call position trades that would have required some market stability or strength, or at least strength in individual positions going against the market grain. So in addition to the bittersweet feeling, there was also a hope for conflicting outcomes and that certainly wasn’t the case today.

Or you could just take it one trade at a time and let the other stuff work itself out.

I think that’s what I’ll be doing this week and take a break from trying to over-think that which can’t even really be understood in hindsight.

Daily Market Update – August 5, 2014 (8:30 AM)

This is possibly going to be the slowest news week of the year, at least as far as planned economic news goes.

That may be a nice change from the previous week when along with all of the unscheduled news we hit the peak in earnings reports and had an FOMC statement and Employment Situation Report to round things out.

I’m tired from even typing all of that out.

AS the week will come to its close hopefully I’ll be in a position to also say that it was nice, for a change, to have started a week as was done this week. Coming off last Thursday and Friday’s sell-offs it was relatively easy to not be very hesitant in establishing some new positions to begin the week.

It seems like an eternity ago, but that used to be a fairly regular pattern with some weeks having as many as 10 new purchases and often little else for the rest of the week until Thursday or Friday.

Lately, though, the dynamic has been changed as bargains are harder to find. But the dynamic has also been changed by the increasing availability of expanded weekly options. That has meant that while a stock with a weekly option might not look so appealing for purchase and call sale on a Wednesday, the same stock with an expanded weekly option might look good with an expanded option.

Too bad that the forward week premiums have been so low, though.

While part of me would love to see that volatility continue rising, especially since it does so at a multiple to the market, there is also the realization that the generation of increased premium income comes at a cost. That is the fact that the market generally has to be in a decline in order to drive up the volatility.

I guess that’s what they mean by “bittersweet,” but if you’re not the kind that frets too much about the illusory bottom line then the reality of the income offsets the illusory decreases that typically work their way back.

Watching this morning’s market deteriorate somewhat from a mildly lower level in the early futures trading I don’t mind seeing some trading days that will help to form some kind of a resting phase for the market, even if that phase is lower.

With a number of trades already made for the week I wouldn’t say “no” to any other potential new position opportunities, but would be happy with those already made, especially if those other income producing trades could be made during the rest of the week.

Of course, that requires some market stability or strength, or at least strength in individual positions going against the market grain. So in addition to the bittersweet feeling, there is also a hope for conflicting outcomes.

Or you could just take it one trade at a time.

I think that’s what I’ll be doing this week and take a break from trying to over-think that which can’t even really be understood in hindsight.

Daily Market Update – August 4, 2014 (Close)

Wow. What a nice surprise to start the week.

It was nice that there was essentially no news over the weekend other than what may have been reasonably expected. Maybe a calm weekend was all that was needed, at least for a day or so worth of aftermath.

Maybe that lack of news meant that there was little reason to have more downward pressure to get this week off to its start after the heavy selling on Thursday and the failed comeback on Friday, but the truth is no one can remotely be confident of what created some market confidence.

As the morning and the week looked to get started there were some mild gains showing up that I was hoping would find themselves persisting as trading opened. I would have been happy if they stayed in the mild range, even if they reverted to mild losses. But even better for a little while it nearly looked as if it might be a triple digit gain.

The week began with some available cash and a few positions set for weekly expiration and approximately an equal number set to expire with next week’s conclusion to the August 2014 cycle.

With some stability I wasn’t adverse to adding some new positions, especially after some of the individual stock declines of last week, although it also wasn’t too likely that I’d get carried away, as I would like to maintain adequate cash for any other surprises.

As it turned out I may ahve spent more today than I anticipated, but I’m still willing to do some more this week.

What will be the interesting thing to see this week is whether there is any strength seen in premiums, especially for forward weeks. That’s really the only benefit of having increased volatility, especially since it stems from market weakness. Today’s market strength, though, caused a substantial drop in volatility, so we may have to wait another day to pass some judgment in that regard.

After the decline of late last week the S&P 500 found itself back to levels not seen since June 3, 2014.

That’s wasn’t very long ago, so in context, either the decline was pretty mild or the climb since June has been pretty torrid and the decline was matching in scope.

