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Daily Newsletter, Tuesday, 11/07/2000

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The Option Investor Newsletter                  Tuesday 11-07-2000
Copyright 2000, All rights reserved.                        1 of 2
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******************************************************************
MARKET WRAP  (view in courier font for table alignment)
******************************************************************
        11-07-2000        High      Low     Volume Advance/Decline
DJIA    10925.20 - 25.00 10996.50 10926.00  879 bln   1463/1326
NASDAQ   3415.79 -  0.42  3435.13  3360.26 1.70 bln   1841/1993
S&P 100   756.30 +  0.86   760.29   751.55   totals   3304/3319
S&P 500  1431.87 -  0.32  1436.22  1423.26           49.9%/50.1%
RUS 2000  506.01 +  2.05   506.01   501.36
DJ TRANS 2770.57 - 22.65  2796.45  2756.26
VIX        26.81 -  0.22    27.15    26.17
Put/Call Ratio      0.58
******************************************************************

What if the markets opened and nobody traded?

That was the case today as everyone sat on the fence and waited
for the election results. Only 876 million shares traded on the
NYSE and only 1.6 billion on the Nasdaq. After pulling back some
on the slaughter of chip stocks and fiber optics as a result of
comments by CSCO last night, the Nasdaq finally pulled into
positive territory in late morning but bled points until just
before the close. The Dow was no better trading in a narrow
50 point range all day. Just simply election jitters with most
traders unsure which way the vote will go and moving to the
sidelines until tomorrow.







The stocks which moved the most were not election related. The
acknowledgement by CSCO that they were overstocked on some chip
components and telecoms were ordering less than previously
expected was not the kind of news traders wanted to hear. Big
chip companies were hammered as traders fled them in droves.
Broadcom was the hardest hit with a -$42 drop followed closely
by PMCS -25, GSPN -17, IDTI -10. The fiber optic stocks also
lost ground on news of slower buying. SDLI dropped -10, QLGC
-8, JDSU -3, GLW -2. Some networkers and contract manufacturers
also fell with RBAK -16, JNPR -8, JNIC -6, JBL -6, CLS -4.

The CSCO conference call was positive in spite of the bloodshed
above. CSCO projected stronger revenue going forward and did
not disappoint traders with current earnings. CSCO had traded
down as low as $53 at the open but rallied on relief as traders
decided 50% growth was still 50% growth regardless of the exact
sub sector it came from. The recovery of CSCO was largely a
factor for the recovery of the Nasdaq. When investors saw the
rebound they decided things must not be as bad as they thought
the day before and even with the election in progress they took
advantage of possibly the last opportunity to buy CSCO before
a fall rally.

If you are a news and event investor and have been expecting a
Bush win there were plenty of sectors in which to position
yourself for post election returns. Drugs, Defense, Energy, HMO,
and of course Microsoft. Most of those sectors saw evidence of
profit taking the last two days as traders took profits just in
case things did not go as planned. Microsoft has probably seen
the biggest gains in anticipation of a possible easing of the
attack in a Bush presidency. MSFT has gained +22 from the October
low of $48 and was up +$1 today. A Gore win is sure to take some
of the wind out of their sails. Puts at the open might be a good
plan if that happens.

Either candidate winning will not help Pets.com which said it
was going to close its online store and lay off 255 of its 320
employees. As the latest dot.com to throw in the towel it joins
the ranks of the fire sale asset sellers. Pets.com said it would
sell inventory, distribution equipment, Internet addresses and
its sock-puppet brand icon and other intellectual property. Now
what exactly does the intellectual property consist of? Speak
and spell toys for dogs? Dog whoopee cushions? Odds are good
that there will not be a huge list of bidders. IPET may go down
as one of the quickest boom to bust Internet stories. IPET went
public in February at $11, zoomed to $14 and closed today at $.22
cents.

The only real news today was the CSCO aftershocks from last night
and the election. The markets tomorrow will be powered entirely
by the results tonight. A Gore win is anticipated to cause some
drastic reactions in the short term but long term the status
quo will be maintained and the markets will recover. If Bush
wins we could see some immediate gains but the long term impact
may be more subdued. Until the investing public sees what changes
Bush can actually ram through congress there may not be any
huge bull rallies. I am not saying the markets will not go higher
after the election of either candidate, it is just we know what
Gore will do as an extension of the current administration and
we don't know exactly what Bush will be ABLE to do. The markets
are not fond of economic change and the unknown may slow investors
coming back into the markets. I am not an election pundit and
you should look at somebody else who lives politics for the real
cause and effect for each party. I am only interested in what the
short term market impact will be and how to trade it. That being
said I think we could see, regardless of who wins, a buy the
rumor, sell the fact event on Wednesday. Everybody has placed
their bets and are waiting. Once the outcome is known those on
the wrong side will change sides and those on the right side will
take profits. With the PPI and Dell earnings on Thursday investors
will immediately refocus back on economic matters and we will
moved based on those factors.

We are moving quickly to include the changes I spoke about on
Sunday and beginning tonight we have some Low Volatility and
Long Term plays. Be sure to check them out and let us know if
we are headed in the right direction. We should have all the
changes made by the weekend so be sure and look for them.

Good luck and sell too soon.

Jim Brown
Editor


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****************
MARKET SENTIMENT
****************

Newton's Law Of Physics
By Austin Passamonte

What can't go up must come down. That centuries-old natural law
holds true for everything in the universe including our beloved
markets. Bulls are in dire need of a serious catalyst to push this
thing towards recent highs.

Which thing? All of them. We see weakness across the board within
the big indexes that lead all others. In particular there is now
bearish stochastic/price action divergence in the Dow, SPX and
OEX.




We take the unusual step of adding charts to this section for a
reason: this market signal is and always will be our #1 market
forecast tool. It is not infallible but remains the highest-odds
market direction signal known to us. It has worked in commodities,
stocks and options so far. Invent another market we can chart and
it will work there, too.




As shown in the Dow and also the SPX (not shown), daily charts
record higher stochastic highs with lower price-action highs at
respective extremes.

The hourly OEX chart is channeled in a bear-flag that shows
divergence as well. This is a clear signal our highest odds of
next major market action lies to the downside.

Notice we said higher odds. That is the very best any trader can
hope to do. Quantify odds and carefully wager trades in that
direction. Over and over again. Wash, rinse, repeat.

Tuesday's action saw very few block-trades in the OEX, SPX or QQQ
until late afternoon when some pretty big blocks of long puts were
opened, including 600 SPX Nov 1400 puts @11.25 - a $675,000
position from someone following purchases of 200 and 300 more just
prior.

The 300 block seems to be a spread between the 1400/1425 puts for
7 points, which happened to be near the debit-spread bid at the
time. The credit-spread bid at the time was near 5 so we are
inclined to believe a major player has wagered $210,000 we will
soon be at or below his 1418 breakeven point in the SPX with only
nine sessions left until expiration.
Nothing but doom & gloom? How could there be if we're option
traders? Equal profits or loss are there for the taking in both
directions depending on how we play it.

On a bullish note, we still see long-term strength in most major
index weekly charts except for the NASDAQ's, but they are within
the oversold extreme and much closer to a bottom than top at this
point in time.

Market Sentiment still looks for all-time market highs in the SPX,
OEX and possibly the Dow by year's end. NASDAQ record highs would
surprise everyone for sure. Call options will certainly have their
place in the sun before long but don't ignore the opposite side of
your option applet just yet. Newton's Law is alive, well and
showing up on our charts.

Trade with the market trend and prosper!

*****

VIX
Tuesday 11/07 close: 26.81


30-yr Bonds
Tuesday 11/07 close: 5.88%

Support/Resistance Indicator
The Index Support/Resistance(S/R)Ratio is a formula used to
gauge possible support or resistance based on open-interest
disparity. Ratio listed is percentage of calls to puts or
puts to calls respectively.

Support is factored from dividing puts by calls at strike
levels beneath index closing price. Resistance is factored
from dividing calls by puts at strike levels above current
closing price.

                                   Tuesday
                                 (11/07/2000)
  (Open Interest)       Calls        Puts          Ratio
S&P 100 Index (OEX)
Resistance:
795 - 780               12,889          239        53.93***
775 - 760                8,763        2,202         3.98

OEX close: 756.30

Support:
750 - 735               15,069        9,788          .65
730 - 715                6,393       11,747         1.84
Maximum calls: 745/5,924
Maximum puts : 700/5,381

Moving Averages
 10 DMA  741
 20 DMA  733
 50 DMA  764
200 DMA  777


NASDAQ 100 Index (NDX/QQQ)
Resistance:
 91 - 89                28,954        10,944         2.65
 88 - 86                29,612        16,233         1.82
 85 - 83                46,983        37,171         1.26

QQQ(NDX)close: 82.04

Support:

 81 - 79                29,163        50,168         1.72
 78 - 76                10,456        56,150         5.37
 75 - 73                 4,553        51,519        11.37

Maximum calls: 84/25,457
Maximum puts : 80/29,238
Moving Averages
 10 DMA 80
 20 DMA 80
 50 DMA 87
200 DMA 93


S&P 500 (SPX)
Resistance:
1500                   12,254         3,840          3.19
1475                   14,763         4,766          3.10
1450                   11,373         8,645          1.32

SPX close: 1431.87

Support:
1400                   27,731        29,722          1.07
1375                   13,382        19,132          1.43
1350                    8,403        23,037          2.74


Maximum calls: 1400/27,731
Maximum puts : 1400/29,722

Moving Averages
 10 DMA 1407
 20 DMA 1389
 50 DMA 1432
200 DMA 1441

*****

CBOT Commitment Of Traders Report: Friday 11/03
Weekly COT report discloses positions held by small specs
and commercial traders of index futures contracts on the
Chicago Board Of Trade. Small specs are the general trading
public with commercials being financial institutions.
Commercials are historically on the correct side of future
trend changes while small specs are not. Extreme divergence
between each signals a possible market turn in favor of the
commercial trader's direction.


