(see all trades this option cycle) 

Daily Market Update - June 18, 2013 (Close)

Make that six triple digit closes in a row or 12 out of the past 16 trading sessions if you're really keeping track.

Since the consecutive streak began the Dow Jones has moved from 15238 to 15318. Even less impressively, since the trend begain in late May at 15303, the market has moved 15 points.

That must be a typo.

It's a little difficult to understand market psychoolgy at the moment. Or ever. It's especially hard to understand the conviction with which the market can go up on the day before what everyone agrees is an important FOMC meeting minutes release.

The market has clearly been event driven for quite a while and is also clearly nervous. That much has been evident by the size of the daily moves and the reaction to speculation regarding whether the tapering of Quantitative Easing will be starting soon or sooner.

Yesterday's market, one that was so blatantly influenced by an article and then in the opposite direction by a Tweet by the article's author isn't the sort of thing that inspires confidence. The likelihood of anyone on the Federal Reserve providing a foreign correspondent with any substantive news is fairly slim, yet the very thought moved markets. Never mind that a completely different sentiment did the same, but in the opposite direction just a couple of days ago.

It's the age old question. Who are you going to believe when it comes to blindly following unsubstantiated opinion? The Wall Street Journal or The Financial Times?

With President Obama's endorsement of Ben Bernanke's role as Federal Reserve Chairman during an interview yesterday, he also left plenty of hints that there may not be another term ahead, further suggesting that the reason was not policy related, but purely an example of overstaying your calling and a sense that "my work here is done."

For those that are familiar with the  popular origin of that expression, you'll know that those were the words found in Eastman Kodak's founder, George Eastman's suicide note.

To the best of my knowledge, outgoing Federal Reserve members are not given ceremonial swords.

The only reason that I could think of the market being so much higher higher on the day before the next release of FOMC minutes is that the preponderance of thought is that either Bernanke continues or that if not, he will be replaced by someone who is perhaps even more inclined to continue the policies of creating liquidity.

"Laissez les bon temps roulez."

The expression "don't fight the Fed" is probably not as well known as "my work here is done," but may be more meaningful.

The correlations appear to be powerful, as least as far as anectdotes go. As long as there are continuing indications that the Federal Reserve will continue doing what appears to be propping up the markets, it will continue to remain futile to be in denial of the power of the Federal Reserve.

Of course, that brings up the question of yet another market axiom, which is that the market discounts the future by six months.

If that's the case we may very well be on the cusp of a market that would be expected to start reacting to the certainty of a tapering being implemented.

The real question for me is whether the realization will result in an orderly consolidation or a frenetic reaction.

And when does that realization happen?

I don't think it will be this week, which is why I decided to venture forward with some weekly contracts, such as with today's Transocean purchase.

But I'm still in denial. Not about the futility of fighting the Federal Reserve, but that the market can continue predicating its advances on a foundation that can't, by its very nature, continue without adverse inflationary consequences.

Regardless of who the next Federal Reserve Chairman will be, you can be reasonably assured that inflation is something that they would like to keep under control unless there is evidence of a deflationary enviroment. Then you can pump money into the system with impunity. Of course, as just seen in Japan what may be good for battling deflation may not necesssarily always be great for the markets.

They may give those beautiful ceremonial swords in Japan, but we certainly don't want to emulate their past 20 years of deflation and fall off the economic power map.

So Quantitative Easing  will end. Get used to it, because it will be done slowly and responsibly to inflict as little adverse impact, as possible, at least unless humans or computers over-react.

As far as tomorrow's Federal Reserve statement goes, it's hard to imagine tomorrow being another day like today's which in turn followed another hard to imagine day like yesterday.





OTP Sector Distribution* as of June 18, 2013

  * Assumes equal number of shares in positions

Intraday versions of the Daily Market Update are not archived. You may access prior day's Daily Market Updates by clicking here







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



 The posting of these trades is not a recommendation to initiate positions nor to execute any trading positions, as they may represent time sensitive actions.

Subscribers may see ROI statistics on all new, exisiting 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 - June 17, 2013 (Close)

Just another week off to an improbable start.

This is the final week of the June 2013 option cycle, so there are potentially lots of decisions that may need to me made as prices evolve.

Since I am near my desired cash level, my preference is to rollover whatever is possible into the forward month, or as in the recent case of Riverbed Technology, perhaps even a bit further.

Going out further has potential advantages during certain kinds of markets.

In addition to locking in premium for a longer period, it gives additional protection in the event of adverse earnings related moves, as we are getting ready to enter yet another earnings season in just a few weeks.

Additionally, there is some evidence of some increasing premiums in forward months as a result of some movement in volatility. WIth increasing volatility the price rises in premiums impacting forward months could give equivalent ROI, yet with reduced trading.

Given this morning's opening, it's getting increasingly difficult to ignore or belittle the market.

This morning's trades, particularly Abercrombie and Fitch and Joy Global, and then using the weekly option contract, reflect some acquiescence. I haven't been opening too many MOMENTUM positions lately, having focused more on dividend and TRADITIONAL stocks, while also going the monthly route.

We're getting lots of mixed information regarding the potential for global economic expansion, especially in China. One day the reports are of activity by central planning agencies that would indicate large construction and infrastructure projects ahead and the next day we hear news of looming under-employment. The news has predictable effects on many stocks, causing them to bounce back and forth. That's been especially true of the metals.

This week, once again, all eyes are focused on Wednesday's FOMC meeting minutes release at 2 PM, give or take a few nano-seconds. Since it is all a "Quadruple Witching" day on Friday, the reaction to Wednesday's report and the subsequent press conference can really have some impact on market movement.

