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Daily Newsletter, Thursday, 10/18/2001

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The Option Investor Newsletter                Thursday 10-18-2001
Copyright 2001, All rights reserved.                       1 of 2
Redistribution in any form strictly prohibited.

To view this email newsletter in HTML format with embedded
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Posted online for subscribers at http://www.OptionInvestor.com
************************************************************
MARKET WRAP  (view in courier font for table alignment)
************************************************************
       10-18-2001           High     Low     Volume Advance/Decline
DJIA     9163.22 - 69.75  9233.94  9134.30  1.2 bln   1106/1994
NASDAQ   1652.72 +  6.38  1668.00  1634.72  1.8 bln   1505/2076
S&P 100   551.01 -  3.66   555.69   548.58   Totals   2611/4070
S&P 500  1068.61 -  8.48  1077.94  1064.54
RUS 2000  421.06 -  3.43   424.86   420.55
DJ TRANS 2204.70 - 23.00  2229.04  2194.19
VIX        37.36 +   .13    38.48    36.67
VXN        70.69 +  3.58    72.06    67.58
TRIN        1.39
Put/Call Ratio       .93
*************************************************************

Mixed Bag of Earnings Scares Investors

As in Super Tuesday for financial stocks today could have
been called Tech Thursday. Big caps of all types announced
after the close and results were mixed and sprinkled with future
warnings. MSFT, SUNW, EBAY, GTW, GLW, KLAC, PSFT, IDPH, SCMR,
GNSS and PVN were a few of the companies that reported after
the bell. The barrage of earnings had something for everyone
and after hours trading was hectic to say the least.





Starting with the biggest tech reporting, Microsoft, the news
was not good. They beat the street by four cents but warned
that earnings would be down for the next couple of quarters
despite all the new products in various stages of delivery.
They also said they saw PC sales flat to down in the fourth
quarter with no holiday bounce. This is inline with what Intel
said earlier in the week but not something investors wanted
to hear repeated. MSFT traded on both sides of the line in
after hours and appeared to be settling with a fractional
positive gain. Volume was especially heavy and Friday is
sure to see many position changes as well.

Following Microsoft was PeopleSoft which posted a +113% jump
in 3Q income at $.15 and beating the lowered estimates of $.12
cents. The company said they were continuing to see accelerated
adoption of their current flagship product, PeopleSoft 8. PSFT
jumped around +$2 in after hours trading.

On the hardware side SUNW announced earnings that beat the
street with a smaller than expected loss and revenue numbers
that were inline with estimates. They said the current economic
environment was very difficult but their strategy was giving
them a competitive advantage. They also restated their profit
goal by June-2002. They have over $6 billion in cash.

Another tech company, Gateway, also announced and missed the
already lowered estimates by two cents. They did say they
expected to see improved results in the fourth quarter which
was contrary to other PC forecasts. They refused to give
specific guidance for the next two quarters and used several
qualifiers on their optimistic outlook. GTW was flat in
after hours.

In the Internet world EBAY continues to rule the auction kingdom
but there may be a crack in their armor. They did raise estimates
for the 4Q but not as aggressively as in the past. The EBAY CFO
said that they were concerned with the U.S. holiday season
approaching that it did not appear as strong as it had been.
The concern and minimal increase in revenue forecasts had
investors fleeing EBAY stock in after hours. As the only
Internet stock still holding a sky-high PE of 189 any slowing
of profits could seriously impact the stock price. EBAY fell
about -$4 in after hours.

The semiconductor sector got a lift in after hours with a
flood of announcements. KLAC beat estimates by a penny and
traded up slightly. AMCC announced earnings inline with estimates
and called a bottom in the current crisis. The CEO said the
sector had stabilized and had seen a bottom from a revenue
standpoint. TQNT announced earnings of a nickel and announced
several new initiatives aimed at cell phones which is a growing
market. PMCS announced earnings that were two cents above the
street and said inventories were hitting acceptable levels
and they were reducing costs by laying off 350 workers. The
clear chip winner was GNSS which beat the street by ten cents
and double prior revenues. GNSS jumped over +3 in after hours.