Torrid isn’t really an apt description of the last two months, although there certainly have been lots and lots of new record highs, only they came a little bit at a time. So again, going back to context, the drop of the past two trading sessions was really very mild by any standard and so far, gives no indication of being the start of some kind of slippery slope.

What I always like to do when we hit one of these near term lows is to check to see where my portfolio stood on that earlier date as compared to where it stands at the moment.

The expectation should be that your personal fortunes withstood the decline better than the overall market, particularly if your portfolio isn’t highly concentrated in any particular area or stock, although that kind of concentration could also result in significant out-performance if good luck is on your side.

Generally, the more options you sold, particularly near or in the money options, the greater your advantage should have been during a period of market decline.

So as we started this week I was pretty pleased, although I definitely still am displeased about having so many uncovered positions and disappointed that i couldn’t reduce their numbers today.

I don’t mind shares going down in value, but what I do mind is if their not contributing to the accumulation of income or in offsetting their cost basis, however you may prefer.

While I won’t be against adding some more new positions at these levels, my real goal would be to add more covered positions to the list, as has been a goal for quite a while, but has proved to be a very difficult one, especially as the volatility has been so low.

While increasing volatility tends to be seen in a declining market for those that don’t really care too much about paper losses or values that increasing volatility can open up many more opportunities to sell options, especially the out of the money variety.

While most people really don’t want to see a market decline it isn’t necessarily that bad of a prospect as long as it doesn’t become a way of life.

However, since you can never really know what the next day brings, so often the best approach is to straddle all worlds.

For me that means new purchases, perhaps at a lesser level than last week and selling whatever options that can be sold. Even if your stocks can’t appreciate in value during any particular time period there should at least be some incremental income that they can produce while a cold spell is in place.

And if it warms up?

Such a terrible problem to have. At least today can ease our way back into dealing with market gains.

Daily Market Update – August 4, 2014 (8:00 AM)

It was nice that there was essentially no news over the weekend other than what may have been reasonably expected.

That means that there was little reason to have more downward pressure to get this week off to its start after the heavy selling on Thursday and the failed comeback on Friday.

As the morning and the week look to get started there are some mild gains showing up that will hopefully find themselves persisting as trading opens, but I would be happy if they stayed in the mild range, even if they reverted to mild losses.

The week begins with some available cash and a few positions set for weekly expiration and approximately an equal number set to expire with next week’s conclusion to the August 2014 cycle.

With some stability I wouldn’t be adverse to adding some new positions, especially after some of the individual stock declines of last week, although it’s not too likely that I’ll get carried away, as I would like to maintain adequate cash for any other surprises.

What will be the interesting thing to see this week is whether there is any strength seen in premiums, especially for forward weeks. That’s really the only benefit of having increased volatility, especially since it stems from market weakness.

After the decline of late last week the S&P 500 finds itself back to levels not seen since June 3, 2014.

That’s not very long ago, so in context, either the decline was pretty mild or the climb since June has been pretty torrid and the decline was matching in scope.

Torrid isn’t really an apt description of the last two months, although there certainly have been lots and lots of new record highs, only they came a little bit at a time. So again, going back to context, the drop of the past two trading sessions was really very mild by any standard and so far, gives no indication of being the start of some kind of slippery slope.

What I always like to do when we hit one of these near term lows is to check to see where my portfolio stood on that earlier date as compared to where it stands at the moment.

The expectation should be that your personal fortunes withstood the decline better than the overall market, particularly if your portfolio isn’t highly concentrated in any particular area or stock, although that kind of concentration could also result in significant out-performance if good luck is on your side.

Generally, the more options you sold, particularly near or in the money options, the greater your advantage should have been during a period of market decline.

So as we start this week I’m pretty pleased, although I definitely still am displeased about having so many uncovered positions.

I don’t mind shares going down in value, but what I do mind is if their not contributing to the accumulation of income or in offsetting their cost basis, however you may prefer.

While I won’t be against adding some new positions at these levels, my real goal would be to add more covered positions to the list, as has been a goal for quite a while, but has proved to be a very difficult one, especially as the volatility has been so low.

While increasing volatility tends to be seen in a declining market for those that don’t really care too much about paper losses or values that increasing volatility can open up many more opportunities to sell options, especially the out of the money variety.