Again, that movement can be in either direction and not necessarily be in a logical direction.

Some evidence of the impact of words was seen mid-afternoon after an article in the FInancial TImes reported that an announcement would be made on Wednesday that the dreaded "tapering" of Federal Reserve intervention would start soon. The market drifted down more than 100 points from its high after the article was released.

That's not the first time in the past month that concerns that the Federal Reserve would end its largesse have dragged the market lower. Although plenty of people fault the Federal Reserve for propping up the market, it's clear that no one actually has minded the results of the largesse. Certainly the market's rally on Thursday after the late day article by the Wall Street Journal's Jon Hilsenrath would indicate that everyone loves the notion of a delay to the start of taper.

If you had any doubts about that you could put it to rest, as the market recovered much of its drop when the author of the Financial Times article Tweeted that he personally believed that the tapering process would not begin until September and that the Federal Reserve would not leak information to journalists.

But you would think that by now the market would be inured to the thought that the flow of funds was going to slow sooner or later, just as they should be inured to the fantasy that the flow of funds would continue.

With that in mind, there may be good reason to attempt rollovers prior to the release of minutes.

Nearly two weeks ago, with the Employment Situation numbers looming I was thinking along the same lines, but the premium differentials just didn't warrant making the rollover trades. In that case, it turned out to be a good decision.

This time around, however, there's much less time value remaining in the June 2013 contracts, so the trading opportunities may be a bit more bountiful. The erosion of time value is greater in the soon to be expiring options than in the forward months, so the premium differential is enhanced with time and then further enhanced if volatility is climbing.

Is volatility climbing?

If memory serves me correctly, the market lost 100 points on Friday, after being up nearly 200 points the day before.

This morning, as I was writing this first draft, the market was again up nearly 200 points. If it finished up triple digits it would be the fifth consecutive triple digit trading day. But just to be complete, if it finished down triple digits today, which wouldn't be unheard of, that 5 consecutive day streak would remain intact. Of course neither of those scenarios considers the recent spate of days with out-sized intraday moves.

No matter where today's trading would have ended, it had already had its triple digit climb higher and then a subsequent triple digit give-back. As it turned out, tomorrow we go for six straight.

This is one nervous and totally undecided market simply looking for an adult to provide guidance.

For someone who's fully invested and especially if they're not hedged, I can understand the ecstasy and I can only forlornly envy their literal and figuraritive fortunes. Maybe it's just me, but I would definitely take some profits if I was in that situation, especially having the memories of all of those paper gains that I had in the past when having professionally managed accounts that disappeared quickly or sometimes just melted away and were gone before you realized that there was a big picture behind the small incremental moves.



Note:

For those holding Pfizer shares, today is the day to decide whether to tender the shares, or not.

Pfizer has traded very interestingly today, as it also did on Friday, alternatingly up and down. Its descent in the final hour exceeded that of the S&P 500, while Zoetis climbed higher. The overall trend for Pfizer has been higher of late, while Zoetis has gone in the opposite direction. I think that latter trend will continue, so I'm not tendering my shares, although they still may end up being assigned this week at $29.

In the unlikely event that the offer is under-subscribed there may be reason to reconsider accepting a new and improved offer.











OTP Sector Distribution* as of June 17, 2013

* Assumes equal number of shares in positions

Intraday versions of the Daily Market Update are not archived. You may access prior day's Daily Market Updates by clicking here







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



The posting of these trades is not a recommendation to initiate positions nor to execute any trading positions, as they may represent time sensitive actions.

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

See all Trade Alerts for this monthly option cycle

Weekly Up to Date Performance

June 10 - 14, 2013

For the week, new purchases (or sales of Put contracts) continued its streak of beating the  time adjusted S&P 500, again by an exceptionally large 2.0%, and also beat the unadjusted index by  2.5%, as the market made lots and lots of noise, but ultimately finished the week lower. The new positions, were 1.4% higher,  exceeding the 1% ROI threshold.

This week the market was as likely to surge as it was to plunge. Sometimes both in a single day, ultimately showing an adjusted loss of only  0.5% for the week, while the unadjusted S&P 500 lost  1.0%. New purchases gained 1.4% for the week, above the threshold and well ahead of the market.

No positions were closed this week.  For positions opened in 2013 and subsequently closed, performance exceeded that of the S&P 500 by 0.3%. They are up 2.6% besting the market by 14.2%.

Another chance to say "What a week."

Friday wasn't a particularly good way to end the week, tallying another triple digit loss, as it only adds to the intrigue of what awaits around the corner.

The hairpin turnarounds in the absence of tangible events or in inconsistent response to recurring events complicates everyone's life.

Revelations that others may have unfair advantage due to their ability to access market moving news milliseconds before you and I has many exorcised and now there are concerns that the individual investor, who was counted on to fuel a rally, will continue sitting on the sidelines.

Predicating one theory on another theory that hasn't been demonstrated to have validity is a shaky proposition.

I, for one, could care less about the High Frequency Trades that may be made on the basis of having paid for proprietary information. Maybe the information shouldn't be released to the public, anyway, floowing the age old formula: "No pay, no play."

Ultimately, the market is a zero sum game at a specific moment in time, but not longitudinally. Add up all of the specific moments and it's still zero sum, but some are left out in the cold while others frolic.

The reality is that if you distribute any resource equally, within moments you'll have those that have squandered it all and others that have parlayed the assets to higher levels.

I really don't care what futures traders are doing a millisecond before 8:30 AM or a millisecond before 10 AM. I'm not likely to be trading immediately on the cusp of market moving news and am not likely to be taken for the ride.

