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Daily Newsletter, Sunday, 10/20/2002

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The Option Investor Newsletter                   Sunday 10-20-2002
Copyright 2002, All rights reserved.                        1 of 5
Redistribution in any form strictly prohibited.

Entire newsletter best viewed in COURIER 10 font for alignment

In Section One:

Wrap: Bulls Will Not Be Denied
Futures Market: Neither Bulls nor Bears got what they expected today
Index Trader Wrap: With a fall rally at hand, bullish leaves 
should begin to Russell
Editor’s Plays: Make Money With High Premiums
Market Sentiment: What I Do, Not What I Say
Ask the Analyst: Trade What You See
Coming Events: Earnings, Splits, Economic Events

Updated on the site tonight:
Swing Trade Game Plan: Another Day in Denial


Posted online for subscribers at http://www.OptionInvestor.com
******************************************************************
MARKET WRAP  (view in courier font for table alignment)
******************************************************************
       WE 10-18        WE 10-11         WE 10-4         WE 9-27
DOW     8322.40 +472.11 7850.29 +321.89 7528.40 - 63.58 -284.57
Nasdaq  1287.86 + 77.39 1210.47 +774.16  436.31 -  9.13 - 22.00
S&P-100  449.02 + 26.34  422.68 + 19.46  403.22 -  4.03 - 10.68
S&P-500  884.39 + 49.07  835.32 + 35.04  800.28 - 14.70 - 18.03
W5000   8323.78 +450.75 7873.03 +274.41 7598.62 -175.00 -150.63
RUT      363.37 + 18.44  344.93 -  3.05  347.98 - 14.29 -  5.51
TRAN    2279.09 +124.42 2154.67 + 16.99 2137.68 - 13.39 +  1.15
VIX       39.82 -  3.62   43.44 -  2.84   46.28 +  3.14 -  1.41
VXN       55.33 -  3.54   58.87 -  1.41   60.28 +  2.42 -  1.22
TRIN       0.80            0.41            1.98            2.09
Put/Call   0.68            0.93            0.97            0.90
******************************************************************

 
Bulls Will Not Be Denied
by Jim Brown

Bad news in all flavors failed to hold the markets back and the
markets finished with big gains for the week. For traders this 
was the week from hell. It did not make a difference which side
you were on as there was plenty of movement in the opposite 
direction. We are three weeks deep into October and with only
two weeks to go the bulls are convinced the bottom is behind us.

Dow Chart


 

Nasdaq Chart


 

Friday started off bad despite the good news from Microsoft. The
fact that the earnings were a one time event and they lowered 
guidance for the 4Q kept them from rocketing like IBM earlier in 
the week. MSFT added +2.37 on Friday but IBM was still climbing
with another +2.05 at 74.25. One of the factors influencing IBM
was short covering by traders that had refused to believe the
market reaction and just "knew" IBM would sell off by the 
weekend. Instead the pain just intensified. 

The October rally is firmly underway. I know this due to the total
disregard for the fundamentals. I reported on the massive drop in
the book-to-bill ratio for semiconductor orders on Thursday night. 
The headline dropped to .84 and the lowest number in a year and 
-30% lower than the average of the last five months. 
http://www.semi.org/web/wpress.nsf/url/booktobill
This is VERY bad news for the tech sector and semiconductor stocks
especially. You would have expected a bad day for semi stocks on 
Friday. Instead the SOX closed at the high of the day and on the
verge of a breakout. Business is getting significantly worse but
nobody seems to care.  

Semiconductor Index Chart


 

Book-To-Bill Chart from Economy.com


 


Economically there were a couple of negative events on Friday. 
The ECRI Leading Indicators almost doubled the decent from the prior
week which was twice as bad as the prior month. The 6-month Growth
Rate dropped -3.4% for the week ended Oct-11th and is the lowest
level since November 2001. Hello, George McFly, there is no recovery!
The Trade Deficit rose to a record -$38.5 billion for August. Money
is flowing out of the U.S. at a record rate. 

I give up trying to analyze the psychology of the markets in 
October. Fundamentals don't matter. Money is flowing into equities
with estimates of $100 billion from pension funds alone over the
four week period beginning last week. It appears the "fix" is in
and the markets not only climbing the wall of worry but hopping 
from gap to gap. The Dow closed at 8331 and ever closer to the 
significant resistance of 8400-8600. The Nasdaq also moved closer
to the magic 1300 level. We are far from out of the woods despite
the comments above. 

If you think trading this market is hard for retail investors your
right. Shucks, if you could just hire the best traders you could find
and round up about $1 billion in trading capital you would be set, 
right? Don't kid yourself. Beacon Hill Asset Management, one of the
biggest hedge-fund managers in the business, announced that it was
closing its biggest hedge funds and selling its remaining positions.
After losing more than 50% or more than $400 million over the last
couple months it was suspending redemptions for six months until 
the funds could be liquidated. Beacon Hill was heavy in the bond
market. 

There was a rumor Friday night that Bank One (ONE) was going to 
buy JPM. This may only be a rumor OR there is a deal to take JPM 
out because of an impending failure. There has been a rumor that 
JPM has a massive derivative problem that could be taking them 
under. Having a white knight with cash show up could help solve 
some of those problems while giving the knight a sweet deal in 
the process.

Monday we have earnings from MMM before the bell. 3M is the largest
weighted stock on the Dow and any move in MMM is greatly exaggerated
in the Dow. There are many conflicting opinions on the MMM earnings
outlook. 3M has made a point of saying that they are cutting costs
aggressively which, while it may help them hit their estimates, does
not always influence investors. The strongest rumors are that they
will hit estimates but then attempt to talk down the outlook and
claim very low visibility. IBM successfully spun its report this 
week and 3M will also try on Monday. How that news would normally
be critical but with fundamentals being ignored we cannot be sure. 
Other well known names announcing on Monday are ALTR, ANAD, CD, 
JDAS, LXK, VRTS, VTSS. 

The focus will be on earnings almost exclusively next week. The
economic calendar is very light with the only material reports
being the Beige book on Wednesday and Durable Good and Sentiment 
and Home Sales again on Friday. As I stated above the actual 
earnings do not appear to be of interest to the October bulls. 
The estimates have been lowered so many times that even Enron
could probably beat earnings this quarter. As I showed you on
Thursday the PE ratios are skyrocketing and stocks are trading
at higher multiples now than during the bubble in October 2000.
Investors are simply tired of the bear market and they want the
October 10th low of 7197 to be the low. Period. 

I have to caution you. Even though I am planning to go long on
Monday morning, market willing, it is usually times when the 
most traders are bullish that the market suddenly tanks. You
might disagree with me about traders being bullish but you only
need to look at the gains in KLAC, NVLS or MXIM from last week
and compare them to the book-to-bill report. If that is not
irrational exuberance I don't know what is. One third of the 
S&P have announced earnings for the quarter with mediocre results.
Alan Abelson, from Barron's, once noted that companies which
announce early tend to post better results than those who 
announce later. We will see if he was right and more importantly
if anyone cares. 

Enter Very Passively, Exit Very Aggressively!

Jim Brown

"In this game, the market has to keep pitching, but you don't
have to swing. You can stand there with the bat on your shoulder
for six months until you get a fat pitch. "  - Warren Buffett


**************
FUTURES MARKET
**************

Neither Bulls nor Bears got what they expected today
by Alan Hewko
futures@OptionInvestor.com

Quotes:
4:00 PM Cash Market Close     ES 883,    YM 8293, NQ 959
4:15 PM Future's Market Close ES 883.25, YM 8296, NQ 961.50

Dow   8322 + 47
SP500  884 +  5
COMPX 1287 + 15

The above Dow, SP500, Compx numbers sound sort of boring, and 
while 1/2 of Friday was indeed very boring with low volume 
sideways action, it wasn't all boring...

A test: Pick one from the list below:

1. the Dow was + 47 for the day
2. the Dow was - 200 from its overnight highs to morning lows
3. the Dow was +180 from its morning lows to its close

If you said ALL of the above are true, you win. [grins]


As previously done, I shall use these abbreviations for this 
article, and the same "ES, YM, NQ" is often in the intra-day 
Market Monitor commentary:
                                       Ticker
ES = E-mini SP500 December futures      ES02Z
YM = E-mini Dow $5 December futures     YM02Z
NQ = E-mini NDX 100 December futures    NQ02Z

If you are not familiar with these futures tickers, but wish to 
be: may I gently suggest writing the above 3 lines on a Post-It 
for your monitor.

_______________________________________________________________


This marks the second week in a row of Green weekly closes.

Best weekly gains since Sept. 2001

Friday in one paragraph: 

A surprise gap down (vs the expected gap up) resulted in 30 
minutes of Longs taking profit (when their expected gap up did 
not occur, they took long profits at the open). The market gaped 
down at 9:30 AM and then sold off for 30 minutes. By 10 AM, 
supports at Dow cash was 8150 and ES 867 held and from a level of 
Dow 200 points lower than its overnight highs, Shorts covered to 
11 AM, followed by a 50% retrace lower by Noon, low volume 
sideways action until 3 PM's Bond close then had the market 
finding a bid into the close.

_______________________________________________________________


RECAP OF THE LAST 24 HOURS

One can gain additional intra-day comments from reading Thursday 
night and Friday's commentary in the Market Monitor archives. And 
yes, I actually did wake up at 3 AM with that signal to short 
futures at 888 off of Europe as the Market Monitor shows - I 
don't suggest everyone get up at 3 AM, but it beats reading a 
book if you can't sleep [grins]

Thursday night MSFT had earnings to the upside, and the resulting 
rally in futures of ES to 888 +10 points from Thursday's close, 
and YM to 8350 +100 points from Thursday's close. Futures went 
sideways the rest of Thursday late night's session.

This past week has consisted most of very large morning Gap days 
(in the area of Dow +/- 150 point gaps); so when traders left for 
the day on Thursday:

Bulls were expecting another similar Gap Up Friday morning, and 
were looking forward to exiting Longs at Dow 8350 area.

By the same token, Bears were expecting the very same large gap 
to the area of Dow 8350 and were looking forward to opening a 
Short near that level.

Guess what? That didn't happen.

Friday morning at 3 AM, when Europe opened with their own gap up; 
quotes were: 3 AM: ES 889, YM 8342, NQ 962.

US futures then did something not-unusual : shortly after Europe 
opened at 3 AM, they reversed their trend on an exhaustion top 
right under ES 890, and sold off all night long and quotes by 
Friday's 9:30 AM open were: ES 872-873, YM 8185-8195, NQ 939-940
Compare the Friday 9:30 AM open numbers with the levels above 
from Friday 3:00 AM.

Instead of the Gap Up that both Bulls and Bears were expecting, 
we actually got a Gap Down. 

Factor in that Friday was Option Friday and you truly had traders 
scratching their heads at the Open.

Here's a chart of what bulls and bears saw to their expected gap 
up Friday morning. 

Chart: ES (E-Mini SP500 futures) 
       Thur 3 PM to Fri 4 PM including the overnights



 


Notice the huge move higher from MSFT and the hard selling once 
Europe opened at 3 AM straight into the Friday market open.
You can also see the chart resistance at ES 887-889 levels. 
(remember this ES 888 number, I shall refer to it later)

Friday Key times of day:

Chart: ES (E-mini SP500 Futures) Friday 9:30 AM - 4:15 PM


 


9:30 AM
Market (to the surprise of both bulls and bears) gaps down
ES 872-873, YM 8185, NQ 940.
Bulls are surprised, and simply decide to take long profits.

9:30 - 10:00 AM  
I've mentioned a few times in the last 2 weeks, how sometimes 
reversals occur at +/- Dow 200 levels. Last night, YM (Dow 
futures) were 8350, and at 10 AM were 200 points lower at 8150, 
and a reversal occurred.

ES 867 was also this Tuesday's opening lows, and therefore a 
support pivot. Indices are Red at this point, with the Dow in the 
-100 area.

10:00 AM  
ES 867, Dow Cash 8150     * Day Lows *

10:00 - 11:00 AM  
ES 887-888, Dow Cash 8325, NQ 969  * Day Highs *
One straight hour of buying leads to 11 AM's exhaustion top at ES 
887 level, matching the 3 AM highs.

2 retracement levels I'd like to point out:
877    : 50% of day low/high 867/887 = 877
879.50 : 50% of 872/887 = 879.50 (872 being the lower band
         of 872-875 "chop" area, as well as 872 being the 
         breakout level around 10:30 AM

12:30 - 1:30 PM 
The 2 above retracement levels of 877 and 879.50 provided a 
rather boring area of night chop trading, before the market broke 
out of this range to a pivot high at 2 PM

2:00 PM
There's a small ES pivot at 883, it was pierced to the upside but 
ES at 2 PM failed to take out 885 and possibly re-test that 887-
888 level, and the market leaked lover to 3 PM.

3:00 PM Bond Close
ES did a double bottom at 877 50% retracement level, matching the 
12:30 PM level; and slow steady buying/covering had the markets 
closing rather strongly and at afternoon highs.

4:15 PM Futures Close
ES 883.25, YM 8296, NQ 961.50

Chart: YM (Dow $5 Futures) [not Dow Cash]
       for Thursday 2-3 PM through Friday close
       including the Overnight session



 


Here is one last chart of Friday:

Chart: NQ (E-mini NDX futures) for Friday 9:30 AM to 4:15 PM


 

_______________________________________________________________


THIS COMING WEEK'S EARNINGS

This past had a tremendous amount of earnings, most of them 
inline or slightly beating the vastly lowered expectations. This 
coming week, the earnings calendar is still heavy.

The Key earnings this week are:

Monday:
MMM (Dow stock), LXK, VRTS

Tuesday:
T (Dow stock), BLS, MCD (Dow stock), Taiwan Semi (TSM), UPS, AFL, 
CA, KLAC

Wednesday:
DCX, DD (Dow stock), LLY, AMGN, AOL, WLP

Thursday:
AIG, BMY, DOW, EK (a Dow stock), AMZN, FLEX, JDSU, VRSN

Friday:
LMT, VZ, ERTS

As you can see, the difference from the number of key earnings 
this past week to next week is vastly reduced.

The big Monday earnings pre-open is MMM $125 (a Dow stock)

_______________________________________________________________


THOUGHTS FOR MONDAY & NEXT WEEK

To help put some perspective on this, let's examine a chart:

Chart: SP500 (SPX) 3 month with Fibonacci retracement:


 


Notice the bottoms on July 24 and Oct 10th, along with the high 
in the middle of August.

If you scroll up, I asked you to remember the ES (Emini SP500 
futures) number of 888.

You can see in above chart how 888 is the 61.8% Fib retracement 
as well as chart resistance several times this week as well.

ES close: 883
ES Up pivots: 885, 887-888, 892-895, 900, 902-905, 912, 928
ES Down pivots: 879.50, 877, 872-875, 867, 862, 852-858, 848

Dow cash remains in a tight 8200-8300 range, with dip buyers a 
bit under 8200, and sellers a little over 8300.

NQ has broken out to upside over 935 resistance, currently at 
960.
NQ resistance to upside: 972, 988, 1000
NQ lower support: 950, 935, 912-15, 902-905

_______________________________________________________________


If you read last Sunday's Futures Wrap column, I talk a great 
deal about the importance of October Options, and "why" they are 
so important. 

Now that all of October options are over with, and ignoring the 
possible "unusual" market action as Option market makers square 
up their long or short stock positions that were put down to 
hedge the October options they sold/bought; the one thought I 
have given the lack of Earnings this coming week, is shall the 
market change its existing tone and become "Sell the News" ? Or 
what catalyst will have stocks to continue going higher now that 
this past week's huge amount of earnings are over with.

Chart wise remains bullish, as the charts look quite strong, but 
are coming up to some serious resistance levels, such as SPX 900, 
Dow Cash 8350-8400, Compx near 1300.

A perfect scenario is that 3M (MMM) - (a Dow stock) misses on 
earnings pre-open Monday, and then warns with their guidance and 
that's the trigger for 1-3 days of solid selling, back to about 
Dow 7800

The market also thought it had a great setup for Friday morning, 
only to be surprised so let's assume MMM doesn't do miss or warn; 
all the charts I've just spent some time looking at indicate two 
things:

     1. Either Chart Break-out to upside
     - or -
     2. Chart resistance hits very soon and we begin a logical, 
        healthy retracement downward.

I plan to use MMM's earnings and ES 885-888 to provide an answer 
Monday morning as to market direction.

Lastly, compare Oct 2001 with Oct 2002.
In Oct 2001, a month after 9-11, there was "hope" that the 9-11 
event would trigger a bottom and that business would starting 
spending again for we knew Q4 2001 earnings would be terrible 
(and they were), but we had "hope" that Q1 2002 earnings would be 
great (they weren't). The only thing that kept the economy from 
falling apart was the consumers spending and the housing sector.

Now, Q3 2002, business and IT spending still is terrible, the 
consumer is starting to crack given the many Retail stocks 
warning (most recent being Sears) but the market remains in "buy 
any good or inline news/earnings and ignore all bad news" 
mindset.

As Jim Brown pointed out so well last night, MSFT earnings for Q3 
were greatly comprised of one-time events which won't repeat. 
MSFT CFO did have some bearish comments, and even though the 
street closed its ears to the bearish aspect of MSFT's earnings - 
the underlying facts remain the same.

How many of you are planning large consumer purchases this 
Christmas or winter period ? How many are planning to buy a new 
PC, a new large TV set or expensive hi-end stereo, a laptop, new 
cell phone, new car, etc.

One interesting note: prior to Friday's open, the Broker sector 
and Semi SOX sector both had bad news - Brokers such as GS closed 
on day lows, while the SOX index closed green and at day highs. 
Odd.

One of the "good" things about Q3 earnings is there seems to be a 
believable quality to them - remember Arthur Anderson? remember 
the Fortune 500 CEOs having to swear their prior financials were 
correct? All of that helped to seemingly create "more honest" 
earnings numbers.

This is good. Perhaps ten years overdue, but still a good thing.

SUMMARY

The market "should" sell off next week on some logical Long 
profit taking. That doesn't mean it will. It may breakout to the 
upside over the nearby resistance - trapping even more shorts in 
the process, as well as having mutual funds chasing it higher as 
they fear being left behind. 

Is Dow 8500 or even 8750 "possible"? Sure, but so is Dow 7800 
or 7500-7600.

I have also written a Futures related article this weekend, 
discussing Futures Entries and Exits, explaining the meaning of 
an order such as "ES is 867, go long at market at 869 "or better" 
and "ES is 876, go long at MIT 878"
The Link for this article is:
http://members.OptionInvestor.com/marketwrap/101302_2.asp


Alan Hewko


As always, your questions and comments are welcome:
email to futures@OptionInvestor.com


********************
INDEX TRADER SUMMARY
********************

With a fall rally at hand, bullish leaves should begin to Russell

With an October mid-election year rally at hand; the major 
indexes now post gains greater than 6% for the month of October.  
All except for one that is.  With a whirlwind of bullish 
enthusiasm giving lift to the large caps, then the next two weeks 
may bode well for the small-caps and the Russell-2000 Index 
(RUT.X).

Each Friday we try and "step back" and look at the weekly, 
quarterly and yearly % changes for the indexes, looking for 
divergence and opportunity.  

Two weeks ago it was the DIVERGENCE we found in the 10-year 
YIELD, which ended up being the "heads up" for an equity rebound.  

For a bull that's been hesitant to "chase" the major indexes, I'm 
looking for the smaller-caps to be the "out performers" this week 
in an attempt to play catch up with their larger cap brethren.

Weekly Index / Sector Changes


 

So far this quarter, it's the Russell-2000 Index (RUT.X) lagging 
the October move, but on a year-to-date basis, has been an out 
performer when compared to the broader NASDAQ Composite (COMPX) 
and narrow NASDAQ-100 Index (NDX.X).  The RUT.X has been an 
"inline" performer on a year-to-date basis with the S&P's, but as 
expected, it's lagged the more institutionally held Dow 
Industials (INDU).  However, the next couple of weeks, under a 
bullish blanket of enthusiasm, I think the Russell-2000 becomes 
the "best" risk/reward trade for bulls as there are perhaps less 
tradable profits to be sold by bulls, when compared to the other 
indexes.  For a supply/demand guy like myself, that would equate 
to more limited supply.

Last Friday, a bull wanted to see the financials get out of their 
slump on the scenario of market theory being that financials 
helps lead an advance.  Boy did that happen this week with 
brokers leading the gains, most likely on the thought that trade 
revenues and potential investment banking deals could grow with a 
more bullish equity market.

Disk Drives (DDX.X) lead technology gains after IBM (NYSE:IBM) 
$74.25 surged 16% on the week.  While IBM is not a component of 
the Disk Drive Index (DDX.X), one can make the association 
between IBM and its impact on sector action.  DDX component 
SanDisk (NASDAQ:SNDK) $19.70 surged 37% on the week after 
reporting better than expected earnings.

And most important for an equity bull to note and continue to 
monitor is the massive round of selling in Treasuries this week 
with the benchmark 10-year YIELD (TNX.X) jumping to 4.13%, 
freeing up cash that obviously flowed toward equities.

Let's take a quick look at the Russell 2000 iShares (AMEX:IWM) 
$72.40, which track the Russell-2000 (RUT.X) 363.  For some 
fundamental breakdown, subscriber's can visit Indexfunds.com at 
this link http://www.indexfunds.com/data/ETFScreener.php?id=IWM for 
sector breakdown.  The major sector weightings are Financials 
(22.5%), Consumer Staples (17.4%), Technology (15.6%), Services 
(14.6%) and Health (11.7%).  The Russell 2000 iShares do trade 
options.

Russell-2000 Index iShares (AMEX:IWM) - Daily Chart


 

If its true that a bull needs selling in Treasuries, to generate 
cash for institutions to snap up their favorite institutional 
"blue chips" in the early stage of a rebound and that the smaller 
capped stocks begin to benefit as after a nice move higher in the 
large caps, then bullish traders look for the smaller-caps to 
play some catch up near-term.  I like 1/4 positions "at market" 
and would look for any type of pullback near $70.05 to have 
round-out position for 1/2.  Then, perhaps in a couple of weeks, 
look for a break above $75.00 to round to full with 
December/January targets of mid-to-upper $80's. 

Dow Industrials Chart - Daily Interval


 

From a perceived risk/reward basis, I would think a Dow bull is 
pretty happy after this weeks 6% gain, compared to a NASDAQ-100 
(NDX.X) gain of 7.4%.  Upside market responses to CAT, IBM and 
MSFT earnings helped drive bullishness.  This week, MMM, MCD, DD 
and IP are scheduled to report.  Key stock here would be MMM, 
which has been a strong performer this year.  3m Company 
(NYSE:MMM) $125.00 hasn't been able to break much above $130, but 
series of higher lows hints pressure is building.  Recent decline 
to $110 came right down to the point and figure chart's bullish 
support trend and price action from there hints that institutions 
were lurking nearby and gobbled up shares.  An "upside surprise" 
with no overhead supply of stock above $130 could have the stock 
and the Dow still moving higher.  However, note that we don't 
have an upward trend on the Dow chart at this point.  Sure, I 
could draw one on it, but it would NOT BE A REASONABLE TREND that 
we'd expect to last for any duration.

This Friday's Dow Industrials Bullish % ($BPINU) reading is "bull 
confirmed" at 43.33%, compared to last Friday's reading of "bull 
correction" at 13.33%.  Who says the bullish % charts don't give 
hint of who has risk?  Not me.  Would currently take a reading of 
70% to be considered "overbought" from an institutional 
perspective, and a reading of 36% to have the bullish % reversing 
back down to "bull correction" status.  Bulls have the football, 
while bears are playing some defense for a change.

Speaking of "reasonable trend" lets use a technique that I call 
"cloned regression" to get a feel for the S&P 500 Index (SPX.X) 
and bullish trend channel.

S&P 500 Index Chart - Daily Interval


 

This week's action saw the S&P 500 Index (SPX.X) surge 5.9% and 
looks higher still.  This week, I'd have to sell some bullish 
gains on any move into the 900-914 zone as this is where I've got 
some crisscrossing resistance from "cloned" regression and 80.9% 
retracement.  "Ideal" pullback bullish entry early this week 
would be the 835-856 zone.  I've labeled the 11/18/02 date on the 
above chart to get me in the mindset that the current upward 
support trend from "cloned" regression would be at the 915 level.  
This may give the options trader a feel for what type of 
strike/expiration/premium that would make sense, or more 
importantly NOT make sense when looking to implement a bullish 
trade.  

For instance, I DO NOT think it would make sense to be buying 
OUT-THE-MONEY Nov. 925's (SXBKE) for $13.00 (925+13 = 938).  If a 
bull is going to risk $5k on November expiration, I would prefer 
1 Nov. 880 call (SPXKP) for $33.50 (880+33.50=913.50) for now, 
then should the SPX pull back into 835-856 zone, look for 
firming, then round out with another Nov. 880 call (guessing 
$17.00?), with a stop below the upward trend.  Both trading 
strategies would be bullish, but a $5K bet at 880 strikes more 
"reasonable" and greater probability of profit.  

Remember... there are still "Iraq concerns" and other "terrorist 
concerns" that could be in play and impact markets.  Buying out-
the-money with Market Volatility (VIX.X) 39.82 still rather high 
stands a greater chance of becoming a LOSING MAN'S BET.  

This week saw the S&P 500 Bullish % ($BPSPX) rise from last 
Friday's "bear confirmed" 21.6% reading to this Friday's "bull 
alert" reading of 37.6%.  It would currently take a reading of 
60% to get this index back into "bull confirmed" status, and a 
lower reading of 30% to reversed back into "bear confirmed."

S&P 100 Index Chart - Daily Interval


 

I believe the OEX outperformed the SPX this week as it has a 
little more exposure to the financials in percentage terms than 
does the SPX.  Also helping perhaps was bullishness from IBM and 
MSFT offsetting some weakness in INTC.  A point and figure 
chartist will note that the Dow Industrials ($INDU) is currently 
battling its bearish resistance trend.  As it relates to the OEX, 
the p/f chart's bearish resistance trend is up at 460 right now.  
Bulls look for continued gains in financials to help boost the 
OEX to 460.  At some point, there's got to be some profit taking 
and I'd expect firm support in the OEX at 430 this week on any 
type of pullback.  I really like our retracement here as the 430 
level marks the p/f chart "buy signal" at 430 and that would have 
been an ultimate stopping out point for bears as risk immediately 
was assessed to 460.  Ask any OEX bear still holding short/put 
where he/she wished they had stopped out and my guess would be 
430.  Look for that to be a support level on any pullback.

This weeks action saw the OEX Bullish % ($BPOEX) reverse up from 
last Friday's "bear confirmed" reading of 20%, to Tuesday's "bull 
alert" reading of 36% and current reading of 42%.  No longer 
"oversold," and still a ways to go before being "overbought" on 
an institutional level of 70%.  It would currently take a reading 
of 60% to get this index back to "bull confirmed" status, and a 
reading of 36% to reverse back lower to "bear confirmed."  

