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Daily Newsletter, Sunday, 10/05/2003

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The Option Investor Newsletter                   Sunday 10-05-2003
Copyright 2003, All rights reserved.                        1 of 5
Redistribution in any form strictly prohibited.


Entire newsletter best viewed in COURIER 10 font for alignment

In Section One:

Wrap: Prosperity Breaking Out All Over
Futures Market: Equities rise, Treasuries fall, Metals slammed
Index Trader Wrap: Naz Catches Up
Editor's Plays: Time to Go Bullish
Market Sentiment: No Doubt
Ask the Analyst: The NASDAQ-100
Coming Events: Earnings, Splits, Economic Events


Posted online for subscribers at http://www.OptionInvestor.com
******************************************************************
MARKET WRAP  (view in courier font for table alignment)
******************************************************************
        WE 10-03        WE 9-26         WE 9-19         WE 9-12
DOW     9572.31 +259.23 9313.08 -331.74 9644.82 +173.27 - 31.79
Nasdaq  1880.57 + 88.50 1792.07 -113.63 1905.70 + 50.67 -  3.21
S&P-100  515.17 + 15.56  499.61 - 21.01  520.62 +  8.32 -  0.19
S&P-500 1029.85 + 33.00  996.85 - 39.45 1036.30 + 17.67 -  2.76
W5000   9990.30 +343.82 9646.48 -407.5910054.07 +176.76 - 29.38
RUT      512.28 + 27.00  485.28 - 34.92  520.20 + 11.14 +  0.19
TRAN    2784.85 +121.02 2663.83 -130.88 2794.71 + 59.11 - 11.69
VIX       19.50 -  2.73   22.23 +  3.16   19.07 -  1.18 +  0.88
VXN       29.20 -  1.68   30.88 +  1.14   29.74 -  2.94 + 11.98
TRIN       0.60            1.42            1.35            1.11
Put/Call   0.75            0.98            0.68            0.90
******************************************************************




Prosperity Breaking Out All Over
by Jim Brown

To the surprise of everyone the jobs number was positive
instead of negative and the resulting explosion caught the
bears completely off guard. The Dow gapped up to near its
52-week highs as broadcasters tripped all over themselves
trying to explain why the consensus estimates were so wrong.

Dow Chart



Nasdaq Chart



S&P Chart




The Jobs Report showed a gain of +57,000 jobs in September
and the -93,000 loss in August was revised up to -41,000.
This is a net increase of +109,000 jobs and the markets
were caught completely unprepared. The gains were driven
by stronger hiring in services and construction. The
unemployment rate remained at 6.1% due to a drop in the
labor force participation rate to 66.1%. That means many
workers gave up looking for a job and are no longer in the
census. The number of workers that have been out of work
for more than 27 weeks rose to 23.2% and levels not seen
since 1992. Hourly earnings fell by a penny and the first
time they have fallen since 1989.

While jobs have been the missing piece of the puzzle the
positive report did have some negative implications. The
drop in hourly wages imply that consumer spending could
slow and that deflation concerns may be increasing. Also
reversing estimates was the news that the state survey
adjustment was projecting a loss of -145,000 jobs instead
of the +200,000 gain analysts were expecting. The chief
economist for Banc One was expecting a gain of +300,000.
This is the book balancing between the state and federal
numbers each June. The September jobs report is the first
look at the numbers and they will be revised as we move
forward.

Temporary workers increased and produced a bullish spin
to the news. Companies tend to put on temporaries to test
the water before adding permanent employees. If this is
the case then the coming trend could be improving. This
was the fifth straight month that temporary jobs were
added.

The only other economic report was the ISM Services which
came in at 63.3 compared to consensus at 62.8. While slightly
higher than consensus it was still a drop from the 65.1 we
saw last month. As I said on Thursday this was a throw away
number as long as it was over 60 and the 63.3 was icing on
the cake. With the jobs bounce already underway when this
number was released at 10:AM there was only a slight move
from the markets. Last months number was an index high so
a slight pullback was anticipated. The employment component
did fall -1.9% so there is still trouble in employment
even in the booming services sector. New orders fell -7.7%
to 59.9 in September.

Individual stock news was pretty much ignored with the race
to cover shorts but there were some significant events. HPQ
announced it would give $25,000 in free services to any
company that switched to HPQ from SUNW for its servers.
While this makes great headlines in a week where SUNW has
been the tech scapegoat it will have little or no impact
on SUNW or HPQ. HPQ would have easily discounted their
servers on any quote for much more than the $25K they are
offering. The switch from SUNW to HPQ would likely be a
multi hundred thousand dollar effort with hundreds if not
thousands of man hours and not something that $25K will
impact. Great marketing ploy and HPQ got much more than
$250K worth of advertising just from the announcement. It
would be interesting to know six months from now how many
companies actually collected on the offer.

BVF was a highlight on Friday and did not open for trading
until 1:45 and closed down -$6.67 or -18% on news that a
truck carrying up to $20 million in drugs was involved in
a multi car accident. The drugs will have to be returned
to the plant and re-certified as saleable before being
put back into the pipeline. BVF said it would impact
earnings for the quarter.

ADTN jumped +9.15 (+14%) on raised guidance to 42 cents
when analysts were only expecting 36 cents per share.
Revenue was expected to be up +6%. This telecom equipment
maker exploded on the good news while TLAB barely broke
even after warning that it was cutting another 10% of its
work force and close a development center in Canada. The
company has already suffered seven rounds of job cuts in
the past two years and five straight quarters of losses.
ADTN said the improvement was in market share gains and
an improved business climate. Maybe TLAB should start
tailing the ADTN salesmen.

Emcor (EME) fell -8.66 to $34.79 after warning that their
second half guidance was dropping by -50%. The construction
services company said small task projects were dropping
due to competitive pressures. The company said the small
jobs were the first to be cut when cost savings were needed
and the last to return. Their outlook is still good once
the economy returns to prior levels. Sounds like a familiar
story.

Another Grasso story made the rounds on Friday. A Wall
Street Journal story said a NYSE specialist firm said
Grasso pressured them to buy more AIG stock to prevent a
drop in price. No big deal since the market makers are
supposed to provide a liquid market and try to avoid big
swings in the stock prices. The problem was that Grasso
did it after receiving complaints from the chairman of
AIG. Still no big deal until you hear that AIG Chairman
Hank Greenberg was a NYSE director and a member of the
compensation committee that approved Grasso's pay package.
This will see more press only because of the relationship
and the assumption Grasso is an easy target now.

With any jump in the market or in the perception of the
economy you would expect a corresponding decline in bonds.
What you would not expect is the magnitude of the decline.
The ten-year yield jumped to near 4.22% when it was trading
at only 3.12% at Wednesday's close. Traders claim this is
the worst volatility in 40 years in the bond market. The
100-year storm that FNM CEO Franklin Rains has claimed is
far from over. The on again off again bond market rally
is playing havoc with mortgage rates. A full point jump,
+33%, in two days on the ten-year is literally unheard of.
Builders took it on the chin in early trading but rallied
back in the afternoon on speculation that more jobs meant
more buyers.

If you are a bond junkie how do you hedge yourself
against a 33% change in yields in a 48 hr period? When
changes in yields are normally measured in 10-15 basis
points and not +186 basis points as on Friday there has
got to be pain. How that pain filters back through the
markets next week will be the key. Obviously it was a
knee jerk reaction and will probably equalize but those
forced out of positions today for big losses will not
appreciate that fact.

Another financial instrument got hammered on Friday. The
gold bugs woke up to a major move that knocked -13.70 off
the price of gold to close at $370. This knocked off all
the gains from September and put the metal back at Aug-27
levels. This is well off the 394.80 high just seven days
ago.

Going in the opposite direction was oil, which closed over
$30 once again on fears that Saudi Arabia was going to cut
production to offset rising Iraqi output. Also adding to
the confusion was strike worries from Nigeria and comments
from Venezuela that they wanted to see prices several dollars
higher. Just when you thought prices were going to settle
back down after soaring to over $2 a gallon in many areas
it appears supply is dwindling again. This undeclared tax
on the U.S. consumer and corporations alike will act to
slow any future recovery. When added to the hike in interest
rates this is a serious problem that most people fail to
consider.

Depending on whom you listen to there were either outflows
from funds in the week ended on Thursday or at best a drop
in the amount of money deposited. TrimTabs said inflows to
all funds fell -50% last week to only $2.39 billion but
the numbers are vague. It appears more than $3 billion
flowed out of the funds that are under investigation for
illegal trading. Janus supposedly lost -$2.6 billion over
the last week after they said they uncovered 12 arrangements
for improper trading of its funds. If that money actually
left Janus then there was some serious selling to raise it
and that could have been one of the major reasons for the
drop last week. That money is probably already sloshing
around in some other funds coffers and is either already
back in the market over the last three days or will be put
back in next week.

Fed Rant Ahead

Ok, I admit it. It was a perfect setup. The perfect sting
to benefit the greater good. Thursday night I mentioned
that it was very coincidental that five different Fed heads
all took it upon them selves to say how concerned the Fed
was about jobs on the very same day. The day before the
actual jobs report. Very coincidental and questionable I
said at the time. What I and obviously many other traders
thought was we were going to have a disaster of a Jobs
report and they were setting us up for it in advance to
ease the blow. After all they were really concerned and
they were really feeling our pain. Considering the Fed
gets a 24-48 hour advance notice of all the economic
reports they obviously knew in advance how bad it was.
BINGO! They knew in advance exactly how good it was and
they orchestrated the perfect short squeeze. Set everybody
up to lean to the downside and then knock them out of the
ring with the sucker punch. The perfect sting for active
traders.

But why go to all the trouble? Because it is easier to
manipulate the markets when the opportunity presents itself
than cut rates again. It costs them nothing and to 99.9%
of the public it is totally secret. Another reason is to
pump up taxes. Not only does the Fed want to pump up the
market long term to reflate tax collection but they need
to stimulate tax collection short term as well. Causing
wild gyrations in the market will promote trading and
trigger tax consequences short term. How many traders
were either stopped out of positions Friday or closed
them for unexpectedly large profits? Maybe millions. They
accomplished multiple goals at once. They took a period
where everybody was coiled up tight worried about an
October drop and blew them out of the water and completely
turned the market around to bring the bulls back to thinking
about new highs. Those hoping to buy the October dip are
much less certain that a dip will appear. Now they are
nervous that they might miss the train. Bullish emails
were flying Friday afternoon. Dow 10,000 was mentioned
numerous times. The normal October tribulation period
has been completely discounted after Friday's bounce.

If a company CEO did this to his stock he would go to jail.
The Fed can do it because they don't own the stocks. They
are operating in our best interest or at least in the best
interest of the country. My shorts that were stopped out
on Friday did not benefit from the Fed help. When you
are dealing with banker barons who have a federal "get
out of jail free" card it brings an entirely new meaning
to "don't fight the Fed." What I would have given to be a
fly on the wall when Bernanke called Alan at the close.
"Well, Al, how did I do? We really put the screws to those
those traders today. What have you got planned for next
week? This is more fun than printing money!"

Obviously I have no evidence to support any of the above
scenario and I am only speculating. I do know that the
Fed gets 24-48 hour advance notice of reports. We also
know for a fact that five Fed guys hit on Jobs in public
speeches after they got that advance information. You
connect the dots.

The markets exploded out of the gate on the jobs news with
the Dow gapping up to 9631 (+150) and completely bypassed
two critical resistance levels at 9500 and 9600. After an
initial but brief pullback the Dow moved to a high of 9666
at 1:PM, +185 points. The Nasdaq surged to a high of 1891
and +56 points. While the Dow traded briefly over its
prior 52-week closing high of 9659 the Nasdaq could not
make repeat the feat. At 2:45 the sell programs began to
fire and the Dow dropped back to up only +84 and 100 points
off its high. Still a very nice gain. The Nasdaq pulled
back to 1878 and +44 for the day. Despite the afternoon
selling this was a very strong performance for October.
This stretched the October winning streak to three
consecutive days. The Dow is up over +300 points already
for Oct and the Nasdaq +90.

This puts the bulls, bears and traders on exactly opposite
sides of the fence. The bulls have completely written off
the possibility of an October decline. I get tons of hate
mail if I even mention the historical trends. (That should
be a strong contrarian indicator on its own.) The bears,
while expecting the mother of all October dips are scared
to pull the trigger and attempt to short the market even
at these levels. Being convinced there is a dip in our
future and being brave enough to put money on the line
and fight the Fed requires vastly different levels of
commitment. Traders don't care which way we go and have
no clue which way we are going. I published a chart on
Thursday showing the almost daily reversals of sentiment
over the last month. Friday's action did not help change
that picture.

Technically speaking, and that is what I am doing when I
talk about the market levels, we are at a critical point
in the market and in time. It seems almost daily since the
rebound began three days ago that I get numerous emails
calling me to task for mentioning a potential October dip.
I got no emails for the prior week when we were slipping
but now they are flying fast with all the reasons why we
should be bullish. I have no argument with being bullish.
I agree we should be long term bullish but that is not
the point. The point is not being bullish or bearish but
being careful as traders. It is simply ridiculous to go
blindly through October as though historical trends did
not exist. The trends MAY not repeat this October but
that does not mean we should not be wary. You would not
try to cross a busy street without first looking both
ways before you stepped off the curb. Be bullish all you
want but at least be aware of the potential land mines
in your path.

Technically speaking the Dow is better off where it closed
than at the highs of the day. Closing at 9650 would have
been an open invitation for shorts to take a free shot at
the open on Monday. Closing at 9575 is just far enough
below several resistance levels to make them think twice
before taking the leap. On the long side the bulls do not
have to grit their teeth and hold their nose to buy at the
52-week high. They can calmly look at the market action on
Monday and decide where to make their buys. With support
at every 50 point increment below us there are plenty of
potential dip buying entry points. Closing 100 points off
the highs took all the pressure off the bulls and put the
worry back on the side of the bears. Still the odds of a
gap fill in our future are really strong.

The Nasdaq has very strong resistance at 1900 and equally
strong support at 1800. 1865 is probably the price magnet
in the middle. The Nasdaq was the strongest index Friday
and was up +4.7% for the week. The networkers were up +6.8%.
While the Friday close represents exactly a 50% gain for
the Nasdaq since the March lows many individual stocks
have huge gains for the year. INTC +89%, EBAY +128%, SAMN
+131%, AMZN +170%. Fundamentally speaking this is a huge
reason why getting over 1900 could be a challenge over the
next two weeks.

Everybody knows earnings start next week. The first Dow
component announces on Tuesday with Alcoa taking the plunge.
Tuesday heats up with YHOO, DNA, SONS, COST. The number of
companies increases daily with GE leading the list on
Friday. The earnings really heat up the week of the 13th
with the biggest accumulation of big caps including IBM
and INTC. Earnings expectations have ratcheted up over the
last two weeks to nearly +20% for the S&P. Considering the
strength of the recovery this is huge. The rally has been
huge and many think the expectations are already priced
into the market and leave us nowhere to go if companies
just hit these numbers. I have no opinion about the
potential earnings other than I do not expect a lot of
better than expected results. The warnings have been
especially light and that has helped ramp up expectations.
We all know what happens when companies just meet
expectations. The result is normally not pleasant. With
expectations so high it is going to be tough to exceed
them enough to please most bullish investors.

What we have is a critical point in the markets. Not a
bullish or bearish point but simply a collection of related
items all rushing together over the next two weeks. It is
small wonder these are the most volatile two weeks of the
year. Other than the small dip that ended on Tuesday we
have not really seen any fund selling yet. As I stated
earlier that bout of weakness could have been Janus flight
more than any generic portfolio shuffling. That leaves the
fund portfolios packed full of profits and racing toward
their October fiscal year end. The most likely scenario
would be some spark over the next two weeks that triggers
some profit taking. Whether that spark is earnings or just
a point on the calendar is anybody's guess.

Just because there is a good chance of profit taking in
our future does not mean we should not be bullish. The
jobs report was the first really positive sign that the
employment is starting to cycle up again. That is very
bullish but it is just a sign and not a major event. With
140 million jobs in the country an addition of +57,000 is
not statistically significant. It is significant only to
the sentiment and to investor confidence. Traders might
remember that despite the positive jobs report the PMI,
Personal Income, Chain Store Sales, Consumer Confidence,
Construction Spending, ISM, Jobless Claims and Factory
Orders were all worse than expected. But who is counting?
While they were weaker than expected nothing goes straight
up and there were extenuating circumstances. We had a
blackout and a hurricane in the reporting period. I am
only trying to paint the entire picture and get you to
step back from the microscopic focus on the jobs report.

I am bullish long term but I still expect some profit
taking in October. What you expect depends on your point
of view and your time horizon. If you are a long term
stock investor then the short term fluctuations are just
a nuisance factor. You probably are hoping for a dip to
buy. If your time frame is 2-3 weeks then you should
revisit your stop loss plan. If your timeframe is only
2-3 days then you already have an opinion about immediate
market direction and I am not going to influence you.

Monday is Yom Kippur and many traders will not be at work.
Normally this would be a low volume day. After three days
of gains I would expect another consolidation day due to
the low volume. It takes strong volume to move the markets
upward and that volume could be lacking on Monday. Use it
as a day to research individual stocks to see which ones
have better than average relative strength and which ones
report earnings late in the cycle. For example with JNPR
reporting earnings next week any positive results would be
reflected in expectations for other networkers that report
a week or two later. Playing JNPR, which reports on the 9th,
does not give you much time and I never recommend holding
over an earnings event. By taking a position in FDRY or
CSCO, only an example, both of which report much later
you could profit from the reaction to the JNPR news with
much less risk.

The next two weeks are one of the most enjoyable "trading"
periods of the year. Moves tend to be quick, volume high
and reversals frequent. I can't wait. I spent many long
hours last week studying chart setups and playing with
different indicators. I suggest you do the same. I suggest
you prepare an October game plan. Decide where you want
to enter new trades both bullish and bearish and decide
where you want to exit those trades once entered. Plan
for bounces and plan for dips. If you plan your trades
in advance then the emotion of things like the jobs report
spike will not cause a knee jerk reaction that costs you
money. There were a lot of traders that went long at the
top of the bounce on Friday because they thought the
market was going to run away from them. If that is your
game plan then go for it. My game plan is still the same
as it was last Sunday. I am going to buy dips at support
and sell spikes to resistance. I am going to let October
play out any way it wants and just follow along for the
ride. Once you form a hard opinion about market direction
you may find yourself humbled. I know from many years of
experience.

Enter Very Passively, Exit Very Aggressively!

Jim Brown


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

Equities rise, Treasuries fall, Metals slammed
Jonathan Levinson

The release of positive economic data 8:30AM and 10:00AM
coincided with a rally in equities, a decline in bond and
preceded a vertical liquidation of precious metals at noon.

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



Note regarding pivot matrix:  The support, pivot and resistance
levels above are derived from the high, low and closing price
levels by a simple mathematical formula.  They are not intended
to be predictive of market turning points or to serve as targets,
but rather represent the range retracement levels as generated by
the pivot algorithm.  Do not think of them as market "calls" or
predictions.  Like any technically-derived indicator or price
level, the pivot matrix values should be regarded as decision
points at which to evaluate current market conditions.  Visit us
in the Futures Monitor for our realtime views of the various
markets covered here.


Daily chart of the US Dollar Index




The US Dollar Index had a good day on Friday for a change,
closing above 93 and printing a bullish doji hammer for the week,
its first solidly bullish weekly print in nearly six weeks.
Friday’s bullish move was the determinative day for the week, as
it was in gold, silver, treasuries and, to a lesser extent,
equities.  The Commodities Index, the CRB, lost .66 to close at
243.90, and was led by strength in crude oil, natural gas and
sugar futures.  The real action, however, occurred in precious
metals, and it wasn’t pretty.


Daily chart of December gold




As was noted in Thursday’s Futures Wrap, the Fed and the BoJ took
center stage this week, with word of mind-boggling sums of
intervention in the currency markets by the BoJ, Ben “Printer”
Bernanke asserting with a straight face that the bubbles whose
existence Chairman Greenspan once denied are not likely caused by
interest rate policy, and numerous Fed heads expressing concerned
words about unemployment.  Jim Brown discusses this latter issue
more fully in the Market Wrap this weekend.  The move in gold and
silver is more easily understood in the context of various
central bankers taking the limelight this week, and with that,
I’ll review the daily chart.

December gold actually gained on the initial release of the
employment data, held steady through the ISM release at 10AM,
declined slightly, and then tanked in what seemed like the blink
of an eye at noon, spiking down approximately 20 points inside of
one hour.  Silver got smoked for an equivalent amount.  The low
printed at 364.30 before it bounced to close at 371.50, down
12.20 on the day.  The oscillators are on sell signals, and the
bear wedge is obviously in play.  My only other observation is
that technical analysis alerted us to the toppiness of and
vulnerability in the precious metals, and I’ve commented on it in
the Futures Monitor.  The charts identified potential support and
resistance areas quite well.  However, the move today was
unpredictable as to its magnitude, and while as of this writing
I’ve heard only silence as to what was behind the high volume
selloff, it left a bad taste in my mouth.  Suffice it to say that
the move in the US Dollar Index does not begin to explain the
precipitous one hour sell-a-thon.  Wire services noted that it
was the single largest one day drop in longer than one year, but
I could find no event or news as of this writing.  For the week,
we have a bearish gap down following last week’s doji top.

