Category Archives: Daily Market Update

(see all trades this option cycle)

Daily Market Update – February 7, 2014 (9:00 AM)

The Week in Review will be posted by 6 PM and the Weekend Update will be posted by Sunday 12 Noon.

The following outcomes may be possible today:

Assignment:  EBAY, GPS*, MET

Rollover:   BMY, TXN, WAG

Expiration:  AIG, ANF,  CHK, CLF, HFC,

* GPS unexpectedly announced sales, revenues and improved guidance after yesterday’s close, sending stock higher in the after-hours. The decision and announcement to do so was likely made yesterday or after Wednesday’s trading close, as there was a tremendous increase in the remaining time value of the 2/7/14 option on Thursday morning. Additionally, there was a tremendous spike in option volume at about 9:45 AM, accounting for nearly the entire day’s volume, suggesting something substantive occurred between Wednesday’s close and Thursday’s open. The same spike in option premium did not extend into the next week, suggesting that there would be some event occurring prior to the close of the week’s trading.

  Access prior Daily Market Updates by clicking here

 OTP Sector Distribution* as of February 6, 2014

 * Assumes equal number of shares in positions

Posting of trades is not a recommendation to execute trades

Monday through Thursday? See “Daily Market Update” with first edition published by 12 Noon and Closing Update published by 4:30 PM

Friday? See Week in Review for summary statistics and performance

Sunday? See Weekend Update for potential stock choices for coming week

Any day? See Performance for open and closed positions

Subscribers may see  ROI statistics  on all new, existing and closed positions on a daily updated basis

See all Trade Alerts for this monthly option cycle

(see all trades this option cycle)

Daily Market Update – February 6, 2014 (Close)

Today’s big stories were likely to be inconsequential as far as anything will ever go.

Twitter and Green Mountain Coffee Roasters were grabbing all of the headlines in the morning, which wasn’t necessarily a bad thing, as we awaited tomorrow’s Employment Situation Report.

Why anyone was surprised over the market’s response to Twitter’s earnings report is amazing. No one had any right to expect anything other than some sort of a surprise, unless the market had fully already understood Twitter and had fully discounted all possibilities. Considering that Twitter was a black box even after its IPO and considering the absence of support levels due to its rapid rise in share price, anything could have been possible as earnings were released.

What is surprising is that user engagement is already decreasing. To me it’s also surprising that they have any revenue to report at all, as many have already figured out how to get their commercial Tweets spread through the system through viral campaigns, like the supposed drunken JC Penney Tweeter during the Super Bowl.

Green Mountain is a different story.

It has a long history of making large earnings related moves and it also has a history of either delaying scheduled earnings or releasing some big news that deflects from attention to earnings related detail. Not to mention allegations of accounting irregularities and some questionable activities by its founder and past Chairman and CEO.

In this case, I think there’s a second overlay, as well, as Brian Kelly, the new and untarnished CEO of Green Mountain struck a deal with Coca Cola, his alma mater. He had been a rising star there, named as President and CEO of Coca Cola Refreshments. No small feat.

I wonder if this deal was one of Coca Cola emulating Microsoft when it made its Nokia deal in an effort to secure a potential CEO successor and bringing Stephen Elop, the Nokia CEO and a Microsoft alumnus, back home.

In that case there was also an element of Microsoft sending a lifesaver in Nokia’s direction and given Green Mountain’s core business growth Coca Cola may have done the same.

Today, I’d rather see the market’s engaged in discussing and analyzing these issues than over analyzing what tomorrow’s data may be or trying to guess what direction the market may go in response to the data.

Also, hopefully the European Central Bank’s policy statement this morning will either be a non-event for us or a net positive, as late in the week adverse news is hard to overcome when contracts expire the very next day. In the recent past the ECB has usually sent our markets higher as they’ve followed an accommodative policy, as had our own Federal Reserve.

Interestingly, as our markets have reached that 5% pullback level and we’re nearing the end of earnings season more attention is being placed on government and other economic reports. The response to Monday’s ISM is an example of a response that has otherwise been really muted for the past year. For the most part the only items the market has cared about during the bull run higher have been the FOMC minutes and the Employment Report.

That may be changing as we become used to the idea of a continued taper and as some political dysfunction shows sign of abating and leaving us with fewer manufactured crises.

