Option Investor

Daily Newsletter, Wednesday, 10/16/2002

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The Option Investor Newsletter                Wednesday 10-16-2002
Copyright 2002, All rights reserved.                        1 of 2
Redistribution in any form strictly prohibited.

In Section One:

Wrap: The Great Pretenders
Futures Wrap:  Intel Taketh away, IBM Giveth back
Index Trader Wrap:  A turn of events
Weekly Fund Family Profile: Loomis Sayles Funds
Traders Corner: Using Dow Futures to hedge IBM options
Options 101: Blind Squirrel Finds Acorn

Updated on the site tonight:
Swing Trader Game Plan: Tech Surprise After Tech Surprise

Posted online for subscribers at http://www.OptionInvestor.com
MARKET WRAP  (view in courier font for table alignment)
10-16-2002                High    Low     Volume Advance/Decl
DJIA     8036.03 - 219.65 8232.10 8013.41  1787 mln   303/1460
NASDAQ   1232.42 -  50.02 1253.61 1229.06  1406 mln   385/1008
S&P 100   436.19 -   7.07  447.26  425.54   totals    688/2468
S&P 500   860.20 -  21.25  881.27  841.44
RUS 2000  350.85 -   9.67  360.63  346.53
DJ TRANS 2201.30 -  85.16 2285.25  2182.73
VIX        41.97 +   2.23   49.71  46.28
VIXN       56.87 +   0.50   59.76  56.87
Put/Call Ratio 1.25

The Great Pretenders
by Steven Price

It appears that several of yesterday's contenders have been 
exposed as pretenders, instead.  Stocks such as General Motors 
(GM), Citigroup (C) and Motorola (MOT) have seen a quick end to 
last week's rally, as earnings from both the companies 
themselves, and competitors, have shown the spotlight a little 
brighter on the fourth quarter outlooks.  Last night's Intel 
earnings miss and comments about the fourth quarter got the ball 
rolling, but it should have been apparent even before that 
release that the good news wasn't really so good. 

Citigroup (C) included the sale of assets in their earnings 
release, which is a one-time occurrence.  If they are relying on 
this type of income to meet earnings, then I get the feeling they 
are looking hard for ways to prop up the stock.  With so many 
problems relating to bad debt and trading losses permeating the 
banking sector, it is hard to imagine that Citigroup doesn't face 
many of the same challenges. They have not (yet) announced 
problems in those areas, which makes me think there may be a time 
bomb somewhere on the horizon.  Especially considering the broad 
base of problems at J.P. Morgan, which released figures today. 

J.P. Morgan Chase (JPM) beat earnings estimates, but profits 
still fell 95% from a year ago.  The company announced 2000 
additional job cuts, and hinted that there may be more to come.  
Vice Chairman Marc Shapiro said," We're going to continue to 
adjust our expenses to fit our revenues."  The company said it 
was committed to maintaining its dividend and the regular payment 
of that dividend at least for this quarter.  JPM's investment 
banking unit lost over $250 million, compared to a $700 million 
profit a year ago.  Underwriting revenues also fell 18%.  Trading 
revenues fell from $1.5 billion a year ago, to $370 million and 
fixed-income profits fell 50%.  One of the biggest problems for 
JPM was bad debt, which cost the company over a $1 billion.   
Shapiro said that the company was aggressive in getting large 
write-offs on the telecom sector in the rear view mirror, but 
that loans to energy trading firms were now starting to create 
problems for banks.

General Motors beat earnings yesterday by $0.21, which seems to 
be a huge margin.  However, the full year estimates would 
indicate a fourth quarter below expectations, when taking into 
account the third quarter numbers. The stock was also downgraded 
recently, citing deteriorating auto industry fundamentals and 
pricing pressure on new and used cars.  The company is already 
offering zero percent financing, which doesn't leave much room to 
account for lower prices without further damaging the bottom 
line.  Standard and Poor's, which cited increasing pension 
liabilities and weakening North American demand for autos, cut 
the company's long-term debt today.   S&P also said it may be 
cutting ratings on Ford (F), as well.   Ford beat earnings 
estimates today, but still lost money in the third quarter. The 
loss came out to about $53 for every vehicle built in North 
America.  It also announced that the return on its U.S. pension 
fund assets was down 15%, increasing its underfunded status to 
$6.5 billion, from $3.2 billion at the end of the previous 
quarter.   About 70% of the fund's assets are invested in stocks. 
The CFO said the company had enough cash to deal with the pension 
shortfall. If the stock market does begin to turnaround, a 
continued rally could bail GM and Ford out of some of their 
current pension fund problems.  However, it is a tenuous position 
to be in, considering the weak economic fundamentals.   GM is 
looking at a current shortfall of around  $20 billion. 

Boeing (BA) released earnings, which fell 43% from the year ago 
period.  The company saw its commercial airplane revenue sink 
24%, as it delivered 73 commercial jets during the quarter - 47 
fewer than last year. However, it lowered the delivery estimate 
for next year from 275-300 planes, to 275-285 planes, and said 
2004 should see a similar range.  For the first time ever, in 
2003, Boeing's military and aerospace aircraft division will 
surpass its commercial division.  Another first is that rival 
Airbus will ship more planes than Boeing in 2003. The company 
also said that its commercial satellite and launch business would 
continue to struggle for several years. 

The Dow rally finally reversed direction today, as it ran into 
some important technical levels. The 1000-point gain of the last 
several days lost steam as it neared previous support, right 
around 8300.  In fact there are quite a few technical indicators 
between 8200 and 8400.   The 50-day moving average of 8277 was 
the first barrier.  The recent drop from August-October, which 
saw the Dow fall from 9077 to 7197, was the down leg of a head 
and shoulders formation, with the right shoulder base at 8305.  
That 8305 level was also the 50% retracement of the July-August 
rally and served as support on 7 out of 10 days prior to the head 
and shoulders breakdown in September.  In addition to these 
levels, there was also the 61.8% retracement of the recent drop, 
just above at 8359.  So the fact that we pulled back today was 
somewhat predictable, when looking at the overextended rally on 
no real good news, and the significant resistance overhead.  

Chart of the Dow Jones

Last night, Jim Brown pointed out in his Market Wrap the 
similarities between the appearance of the late July rally and 
the current rally.  What he couldn't point out yesterday was that 
today's pullback would stop at the same level as the rally in 
July did (8030 vs. 8036). 

Dow Comparison

After this morning's releases, the market geared up again for 
another big release after the bell.  IBM beat expectations by 
0.03 per share.  After selling off, following a dividend cut form 
EDS, last month, Big Blue has come back strong.  The stock traded 
as low as $54.01 before the recent rally.  It finished the day at 
$64.90, down $3.58.  However, after the earnings release, the 
stock traded as high as $70 after hours.  Profits were still off 
19% from last year, but investors apparently felt it had been 

This probably means a rally in the morning, but whether or not 
the Dow can get through that 7300 level should tell us a lot.   
We have already seen a break in the trend of lower highs, and if 
we can set some higher lows the pullback, we could start to see 
the building blocks of a rally.  What makes me still highly 
skeptical is that the majority of reporting companies are still 
seeing poor results ahead.  Even if the market is somewhat 
oversold, the trend of reductions in capital spending continues. 
If the fourth quarter and 2003 estimates are being reduced now, 
it is likely that firms are still hoping for the best and the 
current reductions don't reflect the true dangers ahead.   After 
all, there is no reason for a company to let the cat completely 
out of the bag if there is a chance that things can turn around 
between now and then. 

On Monday, I included a graph of the Semiconductor Sector Index 
(SOX.X) that showed the index on the verge of a breakout. I 
looked back to the rebound attempt in late September as the 
measuring stick for the pattern of lower highs. The closing high 
of 256 and intraday high of 263 were both broken with Tuesday's 
rally.  The index also broke out of its descending channel.  So 
it appeared got that breakout yesterday, only to have the party 
spoiled by Intel's earnings miss and cautious comments going 
forward. Motorola (MOT) also warned that it would miss 
expectations for the fourth quarter and next year, and investors 
hammered it to its lowest level in 10 years. However, after the 
close today, QLogic (QLGC) beat expectations and was trading up 
over $2.50 after hours. Advanced Micro Devices (AMD) posted a 
larger than expected loss, but sales were in line with 
projections and it predicted higher sales and a smaller loss for 
the fourth quarter. This news, combined with IBM's surprise, may 
indicate that today's sector reversal may simply be a pullback on 
the way back up. It is hard to believe that is the case, with 
Intel's cautious comments being echoed by Novellus (NVLS), but we 
try to remember to trade what we see and the SOX may be giving us 
some long opportunities (I'm waiting for lightning to strike me 
for even mentioning chips as a long play).  A bear could point to 
the rebound attempt in August as the high which would have to be 
broken in order to break the trend, as well as the 50-dma looming 
overhead.  The 50-dma provided resistance to that rebound attempt 
in August, so I'm a little torn at the moment, but we should be 
aware of these different levels in deciding which way to play the 
sector. A decisive break above the 50-dma would certainly provide 
bulls with a little more fuel.

Chart of the SOX

Earnings season tends to bring an awful lot of whipsawing.  
Things look bleak, and then all of a sudden the world is a 
brighter place.  Intel warns, and then IBM beats expectations. If 
Microsoft has positive comments on Thursday, we may see the bulls 
in full stampede on Friday morning, only to sit back and think 
about the overall economic picture over the weekend. While we 
have seen some technical barriers crossed, I still have a hard 
time believing in a long-term rally.  When the unemployment lines 
shrink, and businesses begin talking about increasing capital 
spending, then I may start buying out of the money calls again.  
Until then, trading the swings for short-term moves still seems 
the most prudent plan. Today's pullback fell short of 8000, 
indicating we may now be seeing support at a previous level of 
resistance.  To the upside, the 8300-8400 range will be tough to 
break through.  Look for a bounce in the morning, on the heels of 
Big Blue, but look for the above outlined resistance to come into 
play soon thereafter.

