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Daily Newsletter, Wednesday, 08/20/2003

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The Option Investor Newsletter              Wednesday 08-20-2003
Copyright 2003, All rights reserved.                        1 of 2
Redistribution in any form strictly prohibited.


In Section One:

Wrap: Gone Fishing
Futures Wrap: Summer trading
Index Trader Wrap: See Note
Weekly Fund Family Profile: Thornburg Funds


Posted online for subscribers at http://www.OptionInvestor.com
*******************************************************************
MARKET WRAP  (view in courier font for table alignment)
*******************************************************************
     08-20-2003            High     Low     Volume Advance/Decline
DJIA     9397.51 - 31.39  9423.26  9364.03 1.49 bln   1721/1443
NASDAQ   1760.54 -  0.57  1768.52  1747.01 1.51 bln   1637/1565
S&P 100   501.89 -  2.03   503.92   500.54   Totals   3358/3008
S&P 500  1000.30 -  2.05  1003.54   996.62
RUS 2000  489.46 +  0.76   490.24   485.31
DJ TRANS 2661.90 -  2.05  2669.87  2656.49
VIX        19.71 +  0.48    20.18    19.35
VXN        27.64 +  1.14    28.66    27.36
Total Volume 3,250M
Total UpVol  1,484M
Total DnVol  1,697M
52wk Highs     665
52wk Lows       47
TRIN          1.19
PUT/CALL      0.62
*******************************************************************

Gone Fishing
Jonathan Levinson


That's what the smart money did today, with the Nasdaq closing lower by
0.57 of one point and the Dow losing 31.  Volatility remained low, and
the question remains whether trades at the current level are
consolidation near the highs, or distribution of shares ahead of a
drop.

Weekly COMPX




Both the Nasdaq and the Dow weekly candles are at cyclical tops
on their oscillators, and the 10 week stochastics issued  buy
signals in July.  The downphases have hiccupped on this week's
gains in the Nasdaq and the Dow, and a truncation of those
downphases this early in their runs would have very bullish
implications.


Weekly INDU





6 month daily COMPX




The daily Nasdaq and Dow have yet to abandon their uptrends, with
the Nasdaq trading just below it while the Dow is just above.
The 10 day stochastic and MacD are both on buy signals, which is
causing the upticks we saw above on the weekly oscillators.

6 month daily INDU






20 day 30 minute COMPX




The lack of upward momentum today gave us sell signals on the 300
minute stochastic, with both indices trading within bear flags.
A breakdown from these formations should pack sufficient power to
abort the buy signals on the daily oscillators and allow the
ongoing downphases on the weekly to resume.  However, for the
moment, the upphase on the daily appears to be dominant, causing
the short cycles on the 30 minute charts to trend in overbought
territory and the downphasing daily cycles to pause early within
their runs.

20 day 30 minute INDU





On the economic front, the Mortgage Bankers Association (MBA)
announced this morning that seasonally-adjusted demand for
mortgage refinancings, the MBA refi index, dropped 14.9% for the
past week following the previous week's 16.1% drop, bringing the
the index to its lowest level since July 12, 2002.  Demand for
loans with which to buy homes, the Purchase index, fell 4.9%. The
Application index fell 10.7% for the week, following last week's
10.3% drop.  The average interest rate for a 30-year fixed rate
mortgage rose to 6.22% from 6%, now 123 basis points above its
June 13 low.  Recall that John Snow talked down the negative
impact of rising rates: "When an economy is recovering, it is
normal to see interest rates rise some. So I would point to the
rising interest rates as an indication that the economy is coming
back."  Without a strong pickup in employment to cover this
extreme increase in the cost of money to the average home
borrower, I don't see how far the economy can get.  Note, as Jane
reported on Monday, that personal bankruptcies rose 10.2% from
last year, setting a new record on both a quarterly and per
household basis, reaching new record levels.


One year daily chart of the thirty year note yield





It's worth spending a moment to discuss the concept of the
Kondratieff Cycle. I will not be able to do it justice in this
limited space, but it's worth noting the concept in light of the
ongoing developments we follow here on a daily and weekly basis.
Nikolai Kondratieff, whose work was carried forward by Joseph
Schumpeter, posited that there's a long term cycle of credit
expansion and contraction, and tied the cycle in with wars, booms
and busts.  Briefly, economic seeds are planted following periods
of credit contraction.  Businesses are built, investments are
made (the "spring").  As the cycle progresses, the investments
mature and prosperity grows, and the economy begins to incur debt
against its assets (summer).  Expansion slows, but debt continues
to be incurred to extend the "good" times.  Debt begins to peak,
at which point it becomes unsupportable.  At this point, credit
begins to contract, with bankruptcies increasing and economic
activity slowing (the Kondratieff Winter).  After debt has been
cleansed from the system by these mechanisms, the economy is ripe
for the new round of investments to herald the spring.




http://www.OptionInvestor.com/oin/images/commentary/newsletter/2003-08-20/wave1.gif

Without quoting Chauncey Gardiner from "Being There", the
contraction is a necessary part of the cycle.  Kondratieff and
Schumpeter and others have linked the major wars to the cycle's
peaks and troughs, and this is fascinating work to review for the
cost of a quick Google search.  Reputedly, Allan Greenspan during
the late 1960s said that he'd like to be Chairman of the Fed
during the 1990s, because he felt he could overcome the K-Wave
Winter by flooding the financial system with liquidity.  Why one
would wish to do so is beyond me, but this appears to have been
the case.  Unfortunately, as we have seen during the past
Wednesday market wraps, the Fed has succeeded not in averting a
period of necessary economic contraction, but merely in creating
asset bubbles in discrete sectors, first in the Nasdaq during the
Dotcom boom, then in the credit and mortgage markets, with the
price of real estate following along, and possibly in the Chinese
manufacturing sector as well.  Given the explosion in the money
supply, it is my guess that commodities and particularly the
precious metals sector are in the process of becoming the next
asset bubble.  Disclosure:  I am long this sector, as it seems
obvious to me that if dollars are being printed at a rapid rate,
the price of all things that cannot be created at the same rate
should rise.

Weekly chart of MZM money supply




Weekly chart of December 2003 gold




In any event, to conclude our musings on the Kondratieff Winter,
the recent record-setting corporate bankruptcies such as Enron,
Worldcom, K-Mart, Global Crossing and others, the soaring level
of personal bankruptcies and the proliferation of offers of
credit, including zero-down, zero-payment, cash-back deals, all
fit perfectly into this century-old theory.  Apparently there's
talk of interest-only home mortgages resurfacing, a concept I've
heard was last popular during the 1920s.  As the Winter cycle
progresses, we can expect to witness the last gasp of credit
expansion.  I believe that the uptick in rates marks the peak of
the current Winter cycle.

In other news, it was reported by the American Petroleum
Institute (API) that crude oil inventories dropped by 1.6 million
barrels to 278.8M barrels, while the Department of Energy
recorded a loss of 2.03M barrels to 279.M barrels total.  Either
way, analysts managed to get it wrong for another week,
predicting an increase in supply. The API and Energy Department
data reported unleaded gasoline inventories down on the week, and
distillate supplies higher during the week.