If we can get a decent employment number tomorrow, and the ADP data yesterday gives some hope for that, suddenly there appears to be less reason to expect a further drop in markets and I’m beginning to feel some optimism going forward.

Based on the way today’s market went, optimism was the call of the day.

That optimism would really take hold if we could also see volatility maintained at this level or even higher. Instead volatility for the broad market decreased, while for some individual stocks and sectors it remains at its recent highs, in fact, even higher than just yesterday. A good example of that is in the retail sector where suddenly good results from L Brands and Kohls have sent this week’s premiums rocketing higher compared to yesterday.

Today, as yesterday, I was looking for possible DOH Trades as well as any early rollovers,  as I wasn’t expecting much exciting to happen and certainly wasn’t expecting an unbridled march higher.

As would happen nothing exciting did happen except that was enough to send the market nearly 200 points higher.

The speculation is that today’s rise was in expectation of tomorrow’s employment numbers which are thought to be spectacular, perhaps in the 300,000 range or more and that the unemployment rate is going to come in at 6.5%.

For those keeping track, 6.5% was one of the thresholds that we were told the FOMC had set when deciding whether to initiate the taper program. Reportedly Janet Yellen prefers a 6% level, so in some wild scenario it could be conceivable that the next FOMC would have announcement of a slowing or postponement of the taper. If the market believes that may be the case today’s gain could vanish.

The speculation about the fun never ends.

  Access prior Daily Market Updates by clicking here

 OTP Sector Distribution* as of February 6, 2014

 * Assumes equal number of shares in positions

Posting of trades is not a recommendation to execute trades

Monday through Thursday? See “Daily Market Update” with first edition published by 12 Noon and Closing Update published by 4:30 PM

Friday? See Week in Review for summary statistics and performance

Sunday? See Weekend Update for potential stock choices for coming week

Any day? See Performance for open and closed positions

Subscribers may see  ROI statistics  on all new, existing and closed positions on a daily updated basis

See all Trade Alerts for this monthly option cycle

 

(see all trades this option cycle)

Daily Market Update – February 6, 2014 (9:00 AM)

Today’s big stories are likely to be inconsequential as far as anything will ever go.

Twitter and Green Mountain Coffee Roasters are grabbing all of the headlines this morning, which isn’t necessarily a bad thing, as we await tomorrow’s Employment Situation Report.

Why anyone was surprised over the market’s response to Twitter’s earnings report is amazing. No one had any right to expect anything other than some sort of a surprise, unless the market had fully already understood Twitter and had fully discounted all possibilities. Considering that Twitter was a black box even after its IPO and considering the absence of support levels due to its rapid rise in share price, anything could have been possible as earnings were released.

What is surprising is that user engagement is already decreasing. To me it’s also surprising that they have any revenue to report at all, as many have already figured out how to get their commercial Tweets spread through the system through viral campaigns, like the supposed drunken JC Penney Tweeter during the Super Bowl.

Green Mountain is a different story.

It has a long history of making large earnings related moves and it also has a history of either delaying scheduled earnings or releasing some big news that deflects from attention to earnings related detail. Not to mention allegations of accounting irregularities and some questionable activities by its founder and past Chairman and CEO.

In this case, I think there’s a second overlay, as well, as Brian Kelly, the new and untarnished CEO of Green Mountain struck a deal with Coca Cola, his alma mater. He had been a rising star there, named as President and CEO of Coca Cola Refreshments. No small feat.

I wonder if this deal was one of Coca Cola emulating Microsoft when it made its Nokia deal in an effort to secure a potential CEO successor and bringing Stephen Elop, the Nokia CEO and a Microsoft alumnus, back home.

In that case there was also an element of Microsoft sending a lifesaver in Nokia’s direction and given Green Mountain’s core business growth Coca Cola may have done the same.

Today, I’d rather see the market’s engaged in discussing and analyzing these issues than over analyzing what tomorrow’s data may be or trying to guess what direction the market may go in response to the data.

Also, hopefully the European Central Bank’s policy statement this morning will either be a non-event for us or a net positive, as late in the week adverse news is hard to overcome when contracts expire the very next day. In the recent past the ECB has usually sent our markets higher as they’ve followed an accommodative policy, as had our own Federal Reserve.