Intel Taketh away, IBM Giveth back
by Alan Hewko



Forget where the market closed at 4 PM on Wednesday.
IBM's earnings to the upside tonight changed all of that.

In one sentence, Intel's terrible earnings Tuesday night caused
the Dow -220 market we saw on Wednesday. IBM's earnings Wednesday 
afterhours (close $65, after hours $70) brought the bulls back.

As previously done, the below abbreviations apply for this 

ES = E-mini SP500 December futures
YM = E-mini Dow $5 December futures
NQ = E-mini NDX 100 December futures

Futures Prices:
Time       IBM        ES     YM     NQ
4:00 PM     65        860    8020    914
4:08 PM     halted    865    8060    922 at time of IBM earnings
4:15 PM     halted    863    8043    925
8:00 PM    70         876     (1)    935
   (1)Dow Futures closed at 5 PM at 8063, re-opens 9:30 PM

ES futures are higher by 16, NQ higher by 20 vs 4 PM close.

I've showed you a few times, an ES chart of what happens sometimes 
at 3 AM when Europe opens in the futures overnight market. 

The below is an ES charts from about Wed 2PM thru Wed 8pm on how ES 
futures reacted to the IBM earnings, and then its guidance during 
its conference call.

A fair amount of futures information is provided during the trading 
day, so for tonight please view today's Market Monitor for the 
Intraday futures comments.


for today (in the Market Monitor) generated one trade:

Short ES futures at 871.50, covering 1/2 position size at 868.50 
for +3 point gain, and covering remaining 1/2 position at 863.50 
for +8 ES point gain.

Result was: 
1/2 size : Gain of + 3 ES points, $150 per contract (3 x $50), or 
gain of + 15% based on $1000 margin.

1/2 size : Gain of + 8 ES points, $400 per contract (8 x $50), or 
gain of + 40% based on $1000 margin.


Wednesday was all about last night's very bearish Intel (INTC) 
earnings news; and quite simply the market leaked lower most of the 
day until some short covers took place around 2-3 PM.

I had referred several times the last 2 days during that impressive 
1,000 point Dow rally, that ES futures had a downward gap it needed 
to fill at 852-855. That gap came very close to filling today as ES 
saw day lows of 856-857 at approx 2 PM and 3:30 PM

My view is that after a 1,000 4-day Dow move, Shorts were expecting 
a triple header : bad earnings from INTC on Tue, IBM on Wed, and 
MSFT on Thur to generate a Long Profit taking selling event, with a 
possible target of Dow 7500-7600.

I'm sure Shorts were very happy to see INTC miss very bad, and the 
Dow -220 day today had them thinking, 1 down, 2 more to go and 
we'll be back at Dow 7500-7600 by this coming Monday.

IBM tonight ruined that Bear party.

As you know by now, IBM beat by 3 cents, and some decent guidance 
was provided. IBM closed at 65, and was trading at $70 after-hours.

A Short now wonders what MSFT has to say.
Will they follow INTC's example and miss or have negative guidance.
Will they follow IBM's example

Thursday morning has some economic reports, as well as earnings 
from EMC, NOK, MO, S, SAP. 

MSFT is the largest company reporting Thursday afterhours, and are 
somewhat famous for being masters at managing their earnings.


Many shorts are now "trapped"
Assuming no vast surprises on the morning economic data, or from 
Thursday morning earnings, there will be a very large gap up.

Gap up days are always difficult.

1. Gap and run
2. Gap and trap
3. Gap up, dip a bit lower, then continue higher.

I shall use the ES level of 872-875 (and Tue's high of 882) to get 
a sense for the market's direction. Please join us in Market 
Monitor Thursday morning for a better feel on how the open looks.


Given what happened after-hours Wed, they are somewhat moot, but 
some pivot numbers have been noted:

ES: (Emini SP500 futures)

Dow Industrials:

NQ (Emini NDX futures)

It will be an interesting Thursday and Friday [grins]

Alan Hewko

Questions/comments ?

email to futures@OptionInvestor.com


A turn of events

The major indexes gave back some of their gains today with 
disappointments from Intel (INTC) $13.54 -18% and Motorola 
(NYSE:MOT) $7.85 -22% giving bearish traders a bit of a reprieve 
from a four session rally.

In after hours trading, bulls battled back after Dow component 
International Business Machines (NYSE:IBM) $64.90 -4.2% gained 
back today's losses and then some with after-hours trading at 
$70.00 on the New York ECNs after reporting earnings that beat 
the Street's estimates by 3 cents a share.

In recent months, disappointing earnings sent investors scurrying 
toward the safety of Treasuries, but an encouraging sign today 
was that the 5, 10 and 30-year Treasuries all edged lower with 
the shorter-term 5-year Treasury Note futures (fv02z) 112'075 
lower by -0.09%, while the longer-dated 30-year Treasury futures 
(us02z) 109'25 -0.34% closing below its 50-day moving average for 
a second consecutive session.

30-year Treasury Note (PRICE) - Daily Interval


While stock traders are familiar with the saying "short-squeeze," 
bond traders currently talk of a "long squeeze" in Treasury 
bonds.  In essence, bond traders and investors that have been 
stashing cash in Treasuries may be getting "squeezed" out of 
their bonds after buying some historically low YIELDS.  Some 
follow through "squeeze" action may have been taking place today, 
but I think it is encouraging to an equity bull that money didn't 
flood back into the perceived safety of Treasuries.  In our Index 
Trader Wrap on Sunday, October 6th, 
http://members.OptionInvestor.com/itrader/marketwrap/100602_1.asp we noted 
that the benchmark 10-year YIELD ($TNX.X) finished that week with 
a higher YIELD (caused by selling in the 10-year) and stocks 
staged an impressive rally last week.

While we could argue that the longer-dated 10 and 30-year 
Treasuries are getting "long-squeezed" right now, this is why I'm 
keeping an eye on the shorter-term 5-year Treasury, which also 
saw marginal selling today.  The reason I want to watch all 
Treasuries is we need to be careful that bond traders don't just 
take money out of the "riskier" longer-dated maturities and stash 
it in the shorter-date and "safer" maturities.  

I won't discuss the YIELD curve here, but for those interested, 
John Seckinger wrote a great piece for the OI Trader's Corner 
titled "Yield Curve" on September 24th. 

For those that do read John's piece on the Yield Curve, here's 
today's closing futures prices for the Treasuries.  US02Z=109'25, 
TY02Z=113'04 and FV02Z=112'075.  (30, 10, 5 year).

NASDAQ-100 Index Tracking Stock (QQQ) - Daily Interval


It's interesting that the "riskiest" Treasury bond (30-year) 
breaks below its 50-day SMA, while the "riskier" NASDAQ-100 
(NDX.X) 910 -4.23% and QQQ $22.78 -3.31% have recently broken 
above their 50-day SMA's.  I can't believe I'm writing this, but 
the Q's actually traded pretty darned good today consider the 
"bombshell" that Intel (INTC) unloaded last night.  Aggressive 
bulls can look long and use a tight stop just under today's lows 
of $22.50.  I like the way the QQQ's pulled into our "old" upward 
trend, but held that trend as support.  Near-term target would be 
80.9% retracement of $24.21, with a close eye on the Treasury 
markets.  If bonds get "flushed" QQQ should trade strong.  Just 
understand, there's going to be some jitters between bulls and 
bears during earning's season!

S&P 100 Index Chart - Daily Interval


Despite some analyst's questioning Citigroup's (NYSE:C) $33.85 
-0.85% recent "quality of earnings," the KBW Bank Index (BKX.X) 
726.91 -0.77% and Citigroup hardly budged and held the bulk of 
their gains.  While bulls and bears would like to see the OEX 
pull back into the 418-420 ranges, a break above today's high 
could bring another wave of buying into the OEX.  Trade strategy 
for those not holding a bullish position could be to take a 1/4 
position on a break back above 442.  Those bulls holding out for 
a pullback with stochastics "overbought" can establish 1/4 or 1/2 
bullish positions into the 418-430 zone.  I would think a trader 
using some trade size limitations and trade management would be 
well served to do so during earning's season.  I really think a 
pullback into 418-430 that found a brief dip below the 418 level 
(say some type of earning's woes), but would see a rebound higher 
back within the 418-430 range and a move higher.  Despite today's 
lower OEX index action, the OEX bullish % ($BPOEX) actually saw a 
net gain of 1 stock to a point and figure "buy signal" today at 
37% bullish.

S&P 500 Index Chart - Daily Interval


The SPY found intra-day support near our 50% retracement bracket.  
While somewhat "unconventional" our fitted retracement sure 
seemed to provide resistance at this level in late September, but 
held firm despite Intel's news.  Tomorrow morning, a bull may 
actually "hope" form some bad news from EMC, which has warned on 
earnings in previous sessions for the SPY to dip into the $83.77-
$85.97 zone.

I might sound like I'm beating a John Seckinger "drum" tonight, 
but tomorrow morning, a trader following a trade technique called 
"Open to Close" may be useful for trade setup in the morning.  
John wrote about this technique in his October 8th Trader's 
Corner article titled "Open to Close."  
With S&P futures building gains tonight after IBM's earnings, 
this trading technique may be useful tomorrow morning.

Dow Industrials Chart - Daily Interval


While I wouldn't say that IBM's earnings were anything for a bull 
to cheer about, bears probably didn't get their "daily double" 
dose of bad news from another tech-component to add onto Intel's 
shellacking.  Bulls can be looking long on this pullback with 1/4 
positions for now, which would give some cushion to support at 
7,962 and 7,745.  I thought for "sure" that the Dow would trade 
8,000 today, but it didn't.  If that's a sign that bears are 
still rather aggressive in their covering, then there may be more 
bullishness to be found should the Dow make a break above its 50-
day SMA and Monday's high.

Jeff Bailey

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Loomis Sayles Funds 

The Loomis Sayles Funds are a family of 14 no-load mutual funds 
designed to meet a broad range of investment objectives.  Their 
funds may be purchased directly or through Schwab, Fidelity and 
other fund networks.  Established in 1926, Loomis Sayles is one 
of the oldest investment management firms in America with $60.8 
billion in assets under management as of June 30, 2002.  Mutual 
funds comprised $7.3 billion or 12 percent of the firm's assets 
at mid-year 2002.   