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


 

Friday morning's "rejection" near $22.97 hints there's either 
some very skittish bears or some eager bulls in the NASDAQ-100 
and near-term and that now becomes a level that traders will 
monitor as short-term support.  I do believe that Cisco Systems' 
(NASDAQ:CSCO) $10.51 earnings, which are to be released on 
November 6th (also the next FOMC meeting) will be key for 
continued bullishness.  As a trading strategy, bulls in the Q's 
might look to sell gains into the 24.21-25.45 zone ahead of 
Cisco's numbers.  In recent sessions, many firms have been 
bringing down their estimates.  This may make for an easy beat, 
or in line, but with Intel (INTC) still saying it hasn't seen a 
pickup in IT spending, CSCO's outlook may be the same.  "My" 
$22.21 support can be used as an "ultimate" level of support by 
which bullish traders can assess downside risk to.

Jeff Bailey


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**************
Editor's Plays
**************

Make Money With High Premiums

Everybody has seen a promising stock and rushed to the options 
montage only to see call prices that would choke Warren Buffett. 
In frustration you click off and go find another stock like GE
or CSCO with option prices in pennies instead of dollars. 
Unfortunately with lower option premiums you typically get slower
movement. Everything is relative.

One strategy I have not written about in quite some time is 
Naked Puts or Bull Put Spreads. The reason is simple. They are
bullish strategies. You don't want to assume liability in a bear
market. 

I am not going to call this a bull market or recommend that everyone
rush out and buy calls or sell puts next week. However, one of
the perks of this position is that I get hundreds of emails from
readers every week and you can tell from the questions what the
general investor is thinking. This week I got more questions about
naked puts and bull call spreads than I got in the last six months. 
This should be a clue as to what direction investors are leaning. 

There are multiple ways to make money with puts in a bullish market. 
You can sell them naked, which means you "write" or "sell to open"
a put position. This requires naked writing capability and much
more margin in your account. You receive the premium in your account
and you want the stock to rise significantly to where you can buy
the puts back for a substantial profit. The downside is you are
liable to purchase the stock for the strike price you sold. This 
concerns traders way too much since the only risk is that the stock
falls below the price it was when you sold the put. 

To remove this risk you can use the Bull Put Spread strategy instead.
This means you buy a put that is out of the money and then sell a put 
that is higher. This limits your risk to the lower strike price minus
any premium received. 

I am going to give a couple examples of each. 

Using LLTC as an example at $27.55. If you sold the $35 put naked 
for Friday's closing price of $7.40 then you would be liable for 
any risk of the stock trading under $27.50. Any move over $27.50
would result in a profit as the option price declines almost penny
for penny as the stock moves up. (there is the bid/ask spread to 
conquer of 50 cents but after that it is all profit)

The risk is that you can be put the stock at any time. If it rose
to $30 and you were put the stock at $35 you sell the stock for $30
and you would make $2.40. $35 - 7.40 premium = cost basis of $27.60.
Being put the stock is not a bad thing as long as it is above the
$27.55 price where you started the play. 

Being put the stock at a lower price is not bad either AS LONG as
you still plan on continuing the play. If the stock dropped to $25
and you were put at $35 you would "technically" be out $2.60. BUT,
as long as you sell the stock and resell the put exactly at the same
time at the open you would receive $10 for the put the second time
instead of $7.40. That $2.60 difference makes up for the drop in 
the stock. The key here is you can't keep doing this forever. This
is a bullish strategy and is not meant to be used on stocks that 
may drop. Reselling a put stock once is a repair strategy but doing
it several times is crazy, UNLESS you have insurance. 

Using the LLTC example you can turn this into a bull put spread by
purchasing a $25 put for $1.15. Now your total risk is the difference
between $27.55, the current stock price, and your long $25 put, ($2.55)
plus the cost of the insurance put, $1.15. This makes your total 
risk $3.70 compared with your total profit potential of $7.40. 

Obviously that is a 1:2 risk ratio. The ratio is governed by the
distance from the current stock price for the insurance put and the
distance above the current stock price for the put sold. 

Selling the $50 put on LLTC puts $21.90 in your account and changes
the risk/reward ratio to nearly 1:6. The risk is EXACTLY the same
whether you sell a $30 put or a $50 put. You are covered by the 
amount of premium you received on each. You would receive $20 MORE
premium on the $50 put than the $30 put. You have to be realistic.
The odds of LLTC hitting $50 in November are almost zero. You can
construct a 1:20 risk reward ratio but the odds are 20:1 against 
a full profit. 

In these days of low expectations I think $10-$15 out of the money
is about as far as you can expect the stocks to move despite wild
hopes. Therefore selling farther away does no good. You do want to 
sell about $5 farther than you think the stock can actually reach. 
As long as the short put is in-the-money it will have no time value. 
Once it is at-the-money or out-of-the-money it will have only time
premium and that premium decays much more slowly. In order to capture
the maximum profit you need to close the play by buying back the
short put when the stock reaches its maximum gain.

In a bull market you can move out more than one month to sell an
even higher strike and allow the stock to move higher before you
close the play. During a rally in a bear market (now) you need to 
stick with the current month and use stocks with the maximum rate
of gain. 

Try to pick a stock that is between strikes like LLTC at $27.50. 
This makes the insurance puts cheaper because they are already out
of the money. Just remember the distance between the strike you 
buy and the current stock price is risk. 

Using a stock like QCOM which at $36.20 is right between $35 and 
$37.50 strikes. You can pay $2.00 for the $35 strike and your risk
is $2 plus the amount of the stock price over $35 or $1.20 making
your total risk $3.20. (out of pocket $2.00 but total risk $3.20)
If you bought the $37.50 strike at $3.20 your out of pocket is
$3.20 but your risk is only $1.90, because the put is already 
$1.30 in-the-money. However, if the stock goes up your profits
are reduced by $3.20 rather than $2.00 on the lower strike. You
have to decide if it is worth risking the extra $1.20 of lost
profit to have $1.40 of less risk. 

An example of a 1:4 risk reward play would be MOLX. At $25.17
you can buy the $25 put for $1.80 and sell the $35 put for $9.60.
You are 100% protected under $25 and receive maximum profit over 
$35. In reality the stock would probably finish the month in the
$32 range and produce a $5 profit for a $1.80 investment.  
  
MOLX Chart


 


Some stocks I screened that would work for the bull put spread
would be: CTXS, TLAB, NXTL, RATL, NVDA, CYTC, GNSS, CEFT, NVLS, 
GENZ, QLGC, KLAC, DELL and QCOM. A stock I would write naked 
with just a stop loss would be ERTS.

If you are going to write naked I like to do it on a dip. Take
a company like ERTS and wait for one of these big gap down market
days. The premiums will spike instantly and as soon as the market
turns you sell the put at the inflated premium.

ERTS Chart


 

Do not use limit orders and do not use sell more than 10 contracts
at a time. Normally you will get an instant fill at the bid. If
you put in a limit order the market maker will change the bid
in a heart beat rather than have his money sit in your account
for a month. 


********************    

Remember, these are high risk plays and should only be made
with risk capital.

Good Luck

Jim Brown  


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

What I Do, Not What I Say
by Steven Price

What appeared to be a slam-dunk rally never quite materialized 
this morning, instead dropping quickly at the beginning of the 
session.  After last night's earnings surprise from Microsoft, 
the Dow resistance levels between 8300 and 8400 looked like they 
would be nothing more than a shattered glass ceiling.  However, 
that glass looked more like Plexiglas at the open, with the Dow 
falling quickly more than 100 points in the morning.

By the end of the day, we had rallied back and posted a gain of 
47.36, which looked impressive, but wasn't exactly the furious 
rally many had expected. It was significant in that it broke 
through the 50-dma and the previous support level of 8305, which 
had previously appeared to serve as resistance. The average did 
stop short of the 61.8% Fib number of 8359, but the Dow does seem 
to be forming a new base in the current area.  This consolidation 
looks bullish after the 1000-point, four-day rally, has paused 
and crept higher, rather than falling back. 

The rally was impressive, but I'm left wondering how it will 
sustain itself with the constant outflow of assets from stock 
funds.  During the week ending October 16, funds saw withdrawals 
of $9.3 billion, after losing $2.7 billion the week before.  This 
money is coming out of the market during an upswing!  August was 
the first time in 14 years that stock funds had seen net 
redemptions during a month in which the market increased in 
value.  The outflow in August was around $5 billion total for the 
month.  Unless there is a sudden influx of cash, which seems 
unlikely given the recent surge of layoffs, this month will more 
than double August's redemptions.  That's an awfully heavy anchor 
to haul up the hill.  

We seem to be seeing a large asset allocation from bonds into 
stocks, as yields have soared in the 5-year, 10-year and 30-year 
treasuries during the recent rally. This represents a selling of 
bonds, which was most likely triggered when bonds hit 
astronomical levels (as evidenced by extraordinarily low yields), 
and stocks dropped to their July lows. The bulls see this as 
evidence of real money flowing back into stocks, while bears 
wonder if the allocation will shift back in the other direction, 
as stocks increase in value, in spite of weak economic 
fundamentals. 

We have seen a number of sector rebounds, most notably the banks.  
The S&P Banks Index (BIX.X) has bounced from a low under 240 just 
a week ago, to just below its 50-dma of 285.  That 50-dma may 
provide the ceiling, as the Dow hovers near its own. However, 
other than Citigroup "sort of " beating earnings estimates, by 
including a one time asset sale, nothing has really changed for 
the group.  We have seen a similar phenomenon in the retail 
sector, where the S&P Retail Index (RLX.X) has rebounded in the 
last 10 days from testing support at 250, to finish today at 290.  
This rally came in spite of the fact that there has been no 
reversal in the trend of poor retail sales.  Wal-Mart came out 
and said they should meet expectations for 2-4% same store sales 
growth this month, but those growth estimates have come down from 
the 4-6% they commonly predicted in previous months.   In 
addition, the preliminary Consumer Sentiment number was five 
points below expectations, indicating a reluctance to spend on 
the part of consumers. 

Of course, I can spout off all I want about why the market 
shouldn't be going up, and it won't make a bit of difference if 
it keeps going.  Therefore, we need to trade what we see.  Right 
now, we see strength and a rising Dow. If the average can get 
through the aforementioned Fib level of 8359, there is not much 
technical resistance until around 8600.  However, I will also be 
keeping an eye on the Semiconductor Index (SOX.X).  The SOX 
foreshadowed the failed rally in August by failing its 50-dma 
while the other major averages soared through their own.  The SOX 
is currently trading 268, with the 50-dma at 279.  Keep an eye on 
this number and remember to trade what you see.  However, if the 
rally begins to fail, remember that it didn't have much substance 
behind it to begin with and don't be too anxious to pick a 
bottom. 


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

Market Averages

DJIA ($INDU)

52-week High: 10679
52-week Low :  7286
Current     :  8322

Moving Averages:
(Simple)

 10-dma: 7834
 50-dma: 8263
200-dma: 9370



S&P 500 ($SPX)

52-week High: 1176
52-week Low :  775
Current     :  884

Moving Averages:
(Simple)

 10-dma:  834
 50-dma:  877
200-dma: 1015



Nasdaq-100 ($NDX)

52-week High: 1734
52-week Low :  795
Current     :  956

Moving Averages:
(Simple)

 10-dma:  882
 50-dma:  915
200-dma: 1196



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


The Semiconductor Index (SOX.X): With the broader markets in rally 
mode, it is time to start looking to the SOX for indication of 
possible failure.  In August, the rally failure was signaled when 
the VIX failed its 50-dma (now around 280), while the other major 
averages were breaking through theirs. The Dow, SPX and Nasdaq all 
broke their 50-dmas this week.  Regardless off what old-time bulls 
may say, our economy is technology driven and the techs will have 
an important impact on the overall market.  If the SOX stalls out 
again below the 50-dma, be on the watch for another broad market 
drop.

52-week High: 657
52-week Low : 263
Current     : 268

Moving Averages:
(Simple)

 10-dma: 241
 50-dma: 279
200-dma: 441

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


Market Volatility

The VIX hovered around 40 all day before the weekend premium 
sellers finally came in this afternoon selling.  Part of the 
phenomenon of expiration Friday is the roll.  The CBOE begins 
deriving the VIX from November and December options a week before 
October expires, in an effort to avoid using cheap, expiring 
options with misleading volatility numbers in the calculation.  On 
Friday, many firms that have sold OTM September options for higher 
premium levels, come back and buy them in for pennies on 
expiration Friday.  At the same time, they "roll out" to November 
and sell premium in that month, lowering volatility.  Therefore, 
unless the market experiences a big move on expiration, volatility 
drops are common. 


CBOE Market Volatility Index (VIX) = 39.82 –0.34
Nasdaq-100 Volatility Index  (VXN) = 55.33 –0.89

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

          Put/Call Ratio  Call Volume   Put Volume

Total          0.68        909,573       617,816
Equity Only    0.58        756,930       437,085
OEX            1.00         57,735        57,510
QQQ            1.41         73,305       103,066

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

Bullish Percent Data

           Current   Change   Status
NYSE          32      + 1     Bull Correction
NASDAQ-100    42      + 1     Bull Alert
Dow Indust.   43      + 0     Bull Confirmed
S&P 500       38      + 1     Bull Alert
S&P 100       42      + 1     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   0.95
10-Day Arms Index  1.02
21-Day Arms Index  1.27
55-Day Arms Index  1.33

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 they do, they can signal significant market turning 
points.

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

Market Internals

        Advancers     Decliners
NYSE       1348          1352
NASDAQ     1670          1518

        New Highs      New Lows
NYSE         28              66
NASDAQ       36              68

        Volume (in millions)
NYSE     1,655
NASDAQ   1,650


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

Commitments Of Traders Report: 10/15/02

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

Not much change for the commercials, who added 2,000 long 
contracts and 4,000 shorts, for a net increase of 1600 short 
contracts, but not much % change. Small traders increased both 
positions for a net overall increase of only 300 long contracts.


Commercials   Long      Short      Net     % Of OI 
09/24/02      425,276   442,661   (17,385)   (2.0%)
10/01/02      423,661   440,133   (16,472)   (1.9%)
10/08/02      427,070   445,135   (18,065)   (2.1%)
10/15/02      429,448   449,138   (19,690)   (2.2%)

Most bearish reading of the year: (111,956) -   3/6/02
Most bullish reading of the year: ( 16,472) - 10/01/02

Small Traders Long      Short      Net     % of OI
09/24/02      124,232    73,506    50,726     25.7%
10/01/02      123,371    74,704    48,667     24.5%
10/08/02      131,486    81,010    50,476     23.7%
10/15/02      134,507    83,714    50,793     23.37%

Most bearish reading of the year:  36,513 - 5/01/01
Most bullish reading of the year: 114,510 - 3/26/02
 
NASDAQ-100

Commercials made little change to the long side, but reduced 
shorts by almost 4,000 contracts.  Small traders, on the other 
hand, left long positions virtually unchanged, while more than 
doubling their short contract positions; adding a total of almost 
7,000 short contracts.


Commercials   Long      Short      Net     % of OI 
09/24/02       46,637     54,613    (7,976) ( 7.9%)
10/01/02       46,000     52,976    (6,976) ( 7.0%)
10/08/02       45,384     55,504   (10,120) (10.0%)
10/15/02       45,578     51,969    (6,391) ( 6.6%)

Most bearish reading of the year: (15,521) -  3/13/02
Most bullish reading of the year:   9,068  - 06/11/02

Small Traders  Long     Short      Net     % of OI
09/24/02       11,163     9,421     1,742     8.5%
10/01/02       11,896     9,575     2,321    10.8%
10/08/02       10,735     5,721     5,014    30.4%
10/15/02       10,185    12,478     2,293    10.1%

Most bearish reading of the year: (10,769) - 06/11/02
Most bullish reading of the year:   8,460  -  3/13/02

DOW JONES INDUSTRIAL

Commercials increased long positions by 1,400 contracts, reducing 
shorts by 2,000.  Small traders reduced the long side by 1,800 
contracts, while slightly increasing shorts.  


Commercials   Long      Short      Net     % of OI
09/24/02       18,951    10,074    8,877      30.6%
10/01/02       18,969     8,903   10,066      36.1%
10/08/02       19,550    11,823    7,727      24.6%
10/15/02       20,914     9,630   11,284      36.9%

Most bearish reading of the year: (8,322) -  1/16/01
Most bullish reading of the year: 15,135  - 10/16/01

Small Traders  Long      Short     Net     % of OI
09/24/02        7,939     9,453    (1,514)   ( 8.7%)
10/01/02        6,809    10,503    (3,694)   (21.3%)
10/08/02        7,890     9,645    (1,755)   (10.0%)
10/15/02        6,040    10,329    (4.289)   (26.2%)

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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***************
ASK THE ANALYST
***************

Trade What You See
by Steven Price


Question:

May we have your opinion on CTAS as a PUT play?
Thanks

Answer:

Cintas is a classic example of a "trade what you see'" stock.  In 
a suffering economy, this is a stock that I'd really love to 
short, simply because common sense tells me to.  Cintas' primary 
business is company uniforms.  It designs and rents corporate 
identity uniforms to businesses ranging from small services to 
large manufacturers.  They also provide services such as cleaning 
supplies and first-aid kits for businesses, but their primary 
business is the uniforms.   The company supplies its product to a 
wide range of industries. As such, it would seem to suffer in a 
failing economy, as many small businesses close up shop, while 
large companies have do the same or trim staff.  The company 
released earnings on September 19, and the comments sounded 
ominous. It did meet expectations, but lowered revenue guidance 
for the full year, trimming between $100 million and $200 million 
from previous estimates.  The CFO said, "Our lowered guidance 
reflects a more pessimistic view for the economy."  The CEO 
added, "Although our sales force continues to be very successful 
in adding new customers, we continue to experience lower sales 
volume with our existing customers as they shrink their work 
forces, eliminate shifts and departments and even close 
operations." However, CTAS also still expects next quarter's 
earnings to come in line with previous estimates.  The comments 
still seem awfully bearish, yet the stock gave a classic fake-out 
back on October 9.  As the Dow broke down, taking many stocks 
with it, only to rebound in dramatic fashion since then, CTAS 
gave what looked like a sure-fire quadruple bottom point and 
figure breakdown.  Because point and figure still terms this a 
triple bottom, that is how I will refer to it, but the fourth 
bottom simply looked that much worse.  The breakdown turned out 
to be a "bear trap," which is a one box triple bottom breakdown, 
followed by a quick reversal.  And what a reversal it has been. 

Point and Figure Chart of CTAS (source: Stockcharts.com)


 

Looking at the PnF, while the stock appears much overextended, 
the best shorting opportunity may have to wait for a rollover 
below resistance at $50.  The stock's recent strength has taken 
it through its 200-dma of $47.46 and continued on through the 
next round number at $48.  Still, the little bear on my shoulder 
screams "SELL!"  

Of course a look at the daily chart below would have told me the 
same thing at $46.  However, when we combine the PnF and daily 
charts, we see the resistance at $50 as much more significant.  
Even when we get to $50, we will have to decide whether to jump 
on a failure at that level.  With the 200-dma just below to give 
support, a pullback to that level is likely once the stock 
reaches toward $50, even if it is going to continue upward. I 
would most likely look for a rollover below $50 AND a break of 
the 200-dma to the downside, knowing there is plenty of room to 
fall if we get that breakdown.  For now, however, we must trade 
what we see.  What we see is CTAS still acting strong and 
continuing upward.  A little patience usually pays off, and this 
stock is a classic example. 

Daily Chart of CTAS


 

Thanks for all of your suggestions.  For those I didn't address 
in today's column, look for my comments on the Market Monitor.

Please send your questions and suggestions to: 
Contact Support


*************
COMING EVENTS
*************

=========================================
Market Watch for the week of October 21st
=========================================

------------------------
Major Earnings This Week
------------------------

Symbol  Company               Date           Comment      EPS Est

------------------------- MONDAY -------------------------------

MMM    3M Company            Mon, Oct 21  Before the Bell     1.38
ALTR   Altera Corporation    Mon, Oct 21  After the Bell      0.06
AME    AMETEK                Mon, Oct 21  After the Bell      0.64
ASH    Ashland               Mon, Oct 21  Before the Bell     0.72
BKNG   Banknorth Group       Mon, Oct 21  Before the Bell     0.52
BSG    BISYS Group           Mon, Oct 21  After the Bell      0.20
BG     Bunge Limited         Mon, Oct 21  Before the Bell     0.84
CP     Canadian Pac Rlwy     Mon, Oct 21  After the Bell      0.41
CRR    CARBO Ceramics        Mon, Oct 21  After the Bell      0.35
CECO   Career Education      Mon, Oct 21  After the Bell      0.28
CD     Cendant               Mon, Oct 21  After the Bell      0.28
CF     Charter One Financial Mon, Oct 21  After the Bell      0.61
CNF    CNF Inc.              Mon, Oct 21  Before the Bell     0.39
DNB    D&B Corp.             Mon, Oct 21  After the Bell      0.43
XRAY   DENTSPLY Intl         Mon, Oct 21  After the Bell      0.44
DOV    Dover Corporation     Mon, Oct 21  After the Bell      0.33
EPN    El Paso Enrgy Partnrs Mon, Oct 21  Before the Bell     0.27
EOG    EOG Resources         Mon, Oct 21  After the Bell      0.20
RE     Everest Reinsurance   Mon, Oct 21  After the Bell      1.50
ESA    Extended Stay America Mon, Oct 21  After the Bell      0.22
FHR    Fairmont Htl Resorts  Mon, Oct 21  -----N/A-----       0.45
FISV   Fiserv                Mon, Oct 21  After the Bell      0.34
FTI    Fmc Technologies, Inc Mon, Oct 21  Before the Bell     0.24
HAS    Hasbro                Mon, Oct 21  Before the Bell     0.37
HCA    HCA Inc.              Mon, Oct 21  Before the Bell     0.55
IDXX   Idexx Laboratories    Mon, Oct 21  Before the Bell     0.36
ICBC   Indpendence Comm Bank Mon, Oct 21  After the Bell      0.57
LXK    Lexmark Intl, Inc     Mon, Oct 21  Before the Bell     0.78
LPNT   LifePoint Hospitals   Mon, Oct 21  After the Bell      0.30
LNCR   Lincare Holdings      Mon, Oct 21  -----N/A-----       0.43
MCK    McKesson Corporation  Mon, Oct 21  After the Bell      0.42
NHY    Norsk Hydro           Mon, Oct 21  Before the Bell      N/A
NU     Northeast Utilities   Mon, Oct 21  Before the Bell     0.24
OXY    Occidental Petroleum  Mon, Oct 21  Before the Bell     0.76
RYN    Rayonier              Mon, Oct 21  After the Bell      0.41
RGC    Regal Entrtnmnt Grp   Mon, Oct 21  Before the Bell     0.24
RNR    RenaissanceRe Hldngs  Mon, Oct 21  After the Bell      1.07
TXN    Texas Instruments     Mon, Oct 21  After the Bell      0.10
TZA    TV Azteca S.A. C.V.   Mon, Oct 21  -----N/A-----       0.14
UBSI   United Bankshares     Mon, Oct 21  Before the Bell     0.52
X      US Steel Corp.        Mon, Oct 21  Before the Bell     0.64
VRTS   Veritas Software      Mon, Oct 21  After the Bell      0.13
ZMH    Zimmer Inc.           Mon, Oct 21  After the Bell      0.30