It was an otherwise quiet day, and the lack of movement in the
indices reflected that.  We have the following economic data due
tomorrow:

               Report                   Briefing  Market    Prior
                                        Expects   Expects
Aug 21 8:30 AM Initial Claims 08/16 -     395K      395K     398K
Aug 21 10:00 AM Leading Indicators Jul -  0.5%      0.4%     0.1%
Aug 21 12:00 PM Philadelphia Fed Aug -    11.0      10.0      8.3


I expect to see the markets react to the initial claims data
before the bell.  I noticed that some writers were attributing
the selloff in bonds today to expectations of a bullish showing
on the employment data.  If that's the case, which I personally
doubt, then we can expect that anything less than a downside
surprise in new unemployment claims will disappoint the market.
My feeling is that the conflicting cyclicality portrayed in the
charts above is what's causing the market to chop sideways, and
whatever the spark, we should see a resolution, and hopefully
soon.  Until that happens and the market shows its hand, trade
safely and ride your stops.  No trade beats a bad trade.


************
FUTURES WRAP
************

Summer trading
Jonathan Levinson

The indicators whipped this way and that, but it turned out to
be a sideways day for equities, which closed lightly negative.
Treasuries were negative as well, while commodities, precious
metals and the US Dollar Index gained.

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





10 minute chart of the US Dollar Index




The US Dollar Index bottomed just after the cash open this
morning at 97.25, and bounced in what appeared to be a
corrective flag or wedge to the 97.50 level.  Despite the
upward slope, gold and commodities had a very strong day, with
gold trying for an upside pennant breakout and the CRB, led by
natural gas, cotton and cocoa, added 2.38 to 238.47.

Daily chart of December gold




December gold tested the upper trendline again, peeking above
it for a few minutes before falling back to previous
resistance just above 366.  The contract was trading 367.30,
up 4.30 as of this writing. The oscillators are in firm up-
phases, the Fed is running amuck with repos, and goldbugs have
their fists balled up and their shoulders hunched in
anticipation of what could be a big day.  The HUI and XAU were
both very strong as well, adding 4.19 to 190.48 and 1.76 to
91.18 respectively.


Daily chart of the ten year note yield





Treasuries traded higher briefly before reversing their gains
and falling to their lows of the day, bouncing weakly but
never returning to positive territory.  The ten year note
yield added 6 basis points to close at 4.441%.  The Fed added
another 5.5B in overnight repos, bring the tally for
tomorrow's expiration to a whopping 24.5B in temporary open
market operations.


Daily NQ candles




It was a very unpredictable session, with the dollar rallying
alongside gold and commodities, while bonds fell and equities
traded both sides of unchanged.  The NQ was the leader today,
touching new highs for this month before falling back to close
below 1300.  The upper trendline held back the advance, with
the NQ closing right in the middle of its day range for a doji
star.  This is a bearish print, all things being equal.  The
oscillators are still on buy signals and the bull flag
breakout is still in effect.

30 minute 20 day chart of the NQ




The NQ went nowhere today, closing lower by 3 points, but it
did so most dramatically, full of sound and fury that
signified nothing.  Bulls cheered the new highs and bears
cheered the failure to hold them.  NQ fell back into the bear
flag, with the oscillators on the 30 minute chart flipping
back to sell signals.

Daily ES candles




The ES traded a very narrow range of less than 8 points,
closing nearer to the low end of its range, but you had to be
there following the aimlessness tick-by-tick.  It was classic
summer trading, with the tape frustrating most participants as
it shuffled indolently to and fro.  When the dust cleared, the
ES had failed to set a new high as the NQ had done, failing
twice at 1003.25.

20 day 30 minute chart of the ES




ES also went nowhere, dropping 4.25, but bears and bulls held
their breath for the two touches of 1003.25.  I find the
sideways move over the past week to look increasingly suspect,
particularly as the cries of devoted bulls grow increasingly
shrill.  Bears are terrified, bulls are salivating, the put to
call ratio is subterranean, and despite gains in the
volatility indices today, options remain very cheap.  For all
that bullish consensus, and daily 5 to 20 billion dollar
injections from the Fed, one would think that the S&P futures
could do more than hang suspended in a bear flag.
Nevertheless, it hasn't broken down either, and so we wait for
a sign tomorrow.

Daily YM candles




The YM was weaker today, lagging the other two equity indices
with a .33% drop of 31 points.  Nothing to see here, other
than the beginning of a possible breakdown in the bear wedge
on the 30 minute chart below.


20 day 30 minute chart of the YM





Today was a choppy day today, with little to be gathered from
equities or treasuries.  The real action was in gold, with the
metals on the verge of a potential breakout, with the HUI and
XAU setting new mutli-year highs today.  With a major bill
coming due tomorrow in expiring fed repos, we'll gain some
insight into Greenspan's view on the markets.  The addition of
any less than 24.5B in open market ops will constitute a
drain.

See you at the bell!


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

Check the Site Later Tonight For Jeff's Index Trader Article
http://members.OptionInvestor.com/itrader/marketwrap/iw_082003_1.asp


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**************************
WEEKLY FUND FAMILY PROFILE
**************************

Thornburg Funds

This week, we look at the Thornburg Funds advised by Thornburg
Investment Management, an investment firm based in Sante Fe, New
Mexico that's committed to disciplined investing and controlling
risk in all market environments, through laddered fixed income
and focused equity portfolios.  This firm seeks to provide core
strategies for serious investors, and focuses on preserving and
increasing the real wealth of shareholders after accounting for
inflation, taxes and expenses.

Today, Thornburg Investment Management advises four stock funds,
eight bond funds and separately managed portfolios for high net
worth individuals (private clients) and institutional investors.
The separately managed portfolios are based on their mutual fund
strategies, which represent the bulk of assets under management.
According to Morningstar, over $3.1 billion is currently invested
in the Thornburg mutual funds, including $1.7 billion invested in
the Thornburg Value Fund.

Thornburg mutual funds are sold through investment professionals,
including investment advisors, brokerage firms, trust companies,
bank trust departments, and other financial intermediaries.  For
more information on the Thornburg Funds, or Thornburg Investment
Management as an investment advisor, go to the Thornburg website
at www.thornburginvestments.com.  There, you can download a fund
prospectus containing complete information on the funds including
charges and expenses.  For our purposes, we'll use the Class "A"
shares of the funds, but Class B and C shares are also available.

Thornburg Fund Overview

There are currently 13 Thornburg mutual funds to pick from: four
equity funds, eight fixed income funds and one money market fund.
Below is a summary of the Thornburg fund lineup (Class A shares),
per company sources.

