Daily Market Update – May 11, 2015 (Close)
Generally, when the week opens following a large move higher to close the previous week, I like to see the market give back most, if not all of those gains.
That’s because those large Friday gains are usually associated with some assignments and with money in hand on Monday, I don’t like the idea of paying up for positions that went up sharply just the previous trading session.
This week is a little bit different, though.
For one thing, it was another week of not having any assignments or fewer than I had hoped to have. So there’s less cash available for new positions and I tend to be very reluctant to use margin credit for leverage, other than to sell covered puts.
So, with the prospect of not likely making any new purchases, I would much rather see existing positions thrive.
That’s especially the case since this is the end of the May 2015 option cycle and I have a lot of positions riding on the week’s outcome. I would definitely like to see the market continue its climb higher and then end the week with some assignments, or at least rollovers to keep the cash stream flowing.
Even without many assignments over the past week the cash flow has been able to continue as rollovers have been possible for most positions. That at least makes day to day stock watching a little more palatable while waiting for an opportunity to be more pro-active.
As with most weeks the question remains the same, though.
What are the week’s upcoming catalysts to send us higher or to send us lower?
Just like last week this coming week is going to be a very slow one for economic news. It won’t even have anything akin to the previous week’s Employment Situation Report. That, alongside Janet Yellen’s unexpected comment, were the only two catalysts for the week and they sent markets in competing directions.
This week we have tomorrow’s JOLT Survey and Wednesday’s Retail Sales Report.
The former, despite Janet Yellen suggesting that it was an important measure of economic growth, has been widely ignored and the Retail Sales Report won’t hold a candle to the actual earnings reports coming this week from the nation’s leading retailers that actually kick off about an hour prior to the release of the Retail Sales Report.
Those company earnings may be far more important than anything else this week, especially if they give the slightest hint that consumers are finally starting to get involved with the discretionary spending that we’ve been waiting over 6 months to begin seeing.
The pre-opening futures were sitting on the flat line this morning, as might have been expected with such little news coming through, although there was some weekend news out of China that could have set the stage for some optimism in the US, as we are increasingly reliant upon a booming Chinese economy for our own health, but so far that doesn’t appear to be the case.
With that flat line seemingly preparing the market for its open, I was hopeful there would continue to be some opportunities to sell calls on existing positions as has been the case the past few weeks, although there still may continue to be reason to look at extended option expiration dates to do so.
That didn’t happen, but the decision to close the AbbVie, at a cost of only $0.06 on the in the money position likely to be assigned on Friday, did offer a little cushion to generate some revenue from new purchase positions.
One of those, Marathon Oil, goes ex-dividend next Monday. I sold the May 22 options in the hope that the shares will be assigned early at Friday’s close. That way, although not getting the dividend, I would get 2 weeks of option premium and not have to shoulder any of the price reduction related to the dividend and also avoid the risk of an additional week of holding.
As with all great ideas – we’ll see.
Hopefully tomorrow will get back on track and find reasons to take the market higher in a meaningful way and get us one step closer to finishing the monthly option cycle on a decent note.