After the HFT trades are all said and done the zero sum game clock starts ticking anew as if nothing ever preceded.

So it seems to be a waste of time to become incensed and it also seems to be a waste of time to try and understand what is motivating our market movements.

Just accept it and try to make the best of the gyrations.

Next week is a big week, with monthly expirations looming. Compound that with release of FOMC minutes on Wednesday and a Ben Bernanke press conference after the minutes have been digested for 30 minutes. So there will be plenty of opportunity  for imaginations to run wild or for the Chairman to help put nerves at ease or help fray them even more.

It's always a difficult balancing act but this coming week may be a bit more challenging than usual.

Obviously you can't control in which direction the market moves, so you have to be prepared to end up with much more cash on Monday than you would like, due to a slew of assignments, or you have to be prepared to rollover many positions (which also increases your cash level, thankfully).

Doing the latter is preferable if you already have an adequate cash reserve, assuming that you want to be prepared for some kind of downturn, as the market is ramping up volatility. Of course, the rollovers, more than likely into monthly postions results in another month of decreased trading activity.

I happen to like trading, but others may take the reduction as a relief or even good news.

I've been droning on about developing a cash reserve relentlessly, for far too long. So much so, that what used to be an uncharacteristic stance may become characteristic at some point.

I hope not.

I do believe that we are approaching some kind of precipice. If the decline is at hand, I believe that it will be relatively short; perhaps 4 to 6 weeks, and will open open many good opportunities thereafter, especially if the market stays flat or just has a modest rise for the rest of the year.







This week's details may be seen in the Weekly Performance spreadsheet * or in the PDF file, as well as as in the summary.below

(Note: Duplicate mention of positions reflects different priced lots):



New Positions Opened:  AAPL, CHK, DOW, FAST, MRO, MRK

Puts Closed in order to take profits:  none

Calls Rolled over, taking profits, into the next weekly cycle:  none

Calls Rolled over, taking profits, into extended weekly cycle: none

Calls Rolled over, taking profits, into the monthly cycle:  MRK

Calls Rolled Over, taking profits, into a future monthly cycle:  RVBD

Calls Rolled Up, taking net profits into same cycle:  none

Put contracts sold and still open: SHLD, TIVO

Put contracts expired: none

Long term call contracts sold:  none

Calls Assigned:   none

Calls Expired: AAPL

Puts Assigned:  none

Stock positions Closed to take profits:  none

Stock positions Closed to take losses: none

Calls Closed to Take Profits: none

Ex-dividend Positions:  FCX (ex-div 6/12 $1.00), MRK (ex-div 6/13 $0.43) 





For the coming week the exisiting positions have lots that still require the sale of contracts:   AAPL, CLF, FB, FCX,  MCP, PBR, X, WLT, X (See "Weekly Performance" spreadsheet or PDF file)



* If you don't have a program to read or modify spreadsheets, you can download the OpenOffice Suite at no cost.



(see all trades this option cycle) 

Daily Market Update - June 13, 2013 (Close)

I don't know how many of you actually look at the futures market at night or very early in the morning, much less look at overseas markets and their own futures markets.

If you do, it's probably a waste of time.

Mark Haines, the late CNBC anchor, used to say that there was a poor correlation between our own futures markets and the actual market's performance, particularly when the futures indicated a large move. Yet, he observed, so many people put so much emphasis on the futures.

If you looked at the Nikkei late last night their futures were pointing to a horrid day. In that case, it turned out to be a horrid day and caused our own futures to sink triple digits.

I have enough trouble trying to understand the US markets. I'm not going to venture over to the other side of the world and increase my ignorance.

But as we stood ready to open the trading session this morning all of that had been erased, maybe because the Nikkei futures market turned positive, making us forget all about just how bad their real trading session had been.

That's been an interesting and recurring phenomenon for the past few weeks. Our own markets have been more likely to follow the Japanese futures market, which itself has been a poor predictor of how the Japanese market will respond once their trading opens.

A couple of week's ago the theme of a weekly article was "Who's Wagging Who?"

It's still not really clear where the signals are coming from and what is really setting the tone locally and globally.

I suppose none of that really matters. All that matters is what is happening at the moment and not necessarily why it is happening. Certainly the fact that our own markets opened on the downside, despite the fact that the futures were completely turned around and indicated a positive opening adds creedence to that thought.

And then the market went completely in a direction that was completely unexpected, except for the fact that there's now a growing chorus of people calling for a correction. That in itself is a reason to have gone higher.

Market internals have clearly been deteriorating and volatility is marching higher, although it is still far away from earlier levels, but it is a measure that can quickly change and does so in multiples to the market's change.

Today was just another example.

While I continue to want to see a correction, I would love to see some price stability or appreciation between now and the end of the current option cycle. If we do follow last year's pattern, there is a chance of some recovery from this most recent 3.5% drop. That would be wonderful as far as being able to either escape or rollover positions.

As I looked out my window this morning an hour or so before the opening bell, it had suddenly gotten very dark and we were receiving tornado warnings, not something that usually happens early in the morning. Somehow, I saw a market metaphor out there. I know  what to do when there is a tornado warning. I know exactly what part of the house to go to, but the hard part is making the decision to get up and go, because there's always a sense of disbelief.

I think I know what to do when there are market warnings, but there too, the hard part is knowing when to get into gear.

I don't know if my hope for the market is similar to wishing that a tornado bypass me for now and head to Philadelphia and then come back here for when I'll be better prepared.

Instead, it makes sense to be prepared now, but to occasionally stick your head out the window and not lose sight of what's going on.

As it would turn out today was a very welcome rally, bringing positions closer to or beyond strikes that expire next week. The closer they hug the strikes as we pull closer to option expiration the more flexability to balance the needs for income generation, safety and developing cash reserves.