Corning, Nortel and Scyamore announced earnings on the same
day that Sprint said they would cut capital spending by about
$1.4 billion in 2002. Sprint had not announced a 2002 target
but their current rate had put them on a $5.4 billion track.
They said they would only target $4 billion for 2002.
Worldcom and Verizon had already slashed spending estimates
by 25%. This is bad news for GLW, NT as well as SCMR, CSCO
and the others. Corning reported steep losses for the quarter
and warned that they do not see business improving any time
soon. SCMR also announced cuts in their workforce and warned
that next quarter would be less than expected. Nortel also
warned that business was not improving. They said they hoped
a bottom was near but could not tell at this time. All three
companies traded positive and negative after the close which
indicates that most of this bad news is already priced into
their stocks.

There were dozens more earnings of every type but now comes
the crunch. With the majors companies out of the way the urge
to buy and hope for an upside surprise is gone. This may have
been a small factor in the last three weeks of market rally
but it did exist. This is why this period in October is
normally very rough for investors. Summer is typically a
slow time in the corporate world and October earnings are
weak at best. The number of companies beating estimates is
not relative at this time. Why? Because if you dig a hole
to lower the earnings bar to account for recent events it
is very easy to step over the bar. If XYZ company saw its
estimates fall from a $1.00 profit to a loss of -$.25 it
does not take a genius to realize that a loss of only -$.23
is not earth shaking in the overall scheme of things.

Money flow is marginally positive. Lipper reported that
$32 billion left equity funds in the last month. We knew
that since we report on the TrimTabs.com numbers each
week. Lipper also said money was beginning to come back
into funds but only a trickle. There has been no rush
to buy. Yes, there has been an amazing upward bias prior
to the real earnings this week but not a rush to buy.
Investors were nibbling on stocks just to prevent the
train from leaving the station without them. Institutional
investors are still scared and are waiting for October to
be over and some resolution to the current terrorist
problems. Many had hoped that these earnings reports
would bring news of a coming rebound to validate their
urge to own stocks. Instead the reports are validating
the current recession and pushing the expected recovery
further into the future.

As investors we need to be very careful here. For the
last three weeks I have warned you that although the markets
had a bullish bias in spite of the current world events
this week was the most dangerous week. The momentum provided
by earnings is over and forward visibility is still weak
at best. True investors should be buying stocks to hold
for long term on any dip but long call only option traders
should set stops under current plays and be ready to move
to the sidelines. Almost every big cap Nasdaq stock closed
the after hours trading down after the flurry of warnings.
Those few optimistic earnings statements appear to have had
little lasting impact. After being positive earlier, futures
are starting to increase to the negative side. As always
there is a lot of darkness before morning but Fridays have
not been wildly bullish recently. With Bush and other world
leaders congregated in one spot in China anyone could
almost see a bullseye floating over Shanghai. God forbid
that something dreadful could happen but investors are
likely to want to go flat just in case. The increasing
unrest and demonstrations around the world are causing
instability in most of the world markets, not just ours.
The daily roster of new anthrax cases is not building any
confidence among the American people either.

It all boils down to time frame. If you are buying stock
now with a 10-30 year time frame then buy every dip. Stocks
can get cheaper in the next few weeks but compared to where
they will be ten years from now it is immaterial. If you
are a long call "trader/buyer" then this is probably not
a good week to buy. The Dow could easily test 9000 again
and many "analysts" think we could see much lower numbers.
I personally think there are too many investors lurking
just under the bids for a significant sell off below the
9000 level. As a long call buyer I would buy any rebound
from below 9000 if we dipped below that level again. As
a put buyer the financial sector is clearly under pressure.
Providian said today that earnings in the 4Q could fall to
10-15 cents when analysts were expecting $.60 cents. This
is the tip of the iceberg in the consumer community. Zero
interest on cars but nobody with a job left to buy them.
Loan loss reserves are rocketing and defaults are increasing.
More layoffs are ahead. Airlines are openly talking about
bankruptcy. Put buyers should be very excited with their
short term prospects.

In a nutshell, if you have long positions set stops and
be prepared to go flat. The next ten days could provide
another entry point. This is still a news driven environment.
News of a captured or killed Bin Laden could provide a
1000 point rally and news of another attack could swing
us 1000 points in the opposite direction.

Friday is the 14th anniversary of the 1987 market crash.
October 19th, 1987, -22.6% in one day. Are you superstitious?

Definitely, enter passively, exit aggressively!