For the day, the HUI lost 4.8% to close at 189.37 and the XAU
lost 4.6%, closing at 88.63.


Daily chart of the ten year note yield




Coincident with the drop in gold was a selloff in treasuries, but
it began earlier and was neither as sudden nor as shocking.  The
TNX added 18.6 basis points to close at 4.195%, turning the daily
cycle oscillators up from oversold levels and beginning their
upphase.  The bull wedge is now in play, and projects to the year
highs for the TNX.  Note that the TNX bottomed well above the
midpoint of this year’s range, and if this upmove sticks, it is
quite bearish for bonds.  Treasury bulls needed to see more of
the summer rate rally retraced.  The Fed drained near 20B net
since Thursday via unrefunded expiring repurchase agreements, and
this no doubt contributed to the selling.

For the week, the TNX printed a doji hammer, the first bullish
close in 7 weeks.


Daily NQ candles




Nasdaq bulls were treated to a 2.91% gain in the NQ, as it
outperformed the ES and YM strongly, mostly playing catch up.
While the ES and YM added less than 1% with their respective
gains, the NQ did not test its 52 week high, while the ES and YM
did.  Friday’s 37 point gain did not issue buy signals, but it
certain caused some hesitation on the sell signal we’ve been
following since they printed in early September.  The daily cycle
oscillators twitched up with the 3 day bounce off the Wednesday
low, but an upphase has yet to commence.  On this daily
timeframe, both bears and bulls will be on uncertain ground until
Friday’s gains can either be consolidated or reversed.  Bulls
will point at the huge gains within 3 sessions, the potential
truncation of a daily cycle downphase, and lack of depth to the
preceding pullback.  Bears will note that it doesn’t pay to
anticipate signals, and that a lower high was printed despite all
the excitement and short panic this week.


30 minute 20 day chart of the NQ




On the 30 minute NQ chart, the dramatic advance has resolved
itself into what appears as a megaphone or “bulloney bullhorn”
formation.  This is, as one might guess, a bearish pattern, but
it remains an uptrend until its reversal.  The oscillators
reversed at the top of a trend of higher lows, but the true story
will be told once the lower trendline is tested.  The most recent
uptrend on this timeframe reflects itself on the longer daily
candles above as an uptick in the rolling oscillators.  The
downphase now in progress suggests that the bearish roll should
resume, and not reverse.  Monday will tell the tale.  Look for
support between 1362-65, resistance at the rally highs of 1400.


Daily ES candles




Unlike the NQ, the ES actually fulfilled the bull wedge target of
1038 before failing just below its 52 week high.  Bears and bulls
managed to wait until the last point before selling against an
obvious rally high, creating a double top and formidable
resistance.  The depth of the current downphase commencing on the
30 minute chart oscillators (below) will give us an idea of
whether that double top will hold or not.  A higher lower would
suggest that the bulls are not yet done.


20 day 30 minute chart of the ES




The bulloney bullhorn formation contained both the highs and the
lows, with the ES closing out right on the lower rising
trendline.  The rolling 30 minute chart oscillators suggest that
the trendline will break on Monday. The steepness of the ascent
from Wednesday feels untenable, but another bounce from the 1028-
9 confluence zone cannot be ruled out.  Were such to occur, the
1050 target favored by Elliott Wavers could be in play.


Daily YM candles




The YM most closely resembles the ES once again, and while the
bullish action brought the daily oscillators close to bullish
kisses, buy signals were not printed.


20 day 30 minute chart of the YM




This week brought equities to lower lows and, despite the
impressive rally since Wednesday, lower highs.  The intermarket
relationships, however, give us uncertainty in equities in both
directions.  We saw treasuries and precious metals sustain
significant technical damage this week, and the US Dollar Index
looks to have put in a bottom.  This presents two scenarios, as I
see it:  On the one hand, traders are abandoning defensive
positions, a flight from quality, and foreigners are buying US
Dollars with which to load up on US equities for the next launch
in an already-impressive equity rally this year.  On the other,
the Fed drained reserves since Thursday, reducing the supply of
dollars, forcing its dealers to liquidate bonds.  Gold and silver
are very thin markets in any event, but if we’re looking at a
deflationary scenario in which treasuries and metals decline,
then equities should fall as well.  This latter scenario is the
same as the March 2003 rally in reverse, where we saw the dollar
fall and all other asset classes rise.

I will be absent on Monday, and wish all of our Jewish readers an
easy fast.  See you on Tuesday.


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

Naz Catches Up
Jonathan Levinson

Another high volume day brought the Nasdaq up 44 points for a
2.41% gain, while the Dow Industrials added .89% or 84 points,
94% or 9.6 points for the S&P 500.  The move helped the Nasdaq,
which had lagged the Dow and S&P on their rallies off the
Wednesday low, recover some of its lost ground.

It was a day that finished less bullishly than it began, with the
indices trying unsuccessfully to tag their 52 week highs.
Nevertheless, volume was strong overall, with 1.9B NYSE shares
and 2B Nasdaq shares changing hands.  Stocks advanced throughout
the day, pulling back toward the close.


Weekly COMPX candles




This week began on a bleak note for bulls, following last week's
steep decline into Wednesday.  Despite the significant advance to
reverse most of those losses, this week nevertheless had a lower
low and a lower high.  That said, the uptrend from the March lows
was never seriously challenged, and while the weekly chart
oscillators are on the cusp of a downphase, with the 10-week
stochastic showing a divergent pattern of lower highs since July,
the price remains firm above 1760.

Daily COMPX candles





Wednesday's upside reversal came right on time, and Friday's gap
up brings the Nasdaq to within sight of its year highs set two
weeks ago.  Note that while the strong move off the lower rising
trendline retraced most of the decline from the September high,
the oscillators remain within their ongoing downphases.  As the
longer cycle on the weekly chart is topped out and tentatively
rolling over, the ongoing daily chart downphase is aligned with
the longer cycle.  While a higher high for the year is not
impossible, the onus is on bulls to generate sufficient
countertrend momentum to cause these longer cycle oscillators to
begin trending in overbought territory.

The failure from a lower high on Friday despite the overwhelming
bullish consensus and frantic short covering adds to the bulls'
burden, as double and triple top resistance begins to build at
current levels.  For the moment, however, it's easiest to trade
support and resistance and follow the intraday oscillators, which
have been performing reasonably well as seen below in our OEX and
QQQ discussions.  On the Nasdaq, 1800 is first trendline support
on the daily chart, and long term bears will want to see 1760
support fail before allowing themselves to relax.  To the upside,
the rally highs are the level against which both bulls and bears
were selling on Friday.

Weekly INDU candles




The INDU has been printing a more gentle rollover than that of
the COMPX on the weekly chart, with the stochastic divergence
less pronounced than it is on the COMPX.  The week gave us a
lower low and lower high, but the nascent downphase on these
longer cycle oscillators remains.  As noted on the COMPX, a minor
break above the year highs would not on its own reverse this
downward bias on the oscillators as the uptrend has been
weakening for months.


Daily INDU candles




Seen  on the daily INDU chart, the gains since Wednesday amounted
to a retest of the broken rising wedge trendline from the March
lows, otherwise known as a "return to the scene of the crime
rally."  I've indicated the various oscillator divergences, and,
in the case of the Macd, we've been seeing lower oscillator highs
since June.  While these signals do not provide specific timing
cues, they do tell us that the current downphase in the daily
chart oscillators is for real, and bulls need to be careful in
this timeframe.  A sustained break above 9700 will be necessary
to begin changing the technical picture.  9250 support is the
first level bears need to defend below.

That's the broader context.  I've detailed the daily and intraday
timeframes for trading purposes below:

Daily OEX candles




The OEX daily chart shows a successful bull wedge breakout
printed this week, with the daily chart oscillators printing
bullish kisses from oversold territory.  Note that the OEX and
NDX (or its tracking stock, the QQQ) tend to lead the broader
indices.  Here we see that both the OEX and QQQ became more
oversold than did the broader markets, and the bullish kiss is
printing from just above oversold territory.  If it completes
into a full oscillator upphase, it will run into resistance
against the topping weekly oscillators, but could conceivably
pack enough punch to cause the longer cycle to begin trending.
It's for this reason that the 525 resistance level is crucial.
If it fails, the picture will begin to look substantially more
promising for a continuation of this year's rally.


20 day 30 minute chart of the OEX




On the shorter period 30-minute chart, we see the steep rise off
the Wednesday lows in the form of a megaphone formation.  The
oscillator uptrend is intact and implies a continuation of the
pattern of higher lows, but the megaphone or "bulloney bullhorn"
is not generally a sustainable pattern and implies a downside
break.  Combined with the toppy oscillators in this shorter
timeframe, and I'm watching 516 support closely for the first
sign of a change in trend.

Tying it all together, we have the weekly cycles trying to roll
over, the daily bottoming, and the 30 minute topping.  This
suggests a test of downside support at 516, followed by a
possible bounce to challenge the day high of 520m followed by the
rally high of 523, or the upper trendline around 525.  A failure
can come at any of those levels. If the upper resistance at 525
fails, then my next Market Wrap will sound considerably more
bullish than this, as we'll have a new daily oscillator upphase
and potentially trending weekly oscillator phase underway.


Daily QQQ candles




We see the same setup on QQQ, but the bullish kisses aren't as
well-developed as on the OEX.  Nevertheless, the cycle picture is
the same, with the longer weekly cycles trying to pull lower, the
daily possibly bottoming, and the 30 minute topping.  The
oscillators imply a trip to 33.60-70, and then a bounce attempt.
Above the 52 week high, it will appear that the daily chart
oscillators are dominant, in which case the picture becomes more
bullish.  For now, however, the outcome of the 30 minute
oscillator downphase just commencing is key.


20 day 30 minute chart of the QQQ




Next week will be significant as it begins within sight of a
failed attempt to gain the year highs.  I expect a trendline
failure in either direction kick off a quick continuation move,
as either bulls or bears run for cover.  Respect your timeframe,
be nimble, and we'll see you in the Market Monitor.


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

Time to Go Bullish

With the potential growing for a continuing 4Q rally it
is time to go back to a time tested bullish strategy. A
potential bout of profit taking by mutual funds over the
next three weeks could give us a dip to buy or in this
case sell that could be very profitable.

The strategy I like to use is selling naked puts on
quality stocks on a dip. Because many readers do not
have the capability to sell naked we are going to turn
it into a bull put spread by purchasing the long side
of it now while the price is cheap. I want to target a
price for entry of the short side that is at support
and is likely to stop any future drops.

I picked MMM as the potential candidate. It has continued
to move up in a seemingly endless bullish ramp. If we get
an October drop this would be a stock I would like to buy.
I am hoping there are several hundred thousand other
investors with the same thought. Buy the dip, hold for the
quarter. MMM also just affirmed estimates and has already
rebounded from the 2:1 split.

For MMM I want to use the January $80 put MMM-MP.
Support for MMM is at $69 and $65.00. I want to sell one
contract at each price point. We may not get both of them
but we will try.

If MMM hits $69 the $80 put should be about $12.00 and
about $16.50 if it hits the second entry at $65.00.

When selling puts the money goes directly into our
account just like covered calls. It remains there until
the put is closed or expires. We draw interest on the
money while it is there.

The risk is that MMM falls below $65 on a serious market
event. To eliminate the majority of that risk we are
going to buy the Jan-$65 put now for 95 cents. This is
the insurance for the trade. If we never get filled on
the short side then this money is lost. If we do get
filled then it turns into a bull put spread. It also
reduces the margin required to enter the trade.

The risks in the trade are as follows:

The price paid for the long Jan-$65 puts at 95 cents.

The difference between $69 and $65 on the first put
sold. $4  (If this is too much risk then just take the
single entry at $65 instead)

There is no risk on the second $80 put sold at $65 as
the long $65 put covers the risk of any drop below $65.


The profit potential depends on where MMM closes in
January. For the first put sold at $69 the profit is
every dollar above $69 that MMM rises to a maximum of
$80. Once over $80 no more profit is available.

The profit on the put sold at $65 is every dollar
above $65 that MMM rises up to $80.

Assuming that both shorts were filled at even money
and not allowing for any time premium and that MMM
rebounded over $80 before January the play would
look like this.

Short $80 put at $69 = $11.00 (no time value illustration)
Short $80 put at $65 = $15.00
Income = $26.00
Long (2) $65 puts at 95 cents = ($1.90)
Profit = $26.00 - 1.90 = $24.10

Game Plan:

Buy 2 Jan-$65 puts now @ 95 cents
Sell 1 Jan-$80 put with MMM at $69.00
Sell 1 Jan-$80 put with MMM at $65.00
Close all positions with a MMM trade over $80 or
before expiration in January.

MMM Chart







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

Play Recaps

QQQ/DJX Puts (recommended 9/21)

This is starting to be annoying. The targets for the first
exit on the DJX puts was 92.0. The DJX hit 92.30 on Tuesday.
The DJX was 96.45 when I recommended this play and the Oct
$95 recommended strike was $1.10. The option traded at $3.10
on Tuesday. The game plan was to exit 1/2 at $92 and set a
stop at $93. While we came very close to the $92 level we
did not hit it but I hope everyone decided 92.30 was close
enough for government work and either exited early or at
least set the stop for $93 and closed the play on the bounce.
Unfortunately, writing the game plan for the week ahead
always seems to leave out some contingency. The option was
trading for $2.35 when $93 was crossed again and closed the
day at $2.85 on the second dip below 93. There was plenty
of time and opportunity to exit the play for more than a
double.

The QQQ plan was to exit 1/2 at $32 and set a stop at $33.
The QQQ traded to a low of 32.35 twice on Tuesday and down
from the $34.58 when recommended. The Oct-$34 put,
recommended at 75 cents traded at $1.95 several times on
Tuesday and offered an opportunity to exit for more than
100% profit. It was trading for $1.50 when the QQQ crossed
$33 to the upside on Wednesday.

Both stocks did not trade exactly as planned but they did
offer multiple opportunities to exit for better than a 100%
profit. We will chalk this one up as a win. If you are still
in the trade I would look for a dip to exit as both options
are still profitable.

http://members.OptionInvestor.com/editorplays/edply_092103_1.asp


LUV Calls (recommended 9/14)

http://members.OptionInvestor.com/editorplays/edply_091403_1.asp


Powerball

The rebound powered the portfolio back into decent profit
territory but we really need to see some of the laggards in
the middle catch fire. SUNW may be dead and with the TLAB
news this week I doubt they will be surging ahead. Still
three months to go.

It would have taken $1,255 to buy one contract of each on
January-2nd. Any bets on what this will be worth on 12/31/03

Powerball Chart




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

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

Good Luck

Jim Brown


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

No Doubt
- J. Brown

There should be no doubt as to investor sentiment these days.
The gain in the September jobs report on Friday was the missing
piece to the economic puzzle.  For months bears have been harping
on the weak job market and finally bulls have some improvement
they can point to.  Of course, as Jim points out in his wrap, the
+57,000 jobs (+100,000 if you count the revision in August) is
not even a drop in the bucket to the number of jobs needed.
However, it is improvement and hopefully signs of a reversal in
the trend of declining jobs and not just a seasonal blip.

If bears were on the defense earlier, Friday's economic reports
should have them running for cover and short covering was a major
influence on Friday's gains.  Investors will now be free to focus
on the up coming earnings season instead of worrying about every
little economic report.  Yet 100% focus on corporate earnings
will be a double-edged sword.

The good news is that expectations for Q3 results are extremely
positive.  The bad news is that expectations for Q3 results are
extremely positive.  Should results fail to meet or beat these
raised expectations we could easily see a reversal of fortunes.
Currently, analysts expect earnings for companies in the S&P 500
to come in +15 to +16 percent compared with +6.8 percent growth
last year.  Bulls will also point to the lack of earnings
warnings this time.  The ratio of companies who have lowered
estimates compared to those raising estimates is about 1.5 to 1,
which is a big improvement over the recent trend of 3 to 1.

Looking ahead we could see some consolidation of the recent gains
on Monday due to the Yom Kippur holiday.  However, investors will
probably use any weakness to buy the dip ahead of the earnings
parade.  Speaking of which, Alcoa starts the earnings parade on
Tuesday this week.  Estimates are for Alcoa to turn in 30 cents a
share.  Later in the week we hear from bluechip heavy-weight
General Electric on Friday.

If there is one thing that traders should expect in October it's
volatility so trade carefully.


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

Market Averages

DJIA ($INDU)

52-week High:  9686
52-week Low :  7197
Current     :  9572

Moving Averages:
(Simple)

 10-dma: 9439
 50-dma: 9373
200-dma: 8709


3_01

S&P 500 ($SPX)

52-week High: 1040
52-week Low :  768
Current     : 1029

Moving Averages:
(Simple)

 10-dma: 1013
 50-dma: 1004
200-dma:  933


3_02

Nasdaq-100 ($NDX)

52-week High: 1406
52-week Low :  795
Current     : 1375

Moving Averages:
(Simple)

 10-dma: 1343
 50-dma: 1313
200-dma: 1151


3_03

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

The market strength has sent the VIX back under the 20 mark and
the old VIX (now VXO) backs towards the 20 level.  Given the
bullishness in the markets I wonder if we'll see new yearly lows
on the VIX soon.

CBOE Market Volatility Index (VIX) = 19.50 –1.30
Nasdaq Volatility Index (VXN)      = 29.20 –2.05

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

          Put/Call Ratio  Call Volume   Put Volume

Total          0.75        811,472       609,997
Equity Only    0.55        632,898       351,244
OEX            1.01         47,644        48,034
QQQ            2.54         33,282        84,515


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

Bullish Percent Data

           Current   Change   Status
NYSE          72.0    + 0     Bull Confirmed
NASDAQ-100    72.0    + 0     Bear Confirmed
Dow Indust.   83.3    + 0     Bull Correction
S&P 500       77.2    + 0     Bull Confirmed
S&P 100       79.0    + 0     Bull Correction


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

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

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

 5-Day Arms Index  0.90
10-Day Arms Index  1.18
21-Day Arms Index  1.42
55-Day Arms Index  1.38


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    1978      2128
Decliners     853       963

New Highs     235       179
New Lows       13         3

Up Volume   1407M     1583M
Down Vol.    443M      384M

Total Vol.  1862M     1988M
M = millions


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

Commitments Of Traders Report: 09/30/03

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

Wow!  It looks like the commercials traders went to sleep.  There
was almost no change in either the number of longs or number of
short positions.  Everyone must have been waiting on the September
Jobs report.  Small Traders were upping their bets with small
increases in both longs and shorts but still heavily long.


Commercials   Long      Short      Net     % Of OI
09/02/03      417,973   482,392   (64,419)   (7.2%)
09/09/03      418,958   486,209   (67,251)   (7.4%)
09/23/03      395,123   397,858   ( 2,735)   (0.0%)
09/30/03      395,713   397,577   ( 1,864)   (0.0%)

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
09/02/03      169,030    75,748    93,282    38.1%
09/09/03      176,401    81,444    94,957    36.8%
09/23/03      139,482    87,981    51,501    22.6%
09/30/03      144,681    96,801    47,880    19.8%

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

We did see some movement in the e-minis.  Commercials added about
50K new longs while only adding 14K new shorts.  Small Traders took
some money off the table with a redemption in their longs by more
than 40K.  However, small traders are still heavily bullish.


Commercials   Long      Short      Net     % Of OI
09/02/03      347,724   224,011    123,713    21.6%
09/09/03      370,909   237,610    133,299    21.9%
09/23/03      109,417   204,026   ( 94,609)  (30.2%)
09/30/03      163,828   218,991   ( 55,163)  (14.4%)

Most bearish reading of the year: (354,835)  - 06/17/03
Most bullish reading of the year:  133,299   - 09/02/03

Small Traders Long      Short      Net     % of OI
09/02/03       56,709   134,094   (77,385)  (40.6%)
09/09/03       59,692   130,270   (70,578)  (37.1%)
09/23/03      175,750    62,558   113,192    47.5%
09/30/03      131,698    65,259    66,439    33.8%

Most bearish reading of the year: (77,385)  - 09/02/03
Most bullish reading of the year: 449,310   - 06/10/03


NASDAQ-100

Much like the large S&P futures contracts, the commercial
traders appear to be asleep with very little change this
last report.  Small traders were also comatose with just a
couple of thousand new long contracts.


Commercials   Long      Short      Net     % of OI
09/02/03       37,002     55,379   (18,377) (19.9%)
09/09/03       44,677     62,369   (17,692) (16.5%)
09/23/03       32,648     42,565   ( 9,917) (13.2%)
09/30/03       33,571     42,993   ( 9,422) (12.3%)

Most bearish reading of the year: (21,858)  - 08/26/03
Most bullish reading of the year:   9,068   - 06/11/02

Small Traders  Long     Short      Net     % of OI
09/02/03       23,168    10,561    12,607    37.4%
09/09/03       28,788    13,370    15,418    36.6%
09/23/03       17,862     9,880     7,982    28.8%
09/30/03       19,803     9,917     9,886    33.3%

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

There seems to be a theme here for commericals... no movement.
This time the small traders joined them in their sit back and
wait mode.