Sometimes it's nice to sit back and just watch a thing of beauty. That was today's market.

Hopefully, the beast will stay inside just a bit longer.

Amazingly, despite the omenous darkness this morning prior to the opening bell, the rains and winds didn't come until about 10 minutes before the closing bell.

We'll just have to wait and see what Japan thinks about all of this.



OTP Sector Distribution* as of June 13, 2013

  * Assumes equal number of shares in positions

Intraday versions of the Daily Market Update are not archived. You may access prior day's Daily Market Updates by clicking here







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



 The posting of these trades is not a recommendation to initiate positions nor to execute any trading positions, as they may represent time sensitive actions.

Subscribers may see ROI statistics on all new, exisiting 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 - June 12, 2013 (Close)

The market's short term memory is getting increasingly suspect, although its stomach for rapid changes in direction is impressive.

Not necessarily the good kind of "impressive," just more that it gets your attention kind of "impressive," nuch in the same way as roadkill can get your attention and in its own way be quite impressive.

Here's an interesting statistic. For 2013, prior to the market high, the trading range on an average day was about half of what is has been since the market top.

Since May 21st, the average daily range has been almost 200 points. I've been ranting about all of these recent triple digit moves because it's so reminiscent of a year ago.

In the absence of any real alteration in the macro-economic picture from yesterday to today, it's hard to understand the conviction with which the markets go up and then down, only to go up again. But that's exactly what they've been doing for the past 3 weeks.

What traders were thinking when they sent the market up 100 points at the open will be a mystery as it didn't last long enough for many to offer a definitive opinion.

What were they or the computers thinking? WHat then caused them to change their opinion on a dime?

Good luck trying to answer any of those questions.

Once again, this week there is very little to think about when it comes to potential rollovers. Although that was part of the near term plan, it leaves me a little forlorn and looking for things to do.

Instead, just as I did last Wednesday, I will be looking at opportunities to rollover June 2013 monthly contracts into July 2013 contracts and perhaps even an occasional August 2013 contract in order to bypass the potential downwinds from earnings.

Yes, even though we're still in earnings season the next cycle starts all over in July.

I actually started doing that review of opportunities again yesterday and compared the differentials of making those trades today versus having made them last week.

Not surprisingly, with the erosion of time value being faster on the near term options that are running out of life, the differentials are increasing. As I always say, those pennies do add up.

So it pays to wait. Right?

Maybe. The challenge is trying to squeeze as much out of the trades but without waiting too long and potentially losing the opportunity. Things have been changing very quickly lately. In hindsight I look at every lost opportunity. Not so much in regret, but in trying to learn something from inaction.

For example, not having sold new call options on Petrobras. A company whose shares recovered greatly from an overblown period of selling. But just as the recovery happened in the absence of any news, so too did the subsequent relapse occur without any news.

So instead of letting another premium soften the decline it's just another round of waiting for yet another recovery and then not making the same mistake.

In addition to the challenge of not making the same mistake again there is a challenge of not having too many exisiting positions assigned because there is a limit to how much cash I want to be holding that will be in need of stocks.

It's hard enough to figure out what to buy right now, but imagine sitting on a much bigger idle pile. Of course, you could always increase the size of individual purchases, which is something that I'm more likely to do if faced with that kind of situation.

Tough problems to have, for certain. I should probably just throw rocks and Molotov cocktails at the computer screen. Even in my advancing years I think my throwing form is far better than most anything that we've seen from Taksim Square and undoubtedly better than anything from the Middle East over the past two years.

They just don't play enough baseball.

In the time it took to write these first few and probably last few paragraphs, the market has already given up most of its early morning gains. The digression to baseball can give you an idea of how little there is to do at the moment.

But that early market correction of the surprisng advance may be the first logical reaction we've seen in about two weeks, But, given how things have been bouncing around lately, I won't hold out too much hope that it portends anything good for the future, much less the rest of today's trading session.





OTP Sector Distribution* as of June 12, 2013

  * Assumes equal number of shares in positions

Intraday versions of the Daily Market Update are not archived. You may access prior day's Daily Market Updates by clicking here







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



 The posting of these trades is not a recommendation to initiate positions nor to execute any trading positions, as they may represent time sensitive actions.

Subscribers may see ROI statistics on all new, exisiting 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 - June 11, 2013 (Close)

Phillipines? Thailand? Malaysia?

Those describe many of the labels inside of my assorted pillowcases. They aren't the first thoughts that come to mind when thinking what markets on the other side of the world will rock our world.

Those are the markets that caused us to fall out of bed this morning, while in the meantime Japan doesn't even get a mention?

Japan goes down 5% yesterday and not even a yawn on this side.

The nice thing is that there's always an answer that lies just out of the grasp of proof. For the moment, the "buzzwod du jour" is "emerging markets."

When you hear distinguished people asking "could this be the start of the correction?" there's not much being inspired. Neither a respect for the "expert" nor a plan of action. That's a pretty insipid observation that's based on a market reaction that is very likely to halt or reverse itself at the slightest of diversions, once someone realizes that the so called "emerging markets" wag the US market as much as a slow internet connection convinces you to get a group colonoscopy  tomorrow using a Groupon.

In fact, after about 90 minutes, the market, although for the briefest of moments actually turned positive and ended up acquitting itself quite well for the day, if you excluded the final 30 minutes. The retreat backward was blamed on interest rates.

The markets have ADHD and are easily distracted. It will take some significant hyper-focus on a news or economic issue to be able to say that there was an association between the market's sudden, sustained and large move. Even the devolution of events in Turkey, a country with a democratically elected government and the best economy in the region not based on oil, banking or opium, didn't do much to faze us as the news was unfolding.