  Thornburg Equity Funds (4):
  Value Fund A (TVAFX)
  International Value Fund A (TGVAX)
  Core Growth Fund A (THCGX)
  Investment Income Builder Fund A (TIBAX)

  Thornburg Municipal Bond Funds (6):
  Intermediate Municipal National Fund A (THIMX)
  Limited Term Municipal Fund - National A (LTMFX)
  Limited Term Municipal Fund - California A (LTCAX)
  New Mexico Intermediate Municipal Fund A (THNMX)
  New York Intermediate Municipal Fund A (THNYX)
  Florida Intermediate Municipal Fund A (THFLX)

  Thornburg Taxable Bond Funds (2):
  Limited Term U.S. Government Fund A (LTUSX)
  Limited Term Income Fund A (THIFX)

  Thornburg Money Market Fund (1):
  Daily Tax-Free Income (THMXX)

The Thornburg municipal bond funds seek to provide income that's
exempt from Federal income taxes, including four portfolios that
are also exempt from certain state taxes.  We'll leave those for
you to review at your own leisure.  Same goes for the money fund
option.  We really want to look at the four equity funds and the
two taxable bond funds advised by Thornburg Investment Management
Inc.

Thornburg’s equity mutual funds seek to provide long-term growth
of capital through superior equity research.  Equity research is
performed utilizing a fundamental (and comprehensive) analytical
approach, with many factors taken into account.  When investment
decisions are made, the firm invests only when and where the most
compelling values are perceived.  Each of the stock funds focuses
on only a limited number of securities (35-50 range) so that each
holding can have a material impact on performance.  Many holdings
may be viewed as "contrary" to consensus of the moment, they say.

Thornburg Value Fund, the firm's most successful mutual fund with
$1.7 billion in assets, has been run by William Fries since 1995.
Since inception, the fund has amassed a strong performance record
by investing in basic value stocks as well as stocks of companies
that are market leaders, consistent earners, and rapidly growing,
emerging franchises.  Mr. Fries attempts to buy good companies at
great prices and will hang on to his winners if he perceives they
have room to grow.  The result is a value fund that can fall into
the "blend" style box, per Morningstar, and can perform well in a
variety of style environments, whether value or growth is in sync
with market.  A healthy dose of mid-cap stocks makes this fund an
excellent "all-cap" investment option.

The $168 million Thornburg International Value Fund is similar to
its sibling, Thornburg Value Fund, except that it invests in non-
U.S. companies and has a lower average market capitalization.  It
recently had roughly half of portfolio assets invested in mid-cap
and small-cap ranges.  This also helps in terms of "international
diversification" since international mid/small-cap stocks may not
move in sync with the developed markets of U.S., Europe and Asia.
Both the Value Fund and International Value Fund receive 5 stars
from Morningstar for risk-adjusted performance relative to peers,
their highest overall rating.

Thornburg Core Growth Fund, managed by Alex Motola since December
2000, is relatively unknown, but that may not last for long since
the fund is up over 45 percent on a YTD basis through August 20th
using Morningstar's number.  Like Fries, Motola seeks to purchase
great companies at good prices.  Motola focuses on quality growth
stocks that he and the Thornburg growth team believe will exhibit
superior revenue and earnings growth over time.  While the growth
fund falls into the mid-cap growth style box per Morningstar, the
fund's holdings may be any size from larger established companies
to smaller, emerging enterprises.  According to Morningstar, fund
holdings recently consisted primarily of large, mid and small-cap
stocks, giving it "all-cap" growth characteristics.

The firm's most recent equity fund addition, Thornburg Investment
Income Builder Fund, brings together the firm's equity and income
research into one portfolio.  This hybrid fund, through a mixture
of equity and fixed income holdings, seeks to provide attractive,
above average, and growing dividends to shareholders.  The equity
component is comprised mostly of dividend-paying stocks (domestic
and foreign issuers).  The fund's fixed income component supports
the growth of its "dividend stream", investing primarily in bonds
in the corporate sector.  While this fund emphasizes dividends as
a component of building wealth over time, it also pursues capital
appreciation.

Thornburg's two taxable bond funds, Limited Term U.S. Government
Fund and Limited Term Income Fund, invest in short/intermediate-
term investment grade bonds, with the goal of earning attractive
yields for shareholders, without incurring excessive risks.  The
two funds in other words do not make big duration or sector bets;
rather they employ a more conservative "laddering" strategy that
moderates interest-rate and market-price risks in various "yield
curve" environments.  According to Morningstar, both fixed income
portfolios hold a basket of high-grade debt securities (AAA or AA
rated) and have an average duration in the 3.7 years to 3.8 years
range.

Thornburg Fund Performance

As we alluded to earlier, both the Thornburg Value and Thornburg
International Value funds currently receive Morningstar's highest
overall rating of 5 stars for risk-adjusted performance relative
to category peers.  The Thornburg Value Fund A shares have risen
at an annual-equivalent rate of 13.4 percent for the period from
inception (10/95) through June 30, while Thornburg International
Value Fund A shares have produced an average annual total return
of roughly five percent since inception (12/98) through June 30.
William Fries and the Thornburg value team remain at the helm of
these two funds today, so all the performance is attributable to
them.

In relation to other large-blend funds, Thornburg Value Fund has
produced high returns with average risk overall, while Thornburg
International Value Fund has produced above average returns with
average risk overall in relation to its foreign stock fund peers,
per Morningstar, earning them both 5-star (highest) fund ratings.

Thornburg Core Growth and Investment Income Builder funds aren't
yet rated by Morningstar.  The Core Growth Fund began operations
in December 2000, and for most of its life, growth investing has
been out of favor with the market.  Accordingly, the fund sports
a negative annualized total return of 8.6 percent for the period
from inception through mid-year 2003.  However, over the past 12
months, the Core Growth Fund has risen nearly 50%, ranking it in
the top 1% of the Morningstar mid-cap growth category.  Its year
to date return of 45.4% also ranks in the category's top 1%.  So,
if you perceive (as I do) that we are in the early stages of the
next growth cycle, this is one fund to watch and consider now for
investment.

Investment Income Builder Fund is less than a year old, but since
inception (12/02) the fund has increased in value by more than 15
percent through June 30.  So, it is off to a promising beginning.

Thornburg's two taxable bond funds also sport competitive records
of performance.  The Limited Term U.S. Government Fund has posted
an average annual total return of 6.1% for the trailing five-year
period through August 19, per Morningstar, while the Limited Term
Income Fund has produced an annualized total return of 6.4% (both
funds ranking in their respective category's top quartile).  Both
funds are also holding up well so far in 2003, with the threat of
higher interest rates looming.  The Limited Term U.S. Government
Fund is up 0.6% (top 15%), while the Limited Term Income Fund has
risen two percent to rank in the top one-third of its Morningstar
category.

Conclusion

There is a lot to like about Thornburg Investment Management and
its mutual funds.  The value fund strategies have performed well
under various market conditions due to solid equity research and
security selection.  William V. Fries deserves much of the credit
there.  The core growth strategy struggled a little bit at first,
but is now scorching the competition in 2003 with growth equities
back in favor with investors.

Thornburg's taxable bond portfolios play it safer than many bond
funds on the market, avoiding excessive risks and using a ladder
portfolio strategy that moderates interest-rate and market-price
risks in various yield curve environments.  Keeping fund average
durations below four years should help a little bit in the event
rates do in fact rise in the second half of 2003 or next year vs.
longer duration funds.