Jim Brown
Editor


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

Arbitrary Observations
By Eric Utley

The Dow ($INDU) bounced, ever so slightly, from its short-term
support; the S&P (SPX.X) settled, ever so slightly, below its
short-term support; the Nasdaq-100 (NDX.X) traded below, but
closed above, its short-term support.  I don't know about you,
but I had a hard time reading into Thursday's session, let alone
discerning the market's sentiment!?

Instead of making any would-be erroneous predictions, I'd like
to make a few observations:

What's up with big cap tech's out performance lately?  The
NDX finished up Thursday by 1.18 percent, while the Composite
(COMPX) gained 0.38 percent.  The NDX's out performance can
be attributed to the GSO.X, BMX.X, NWX.X, and BTK.X.

The Nasdaq-100 Volatility Index (VXN.X) gained more than 5
percent Thursday.  To repeat, the NDX added over 1 percent
Thursday.  So, why were options market participants fearful in
the face of rising stock prices?  Could it be that implied
volatility mysteriously rose ahead of Microsoft's (NASDAQ:MSFT)
report after the bell.  After all, Microsoft currently
accounts for 11.5 percent of the NDX -- by far the largest
component of the index.

Bullish percent data across the markets, for the most part,
remained unchanged Thursday.  Considering the recent and big runs
of many tech stocks, it's very possible that the NDX could shed
quite a few points before its bullish percent chart reverses.  The
same could be said of the SPX.

Direction is the most difficult to call near the end of a trend
because of the many conflicting signals.

-----------------------------------------------------------------

Market Volatility

VIX   37.36
VXN   70.69

-----------------------------------------------------------------

          Put/Call Ratio  Call Volume   Put Volume
Total          0.93        773,976       716,752
Equity Only    0.79        602,182       477,795
OEX            1.26         31,321        39,592
QQQ            0.72         54,201        38,992

-----------------------------------------------------------------

Bullish Percent Data


           Current   Change   Status
NYSE          27      + 0     Bull Alert
NASDAQ-100    63      + 0     Bull Confirmed
DOW           53      + 0     Bull Confirmed
S&P 500       44      + 0     Bull Alert
S&P 100       44      + 0     Bull Alert

Bullish percent measures the number of stocks in an index
currently trading on a buy signal on their point and figure
chart.  Readings above 70 are considered overbought, and readings
below 30 are considered oversold.

Bull Confirmed  - Aggressively long
Bull Alert      - Cautiously long
Bull Correction - pause or pullback in upward trend
Bear Alert      - Take defensive action if long
Bear Confirmed  - High risk if long, good conditions for shorting
Bear Correction - Pause or rebound in downtrend

-----------------------------------------------------------------

 5-Day Arms Index  1.23
10-Day Arms Index  1.07
21-Day Arms Index  1.01
55-Day Arms Index  1.22

Extreme readings above 1.5 are bullish, and readings below .85
are bearish.  These signals don't occur often and tend be early,
but when the do, they can signal significant market turning
points.

-----------------------------------------------------------------

        Advancers     Decliners
NYSE      1106           1994
NASDAQ    1505           2076

        New Highs      New Lows
NYSE       30             46
NASDAQ     31             55

        Volume (in millions)
NYSE     1,263
NASDAQ   1,778

-----------------------------------------------------------------

Commitments Of Traders Report: 10/12/01

Weekly COT report discloses positions held by small specs
and commercial traders of index futures contracts at the
Chicago Mercantile Exchange and Chicago Board of Trade. COT data
can be found at www.cftc.gov.

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 tend
to be wrong.

S&P 500

Commercials   Long      Short      Net     % Of OI
09/25/01      357,873   407,036   (49,163)   (6.4%)
10/05/01      365,200   408,567   (43,367)   (5.6%)
10/12/01      369,049   407,804   (38,755)   (4.9%)

Most bearish reading of the year: (111,956) - 3/6/01
Most bullish reading of the year: ( 41,144) - 5/1/01

Small Traders Long      Short      Net     % of OI
09/25/01      122,613     71,721   50,892     26.2%
10/05/01      124,249     73,882   50,367     25.4%
10/12/01      122,292     74,539   47,753     24.0%

Most bearish reading of the year:  36,513 - 5/01/01
Most bullish reading of the year:  91,122 - 3/06/01

NASDAQ-100

Commercials   Long      Short      Net     % of OI
09/25/01       26,761     36,812   (10,051)  (15.8%)
10/05/01       26,703     37,669   (10,966)  (17.0%)
10/12/01       24,662     38,020   (13,358)  (21.4%)