Commercials   Long      Short      Net     % of OI
09/02/03       25,462    10,447   15,015      41.8%
09/09/03       25,807    10,756   15,051      41.2%
09/23/03       15,911     9,123    6,788      27.1%
09/30/03       16,561     8,932    7,629      31.5%

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
09/02/03        6,629    13,402   (6,773)   (33.8%)
09/09/03        7,429    13,796   (6,367)   (30.0%)
09/23/03        7,505     7,779   (  274)   ( 1.8%)
09/30/03        7,578     8,125   (  547)   ( 3.5%)

Most bearish reading of the year:  (8,777) - 10/12/01
Most bullish reading of the year:   8,523  -  8/26/03

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


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

The NASDAQ-100

I learned a lot from the article you wrote regarding the S&P 100
Index and its components.  Would it be possible for you to put
together a list of the NASDAQ-100 Components?

I've had several e-mail requesting an article on the NASDAQ-100
Index after having written "Cap-weighted vs. Price Weighted
Index" on September 14, 2003.

There's not all that much I'd add to the basic comments from the
09/14/03 article, but I'll show the NASDAQ-100 components with
some different information.

For those not familiar with the NASDAQ-100, this index is not
unlike the S&P 100 in that it is also a cap-weighted index
consisting of 100 of the largest companies listed on The NASDAQ
Stock Exchange based on market capitalization.  The NASDAQ 100
does not contain financial companies including investment
companies.

Today I'm going to show the current NASDAQ-100 components with a
table I created in QCharts, but will remind traders and investors
that these components may change over time.  I'm also going to
make note that after reviewing some of the QCharts data, it would
appear there are some errors in the data, but for the most part,
should serve its purpose for this article.

For updated information on how the NASDAQ-100 Index is weighted,
I would recommend traders and investor go to the NASDAQ site at
this http://dynamic.nasdaq.com/dynamic/nasdaq100_activity.stm.

The NASDAQ-100 is often associated with technology stocks, and
while the bulk of stocks comprising the NASDAQ-100 are indeed
technology related, there are a few stocks in there than many of
us, at least me, never realized were components to begin with.

Henry Schein?  C.H. Robinson Worldwide?  Ryanair Holdings?
Microsoft?  Ooops!  I've heard of Microsoft.

To let you know how smart I am.  I was working at Mobil Oil in
the the 1980's when this computer operating system calls Windows
was released.  One of the geologists in my group had just
installed it and was showing me how neat it was.  I told him it
would never catch on as real computer users like myself would
prefer to change directories by type in cd://jeffsanidiot to get
to the directory where important files were located.

Anyway... I digress.

Here's a list of the NASDAQ-100 components, which I've sorted by
their market capitalization.  Again, it appears that QCharts may
not have their market capitalization correct, as the sort order
would be incorrect in relation to how the NASDAQ-100 is weighted.
The top 6 weighted stock in the NASDAQ-100 are Microsoft
(10.08%), Intel (6.20%), Cisco Systems (4.72%), Qualcomm (3.91%),
Amgen (3.78%) and Dell Computer (3.09).

As such, I have arranged the top 6 stocks accordingly, and these
6 stocks account for near two-thirds of the NASDAQ-100's
weighting.

Top 50 cap-weight NASDAQ-100 Stocks

1



I really like QCharts as a charting package, but I will urge
everyone to double check any fundamental data show above.
Underlined in PINK, I corrected some 12-month percentage gain
totals there were in error, and I almost hesitate to even show
QCharts data like P/E Ratio, E/S Growth, Gross Margin, Revenue
Growth and YrNet % Change, but thought some fundamental investors
might find the data informative.  It has been a long-held belief
of mine, especially for technology stocks, revenue growth and
gross margins tell a lot about a company's products.  Usually the
good and bad news shows up in the chart before the fundamentals,
but if a company can grow the top line (revenue) and large
margins are found, it often times flows to the bottom line at a
similar pace and gets reflected in the stock price.

Lower 50 cap-weight NASDAQ-100 Stocks

2



I didn't comb through the lower 50 market cap stocks, but since I
mentioned Texas Instruments (NYSE:TXN) $25.65 as a stock that
showed up in a stock screen in the September 14, 2003 Ask the
Analyst column as a stock that looked to be gaining longer-term
favor within the OEX, I thought it appropriate to perhaps make a
selection for the NDX.

I've discussed and profiled shares of Monster Worldwide
(NASDAQ:MNST) $28.50 as bullish in prior months, at these same
price levels, Friday's nonfarm payroll data may finally be
showing some signs of a recovery taking place for the jobs
market.

Running the same point and figure scan used for the 09/14/03 Ask
the Analyst column, but this time for the NDX ....

Price between $0.00 and $200.00 per share,
Relative Strength is "buy"
Relative Strength trend/column is X
All Sectors
Universe is NDX

Monster Worldwide (MNST) gave a relative strength "buy" signal
back on June 5, 2003, when the stock closed that session at
$22.50.  Hey, that's right!  I also used MNST as an example stock
in the July 27, 2003 Ask the Analyst column titled "Looking for
short squeeze candidates."  As an update here, September 15th
short interest report from the NASDAQ had 12.7 million shares
short, with a days to cover ratio at 7.72.

With Halloween just around the corner and some resemblance of a
job recovery at hand, its scary to me to think there are so many
shorts in MNST, with a bullish vertical count of $46 currently in
play.

Get it?  Halloween, scary, Monster?

For purposes of disclosure, I do hold a bullish position in MNST.

Some other stocks among the NASDAQ-100 that showed up as recently
giving some longer-term relative strength buy signals and
currently in a column of X ...

RF Micro Devices (NASDAQ:RFMD) $9.96, which gave a relative
strength buy signal on 09/08/03 when the stock closed that
session at $10.46, and its PnF chart currently has a bullish
vertical count of $22.50.

Applied Materials (NASDAQ:AMAT) $19.46 gave a relative strength
buy signal on 08/22/03 when the stock closed at $21.30.  AMAT's
PnF chart has a bullish vertical count of $26.00 currently
associated with its chart.

I wish I could have more confidence in QCharts fundamental data
as it would be interesting to come back to the above stocks after
this upcoming quarter's earnings reports and make some
comparisons, see if the fundamentals match the technicals.

Here's the NASDAQ-100 Components again, but this time I'm sorting
them by Industry Name.  Some QQQ traders that like to implement
hedges by being long the QQQ and short a stock or two, or short
the QQQ and long a stock, wanted to see some basic sector
information that they might use along with Dorsey/Wright &
Associates various sector bullish % data.  Several others wanted
a quick reference guide so when a sector is on the move, they
would have a list of stocks to quickly scan by sector.

I'm looking forward to issuing an upside or downside alert on the
school sector someday!

NASDAQ-100 Components - Sorted by Industry (1-50)

3



NASDAQ-100 Components - Sorted by Industry (1-50)

4



Jeff Bailey


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

-----------------
Earnings Calendar
-----------------

Symbol  Company               Date           Comment      EPS Est

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

None


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

AA     ALCOA                 Tue, Oct 07  -----N/A-----     0.30
AMB    AMB Property Corp     Tue, Oct 07  After the Bell    0.51
APOL   Apollo Group          Tue, Oct 07  Before the Bell   0.34
PEP    PepsiCo               Tue, Oct 07  Before the Bell   0.62
RI     Ruby Tuesday          Tue, Oct 07  Before the Bell   0.36
YUM    Yum! Brands, Inc.     Tue, Oct 07  After the Bell    0.52


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

BRO    Brown & Brown         Wed, Oct 08  After the Bell    0.37
COST   Costco Wholesale Corp Wed, Oct 08  Before the Bell   0.47
DNA    Genentech, Inc.       Wed, Oct 08  After the Bell    0.25
ISCA   Intl Speedway         Wed, Oct 08  Before the Bell   0.68
RPM    RPM INTL INC          Wed, Oct 08  Before the Bell   0.40
SONS   Sonus Networks        Wed, Oct 08  -----N/A-----    -0.01
SVU    Supervalu Inc.        Wed, Oct 08  Before the Bell   0.46
SBL    Symbol Technologies   Wed, Oct 08  -----N/A-----     0.08
WIN    Winn-Dixie Stores     Wed, Oct 08  After the Bell    0.00
YHOO   Yahoo, Inc.           Wed, Oct 08  After the Bell    0.09


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

ABT    Abbott Laboratories   Thu, Oct 09  Before the Bell   0.53
ACN    Accenture             Thu, Oct 09  Before the Bell   0.25
ADX    Adams Express         Thu, Oct 09  -----N/A-----      N/A
ARA    ARACRUZ CELULOSE S A  Thu, Oct 09  -----N/A-----     0.57
CBSH   Commerce Bancshares   Thu, Oct 09  Before the Bell   0.73
FNFG   1st Niagara Finl GroupThu, Oct 09  Before the Bell   0.15
JNPR   Juniper Networks      Thu, Oct 09  After the Bell    0.03
MDC    M.D.C Holdings        Thu, Oct 09  Before the Bell   1.68
MAR    Marriott Intl         Thu, Oct 09  Before the Bell   0.38
STI    SunTrust              Thu, Oct 09  Before the Bell   1.17


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

ATYT   ATI Technologies      Fri, Oct 03  Before the Bell   0.10
GE     General Electric      Fri, Oct 10  Before the Bell   0.40
INFY   Infosys Technologies  Fri, Oct 10  Before the Bell   0.45
MTB    M&T Bank Corporation  Fri, Oct 10  Before the Bell   1.37
OCENY  OcÚ N.V.              Fri, Oct 10  Before the Bell    N/A


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

Symbol  Company Name              Ratio    Payable     Executable

MYL     Mylan Laboratories Inc    3:2      Oct   8th   Oct   9th
TXUI    Texas United Bancshares   3:2      Oct  15th   Oct  16th
CELL    Brightpoint Inc           3:2      Oct  15th   Oct  16th
MPR     Met-Pro Corporation       4:3      Oct  15th   Oct  16th
THFF    First Financial Corp      2:1      Oct  15th   Oct  16th
PCBK    Pacific Continental Corp  4:3      Oct  15th   Oct  16th


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

Q3 earnings announcements really don't get started for another
week but we'll see some early birds begin to announce starting
this Tuesday.  Thursday and Friday this week have the heaviest
economic reports.


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

----------------
Monday, 10/06/03
----------------
None


-----------------
Tuesday, 10/07/03
-----------------
Consumer Credit (DM)    Aug  Forecast:   $6.0B  Previous:    $6.0B


-------------------
Wednesday, 10/08/03
-------------------
Wholesale Invntories(DM)Aug  Forecast:    0.1%  Previous:     0.0%


------------------
Thursday, 10/09/03
------------------
Initial Claims  (BB)  10/04  Forecast:     N/A  Previous:     399K
Export Prices ex-ag.(BB)Sep  Forecast:     N/A  Previous:     0.0%
Import Prices ex-oil(BB)Sep  Forecast:     N/A  Previous:    -0.2%
Natural Gas Inventories (report)
September Same-Store Sales come out


----------------
Friday, 10/10/03
----------------
Trade Balance (BB)      Aug  Forecast: -$41.0B  Previous:  -$40.3B
PPI (BB)                Sep  Forecast:    0.1%  Previous:     0.4%
Core PPI (BB)           Sep  Forecast:    0.2%  Previous:     0.1%



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


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The Option Investor Newsletter                   Sunday 10-05-2003
Sunday                                                      2 of 5


In Section Two:

Watch List: Breakouts, Bounces & Consolidations
Call Play of the Day: CBE
Dropped Calls: APOL, SLB
Dropped Puts: CCMP, GILD


------------------------------------------------------------
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 . $1.50 /contract (10+ contracts) or $14.95 Min. No hidden fees
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 . Contingent, Stop Loss, Trailing stop, or OCO
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------------------------------------------------------------


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

Breakouts, Bounces & Consolidations

General Dynamics - GD - close: 79.50 change: +0.73

WHAT TO WATCH: The second half of September was pretty tough on
defense stocks as several brokers downgraded the entire industry
over concerns that the defense spending boom may already be
fading.  Shares of GD gapped down out of rising channel, broke
support under its simple 50-dma and the $80 level and then
proceeded to drop towards the $75 mark.  We've since witnessed a
nice bounce back to the $80 level.  The question now is where
does it go from here?  Short-term resistance is actually about
$80.65 but then it has more overhead resistance at the 50-dma and
its old support near $83.00.  Bulls can keep an eye on it for a
breakout but bears will be watching the one-week trend of higher
lows for any signs of weakness.

Chart=


---

General Motors - GM - close: 41.44 change: +0.62

WHAT TO WATCH: The largest automaker in the U.S. just recently
announced its September sales numbers, which were up about 13%.
While this is good news some analysts had been expecting better
performance.  Chart readers will notice the big breakout over the
$40 level of resistance in late August.  Since then the stock has
consolidated lower back to the $40 mark.  Friday produced a small
bounce but it wasn't that convincing.  Technically bulls might
consider bounces above $40 as potential entry point but use a
tight stop under $40.  Keep in mind the stock doesn't move that
fast and earnings are expected in two weeks.

Chart=


---

Foundry Networks - FDRY - close: 23.83 change: +1.63

WHAT TO WATCH: Networking stocks have been very big winners for
bullish traders and FDRY added another 7.3% on Friday's rally.
The weekly charts show some strong resistance at $22.50
(conquered) and again at $25.00, while the daily chart shows FDRY
struggling with the $24 level.  We suspect that momentum style
bulls could use a trigger above $24.00 to open a play and ride
the next breakout.  A dip (and bounce) back near the $22 level
might work for traders who like to target shoot an entry.  Use a
tight stop!

Chart=

Y

---

MicroStrategy - MSTR - close: 50.03 change: +2.03

WHAT TO WATCH: Friday's rally did produce a decent sized gain for
MSTR but this looks like one software stock that hasn't gotten
ahead of itself.  Shares spent the month of September
consolidating between $45 and $50(51).  Technology bulls could
use a trigger above $51.00 to open a play and ride the next leg
higher.  Or, if given the opportunity, look for a bounce again
from the $45 level and use a tight stop.

Chart=

r


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

PPG $54.07 +0.74 - Shares are still consolidating under a pattern
of lower highs.  Look for a breakout over $55.

HAR $106.20 +1.70 - HAR is still rocketing higher after
consolidating for a month near the $100 mark. If the opportunity
appears, a bounce from the $102-103 level might be worthwhile.

AVID $56.62 +3.07 - The rising channel for AVID is still very
much in play.  After Friday's 5.7% gain and slight rollover under
resistance at $58 we might see another entry point near $52.50-
53.00.  Otherwise, look for the breakout above $58.00.

GDT $46.82 -1.07 - Shares of GDT appear to be painting a three-
candle reversal pattern under resistance of its simple 50-dma.
Bears might want to evaluate new positions on a breakdown under
the $46.00 mark.


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



********************
THE PLAY OF THE DAY
********************

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

Cooper Industries - CBE - cls: 51.00 chg: +1.00 stop: 48.00

See details in play list


_1


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

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


CALLS
^^^^^

Apollo Group - APOL - close: 67.64 chg: -0.13 stop: 64.75

Okay, students.  Put down your pencils.  Time's up for APOL.  The
company is expected to report earnings on Tuesday, October 7th,
most likely before the opening bell.  We just haven't seen the
follow through on its bounce from the $65 level and there was no
participation in the market's rally on Friday.  Expectations are
pretty positive for its earnings report so investor reaction
could quickly sour if earnings quality is poor or the company
says something Wall Street doesn't like.  We're closing this
play.

Picked on September 16 at $68.45
Change since picked:      - 0.81
Earnings Date           10/07/03 (confirmed)
Average Daily Volume:        1.9 million
Chart =

l

---

Schlumberger Ltd. - SLB - close: 50.08 change: +0.41 stop: 48.00

We've certainly exercised sufficient patience in our wait for SLB
to deliver on the upside.  Unfortunately, it just doesn't seem in
a rallying mood.  While it is nice to see the stock successfully
rebound from above $48 and reclaim the $50 level, that only just
gets us back to slightly below break even.  Rather than continue
to nurse an underperforming position, we're just going to drop
the play and recommend exiting the play into any strength on
Monday.  Traders willing to hold in the expectation of further
upside should work with a stop no lower than $49.00, Friday's
intraday low.

Picked on September 21st at  $50.99
Change since picked:          -0.91
Earnings Date              10/21/03 (unconfirmed)
Average Daily Volume =     3.15 mln
Chart =



PUTS
^^^^

Cabot Microelect. - CCMP - close: 57.96 change: +2.83 stop: 58.25

Thoughts of economic recovery surged through the Technology
market on Friday, with the Semiconductor index (SOX.X) delivering
a beefy 4.5% gain by the end of the day.  Despite its very poor
performance lately, our CCMP finally caught more than a token
lift and itself finished with a 5.1% gain.  Although the stock
ended off its intraday high and below our stop, it seems clear
the tide has turned.  In hindsight, the better exit would have
been on Thursday near $55, but we'll settle for a small gain.
Take advantage of any weakness early on Monday to manage a better
exit, but make no mistake, this play is over and its time to lock
in whatever gains have accrued.

Picked on September 23rd at    $59.05
Change since picked:            -1.09
Earnings Date                10/23/03 (unconfirmed)
Average Daily Volume =          771 K
Chart =

p

---

Gilead Sciences - GILD - close: 58.79 chg: -0.10 stop: 60.01

That's an interesting pattern on the BTK biotech index and the
chart of GILD.  Both really failed to enjoy most of the market's
rally on Friday.  The BTK may have closed in the green but it
gave up most of its gains.  Meanwhile, GILD did trade higher in
the session but actually lost ground.  Unfortunately, the early
morning enthusiasm was too much for GILD and it traded above our
stop loss at $60.01.  This actually looks like a potential failed
rally in GILD and thus a new entry point for bearish plays but
we'll pass.

Picked on September 16 at $59.40
Change since picked:       -0.61
Earnings Date           07/31/03 (confirmed)
Average Daily Volume:       3.31 million
Chart =

d


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

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

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

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

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

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

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


------------------------------------------------------------
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The Option Investor Newsletter                   Sunday 10-05-2003
Sunday                                                      3 of 5


In Section Three:

Current Calls: AMZN, CAT, RYL, UTX
New Calls: BBY, CBE
Current Put Plays: ITT
New Puts: MRK


------------------------------------------------------------
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 . optionsXpress's "order-entry screens...go far beyond...
   other online broker sites"--Barron's
 . 8 different online tools for options pricing, strategy, and charting
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 . Real-Time Buying Power, Account Balances or Cancels

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http://www.optionsxpress.com/welcome_risk_index.htm
------------------------------------------------------------


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

Amazon.com - AMZN - close: 52.89 change: +2.80 stop: 49.50*new*

Company Description:
Amazon.com is a website where customers can find virtually
anything they want to buy online.  The company lists millions of
unique items in categories such as books, music, DVDs, consumer
electronics, toys, software, computer and video games, lawn a
patio items, kitchen products and wireless products.  Through its
Amazon Marketplace, Auctions and zShops services, any business or
individual can sell virtually anything to AMZN's approximately 30
million cumulative customers.

Why we like it:
After that first foray above the $50 level nearly two weeks ago,
AMZN settled into a bull flag consolidation pattern, finding
support last Wednesday right at the center of the rising channel
and the 20-dma (now at $48.05).  The first hint of a bullish
resolution to that pattern was Thursday's rally through the top
of the flag just over $49, with a subsequent close over $50.
That hint turned into a flashing neon sign as the stock gapped
sharply higher at the open and then charged dutifully higher
throughout the day, hitting a high of $53.22, before settling in
just below $53 at the close.  Showing just how strong Friday's
rally was, AMZN closed well above its upper Bollinger band
($52.10) and above the top of the 7-month rising channel on
volume more than 50% above the ADV.  Clearly, the stock is
extended up here, but with no signs of weakness, it appears our
$55 target could be achieved early next week.  Conservative
traders would do well to harvest some gains near current levels
and we're recommending that all positions be closed into strength
near that $55 target.  One other factor to be aware of is that
YHOO is set to report earnings on Wednesday, and it would be
prudent to harvest gains ahead of that event.  Given the
proximity of that target, it is time to start getting more
aggressive with our stop.  Raise stops to $49.50 this weekend,
which is just below both the 10-dma ($49.65) and the bottom of
Friday's gap ($50.09).

Suggested Options:
Shorter Term: The October 47 Call will offer short-term traders
the best return on an immediate move, as it is slightly in the
money.  Note that October strikes expire in two weeks.

Longer Term: Aggressive traders looking to capitalize on an
extended rally will want to look to the November 50 Call.  This
option is currently out of the money, but should provide
sufficient time for the stock to move higher without time decay
becoming a dominant factor over the short run.  More conservative
long-term traders will want to use the November 47 Call.

BUY CALL OCT-50 ZQN-JJ OI=18341 at $3.80 SL=2.25
BUY CALL OCT-55 ZQN-JK OI= 9079 at $1.10 SL=0.50
BUY CALL NOV-50 ZQN-KJ OI=10650 at $5.50 SL=3.50
BUY CALL NOV-55 ZQN-KK OI= 2271 at $2.90 SL=1.50

Annotated Chart of AMZN:

n_1



Picked on September 18th at  $47.89
Change since picked:          +5.00
Earnings Date              10/21/03 (unconfirmed)
Average Daily Volume =     9.04 mln
Chart =

n

---

Caterpillar Inc - CAT - close: 73.38 chg: +0.68 stop: 67.50

Company Description:
For more than 75 years, Caterpillar Inc. has been building the
world's infrastructure and, in partnership with its worldwide
dealer network, is driving positive and sustainable change in
every continent. With 2002 sales and revenues of $20.15 billion,
Caterpillar is a technology leader and the world's leading
manufacturer of construction and mining equipment, clean diesel
and natural gas engines and industrial gas turbines.
(source: company press release)

Why We Like It: (original write up from Thursday)
There appears to be a lot of positives being reflected in CAT's
stock price.  The recent ISM data reassured investors that the
manufacturing sector was still expanding for its third month in a
row.  Analysts are still suggesting investors look to cyclicals
to benefit from the pick up in economic activity.  CAT
shareholders are also eager to find out if CAT will be awarded a
major contract to the U.S. government for power generators to
rebuild Iraq.  The latest news, regarding the potential contract,
hit the wires today and contributed to CAT's breakout of its
trend of descending highs.