The Thornburg Investment Income Builder Fund has the makings of a
top hybrid offering, one that emphasizes the power of compounding
dividend income.  It could be a beneficiary of recent tax cuts on
dividends.  For more information or to download a fund prospectus
go to www.thornburginvestments.com.

Steve Wagner
Editor, Mutual Investor
steve@mutualinvestor.com


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The Option Investor Newsletter               Wednesday 08-20-2003
Copyright 2003, All rights reserved.                        2 of 2
Redistribution in any form strictly prohibited.


In Section Two:

Stop Loss Updates: None
Dropped Calls: None
Dropped Puts: None
Play of the Day: Call - OMC
Spreads, Combinations & Premium-Selling Plays: Rally Pauses After
Hewlett-Packard Report
Watch List: A Steady Mix

Updated on the site tonight:
Market Posture: 15 to 8 Bulls



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*****************
STOP-LOSS UPDATES
*****************

None


*************
DROPPED CALLS
*************

None


************
DROPPED PUTS
************

None


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Note: Options involve risk. Risk disclosure:

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


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

Omnicom Group - OMC - close: 76.67 chg: +0.84 stop: 72.99

Company Description:
Omnicom 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 over 5,000 clients in
more than 100 countries. (source: company press release)

Most Recent Update (Tuesday, August 19, 2003):
Keeping with the biotech-drug theme we're going to suggest a
bullish play on OMC, an advertising company.  Makes sense,
doesn't it?  Oh wait, maybe we should explain.  American
consumers are about to witness a three-way rumble for their
dollars over erectile dysfunction.  Right now if someone mentions
any sort of drug related to this topic you're probably going to
think of Pfizer's (PFE) little blue pill called Viagra.  It's
been a huge success for the drug maker.  However, the U.S. is
about to approve two more competitors.  Bayer AG and
GlaxoSmithKline have produced a drug called Levitra and Eli Lilly
& Co (LLY) and Icos Corp (ICOS) have developed Cialis.

It's going to become a battle-royale and some of the biggest
winners could be the advertising agencies hired to promote these
products.  OMC is certainly going to be a benefactor.  Yet this
isn't the only reason we're suggesting calls on OMC.  The
improving economy is a much more big-picture influence for rising
business for ad agencies.  Plus it doesn't hurt to see a new
closing 52-week high and positive technicals.  We listed OMC on
the OptionInvestor.com watch list on Monday with its breakout
over $75.00.  Today's move just confirms it and we feel that
bulls might be able to cash in on a move to $80 (initial target)
and potentially $85 (secondary target).  We're going to start the
play with a stop loss at $72.99, which keeps it under the simple
50-dma.

- Play of the Day Comments -
Shares of OMC continue to add to Monday's breakout over the $75
level.  It wasn't much but we were encouraged by the stock's
relative strength over the $Industrials and S&P 500 today.

Suggested Options:
Currently OMC has September, October and January calls to choose
from.  Our preference is for the September 75s and 80s.

BUY CALL SEP-75 OMC-IO OI= 1524 at $3.40 SL=1.70
BUY CALL SEP-80 OMC-IP OI= 1362 at $0.90 SL=0.45
BUY CALL OCT-75 OMC-JO OI= 1427 at $4.60 SL=2.25
BUY CALL OCT-80 OMC-JP OI= 1726 at $2.05 SL=1.00

Annotated chart (dated Aug. 19th, 2003):



Picked on August 19 at $76.67
Change since picked:    +0.20
Earnings Date        07/29/03 (confirmed)
Average Daily Volume:     881 thousand
Chart link:



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

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


*********************************************
SPREADS, COMBINATIONS & PREMIUM-SELLING PLAYS
*********************************************

Rally Pauses After Hewlett-Packard Report
By Ray Cummins

A mediocre quarterly report from Dow component Hewlett-Packard
(NYSE:HPQ) was enough to stall the rally today, despite renewed
strength in networking stocks and optimism in the data storage
sector.

The Dow Jones industrial average ended 31 points lower at 9,397
on weakness in Hewlett-Packard (NYSE:HPQ), Honeywell (NYSE:HON),
General Electric (NYSE:GE) and Merck (NYSE:MRK).  The composite
technology index finished unchanged at 1,760 as buying pressure
in networking and storage stocks equalized the downward bias in
computer hardware and software shares.  The Standard & Poor's 500
stock index edged lower, down 2 points at 1000 with airline, gold,
utility, and oil among the few bullish groups.  Volume was light
with 1.20 billion shares traded on the NYSE while 1.50 billion
shares were swapped on the NASDAQ.  Winners outpaced losers by a
slim margin on both the Big Board and the technology exchange.
Treasurys retreated from early gains to close in the red.  The
10-year note ended down 18/32 to yield 4.44% while the 30-year
government bond finished 18/32 lower with a yield of 5.28%.


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

SUMMARY OF CURRENT POSITIONS - AS OF 8/19/03

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

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 our subscribers, 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 editor of this section does not take actual positions in any
published plays and the summary comments are 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 in
any way replace your duty to diligently monitor and manage the
positions in your portfolio.


MONTHLY YIELD FOR UNCOVERED OPTIONS: MAXIMUM & SIMPLE

The Maximum Yield (listed in the summary and with "naked" option
selling plays) is the greatest possible profit available in the
position.  This amount, expressed as a percentage, is based on
the initial margin requirement as determined by the Board of
Governors of the Federal Reserve, the U.S. options markets and
other self-regulatory organizations.  Although increased margin
requirements may be imposed either generally or in individual
cases by various brokerage firms, our calculations use the widely
accepted margin formulas from the Chicago Board Options Exchange.
The "Simple Yield" is based on the cost of the underlying issue
(in the event of assignment), including the premium from the sold
option, thus it reflects the maximum potential loss in the trade.


Naked Puts
**********

Stock   Strike Strike Cost  Current   Gain    Max    Simple
Symbol  Month  Price  Basis  Price   (Loss)  Yield   Yield

DRIV     SEP    17    17.15  24.28   $0.35   4.88%   2.04%
IMCL     SEP    30    28.85  40.30   $1.15   8.88%   3.99%
LLTC     SEP    32    31.75  39.38   $0.75   4.40%   2.36%
OVTI     SEP    30    29.15  44.81   $0.85   6.18%   2.92%
SINA     SEP    22    21.90  31.48   $0.60   5.80%   2.74%
ZRAN     SEP    20    19.60  24.69   $0.40   4.92%   2.04%
CBK      SEP    35    34.55  42.70   $0.45   3.39%   1.30%
IMCL     SEP    30    29.45  40.30   $0.55   5.18%   1.87%
LLTC     SEP    32    32.00  39.38   $0.50   3.64%   1.56%
NVLS     SEP    30    29.55  38.01   $0.45   3.92%   1.52%
OVTI     SEP    30    29.35  44.81   $0.65   5.83%   2.21%
PCLN     SEP    25    24.65  37.53   $0.35   4.03%   1.42%
PHTN     SEP    22    22.10  29.79   $0.40   5.24%   1.81%
RIMM     SEP    20    19.60  27.84   $0.40   5.78%   2.04%
URBN     SEP    40    39.40  47.36   $0.60   3.78%   1.52%
AEIS     SEP    17    17.10  22.66   $0.40   5.97%   2.34%