                     Small Specs                Commercials
DJIA futures    (Current)  (Previous)      (Current)  (Previous)
Open Interest
Net Value        -1066        +89            +657        -483
Total Open
Interest %       (11.56%)    (1.07%)        (2.84%)     (2.34%)
                net-short    net-long       net-long    net-short

NASDAQ 100
Open Interest
Net Value         -448        -262          -927          +85
Total Open
Interest %       (2.40%)      (1.48)        (1.89%)      (.21%)
                 net-short   net-short     net-short    net-long

S&P 500
Open Interest
Net Value        +60112      +57,031        -70603     -66,429
Total Open
Interest %       (31.64%)    (31.05%)       (11.10%)    (10.72%)
                 net-long    net-long       net-short   net-short

What COT Data Tells Us: Commercial positions in S&P 500 remain at
their ten-year extreme short levels while small specs held their
net-long positions as compiled Tuesday 10/31 by the CFTC.
Commercials have reversed position albeit modestly on the DOW, and
have now gone to a net-long position while the small specs have
turned net-short positions


**************
MARKET POSTURE
**************

Please visit this link for Market Posture:

http://members.OptionInvestor.com/marketposture/110700_1.asp


***********
OPTIONS 101
***********

Optical Illusions
By David Popper

About 12 years ago, I defended a businessman that caused the
collapse of a small bank.  "John" owned ten fast food restaurants,
each of which was extremely successful.  Each restaurant was a
separate corporation and each restaurant had its own banking
relationship with a separate bank.  John also had a central bank
account from which all monies from all of the ten satellite
flowed.  This way, each restaurant stood on its own but through
the central bank, money could be transferred to one restaurant
or another as needed.  It really was an efficient system.

Sometime around late 1989, John developed an extremely extravagant
lifestyle which was beyond his means.  John began draining one
satellite account after another and covered the overdrafts with
a check from another satellite bank.  Eventually money from all
of the satellite banks were empty so John began to kite checks
from one satellite bank to another and cover that bad check with
a bad check from yet another satellite bank.  John actually got
away with this for several months, not realizing the geometric
increase in the debt that he was creating.  Eventually John
contacted the president of the central bank and explained that
from time to time he would need from one to two million dollars
in checks covered.  The president agreed and for his kindness
he received a $100,000 gift of "appreciation."  Well it all fell
apart when John and the president went away, together with their
wives one weekend.  Checks that were normally personally cleared
by the president bounced and a chain reaction was initiated,
which led to the conviction of John and the bank president.  The
bank itself collapsed due to this bad loan. The FDIC examined
the issues and issued a report.  The FDIC concluded that the
cause of the bank's collapse was that the rule of concentration
was violated.  This rule requires the bank to limit its exposure
to any one client to a small percentage.

Isn't it funny how rules related to everyday life and to business
situations apply equally to the market.  You can learn a lot
about life from the market.  It is just common sense for a bank
not to overload its lending portfolio with too much risk from
any one customer or type of customer.  Too much concentration
in one customer or sector can lead to collapse.  This explains
in part the savings and loan debacle of the late 1980's.  Sure
the tax reform act played a role, but the simple fact of the
matter is that overexposure to a sector places you at risk to
suffer from the unexpected.

Lately, the same lesson was visited upon traders who were
overextended in the optical sector.  As I recall, one month ago,
the projections for the optical sector were of unlimited growth.
Yeah September was bad, but the analysts said just wait until
earnings season, the numbers will be tremendous and the stocks
will rocket.  Traders piled into calls and fortunes were ready to
be made, but someone forgot to tell NT.  NT reported a chink in
the armor of the optical sector and you know the rest of the
story.  Fortunes were lost by people, who let greed blind them
from the common sense rule of avoiding excessive concentration.

Now for the really tough part, the optical sector is still a great
sector with growth projections that most sectors would die for.
It will take off again, just not in time to save the day for the
holders of expired October calls.  The sector may very well be a
buying opportunity now or in the near future.  What a shame not to
have some cash on hand now to take advantage of the dip.  What a
shame to have too much of a portfolio in a sector that took a fall.
I have been there and it is painful.  Are there any solutions?
Probably a million of them.

My solution is to adopt a business attitude to my portfolio.  I am
not in it to make a killing this month, rather I am in it to make
steady growth each year.  Therefore, I don't have enough invested
in any one sector to inflict serious long term damage to my account
should the unexpected happen.  If there are not enough stocks that
I like, I still don't overbuy, instead, I simply wait in cash until
things become more attractive.  No, this approach may not be as
dramatic, but it keeps you in the game.  By maintaining a cash
position, you can buy LEAPs on great stocks when they are down.
By maintaining some cash, dips are no longer feared.  Instead they
provide the opportunity to exploit a buying opportunity.  Besides
a little bit of a volatile stock can go a long way.  For example,
QLGC has recently rebounded 50 points as did VRTS and SUNW.  There
is value in being patient and in not violating the rule of
concentration.  For me, it's just all part of my maturation as a
trader.  Now if only my trading can match my rhetoric.


**************
TRADERS CORNER
**************

Market Indicators: What's a Trader to Believe?
By Scott Martindale

Today is Election Day.  This is good.  At least one market-moving
uncertainty has been removed.  Others are perpetual.  What are
these widely discussed indicators that make investors worry and
have the power to turn markets upside down?  In honor of our
nation's favorite quadrennial event removing one uncertainty, and
despite the fact that everyone else seems to be talking about
them as well, I'll give my own take on these market-moving
parameters and what they might be telling us for the markets
going forward.

Some refer to the Four E's, some the Five E's.  Molly is
describing the four "Key Market Pillars" in a series of articles.
Whatever you call them or however you count them, to my mind the
market movers and earth shakers include:

 Corporate earnings
 Economic growth
 Interest rates
 Money supply (liquidity)
 Inflation
 Energy prices
 Euro strength
 Presidential election

We all have seen how skittish the market is with respect to
earnings reports.  Anything that can be perceived as anything but
wonderful news is treated as bad news and the stock is punished,
sometimes severely.  This is especially true when a highly valued
stock like AAPL, NT or JDSU remarks about a possible slowing of
demand, building of inventories, or an inability to meet demand.
NT and the whole networking sector got creamed when they
commented about a revenue shortfall not due to slowing demand but
due to their inability to keep up with demand because of a
shortage of trained staff.

Even though many companies have been forced to lower earnings
expectations, profit margins in most sectors are still at the
highest levels seen in a long time.  Plus, B2B e-commerce is
still quite early in its rollout, so the benefits like higher
productivity and cost reduction have not yet been realized on
most companies' bottom lines.

Is the economy really slowing?  Third quarter GDP growth looked
pretty slow.  But a recession?  Doubtful.  The overall health of
the economy is still quite strong, and it appears likely that the
Fed is probably done raising interest rates for a while, now that
it has accomplished its goal of slowing economic growth to more
manageable levels.  In fact, if the Euro remains weak, the Fed
may have no choice but to cut rates to make the dollar relatively
less attractive and help keep Europe out of a recession.  Thus,
the Euro is unlikely to remain weak, and we might get a rate cut
to boot.  Plus, money supply is not being tightened and inflation
is showing no signs of accelerating.

Energy prices are a real wild card.  Will oil go up further?  Or
will oil fall back to the $25 level?  How much does it really
matter?  Well, despite all the rhetoric, oil is still cheap
compared to historical prices.  In today's dollars, oil was
actually over $35-40 from the mid-1970's through the mid-1980's,
peaking at $90 around 1980.  Furthermore, since the 1970's, the
U.S. has moved from spending about 2% of GDP on oil imports to
only about 0.5% today, so the impact of oil prices is much less
today.  However, the impact is greater in Asia, and OPEC knows
from recent experience what recession in Asia can do to oil
demand and market prices (like $10/bbl).  Thus, OPEC is unlikely
to force Asia into a recession by keeping oil prices too high.  A
greater risk to U.S. growth is our limited and aging refining
capacity and oil tankers.  We are currently running at 95-97% of
refining capacity, and no new domestic refineries have been built
in over 25 years.  Tankers, too, are near full utilization.

The election has finally passed, and the skittish market will
make any last minute adjustments to account for whoever is
elected.  Of course, a Bush victory will likely ameliorate oil
prices due to his stance on encouraging domestic production.  No
matter who wins, however, growth in new technologies will
continue.  Semiconductors, the foundation components of the new
economy, continue to show 25% demand growth despite the fact that
the chip foundries are already running at full capacity.