CSFB's analyst John McGinty said the potential deal could be
worth 25 to 30 cents a share to CAT's earnings for 2004.  Details
were muddy but the expectation is for an announcement sooner
rather than later.  He reiterated his "out perform" and $79 price
target for the stock.  Meanwhile, we really like the technical
breakout for CAT.  MACD took a long time to drift back from
overbought and today's move helped create a fresh buy signal.
The stock's stochastics, RSI and momentum oscillators all look
positive as well.  Today's jump even created a fresh buy signal
on its point-and-figure chart (see below).  We're going to target
the $79-80 level and start the play with a stop at $67.50 (the
recent low).  More conservative traders might be able to sneak by
with a stop closer to $69.00.  Earnings are in two weeks so we
might actually see some pre-earnings momentum.

Friday update: The jobs report was exactly what the market wanted
to hear and bluechips surged behind technology issues.  The
current breakout already underway in CAT broke to a new high
before fading back into the afternoon.  Patient traders might get
a chance to buy CAT on a dip back to the $72 level.

Suggested Options:
Short-term traders can look at the October and November strikes,
while those investors who enjoy a little more time can evaluate
the January's.  We like the 70's and 75's and would probably play
the Novembers.

BUY CALL OCT 70 CAT-JN OI=7088 at $3.90 SL=1.85
BUY CALL OCT 75 CAT-JO OI=3592 at $1.05 SL=0.45
BUY CALL NOV 70 CAT-KN OI=2974 at $5.00 SL=2.55
BUY CALL NOV 75 CAT-KO OI=1345 at $2.20 SL=1.10
BUY CALL NOV 80 CAT-KP OI= 449 at $0.75 SL= -- speculator
BUY CALL JAN 70 CAT-AN OI=8353 at $6.40 SL=4.00
BUY CALL JAN 75 CAT-AO OI=5389 at $3.60 SL=1.75
BUY CALL JAN 80 CAT-AP OI=1159 at $1.80 SL=0.95

Annotated Chart:

_1



Picked on October 2 at $72.70
Change since picked:   + 0.68
Earnings Date        10/16/03 (confirmed)
Average Daily Volume:    2.9 million
Chart =


---

The Ryland Group - RYL - close: 78.25 change: -0.40 stop: 74.00

Company Description:
The Ryland Group is a homebuilder and mortgage-finance company
that has built more than 175,000 homes.  Additionally, the Ryland
Mortgage Company (RMC) has provided mortgage financing and
related services for more than 155,000 homebuyers. Currently,
Ryland homes are available in more than 260 communities in 21
markets across the United States.

Why we like it:
From the "Nick of Time" file, we clearly initiated coverage on
RYL with perfect timing.  The stock absolutely exploded upwards
on Wednesday, moving to new all-time closing highs.  Over the
past two days, the bulls have been struggling with resistance at
$79 and it now remains to be seen whether there is more upside in
store.  The strong selling in the bond market on Friday drove RYL
down to an intraday low of $76.06, but the powerful bullish
sentiment drove the stock right back up to resistance before a
slight drop into the close.  Conservative traders should have
taken advantage of the strength towards the end of the week to
lock in some gains and that still remains our advice.  With price
still above the upper Bollinger band, entering at this altitude
is not advisable.  With the $DJUSHB index ending the week at
another new high, RYL still looks like it could continue higher,
so we're maintaining our stop at $74.  Traders unwilling to give
the play that much room to the downside can use a tighter stop at
$76, just under Friday's intraday low.  The PnF bullish price
target is $91, so there is still substantial potential upside.
But the best approach for traders still looking for new entries
would be on a rebound from the $75-76 area, which should now be
solid support.

Suggested Options:
Shorter Term: The October 75 Call will offer short-term traders
the best return on an immediate move, as it is currently in the
money.  Note that October strikes expire in two weeks.

Longer Term: Aggressive traders looking to capitalize on an
extended rally will want to look to the November 80 Call.  This
option is currently out of the money, but should provide
sufficient time for the stock to move higher without time decay
becoming a dominant factor over the short run.  More conservative
long-term traders will want to use the November 75 Call.

BUY CALL OCT-75 RYL-JO OI=1826 at $4.70 SL=2.75
BUY CALL OCT-80 RYL-JP OI= 836 at $1.80 SL=0.90
BUY CALL NOV-75 RYL-KO OI=  72 at $6.80 SL=4.75
BUY CALL NOV-80 RYL-KP OI= 142 at $4.00 SL=2.50

Annotated Chart of RYL:

_1



Picked on September 4th at  $72.18
Change since picked:         +5.14
Earnings Date             10/21/03 (unconfirmed)
Average Daily Volume =       835 K
Chart =


---

United Technologies - UTX - cls: 81.80 chg: +1.35 stop:
77.50*new*

Company Description:
United Technologies Corp., based in Hartford, Connecticut, is a
diversified company that provides a broad range of high
technology products and support services to the building systems
and aerospace industries.  Its four main business segments are
Otis, Carrier, Pratt and Whitney, and Flight Systems.
(source: company press release)

Why We Like It: (Thursday's original write up)
It's back!  We're adding UTX back to the call list because it
finally looks finished with its consolidation between $77 and
$80.50.  Fundamentally, the company should benefit from the
economic expansion in the manufacturing sector as evidenced from
the ISM report earlier this week.  The stock didn't react to last
week's multiple-broker downgrade of the defense sector.
Technically, we like the new relative high and breakout over the
$80.50 level (okay, it closed back below it by a nickel).  The
stock's MACD has drifted back from overbought and looks ready to
print another buy signal.  Plus, there are just two weeks left
before its earnings report and we might actually see some pre-
earnings momentum.

Our first target will be the old highs near $87.  We'll start the
play with a stop at $77 and look to raise it as shares progress
higher.  More conservative traders may want to wait for a little
more confirmation with a move over today's high.

Friday's update: Good news for UTX bulls.  The powerful rally in
the markets helped push shares of UTX confidently through the
80.50 mark, which has been a barrier the past few weeks.  The
stock's MACD has finally produced a new buy signal and there is
little overhead resistance between here and our target near $87.
However, we would not be surprised by a pull back should the
markets dip early next week and traders can gauge new entries on
any bounce above $80.

Suggested Options:
There are just two weeks before UTX's earnings and we don't plan
to hold over the report, which means traders could use the
October calls, but they remain higher risk. We're going to
suggest trading the Novembers.

BUY CALL OCT 75 UTX-JO OI= 548 at $7.20 SL=4.50
BUY CALL OCT 80 UTX-JP OI=2635 at $2.90 SL=1.45
BUY CALL OCT 85 UTX-JQ OI=1096 at $0.50 SL= -- riskier
BUY CALL NOV 75 UTX-KO OI=2145 at $7.80 SL=5.00
BUY CALL NOV 80 UTX-KP OI=1603 at $4.10 SL=2.00
BUY CALL NOV 85 UTX-KQ OI= 442 at $1.35 SL=0.65

Annotated Chart:

_1



Picked on October 2 at $80.45
Change since picked:   + 1.35
Earnings Date        10/16/03 (confirmed)
Average Daily Volume:    1.9 million
Chart =



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

Best Buy Company - BBY - close: 51.00 change: +2.08 stop: 46.00

Company Description:
Best Buy a specialty retailer of name-brand consumer electronics,
home office equipment, entertainment software and appliances.
The company provides a broad selection of models within each
product line in order to provide the customer with a meaningful
assortment, offering more than 5800 products, not counting
entertainment software titles.  Growing its store count by 15% in
fiscal year 2000, brought the grand total to more than 4000 in 41
states by year end.

Why we like it:
Investors have responded with strong enthusiasm to the economic
reports over the past two days, taking the improvement in the
employment picture as evidence that the much-advertised second-
half recovery is for real.  Fresh from its breakdown out of the
6-month ascending channel, the Retail index (RLX.X) has been
driven vertically back inside that chart formation over the past
3 days, with Friday's 2.06% gain bringing this index right back
to the mid-September $363 resistance level.  Following its top in
early September near $54, BBY has been headed lower in a bull
flag formation.  Friday's 4.25% gain pushed the stock just above
the top of that pattern at $50 and it looks like a fresh assault
on those highs from a month ago is in the cards.  Friday's move
left behind a good-sized gap down to just below $49 and it is
entirely possible that gap will need to be filled in with an
intraday dip before the stock can continue higher for that retest
of the recent highs and an expected breakout.

That makes the best entry strategy to buy into a rebound from the
$49 level, especially if accompanied by continued strength in the
RLX.  Aggressive traders can certainly use a breakout over
Friday's intraday high ($51.55) to enter the play on the
assumption that we've got a breakaway gap on our hands, but with
potential resistance every 50-cents between $52 and $54, the dip
entry certainly carries less risk.  The PnF chart really provides
no guidance, as despite the fact it is still strongly bullish,
the vertical count of $52 was reached in late August.  Looking at
the weekly chart, it appears there will be strong resistance
found in the $57-58 area, so we'll use a $57 profit target for
the play.  Place initial stops at $48, as a trade at that level
would represent a break of Thursday's intraday low, as well as
the 50-dma ($48.75) and would be a clear indication that this
breakout attempt has failed.

Suggested Options:
Shorter Term: The October 50 Call will offer short-term traders
the best return on an immediate move, as it is just slightly in
the money.  Note that October contracts expire in 2 weeks.

Longer Term: Aggressive traders looking to capitalize on an
extended rally will want to look to the November 55 Call.  This
option is currently out of the money, but should provide
sufficient time for the stock to move higher without time decay
becoming a dominant factor over the short run.  More conservative
long-term traders will want to use the November 50 Call.

BUY CALL OCT-50 BBY-JJ OI=17475 at $1.95 SL=1.00
BUY CALL NOV-50 BBY-KJ OI= 1395 at $3.30 SL=1.75
BUY CALL NOV-55 BBY-KK OI= 1870 at $1.20 SL=0.60
BUY CALL DEC-55 BBY-LK OI= 3210 at $1.95 SL=1.00

Annotated Chart of BBY:

_1



Picked on October 5th at     $51.00
Change since picked:          +0.00
Earnings Date              12/17/03 (unconfirmed)
Average Daily Volume =     3.78 mln
Chart =


---

Cooper Industries - CBE - cls: 51.00 chg: +1.00 stop: 48.00

Company Description:
Cooper Industries, Ltd., with 2002 revenues of $4 billion, is a
global manufacturer of electrical products and tools and
hardware. Incorporated in Bermuda, with administrative
headquarters in Houston, Texas, Cooper has more than 28,000
employees serving more than 100 locations around the world, and
sells products to customers in more than 50 countries.
(source: company press release)

Why We Like It:
We're adding CBE to the call list as a technical play.  The stock
has been a huge winner from late May where it broke out of a
sideways consolidation under $39.00.  The rally pushed CBE up to
the $51 level by late August and shares spent the month of
September consolidating in bullish flag formation.  The recent
strength has produced a clean bullish breakout with decent volume
on Friday's move.

There is potential resistance at $51.00-51.50 but we don't expect
it to hold for very long.  Should we see a pull back, then
traders can use dips above the $50 mark as potential entry
points.  CBE's MACD is about to produce a new bullish buy signal
while its daily stochastics, momentum and RSI indicators are
already bullish.  There is potential for more resistance at $54,
where CBE gapped down from the 9/11 attack but we're going to
target a move to the $55-56 region.  We will use an initial stop
loss at $48.00 near its simple 50-dma but more conservative
traders can probably beat that by another dollar.

Suggested Options:
Short-term traders have October and November options to choose
from while longer-term traders can look at January and April
strikes.  Our preference is for the November 50s and 55's.

BUY CALL OCT 50 CBE-JJ OI= 104 at $1.65 SL=0.85
BUY CALL OCT 55 CBE-JK OI=   0 at $0.15 SL= -- not recommended
BUY CALL NOV 50 CBE-KJ OI=  83 at $2.60 SL=1.40
BUY CALL NOV 55 CBE-KK OI= 507 at $0.65 SL= --

Annotated Chart:

_1


Picked on October 5 at $51.00
Change since picked:   + 0.00
Earnings Date        10/23/03 (confirmed)
Average Daily Volume:    539 thousand
Chart =



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I T T Industries - ITT - cls: 61.33 chg: +0.24 stop: 62.51

Company Description:
ITT Industries, Inc. (www.itt.com) supplies advanced technology
products and services in key markets including electronic
interconnects and switches; defense communication, opto-
electronics, information technology, and services; fluid and
water management; and specialty products. Headquartered in White
Plains, NY, the company generated $4.99 billion in 2002 sales. In
addition to the New York Stock Exchange, ITT Industries stock is
traded on the Midwest, Pacific, Paris, and Frankfurt exchanges.
(source: company press release)

Why We Like It:
We like ITT as a put play for several reasons.  The month of
September should have been more bullish for the stock.  The
company reiterated their financial guidance twice and received a
nice upgrade from Goldman Sachs.  Yet investors ignored all of it
and have sent shares strongly lower.  As a matter of fact shares
of ITT have been slowly eroding over the last few months while
most of the market has been climbing.  We originally added ITT on
the breakdown below its simple 200-dma and the $60 level of
support.  However, in the last week we've witnessed a huge
rebound in the broader markets and ITT was not immune to this
buying pressure, although it did seem to under perform.

Volume has been declining on the recent bounce and the stock has
performed a great looking failed rally just under our stop loss
at $62.51.  We see Friday's move as a low-risk entry for new
bearish positions but it takes guts because the stock is still
above its 200-dma and the $60 mark.  More conservative traders
may want to wait for the momentum to fade and for ITT to close
back below its 200-dma.


Suggested Options:
Our preference to play the drop in ITT would be the October and
November 60's and 55's but investors who prefer a higher delta
can consider the 65's.

BUY PUT OCT 55 ITT-VK OI= 92 at $0.25 SL= --
BUY PUT OCT 60 ITT-VL OI=174 at $0.80 SL=0.40
BUY PUT OCT 65 ITT-VM OI=160 at $4.00 SL=2.25 (low premium)
BUY PUT NOV 55 ITT-WK OI= 74 at $1.30 SL=0.65
BUY PUT NOV 60 ITT-WL OI=343 at $1.60 SL=0.85
BUY PUT NOV 65 ITT-WM OI=  4 at $4.50 SL=2.25

Annotated Chart:

_1



Picked on September 28 at $59.64
Change since picked:       +1.69
Earnings Date           07/28/03 (confirmed)
Average Daily Volume:        546 thousand
Chart =



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

Merck & Co - MRK - close: 50.11 chg: -0.89 stop: 52.01

Company Description:
Merck & Co., Inc. is a global research-driven pharmaceutical
products and services company. Merck discovers, develops,
manufactures and markets a broad range of innovative products to
improve human and animal health, directly and through its joint
ventures. (source: company press release)

Why We Like It:
The drug sector has seriously been under performing the broader
markets for months and after a brief rally higher in early
September they look ready for another leg lower.  Trying to lead
the charge are shares of MRK, which completely ignored the rally
on Friday and produced a wonderful failed rally at the $52 level.
Investors could be concerned about new competition in the
cholesterol drug market from rival AstraZeneca who just launched
their Crestor drug last month.  Merck could also be suffering
some bad karma as federal prosecutors have moved from a probe to
a lawsuit against the recently spun off Medco unit.  The U.S. is
charging Medco with fraud.  Of course, the company is not without
its good news.  Just a few days ago one of its partners, Iceland-
based deCODE Genetics (DCGN) announced they have found the "fat"
gene, which could be used in the fight against obesity.  MRK is
their partner to develop a fat-fighting drug.  Plus, bears
playing the short side of major drugs will have to contend with
potential headline risks.  There is always risk of MRK announcing
some big new breakthrough or more probable that the brokerage
houses will start upgrading the group on valuation since they're
so much cheaper than the rest of the market.

The daily and weekly charts of MRK show support at the $50 mark
so we're going to use a TRIGGER at $49.90 to open the play for
us.  Momentum traders may want to see MRK break the old low from
late August near $49.50 before opening any bearish positions.
Fortunately, MRK is already on a P&F sell signal, which also
looks ready for another leg lower.  Our first target is $45 but
shares could fall even lower.


Suggested Options:
Short-term traders can choose from October and November strikes
but our preference would be for Novembers.  Longer-term traders
can look to the January's.

BUY PUT OCT 50.00 MRK-VJ OI=10270 at $1.10 SL=0.55
BUY PUT OCT 47.50 MRK-VW OI= 2819 at $0.40 SL= --
BUY PUT NOV 50.00 MRK-WJ OI= 5649 at $1.80 SL=0.90
BUY PUT NOV 47.50 MRK-WW OI= 6196 at $0.80 SL=0.50
BUY PUT NOV 45.00 MRK-WI OI= 1502 at $0.40 SL= --

Annotated Chart:

_1



Picked on October 5 at $xx.xx
Change since picked:   - 0.00
Earnings Date        10/22/03 (confirmed)
Average Daily Volume:    6.2 million
Chart =



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The Option Investor Newsletter                   Sunday 10-05-2003
Sunday                                                      4 of 5


In Section Four:

Leaps: Are We Having Fun Yet?
Traders Corner: Another Trade Bites The Dust - Just A Small Bite
Traders Corner: Where is the Dow Going?


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*****
LEAPS
*****

Are We Having Fun Yet?
By Mark Phillips
mphillips@OptionInvestor.com

Nobody ever said this was an easy gig, and the past several months
have certainly proven that to be true.  One week, it looks like
we're headed to new highs and the following we're contemplating a
major breakdown.  Move forward a few more weeks and repeat the
process.  In my opinion, the major development last week was the
selloff in bonds and huge rally in equities, both of which seems
to have been driven by the "positive" economic data.  I put the
word positive in quotes because I really think you have to squint
to see the reported data as sufficient to drive the market as
strongly as it did, especially on Friday.

The key here is that it is all about expectations.  Clearly
expectations were for much worse numbers than were reported,
especially for the employment picture and equity bulls rejoiced on
the mistaken (my opinion) perception that the second half recovery
is here and we can kiss the bear market good-bye.  Let's just say
I remain unconvinced.

Be that as it may, Sentiment took over again big time towards the
end of last week, and the bulls are in a frisky mood.  That
optimism could evaporate next week, or it could propel the major
indices to those lofty levels I've recently mentioned in this
column.  For review, the DOW looks like it could be headed for
9800-10,000, the SPX to the 1070 level and the NASDAQ Composite
could lift off towards the 2100 area.  I don't think those are
reasonable levels based on fundamentals, but as we've seen in
recent months, Sentiment and Technicals can easily trump the
fundamentals in the near-term.

The 'new and improved' VIX plunged back under 20 to close at 19.50
on Friday, keeping the trend of lower highs intact.  As a measure
of how deeply 'oversold' the VIX is, the weekly Stochastics
(10,5,3) have essentially remained in oversold territory for 5
months and it feels like an upside explosion is getting closer and
closer to reality.  Take a look at the weekly Stochastics on the
VIX from 11/01-4/02 and tell me if it doesn't look an awful lot
like the current picture on the VIX weekly Stochastics.  Recall
that from late April 2001 through July 2002, the VIX absolutely
exploded to the upside from roughly 20 to above 56.  Could it
happen that way again?  Absolutely!  Picking the timing of the
move though is a tricky business.

The key is finding what the catalyst will be, and more and more I
believe it is found in the currency arena.  At some point, we're
going to have to pay the piper for the flagrant money creation
that has been occurring over the past couple years, and if the
dollar does in fact break down, it could get ugly in a hurry.  In
that event, investments in tangible assets and real money like
gold will soar.  That's a big part of why I'm pushing NEM onto the
Watch List this weekend, despite the absolute pounding suffered in
the precious metals markets over the past couple weeks.  But we
aren't at that elusive tipping point yet and until the right
catalyst comes along, the bulls are content to party like its
1999.  You know what they say -- the bigger they are, the harder
they fall.  Correspondingly, the higher the markets go, the more
out of whack the valuations become and the more room there is to
the downside.

I still feel the Bullish Percents are our best method of
determining when there is a clear shift of both Sentiment and
Technicals in unison.  The only Bullish Percent reading that looks
to be giving us the "go" signal is the NASDAQ-100, which is in
Bear Confirmed.  All the rest of the major indices are in varying
degrees of Bullishness.  The NASDAQ Composite and S&P 500 are
still Bull Confirmed, with the OEX and DOW resting comfortably in
Bull Correction status.  But all of the readings are still above
the 70% reading that denotes overbought.  Sure the bulls are still
carrying the bulk of the risk here, but that certainly hasn't
stopped investors from continuing to buy the dips.

In last Wednesday's Trader's Corner article, I updated the
technical view on the markets, focusing on the S&P 500, bringing
in the issues of bearish Stochastics divergence, the bullish
percent SharpChart and the price pattern on the VIX as it pertains
to the ADX.  In just a few short days, that picture has changed
significantly, telling me that pressing the downside, even with
long-term positions is still a premature move.