Through its institutional channels and no-load family of funds, 
Loomis Sayles & Co. manages both fixed income and equity assets 
for institutional, high net worth and mutual fund clients.  The 
firm's investment staff (509 as of June 30, 2002) is one of the 
largest in the industry, reflecting a strong commitment to high 
quality, proprietary research.  Headquartered in Boston, Loomis 
Sayles maintains regional offices in New York, Chicago, Detroit, 
Washington DC, Milwaukee, Minneapolis/St. Paul, Pasadena and San 

Loomis Sayles & Co. today is one of 14 affiliates and divisions 
that comprise CDC IXIS Asset Management North America, a wholly 
owned subsidiary of CDC IXIS Asset Management, France's leading 
institutional money manager.  Affiliates of Loomis Sayles & Co. 
include AEW Capital Management; Capital Growth Management; 
Caspian Capital Management; CDC IXIS Asset Management Advisors 
Group; CDC IXIS Asset Management Associates; CDC IXIS Asset 
Management Services; Harris Associates; Jurika & Voyles; Reich & 
Tang Capital Management; Reich & Tang Funds; Snyder Capital 
Management; Vaughan, Nelson, Scarborough & McCullough; and 
Westpeak Global Advisors.

Loomis Sayles' mutual funds come in three classes: institutional, 
administrative ("admin") and retail shares.  Institutional class 
shares have no 12b-1 fee and $250,000 minimum initial investment, 
except for Loomis Sayles Bond Fund ($25,000).  Admin shares are 
available only through 401(k) administrators and wrap programs, 
and charge up to 0.25% of average net assets to offset record-
keeping costs (in addition to a 0.25% 12b-1 fee).  Retail class 
shares have a 0.25% 12b-1 fee, and are available directly from 
Loomis Sayles for a minimum initial investment of $2,500.  They 
may also be purchased through over 100 fund networks.  Our focus 
is on the 11 Loomis Sayles funds open to retail investors (three 
funds are available only to the institutional marketplace).  

Mutual Funds Overview

According to the Loomis Sayles website, the following investment 
strategies are available to retail investors directly or through 
leading mutual fund marketplaces as follows:

 Equity Funds:
 -Aggressive Growth
 -Small Cap Growth
 -Small Cap Value
 -International Equity
 -Emerging Markets

 Fixed Income Funds:
 -Benchmark Core Bond
 -Investment Grade
 -Global Bond

Loomis Sayles Research Fund was introduced in July 2000 to expand 
the firm's institutional lineup, and was made available to retail 
investors in November 2001.  Lauriann Kloppenburg, who has been 
with Loomis Sayles since 1982 and is director of equity research 
today, serves as the lead portfolio manager of the Research Fund.  
This product seeks to capitalize on the depth and experience of 
Loomis Sayles' equity analysts and their "proprietary" internal 
research capability, their so-called "cornerstone for 70 years."

The equity analysts are grouped in teams representing each sector 
of the S&P 500 Index.  They meet regularly to discuss trends and 
exchange stock ideas, focusing on companies possessing strong or 
improving fundamentals.  Each team then decides what equities to 
recommend for purchase (or sale) in their respective sector.  In 
other words, the Research Fund seeks to leverage the information 
advantage the firm believes it has in the form of a single "best 
ideas" portfolio.  While the fund can invest in companies of any 
size, it generally lands in the large-cap core (blend) style box.

Loomis Sayles offers only one value-driven fund at this time, the 
Small-Cap Value Fund (LSCRX), but it has more of a core style, at 
least as far Lipper and Morningstar are concerned.  Both trackers 
have the Small-Cap Value Fund in the small-cap core (blend) style 
box.  Loomis Sayles' core value product (Value Fund) is available 
only to institutional investors currently.

On the growth side, Loomis Sayles has three growth-oriented fund 
products.  Loomis Sayles Growth Fund was launched in May 1991 to 
the institutional marketplace and invests primarily in large-cap 
growth stocks.  Retail class shares of the Growth Fund were made 
available on December 31, 1996.  Loomis Sayles Aggressive Growth 
Fund (LAGRX) and Small-Cap Growth Fund (LCGRX) were also started 
on December 31, 1996, both institutional and retail class shares.  
Aggressive Growth Fund invests mainly in mid-cap growth equities, 
while Small-Cap Growth Fund as its name suggests focuses on small 
rapidly growing companies.

Loomis Sayles offers two international equity fund products, one 
focused on the developed foreign markets, and one focused on the 
developing (emerging) markets.  The International Equity product 
was launched in May 1991, and was opened to the retail market in 
December 1996.  It has a "growth" style and invests primarily in 
mid/large-cap stocks.  The Emerging Markets product was launched 
in November 1999, and was opened to retail investors in May 2000.  
It has a mid-cap growth style bias.  Loomis Sayles' global equity 
fund product (Worldwide Fund) is available only to institutional 
investors at this time.

The firm offers four fixed income strategies to retail investors, 
which all seek to achieve high total investment return through a 
combination of current income and capital appreciation.  The four 
funds vary in terms of their average credit quality and maturity.

Like Loomis Sayles Growth Fund, Loomis Sayles Bond Fund (LSBRX) 
was launched in 1991 and opened to retail investors in December 
1996.  It invests primarily in mid-grade (A/BBB) corporate bond 
securities with long-term maturities.  The Investment Grade Bond 
Fund began operations in December 1996, and introduced a retail 
share class in January 2002.  It invests mainly in intermediate, 
investment-grade securities.

The Benchmark Core Bond fund product was introduced in May 1997 
and was recently opened to the retail marketplace in April 2002.  
It's designed to serve the role of a "core" bond fund, one that 
invests in both high-quality government bonds and medium-grade 
corporate bonds with intermediate-term to long-term maturities.  
The U.S. Government Securities Fund product is offered only to 
institutional investors currently.

Loomis Sayles Global Bond Fund has its origin in May 1991, and 
introduced a retail class share in December 1996.  It seeks to 
provide high total investment return by investing primarily in 
medium-grade foreign bonds with long-term maturities.  Being a 
global bond fund it may invest in U.S. fixed income securities 
also (30% is common).  

Our Favorite Funds

Our favorite U.S. equity product is the Loomis Sayles Research 
Fund (ticker N/A) run by director of equity research, Lauriann 
Kloppenburg.  It does not have an established track record yet, 
but should serve its "large-cap core" role nicely.  It invests 
across various industries within a sector and allocates assets 
across sectors in weightings that are relatively similar to the 
market (S&P 500 index).  The Research Fund seeks to "add value" 
over the benchmark through security selection using proprietary 
internal research, rather than making big sector bets that have 
potential to backfire.

As of September 30, 2002, the Research Fund was down 26.8% on a 
YTD basis compared to losses of 28.2% for the S&P 500 index and 
28.2% for the average large-cap core fund per Lipper.  The fund 
is almost a full percentage point behind the benchmark index on 
an inception-to-date basis, however.  Still, I like the chances 
of this disciplined strategy over time, which seeks to leverage 
Loomis Sayles' equity analysts and information advantage in the 
form of a single "best ideas" portfolio.

If you think that we are in the early stages of the next growth 
cycle in the market then you may wish to consider one of Loomis 
Sayles' growth-oriented stock funds.  Loomis Sayles Growth Fund 
(ticker N/A) is the most conservative of three pro-growth funds 
since it invests primarily in the large-cap growth sector.  The 
Loomis Sayles Aggressive Growth Fund (LAGRX) emphasizes the mid 
capitalization sector while Loomis Sayles Small Cap Growth Fund 
fishes in small-cap waters.  Each fund has a different risk and 
reward tradeoff.

Among fixed income funds we like the prospects of the Benchmark 
Core Bond Fund (ticker N/A) over time.  It invests primarily in 
investment grade, fixed income securities (including government, 
corporate, mortgage-backed and asset-backed securities) and may 
invest in bonds of any maturity.  Overall, it seeks to create a 
portfolio similar to the Lehman Aggregate Bond Index with regard 
to weightings among segments of the investment-grade bond market.  
In other words it's similar to the benchmark bond index in terms 
of its risk factors (duration/maturity, industry sectors, credit 
quality, and call protection).

Through September 30, 2002, the Benchmark Core Bond Fund product 
had an inception-to-date annualized total return of 6.9%.  That 
return is comparable to other intermediate-term investment-grade 
bond funds per Lipper but about 1.2% less a year on average than 
the benchmark (Lehman Aggregate Bond index).  However, since new 
co-managers (Richard Rezek and Kurt Wagner) took over the day to 
day portfolio management on May 1, 2002, return performance has 
improved.  The fund produced a 2.7% return in Q2 2002 and a 4.3% 
return in Q3 2002 (using institutional class share information).   

Bond investors seeking the higher yield and return potential of 
global fixed income securities should like Loomis Sayles Global 
Bond Fund (ticker N/A).  It invests mostly in investment grade, 
fixed income securities (including convertibles) denominated in 
various currencies, including U.S. dollars or in multi-currency 
units ("Euro").  Note that foreign securities may present risks 
not associated with investments in comparable securities of U.S. 
issuers, such as currency fluctuations, political and economic 
instability, and differences in accounting/reporting standards.

Compared with its benchmark (Salomon Brothers World Government 
Bond index) and its global fixed income fund peers, the Loomis 
Sayles Global Bond Fund has performed very well, generating an 
average annual return of 7.3% over the trailing 10-year period 
thru September 30, 2002.  That compares to an annual-equivalent 
return of 5.8% for the benchmark index, and 5.2% for the Lipper 
average of global income funds.  Since December 31, the fund is 
up around 10 percent.


Some of Loomis Sayles' retail class shares do not have symbols 
yet due to their small size or because they are relatively new.  
You can obtain more information by calling 1-800-633-3330, and 
speaking with a Loomis Sayles representative.  Fund prospectus 
information is available online at www.loomissayles.com.