But despite all this, aren't valuations still too high?  An
interesting argument to consider is the "liquidity crisis
theory."  This is not a reference to tightening of national money
supply by the Fed.  Rather, as capital continues to flow into the
stock market at record levels, there are not enough publicly
traded industry-leading companies to absorb the dollars, i.e., a
lot of money is chasing a small group of stocks. The share prices
become highly volatile due to demand imbalances.  Because
portfolio managers feel they must invest aggressively in growth
with all this cash to win the competition among fund managers,
the "best bets" get bid up to high valuations.  But this works
the other way as well when the shares sell off and everyone wants
to preserve their gains.  No one wants to be the last one out in
a correction.

But they need to come back eventually.  This new money has to go
somewhere.  How long can it stay in cash or 5.7% bonds?  Will it
keep going into the old economy stalwarts like KO, CAT, PG, and
T?  Judging by the recent performance of the Dow vs. Nasdaq, you
might think so.  As I mentioned last week, the November issue of
Bloomberg Personal Finance includes an article that suggests that
the best way to time the market is to avoid buying at the peaks,
and you do that by focusing on low P/E's, i.e. buy value and
avoid the popular momentum stocks.

Nevertheless, the reason that value investing has fared so poorly
in recent years is that growth in many of these value companies
is stalling as the economy shifts to new areas. When you look at
past performance and expected earnings growth rates for value
companies vs. new-technology companies, it seems clear that both
the aggressive money and long-term growth money will continue to
chase the best of the high-growth tech stocks in search of
substantially higher-than-average returns.  But beware, the cruel
reality is that the second-tier tech companies (many of which are
sporting the same high valuations) will be filtered out of this
market.  You need to combine value with growth, and growth in the
global economy is driven by technology.

Can the highly valued stocks that everyone wants to own really be
considered to have "value" at current prices?  Although
valuations are still at historically high levels, new technology
has spurred growth, not limited it. Investors have simply chased
the growth created by this technology.  And if share prices
remain flat while earnings growth continues to accelerate, the
leaders would soon be undervalued.  So who wants to keep all
their money in T-bills and wait for that to happen?  Not I.


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PICKS WE DROPPED
****************
When we drop a pick it doesn't mean we are recommending a sell
on that play. Many dropped picks go on to be very profitable.
We drop a pick because something happened to change its
profile. News, price, direction, etc. We drop it because we
don't want anyone else starting a new play at that time.
We have hundreds of new readers with each issue who are
unfamiliar with the previous history for that pick and we
want them to look at any current pick as a valid play.


CALLS:
*****

MEDX $70.88 -0.63 (+2.06) Nobody likes a wise guy.  As we
mentioned over the weekend, MEDX was being tight-lipped about
their earnings release date, but pointed us towards the middle
of the month.  Yesterday, the answer was just as vague, with
the company stating that they had not set the date yet.  But
apparently somebody knew, because the price gapped up at the
open on Monday, moving briefly above $74 before settling down
to close at $71.50.  Then surprise!  There we go with the
company announcing their third quarter results this morning.
The stock seemed to move very little after its earnings report,
but did drop as low a $68.38 this afternoon.  While still
technically a viable play, we endeavor not to hold over
earnings.  Since we got surprised, we have to drop this one
after the fact, but drop it nonetheless.  Fortunately for
those caught unaware, MEDX recovered into the close, ending
the day with a loss of less than $1.


PUTS:
*****

DGX $103.56 +5.38 (+6.81) DGX gapped up and made a bold run
through the 10-dma ($97.09) on respectable volume in today's
session.  The bullish momentum pushed DGX to the topside of the
$100 level early on Election Day.  There was no company-specific
news to forewarn the intraday climb.  The positive close at
$103.56 clearly violated our Stop set at the century mark.
We're exiting the play this evening as the markets trade in
higher territory.


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The Option Investor Newsletter                 Thursday 11-07-2000
Copyright 2000, All rights reserved.                        2 of 2
Redistribution in any form strictly prohibited.

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********************
PLAY UPDATES - CALLS
********************

MSFT $70.50 +1.00 (+1.82) MSFT burst out of the gate on Tuesday,
clearing $70 easily.  The stock found resistance at $71.50 mid
morning and fell back as the markets slowed down on election
jitters.  MSFT is in good shape from a technical standpoint, as
it remains firmly above the 50-dma of $64, and support at higher
lows near $68.  However, the wild care is the election results.
Many analysts believe that a Gore presidency would be a
disappointment for MSFT shareholders, and that a Bush presidency
would mean that the case would be dropped.  A new president will
mean a new cabinet, a new attorney general, and new advisors,
most of whom must be approved by the Senate.  We will most
likely not see a definitive answer in the monopoly trial issue
for many months, and in the meantime, the market may react in a
volatile fashion to perceived developments.  A strong post
election rally could easily lift all stocks, where entries above
the resistance level at $72 could be taken.  Also, consider
taking positions on a bounce off the 5-dma of $69.63, or the
10-dma of $67.94, but step away from the play if MSFT closes
below the 50-dma of $64.

ADBE $82.25 -1.00 (+1.56) Yesterday was a busy day for ADBE, as
the company held an an analyst meeting, increasing its operating
margin target from 31 percent to 32 percent for fiscal 2001 due
to expected decreases in research and development  Needless to
say, shares of ADBE moved higher on Monday, closing up $2.56 or
3.18% on almost 250% of ADV.  Today, we had a small giveback, but
the stock found support and buyers willing to enter at the $77
level.  In the interest of preserving profits, we are moving our
stop higher to $79.  A bounce off the $79-80 level would be an
aggressive entry point but make sure ADBE does not close below
$79.  A bounce off the 5-dma at $81 is another entry possibility.
For conservative traders, wait for ADBE to move above $85 with
conviction before initiating a play.

BRCD $256.50 +1.06 (+2.75) With lack of company-specific news and
traders holding their collective breath in advance of Cisco's
earnings and the election, BRCD had a relatively quiet Monday.
After the strong bounce from its low of $200 last week, a little
breather is healthy, if not necessary.  With a trading range of
"only" 15 points on Monday, aggressive traders who bought the
morning dip were amply rewarded with an entry point, with the
stock closing up $1.69 on average volume.  For those who missed
yesterday's opportunity, BRCD touched its 5-dma today before
attempting to break through and close above $260.  While BRCD
was unsuccessful, it did make progress, as the stock closed
slightly higher for the day on average volume.  What we are
looking for is either a close above resistance at $260 or a break
through to new all-time highs on strong volume for a conservative
entry.  For aggressive traders, support can be found at the 5-dma
near $247.  There is also support in increments of $5, from $255
down to $235, but be aware that we have placed a stop at $235 and
would no longer recommend the play if BRCD closes below that
level.

CMVT $117.81 -1.19 (+0.31) Resistance at $120 is proving to be
formidable indeed, but the good news is, the stock appears to be
consolidating for a breakout.  Trading in a narrow range of 3
points Monday, the stock got as high as $120.75.  And while
there was volume upon getting to that point, the volume was on
the sell side, as traders took their profits.  Today, CMVT once
again traded in a tight range, and while it closed down 1 percent
for the day, volume was low, at only 57% of ADV.  The willingness
of buyers to lend support to the stock at $115 is a good sign
however, as is the last minute buying at the end of the day.  For
aggressive traders, a bounce off the 5 and 10-dmas, at $117.59
and $112.25 respectively, are targets to shoot for but confirm
with volume.  Conservative traders will be waiting for CMVT to
punch through $120 resistance, backed by strong volume to the buy
side before taking a position.  As a note, we have placed a stop
at $110 support.  If CMVT closes below this level, we will most
likely close out the play.

EMC $97.56 +2.75 (-0.19) Simply put, EMC has found support at
important technical levels.  On Monday, traders took some of last
week's profits ahead of Cisco and Federal Election uncertainty.
Closing down $2.94, the stock was technically strong, bouncing
off support from the 5-dma (now at $95.26) and closing just
above the 50-dma (now at $94.80).  Today, on the heels of news
of an alliance with leading Scientific Data Management System
(SDMS) provider NuGenesis Technologies, EMC gained back 2.9
percent.  While volume was light, 85% of ADV, the tenacity with
which EMC is holding its moving averages is a bullish sign
indeed.  For conservative traders, the number to watch is the
psychological $100 level.  A break through that level with
conviction will be a signal to take a position.  Aggressive
entries can be found on bounces off the 5, 10 and 50-dmas, as well
as support at $95 and $90.  Just be aware of our stop at $86, as
a close below could spell more downside and leave us no choice
but to exit the play.

PSFT $49.69 +2.38 (+2.94) While people will be awaiting the
results of the election tonight in suspense of who will win,
there is no surprise with PSFT.  Investors and traders alike have
been voting with their dollars and the result is decidedly
bullish.  Yesterday, PSFT took a pause to refresh, but even in
its resting state it managed to gain 1.2% on 68% of ADV.  Today,
while the NASDAQ for the most part was undecided, PSFT moved
higher to make a new all-time high.  Hitting resistance at $50
intra-day, the stock gained a little over 5 percent, thanks to
news of an alliance with web marketplace maker Embark.  It
should be noted however, that today's move higher was on light
volume, only 58% of ADV.  If volume picks up tomorrow and pushes
PSFT past $50, this could allow for a conservative entry.  For
aggressive traders, a bounce off 5 and 10-dma support, near $46
is a target to shoot for.  At present, our stop on PSFT is also
set at $46.  Make sure that PSFT closes above this level when
considering a play.