The bearish cross on the weekly Stochastics has almost completely
been reversed and that divergence will likely be negated if the
SPX breaks out to new highs next week.  Following the pattern seen
back in early August, the ADX for the VIX has dipped back under
the 20 level, keeping the 'trendless' condition intact.  And to
top it all off, the SPX bullish percent line has turned back up
and should challenge the 10-dma next week.  At the same time the
CCI on the BP SharpChart is threatening to cross back above the -
100 level.  None of these developments negate the downside
potential I see for the market.  But they do work together to tell
us that if establishing bearish positions, we need to do so by
selling into failed rallies, not by attempting to jump into a
breakdown in progress.

We're 5 weeks past the official end of summer and while the
markets have definitely woken up significantly, they really
haven't made any progress in telling us whether this bull phase is
about out of juice or if there is another leg up in store.  We're
making progress in aligning our playlists to benefit from either
scenario, but it is definitely a work in progress.  Without
further ado, let's dive right in and see what developments the
week just ended has to offer.

Portfolio:

WMT - Alright, enough is enough.  WMT satisfied our amended entry
criteria on Friday and this play finally moves into the Portfolio.

Watch List:

AGN - Well, what do you know?  AGN came back to life with the rest
of the market, rebounded from the ascending trendline near $78 and
looks like it wants to make a run at that elusive breakout over
$82.  After struggling with this resistance level since the middle
of June, a breakout over that level could be quite powerful, as it
would also give a "quintuple-top" Buy signal on the PnF chart,
projecting a vertical count of at least $93.  Our entry strategy
on this play is a bit different from usual, as we'll enter on a
breakout and close above $82 without waiting for a subsequent
pullback.  Individual traders are welcome to "game" the entry as
they see fit, but please don't jump the gun before that trade at
$82.  After entry, we'll set our stop at $76, as a trade at that
level would be a subsequent PnF Sell and would invalidate any
bullish target.  For a taste of how that could happen, all we have
to do is look at the price action in AMGN over the past few weeks.

AMGN - It's the end of the road for any bullish aspirations on
AMGN's part.  Last week's trade below $64 generated a PnF Sell
signal and it's time to let this one go.

QQQ - Can you say volatility?  After a brief violation of the
bottom of the ascending channel last week, the QQQ regained its
composure and then really launched higher on Friday, to the tune
of 2.79%, most of that move taking place on a large gap.  When I
reactivated the play last week, I was looking for a failed rally
at $34 to justify a bearish entry point.  Well, we got the rally,
but you'd be hard-pressed to call the fade at the end of the day a
failure!  There is the possibility that Friday's rally marked the
right shoulder of a H&S pattern, but the problem with that theory
is that we'll need to see a break of the neckline (currently
$32.25) to know for sure.  With the QQQ back inside its ascending
channel, it will take a trade at $33 to break back under that
pattern and a trade under the 50-dma ($32.65) for further
confirmation.  The problem with using either of those measures as
a trigger is the fact that they were both violated on a closing
basis last week and here we are back to testing resistance near
$35.  That makes new entries still an aggressive proposition until
the QQQ breaks below last week's lows.  At that point, we could
once again be faced with a buy-the-dip phenomenon.  Are you dizzy
and confused yet?  We'll stick with the initial trade plan,
looking to enter on a close below $34, provided it doesn't happen
on a big gap.  More conservative traders will want to wait for a
break and close below $32 before playing.  Once filled, we'll use
a stop at $35.  That way, if I'm wrong and the NASDAQ does just
continue higher, we'll be out with minimal damage.

SMH - The Semiconductor index gave up its relative weakness on
Friday and the SMH launched higher by 4.44% to end right at the
top of our targeted entry zone.  I vacillated back and forth about
whether I ought to initiate a position, but in the end was forced
to concede that new positions here would likely be ill-advised.
Certainly, the SMH closed significantly off its intraday high, but
there wasn't enough weakness to suggest that it is headed
immediately lower from here.  We'll wait for a subsequent close
below the bottom of the entry zone ($36) before taking a position,
but we won't do it on another big gap move.  Aggressive traders
may want to consider entering on a failed rally closer to strong
resistance in the $38-39 area, but that's too aggressive for our
official Portfolio, especially in light of the strong buying
volume on Friday.  Once we enter the play, our initial stop will
be placed at $40, which should be safe unless the bulls have a lot
more gas in the tank.

FRX - There have been numerous days in the past 2 weeks when I've
lamented that I must have set the entry target too strictly and
feared we'd never see an entry point into our FRX play.  Well the
pric action last week certainly didn't look very constructive now,
did it?  FRX has been very volatile since the company gained FDA
approval for its Alzheimer's drug.  I really don't care for the
pattern of lower highs and lower lows we've seen since that event,
so I'm going to fall back to the initial plan of targeting entries
in the $46-47 area, with my preference being for the lower end of
that range.  We need to see some base-building before taking an
entry, as trying to pick an entry point out of the price action
we've seen in the past couple weeks can be quite treacherous.
There is no trend to speak of and I would now classify FRX as an
aggressive play.  The issue that really concerns me is that a
trade at $47 will generate a new Sell signal on the PnF chart,
negating the Buy signal that first caught my attention a few weeks
back.  I still think this one has bullish potential, but I don't
want to take an entry until we see some more constructive price
action.  So with regret, I'm shifting FRX to HOLD and we'll look
for a more solid base to form and give a better entry setup.

Radar Screen:

FNM - With mortgage rates falling again most of last week, FNM
continued its persistent climb, reaching the $72 level on Friday
before profit taking took hold.  I'm having a hard time
maintaining a bearish stance on the stock, with the only factor in
our favor being the descending trendline from the April 2002
highs, which currently rests at $73.50.  Weekly Stochastics are
still climbing and the PnF chart is on a strong Buy signal, with
price above the bearish resistance line and a bullish price target
of $95!  Can you say high risk?  As I mentioned several weeks ago,
I'm done with trying to pick tops in uptrends for awhile and FNM
certainly qualifies.  Until we see some signs of price weakness or
a hint of a PnF Sell signal, I think we had best leave it here on
the Radar Screen.

QCOM - Any hopes of nabbing an entry point on QCOM quickly
vanished last week, with the stock finding support on Wednesday at
$41 and vaulting higher in gap-happy fashion.  that rebound took
place in space without a serious test of support and we couldn't
have considered it a strong entry anyways. I'll keep it on my
short list for now, but in reality, we need to see it trade down
to at least $40 before we'll have a tempting setup.  Patience is
the watchword for now.

DJX - Last week's price action should remove any doubt as to why I
wasn't willing to put the DJX back onto the Watch List last
weekend.  With Bullish Percents still quite high and the DOW BP
still in Bull Confirmed, we're still early to any play to the
downside.  And with the bulls charging hard at the end of the week
in response to the "great" jobs data, we've got a very clear
picture of the still-strong bullish sentiment.  Remember, I am not
going to try to pick a top for a bearish play until the charts say
it is advisable to do so.  I'm expecting that any follow through
to the upside could take the DOW back to the 9800-10000 area that
we were talking about some weeks back.  At a minimum, we need to
see the DOW Bullish Percent fall below 80% to show us some sign of
internal weakening.  With components like CAT, UTX, MMM and PG
still charging to new 52-week highs, patience is the best
strategy.

NEM - With gold and gold stocks getting dumped wholesale on
Friday, you'd think this would be the last place I'd be looking
for a bullish play.  You'd be right if it was any other sector.
But this weakness is just the sort of gift I've been eagerly
awaiting for several months now.

Closing Thoughts:

Last week at this time, I really felt like things were starting to
behave in a rational manner, but as you can see from my commentary
above and the actual action in the market, I'm less sure of myself
again this weekend.  The dominant factor in price action is still
the overwhelming bullish sentiment and until that factor suffers a
serious blow, it is going to be difficult for the broad market to
make any significant progress to the downside.  I have no doubt
that there is another major leg down, but determining when it will
occur and from what altitude, remains a challenge of the first
order.  But make no mistake about it -- I'll be here each and
every week doing my level best to sort it all out.  That is, with
the very likely exception of next week.

Time is drawing short in life as I have known it, as I'm expecting
the arrival of my first child by the middle of next week.  That
means there is a better than even chance that I won't be writing a
LEAPS column next weekend.  It all depends on what fate has in
store, and I apologize in advance for the gap in coverage.  But I
hope you'll understand that I must take care of that priority
before refocusing my efforts on the pursuit of financial gain that
we engage in here each week.

Have a great week!

Mark


LEAPS Portfolio

Current Open Plays

SYMBOL OPENED     LEAPS    SYMBOL  ENTRY   CURRENT  CHANGE  STOP

Calls:
None

Puts:
WMT    10/03/03  '05 $ 55  ZWT-MK  $ 5.10  $ 5.10  + 0.00%  $61
                 '06 $ 55  WWT-MK  $ 7.20  $ 7.20  + 0.00%  $61


LEAPS Watchlist

Current Possibles

SYMBOL  SINCE    TARGET PRICE  TARGETED LEAP  SYMBOL

CALLS:
AGN    09/14/03   $82          JAN-2005 $ 85  ZFH-AQ
                            CC JAN-2005 $ 80  ZFH-AP
                               JAN-2006 $ 90  YOK-AR
                            CC JAN-2006 $ 80  YOK-AP
FRX    09/21/03   HOLD         JAN-2005 $ 50  ZML-AJ
                            CC JAN-2005 $ 45  ZML-AI
                               JAN-2006 $ 50  WRT-AJ
                            CC JAN-2006 $ 40  WRT-AH
NEM    09/21/03   $33-34       JAN-2005 $ 30  ZIE-AG
                            CC JAN-2005 $ 35  ZIE-AF
                               JAN-2006 $ 30  WIE-AG
                            CC JAN-2006 $ 35  WIE-AF


PUTS:
QQQ    08/10/03  $34           JAN-2005 $ 32  ZWQ-MF
                               JAN-2006 $ 32  WD -MF
SMH    08/24/03  $36-37        JAN-2005 $ 35  ZTO-MG
                               JAN-2006 $ 35  YRH-MG


New Portfolio Plays

WMT - Wal-Mart Stores, Inc. $57.48  **Put Play**

That's enough waiting for me!  WMT reversed last month right at
its descending trendline and headed sharply lower with the
weakness in the overall Retail index (RLX.X)  Over the past few
days, the RLX has been in strong rally mode, as the economic
reports last week seem to have convinced investors that the second
half recovery is real.  We've been looking for a rally failure in
the $58 area and that's precisely what the market delivered on
Friday, with an opening gap followed by a continued push up to
$58.23, before weakness set in, driving the stock down to close at
its intraday low.  While WMT still ended with a 0.7% gain on the
day, its intraday weakness was in sharp contrast to the more than
2% gain in the RLX.  Part of this weakness may be related to the
company's "reaffirmation" of Q3 guidance at $0.45-0.47 cents per
share.  That didn't sit too well with investors, when consensus
estimates were calling for $0.47.  Technically, the weakness over
the past few weeks produced a breakdown from the bearish ascending
wedge and Friday's intraday high looks like a clear rejection from
the lower wedge line as prior support is now looking like
resistance.  Additionally, weekly Stochastics are now in full
bearish decline and odds favor the downside.  The only missing
ingredient is a PnF Sell signal, but we won't get that until WMT
trades $51, clearly a long ways away.  We have strong resistance
working for us at the long term descending trendline just below
$60.  So placing our stop at $61 should keep us out of trouble, if
the play has any hope of working in our favor.  There's likely to
be lots of support on the way down, meaning we'll have to exercise
significant patience, but if the economic weakness I expect begins
to manifest itself into Q4, then a drop back to major support at
$45 is not out of the question.

BUY LEAP DEC-2005 $55 ZWT-MK $5.10
BUY LEAP DEC-2006 $55 WWT-MK $7.20



New Watchlist Plays

NEM - Newmont Mining $37.88  **Call Play**

Gold and gold stocks have been vacillating near their highs for
the past several weeks, but gold has been unable to push through
the $390 level and the Gold and Silver index (XAU.X) couldn't
maintain its altitude either.  Profit taking took a big bite out
of the elevated level of the XAU just over a week ago and economic
data pointing towards an improvement in the employment picture
sent gold and the XAU reeling again on Friday.  Gold lost more
than $13/ounce, while the XAU got slammed lower for a 4.59% loss.
So why am I picking this opportunity to move NEM onto the Watch
List for a bullish play?  Anticipation!  My long-term view is that
the wholesale creation of fiat currencies is going to have a
profound long-term impact and it isn't going to be pretty.  Gold
is the ultimate hedge against out-of-control currency inflation
and we want to take advantage of this selloff as a gift of an
entry point.  NEM broke its 50-dma on Friday and it did so on very
heavy volume.  Obviously this is not the place to be entering new
bullish positions.  But I do like our odds if we can get an entry
down near the $33-34 area.  By that time, I expect to see the 200-
dma rise to the $32.50 area, which should provide solid support.
At the same time, we should see the XAU fall back near $80, which
is also very strong support and should be just above the 200-dma
at the time.  Weekly Stochastics are just starting to tip over out
of overbought, so we're in no hurry to establish a position here,
but this is the heads up to start watching.  Assuming we get the
entry point I've listed, we'll go with a rather broad stop at $30,
which should be an untouchable level if my fundamental views are
correct.  Over the next year or two, I can see NEM marching its
way into the $60-70 area, with gold challenging making an earnest
effort at reaching levels most investors don't even dream about
now.  This is a play that will serve us well if we can exercise
the necessary patience, both in terms of entry and position
management.

BUY LEAP JAN-2005 $35 ZIE-AG
BUY LEAP JAN-2005 $30 ZIE-AF **Covered Call**
BUY LEAP JAN-2006 $35 WIE-AG
BUY LEAP JAN-2006 $30 WIE-AF **Covered Call**


Drops

AMGN - $64.97 The suspense is over.  After tapping $70 just over 2
weeks ago, it looked like our bullish play on AMGN was good to go
with a fresh PnF Buy signal.  But things took an ugly turn the
very next day with a downgrade from Wachovia.  A couple days of
consolidation and the stock really plunged, reaching to just above
$64 a little over a week ago.  That had us really on edge, as a
trade at $64 would generate a PnF Sell signal, negating the Buy
signal and the $81 price target.  That trade at $64 appeared this
past Monday and as noted in the Market Monitor, it ended my
interest in trying to game an entry to the long side.  AMGN spent
the remainder of the week vacillating between $64-67, and with
Friday's drop, it appears the bears have the nod.  Time to let
this one go and look for better candidates.


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

Another Trade Bites The Dust - Just A Small Bite
By Mike Parnos, Investing With Attitude

A surprise positive jobs report goosed the market on Friday.  We
can all use an occasional goose (not the X-mas kind).  It's a
great motivator.  However, in this instance, one of our positions
was assaulted.  Our stronghold is still in tact, though, but we
did have a casualty. (See Below)

Recap Of INTC (Intel) "Siamese" Condor October Position
We sold 10 contracts of the October INTC $27.50 calls and sold 10
contracts of the October INTC $27.50 puts for a total credit of
$2.10 ($2,100).  Then, for protection, we bought 10 contracts of
the October INTC $32.50 calls and 10 contracts of the October
INTC $22.50 puts for a total debit of $.20 ($200).  Our total net
credit was $1.90 ($1,900).

Our profit range was $25.60 to $29.40.  The parameters of our
profit range were also our bailout points.  On Friday morning,
when Intel moved through $29.40 we were out.  We bought back the
$27.50 call for $2.25 and sold the $32.50 for $.10.  The closeout
cost was $2.15.  We had taken in $1.90, so we accepted a loss of
$250 - not bad for a trade gone awry.

Intel closed at $29.61.  It's completely possible that Intel will
come back down to finish within our profit range.  But, again, we
have to adhere to our trading plan.  We have to preserve our
trading capital.  An alternative:  We could have not sold the
$32.50 call and remained long.  Hell, it's only a dime.  If Intel
continues its upward move, that $.10 could turn into $.50 pretty
easily.
_________________________________________________________________

CPTI Decree
Henceforth the strategy formerly known as a "Joined" Condor will
now be known as a "Siamese" Condor - thanks to a suggestion of
William, a long time CPTI student.  I have to admit, it's
creative, more colorful and lends a uniqueness to the strategy -
plus conjures up an interesting image.
_________________________________________________________________

Iron Condor vs. Siamese Condor
In last Thursday's column we discussed some of the differences
between these two Condor strategies.  We looked at our exposure
in each strategy.  We concluded that the worst-case scenario
exposures technically aren't too different.

Let's Dig Deeper
One of the benefits of using the Siamese Condor is that you give
yourself the opportunity to make a lot more money.  In the
educational example outlined in Thursday's column, with IBM
trading close to $90, we sold the October $90 puts and calls,
then protected them buy buying the $100 calls and the $80 puts
for a total net credit of $4.20.

If IBM hovers around the $90 level, the closer it finishes to
$90, the more money we make.  If it finishes at $92, we simply
have to buy back the $90 call for about $2.  We make the $4.20
less the $2 = $2.20.  That's substantially more than the $.90 we
would have made based a normal Iron Condor with an $85 to $95
range.

Also helping our cause are our friends(?) the market makers.
Check the option chains. You'll see that the $90 puts and calls
have the highest open interest.  As option expiration approaches,
the market makers have a tendency to try to manipulate the stock
toward the strike price with the highest open interest.  In this
rare scenario, market makers would actually be working toward
increasing our profits.

Lower Risk
OK.  This will take some focus.  With the normal Iron Condor,
it's difficult to calculate the optimal time to bail out of the
trade.  Do we bail when the short strike is violated?  When a
support or resistance line is broken?  Do we just wait and hope?

Note that, as the stock approaches the short strike (Iron
Condor), the amount of time value is increasing.  When it reaches
the short strike, it will be at-the-money.  Therefore, you will
pay more to close out the position.

With the Siamese Condor, for every dollar IBM moves away from the
short strike ($90), the more in-the-money it becomes.  The more
intrinsic (ITM) value there is in the option's price, the less
time value there is.  Since we took in $4.20, once IBM reaches
$94.20, there won't be much time value left in the $90 call -
maybe $.75-$1.00 or less (depending on when the move occurs).
You might have to pay $5.20 to close the short call.

Then, you might recoup $.25-$.40 (or more) when you sell the long
$100 call.  Thus, to close the bear call portion of the Siamese
might cost only $.60-$.75.  That's not bad for a position that
has gone wrong.

Wait! We're Not Done Yet
Just because we closed out the bear call spread, we're not out
totally of the woods.  Don't forget that, in the above example,
we're still holding the $90/$80 bull put spread.  If IBM reverses
and moves below $90, you'll be faced with possible additional
losses.  Some traders may prefer to close the short $90 put when
they close the bear call spread - to eliminate any additional
exposure.
______________________________________________________________

OCTOBER POSITIONS
October Position #1 - SPX Iron Condor - Trading @ 1029.85
We were going to create an Iron Condor with a range of 995-1075
and take in $2,300 in premium.  However, on the Monday following
expiration Friday, the SPX gapped lower.  So, we adjusted our
condor to take the gap into consideration.  We created the Iron
Condor with a new range is 980-1065.

We sold 10 contracts of the October 980 puts and also sold 10
contracts of the October 1065 calls.  Then we bought our
protection in the form of 10 contracts of the October 970 puts
and 10 contracts of the October 1075 calls.
We took in a total of $2,300 in premium and that's our maximum
potential profit.  Our maximum profit range is 980 to 1065.  Our
safety range is 977.70 to 1077.30.  We're at 1029.85, comfortably
near the middle of our Iron Condor position - a nice place to be.

October Position #2 - QQQ - Put Calendar Spread - Trading @
$34.19
We decided to risk a buck.  Since many folks think the market is
due to correct.  So we created a cheap play that will let us take
advantage of a nice down move.

We bought 10 contracts of January 04 QQQ $32 puts and sold 10
contracts of October 03 QQQ $32 puts for a total debit of $1.00
($1,000).

If/when the QQQs make their move down, the January $32 put will
increase in value more rapidly than the October $32 put.  We'll
look for a $500-$750 profit on this position and take the money
and run.  The risk is small.  The percentage profit potential is
very appealing.

October Position #3 - FDC (First Data Corp.) "Siamese" Condor -
Trading at $41.01.
We selected FDC, a financial stock, because is may be less
vulnerable volatile movements of the tech stocks.  We're going to
sell 10 contracts of the October FDC $40 calls and sell 10
contracts of the October FDC $40 puts for a total credit of $2.40
($2,400).  Then, for protection, we'll buy 10 contracts of the
October FDC $45 calls and 10 contracts of the October FDC $35
puts for a total debit of $.30 ($300).  Our total net credit is
$2.10 ($2,100).

Our profit range is $37.90 to $42.10.   The closer FDC finishes
to $40, the more profit we will make.  The parameters of our
profit range are also our bailout points.

OEX - Bearish Calendar Spread - OEX @ $511.20
We bought 8 contracts of OEX November 470 puts @ $10.60 and sold
8 contracts of OEX September 470 puts @ $2.20 for a total debit
of $8.40.  The Sept. 470 puts obviously expired worthless.  We
were going to sell the October 490 puts and take in another
$2.10.  However, with the Monday market gap-down, we were able to
take in $3.10 instead.  Our new cost basis is $5.30.

