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Daily Newsletter, Thursday, 10/09/2003

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The Option Investor Newsletter                Thursday 10-09-2003
Copyright 2003, All rights reserved.                       1 of 3
Redistribution in any form strictly prohibited.


In Section One:

Wrap: Happy Birthday
Futures Markets: Fake n Bake
Index Trader Wrap: 
Market Sentiment: Happy Anniversary


Posted online for subscribers at http://www.OptionInvestor.com
************************************************************
MARKET WRAP  (view in courier font for table alignment)
************************************************************ 
      10-09-2003           High     Low     Volume Advance/Decline
DJIA     9680.01 + 49.10  9768.69  9633.20 1.96 bln   1985/1225
NASDAQ   1911.90 + 18.10  1936.93  1899.21 2.10 bln   1917/1280
S&P 100   518.48 +  1.94   523.41   516.51   Totals   3902/2505
S&P 500  1038.73 +  4.95  1048.28  1033.78 
W5000   10092.92 + 54.30 10183.38 10038.58
RUS 2000  521.34 +  5.66   526.40   515.68 
DJ TRANS 2850.73 + 59.10  2876.46  2792.97   
VIX        18.82 -  0.36    19.28    18.26   
VXN        28.84 -  0.32    28.99    27.79 
Total Volume 4,377M
Total UpVol  2,947M
Total DnVol  1,343M
52wk Highs 1060
52wk Lows    14
TRIN       0.74
NAZTRIN    0.75
PUT/CALL   0.76
************************************************************

Happy Birthday

My how you have grown in one year. October 10th 2002 was the 
bottom of the two year bear market and the birth of the new
bull that we are experiencing now. The Dow bottomed at 7197
and has rebounded +2483 points (+34.5%) in the last 12 months.
The Nasdaq bottomed at 1108 and has gained +804 points (+72.5%)
to threaten 2000 once again. The S&P hit 769 before rebounding
to 1038 today. (+34.9%) The million-dollar question is this, 
"what is the average rebound from a bear market bottom?" 

Dow Chart


 
Nasdaq Chart


 
S&P Chart


 

Before I answer that question we need to wade through the 
market data for today and there was not a lot. In fact it 
was pretty limited. Jobless Claims fell to 382,000 and 
-13,000 below estimates. This was the lowest level in eight
months. You would have thought they had said 382,000 people
found new jobs last week from the market reaction. Futures
exploded despite the upward revision to 405,000 for the 
prior week. Analysts were quick to point out that a slight 
drop in layoffs was a big leap from a pickup in hiring. 
Continuing claims fell only -7,000 to 3.63 million. Jobs 
are still tough to find and until that changes we should 
not expect the Jobless Claims to continue dropping 
significantly. The market rose on a stabilization of 
employment not a jobs celebration.

A reader sent me an analysis of the jobs situation from a
viewpoint I had not considered. The nonfarm payrolls rose
+57,000 last week for the month of September. He was from
a hurricane state where according to him there was more
than 57k workers hired to rebuild just the damage in
his state. He speculated that across all the states with
damage there would have been many more than that hired and
that the employment would not be long term. If this is true
then the Jobless Claims would have also been impacted and
the October Jobs report could show a reversal of those 
gains. Just a different point of view from the trenches. 

Another positive for Thursday was a very strong Chain Store
Sales number for September. The headline number rose +5.9%
and well over the +3.5% number that had been reported as
the official estimate. Even better was the breadth of the
gains. All components saw bigger gains from August except
discount stores which, while still strong at +5.8%, slowed
slightly from the +6.4% rate in August. Apparel, department
stores and wholesale clubs had their best month in over
two years. Total store sales growth rose +10.8% and the
fastest growth since Jan-2001. While analysts were rushing
to upgrade earnings estimates again the Bank of Tokyo was
warning that growth in October could slow to 4.5%-5.0%. 
They also had said they expected September to be 3.5%-4.0%
in their last weeks estimate. Sales in September were up
on the remaining tax rebate checks and colder weather in
the north east which prompted early fall clothing purchases.
October will see a boost from 307,000 autoworkers getting
bonus checks of $3,000 from signing a new contract. That
is nearly $1B being paid out but a small fraction of the
previous tax rebate. 