RIMM $112.50 +8.00 (+3.25) With an uncertain market yesterday and
profits being taken from PALM yesterday after its addition to the
NASDAQ 100, RIMM moved lower, closing down $4.75 or 4.35% on 83%
of ADV.  RIMM was also likely dragged down by Nortel, one of the
large caps stocks in the Toronto Stock Exchange (TSE).  The low
volume on Monday's decline was a welcome pause, after last week's
strong performance.  As well, RIMM managed to close firmly above
its major moving averages.  Today, strong buying pressure helped
RIMM eclipse the Nortel Effect, closing up 7.66% on strong
volume, clocking in at 120% of ADV.  In doing so, RIMM put itself
back above resistance at $110.  For aggressive traders, a
pullback to this resistance level or a bounce off the 5 and
10-dma, currently at $105.66 and $102.02 are possible entry
points but confirm make sure a bounce is backed by buying volume.
A break through $115 resistance, helped by a strong market (we
recommend watching the TSE) would allow for a conservative entry.
Looking to protect our profits, we have moved our stop up to
$99.  Make sure that RIMM stays above this level when making a
play.

IMCL $62.63 -2.06 (-5.00) Consistent with its recent pattern,
IMCL ran up to its upper Bollinger band on Friday, only to pull
back for some consolidation early in the week.  Volume on the
pullback has dropped off considerably, clocking in right at the
ADV over the past 2 sessions. Recall that it had risen to more
than triple the ADV in Friday's session as the stock hit $68.38,
its highest level since early March.  Conservative traders will
want to wait for the buyers to return, propelling the stock back
above Friday's high.  The stock has pulled back to our expected
support level ($61-62).  The highs from late September and late
October formed a double-top at $61, which the stock broke
through last Thursday, and a bounce from this level looks like
a good aggressive entry point.  Consistent with this support
level, our stop level remains $59, and a close below there will
be cause for IMCL's expulsion from the call list.  We are still
playing IMCL for a run into earnings, but we need to convey
caution.  While the best information from the company indicates
the report SHOULD be out next week, they have not provided a
firm date.  The prudent approach will be to keep those stops in
place as we continue to endeavor to extract a firm earnings date
as the week continues.

PKI $116.50 -2.31 (+0.56) Apparently waiting for the outcome of
the presidential election, PKI has gone nowhere fast over the
past week, consolidating between $115-119.  Reflecting investor
indecision, volume was particularly light in today's trading
session with only half the average number of shares trading
hands.  Hopefully with the election behind us, investors will
decide whether they truly want to push shares of PKI higher.
While a volume-backed bounce from the $115-116 level (supported
by the 10-dma at $115.50) still looks like an attractive entry,
the cautious approach may be more prudent at this point.  If
that fits your style, wait for buying interest to push PKI above
$121 before playing.  Our stop level is still sitting at $113,
and a close below this level will spell doom for our play,
moving it onto the drop list.  We've been patient up to this
point, waiting for the election to be over, but if the stock
can't get moving soon, we may have to let the play go for lack
of interest.

VRTS $159.94 +5.44 (+6.00) Volume picked up pace this week as
VRTS tested the higher trading levels.  VRTS is however finding
$160 a tough mark to penetrate.  Despite its inability to crack
that first line of opposition, it's maintaining a bullish
position above the dma technicals and recent resistance levels.
On intraday downdrafts, $152 and $153 are offering support on a
pullback and could provide the aggressive trader an entry.
Higher, $157 is evolving as a shorter-term support.  Watch for
strength to develop above this level.  Traders might consider
buying into a surge as VRTS moves through $160 and challenges
the upper resistance at $166.81, a recent high.  Our stop near
the $139 level remains in place.

ITWO $176.19 +1.44 (+5.75) Just as we predicted, ITWO broke to
the upside of $180 resistance.  As the NASDAQ came off an early
morning weakness today, ITWO surged and shattered the upper
resistance.  It tagged $183.50 before experiencing mild profit
taking.  The downside action returned ITWO to a solid position
at near-term support.  A more enterprising entry is lower at the
intersecting 5, 30 & 50 dma lines near $172 or a bounce off
major support at $170 should ITWO pull back.  Consider
aggressively target shooting for entries during a volatile
session; however should ITWO close under $160, it's time to
exit.

MANU $130.00 +8.13 (+9.50) The momentum behind MANU's remarkable
recovery from a recent low of $61.75 continues to propel it
higher.  Today's powerful surge through the all-time high of
$126.25 confirmed MANU could stretch into new territory as it
approaches December earnings.  The 52-week record now stands at
$130.75.  Support is relatively firm at the $120 level, but a
return to $110 is not out of the question if profit takers
surface.  Be cautious of a close at $110 or below.  Weakness of
that magnitude would prompt us to exit the call play.  Consider
taking more moderate entries off the rising 5-dma, currently at
$122.34 on intraday bounces.

MLNM $86.50 +4.69 (+1.43) Yesterday's action saw MLNM set
another in a series of 52-week highs as it peaked at $88.56 on
respectable volume.  The late day weakness on the NASDAQ
however, took MLNM down to the vicinity of the 5-dma ($82.50) by
the finish.  The mild downswing provided an opportune entry
point for the more adventurous traders.  Today's trading was
rather flat.  MLNM channeled in a tight range of $84 and $85
before it resumed its uptrend and closed smack on the daily high
of $86.50!  Traders might consider buying into the momentum if
MLNM demonstrates strength above the current level and
challenges the new resistance.  A more conservative approach is
to wait for a breakthrough the $90 level.  While the overall
bullish trading above historical resistance at $80 is
encouraging, let's keep our stop set at $75 for protection.

AKAM $57.75 +1.25 (+3.69) AKAM managed to continue its uptrend in
the face of an unchanged NASDAQ.  It didn't get caught up in the
uncertainty of the Election and the traders' lack of conviction.
Today's modest advance has positioned AKAM on the verge of a
breakout of its bullish wedge traced over the past two weeks.
The key $60 support level is the only barrier preventing AKAM
from busting out.  As such, watch closely for a breakout above
$60 on strong volume.  However, should AKAM pullback in
sympathy with the tech sector look for the stock to bounce
off support at $57, or slightly lower at the $56 level.
Additionally, if AKAM should suffer from an extended pullback
we would use a close below the $53 level as a stop out of the
play.


*******************
PLAY UPDATES - PUTS
*******************

SLR $42.56 -1.38 (-1.62) Solectron exhibited a clear pattern of
lower highs in the last week.  In fact, the chart looks like a
staircase heading downward.  SLR has had three failed rallies in
the last several days.  Last week, the stock tried to clear the
50-dma at $44.9, but rolled over.  On Monday, it rolled over
$44.44 in the morning, tried to clear $44 in the afternoon, and
rolled over again.  On Tuesday, SLR opened with a big bearish
red candlestick, and rolled over on an attempt to clear $43.00.
The trend is clearly down, and it is likely that SLR will hit
the 200-dma near $41.75 at some point in the next several days,
depending on market conditions.  Consider taking new positions
on a rollover near the 5-dma at $43.81.  However, a strong
market rally could lift all boats, so be prepared to step aside
if SLR closes above $48.

LVLT $38.00 +3.00 (+1.81) We saw LVLT significantly weaken right
out of the gate on Monday.  The downtrend gained momentum as
shares sunk to an intraday low of $34.25 before they stabilized
at $35 and $36.  Trading activity was heavy at 3.2 times the ADV
on the decline.  The robust volume continued today, but in
contrast, it was the bulls taking LVLT off the recent lows.  An
influential Buy upgrade coupled with a $59 price target issued
by Kaufman Brothers incited the buying spree.  Today's
reassuring press release by Level3 Communication's CEO, James Q.
Crowe, also had a positive effect on trading.  In response to
the recent concerns about LVLT's stock weakness, the CEO pledged
that the company would meet estimates despite the growing
concerns in the telecommunications industry.  However convincing
the sentiment, LVLT couldn't push through $39.25.  On the day,
LVLT ended below the 5-dma ($39.41) and $41, our current stop.
Keep in mind, a bullish close above $41 signals the end of this
put play.  Consider taking an entry on further weakness under
$38 or more conservatively, on a high-volume move to the
underside of $36.  Watch for opposition at $34.25, the most
recent low.

GSPN $50.25 - 17.56 (-23.22) Wow, what a ride!  If you jumped
aboard our play yesterday, you are likely having a hard time
wiping the grin off your face.  Today's 25% plunge dwarfed the
nearly 10% loss in yesterday's session, as the stock sold off
in response to comments made in the CSCO conference call
following their earnings report.  CSCO is the company's top
customer and news that the Networking giant would be reducing
inventory did not sit well with investors, as GSPN slid to its
lowest level since mid-April.  Volume was huge today at nearly
6 times the ADV, and despite some last minute buying, the stock
settled very close to its low of the day.  Below current levels,
the stock may find support near $42, the site of the April lows
followed by more historical support at $37.  In order to
preserve our profits, we have moved our stop down to $56;
closing higher than that will be our trigger to move on to other
plays.  If the negative sentiment continues though, GSPN could
head even lower.  Consider new entries as the stock falls below
$49, enroute to its next support level.