More than likely, the antecedent event won't exist. It will be some kind of arcane or proprietary metric that triggers selling or buying, which in turn trips other proprietary algorithms into action.

Last week, it was the "Hindenburg Omen."

Talk about arcane. While doing so you can also talk about how poorly correlated so many of these technical indicators are with actual outcomes. The funny thing is that there's recognition of such poor correlation when you hear certain comments, such as "it has successfully predicted the last 17 of 5 recessions."

Yet, attention is still paid, particularly since the individual hurling incredulity at one metric is quick to propose another arcane metric as an alternative.

The one metric that did get my concern was the fact that there were 5 times as many losing stocks as there were gainers. Although semi-quantitative at best, it does sometimes paint a better picture of the nature of the market than do the indices. That was certainly the case going into the final hour when we had cut our losses by two-thirds and it was beginning to look like only a modest loss was in the cards.

But if and when the true market moving wave comes, think of it as investing by drones being controlled by computers and software, rather than real global or national disasters determining longer term movements.

Unfortunately, it may then take another computer wave to undo the first wave, as opposed to when humans are more intimately involved and especially when dealing with an unforeseen natural event. Our recoveries always seem to be quite fast when identifiable events are present and concrete.

It's those amorphous and poorly defined events, such as only perceived by a computer or an afficianado of obscure metrics that are so difficult to overcome. Those represent "the unknown" and it's much harder to get back into action when you don't know what you're facing.

As I look at my cash reserve, I'm already at the low point of my range, now at about 35%, although I still may have desire to add more, such as Merck, which goes ex-dividend this week. I'd like to, but it hasn't gone down in price enough, relative to its recent price gains. But there's still; always tomorrow.

The recently increased flow of dividends into my account has me wanting more, because everytime they get credited to the account they seem like unexpected gifts. Despite what is said, it is definitely better to receive, even though it is a return of your own money.

So far, today's lone trade, Dow Chemical continues along the lines of looking to lock in premiums and if possible, get a dividend out of the process as well. That might be a nice way to start the July 2013 cycle.

The more of those, the better.



OTP Sector Distribution* as of June 11, 2013

  * Assumes equal number of shares in positions

Intraday versions of the Daily Market Update are not archived. You may access prior day's Daily Market Updates by clicking here







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



 The posting of these trades is not a recommendation to initiate positions nor to execute any trading positions, as they may represent time sensitive actions.

Subscribers may see ROI statistics on all new, exisiting 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 - June 10, 2013 (Close)

Two bits of news of what could have been significant market movers greeted us this morning.

The first was that the Nikkei closed 5% higher, but if you followed Asian markets, you knew that yesterday, as did our own futures markets, which seemed to ignore that significant rally.

One of my son's is currently in Shanghai. We're busily trying to figure out how to take advantage of things happening there first, but whenever he asks anyone about it they just look at him vacantly.

Maybe it's the lanuage barrier.

The second event occured about an hour before the market opened, when Standard & Poors raised US credit ratings to "stable" from "negative outlook."

S&P, which is part of McGraw Hill took quite a bit of heat about 2 years ago when it first warned of lowering US credit worthiness and some believe a little bit of revenge was behind the US Justice Department deciding to investigate S&P over its role in the meltdown of the credit and mortgage markets.

Since the 25% drop in share price after that announcement of an investigation, McGraw Hill has changed its name and ticker symbol in an effort to perhaps lessen its profile among angry investors. Maybe even as a tactic to hide from the government. Since then, however, it's been a great place to park money as the DOJ bark may not necessarily indicate that there will be any forthcoming bite.

My dachshund can attest to that.

But with those two big stories it still seems that the only story of any interest was the opening session of Apple's Worldwide Developer's Conference this morning. There's been so much speculation about what is going to be presented. So  much speculation over whether Apple will shift to emphasizing software over hardware and what that may mean with regard to revenue growth, since people tend to get more excited about hardware than they do software.

Like so many things it wouldn't be too unusual if everything ends up being anti-climactic once the conference gets underway. As it would turn out after the lights were turned off marking the end of the first day sellers came back into the picture, clearly not over-whelmed by the proceedings and left wanting more.

However, Apple used to be the ultimate in "Under promise and over deliver" on earnings and typically rewarded shareholders by lowering expectations. On the other hand, while the rest of the world had expectations for over delivery on the consumer end of things these kind of conferences can deflate expectations.

But that was all so yesterday.

I think that so much seems to already be expected from this conference and so much has already been recently suggested that there is relatively little downside to price fallout from this meeting. It just doesn't have the same speculative feel it did even a year or two ago.

I don't think that's a function of the absence of Steve Jobs. I think this is a function of the evolution of the company. As one analyst said earlier today, Apple's problem has been being too innovative.

Maybe now the rest of the world is catching on to the fact that Apple is only human and sooner or later the kind of histrionic share moves will become fewer and fewer.

That would make Apple a very good covered option stock, especially since mini-options are now available for those unwilling to invest upwards of $50,000 for the bare minimum of shares.

But if you now forget about Apple for just a moment, the market appears on track to do nothing after what could have been two potential market movers and our own market's reaction to the Employment Situation Report on Friday.

The follow-through from Friday's really overblown rally never existed, so there are still no clues to what may await. The rally on the basis of receiving expected news was about the same as giving everyone a "Participant" trophy.

"We're all winners" eventually loses its meaning.