------------------------- TUESDAY ------------------------------

NDN    99 CENTS Only         Tue, Oct 22  Before the Bell     0.19
ABY    Abitibi-Consolidated  Tue, Oct 22  Before the Bell      N/A
ACXM   Acxiom                Tue, Oct 22  After the Bell      0.15
ACS    Affiliated Com Serv   Tue, Oct 22  -----N/A-----       0.50
AFL    AFLAC                 Tue, Oct 22  After the Bell      0.40
ALD    Allied Capital        Tue, Oct 22  Before the Bell     0.52
T      AT&T                  Tue, Oct 22  Before the Bell     0.05
AVB    Avalonbay Communities Tue, Oct 22  After the Bell      0.87
AVY    Avery Dennison        Tue, Oct 22  During the Market   0.72
BPC    Banco Com Portugues   Tue, Oct 22  After the Bell       N/A
BLS    BellSouth             Tue, Oct 22  Before the Bell     0.50
BBI    Blockbuster           Tue, Oct 22  Before the Bell     0.31
BWA    BorgWarner, Inc.      Tue, Oct 22  -----N/A-----       1.14
BSX    Boston Scientific     Tue, Oct 22  After the Bell      0.22
EAT    Brinker Intl          Tue, Oct 22  Before the Bell     0.45
BNI    Burlngtn No. Santa Fe Tue, Oct 22  Before the Bell     0.51
BOBJ   Business Objects S.A  Tue, Oct 22  After the Bell      0.10
CHRW   C.H. Robnsn Worldwide Tue, Oct 22  After the Bell      0.29
CAI    CACI International    Tue, Oct 22  Before the Bell     0.31
CNI    Canadian Natl Railway Tue, Oct 22  After the Bell      0.83
CAH    Cardinal Health       Tue, Oct 22  Before the Bell     0.66
CTX    Centex Corporation    Tue, Oct 22  Before the Bell     1.75
CEY    Certegy               Tue, Oct 22  Before the Bell     0.40
CKFR   CheckFree             Tue, Oct 22  After the Bell      0.12
CTXS   Citrix Systems        Tue, Oct 22  After the Bell      0.06
COH    Coach                 Tue, Oct 22  Before the Bell     0.21
BVN    Comp Minas Benavntra  Tue, Oct 22  -----N/A-----       0.46
CA     Computer Ass Intl     Tue, Oct 22  After the Bell      0.02
CBE    Cooper Industries     Tue, Oct 22  Before the Bell     0.72
ECL    Ecolab                Tue, Oct 22  Before the Bell     0.53
EW     Edwards Lifesciences  Tue, Oct 22  After the Bell      0.31
ELUX   Electrolux Ab         Tue, Oct 22  -----N/A-----       0.80
FII    Federated Investors B Tue, Oct 22  After the Bell      0.43
G      Gillette              Tue, Oct 22  Before the Bell     0.33
HET    Harrah`s Entertain    Tue, Oct 22  -----N/A-----       0.88
HHS    Harte-Hanks           Tue, Oct 22  After the Bell      0.26
HCP    Health Care Property  Tue, Oct 22  Before the Bell     0.87
HMA    Health Mgmt Ass, Inc. Tue, Oct 22  Before the Bell     0.24
HRH    Hilb, Rogal&Hamilton  Tue, Oct 22  Before the Bell     0.46
HNI    Hon Industries        Tue, Oct 22  Before the Bell     0.45
IMN    Imation               Tue, Oct 22  Before the Bell     0.45
IMO    Imperial Oil Limited  Tue, Oct 22  -----N/A-----        N/A
N      Inco                  Tue, Oct 22  -----N/A-----       0.21
IPCR   IPC Holdings          Tue, Oct 22  After the Bell      0.94
JEF    Jefferies Group       Tue, Oct 22  Before the Bell     0.41
KMB    Kimberly Clark        Tue, Oct 22  Before the Bell     0.89
KLAC   KLA-Tencor            Tue, Oct 22  After the Bell      0.23
LRY    Liberty Prop Trust    Tue, Oct 22  -----N/A-----       0.83
LOGI   Logitech Intl         Tue, Oct 22  During the Market   0.30
MCD    McDonalds Corporation Tue, Oct 22  -----N/A-----       0.38
MHP    McGraw-Hill           Tue, Oct 22  Before the Bell     1.40
MDU    MDU Resources         Tue, Oct 22  -----N/A-----       0.70
MWV    MeadWestvaco          Tue, Oct 22  Before the Bell     0.13
MDG    Meridian Gold         Tue, Oct 22  After the Bell      0.11
MGM    Metro-Goldwyn-Mayer   Tue, Oct 22  -----N/A-----      -0.05
MCO    Moody`s               Tue, Oct 22  After the Bell      0.40
NOI    National-Oilwell      Tue, Oct 22  Before the Bell     0.22
NEU    Neuberger Berman      Tue, Oct 22  Before the Bell     0.42
NBP    No. Border Partners   Tue, Oct 22  After the Bell      0.68
ORLY   O`Reilly Automotive   Tue, Oct 22  After the Bell      0.45
OEI    Ocean Energy          Tue, Oct 22  Before the Bell     0.29
OVER   Overture Serv, Inc.   Tue, Oct 22  After the Bell      0.21
OI     Owens Illinois        Tue, Oct 22  After the Bell      0.62
PCAR   Paccar                Tue, Oct 22  Before the Bell     0.76
PTV    Pactiv                Tue, Oct 22  After the Bell      0.35
PTEN   Patterson-UTI Enrg    Tue, Oct 22  Before the Bell     0.00
PHA    Pharmacia Corporation Tue, Oct 22  Before the Bell     0.44
PDG    Placer Dome           Tue, Oct 22  After the Bell      0.08
PL     Protective Life       Tue, Oct 22  After the Bell      0.63
PHM    Pulte Homes Inc.      Tue, Oct 22  Before the Bell     1.81
RJR    R.J. Reynolds Tobacco Tue, Oct 22  Before the Bell     1.54
RSH    Radio Shack Corp      Tue, Oct 22  Before the Bell     0.24
RJF    Raymond James         Tue, Oct 22  -----N/A-----       0.31
RYL    Ryland Group          Tue, Oct 22  Before the Bell     1.52
SRE    Sempra Energy         Tue, Oct 22  Before the Bell     0.62
SHW    Sherwin-Williams      Tue, Oct 22  Before the Bell     0.70
SIAL   Sigma-Aldrich         Tue, Oct 22  After the Bell      0.56
SLAB   Silicon Laboratories  Tue, Oct 22  After the Bell      0.11
SSCC   Smurfit-Stne Con Corp Tue, Oct 22  Before the Bell     0.13
SNA    Snap-On               Tue, Oct 22  Before the Bell     0.33
SPW    SPX                   Tue, Oct 22  Before the Bell     2.25
JOE    St. Joe Company       Tue, Oct 22  Before the Bell     0.14
STM    STMicroelect N.V.     Tue, Oct 22  After the Bell      0.14
SEO    Stora Enso            Tue, Oct 22  -----N/A-----       0.12
STK    Storage Technology    Tue, Oct 22  After the Bell      0.18
TSM    Taiwan Semi Manu Co   Tue, Oct 22  Before the Bell     0.06
TMO    Thermo Electron       Tue, Oct 22  After the Bell      0.23
TDW    Tidewater             Tue, Oct 22  Before the Bell     0.39
TMK    Torchmark             Tue, Oct 22  Before the Bell     0.88
TRI    Triad Hospitals       Tue, Oct 22  After the Bell      0.36
UPS    United Parcel Service Tue, Oct 22  Before the Bell     0.54
VMC    Vulcan Materials      Tue, Oct 22  After the Bell      0.75
WFSL   Wash Fed Savings Bank Tue, Oct 22  -----N/A-----       0.56
WAT    Waters Corporation    Tue, Oct 22  Before the Bell     0.30
WY     Weyerhaeuser          Tue, Oct 22  Before the Bell     0.14
WYE    Wyeth                 Tue, Oct 22  Before the Bell     0.52
XTO    XTO Energy            Tue, Oct 22  Before the Bell     0.36
YRK    York International    Tue, Oct 22  After the Bell      0.70


-----------------------  WEDNESDAY -----------------------------

ADO    Adecco SA             Wed, Oct 23  -----N/A-----        N/A
AMG    Affiliated Man Grp    Wed, Oct 23  -----N/A-----       1.05
AFFX   Affymetrix            Wed, Oct 23  After the Bell      0.02
ARG    Airgas                Wed, Oct 23  After the Bell      0.24
ALB    Albemarle             Wed, Oct 23  Before the Bell     0.42
AXL    Am Axle & Manu Hldng  Wed, Oct 23  -----N/A-----       0.69
AMGN   Amgen                 Wed, Oct 23  After the Bell      0.32
BUD    Anheuser-Busch        Wed, Oct 23  -----N/A-----       0.71
AOL    AOL Time Warner       Wed, Oct 23  After the Bell      0.18
ADM    Archer Daniels Mdld   Wed, Oct 23  -----N/A-----       0.12
AJG    Arthur J. Gallagher   Wed, Oct 23  After the Bell      0.46
AWE    AT&T Wrls Services    Wed, Oct 23  -----N/A-----       0.00
AVX    AVX Corporation       Wed, Oct 23  Before the Bell     0.01
BOH    Bank of Hawaii Corp   Wed, Oct 23  Before the Bell     0.43
BCE    BCE                   Wed, Oct 23  Before the Bell     0.28
BLC    Belo                  Wed, Oct 23  Before the Bell     0.20
BMS    Bemis                 Wed, Oct 23  Before the Bell     0.80
BDK    Black & Decker        Wed, Oct 23  Before the Bell     0.84
BXP    Boston Properties     Wed, Oct 23  -----N/A-----       0.97
CHIR   Chiron                Wed, Oct 23  After the Bell      0.40
CYH    Community Health Sys  Wed, Oct 23  After the Bell      0.23
CVG    Convergys Corporation Wed, Oct 23  -----N/A-----       0.33
CVD    Covance               Wed, Oct 23  After the Bell      0.22
CFR    Cullen/Frost Bankers  Wed, Oct 23  Before the Bell     0.57
CYTC   CYTYC                 Wed, Oct 23  -----N/A-----       0.10
DCX    DaimlerChrysler       Wed, Oct 23  -----N/A-----       0.71
DASTY  Dassault Systemes SA  Wed, Oct 23  -----N/A-----       0.20
DBD    Diebold               Wed, Oct 23  Before the Bell     0.60
DRYR   Dryr`s Grand Ice Crm  Wed, Oct 23  Before the Bell     0.59
DST    DST Systems           Wed, Oct 23  After the Bell      0.44
DD     DuPont                Wed, Oct 23  Before the Bell     0.35
LLY    Eli Lilly             Wed, Oct 23  Before the Bell     0.68
EXPE   Expedia               Wed, Oct 23  After the Bell      0.40
ESRX   Express Scripts A     Wed, Oct 23  After the Bell      0.67
FNF    Fidelity Natl Fncl    Wed, Oct 23  Before the Bell     1.24
FR     First Indl Realty     Wed, Oct 23  After the Bell      0.95
FMBI   First Midwest Bancorp Wed, Oct 23  Before the Bell     0.47
FRE    Freddie Mac           Wed, Oct 23  -----N/A-----       1.26
FBN    Furniture Brands Intl Wed, Oct 23  After the Bell      0.44
GETY   Getty Images          Wed, Oct 23  After the Bell      0.08
GSK    GlaxoSmithKline       Wed, Oct 23  Before the Bell     0.51
GG     Goldcorp              Wed, Oct 23  After the Bell      0.09
GLK    Great Lakes Chemical  Wed, Oct 23  After the Bell      0.25
TV     Grupo Televisa, S.A.  Wed, Oct 23  -----N/A-----       0.37
HLT    Hilton Hotels Corp    Wed, Oct 23  Before the Bell     0.10
HLYW   Hollywood Entertain   Wed, Oct 23  Before the Bell     0.26
ROOM   Hotels.com            Wed, Oct 23  Before the Bell     0.42
IP     International Paper   Wed, Oct 23  Before the Bell     0.31
ISIL   Intersil              Wed, Oct 23  After the Bell      0.18
ITT    ITT Industries        Wed, Oct 23  Before the Bell     0.90
JCI    Johnson Controls      Wed, Oct 23  Before the Bell     2.02
KMT    Kennametal            Wed, Oct 23  -----N/A-----       0.30
LM     Legg Mason            Wed, Oct 23  Before the Bell     0.68
LSI    LSI Logic             Wed, Oct 23  After the Bell     -0.02
LZ     Lubrizol              Wed, Oct 23  Before the Bell     0.55
LU     Lucent Technologies   Wed, Oct 23  Before the Bell    -0.65
MGG    MGM MIRAGE            Wed, Oct 23  Before the Bell     0.47
MCHP   Microchip Technology  Wed, Oct 23  After the Bell      0.17
MCL    Moore Corporation     Wed, Oct 23  After the Bell      0.12
NBR    Nabors Industries     Wed, Oct 23  -----N/A-----       0.11
NSANY  Nissan Motor Co. Ltd. Wed, Oct 23  -----N/A-----        N/A
NRD    NORANDA INC           Wed, Oct 23  After the Bell       N/A
NSC    Norfolk Southern      Wed, Oct 23  Before the Bell     0.32
NCX    Nova Chemical         Wed, Oct 23  Before the Bell     0.00
NUS    Nu Skin               Wed, Oct 23  Before the Bell     0.19
PAS    PepsiAmericas         Wed, Oct 23  Before the Bell     0.33
PMI    PMI Group             Wed, Oct 23  Before the Bell     0.97
POT    Potash Corp Ssktchwn  Wed, Oct 23  -----N/A-----       0.27
PX     Praxair Incorporated  Wed, Oct 23  Before the Bell     0.85
RDN    Radian Group          Wed, Oct 23  After the Bell      1.11
RTN    Raytheon Co.          Wed, Oct 23  After the Bell      0.57
RBK    Reebok International  Wed, Oct 23  Before the Bell     0.78
RCL    Royal Caribbean       Wed, Oct 23  -----N/A-----       0.99
DNY    RR Donnelley          Wed, Oct 23  -----N/A-----       0.53
R      Ryder System          Wed, Oct 23  Before the Bell     0.51
SNY    Sanofi Synthelabo     Wed, Oct 23  -----N/A-----        N/A
SNY    Sanofi Synthelabo     Wed, Oct 23  -----N/A-----        N/A
SEE    Sealed Air            Wed, Oct 23  -----N/A-----       0.63
SRA    Serono S.A.           Wed, Oct 23  Before the Bell     0.13
SPC    St. Paul Companies    Wed, Oct 23  Before the Bell     0.81
SU     Suncor Energy         Wed, Oct 23  -----N/A-----       0.28
TLTOB  Tele2 AB              Wed, Oct 23  -----N/A-----        N/A
EXBD   The Corp Exec Brd Co  Wed, Oct 23  After the Bell      0.20
FAF    The First Am Corp     Wed, Oct 23  Before the Bell     0.57
VARI   Varian, Inc.          Wed, Oct 23  After the Bell      0.38
WLP    WellPoint Health Net  Wed, Oct 23  After the Bell      1.13
WWY    Wm. Wrigley Jr.       Wed, Oct 23  -----N/A-----       0.46
XRX    Xerox                 Wed, Oct 23  Before the Bell     0.02


------------------------- THURSDAY -----------------------------

TW     21st Century Ins      Thu, Oct 24  Before the Bell     0.10
ABB    ABB Ltd.              Thu, Oct 24  Before the Bell      N/A
RKY    Adolph Coors          Thu, Oct 24  Before the Bell     1.26
AG     AGCO                  Thu, Oct 24  Before the Bell     0.18
APD    Air Products Chem     Thu, Oct 24  Before the Bell     0.64
ACV    Alberto-Culver        Thu, Oct 24  During the Market   0.66
ACL    Alcon Inc.            Thu, Oct 24  -----N/A-----       0.34
AGN    Allergan              Thu, Oct 24  -----N/A-----       0.45
AMZN   Amazon.com            Thu, Oct 24  After the Bell     -0.04
AHC    Amerada Hess          Thu, Oct 24  -----N/A-----       1.22
AIG    American Intl Grp     Thu, Oct 24  -----N/A-----       0.88
AVZ    AMVESCAP PLC          Thu, Oct 24  Before the Bell     0.20
APA    Apache                Thu, Oct 24  Before the Bell     1.00
ABI    Applied Biosystems    Thu, Oct 24  Before the Bell     0.15
ARW    Arrow Electronics     Thu, Oct 24  -----N/A-----       0.00
AZN    AstraZeneca PLC       Thu, Oct 24  -----N/A-----       0.36
ANZ    Aus New Zea Bank Grp  Thu, Oct 24  -----N/A-----        N/A
AN     AutoNation            Thu, Oct 24  Before the Bell     0.30
BHI    Baker Hughes          Thu, Oct 24  Before the Bell     0.21
BLL    Ball                  Thu, Oct 24  Before the Bell     0.88
ABX    Barrick Gold          Thu, Oct 24  -----N/A-----       0.06
BMC    BMC Software          Thu, Oct 24  After the Bell      0.04
BYD    Boyd Gaming           Thu, Oct 24  After the Bell      0.25
CBT    Cabot                 Thu, Oct 24  After the Bell      0.34
CMX    Caremark Rx           Thu, Oct 24  Before the Bell     0.28
CELG   Celgene               Thu, Oct 24  Before the Bell    -0.01
CTL    CenturyTel, Inc.      Thu, Oct 24  Before the Bell     0.50
CINF   Cincinnati Financial  Thu, Oct 24  -----N/A-----       0.41
CIN    Cinergy               Thu, Oct 24  -----N/A-----       0.78
COLM   Columbia Sportswear   Thu, Oct 24  After the Bell      1.34
CFB    Commercial Federal    Thu, Oct 24  Before the Bell     0.55
CCR    Countrywide Crdt Ind  Thu, Oct 24  Before the Bell     1.64
CSX    CSX                   Thu, Oct 24  Before the Bell     0.55
DP     Diagnostic Products   Thu, Oct 24  Before the Bell     0.38
DLTR   Dollar Tree Stores    Thu, Oct 24  After the Bell      0.16
DOW    Dow Chemical          Thu, Oct 24  Before the Bell     0.16
DUK    Duke Energy           Thu, Oct 24  -----N/A-----       0.57
EMN    Eastman Chemical      Thu, Oct 24  After the Bell      0.35
EK     Eastman Kodak         Thu, Oct 24  Before the Bell     0.86
ELX    Emulex                Thu, Oct 24  -----N/A-----       0.16
EEP    Enbridge Enrg Prtnrs  Thu, Oct 24  After the Bell      0.44
EC     Engelhard             Thu, Oct 24  Before the Bell     0.47
FLEX   Flextronics           Thu, Oct 24  After the Bell      0.08
BEN    Franklin Resources    Thu, Oct 24  After the Bell      0.44
HSC    Harsco Corporation    Thu, Oct 24  -----N/A-----       0.68
HCR    HCR Manor Care        Thu, Oct 24  Before the Bell     0.36
HNT    Health Net, Inc.      Thu, Oct 24  After the Bell      0.54
HR     Healthcare Rlty Trust Thu, Oct 24  After the Bell      0.68
IDT    IDT Corporation       Thu, Oct 24  -----N/A-----        N/A
IKN    Ikon Office Solutions Thu, Oct 24  Before the Bell     0.21
IGL    IMC Global            Thu, Oct 24  Before the Bell     0.05
IDCO   Interactive Data Corp Thu, Oct 24  Before the Bell     0.16
ITMN   InterMune, Inc.       Thu, Oct 24  After the Bell     -0.93
IVGN   Invitrogen            Thu, Oct 24  After the Bell      0.46
SFI    iStar Financial Inc.  Thu, Oct 24  Before the Bell      N/A
JDSU   JDS Uniphase          Thu, Oct 24  After the Bell     -0.07
KSE    KeySpan Corporation   Thu, Oct 24  Before the Bell     0.05
KB     Kookmin Bank          Thu, Oct 24  -----N/A-----        N/A
LR     Lafarge               Thu, Oct 24  -----N/A-----        N/A
MFC    Manulife Financial    Thu, Oct 24  -----N/A-----       0.44
MRO    Marathon Oil Corp.    Thu, Oct 24  Before the Bell     0.52
MEDI   MedImmune             Thu, Oct 24  Before the Bell    -0.14
NFG    National Fuel Gas     Thu, Oct 24  After the Bell      0.06
NCR    NCR                   Thu, Oct 24  Before the Bell     0.34
NXTL   Nextel Communications Thu, Oct 24  Before the Bell     0.04
NE     Noble Corporation     Thu, Oct 24  -----N/A-----       0.37
NST    NSTAR                 Thu, Oct 24  -----N/A-----       1.38
ONB    Old National Bancorp  Thu, Oct 24  Before the Bell     0.45
ORI    Old Republic Intl     Thu, Oct 24  -----N/A-----       0.77
POC    P & O Prncess Cruises Thu, Oct 24  -----N/A-----       0.91
PPE    Park Place Entertain  Thu, Oct 24  -----N/A-----       0.15
PY     Pechiney              Thu, Oct 24  -----N/A-----       0.32
POM    Pepco Holdings, Inc.  Thu, Oct 24  -----N/A-----       0.89
PXD    Pioneer Natural Res   Thu, Oct 24  Before the Bell     0.13
PDE    Pride Intl Inc.       Thu, Oct 24  After the Bell      0.00
RGA    Reinsurance Grp of Am Thu, Oct 24  After the Bell      0.69
RESP   Respironics, Inc.     Thu, Oct 24  Before the Bell     0.32
SLE    Sara Lee              Thu, Oct 24  -----N/A-----       0.34
SBC    SBC Communications    Thu, Oct 24  Before the Bell     0.54
SGP    Schering-Plough       Thu, Oct 24  Before the Bell     0.28
SCIO   Scios                 Thu, Oct 24  Before the Bell    -0.54
SCRI   SICOR                 Thu, Oct 24  -----N/A-----       0.20
SFG    StanCorp Fincl Grp    Thu, Oct 24  Before the Bell     1.01
HOT    Starwood Htls & Rsrts Thu, Oct 24  Before the Bell     0.26
STE    Steris                Thu, Oct 24  Before the Bell     0.24
SDS    SunGard Data Systems  Thu, Oct 24  After the Bell      0.28
SUN    Sunoco                Thu, Oct 24  Before the Bell     0.40
TECH   Techne                Thu, Oct 24  Before the Bell     0.25
MNI    The McClatchy Company Thu, Oct 24  Before the Bell     0.69
TRH    Transatlantic Hldngs  Thu, Oct 24  Before the Bell     1.15
TYC    Tyco International    Thu, Oct 24  Before the Bell     0.32
UNP    Union Pacific         Thu, Oct 24  Before the Bell     1.42
UCL    Unocal                Thu, Oct 24  Before the Bell     0.54
UPM    UPM-Kymmene Group     Thu, Oct 24  Before the Bell     0.50
USAI   USA Interactive       Thu, Oct 24  Before the Bell     0.09
VCI    Valassis              Thu, Oct 24  Before the Bell     0.60
VAR    Varian Medical        Thu, Oct 24  After the Bell      0.45
VVC    Vectren               Thu, Oct 24  After the Bell      0.24
VRSN   VeriSign              Thu, Oct 24  After the Bell      0.14
VVI    Viad                  Thu, Oct 24  Before the Bell     0.35
WDR    Waddell&Reed Finl     Thu, Oct 24  Before the Bell     0.27
WFT    Weatherford           Thu, Oct 24  After the Bell      0.29
WEN    Wendy`s International Thu, Oct 24  -----N/A-----       0.52


------------------------- FRIDAY -------------------------------

LNT    Alliant Energy        Fri, Oct 25  Before the Bell     0.68
AT     Alltel Corporation    Fri, Oct 25  Before the Bell     0.80
AEP    American Elec Power   Fri, Oct 25  -----N/A-----       1.06
BEC    Beckman Coulter       Fri, Oct 25  Before the Bell     0.52
BC     Brunswick             Fri, Oct 25  Before the Bell     0.27
KOF    Coca-Cola FEMSA,      Fri, Oct 25  Before the Bell     0.48
CTC    Comp Telecom de Chile Fri, Oct 25  -----N/A-----       0.02
DCN    Dana                  Fri, Oct 25  -----N/A-----       0.26
RDY    Dr. Reddy`s Lab       Fri, Oct 25  -----N/A-----        N/A
EAS    Energy East           Fri, Oct 25  After the Bell      0.16
ERIE   Erie Indemnity        Fri, Oct 25  -----N/A-----       0.73
FMX    FEMSA                 Fri, Oct 25  Before the Bell     0.81
LMT    Lockheed Martin       Fri, Oct 25  Before the Bell     0.65
PGL    Peoples Energy        Fri, Oct 25  Before the Bell     0.02
RDA    Reader`s Digest Ass   Fri, Oct 25  Before the Bell     0.02
ROH    Rohm and Haas         Fri, Oct 25  Before the Bell     0.41
SCG    SCANA                 Fri, Oct 25  Before the Bell     0.70
SNRA   Sonera Group plc      Fri, Oct 25  Before the Bell      N/A
SYT    Syngenta AG           Fri, Oct 25  -----N/A-----        N/A
SYY    Sysco                 Fri, Oct 25  Before the Bell     0.28
TROW   T. Rowe Price         Fri, Oct 25  Before the Bell     0.37
VRC    Varco                 Fri, Oct 25  Before the Bell     0.22
VZ     Verizon Comm          Fri, Oct 25  Before the Bell     0.77
WEC    Wisconsin Energy      Fri, Oct 25  Before the Bell     0.50


----------------------------------------------
Upcoming Stock Splits In The Next Two Weeks...
----------------------------------------------

Symbol  Company Name              Ratio    Payable     Executable

SPW     SPW Corp.                 2:1      10/24       10/25
CPBI    CPB Inc.                  2:1      10/25       10/28
EASI    Engineered Support Sys.   3:2      10/31       11/02


--------------------------
Economic Reports This Week
--------------------------

The new home sales numbers and sentiment report on Friday are the
big economic reports this week but third quarter earnings will 
remain the headlining attraction on Wall Street.

==============================================================
                       -For-           

Monday, 10/21/02
----------------
Leading Indicators (DM) Sep  Forecast:  -0.2%  Previous:    -0.2%
Treasury Budget (DM)    Sep  Forecast: $43.0B  Previous:   $35.4B

Tuesday, 10/22/02
-----------------
None


Wednesday, 10/23/02
-------------------
Fed’s Beige Book (DM)


Thursday, 10/24/02
------------------
Initial Claims (BB)   10/19  Forecast:   405K  Previous:     411K


Friday, 10/25/02
----------------
Durable Orders (BB)     Sep  Forecast:  -2.0%  Previous:    -0.4%
Mich Sentiment-Rev (DM) Oct  Forecast:   81.0  Previous:     80.4
New Home Sales (DM)     Sep  Forecast:   985K  Previous:     996K
Existing Home Sales (DM)Sep  Forecast:  5.35M  Previous:    5.28M


Definitions:
DM=  During the Market
BB=  Before the Bell
AB=  After the Bell
NA=  Not Available


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SWING TRADE GAME PLAN
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Another Day in Denial

Expiration Friday was filled with promise. Several times the 
indexes rallied right to resistance at 8300/1285/450 only to roll 
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The Option Investor Newsletter                   Sunday 10-20-2002
Sunday                                                      2 of 5


In Section Two:

Stock Pick: Important Conclusions
Daily Results
Call Play of the Day: ERTS
Put Play of the Day: GM
Dropped Calls: ITMN, NPSP
Dropped Puts: None

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orders based on the price of the option or stock offers 
online spread order entry for net debit or credit offers fast 
option executions

PreferredTrade offers these online option trading features and 
more; call 1-888-889-9178 or click for more information.

http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN
**************************************************************


**********
Stock Pick
**********

PLCM - Polycom, Inc. - $9.65 
Strategy: Long stock with put insurance 

One week into the heart of the Q3 earnings season, there are a
couple of important conclusions that can be drawn.  For the most
part, earnings are not as bad as many market participants had
feared, and investor relief is leading the broad markets higher.
The second important realization is that the environment for
corporate spending is still abysmal, and continues to be almost
nonexistent visibility for when it will improve.

If we listen to the language of the market, the net result is
that companies that continue to deliver solid earnings and cater
to a portion of the economy that is likely to grow both near-term
and longer-term, will be rewarded with investor loyalty and
consequently, a higher share price.

PLCM is a worldwide leader in the convergence of interactive
voice, video, data and web communications.  With corporations
trying to streamline expenses until the next growth phase arrives,
one way to cut those costs is to use the technology PLCM
specializes in, to allow employees to collaborate and meet
online, rather than physically traveling.  Judging by the
company's earnings report last Wednesday, corporations are
starting to wise up to the benefits of this form of interaction.

The company reported pro-forma earnings of 9-cents per share, a
penny ahead of consensus estimates on revenues of $106 million.
Looking at the company's earnings history, it is encouraging to
see a solid trend of year-over-year revenue growth.  While not
yet truly cash-flow positive, PLCM is getting closer every
quarter, and the business trends described above should continue
to work in the company's favor.

Breaking down with the rest of the Technology market, PLCM broke
below the $10 level back in July, and after apparently finding
support near there, broke down again last month to trace a new
multi-year low just below $6.50.  Investors then came off the
sidelines with some enthusiasm, recognizing the stock's inherent
value.  Since then PLCM has risen to test the $10 level as
resistance on a couple of occasions.  While we obviously expect
that level to be broken by the bulls, we're looking for a dip
back to support first, so that the buyers can get a running
start.

The ideal entry will consist of a pullback to the $8.00-8.50
area, which now looks like decent support.  Obviously, the first
hurdle will be for PLCM to clear the $10 level to the upside,
before meeting solid resistance at $12.25.  This was support
until last Summer, and will likely take some serious buying
interest to clear.  Perhaps in anticipation of a strong Q4
earnings report?  As shown on the chart below, the longer-term
objectives for the play are $19 and then $22.50.