Interestingly, as our markets have reached that 5% pullback level and we’re nearing the end of earnings season more attention is being placed on government and other economic reports. The response to Monday’s ISM is an example of a response that has otherwise been really muted for the past year. For the most part the only items the market has cared about during the bull run higher have been the FOMC minutes and the Employment Report.

That may be changing as we become used to the idea of a continued taper and as some political dysfunction shows sign of abating and leaving us with fewer manufactured crises.

If we can get a decent employment number tomorrow, and the ADP data yesterday gives some hope for that, suddenly there appears to be less reason to expect a further drop in markets and I’m beginning to feel some optimism going forward.

That optimism would really take hold if we could also see volatility maintained at this level or even higher.

Today, as yesterday, I’ll look for possible DOH Trades as well as any early rollovers, but am not expecting much exciting to happen.

Access prior Daily Market Updates by clicking here

OTP Sector Distribution* as of February 5, 2014

 * Assumes equal number of shares in positions

Posting of trades is not a recommendation to execute trades

Friday? See Week in Review for summary statistics and performance

Sunday? See Weekend Update for potential stock choices for coming week

Any day? See Performance for open and closed positions

Subscribers may see  ROI statistics  on all new, existing and closed positions on a daily updated basis

See all Trade Alerts for this monthly option cycle

(see all trades this option cycle)

Daily Market Update – February 5, 2014 (Close)

This morning the ADP Employment numbers were released.

Ever since they started doing so there’s been lots of disagreement over how accurately ADP’s numbers parallel the government’s Non-farm Payroll statistics that come out two days later. Regardless of the validity of the ADP Report it still has the capability of moving markets.

After last month’s disappointing official numbers the ADP number was pretty much on target for expectations but the market showed some mild disappointment in the pre-open trading, however, it got over that disappointment very quickly.

At this point we’ll have to wait until Friday to have it settled and to see how the market reacts.

About 2 weeks ago I collected some data looking at the relationship, if any, between the Employment Situation Report and market performance. Watching the release of that most recent report and seeing the market react to very disappointing numbers by pushing the market higher got me thinking that it seemed as if the market always went higher with the announcement of those official numbers.

Who knew that in the comfort of my retirement I would actually once again find myself running t-tests?

Looking at 3 years of statistics there was no association between the reporting of data, regardless of its content and how the market did, neither in the week leading up to the report nor the week following. Neither did the day before the report release have any predictive value.

That is unless you looked at the past 18 months.

During that time period there was a statistically significant likelihood that on the week preceding the report and the day preceding the report that the market would move higher.

For those interested in such things the chance that the market went randomly higher on the day of the Employment Situation Report release was less than 4% and less than 2% when considering the prior week.

While that seemed compelling, as with all statistics it helps to look beyond the numbers and try to have an understanding of possible confounders or environmental factors that may have played a role.

Perhaps coincidentally the past 18 months reflected the beginning of the third and final phase of Quantitative Easing.

Because of that possibility I wasn’t terribly excited about being further long the market in anticipation of an additional Employment Situation Report fueled run higher, considering that there appears to also be an association between the announcement of the taper and the market’s fortunes.

In hindsight, starting the week with a 325 point loss seemed to indicate that playing the market for Friday’s report wouldn’t have been a very good idea.

However, about half of the weekly gains seen in Employment Situation Weeks came on the day of the report, suggesting that there might be some advantage to adding long positions prior to Thursday’s close.

While I generally don’t consider index ETF trading, I may look at the possibility of purchasing some SPDR S&P 500 Trust shares with the anticipation of closing the position at the end of Friday’s trading by selling slightly out of the money call options on the position, as premiums are beginning to reflect increasing volatility.

Otherwise, I’m expecting little activity for the remainder of the week, while remaining hopeful that the market shows some stability and even strength as the week comes to a close, as it would be nice to get back to seeing assignments and rollovers just like the old days.

Today was just that kind of day as the market traded in a tight range, something that it had done for most of 2013, but very little of 2014, thus far.

A little telling is that even with today’s very muted action the short term volatility continues to rise and is nearing the October high, which itself was a low high as far as highs go. So the market is still nervous and waiting for any kind of meaningful and sustained move, regardless of direction.

For my part, I hope that this Friday’s performance breaks that recent pattern of downward moving weekly closes and I wouldn’t mind seeing the market take a little rest at this level, particularly if volatility can stay here or even move a little higher.