While most people really don’t want to see a market decline it isn’t necessarily that bad of a prospect as long as it doesn’t become a way of life.

However, since you can never really know what the next day brings, so often the best approach is to straddle all worlds.

For me that will mean new purchases, perhaps at a lesser level than last week and selling whatever options that can be sold. Even if your stocks can’t appreciate in value during any particular time period there should at least be some incremental income that they can produce while a cold spell is in place.

And if it warms up?

Such a terrible problem to have.

Daily Market Update – August 1, 2014 (9:00 AM)

The Week in Review will be posted by 6 PM and the Weekend Update will be posted by Noon on Sunday.

Today’s possible outcomes include the following, although it may be another tumultuous day with some surprises in store. As in some recent weeks I may elect to defer rollovers if the cost of doing so seems too high relative to the reward.

Assignments:  BMY, KSS

Rollovers:  EBAY, GPS

Expirations: BX, DOW,  EBAY, GM, IP, RIG, RIG

Trades, if any, will be attempted to be made prior to 3:30 PM EDT.Had I known yesterday that today would have had no redeeming qualities, I would have stayed in bed.

Daily Market Update – July 31, 2014 (Close)

Had I known yesterday that today would have had no redeeming qualities, I would have stayed in bed.

Any day that comes at the very end of the month and simply wipes out the entire gains for that month is a day best left unfaced.

Whenever I wake up to visions of red on the screen as this morning the first thought that comes to my mind is “what day is it?”

Looking at the prospects of a DJIA opening approximately 100 points lower based on the futures trading the thought occurs that such an open would be far more welcome on a Monday than on a Thursday.

Now that the day’s trading has come to its close, that simple 100 point drop would have been much appreciated, as opposed to how the day came to its end, as we had one of the worst trading days in about 4 months and which left no sector unscathed.

Being a Thursday and nearly the end of the trading week you can understand the simple thought process of wondering what day it is when things are looking bad. How much better is it to wake up on a Monday morning with freshly freed up cash from assignments and to be greeted by falling prices?

Contrast that with wanting to get rid of positions or roll them over and to be greeted by declining prices on a Thursday, or even worse, on a Friday, when there’s no chance of getting a bounce back later in the week..

I know which order I prefer and it’s strongly associated with the concept of “buy low, sell high” or in my case, “buy low, sell somewhere near low, but preferably a little higher and with a dividend, too, if that’s not asking too much.”

When they say “what a difference a day makes,” I doubt that they had stock markets on the mind, but the relative order of daily results can have such a significant impact on outcomes, sometimes for good and sometimes less so.

This morning’s poorly timed news event on everyone’s mind is primarily related to Argentina and how it has perceived its debt obligations and its various class of debt holders.. It’s one thing to be unable to pay back a nation’s debt, but it may be another thing when it’s the eighth time.

With Argentina in technical default of loans after a very protracted legal battle you can understand how the market may take that as a negative signal, although  there’s really no reason to believe that problem goes any further or deeper. The expectation shouldn’t be that it becomes the nidus for a larger and systemic market decline.

Beyond Argentina there are increasing concerns that growing sanctions against Russia will also have adverse impact on a number of corporations, particularly in the energy sector, but there is always the threat of trickle down and growing economic “tit for tat” that take out the innocent, as well. It might come as no surprise if suddenly McDonalds or Coca Cola were to find themselves in the cross hairs of some previously inert regulatory mechanism.

Adding to those bits of international news was some further futures weakening as jobless claims rose in the most recent period.

That’s consistent with the less than expected numbers seen in yesterday’s ADP report and may hold some clue as to what we might expect with tomorrow’s Employment Situation Report.

No one, other than a Republican in a congressional race, really wants to see anything that can be construed as a slowing down of the growth of employment. Most of us would prefer to see growth, especially to confirm the good GDP numbers that were released yesterday, to only transient applause.

So today held some challenges and tomorrow will be a wild card as the non-farm payroll numbers will have their influence one way or another.

That likely means that today, which turned out not to have very many rollover opportunities, will just have to become a distant memory in the hope that tomorrow brings the opportunities that would have been welcome today.