So the play is to go long PLCM stock in the $8.00-8.50 range
and go long one contract of the Jan-2003 $7.500 puts QHD-MU at
$0.65 for each 100 shares you are long.  There is no requirement
to go long the put but it does prevent all but a very minimal
loss should something unexpected happen to PLCM. 

Option 1: If PLCM is not above $10.00 by Jan 2nd, close both
positions and exit the play.

Option 2: If PLCM is below $7.50 on Jan 2nd then you have the
option of closing the put for a slight profit and lowering your
basis in the long stock play by the amount of the put premium
received or closing both positions and exiting the play. 

Option 3: If PLCM is above $12.50 by Jan 2nd then close the put
position for any remaining premium and set a stop loss on the
stock at your entry point of $8.00-8.50 plus any short fall on
the put premium.

Polycom (PLCM) Weekly Chart


 


***********************************************************
DAILY RESULTS
***********************************************************

For Best Alignment view in Courier Ten Font
*******************************************

CALLS              Mon    Tue    Wed   Thu   Week

ERTS     70.14    1.26   0.57   0.65  0.19   3.64  New, new highs
FNM      71.89    1.36   1.73  -0.60 –1.29   6.99  New, bonds 
ITMN     36.00    1.88   1.29  -0.52  0.89   3.67  Drop, profits
NPSP     25.21    0.40   2.02  -0.23  0.67   1.01  Drop, offer
PNRA     30.95    1.37  -1.20  -0.21  0.73   3.32  New, above $30  
UNH      99.73    1.38   1.73   1.48 –2.12   6.40  New, strong


PUTS               

EBAY     59.96    2.00   0.45  -0.08  0.15   4.46  $60 failure
GIS      41.69    1.33  -0.02  -0.17 –0.25   0.19  slow but sure
GM       34.31   -1.57   0.79  -1.91 –0.14  -0.52  New, rolling
KSS      55.15    0.99  -0.81  -1.34 –2.16   2.65  weak rebound
OMC      59.25    1.54  -0.46  -0.54 –2.94   3.18  under $60


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

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**************************************************************


********************
THE PLAYS OF THE DAY
********************

Call Play of the Day:
*********************

ERTS - Electronic Arts - $70.14 +0.82 (+2.55 for the week)

See details in play list




Put Play of the Day:
********************

GM – General Motors $34.31 (-0.51 last week)

See details in play list





**************************
PICKS WE DROPPED THIS WEEK
**************************

Remember that historically, when we drop a pick it will go up
10 to 15% the very next week. It is part of Murphy's Law.
Just because we drop a stock as a pick does not mean we are
advocating a "sell" on any position you have. We are simply
dropping our recommendation as a new play. Existing plays
can and do continue on and are usually profitable.


CALLS
^^^^^

ITMN $36.00 (-0.10) our patience eventually paid off with ITMN, 
which was entered at $33.99.  The stock has traded as high as 
$37.44 and traded over $37 on 3 of the last 4 days.  
Unfortunately it seems to have found a temporary top at that 
level and we would rather not watch our option premiums decay 
while it struggles there.  We will take our profits and close the 
play.  If it is able to break the $37.50 mark, there may be some 
additional upside, but we will re-examine it at that time.

---

NPSP $25.21 (+1.01) So much for that relative strength! 
Following its recent breakout over the $25 level, NPSP pulled a
fast one this morning when the company announced a 4 million
share stock offering.  That knocked the stock back from the $27
level to below $25.50, where it spent the entire session in a
fairly tight range.  While the stock could rebound next week,
the additional shares that are going to come to market are likely
to keep the price depressed.  Rather than wait and hope, we'll
lick our wounds and move on to the next winning play.  If still
in the play, keep your stop in place at $24 and look to exit on
any rally attempt up into the $26-27 area.


PUTS
^^^^

None


***********
DEFINITIONS
***********

SL  = Suggested stop loss. Sell if bid breaks this price.
OI  = Open Interest - the number of open contracts outstanding.
ITM = In the money
ATM = At the money
OTM = Out of the money
ADV = Average Daily Volume

The options with a "*" by the strike price are our choices from the
group. If the stock moves as expected we feel they have the best
chance to substantially increase or double in price with the best
risk/reward ratio compared to the other options for the same stock.
You must determine if they fit your risk profile for time and price.

Analysts ratings: 1-2-3-4-5
Analysts who follow each stock rate it and these rating are
accumulated and displayed as follows;

Position 1 = number of analysts recommending "strong buy"
Position 2 = number of analysts recommending "moderate buy"
Position 3 = number of analysts recommending "hold" or "neutral"
Position 4 = number of analysts recommending "moderate sell"
Position 5 = number of analysts recommending "strong sell"

Example rating 5-3-1-0-0 would be 5 "strong buys", 3 "moderate buys",
1 "hold" recommendation.

RISKS of SELLING PUTS:
The risk of selling naked puts is always the possibility
of a catastrophic event that drops the stock below the
strike price and could result in the stock being PUT to you.
Always protect yourself with a "buy to cover" limit order
to take you out before this can happen.


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**************************************************************


**********
DISCLAIMER
**********

Please read our disclaimer at:
http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html


**************************************************************
ADVERTISING INFORMATION

For more information on advertising in OptionInvestor Newsletter,
or any Premier Investor Network newsletter please contact:

Contact Support
The Option Investor Newsletter                   Sunday 10-20-2002
Sunday                                                      3 of 5

In Section Three:

New Calls: ERTS, UNH, PNRA, FNM
Current Calls: None
New Puts: GM


************************Advertisement*************************
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offers true direct access to each option exchange offers stop and 
stop loss online option orders offers contingent option 
orders based on the price of the option or stock offers 
online spread order entry for net debit or credit offers fast 
option executions

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more; call 1-888-889-9178 or click for more information.

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**************************************************************

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

ERTS - Electronic Arts - $70.14 +0.82 (+2.55 for the week)

Company Summary:
Electronic Arts, headquartered in Redwood City, California, is 
the world's leading interactive entertainment software company. 
Founded in 1982, Electronic Arts posted revenues of more than 
$1.7 billion for fiscal 2002. The company develops, publishes and 
distributes software worldwide for the Internet, personal 
computers and video game systems. EA markets its products under 
four brand names: EA SPORTS(TM), EA GAMES(TM), EA SPORTS BIG(TM) 
and EA.COM(SM). (source: company release)

Why We Like It:
ERTS continues to perform like a champ and we haven't even hit 
the holiday shopping season.  The stock hit another all-time high 
in today's trading session and also cracked the $70 resistance 
level.  This is the third higher high since the July low. The 
trade of $70 also created a fresh buy signal on the point and 
figure charts and the bullish vertical count is now $89. The 
stock gapped up on Thursday, came back on Friday, filled the gap 
and then took off.  The stock struggled with $70 throughout much 
of the afternoon, until the buyers finally overwhelmed sellers at 
that level and the hold over $70 at the close looks bullish.

ERTS continues to dominate the video game market, and its share 
is still growing.   The company forecasted revenue of over $1 
billion for the fiscal third quarter, ending in December.  This 
is the first time a purely games company has taken in that much 
in a quarter and is more than the full-year forecast of any of 
its competitors. With leading games, such as Madden 2003, Harry 
Potter and Lord of the Rings, the company expects continued 
growth through the holiday season and beyond.  One of the biggest 
factors contributing to the success of ERTS is that their primary 
audience now includes consumers over the age of 21.  While the 
company is still a leader in the younger age groups, the fact 
that their target consumer now includes those "gamers" with jobs 
and money will prevent them from relying solely on kids who have 
to wait for the holidays for their parents to spend $50 on a new 
game. 

The stock has tacked on almost $8 in a week, so a pullback is 
likely at some point and we will use $66, which is just below 
recent closing levels, as a gauge for the current trend's 
continuation.  New entries can look for a pullback above $66 for 
an ideal entry level. However, the strength of the recent move is 
impressive and if we don't get a pullback, then we will look for 
intraday support at $70 for new entries. Now that the stock has 
broken through $70, a show of new support at that level could 
catapult it quickly toward our initial target of $75.  

BUY CALL NOV-65*EZQ-KM OI= 1915 at $7.30 SL=3.60
BUY CALL NOV-70 EZQ-KN OI= 5704 at $3.90 SL=1.80
BUY CALL DEC-65 EZQ-LM OI= 1442 at $8.90 SL=4.50
BUY CALL DEC-70 EZQ-LN OI= 1535 at $5.80 SL=3.00

Average Daily Volume = 4.93 mil


---

UNH - United Healthcare - $99.73 +2.03 (+6.24 for the week)

Company Summary:
UnitedHealth Group is a diversified health and well-being company 
that provides a broad spectrum of resources and services to help 
people achieve improved health and well-being through all stages 
of life. UnitedHealth Group offers products and services through 
five primary operating companies: UnitedHealthcare, Ovations, 
Uniprise, Specialized Care Services and Ingenix. (source: company 
release)

Why We Like It: 
UNH, as well as other HMO stocks have been on a tear lately.  UNH 
released earnings on Thursday that rose 53% from a year ago.  The 
company reported its 16th consecutive quarter of double digit 
growth and also raised estimates for this year and next.  The 
company has diversified itself to keep ahead of rising medical 
costs by expanding into areas such as dental care and mental 
health coverage. The recent earnings came in at $1.12 cents per 
share, beating forecasts of $1.04. UNH has done a good job of 
estimating costs and raising premiums quickly enough to cover 
those costs. They have maintained a favorable medical cost ratio, 
a profitability measure which takes into account premium dollars 
spent on costs such as hospitals and doctors.  The results 
propelled the stock to just over $100 on Thursday, before the HMO 
sector experienced a pullback and landed the stock back to 
unchanged.  On Friday, however, UNH traded back over $100 again, 
finding a top for the second day in a row right around $100.50.  

UNH has put together a series of higher highs and higher lows 
since dropping to around $82 during the July market swoon.  It is 
currently working on the third higher high after the second 
higher low. The stock is far above its 50-dma and 200-dma, which 
are consistently rising. The stock's point and figure buy signal 
came down at $94 and the current column of "X"s does look a 
little extended.  However, the fact that even it's pullback 
stopped short of a three-box reversal indicates that we may not 
see a reversal above the breakout level.  There had been previous 
resistance at $97 on both the daily and PnF charts, which has now 
been broken.  Ideally, we would like a pullback to support, 
around that previous resistance level ($97), for a long entry.  
We favor the 95 call for that pullback. However, if the strength 
in UNH continues and does not give us that entry point, then a 
show of intraday support at $100 or above would be our trigger to 
enter long. In that case, the 100 strike would be preferred.  
Place stops at $95.

BUY CALL NOV-95 *UHB-KS OI= 2687 at $6.90 SL=3.50
BUY CALL NOV-100 UHB-KT OI= 2168 at $3.60 SL=1.80
BUY CALL DEC-95  UHB-LS OI= 1285 at $8.50 SL=4.25
BUY CALL DEC-100 UHB-LT OI=  993 at $5.40 SL=2.70

Average Daily Volume = 2.44 mil


---

PNRA - Panera Bread - $30.95 +0.95 (+3.19 for the week)

Company Summary:
Panera Bread Company owns and franchises bakery-cafes under the 
Panera Bread and Saint Louis Bread Co. names. The company is a 
leader in the emerging specialty bread/cafe category due to its 
unique bread combined with a quick, casual dining experience. 
(source: company release)

Why We Like It:
Panera looked as though it was ready for a breakdown in the 
middle of September, and we played it as such, only to be 
disappointed in the sudden upward reversal. We're going back to 
the well on this one, as it has been building a series of higher 
highs and higher lows, culminating with today's move through the 
200-dma of  $30. 46.  The stock traded as high as $31.15, before 
settling in for the day at $30.95.  A look at the point and 
figure chart shows the stock currently in the middle of a 
reversal off its lows at $24, where it bounced off the bullish 
support line twice.   There is some resistance at $35 and again 
at $36, but so far Panera has been a disappointment only to the 
shorts.   The stock topped out at $30.04 on Tuesday and Thursday, 
but then broke through that barrier and $31 on Friday, showing 
continuing strength at successively higher levels.  Both days 
closed on upswings near their highs of the day.  Most impressive, 
however, was the fact that the stock saw a struggle between 
buyers and sellers at $30 at the end of the day on Thursday and 
most of the day Friday before the breakthrough.  Once that round 
number resistance was gone, it was a quick trip up to $31, which 
was broken without much effort.  

While many retailers and restaurants have seen declining same 
stores sales growth, or decreases in many cases, over the last 
several months, Panera has continued to grow its business. Its 
August same store sales were up 4.4% and the company recently 
announced a deal to develop 30 more stores in southern 
California. We like entry for new longs on either a pullback and 
show of support at $30, or a break back above $31, with evidence 
of intraday support at that level. Place stops at $28, just below 
the 50-dma

BUY CALL NOV-27.50*UPA-KY OI= 236 at $4.30 SL=2.15
BUY CALL NOV-30    UPA-KF OI= 797 at $2.50 SL=1.25
BUY CALL FEB-27.50 UPA-BY OI=  84 at $6.20 SL=3.10
BUY CALL FEB-30    UPA-BF OI= 147 at $4.50 SL=2.25

Average Daily Volume = 983 k


---

FNM – Federal National Mortgage Assn. $71.89 (+6.81 last week)

Company Summary:
Commonly known as Fannie Mae, the Federal National Mortgage
Association is a company that works to assure that mortgage
money is readily available for existing and potential homeowners
in the United States.  FNM does not directly lend money to
homebuyers, but works with lenders to ensure that there is no
shortage of funds available for mortgage loans.  The company
accomplishes this by purchasing mortgages from a variety of
institutions that make up the primary mortgage market.  Primary
market lenders include mortgage companies, savings and loans,
commercial banks, credit unions and state and local housing
finance agencies.  These are the businesses where the mortgages
are originated and the funds are loaned directly to the borrower.
FNM then buys the mortgage, thus allowing the primary market
lender to replenish their funds and lend more money to
homebuyers.

Why We Like It:
It has been interesting to note how the possible bubble in the
Housing market has gotten so much more air time that the equity
bubble ever did.  It seems everyone has an opinion about whether
it is a bubble, how big it is and how it might resolve itself.
This speculation, along with bond yields moving to multi-decade
lows recently raised the question of how FNM was going to be hit
by having to rebalance its bond portfolio.  That scenario
prompted investors to dump the stock, selling it off to below the
$60 level at the end of September.  That was before the company
came out and announced that they had already taken corrective
action, narrowing its duration gap from 14-months to 10-months.
That news appears to have cheered investors, as they have
propelled the stock through some important resistance levels in
the past week.  First up was $66, and after clearing that on
Monday, the bulls pushed steadily higher throughout the week
(following the company's upside earnings surprise on Tuesday),
closing on Friday above the 50-dma ($70.39), with the stock
posting a nearly 5% gain.  The stock has now gone on a strong
PnF Buy signal and blasted through the bearish resistance line.
Significant resistance is waiting just overhead near $72.50, so
we want to look for a pullback before initiating new positions.
Intraday support is resting in the $69.50-70.00 range with
further support near $68 (the site of Friday's intraday low). 
Use a dip and bounce from these levels to initiate new positions
in anticipation of a rally up towards the 200-dma, which is
currently sitting at $76.  Set stops initially at $67.50.

BUY CALL NOV-70 FNM-KN OI= 5772 at $4.10 SL=2.50
BUY CALL NOV-75*FNM-KO OI= 7531 at $1.65 SL=0.75
BUY CALL DEC-70 FNM-LN OI= 3489 at $5.70 SL=3.75
BUY CALL DEC-75 FNM-LO OI=15003 at $3.00 SL=1.50

Average Daily Volume = 5.34 mln



************************Advertisement*************************
”If you haven’t traded options online – you haven’t really traded 
options,” claims author Larry Spears in his new compact guide book:

“7 Steps to Success – Trading Options Online”.

Order today and save 25% (only $15) by clicking on PreferredTrade 
and clicking on the link to the book on its home page.

http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN
**************************************************************


******************
CURRENT CALL PLAYS
******************

None


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

GM – General Motors $34.31 (-0.51 last week)

Company Summary:
Maintaining its position as the world's #1 maker of cars and
trucks, GM has managed to diversify its business so that it is
more than just a car company.  Its automotive business
encompasses the Buick, Cadillac, Chevrolet, GMC, Oldsmobile,
Pontiac and Saturn brands, as well as others through its
affiliations with Suzuki, Saab, and Isuzu.  Non-automotive
operations include Hughes Electronics (satellites,
communications), Allison Transmission (medium and heavy-duty
transmissions), and GM Locomotive (locomotives, diesel engines).
GM has successfully spun off Delphi Automotive Systems, the
world's #1 auto parts maker.

Why We Like It:
While familiarity may breed contempt, when it comes to plays that
continue to perform, that familiarity tends to produce profits.
It is becoming increasingly clear that the Automotive industry
has painted itself into a corner over the past year.  Aggressive
price competition and zero percent financing have lured many a
consumer into buying new cars earlier than they might otherwise
have done.  The problem is that there isn't a fresh wave of
consumers to follow them, and that is starting to show up as
declining sales, despite the continuation of the aggressive
financing programs.  We played GM to the downside a couple weeks
ago, as the stock drilled down from the $40 level all the way to
$31.  We dropped the play just in time, because after hitting
that important support level, the stock rallied a bit into
earnings, reaching as high as $37 on Tuesday following the
company's earnings release.  That proved to just be another
bearish entry point, as S&P went on a debt-downgrade safari on
Wednesday, dropping their rating on GM's long-term debt to BBB.
Investors didn't like the sound of that one bit, driving the
stock back down to the $34 level.  We saw a bit of a rebound on
Thursday with the strong rebound in the broad market, but as
Friday's session drew to a close, the price was gravitating back
towards that $34 level.  There appears to be little in the way
of good news for GM shareholders, as the company guided down for
the 4Q, and this is being reflected in the price.  If the broad
market rolls over, that pressure will likely pressure the stock
back toward its recent lows near $31.  Just for reference, it is
interesting to note that the long column of O's on the PnF chart
is currently projecting a price target of $11.  While it doesn't
appear that is in play over the near-term, it certainly provides
an indication that the stock is under distribution and will
likely remain so until the fundamental picture improves.  Use a
failed rally at the $35 or $36 intraday resistance levels to
initiate new positions.  Alternatively, look to enter the play
on a decline under $34, using broad market weakness for
confirmation.  Our stop is initially in place at $37.25.

BUY PUT NOV-35 GM-WG OI=8109 at $3.40 SL=1.75
BUY PUT NOV-32*GM-WZ OI= 966 at $2.15 SL=1.00
BUY PUT NOV-30 GM-WF OI=1836 at $1.45 SL=0.75

Average Daily Volume = 6.01 mln



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Does your broker offer Stop Losses on Options?

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Stop Losses based on the option price or the stock price.
Move your trading into the next millennium with PreferredTrade.

Anything else is too slow!

http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN
**************************************************************


**********
DISCLAIMER
**********

Please read our disclaimer at:
http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html


**************************************************************
ADVERTISING INFORMATION

For more information on advertising in OptionInvestor Newsletter,
or any Premier Investor Network newsletter please contact:

Contact Support
The Option Investor Newsletter                   Sunday 10-20-2002
Sunday                                                      4 of 5

In Section Four:

Current Put Plays: OMC, C, EBAY, GIS, KSS
Leaps: Back At Resistance Already?
Traders Corner: Hey Baby, Wanna Get Lucky?
Traders Corner: Moving Average Indicators: As Support & Resistance
Traders Corner: Futures Trade Signals for Entries and Exits


************************Advertisement*************************
If you trade options online, then you need an online broker that:
offers true direct access to each option exchange offers stop and 
stop loss online option orders offers contingent option 
orders based on the price of the option or stock offers 
online spread order entry for net debit or credit offers fast 
option executions

PreferredTrade offers these online option trading features and 
more; call 1-888-889-9178 or click for more information.

http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN
**************************************************************


*****************
CURRENT PUT PLAYS
*****************

OMC - Omnicom - $59.25 +1.41 (+3.18 for the week) 

Company Summary:
Omnicom Group Inc. is a leading global marketing and corporate 
communications company. Omnicom's branded networks and numerous 
specialty firms provide advertising, strategic media planning and 
buying, direct and promotional marketing, public relations, and 
other specialty communications services to more than 5,000 
clients in more than 100 countries

Why We Like It:
OMC started the day lower as the Dow fell this morning, only to 
find buyers just over $56.  However, the rebound stopped shy of 
$60 once again. Thursday's high was $60.00 and today's was 
$59.50. This was the stock's fourth straight lower high and third 
rejection at the descending trend line begun in the middle of 
August. While we don't like the move back above the 50-dma of 
$58.49, the industry still appears to have problems.  Fellow ad 
agency Interpublic Group recently warned for the second time, 
citing problems in a number of businesses, including retail 
advertising, public relations and corporate-identity consulting.  
Merrill Lynch analyst Lauren Fine said that Inerpublic's 
estimates were "beyond comprehension," and that," When we issued 
our third-quarter preview a few weeks ago we indicated that we 
thought there was risk to our forecast...Interpublic's pre-
announcement last night went beyond our imagination."    
Interpublic also cited revenue declines in Latin America and 
Japan, indicating a possible slowdown in the worldwide 
advertising market.   This indication is not good for the 
industry overall, which has already had a tough year. OMC 
recovered from earlier accounting problems, but the rebound has 
found a series of lower highs and $60 appears to be the new lower 
ceiling.  We would recommend new entries on continued resistance 
under $60.00. If the stock breaks that mark to the upside, we 
suggest stepping to the sidelines and waiting to reassess on 
another move below that level. 

BUY PUT NOV-60 OMC-WL OI=  613 at $5.20 SL=2.60
BUY PUT NOV-55 OMC-WK OI= 1181 at $3.30 SL=1.70

Average Daily Volume = 2.60 MIL


---

C - Citigroup, Inc. $34.98 (+4.58 last week)

Company Summary:
Citigroup Inc. is a diversified global financial services holding
company whose businesses provide a broad range of financial
services to consumer and corporate customers.  The company has
over 192 million customer accounts in over 100 countries and
territories.  C's activities are conducted through Global
Consumer, which delivers a wide array of banking, lending,
insurance and investment services; Global Corporate, which
provides corporations, governments, institutions and investors
with a broad range of financial products and services and Global
Investment Management, which offers a broad range of life
insurance, annuities and asset management products and services.
Additionally, the company's Investment Activities division
consists of the firm's venture capital activities.

Why We Like It:
Brokerage stocks got a reprieve from the relentless selling last
week, triggered in large part by the positive reception of C's
earnings report on Tuesday.  While the company managed to beat
by a penny, there was a lot of talk on the street about the
quality of those earnings.  What seemed to get a lot of attention
was the sale of its headquarters building.  While this was
clearly a one-time sale, the revenue was treated as part of the
core earnings.  Both Prudential and Keefe Bruyette pointed out
this unusual classification, indicating that it seems to fall
short of C's desire to exemplify 'best practices' in corporate
governance.  Nonetheless, shares of the company rose throughout
most of the week, not really running into trouble until hitting
the $36 resistance level.  While the stock closed in the red on
Friday, it wasn't by much as the market makers pinned the stock
to the $35 strike for expiration.  As if the Brokerage sector
needed another albatross around its neck, with the ongoing
investigation into these firms' ethical practices and the concern
of the quality of their debt, another possible problem surfaced
on Friday.  Rumors once again arose about a major Japanese
insurer that may be going under.  Possible exposure by the big
firms like C is perhaps another problem these companies will have
to face.  In just the last 6 sessions, C has risen by nearly $10,
and next week is likely to see some give back of those gains,
unless the broad market is able to push through some major
resistance.  Use another rally failure near the $36 level to
initiate new positions, and then look to add to those positions
as the stock declines under the $35 level.  If more weakness
appears at the open on Monday, then look to enter on a breakdown
under $34.  The gap from Tuesday needs to be filled, and that
will have us initially targeting the bottom of that gap just
above $30.  Keep stops set at $36.50.

BUY PUT NOV-37 C-WU OI= 205 at $3.40 SL=1.75
BUY PUT NOV-35*C-WG OI=5665 at $1.90 SL=1.00
BUY PUT NOV-32 C-WZ OI=2962 at $1.05 SL=0.50

Average Daily Volume = 26.5 mln


---

EBAY – eBay, Inc. $59.96 (+3.66 last week)

Company Summary:
After developing a Web-based community in which buyers and
sellers are brought together in an efficient format, EBAY has
emerged as the dominant online auction site.  The eBay dynamic
pricing format permits sellers to list items for sale, buyers to
bid on items of interest and all eBay users to browse through
listed items.  Items listed on eBay include collectibles,
automobiles, art objects, jewelry, consumer electronics and a
host of practical and miscellaneous items.  Although based in
the United States, through its subsidiaries, EBAY also operates
trading platforms in Germany, the United Kingdom, Australia,
Japan, Canada, France, Austria, Italy and South Korea.

Why We Like It:
If you needed proof that investors can't make up their minds in
this market, recent trading action in EBAY certainly provided it.
After trading up near the $60 level on a couple occasions last
week ahead of the company's earnings report, the stock sold off
sharply this morning, briefly piercing the $56 support level at
the open, before rallying throughout the day to close near that
important $60 level as expiration Friday wound to a close.
Despite the company beating expectations for last quarter,
investors were disappointed by the company's lowered guidance
for the full year, which seemed to indicate lowered expectations
for Q4.  Our attraction to EBAY is based on the fact that the $60
level is both solid historical resistance, as well as the site of
the descending trendline that began back in December.  If
earnings news didn't carry the horsepower to drive the stock
through this level, then gravity ought to take effect next week.
The $56 level is still strong support, as demonstrated by the
rebound from just below that level this morning.  It should come
as no surprise, that EBAY got pinned to the $60 level on
expiration Friday, as many stocks went out near the high open
interest strikes.  For EBAY, the $60 strike was the ticket on
the Call side, while the $55 strike had the highest open interest
on the Put side.  While Friday's price action may have provided
an attractive entry point, we'll have to wait for Monday to see
whether this is another near-term top for the stock, or just a
resting point before breakout out of its persistent, if somewhat
volatile downtrend.  Aggressive traders can look to initiate new
positions on a failure near current levels, while a slightly
more conservative approach will be to wait for the stock to fall
back under $58.75, which provided intraday support on Friday.
Look for solid confirmation (and an opportunity to add to
positions) as EBAY falls back under its next levels of intraday
support, first at $58 and then $56.50.  Our initial target is
$55, followed by $52.  Due to the possibility of a breakout
attempt next week (which we expect to fail), we want to give the
play a bit more room to breathe, so we're raising our stop to
$62.  More conservative traders may want to keep their stops
tight at $60.50.