There’s nothing wrong with wishing for the best of all worlds. We’ve had it before, why not again?

  Access prior Daily Market Updates by clicking here

 OTP Sector Distribution* as of February 4, 2014

 * Assumes equal number of shares in positions

Posting of trades is not a recommendation to execute trades

Monday through Thursday? See “Daily Market Update” with first edition published by 12 Noon and Closing Update published by 4:30 PM

Friday? See Week in Review for summary statistics and performance

Sunday? See Weekend Update for potential stock choices for coming week

Any day? See Performance for open and closed positions

Subscribers may see  ROI statistics  on all new, existing and closed positions on a daily updated basis

See all Trade Alerts for this monthly option cycle

(see all trades this option cycle)

Daily Market Update – February 5, 2014 (9:30 AM)

This morning the ADP Employment numbers were released.

Ever since they started doing so there’s been lots of disagreement over how accurately ADP’s numbers parallel the government’s Non-farm Payroll statistics that come out two days later. Regardless of the validity of the ADP Report it still has the capability of moving markets.

After last month’s disappointing official numbers the ADP number was pretty much on target for expectations but the market showed some mild disappointment in the pre-open trading, however, it got over that disappointment very quickly.

At this point we’ll have to wait until Friday to have it settled and to see how the market reacts.

About 2 weeks ago I collected some data looking at the relationship, if any, between the Employment Situation Report and market performance. Watching the release of that most recent report and seeing the market react to very disappointing numbers by pushing the market higher got me thinking that it seemed as if the market always went higher with the announcement of those official numbers.

Who knew that in the comfort of my retirement I would actually once again find myself running t-tests?

Looking at 3 years of statistics there was no association between the reporting of data, regardless of its content and how the market did, neither in the week leading up to the report nor the week following. Neither did the day before the report release have any predictive value.

That is unless you looked at the past 18 months.

During that time period there was a statistically significant likelihood that on the week preceding the report and the day preceding the report that the market would move higher.

For those interested in such things the chance that the market went randomly higher on the day of the Employment Situation Report release was less than 4% and less than 2% when considering the prior week.

While that seemed compelling, as with all statistics it helps to look beyond the numbers and try to have an understanding of possible confounders or environmental factors that may have played a role.

Perhaps coincidentally the past 18 months reflected the beginning of the third and final phase of Quantitative Easing.

Because of that possibility I wasn’t terribly excited about being further long the market in anticipation of an additional Employment Situation Report fueled run higher, considering that there appears to also be an association between the announcement of the taper and the market’s fortunes.

In hindsight, starting the week with a 325 point loss seemed to indicate that playing the market for Friday’s report wouldn’t have been a very good idea.

However, about half of the weekly gains seen in Employment Situation Weeks came on the day of the report, suggesting that there might be some advantage to adding long positions prior to Thursday’s close.

While I generally don’t consider index ETF trading, I may look at the possibility of purchasing some SPDR S&P 500 Trust shares with the anticipation of closing the position at the end of Friday’s trading by selling slightly out of the money call options on the position, as premiums are beginning to reflect increasing volatility.

Otherwise, I’m expecting little activity for the remainder of the week, while remaining hopeful that the market shows some stability and even strength as the week comes to a close, as it would be nice to get back to seeing assignments and rollovers just like the old days.

  Access prior Daily Market Updates by clicking here

 OTP Sector Distribution* as of February 4, 2014

 * Assumes equal number of shares in positions

Posting of trades is not a recommendation to execute trades

Monday through Thursday? See “Daily Market Update” with first edition published by 12 Noon and Closing Update published by 4:30 PM

Friday? See Week in Review for summary statistics and performance

Sunday? See Weekend Update for potential stock choices for coming week

Any day? See Performance for open and closed positions

Subscribers may see  ROI statistics  on all new, existing and closed positions on a daily updated basis

See all Trade Alerts for this monthly option cycle

(see all trades this option cycle)

Daily Market Update – February 4, 2014 (Close)

A couple of years ago the last time we really had a market that was going through some corrections the United States stock markets were in an unusual position.

Rather than leading the world we were being wagged and our markets were following in response to European and Asian markets that were struggling with their own issues, particularly currency and monetary policy related.

We’re not used to following.

