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Daily Newsletter, Thursday, 08/07/2003

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The Option Investor Newsletter                Thursday 08-07-2003
Copyright 2003, All rights reserved.                       1 of 3
Redistribution in any form strictly prohibited.


In Section One:

Wrap: Competition Terminated
Futures Markets: Rock n Roll
Index Trader Wrap: See Note
Market Sentiment: Option Market Warning
Weekly Manager Microscope: Kinetics Funds: The Internet Fund
(WWWFX)


Posted online for subscribers at http://www.OptionInvestor.com
************************************************************
MARKET WRAP  (view in courier font for table alignment)
************************************************************
      08-07-2003           High     Low     Volume Advance/Decline
DJIA     9126.45 + 64.70  9135.00  9031.14 1.59 bln   1968/1224
NASDAQ   1652.18 -  0.50  1658.43  1641.74 1.60 bln   1470/1697
S&P 100   491.76 +  3.63   492.20   486.45   Totals   3438/2921
S&P 500   974.12 +  7.04   974.89   963.82
W5000    9362.38 + 54.90  9365.90  9276.22
RUS 2000  453.77 -  0.14   454.22   449.97
DJ TRANS 2550.77 + 17.00  2551.68  2529.73
VIX        21.89 -  1.41    23.57    21.73
VXN        34.02 -  0.40    35.83    33.98
Total Volume 3,406M
Total UpVol  1,714M
Total DnVol  1,638M
52wk Highs  164
52wk Lows    59
TRIN       1.12
NAZTRIN    1.39
PUT/CALL   1.02
************************************************************

Competition Terminated

Arnold announced his candidacy for governor of California and
previously announced candidates began dropping out in droves.
Traders not in California could have cared less. The media
panic and rush to document every word and deed done by the
Running Man drowned out some pretty positive market news.
The intraday market action was positively dead and the major
markets traded well below their recent volumes. Yawn.

Dow Chart - Daily



Nasdaq Chart - Daily



S&P Chart - Daily



Wilshire 5000 Chart - Daily




The morning started off well with Chain Store Sales for July
soaring +4.3%, well over expectations. The good news was across
the board with several major retailers raising guidance for the
quarter. This was the strongest advance in 13 months. The good
news was due to sales from heavy discounting, the first wave
of tax rebate checks and warmer weather after a soggy May/June.
Department stores posted their first gain in same store sales
since November 2001. The hot weather prompted strong sales of
seasonal summer products with July being the 12th warmest on
record. WMT, FD, BBY, ANN and GPS all raised earnings guidance
on the better than expected news. July is the month that all
retailers try to dump the summer merchandise in preparation
for the shift to fall and back to school specials. It appears
the hot weather produced more sales than the tax checks since
the first wave began delivering on July-25th and would have
had limited impact at the register. This sets up August as a
banner month with all reports that back to school sales have
started off with a bang.

Adding to the premarket excitement was another drop in Jobless
Claims to 390,000 and the third consecutive week under 400K.
This was the last week of adjustment to offset expected auto
maker retooling layoffs. Next week we are on our own again and
with the +72,000 spike in continuing claims it is evident that
getting a job is still tough and getting tougher. Also, in two
weeks the summer vacation season will be over and many more
unemployed workers will get back the business of finding a job.
Temp workers will find themselves unemployed again with the
vacationing full timers back at work. The key week in my
opinion is the week ending September 12th. The first full,
post summer week should be a key indicator for the real health
of the job market.

Hurting the job market was the surging Productivity, which came
in today at +5.7% and well over estimates of +4.6%. The big
gains came from a sharp drop in hours worked and higher output.
This gain was more than twice the +2.1% in the first quarter.
Overall hours worked dropped -2.7% but manufacturing hours
worked dropped -6.1%. This huge drop in hours skewed the
headline number and while some traders took it as a positive
others did not. The reason hours worked dropped so significantly
is due to continued layoffs and less product demand. Employers
continue to be pressed to reduce costs and much of those costs
savings come from layoffs. Manufacturing output declined despite
the gain in the headline numbers. It will be interesting to see
what revisions are made to this productivity number next month.

Wholesale Inventories remained flat in June after two months
of declines. The only real rise in the components was a rise
in automobile inventories. That could be disturbing as it
indicates sales are slowing as the model year comes to a close.
Sales for all products did rise but not enough to make a
material change in the numbers.

Consumer Credit shocked analysts by dropping -$400 million
when they had expected a gain of +$6-$7 billion. Suddenly
consumers are not pulling that plastic out to pay for
purchases. Considering the sharp rise in retail sales this
number poses some confusion to analysts. It is unlikely the
consumer suddenly decided to pay cash just when interest
rates were putting a stop to the refinancing bonanza. It is
also possible this drop could be in response to the record
number of refinancings over the last two months and the
resulting payoff of high interest credit cards with the
proceeds. This number tends to be very volatile and is
subject to monthly revisions. The market reacted calmly to
the announcement due to the confusion numbers.

Other than Arnold the big news of the day was the last auction
of treasury notes which went as expected. This was a relief for
the markets which were afraid the demand for bonds had dried
up. The bid-to-cover for the 10-year notes came in at 2.0 which
means there were bids for twice as many bonds as there were
bonds offered. The price went at 4.36% yield and only .01%
less than the market rate just before the auction. Once it was
completed the bond markets flip flopped on both sides of the
price and yields finished negative for the day at 4.22% as
traders decided maybe the worst was over and bought bonds. As
I sat and pondered this today it occurred to me that much of
the panic in the bond market could have been caused by the
26 primary dealers who took down the majority of the $60
billion in notes this week. If you knew that you were going
to have to eat $60 billion of product six weeks in advance it
would certainly behoove you to drive that price as far from
the record highs as possible. You are not going to make a lot
of money buying $60 billion in bonds at 45 year highs. Could
they really drive bonds down to where they could afford to
absorb that much inventory? Absolutely. If the major dealers
simply withdrew their bids then the weight of the market would
do the rest. It happens in the market every day. Once the panic
begins all they have to do is watch and continue to lowball
the bids to make sure it does not recover.