Also helping cheer the bulls was the jump in the MAPI
Survey to 68% for Q3 and the highest level in two years. 
This was the seventh consecutive quarter of expansion in
the manufacturing outlook. All components except for 
inventory and profits increased. Shipments rose to 80
from 70, New Orders to 69 from 53 and Order Backlog to
69 from 56. This is very bullish but it is over a long
period of time. This is a quarterly number but it shows
the continued improvement in the sector. The low inventory
number continues to predict a faster ramp up in production
soon. However, the profits component will continue to 
suffer as reports out today outlined increasing capacity
in China. Their exports to the U.S. now exceed $150 billion
per year and are impacting nearly every sector of U.S.
manufacturing. 

Import Prices fell slightly by -0.5% compared to estimates
of +0.2%. The majority of the change was due to falling
energy prices early in the month. The falling dollar also
helped. Meat prices continue to rise due to an import ban
on Canadian cattle and lumber prices rose due to the
hurricane and increased buying by the government. Seems
we have to supply all the plywood and sheetrock for Iraq 
due to the lack of a lumber industry in the desert. Oil
prices are beginning to rise again so any dip in these
numbers could only be temporary. 

Yahoo powered the markets higher today with its better
than expected earnings and improved guidance. Short covering
was rampant in YHOO, AMZN and EBAY with AMZN roaring to 
a high of $59 and EBAY sprinting to within $3 of its all
time high of $63. You would think bubble mania had returned
to Internet stocks except it was broad based across all
sectors. There was over 1000 new 52-week highs and only
15 new lows. Earnings estimates were being ratcheted up
yet again and as one trader said, "expectations are higher
than when Adam met Eve." 

Those expectations took a slight hit when the CEO Conference
did not produce any evidence of future confidence. The IP
CEO was on CNBC several times bragging about cost cutting
but saying he saw no sustainable increase in orders. The
various surveys taken by attendees showed they expected
the economy to remain flat to only slightly up over the
next year. Participants were equally divided between those
that were seeing a slight increase ahead and those seeing
a slight decline. The biggest hindrance to future gains
was seen as a growing excess in global manufacturing 
capacity and increased price competition.

Despite the calming influence of the CEO Conference the
markets roared into the stratosphere and new 52-week 
highs all around with the Dow up +140 at noon. Dow 10,000
comments were flying and traders were back slapping each
other on their good fortune. Then Uncle Ben took to the 
podium. Ben Bernanke took the stage in London and the 
headline on the wire services was "Bernanke says, Too soon
to say if the recovery was sustainable." Like an under age
drinking party with cops at the door the party goers raced
for the exits. While the -100 point drop from the highs 
was dramatic it was not material. 

The damage to the bears psyche was already done and bulls
rushed to buy the dip. New highs and better than expected
earnings were just signs of the future according to the
bulls. The dollar rallied overseas overnight, gold fell
and bonds were selling off. All positives for the equity
market. There simply seems to be nothing on the horizon
to put out this fire regardless of how high it blazes. 
The bears continued to claim over valuation in excess
of bubble market levels in some cases and no surge in IT
spending. The bear battle cry is "good news priced in".
With better than expected earnings apparently the order
of the day it is hard to convince traders that better 
times may not be ahead. The problem will remain until the
pony appears. If your daughter spends the month before
her birthday buying riding clothes, boots, whips, helmets,
etc in anticipation of getting a pony for her birthday
there will be hell to pay if the pony does not appear. 
Today it looks like the earnings will appear on schedule 
and until there is reason to worry the bulls will continue
to party.

Just how long can they party? For the answer to the initial
million dollar question consider the following facts. The
average bear market lasts 6-12 months. The bear market that
ended on Oct-10, 2002 was the longest bear market on record
since the great depression. According to Ned Davis Research
the average bear market is 418 days while the average bull
market lasts 673 days. The average bear market knocks -31%
off the Dow while the average bull market adds, are you
ready, +81% to the Dow. If the last bear market was the
worst ever knocking -4553 points off the Dow high of 11,750
(-38.7%) then might we expect at least the average bounce
of +81%? If your answer was yes then take a deep breath
before calculating the answer. If the averages hold the
Dow could hit 13,026 in the next 307 days. While I doubt
it and I am sure even then most blatant bulls doubt it
that is what the averages predict. 