Naked Calls
***********

Stock  Strike Strike Cost  Current   Gain    Max     Simple
Symbol Month  Price  Basis  Price   (Loss)  Yield    Yield

CVTX     SEP    32   32.95  25.63   $0.35   5.65%    1.06%
MEDI     SEP    40   40.65  35.47   $0.65   4.68%    1.60%
RJR      SEP    35   35.55  31.92   $0.55   4.15%    1.55%


Put-Credit Spreads
******************

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

KSS     60.64  62.70   SEP   50  55  0.60  54.40  $0.60   Open
WHR     66.05  69.62   SEP   55  60  0.60  59.40  $0.60   Open
XAU.X   82.67  91.18   SEP   70  75  0.55  74.45  $0.55   Open
APPX    43.86  46.65   SEP   30  35  0.55  34.45  $0.55   Open
CHIR    46.33  47.76   SEP   40  42  0.25  42.25  $0.25   Open
TIF     37.42  39.31   SEP   30  35  0.45  34.55  $0.45   Open


Call-Credit Spreads
*******************

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

UNH     48.79  51.47   SEP  58  55   0.30  55.30  $0.30   Open
WLP     76.49  78.74   SEP  90  85   0.50  85.50  $0.50   Open
CTX     73.74  78.59   SEP  85  80   0.65  80.65  $0.65   Open
NBIX    49.52  51.40   SEP  60  55   0.60  55.60  $0.60   Open

Centex (NYSE:CTX) is on the "watch" list after Tuesday's rally
in the Homebuilder group.


Synthetic Positions
*******************

No Open Positions


Debit Straddles
***************

No Open Positions


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

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

BULLISH PLAYS - NAKED PUTS

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

WARNING: THE RISK IN SELLING UNCOVERED OPTIONS IS SUBSTANTIAL!

The sale of uncovered puts entails considerable financial risk,
far more than the initial margin or collateral required to open
a position.  The maximum financial obligation for the sale of a
naked put is the strike price (of the underlying stock) that is
sold.  Although this obligation is reduced by the premium from
the sale of the option, a writer of puts should have the cash or
collateral equivalent of the sold strike price in reserve at all
times.  In addition, there is one very important rule when using
this strategy: Don't sell puts on stocks that you don't want to
own!  Why?  Because stocks occasionally experience catastrophic
declines, exponentially increasing the margin maintenance and
possibly causing a devastating shortfall in your portfolio.  It
is also important that you consider using trading stops on naked
option positions to help limit losses when a stock's price falls.
Many professional traders suggest closing the position when the
underlying share value moves below the sold strike, or using a
"buy-to-close" stop order at a price that is no more than twice
the original premium received from the sold option.

**************
ANPI - Angiotech  $44.80  *** Stent-Coating Maker ***

Angiotech Pharmaceuticals (NASDAQ:ANPI) is engaged in the fusion
of medical device technologies and pharmaceutical therapies.  The
company's first product was a drug-coated stent.  Angiotech's goal
is to develop other products to enhance the performance of medical
devices and biomaterials through the use of pharmatherapeutics.
In September 2002, the company and Cohesion Technologies, agreed
to a merger in which Cohesion will merge with a subsidiary of
Angiotech, with Cohesion continuing as a wholly owned subsidiary
of the company.

ANPI - Angiotech  $44.80

PLAY (sell naked put):

Action    Month &   Option    Open   Last  Cost    Max.  Simple
Req'd     Strike    Symbol    Int.   Price Basis  Yield  Yield

SELL PUT  SEP 35    AUJ UG   3,228   0.45  34.55   4.7%   1.3% *
SELL PUT  SEP 40    AUJ UH   3,147   1.50  38.50  10.1%   3.9%


**************
AEIS - Advanced Energy  $22.98  *** The Rally Continues! ***

Advanced Energy (NASDAQ:AEIS) is a leader in the development and
support of technologies for critical high-technology manufacturing
processes used in the production of semiconductors, flat panel
displays, data storage products, compact discs, digital video
discs, architectural glass, and other advanced product applications.
Leveraging a diverse product portfolio and technology leadership,
the firm creates solutions that maximize process impact, improve
productivity and lower cost of ownership for its customers.  This
portfolio includes a comprehensive line of technology solutions in
power, flow, thermal management, plasma and ion beam sources, and
integrated process monitoring and control for original equipment
manufacturers and end-users around the world.

AEIS - Advanced Energy  $22.98

PLAY (sell naked put):

Action    Month &   Option    Open   Last  Cost    Max.  Simple
Req'd     Strike    Symbol    Int.   Price Basis  Yield  Yield

SELL PUT  SEP 20    OEQ UD      32   0.50  19.50   7.3%   2.6% *
SELL PUT  SEP 22.5  OEQ UX       4   1.30  21.20  12.7%   6.1%


**************
FLML - Flamel Technologies  $22.34  *** Hot Biotech Stock! ***

Flamel Technologies (NASDAQ:FLML) is a biopharmaceutical company
engaged mainly in the development of two polymer-based delivery
technologies for medical applications.  The company's Micro-pump
technology is a multi-particulate technology for oral ingestion
of small molecule drugs with applications in controlled release,
tastemasking and bioavailability enhancement.  The company has
three major products based on its Micropump technology: Asacard,
a controlled-release formulation of aspirin for the treatment of
cardiovascular disease; Metformin XL, a controlled-release form
of Metformin that is in development for use for the treatment of
Type II diabetes, and Genvir, a controlled-release acyclovir for
the treatment of genital herpes.  In addition, FLML has developed
new herbicide delivery systems and has patented a biomaterial,
ColCys.

FLML - Flamel Technologies  $22.34

PLAY (sell naked put):

Action    Month &   Option    Open   Last  Cost    Max.  Simple
Req'd     Strike    Symbol    Int.   Price Basis  Yield  Yield

SELL PUT  SEP 17.5  FLU UW     217   0.50  17.00   9.9%   2.9% *
SELL PUT  SEP 20    FLU UD     237   1.20  18.80  15.1%   6.4%


**************
IMCL - ImClone  $40.81  *** Becoming An Old Favorite! ***

ImClone Systems (NASDAQ:IMCL) is a biopharmaceutical company whose
mission is to advance oncology care by developing a portfolio of
targeted biologic treatments designed to address the medical needs
of patients with a variety of cancers. The company's lead product,
Erbitux, is a therapeutic antibody that inhibits stimulation of
epidermal growth factor receptor upon which certain solid tumors
depend in order to grow. In addition to the development of its
lead product candidates, the company conducts research in a number
of areas related to its core focus of growth factor blockers, as
well as cancer vaccines and angiogenesis inhibitors. IMCL has also
developed diagnostic products and vaccines for certain infectious
diseases.