QQQ ITM Strangle - Ongoing Long Term -- $33.26.
We bought 10 contracts of the 2005 QQQ $39 puts @ $7.00 = $7,000
and also bought 10 contracts of the 2005 QQQ $29 calls @ $7.30 =
$7,300 for a total debit of $14,300.  Then we sold 10 contracts
of the QQQ Oct. 33 puts @ $.85 = $850 and also sold 10 contracts
of the QQQ Oct. 34 calls @ $1.05 = $1,050 for a total credit of
$1,900.

HPQ (Hewlett Packard) Bear-Put Spread - HPQ at $19.52.
HPQ is weak and may return to the $15 range.  So, we bought 10
contracts of the HPQ Feb. 2004 $20 puts @ $2.25 and we sold 10
contracts of the HPQ Feb. 2004 $15 puts @ $.40.  Total debit of
$1.85.   Potential max profit of $3.15.  We'd gladly accept a
profit of $800-900 and close the position early if the
opportunity presents itself.  This is a long-term position.
______________________________________________________________

OCTOBER CLOSED POSITIONS
#1 - APPX Short Term Straddle:  $1,400 Profit
#2 - BBH "Siamese" Iron Condor:  $300 Loss
For trade details, refer to Sept. 21 and Sept. 25 columns
#3 - INTC "Siamese" Iron Condor:  $250 Loss
For trade details, see article above
_______________________________________________________________

New To The CPTI?
Are you a new Couch Potato Trading Institute student?  Do you
have questions about our educational plays or our strategies?
The OptionInvestor archives offer a wealth of information - from
my columns to past and present informational and educational
columns by my OI colleagues. To find past CPTI (Mike Parnos)
articles, look under "Education" on the OI home page 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


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

Where is the Dow Going?
By Steve Gould

I had my weekly analysis completely written on Wednesday night,
albeit in my head.  The S&P 500 was behaving ideally and I did not
see any reason why this Elliott Wave pattern should not unfold as
expected.  Then Thursday hit and everything went to Hell in a hand
basket.  At least as far as my analysis was concerned.  If I were
as arrogant and egoistical as an ex-friend of mine I would have
said that my analysis was faultless.  It is the market that is
wrong. (How does that work?)

It looks as if the market is set to go higher yet before it does
what it is going to do next.  What will it do next, you ask?
Well, it will go down...unless of course it goes up.

Before we look at Friday's charts, let's recap last week's
analysis.

Last week I predicted that the weekly S&P 500 had completed the 4
wave, because it had completed the A-B-C correction, because the
five wave basic pattern was complete on the C wave.  Therefore,
the S&P 500 was on its way down to the 650 level as it completes
wave 5 of the five wave basic pattern that started in January
2000.  Everything lined up so precisely that I had a very high
confidence level in my analysis.

On Wednesday night, the S&P 500 hourly chart looked like it was
behaving just the way it was supposed to.  Well, almost.

Chart: S&P 500 Hourly 10/1/2003




The Wednesday hourly chart of the S&P 500 shows that the wave
pattern starting on 9/19/2003 is consistent with the formation of
the five wave basic pattern that I was expecting.  Had the S&P 500
finished the final 5 (circle) wave, this would have been the 1
wave on the daily chart.

If we dig a bit deeper, we can see that the S&P 500 did signal a
few red flags within this pattern.  Notice that the 4 wave has
retraced to within 0.08 points of overlapping into the 1 wave's
territory.  This would violate the first rule of Elliott Wave
theory.  IF the S&P 500 did not continue any higher, for example,
gapping down, then everything would still be fine.  Unfortunately,
that was not going to be a likely possibility because the
oscillator had not yet retraced the required 90% and further
upside movement was likely.  It could still happen mind you.  IF
the S&P 500 did not trace out any higher and instead trended
sideways for a bit, the oscillator could have caught up.

If, if, if.  At this point, the S&P 500 had to behave in a very
specific manner with no margin for error for this scenario to play
out.  It has been my experience that if I have to place all these
conditions on a market, then the analysis is most likely faulty.
True to form, the S&P 500 did not let me down. The next day the
S&P 500 did print higher.

(This was of course all my fault as I had bought SPX puts at the
1012 level.  At 12:00 pm EST, the analysis was a perfect set up.)

Fast forwarding to Friday's close, the S&P 500 now looks like
this.

Chart: S&P 500 Weekly 10/3/2003




Here is the current wave pattern of the weekly S&P 500.  At this
point we have to consider three possibilities.

Scenario 1:

In this scenario, I am going to follow through on my original
prediction from last week where the S&P 500 (and the rest of the
markets) has completed the 4 wave and is starting the 5 wave down
to the 650 level.

Chart: S&P 500 Daily 10/3/2003 scenario 1




This is still a possibility, BUT a bunch of things have to take
place for this to occur.  The S&P 500 is still presenting
evidence, if only by a thread, that the 5 wave has peaked.
Specifically, the oscillator divergence and the nice subdivisions
of the 5 (circle) wave suggest that the S&P 500 will go no higher.
However, we do not have a good start to the new 1 (circle) wave.
The 1 wave is well formed but the 2 wave is not.  The retracement
level of this alleged 2 wave comes to within 99.9999999% of the 1
wave.  Not unheard of, but unlikely.  Furthermore, when we look at
the hourly data, the chart suggests that the S&P 500 is about to
trend higher.

Chart: S&P 500 Hourly 10/3/2003 scenario 1





The hourly chart of the S&P 500 implies that the daily 1 wave is
well formed but the 2 wave is suspect.  2 waves are going to be an
A-B-C correction pattern.  I just don't see an A-B-C correction in
this wave pattern no matter how much I blur my eyes.  Could it
still happen?  Yes.  Is it likely?  I am losing confidence
rapidly.

Scenario 2

In this scenario, I am going to put forward that the 4 wave on the
weekly chart is not yet complete.

Chart: S&P 500 Weekly 10/3/2003 scenario 2





This weekly S&P 500 chart focuses in on the now notorious 4 wave.
In the past, I have suggested that this 4 wave corrective pattern
is unfolding as an expanded flat.  That has not changed.  One of
the characteristics of the expanded flat is that the C wave is
1.38 - 1.62 times the length of the A wave.  This chart shows that
the 1.62 x A wave level is at 1070.  Coincidentally, the 38.2%
retracement level of the 4 wave is at the 1060 level.  This
confluence sets up a massive resistance level that the S&P 500
will find most arduous to penetrate.  In my opinion, this is the
most likely scenario that the S&P 500 will take over the next week
or so.  If so, the iv wave will need to be relabeled.

Scenario 3

This scenario takes into account the possibility that both the
other scenarios are ill conceived and the markets are actually
taking a completely different form.  I do not think this is the
most likely scenario, but it does have some merit and must be
considered.

Chart: S&P 500 Weekly 10/3/2003 scenario 3





Keep in mind that the markets are currently undergoing an A-B-C
correction of a larger wave pattern.  Just how it will unfold is
yet to be determined.  But we do know that we will see some type
of an A-B-C correction.  We just don't know how yet.  In the other
two scenarios the A wave is unfolding to be a five wave basic
pattern that has not, as of yet, completed.

In this scenario, the S&P 500 has already completed the A wave of
the A-B-C correction and is proceeding to unfold the B wave.  This
A wave turns out to be a five wave basic pattern with a failed 5th
wave.  Since the A wave is a five wave basic pattern, the most
likely A-B-C correction pattern would be a zigzag.  Remembering
that the B wave will be an A-B-C correction, the S&P 500 could
trend a bit higher to complete the a wave, then drop to trace out
the b wave and then rise again to finish with the c wave.  The
time frame on that would most likely be a b wave by the end of
November and a new bear market rally well into the next year.

Bottom line, I expect the markets to trend a bit higher (to an S&P
500 level of 1060-1070 and equivalent in the other markets) over
the next week or so before they undergo a major correction.


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The Option Investor Newsletter                   Sunday 10-05-2003
Sunday                                                      5 of 5


In Section Five:

Covered Calls: Q&A With The Editor
Naked Puts: Q&A On Volatility -- Part II
Spreads/Straddles/Combos: Stocks Rally On Optimistic Jobs Outlook!

Updated In The Site Tonight:
Market Posture: Bears in Hibernation


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

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

One of our devoted readers offered some excellent ideas for
position management and the use of technical analysis to
identify favorable covered-call candidates.


Editor's note: Today's reply makes reference to previous comments
about a bullish position in Western Wireless (NASDAQ:WWCA).  Here
is a link to the initial discussion on the issue:

http://members.OptionInvestor.com/coveredcalls/cc_092103_1.asp


Attn: mark@OptionInvestor.com
Subject: WWCA hedge (Continued)

Hi Mark,

Man, I am really glad I sought out your thoughts on this subject.
All of the suggestions are outstanding and I have learned so much.
This is what I finally decided upon.  Going into October my number
one priority was to NOT give back the unrealized gain I am sitting
on -- just as all of the suggestions emphasized.  I purchased the
October 20 puts for the following reasons.  The market is due for
a correction at the very least; a consolidation period to digest
the gains if in fact the market wants to make another run higher.
If WWCA decides to tank I have locked in profits just under the
current levels [and] at the same time I am able to participate in
any further gains from here.  Like you said, it is a balancing act
and if there is one thing I have learned over the years, it is
imperative to hedge my bets [while] at the same time letting the
winners run.  If October does in fact get ugly, I will close the
trade and possibly look to reenter at lower levels.  Reestablishing
a trade after a period of consolidation or distribution is something
that for some reason gets pushed to the back of my mind and yet it
is such a great tactic to employ in these types of situations.

Since we are heading into the worst period of the year for stocks,
I will be looking to put together a list of candidates that I can
trade like this early next year.  Many of the stocks I have been
watching look very similar to WWCA.  A long period of basing in
stage I evolving into the classic rounding bottom chart pattern
and stage II.  A few are beginning to build a handle to the cup
and handle pattern, while some have even broken out beyond the
handle.  This is just another observation.  During periods like
October I notice you warn against becoming complacent with the
covered call strategy.  Would those stocks that survive over the
next month with the cup and handle intact and then break upwards
from there be good covered call candidates?  Do patterns like
these play a part in the covered call strategy?  Over time I have
noticed that many stocks exhibit the same patterns as they start
to move together as a group.  I realize this is a generalization
and I do not mean to place all stocks into this category.  It
also seems like it could be a pattern that might lend support to
the strategy and could be taken advantage of much like your first
article highlighting the different stages.

This has been an awesome experience and I want to thank you and
the other readers for the great ideas.  Again, Thanks for all of
the great ideas.

Sko


Hello Again Sko,

My section of the OIN is very short-term oriented and involves only
"in-the-money" covered-call candidates.  With that in mind, I use
technical analysis to identify neutral to bullish stocks that offer
a reasonable probability of success in conservative covered-call
positions.  As a "cup-and-handle" pattern is generally considered
bullish by market technicians, it could be considered a positive
signal, but it tends to be more of a long-term signal, outside of
my target time frame.  Thanks again for the kind words and good
luck!

Best Regards,

Mark W.
OIN

Well readers, here's your chance.  Any thoughts about Sko's use
of the cup-n-handle formation?  Please use this link to send your
replies and other questions or comments:

http://www.OptionInvestor.com/email/author.asp?author=mark


SUMMARY OF PREVIOUS CANDIDATES
*****

The following summary is a reasonable account of the positions
previously offered in this section.  However, no representation
is being made as to the actual performance of a position and in
fact, there are frequently large differences between the summary
results and those of 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.

Note:  Margin not used in calculations.

Stock   Price   Last    Option    Price   Gain  Potential
Symbol  Picked  Price   Series    Sold   /Loss  Mon. Yield

HLIT     5.48    7.16  OCT  5.00  0.80    0.32*   9.9%
CHU      7.43    8.91  OCT  7.50  0.50    0.57*   7.1%
SCMR     5.20    4.91  OCT  5.00  0.65    0.36    6.9%
QSFT    12.44   13.39  OCT 12.50  0.50    0.56*   6.8%
ARIA     5.24    6.43  OCT  5.00  0.60    0.36*   6.7%
MXO     12.90   13.10  OCT 12.50  1.05    0.65*   6.0%
OXGN    11.17   11.55  OCT 10.00  1.55    0.38*   5.7%
VXGN     6.50   11.51  OCT  5.00  1.80    0.30*   5.5%
XING     8.43    9.06  OCT  7.50  1.20    0.27*   5.4%
THOR    16.83   16.00  OCT 15.00  2.70    0.87*   5.4%
CREE    19.21   19.01  OCT 17.50  2.25    0.54*   4.6%
NABI     8.22   10.30  OCT  7.50  0.95    0.23*   4.6%
SEAC    13.18   13.50  OCT 12.50  1.05    0.37*   4.4%
DSCM     7.99    7.98  OCT  7.50  0.85    0.36*   4.4%
ALKS    14.23   15.28  OCT 12.50  2.20    0.47*   4.2%
BEAV     5.12    4.60  OCT  5.00  0.45   -0.07    0.0%
INCY     5.15    4.20  OCT  5.00  0.50   -0.45    0.0%
ISIS     8.05    6.65  OCT  7.50  0.80   -0.60    0.0%

*   Stock price is above the sold striking price.

Comments:

The sell-off from last week failed to gain much follow-through
and the bulls finally pushed the major equity averages higher
as September came to an end.  With the recent "wild" action, a
defensive outlook appears in order and exiting any positions
that act weaker than expected may be wise.  Friday's move lower
by Incyte (NASDAQ:INCY) on a bullish day is a bit worrisome and
next week, we will show the position closed.  Other issues to
consider for early-exit on further weakness are: B.E. Aerospace
(NASDAQ:BEAV) and ISIS Pharmaceuticals (NASDAQ:ISIS).

Positions Previously Closed: Hollis-Eden Pharma (NASDAQ:HEPH)
and ID Biomedical (NASDAQ:IDBE), which rebounded. (sigh...)


NEW CANDIDATES
*********

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

ALKS   15.28  OCT 15.00  QAL JC  1.00  1169  14.28  14  11.0%
PVN    12.60  OCT 12.50  PVN JV  0.55  7409  12.05  14   8.1%
STEC    7.73  OCT  7.50  QCQ JU  0.50  49     7.23  14   8.1%
CHKP   17.88  OCT 17.50  KEQ JW  0.85  7327  17.03  14   6.0%
ECLG   22.37  OCT 20.00  EGU JD  2.90  2     19.47  14   5.9%
ISRG   17.75  OCT 17.50  AXQ JW  0.70  53    17.05  14   5.7%
NTPA    7.97  OCT  7.50  NQD JU  0.65  257    7.32  14   5.3%


Company Descriptions

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

*****
ALKS - Alkermes  $15.28  *** Next Leg Higher? ***

Alkermes (NASDAQ:ALKS) is a pharmaceutical company developing
products based on applying its sophisticated drug delivery
technologies to enhance therapeutic outcomes.  The company's
areas of focus include controlled, extended-release of injectable
drugs using its ProLease and Medisorb delivery systems, and the
development of inhaled pharmaceuticals based on its proprietary
Advanced Inhalation Research pulmonary delivery system.  Alkermes
partners its proprietary technology systems and drug delivery
expertise with many other pharmaceutical companies, and it also
develops novel, proprietary drug candidates for its own account.
The company has a pipeline of products in various stages of
development including:  Risperdal Consta, Nutropin Depot,
Vivitrex, inhaled epinephrine, r-hFSH (recombinant human
follicle stimulating hormone), Exenatide LAR, inhaled insulin
and inhaled human growth hormone.  Alkermes has rallied above
the June high on good volume making another new 52-week high.
Investors who believe the bullish trend will continue can use
this position to profit from that outcome.

OCT-15.00 QAL JC LB=1.00 OI=1169 CB=14.28 DE=14 TY=11.0%



*****
PVN - Providian  $12.60  *** Rally Mode! ***

Providian Financial (NYSE:PVN) provides credit card and deposit
products to customers throughout the U.S.  The company's lending
and deposit taking activities are conducted primarily through
Providian National Bank and Providian Bank.  PVN historically
focused on three market segments: the standard market segment,
the middle market segment and the platinum market segment.  As
of December 31, 2002, approximately $5.0 billion of reported
loans and $17.70 billion of managed loans were outstanding to
customers in the standard and middle market segments. In addition
to its core credit card business, Providian operates GetSmart.com,
an online marketplace designed to match individual consumers
seeking a specific product, such as a credit card, home loan or
auto loan, with lenders offering those products.  Providian
soared this week after Fitch Ratings raised the company up one
level to "B-plus," citing management's progress in a restructuring
effort and improved liquidity.  We simply favor the bullish trend
that shows no signs of abating and traders can use this short-term
position to gain an entry point closer to technical support.

OCT-12.50 PVN JV LB=0.55 OI=7409 CB=12.05 DE=14 TY=8.1%


*****
STEC - SimpleTech  $7.73  *** STEC Raises Guidance ***

SimpleTech (NASDAQ:STEC) designs, manufactures and markets a
comprehensive line of memory and storage products, as well as
connectivity products that connect memory cards and hard drive
upgrade kits to personal computers.  The company's memory and
storage products are based on DRAM, SRAM and Flash memory
technologies.  These products are used in consumer electronics,
high-performance computing, defense and aerospace, networking
and communications and industrial applications.  STEC offers
its products through its industrial and commercial divisions.
Commercial division channels include value-added resellers,
direct marketers, commercial and industrial distributors and
mass-market retailers.  The industrial division sells primarily
custom memory products for newly manufactured systems.  The
company raised its 3rd-quarter financial outlook this week,
citing higher-than-expected sales and favorable pricing.  The
stock continues to move higher on heavy volume and investors
can speculate on the near-term performance of the issue with
this position.

OCT-7.50 QCQ JU LB=0.50 OI=49 CB=7.23 DE=14 TY=8.1%



*****
CHKP - Check Point  $17.88  *** Stage I Base ***

Check Point Software Technologies (NASDAQ:CHKP) develops, markets
and supports Internet security and VPN solutions for enterprise
and high-end networks, small and medium-sized businesses, and
service providers.  Check Point product offerings also include
Quality of Service (QoS) and Security Management solutions.  Check
Point products are fully integrated as a part of the company's
Secure Virtual Network architecture, and provide centralized
management, distributed deployment and comprehensive policy
administration.  The capabilities of Check Point products can
be extended with the Open Platform for Security (OPSEC), enabling
integration with hardware appliances and third-party security
software applications.  The company's Security product line
includes the VPN-1 family of virtual private networking solutions
FireWall-1 family of products, SmartDefense, SofaWare Safe@ product
line, SMART management solutions, Web Access solutions and some
associated products.  Check Point has been forging a Stage I base
for almost two years and this position offers a method to profit
from that trend at the risk of owning CHKP shares near $17.

OCT-17.50 KEQ JW LB=0.85 OI=7327 CB=17.03 DE=14 TY=6.0%



*****
ECLG - eCollege.com  $22.37  *** Rally Mode: Part II ***

eCollege.com (NASDAQ:ECLG)) is a provider of technology, products
and services that enable colleges, universities, primary and high
schools (K-12) and corporations to offer an online environment for
distance, on-campus and hybrid learning.  The company's technology
enables it's customers to reach students who wish to take courses
at convenient times and locations via the Internet.  Its customers
can also use its technology to supplement their on-campus courses
with an online environment.  In addition, ecollege offers services
to assist in the development of online programs, including online
course and campus design, development, management and hosting, as
well as ongoing administration, faculty and student support.  ECLG
is another stock in a bullish trend supported by heavy volume.
Investors who believe the rally will continue can profit from that
outcome with this position.

OCT-20.00 EGU JD LB=2.90 OI=2 CB=19.47 DE=14 TY=5.9%



*****
ISRG - Intuitive Surgical  $17.75  *** Bracing For A Rally? ***

Intuitive Surgical (NASDAQ:ISRG) manufactures and markets the da
Vinci Surgical System, an advanced surgical system for use in
performing what the company calls intuitive surgery.  Intuitive
surgery is a procedure similar in scope to open surgery and
minimally invasive surgery.  Intuitive Surgical's da Vinci
Surgical System consists of a surgeon's console, a patient-side
cart, a high-performance vision system and proprietary wrested
instruments.  The da Vinci Surgical System seamlessly translates
the surgeon's natural hand movements on instrument controls at
a console into corresponding micro-movements of instruments
positioned inside the patient through small puncture incisions,
or ports.  The company also manufactures a variety of EndoWrist
instruments, each of which incorporates a wrist joint for natural
dexterity, with tips customized for various surgical procedures.
ISRG has recovered from its post-split selling phase and is now
on the verge of moving above the June high.  Investors who
wouldn't mind owning the issue near a cost basis of $17 can
profit from future upside activity in the stock with this play.

OCT-17.50 AXQ JW LB=0.70 OI=53 CB=17.05 DE=14 TY=5.7%



*****
NTPA - Netopia  $7.97  *** Rally Mode: Part III ***

Netopia (NASDAQ:NTPA) develops, markets and supports broadband
equipment, software and services that enable its carrier and
broadband service provider customers to simplify and enhance
the delivery of broadband services to their residential and
enterprise-class customers.  The company's product and service
offerings enable carriers and broadband service providers to
improve their profitability with feature rich routers and
gateways and software that manages to the edge of the network
to reduce costs, and provide value-added services to enhance
revenue generation.  These bundled service offerings often
include DSL or broadband cable equipment bundled with back-up,
bonding, virtual private networking (VPN), firewall protection,
parental controls, Web content filtering, integrated voice and
data and e-site and e-store hosting.  Netopia has now moved to
a new multi-year high on heavy volume and appears destined to
climb higher.  This short-term position offers traders a method
to profit from the current trend with a cost basis closer to
near-term technical support.