In addition to those kinds of woes the United States markets have continually fallen under the pressures of the Chinese markets, especially when it appeared as if the data was truthful.

Over the past 18 months or so the US markets have not been held hostage by events in other markets, although Chinese economic news has still been impactful.

Yesterday, however, there was some widespread belief that our own markets, which were already teetering a little, were sent over the cliff as the Nikkei and Russian stock markets gave the push, as they officially entered correction territory.

With the Nikkei dropping another 4% in its trading overnight it’s comforting to see that our own markets are resisting, thus far, following that path lower.

The word this morning was that the start to February was the worst seen since 1982. For his part, Peyton Manning says he’s seen worse starts, but for those that remember, 1982 was the beginning of the re-awakening of the stock market and the beginning of a 5 year bull market, until shortly after Alan Greenspan became Chairman of the Federal Reserve.

If that’s what it takes to ignite a fire I’m all for it. Besides you really don’t appreciate the heights until you’ve seen the depths.

The market crash in 1987 came just 2 months after Greenspan took office. The market decline in 2007 started almost 2 years after Bernanke took office. On the other hand, Janet Yellen’s first day was greeted with a 325 point loss, but today looks to be more hospitable.

For those that were daring and made some of the new trades yesterday, i don’t think there will be many more this week, although I’m not closed to the idea, but am not drinking any Kool-Ade if the market enjoys some kind of substantive bounce back.

Before making too much of an additional commitment I want to have some level of comfort that I’ll be seeing some assignments this week, but as we’ve seen the past few weeks it doesn’t take much to change everything. One day will do it, especially if it’s a Friday and the clock runs out on you.

After yesterday’s fall there’s a lot of ground that needs to be recovered, but at least we do have a few days to do so, although Friday’s Employment Situation Report brings a new challenge.

In the meantime it’s time for all of those who have been saying that they would be buyers on any dips to come and put their money where their mouths are. Instead many are seemingly busy either re-writing their personal history or patting themselves on the back for having predicted a correction consistently over the course of the past year.

Like me.

At least I did my part and opened some new positions.

As the market came to a close it didn’t come even close to erasing yesterday’s loss. However, on a very positive note despite several attempts to pare back the gains today the market fought back, even though the opposition may have been taking a rest after all of its efforts yesterday. Most impressive was that it did so one last time during the final hour of trading.

During the course of the day there were a number of trades that I had entered, including new positions in Intel, International Paper and Eli Lilly, but then canceled the orders, as I still had some doubts about today’s initial reaction to the stresses in the market and also mindful of the potential stress to come on Friday with the Employment Situation Report.

I’d love to see tomorrow be another day like much of today even if only to have opportunity to pick up cover for some positions, as nothing beats selling calls into price strength. Hopefully, the Nikkei futures which are spiking 3% higher as our own markets come to a close will provide some leadership for us tomorrow.

Sometimes it’s nice to be wagged for a change.

  Access prior Daily Market Updates by clicking here

 OTP Sector Distribution* as of February 4, 2014

 * Assumes equal number of shares in positions

Posting of trades is not a recommendation to execute trades

Monday through Thursday? See “Daily Market Update” with first edition published by 12 Noon and Closing Update published by 4:30 PM

Friday? See Week in Review for summary statistics and performance

Sunday? See Weekend Update for potential stock choices for coming week

Any day? See Performance for open and closed positions

Subscribers may see  ROI statistics  on all new, existing and closed positions on a daily updated basis

See all Trade Alerts for this monthly option cycle

(see all trades this option cycle)

Daily Market Update – February 4, 2014 (9:30 AM)

A couple of years ago the last time we really had a market that was going through some corrections the United States stock markets were in an unusual position.

Rather than leading the world we were being wagged and our markets were following in response to European and Asian markets that were struggling with their own issues, particularly currency and monetary policy related.

We’re not used to following.

In addition to those kinds of woes the United States markets have continually fallen under the pressures of the Chinese markets, especially when it appeared as if the data was truthful.

Over the past 18 months or so the US markets have not been held hostage by events in other markets, although Chinese economic news has still been impactful.

Yesterday, however, there was some widespread belief that our own markets, which were already teetering a little, were sent over the cliff as the Nikkei and Russian stock markets gave the push, as they officially entered correction territory.

With the Nikkei dropping another 4% in its trading overnight it’s comforting to see that our own markets are resisting, thus far, following that path lower.