This week I'm willing to get cash levels down to 35% but am also continuing to look at opportunities to rollover monthly June 2013 contracts to July 2013. The problem is finding anything to warrant the risk. Not of market risk, but most stocks that are worthy of owning have seen their own bull runs and have to take a pause, although my bet was sooner, rather than later.

Again, it's all about locking in premiums in the event that "later" gets here, sooner or later.



 

OTP Sector Distribution* as of June 10, 2013

  * Assumes equal number of shares in positions

Intraday versions of the Daily Market Update are not archived. You may access prior day's Daily Market Updates by clicking here







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



 The posting of these trades is not a recommendation to initiate positions nor to execute any trading positions, as they may represent time sensitive actions.

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

  See all Trade Alerts for this monthly option cycle

Weekly Up to Date Performance

June 3 - 7, 2013

For the week, new purchases (or sales of Put contracts) continued to beat the  time adjusted S&P 500, again by an exceptionally large 2.1%, and also beat the unadjusted index by  1.9%, as the market finished the week with a gain of 0.8% after its 1.3% gain today.

The size of the difference was related to the rollover of 3 positions into monthly contracts. Without the rollovers, the new positions would have beaten the S&P 500 by 0.8% for the week.

This week the market was essentially flat until Friday's rise. Ultimately showing an adjusted gain of  0.7% for the week, while the unadjusted S&P 500 gained  0.8%. New purchases gained 2.7% for the week, surpassing the 1% threshold target and well ahead of the overall market.

Without the rollovers the gain for the week by the new positions would have been 1.5%

Again, just like in the previous week, only one new positions was added to the 2013 Closed Positions. 119 positions comprise the "2013 Closed Position" results For positions opened in 2013 and subsequently closed, performance exceeded that of the S&P 500 by 0.%. They are up 2.6% besting the market by 14%.

What a week. Talk about highs and lows.

Remember yesterday's comment about how the Volatility Index had gone well above the 50 Day Moving Average?

Well that was so yesterday.

The delayed reaction to the Employment Situation Report was just another in a week when large moves were the norm and not just from day to day.

It all started a couple of weeks ago on the day that the market had what is called a "Key Reversal." That's the kind of move that makes you wonder how could such extremes exist in the same breath.

Technicians will tell you that such reversals have implications although like lots of things in technical analysis, they don't really tell you when those implications never materialize.

The nice thing about market predictions and applying any kind of analytical tool is that the time frame is so fuzzy. Eventually a "Key Reversal" on the charts must lead to a key reversal.in real life.

How many "cup and handles" end up really having any meaningful predicitive capability? If they did, everyone would be applying the rules learned from charts and there would be no one to trade with in a universe populated by those with perfect knowledge.

Although Thursday's reversal didn't meet the criteria to be designated a key reversal, the theme was the same, except in opposite sequences. A few weeks ago the key reversal was bearish. Yesterday's performance was bullish, especially in advance of the great unknown that was in the form of the Employment SItuation Report.

Whether big traders  just wanted to better position themselves after perhaps having gone overboard ont he sell side, or whether they were expressing a real bullish outlook, it's not possible to really know, but it was a very bold reversal, given the possibilities and the sheer impossibility of prediciting how a market woud react to any kind of news.

To some degree there was serendipity involved.

Had the number fallen on either side outside of the anticipated range, all sorts of speculative thinking would have been triggered. Is the good news bad? Is the bad news good? What does it means about what and when the Federal Reserve is likely to do or not no, next?

As much as many decry the role of the Federal Reserve in promoting its Quantitative Easing program. those same people have gotten very addicted to the benefits and go into spasms of withdrawal at the very thought of removing the stimulus.

As good as the market's performance has been in 2013, there really haven't been many triple digit moves higher. Instead, most of the  climb came as a result of many "under the radar" advances. A little here and a little there really does add up if you do it often enough.

But now it's different.

While everyone expects gold to do that kind of about face on a regular basis, after all, it is an emotionally laden kind of investment, you just don't expect stocks to do that.

When they do it gets people's attention, whether the moves are all in the same direction or even when the moves simply contradict one another.

We're definitely in a contradictory state.

Just look at the ISM number early in th week. A negative report on the state of US manufacturing. The ADP number mid-week was more of the same. Maybe that explains why a completely expected Employment SItuation Report was greeted so enthusiastically. Never mind the inconsistencies. ISM and ADP were an eternity ago.

I must admit, though, that I went with the tide on Thursday.

I was totally prepared to start looking at rollover opportunities of exisiting June 2013 contracts into July 2013.

Well, strictly speaking, I was looking and charting the prices all through the day, but my anticipation was that if any of those kind of trades would occur I was going to try and wait until the final 2 hours or so in order to try and get a bigger differential premium on rollovers.

But as the market strengthened on Thursday early afternoon the mood shifted near term premiums higher than longer term premiums, making the differentials smaller.

The positive mood was infectious and made it hard to justify not only taking a lower ROI, but then further reducing that ROI by ignoring the optimism.

In the meantime the late week advance provides some cushion for a subsequent drop, as certainly do the various premiums and the dividends that have been accruing.