Meanwhile the rest of the consumer market has seen a record
rise in rates over the last six weeks as a result. Prior to
June 30th there was only one 25-point move in interest rates
in a single day over the last three years. There was eight of
those moves in the last three weeks. This is unprecedented
and a 100-year storm in the bond market according to Franklin
Raines, CEO of Fannie Mae. 30-year mortgage rates rose to
6.34% today after hitting 5.25% six weeks ago. Fannie Mae
came under attack today with a news article claiming FNM had
suffered huge losses due to the bond crash because they had
taken undue interest risks. The stock opened down sharply
but recovered intraday after FNM denied the allegations.
FNM sold $2 billion in 3-year notes on Thursday. Do you
think they could be plugging holes in their cash flow from
the 100-year storm? Earnings for the major financial stocks
for the 3Q are going to be real exciting as we see who took
a hit and who didn't.

The markets wandered higher after an early morning dip or
maybe I should say the Dow wandered higher. The Nasdaq was
weak all day and spent only a brief period in positive
territory. The markets expected a positive conclusion to the
three day bond auction but were nervous before the results
were announced at 1:PM. The fear was a weak auction which
would indicate more bond sales and higher rates ahead. When
the auction was over the indexes breathed a sigh of relief
and rallied to resistance only to be knocked back by selling
once again. As we approached the Consumer Credit at 3:PM
the bears managed to push the Dow back below 9100 for the
last time. Seven times the Dow crossed 9100 today before
finally ending at 9126.

The Nasdaq managed to get back to flat at the close but techs
are still suffering from the Cisco hangover. The Nasdaq is
well under 1700 at 1653 and down more than 100 points from the
1757 high last Thursday. Earnings after the close today did
little to provide hope for tomorrow despite some decent results.
The results from PIXR and NVDA were mixed with PIXR soaring on
the Finding Nemo film and NVDA warning on flat margins and
increasing expenses. With PIXR seen as a cyclical event and
one not likely to be repeated next quarter the futures were
trading down slightly in after hours.

All in all for the first week in August the markets have held
up extremely well. The Dow refuses to break 9000 and 9100 has
turned into the mother of all price magnets. As long as this
trend holds the end of quarter rebound could start from a nice
comfortable level. Should the trend fail and the Dow break 9000
it could get ugly fast. Traders are always encouraged when
volume accompanies an up move. That was not the case today. It
was simply a matter of the path of least resistance and a little
short covering after the bond auction failed to tank the market.
Volume on the NYSE was only 1.3 billion and 1.6 billion for the
Nasdaq.

Dow downtrend chart - 30 min




The markets closed at serious resistance and it might be
difficult to move up in the morning without some help from Asia
and Europe. The Dow has strong resistance at 9130 and closed at
9126. The Nasdaq has strong resistance at 1650 and it closed
just over that level at 1653. The S&P has strong resistance at
975 and it closed at 974.30. All of these indexes are poised to
either explode or implode at the open. There are no economic
reports on Friday and the markets will be left to find their
own level. Considering how they have ignored good news lately
they may be better off on their own. We have retraced +89 Dow
points of the -149 lost on Tuesday and the oversold conditions
have eased considerably. However, we are still down -235 points
from last Thursday's high of 9361. The two-week trend is still
down until we move back above 9200. Friday may not hold the
answer to the mystery as volume should be the lightest of the
summer with no catalyst to spark a move. Could be a good day
for Saddam to surrender.

Enter Very Passively, Exit Very Aggressively!

Jim Brown
Editor


***************
FUTURES MARKETS
***************

Rock n Roll
Jonathan Levinson

Today's price movements in both equities and treasuries were
particularly inscrutable, a fine example of summer trading.  It
was difficult to tell whether equities or treasuries were having
a good day or not almost from hour to hour, but when the dust
cleared, treasuries with the exception of five year notes closed
higher, as did equity futures.

Daily Pivots (generated with a pivot algorithm and unverified):

Figures rounded to the nearest point:

           R2     R1    Pivot   S1     S2
ES03U      984    979    971    966    957
YM03U     9202   9161   9083   9042   8964
NQ03U     1236   1227   1218   1209   1199


10 minute chart of the US Dollar Index




The US Dollar Index sold off until 11AM, bottoming just below
95.60 before bouncing in what appears to be a bear flag as of
this writing.  Euro, Swiss franc and Canadian dollar futures were
all up on the day.


Daily chart of December gold




The overall weakness in the US Dollar favored gold and
commodities valued in US Dollars.  December gold was higher,
posting another day countertrend to its ongoing cycle downphase,
struggling to gain a foothold above the 354 s/r line we've been
watching during the past weeks.  Despite the strength in the gold
contract, precious metals stocks were lower, with the HUI losing
90 to close at 168.63, and the XAU lower by .04 to 82.63.  The
CRB added 1.29 to close at 237.13, led by natural gas, heating
and crude oil futures.


Daily chart of the ten year note yield




The ten year treasury sale today completed the quarterly treasury
auction, and the tens were not as well bid as the fives were
yesterday, generating a bid-to-cover ratio of 2.  The five year
note yield spent the day in the green, closing higher by 5.4
basis points and peaking above a 10 bp gain intraday, giving the
appearance that yesterday's bidders might have bitten off more
than they could chew.  Tomorrow's session will tell the tale on
today's sale of ten year notes.  The bidding managed to drive the
TNX below its ascending trendline, at last, but the day was
confused at best, as can be seen by the wide-ranging doji print.
A failure to rise back above the trendline tomorrow would be a
very bullish development for ten year treasury bonds.  The TNX
finished the day down 5.9 bps to 4.229%.  Today's move generated
sell signals on the daily oscillators from deep in overbought
territory.

Equities were a confusing bunch, with the NQ printing a lower low
and lower high, YM a higher high and higher low, and ES a higher
low and matching yesterday's high.  Despite the confusion, all
finished in the green.


Daily NQ candles




The weakest of the bunch was the Nasdaq future, printing a doji
star at the bottom of yesterday's bearish engulfing.  I've
applied trendlines to illustrate the possibility of a bounce from
current levels in the context of a broader bull flag.  While I'm
not the Nasdaq's biggest fan, the chart pattern suggests that the
downphase is in a corrective flag pattern at the top of its
rising trend.  A break below the lower trendline will confirm the
reversal and extinguish hopes of that bullish outcome, but until
it occurs the possibility is real.  If the bullish interpretation
plays out, significantly higher highs will be possible, but the
NQ must first clear 1260 resistance in order for that to happen.

30 minute 20 day chart of the NQ




Today's session left the oscillators on buy signals, with the
late afternoon weakness a potential retest of the broken
trendline on a steep bullish descending wedge.  I'm not confident
in the pattern on this chart, but today's market action was not
such as to instill confidence either.  I expect further upside
tomorrow, all things being equal.