MNMD $62.75 -2.13 (-4.94) Proof that the trend is your friend,
MNMD has continued to sell off leading up to the election.  The
rollover that took place at the $75 resistance level (also the
site of the 50-dma) a week ago has accelerated since then,
pushing our play down close to the 200-dma (currently $61.63)
by the close of today's session.  This level is also where the
stock found support during the selloff 3 weeks ago.  The selling
over the past three days has come on heavy volume, indicating
that there may be more to come.  The only point of concern is
that the stock has not violated its 200-dma since early
February, so it may find buyers waiting near that level.  Any
recovery will find intraday resistance at $65, and then $68, so
these may be attractive levels for initiating new positions if
the bulls run out of steam.  Due to the sharp drop this week,
we have moved our stop down to $68 to preserve our profits.
Conservative players will want to wait for MNMD to break down
through the $61 level before initiating new positions.


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**************
NEW CALL PLAYS
**************

AGGRESSIVE:

IMGN - Immunogen, Inc. $41.56 -2.44 (+3.50 this week)

Founded in 1981, ImmunoGen develops products that deliver
chemotherapy directly to cancer cells.  Called Tumor-Activated
Prodrugs (TAPs), ImmunoGen's products are small-molecule-based
anti-cancer agents with high potency and reduced toxicity.  They
are produced by combining extremely potent chemicals with
monoclonal antibodies that recognize and bind directly to tumor
cells.  ImmunoGen's product portfolio is focused on TAPs for
colorectal cancer, small-cell lung cancer and other aggressive
malignancies.  In preclinical studies, all of ImmunoGen's
products have proven to be more potent and less toxic in animals
than existing chemotherapeutics.

There are many reasons to like Immunogen.  Aside from fighting a
much-dreaded nemesis in cancer, it does so in a unique and
patented way, by using a research platform that actually makes
the blood supply unusable by tumors.  IMGN also has strong backing
from the Ivy League, as its largest shareholder is Harvard
University.  Along with this, the company has a collaboration
agreement with Smithkline Beecham, which in IMGN's most recent
quarter, helped to generate revenues of over $4 million.  IMGN
will soon add a significant cash position to its war chest, by
selling 4 million shares of its stock.  The pricing for this
secondary offering is slated for November 13.  Considering the
timing, of the two events, it appears that good news may be in
store.  This cash will most certainly be welcome, as the company
has recently been ramping up their research and development.
Technically the chart is beautiful, with a long-term up-trend
forming a lower-left to upper-right pattern.  Today, IMGN broke
through resistance at $40 on over 120% of ADV.  Continued strength
from strong buying carrying the stock above $42 will provide
conservative traders with an entry while a bounce off support at
$40, the 5-dma at $39.39, and the 10-dma at $37.50 could allow for
an aggressive entry.  There is also support at our stop level of
$37 but make sure IMGN is able to close above this level to
confirm continued upward momentum.

***November contracts expire next week***

BUY CALL NOV-35 GMU-KG OI= 665 at $8.38 SL=6.00
BUY CALL NOV-40*GMU-KH OI= 852 at $5.25 SL=3.25
BUY CALL NOV-45 GMU-KI OI=1562 at $3.00 SL=1.50
BUY CALL DEC-40 GMU-LH OI= 123 at $7.88 SL=5.75
BUY CALL DEC-45 GMU-LI OI= 120 at $5.88 SL=4.00

Average Daily Volume = 874 K



CFLO - CacheFlow $144.69 +4.81 (+8.13 this week)

CacheFlow designs, develops and markets appliances that
accelerate and manage the flow of information over the Internet
through a process called Internet caching, the storing of
popular objects closer to the individuals requesting them.  The
applications increase intranet efficiency, speed response times,
and handle traffic surges. Clients include ISPs such as Swisscom
and Global One and other blue chip companies like Hewlett-
Packard and Xerox.

We're initiating coverage on CFLO as it makes a convincing
momentum run and heads into earnings this month.  CFLO saw its
share price vanquish last month as tech investors took no
prisoners and sold off issues with a vengeance.  The shares have
since recouped their recent value and are now at a crucial
level.  Recently on October 19th, the share price pushed through
the $140 level and closed at $145 before it became a casualty of
the above-mentioned tech correction.  This week, the bullish
action took CFLO through this first line of opposition at $140
and the growing momentum launched CFLO upwards to the $147 mark.
Volume was above the norm on the upswing and indicates the
buying may not be over.  As we approach the company's earnings'
release, which is confirmed for November 21st (after the
market), we're anticipating that excitement will mount.  Look
for sensible entries into this earnings run as CFLO climbs off
the current level and challenges $150.  Be cautious of taking
aggressive entries below the $134 mark.  We will exit on a
close below this level.   The ultimate objective is to breakout
above September 26th's peak of $161.38, a formidable line of
resistance.  In light of the current price level and the fact
that CFLO has 200 mln shares authorized and only 39.6 mln
outstanding, there's also the potential for a stock split in
the near future too.

***November contracts expire next week***

BUY CALL NOV-140 FUJ-KV OI=145 at $13.75 SL=10.25
BUY CALL NOV-145*FUJ-KW OI= 48 at $10.88 SL= 8.25
BUY CALL NOV-150 FUJ-KX OI=465 at $ 8.75 SL= 6.00
BUY CALL DEC-145 FUJ-LW OI=110 at $22.50 SL=17.50
BUY CALL DEC-150 FUJ-LX OI=  0 at $20.38 SL=14.50

Average Daily Volume = 994 K



ELNT - Elantec Semiconductor $107.81 -13.94 (-8.06 this week)

Elantec is engaged in the design, manufacturing and marketing
of high performance analog integrated circuits, primarily for
the video, optical storage, and DSL markets.  The company
offers approximately 150 products such as amplifiers, drivers,
faders, transceivers and multiplexers, most of which are
available in multiple packaging configurations.  ELNT targets
high growth commercial markets in which advances in digital
technology are driving increasing demand for high speed, high
precision and low power consumption analog circuits.

In the wake of CSCO's earnings report, Semiconductor companies
that supply the Networking sector came under severe selling
pressure today.  Prompting the negative sentiment was CSCO's
reference to increasing inventory, leading investors to believe
that sales would slow for companies that supply the components
used in networking products.  ELNT has been in an upward
trending channel over the past several months, and after closing
above the upper bound of this channel yesterday, some profit
taking was to be expected.  Towards the end of the day, shares
of the company bounced from the center of its channel on
increasing volume, leading us to believe the selloff was
overdone.  While this is an aggressive play, we are looking for
a quick rebound.  If ELNT can continue its late-day recovery,
it looks like it could quickly move back to new highs.  Use
today's low (near $103) as an aggressive target for initiating
new positions, but make sure that buying volume remains robust.
A slightly more conservative entry strategy will be to wait for
shares to move through intraday resistance near $111 before
taking a position.  The top of the channel currently sits at
$120, and with yesterday's high of $123, it looks like the stock
will find resistance in this area.  Since this is an aggressive
play, we have set a fairly tight stop.  If ELNT closes below
$99, we will take it as a sign that we were wrong about the
play, and will move it onto the drop list.

***November contracts expire next week***

BUY CALL NOV-105 UET-KA OI= 82 at $11.50 SL= 8.75
BUY CALL NOV-110*UET-KB OI=383 at $ 9.25 SL= 6.50
BUY CALL NOV-115 UET-KC OI=191 at $ 7.38 SL= 5.25
BUY CALL DEC-110 UET-LB OI= 36 at $16.63 SL=12.00
BUY CALL DEC-115 UET-LC OI= 24 at $14.50 SL=10.75

Average Daily Volume = 918 K



LONG TERM:

TWX - Time Warner $85.42 +2.02 (+5.99 this week)

Time Warner's agreement to be acquired by the Internet powerhouse
AOL will blend legendary brands with online dominance.  Time
Warner owns 75% of Time Warner Entertainment, which included
Warner Brothers and Time Warner Cable.  Time Warner's other
subsidiaries operate such brands as CNN, Time and People
Magazines, Warner Music Group, and even the Atlanta Braves
baseball organization.

The mega-merger between AOL and Time Warner edged one step
closer to regulatory approval Monday.  The two companies made
progress with antitrust regulators on the issue of open
access to cable lines.  Investors are beginning to warm up to
the prospects of an AOL-Time Warner combination as has been
witnessed in the narrowing of the spread between the deal.
Arbitrageurs have adjusted positions accordingly and reflected
the likelihood of the deal receiving approval.  As the two
companies continue to appease regulators, the long-term
outlook for the combined entity could present profit
opportunities for patient options traders.  New positions
can be entered either on a pullback or a continued advance in
TWX.  If you choose to wait for a pullback, watch for TWX to
bounce off support near the $80 level.  A near-term bounce
off the $85 level might also provide additional entries.
Furthermore, an advance above the $87 level on strong volume
could provide entries into strength.  Make sure to confirm
direction in shares of AOL before entering new plays.
Should TWX suffer an extended pullback, use a close below the
$77 level as a stopping point.

***November contracts expire next week***

BUY CALL NOV-85 TWX-KQ OI=2944 at $3.00 SL=1.50  High Risk!!
BUY CALL DEC-85*TWX-LQ OI= 657 at $6.30 SL=4.25
BUY CALL DEC-90 TWX-LR OI=1862 at $3.90 SL=2.50
BUY CALL JAN-85 TWX-AQ OI=4353 at $8.30 SL=6.00
BUY CALL JAN-90 TWX-AR OI=4531 at $6.40 SL=4.50
BUY CALL MAR-90 TWX-CR OI= 122 at $8.70 SL=6.25

Average Daily Volume = 3.89 mln



KANA - Kana Communications $27.88 +0.38 (+2.00 this week)

Kana Communications makes software that helps businesses
manage electronic communications with customers.  Its products
manage incoming customer communications, e-mails, and instant
messages.  Its customers include American Airlines, Dow Jones,
eBay, and The Gap.  Kana has been expanding its product line
by growth and recent acquisitions.