Today would have been an idea day to get those trades done, especially since you never know what tomorrow will bring..

I only wish I would have realized that expression had so much meaning yesterday.

Daily Market Update – July 31, 2014 (9:00 AM)

Whenever I wake up to visions of red on the screen as this morning the first thought that comes to my mind is “what day is it?”

Looking at the prospects of a DJIA opening approximately 100 points lower based on the futures trading the thought occurs that such an open would be far more welcome on a Monday than on a Thursday.

How much better is it to wake up on a Monday morning with freshly freed up cash from assignments and to be greeted by falling prices?

Contrast that with wanting to get rid of positions or roll them over and to be greeted by declining prices.

I know which order I prefer and it’s strongly associated with the concept of “buy low, sell high” or in my case, “buy low, sell somewhere near low, but preferably a little higher and with a dividend, too, if that’s not asking too much.”

When they say “what a difference a day makes,” I doubt that they had stock markets on the mind, but the relative order of daily results can have such a significant impact on outcomes, sometimes for good and sometimes less so.

This morning’s poorly timed news event on everyone’s mind is primarily related to Argentina and how it has perceived its debt obligations and its various class of debt holders.. It’s one thing to be unable to pay back a nation’s debt, but it may be another thing when it’s the eighth time.

With Argentina in technical default of loans after a very protracted legal battle you can understand how the market may take that as a negative signal, although  there’s really no reason to believe that problem goes any further or deeper. The expectation shouldn’t be that it becomes the nidus for a larger and systemic market decline.

Beyond Argentina there are increasing concerns that growing sanctions against Russia will also have adverse impact on a number of corporations, particularly in the energy sector, but there is always the threat of trickle down and growing economic “tit for tat” that take out the innocent, as well. It might come as no surprise if suddenly McDonalds or Coca Cola were to find themselves in the cross hairs of some previously inert regulatory mechanism.

Adding to those bits of international news was some further futures weakening as jobless claims rose in the most recent period.

That’s consistent with the less than expected numbers seen in yesterday’s ADP report and may hold some clue as to what we might expect with tomorrow’s Employment Situation Report.

No one, other than a Republican in a congressional race, really wants to see anything that can be construed as a slowing down of the growth of employment. Most of us would prefer to see growth, especially to confirm the good GDP numbers that were released yesterday, to only transient applause.

So today may hold some challenges and tomorrow will be a wild card as the non-farm payroll numbers will have their influence one way or another.

That likely means that today will be a day to look for whatever rollover opportunities may exist and attempt to secure those trades, if any, while they are still possibilities, as you never know what tomorrow will bring.

I only wish I would have realized that expression had so much meaning yesterday.

.

Daily Market Update – July 30, 2014 (Close)

When did the FOMC become such a yawner?

Actually, today was a disappointing one. Given the strong GDP number you might have expected a strong reaction, but just as when the market didn’t give a strong reaction to the significant downward revision last month, you really can’t expect to have it both ways.

The market did seem to react to some more news of sanctions against Russia and then generally moved higher after the FOMC release, despite an initial move lower.

The real story of the day was Twitter.

The reaction to Twitter’s earnings released yesterday afternoon was pretty implausible and makes you wonder who exactly runs in to purchase shares after hours when a buying frenzy is going on. You have to have lots and lots of confidence to commit to a stock when its shares jump about 30% in the blink of an eye, especially when they’ve shown that they can also do the same in the opposite direction.

I have enough trouble running in and doing so after a 1% climb, but there’s something unnerving about buying into something when there’s a big price gap, just as there’s something unnerving about being on the wrong side of a gap lower.

For me, the good news is that if the price holds until Friday I will finally be out of shares that started as a put sale at $47, then an assignment at $43.50 and a large number of rollovers of both puts and calls in an effort to stay ahead of assignment, including the sale of even more puts at lower prices to generate offsetting revenues. 

First the fear was that of assignment of puts and then the fear was that of assignment of calls when executing DOH trades.

Fear can be a good motivator, but it’s a lot easier to take than stress, because somewhere along the line I believed that somehow everything would work out, or at least not be as bad as things may appear.