Most bearish reading of the year: (15,521) - 3/13/01
Most bullish reading of the year:  (1,825) - 1/02/01

Small Traders  Long     Short      Net     % of OI
09/25/01       10,699     6,580    4,119      23.8%
10/05/01       10,918     6,804    4,114      23.2%
10/12/01       11,948     7,012    3,936      20.6%

Most bearish reading of the year:  (1,028) - 1/02/01
Most bullish reading of the year:   8,460  - 3/13/01

DOW JONES INDUSTRIAL

Commercials   Long      Short      Net     % of OI
09/25/01       20,013     7,806   12,207     43.9%
10/05/01       22,755    10,124   12,631     38.3%
10/12/01       24,873    10,194   14,679     41.7%

Most bearish reading of the year: (8,322) - 1/16/01
Most bullish reading of the year: 13,348  - 9/18/01

Small Traders  Long      Short     Net     % of OI
09/25/01        4,530    12,621    (8,091)   (47.2%)
10/05/01        4,731    11,868    (7,137)   (43.0%)
10/12/01        3,517    12,294    (8,777)   (55.5%)

Most bearish reading of the year:  (8,777) - 10/12/01*
Most bullish reading of the year:   1,909  -  1/16/01

-----------------------------------------------------------------


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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:
*****

ENZN $60.75 +0.40 (+1.35) ENZN's recent run may be coming to
an end.  The stock is acting a bit top heavy, so we're choosing
to close the play out at current levels.  Traders with open
positions might look for any strength early Friday to exit plays.

TEVA $64.20 -0.85 (-2.50) TEVA's recent price action suggests
further downside.  In the past two days, the stock has closed
near its day lows, which isn't a good sign for upside potential.
Hopefully those who traded this play were stopped out with a
profit in the last two days.  If not, look for a relief rebound
early Friday as an exit opportunity.

NOK $18.78 -0.72 (-0.19) After making an impressive push through
the $20 level on Wednesday, bullish traders lost their resolve
and have allowed the bears to have their way over the past
couple days.  Shares of the wireless handset company are finding
some support near $18.50, but with the clear rollover in the
daily Stochastics, it looks like our play is in trouble.  Add in
the fact that the company will release earnings tomorrow morning,
and we need to move NOK to the drop list tonight.  Use any
morning strength to exit remaining open positions.


PUTS:
*****

No Dropped Puts for Thursday.


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The Option Investor Newsletter                 Thursday 10-18-2001
Copyright 2001, All rights reserved.                        2 of 2
Redistribution in any form strictly prohibited.

To view this email newsletter in HTML format with embedded
charts and graphs, click here:
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* FREE REAL-TIME quotes and custom option chains
* $1.50 Per Contract (10+ contracts) or $14.95 Minimum. No Hidden Fees.
* ZERO minimum deposit required to open an account
Visit: http://www.optionsxpress.com/marketing.asp?source=optinv1

Note: Options involve risk. Risk disclosure:
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**************************************************************


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

FFIV $14.74 +0.02 (-1.01) FFIV pulled back in a big way Wednesday
along with the broader market.  The stock did catch a minor bid
Thursday, but didn't make much progress to the upside.  The
Networking Sector Index (NWX.X) remains one of the stronger tech
sectors currently, which is in stark contrast to how the group
had been trading over the past six months.  For that reason,
we're still cautiously bullish on FFIV.  Plus, GLW's upside
earnings surprise after the bell may add a boost to the group.
But, we need to reinforce the notion that FFIV needs the support
of the Nasdaq in order to advance.  With that said, if the
Nasdaq holds up early Friday, bullish traders might look for an
entry into FFIV around the $14.50 level, with a tight stop just
beneath that area.  Of course further strength in the NWX.X
would add conviction.  Traders looking for a short-term breakout
might consider waiting for FFIV to advance past the $15.25 level
before entering new plays.

DELL $23.22 +0.00 (-0.88) DELL has slipped into a trading range
over the past few days.  The stock traded up to the $25 level
Wednesday morning, but fell back down along with the Nasdaq.
For its part, DELL has found some buying interest around the
$23 level, which may serve as support going forward.  New call
entries might be found off bounces from the $23 level accompanied
with a tight stop to manage risk.  Entries at the $23 level would
allow bullish traders to be in ahead of any bounce from that
level in the near future.  Those who prefer momentum-based
strategies might wait for DELL to advance past the $23.75 level
before entering new plays.  But DELL will most likely need the
cooperation of the Nasdaq Composite (COMPX) to breakout, so
make sure to confirm market direction before entering a play
into strength.  Those entering around current levels could
consider using any future rally up to the $25 level as an
exit point.