This week's details may be seen in the Weekly Performance spreadsheet * or in the PDF file, as well as as in the summary.below

(Note: Duplicate mention of positions reflects different priced lots):



New Positions Opened:  ANF, BAX, EBAY, MDLZ, WMB

Puts Closed in order to take profits:  none

Calls Rolled over, taking profits, into the next weekly cycle:  none

Calls Rolled over, taking profits, into extended weekly cycle: none

Calls Rolled over, taking profits, into the monthly cycle:  BAX, EBAY, MDLZ

Calls Rolled Up, taking net profits into same cycle:  none

Put contracts sold and still open: none

Put contracts expired: none

Long term call contracts sold:  none

Calls Assigned:   ANF

Calls Expired: FB

Puts Assigned:  none

Stock positions Closed to take profits:  none

Stock positions Closed to take losses: none

Calls Closed to Take Profits: none

Ex-dividend Positions:  BAX (ex-div 6/5 $0.49), HAL (ex-div 6/3 $0.125), LTD (ex-div 6/5 $0.30), WMB (ex-div 6/5 $0.35)





For the coming week the exisiting positions have lots that still require the sale of contracts:   CLF, FB, FCX,  MCP, PBR, X, WLT, X (See "Weekly Performance" spreadsheet or PDF file)



* If you don't have a program to read or modify spreadsheets, you can download the OpenOffice Suite at no cost.



(see all trades this option cycle) 

Daily Market Update - June 6, 2013 (Close)

It seems as if the entire market was waiting for Friday's Employment Situation Report.

With the ADP Non-Farm Jobs Payroll Report on Wednesday and this morning's Job's Report the prevailing opinion is that the Employment Situation report due tomorrow can make or break the rally just as it could grease a slide downward.

As one commentator said this morning, it's hard to know what constitutes good news when the number is released. As with many things there is a tendency sometimes to over-analyze the facts and end up making illogical decisions as a result.

Just imagine the voice that does movie previews and promotional clips saying "In a world where bad is good and good is bad...," and you have an idea of what tomorrow may bring.

That's right. You have no idea of what tomorrow will bring.

You certainly had no inkling that the market would erase another mid-day triple digit loss today.

As usual, everyone has their  jobs targets but there's so much uncertainty about how the number, whatever it may be, will end up being perceived. Of course, you always have to add revisions of previous month's data into the mix, as well.

I think that in the best case scenario the previous months would be revised downward, but the current month's data would paint a picture of jobs growth. That combination should confuse both sides enough to perhaps leave the markets right where they ended the previous day.

As I mentioned yesterday, I don't believe that the jobs report will have a terribly big impact on tomorrow's trading unless the number is really far outside of the expected range.

But you just don't know and the market has been on edge for the past two weeks. To hear everyone talk about it, the report will be the single most important one ever delivered and will determine everything and forever.

I'll continue to take a less hysterical position.

As with everything, the question always has to be "But how does it effect me?"

So the choices with exisiting covered positions are two-fold while waiting for the numbers and then the sustained response following whatever knee-jerk moves may occur.

Do nothing is certainly a possibility, especially since most exisiting contracts are monthly contracts and even with a negative response to the report there are still two weeks of cover from the June contracts to give some time to recover from a moderate drop.

However, that leaves the few weekly contracts vulnerable and at risk of becoming non-performing assets if their prices precipitously drop on the day of expiration.

That was the rationale for rolling over the Mondelez and Baxter International contracts today. Abercrombie and Fitch on the other hand, just as in the previous week, are shares that I wouldn't mind seeing assigned and it was also just too expensive to rollover the position.

On the other hand we can rollover exisiting contracts, where feasible to July 2013 expirations in anticipation of a negative response and the desire to lock in some premium while minimizing the chance of ending up with more uncovered positions following June 2013 expiration.

In the case of eBay, the differential between buying back and selling new contracts was enhanced a bit because it reports earnings on July 17th, right before contract expiration. It was hard to not take that opportunity, especially since July is an eternity away. I'll worry about that when the time comes, but for now it's all been taken care. 

For starters I really don't want much more cash other than for some discretionary spending money next week. I've long set 40% as my objective and don't particularly want to see any assignments this week that would push me beyond 50% and am ambivalent about June's contracts. I don't particularly like the idea of a large number of assignments in two weeks and being left with much more than 40% in cash looking for places to go, once again channeling a Meatloaf song "All Revved Up with No Place to Go."

During the opening hour the market has been going back and forth, almost out of a sense of obligation and certainly without a sense of commitment.

It would have certainly been surprising to see any large moves ahead of today's close. That kind of move, the type we've seen in five of the last sessions would represent those who are either very stupid, very reckless or very certain because they are very much in the know of what's to come. The reversal may have been an an indication that people had over-commited to a pessimistic position and in essence took steps to move themselves back to a more understandable neutral position as the numbers are awaited.

My personal theory is that as soon as we reached a 5% drop, as we did during the low point of trading today, the algorithms kicked in and bought shares. Some algorithms are less fancy than others and use third grade metrics.

Always an optimist,  I had been hoping that as the day progressed the market continued to show stability.

And it did. A little upward bias was especially nice, particularly since it looked for an hour or so that we might be entering into a meltdown.

But as the market started to recover it was an opportune time to consider rollovers and bypassing the June 2013 contracts for July. It happened about an hour before I thought I would have to start making some decisions. The reason for waiting was that the premiums near the end of the day to buy back the contracts should change more on the downside and less on the upside than the corresponding July contracts.

Why July instead of June?

I like the market 6 weeks from now more than I like the market 6 days from now. Although you do have to be impressed with the reversal in the mid-afternoon.

While I had been consiering en masse early rollovers of June 2013 contracts to July where the differential between premiums offered enough of a reason to take a 6 week contract, the atmosphere and sentiment improved and the prices weren't as compelling as I would have preferred. Instead of en masse rollovers, it was just a handful. The trade off in not making the trades was giving up some security of knowing that June and July were all spoken for during a period that has a greater probability of being tumultuous.

Who knows? Maybe tomorrow.





 

OTP Sector Distribution* as of June 6, 2013

  * Assumes equal number of shares in positions

Intraday versions of the Daily Market Update are not archived. You may access prior day's Daily Market Updates by clicking here







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



 The posting of these trades is not a recommendation to initiate positions nor to execute any trading positions, as they may represent time sensitive actions.