What the process, now that it’s coming to an end demonstrates is that it is possible to make proverbial lemonade even when things aren’t looking very good. Unfortunately, there are plenty of lemons to deal with sometimes.

In the case of Twitter it was easier because the shares have some volatility. That’s the secret sauce that makes some things more likely.It is what enhances premiums, even when they’re deep in the money. It is what is lacking in most other positions and that makes it difficult to maneuver in the event of an adverse price movement.

That adverse price movement can be higher, just as easily as it can be lower.

I mention that because of one subscriber who had sold August 16, 2014 calls on his Family Dollar Store holdings. With shares being now deep in the money after the buyout bid the likelihood of being able to roll those shares over into the future at a higher strike price in order to gain some benefit from the buyout isn’t very high as long as the volatility is low.

When the original stake by Icahn was announced we were able to rollover shares to a higher strike and participate in the share’s appreciation due to  having selected an option expiration that coincided with earnings. That alone caused the enhanced volatility that allowed a trade to be made, and to live to see another day.

In the current case the next earnings date is in October. While that may give some opportunity, there is another difference between the Family Dollar of old and the Family Dollar of today.

Back then there was still an unlimited potential for the share price to climb, as Icahn had just entered the picture. Now, there is a defined offer that prices shares at about $74.50. While that can change if some other player comes in, the volatility won’t appear again unless that  happens. That immediately limits potential trade opportunities.

But, like today’s FOMC statement release, you just never know if a surprise is just around the corner. You really can’t take anything for granted.

As long as a company still has some breath in it there’s always the chance, in fact, the probability that it will show some recovery. The key is whether that recovery is enough to start instituting some measures, such as DOH trades, to start resurrecting the position’s ability to support itself and justify its existence in a portfolio.

That requires a lot of patience sometimes, but that patience, as it grows, also comes with a remarkable reduction in stress.

Of course, nothing reduces that stress more than profits.

Daily Market Update – July 30, 2014 (8:30 AM)

The reaction to Twitter’s earnings released yesterday afternoon was pretty implausible and makes you wonder who exactly runs in to purchase shares after hours when a buying frenzy is going on. You have to have lots and lots of confidence to commit to a stock when its shares jump about 30% in the blink of an eye, especially when they’ve shown that they can also do the same in the opposite direction.

I have enough trouble running in and doing so after a 1% climb, but there’s something unnerving about buying into something when there’s a big price gap, just as there’s something unnerving about being on the wrong side of a gap lower.

For me, the good news is that if the price holds until Friday I will finally be out of shares that started as a put sale at $47, then an assignment at $43.50 and a large number of rollovers of both puts and calls in an effort to stay ahead of assignment, including the sale of even more puts at lower prices to generate offsetting revenues. 

First the fear was that of assignment of puts and then the fear was that of assignment of calls when executing DOH trades.

Fear can be a good motivator, but it’s a lot easier to take than stress, because somewhere along the line I believed that somehow everything would work out, or at least not be as bad as things may appear.

What the process, now that it’s coming to an end demonstrates is that it is possible to make proverbial lemonade even when things aren’t looking very good. Unfortunately, there are plenty of lemons to deal with sometimes.

In the case of Twitter it was easier because the shares have some volatility. That’s the secret sauce that makes some things more likely.It is what enhances premiums, even when they’re deep in the money. It is what is lacking in most other positions and that makes it difficult to maneuver in the event of an adverse price movement.

That adverse price movement can be higher, just as easily as it can be lower.

I mention that because of one subscriber who had sold August 16, 2014 calls on his Family Dollar Store holdings. With shares being now deep in the money after the buyout bid the likelihood of being able to roll those shares over into the future at a higher strike price in order to gain some benefit from the buyout isn’t very high as long as the volatility is low.

When the original stake by Icahn was announced we were able to rollover shares to a higher strike and participate in the share’s appreciation due to  having selected an option expiration that coincided with earnings. That alone caused the enhanced volatility that allowed a trade to be made, and to live to see another day.

In the current case the next earnings date is in October. While that may give some opportunity, there is another difference between the Family Dollar of old and the Family Dollar of today.