IMCL - ImClone  $40.81

PLAY (sell naked put):

Action    Month &   Option    Open   Last  Cost    Max.  Simple
Req'd     Strike    Symbol    Int.   Price Basis  Yield  Yield

SELL PUT  SEP 35    QCI UG   1,792   0.50  34.50   4.5%   1.4% *
SELL PUT  SEP 40    QCI UH   1,865   2.05  37.95  11.5%   5.4%


**************
JCOM - j2 Global Communications  $61.49  *** New All-Time High! ***

j2 Global Communications (NASDAQ:JCOM) provides outsourced value
added messaging and communications services to individuals and
businesses throughout the world.  The company offers faxing and
voicemail solutions, Web initiated conference calling, document
management solutions and unified messaging services.  j2 Global
markets its services principally under the brand names eFax and
jConnect.  The company delivers its services through its global
telephony/Internet protocol network, which spans more than 600
cities in 18 countries across five continents, including four
capital cities in Latin America where j2 Global is in the process
of launching its unique service.

JCOM - j2 Global Communications  $61.49

PLAY (sell naked put):

Action    Month &   Option    Open   Last  Cost    Max.  Simple
Req'd     Strike    Symbol    Int.   Price Basis  Yield  Yield

SELL PUT  SEP 50    JQF UJ     363   0.45  49.55   3.3%   0.9% TS
SELL PUT  SEP 55    JQF UK     298   1.30  53.70   6.6%   2.4%


**************
MGAM - Multimedia Games  $25.99  *** Entry Point? ***

Multimedia Games (NASDAQ:MGAM) is the leading supplier of
interactive electronic games and player stations to the rapidly
growing Native American gaming market.  The company's games are
delivered through a telecommunications network that links its
player stations with one another both within and among gaming
facilities.  Multimedia Games designs and develops networks,
software and content that provide its customers with a range of
gaming systems.  The company's development and marketing efforts
focus on Class II gaming systems and Class III video lottery
systems for use by Native American tribes throughout the United
States.

MGAM - Multimedia Games  $25.99

PLAY (sell naked put):

Action    Month &   Option    Open   Last  Cost    Max.  Simple
Req'd     Strike    Symbol    Int.   Price Basis  Yield  Yield

SELL PUT  SEP 22.5  QMG UX     599   0.30  22.20   4.1%   1.4% *
SELL PUT  SEP 25    QMG UE     592   1.05  23.95   9.9%   4.4%


**************
NFLX - Netflix  $27.72  *** Buy-Out Rumors? ***

Netflix (NASDAQ:NFLX) is an online entertainment service in the
United States that provides more than 600,000 subscribers access
to a comprehensive library of more than 11,500 movie, television
and other filmed entertainment titles.  The company's standard
subscription plan allows subscribers to have three titles out at
the same time with no due dates, late fees or shipping charges.
Subscribers can view as many titles as they want in a month and
they select these titles at the firm's Website (www.netflix.com)
aided by its proprietary CineMatch technology.  They receive them
on DVD by first-class mail and return them to the company at their
convenience using prepaid mailers.  Once a title has been returned,
Netflix mails the next available title in a subscriber's queue.

NFLX - Netflix  $27.72

PLAY (sell naked put):

Action    Month &   Option    Open   Last  Cost    Max.  Simple
Req'd     Strike    Symbol    Int.   Price Basis  Yield  Yield

SELL PUT  SEP 22.5  QNQ UX   5,128   0.25  22.25   4.0%   1.1% *
SELL PUT  SEP 25    QNQ UE   3,618   0.70  24.30   7.6%   2.9%


**************
NTES - NetEase.com  $51.20  *** China Internet Revolution ***

NetEase.com (NASDAQ:NTES) is a China-based Internet technology
company that pioneered the development of applications, services
and other technologies for the Internet in China.  The NetEase Web
sites, operated by a company affiliate, organize and provide access
to 18 content channels through distribution arrangements with more
than one hundred international and domestic content providers.  In
addition, the NetEase Internet sites offer a variety of products and
services, including Instant Messaging (Popo), Dating, Love, Alumni
and Personal Home Page.  These products and services enable users to
communicate about interests and areas of expertise.  At the end of
March 2003, the number of registered users of the NetEase Web sites
reached 114 million with the average number of daily page views over
370 million.

NTES - NetEase.com  $51.20

PLAY (sell naked put):

Action    Month &   Option    Open   Last  Cost    Max.  Simple
Req'd     Strike    Symbol    Int.   Price Basis  Yield  Yield

SELL PUT  SEP 40    NQG UH   2,200   0.45  39.55   4.1%   1.1% *
SELL PUT  SEP 45    NQG UI   1,890   1.45  43.55   9.0%   3.3%


**************
PHTN - Photon  $29.64  *** Recovery In Progress! ***

Photon Dynamics (NASDAQ:PHTN) is a provider of yield management
solutions to the flat panel display (FPD) industry.  The company
also offers yield management solutions for the printed circuit
board assembly and advanced semiconductor packaging industries
and the cathode ray tube display and CRT glass and auto glass
industries.  The firm's test, repair and inspection systems are
used by manufacturers to collect data, analyze product quality
and identify and repair product defects at critical steps in the
manufacturing.

PHTN - Photon  $29.64

PLAY (sell naked put):

Action    Month &   Option    Open   Last  Cost    Max.  Simple
Req'd     Strike    Symbol    Int.   Price Basis  Yield  Yield

SELL PUT  SEP 25    PDU UE     315   0.40  24.60   5.2%   1.6% *
SELL PUT  SEP 27.5  PDU UY     177   1.05  26.45   9.6%   4.0%


**************
RIMM - Research In Motion  $27.64  *** Next Leg Up? ***

Research In Motion Limited (NASDAQ:RIMM) is a designer, builder,
and marketer of wireless solutions for the mobile communications
market.  Through development and integration of hardware, software
and services, the firm provides solutions for seamless access to
time-sensitive information and communications, including e-mail,
telephone, messaging and Internet- and intranet-based applications.
The company's technology also enables a broad array of third-party
developers and manufacturers around the world to enhance their own
products and services with wireless connectivity.  RIM's portfolio
of products includes a family of wireless handhelds, the BlackBerry
wireless e-mail solution, embedded radio modems and a suite of
software development tools.

RIMM - Research In Motion  $27.64

PLAY (sell naked put):

Action    Month &   Option    Open   Last  Cost    Max.  Simple
Req'd     Strike    Symbol    Int.   Price Basis  Yield  Yield

SELL PUT  SEP 22.5  RUL UX   1,144   0.35  22.15   5.5%   1.6% *
SELL PUT  SEP 25    RUL UE   3,728   0.85  24.15   9.0%   3.5%


**************
SINA - SINA Corporation  $33.27  *** Up-trend Intact! ***

SINA Corporation (NASDAQ:SINA), formerly known as SINA.com, is an
online media company and value-added information service provider
for China and the global Chinese communities.  With a branded
network of localized Websites targeting China and overseas Chinese,
the company provides an array of services to its users including
region-focused online portals, search, directory, interest-based
and community-building channels, free and premium e-mail, wireless
short messaging, online games, virtual Internet service provider,
classified listings, e-commerce, e-learning, and enterprise
e-solutions.  In turn, SINA generates revenue through advertising,
fee-based services, e-commerce and enterprise services.