ABGX $27.57 -0.28 (+0.15) After failing on its attempt to push
through the 510 resistance level, the Biotech index (BTK.X) is
struggling to regain its footing and ABGX has suffered a bit
of a setback as well.  Unable to clear the $30 level, the stock
is now fighting to hold the $27 support level, and things are
looking tenuous with the daily Stochastics once again rolling
over.  We've still got our stop sitting at $26 and any drop
below that level will portend further weakness.  Aggressive
traders can target a bounce from current levels for new
positions, but the more prudent approach will be to see some
serious buying emerge to push the stock back above $30 before
putting fresh capital at risk.  A breakout over $30 could lead
ABGX to test the $33 resistance level, but we'll need to see
 solid volume to do it, not to mention renewed health in the
BTK.  Remember ABGX reports earnings after the bell on Tuesday,
so we are running out of time for our play as we want to exit
any open plays before the announcement.

ORCL $14.26 +0.60 (-0.68) The slow steady advance that ORCL has
been enjoying for the past month finally ran into solid
resistance near $15.50 yesterday, and the bears proceeded to
knock our play back to the $13.65 level by the close.  The bulls
regrouped a bit today and managed to inch back over the $14
level, but the sharp drop in daily Stochastics is painting a
grim picture.  If ORCL can hold above our $13.50 stop, there
could be room for another entry on the rebound, but only if
buying volume is solid.  The 20-dma at $13.40 could provide some
support as well, but our real concern is the fact that the
ascending trendline ($14.25) looks like it may have turned to
resistance now.  The prudent approach will be to stand aside
from new positions until we see ORCL top the $15.50 level and
continue to advance from there.


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

JNJ - Johnson & Johnson $58.08 +0.31 (+2.73 this week)

Johnson & Johnson is engaged in the manufacture and sale of a
broad range of products in the healthcare field.  The company
conducts business in virtually every corner of the globe.
JNJ's activities are divided into three primary business
segments; Consumer, Pharmaceutical and Professional.  The
Consumer division is focused on personal care and hygiene
products, while the Professional segment provides a wide range
of products used by the healthcare profession.  The
Pharmaceutical group provides a broad range of over-the-counter
and prescription medications for the treatment of afflictions
ranging from antifungal to dermatological to pain management
conditions.  In June of 2001, the company merged with ALZA Corp,
a research-based pharmaceutical company which became a direct,
wholly owned subsidiary of JNJ.

Healthcare stocks have been holding up better than the broader
market, especially in the past couple weeks, and this can be
seen in the S&P Health Care index (HCX.X), which is holding onto
most of its gains accrued since September 21st.  Of course, it
is showing some signs of weakness, but if it can continue to
push higher, JNJ should perform quite well as the stock pushed
to a new all-time closing high today.  Now that is what we mean
we refer to relative strength.  HCX is outperforming the broad
market, and JNJ is outperforming the HCX.  If you're going to
game the long side in a weak market, JNJ is the type of stock
with which to do it.  Perhaps the third time is the charm, as
this is JNJ's third attempt at breaking through the $58 level,
and based on Thursday's close at $58.08, it looks like the bulls
may succeed.  We'd really like to see a dip and bounce from the
$56 level before initiating new positions, and given the broad
market weakness, we should get our chance in the next few days.
That is the closest level that should provide support and would
allow us to enter the play at a lower risk level.  We are
initially placing our stop at $54.50, just below the $55 support
level.