Back then there was still an unlimited potential for the share price to climb, as Icahn had just entered the picture. Now, there is a defined offer that prices shares at about $74.50. While that can change if some other player comes in, the volatility won’t appear again unless that  happens. That immediately limits potential trade opportunities.

But, like today’s FOMC statement release, you just never know if a surprise is just around the corner. You really can’t take anything for granted.

As long as a company still has some breath in it there’s always the chance, in fact, the probability that it will show some recovery. The key is whether that recovery is enough to start instituting some measures, such as DOH trades, to start resurrecting the position’s ability to support itself and justify its existence in a portfolio.

That requires a lot of patience sometimes, but that patience, as it grows, also comes with a remarkable reduction in stress.

Of course, nothing reduces that stress more than profits.

Daily Market Update – July 29, 2014 (Close)

While today will be another busy earnings day, having already gotten underway with Pfizer and others, it’s likely to be relatively quiet as it usually is once the FOMC meeting gets underway.

While some additional sanctions on Russia did have some mildly negative impact on the market, ringing it down from an equally mild gain, it was really a quiet day and no surprises were in store, other than from a possible gift from the IRS to companies with significant land holdings used to bury cables, such as for land telephone lines and cable television.

However, the real surprise would be if at 2 PM tomorrow there is some surprise coming from the statement released after the two day meeting. However, increasingly the words are being parsed for the slightest hint of nuance or the appearance of a new word or deletion of an old one, in order to ascertain what is really going on in the minds of those in control of the economy. That could mean some reaction beyond the usual knee-jerk response, which itself was actually missing at least month’s release.

Following a nice recovery from yesterday’s early sell-off there’s reason to believe that records could easily be assaulted again, especially if some of the bigger names come out with earnings. It doesn’t take too much to move the DJIA and this morning both Merck and Pfizer seem to be contributing to the pre-open advance, as they have released their earnings. Verizon and AT&T are also both up strongly, helping to give the DJIA an early lead over the broader S&P 500.

Pfizer, itself, later gave up a nice gain, not because of earnings, but almost the instant it mentioned that it wasn’t giving up on the idea of a blockbuster kind of acquisition, perhaps even another run at Astra Zeneca. Apparently the market didn’t like that kind of aggressiveness particularly with the flurry of concern around so called “inversions” which could include being ineligible for any kind of federal contracting, which could be a huge blow to a company like Pfizer. 

Otherwise, with the early assignment of Texas Instruments in order to capture the dividend that pesky problem of having cash is even greater now. I would still have liked the opportunity to spend some down and would have liked to have to seen another day of some downward moves or at least some flatness while awaiting something that looks appealing.

That downward move didn’t come until the end of the day, but hopefully the day’s earlier purchases in International Paper and Blackstone will still turn out to have been a relative bargain prices.

As with other times that problem of having cash has been the case, I’m not too likely to want to compound that problem by spending it down just for the sake of spending it down. Last Friday seemed to bring some relative bargains, but the key word is “relative.” Many stocks still look and feel expensive so there has to be a nagging voice somewhere questioning every potential new purchase as being without value.

By the same token everything that looks like a bargain may get the same scrutiny as a 45 year old bachelor. People want validation for their biases. Why in the world hasn’t he never been married? Why would it be so “cheap” when everything else is going higher?

While one may certainly be a lifestyle choice, it would be hard to find anyone other than a short seller who wouldn’t want to see shares higher, so wondering why something hasn’t been participating may be a justified question.

Whereas yesterday I felt willing to jump in without waiting for much validation, in the hopes of picking up some of those seeming bargains, I don’t have that same confidence this morning. With the very strong early moves in some of the DJIA components there may be some early skew to the perception of how the market will actually trade. Those gains just seem to be illusory, very much based on some financial engineering ideas put forth by a tiny player in the communications sector that may have big implications for the likes of the behemoths, Verizon and AT&T.

So while I thought I would revert back to recent style and watch and see how the market’s trend, if any, would develop this morning, sometimes those plans gets scuttled as the opportunities seem to appear.

Sit would turn out, whether due to the new sanctions or not, much of the early rise fueled by the IRS decision died down as investors may have come to the realization that what matters for Verizon and others may have little to no relevance for anyone else and still may have some regulatory and even some further IRS hurdles ahead.