BUY PUT NOV-60*QXB-WL OI=1209 at $3.50 SL=1.75
BUY PUT NOV-55 QXB-WK OI=9477 at $1.85 SL=1.00

Average Daily Volume = 8.72 mln


---

GIS - General Mills, Inc. $41.69 (+0.19 last week)

Company Summary:
General Mills is a producer of packaged consumer foods and
operates exclusively in the consumer foods industry.  The
company operates three business segments: U.S. Retail, Bakeries
and Foodservice and International.  U.S. Retail consists of
cereals, meals, refrigerated and frozen dough products, baking
products, snacks, yogurt and health venture activities.  The
Bakeries and Foodservice segment consists of products marketed
to retail and wholesale bakeries and offered to the commercial
and noncommercial foodservice sectors throughout the United
States and Canada, such as restaurants and school cafeterias.
The International segment is made up of retail business outside
the U.S. and foodservice business outside of the U.S. and Canada.

Why We Like It:
There's no question that GIS is weak, and the debt downgrade last
week certainly didn't help.  But at the same time, the stock has
been incredibly resistant to the bears' advances.  Every time it
looks like it is going to break down under the $41 support level,
buyers appear to prop it up.  The bulk of Friday's session saw
the stock under pressure, as it traded right down to that $41
level.  But the end of day short-covering popped it back up,
keeping it just above that ascending trendline that connects the
lows posted in July.  The intraday violation of that trendline on
Friday was our best indication yet that GIS is eventually going
to perform for us.  The big question is when?  While price action
hasn't confirmed just yet, it is encouraging to see that the
daily Stochastics tipped over in bearish fashion on Friday
without making it even halfway up to overbought.  That's a good
bearish sign.  The intraday highs have also been marching lower
over the past few days, and there is now some nice overhead
resistance at $42 and then $42.50.  The rollover near the $43.25
level provided a great entry for those that took it, as they now
have a cushion of gains to sit on while they wait for the
expected breakdown.  Another failed intraday rally near one of
those above-mentioned resistance levels can still be used for
entry into the play.  Conservative traders will want to see a
strong push under the $41 level before taking a position.  That
breakdown (when it comes) should lead GIS down to $40 and then
$38 (the site of the July lows).  If the stock trades at $38, it
will put the PnF chart back on a Sell signal, which would project
a decline down towards the $30 level.  Our stop remains at
$43.50.

BUY PUT NOV-45 GIS-WI OI=241 at $3.90 SL=2.50
BUY PUT NOV-40*GIS-WH OI=244 at $1.15 SL=0.50

Average Daily Volume = 1.27 mln


---

KSS - Kohl's Corporation $55.15 (+2.75 last week)

Company Summary:
Kohl's Corporation operates family-oriented, specialty department
stores, primarily in the Midwest.  The company's stores sell
moderately priced apparel, shoes, accessories and home products
targeted to middle-income customers shopping for their families
and homes.  Kohl's stores have fewer departments than full-line
department stores, but offer customers assortments of merchandise
displayed in complete selections of styles, colors and sizes.  Of
the 420 stores the company operates, 116 are takeover locations,
which have facilitated the entry into several new markets,
including Chicago, Illinois; Detroit, Michigan; Ohio; Boston,
Massachusetts; Philadelphia, Pennsylvania; St. Louis, Missouri,
and the New York region.  

Why We Like It:
In typical expiration Friday form, the bulls and bears fought to
a standstill, at least as far as KSS is concerned.  Without any
strong buying or selling pressure, the market makers were able to
keep the stock pinned near the $55 level.  Friday's action formed
a small-range Doji candlestick pattern, which is a classic sign
of indecision.  That likely portends a continuation of the
rollover that began mid-week as the Retailers are likely to remain
under pressure as earnings season continues.  The most recent
shock to the Retail sector (RLX.X) came from Sears on Thursday,
when the company missed earnings estimates by a country mile, due
to having to a sharp increase in credit card delinquencies and
defaults.  The big gun in the Retail sector is WMT, and they
don't report results until the middle of November, so our KSS
play will likely trade in line with the overall sector (which
looks weak) over the near term.  For the RLX, the $290 level is
an important resistance level, followed by more overhead at $295.
A failed rally in the sector near one of these levels is likely
to provide us with an attractive entry into KSS.  After rallying
up near the $59 level mid-week, the stock rolled over just below
the 20-dma (currently $58.58), and with the daily Stochastics in
full bearish roll, appears destined to retest its recent closing
lows near the $49.50 level.  While aggressive traders will want
to target shoot entries on the rollover from resistance (first at
$56.50 and then $58.50), the more conservative approach will be
to wait for a drop under $54, which is just below Friday's
intraday low.  Look for confirmation of weakness from the RLX
index before playing.  Keep stops set at $59.

BUY PUT NOV-60 KSS-WL OI=1778 at $6.40 SL=4.50
BUY PUT NOV-55*KSS-WK OI=4850 at $3.50 SL=1.75
BUY PUT NOV-50 KSS-WJ OI=2222 at $1.80 SL=1.00

Average Daily Volume = 3.70 mln



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*****
LEAPS
*****

Back At Resistance Already?
By Mark Phillips
mphillips@OptionInvestor.com

That's the nature of bear market rallies.  They frequently come
out of nowhere, are composed of violent (and large) moves, which
often take the form of gaps.  While nice to see the broad markets
backing away from the abyss they were staring into just 2 short
weeks ago, this type of rebound is VERY difficult to responsibly
trade, since the technical indications on a daily basis are so
muddled.  Throughout all the volatility we have seen in the past
2 weeks, the internals of this market have been steadily
improving.  The question now is how much further can this rally
run before the mighty bear reasserts his authority?

First let's look at where we have been, and that should help us
to gauge the possibility that this fledgling rally continues for
more than a few weeks.  I think the best tool for gauging the
potential upside/downside in a given market is to look at the
Bullish Percent PnF chart.  I've focused on the current and
recent extreme readings of these charts in some recent columns,
so let's update that statistic right here.

Bullish Percent:

Index         July Low    October Low    Current
S&P 500       12%         19%            36% -- Bull Alert
DOW            3%          7%            43% -- Bull Confirmed
NASDAQ-100     8%         13%            42% -- Bull Alert

SPX needs to print 60 to go take out the August high.  It is
interesting that it reversed in August from a high of 59, falling
just shy of the 66 level necessary to take out the May high.
Will this rally also fail at a lower Bullish Percent high than
in August?  Or will it really run into the end of the year?

The DOW reversed at its bearish resistance line at 60 back in
August.  So that resistance line (now at 58) will be the first
major test for the bulls' resolve.  If they can power through,
then we could see the DOW Bullish percent moving into overbought
territory (above 70) for the first time since early April.

The NASDAQ-100 (NDX.X) has its own bearish resistance sitting
at 58, just below the site of the August high of 60.

So from a Bullish Percent standpoint, this rally should still
have some legs, as the oversold condition continues to be worked
off.  Turning to the long-term descending channel that I have on
the S&P 500 (SPX.X), the top of the channel (if the bulls really
outdo themselves) is up at 1040.  But first they'll have to push
through resistance in the 910-925 area, then the August highs
near 965 and then the 200-dma, which is currently at 1015.  Just
getting back to the 200-dma would represent a 32% advance off the
October lows, which would be a tremendous move.  In the bigger
picture though, we can't even start to think about a longer-term
bull market until the SPX can break out of this 2-year descending
channel.

Let me be entirely honest.  I would like nothing better than to
tell you that this rally is for real, that the bottom is behind
us and that the market is embarking on the road to recovery that
has been advertised so many times in the mainstream media.  But
I can't.  The business climate is continuing to deteriorate, as
we can see by the continuing stream of layoffs throughout the
Manufacturing and Technology industries, typically the key
engines of growth.  The two factors that have kept the economy
from completely falling apart, the consumer and housing growth,
are starting to teeter.

The signs of weakness from the consumer are easier to see, with
tepid forecasts coming out of the Retail sector.  The earnings
miss from Sears last week was particularly ominous, as it was
due to a sharp rise in delinquencies and defaults from their
credit card division.  Consumers may have continued to spend, but
they are now unwilling or unable to pay the bills.  Housing has
continued to be strong throughout the past two years, but that
gravy train is also coming to an end.  Mortgage rates are nearing
a practical floor, and the lack of a continuation of that
stimulus that has been provided by lower rates for home
purchases and refinancing will have a seriously detrimental
effect on that area of prior growth.  No, I didn't miss the
strong housing numbers last week.  They were impressive, but I
just don't see much further upside available.  Remember the
great results that were coming out of the Technology sector
in early 2000?  What happened next?

Until this bear market has breathed its last (which I fear will
occur with the markets substantially below where they were a
mere 2 weeks ago), we must continue to view each rally with a
healthy dose of skepticism.  These rallies will continue to be
quick and violent, mandating that successful bullish traders
enter early, ride out the ensuing volatility and then prudently
take profits early.  If that sounds difficult, it's because it
is.  We need to be able to pick both the sector and stocks that
will benefit most from the next bull run, and then we need to
practically target shoot the bottom and hang on for the volatile
ride up to the next bear market peak.

A perfect example of how difficult this is would be our attempts
to enter a successful bullish play on the QQQ.  In the past few
months, we tried to pick the bottom twice and missed, both times
being stopped out for a loss.  I added the QQQ back onto the
Watch List last weekend, looking for a slight pullback to give
us a solid entry.  What happened is a series of violent gap moves
that easily kept us out of the play.  Now the QQQ is up more than
20% from its early October low.  The question now is whether it
makes sense to chase it higher, or do we wait for a pullback that
never comes?  Missing a profitable trade is always preferable to
entering one that turns out to be a loser, so we must stick to
our objective of balancing risk and reward and not being goaded
into chasing stocks higher.

Hindsight is always 20/20, and in retrospect we could say that
LEAP Calls on any 4-letter stock (that still has earnings) on
October 8th would have profited handsomely since then.  Look at
CSCO, which bottomed near $8 and is now trading north of $10.
If we had an idea where the stock would bottom, we could have
bought LEAPS near the bottom of that dip and the '04 $10 LEAP
would currently be up 50%.  The trick is to determine in advance
where that bottom is going to be.  Those that targeted entries
near the double bottom ($11) would still be underwater.

My point in this discussion is that we can still profit from
the bullish moves when they come along, but we need to stick to
a defined trading plan, of entering where we can responsibly
manage our risk relative to the potential reward in the trade.
And it should go without saying, that we should be using a
smaller amount of capital in these perilous market conditions.
Will we ever return to the days of buying options and holding
them for months at a time before cashing out for a fat profit?
I believe we will.  But if we refuse to play the game by the new
rules in the meantime, we won't be in any position to benefit
when that time arrives.  The most important rule change for the
foreseeable future is that rallies will be quick and explosive,
and declines will be more slow and grinding in nature.

Based on the Bullish Percent readings that I covered above and
the fact that the weekly Stochastics oscillators are now in
solid bullish ascent, I think this bear market rally has more
room to go.  Play it for all its worth, but be ready to bail out
when the Mr. Bear comes out of hibernation.  So without further
ado, let's check on our current list of play candidates.

Portfolio:

LEN - Following the sharp selling in the Housing sector the prior
week, the group went along with the broad market rally last week,
correctly predicting the blowout housing numbers that came out on
Thursday.  LEN went along with the group, continuing its rebound
from the $50 level and falling just short of our $60 stop on
Thursday.  At this point, I don't know if we'll be successful with
this bearish play, but at these levels, the risk is definitely
easy to manage.  I still like new entries on rally failures below
our $60 stop.  We need to see the $50 level fail as support before
I'll be comfortable in lowering our stop.

JNJ - Sure and steady, JNJ reported earnings a penny ahead of
estimates last week and investors rewarded the stock by pushing it
up to close over $60 on Thursday, its highest level since late
May.  But there could be a bit of weakness early next week
following the news out late on Friday that the company has been
ordered to pay $150 million in damages to AMGN for inappropriate
conduct in the early 1990s.  This should be a nonevent, and JNJ
indicated as much late Friday when it announced the news, while at
the same time reiterating its guidance.  We need to see the stock
continue to push higher, using prior highs as new support.
Traders still looking to participate can consider a dip down near
the 200-dma ($57.73) to be an acceptable entry.  Note that we've
raised our stop to $54 this weekend.

Watch List:

MO - Back from the dead, MO clawed its way back over the $40 level
late last week.  While hardly a sign of strong bullish action, it
does indicate that the stock has likely seen its lows for awhile.
Look for a mild broad market retreat to drop the stock back near
the $38 level, enabling us to take an attractive entry point.
Our stop will initially be set at $36, just below the recent
closing lows.

MSFT - Ahead of its earnings report, MSFT went with the whims of
the broad market, with most sessions starting out with a sizable
gap.  The company's own earnings report was pretty impressive on
the surface, but the change in the way the company accounts for
certain sales was a big part of the upside surprise.  With
significant resistance overhead, including the 200-dma, I have
no interest in chasing the stock higher.  The only viable entry
will come on a pullback in the next week or so.  Look for a fill
of last Tuesday's gap down to $49 to provide the next high odds
entry point.

NEM - Close, but no cigar!  By the way, does anyone know where
that saying came from?  I'll post the answer next week.  NEM
traded down early in the week, hitting a low of $22.57 before a
slight recovery, likely due to the broad market strength.  This
play is definitely for the patient investor, and we'll stick
with our target at $22.50 unless the bulls go crazy and break
it out over the $25 resistance level.

QQQ - There was nothing wrong with our desired entry point.  The
market just decided not to deliver it, as the shorts have been
covering their profitable positions with a vengeance.  Even if
our entry target had been set at $22.50 last week, I would have
been hesitant to take it, given the wild gap-dominated action in
the broad markets.  I've raised the target for entries to the
$22.00-22.50 area, as trading down to that level would both
relieve the near-term overbought condition of the QQQ, as well
as test the bottom of Tuesday's gap as support.  Once into the
play, we'll follow it with a fairly tight stop at $21, which
just happens to be the bottom of the October 10th gap.

One other note worth covering is that the VIX is right back at
that 40 level (39.82) which has been providing a floor for the
past month.  Either it will plunge below there, or take another
run at the top of the recent range.  Since my near-term thesis
is for a rising market, a falling VIX goes right along with it.
But given the fact that we're in the midst of earnings season, I
expect one more push higher for the VIX before it finally loses
the 40 support level.  The important thing to keep in mind is
that with the VIX at historically high levels, option premiums
are inflated.  Keep this in mind when choosing your trading
strategy in the weeks ahead.

In the broad scheme of things, this is still a bear market.  But
in the near-term, this rally looks like it still has sufficient
room to run, so that we can profit from bullish plays.  Keep an
eye on those bullish percent charts.  So long as they continue
northward, then we should have confidence that the bulls are in
the driver's seat.  Just don't get too complacent when sitting
on gains.  The bear is vicious, and when he awakens, we'll want
to switch sides quickly.  Keep those trades small and manageable,
and harvest gains when they are available.

Have a great week!

Mark


LEAPS Portfolio

Current Open Plays

SYMBOL OPENED     LEAPS    SYMBOL  ENTRY   CURRENT  CHANGE  STOP

Calls:
None
JNJ    10/10/02  '04 $ 60  LJN-AL  $ 6.50  $ 8.00  +23.08%  $54
                 '05 $ 60  ZJN-AL  $ 9.10  $11.10  +21.98%  $54


Puts:
LEN    10/02/02  '04 $ 50  KJM-MJ  $ 8.60  $ 9.20  + 6.97%  $60
                 '05 $ 50  XFF-MJ  $11.20  $12.30  + 9.82%  $60



LEAPS Watchlist

Current Possibles

SYMBOL  SINCE    TARGET PRICE  TARGETED LEAP  SYMBOL

CALLS:
MO     08/25/02  $38           JAN-2004 $ 40  LMO-AH
                            CC JAN-2004 $ 35  LMO-AG
                               JAN-2005 $ 50  ZMO-AJ
                            CC JAN-2005 $ 40  ZMO-AH
MSFT   09/29/02  $48-49        JAN-2004 $ 50  LMF-AJ
                            CC JAN-2004 $ 45  LMF-AI
                               JAN-2005 $ 50  ZMF-AJ
                            CC JAN-2005 $ 40  ZMF-AH
NEM    09/29/02  $22.50, 25    JAN-2004 $ 30  LIE-AF
                            CC JAN-2004 $ 25  LIE-AE
                               JAN-2005 $ 30  ZIE-AF
                            CC JAN-2005 $ 25  ZIE-AE
QQQ    10/13/02  $22-22.50     JAN-2004 $ 24  KLF-AX
                            CC JAN-2004 $ 21  KLF-AT
                               JAN-2005 $ 24  ZWQ-AX
                            CC JAN-2005 $ 21  ZWQ-AT
DJX    10/20/02  $79-80        DEC-2003 $ 84  ZDJ-LF
                            CC DEC-2003 $ 80  ZDJ-LB
                               DEC-2004 $ 84  YDJ-LF
                            CC DEC-2004 $ 80  YDJ-LB



PUTS:



New Portfolio Plays

None


New Watchlist Plays

DJX - Dow Jones Industrials $83.22  **Call Play**

Just one week into the Q3 earnings season, the DOW has risen an
astounding 1100 points from its October 8th low.  That has served
to raise the index right to a very important level of resistance.
The descending trendline that began with the highs in May rests
at 8325, and the bearish resistance line on the PnF chart is at
8300.  The DJX is an index priced at 1/100 the price of the
actual Dow Industrials.  Not only does it have LEAPS available,
but is preferable to the DIA stock due to greater liquidity of
the options.  It seems likely that there is some profit taking
right around the corner, but given the dramatic improvement in
the Bullish Percent readings, it looks like the next dip will
lead to a breakout over this important level of resistance.  The
weekly Stochastics is in a solid bullish ascent and should
(absent a major negative event) be sufficient to propel the DOW
to at least 8700 and quite possibly up near the 9000-9100 area,
which proved to be a top back in August.  Trying to catch the
initial bottom prior to these explosive bear-market rallies is
next to impossible, but if we follow the pattern we saw after the
July bottom, the next dip should provide an attractive entry for
the next leg up the chart.  Daily Stochastics are buried in
overbought, so we want to see them relax a bit before we throw
our hat in the ring.  Investors appear to have discounted most of
the bad news that has been coming out over the past couple weeks,
and in the absence of the heavy selling pressure, the market is
rising like a balloon that had been held under water.  Wait for
the next decline to major support near the $79-80 area, at which
time we should have daily oscillators down near oversold again.
Because of the volatile nature of the market right now, we want
to start out with a wide stop to prevent premature exit from the
play.  After entry, we want to place our stop at $75.50.

BUY LEAP DEC-2003 $84 ZDJ-LF
BUY LEAP DEC-2003 $80 ZDJ-LB **Covered Call**
BUY LEAP DEC-2004 $84 YDJ-LF
BUY LEAP DEC-2005 $80 YDJ-LB **Covered Call**


Drops

BA - $29.00 What can I say?  I was dead wrong on BA.  Not only
has there been scarcely a hint of bullish price action, even
after hitting our $32 price target, but last week's earnings
report was a huge disappointment.  BA is losing important
business to Airbus, is forecasting declining commercial aircraft
sales for the next 2 years and doesn't have any glowing positive
comments about the military size of its business.  The steady
grind lower in price could continue for awhile or the stock could
bottom and rebound at any time.  But based on the deteriorating
fundamental picture, both for the company and the overall
industry, I see no merit on continuing to look for that elusive
bottom.  There are better opportunities available elsewhere.


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

Hey Baby, Wanna Get Lucky?
By Mike Parnos, Investing With Attitude

When’s the last time you had an offer like that?  Never?  Well, 
join the crowd.  With the exception of offers from less than 
endearing telemarketers and high-heeled companions, we’re going 
to have to make our own luck. 

Do you have some discretionary dollars that you want to have a 
little fun with?  This week, the CPTI will grant permission for 
you to take some of that excess six-pack and General Chow's 
Chicken money and play the option lottery.

If you are a Couch Potato Trading Institute student in good 
standing, you likely put on about four trades a month.  You've 
hedged these positions to where, in a worst-case scenario, you 
can lose $2.50 per position.  That shouldn't happen unless you’ve 
relapsed to your pre-CPTI state of mind -- or had a frontal 
lobotomy.  Hence the old saying:  "I'd rather have a bottle in 
front of me than a frontal lobotomy." 

This month, instead of putting on four trades, consider just 
putting on three.  That will give you an extra $2.50 to use for 
our expiration week adventure.

ITM vs. OTM
There is a school of thought that advocates the purchase of in-
the-money (ITM) options with a lot of time value.  They believe 
that this is safer.  They say that it gives you “time to be 
right.”  With the “Let It Ride” strategy, we don’t need the extra 
time to be right because we’re not going to be right all that 
often and it’s not worth the extra monetary risk.  And we 
certainly don’t want to pay for additional intrinsic value – 
because it also increases our risk.

An ITM option has a higher delta – and that’s just dandy if 
you’re right.  The option will increase more quickly as the 
underlying increases.  But, if you’re not, it will lose value at 
the same rapid rate.  By the same token, an OTM option will 
increase (percentage wise) more quickly.  

Good Stuff Can Happen
If you buy an option with one week left before expiration, and 
five dollars out of the money, it might cost you $.40.   If the 
stock should bounce up $3 in the next 2-3 days, your option is 
only $2 out of the money and can easily have appreciated to 
$1.20.  In this choppy market, there are any number of spike-ups 
and downs.  That’s a 200% return on your risk.

Obviously, the above numbers are approximate.  The point is that 
if you’re right one out of three times, you could break even.  
And a $3 move is not unrealistic.  If the stock spikes up $5 and 
is at the money, the option could easily be worth $2.00.

If you are willing to risk $2,500 per month you on the “Get 
Lucky” strategy, you should be able to put on 5-6 positions.

Other Forces Working For You
As we get closer to option expiration, it’s not unusual for 
volatility to increase.  Our little OTM option will benefit.  
Plus, we’ve learned in the past that, if the underlying is moving 
toward a high open interest strike price close to expiration, the 
market makers may do their little manipulative trick. They may 
inflate the value to take advantage of those buying back the 
option and rolling it out.

Stock Pickin’ 
What kind of underlyings do you look for?  Stocks are more 
vulnerable to news, hence, more apt to make a big move.  Look for 
stocks that are bouncing off support or resistance.  Check out 
stocks that are about to announce earnings or anticipate FDA 
acceptance or rejection rulings.  Look for a sector that has 
moved up or down where one stock has lagged. Consider a stock 
that has spiked up or down -- away from strikes with high 
concentration of open interest.  

There are times, especially when dealing with lower priced 
stocks, that you can pick up one strike OTM options for a nickel 
or dime with a week left (see example below) -- usually in stocks 
with 2-1/2 point strike prices.

Bad Stuff Can Happen
But it isn’t all that bad.  You know you’re going to be wrong 
most of the time.  So, when your chosen stocks don’t move, you 
won’t: a) be surprised; b) be in a food stamp line; or c) take it 
out on your therapist.

Do your homework and your chances of success will increase 
dramatically.  It’s amazing how some of the luck is taken out of 
the equation when you’re prepared.  

Keep in mind that this is a bet – pure and simple.  In life, you an 
never make any shots you don’t take.  Be careful, but live a 
little.
_____________________________________________________________

Let It Ride!
Last week a reader contacted me about an unfortunate situation. 
He had made a directional trade on the QQQs back in September, 
trying to catch that falling knife.  He had purchased 150 
contracts of the October $24 calls for $.95 -- that's about a 
$15,000 bet.  It's like drawing to an inside straight.  I want to 
play poker with this guy -- at least until he learns that you 
can't bluff the market.

With the QQQs at $21.75, and about a week left before October's 
expiration, the value of his Oct. $24 call had eroded to $.05.  
The total value was $750.  His question was basically, "Help!!  
What should I do?"

I told him he had two choices. He could:  a) close the position 
and salvage the $750; or b) bet the nickel that the QQQs would 
bounce.  The QQQs had already moved up two points the previous 
week and there seemed to be some short covering and the eternal 
optimists were coming out of the woodwork to test the water – 
sort of the stock market's version of Groundhog Day.

I believed the nickel was a cheap bet.  After all, how many times 
do we take positions that we are willing to risk $1.00 or $1.50?  
A nickel?  What the hell, let's roll the dice.

He held the position and, as of Tuesday morning, the QQQs moved 
over $23.50.  The October $24 calls could be sold for $.30.  His 
$750 position was now worth $4,500!!  What a return!  600% on the 
amount risked.

Did he sell and take profits on his nickel bet?  I don't know, 
but it was there for the taking.  I would welcome him as a CPTI 
member, but I heard his Mensa membership application was returned 
with a short note, "Don't call us.  We'll call you!"

It was a shame that he initially incurred such a loss, but that's 
what happens when you play directional and don't hedge your 
position or have a predetermined exit strategy.

What do you do with that nickel or dime that's left?  Where else 
could you put it that will give you a chance for a substantial 
profit?  Sometimes, if the story is right, it may pay to just let 
it ride.  It may be too late to cut the mustard, but you can 
still lick the jar.
___________________________________________________________

Iron Condor Update: It’s Over – Finally!
BBH closed at $88.96 -- comfortably between the $80 and $110 
strikes.  All options expired worthless. We took in a credit of 
$1,100 on a 10-contract position.  We got bounced around plenty 
during the life of the position.  I calculated eight times we had 
to protect our short position by shorting BBH at $80 and 
repurchasing BBH shares as it moved back up above $80.  At $10 
per transaction, we deduct $160 in commissions and another $200 
in slippage.  That’s a total of $360.  Subtract the $360 from the 
initial $1,100 credit and profit is $740.  

The original risk was $3,900. The return on risk was 19% in six 
weeks.  It ain’t a fortune, but it sure beats working for a 
living.
____________________________________________________________

Happy trading!  Remember the CPTI credo:  May our remote 
batteries and self-discipline last forever, but mierde happens.  
Be prepared!  In trading, as in life, it’s not the cards we’re 
dealt.  It’s how we play them.
 
Your questions and comments are always welcome.  
mparnos@OptionInvestor.com  


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

Moving Average Indicators: As Support & Resistance 
By Leigh Stevens
lstevens@OptionInvestor.com

Moving averages are not unlike trendlines - they not only help 
measure the direction and momentum (the relative angle) of a 
trend, but can alert us to when a trend has reversed. A moving 
average is a lagging indicator based on past closes only. A 
significant difference between trendline use and moving averages 
is that, whereas the break of a trendline can alert us on a 
pretty immediate basis that a trend is reversing, we need to wait 
usually to see if a close puts a stock or index above/below a key 
moving average.  

While it’s at the end of the latest period being measured that we 
see if the most recent close is above or below the moving 
average, we often see highs or lows bounce off from key moving 
averages. This can be contrasted to when prices penetrate or 
pierce a trendline, where this penetration is seen immediately – 
although it may not be apparent until near the end of the 
session, if the close will be above or below the trendline which 
is also the “confirming” moment so to speak.  