Kana's third-quarter revenues increased by 975% from the
year-ago period!  The enterprise relationship manger market
is growing by leaps and bounds and Kana is in the middle
of the mix capitalizing on that explosion.  After reporting
such bullish numbers, several Wall Street analysts bestowed
KANA with positive comments.  Reginal Kind, Chase H&Q
analyst, said, "Investors looking for long-term winners
should buy Kana."  The stock has been on a tear since
reporting such positive numbers and is poised to breakout
above a key resistance level, which could set KANA up for a
generous year-end rally.  The key resistance level for KANA
to clear is located at the $29 level.  New positions could
be entered on a volume-backed breakout above $29.  A
pullback to support at $26, or lower near the $24 level
(around the 10-dma) would provide a favorable entry upon a
bounce.  We'll use $23 as the stopping point should KANA
close below that level.

***November contracts expire next week***

BUY CALL NOV-25 URW-KE OI= 884 at $4.00 SL=2.50  High Risk!!
BUY CALL DEC-25*URW-LE OI= 618 at $5.88 SL=4.00
BUY CALL DEC-30 URW-LF OI=2375 at $3.25 SL=1.75
BUY CALL MAR-25 URW-CE OI= 195 at $8.75 SL=6.25
BUY CALL MAR-30 URW-CF OI= 641 at $6.75 SL=4.75

Average Daily Volume = 2.73 mln



LOW VOLATILITY:

WIN - Winn-Dixie $20.69 +0.75 (+0.88 this week)

Winn-Dixie operates 1,000 stores in 14 states.  The company
specializes in general merchandising and larger marketplaces
which offer amenities such as pharmacies, photo labs, and food
courts.  Winn-Dixie also runs Thriftway, The City Meat Markets,
and Buddies stores.  A few months back, the company said it would
acquire over 100 stores from grocer Jitney-Jungle Stores of
America.

Since announcing its "Plan of Restructuring" in early October,
shares of Winn-Dixie have been on a steady climb.  The stock has
advanced nearly 50% in that time and looks to have more upside
potential.  Investors have been shopping for bargains in the
Retail sector recently, and shares of Winn-Dixie are directly
benefiting from that buying interest.  We're looking to take
advantage of the stock's steady rise and low volatility in
options.  Given the stock's recent run-up, we'd look to enter
on a pullback to the $19.50 to $20 support area.  However,
aggressive entries might be found if the stock rallies above
the $21 level - its high from last spring.  If your entry
strategy is to buy into strength, make sure to confirm that
volume is there to support the move.  Finally, we'd use a
close below the significant support level at $18.50 as a
sign WIN's momentum has run out.

***November contracts expire next week***

BUY CALL NOV-20 WIN-KD OI=89 at $1.06 SL=0.50  High Risk!!
BUY CALL DEC-20*WIN-LD OI=32 at $1.69 SL=0.75
BUY CALL JAN-20 WIN-AD OI=81 at $2.06 SL=1.00
BUY CALL APR-20 WIN-DD OI=68 at $2.94 SL=1.50

Average Daily Volume = 214 K



RE - Everest Re Group $59.00 +1.56 (+4.81 this week)

Everest Re group is engaged in the underwriting of property and
casualty reinsurance on a treaty basis.  The company's products
include the full range of property and casualty coverage,
including marine, aviation, surety, errors & omissions
liability, medical malpractice, and other specialty lines.  The
company operates extensively in both international and domestic
markets.

The insurance sector has been on fire this year!  Believe it or
not, shares of Everest have advanced by 120 percent in the
last 52-weeks.  We're looking for the sector momentum to carry
shares of Everest even higher into the end of the year.  The
stock closed at a new all-time high Tuesday at the $59 mark,
as such, a pullback may be in order.  If the stock pulls back
on light volume, look to enter new positions near support levels
at $58, or lower near $56.  A bounce off either level would
mark a continuation of RE's year-long trend of higher lows.
More aggressive entries might be found if the stock crosses
the $60 level in the coming days, but make sure to confirm new
highs with healthy volume before entering on strength.  On a
cautionary note, if RE should suffer an extended pullback and
close below the $54 support level we would no longer initiate
coverage on the play.

***November contracts expire next week***

BUY CALL NOV-60 RE-KL OI= 0 at $1.50 SL=0.75  High Risk!!
BUY CALL DEC-55 RE-LK OI= 0 at $6.13 SL=4.00
BUY CALL DEC-60*RE-LL OI=10 at $3.38 SL=1.75
BUY CALL JAN-60 RE-AL OI=59 at $4.25 SL=2.50

Average Daily Volume = 1.58 mln



LXK - Lexmark International $46.81 +3.00 (+2.56 this week)

Lexmark is a leading maker of computer printers and related
products.  Its printer line include laser printers and ink jet
printers.  Unlike many of its competitors, the company
develops and manufactures its own devices, thereby speeding
product cycles.  The company also makes supplies for Compaq,
Fujitsu, and Samsung.

Shares of Lexmark are on the mend.  Since beating Wall Street's
reduced estimates for its third-quarter, Lexmark has fallen
back into favor with investors.  As a result of the company's
restructuring efforts, Lexmark guided analysts to higher
than expected profits in its upcoming fourth-quarter.  The
company's bullish guidance has boosted its stock by over 60
percent since late October, and it may still have room to run
as there is an unfilled gap up to the $52 level.  The low
volatility in Lexmarx's options combined with the prospects of
an extended rebound have attracted us to the play.  Entries
might be found if LXK moves above the $48 level on strong
volume early tomorrow.  Additionally, a pullback to support
at $45, or lower near $44 might provide additional entry
opportunities.  However, a close below $43 would signal an end
to the play as it's the site of our stop loss.

***November contracts expire next week***

BUY CALL NOV-45 LXK-KI OI=1398 at $3.38 SL=1.75  High Risk!!
BUY CALL DEC-45*LXK-LI OI= 390 at $5.50 SL=3.50
BUY CALL DEC-50 LXK-LJ OI=  60 at $3.38 SL=1.75
BUY CALL JAN-50 LXK-AK OI=2352 at $3.50 SL=1.75

Average Daily Volume = 1.58 mln



*************
NEW PUT PLAYS
*************

IDTI - Integrated Device $42.25 -10.69 (-8.13 this week)

The company's high-performance semiconductor products and modules
are found in computers, peripherals, and communications and
networking devices.  About 70% of sales are from communications
and high-performance logic components, specialty memory, clock
management circuits, and networking devices.  IDTI also makes
static random-access memories (SRAMs).

The last time IDTI graced the hallowed halls of our recommended
list, it was as a call play, and a highly profitable one at that.
But ever since hitting its all-time high in mid-September, it's
been all downhill for this OEM chipmaker.  Many factors led
to IDTI's decline, most notably weakness in the overall
Semiconductor sector during the late summer months.  A stellar
earnings report in October was largely ignored as the stock
continued to head ever lower, breaking through its 50, 100 and
200-dmas, currently at $80, $72.16 and $56.91, respectively.  A
downgrade on October 27th by Banc of America Securities, from a
Strong Buy to a Buy rating, did not help the stock either.  Most
recently failing to rally above resistance at the 200-dma, the
stock has since moved deeper into negative territory on the backs
of the 5 and 10-dma (now at $49.88 and $54.19).  Today's sharp
decline of over 20% on over 350% of ADV can be explained in three
simple words: The Cisco Effect.  While Cisco's earnings were for
the most part solid, analysts noted the significant increase in
inventories.  This suggests that Cisco has been stockpiling raw
materials and that companies who supply the networking giant are
likely to see significant slowdowns in demand going forward.
With Cisco being a large customer of IDTI, this is most certainly
bad news for the company, which is good news for our put play.
Aggressive traders will be watching for a failure to break above
the 5- and 10-dma as a possible entry point but make sure IDTI
does not close above our $49 stop price.  For conservative
traders, continued weakness in the Semiconductor sector leading
to a break below $40 on strong volume could be the signal to
enter this play.

***November contracts expire next week***

BUY PUT NOV-45*ITQ-WI OI=492 at $5.88 SL=4.00
BUY PUT NOV-40 ITQ-WH OI=364 at $3.38 SL=1.75

Average Daily Volume = 4.10 mln



ADI - Analog Devices $53.94 -8.06 (-8.38 this week)

Analog Devices is a leading maker of analog (linear and
mixed-signal) and digital integrated circuits (ICs), including
digital signal processors.  The company's broad line of ICS
incorporate analog, mixed-signal and digital signal processing
technologies that translate real-world phenomena such as
pressure, temperature, and sound into digital signals.  ADI's
products are used in communications equipment (40% of sales),
computers and peripherals, and medical and scientific
instruments.  Among ADI's more notable customers are Motorola,
Dell, Lucent, and Sony.