Daily ES candles




ES traded much stronger today, printing a "ladder bottom"
candlestick pattern, rising above the close of yesterday's
inverted hammer.  The sell signals on the oscillators lost their
vigor today, and a move to the upper trendline in the 984 area
cannot be ruled out.  The ES closed a point below its high of the
day, and was trading 074.25 as of this writing, no pullback as
yet apparent.


20 day 30 minute chart of the ES




The 30 minute chart on ES confirms the closing strength, with the
bull wedge breakout looking more convincing.  On this timeframe,
the upper resistance line suggests 987, which is close enough to
the daily bull flag resistance to confirm that level as strong
resistance.


Daily YM candles





The YM is just below trendline resistance on the 30 minute chart,
but paints the same cyclical picture as the ES.

20 day 30 minute chart of the YM




The weakness in five year notes today put a big dose of
perspective on their grand reception so widely publicized
yesterday.  If we see a repeat in the ten year yields tomorrow,
then my concerns about contracting liquidity will appear
confirmed.  However, for the moment, the break below the
ascending trendline on the TNX is real, and traders will be
watching for a possible retest of that trendline tomorrow for
confirmation.

Equities remain in a difficult trading range, close to their
lows, making long entries tricky and short entries risky.  The
top of the current up-phase on the 30 minute charts will go a
long way to helping us determine whether the current move is a
meaningful bounce, or merely another distribution attempt by the
institutions who were in such a great hurry to sell ahead of
CSCO's earnings earlier this week.

See you at the bell!


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

Check the Site Later Tonight For Jeff's Index Trader Article
http://members.OptionInvestor.com/itrader/marketwrap/iw_080703_1.asp


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

Option Market Warning
Jonathan Levinson

Today's session opened lower and saw traders fearful of an
anticipated decline.  Yesterday's close was very bearish for the
Nasdaq as well as the S&P, and all but the shortest cycle
indicators were warning bulls of impending downside.

Predictably, the put to call ratio shot higher from its first
readings, as did the VIX.  The CBOE p/c ratio started at 1.04 and
spiked to 1.29 for the second half hour of trading, drifting down
to a low of .95 in the afternoon before bouncing anew.  The VIX,
meanwhile, opened flat in the 23.50 area, and sunk lower
throughout the session.

We observed in the futures monitor that the opening put to call
ratio was too high for bears' comfort, and reiterated the warning
with the 1.29 print.  Looking at the chart of the VIX, it appears
that sellers of puts were willing to part with their contracts
for decreasing amounts of premium as the session progressed.

While these secondary indicators are not certain because of the
wide range of options strategies available, it appears that put
writers were dumping puts at an increasing rate throughout the
session.  If there is such as thing as "smart" money, which is
seriously open to debate, it was making bullish bets throughout
the duration of the session, and increasingly so as the session
wore on.  Regardless of the economic news or chart patterns, such
action intraday is a clear warning from the options market for
bears to tighten their stops, and bulls to look for possible
entries.

As we approach options expiration week next week, options will
become an increasingly important driver of underlying price.
While one can debate whether derivative instruments which move
the markets are truly derivatives or not, smart traders will be
keeping a watchful eye on the different option volatility and
volume indicators in the upcoming sessions.


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

Market Averages

DJIA ($INDU)

52-week High:  9361
52-week Low :  7197
Current     :  9126

Moving Averages:
(Simple)

 10-dma: 9175
 50-dma: 9111
200-dma: 8544




S&P 500 ($SPX)

52-week High: 1015
52-week Low :  768
Current     :  974

Moving Averages:
(Simple)

 10-dma:  983
 50-dma:  987
200-dma:  912



Nasdaq-100 ($NDX)

52-week High: 1316
52-week Low :  795
Current     : 1217

Moving Averages:
(Simple)

 10-dma: 1256
 50-dma: 1239
200-dma: 1094



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

As Jon pointed out in his commentary above, the VIX and VXN appear
to be acting rather oddly.  The big move down from Wednesday's high
in the VIX would make one think there was a large rally in the
market to necessitate such a reduction in investor concern.  We saw
no such rally.  Remember, the VIX tends to go up as the markets fall
and vice versa.

CBOE Market Volatility Index (VIX) = 21.89 -1.41
Nasdaq-100 Volatility Index  (VXN) = 34.02 -0.40


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

          Put/Call Ratio  Call Volume   Put Volume

Total          1.02        530,986       542,475
Equity Only    0.91        405,949       369,369
OEX            0.90         27,394        24,674
QQQ            4.45         23,708       105,511


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

Bullish Percent Data

           Current   Change   Status
NYSE          67.7    - 1     Bull Confirmed
NASDAQ-100    66.0    - 4     BEAR CONFIRMED
Dow Indust.   80.0    + 0     Bull Correction
S&P 500       73.4    - 1     Bull Correction
S&P 100       80.0    - 1     Bull Confirmed


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

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

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

 5-Day Arms Index  1.16
10-Day Arms Index  1.06
21-Day Arms Index  1.05
55-Day Arms Index  1.10


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

            -NYSE-   -NASDAQ-
Advancers    1708      1414
Decliners    1103      1598

New Highs      48        81
New Lows       15        12

Up Volume    983M      591M
Down Vol.    599M     1016M

Total Vol.  1603M     1634M
M = millions


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

Commitments Of Traders Report: 07/29/03

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

Still looking at a lack of major change in the large S&P futures
contracts.  Commercial traders and small traders have yet to make
any big moves lately.


Commercials   Long      Short      Net     % Of OI
07/08/03      415,053   453,720   (38,667)   (4.5%)
07/15/03      414,020   453,033   (39,013)   (4.5%)
07/22/03      411,206   442,131   (30,925)   (3.6%)
07/29/03      405,429   445,114   (39,685)   (4.7%)

Most bearish reading of the year: (111,956) -  3/06/02
Most bullish reading of the year:   18,486  -  6/17/03

Small Traders Long      Short      Net     % of OI
07/08/03      152,239    74,749    77,490    34.2%
07/15/03      148,716    70,279    78,437    35.8%
07/22/03      155,891    76,466    79,425    34.2%
07/29/03      155,216    73,030    82,186    36.0%

Most bearish reading of the year:  (1,657)- 5/27/03
Most bullish reading of the year: 114,510 - 3/26/02


E-MINI S&P 500

Quite the opposite of the large S&P futures above, we're seeing
some big differences in the e-mini positions.  Commercial traders
have turned very bullish while the small traders is increasing
their net bearish positions.  These are new milestones for both.