Many analysts, money managers and traders myself included, at 
least partly define the long-term trend by whether a stock or a 
market average is trading above or below its 200-day (40-week) 
moving average. The secondary stock market trend seems fairly 
well-defined by the use of the 50-day (10-week) moving average.  
To purchase a stock for an investment that has been in a down or 
sideways trend, the “minimum” requirement should be a close above 
its 50-day moving average – even more conclusive is a close above 
the 200-day moving average.  

The recent rally and the Friday (10/18/02) close has put the 
Nasdaq Composite (COMPX), Nas 100 (NDX), the S&P 500 (SPX), 100 
(OEX) and Dow Industrial (INDU) indices all above their 50-day 
simple moving averages, which is the first sign of a turnaround 
in the intermediate-term trend of the market – 



 

The fact that recent closes were ALSO above the top end of the 
downtrend channel was a definite “confirming” technical 
indication of a trend reversal.  I am always looking for as many 
technical factors as possible that line up bullishly or 
bearishly.  

For example, in mid-March in the Composite (above), when the 
index was both deflected from the area of its 200-day moving 
average AND was registering as overbought according to the 14-day 
stochastic. While there was one close above the average in this 
example, the lack of follow through the next day, given the 
overbought conditions, was the tip off to buy index puts and 
short bellwether stocks in the index.  

Of course, in the current timeframe at this writing, there is an 
approaching overbought situation developing with the stochastic 
model along with or after a crossover above the 50-day moving 
average.  Now should be the time to watch to see if the index 
holds above the 50-average – I especially would take note of any 
two consecutive days where one of the major indexes closed back 
under its 50-day average as bearish.   

Yet remaining for the major indices are closes above the 200-day 
moving averages which would suggest that the long-term trend had 
also reversed from down to up – 



  

We can anticipate that a major technical milestone comes with a 
“test” of the 200-day moving average.  When we say that a moving 
average is “tested” the reference is usually to whether a stock 
or index close pierces (goes through) the moving average in 
question or NOT – if prices pierce the moving average, there is 
then a watch on whether on subsequent hours, days or weeks, 
prices ALSO stay above or below the moving average in question. 
As long as this is the case, I’m going to trade more heavily on 
the long side on pullbacks.  

For options trading, the key moving averages will tend to be 
shorter ones; e.g., 5, 10, 15, 21-day lengths on daily charts. In 
a bearish downtrend, a move up to but not beyond these averages 
are often put buying opportunities – especially in my estimation 
in the case of the 21-day average.  There are times where there 
is of course only a ONE close above/below some key moving average 
as the item in question lacks follow through the next day.  

In the case of a single close above/below a key moving average 
and where other technical factors leave you in doubt about 
whether this event is merely a fake-out move or whether it’s a 
trend reversal, it can be useful to wait and see if there are TWO 
consecutive closes above or below the moving average.  Typically 
or most often, a true trend reversal will occur on more than one 
single penetrating close - whether that close is hourly, daily or 
weekly – and there will at least two consecutive closes that 
pierce the moving average.     



 
 
I suggest also using combinations of moving averages.  For 
example – from a trading standpoint, buying puts on an initial 
downside penetration of the 5-day moving average, especially if 
there are other bullish chart considerations (e.g., a breakout 
below a trading range or “rectangle”), but only taking one-half 
of the number of contracts of a usual purchase.  A further 
purchase could be made after a close below the 10-day moving 
average. Or, this strategy could be employed by using a 
combination of the 15 and 21-day moving averages. 

It is also often appropriate to wait for a time and see if a 
support/resistance “role reversal” comes into play.  If the 50 or 
200-day moving average has been coinciding with a series of highs 
or lows and are frequently stopping or “deflecting” the price 
moves, such moving averages are “acting as” resistance or 
support. Just as with prior lows or highs and with trendlines, 
their can be role reversal – once broken, support “becomes” 
resistance and resistance becomes support.   

For example, the 21 or 50-day moving average has been acting as 
support on a decline or in a sideways trend. Prices then decline 
below the 50-day average and keep falling in the short-term.  On 
the next rebound the 50-day average “deflects” the rally.  This 
price action relative to the moving average should be assumed, 
until otherwise resolved, to be a definite sign of a bearish 
trend reversal.  

As declines often LOSE ground faster than advances GAIN ground 
and the price breaks sharper, there will typically be fewer 
occasions of prices rebounding back up to and then being 
deflected by, a key moving average - but there are some 
occurrences of course.  

Let’s assume the reverse situation and that there’s an upside 
breakout above some important moving average like the 200-day, 
which has been previously acting as resistance. But prices rally 
above the average and keep going in the short-term.  If the index 
or stock then falls back to the average, only to rebound again, 
this provides an alert technically of a bullish upside reversal.  

If other technical and fundamental aspects are also “supporting” 
what is going on with a moving average penetration, the moving 
average break can provide a reason to initiate a trade. If so, 
the exit point on long calls might be a move of a certain amount 
below the moving average – on long puts, a move back above the 
moving average; e.g., a 3-5% adverse penetration of the moving 
average.  This makes for a stop order that will suggest or 
trigger an exit DURING the trading session as well as on a 
closing basis. 

When a market or individual stock begins a sideways consolidation 
or goes into a trading range, the 50 and 200-day moving averages 
will, over time, flatten out.  At this juncture the moving 
averages will act as a support area at times and offer resistance 
at other times - as can be seen in the chart below – 



 

Difficulties are presented in knowing if one should stay in a 
shifting trend like this.  If prices are moving above or below a 
key moving averages during these sideways trends or non-trending 
periods, use of exit points based on moving averages can result 
in being “whipsawed”.  Being whipsawed is a way of saying that 
soon after entry, there develops an opposite trend direction 
signal as closing prices “whip” back and forth or above and below 
the moving average(s) in question.  

To help avoid this frustrating situation, it’s suggested to use 
whatever technical analysis tools are providing a clear 
direction, such as provided by any top or bottom formations, 
trendline analysis and making a use of the key moving averages as 
a “confirming” or secondary tool – an example is shown in the 
chart below – 






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

Futures Trade Signals for Entries and Exits
by Alan Hewko
futures@OptionInvestor.com


As previously done, I shall use these abbreviations for this 
article, and the same "ES, YM, NQ" is often in the intra-day 
Market Monitor commentary:
                                       Ticker   1 Point move
                                       Symbol     is worth
ES = E-mini SP500 December futures      ES02Z      $50
YM = E-mini Dow $5 December futures     YM02Z      $ 5
NQ = E-mini NDX 100 December futures    NQ02Z      $20

The purpose of the article is so get you better acquainted with 
the Futures Trade Signal posts made intra-day in Market Monitor.

As a reminder, ES trades in Ticks (or smallest movement) or 
$12.50 and in price moves of 878.00, 878.25, 878.50, 878.75, 
879.00; and 1 ES point or movement is $50 (per contract.)

I respect that Futures are a new concept to many readers. Pretend
you are an seasoned option trader and are talking to someone who 
is an experienced stock trader, but someone who has never traded 
options before. You would spend some time talking about the 
basics, but at some point, when they were ready to start option 
trading, you would explain to them about the 5 different option 
exchanges, or how hitting the ISE option exchange gives great 
fast fills, and to perhaps avoid the ASE exchange if possible, 
etc. You might talk about how sometimes Limit orders for an entry 
are desired, but also that sometimes a Market order is the best 
method for entry.

In a perfect world, I could give you a Futures Signal on where 
the market is going to be an hour from now, and exactly what 
Limit Buy price to park your order at to be filled exactly at the 
bottom tick. Maybe someone can do that all the time, but I would 
imagine they add a few zeros to their monthly fee. [grins]

During the last week, in the Market Monitor, most of the ENTRIES 
were provided with Limit Orders or perhaps words such as "go long 
'close' to ES 858" as its downticking from 865 and likely to 
bounce near a known support of 858. However, there have also been 
times when I did not see a trade signal UNTIL IT PRINTED THERE; 
and in the time it took me to type the signal and suggested LIMIT 
PRICE to you, it kept changing so much (within 1-2 pts), I found 
myself deleting, retyping the current price for the LIMIT order, 
it moved 1/2 point, so delete and retype, etc. And by the time it 
was sent, it was "too late". This is not an excuse, merely a 
realization that I need to convey ENTRY points in a slightly 
different fashion under some market conditions.

I believe the EXIT signals on the other hand have worked better 
than the ENTRY signals, for often the EXIT signals were "from 
your ENTRY short price "near" 877 (realizing it may have been 
876.50 to 877.50), EXIT signals were often given very precisely 
such as "From Entry price on the short, take 1/2 position profit 
for +3, and target +5 for the remaining position with a break-
even stop"

Allow me to give you a perfect example of what I meant by "taking 
so many attempts to get the right LIMIT order price in the buy 
signal Market Monitor post, it was gone before it could be 
posted"

Friday morning, here's the chart:

ES (Emini SP500 futures): Friday Oct 18 9 AM to 4 PM


 

From Friday's Market Monitor at 9:28 AM (pre open)


  10/18/02,  09:28:36
     Index Futures  
  As a reminder for those without real-time futures quotes, if 
  you wish to check the overnight futures, and what happened 
  around 3 AM (off of Europe), go to www.livecharts.com and use 
  ticker ES02Z and select Chart, All Sessions, 15minute chart. 
  It's free, but delayed. 

  2 thoughts on open : Longs rush to take profits as they are not 
  getting their expected gap up, or dip buyers are still in the 
  market. If this was not option expiry, as it is a Friday with a 
  great deal of Long Profits, one would expect some Friday profit 
  taking - however Option Fridays can skew that and make for 
  sometimes difficult to read market days. ES is 873-874 
  currently, which is the area of Thur's Lows. Overnight high 
  889. Dow futures indicate Dow cash open of about 8230; NDX 
  futures are also currently trading at yesterday's Lows (940-
  941) Will most likely avoid the first 15 minutes and allow a 
  direction to establish.


While the 'guess' from pre-open was correct, that Longs not 
getting their expected gap up, rushed to sell at the open and did 
for the first 30 minutes. But as it was Option Friday, and 
sometimes very weird things happen the first 30 minutes, it was a 
smart decision not to offer a Trade Signal of "Short the Open at 
Market and target a 3 ES point gain from the short"

Next Market Monitor Post was at 10:05 AM

  10/18/02,  10:05:54
  Index Futures

  10 AM: many futures traders either completely avoid Option 
  Friday, or at least the first 30 minutes as Option Market  
  Makers adjust their inventory.

  ES 867, YM 8140, NQ 928. I'm now looking for a Long Scalp as I 
  expect Dow 8150 to offer some support, and that level is 200 
  points under last nights high. 


Without realizing it at the time, that would indeed been the 
perfect ENTRY for a long as it became day LOWS. 
This particular post was the one I kept typing for 6 minutes 
with, and kept changing the "BUY ES AT Limit 866.75" then delete 
and retype the price to "Buy ES at Limit 877.50" , then delete 
and retype to 878, then to 877, then to 878.25, etc until I 
finally just erased it and posted what you read above.

I would have loved to have posted "It's 945 AM, and it seems the 
preopen thought was correct, we have Longs taking profits, ES is 
869.50, and lets place a FUTURES TRADE SIGNAL ENTRY at LIMIT 
867.00" Some signal posts have been in that fashion, giving a 
suggest LIMIT ENTRY price 10-30 minutes before they occurred, but 
in all candor, before 10 AM, I was looking for the 865 level to 
be bottom, (885-20) and had been preparing a post to that effect, 
but when I saw Dow Cash 8150 support holding at 10 AM that 
provided my mental trigger that ES is now a LONG at WHATEVER 
price it was, in this case 867.

The above 10:05 AM post contained all the language to suggest a 
LONG ENTRY signal, without actually suggesting an entry limit 
price. :( If you were able to go long yourself off that comment, 
great. 

To prevent another situation like this happening again, if the 
same set of circumstances happened (namely, not really seeing the 
trade signal ENTRY until it was occurring, and not giving you 
much setup time, other than the pre-open comment), I shall make a 
post similar to this 

"ES 867, YM 8140. TRADE SIGNAL ENTRY LONG: Open a LONG ES at 
MARKET, but don't pay over 869"

That sentence seems less confusing than me typing:
"ES 867, YM 8140. TRADE SIGNAL ENTRY LONG: Open a LONG ES at 
LIMIT 869"

But I could see confusion with you thinking, ES is 867.75 x 
868.00 right now, and he's telling me to place a LIMIT order 1 
point higher than the market - I don't understand.

If you read carefully, both above 2 orders are really the EXACT 
SAME order - they really are :) but I believe the first one is 
much clearer, and shall post it in that fashion. This would also 
provide someone who was away for 15 minutes, and comes back to 
see the ENTRY signal, and with ES now at 872.50 realizes they are 
too late for that particular entry. (and that is also useful 
information).


Frankly, this is the reason that it is sometimes rather difficult 
to always post an ENTRY with a LIMIT order. On an average day, ES 
can easily trade 20 points from its intraday high to its low. 
That's 20 points. 

Remember some stocks from 1999-2000 like SDLI, QCOM, IDPH, RMBS, 
YHOO when it would be nothing for them to run 20-30 points in one 
day from intraday high to low. And also how quickly they 
sometimes moved up and down within a 25 cent to 75 cent range 
sometimes making trading them with LIMIT orders on your ENTRY 
somewhat difficult and that there were times you simply hit BUY 
at MARKET and used a LIMIT order on your EXIT. 
There are similarities to trading those stocks back then to 
trading futures today. You would love to be able to do every 
ENTRY with a LIMIT order, but sometimes MARKET orders are the 
best ENTRY method. A bit of real-world futures trading experience 
helps determine when a MARKET order is "safe" and when it is not 
safe. Market orders are "safe" 98% of the time in my view.

Another time MARKET orders are sometimes better were the 3 big 
earnings this week: INTC on Tue, IBM on Wed, and MSFT on Thur. 
You know that based on their earnings, there's going to be a fast 
move in the futures up or down and sometimes trying to buy or 
short LIMIT at the current price after the earnings come out 
leaves you with no fill. (and not happy as you watch the limit 
order you tried to be cute with to save $12.50 (one tick), that 
you didn't get a fill on from being "too cute" just move $300 
higher in 10 minutes without you.)

There are a few non-complicated ways around that:

Example: Wed 4 PM ahead of IBM's earnings
You know ES will obviously react up or down off IBM's earnings.
ES is currently chopping around 842 to 844.
You get 2 different orders ready to go:
Order 1 : Buy ES at 846.50 LIMIT
Order 2 : Short ES at 839.50 LIMIT (you don't an uptick to short)
The moment you see ES react to the IBM number that just came out, 
you hit the order in the direction it is moving in.
IBM beat - then just simply send Order 1, maybe you get filled at 
845.75, maybe you get filled at 846.25 with your limit buy at 
846.50 (as of course, it can fill at 846.25 or lower)
Once you are filled, either you select an EXIT target or perhaps 
view the Market Monitor for the comments given 5 minutes later.

I believe on both Wed and Thur night with IBM and MSFT, either I 
or someone else had posted very short comment on their earnings, 
such as "MSFT crushes earnings by 7 cents" and that becomes a 
long signal for you.

There is also yet another way to execute the same above trade.

Order 1: Buy ES at 846.50 LIMIT
Order 2: Short ES at 839.50 LIMIT (you don't an uptick to short)

Except this time, you do not wait to see what the actual earnings 
are and SEND * BOTH * orders LIVE * moments AHEAD OF THE EARNINGS 
RELEASE *

Why?
Both will be live working orders and your order is now in the 
order queue, and most probably, ONLY ONE will fill !
The one side moving in the direction of IBM's earnings, whether 
they are good or bad.

Does this have danger?

You are limiting your risk if you KEEP THE 2nd ORDER LIVE for 
perhaps 10-15 minutes or longer.
IBM beats, you get filled on a LONG perhaps at 845.75
ES is now strongly upticking to 848, 849, 850 
and you then cancel the SELL order at 839.50 limit but 
IMMEDIATELY replace it with another SELL order perhaps at 845 
with ES trading at 850.

Why?
What if IBM had beat the earnings, futures rocketed upward, and 
then 5 minutes later it came out they were warning going forward 
rather badly - futures would reverse and sell BUT you have your 
SELL order already live, so your damage is almost nothing.

________________________________________________________________


Next week, I would expect to make some Market Monitor Futures 
Trade Signals using the term 

MIT (Market if Touched)

That is a trading term somewhat unique to futures.

Example:
ES is coming down from a resistance at 885, went to a support at 
877, and is upticking slowly from 877 with 1 point of up/down 
chop action.

It would be hard to get the exact LIMIT order.
I don't wish to go long at MARKET just yet as I wish to confirm 
this up move a bit more.
I might type to you this:

"FUTURES TRADE SIGNAL ENTRY: 
ES at 876-877 chop currently, go LONG ES MIT 878.00
If filled, use 1 pt stop and target of +3 for exit"

If you scroll up to the chart in this article, look at the chop 
around 3 PM, at 876-877s. Often reversals for 3-4 ES points occur 
at 3 PM when bonds close, and that was the "why" of the above 
trade signal.

In English, the "go LONG ES MIT 878.00"
simply means this: 
At the FIRST print of LAST PRICE = 878.00 
you get filled LONG * AT MARKET

in the real-world, this means you would either get filled LONG at 
878.00 or possibly 878.25

Let's assume your fill was 878.25
You note your ENTRY, and find the price point of your 1 pt stop 
which would be 877.25 and immediately -repeat- immediately send a 
LIVE working order to SELL at 881.25 
(your ENTRY of 878.25 + 3 target = 881.25)
And you would have gotten filled on your EXIT as ES traded up to 
883.

Did I see this trade signal a little after 3 PM?

Yes.

So why didn't I post it?

Similar to the 10 AM situation, by the time I saw it, realized 
that if 877 (a 50% retracement number mentioned a few times 
today) would hold and maybe bounce to retrace perhaps 1/2 of that 
877 level to the 888 high; and started typing an EXACT LIMIT 
order entry of 877, then 877.50, then 878.25, then ...it was too 
late to post it, have you see it, and try to get a fill with a 
LIMIT.

However, if I had posted the above "ES is chopping 876-877s, go 
LONG ES MIT 878.00"

You hopefully will now have an idea of the Trade Signal being 
given and what it means.

OCO

"Once cancels the other"

ES is sideways at 870, it appears it shall either climb up to the 
gap from this morning at 880

-or-

head back lower to make a double bottom at today's low of 858.
Whichever way it starts to move should continue given the 
lateness of the day.

FUTURES TRADE SIGNAL ENTRY
There are two but we only expect one to fill.
ES remains chopping between 869 and 871
Buy ES at Market MIT 873.00
OCO (ONE CANCELS THE OTHER)
Short ES at MARKET MIT 867.00

We've already explained what MIT is, but this says in English:
IF ES trades at 873 open a LONG at market (as it now appears that 
once its broken out of this sideways action of 869-871 it will 
head back up to make a double top near its day highs of 888

If this LONG fills, then the "short at MIT 867 is CANCELED"

It's that simple. Some futures offer OCO orders, some do not; and 
in that case, you the human would need to KILL the remaining 
unfilled order.


"OR BETTER"

The last trading term I wish to explain is "OR BETTER"

Example: ES is 875.25 and upticking near resistance.

FUTURES TRADE SIGNAL ENTRY: 
SHORT : Open Short ES at 875.75 'OR BETTER' and use stop of 1 
point from your entry

Perhaps in the 1-3 minutes it took to type and post that Market 
Monitor message, and for you to read it, ES is now at 877.00 
(as 877 is a BETTER price than the posted 875.75 SHORT ENTRY,
if you wished to take the signal, you would open a Short at 877, 
and keep a 1 pt stop.

By the same token, if ES was at 873.00, you would NOT take the 
short signal as 873 is NOT a better price to short than the 
posted entry of 875.75, and you might place a short at 875.75 to 
await a possible fill.

Reason some signals are given in that format is there are times 
of great "chop" near support and pivot areas, and realizing there 
is 2-5 minutes lag between me starting to type a post, posting 
it, and then having you read it allows for an entry at a 'better' 
price.

________________________________________________________________

FUTURES BROKERS

Many emails have come in requesting information for suggested 
online futures brokers. In order to serve you the best way 
possible, discussions are underway currently and hopefully we 
shall have detailed information for you on the website shortly.

Briefly - trading futures online is execution wise
JUST AS EASY AS TRADING MSFT STOCK or the QQQs.

________________________________________________________________

Prior Trader Corner articles on Futures that I wrote are below if 
you wish to either re-read them, or if you missed them the first 
time:


10-8-02 
Using Index Futures to Hedge an Index Option position: 
http://www.OptionInvestor.com/traderscorner/100802_1.asp

10-7-02 
Index Futures Primer
http://www.OptionInvestor.com/traderscorner/100702_1.asp

10-16-02 
Using Dow Futures to hedge IBM options
http://www.OptionInvestor.com/traderscorner/101602_1.asp 

________________________________________________________________


If, after reading a section of this twice, still don't understand 
these examples and terms, or have any questions on anything in 
this or a prior article, please email me and I shall try and 
answer.

I would like to ask our audience a question.  Is this article too 
complicated?  Does it need more explanation on my part?

I do not believe it is, if you read it twice; but then again I'm 
biased since I wrote it. 



Alan Hewko

email:
futures@OptionInvestor.com


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The Option Investor Newsletter                   Sunday 10-20-2002
Sunday                                                      5 of 5

To view this email newsletter in HTML format with embedded
charts and graphs, click here:
http://www.OptionInvestor.com/htmlemail/d20y_5.asp

In Section Five:

Covered Calls: Trading Basics: Q&A With The Editor
Naked Puts: Options 101: Understanding Risk-Reward (Part II)
Spreads/Straddles/Combos: Shhhhh...Don't Make A Sound.  You Might
Wake The Bear!

Updated In The Site Tonight:
Market Watch
Market Posture


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*************
COVERED CALLS
*************

Trading Basics: Q&A With The Editor
By Mark Wnetrzak

One of our readers asked for some information on covered-calls
with indexes and exchange-traded funds.

Attn: Covered-Calls editor
Subject: Option Trading Strategies

Hello,

Could you suggest CC on index plays-like the Dow and the QQQs?

I would love to see a section on this but in the meantime could
you suggest some for November?
 
Thanks.

RG


Hello RG,

Regarding covered-call plays on indexes and exchange traded funds:

First, here is a link to the CBOE that lists the majority of
exchange-traded funds:

http://www.cboe.com/OptProd/ProductSpecs.asp#structured

Second, it is fairly difficult to obtain much downside protection
in the QQQ or the DIA options as they trade in $1 increments and
their movement is dictated by the relative components.  Essentially,
the success of the overall position would be based more on the
anticipated market direction and less on the benefits of writing
the call.

Remember, these popular instruments are used mainly by day-traders
or scalpers, with many experienced "at-home" players trading this
security exclusively.  You can sell them short without an up-tick,
and many are traded on a parallel track with futures counterparts,
especially the Chicago Mercantile Exchange's E-mini contracts.
This generates arbitrage and hedging by big players, and it also
attracts small-position traders who don't have adequate funds to
open futures accounts.

It's quite a volatile combination than can equate to large moves or
quick reversals and that's not the most favorable environment for
the conservative trader.

Regards,

Mark W.
coveredcalls@OptionInvestor.com


Editors Note:  For those of you who are new to stock indexes and
futures, read on...

Stock indexes are portfolios, which are composed of many different
company's shares.  Different indexes have different values because
of the composite shares' performance and the way they are weighted
in the index.  The S&P 500 Index for example, is a value weighted
combination of 500 different companies, representing approximately
80% of the value of all the shares traded on the New York Stock
Exchange.  Each company's weight in the index is determined by its
relative market importance and their values are then computed by
multiplying each company's number of outstanding shares of common
stock by the share's current cash market price.  These values then
are summed and compared to a 1941-1943 base period to determine
the final cash value.  The cash market values of the S&P 500 Index
represent the interaction between a market-wide rate of return
and the average growth rate in earnings (and dividends) and will
accurately reflect the overall market supply and demand factors.

In addition to acting as general market indicators, indexes have
been widely adopted as underlying instruments for futures.  The
underlying interest may be anything from grain to gold and silver
or Treasury bonds.  In the case of a futures contract, the seller
agrees to provide an underlying commodity (or instrument) at a
specified price and time while the buyer of the futures contract
agrees to buy the product on the same terms.  Historically, the
need for futures grew out of America's agricultural economy of
the early 1900's.  Farmers would agree to sell their crops, when
harvested, at some specific future date, at a profitable price.
Speculators would purchase these contracts with the expectation
of reselling the crops at even higher prices, thereby making a
profit for themselves.  In addition to market speculators, food
processors and wholesale manufactures would purchase futures
to guarantee the cost of raw materials for future production.

In time, the futures contract has become a trading vehicle of
its own and it is now offered on a host of underlying interests,
including stock indexes.  The problem with index futures is the
actual delivery of the underlying instrument in the event the
seller decides to "exercise" the contract.  In reality, only a
small percentage of futures are exercised, so physical delivery
is not likely.  Nevertheless, when a contract is exercised, the
seller's duty is to deliver the commodity; wheat, orange juice,
or pork bellies to the buyer.  In the case of an index future,
cash is the actual method of payment.

The first derivatives were based on stocks but today options are
traded on a number of instruments such as government securities,
currencies, and indexes.  While options are very different from
futures in many ways, they are also used by portfolio managers
to hedge market risk.  Most options involve the delivery of the
underlying interest but with indexes, the exercise of the option
results in a cash payment.  Trading options on futures, including
index futures is much more complicated.  When a futures option is
exercised, the buyer takes delivery of the futures contract. To
take delivery of the cash, the owner has to exercise the futures
contract.  To protect their holdings against risk, institutional
investors must maintain large and often complex positions in the
index futures and their options.  These portfolios are difficult
to manage without the aid of computerized trading programs and
that is why most retail traders use simple strategies on common
indices such as the S&P 500 Index (SPX), the S&P 100 Index (OEX),
and more recently, the NASDAQ 100 Unit Trust (QQQ).


SUMMARY OF PREVIOUS CANDIDATES
*****

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.

Note:  Margin not used in calculations.