Semiconductor investors haven't been having much fun lately,
as many stocks in the sector have been unable to break out of
persistent downtrends.  ADI completed a double-top formation
near $100 at the end of August, and since then has proceeded
to trace a series of lower highs and lower lows.  Support had
begun to develop between $58-60, and even after a downgrade
from JP Morgan last Wednesday, it actually looked like the
stock might be able to recover from there.  Then CSCO's comments
in its conference call last night about increasing inventories,
sent another shockwave through the Broadband Semiconductor
sector with leading stocks like BRCM and PMCS giving up 19%
and 17% respectively.  In its weakened state, ADI went along
for the ride, crashing through support on its way to a 13% loss
for the day.  Today's closing price represents the lowest point
for the stock since February, eclipsing the lows from April and
May, and opening the door for more downside.  While the stock
may find some support near $52, it appears likely that ADI may
have to revisit the $46-47 level before finding support
sufficient to halt its decline.  Should the bulls try to rally
the stock after today's sharp decline, they will run into
formidable resistance at the $58 level, so this is where we have
placed our stop for the play.  The best entry point will likely
come from a failed rally attempt near resistance.  Use any such
recovery as an opportunity to initiate new positions as the
bears reassert control and drive the stock lower.  Those looking
for a more conservative play will wait for selling pressure to
push the stock below today's low before jumping on board.

***November contracts expire next week***

BUY PUT NOV-55 ADI-WK OI=1636 at $5.50 SL=3.50
BUY PUT NOV-50 ADI-WJ OI= 323 at $2.75 SL=1.50
BUY PUT DEC-55 ADI-XK OI= 774 at $7.75 SL=5.50
BUY PUT DEC-50 ADI-XJ OI= 435 at $5.00 SL=3.00

Average Daily Volume = 3.90 mln



**********************
PLAY OF THE DAY - CALL
**********************

RIMM - Research In Motion Ltd. $112.50 +8.00 (+3.25 this week)

Based in Waterloo, Ontario, Canada, Research In Motion Limited is
a leading designer, manufacturer and marketer of innovative
wireless solutions for the mobile communications market.  Through
development and integration of hardware, software and services,
RIMM provides solutions for seamless access to time-sensitive
information including email, messaging, Internet and
intranet-based applications.  RIMM technology also enables a
broad array of third party developers and manufacturers in North
America and around the world to enhance their products and
services with wireless connectivity.

Most Recent Write-Up

With an uncertain market yesterday and profits being taken from
PALM yesterday after its addition to the NASDAQ 100, RIMM moved
lower, closing down $4.75 or 4.35% on 83% of ADV.  RIMM was also
likely dragged down by Nortel, one of the large caps stocks in
the Toronto Stock Exchange (TSE).  The low volume on Monday's
decline was a welcome pause, after last week's strong performance.
As well, RIMM managed to close firmly above its major moving
averages.  Today, strong buying pressure helped RIMM eclipse the
Nortel Effect, closing up 7.66% on strong volume, clocking in at
120% of ADV.  In doing so, RIMM put itself back above resistance
at $110.  For aggressive traders, a pullback to this resistance
level or a bounce off the 5 and 10-dma, currently at $105.66 and
$102.02 are possible entry points but confirm make sure a bounce
is backed by buying volume.  A break through $115 resistance,
helped by a strong market (we recommend watching the TSE) would
allow for a conservative entry.  Looking to protect our profits,
we have moved our stop up to $99.  Make sure that RIMM stays above
this level when making a play.

Comments

In a day that the NASDAQ was essentially unchanged, RIMM proved
that the Election wouldn't phase it.  With technically bullish
trading today, we think that the Election results won't matter much
to RIMM.  Look for entry on bounces from $109, or $105 if profits
are taken.  A break through $113 would also be playable.

***November contracts expire in 2 weeks***

BUY CALL NOV-105 RUL-KA OI=321 at $12.50 SL=10.00
BUY CALL NOV-110*RUL-KB OI=645 at $ 9.38 SL= 7.00
BUY CALL NOV-115 RUL-KC OI=799 at $ 7.00 SL= 5.25
BUY CALL DEC-110 RUL-LB OI=331 at $16.63 SL=13.00
BUY CALL DEC-115 RUL-LC OI=150 at $14.38 SL=11.50

SELL PUT NOV-100 RUL-WT OI=329 at $ 3.00 SL= 4.25
(See risks of selling puts in play legend)

Average Daily Volume = 2.00 mln



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************************
COMBOS/SPREADS/STRADDLES
************************

The Sidelines Were Crowded...

The market closed virtually unchanged today as investors awaited
the results of the political elections.

Monday, November 6

Shares of blue-chip stocks moved higher today while technology
issues consolidated.  The Dow finished up 159 points at 10,977
while the Nasdaq closed down 35 points at 3,416.  The S&P 500
index ended up 5 points at 1,432.  Activity on the Nasdaq was
mild at 1.6 billion shares exchanged, with declines outpacing
advances 2,148 to 1,804.  Trading volume on the NYSE reached
924 million shares, with losers beating winners 1,424 to 1,387.
In the bond market, the U.S. 30-year Treasury dropped 12/32,
pushing its yield up to 5.89%.


Sunday's new plays (positions/opening prices/strategy):

Hewlett Packard   HWP    JAN40C/NOV47C   $6.50   debit   diagonal
Flowers Ind.      FLO    DEC15C/DEC15P   $1.31   debit   straddle
Glaxo-Wellcome    GLX    NOV65C/NOV60C   $0.88   credit  bear-call
JNI Corp.         JNIC   NOV85P/NOV90P   $0.31   credit  bull-put
Global Crossing   GX     NOV30C/NOV15P   $0.43   credit  strangle

There was little favorable activity in our new spread positions
on Monday.  Glaxo-Wellcome and Hewlett Packard were the only
plays that met our target entry prices.  The Flowers straddle did
not trade for less than $1.31, well above our target debit.  JNIC
jumped $3 at the open and traded higher throughout the day.  There
was no opportunity to participate in the bullish credit spread but
we will monitor the position for future entry opportunities.  The
initial premium in the Global Crossing strangle was much lower
than expected and we did not open the play.  Surprisingly, there
was a 1000 contract trade late in the day on the NOV-$15 Put.  Is
that an indication of things to come?


Portfolio Plays:

Industrial stocks rallied today, led by gains in blue-chip issues
as traders went on the defensive ahead of Cisco's earnings.  The
technology giant slumped to $55 at the close, before reporting a
first-quarter profit of $0.18 a share, which beat the estimates
by a penny.  The fear of poor results took its toll on a number
of companies in the group with networking and computer software
issues leading the way down.  The industry was also dragged down
by software developer VA Linux Systems, after the company issued
a report warning that slack sales from new customers would crimp
quarterly results.  On the Dow, a well-known general rallied the
troops as General Motors (GM) surged to $60 amid a market-wide
flight to safety issues.  Alcoa (AA), United Technologies (UTX)
and Caterpillar (CAT) also participated in the bullish activity.
Blue-chip techology companies were also in demand.  Intel (INTC),
the world's #1 semiconductor maker, and International Business
Machines (IBM), the world's #1 computer maker, both moved higher.
Software giant Microsoft (MSFT) rallied to just short of the $70
mark and those of you in the original long-term bullish position
(JAN03-$50C/DEC00-65C) may need to adjust the outlook for the
play, based on the recent bullish activity.  In broader trading,
strength was seen in drug, retail and defense issues while bank
and financial stocks slumped ahead of the Presidential election.

Our portfolio mirrored the market with blue-chip issues moving
higher while technology positions retreated.  Mercury Interactive
(MERQ) was the top performer, up $13 to $126 after the company's
LoadRunner system was awarded two Reader's Choice Awards.  The
awards were presented to superior products as selected by more
than 13,000 professional developers and LoadRunner took honors as
the "Most Innovative" and "Best Testing" solution.  Our neutral
credit strangle needed the boost and now the issue is back in the
maximum profit range.  However, if the rally continues, plan to
cover the short option at $145 on any "heavy volume" move through
the resistance area at that strike price.  In the Health Services
sector, Unitedhealth Group (UNH) rebounded from a recent bout of
profit-taking as buyers of HMO industry stocks speculated on a
Republican dominated outcome in Tuesday's election.  Analysts say
that Democratic passage of a healthcare "bill of rights" would
increase litigation for improper denial of care and in addition,
Vice President Al Gore has strongly backed the expanded right for
patients to sue.  Most Republicans support limiting the industry's
exposure to lawsuits and they currently hold narrow majorities in
both houses.  The managed care industry is one of many groups that
will be affected by the Presidential election and the dozens of
congressional races, and it will be interesting to see how the
market is influenced by the results in the coming sessions.


Tuesday, November 7

The market closed virtually unchanged today as investors awaited
the results of the political elections.  The Nasdaq finished at
3,415 and the Dow ended at 10,952. The S&P 500 index closed almost
where it started at 1,431.  Activity on the Nasdaq was relatively
light at 1.7 billion shares traded, with declines edging advances
1,999 to 1,839.  Volume on the NYSE reached 876 million shares,
with winners beating losers 1,467 to 1,328.  In the bond market,
the 30-year Treasury fell 5/32, pushing its yield up to 5.89%.