BUY CALL NOV-55*JNJ-KK OI= 3397 at $4.00 SL=2.50
BUY CALL NOV-60 JNJ-KL OI= 3824 at $0.95 SL=0.50
BUY CALL JAN-55 JNJ-AK OI=11541 at $5.30 SL=3.25
BUY CALL JAN-57 JNJ-AY OI=14827 at $3.50 SL=1.75
BUY CALL JAN-60 JNJ-AL OI=26497 at $2.15 SL=1.00

Average Daily Volume = 8.09 mln



JNPR - Juniper Networks $23.00 +1.87 (+1.94 this week)

As a provider of Internet infrastructure solutions, JNPR serves
Internet service providers and other telecommunications service
providers, helping them to meet the demands resulting from the
rapid growth of the Internet.  The company delivers next
generation Internet backbone routers that are specifically
designed for service provider networks.  JNPR's flagship product
is the M40 Internet backbone router, which complements the
recently-introduced M20, which is a router built specifically
for emerging service providers.  The routers provided by the
company combine the features of the JUNOS Internet Software,
high performance ASIC-based packet forwarding technology and
Internet-optimized architecture into a purpose-built solution
for service providers.

Technology stocks have actually been showing signs of life in
recent weeks and one of the strongest sectors in this revival
has been the Networking sector (NWX.X), gaining more than 40%
from the late September lows as of yesterday's high.  JNPR has
made that move look like peanuts though, as it has gained more
than 170% from its September lows.  Not only that, but the stock
has managed to hang onto those gains and showed solid buying
support today.  The bulls will have to work to push JNPR back
above the $24-25 resistance level, but there should also be some
solid support near the $20 level.  This is obviously an
aggressive play, but the action points are easy to define.  We
are placing our stop at $19.50 (just below the top of October
12th gap), and dip-buyers will want to see a bounce from the
vicinity of the $20 level before initiating new positions.
Traders interested in momentum plays will want to target a
breakout over $24 on solid volume as the bulls take aim on the
next level of resistance at $29-30.  Keep a sharp watch on
volume if you choose the momentum path, as a weakening of buying
volume will be the first sign that JNPR is running out of steam.

BUY CALL NOV-22*JUX-KX OI=5705 at $3.40 SL=1.75
BUY CALL NOV-25 JUX-KE OI=5238 at $2.20 SL=1.00
BUY CALL NOV-30 JUX-KF OI=1146 at $1.00 SL=0.50
BUY CALL JAN-25 JUX-AE OI=2970 at $4.10 SL=2.50
BUY CALL JAN-30 JUX-AF OI=3751 at $2.55 SL=1.25

Average Daily Volume = 14.9 mln



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

WFC $39.07 +0.22 (-2.01) The weakness across the broader markets
certainly played in our favor in WFC Wednesday.  The stock got
hammered below the $40 level, which could've allowed traders to
book some quick gains on the weakness.  WFC did stage somewhat
of a rebound Thursday, but the stock's range was extremely small,
so future market and sector weakness should result in the stock
trading lower.  Those traders with entries at higher prices
should be thinking about lowering stops to manage risk and
protect gains, while those looking for new entry points might
look for a rollover around the $39.50 area.  Entries on further
weakness aren't as prudent, considering the oversold nature of
WFC, but a momentum-based entry could be considered if the BKX.X
continues to pullback.

CIMA $58.30 +0.30 (-1.25) After topping out near $64 a couple
weeks ago, CIMA has been inching its way lower.  And with the
200-dma (currently $61.48) acting as solid resistance, the stock
saw a solid drop on Wednesday.  If the recent pattern continues,
we would look for another intraday rally to provide fresh entry
opportunities with a rollover near the 20-dma ($59.19), which
failed as support on Wednesday, or the 200-dma.  Further
weakness below the recent lows ($57) will open the door for a
decline back to $55 and then $50, and we would look at that drop
below $57 as an attractive entry point.  While volume has
continued to atrophy, there is no arguing with the fact that the
daily Stochastics are once again rolling lower, paving the way
for further price declines.  Keep stops set at $62.

MBI $44.98 -1.42 (-3.16) After the oversold bounce finished
running its course a couple weeks ago, shares of MBI were primed
to rollover and that is exactly what they did, right at the
200-dma (then at $51).  Since then, declining daily Stochastics
have led shares back to the 38% retracement level ($45.18) of
the late-September rally.  Now that level has failed as support
and we are looking for the next support to emerge near the 50%
retracement ($43.43), which also lines up with historical
support in the $42.75-43.50 range.  Overhead resistance is now
resting at $46.50 and any bounce up into that area should
provide attractive entry points for new positions.  We could
even see MBI decline back to the $40 level.  Continued weakness
below current levels could easily open the door for fresh
entries as the stock drops below today's low of $44.90.  Earnings
are slated to be released November 1st, so we still have plenty
of time to ride this play lower before the announcement.  Given
the recent decline, we are ratcheting our stop down to $47.