Stock  Price  Last   Call  Strike Price   Gain   Potential
Symbol Picked Price  Month Sold   Picked  /Loss  Mon. Yield

CRY     2.94   3.30   OCT   2.50  0.75  *$  0.31  15.4%
IMCL    7.77   7.83   OCT   7.50  0.75  *$  0.48  14.9%
ISSX   13.65  17.17   OCT  12.50  1.70  *$  0.55  10.0%
MENT    6.17   7.80   OCT   5.00  1.35  *$  0.18   8.1%
NWRE   13.75  13.38   OCT  12.50  1.90  *$  0.65   7.9%
PLMD   26.25  29.31   OCT  25.00  2.35  *$  1.10   6.7%
ISIS    9.15   9.00   OCT   7.50  1.95  *$  0.30   6.0%
MACR    8.49   9.15   OCT   7.50  1.45  *$  0.46   5.7%
GNSS    8.73  12.29   OCT   7.50  1.60  *$  0.37   5.6%
UTSI   16.25  16.70   OCT  15.00  1.80  *$  0.55   5.5%
CVC     9.48   8.78   OCT   7.50  2.50  *$  0.52   5.4%
AMZN   16.55  19.04   OCT  15.00  1.90  *$  0.35   5.2%
QCOM   28.08  36.20   OCT  25.00  4.20  *$  1.12   5.1%
RTIX    8.00   8.54   OCT   7.50  0.75  *$  0.25   5.0%
BSTE   29.40  27.52   OCT  25.00  5.70  *$  1.30   4.8%
NOK    13.95  16.39   OCT  12.50  2.20  *$  0.75   4.6%
NWRE   15.97  13.38   OCT  12.50  4.10  *$  0.63   4.6%
PPD    21.80  20.16   OCT  17.50  5.00  *$  0.70   4.5%
SYMC   34.30  39.00   OCT  30.00  5.20  *$  0.90   4.5%
KDE    23.39  27.25   OCT  22.50  1.55  *$  0.66   4.4%
FLE     6.02   6.47   OCT   5.00  1.30  *$  0.28   4.3%
CMLS   16.85  18.42   OCT  15.00  2.55  *$  0.70   4.3%
UDI    22.58  19.99   OCT  20.00  3.30   $  0.71   4.0%
AES     2.92   1.29   OCT   2.50  0.75   $ -0.88   0.0%
PRX    28.20  21.10   OCT  25.00  4.30   $ -2.80   0.0%

SNDK   14.30  19.70   NOV  12.50  2.75  *$  0.95   7.1%
VOXX    7.40   7.87   NOV   7.50  0.45  *$  0.55   6.9%
BCGI   10.30  11.26   NOV  10.00  1.10  *$  0.80   6.3%
TMCS   18.14  20.33   NOV  17.50  1.80  *$  1.16   6.2%
FDRY    6.02   6.10   NOV   5.00  1.35  *$  0.33   5.1%
MEDI   24.95  27.70   NOV  22.50  3.70  *$  1.25   5.1%
MCHP   23.18  24.69   NOV  20.00  4.20  *$  1.02   4.7%
CPB    22.59  23.02   NOV  22.50  1.05  *$  0.96   3.9%
MENT    7.50   7.80   NOV   5.00  2.70  *$  0.20   3.6%
WWCA    2.71   2.30   NOV   2.50  0.50   $  0.09   2.9%

*$ = Stock price is above the sold striking price.

Comments:

Ok, the first part was easy, but now that the market euphoria is
beginning to wane, will support hold?  Next week should offer some
clues on whether this rally has legs or is simply another bear-trap.
The lone disappointment this week was Pharmaceutical Resources
(NYSE:PRX), which suffered from a federal judge ruling on Monday
reference AstraZeneca PLC's patent on Prilosec, a popular heartburn
treatment.  As for November's positions, the speculation play in
Western Wireless (NASDAQ:WWCA) is looking more speculative.  Monitor
your positions closely as the expected consolidation of the recent
"rabid" rally could easily transform into a new leg lower.

Positions Closed:  Osteotech (NASDAQ:OSTE), Luminex (NASDAQ:LMNX)
and Restoration Hardware (NASDAQ:RSTO).



NEW CANDIDATES
*********

Sequenced by Company
*****
Stock  Last  Call Strike  Option  Last Open  Cost   Days  Target 
Symbol Price Mon. Price   Symbol  Bid  Int.  Basis  Exp.  Yield

BCGI   11.26  NOV 10.00   QGB KB  1.60 10     9.66   28    3.8%
CREE   14.98  NOV 12.50   CVO KV  2.90 779   12.08   28    3.8%
CVH    37.55  NOV 35.00   CVH KG  3.90 2540  33.65   28    4.4%
GNSS   12.29  NOV 10.00   QFE KB  2.75 539    9.54   28    5.2%
MACR    9.15  NOV  7.50   MRQ KT  2.00 172    7.15   28    5.3%
PCS     2.82  NOV  2.50   PCS KR  0.50 835    2.32   28    8.4%
VSAT    8.47  NOV  7.50   IQS KU  1.40 134    7.07   28    6.6%

Sequenced by Target Yield (monthly basis)
*****
Stock  Last  Call Strike  Option  Last Open  Cost   Days  Target 
Symbol Price Mon. Price   Symbol  Bid  Int.  Basis  Exp.  Yield

PCS     2.82  NOV  2.50   PCS KR  0.50 835    2.32   28    8.4%
VSAT    8.47  NOV  7.50   IQS KU  1.40 134    7.07   28    6.6%
MACR    9.15  NOV  7.50   MRQ KT  2.00 172    7.15   28    5.3%
GNSS   12.29  NOV 10.00   QFE KB  2.75 539    9.54   28    5.2%
CVH    37.55  NOV 35.00   CVH KG  3.90 2540  33.65   28    4.4%
BCGI   11.26  NOV 10.00   QGB KB  1.60 10     9.66   28    3.8%
CREE   14.98  NOV 12.50   CVO KV  2.90 779   12.08   28    3.8%


Company Descriptions

LB-Last Bid price, OI-Open Interest, CB-Cost Basis or break-even 
point, DE-Days to Expiry, TY-Target Yield (monthly basis).

*****
BCGI - Boston Communications  $11.26  *** Own This One! ***

Boston Communications Group (NASDAQ:BCGI), an S&P Small Cap 600
Index company and Russell 2000 Index company, is a leader in
transaction processing solutions for real-time wireless subscriber
management and payment services, delivering prepaid wireless,
mobile commerce, ATM Recharge, and other billing services.  In
1988, BCGI began providing solutions to carriers through a unique
combination of industry-leading proprietary software applications,
a scalable transaction processing platform, and its Intelligent
Voice Services Network (IVSN).  Through this nationwide real-time
infrastructure, BCGI provides one or more of its services to over
70 wireless carriers and resellers, including four of the top six
national carriers.  The firm's software, transaction processing
platform, and IVSN make up the company's Prepaid Wireless service
offering, a market leader in one of the highest growth segments of
the wireless communications industry.  Shares of BCGI have been on
the move in recent sessions and investors who like the outlook for
the company can establish a low risk cost basis in the issue with
this position.  Earnings are due October 22.

NOV 10.00 QGB KB LB=1.60 OI=10 CB=9.66 DE=28 TY=3.8%


*****
CREE - Cree  $14.98  *** Technical Reversal? ***

Cree (NASDAQ:CREE) is engaged in the development and manufacture
of compound semiconductor materials and electronic devices made
from silicon carbide (SiC), and a developer and manufacturer of
optoelectronic and electronic devices made from gallium nitride 
(GaN) and related materials.  The company also produces RF power
transistor components and modules for wireless infrastructure
applications using silicon-based bipolar and laterally diffused
metal oxide semiconductor process technologies.  Cree operates 
its business in two segments, the Cree segment, which consists 
of its SiC-based products and research contracts, and the Cree 
Microwave segment, which consists of RF transistors and RF 
transistor modules based on a silicon platform.  Cree reported
earnings on Thursday and said it earned $3.88 million, or 5 
cents a share as revenue rose 13 percent to $48.8.  Investors
are apparently happy with the results as the stock rallied 
almost $2.00.  Our outlook is also bullish, due to the recent
technical reversal and this position offers a relatively low 
risk basis in the issue.

NOV 12.50 CVO KV LB=2.90 OI=779 CB=12.08 DE=28 TY=3.8%


*****
CVH - Coventry $37.55  *** Another "All-Time" High ***

Coventry Health Care (NYSE:CVH) is a managed healthcare company. 
Coventry has approximately 1.84 million members operating health
plans under the names Coventry Health Care, Coventry Health and 
Life, Carelink Health Plans, Group Health Plan, HealthAmerica,
HealthAssurance, HealthCare USA, Southern Health and WellPath. 
Coventry operates a diversified portfolio of local market health
plans serving 14 states, primarily in the Mid-Atlantic, Midwest
and Southeast regions.  The company's health plans are generally
located in small to medium-sized metropolitan areas.  The price
history of Coventry reveals one of the better charts we've seen
in the broader-market groups (jinx?) and investors who want to
diversify their portfolio into the health care industry should
consider this position.  Earnings are due on October 29.

NOV 35.00 CVH KG LB=3.90 OI=2540 CB=33.65 DE=28 TY=4.4%


*****
GNSS - Genesis Microchip  $12.29  *** Breaking Out? ***

Genesis Microchip (NASDAQ:GNSS) designs, develops and markets
integrated circuits that receive and process digital video and
graphic images.  The company's ICs are typically located inside
a display device and process incoming images for viewing on that
display.  Genesis is targeting the flat-panel computer monitor, 
flat-panel television and progressive scan cathode ray tube (CRT)
television markets and other potential mass markets.  Genesis
operates through subsidiaries and offices in the United States,
Canada, China, India, Japan, South Korea and Taiwan.  Genesis
has rallied strongly this week as investors anticipate earnings
due on October 23.  In September, the company raised its fiscal
2nd-quarter earnings and revenue expectations.  The technical 
break-out above a four-month base on heavy volume suggests more
upside potential and this position offers favorable speculation
for investors who are ready to "bottom-fish" in the semiconductor
segment.

NOV 10.00 QFE KB LB=2.75 OI=539 CB=9.54 DE=28 TY=5.2%


*****
MACR - Macromedia  $9.15  *** Earnings Rally! ***

Macromedia (NASDAQ:MACR) provides software that empowers millions
of developers and designers to create effective user experiences 
on the Internet.  The company's integrated family of software 
technologies enables the development of a wide range of Internet 
solutions including Websites, rich media content, and Internet 
applications across multiple platforms and devices.  With an 
installed base of more than 3 million developers and designers,
and with Macromedia Flash Player available to 98% of Web users,
the company is a strategic information technology supplier to 
customers in the business, government and educational markets. 
Macromedia posted a much narrower loss than expected despite a
slight drop in sales, and projected solid growth in revenue for
the current quarter.  Obviously investors were pleased as the
stock jumped almost $2 on heavy volume after the news.  This 
position offers excellent reward potential at the risk of owning
this industry-leading issue at a favorable cost basis.

NOV 7.50 MRQ KT LB=2.00 OI=172 CB=7.15 DE=28 TY=5.3%


*****
PCS - Sprint PCS Group  $2.82  *** Cheap Speculation! ***

Sprint (NYSE:PCS) operates a 100% digital personal communication
system (PCS) wireless network in the United States, using a single
frequency and a single technology.  Sprint PCS, a subsidiary of 
Sprint Corporation, comprises Sprint Corporations' wireless PCS 
operations.  The PCS Group has licenses to serve the entire United
States population, including Puerto Rico and the United States 
Virgin Islands.  The PCS Group also includes Sprint Corporation's
investment in Pegaso Telecomunicaciones, S.A. de C.V. (Pegaso), a
wireless PCS operation in Mexico; SVC BidCo L.P., a joint venture 
to acquire wireless spectrum rights, and Virgin Mobile U.S.A., a
joint venture to market wireless services.  Shares of PCS jumped
on Friday after the company introduced more competitive price plans
in a bid to regain customers and encourage them to try its data 
service a day after posting its first-ever subscriber loss.  Sprint
PCS beat analysts' expectations on Thursday as the company narrowed
its 3rd-quarter loss.  This position offers a reasonable reward
for investors who like the recovery prospects for the wireless
sector.

NOV 2.50 PCS KR LB=0.50 OI=835 CB=2.32 DE=28 TY=8.4%


*****
VSAT - ViaSat   $8.47   *** On The Mend ***

ViaSat (NASDAQ:VSAT) is a provider of advanced broadband digital
satellite communications and other wireless networking and signal
processing equipment and services to the government and commercial
marketplace.  The company's defense products include tactical data
links, such as advanced multi-function information distribution
system (MIDS) product line, simulation and test equipment, ultra-
high frequency (UHF) Demand Assigned Multiple Access satellite
communications products, and the networks business, where the
company's information security segment is gaining traction.  VSAT
has rallied off its August low after the company said it had booked
$80 million in new orders in its first quarter.  Recently, the
company has reported several new subcontracts and a $10 million 
contract with the National Security Agency.  We simply favor the
recent rally above the August and September highs (which now act
as support) and our conservative position offers a great way to
participate in the future movement of the issue with relatively
low risk.

NOV 7.50 IQS KU LB=1.40 OI=134 CB=7.07 DE=28 TY=6.6%


*****

*****************
SUPPLEMENTAL COVERED CALL CANDIDATES
*****************

The following group of issues is a list of additional 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
and positions are suitable for your experience level, risk-reward
tolerance and portfolio outlook.  They will not be included in
the weekly portfolio summary. 

Sequenced by Target Yield (monthly basis)
*****
Stock  Last  Call Strike  Option  Last Open  Cost   Days  Target 
Symbol Price Mon. Price   Symbol  Bid  Int.  Basis  Exp.  Yield

CRXA    7.78  NOV  7.50   CVQ KU  0.80 404    6.98   28    8.1%
PPD    20.16  NOV 17.50   PPD KW  3.70 812   16.46   28    6.9%
ESPD   12.85  NOV 12.50   ENU KV  1.00 74    11.85   28    6.0%
PSFT   17.14  NOV 15.00   PQO KC  2.80 1065  14.34   28    5.0%
ISSX   17.17  NOV 15.00   ISU KC  2.75 345   14.42   28    4.4%
PLMD   29.31  NOV 25.00    PM KE  5.20 41    24.11   28    4.0%
INVN   35.05  NOV 30.00   FQQ KF  6.10 632   28.95   28    3.9%
SLAB   24.80  NOV 20.00   QFJ KD  5.50 68    19.30   28    3.9%
QCOM   36.20  NOV 32.50   AAW KZ  4.80 12553 31.40   28    3.8%
CKFR   15.70  NOV 12.50   FCQ KV  3.60 346   12.10   28    3.6%



*****************
NAKED PUT SECTION
*****************

Options 101: Understanding Risk-Reward (Part II)
By Ray Cummins

Of all the financial instruments available to the retail investor
in the stock market, options offer the greatest reward potential.

People buy and sell options in order to make money.  Of course,
anytime you enter a trade, there is also the possibility of loss.
That is the inherent "risk" component associated with financial
instruments and in most strategies, potential reward is inversely
proportionate to the possibility of loss.  As humans, we are very
familiar with risk; it is part of our lives on a continuous basis.
Almost everything we do entails some level of danger or peril and
although a few risks are great, possibly even life threatening,
most are hardly noticeable.  The reason is, the majority of people
are very good at risk-management -- they simply don't realize it.
Those who do are quick to learn that that the key to success in
trading options is to correctly appraise the risk-reward tradeoff
in each prospective position and if the outlook is favorable, use
all the available risk control methods to enhance the probability
of profit.

The first step in developing this ability is to create a simple
risk-management process.  The procedure begins with identifying
and understanding the potential risk in a position.  Of course,
this includes recognizing any personal attitudes or attributes
that could lead to negative results in a trade, such as having
unrealistic expectations or allowing emotions to affect your
decisions.  Among new traders, failing to follow a trading plan
that incorporates appropriate profit goals and loss limits is one
of the most common faults in this category.  Another frequent
error stems from a lack of portfolio diversification, a proven
risk-management technique that combines a variety of positions
in a range of market segments, thus reducing the impact of any
one trade on overall performance.  Some risks are inherent in all
financial instruments.  The most obvious example is adverse price
movement due to unexpected company events or significant news or
economic data.  The impact of the recent slump in the economy on
corporate profits is well known and that condition often results
in negative earnings surprises; a substantial risk for those who
favor bullish strategies.  In addition, the rise in volatility
surrounding an earnings announcement has considerable affect on
option premiums and unwary traders can lose money even when they
have correctly predicted the movement of the underlying issue.
One final risk stems from using trading techniques that are too
complex.  This is one of the most destructive tendencies among
novice market participants because it is impossible to manage or
control any risk which you do not completely understand.

Once you've identified all the possible (tangible) risks, the next
step is to evaluate them.  The question you should ask is, "How
likely is it that each of these risks will occur and what will the
impact be on the outlook for the position?"  A correct answer is
the key to properly understanding the risk-reward tradeoff, thus
all the possible alternatives should be carefully reviewed.  Among
the factors to be considered are: potential return and draw-down,
target time frame and maximum holding period, anticipated trading
range of the underlying, and available risk-management strategies.
After careful analysis of the components affecting potential profit
and loss, the next step is to review the techniques for controlling
risk in the specific strategy you are using.  Some traders focus on
sophisticated (mathematical) position-management strategies while
other people utilize simple, proven methods known to even the most
inexperienced investor.  Among all the techniques used for limiting
losses, a mechanical stop-loss order on the option price is easiest
to use.  However, in recent years, proprietary systems that allow
option orders to be triggered by the price of the underlying issue
have become more popular.  While effective position management is
critical to long-term success, incorrect adjustments and untimely
transitions or "roll-outs" can often be more detrimental than no
management at all.  Another oft-repeated mistake among new traders
is confusing fluctuation with loss, and until the two conditions
are clearly defined, there is little chance of long-term success.

After you have identified a position's potential risk and reward,
calculated the likelihood of a profitable outcome and evaluated
the maximum impact of a loss, and reviewed the available risk
control methods, it is time to act.  But, reaching this point in
the risk-management process does not make the final step any easier.
In fact, deciding whether or not to "pull the trigger" is often
most difficult choice a trader must make and only with extensive
study and preparation can you be confident that your decision is
the right one.

Good Luck! 

                        *** WARNING!!! ***

Occasionally a company will experience catastrophic news causing
a severe drop in the stock price.  This may cause a devastatingly
large loss which may wipe out all of your smaller gains.  There is
one very important rule: Don't sell naked puts on stocks that you
don't want to own!  It is also important that you consider using
trading STOPS on naked option positions to help limit losses when
the stock price drops.  Many professional traders suggest closing
the position when the stock price falls below the sold strike or
using a "buy-to-close" STOP at a price that is no more than twice
the original premium from the sold option.


SUMMARY OF PREVIOUS CANDIDATES 
*****

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.

Stock  Price  Last   Call  Strike Price   Gain   Potential
Symbol Picked Price  Month Sold   Picked  /Loss  Mon. Yield

CVC     9.94   8.78   OCT   7.50  0.25  *$  0.25  16.2%
RGLD   18.70  16.61   OCT  15.00  0.45  *$  0.45  11.6%
PPD    21.41  20.16   OCT  15.00  0.60  *$  0.60  10.7%
ABFS   27.53  30.20   OCT  25.00  0.90  *$  0.90  10.4%
ULAB   18.83  21.94   OCT  15.00  0.40  *$  0.40  10.4%
OVER   23.40  30.07   OCT  20.00  0.30  *$  0.30  10.4%
AG     22.63  25.50   OCT  20.00  0.45  *$  0.45   9.5%
RGLD   18.05  16.61   OCT  15.00  0.50  *$  0.50   9.3%
UTHR   16.50  15.01   OCT  15.00  0.55  *$  0.55   8.5%
QCOM   29.26  36.20   OCT  25.00  0.30  *$  0.30   8.4%
GILD   33.56  34.25   OCT  25.00  0.55  *$  0.55   8.2%
MMSI   20.14  20.10   OCT  18.00  0.35  *$  0.35   8.1%
UDI    22.75  19.99   OCT  20.00  0.25   $  0.24   7.9%
UDI    24.25  19.99   OCT  20.00  0.30   $  0.29   7.3%
BSX    30.18  36.10   OCT  27.50  0.85  *$  0.85   7.2%
AMZN   16.61  19.04   OCT  12.50  0.30  *$  0.30   7.2%
TTWO   29.45  27.03   OCT  25.00  0.35  *$  0.35   6.6%
UTHR   17.01  15.01   OCT  15.00  0.30  *$  0.30   6.4%
COF    38.92  30.17   OCT  27.50  0.60  *$  0.60   6.2%
SYMC   34.30  39.00   OCT  25.00  0.30  *$  0.30   6.1%
CYH    27.10  26.42   OCT  25.00  0.25  *$  0.25   6.0%
TTWO   26.20  27.03   OCT  20.00  0.30  *$  0.30   5.9%
FDS    25.95  27.00   OCT  22.50  0.35  *$  0.35   5.2%
INVN   35.76  35.05   OCT  25.00  0.45  *$  0.45   5.1%
STN    14.15  16.96   OCT  12.50  0.25  *$  0.25   5.1%
PRX    28.20  21.10   OCT  22.50  0.25   $ -1.15   0.0%

AMLN   16.95  17.63   NOV  15.00  0.75  *$  0.75  11.7%
AMZN   18.46  19.04   NOV  15.00  0.55  *$  0.55  10.7%
HOLX   11.74  12.20   NOV  10.00  0.50  *$  0.50  10.5%
HLYW   17.20  19.95   NOV  15.00  0.60  *$  0.60   8.2%
NOK    14.44  16.39   NOV  12.50  0.40  *$  0.40   8.2%
QCOM   31.37  36.20   NOV  25.00  0.65  *$  0.65   8.2%
AMLN   15.80  17.63   NOV  12.50  0.40  *$  0.40   8.1%
KDE    23.77  27.25   NOV  20.00  0.70  *$  0.70   7.9%
COCO   37.75  36.99   NOV  30.00  0.75  *$  0.75   7.9%
VZ     35.19  34.97   NOV  30.00  0.70  *$  0.70   6.3%
GENZ   23.57  28.45   NOV  17.50  0.35  *$  0.35   6.0%
OVER   27.51  30.07   NOV  20.00  0.40  *$  0.40   5.9%

*$ = Stock price is above the sold striking price.

Comments:

Stock prices soared this week, albeit from extremely oversold
conditions, and despite the near-term bullish outlook, many
analysts believe the current recovery rally will end with a
plunge through the July lows.  Along those lines, one expert
recently noted, "The wave theories, sober valuation analysis,
and the macroeconomic backdrop all suggest severe troubles
ahead."  With that bearish forecast in mind, option traders
are reminded to remain vigilant in position management and
exit or adjust any plays on issues with less than outstanding
technical indications.

Positions Closed: Integrated Defense Technology (NYSE:IDE),
Meridian Gold (NYSE:MDG), Boyd Gaming (NYSE:BYD), and Right
Management Consultants (NASDAQ:RMCI).



NEW CANDIDATES
*********

Sequenced by Company
*****
Stock  Last  Call Strike  Option  Last Open  Cost   Days  Target 
Symbol Price Mon. Price   Symbol  Bid  Int.  Basis  Exp.  Yield

AFFX   23.99  NOV 17.50   FIQ WW  0.30 623   17.20   28    6.4%
AMZN   19.04  NOV 15.00   ZQN WC  0.50 9276  14.50   28   12.6%
INVN   35.05  NOV 25.00   FQQ WE  0.40 1487  24.60   28    5.9%
OVER   30.07  NOV 22.50   GUO WX  0.45 931   22.05   28    7.6%
PPDI   26.99  NOV 22.50   PJQ WX  0.45 32    22.05   28    7.2%
QCOM   36.20  NOV 30.00   AAW WF  0.65 8381  29.35   28    7.9%
SYMC   39.00  NOV 30.00   SYQ WF  0.45 4289  29.55   28    5.9%
TMCS   20.33  NOV 17.50   QMF WW  0.55 20    16.95   28   10.2%
VXGN   10.40  NOV  7.50   UWG WU  0.35 126    7.15   28   15.6%

Sequenced by Target Yield (monthly basis)
******
Stock  Last  Call Strike  Option  Last Open  Cost   Days  Target 
Symbol Price Mon. Price   Symbol  Bid  Int.  Basis  Exp.  Yield

VXGN   10.40  NOV  7.50   UWG WU  0.35 126    7.15   28   15.6%
AMZN   19.04  NOV 15.00   ZQN WC  0.50 9276  14.50   28   12.6%
TMCS   20.33  NOV 17.50   QMF WW  0.55 20    16.95   28   10.2%
QCOM   36.20  NOV 30.00   AAW WF  0.65 8381  29.35   28    7.9%
OVER   30.07  NOV 22.50   GUO WX  0.45 931   22.05   28    7.6%
PPDI   26.99  NOV 22.50   PJQ WX  0.45 32    22.05   28    7.2%
AFFX   23.99  NOV 17.50   FIQ WW  0.30 623   17.20   28    6.4%
INVN   35.05  NOV 25.00   FQQ WE  0.40 1487  24.60   28    5.9%
SYMC   39.00  NOV 30.00   SYQ WF  0.45 4289  29.55   28    5.9%


Company Descriptions

LB-Last Bid price, OI-Open Interest, CB-Cost Basis or break-even 
point, DE-Days to Expiry, TY-Target Yield (monthly basis).

*****
AFFX - Affymetrix  $23.99  *** Genomic Research Giant! ***

Affymetrix (NASDAQ:AFFX) is a pioneer in creating breakthrough
tools that are driving the genomic revolution.  By applying the
principles of semiconductor technology to the life sciences,
Affymetrix develops and commercializes systems that enable
scientists to improve the quality of life.  The firm's customers
include pharmaceutical, biotechnology, agrochemical, diagnostics
and consumer products companies as well as academic, government
and other non-profit research institutes.  Affymetrix offers an
expanding portfolio of integrated products and services, as well
as its integrated GeneChip platform, to address growing markets
focused on understanding the relationship between genes and
human health.  AFFX recently announced it is now taking orders
for its new GeneChip re-sequencing array, a powerful DNA analysis
tool on the same proven Affymetrix platform that has become the
industry standard for mRNA gene expression research.  Investors
who want to own a popular issue in the genomic industry should
consider this position.

NOV 17.50 FIQ WW LB=0.30 OI=623 CB=17.20 DE=28 TY=6.4%


*****
AMZN - Amazon.com  $19.04  *** Internet Retail Leader ***

Amazon.com (NASDAQ:AMZN) is a website where customers can find
and discover anything they may want to buy online.  The company
lists millions of items in categories such as books, music, DVDs,
videos, consumer electronics, toys, camera and photo items, PC
software, computer and video games, tools and hardware, outdoor
living items, kitchen and house-wares products, toys, baby and
baby registry, travel services and magazine subscriptions.  At
its Amazon Marketplace, Auctions and zShops services, businesses
and individuals can sell virtually any product to millions of
customers, and with Amazon.com Payments, sellers are able to
accept credit card transactions in addition to other methods of
payment.  The company operates a U.S.-based Website: amazon.com,
and four internationally focused Websites: www.amazon.co.uk,
www.amazon.de, www.amazon.fr and www.amazon.co.jp.  Amazon.com
in July posted a second quarter net loss of $94 million, or $0.25
per share, but boosted its full-year sales outlook.  Last month,
Moody's Investors Service raised one of AMZN's ratings, saying
the Internet retailer has improved its ability to generate cash.
Investors who wouldn't mind owning the Internet's retail leader
near a cost basis of $14.50 should consider this position.