The word this morning was that the start to February was the worst seen since 1982. For his part, Peyton Manning says he’s seen worse starts, but for those that remember, 1982 was the beginning of the re-awakening of the stock market and the beginning of a 5 year bull market, until shortly after Alan Greenspan became Chairman of the Federal Reserve.

If that’s what it takes to ignite a fire I’m all for it. Besides you really don’t appreciate the heights until you’ve seen the depths.

The market crash in 1987 came just 2 months after Greenspan took office. The market decline in 2007 started almost 2 years after Bernanke took office. On the other hand, Janet Yellen’s first day was greeted with a 325 point loss, but today looks to be more hospitable.

For those that were daring and made some of the new trades yesterday, i don’t think there will be many more this week, although I’m not closed to the idea, but am not drinking any Kool-Ade if the market enjoys some kind of substantive bounce back.

Before making too much of an additional commitment I want to have some level of comfort that I’ll be seeing some assignments this week, but as we’ve seen the past few weeks it doesn’t take much to change everything. One day will do it, especially if it’s a Friday and the clock runs out on you.

After yesterday’s fall there’s a lot of ground that needs to be recovered, but at least we do have a few days to do so, although Friday’s Employment Situation Report brings a new challenge.

In the meantime it’s time for all of those who have been saying that they would be buyers on any dips to come and put their money where their mouths are. Instead many are seemingly busy either re-writing their personal history or patting themselves on the back for having predicted a correction consistently over the course of the past year.

Like me.

At least I did my part and opened some new positions

.

  Access prior Daily Market Updates by clicking here

 OTP Sector Distribution* as of February 3, 2014

 * Assumes equal number of shares in positions

Posting of trades is not a recommendation to execute trades

Monday through Thursday? See “Daily Market Update” with first edition published by 12 Noon and Closing Update published by 4:30 PM

Friday? See Week in Review for summary statistics and performance

Sunday? See Weekend Update for potential stock choices for coming week

Any day? See Performance for open and closed positions

Subscribers may see  ROI statistics  on all new, existing and closed positions on a daily updated basis

See all Trade Alerts for this monthly option cycle

 

(see all trades this option cycle)

Daily Market Update – February 3, 2014 (Close)

The week comes to its start that the Nikkei is now officially in correction territory.

Our own markets aren’t looking very committal this morning, as the single biggest piece of news is likely to come at the end of the week as the new Federal Reserve Chairman, Janet Yellen, will be closely watching the Employment Situation Report, especially after last month’s surprisingly abysmal numbers.

The reaction that came to the release of the ISM number at 10 AM was pretty swift and very harsh.

I just wonder where the shock comes from? It’s not as if anyone should believe that the economy has been robust. If that was indeed the case people would be spending their money and it’s been pretty clear that they haven’t. You can’t blame all of the retail bad news on Amazon.

And sooner or later someone is going to be bold enough to come right out and say it. The earnings that are being reported as being better than expected are all artificially inflated on a per share basis because of all of the buy backs, that aren’t even being down with share price value in mind.

But regardless of what’s going on overseas, here, we’re still far away from official correction territory and the DJIA and the S&P 500 have diverged a bit with the narrower DJIA showing nearly a 50% greater loss, with it having gone down 5.4% as compared to just 3.6% for the S&P.

By the time the market closed for the day we did get considerably closer to where Japan and Russia are finding themselves.

The safety perceived in the boring blue chips isn’t supposed see that sort of divergence happening on more than an occasional day or two when it is usually due to a single or two outliers that have just had an unusual day. But this is now a relatively prolonged divergence that to some degree is a consequence of having added high priced Visa and Goldman Sachs to the index, while Alcoa was shown the door.

In the meantime volatility, which I always harp about in the hopes that it will increase, has done so, having gone slightly more than 50% higher in the past month and still having a long way to go until it returns even to 2011’s levels, which in turn were quite a bit lower than a couple of years prior.

Again, today did quite a bit to narrow that difference as the volatility index was about 15% higher today. These whipsaw kind of days are what volatility is all about.

With the possibility of increasing volatility will come greater reliance on monthly options rather than weekly, although we’re still at a transition phase.

The reasons for considering moving to longer contracts is because the monthly options will finally be returning a decent premium in exchange for the additional time and also the longer term options give some opportunity to perhaps ride out any short term market decline that could occur when you blink your eyes.