Portfolio Plays:

The broad market ended relatively unchanged today as investors
chose to remain on the sidelines during the Presidential and
Congressional elections.  Technology stocks managed small gains
with much of the activity coinciding with a recovery in shares
of Cisco Systems (CSCO) after its better-than-expected earnings
report.  The networking giant's shares fell to $53 early in the
session before closing near $57, up almost $2.  Cisco was also
the most active stock on the Nasdaq with more than 90 million
shares exchanged.  Advances in computer hardware, software and
Internet stocks also boosted the technology group but shares of
semiconductor companies remained under pressure amid concerns of
declining demand going forward.  Industrial stocks edged higher
on strength in Honeywell (HON), International Paper (IP), Dupont
(DD), Eastman Kodak (EK) and General Electric (GE).  Blue-chip
technology issues also participated in the upside activity with
International Business Machines (IBM) and Hewlett Packard (HWP)
closing up for the day.  Leading the Dow on the downside were
shares of United Technologies (UTX), Merck (MRK) and Disney (DIS).
General Motors (GM) also lost ground after Goldman Sachs lowered
its rating on the company and removed GM from its "recommended"
list.  In the broader market, bank, utility and airline shares
retreated while most oil service, biotech, brokerage and paper
issues closed higher.  Analysts said there was little to be made
of the lackluster session and technical indications suggest the
market will continue its recent recovery once the elections and
the upcoming FOMC meeting are completed.

Our portfolio enjoyed a number of big winners during the "Super
Tuesday" session.  Handspring (HAND) was the top performer, up
$7 to $90 as the handheld wireless sector recovered from recent
selling.  Vertex Pharmaceuticals (VRTX) was the leading issue in
the drug group, up $5 to close near $96.  Data storage companies
Seagate (SEG), Maxtor (MXTR) and EMC Inc. (EMC) rallied and our
recent entry in the managed care industry, WellPoint (WLP) also
experienced favorable activity.  Mercury Interactive (MERQ) was
again the leader in the Computer Software sector and the short
option (NOV-$145C) will need to be monitored closely to protect
profits in the neutral credit strangle.  The surprise in today's
session was Broadcom (BRCM).  The company's stock plummeted to
$176 amid weakness in high-speed communication chip-makers after
Cisco Systems reported it was planning to reduce its inventory.
Equipment sales to Cisco account for about 15% of BRCM's total
revenues and the move would substantially affect their earnings.
In addition, BRCM announced that it has signed an agreement to
acquire privately held SiByte; a semiconductor company focused
on the development of network processing technology based on the
MIPS architecture.  The two news items were more than investors
could tolerate and the stock tumbled in the midst of analysts'
downgrades.  Rather than close our bullish position at $185 for
a loss, we decided to roll out and down to the DEC-$165 Put for
a small debit.  Our cost basis in the issue is slightly above
$160 and we will make additional adjustments as the stock finds
a new trading range in the coming sessions.

Questions & comments on spreads/combos to Contact Support
******************************************************************
                         - NEW PLAYS -

With little indication of the future direction of the market, we
decided to offer a change of pace with some plays on issues that
have been identified by our faithful readers.

******************************************************************
GCO - Genesco  $19.75  *** Earnings Rally! ***

Genesco is a retailer and wholesaler of branded footwear.  The
company operates a number of unique business segments including:
Journeys; Jarman, comprised of the Jarman, Underground Station
and Stone & Company retail footwear chains; Johnston & Murphy,
comprised of Johnston & Murphy stores and wholesale distribution;
Licensed Brands, comprised of Dockers and Nautica Footwear; Other
Retail, comprised of the Jarman Leased departments, which was
closed earlier in the year, and Leather.  In April of last year,
the company operated more than 675 retail stores and leased
footwear departments throughout the United States and Puerto Rico.
Genesco also designs, sources, markets and distributes footwear
under its own and licensed brands, including Johnston & Murphy,
Nautica and Dockers.

Genesco recently said it expects to exceed third-quarter earnings
estimates of $0.30 per share by at least 10%, based on strength
in the company's operating results.  Genesco also plans to open
as many as four new stores during the first quarter of next fiscal
year using a concept called, "Journeys Kidz," targeting customers
between five and 12 years of age.  The company expects to report
third-quarter earnings on November 16 and based on the recent
activity in the underlying issue, investors believe the outcome
will be favorable.  Today's rally to a new all-time high suggests
the trend will continue and the previous highs near $17-18 should
provide adequate support for any future corrections.


PLAY (conservative - bullish/debit spread):

BUY  CALL  DEC-15.00  GCO-LC  OI=252  A=$5.38
SELL CALL  DEC-17.50  GCO-LW  OI=119  B=$3.25
INITIAL NET DEBIT TARGET=$1.88-$2.00  ROI(max)=25%


******************************************************************
T - AT&T  $22.38  *** Bottom Fishing! ***

AT&T Corporation provides voice, data and video communications
services to large and small businesses, consumers and government
entities.  AT&T and its subsidiaries furnish a range of domestic
and international long distance, regional, local and wireless
communications services, cable television and Internet services.
AT&T also provides billing, directory and calling card services
to support its communications business.  AT&T's primary lines of
business are business services, consumer services, broadband
services and wireless services.  In addition, AT&T's other lines
of business include network management and professional services
through AT&T Solutions and international operations and ventures.
AT&T recently completed the acquisition of MediaOne Group and
with the addition of MediaOne's 5 million cable subscribers,
AT&T becomes the country's largest cable operator, with about 16
million customers.

AT&T has endured some rough treatment over the past few months,
falling to record lows along with other giants in the telecom
industry.  Strangely enough, there has been a recent increase in
bullish options activity and traders are at a loss to explain the
rise in call option interest.  One thing is clear, the activity
suggests that someone believes there is future upside potential
in the issue.  At the same time, the upper limits of any rally
are significantly affected by the resistance at the sold strike
price; a perfect condition for a time selling position.  Those
of you who enjoy speculative plays can use the favorable option
premiums to initiate a long-term calendar spread.


PLAY (conservative - bullish/calendar spread):

BUY  CALL  JAN02-30  WT-AF  OI=36358  A=$2.93
SELL CALL  JAN01-30  T-AF   OI=34032  B=$0.43
INITIAL NET DEBIT TARGET=$2.38  TARGET ROI=100%


Calendar Spread Basics:

The basic premise in a calendar spread is simple; time erodes
the value of the near-term option at a faster rate than it will
the far-term option.  A less neutral and more bullish type of
calendar spread is when the underlying issue is some distance
below the strike price of the options.  The outlook is aggressive
with low initial cost and large potential profits.  Two favorable
outcomes can occur: the stock rallies in the short-term and the
position is closed for a profit as time value erosion in the
short option produces a net gain or; the stock consolidates,
allowing the sold option to expire and then eventually rallies
above the long option strike price.

The strategy is best initiated when the near-term options are
trading at a premium with respect to longer-term volatility.
Most investors prefer to establish these positions at least 3-5
months before the long options expire, to allow the sale of a
number of short-term options.  The basic concept in this type of
spread is selling time value in the call options when they are
overpriced (high implied volatility) and buying it back, if
necessary, when the options return to intrinsic value.  Ideally,
the trader would like to have the stock finish just below the
sold strike when the near-term option expires.  However, when
the short-term position is in-the-money on the last day of the
strike period, you must buy it back so that you don't have to
exercise the long-term options to cover your obligation; that
would defeat the purpose of the strategy.  At the beginning of
each expiration period, you simply sell the next month's call to
further reduce the cost basis of the long position.


******************************************************************
ISLD - Digital Island  $12.63  *** Ready To Rebound? ***

Digital Island offers a global network and related services for
companies that are using the Internet to deploy key business
applications worldwide. ISLD's services makes it easier for
companies to globalize their operation and to provide a higher
quality of service and more functions than the public Internet.
The company targets corporations that are increasingly relying
on the Internet to conduct business but are constrained by its
unreliability, slow performance and limited range of functions.
Its global private network and expert services enable customers
to effectively deploy and manage global applications by combining
the reliability, performance and range of functions available in
private intranets operated by individual companies for their own
users, with the global access of the public Internet.  ISLD also
offers service level guarantees, network management and other
high quality services designed to improve the applications
deployed on its network.

ISLD is another issue that has experienced recent bottom-fishing
activity and the increased interest in call options suggests that
traders are anticipating a rebound in the company's share value.
Earnings are due tomorrow and this position provides an excellent
opportunity to speculate on the outcome of the announcement.


PLAY (speculative - bullish/synthetic position):

BUY  CALL  DEC-17.50  SUH-LW  OI=163  A=$1.38
SELL PUT   DEC-10.00  SUH-XB  OI=147  B=$1.25
INITIAL NET CREDIT TARGET=$0.00-$0.12 ROI TARGET=50%

Note:  Using options, the position is equivalent to being long
on the stock.  The collateral requirement for the naked put is
approximately $375 per contract.




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DISCLAIMER
**********

Please read our disclaimer at:
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DISCLAIMER

Option Investor Inc is neither a registered Investment Advisor nor a Broker/Dealer. Readers are advised that all information is issued solely for informational purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy, nor is it to be construed as a recommendation to buy, hold or sell (short or otherwise) any security. All opinions, analyses and information included herein are based on sources believed to be reliable and written in good faith, but no representation or warranty of any kind, expressed or implied, is made including but not limited to any representation or warranty concerning accuracy, completeness, correctness, timeliness or appropriateness. In addition, we do not necessarily update such opinions, analysis or information. Owners, employees and writers may have long or short positions in the securities that are discussed.

Readers are urged to consult with their own independent financial advisors with respect to any investment. All information contained in this report and website should be independently verified.

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Option Investor Inc
PO Box 630350
Littleton, CO 80163

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