I'd be remiss if I didn't mention Loomis Sayles Provident Fund 
(LSCGX), the firm's only Morningstar 5-star rated stock mutual 
fund.  The Provident Fund, however, has a $2.5 million minimum 
initial investment.  Its large-cap blend style makes it a fine 
"core" holding.  If it opens to the retail market, you may want 
to have a closer look. 

Steve Wagner
Editor, Mutual Investor


Using Dow Futures to hedge IBM options
by Alan Hewko

Wednesday, Oct 16 2002
I had noticed an interesting trade today, but given its complex 
nature, did not view the Market Monitor as the proper venue to 
discuss it. I would like to review it nonetheless, as it's rather 

In short, the trade would have used Dow Futures to hedge an IBM 
option position into IBM's earnings Wed night, October 16.


Trade Setup:
Last night, Intel (INTC) had terrible earnings causing Wednesday's 
Dow -200 point decline. 

IBM, a Dow 30 stock, had earnings tonight with some expecting them 
to miss earnings or provide negative guidance which would match the 
bearish words from INTC just last night.

IBM spent most of the afternoon going sideways at $65, which was 3 
points lower than yesterdays close. The Dow spent most of the 
afternoon at the 8050 level.

If you were an IBM Option Market Maker today, would you price IBM 
Oct 65 Calls and IBM Oct 65 Puts cheaply or would you price them 

Obviously, given the vast uncertainty of IBM's earnings, you would 
price them very high, making them "expensive". Once the Option 
market makers discovered tonight what IBM had to say on their 
earnings and forward-looking guidance, the premium of those IBM 
October options would be reduced as the uncertainty factor was 
removed by hard data.

The key to this trade is that "smart money" will often SELL 
expensive option premium (and find a way to hedge it) vs. BUYING 
expensive option premium. (read that again for its the key to the 
entire trade)

October options expire this Friday.

YM (Dow $5 Futures) trade until 5 PM (long after IBM earnings would 
be released).


Trade Details:
It is now Wednesday at 1:30 PM, a few hours before IBM earnings.
IBM Stock is $65 and sideways.
Dow is sideways at 8050.
IBM October 65 Calls are $2.20 x $2.30
IBM October 65 Puts  are $2.40 x $2.50

Short (sell to open) 10 IBM Oct 65 Calls at $2.20, $2200
Short (sell to open) 10 IBM Oct 65 Puts at $2.40, $2400

Your total CREDIT from these 2 positions is $4.60, $4600

In a perfect world, you now want IBM to close at 65.00 this Friday 
at 4 PM so both of those options will expire worthless and you get 
to keep 100% of the above premium that you sold today.


You realize there are 3 possible scenarios:

IBM closed at $65, and you see it trading at either $60 or $70 
tomorrow, with the third possibility (slight) that the earnings are 
a "non-event" and the stock looks to remain at/near $65

1. IBM follows INTC and has TERRIBLE earnings.
Your guess is IBM will head to the $60 level.

As Dow Futures will be trading when IBM earnings come out, you 
would then open a Dow Futures SHORT with a fill at 8000 with a size 
of 5 futures contracts; and take all 3 positions home overnight.

When IBM goes lower off those terrible earnings, it will go under 
the 65 strike price.

IBM 65 Calls will go down at tomorrow's open, and likely to become 
worthless as they expire this Friday. You sold them for $2.20 and 
will get to keep all of that premium.

IBM 65 Puts will increase in value at tomorrow's open; but much 
closer to their intrinsic (or real) value as expiry is coming up. 
If IBM stock opens at $60 tomorrow morning and the Dow at 7850; the 
IBM 65 Puts would likely be about $5.50 to $6.00 range. You are 
however fully hedged as you still are Short Dow Futures. 

You sold those 65 Puts for $2.40 and they are now at $5.75 (-3.35 
or negative $3,335 for you); but you have a gain of 150 YM points 
(Dow $5 futures) in the 5 contracts you took home [Gain of 150 
points x $5 per point x 5 contracts = + $3750] from your Dow 
futures short from 8000; and this fully offsets the losing "Short 
IBM 65 put position"

Result of this scenario at IBM $60, Dow 7850: 
Position:                              Value    Your Profit/Loss
Short 10 IBM 65 Calls at $2.20, $2200   $ 0      + $2,200
Short 10 IBM 65 Puts at $2.40, $2400    $ 5,500  - $3,100
Short 5 YM Dow Futures from 8000        $ 3,750  + $3,750
               Your total Profit                 + $2,850
2. IBM has an earnings surprise to the UPSIDE
Your guess is IBM will head to the $70 level.

Hedge by opening a YM (Dow futures) LONG at 8060 with a size of 5 
futures contracts, and take all positions home overnight.
In this case, the Calls will increase in value, the puts will 
become worthless.

IBM tomorrow trades at $70, Dow trades at 8200 and the IBM Oct 65 
Calls would likely be $5.50x$6.00 (Calls you sold for $2.20); 
however, once again, you are fully hedged by still being Long Dow 
futures. Dow is 8200 so the 5 Long YM (Dow$5 futures) contracts you 
hold long from 8060 are worth a gain of 140 points (8200-8060=140), 
and have a Gain of + $3,500 (140 Dow points x $5 per point x 5 
contracts = $3,500)

Result of this scenario at IBM $70, Dow 8200: 
Position:                              Value    Your Profit/Loss
Short 10 IBM 65 Calls at $2.20, $2200   $ 5,750  - $3,550
Short 10 IBM 65 Puts at $2.40, $2400    $ 0      + $2,400
Long 5 YM Dow Futures from 8060         $ 3,500  + $3,500
               Your total Profit                 + $2,350

You might ask why the total profit is less when IBM had good 
earnings vs. bad.

I took the real-world assumption that you would have had a harder 
time going long those Dow futures and would have needed to pay a 
bit more to create the hedge. Why? Because IBM beating earnings was 
more of a surprise than them missing; and you would have had long 
buyers and shorts covering (on a short squeeze) creating a 
condition of needing to pay a higher price to open the Dow Futures 
long hedge.

3. IBM earnings are a "non-event" and are inline with so/so 

This was the least likely possibility, but nonetheless, something 
you needed to consider.

You would expect IBM to trade between 64 and 66.

You do not hedge with Dow Futures, neither long or short.

We've seen cases where a highly anticipated important stock 
earnings becomes a total boring "non-event". It's neither good nor 

Let's assume IBM opens tomorrow at $66.33 and appears to just drift 
sideways. Since the option market makers now know the result of 
IBM's earnings, the option premium for all October options gets 
reduced, also, even though it's just one day, there is a fair 
amount of time decay as they expire this Friday.

At IBM stock of $66.33 tomorrow
IBM Oct 65 calls are $1.50 x $1.80
IBM Oct 65 puts are $0.80 x $1.00

We close out this position by "buying to close" both IBM positions.

Buy (to close) IBM 65 calls at $1.80, $1800
Buy (to close) IBM 65 puts at $1.00, $1000

Result of this scenario at IBM $66.33, Dow 8100: 
Shorted 10 IBM 65 calls at $2.20, $2200   
Buy to cover 10 IBM 65 calls at $1.80, $1800
       Profit/Loss on this position:      + $700

Shorted 10 IBM 65 puts at $2.40, $2400    
Buy to cover 10 IBM 65 puts at $1.00, $1000
       Profit/Loss on this position:      + $1,400

No Dow Futures hedge position was established
          Profit/Loss on this position:      Not applicable

     Grand total of this Trade: + $2,100 (700+1400)



If you read this article twice, you might discover it is not as 
complicated as it appears on the surface. It is an elegant and 
somewhat complicated method to simply gain profit by selling 
expensive option premium and then hedging with futures. 

The risk on the trade was rather small. Naturally, some of the 
above numbers are an educated guess as to where the options would 
trade at, but they serve the purpose for this example.

Alan Hewko


Blind Squirrel Finds Acorn
by Mark Phillips

As the pivotal month of October reaches its mid-point, the one
factor that has remained constant is volatility.  Triple-digit
moves on the DOW continue to be a nearly daily occurrence, as
investors struggle to make sense of the early earnings reports
coming out of Corporate America.  Since the August highs, the
markets have been sold hard, with all of the major indices (with
the notable exception of the OEX) moving to fresh multi-year
lows.  At the same time, all of the PnF Bullish Percent readings
moved very close to the extreme readings found in late July, the
last time the market attempted to put in a bottom.

Two weeks ago, with the broad markets looking like they were
trying to form a bottom, I went looking for some metrics that
could be used to gauge the likelihood of a bottom formation.  In
case you missed it, here are the three signs I was looking for,
to prompt me to consider fishing for a bottom.

1. VIX pushing above 50 again with the broad markets slightly
   breaking their lows for the year.

2. Bullish Percent charts for the major indices reversing from
   oversold condition below current levels.

3. Successful upturn in multiple oscillators (MACD, RSI and
   Stochastics) on weekly charts of all the major indices.

Hmmmm...that's kind of interesting.  Since that time, all of
those factors have shaped up in the bulls' favor.  Is it any
surprise that the DOW experienced a powerful 1000+ point rally
off its recent lows?  Let's look at the individual factors, as
they have shaped up over the past few weeks.

Volatility (VIX):

When we looked at the VIX two weeks ago, I pointed out that the
index had been rangebound between 40-48, and needed to either
break out over the 48 level or print a value of 39 or below to
break out of this range.  I was looking for the VIX to push
through the 50 level, in conjunction with the broad market
violating the July lows.  With the broad market already deep in
oversold territory, my expectations were for any breakdown to be
short-lived, leading to a strong short-covering rally.  Sure
enough, last week's market weakness led the VIX to push briefly
above 50, while the DOW, SPX and NDX all pushed to new multi-year
lows.  Since last Thursday morning, the VIX has fallen from a
high of 50.48 to a low yesterday afternoon of 39.58.  Isn't it
interesting how the print at 50 confirmed the PnF Buy signal just
in time for the market (and VIX) to reverse with vigor?  The PnF
picture for the VIX has changed dramatically in the past couple
weeks, and it is in the bulls favor.  Take a look at the updated
PnF chart below and you can see that the drop in the VIX in recent
days has put the VIX on its first PnF Sell signal since early

Point & Figure Chart of the VIX

As the VIX is a pretty reliable measure of investor fear, this
reversal of fortunes in the supply/demand of the 'Fear Index'
tells me that this fledgling rally in the broad market still has
some room to run.