TGH $61.95 -0.45 (-1.30) Continuing to work lower from the latest
failed attempt to break through the formidable $70 resistance
level, TGH has been pressured by the steeply descending
trendline, currently resting at $63.50.  The pop at the open
this morning provided another attractive entry as TGH stopped
right at the trendline and headed lower from there.  Volume is
running right around the daily average, and daily stochastics are
headed lower once again, adding to the bearish pressure.  The
bulls may try to hold support near the $61.50 level, and any
bounce should run out of steam near the descending trendline.
That rollover would give us another solid entry, and we'll
continue to protect ourselves with our stop, now at $65.  A drop
under $61.50 can also be used for fresh entries, as it looks
like TGH is likely to challenge the $60 support level and
possibly fill the late September gap down at $58.


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

GDW - Golden West Financial $49.36 -1.84 (-4.03 this week)

Golden West Financial is a savings and loan holding company,
the principal business of which is the operation of a savings
bank business through its wholly owned savings bank subsidiary,
World Savings Bank, FSB.  The company operates in California,
Florida, Colorado, Texas, Arizona, New Jersey, Kansas, and
Illinois.

Is the Fed nearing the end of its benign monetary policy?  The
recent price action in the S&Ls might suggest so.  Stocks such
as WM and GDW, among others in the group, have taken a beating
over the past few days and look to have more downside.  Part of
the sell-off in the last three days was probably market related,
but some have suggested that the weakness in the thrifts
suggests that the Fed is nearing the end of its cutting of
interest rates.  If that's the case then stocks such as GDW
are poised to trade lower over the intermediate-term.  For its
part, GDW closed below the psychologically critical $50 level
Thursday.  The only support to speak of below current levels is
at the stock's 52-week low, which currently sits at the $48.88
level.  If that level doesn't hold, GDW should make its way
down to the $45 level over the next week or two.  If the stock
does rebound in the coming days, a rollover from the $50 area
may serve as a solid entry point.  A protracted relief rally
could take GDW up to the $52 level, which is the site of its
most recent gap lower and could serve as an excellent entry
point for new put plays.  Our stop is initially in place at the
$52 site.

BUY PUT NOV-55 GDW-WK OI=633 at $6.70 SL=5.00
BUY PUT NOV-50*GDW-WJ OI= 63 at $3.20 SL=1.75

Average Daily Volume = 966 K



ADVS - Advent Software $40.86 -0.46 (-3.70 this week)

Advent Software is a provider of Enterprise Investment
Management solutions that automate and integrate mission
critical functions of investment management organizations
through software products, services and data integration.

ADVS has sold off in the past three sessions.  The stock closed
near its day low today and looks to have further downside from
current levels.  MSFT's report after the bell today might impact
trading in ADVS early Friday.  If ADVS rallies in the wake of
the MSFT report bearish traders might find a nice entry point
near resistance.  The first site to look for a possible rollover
is around the $42 level.  The stock has traced a series of
relatively lower highs over the past three days and a rollover
at the $42 would perpetuate the pattern.  If the stock does
edge past that level, then resistance at $43 should contain
any rally attempt.  To the downside, the stock has built a
very short-term base around the $40.75 level over the past two
days.  A failure of that level could lead to further downside
in the event that the Software Sector Index (GSO.X) pulls back.
The $40 level could potentially serve as support over the
short-term, so if you enter on a breakdown below $40.75 make
sure to confirm further weakness with a decline below the $40
mark.  Below $40, ADVS doesn't have much in the way of support
until the $36 level, which will serve as our first downside
target in this play.  Our stop is initially in place at $44.

BUY PUT NOV-45*UIV-WI OI= 60 at $7.00 SL=5.00
BUY PUT NOV-40 UIV-WH OI=157 at $4.20 SL=3.00

Average Daily Volume = 851 K



EBAY - eBay $59.06 +1.97 (+0.03 this week)

eBay is a United States based dynamic pricing online trading
platform located at ebay.com.  eBay developed a Web based
community in which buyers and sellers are brought together in
an efficient format to buy and sell items, such as collectibles,
automobiles, high end or premium are times, jewelry, electronics
and a host of other items.