Commercials   Long      Short      Net     % Of OI
07/08/03      192,815   224,124    (31,309)  ( 7.5%)
07/15/03      214,274   218,765    ( 4,491)  ( 1.0%)
07/22/03      249,392   249,386          6     0.0%
07/29/03      272,659   216,166     56,493    11.6%

Most bearish reading of the year: (354,835)  - 06/17/03
Most bullish reading of the year:   56,493   - 07/29/03

Small Traders Long      Short      Net     % of OI
07/08/03       56,394    72,090   (15,696)  (12.2%)
07/15/03       45,372    54,654    (9,282)   (9.3%)
07/22/03       45,945    76,071   (30,126)  (24.7%)
07/29/03       44,437    93,144   (48,707)  (35.4%)

Most bearish reading of the year: (48,707)  - 07/29/03
Most bullish reading of the year: 449,310   - 06/10/03


NASDAQ-100

There is very little change in positions for either the
small trader or the commercials.


Commercials   Long      Short      Net     % of OI
07/08/03       30,489     48,311   (17,822) (22.6%)
07/15/03       28,467     49,154   (20,687) (26.7%)
07/22/03       32,502     48,139   (15,637) (19.4%)
07/29/03       31,456     50,294   (18,838) (23.0%)

Most bearish reading of the year: (20,687)  - 07/15/03
Most bullish reading of the year:   9,068   - 06/11/02

Small Traders  Long     Short      Net     % of OI
07/08/03       26,136     9,035    17,101    48.6%
07/15/03       26,489     8,004    18,485    53.6%
07/22/03       27,321     8,844    18,477    51.1%
07/29/03       25,691     7,810    17,881    53.4%

Most bearish reading of the year: (10,769) - 06/11/02
Most bullish reading of the year:  19,088  - 01/21/02

DOW JONES INDUSTRIAL

It's the same story here.  Maybe it's the summer doldrums
that's leaving the size of futures positions in a very sideways
trend.


Commercials   Long      Short      Net     % of OI
07/08/03       20,752    11,860    8,892      27.3%
07/15/03       21,607     7,855   13,752      46.7%
07/22/03       22,198     8,176   14,022      46.2%
07/29/03       23,696     9,572   14,124      42.5%

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
07/08/03        5,005     8,093   (3,088)   (23.6%)
07/15/03        5,475     9,717   (4,242)   (27.9%)
07/22/03        6,110    10,898   (4,788)   (28.2%)
07/29/03        5,744    11,601   (5,857)   (33.8%)

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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*************************
WEEKLY MANAGER MICROSCOPE
*************************

Kinetics Funds: The Internet Fund (WWWFX)

This week, we take another look at the no-load class of Kinetics'
Internet Fund (WWWFX), a team-managed portfolio that has produced
an average annual return since inception of 22.9% and in the last
five years has produced an annualized total return of 16.1%, well
ahead of the S&P 500 index and average tech fund.  In its earlier
years, the fund was a primary beneficiary of the Internet bubble,
producing annual total returns of 196% and 216% in 1998 and 1999,
respectively.  This portfolio took a tumble when the bubble burst
in 2000, however, finishing the year down 51.5 percent.

Since 2001, the fund's portfolio management team has done a much
better job of curbing fund losses.  In fact, over the past three
years, The Internet Fund portfolio has exhibited "below average"
risk compared to its Morningstar category peers (i.e. technology
sector funds).  With the tech sector higher in 2003, the fund is
up 21.4% through August 6, ranking in the 27th percentile of the
peer group.  So, it's showing again that it can capture its fair
share of the returns available in the Internet/technology sector
in rising markets.

Peter Doyle, co-founder of Kinetics Asset Management, the fund's
investment advisor, leads the portfolio management team.  Steven
Tuen and Tina Larsson are co-portfolio managers of the fund.  Mr.
Doyle is also co-founder and managing director of Horizon Asset
Management.  From 1988 until late 1994, Doyle was an investment
officer in the investment services unit of Bankers Trust Company.
Mr. Tuen, CFA was an analyst and director of research at a firm
called IPO Value Monitor from 1996 to 1999.  Previously, he was
an analyst at Bankers Trust Company from 1989 and 1996, as well
as a portfolio manager in the bank's private banking group.  Ms.
Larsson was an analyst with Horizon Asset Management (see above)
before joining Peter Doyle at Kinetics Asset Management in 1999.

Investment Style/Strategy

According to the Kinetics Funds website (www.kineticsfunds.com),
The Internet Fund seeks to provide long-term capital growth by
investing primarily in equity securities of domestic and foreign
companies that are engaged in the Internet and Internet-related
activities.  Here, the portfolio management team focuses on the
next generation of Internet stocks in what is truly a new, fast
paced and dynamic industry sector.  However, the early years of
the Internet revolution are over along with the euphoria, which
accompanied the Internet bubble of the 1990s.

Some Internet companies today are past their hyper-growth years
and unlikely to generate the kind of growth seen in the 1990's.
Rather than focus research entirely on today's dominant players,
Doyle, Tuen and Larsson also seek out new kinds of services and
products, which may provide high growth rates at those companies.

Actually, Kinetics' portfolio management team follows five broad
investment themes as part of their overall investment philosophy.
First, they focus on undiscovered companies that are reinventing
their business models or developing new ones that naturally lend
themselves to the Internet, including firms that are positioning
themselves to use the Internet as an unlimited pipeline for their
products, services and ideas.  The fund also favors corporations
that have proprietary infrastructure in place to channel revenue
streams and that have limited competition.

In addition to looking at proprietary infrastructure, Doyle, Tuen
and Larsson focus on companies that have propriety content, which
is unique and gives them a sustainable competitive advantage into
the future that they can profit from.  Getting in on the "ground"
floor is important too, so the portfolio management team looks to
invest in Internet and Internet-related companies that are in the
early-stage cycle.  Rather than acquire an insignificant position
of a stock that has IPO'd, the Kinetics portfolio management team
here tries to beat that by investing through venture capital type
"incubator" firms.  Also, rights offerings and private placements
are possible.

Lastly, Doyle, Tuen and Larsson seek to capitalize on the global
nature of the Internet.  In this regard, they look for companies
that have high potential to be dominant players in the expanding
international markets.