Bullish Percent:

Index         July Low    October Low    Current
S&P 500       12%         19%            32% -- Bull Alert
DOW            3%          7%            36% -- Bull Confirmed
NASDAQ-100     8%         13%            38% -- Bull Alert

That's one heck of a recovery in such a short period of time.
Typical of a bear-market rally, the rebound has been fast and
furious, as shorts have stumbled over one another trying to
close profitable positions before those profits melt away.  While
the initial upthrust has been violent and abrupt, dominated by
huge gap moves, the internal strengthening demonstrated by the
improvement in the Bullish Percent numbers hints that the market
has already factored in most of the negative earnings news and
is willing to let prices continue higher over the near term.

Price Charts:

That leaves us with one more piece of the puzzle that needs to
be evaluated -- the progression of the weekly price charts, along
with their oscillators, such as Stochastics and RSI.  Just 2 weeks
ago, the S&P 500 (SPX.X) was struggling to hold above the 800
level, while the NASDAQ-100 (NDX.X) had just posted fresh
multi-year lows near 825.  Clearly, that situation has improved
significantly since then, but let's see what those weekly charts
have to say.

Weekly Chart of the SPX and NDX

The recovery off the price lows of last week has put the charts
in a much more bullish position.  The weekly Stochastics have
reversed nicely out of oversold territory, as the price charts
have marched sharply higher.  And then we have some bullish
divergence between the price charts and the RSI oscillator.
While price in both the SPX and NDX moved to lower lows than what
was seen in July, the RSI for both indices put in higher lows.
This gives us another hint that the bulls are gaining strength.

Well, how do you like that?  All three of the indications that
I was looking for to signal the next sustained bullish move have
been satisfied -- and in short order, to boot!  Every once in a
while, a blind squirrel manages to find an acorn!

Of course, we need to temper any bullish long-term enthusiasm
with the realization that both of these indices are still well
under their multi-month descending trendlines and we still haven't
seen the pattern of lower highs challenged.  Before we'll even
have a hint that the bearish nature of the market has changed, we
need to see a higher high to break the persistent downtrend of the
past 2+ years.  That means the NDX needs to push through the 1055
level, while the SPX will need to convince us by scaling the
August highs near 965.

Between here and there, significant upside exists for traders
that are willing to side with the bulls for awhile.  To recap,
all the weekly charts are in the early stage of a bullish advance,
the VIX has turned bearish (bullish for equities) and all of the
Bullish Percent charts are telling us of a bullish advance that
is just getting started.  Does this mean that we can go long with
impunity?  Not by a long shot!  But it does tell us that the
trading environment has changed.  No longer is "Sell the Rallies"
the battle cry of the successful trader.  Since late July, we went
from deeply oversold to overbought and back to oversold.  Now we
are in the process of working off that oversold condition, and now
"Buy the Dips" appears to be the 'en vogue' approach.

Changing our bias as quickly as the current market environment
demands is difficult, even for experienced traders.  Hopefully
this discussion, where we have combined option volatility
analysis and supply/demand metrics (Bullish Percent charts) with
the more widely understood price charts gives you a fresh view
and more tools to apply in the battle we face every day.

Best Trading Wishes!


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Tech Surprise After Tech Surprise

Tech stocks are set to rocket on Thursday if the earnings after the 
bell are to be believed. IBM beat estimates by 3 cents, MACR beat 
by 11, QLGC beat by 2 cents and SYMC raised their guidance. The 
October bulls should have a field day with these results.

To read the rest of the Swing Trader Game Plan Click here:

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options,_ claims author Larry Spears in his new compact guide

_7 Steps to Success _ Trading Options Online_.

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and clicking on the link to the book on its home page.



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The Option Investor Newsletter                Wednesday 10-16-2002
Copyright 2002, All rights reserved.                        2 of 2
Redistribution in any form strictly prohibited.

In Section Two:
Stop Loss Updates: none
Dropped Calls: MBG
Dropped Puts: none
Play of the Day: Call - LLY
Spreads, Combinations & Premium-Selling Plays: From Rally To 

Updated on the site tonight:
Market Watch
Market Posture

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MBG  $29.27 -2.53 (-0.92 for the week)  Mandalay Bay saw its 
rebound fail today, after Lehman Brothers made comments regarding 
the drop-off in business in riverboat markets.  Tropical storm 
Isidore interrupted business at Gulf coast casinos owned by MBG 
and others.  In spite of increases in business at Las Vegas strip 
casinos, investors sold-off MBG and other gaming stocks.  MBG had 
successfully tested its 200-dma, currently $29.76, on several 
occasions last week, however today's drop took it below that 
level and engulfed most of the last week's activity.  We don't 
like the technical breakdown in MBG and will walk away and find 
better opportunities. 



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traded options,_ claims author Larry Spears in his new compact
guide book:

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and clicking on the link to the book on its home page.



LLY - Eli Lilly - $63.66 -0.35 (+1.66 for the week)

Company Summary:
Lilly, a leading innovation-driven corporation, is developing a 
growing portfolio of best-in-class pharmaceutical products by 
applying the latest research from its own worldwide laboratories 
and from collaborations with eminent scientific organizations. 
Headquartered in Indianapolis, Ind., Lilly provides answers -- 
through medicines and information -- for some of the world's most 
urgent medical needs. (source: company release)

Most Recent Write-Up:
Lilly broke out on the daily chart after consolidating between 
$60 and $55 for the better part of the last 2 months.  While the 
broader market screamed forward the last four days, Lilly just 
continued its upward movement in orderly fashion, which began 
prior to the rally. On Monday, it broke out on the point and 
figure chart, trading over $63 to get the stock above resistance 
from the end of August.  It then reversed course and headed 
lower, but found support right at $61, for a successive higher 
low.  Today, the stock sat close to unchanged for most of the 
morning, before starting its climb toward another new high.  
While watching LLY intraday can be frustrating from the long 
side, the stock has now posted gains for 6 of the past seven 
days, losing only $0.01 on the one day it did not. We are 
approaching the 200-dma of $65.54 and the stock could certainly 
see some resistance there.  The company settled a lawsuit today 
over a 1991 suicide that a man's family based on his use of 
Prozac, and Johnson and Johnson beatings earning's also helped 
its rise.  If we experience a broad market pullback, after the 
recent surge, a sinking tide could drag LLY back a bit with it.  
We are raising our stop on the play to $61, where the stock found 
support yesterday.  Another higher low, above this level, can be 
used for long entries, as long as the bottom is not falling out 
of the Dow.  In the case of a major sell-off, we don't recommend 
long entries.

Why This is Our Play of the Day:
LLY did its best to buck the trend this morning, achieving a new 
relative high of $65.00.  While it has some resistance at the 
200-dma of $65.53 looming above, the stock continues to find 
intraday support at successively higher round numbers. Friday was 
$60, Monday was $61, Tuesday was $62 and Wednesday was $63.  
While it couldn't hold its high, in the face of a sinking tide, 
we are looking for a market rebound in the morning to give it 
another push. When a stock begins to look extended, we look for 
signs of a pullback for entry.  LLY has experienced pullbacks 
intraday, but has been so strong that it has posted gains in 6 of 
the last 7 trading sessions, and the only pullback was today's 
loss of 0.35 on a day when the Dow lost over 200 points.  
Conservative traders can look for a break above the 200-dma of 
$65.44 to initiate a long play. However, we favor entry on a 
pullback to intraday support of $63, or a show of new intraday 
support of $64.

BUY CALL NOV-60 LLY-KL*OI=  1801 at $5.40 SL=2.70
BUY CALL NOV-65 LLY-KM OI=  5447 at $2.20 SL=1.10
BUY CALL JAN-60 LLY-AL OI=  9096 at $7.30 SL=3.75
BUY CALL JAN-65 LLY-AM OI=  7948 at $4.30 SL=2.20

Average Daily Volume = 4.38 MIL

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From Rally To Retreat!
By Ray Cummins

Stocks recoiled Wednesday amid renewed selling pressure after
a cluster of market bellwethers warned of challenging economic
The Dow Jones Industrial Average fell 219 points to 8,036 in
response to negative comments from Intel (NASDAQ:INTC), Boeing
(NYSE:BA) and Coca-Cola (NYSE:KO).  The NASDAQ Composite fared
no better, down 50 points to 1,232 on weakness in networking and
computer hardware issues.  In the broader market, airline, auto,
financial, utility and cyclical shares were sharply lower while
gold-related stocks edged into the plus column.  The Standard &
Poor's 500-Stock Index slid 21 points to 860.  Trading volume was
light at 1.55 billion the NYSE and at 1.59 billion on the hi-tech
exchange.  Decliners trounced advancers 3 to 1 on the Big Board
and more than 3 to 2 on the NASDAQ.  Treasury notes rebounded as
stocks slumped.  The 10-year note edged up 12/32 to yield 4.04%
while the 30-year government bond was off 15/32 to yield 4.99%.




The following summary is a reasonable account of the positions
previously offered in this section.  However, no representation
is being made as to the actual performance of a position and in
fact, there are frequently large differences between the summary
results and those of actual traders, due to the variety of ways
in which each play can be opened, closed and/or adjusted.  In
addition, the summary might not be completely representative of
the manner in which the average trader would react to changing
conditions in a position and to the options market in general.
The play commentary (when provided) is simply a service to help
new traders understand when positions might be opened and closed.
In most cases, actions taken based on the commentary would be far
too late to be effective, thus it is not intended as a substitute
for personal trade management nor does it replace your duty to
diligently monitor and manage the positions in your portfolio.