Shares of EBAY rallied more than 50% over the last few weeks.
Part of the stock's strength came from the market's rebound.
The other part of the stock's strength came from the rumored
solid quarter that the company reported after the bell Thursday.
And the company did report a fantastic third-quarter, but a
few other interestingly bearish points were raised with EBAY's
report.  The company raised revenue guidance for the fourth
quarter by $5 million, which is an unusually small amount
compared to the company's historical tendencies to raise the
bar by a large amount.  Plus, the CFO made cautious comments
about the upcoming holiday season and profit margins showed
weakness.  Up until this point, EBAY's loft valuation had been
justified by its unstoppable growth.  But the cult-like allure
of its shares may lose some followers in light of EBAY's early
signs of slowing.  The stock sharply sold off in the after
hours, so it's likely that Friday morning's trading is going
to be fast, to say the least.  Aggressive traders might
consider opening new put positions early Friday, but a short
covering rally might offer a better risk/reward set-up for
put plays.  The $57 level may serve as resistance on any
recovery attempt.  Our stop is initially in place at $60, but
we'll most likely move that lower Friday depending upon on
EBAY closes.

BUY PUT NOV-60 QXB-WL OI=1302 at $5.60 SL=4.00
BUY PUT NOV-55*QXB-WK OI=1833 at $3.60 SL=1.00

Average Daily Volume = 7.50 mln



ADI - Analog Devices $35.80 -3.96 (-7.31 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.

As this expiration week got underway, it became clear that the
rally in Semiconductor stocks had pretty much run its course,
and we are starting to see the proof of that as the SOX index is
in full rollover mode now.  Resistance at $475 was too much for
the bulls to overcome and as the daily stochastics oscillator
began to rollover, it dragged the price lower as well.  Looking
as weak Semiconductor stocks quickly reveals that ADI is
demonstrating the same pattern and is well on its way to
retesting the September lows near $30.  The 200-dma (currently
$44.57) turned back the bulls yesterday and since then ADI has
given up a whopping 18.8%.  Adding to the strong bearish picture
is the fact that the selling volume today more than doubled the
ADV, and ADI closed just off its low of the day.  Stochastics
are only midway back to the oversold region and that leaves
plenty of room to fall.  We're placing our stop initially at $40
(right at today's high) and any bounce into the $39-40 range
would make for an attractive entry on the rollover.  More
realistically though, we're going to need to focus on further
weakness, targeting new positions as ADI falls through the $35
support level on its way back to $30.  Continued strong selling
volume will confirm the bearish picture and give us more
confidence in initiating new positions.

BUY PUT NOV-35*ADI-WG OI=436 at $3.20 SL=1.50
BUY PUT NOV-30 ADI-WF OI=240 at $1.40 SL=0.75

Average Daily Volume = 3.52 mln



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*********************
PLAY OF THE DAY - PUT
*********************

TGH - Trigon Healthcare $61.95 -0.45 (-1.30 this week)

Trigon Healthcare, through its subsidiaries, is a managed
healthcare company in Virginia, serving over two million
members primarily through statewide and regional provider
networks.  The company divides its business into four
segments, which include health insurance, government programs,
investments and all other.

Most Recent Update

Continuing to work lower from the latest failed attempt to break
through the formidable $70 resistance level, TGH has been
pressured by the steeply descending trendline, currently resting
at $63.50.  The pop at the open this morning provided another
attractive entry as TGH stopped right at the trendline and headed
lower from there.  Volume is running right around the daily
average, and daily stochastics are headed lower once again,
adding to the bearish pressure.  The bulls may try to hold
support near the $61.50 level, and any bounce should run out of
steam near the descending trendline.  That rollover would give us
another solid entry, and we'll continue to protect ourselves with
our stop, now at $65.  A drop under $61.50 can also be used for
fresh entries, as it looks like TGH is likely to challenge the $60
support level and possibly fill the late September gap down at $58.

Comments

TGH closed below its near-term support level at $62 Thursday.
The failure of that level could lead to further downside
Friday.  Look for the stock to take out its intraday low in
Thursday's session at $61.61.  Downside momentum should force
TGH below $61.25 and carry it towards its 200-dma at $60.50
early next week.

BUY PUT NOV-65*TGH-WM OI=0 at $4.80 SL=3.50
BUY PUT NOV-60 TGH-WL OI=0 at $2.10 SL=1.00

Average Daily Volume = 231 K



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Stop Losses based on the option price or the stock price.
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**************************************************************


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