OCT-7.50 NQD JU LB=0.65 OI=257 CB=7.32 DE=14 TY=5.3%



*****


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

The following group of issues is a list of additional candidates
to supplement your search for profitable trading positions.  As
with any investment, you must decide if the selections meet your
criteria for potential plays.  Only you can know what strategies
and positions are suitable for your experience level, risk-reward
tolerance and portfolio outlook.  They will not be included in
the weekly portfolio summary.

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

DRIV   30.10  OCT 30.00  DQI JF  1.45  664   28.65  14  10.2%
DCTM   22.89  OCT 22.50  QDC JX  1.25  2615  21.64  14   8.6%
GLFD    6.39  NOV  5.00  GQF KA  1.95  0      4.44  49   7.8%
MOBE    8.47  NOV  7.50  MUL KU  1.70  161    6.77  49   6.7%
ASYT   15.51  OCT 15.00  QQY JC  0.90  1118  14.61  14   5.8%
AGEN   13.39  OCT 12.50  QHL JV  1.20  362   12.19  14   5.5%
ERES   36.70  OCT 35.00  UDB JG  2.55  748   34.15  14   5.4%
IMCO    7.70  NOV  7.50  IQZ KU  0.80  365    6.90  49   5.4%
FDRY   23.83  OCT 22.50  OUJ JX  1.85  1872  21.98  14   5.1%
VXGN   11.51  NOV 10.00  UWG KB  2.25  1593   9.26  49   5.0%
JCOM   43.16  OCT 40.00  JQF JH  3.90  2079  39.26  14   4.1%
VICL    5.50  NOV  5.00  VAQ KA  0.75  115    4.75  49   3.3%



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

Options 101: Q&A On Volatility -- Part II
By Ray Cummins

Our recent discussion on volatility prompted one reader to submit
some additional comments on the subject.

Attn: Contact Support
Subject: Volatility & Option Pricing Explanation

Ray,

I liked the stuff you talked about last week in the volatility
and option pricing E-mail but I think you left a few readers in
the dark when you went straight into the reply without giving
definitions for some of your terms and references.  That works
great when the reader is experienced but many of the people in
your audience are new to options and pricing theories.

Look at what you said at the beginning: "The problem with using
longer-term historical volatility in the calculations is that
it is based on a statistical measure - which reflects standard
deviation of the stock from the mean over the trading pattern
of past stock prices, averaged over some period such as 20, 50
or 100 trading days."

Obviously, we can all read the words but I don't know how many
people really understood that sentence.  You need to explain the
more complex types of analysis thoroughly and make sure the main
ideas are clear and simple so that the readers can understand
the explanation and make better use of the information you are
providing.  Also, I doubt few of them really learned why a stock
in a directional trend might not be a good candidate for normal
volatility analysis.  Want to try that explanation again?

Keep up the good work!

GD


Hello GD,

Your critique is well taken and looking back, I see now that much
of that narrative would be useless to new traders without some
background information.  With that in mind, we'll use this week's
narrative for a review of volatility and hopefully the reasons for
using a more subjective type of analysis when evaluating debit
straddles on directional issues will become transparent.

A stock's volatility, often referred to as historical volatility,
is determined by mathematical formulas that use the issue's recent
price activity (closing or high and low values).  One of the most
common volatility calculations utilizes past closing prices for a
specific stock to determine its annualized standard deviation.
For example, a historical volatility of 50 means that the stock
has a 68% probability (one sigma) of trading within 50% of its
average targeted move within one year.  In contrast, an option's
volatility usually refers to its implied volatility.  This is an
estimate or assumption produced by an option pricing model based
on factors such as relative strike price, time to expiration,
intrinsic value, risk-free interest rate, and the dividend issued
with ownership of the underlying stock.

Pricing models use a projection of a stock's future volatility
in calculating option prices.  These formulas do not include an
issue's directional trend or price momentum.  Thus, if all other
factors are the same (stock and strike price, time to expiration,
and dividend issued), two different issues that have the same
forecast volatility will have similar option prices.  It doesn't
matter whether one has remained relatively close to a specific
price (a trading range) while the other has moved steadily in one
direction.  That's why it is so important to have a fundamental
understanding of technical analysis and basic market trends when
selecting an issue; because an option trader can greatly improve
his or her success in situations where directional trends are not
incorporated into an option's pricing.

One tool that can help the decision-making process in evaluating
future volatility in a trending issue is a probability calculator.
Although this calculator cannot factor-in expected potential or
upcoming events, it is very useful for establishing a statistical
range for future prices in the underlying.  I personally like the
"Monte-Carlo style" calculator, which is basically a mathematical
process that models an event such as a potential market character
or movement.  The Monte-Carlo style calculator works by repeating
randomly generated instances of a particular set of circumstances
to formulate a prediction as to how the whole process might behave.
This unique type of simulation is appropriate when a formula can't
be used, and that is often the case in real-life situations.  Most
calculators found in option pricing software programs only tell you
the resultant probability percentages, which is the chance that the
stock will exceed the target price at the end of the time period.
These probabilities are insufficient, however, for an option trader
that needs to make decisions during the time period prior to the
option's expiration.  A Monte-Carlo style calculator gives you the
overall probabilities of the stock ever reaching the target price
at any time during the life of the position.  One of the most
popular products in this category is available from option guru
Larry McMillan and most traders agree that it is a useful, low
cost tool for probability analysis.

We'll continue our discussion on volatility next week...


SUMMARY OF PREVIOUS CANDIDATES
*****

The following summary is a reasonable account of the positions
previously offered in this section.  However, no representation
is being made as to the actual performance of a position and in
fact, there are frequently large differences between the summary
results and those of 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.

Stock   Price   Last    Option    Price   Gain   Simple  Max
Symbol  Picked  Price   Series    Sold   /Loss   Yield  Yield

EMIS     6.19    7.85  OCT  5.00  0.35    0.35*   6.5%  18.6%
GERN    12.98   13.05  OCT 10.00  0.25    0.25*   3.7%  12.7%
ADLR    15.95   18.44  OCT 12.50  0.50    0.50*   3.6%  11.8%
USG     17.51   17.00  OCT 12.50  0.35    0.35*   3.1%   9.9%
SEAC    14.34   13.50  OCT 12.50  0.35    0.35*   3.1%   9.0%
LRCX    22.81   24.38  OCT 20.00  0.40    0.40*   3.0%   8.6%
STAT    14.58   14.45  OCT 12.50  0.40    0.40*   2.9%   8.4%
PDII    25.06   25.99  OCT 22.50  0.40    0.40*   2.6%   7.4%
NKTR    13.83   13.50  OCT 10.00  0.25    0.25*   2.2%   7.2%
ONXX    23.92   23.85  OCT 20.00  0.40    0.40*   2.2%   7.2%
RIMM    37.29   41.75  OCT 32.50  0.50    0.50*   2.3%   6.8%
CEPH    49.62   45.98  OCT 40.00  0.65    0.65*   1.8%   6.5%
ERES    33.63   36.70  OCT 27.50  0.30    0.30*   1.6%   5.7%
AMHC    41.98   44.23  OCT 35.00  0.40    0.40*   1.7%   5.7%
MERQ    45.76   50.15  OCT 40.00  0.50    0.50*   1.8%   5.6%
IDXC    26.02   24.40  OCT 22.50  0.35    0.35*   1.7%   5.3%
INSP    19.92   22.16  OCT 17.50  0.35    0.35*   1.8%   5.2%
GOLD    23.93   22.08  OCT 20.00  0.35    0.35*   1.5%   5.1%

*  Stock price is above the sold striking price.

Comments:

The recent broad rally has brought new hope to investors but the
fact remains, there is much work to be done before the market can
truly be called "bullish" from a long-term viewpoint.  With that
idea in mind, traders should continue to diligently monitor all
of the issues in their portfolio and exit any positions with less
than outstanding technical indications.  Seachange (NASDAQ:SEAC),
i-Stat (NASDAQ:STAT) and Randgold (NASDAQ:GOLD) are on the "watch"
list.

Previously Closed Positions: Ask Jeeves (NASDAQ:ASKJ), Thoratec
(NASDAQ:THOR) and Nps Pharmaceuticals (NASDAQ:NPSP), all of which
are currently profitable.



WARNING: THE RISK IN SELLING NAKED 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.


MARGIN REQUIREMENTS

The Initial Margin is the amount of collateral you must have in
your account to initiate the position.  In specific terms, margin
refers to cash or securities required of an option writer by his
brokerage firm as collateral for the writer's obligation to buy
or sell the underlying interest if assigned through an exercise.
The Maintenance Margin is the amount of cash (or securities)
required to offset the changing collateral requirements of the
written options in your portfolio.  As the price of the option
and the underlying stock changes, so does the maintenance margin.
With (short) put options, the margin requirements can increase
when the underlying stock price declines and also when it rises
significantly.  The reason is the manner in which the collateral
amount is determined (with the formula listed above) and traders
should always consider not only the initial margin requirement,
but also the maximum margin needed for the life of the position.
Option writers occasionally have to meet calls for additional
margin during adverse market movements and even when there is
enough equity in the account to avoid a margin call, the need
for increased collateral will make that equity unavailable for
other purposes.  Please consider these facts carefully before
you initiate any "naked" option positions.

For more information on margin requirements, please refer to:

http://www.cboe.com/LearnCenter/pdf/MarginManual2000.pdf


MONTHLY YIELD: MAXIMUM & SIMPLE

The Maximum Monthly Yield (listed in the summary and with each
new candidate) 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 Monthly 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 position.


NEW CANDIDATES
*********

Sequenced by Maximum Yield (monthly basis - margin)
*****
Stock  Last    Option    Option Last Open  Cost  Days Simple  Max
Symbol Price   Series    Symbol Bid  Int.  Basis Exp. Yield  Yield

RMBS   18.73  OCT 15.00  BNQ VC 0.30 3292  14.70  14   4.4%  16.0%
CERN   35.47  OCT 30.00  CQN VF 0.55 858   29.45  14   4.1%  12.9%
MSTR   50.03  OCT 45.00  EOU VI 0.55 285   44.45  14   2.7%   7.7%
NFLX   40.15  OCT 32.50  QNQ VZ 0.30 745   32.20  14   2.0%   7.5%
ATMI   27.52  OCT 25.00  ASQ VE 0.30 38    24.70  14   2.6%   7.4%
ERES   36.70  OCT 32.50  UDB VZ 0.35 794   32.15  14   2.4%   7.0%
BRCM   28.79  OCT 25.00  RCQ VE 0.25 18537 24.75  14   2.2%   6.8%


Company Descriptions

LB-Last Bid price, OI-Open Interest, CB-Cost Basis or break-even
point, DE-Days to Expiry, SY-Simple Yield (monthly basis - without
margin), MY-Maximum Yield (monthly basis - using margin).

*****
RMBS - Rambus  $18.73  *** Litigation Speculation! ***

Rambus (NASDAQ:RMBS) designs, develops and markets "chip-to-chip"
interface solutions that enhance the performance and effectiveness
of its client's chip and system products.  These solutions include
multiple chip-to-chip interface products, which can be grouped into
two categories: memory interfaces and logic interfaces.  Rambus'
memory interface products provide an interface between memory chips
and logic chips.  In addition, the firm's logic interface products
provide an interface between two logic chips.  Rambus has two major
memory interface products: Rambus dynamic random access memory and
Yellowstone.  Additionally, it offers a logic interface product for
high-speed serial chip-to-chip communications between logic chips
in a range of computing, networking and communications applications.
RMBS shares soared in January after a favorable ruling in a patent
case.  A federal appeals court ruled that Rambus had not committed
fraud in a dispute involving memory maker Infineon, reversing the
ruling of a lower court, and the court also revived Rambus' patent
infringement claim against Infineon.  The bullish trend continued
after a U.S. appeals court denied a request by Infineon for a full
court rehearing of the case.  Last week, the stock rallied again
after the U.S. Supreme Court released a preliminary list of cases
it will hear this session which did not include an appeal from
Infineon Technologies.  Investors who think the court will decide
not to review the Infineon case can speculate on that outcome in a
relatively conservative manner with this position.

OCT-15.00 BNQ VC LB=0.30 OI=3292 CB=14.70 DE=14 TY=4.4% MY=16.0%



*****
CERN - Cerner  $35.47  *** Trend Reversal? ***

Cerner Corporation (NASDAQ:CERN) designs, develops, markets,
installs, hosts and supports software information technology and
content solutions for healthcare organizations and consumers.
The company's solutions give end users secure access to clinical,
administrative and financial data in real-time.  Consumers get
the appropriate care information and educational resources via
the Internet.  The firm implements these solutions as stand-alone,
combined or enterprise-wide systems.  Cerner solutions can also be
managed by the firm's clients or via an application outsourcing
or hosting model.  Cerner provides hosted solutions from its data
center in Lee's Summit, Missouri.  Shares of CERN jumped over 10%
Friday with no "public" news to explain the upside activity.  The
volume-supported move was in opposition to the recent trend and
traders who believe there is a good reason for the renewed buying
pressure should consider this position.

OCT-30.00 CQN VF LB=0.55 OI=858 CB=29.45 DE=14 TY=4.1% MY=12.9%



*****
MSTR - MicroStrategy  $50.03  *** Consolidation Complete? ***

MicroStrategy (NASDAQ:MSTR) is a global leader in the increasingly
critical business intelligence software market.  Large and small
firms alike are harnessing MicroStrategy's business intelligence
software to gain vital insights from their data to help them
proactively enhance cost-efficiency, productivity and customer
relations and optimize revenue-generating strategies.  The firm's
business intelligence platform offers exceptional capabilities that
provide organizations, in virtually all facets of their operations,
with user-friendly solutions to their data query, reporting, and
advanced analytical needs, and distributes valuable insight on this
data to users via Internet, wireless, and voice.  MicroStrategy was
recently awarded the 2003 Software Business Industry Award for Best
Product Development.  The award was based on the firm's Business
Intelligence Platform, which has "consistently stood out as an
industry-leading solution" and is the "only platform flexible
enough to suit every business need."  Investors must be happy with
the news as the stock is testing a 2-year high and appears poised
to breach that level in the coming week.

OCT-45.00 EOU VI LB=0.55 OI=285 CB=44.45 DE=14 TY=2.7% MY=7.7%



*****
NFLX - Netflix  $40.15  *** Solid Subscriber Growth! ***

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.
Shares of NFLX soared last week after the online DVD renter said
that quarterly subscriber growth beat forecasts, raising prospects
that earnings may exceed targets.  Netflix announced it ended the
third quarter with 1.29 million subscribers, up 74% from the same
period last year and up 13% from the previous quarter.  Traders
who believe the trend will continue should consider this bullish
position in the issue.

OCT-32.50 QNQ VZ LB=0.30 OI=745 CB=32.20 DE=14 TY=2.0% MY=7.5%



*****
ATMI - Atmi Inc.  $27.52  *** Chip Equipment Rally! ***

Atmi Inc. (NASDAQ:ATMI) provides specialty materials and related
equipment and services, to the worldwide semiconductor industry.
As the Source of Semiconductor Process Efficiency, ATMI helps
customers improve wafer yields and lower operating costs.  The
semiconductor-equipment segment lead the technology rally on
Friday and ATMI was one of the issues that powered higher amid
heavy trading volume. The technical indications suggest the
bullish trend will continue in the near-term and traders can
profit from that outcome with this position.

OCT-25.00 ASQ VE LB=0.30 OI=38 CB=24.70 DE=14 TY=2.6% MY=7.4%



*****
ERES - eResearch Technology  $36.70  *** Uptrend Intact! ***

eResearch Technology (NASDAQ:ERES) is a provider of technology and
services that enable the pharmaceutical, biotechnology and medical
device industries to collect, interpret and distribute cardiac
safety and clinical data more efficiently.  The company offers a
range of products and services, including Diagnostics Technology
and Services and Clinical Research Technology.  Their Diagnostics
Technology and Services include centralized diagnostic services
and clinical research operations, including clinical trial and
data management services.  Their Clinical Research Technology and
Services include the developing, marketing and support of clinical
research technology and services.  Last week, eResearch Technology
announced that earnings and revenue in the coming year would top
its previous estimates because of recent contract signings.  The
company said it now expects 2004 earnings of 92 cents per share to
94 cents per share, up from its previous estimate of 84 cents per
share.  Traders who agree with a bullish outlook for the company
can profit from continued upside activity in its share value with
this position.

OCT-32.50 UDB VZ LB=0.35 OI=794 CB=32.15 DE=14 TY=2.4% MY=7.0%



*****
BRCM - Broadcom  $28.79  *** New Trading Range? ***

Broadcom (NASDAQ:BRCM) is a leading provider of highly integrated
silicon solutions that enable broadband communications and the
networking of voice, video and data services.  Using proprietary
technologies and advanced design methodologies, Broadcom designs,
develops and supplies complete system-on-a-chip solutions and
related hardware and software applications for all broadband
communications markets.  Their diverse product portfolio includes
solutions for digital cable and satellite set-top boxes; cable
and DSL modems and residential gateways; high-speed transmission
and switching for local, metropolitan, wide area and storage
networking; home and wireless networking; cellular and terrestrial
wireless communications; Voice over Internet Protocol (VoIP)
gateway and telephony systems; broadband network processors; and
SystemI/O(TM) server solutions.  BRCM shares soared to a recent
high during Friday's rally and the chart pattern implies a new
trading range for the popular issue.  Traders with a positive
outlook on the company can establish a low risk entry point in
the issue with this position.

OCT-25.00 RCQ VE LB=0.25 OI=18537 CB=24.75 DE=14 TY=2.2% MY=6.8%



*****


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

The following group of issues is a list of additional candidates
to supplement your search for profitable trading positions.  As
with any investment, you must decide if the selections meet your
criteria for potential plays.  Only you can know what strategies
and positions are suitable for your experience level, risk-reward
tolerance and portfolio outlook.  They will not be included in
the weekly portfolio summary.

Sequenced by Maximum Yield (monthly basis - margin)
*****
Stock  Last    Option    Option Last Open  Cost  Days Simple  Max
Symbol Price   Series    Symbol Bid  Int.  Basis Exp. Yield  Yield

RETK    7.68  OCT  7.50  QRD VU 0.30 74     7.20  14   9.1%  20.4%
RSAS   15.73  OCT 15.00  QSD VC 0.40 101   14.60  14   6.0%  14.6%
TALX   26.65  OCT 25.00  TUB VE 0.60 74    24.40  14   5.3%  13.6%
ADIC   15.54  OCT 15.00  QXG VC 0.35 82    14.65  14   5.2%  12.6%
ISIL   27.21  OCT 25.00  UFH VE 0.45 2226  24.55  14   4.0%  10.7%
AMHC   44.23  OCT 40.00  QMH VH 0.70 526   39.30  14   3.9%  10.7%
LRCX   24.38  OCT 22.50  LMQ VX 0.40 840   22.10  14   3.9%  10.5%
LEXR   20.10  OCT 17.50  EQG VW 0.25 1054  17.25  14   3.1%   9.5%
NTLI   52.60  OCT 45.00  NUD VI 0.55 2411  44.45  14   2.7%   8.5%
MERQ   50.15  OCT 47.50  RQB VR 0.70 3438  46.80  14   3.2%   8.4%
WMAR   20.85  OCT 20.00  XWQ VD 0.30 24    19.70  14   3.3%   8.4%
JNPR   16.63  OCT 15.00  JUX VC 0.20 10292 14.80  14   2.9%   8.3%
RIMM   41.75  OCT 37.50  RUL VS 0.45 930   37.05  14   2.6%   7.6%
INTC   29.61  OCT 27.50  INQ VY 0.25 55814 27.25  14   2.0%   5.4%


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


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

Stocks Rally On Optimistic Jobs Outlook!
By Ray Cummins

The major equity averages moved higher Friday after the Labor
Department said that the U.S. economy added its first jobs since
the beginning of 2003.

The Dow Jones industrial average climbed 84 points to 9,572 with
nearly all of the 30 components participating in the bullish
activity.  Hewlett-Packard (NYSE:HPQ), 3M Corp. (NYSE:MMM), Alcoa
(NYSE:AA), and Honeywell (NYSE:HON) lead the blue-chip group.  In
the technology segment, the NASDAQ Composite Index rose 44 points
to 1,880 with semiconductor-related stocks enjoying much of the
renewed buying pressure.  The broad Standard & Poor's 500 Index
added 9 points to close at 1,029 with gold stocks the only dull
spot in the major sectors.  Breadth was bullish with advancers
leading decliners by more than 2 to 1 on both the Big Board and
the NASDAQ.  Trading was active, with about 1.5 billion shares
swapped on the New York Stock Exchange and 2 billion crossed on
the technology exchange.  Treasury prices tumbled after the jobs
report with the 10-year note ending down 1 21/32 while its yield
climbed to 4.2%.

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

The following summary is a reasonable account of the positions
previously offered in this section.  However, no representation
is being made as to the actual performance of a position and in
fact, there are frequently large differences between the summary
results and those of 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 or 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.