SINA - SINA Corporation  $33.27

PLAY (sell naked put):

Action    Month &   Option    Open   Last  Cost    Max.  Simple
Req'd     Strike    Symbol    Int.   Price Basis  Yield  Yield

SELL PUT  SEP 25    NOQ UE   2,588   0.30  24.70   4.2%   1.2% *
SELL PUT  SEP 30    NOQ UF   3,330   1.35  28.65  11.6%   4.7%


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

BULLISH PLAYS - CREDIT SPREADS

These candidates are based on the underlying issue's technical
history or trend.  The probability of profit in these positions
may also be higher than other plays in the same strategy, due to
small disparities in option pricing however, each play should be
evaluated for portfolio suitability and reviewed with regard to
your strategic approach and trading style.

***************
AMZN - Amazon.com  $43.76  *** Testing 3-Year Highs! ***

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.

AMZN - Amazon.com  $43.76

PLAY (less conservative - bullish/credit spread):

BUY  PUT  SEP-37.50  ZQN-UU  OI=12500  ASK=$0.30
SELL PUT  SEP-40.00  ZQN-UH  OI=7801   BID=$0.60
INITIAL NET-CREDIT TARGET=$0.30-$0.40
POTENTIAL PROFIT(max)=14% B/E=$39.70


**************
KLAC - KLA Tencor  $54.35  *** Chip Sector Speculation! ***

KLA-Tencor (NASDAQ:KLAC) is a supplier of process control and
yield management solutions for the semiconductor and related
microelectronics industries.  The company's large portfolio
of products, software, analysis, services and expertise is
designed to help integrated circuit manufacturers manage yield
throughout the entire wafer fabrication process, from research
and development to final mass production yield analysis.  The
company offers a broad spectrum of products and services that
are used by every major semiconductor manufacturer in the world.
These customers turn to the company for in-line wafer defect
monitoring; reticle and photomask defect inspection; CD SEM
metrology; wafer overlay; film and surface measurement; and
overall yield and fab-wide data analysis.

KLAC - KLA Tencor  $54.35

PLAY (less conservative - bullish/credit spread):

BUY  PUT  SEP-47.50  KCQ-UT  OI=5816  ASK=$0.45
SELL PUT  SEP-50.00  KCQ-UJ  OI=9166  BID=$0.75
INITIAL NET-CREDIT TARGET=$0.30-$0.40
POTENTIAL PROFIT(max)=14% B/E=$49.70


**************
RCII - Rent A Center  $75.80  *** Why Buy When You Can Rent? ***

Rent-A-Center (NASDAQ:RCII) is a primary store operator in the
rent-to-own industry.  Rent-A-Center operates approximately 3,000
company-owned stores in 50 states, the District of Columbia and
Puerto Rico.  The company's subsidiary, ColorTyme, is a national
franchisor of rent-to-own stores.  ColorTyme has over 300 stores
in 42 states, 330 of which operated under the ColorTyme name and
12 stores of which operated under the Rent-A-Center name.  The
company's stores offer popular consumer products, such as home
electronics, appliances, computers and furniture, and accessories
under flexible rental purchase agreements that typically allow the
customer to obtain ownership of the merchandise at the conclusion
of an agreed-upon rental period.  These unique agreements cater to
customers who only have a temporary need, or who simply desire to
rent rather than purchase, the merchandise.  The rent-to-own store
operator is planning a 5-for-2 stock split on 9/2/2003.

RCII - Rent A Center  $75.80

PLAY (less conservative - bullish/credit spread):

BUY  PUT  SEP-65.00  RQG-UM  OI=429  ASK=$0.75
SELL PUT  SEP-70.00  RQG-UN  OI=190  BID=$1.40
INITIAL NET-CREDIT TARGET=$0.65-$0.75
POTENTIAL PROFIT(max)=15% B/E=$69.35


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

STRADDLES AND STRANGLES

Based on analysis of the historical option pricing and technical
background, these positions meet the fundamental criteria for
favorable volatility-based plays.

**************
ABC - AmerisourceBergen  $60.00  *** Probability Play! ***

AmerisourceBergen (NYSE:ABC) is a wholesale distributor of
pharmaceutical products and related healthcare services and
solutions.  The company distributes a full line of products,
including pharmaceuticals, proprietary medicines, cosmetics,
toiletries, personal health products, sundries and home
healthcare supplies and equipment.  It provides services to
acute care hospitals and health systems, independent retail
pharmacies, alternate site customers and national and also
egional retail pharmacy chains located throughout the United
States.  The company distributes pharmaceuticals to long-term
care and workers' compensation patients and provides product
distribution, logistics, pharmacy management programs, pharmacy
automation, consulting services and web fulfillment services.
The firm operates in two segments: Pharmaceutical Distribution,
mainly its wholesale and specialty drug distribution business,
and PharMerica, its institutional pharmacy business.

ABC - AmerisourceBergen  $60.00

PLAY (conservative - neutral/debit straddle):

BUY CALL  NOV-60.00  ABC-KL  OI=800  ASK=$3.80
BUY PUT   NOV-60.00  ABC-WL  OI=383  ASK=$3.70
INITIAL NET-DEBIT TARGET=$7.25-$7.40
INITIAL TARGET PROFIT=$2.45-$3.25


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

BEARISH PLAYS - NAKED CALLS

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

WARNING: THE RISK IN SELLING UNCOVERED OPTIONS IS SUBSTANTIAL!

The sale of uncovered calls entails considerable financial risk,
far more than the initial margin or collateral required to open
the position.  The maximum financial obligation for the sale of a
naked option is the strike price (of the underlying stock) that
is sold.  Although this obligation is reduced by the premium from
the sale of the option, a writer of options must have the cash or
collateral equivalent of the sold strike price in reserve at all
times.  The simple fact is: stocks often experience large price
swings, exponentially increasing the margin maintenance and very
possibly causing a devastating shortfall in your portfolio.  It
is also important that you consider using trading stops on naked
option positions to help limit losses when a stock price moves in
a volatile manner.  Many professional traders suggest closing the
position when the underlying share value moves beyond the sold
strike, or using a "buy-to-close" stop order at a price that is no
more than twice the original premium received from the sold option.

***************
CVTX - CV Therapeutics  $24.96   *** Premium-Selling Only! ***

CV Therapeutics (NASDAQ:CVTX) is a biopharmaceutical firm focused
on the discovery, development and commercialization of new small
molecule drugs for the treatment of cardiovascular diseases.  The
company's New Drug Application (NDA) for Ranexa (ranolazine) for
the treatment of chronic angina has been filed at the U.S. FDA.
Tecadenoson (CVT-510), an A1-adenosine receptor agonist, is being
developed for the potential reduction of rapid heart rate during
atrial arrhythmias.  CVT-3146, an A2A-adenosine receptor agonist,
is being developed for the potential use as a pharmacologic agent
in cardiac perfusion imaging studies.  Adentri, an A1-adenosine
receptor antagonist, is being developed by the company's partner,
Biogen, for the potential treatment of acute and chronic congestive
heart failure.  CVTX also has several research and preclinical
development programs designed to bring additional drug candidates
into human clinical testing.