As the fund website states, The Internet Fund is subject to risk
factors not normally found in diversified stock funds.  Since it
invests in a single industry sector, the fund does not represent
a complete investment program and is subject to a high degree of
volatility in the short-term.  Internet stocks are subject to a
rate of change in technology, obsolescence and competition that
is generally higher than that of other sectors.  Many stocks in
the group have experienced extreme price and volume fluctuations
as you well know by now.

Investment Performance

The Internet Fund's performance is a "matter of record," per the
Kinetics Funds website.  However, we're not likely to see annual
returns of near 200% two consecutive years again either like the
fund produced in 1998 and 1999.  Unrealistic valuations have now
given way to more realistic valuations, resulting in less return
potential.

Since 2001, however, the fund has shown that it can limit losses
relative to the average tech sector fund in a down market (as it
did in 2001 and 2002) and that it can capture return in a tech-
led advance as it has in 2003.







As you can see from the chart above, the fund's current up-trend
came to a halt about a month ago.  Over the past month, the fund
has declined in value by more than nine percent, ranking towards
the bottom of the technology fund group, per Morningstar.  So as
Internet stocks go, so goes the Kinetics Internet Fund.  At over
$20 a share, though, the Internet Fund's net asset value (price)
is still considerably higher than the below $16 level from March.

The best way to look at The Internet Fund's performance is based
on its long-term investment results.  For the trailing five-year
period through August 6, 2003, Doyle, Tuen and Larsson generated
an annualized total return of 16.1% for shareholders, to rank in
the first decile (7th percentile) of the Morningstar tech sector
category.  Granted that number stems in large part from the fine
performances the fund delivered in the 1990s, but when the stock
market goes up and tech stocks lead the way, this fund has shown
that it can participate strongly in the advance.

Conclusion

According to one report, over the past five years The Internet
Fund's best three-month performance has been 161.9%, while its
worst three-month performance was negative 37.6%.  That should
serve well as an indicator of this fund's potential volatility.

Still, over the past year the fund's portfolio management team
has performed well.  For the most recent 1-year period through
August 6, Doyle, Tuen and Larsson produced a 29.5% total return
for shareholders, ranking in the tech category's first quintile
(15th percentile).

Because of its industry concentration and short-term volatility,
the Kinetics Internet Fund is appropriate only for investors who
seek specific exposure to the Internet and are willing to accept
potentially extreme share price fluctuations in pursuit of long-
term growth of capital.

Steve Wagner
Editor, Mutual Investor
steve@mutualinvestor.com


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The Option Investor Newsletter                 Thursday 08-07-2003
Copyright 2003, All rights reserved.                        2 of 3
Redistribution in any form strictly prohibited.


In Section Two:

Dropped Calls: None
Dropped Puts: BBY, MRK
Call Play Updates: KSS, LLL, PCAR
New Calls Plays: None
Put Play Updates: BDK, FITB, FRE, IBM, PGR
New Put Plays: YHOO


****************
PICKS WE DROPPED
****************

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


CALLS:
*****

None


PUTS:
*****

Best Buy Company - BBY - close: 46.49 change: +5.81 stop: 43.05

Ouch!  If you forgot what stop losses are for, our bearish BBY
play provided a painful reminder this morning.  As noted in the
Market Monitor just after the open, the stock gapped sharply
higher at the open on the company's revised earnings guidance, as
Q2 EPS estimates rose from $0.30 to $0.37-0.42.  The opening gap
to $43.75 triggered our stop and if you didn't use a stop, the
pain just got worse throughout the day, as the stock continued to
work higher, ending well above $46.  There should be no question
about dropping this busted play tonight.

Picked on August 5th at  $40.18
Change since picked:      +6.31
Earnings Date          09/17/03 (unconfirmed)
Average Daily Volume = 9.61 mln
Chart link:


---

Merck & Co. - MRK - close: 55.90 change: +1.68 stop: 55.75

The broad market caught a solid bounce from critical support on
Thursday and the Pharmaceutical index (DRG.X) was one of the
leaders to the upside with at 2.23% gain.  That rising tide
lifted all the boats and even though it just broke down
convincingly, our MRK play rebounded with conviction, tacking on
more than 3%.  Cruising easily through the 10-dma, which should
have provided some resistance, MRK pushed higher right into the
closing bell, triggering our stop in the final 30 minutes of
trade.  We knew if the 10-dma was broken, our bearish play would
be in trouble, so there is no hesitation about dropping it
tonight.

Picked on July 29th at    $55.39
Change since picked:       +0.51
Earnings Date           10/20/03 (unconfirmed)
Average Daily Volume =  6.40 mln
Chart link:



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

Kohl's Corp. - KSS - close: 59.95 change: -0.69 stop: 58.00*new*

Did somebody get the news early?  One could certainly make that
argument based on the price action for KSS on Thursday.  You'll
recall that the stock outperformed the market and Retail index
(RLX.X) on Wednesday, ending right at its high of the day and
delivering the breakout over $60.60 to trigger the play to live
status.  A strong upside surprise (+6.7% vs. +1.6% estimates) in
July comps sent the stock soaring above $62 shortly after the
open.  But there was an ample supply of willing sellers up there
and they knocked it back below $61 in short order.  The rebound
off that level failed, KSS rolled over near $61.50 and ended back
under $60 with a loss for the day.  That isn't the bullish follow
through we were hoping for and now we must once again look for a
rebound from support, this time in the $59-60 area.  Based on the
heavy volume and the stock closing right at its intraday low,
(not to mention its gross underperformance relative to the RLX)
we're not eager to recommend initiating new entries until KSS can
get back over $60.60.  Aggressive traders can try to buy a bounce
from the $59-60 area, but need to understand the increased risks
after today's reversal.  Note that we've raised our stop to $58
tonight, as the bottom of the 7/31 gap should hold as support,
reinforced by the 20-dma at $58.13.

Picked on July 31st at    $59.35
Change since picked:       +0.60
Earnings Date           08/14/03 (unconfirmed)
Average Daily Volume =  4.56 mln
Chart =


---

L-3 Communications -LLL - close: 48.16 change: +0.10 stop: 47.25

Our concerns on Tuesday were well founded, as LLL continued to
fall over the past couple days, dipping as low as $47.45 this
morning before rebounding back over $48 and then consolidating in
a tight range for the remainder of the session.  This morning's
dip successfully filled the gap from July 28th and now we need to
see if it really is the strong support level that we're hoping
for.  Our concern is that today's rebound was simply a dead-cat
bounce, so we would prefer to wait for LLL to get back over the
10-dma ($48.86) before initiating new positions.  More
conservative traders will want to wait for a real breakout, with
the stock clearing the $50.50 level before playing.  Keep stops
set at $47.25

Picked on August 3rd at    $49.90
Change since picked:        -1.74
Earnings Date            10/22/03 (unconfirmed)
Average Daily Volume =      962 K
Chart =


---

PACCAR - PCAR - close: 77.63 change: +0.93 stop: 72.99

We have little news to report on PCAR today.  The stock continues
to consolidate above previous resistance of $75.00 so that's good
news.  Plus we're seeing a slow trend of higher lows and that's
good news.  Traders can take their time in picking their entry as
we could see dips back toward $76.00 or some might choose to wait
for a momentum move over $80.00.