NOV 15.00 ZQN WC LB=0.50 OI=9276 CB=14.50 DE=28 TY=12.6%


*****
INVN - InVision Technologies  $35.05  *** 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.  Invision announced some
new contract awards this month and investors are expecting the
demand for explosives detection systems to result in favorable
quarterly earnings for the company.  Traders can speculate in a
conservative manner on the outcome of that report (due next week)
with this position.

NOV 25.00 FQQ WE LB=0.40 OI=1487 CB=24.60 DE=28 TY=5.9%


*****
OVER - Overture Services  $30.07  *** Earnings Are Due! ***

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.  Last week, Overture moved up and out of a
6-month trading range and traders who think the firm's upcoming
earnings report will be favorable can speculate on that outcome
in a conservative manner with this position.

NOV 22.50 GUO WX LB=0.45 OI=931 CB=22.05 DE=28 TY=7.6%


*****
PPDI - Pharmaceutical Product Dev.  $26.99  *** Rally Mode! ***

Pharmaceutical Product Development (NASDAQ:PPDI) is a worldwide
provider of drug discovery and development services to companies
in the pharmaceutical and biotechnology industries.  PPD applies
innovative technologies, therapeutic expertise and a commitment
to quality to help clients maximize the return on R&D investments.
With proven early discovery through post-market resources, the
company also offers unique partnerships and alliances for virtual
drug development.  PPD has more than 5,200 professionals in 24
countries around the world.  Shares of PPD rallied last week after
after the company predicted earnings would be higher than expected
in the fourth quarter.  The firm also raised its profit estimates
for the year, citing strong demand for drug development services.
Investors who like the outlook for this company can establish a
low risk cost basis in its stock with this position.

NOV 22.50 PJQ WX LB=0.45 OI=32 CB=22.05 DE=28 TY=7.2%


*****
QCOM - Qualcomm  $36.20  *** Hot Sector! ***

Qualcomm (NASDAQ:QCOM) is a developer and supplier of code 
division multiple access (CDMA)-based integrated circuits 
and system software for wireless voice and data communications
and global positioning system (GPS) products.  The company 
offers complete system solutions, including software and 
integrated circuits for wireless handsets and infrastructure 
equipment.  This complete system solution approach provides 
customers with advanced wireless technology, enhanced component
integration and interoperability, as well as reduced time to 
market.  Qualcomm recently announced that strong demand for
next-generation chips for wireless phones prompted it to raise
its shipment guidance for the fiscal fourth quarter.  The news
helped the issue move back to the top of an intermediate-term
trading range and Friday the stock moved to a 3-month high.
The wirelss sector is performing well and this position offers
investors reasonable reward potential at the risk of owning the
company at a cost basis near $30.

NOV 30.00 AAW WF LB=0.65 OI=8381 CB=29.35 DE=28 TY=7.9%


*****
SYMC - Symantec  $39.00  *** Solid Earnings! ***

Symantec (NASDAQ:SYMC) provides a broad range of content and
network security software and appliance solutions to enterprises,
individuals and service providers.  The company is a provider of
client, gateway and server security solutions for computer virus
protection, firewall and virtual private network, vulnerability
management, intrusion detection, Internet and e-mail filtering,
remote management technologies and security services to various
enterprises and service providers around the world.  Symantec has
five operating segments: Enterprise Security, Administration,
Consumer Products, Services and Other.  Last week, SYMC posted a
second-quarter profit versus a loss a year ago, handily beating
estimates on strong sales of antivirus software.  Ongoing demand
for anti-virus and firewall software, along with a boost in sales
for managed security services, offset slower than anticipated
sales in network intrusion detection and vulnerability management
software.  Investors can speculate conservatively on the near-term
performance of SYMC with this position.

NOV 30.00 SYQ WF LB=0.45 OI=4289 CB=29.55 DE=28 TY=5.9%


*****
TMCS - Ticketmaster  $20.33  *** Buy-Out Activity ***

Ticketmaster (NASDAQ:TMCS) is a provider of automated ticketing
services, as well as a local portal and electronic commerce 
company that provides in-depth local content and services.  The
company's ticketing service has over 7,000 domestic and foreign
clients, including many entertainment facilities, promoters and
professional sports franchises.  The company's principal online
businesses are ticketing, personals, city guide and camping 
reservations.  Ticketmaster's family of Websites includes 
ticketmaster.com, Match.com, citysearch.com, reserveamerica.com,
museumtix.com, ticketweb.com, evite.com and livedaily.com, among
others.  Its businesses are operated in three segments: ticketing,
personals and city guide.  USA Interactive (NASDAQ:USAI) said last
week it will buy the shares of Ticketmaster it does not already
own where shareholders of Ticketmaster would receive 0.935 of a
share of USA common stock.  USAI rallied strongly on the news as
the company also said it was planning to acquire all of online
travel firms Expedia (NASDAQ:EXPE) and Hotels.com (NASDAQ:ROOM).
This position takes advantage of the bullish momentum amid the
"buy-out" activity and offers a favorable method to speculate on
the near-term performance of the issue.

NOV 17.50 QMF WW LB=0.55 OI=20 CB=16.95 DE=28 TY=10.2%


*****
VXGN - VaxGen  $10.40  *** AIDS Drug Speculation! ***

VaxGen (NASDAQ:VXGN) is engaged in the commercialization and
development of AIDSVAX, a vaccine designed to prevent infection
or disease caused by HIV (Human Immunodeficiency Virus), the
virus that causes AIDS.  The original AIDSVAX technology was
developed by Genentech, and then licensed exclusively to the
company.  AIDSVAX consists of two primary, biologically active
ingredients: an antigen and an adjuvant.  An antigen is the
ingredient in vaccines that activates the human immune system
response.  The antigen in AIDSVAX is synthetic gp120 protein.
An adjuvant is an active ingredient in vaccines that improves
the human immune system response by attracting immune cells to
the region where the vaccine is injected.  The adjuvant is alum,
or aluminum hydroxide.  Vaxgen is also under contract with the
U.S. government to develop a new and better anthrax vaccine in
case of a biological attack.  Traders who want to establish a
relatively low risk position in a speculative issue should
consider this play.

NOV 7.50 UWG WU LB=0.35 OI=126 CB=7.15 DE=28 TY=15.6%


*****

*****************
SUPPLEMENTAL NAKED PUT CANDIDATES
*****************

The following group of issues is a list of additional 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
and positions are suitable for your experience level, risk-reward
tolerance and portfolio outlook.  They will not be included in
the weekly portfolio summary. 

Sequenced by Target Yield (monthly basis)
******
Stock  Last  Call Strike  Option  Last Open  Cost   Days  Target 
Symbol Price Mon. Price   Symbol  Bid  Int.  Basis  Exp.  Yield

REGN   15.08  NOV 12.50   RQP WV  0.40 71    12.10   28   11.3%
ATMI   17.63  NOV 15.00   ASQ WC  0.50 30    14.50   28   11.0%
NVLS   27.51  NOV 22.50   NLQ WX  0.55 624   21.95   28    9.1%
MOLX   25.17  NOV 22.50   OXQ WX  0.65 1250  21.85   28    8.8%
AMHC   20.50  NOV 17.50   QMH WW  0.45 42    17.05   28    8.7%
DLTR   25.12  NOV 20.00   DQO WD  0.40 69    19.60   28    8.0%
SAP    18.15  NOV 15.00   SAP WC  0.30 111   14.70   28    7.4%
SLAB   24.80  NOV 17.50   QFJ WW  0.35 47    17.15   28    7.2%
NBR    35.50  NOV 30.00   NBR WF  0.60 247   29.40   28    7.0%
GENZ   28.45  NOV 22.50   GZQ WT  0.30 579   22.20   28    5.4%


SEE DISCLAIMER IN SECTION ONE
*****************************


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

Shhhhh...Don't Make A Sound.  You Might Wake The Bear!
By Ray Cummins

Stocks rallied this week as market bears went into hibernation
after months of feeding on innocent investors.

On Friday, the three major U.S. stock indexes ended their second
consecutive week of gains, after almost two months of losses.  The
The Dow average climbed 47 points to finish at end at 8,322, while
the tech-laden NASDAQ composite index rose 15 points to close at
1,288.  The broader Standard & Poor's 500-stock index climbed 5
points to end at 884.  Blue-chip stocks were led by International
Business Machines (NYSE:IBM), SBC Communications (NYSE:SBC), and
Home Depot (NYSE:HD) while technology shares were bolstered by a
bullish report from Microsoft (NASDAQ:MSFT).  In the broad market,
specialty retail, automotive, drug-related and healthcare services
stocks were among the best performers.  Market breadth was mixed
with decliners narrowly outpacing advancers on the Big Board while
gainers edged past losers on the NASDAQ.  More than 1.42 billion
shares changed hands on the NYSE and more than 1.66 billion shares
were traded on the technology exchange.  Treasurys finished with
large gains after a volatile session.  The 10-year note rose 24/32
to yield 4.11% percent while the 30-year government added 27/32 to
yield 5.06%.

*****************
PORTFOLIO SUMMARY
*****************

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.


PUT CREDIT SPREADS
******************

Symbol  Pick   Last  Month L/P S/P Credit   C/B   (G/L)  Status

OHP     42.62  43.24  OCT   33  35  0.30   34.70  $0.30  Closed
NOC    124.54 100.72  OCT  105 110  0.35  109.65 ($3.65) Closed *
UOPX    32.11  31.70  OCT   25  30  0.55   29.45  $0.55  Closed
AZO     81.27  85.79  OCT   70  75  0.50   74.50  $0.50  Closed
VZ      33.60  34.97  OCT   28  30  0.30   29.70  $0.30  Closed
SLM     96.58 105.15  NOV   80  85  0.50   84.50  $0.50   Open
UNH     93.49  99.73  NOV   80  85  0.60   84.40  $0.60   Open
WTW     45.40  47.25  NOV   35  40  0.50   39.50  $0.50   Open

Northrop Grumman (NYSE:NOC) shares tumbled Thursday morning after
the defense giant said it missed earnings forecasts by $0.04 and
would have trouble meeting expectations for the year.  Traders
who closed the position after the initial sell-off were able to
limit losses due to the remaining premium in the long (OCT-$105)
option.  Those who "legged-out" during the session had superior
results however, there was no way to avoid a loss in the spread
on a simultaneous order basis.

Previously Closed: Ball Corporation (NYSE:BLL) and S&P 100 Index
(CBOE:OEX), both of which ended the expiration period positive.


CALL CREDIT SPREADS
*******************

Symbol  Pick   Last  Month L/C S/C Credit   C/B   (G/L)  Status

PHA     40.86  45.30  OCT   50  45  0.60   45.60  $0.30  Closed
OEX    446.00 449.02  OCT  500 495  0.45  495.45  $0.45  Closed
SLAB    19.66  24.80  OCT   30  25  0.40   25.40  $0.40  Closed
BRL     63.65  61.45  OCT   75  70  0.50   70.50  $0.50  Closed
MMM    119.46 125.31  OCT  135 130  0.40  130.40  $0.40  Closed
WFC     46.89  50.36  OCT   55  50  0.55   50.55  $0.19  Closed
ASD     64.56  67.75  OCT   75  70  0.65   70.65  $0.65  Closed
S       40.62  24.16  OCT   50  45  0.30   45.30  $0.30  Closed
FITB    57.47  65.73  NOV   70  65  0.65   65.65 ($0.08)  Open?
LEN     53.67  57.33  NOV   65  60  0.80   60.80  $0.80   Open
LMT     62.45  59.38  NOV   75  70  0.55   70.55  $0.55   Open
MMM    120.60 125.31  NOV  140 135  0.50  135.50  $0.50   Open

As noted last week, positions in which the underlying issue moved
above the strike price were candidates for early exit and Fifth
Third Bancorp (NYSE:FITB) breached $65 during Thursday's session.
However, the heavy overhead supply near the current price offers
substantial resistance against further upside activity.  Traders
with an aggressive outlook can monitor the issue for a move above
$67 on increasing volume before exiting or adjusting the position.

Previously Closed: Lexmark (NYSE:LXK), which moved above the sold
strike last Friday and ended the expiration period with a negative
outcome.


SYNTHETIC (BULLISH)
*******************

Symbol  Pick   Last  Month L/C S/P Credit  M/V   (G/L)  Status

ERTS   67.73  70.14   NOV  75  60   0.40   0.50   0.90   Open
SCHL   47.43  46.10   NOV  55  40   0.25   0.60   0.85   Open

Electronic Arts (NYSE:ERTS) closed at a historical high Friday,
suggesting further upside potential in the speculative position.
Scholastic (NASDAQ:SCHL) offered an excellent entry point and a
favorable "early-exit" opportunity early in the week.  Previously
closed positions in Boyd Gaming Group (NYSE:BYD) and Cablevision
(NYSE:CVC) yielded short-term profits and the speculative play in
Taro (NASDAQ:TARO) offered a small gain.  The position in Dianon
Systems (NASAQ:DIAN) was closed to limit losses.


SYNTHETIC (BEARISH)
*******************

No Open Positions

Brocade Communications (NASDAQ:BRCD) was the "big winner" this
month with an overall profit of up to $8.90 as the issue traded
at a new 2002 low.  Positions in Pfizer (NYSE:PFE), Met-Life
(NYSE:MET), Merck (NYSE:MRK) and Progressive (NYSE:PGR) offered
profitable trading opportunities.  Cognizant (NASDAQ:CTSH) and
Citigroup (NYSE:C) were briefly playable during the broad-market
downturn, with small potential gains.


BULL CALL SPREADS
*****************

Symbol  Pick   Last  Month  L/C S/C  Debit  M/V   B/E   Status

LUME    5.80   3.90   JAN    5   7   1.00   0.90  6.00   Open
CHTT   42.99  43.25   NOV   35  40   4.20   4.40  39.20  Open


CALENDAR SPREADS
****************

Symbol  Pick   Last   Long-Opt  Short-Opt  Debit  M/V   Status

BAC    58.00  69.32   JAN-50P   OCT-50P    2.00   2.70  Closed
LPNT   33.04  36.65   FEB-35C   NOV-35C    1.25   1.40   Open
WAT    26.61  26.75   MAY-30C   NOV-30C    2.20   2.00   Open

Our new position in Lifepoint Hospitals (NASDAQ:LPNT) continued
its bullish activity Friday and the short option (OCT-$35C) in
the spread was rolled forward to November for a credit of $1.25.
The Lehman Brothers (NYSE:LEH) position provided an excellent
short-term gain during the recent bearish activity and the Bank
Of America (NYSE:BAC) play also enjoyed a small profit during
the sharp sell-off in early October.

Previously Closed: Schering Plough (NASDAQ:SGP)


SHORT-PUT COMBOS
****************

Symbol  Pick   Last  Short-Opt  Long-Opt  Credit  M/V   Status

AES     2.92   1.29   J04-7.5P  J03-2.5P   4.50   4.25   Open
IMCL    7.77   7.83   J04-15P   JO3-5P     8.00   7.75   Open


CREDIT STRANGLES
****************

Symbol  Pick   Last  Month S/C S/P Credit  C/V   (G/L)  Status

ADRX   24.65  13.40   OCT  40  15   1.10   1.60  (0.50) Closed
ISIS   8.97    9.00   OCT  15   7   1.50   0.00   1.50  Closed
QCOM   28.58  36.20   OCT  32  22   1.50   1.20   0.30  Closed *
PPD    21.80  20.16   OCT  25  17   1.95   0.00   1.95  Closed
STJ    36.29  35.75   OCT  40  30   1.00   0.00   1.00  Closed
OMC    55.86  59.25   OCT  65  40   0.95   0.00   0.95  Closed

As noted last week, the bearish portion of the QualComm strangle
was on the watch-list and Monday's move above the sold strike at
$32.50 signaled our exit in that position.  The cost to buy back
the short option (OCT-$32.50) was slightly less than the overall
credit in the neutral-outlook play.

Previously Closed: Transkaryotic Therapies (NASDAQ:TKTX)

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

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.

****************
CALENDAR SPREADS
****************

A calendar spread (or time spread) consists of the sale of one
option and the simultaneous purchase of an option of the same
type and strike price, but with a future expiration date.  The
premise in a calendar spread is simple: time erodes the value of
the near-term option at a faster rate than the far-term option.

*****
CREE - Cree Inc.  $14.98  *** Sales Are Up! ***

Cree (NASDAQ:CREE) is engaged in the development and manufacture
of compound semiconductor materials and electronic devices made
from silicon carbide (SiC), and a developer and manufacturer of
optoelectronic and electronic devices made from gallium nitride
and related materials.  The company also produces radio frequency
power transistor components and modules for wireless infrastructure
applications using silicon-based bipolar and laterally diffused
metal oxide semiconductor process technologies.  Cree operates its
business in two segments, the Cree segment, which consists of its
SiC-based products and research contracts, and the Cree Microwave
segment, which consists of RF transistors and also RF transistor
modules based on a silicon platform.


Strategy Explanation:

A less neutral and more bullish type of calendar or time spread
is initiated when the current value of the underlying issue is
below the strike price of the options.  This type of position is
speculative with low initial cost and large potential profits.
Two favorable outcomes can occur: the underlying stock rallies in
the short-term and the position is closed for a profit as time
value erosion in the short option produces a net gain or; the
underlying stock consolidates, allowing the sold option to expire
and then eventually rallies above the long option's strike price.
It is generally best to establish this type of spread at least
2 - 3 months before the long option expires, capitalizing on the
ability to sell another option against the longer-term position.
That is the basic idea in this spread play; selling time value
in the options when they are overpriced (high implied volatility)
and buying it back (if necessary) when they return to intrinsic
value.  Ideally, the trader would like to have the stock finish
just below the sold strike when the near-term option expires.  If
the short options are "in-the-money" at expiration, he will have
to buy them back to preserve the long-term position.

PLAY (speculative - bullish/calendar spread):

BUY  CALL  JAN-17.50  CVO-AW  OI=248  A=$1.55
SELL CALL  NOV-17.50  CVO-KW  OI=33   B=$0.60
INITIAL NET DEBIT TARGET=$0.85-$0.95  TARGET PROFIT=$0.50-$0.75


**************
HNT - Health Net  $25.75  *** Earnings Speculation! ***

Health Net (NYSE:HNT) is an integrated managed care organization
that administers the delivery of managed healthcare services.
The firm's health maintenance organizations, insure preferred
provider organizations, and government contract subsidiaries
provide health benefits to approximately 5.5 million individuals
in 15 states through group, individual, Medicare, Medicaid and
Tricare programs.  The company's subsidiaries also offer managed
healthcare products related to behavioral health, dental, vision
and prescription drugs, and offer managed healthcare product
coordination for multi-region employers and various administrative
services for medical groups and self-funded benefits programs.
The company operates and conducts its HMO and other businesses
through its subsidiaries.  The firm operates within two segments,
Health Plan Services and Government Contracts/Specialty Services.
Health Net's quarterly earnings are due 10/25/02.

PLAY (speculative - bullish/calendar spread):

BUY  CALL  JAN-30.00  HNT-AF  OI=39  A=$1.25
SELL CALL  NOV-30.00  HNT-KF  OI=0   B=$0.40
INITIAL NET DEBIT TARGET=$0.75-$0.85  TARGET PROFIT=$0.45-$0.75


**************
CREDIT SPREADS
**************

These candidates are based on the underlying issue's technical
history or trend.  The probability of profit in these positions
may be higher than other plays in the same strategy, due to
small disparities in option pricing.  Current news and market
sentiment will have an effect on these issues, so review each
play individually and make your own decision about its outcome.

*****
ABK - Ambac Financial Group  $63.21  *** On The Rebound! ***

Ambac Financial Group (NYSE:ABK) is a holding company that,
through its subsidiaries provides financial guarantee products
and other financial services to clients in both the public and
private sectors around the world.  The firm provides financial
guarantees for municipal and structured finance obligations
through its principal operating subsidiary, Ambac Assurance
Corporation.  Through its financial services subsidiaries, the
company provides financial and investment products, including
investment agreements, interest rate swaps, funding conduits,
investment advisory and cash management services, principally
to its financial guarantee clients, which include municipalities
and their authorities, school districts, healthcare organizations
and asset-backed issuers.

PLAY (conservative - bullish/credit spread):

BUY  PUT  NOV-50  ABK-WJ  OI=4563  A=$0.55
SELL PUT  NOV-55  ABK-WK  OI=1110  B=$1.10
INITIAL NET-CREDIT TARGET=$0.60-$0.65
POTENTIAL PROFIT(max)=14% B/E=$54.40
PROBABILITY OF PROFIT (100-day HV)=89%


*****
CHIR - Chiron  $42.51  *** Strong Earnings Expected ***

Chiron Corporation (NASDAQ:CHIR) is a global pharmaceutical firm
that is focused on developing products for cancer and infectious
disease.  Chiron continues to build upon its cancer franchise,
which has three dimensions, including immune system modulators,
monoclonal antibodies and novel anti-cancer agents.  In the area
of infectious disease, the company has a range of products.  The
company commercializes its products through three business units,
which include biopharmaceuticals, vaccines and blood testing.
Chiron Biopharmaceuticals discovers, develops, manufactures and
markets a range of therapeutic products.  Chiron Vaccines offers
more than 30 vaccines for adults and children.  Chiron Blood
Testing provides products used by the blood banking industry.

PLAY (conservative - bullish/credit spread):

BUY  PUT  NOV-35.00  CIQ-WG  OI=456  A=$0.45
SELL PUT  NOV-37.50  CIQ-WU  OI=145  B=$0.70
INITIAL NET-CREDIT TARGET=$0.30-$0.35
POTENTIAL PROFIT(max)=14% B/E=$37.20
PROBABILITY OF PROFIT (100-day HV)=82%


*****
AIG - American Intl. Group  $63.71  *** Sector Slump! ***

American International Group (NYSE:AIG) is a holding company that,
through its subsidiaries, is engaged in a wide range of insurance
and insurance-related activities in the United States and abroad.
AIG's activities include general and life insurance operations as
well as financial services, retirement savings and financial asset
management.  AIG's general insurance subsidiaries are multiple
line companies writing substantially all lines of property and
casualty insurance.  One or more of these companies is licensed to
write substantially all of these lines in all states of the United
States and in approximately 70 foreign countries.  The company's
earnings are due 10/24/02.

PLAY (conservative - bearish/credit spread):

BUY  CALL  NOV-75  AIG-KO  OI=10515  A=$0.30
SELL CALL  NOV-70  AIG-KN  OI=7026   B=$0.85
INITIAL NET CREDIT TARGET=$0.60-$0.65
POTENTIAL PROFIT(max)=14% B/E=$70.60
PROBABILITY OF PROFIT (100-day HV)=76%


*******************
GD - General Dynamics  $76.58  *** Don't Be Defensive! ***

General Dynamics (NYSE:GD) operates businesses that produce
information and communications technology, land and amphibious
combat systems, and is also engaged in naval and commercial
shipbuilding, and business aviation.  These are high technology
businesses that use design, manufacturing and program management
expertise together with advanced technology and the integration
of complex systems as part of their everyday operations.  The
company operates in four primary business groups: Information
Systems and Technology, Combat Systems, Marine Systems, and
Aerospace.  The company also owns other commercial operations.

PLAY (conservative - bearish/credit spread):

BUY  CALL  NOV-90  GD-KR  OI=2828  A=$0.30
SELL CALL  NOV-85  GD-KQ  OI=2656  B=$0.80
INITIAL NET CREDIT TARGET=$0.55-$0.60
POTENTIAL PROFIT(max)=12% B/E=$85.55
PROBABILITY OF PROFIT (100-day HV)=84%


*******************
SYNTHETIC POSITIONS
*******************

These stocks have established trends and favorable option premiums.
Traders with a directional outlook on the underlying issues may
find the risk-reward outlook in these momentum plays attractive.

*****
DLTR - Dollar Tree Stores  $25.12  *** Earnings Speculation! ***

Dollar Tree Stores (NASDAQ:DLTR) owns and operates discount stores
with a variety of products and merchandise at the fixed price of
$1.00.  Since 1986, Dollar Tree has evolved from opening primarily
mall-based stores to opening primarily strip-shopping-center-based
stores.  Since 1997, the company gradually increased the size of
stores that it opened each year as it improved its merchandise
offerings and service to its customers.  Last year Dollar Tree had
1,975 stores in 37 states.  The company's store growth has come
from opening new stores and completing selective mergers and other
acquisitions.  Dollar Tree operates single-price-point stores under
the names of Dollar Tree, Dollar Express, Dollar Bills, Only One
Dollar and Only $One.  The company also operates 12 multi-price
point stores under the name Spain's Cards and Gifts.

PLAY (very speculative - bullish/synthetic position):

BUY  CALL  NOV-30.00  DQO-KF  OI=1385  A=$0.50
SELL PUT   NOV-20.00  DQO-WD  OI=69    B=$0.40
INITIAL NET CREDIT TARGET=$0.00-$0.10  TARGET PROFIT=$0.45-$0.60

Note:  Using options, the position is similar to being long the
stock.  The initial collateral requirement for the sold (short)
put is approximately $550 per contract.


*****
NXTL - Nextel Communications  $9.69  *** Sector Recovery! ***

Nextel (NASDAQ:NXTL) provides digital mobile communications across
the United States by offering integrated wireless services under
the Nextel brand name, primarily to business users.  The company's
digital mobile network constitutes an integrated wireless telecom
system utilizing a single transmission technology, the integrated
Digital Enhanced Network (iDEN) technology, which was developed by
Motorola.  Customers are able to access digital mobile telephone
services, such as speakerphone, conference calling, voice mail,
call forwarding and additional line service; Nextel Direct Connect
service, which allows subscribers in the same local calling area
to contact each other instantly on a private one-to-one call or on
a group call; Internet services, mobile messaging services, e-mail
and advanced Java-enabled business applications, marketed as Nextel
Wireless Web services, and international roaming capabilities,
marketed as Nextel Worldwide.  The company's quarterly earnings are
due 10/24/02.

PLAY (speculative - bullish/synthetic position):

BUY  CALL  JAN-12.50  FQC-AR  OI=33868  A=$0.75
SELL PUT   JAN-7.50   FQC-MA  OI=9089   B=$0.85
INITIAL NET CREDIT TARGET=$0.10-$0.25  TARGET PROFIT=$0.65-$0.90

Note:  Using options, the position is similar to being long the
stock.  The initial collateral requirement for the sold (short)
put is approximately $275 per contract.


*****


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************
MARKET WATCH
************

Looking for Confirmation


To Read The Rest of The OptionInvestor.com Market Watch Click Here
http://members.OptionInvestor.com/watchlist/wl_102002.asp


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

Reluctantly Bullish


To Read The Rest of The OptionInvestor.com Market Posture Click Here
http://www.OptionInvestor.com/marketposture/mp_101802.asp



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**********

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