With low volatility there is greater use of weekly options because it provides a better premium, but also because it doesn’t tie you down during a higher moving market. The downside is that if the share price moves against you you won’t have coverage for very long.

That’s the trade-off.

With increasing volatility usually comes a decrease in the number of new positions opened as it reflects a market that isn’t consistently continuing higher and higher and resulting in an unending stream of assignments.

But that increasing volatility also makes it easier to get a decent premium even using out of the money strikes. Coupled with longer term options even the orphaned positions suddenly have some hope of at least becoming contributing members to a portfolio.

In so many ways, even though at first blush it may seem as increasing volatility is a decided negative, there are many more opportunities that present themselves, especially if the increase in volatility isn’t accompanied by a rapidly plunging market. A slow decline in the broad index punctuated with some large moves up and down is all it takes to start seeing the volatility increase and the premiums follow right along.

We’ve certainly seen more of those large moves in the first month of 2014 than we saw in all of 2013.

This week starts off with cash reserves replenished a bit, but again, not as much as I would have liked.

This will likely mark another week when I’m not going to dip too deeply into those reserves, but I am probably willing to go from 30% to about 20%, which might leave room for 5 or so new positions, although if Apple, which goes ex-dividend this week is one of them, I may end up with fewer.

As a reminder, if Apple is a possibility, the mini-options are available for those that don’t want a full 100 share position. The mini-options allow contracts to be written on every 10 share lot and trades with good liquidity.

As with last week I’m going to sit back and see whether any early gains can persist after the first 60-90 minutes of trading. That has been a key for the past two weeks. Opening strength has been hard to maintain and there has been a price to be paid for jumping in trying to get ahead of the curve or thinking that value was about to disappear.

With only a handful of positions set to expire this Friday, despite starting to think more long term, if volatility continues higher, I will also be looking to have more positions in play to expire this week, if the market looks as if it can sustain prices for those few days.

Lately, that hasn’t been a sure thing as week end fades have become the norm.

Access prior Daily Market Updates by clicking here

OTP Sector Distribution* as of February 3, 2014

 * Assumes equal number of shares in positions

Posting of trades is not a recommendation to execute trades

Friday? See Week in Review for summary statistics and performance

Sunday? See Weekend Update for potential stock choices for coming week

Any day? See Performance for open and closed positions

Subscribers may see  ROI statistics  on all new, existing and closed positions on a daily updated basis

See all Trade Alerts for this monthly option cycle

(see all trades this option cycle)

Daily Market Update – February 3, 2014 (9:00 AM)

The week comes to its start that the Nikkei is now officially in correction territory.

Our own markets aren’t looking very committal this morning, as the single biggest piece of news is likely to come at the end of the week as the new Federal Reserve Chairman, Janet Yellen, will be closely watching the Employment Situation Report, especially after last month’s surprisingly abysmal numbers.

Here, we’re still far away from official correction territory and the DJIA and the S&P 500 have diverged a bit with the narrower DJIA showing nearly a 50% greater loss, with it having gone down 5.4% as compared to just 3.6% for the S&P.

The safety perceived in the boring blue chips isn’t supposed see that sort of divergence happening on more than an occasional day or two when it is usually due to a single or two outliers that have just had an unusual day. But this is now a relatively prolonged divergence that to some degree is a consequence of having added high priced Visa and Goldman Sachs to the index, while Alcoa was shown the door.

In the meantime volatility, which I always harp about in the hopes that it will increase, has done so, having gone slightly more than 50% higher in the past month and still having a long way to go until it returns even to 2011’s levels, which in turn were quite a bit lower than a couple of years prior.

With the possibility of increasing volatility will come greater reliance on monthly options rather than weekly.

The reasons for that are because the monthly options will finally be returning a decent premium in exchange for the additional time and also the longer term options give some opportunity to perhaps ride out any short term market decline that could occur when you blink your eyes.

With low volatility there is greater use of weekly options because it provides a better premium, but also because it doesn’t tie you down during a higher moving market. The downside is that if the share price moves against you you won’t have coverage for very long.

That’s the trade-off.

With increasing volatility usually comes a decrease in the number of new positions opened as it reflects a market that isn’t consistently continuing higher and higher and resulting in an unending stream of assignments.