Picked on July 31 at $77.24
Change since picked:  +0.39
Earnings Date      07/24/03 (confirmed)
Average Daily Volume:  1.15 million
Chart =



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

None


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

Black & Decker - BDK - cls: 39.24 chg: +0.47 stop: 41.01

Right on cue.  In Tuesday's update we said BDK was due for a
bounce and sure enough that's what we got.  The question now is
whether or not the bounce can reach overhead resistance at $40 or
will selling pressure force shares to roll over sooner.  Some of
BDK's intraday charts suggest that today's high might be the end
of the bounce.  We can only wait and see.  Traders still looking
for new entries can wait for a failed rally under $40.00 or a new
move under $38.00.  More conservative traders might want to cinch
their stop down closer to $40.00.  We'll leave ours at $41 for
now and re-evaluate tomorrow.

Picked on August 4 at $39.99
Change since picked:   -0.75
Earnings Date       07/24/03 (confirmed)
Average Daily Volume:   731  thousand
Chart =


---

Fifth Third Bancorp - FITB - cls: 53.87 chg: +0.80 stop: 55.01

The trend for FITB may be down but it's starting to react more in
tune with the BIX and BKX banking indices.  Both banking indices
have managed to halt their recent bearish breakdowns.  Whether or
not they can reverse them altogether is a good question.  We're
not enthusiastic about the bounce in FITB but it seems to be par
for the course with this play.  Traders looking for new entries
might want to watch for a failed rally near $54.50.

Picked on July 17th at $55.26
Change since picked:    -1.39
Earnings Date        07/15/03 (confirmed)
Average Daily Volume =    2.4 million
Chart link:


---

Freddie Mac - FRE - close: 49.40 change: -0.04 stop: 50.25

With good reception of this week's bond auction and the broad
markets rebounding from critical support, the selling pressure on
FRE has eased considerably, and the stock is consolidating below
$50 resistance.  None of the bearish factors we've been focused
on have eased enough for us to pull the plug just yet, as the 10-
year yield is still more than 1% higher than it was in the middle
of June.  But our play is definitely subject to some near-term
risks.  With today's close over the 10-dma ($49.27) and daily
Stochastics moving up out of oversold, another test of $50
resistance seems likely.  Unless we see a fresh bout of weakness
show itself, we aren't recommending new positions here.  We need
to see the stock fail to crest $50 and fall back below the 10-dma
at a minimum.  Then we can turn our attention to the downside
possibilities.  For now, our attention is focused on managing
open positions, and with our stop at $50.25, just below
breakeven, the risk appears manageable.

Picked on July 22nd at    $50.33
Change since picked:       -0.93
Earnings Date           07/15/03 (confirmed)
Average Daily Volume =  7.438 mln
Chart link:


---

Intl Business Mach - IBM - cls: 80.69 chg: +0.94 stop: 82.51

What to do now?  We added IBM with its trend of lower highs and
lower lows culminating into a break of support at $80 on Tuesday.
The markets were selling off and tech stocks were being singled
out.  Big Blue was dealing with bad press over its move to cash-
balance pensions.  Things were looking pretty good for bearish
traders.  We're not saying they look bad now but it is a little
frustrating to see the bounce back above $80.  We suspect it is
all market related.  The INDU has been bouncing from the 9000
level so IBM bounces with it.  In the news there have been some
headlines about IBM counter-suing SCO Group (SCOX) over a bitter
Linux-Unix battle that's been ongoing for a while now.  Shares of
SCOX dropped more than 8% on the news today.  Looking at IBM we
suggest that traders wait for a move back below $80 before
considering new positions.  Our stop at $82.51 is above the
simple 200-dma so we'll let it do its work.

Picked on August 5 at $79.85
Change since picked:   +0.87
Earnings Date       07/16/03 (confirmed)
Average Daily Volume:   8.2  million
Chart =


---

Progressive Corp - PGR - close: 64.61 chg: -0.36 stop: 67.26

We're not making much progress here are we?  The bears have
finally been able to crack support at $65 on PGR but the stock
still won't drop.  That may be a sign telling us to keep our
positions small.  The IUX.X insurance index is trying to bounce
from the 270 level and thankfully we're not seeing any
participation in PGR.  We do observe the continuing trend of
lower highs in PGR so bears shouldn't give up hope.  We are going
to lower our stop to $67.01.

Picked on July 23 at $65.22
Change since picked:  -0.61
Earnings Date      07/16/03 (confirmed)
Average Daily Volume:  941  thousand
Chart =



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

Yahoo! Inc. - YHOO - close: 28.87 change: -0.59 stop: 31.50

Company Description:
Yahoo! Inc. is a global Internet company that offers a comprehensive
branded network of properties and services to consumers and businesses
worldwide.  The company's properties and services for consumers and
businesses reside in five vertical areas: Search and Marketplace,
Information and Content, Network and Platform Services, Enterprise
Solutions and Consumer Services.  YHOO's basic products and service
offerings are available without charge to its consumers.  The company
also offers a variety of fee-based premium services that provide its
consumers access to value-added content or services.

Why we like it:
The seeming indomitable strength of the Internet sector was led
by the three horsemen, AMZN, YHOO and EBAY.  Each of them rode a
wave of investor optimism to heights not believed possible by
many.  Now the momentum has faded and the bears are starting to
get more aggressive, with the broad market (especially the
NASDAQ) starting to fray around the edges.  YHOO has been looking
weak ever since the big gap down following its earnings report on
July 9th.  The first break below the $30 support level was met by
a rush of buying that propelled it up for a subsequent failed
rally below $34, showing there wasn't even enough bullishness to
fill in the post-earnings gap.  With the pronounced weakness
throughout the market this week, things shifted much more in
favor of the bears, as YHOO broke below the 50-dma (currently
$31.30) on Monday and extended its losses on each of the past 3
days, cracking below $30 yesterday.  More important perhaps was
today's trade at $29, which finally generated a new PnF Sell
signal (target $24), further tipping the scales in favor of the
bears.