Naked Puts

Stock  Strike Strike  Cost Current  Gain  Potential
Symbol  Month  Price Basis  Price  (Loss) Mo. Yield

AMGN     OCT    35   33.15  50.48   $0.85    6.1%
CHTT     OCT    35   34.50  41.40   $0.50    4.3%
CCMP     OCT    30   28.90  42.12   $1.10    8.1%
INTU     OCT    40   38.60  49.53   $1.40    6.9%
INVN     OCT    25   24.45  31.71   $0.55    6.3%
MIK      OCT    40   39.35  43.00   $0.65    4.6%
ROOM     OCT    40   39.25  55.17   $0.75    5.1%
BSTE     OCT    20   19.65  28.55   $0.35    5.6%
ESRX     OCT    45   44.50  57.05   $0.50    4.0%
GD       OCT    75   73.65  80.00   $1.35    5.3%
INVN     OCT    25   24.45  31.71   $0.55    7.8%
NOC      OCT   110  108.55 115.39   $1.45    4.0%
XAU      OCT    60   59.25  61.16   $0.75    4.6%
AZO      OCT    70   69.30  83.50   $0.70    4.0%
BSTE     OCT    22   22.10  25.90   $0.40    8.3%
ESRX     OCT    45   44.45  28.55   $0.55    5.6%
FRX      OCT    70   69.20  97.06   $0.80    4.7%
ROAD     OCT    30   29.65  38.98   $0.35    5.8%
SCHL     OCT    40   39.55  47.95   $0.45    4.6%
AZO      OCT    75   74.05  83.50   $0.95    6.7%
FRX      OCT    80   79.30  97.06   $0.70    4.9%
WLP      OCT    72   71.80  84.80   $0.70    4.9%
AMGN     OCT    40   39.65  50.48   $0.35    9.1%
BSX      OCT    32   32.30  35.19   $0.20    5.9%
FRX      OCT    80   79.55  97.06   $0.45    5.9%
UHS      OCT    50   49.65  55.83   $0.35    6.2%
WLP      OCT    72   72.15  84.80   $0.35    4.5%
GILD     NOV    25   24.35  34.00   $0.65    7.0%
TARO     NOV    28   26.90  35.16   $0.60    5.4%

Positions in L-3 Communications (NYSE:LLL), Engineered
Support Systems (NASDAQ:EASI) and Capital One Finance
(NYSE:COF) have been closed, though all three issues
have rebounded with the recent rally.  The position in
Cognizant Technology Group (NASDAQ:CTSH), while closed
early to prevent losses, is currently positive.

Naked Calls

Stock  Strike Strike  Cost   Current  Gain  Potential
Symbol Month  Price   Basis  Price   (Loss) Mon. Yield

QLGC     OCT    40    41.20  26.40   $1.20    9.7%
INTU     OCT    50    51.50  49.53   $1.50    6.8%
EBAY     OCT    65    66.20  58.01   $1.20    5.5%
QLGC     OCT    45    45.45  26.40   $0.45    4.9%
XL       OCT    80    81.25  79.40   $1.25    4.6%
DIA      OCT    86    87.15  82.80   $1.15    4.0%
MUR      OCT    90    91.75  89.60   $1.75    6.2%
BZH      OCT    70    70.70  62.80   $0.70    5.5%
MUR      OCT    90    91.35  89.60   $1.35    6.7%
SNPS     OCT    40    40.70  38.23   $0.70   14.6%
KSS      NOV    65    65.90  58.60   $0.90    5.8%
SIAL     NOV    50    50.75  48.26   $0.75    5.0%

As previously noted, Murphy Oil (NYSE:MUR) has resumed its
upward trend and conservative traders should consider closing
the position to lock-in profits and/or limit losses.  Intuit
(NASDAQ:INTU) and XL Capital (NYSE:XL) are on the early exit
watch-list after Tuesday's market-wide rally.  November plays
in Kohl's Stores (NYSE:KSS) and Sigma Aldrich (NASDAQ:SIAL)
should be monitored for continued upside activity as they
approach near-term resistance areas.

Put-Credit Spreads

Stock                                             Gain
Symbol  Pick   Last  Month L/P S/P Credit  C/B   (Loss) Status

MBG     32.46  31.80  OCT   27  30  0.30  29.70  $0.30   Open
APOL    43.48  45.05  OCT   35  40  0.50  39.50  $0.80   Open
ETM     48.45  48.80  OCT   40  45  0.65  44.35  $0.03   Open
UNH     89.50  96.47  OCT   80  85  0.65  84.35  $0.65   Open
INTU    45.90  49.53  NOV   35  40  0.60  39.40  $0.60   Open
MME     38.08  41.77  NOV   30  35  0.55  34.45  $0.55   Open

Positions in Lowe's Companies (NYSE:LOW), Stryker (NYSE:SYK),
Patterson Dent (NASDAQ:PDCO) and H&R Block (NYSE:HRB) were
previously closed to prevent losses.  Just as "Murphy's Law"
would have it, they are all currently positive.

Call-Credit Spreads

Stock                                             Gain
Symbol  Pick   Last  Month L/C S/C Credit  C/B   (Loss) Status

JNJ    55.48   59.56  OCT   65  60  0.50  60.50  $0.50   Open?
MSFT   48.58   52.29  OCT   60  55  0.55  55.55  $0.55   Open
PHM    48.46   43.01  OCT   60  55  0.60  55.60  $0.60   Open
WFT    39.37   42.20  OCT   50  45  0.60  45.60  $0.60   Open
WY     49.78   44.98  OCT   60  55  0.60  55.60  $0.60   Open
LEN    55.07   57.14  OCT   65  60  0.70  60.70  $0.70   Open
PII    65.02   61.91  OCT   75  70  0.50  70.50  $0.50   Open
ATK    69.25   60.20  OCT   80  75  0.45  70.45  $0.45   Open
FNM    64.62   70.98  OCT   75  70  0.55  70.55 ($0.43)  Open?
AHC    62.35   67.61  NOV   75  70  0.60  70.60  $0.60   Open
HET    44.70   46.28  NOV   55  50  0.50  50.50  $0.50   Open
HRB    37.45   45.51  NOV   50  45  0.60  45.60  $0.09   Open?

The previously closed position in Apache (NYSE:APA) is positive, 
however Total Fina (NYSE:TOT) is $0.67 "in the red."  Johnson &
Johnson (NYSE:JNJ) has moved through the top of a recent trading
range and conservative traders should consider closing the play.
H&R Block (NYSE:HRB) is quickly becoming a "thorn in the side"
of this researcher as the issue has rampant volatility and gives
little advance notice when it changes direction.

Credit Strangles

Stock   Strike  Strike  Cost   Current  Gain   Potential
Symbol  Month   &Price  Basis  Price   (Loss)  Mon. Yield

INTU     OCT     50C    51.50   49.53   $1.50    6.8%
INTU     OCT     40P    38.60   49.53   $1.40    6.9%
GILD     OCT     35C    36.45   34.00   $1.45    9.8%
GILD     OCT     30P    28.50   34.00   $1.50   10.4%
BBBY     OCT     27P    27.05   34.17   $0.45    6.2%
BBBY     OCT     37C    38.30   34.17   $0.80    7.1%
CAI      OCT     30P    29.55   38.46   $0.45    5.0%
CAI      OCT     40C    40.55   38.46   $0.55    5.3%
WFMI     OCT     40P    39.45   46.70   $0.55    4.2%
WFMI     OCT     50C    50.50   46.70   $0.50    3.6%
CCMP     OCT     50C    50.30   42.12   $0.30    4.7%
CCMP     OCT     30P    29.65   42.12   $0.35    5.5%
EBAY     OCT     60C    61.00   58.01   $1.00    6.5%
EBAY     OCT     50P    49.20   58.01   $0.80    6.3%
RNR      OCT     40C    40.50   42.93  ($1.40)   0.0%
RNR      OCT     35P    34.45   42.93   $0.55    8.0%

The bearish position in Renaissance Holdings was closed last
Thursday when the issue moved above the sold strike on heavy
volume.  The losses in the position were offset by the credit
received in the bullish portion of the neutral-outlook play.

Synthetic Positions:

Stock  Pick     Last    Position   Credit   C/B    M/V   Status

THC    51.55   50.40   NOV55C/46P   0.00   46.62   0.10   Open
EXPE   46.06   48.83   NOV35P/55C   0.10   55.10   1.85   Open?
ANSI   37.38   35.56   NOV40C/35P	0.10   34.90   0.80   Open?

Advanced Neuromodulation (NASDAQ:ANSI) provided an acceptable
early profit on Friday when the issue rallied to a new high at
$39.01.  However, Expedia (NASDAQ:EXPE) was the big winner this
month, offering a credit of almost $2 in the bearish position
after only 4 trading sessions.

Questions & comments on spreads/combos to Contact Support


This following group of plays is simply a list of candidates to
supplement your search for profitable trading positions.  As
with any investment, you must decide if the selections meet your
criteria for potential plays.  Only you can know what strategies
are suitable for your skill level, risk-reward tolerance and
portfolio outlook.  In addition, we recommend that you avoid any
strategy or technique in which you are not completely comfortable
with the potential loss, the necessary adjustments and the common
entry-exit strategies.  The positions with *** will be included
in the weekly summary.  Those with "TS" (Target-Shoot) are below
our minimum monthly return but may offer a favorable entry price
with a limit order, due to the daily volatility of the underlying


BULLISH PLAYS - Premium Selling

All of these issues have robust option premiums and relatively
favorable technical indications.  However, current news and market
sentiment will have an effect on these stocks, so review each play
thoroughly and make your own decision about its future outcome.