But that increasing volatility also makes it easier to get a decent premium even using out of the money strikes. Coupled with longer term options even the orphaned positions suddenly have some hope of at least becoming contributing members to a portfolio.

In so many ways, even though at first blush it may seem as increasing volatility is a decided negative, there are many more opportunities that present themselves, especially if the increase in volatility isn’t accompanied by a rapidly plunging market. A slow decline in the broad index punctuated with some large moves up and down is all it takes to start seeing the volatility increase and the premiums follow right along.

We’ve certainly seen more of those large moves in the first month of 2014 than we saw in all of 2013.

This week starts off with cash reserves replenished a bit, but again, not as much as I would have liked.

This will likely mark another week when I’m not going to dip too deeply into those reserves, but I am probably willing to go from 30% to about 20%, which might leave room for 5 or so new positions, although if Apple, which goes ex-dividend this week is one of them, I may end up with fewer.

As a reminder, if Apple is a possibility, the mini-options are available for those that don’t want a full 100 share position. The mini-options allow contracts to be written on every 10 share lot and trades with good liquidity.

As with last week I’m going to sit back and see whether any early gains can persist after the first 60-90 minutes of trading. That has been a key for the past two weeks. Opening strength has been hard to maintain and there has been a price to be paid for jumping in trying to get ahead of the curve or thinking that value was about to disappear.

With only a handful of positions set to expire this Friday, despite starting to think more long term, if volatility continues higher, I will also be looking to have more positions in play to expire this week, if the market looks as if it can sustain prices for those few days.

Lately, that hasn’t been a sure thing as week end fades have become the norm.

  Access prior Daily Market Updates by clicking here

 OTP Sector Distribution* as of January 31, 2014

 * Assumes equal number of shares in positions

Posting of trades is not a recommendation to execute trades

Monday through Thursday? See “Daily Market Update” with first edition published by 12 Noon and Closing Update published by 4:30 PM

Friday? See Week in Review for summary statistics and performance

Sunday? See Weekend Update for potential stock choices for coming week

Any day? See Performance for open and closed positions

Subscribers may see  ROI statistics  on all new, existing and closed positions on a daily updated basis

See all Trade Alerts for this monthly option cycle

MONDAY: Nikkei now officially in correction territory, but we start the week looking like an indifferent opening is in the works. Lots of earnings this week, but most big names already in the record books

TUESDAY:     Huge sell-off in Japan, but not seeming to translate here as the market prepares to open and Nikkei futures now also pointing broadly higher. We’ll see.

WEDNESDAY:  Nikkei has small rebound on same order as our own yesterday, signifying nothing. All eyes will be on ADP Report and then Friday’s Employment Situation Report

THURSDAY:    As long as Twitter and Green Mountain Coffee Roasters is able to keep everyone’s interest today could be another quiet day awaiting tomorrow’s Employment Report

FRIDAY:  Was yesterday’s advance justified? Not based on the first reaction to the disappointing Employment Report. Much weaker than expected.

 

(see all trades this option cycle)

Daily Market Update – February 2, 2014 (Close)

The Week in Review and the Weekend Update are now posted, in addition to an accompanying article on potential earnings related trades this week.

Access prior Daily Market Updates by clicking here

OTP Sector Distribution* as of January 31, 2014

 * Assumes equal number of shares in positions

Posting of trades is not a recommendation to execute trades

Friday? See Week in Review for summary statistics and performance

Sunday? See Weekend Update for potential stock choices for coming week

Any day? See Performance for open and closed positions

Subscribers may see  ROI statistics  on all new, existing and closed positions on a daily updated basis

See all Trade Alerts for this monthly option cycle

 

(see all trades this option cycle)

Daily Market Update – January 31, 2014 (Close)

The Week in Review is now posted  and the Weekend Update will be posted by 12 Noon on Sunday.

Access prior Daily Market Updates by clicking here

OTP Sector Distribution* as of January 31, 2014

 * Assumes equal number of shares in positions

Posting of trades is not a recommendation to execute trades

Friday? See Week in Review for summary statistics and performance

Sunday? See Weekend Update for potential stock choices for coming week

Any day? See Performance for open and closed positions

Subscribers may see  ROI statistics  on all new, existing and closed positions on a daily updated basis

See all Trade Alerts for this monthly option cycle