There's some decent support near $27.50, so traders that enter on
weakness (below yesterday's $28.65 intraday low) will need to do
so with the understanding that there is only about $1 of downside
until the next likely bounce point.  Our preference for new trade
entries would be for a failed rebound in the $30-31 area,
confirming that former support is now acting as resistance.  Once
below $27.50, our target will be for a drop to strong support
near $26.  The stock may really have downside to the $24 level,
but given the strength in the stock and sector in recent months,
there's no need to press our luck.  Adding to overhead resistance
is the combination of the 10-dma ($30.92), 20-dma ($31.30) and
the 50-dma (also at $31.30).  That ought to provide a strong wall
of resistance, that will be pressing ever lower with the passage
of time.  Our initial stop will be set at $31.50.

Suggested Options:
Aggressive short-term traders will want to focus on the August 30
Put, as it will provide the best return for a short-term play.
With August contracts expiring next week though, conservative
traders will want to utilize the September 30 contract, which
provides greater insulation from the spectre of time decay.

BUY PUT AUG-30 YHQ-TF OI=10030 at $1.55 SL=0.75
BUY PUT SEP-30 YHQ-UF OI= 3943 at $2.50 SL=1.25
BUY PUT SEP-27 YHQ-UY OI= 1390 at $1.30 SL=0.60

Annotated Chart of YHOO:




Picked on August 7th at   $28.87
Change since picked:       +0.00
Earnings Date           10/08/03 (unconfirmed)
Average Daily Volume =  13.4 mln
Chart link:



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

Please read our disclaimer at:



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

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

Contact Support
The Option Investor Newsletter                 Thursday 08-07-2003
Copyright 2003, All rights reserved.                        3 of 3
Redistribution in any form strictly prohibited.


In Section Three:

Play of the Day: PUT - YHOO
Traders Corner: Choosing A Mate Or A Trade – Both Can Be Tricky


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

Yahoo! Inc. - YHOO - close: 28.87 change: -0.59 stop: 31.50

Company Description:
Yahoo! Inc. is a global Internet company that offers a
comprehensive branded network of properties and services to
consumers and businesses worldwide.  The company's properties and
services for consumers and businesses reside in five vertical
areas: Search and Marketplace, Information and Content, Network
and Platform Services, Enterprise Solutions and Consumer Services.
YHOO's basic products and service offerings are available without
charge to its consumers.  The company also offers a variety of
fee-based premium services that provide its consumers access to
value-added content or services.

Why we like it:
The seeming indomitable strength of the Internet sector was led
by the three horsemen, AMZN, YHOO and EBAY.  Each of them rode a
wave of investor optimism to heights not believed possible by
many.  Now the momentum has faded and the bears are starting to
get more aggressive, with the broad market (especially the
NASDAQ) starting to fray around the edges.  YHOO has been looking
weak ever since the big gap down following its earnings report on
July 9th.  The first break below the $30 support level was met by
a rush of buying that propelled it up for a subsequent failed
rally below $34, showing there wasn't even enough bullishness to
fill in the post-earnings gap.  With the pronounced weakness
throughout the market this week, things shifted much more in
favor of the bears, as YHOO broke below the 50-dma (currently
$31.30) on Monday and extended its losses on each of the past 3
days, cracking below $30 yesterday.  More important perhaps was
today's trade at $29, which finally generated a new PnF Sell
signal (target $24), further tipping the scales in favor of the
bears.

There's some decent support near $27.50, so traders that enter on
weakness (below yesterday's $28.65 intraday low) will need to do
so with the understanding that there is only about $1 of downside
until the next likely bounce point.  Our preference for new trade
entries would be for a failed rebound in the $30-31 area,
confirming that former support is now acting as resistance.  Once
below $27.50, our target will be for a drop to strong support
near $26.  The stock may really have downside to the $24 level,
but given the strength in the stock and sector in recent months,
there's no need to press our luck.  Adding to overhead resistance
is the combination of the 10-dma ($30.92), 20-dma ($31.30) and
the 50-dma (also at $31.30).  That ought to provide a strong wall
of resistance, that will be pressing ever lower with the passage
of time.  Our initial stop will be set at $31.50.

Suggested Options:
Aggressive short-term traders will want to focus on the August 30
Put, as it will provide the best return for a short-term play.
With August contracts expiring next week though, conservative
traders will want to utilize the September 30 contract, which
provides greater insulation from the spectre of time decay.

BUY PUT AUG-30 YHQ-TF OI=10030 at $1.55 SL=0.75
BUY PUT SEP-30 YHQ-UF OI= 3943 at $2.50 SL=1.25
BUY PUT SEP-27 YHQ-UY OI= 1390 at $1.30 SL=0.60

Annotated Chart of YHOO:




Picked on August 7th at   $28.87
Change since picked:       +0.00
Earnings Date           10/08/03 (unconfirmed)
Average Daily Volume =  13.4 mln
Chart link:



************************Advertisement**********************************
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-    true direct access to each option exchange
-    stop and stop loss online option orders
-    contingent option orders based on the price of the option or stock
-    online spread order entry for net debit or credit
-    fast option executions
-    rates as low as $1.50 per contract ($14.95 min)

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

Choosing A Mate Or A Trade – Both Can Be Tricky

By Mike Parnos, Investing With Attitude

My two grown children figured that two cats, a comfortable couch,
a large screen TV and a Pentium IV computer with a cable modem are
not enough to fill my life.  They decided to play the home version
of the TV show "Who Wants To Marry My Daddy."

An Interesting Blend
Most of you who've been reading this column for awhile know that
I'm a cross between George Clooney and Al Bundy – often leaning a
little further toward the Bundy camp.  The doctors have given me a
clean bill of health and pronounced all parts to be in working
order.  Like a Porsche, or other any fine tuned machine, I need an
oil change every 3,000 commercials.  I may have some extra trunk
space, but it was hard earned and thoroughly enjoyed.

We're still waiting for the first game contestant.  I don't
understand it.  The kids put up flyers at the library, eight
Starbux and the local art museum.  Hmmm? Maybe the kids should
change their strategy and put flyers at the 7-11, McDonalds,
Domino's, the Merri-Bowl and Motel 6. Obviously, my kids have
their work cut out for them.  I'll keep you posted.