AMGN - Amgen  $50.38  *** An Old Favorite ***

Amgen (NASDAQ:AMGN) is a biotechnology company that discovers,
develops, manufactures and markets human therapeutics based on
advances in cellular and molecular biology.  The firm makes and
markets human therapeutic products, including Epogen, Neupogen,
Aranesp, Neulasta and Kineret.  Amgen focuses its research and
development efforts on therapeutics delivered in the form of
proteins, monoclonal antibodies and small molecules in the areas
of nephrology, cancer, inflammation and neurology and metabolism.
The company has research facilities in the United States, and has
clinical development staff in the United States, the European
Union, Canada, Australia and Japan.  Amgen has acquired Immunex,
a biopharmaceutical company dedicated to developing immune system
science to protect human health.  Immunex successfully developed
two products, Enbrel and Leukine, and was marketing four products
treating multiple indications, Enbrel, Leukine, Novantrone and

AMGN - Amgen  $50.38

PLAY (sell naked put):

Action    Month &  Option    Open    Closing  Cost     Target
Req'd     Strike   Symbol    Int.    Price    Basis    Mon. Yield

SELL PUT  NOV 40   AMQ WH    5,085    0.60    39.40      5.3% ***
SELL PUT  NOV 42.5 AMQ WV    1,149    0.90    41.60      6.5%
SELL PUT  NOV 45   AMQ WI    8,098    1.35    43.65      8.0%

ATH - Anthem  $73.50  *** Bullish Sector! ***

Anthem NYSE:ATH), formed as a wholly owned subsidiary of Anthem
Insurance, is a health benefits company.  The company offers a
diversified mix of managed care products as well as broad range
of administrative and managed care services and partially insured
products for employer self-funded plans and specialty products,
including group life, disability, prescription management, workers
compensation, dental and vision.  In July 2002, the company merged
with Trigon Healthcare, a managed healthcare firm.  Anthem serves
approximately eight million members primarily in Indiana, Kentucky,
Ohio, Connecticut, New Hampshire, Maine, Colorado and Nevada.  The
firm owns the exclusive right to market its products and services
using the Blue Cross Blue Shield (BCBS) names, and marks in all
eight states under license agreements with the Blue Cross Blue
Shield Association, an association of independent BCBS plans.

ATH - Anthem  $73.50

PLAY (sell naked put):

Action    Month &  Option    Open    Closing  Cost     Target
Req'd     Strike   Symbol    Int.    Price    Basis    Mon. Yield

SELL PUT  NOV 65   ATH WM     35      0.90    64.10      3.9% "TS"
SELL PUT  NOV 70   ATH WN      0      2.00    68.00      6.8%

ERTS - Electronic Arts  $68.16  *** All-Time High! ***

Electronic Arts (NASDAQ:ERTS), headquartered in Redwood City,
California, is the world's leading interactive entertainment
software company.  Founded in 1982, the company is the leading
software maker for video game systems including the PlayStation2
computer entertainment system, the PlayStation console, Nintendo
GameCube, Xbox video game system from Microsoft, computers and
the Internet.  The company publishes and distributes software
worldwide.  Electronic Arts sells its products under four brand

ERTS - Electronic Arts  $68.16

PLAY (sell naked put):

Action    Month &  Option    Open    Closing  Cost     Target
Req'd     Strike   Symbol    Int.    Price    Basis    Mon. Yield

SELL PUT  NOV 55   EZQ WK    2,229    0.70    54.30      4.5% ***
SELL PUT  NOV 60   EZQ WL    4,267    1.25    58.75      5.8%
SELL PUT  NOV 65   EZQ WM      915    2.45    62.55      8.8%

FRX - Forest Laboratories  $97.67  *** Rally Continues! ***

Forest Laboratories (NYSE:FRX) and its many subsidiaries develop,
manufacture and sell both branded and generic forms of ethical
drug products that require a physician's prescription, as well as
non-prescription pharmaceutical products sold over-the-counter.
Forest's most important United States products consist of branded
ethical drug specialties marketed directly, or detailed, to doctors
by the firm's Forest Pharmaceuticals, Forest Therapeutics, Forest
Healthcare and Forest Specialty Sales sales forces.  Such products
include Celexa, Forest's SSRI for the treatment of depression; the
respiratory products Aerobid and Aerochamber; Tiazac, Forest's once
daily diltiazem for the treatment of hypertension and angina, and
Infasurf, a lung surfactant for the treatment and prevention of
respiratory distress syndrome in premature infants.

FRX - Forest Laboratories  $97.67

PLAY (sell naked put):

Action    Month &  Option    Open    Closing  Cost     Target
Req'd     Strike   Symbol    Int.    Price    Basis    Mon. Yield

SELL PUT  NOV 85   FHA WQ      700     1.00  84.00       3.5% "TS"
SELL PUT  NOV 90   FHA WR    1,284     1.80  88.20       5.1% ***
SELL PUT  NOV 95   FHA WS      201     3.10  91.90       7.4%

INVN - InVision Technologies  $32.79  *** Aviation Security ***

InVision Technologies (NASDAQ:INVN) is a provider of Federal
Aviation Administration (FAA)-certified explosives detection
systems (EDSs) used at airports for screening checked passenger
baggage.  The company has delivered over 160 EDS units to U.S.
airports and over 100 EDS units for installation in airports
outside of the United States.  The company's products are based
on advanced computed tomography, which is the only technology for
explosives detection that has met the FAA certification standards.
InVision Technologies was the first manufacturer, and is one of
only two manufacturers, whose EDS products have been certified by
the FAA for screening checked baggage.

INVN - InVision Technologies  $32.79

PLAY (sell naked put):

Action    Month &  Option    Open    Closing  Cost     Target
Req'd     Strike   Symbol    Int.    Price    Basis    Mon. Yield

SELL PUT  NOV 22.5 FQQ WX     353     0.40    22.10      5.5% ***
SELL PUT  NOV 25   FQQ WE     715     0.55    24.45      7.4%
SELL PUT  NOV 30   FQQ WF     435     1.75    28.25     13.8%

OVER - Overture Services  $29.73  *** Rally Mode! ***

Overture Services (NASDAQ:OVER) is engaged in the provision of
pay-for-performance search services on the Internet.  Overture
operates an online marketplace that introduces consumers and
businesses that search the Internet to advertisers that provide
products, services and information.  Advertisers participating
in the company's marketplace include retail merchants, wholesale
and service businesses and manufacturers.  Overture facilitates
these introductions through its search service, which enables
advertisers to bid in an ongoing auction for priority placement
in the company's search results after editorial approval.  The
company's marketplace offers consumers and businesses quick,
easy and relevant search results for products, services and
information, while providing advertisers with a cost-effective
way to target them.

OVER - Overture Services  $29.73

PLAY (sell naked put):

Action    Month &  Option    Open    Closing  Cost     Target
Req'd     Strike   Symbol    Int.    Price    Basis    Mon. Yield

SELL PUT  NOV 22.5 GUO WX      930    0.40    22.10      6.0% ***
SELL PUT  NOV 25   GUO WE    2,183    0.85    24.15     10.1%

TRMS - Trimeris  $49.39  *** Priority Drug Review ***

Trimeris (NASDAQ:TRMS) is engaged in the discovery and development
of fusion inhibitors, a new class of antiviral drug treatments.
Fusion inhibitors impair viral fusion, a complex process by which
viruses attach to and penetrate host cells.  If a virus cannot
enter a host cell, the virus cannot replicate.  By inhibiting the
fusion process of particular types of viruses, the company's drug
candidates under development offer a novel mechanism of action
with the potential to treat a variety of medically important viral
diseases.  Trimeris is a development stage company.  The firm has
invested a significant portion of its time and financial resources
in the development of T-20, its lead drug candidate.  If Trimeris
is unable to commercialize T-20, its business will be significantly

TRMS - Trimeris  $49.39

PLAY (sell naked put):

Action    Month &  Option    Open    Closing  Cost     Target
Req'd     Strike   Symbol    Int.    Price    Basis    Mon. Yield

SELL PUT  NOV 40   RQM WH     302     0.65    39.35       5.6% ***
SELL PUT  NOV 45   RQM WI      28     1.50    43.50       8.5%

WMT - Wal-Mart  $56.76  *** Rallying Retail Giant! ***

With annual sales of $218 billion, Wal-Mart Stores (NYSE:WMT)
operates more than 2,800 discount stores, Super-Centers and
Neighborhood Markets, and more than 515 SAM'S CLUBS in the U.S.
Internationally, the firm operates over 1,200 units and employs
1.3 million associates worldwide.  Last year, Wal-Mart associates
raised and contributed $196 million to support communities and
local non-profit organizations.  FORTUNE magazine recently named
Wal-Mart the third "most admired" company in America and one of
the 100 best companies to work for in the U.S.  According to a
recent study, Americans say Wal-Mart is the company they think of
first in supporting local causes and issues, and that is one of
the main reasons people shop at Wal-Mart.
WMT - Wal-Mart  $56.76

PLAY (sell naked put):

Action    Month &  Option    Open    Closing  Cost     Target
Req'd     Strike   Symbol    Int.    Price    Basis    Mon. Yield

SELL PUT  NOV 47.5 WMT WW   13,701    0.45    47.05      3.1% "TS"
SELL PUT  NOV 50   WMT WJ    9,330    0.75    49.25      4.3% ***
SELL PUT  NOV 55   WMT WK    1,595    1.75    53.25      7.3%


BULLISH PLAYS - Credit Spreads

HCA - HCA Inc.  $51.18  *** Sector Rally! ***

HCA (NYSE:HCA) is a healthcare services company that operates
approximately 200 hospitals comprised of general, acute care
hospitals, psychiatric hospitals and hospitals included in joint
ventures.  In addition, the company operates approximately 80
freestanding surgery centers.  The firm's facilities are located
in 23 states, England and Switzerland.  HCA's general, acute care
hospitals provide a full range of services to accommodate such
medical specialties as internal medicine, surgery, cardiology,
oncology, neurosurgery, orthopedics and obstetrics, as well as
diagnostic and emergency services.  Outpatient and most ancillary
healthcare services are provided by HCA's general, acute care
hospitals and through the firm's freestanding outpatient surgery
and diagnostic centers, and rehabilitation facilities.  HCA's
psychiatric hospitals provide a full range of mental healthcare
services through inpatient, partial hospitalization as well as
outpatient settings.