CVTX - CV Therapeutics  $24.96

PLAY (sell naked call):

Action     Month &   Option    Open   Last  Cost    Max.  Simple
Req'd      Strike    Symbol    Int.   Price Basis  Yield  Yield

SELL CALL  SEP 30    UXC IF   2,072   0.45  30.45   8.1%   1.5% *
SELL CALL  SEP 27.5  UXC IY   1,030   0.95  28.45  11.1%   3.3%


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

BEARISH PLAYS - CREDIT SPREADS

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

**************
LLY - Eli Lilly  $61.61  *** Sector Slump! ***

Eli Lilly & Company (NASDAQ:LLY) discovers, develops, manufactures
and sells pharmaceutical products.  The company manufactures and
distributes its products through owned or leased facilities in the
United States, Puerto Rico, and 19 other countries.  Eli Lilly's
products are sold in approximately 150 countries and most of the
products the company sells were discovered or developed by its own
scientists and its success depends to a great extent on its ability
to continue to discover and develop new pharmaceutical products.
Eli Lilly directs its research efforts primarily toward the search
for products to diagnose, prevent and treat human diseases.  The
company also conducts research to find products to treat diseases
in animals and to increase the efficiency of animal food production.

LLY - Eli Lilly  $61.61

PLAY (conservative - bearish/credit spread):

BUY  CALL  SEP-70.00  LLY-IN  OI=3079  ASK=$0.15
SELL CALL  SEP-65.00  LLY-IM  OI=3964  BID=$0.65
INITIAL NET-CREDIT TARGET=$0.50-$0.60
POTENTIAL PROFIT(max)=11% B/E=$65.50


**************
MRK - Merck  $52.12  *** Murky Future After Medco Spin-off! ***

Merck (NYSE:MRK) is a global research-driven pharmaceutical
products and services company that discovers, develops, makes
and markets a broad range of products to improve human and animal
health, directly and through its joint ventures.  The firm also
previously provided pharmacy benefit management services through
Medco Health Solutions.  Merck's operations were comprised of two
business segments: Merck Pharmaceutical and Medco Health.  Merck
Pharmaceutical's products consist of therapeutic and preventive
agents, sold by prescription, for the treatment and prevention
of human disorders.  Medco Health, which has been spun-off as a
new company, provides pharmacy benefit services, including sales
of prescription drugs through managed prescription drug programs.
The company sells its human health products primarily to drug
wholesalers and retailers, hospitals, clinics, government agencies
and managed healthcare providers, such as health maintenance
organizations and other institutions.

MRK - Merck  $52.12

PLAY (conservative - bearish/credit spread):

BUY  CALL  SEP-60.00  MRK-IL  OI=3354  ASK=$0.10
SELL CALL  SEP-55.00  MRK-IK  OI=5331  BID=$0.65
INITIAL NET-CREDIT TARGET=$0.55-$0.65
POTENTIAL PROFIT(max)=12% B/E=$55.55


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

SEE DISCLAIMER - SECTION 1

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


**********
Watch List
**********

A Steady Mix

Bank of America - BAC - close: $81.71 change: +0.50

WHAT TO WATCH: The recent advance for some of the financials
appears to be stalling but not for BAC.  The bank stock just
keeps inching higher using its rising 50-dma as support.  Its
MACD is about to produce a new buy signal and with psychological
support of $80 nearby this might be a tempting entry point for
some bullish traders.  There is some congestion/resistance at $84
and $85 for the share price but UBS just upgraded the stock to a
"buy" and put a $95 price target on it.

Chart=


---

Bear Stearns - BSC - close: $69.26 change: -1.00

WHAT TO WATCH: Broker/Dealer BSC is another financial stock we've
been watching.  Shares dropped from $85 to less than $65 in the
mid-June to early August sell-off.  Now shares have bounced back
towards the $70 level, which was old resistance in the spring.
Today's weakness is hinting at a potential roll over as are the
stock's stochastics and momentum indicators.  Aggressive bears
could speculate on additional weakness but only with a tight stop
in case of a reversal.  There is plenty of congestion near $68
and that can slow down any descent.

Chart=


---

Cigna Corp - CI - close: $46.55 change: +1.59

WHAT TO WATCH: Insurance equity CI has been trading sideways at
the $45 level for most of August and on light volume.  The light
volume is to be expected during the dog days of summer but
today's rally on decent volume without news is interesting.
Shares stalled at late July resistance near $47.00 so we're not
suggesting bullish entries just yet.  However, we do note that
the recent consolidation at $45 coupled with its simple 50 & 200-
dma's looks like a base bulls could build on.

Chart=


---

Thor Industries - THO - close: 49.85 change: +2.12

WHAT TO WATCH: Shares of THO have been up almost non-stop for two
weeks straight.  The last three days almost looks like a short
squeeze on the breakout over the $45.00 level.  That or someone
knew ahead of time that THO would buy privately held motor home
maker Damon Corp before the Aug. 19th announcement.  THO said the
acquisition would add about 20 cents to its fiscal 2004 earnings.
While bulls should be encouraged to see the big rally on growing
volume we're not suggesting plays at current levels.  A pull back
(maybe to $46.00 or $47.50) might be an entry point worth
evaluating.

Chart=


---

J2 Global Comm. - JCOM - close: $61.41 change: +2.16

WHAT TO WATCH: Still climbing into the upper stratosphere, shares
of JCOM fired their latest round of booster rockets a few days
ago.  Shares are up six days in a row and have cleared resistance
just above $55 and again at $60.  This stock does have a 2:1
stock split scheduled for August 29th but we'd still be hesitant
to buy it here.  A pull back and bounce above $56 might be
tempting though.

Chart=



===================================
RADAR SCREEN - more stocks to watch:
===================================

MGA $81.35 - Shares of MGA are still climbing and appear to be
hitting new all time highs on a daily basis.  Volume was very
strong on today's gain.

RARE $38.38 - The owner of several different restaurant chains,
RARE has been climbing strongly since its bounce off the 50-dma
in early August.  Volume has been strong the last three days and
so have the percentage gains.

PG $87.38 - A favorite stock on the watch list, shares of PG keep
dropping and have now closed below their simple 200-dma again.

WWW $20.50 - WWW has been in a slow, meandering but rising
channel since late January.  The breakout today just broke
through resistance at $20 and crossed the centerline of the
channel.  Patient traders with plenty of time might find this one
interesting.


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

15 to 8 Bulls

To Read The Rest of The OptionInvestor.com Market Watch Click Here
http://www.OptionInvestor.com/marketposture/mp_082003.asp


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