It's equally as difficult to find a good trade.  Trades are short-
term relationships that, good or bad, have a defined lifespan.
Let's review some of the thought processes in finding a
"compatible" trade.
______________________________________________________________

Step #1:  What kind of equity/index do you want to trade?
If your favorite strategies involve selling options, and you
prefer some degree of stability, you should consider an index.
Because indexes consist of multiple stocks, there is less
likelihood that it will move dramatically if one company's CEO
does a Kobe and gets caught.  The diversification of the index
will go a long way towards neutralizing these disturbing albeit
not unusual occurrences.

If you like playing straddles and strangles, you're looking for
large movements.  Individual stocks, that have a history of big
moves, might be your best bet.  Upcoming earnings announcements
and/or stock splits often result in major moves.  Look at
industries like biotech that are always at the mercy of FDA
approvals or rejections.  That's when the mierde is going to hit
the fan -- and that's when you want to be there.

Be thorough.  You can call the companies and find out when FDA
decisions are scheduled.  That's what their "investor relations"
departments are for.  You may be able to find that information on
the Internet, but confirm it with a call before you put on the
trade.

If you want to pick a direction, as they say at my favorite
Chinese restaurant, "rotsa ruck!"  Even a blind squirrel finds an
acorn once in awhile.  But, if you insist, you have some research
to do.  Check the sectors.  If you're bullish, pick the best
acting stocks in a particular sector.  If you're bearish, pick the
worst.  It's mind-boggling to see traders buy calls on the worst
stock in a sector and wonder why it goes down.  There's one born
every minute -- maybe more than one.

Also, don't overlook an examination of an option's volatility.  At
this writing, there's exceptionally high volatility in the market.
That's an option seller's paradise.  Why?  Because sellers will
take in an inflated amount of premium.  We can expect the
volatility to return to its normal levels -- even if the
underlying doesn't move.  The more premium that erodes, the more
premium that remains in your pockets.

On the other hand, option buyers will overpay for those same
options. As the volatility returns to normal levels, the time
value element of the purchased option will decrease -- even if the
underlying doesn't move.  That means the underlying will have to
move even farther in the predicted direction just to make back the
additional eroded premium.

Step #2:  What strategy should you use?
There are over 10,000 stocks, indexes etc., but there are only a
few dozen option strategies.  It might be easier to have your
favorite strategies and let the market come to you.  In your
search, you may find stocks/indexes that aren't ready -- they
don't quite fit the parameters of your favorite strategies.  Put
them on your watch list and wait.  Resist the temptation.  Put
those itchy mouse fingers somewhere out of harm's way. (No
suggestions. I'll leave that to your imaginations.)

To be a consistently successful options trader, you need to play
favorites -- to have a strategy for every market condition.  One
that enables you to profit when you are neutral, another for when
there's anticipated high volatility, and another when you pick a
direction.  With these strategies in your arsenal, you're ready to
go to war.

You must know these strategies inside and out.  You can have a
bazooka in your arsenal, but if you don't know how it works,
you'll end up shooting yourself in the foot.  And you need your
feet, just like you need your trading capital.

Know the strategies thoroughly.  Know when to put them on, how to
get the best prices when entering the trade, and the appropriate
months and strikes to use.  That's only half the battle.  You also
have to know your target profit, your maximum risk, when you will
get out -- both in your favor or otherwise.  Know what adjustments
you have to make -- and how to make them.

If you don't know the ins and outs of a strategy, don't even think
about trading.  You're not ready.  Trading is tough enough as it
is.  Let's put this into perspective.  By trading, you are, in
essence, making a wager on something over which you have
absolutely no control.  It's a helpless feeling when things go
against you, but a euphoric feeling when trades become profitable.
All we can do is try to increase our chance of success.   We can
play blackjack, but if we're card counters, we improve are
chances.  We have to find a table (strategy) that only uses one
deck -- so there's only one deck stacked against you -- not four.
______________________________________________________________

AUGUST CPTI PORTFOLIO TRADES

August Position #1 – BBH Iron Condor – Closed at $126.80
We sold 10 contracts of BBH August $125 puts @ $1.45 and bought 10
contracts of BBH August $120 puts @ $.80 for a net credit of $.60.
We also sold 10 contracts of BBH August $140 calls @ $1.75 and
bought 10 contracts of BBH August $145 calls @ $.85.

We have a maximum profit range of $125 to $140 with a total credit
of $1,550.   Our risk is $3,450.  BBH tested the lows and almost
got down on all fours, but bounced up a bit.   If you need your
maintenance money for the bear call portion of the spread, you can
buy back the $140 call for a dime.

August Position #2 – LLTC Sell Straddle – Closed at $35.81
We sold 10 contracts of LLTC August $35 call @ $1.45 and sold 10
contracts of LLTC August $35 put @ $2.40 for a total credit of
$3.45. Our maximum profit can be about $3,450 if LLTC finishes at
$35.  Our profit range is from $31.55 to $38.45.  Our bailout
points are at the parameters of the profit range.  At $35.81,
we're in pretty good shape, but there's still a long way to go.

August Position #3 – SPX Iron Condor – Closed at 974.12
This is a slightly more aggressive position than usual.  Why?  The
range is smaller.  Also, note the different number of contracts we
use for the calls and the puts.

We sold 3 contracts of the SPX August 1025 calls and bought 3
contracts of the August 1050 calls for a net credit of $3.70
($1,110).  Then, we'll sold 6 contracts of the August SPX 960 puts
and bought 6 contracts of the August SPX 950 puts for a net credit
of $2.00 ($1,200).  The total credit was $2,310 – and that's our
maximum profit.  I reduced the number of contracts on the bear
call spread because there's a $25 exposure.  As of Thursday's
close, SPX did not have call strike prices between 1025 and 1050.

Monday, no additional strikes were opened, so we went with the
original plan.  Thus far, no additional strikes, between 1025 and
1050 have been opened.  The SPX closed at 974.12 – still within
our range.  Support is at about 960.
______________________________________________________________

New To The CPTI?
Are you a new Couch Potato Trading Institute student?  Do you have
questions about our plays or our strategies?  Feel free to email
me your questions.  An excellent source for new students is the
OptionInvestor archives where we've been discussing strategies and
answering questions since last July.  To find past CPTI (Mike
Parnos) articles, look under "Education" and click on "Traders
Corner."  They're waiting for you 24/7
______________________________________________________________

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.
Mike Parnos
CPTI Master Strategist and HCP


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