Subscribers may see ROI statistics on all new, exisiting 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 - June 5, 2013 (Close)

Today's trading reminded me of the classic refrain from an equally classic song, "Paradise by the Dashboard Light," by Meatloaf

"What's it going to be boy? Yes or no?"

Was today going to be the start of something bigger or wasn't it? For now, I'm guessing it's not, because on Wednesdays, other than when the Federal Reserve unleashes its thoughts, not much happens.

Wednesdays are usually boring.

Until that point that I decided that it was a good time to amass some cash and also transitioned to more monthly contracts, I rarely had much cash to invest by Wednesday of any particular week. That alone was enough to make it boring. Most of the time there were weekly assignments and fresh cash awaiting investment on Monday and Tuesdays and very little would be left over by Wednesday.

Of course, Thursdays and Fridays were always rollover days.

So Wednesdays were a perfect day to do nothing, other than to watch the screen, the ticker and television. Which coincidentally is exactly what I do on Mondays. Tuesdays, Thursdays and Fridays. At least Wednesdays was a chance to think about possible rollovers.

But now it's different. It's Wednesday, cash in hand, but it's still boring despite another 200 points lower. Only a few potential weekly rollovers to look forward to, but in a market that has a decidedly negative tone to it.

It's boring because it appears we're at a precipice of something and can't do anything but sit and watch it unwind. Markets don't fluctuate quite like this for long. But it's not a good time to be making bets on one direction over another. So it's just watching to see what unfolds.

What lay ahead may be exciting, but the process of preparing for it fosters boredom and waiting for something to unfold is boring, as well.

Once something does unfold I may add "frustrating" to the description, too.

As the market was tentatively heading lower again today, we were only about 3% below the peak hit two weeks ago, but that went to about 4% by the session's close. By historical standards, that's an still an inconsequential kind of drop and one or two head fakes could completely erase that kind of a loss. That was certainly the case last year.

It's the head fake that gives people a false sense of confidence that we've tamed the great bear and vanquished it. 4% is standard operating business and means nothing.

Last year that wasn't the case. The lure of having believed that the battle was synonymous with the war is a powerful one and goes after your uninvested funds in a really voracious way.

There's nothing like feeling smug when you're fully invested at the top.

Of course, you could also feel smug about sitting on a pile of cash only to find that  it ends up missing out on the party. The past few days have been the first few days of feeling reasonably good about holding much more cash than usual.

This morning some prices were beginning to get more attractive, but just not enough, yet. However, I'm still more inclined to pull the trigger and buy something now or on further weakness than to take the lure if there appears to be some kind of bounce higher over the next few days or week..

Reminds me of another song refrain: "Won't get fooled again."

In 2012, the preliminary move lower and the reaction higher were both about two weeks in length.

This time around, I wouldn't be surprised, though if the weakness goes beyond two weeks or at least there's no immediate bounce higher. Beware those that call a cessation of weakness as "the market is setting a floor" or "the market is consolidating for its next climb higher."

Unlike last year when the market took that preliminary drop people weren't walking around saying that the market had been over bought. Instead, they felt that there was an aberration that the market dropped a little. They fell for the head fake.

This time there is more belief that some kind of a rest is overdue and you do hear more people now advising not to buy on this dip, whereas all through 2013 any slight hesitation in the market was viewed as a buying opportunity.

Part of the reason that there's hesitancy to buy on this drop is that the Volatility Index has been climbing quite a bit after being in hibernation for about a year. As it's done so it has gone through its 200 Day Moving Average.

Technicians don't like that sort of thing, but if you sell options you will begin to like it as the option premiums tend to follow.

In fact, boring Wednesday or not, I'm starting to look at the possibility of rolling positions over early to lock into July 2013 premiums. But it's that feeling that today wasn't quite yet the start of something big that precluded me from executing those monthly rollover trades today. 

By 11 AM the market itself was approaching another triple digit move and again, the move was lower. It just missed making it 5 for 6  trople digit days yesterday, but the pattern is really emerging, especially if you look at intra-day moves in absolute terms from highs to lows. As the day wore on that pattern became even more clear.

But why the weakness?

There was some weakness in the ADP employment numbers today, not that it portends anything for the official government release on Friday. But even if it does track the official numbers closely this time around,  I have a hard time seeing the market react to Friday's release uinless the numbers are truly spectacular or truly horrific.

For moves like today, sometimes you just don't really need a reason.

As far as Friday is concerned good numbers are already expected. Big yawner if the numbers are good.

However, even with spectacular numbers the result would likely be negative for the market as that perverse tendency we have to try and out-think everything with a unique sense of inverse logic, would suggest that good news is likely to lead to an earlier departure of the Federal Reserve from the credit markets.

So I'm likely to sit bored for the next few days, but if we start approaching a 7% drop from the recent S&P high, I think I would be willing to start depleting cash faster rather than slower. In the meantime, the challenge will be to secure what can be secured, even if it means giving up some upside gains between now and July 19th.

But if things do turn around and start moving higher, I'm ready to become a believer once we get to about 2% higher than that S&P 500 peak.

I'm not a technician, I just play one in the internet, but even that gets boring quickly.



 

OTP Sector Distribution* as of June 5, 2013

  * Assumes equal number of shares in positions

Intraday versions of the Daily Market Update are not archived. You may access prior day's Daily Market Updates by clicking here







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



 The posting of these trades is not a recommendation to initiate positions nor to execute any trading positions, as they may represent time sensitive actions.

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

  See all Trade Alerts for this monthly option cycle