HCA - HCA Inc.  $51.18

PLAY (conservative - bullish/credit spread):

BUY  PUT  NOV-45.00  HCA-WI  OI=225  A=$0.40
SELL PUT  NOV-47.50  HCA-WW  OI=279  B=$0.65
POTENTIAL PROFIT(max)=14% B/E=$47.20

UNH - UnitedHealth Group  $97.98  *** All-Time High! ***

UnitedHealth Group (NYSE:UNH) forms and operates markets for the
exchange of health and well being services.  Through its family
of businesses, the company helps people achieve optimal health
and well being through all stages of life.  The firm's revenues
are derived from premium revenues on insured (risk-based) products,
fees from management, administrative and consulting services and
investment and other income.  It conducts its business primarily
through operating divisions in the following business segments:
Uniprise; Healthcare Services, which includes the UnitedHealthcare
and Ovations businesses; Specialized Care Services, and Ingenix.

UNH - UnitedHealth Group  $97.98

PLAY (moderately aggressive - bullish/credit spread):

BUY  PUT  NOV-85.00  UHB-WQ  OI=262  A=$0.85
SELL PUT  NOV-90.00  UHB-WR  OI=382  B=$1.45
POTENTIAL PROFIT(max)=15% B/E=$89.35


Neutral Plays - Credit Strangles

Here are some new candidates for traders who use neutral-outlook
premium-selling strategies.  Both issues have a relatively stable
chart pattern and robust option prices, however current news and
market sentiment will have an effect on this position, so review
the play thoroughly and make your own decision about its outcome.

CDWC - CDW Computer Centers  $48.44  *** Solid Earnings! ***

CDW (NASDAQ:CDWC), ranked #414 on the Fortune 500, is a leading
provider of technology solutions for businesses, government
agencies and educational institutions nationwide.  CDW is a
principal source of technology products and services including
top name brands such as Cisco, Compaq, Computer Associates,
Hewlett-Packard, IBM, Intel, Microsoft, and Toshiba.  The firm
distributes contracts to various end users for both customized
and standardized on-site services supplied directly by providers
such as HP Services and Unisys and for training programs provided
by firms such as KnowledgeNet and Productivity Point International.
CDWC was founded in 1984 as a home-based business and today employs
2,800 coworkers whose efforts generated net sales of $4 billion in
2001. CDW's direct model offers one-on-one relationships with its
knowledgeable account managers; purchasing by telephone, fax, the
company's award-winning site or customized CDW@work(TM) extranets;
custom solutions and daily shipping; flexible financing solutions;
and pre- and post-sales technical support, with factory-trained and
A+ certified technicians on staff.

Editors Note: Wait for a reaction to Wednesday evening's earnings
report from International Business Machines (NYSE:IBM) before
initiating this position.

CDWC - CDW Computer Centers  $48.44

PLAY (aggressive - neutral/credit strangle):

Action    Month &   Option   Open    Closing  Cost     Target
Req'd     Strike    Symbol   Int.    Price    Basis    Mon. Yield

SELL CALL NOV 55    DWQ KK    211     1.10    56.10       7.5%
SELL PUT  NOV 40    DWQ WH    621     1.15    38.85       9.0%

GILD - Gilead Sciences  $34.10  *** Trading Range! ***

Gilead Sciences (NASDAQ:GILD) is an independent biopharmaceutical
company that discovers, develops and commercializes therapeutics
to advance the care of patients suffering from life-threatening
diseases.  The company has five products that are marketed in the
United States and in other countries worldwide.  These are Viread,
a drug for treating HIV infection; AmBisome, a drug for treating
and preventing life-threatening fungal infections; Tamiflu, a drug
for treating and preventing influenza; Vistide, a drug for treating
cytomegalovirus (or CMV) retinitis in AIDS patients, and DaunoXome,
a drug for treating AIDS-related Kaposi's sarcoma.

GILD - Gilead Sciences  $34.10

PLAY (moderately aggressive - neutral/credit strangle):

Action    Month &   Option   Open    Closing  Cost     Target
Req'd     Strike    Symbol   Int.    Price    Basis    Mon. Yield

SELL CALL NOV 40    GDQ KH   6,789     0.50   40.50       5.8%
SELL PUT  NOV 27.5  GDQ WY       6     0.60   26.90       7.5%



Based on analysis of option pricing and the underlying stock's
technical background, these positions meet our fundamental
criteria for bearish "premium-selling" strategies.  Each issue
has robust option premiums, a well-defined resistance area and
a high probability of remaining below the target strike prices.
As with any recommendations, these positions should be carefully
evaluated for portfolio suitability and reviewed with regard to
your strategic approach and personal trading style.

BZH - Beazer Homes  $60.25  *** Construction Sector Slump ***

Beazer Homes USA (NYSE:BZH) designs, builds and markets single
family homes in the following locations within the United States:
Florida, Georgia, North Carolina, South Carolina, Tennessee,
Arizona, California, Colorado, Nevada, Texas, Maryland, Virginia,
New Jersey, and Pennsylvania.  The company designs its homes to
appeal primarily to entry-level and first time move-up homebuyers.
The company's objective is to provide its customers with homes that
incorporate quality and value while seeking to maximize its return
on invested capital.  Beazer's homebuilding and sales activities
are conducted under the name of Beazer Homes in each of its markets
except in Colorado (Sanford Homes) and Tennessee (Phillips Builders).

BZH - Beazer Homes  $60.25

PLAY (moderately aggressive - sell naked call):

Action     Month &  Option   Open   Closing  Cost       Target
Req'd      Strike   Symbol   Int.   Price    Basis    Mon. Yield

SELL CALL  NOV 60   BZH KL    201    4.30    64.30      14.3%
SELL CALL  NOV 65   BZH KM    437    2.00    67.00       8.9%
SELL CALL  NOV 70   BZH KN    162    0.90    70.90       5.6% ***

DHR - Danaher  $55.75  *** Accounting Issues? ***

Danaher Corporation (NYSE:DHR) is a producer of precision motion
control products, scientific and technical tools and instruments
for commercial and industrial applications.  The firm conducts its
operations through two business segments: Process/Environmental
Controls and Tools & Components.  Process/Environmental Controls,
in 2001, encompassed three strategic platforms, which included
Motion Control, Environmental and Electronic Test, and its focused
niche businesses, which included Power Quality, Aviation & Defense
and Industrial Controls.  In 2002, a fourth strategic platform,
Product Identification, was added to that market segment through
the acquisition of Videojet Technologies.  The Tools & Components
segment encompasses one strategic platform, Mechanics Hand Tools,
and five focused niche businesses, which include Jacobs Chuck
Manufacturing Company, Delta Consolidated Industries, Jacobs
Vehicle Systems, Hennessy Industries and Joslyn Manufacturing
Company.  The company's earnings are due on October 17.

DHR - Danaher  $55.75

PLAY (moderately aggressive - sell naked call):

Action     Month &  Option   Open   Closing  Cost       Target
Req'd      Strike   Symbol   Int.   Price    Basis    Mon. Yield

SELL CALL  NOV 55   DHR KK    282    4.60    59.60      15.8%
SELL CALL  NOV 65   DHR KL    297    2.20    67.20      13.7%
SELL CALL  NOV 70   DHR KM    353    0.85    70.85       6.7% ***


BEARISH PLAYS - Credit Spreads

All of these positions are favorable candidates for "bear-call"
credit spreads, based on the current price or trading range of
the underlying issue and its recent technical history or trend.
The probability of profit from these positions may be higher
than other plays in the same strategy, due to disparities in
option pricing.  However, current news and market sentiment will
have an effect on these issues, so review each play individually
and make your own decision about its future outcome.

TLM - Talisman Energy  $35.81  *** Lowered Outlook ***

Talisman Energy (NYSE:TLM) is a diversified oil and gas producer
based in Calgary, Alberta, Canada. The Company is also North 
American natural gas supplier and is expanding into a number of 
international areas. Talisman's Canadian exploration and 
development program is focused on large, relatively deep, natural 
gas prospects. Canada accounts for 48% of Talisman's production. 
The Company will continue to develop commercial hubs around core 
operated properties and infrastructure in the North Sea. In its 
Southeast Asia segment, the Company's is focused on continued 
development of its reserves in the gas business in Indonesia, 
Malaysia and Vietnam, as well as oil opportunities in each of these 
countries. Talisman also has an operated gas discovery offshore 
Papua New Guinea. In its Sudan segment, the Company will continue 
to develop oil fields in Blocks 1a and 2a and explore large targets 
in Block 4.

TLM - Talisman Energy  $35.81

PLAY (conservative - bearish/credit spread):

BUY  CALL  NOV-45.00  TLM-KI  OI=1404  A=$0.35
SELL CALL  NOV-40.00  TLM-KH  OI=1362  B=$0.90
POTENTIAL PROFIT(max)=14% B/E=$40.60

TEVA - Teva Pharmaceuticals  $64.90  *** FDA Approval Pending? ***

Teva Pharmaceutical Industries (NASDAQ:TEVA) is a global healthcare
firm specializing in pharmaceuticals.  Teva has major manufacturing
and marketing facilities in Israel, the North America and Europe.
Teva's scope of activity extends to many facets of the industry,
with a primary focus on the manufacturing and marketing of products
in the areas of human pharmaceuticals and active pharmaceutical
ingredients.  Teva produces generic drugs in all major therapeutics
and steriles in a variety of dosage forms, from tablets and capsules
to ointments, creams and liquids.  In addition, the firm makes drugs
in niche markets where it has a relative advantage in research and
development.  The firm distributes its API to manufacturers around
the world as well as supporting its own pharmaceutical production.

TEVA - Teva Pharmaceuticals  $64.90

PLAY (aggressive - bearish/credit spread):

BUY  CALL  NOV-75.00  TVQ-KO  OI=92   A=$0.40
SELL CALL  NOV-70.00  TVQ-KN  OI=532  B=$1.30
POTENTIAL PROFIT(max)=23% B/E=$70.90





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