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

Symbol  Pick    Last  Month  LP  SP  Credit  CB     G/L   Status

AMLN    29.04   29.98  OCT   22  25   0.30  24.70  $0.30   Open
MERQ    49.41   50.15  OCT   40  42   0.30  42.20  $0.30   Open
BBH    137.69  132.00  OCT  120 125   0.45 124.55  $0.45   Open
CELG    45.48   44.54  OCT   35  40   0.50  39.50  $0.50   Open
MYL     39.00   41.93  OCT   32  35   0.20  34.80  $0.20   Open
SINA    37.41   37.70  OCT   25  30   0.45  29.55  $0.45   Open
COGN    33.16   32.39  OCT   27  30   0.40  29.60  $0.40   Open
CTSH    40.41   39.70  OCT   30  35   0.55  34.45  $0.55   Open
IMDC    76.91   75.40  OCT   60  65   0.55  64.45  $0.55   Open
NEM     40.66   37.88  OCT   35  37   0.30  37.20  $0.30   Open
EBAY    54.22   57.35  OCT   47  50   0.25  49.75  $0.25   Open
GENZ    46.00   49.10  OCT   40  42   0.35  42.15  $0.35   Open
RIMM    37.29   41.75  OCT   30  32   0.20  32.30  $0.20   Open

LP = Long Put  SP = Short Put  CB = Cost Basis  G/L = Gain/Loss

The recent bullish activity saved our portfolio from impending
doom and it appears the trend will continue in the near-term.


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

Symbol  Pick    Last   Month  LC  SC  Credit  CB     G/L   Status

CAH     56.36   58.04   OCT   65  60   0.65  60.65  $0.65   Open
PFE     30.51   30.78   OCT   35  33   0.25  32.75  $0.25   Open
XL      76.05   79.12   OCT   85  80   0.60  80.60  $0.60   Open
APC     42.70   42.00   OCT   48  45   0.35  45.35  $0.35   Open
CI      47.15   45.96   OCT   55  50   0.50  50.50  $0.50   Open
FRX     48.93   48.48   OCT   60  55   0.50  55.50  $0.50   Open
BVF     36.75   31.10   OCT   45  40   0.50  40.50  $0.50   Open
CERN    31.42   35.47   OCT   40  35   0.60  35.60  $0.13  Closed
GPRO    25.85   27.08   OCT   32  30   0.25  30.25  $0.25   Open
IMCL    37.73   39.64   OCT   50  45   0.40  45.40  $0.40   Open

LC = Long Call  SC = Short Call  CB = Cost Basis  G/L = Gain/Loss

This week's recovery rally was not favorable for bearish traders
but most of the positions in this portfolio are holding up well
considering the upside activity.  Cerner (NASDAQ:CERN) was one of
the victims of the recent "buying-spree" and the spread has been
closed to limit potential losses.  XL Capital (NYSE:XL) is on the
"watch" list for the coming week.


CALL DEBIT SPREADS
******************

Symbol  Pick   Last   Month  LC  SC   Debit   B/E   G/L   Status

HTCH    33.02  34.17   OCT   25  30   4.50   29.50  0.50   Open
AVII     5.54   5.23   DEC    5   7   0.90    5.90 (0.67)  Open

LC = Long Call  SC = Short Call  B/E = Break-Even  G/L = Gain/Loss

America Pharma Partners (NASDAQ:APPX) and Novellus (NASDAQ:NVLS),
which is currently profitable, have previously been closed to
limit losses.  Avi Biopharma (NASDAQ:AVII) is a speculative play
based on potential news-driven activity later in 2003, thus it
will remain open until a major change in (technical) character
occurs.


PUT DEBIT SPREADS
*****************

Symbol  Pick   Last  Month  LP  SP   Debit   B/E   G/L   Status

LMT     48.70  45.70  OCT   55  50   4.60   50.40  0.40   Open
CCMP    55.83  57.82  OCT   65  60   4.35   60.65  0.65   Open

Lockheed Martin (NYSE:LMT) did not offer the target debit in the
bearish position, however the available spread price was viable
for conservative traders with a bearish outlook on the issue.
Cabot Micro (NASDAQ:CCMP) may become an "early-exit" candidate
if the recent rally in semiconductor-related stocks continues.


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

Stock   Pick   Last   Expir.  Long  Short  Initial   Max.   Play
Symbol  Price  Price  Month   Call   Put   Credit   Value  Status

XING     9.13   9.06   DEC     12     7     0.10    0.30    Open

Gene Logic (NASDAQ:GLGC) traded at a recent high Friday, however
that bullish play, along with positions in Andrx (NASDAQ:ADRX)
and CV Therapeutics (NASDAQ:CVTX), have previously been closed
to limit losses.


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

Stock   Pick   Last   Expir.  Long  Short  Initial   Max.   Play
Symbol  Price  Price  Month   Put   Call   Credit   Value  Status

NTE     24.61  28.57   OCT    20P    30C    0.10     0.00   Open?

The "Reader's Request" position in Nam Tai Electronics (NYSE:NTE)
has been very volatile and traders who are in the bearish play
should monitor the underlying issue closely for potential upside
activity.


CALENDAR & DIAGONAL SPREADS
***************************

Stock   Pick   Last     Long     Short    Current   Max.   Play
Symbol  Price  Price   Option    Option    Debit   Value  Status

PRU     36.41  37.63   DEC-37C   OCT-37C   0.30    0.60    Open
MSFT    27.31  29.08   JAN-27C   OCT-30C   2.20    2.40    Open

Ing Groep (NYSE:ING) and The Medicines Company (NASDAQ:MDCO) both
offered profitable opportunities prior to be closed.  Prudential
(NYSE:PRU) and Microsoft (NASDAQ:MSFT) are performing well with
regard to the recent volatility.


DEBIT STRADDLES
***************

Stock   Pick   Last   Exp.   Long  Long  Initial   Max     Play
Symbol  Price  Price  Month  Call  Put    Debit   Value   Status

CLS     17.55  16.98   OCT    17    17     2.35    3.10    Open
NVDA    18.17  16.78   OCT    17    17     2.90    3.50    Open
AFCI    22.66  23.63   OCT    22    22     3.10    3.00    Open
TRI     30.50  32.03   NOV    30    30     4.90    5.00    Open
EASI    59.70  62.01   NOV    60    60     8.50    9.00    Open
YHOO    37.24  39.24   OCT    37    37     3.75    3.90    Open
ZMH     55.52  56.69   DEC    55    55     5.20    5.00    Open

Celestica (NYSE:CLS), Nvidia (NASDAQ:NVDA), Engineered Support
Systems (NASDAQ:EASI), and Yahoo! (NASDAQ:YHOO) have achieved
small profits.  Advanced Fibre Communications (NASDAQ:FIBR) has
been a very active issue, but has yet to achieve a profit on a
simultaneous order basis.  The very successful position in Sony
(NYSE:SNE) has previously been closed to "lock-in" gains.


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

Stock   Pick   Last   Exp.   Short Short  Initial  Current   Play
Symbol  Price  Price  Month  Call   Put   Credit    Debit   Status

MANH    27.68  28.60   Oct    30     25    1.40     1.40     Open


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

This following group of plays is simply a list of candidates to
supplement your search for profitable trading positions.  As
with any investment, you must decide if the selections meet your
criteria for potential plays.  Only you can know what strategies
are suitable for your skill level, risk-reward tolerance, and
portfolio outlook.  In addition, we recommend that you avoid any
strategy or technique in which you are not completely comfortable
with the potential loss, the necessary adjustments and the common
entry-exit strategies.

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

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

*****
ADTN - Adtran  $72.64  *** New Multi-Year High! ***

Adtran designs, develops, manufactures, markets and services a
broad range of high-speed network access products utilized by
providers of telecommunications services and corporate end users
to implement advanced digital data services over both public and
private networks.  The company's business is arranged with two
divisions, the Carrier Networks Division (CN) and the Enterprise
Networks Division (EN), to enable it to quickly respond to the
needs of the two important market segments that its products
address.  These two market segments are CN products for use in
the service provider's Local Loop, including central office,
remote terminal and customer premises, and EN products for use
at enterprise headquarters, remote offices and telecommuting
locations.  Adtran offers more than 500 products built around a
set of core technologies, and developed to address high-speed
digital communications over the last mile of the Local Loop.

ADTN - Adtran  $72.64

PLAY (less conservative - bullish/credit spread):

BUY  PUT  OCT-60.00  RQA-VL  OI=1871  ASK=$0.50
SELL PUT  OCT-65.00  RQA-VM  OI=783   BID=$1.00
INITIAL NET-CREDIT TARGET=$0.55-$0.65
POTENTIAL PROFIT(max)=12% B/E=$64.45



*****
MRVL - Marvell Technology  $40.61  *** Consolidation Complete? ***

Marvell (NASDAQ:MRVL) designs, develops and markets integrated
circuits utilizing proprietary communications mixed-signal and
digital signal processing technology for communications-related
markets.  Marvell offers its customers a wide range of integrated
circuit solutions using proprietary communications mixed-signal
processing and digital signal processing technologies.  Marvell's
product groups include: storage products, consisting of a variety
of read channel, system-on-chip and preamplifier products; and
broadband communications products, consisting of a variety of
transceiver products, switching products, internetworking
products and wireless LAN products.

MRVL - Marvell Technology  $40.61

PLAY (less conservative - bullish/credit spread):

BUY  PUT  OCT-35.00  UVM-VG  OI=4165  ASK=$0.15
SELL PUT  OCT-37.50  UVM-VU  OI=1452  BID=$0.35
INITIAL NET-CREDIT TARGET=$0.25-$0.30
POTENTIAL PROFIT(max)=11% B/E=$37.25



*****
SNDK - SanDisk  $71.18  *** Next Leg Up? ***

SanDisk (NASDAQ:SNDK) designs, manufactures and markets flash
memory storage products that are used in a wide variety of
electronic systems and devices.  SanDisk's products are
compatible with a number of consumer electronics applications
including digital cameras, PDAs, portable digital music players,
digital video recorders and mobile telephones, as well as in
industrial and communications applications, such as communications
routers and switches and wireless communications base stations.
The company's products include removable CompactFlash (CF) cards,
SD cards, miniSD cards, xD-Picture cards, SmartMedia cards,
FlashDisk cards, MultiMediaCards (MMC), Memory Stick and Memory
Stick Pro version, CompactFlash and SD card Wi-Fi access and
storage cards, Cruzer, Cruzer Mini Universal Serial Bus flash
drives, plus-embedded flash chipsets and NAND flash components
ranging in storage capacities ranging from 16 megabytes to four
gigabytes.

SNDK - SanDisk  $71.18

PLAY (less conservative - bullish/credit spread):

BUY  PUT  OCT-60.00  SWQ-VL  OI=5335  ASK=$0.45
SELL PUT  OCT-65.00  SWQ-VM  OI=2378  BID=$0.95
INITIAL NET-CREDIT TARGET=$0.55-$0.65
POTENTIAL PROFIT(max)=12% B/E=$64.45



*****
SMH - Semiconductor Holdrs Trust  $36.92  *** Hot Sector! ***

The Semiconductor Holdrs Trust (AMEX:SMH) is a unique instrument
that represents an investor's ownership in the stock of specified
companies in the semiconductor sector.  HOLDRS allow investors to
own a diversified group of stocks in a single investment that is
highly transparent, liquid and efficient.  Each HOLDR is a fixed
basket of 20 stocks (except the Telebras HOLDR, which holds 12
companies).  They work operate much like ADRs; American Depositary
Receipts, which allow U.S. investors to purchase foreign-owned
companies on the U.S. exchanges in dollar denominated amounts.  In
just the same way, the investor actually owns the shares of each
underlying company, receives dividends, proxies, and annual reports
from each.  The HOLDRs are not managed, and once the companies and
amounts have been determined they are fixed, no companies will be
substituted.  In this way, the HOLDRs differ somewhat from Spiders
(SPDRs), or Standard & Poor Depositary Receipts and other exchange
traded funds, which will add and delete stocks on a regular basis,
usually in conjunction with an index that they are tracking.

A complete explanation of this issue, including the companies that
make up each HOLDRS' particular industry, sector or group can be
found here:

http://www.holdrs.com/holdrs/main/index.asp?Action=Definition

SMH - Semiconductor Holders Trust  $36.92

PLAY (less conservative - bullish/credit spread):

BUY  PUT  OCT-32.50  SMH-VZ  OI=59835  ASK=$0.15
SELL PUT  OCT-35.00  SMH-VG  OI=46783  BID=$0.45
INITIAL NET-CREDIT TARGET=$0.30-$0.40
POTENTIAL PROFIT(max)=14% B/E=$34.70


*****
DNA - Genetech  $79.82  *** The Consolidation Continues! ***

Genentech (NYSE:DNA) is a biotechnology firm using human genetic
information to discover, develop, manufacture and commercialize
biotherapeutics for significant unmet medical needs.  The company
manufactures and commercializes 10 biotechnology products directly
in the United States.  These include Herceptin, Rituxan, TNKase,
Activase, Cathflo Activase, Nutropin Depot, Nutropin AQ, Nutropin
human growth hormone, Protropin and Pulmozyme.  The company also
licenses several additional products to other companies and its
product development efforts, including those of its collaborative
partners, cover a wide range of medical conditions, including
cancer, respiratory disorders, cardiovascular diseases, endocrine
disorders and inflammatory and immune problems.

DNA - Genetech  $79.82

PLAY (less conservative - bearish/credit spread):

BUY  CALL  OCT-90.00  DNA-JR  OI=4387   ASK=$0.15
SELL CALL  OCT-85.00  DNA-JQ  OI=13465  BID=$0.65
INITIAL NET-CREDIT TARGET=$0.55-$0.65
POTENTIAL PROFIT(max)=12% B/E=$85.55


*****
FFH - Fairfax Financial  $157.95  *** In A Trading Range? ***

Fairfax Financial Holdings Limited (NYSE:FFH) is a financial
services holding company which, through its subsidiaries, is
engaged in property, casualty and life insurance/reinsurance,
investment management and insurance claims management.  The
company's corporate objective is to achieve a high rate of
return on invested capital and build long-term shareholder value.
The firm has subsidiaries in both the United States and Canada.
Canadian insurance subsdiaries include Commonwealth Insurance,
Federated Insurance, Lombard Insurance, Markel Insurance and
CRC (Bermuda) Reinsurance.  Insurance subsidiaries based in the
United States include Crum & Forster, Fairmont Insurance, Old
Lyme Insurance and Falcon Insurance.

FFH - Fairfax Financial  $157.95

PLAY (conservative - bearish/credit spread):

BUY  CALL  OCT-175.00  FFH-JO  OI=8   ASK=$0.85
SELL CALL  OCT-170.00  FFH-JN  OI=11  BID=$1.25
INITIAL NET-CREDIT TARGET=$0.40-$0.50
POTENTIAL PROFIT(max)=8% B/E=$170.40


*****
IMCL - ImClone  $39.64  *** Premium-Selling Only! ***

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  $39.64

PLAY (conservative - bearish/credit spread):

BUY  CALL  OCT-50.00  QCI-JJ  OI=5742  ASK=$0.25
SELL CALL  OCT-45.00  QCI-JI  OI=8741  BID=$0.65
INITIAL NET-CREDIT TARGET=$0.40-$0.55
POTENTIAL PROFIT(max)=8% B/E=$45.40



*************
DEBIT SPREADS
*************

These candidates offer a risk-reward outlook similar to credit
spreads, however there is no margin requirement as the initial
debit for the position is also the maximum loss.  Since these
positions are based primarily on technical indications, traders
should review the current news and market sentiment surrounding
each issue and make their own decision about the outcome of the
position.

*****
DELL - Dell Inc.  $34.91  *** Break-Out Coming? ***

Dell (NASDAQ:DELL), formerly known as Dell Computer Corporation,
designs, develops, manufactures, markets, services and supports a
range of computer systems, including enterprise systems (servers,
storage and networking products and workstations), notebook PC
systems, desktop computer systems and software and peripherals.
The company also offers a portfolio of services that help maximize
information technology (IT), rapidly deploy systems and educate IT
professionals and consumers.  In addition, Dell offers a variety of
financing alternatives, asset management services, and customer
financial services for its business and consumer customers in the
United States through Dell Financial Services, a joint venture
between Dell and CIT Group.  The company is generally managed on
a geographic basis: the Americas, Europe and Asia Pacific-Japan.

DELL - Dell Inc.  $34.91

PLAY (conservative - bullish/debit spread):

BUY  CALL  OCT-30.00  DLQ-JF  OI=3065  ASK=$4.70
SELL CALL  OCT-32.50  DLQ-JZ  OI=7983  BID=$2.45
INITIAL NET-DEBIT TARGET=$2.20-$2.25
POTENTIAL PROFIT(max)=11% B/E=$32.25



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

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

*****
JNPR - Juniper Networks  $16.63  *** Optimistic Outlook! ***

Juniper Networks (NASDAQ:JNPR) transforms the entire business of
networking by converting a commodity: bandwidth, into a dependable,
secure, and highly valuable corporate asset.  Founded in 1996 to
meet the stringent demands of service providers, Juniper Networks
is now relied upon by the world's leading network operators, such
as government agencies, research and education institutions, and
information-intensive enterprises as the foundation for stable,
uncompromising networks.

JNPR - Juniper Networks  $16.63

PLAY (speculative - bullish/synthetic position):

BUY  CALL  NOV-19.00  JUX-KT  OI=163   ASK=$0.55
SELL PUT   NOV-14.00  JUX-WP  OI=8293  BID=$0.45
INITIAL NET-CREDIT TARGET=$0.00-$0.05
INITIAL TARGET PROFIT=$0.45-$0.60

Note:  Using options, the position is similar to being long the
stock.  The minimum initial margin/collateral requirement for the
sold option is approximately $450 per contract.  However, do not
open this position if you can not afford to purchase the stock at
the sold put strike price ($14.00).



*****
LRCX - Lam Research  $24.38  *** Chip-Equipment Specialist! ***

Lam Research Corporation (NASDAQ:LRCX) designs, manufactures,
markets and services semiconductor processing equipment used in
the fabrication of integrated circuits.  The company's products
are currently used in the front-end of the wafer processing
manufacturing cycle: etch, CMP, and post-CMP clean.  Lam's unique
family of etch systems incorporates plasma technologies designed
to meet both current and future needs.  The company offers both
200-milimeter and 300-milimeter Teres CMP integrated polishing
and cleaning systems with Linear Planarization Technology (LPT),
which uses a high-speed belt instead of the rotating table used
in conventional polishers.  The company also provides the Synergy
Integra, which incorporates advanced cleaning technology with a
platform that integrates polisher and cleaner.

LRCX - Lam Research  $24.38

PLAY (speculative - bullish/synthetic position):

BUY  CALL  DEC-30.00  LMQ-LF  OI=226  ASK=$0.60
SELL PUT   DEC-20.00  LMQ-XD  OI=485  BID=$0.75
INITIAL NET-CREDIT TARGET=$0.20-$0.25
INITIAL TARGET PROFIT=$0.65-$0.90

Note:  Using options, the position is similar to being long the
stock.  The minimum initial margin/collateral requirement for the
sold option is approximately $600 per contract.  However, do not
open this position if you can not afford to purchase the stock at
the sold put strike price ($20.00).



***********************
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.

*****
COF - Capital One Financial  $59.70  *** Probability Play! ***

Capital One Financial (NYSE:COF) is a holding company whose major
subsidiaries market a variety of financial products and services
to consumers using its proprietary information-based strategy.
The company's primary business is consumer lending, with a focus
on credit cards, but including other consumer lending activities
such as unsecured installment lending and automobile financing.
The company's principal subsidiary, Capital One Bank, a limited
purpose, state-chartered credit card bank, offers credit card
products.  Capital One, F.S.B., a federally chartered bank, offers
consumer lending and deposit products.  Capital One Services, the
other major subsidiary, provides various operating, administrative
and business services to the company and its subsidiaries.

COF - Capital One  $59.70

PLAY (very speculative - neutral/debit straddle):

BUY CALL  OCT-60.00  COF-JL  OI=7301  ASK=$1.35
BUY PUT   OCT-60.00  COF-VL  OI=1811  ASK=$1.60
INITIAL NET-DEBIT TARGET=$2.90-$2.95
INITIAL TARGET PROFIT=$1.00-$1.45


*****
TTWO - Take-Two Interactive  $39.18  *** An Active Issue! ***

Take-Two Interactive Software (NASDAQ:TTWO) is an integrated
global developer, marketer, distributor and publisher of
interactive entertainment software games and accessories for
the PC, PlayStation, PlayStation2, Nintendo Game Boy Color,
Nintendo GameCube, Nintendo Game Boy Advance and the Xbox.
The company publishes and develops products through various
wholly owned subsidiaries including Rockstar Games, Rockstar
Studios, Gathering, Joytech, PopTop, Global Star and under the
Take-Two brand name.  The company maintains sales and marketing
offices in Cincinnati, New York, Toronto, London, Paris, Munich,
Vienna, Copenhagen, Milan, Sydney and Auckland.

TTWO - Take-Two Interactive  $39.18

PLAY (very speculative - neutral/debit straddle):

BUY CALL  OCT-40.00  TUO-JH  OI=414  ASK=$0.95
BUY PUT   OCT-40.00  TUO-VH  OI=95   ASK=$1.70
INITIAL NET-DEBIT TARGET=$2.50-$2.60
INITIAL TARGET PROFIT=$0.80-$1.25



*****


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