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Daily Market Update – December 8, 2015 (7:30 AM) Yesterday was another unexpected day in a series of unexpected and largely unwarranted kind of days. To some degree OPEC’s continued inability to actually act like a cartel helped to grease the slide, as may be appropriate. We’re still in that odd kind of market that doesn’t look at the prospects of cheap energy as being bullish for worldwide economic growth. While that would be understandable if there was also a worldwide decrease in the appetite for energy resources, that’s really not the case and you would be excused for believing that people would be celebrating a production side decrease in pricing. But that continues to not be the case, as the market has been moving in the same direction as oil has been going and OPEC’s decision to not cut production could only send prices lower or at the very least keep them at these low levels. But must expected the lack of any agreement from OPEC, so it doesn’t make too much sense that energy prices would slide hard or that markets would follow. Instead, it may simply be that an upcoming interest rate hike is now fully discounted and digested and that the market now needs something tangible upon which to act or to which to respond. If that’s the case, we may not have much of anything until earnings start all over again in about a month, even as this cycle is still not complete. Yesterday’s decline would have seemed like an invitation to go bargain hunting, but I didn’t get a very good feeling from the trading yesterday. Even with OPEC as a possible reason for the decline, it just never felt as if there was a floor below, although the market did recover from its lows and did so in a significant way, even though still finishing down by more than 100 points. This morning, the futures continue to point to more losses, although not as large as yesterday’s, but still enough to make note of and to have some concern. For some reason, those positions that are expiring this week seemed to fare pretty well during yesterday’s sell-off and are all still reasonable prospects for either rollover or assignment. With a number of positions already set to expire next week, which will also be the week of the FOMC decision, I’d prefer not to add to that list. I would much rather see positions assigned this week, as the number of ex-dividend positions can serve as a proxy for income generation, rather than through the sale of option contracts. I’d like to be able to add cash to reserves, instead. However, if faced with rollover, I would certainly much rather do that than to see expirations, other than for the single short put position. In that event, where possible, I would look for expirations other than the December 18, 2015 month ending contract, in an effort to continue the diversification in expiration dates that currently exists. That kind of diversification is a good way to protect a portfolio from singular events that can be unpredictable in magnitude or direction, such as may be the case next Wednesday. For today, it’s likely to be more watching and less trading, as was the case yesterday and hoping that all expiring positions stay in contention. |