Obviously, we cannot rely on averages except over very
long periods as in decades or dozens of bull/bear markets.
Averages are the tools of statisticians and historians.
Historically October is known for dramatic dips but the
biggest dip we have seen so far is the -23 point drop 
on Wednesday. So far in October the Dow is up exactly 
+400 points with bullish sentiment in the extreme. I 
confess I thought we were going negative for the day when
the afternoon drop began. I see no reason for it but we
don't always know the reason in advance. When profit taking
begins in earnest it can take on a life of its own and there
does not have to be a reason. We are roaring into the last
three weeks of October with option expiration week just
ahead. If there was ever a period of time to be cautious
this is it. 

We will get GE earnings on Friday but no fireworks are
expected there. That sets up a potential for a negative
surprise if they caution about economic conditions. GE
is normally seen as a proxy for the economy and as such
the earnings are critical. Not for the earnings because
everybody expects an inline report but for the guidance.
GE reported two weeks ago that orders for its plastics
division were down -5% and plastics supplies 10% of GE
earnings. The plastics division is also seen as a proxy
for the market because nearly every manufactured product
contains plastic. 

Once the GE earnings are public tomorrow morning the 
potential for a bout of profit taking increases for Friday.
Even if GE earnings are positive there may be just too much
profit for traders to resist the urge to take some off the 
table. Dow 9600 would be the best estimate of a target and
it would probably be bought heavily. The flood of earnings
does not really begin until next week and traders are 
looking forward to some big names like INTC on Tuesday and
IBM on Wednesday along with over 250 other companies. 

Market Breadth


 

Volume for Thursday was strong with nearly 4.4 billion shares
traded. Advancing volume was 2:1 over down volume. I posted 
the market breadth spreadsheet above last week to show how 
the market had been changing sides daily. From Aug-22 through
Oct-2nd there was 109 billion shares traded. In the last five
days we added nearly 20 billion shares. Note the update for 
this week that the top eight days have been very strong
volume wise and most of that volume has been on the upside.
This market breadth is very bullish but with the big jump 
at the open traders would like to have seen a much stronger
imbalance to the upside. It was strong but market technicians
want to see 4:1 or 5:1 up volume on breakouts to confirm the
move. This increases the potential for some cautious profit
taking on Friday. Whether this potential comes true or not 
it has definitely been an exciting October week already and
we still have three weeks to go! As I said last time, keep 
those seatbelts fastened as our thrill ride gains speed. 

Enter Very Passively, Exit Very Aggressively!

Jim Brown
Editor


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

Fake n Bake
Jonathan Levinson

Equity bulls dropped everything, cleared their heads, held their 
breath and bought the news at 8:30AM, driving equity futures to 
new 52 week highs.  Bears, armed with 1000 compelling reasons why 
the highs would hold and with active stops parked just above, 
rushed to cover, and a full-blown melt up ensued.  Despite a near-
perfect setup however, the sheer bloated weight of current market 
prices proved insurmountable even for rabid bulls and panicked 
shorts working in concert, and what began as a pullback from the 
day highs developed some momentum commencing slightly after 1PM 
EST.  Most of the day's gains were vaporized, but the previous 
day's lows held.  Gold declined, the CRB advanced, the dollar 
rose, and treasuries sank.

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.

15 minute chart of the US Dollar Index




The US Dollar Index ramped up over 100 basis points from its 
overnight lows, beginning at 5AM with London's open and going 
ballistic on the 8:30AM release of the initial claims data.  Last 
week's 399,000 initial claims number was revised upward to 
405,000, and an upward revision next week of this week's downside 
surprise would certainly cast aspersions on the methodology used 
to produce this week's bullish reading.  In any event, the USD 
Index broke its losing streak, peaking just above 92.30 before 
pulling back.  The CRB tacked on 1.49 to close above 244, led by 
strength in natural gas, crude and heating oil futures.

Daily chart of December gold


 

December gold and silver had a poor day.  The dollar strength was 
negative for gold and silver, which had been rising alongside the 
falling dollar all week following the selloff in metals last 
Friday.  Although I continue to puzzle out the intermarket 
relationships, a good argument can be made for simply following 
the longer oscillators on each individual chart.  Gold continued 
its daily cycle downphase and appears to be headed back for test 
of the Friday spike low at 365.  Note that the bear wedge in 
progress projects to a low at 349, which is not unimaginable to 
me.  Short term Bollinger band support implies the potential for 
a bounce here, however, and I don't expect it to be an easy trip 
to those lower levels.  That said, it's been a week since The 
Twelve o'Clock Travesty, and every Friday for the last several 
weeks has seen an afternoon selloff in gold to be at least 
partially reversed on Monday.  We'll see tomorrow if it happens 
again.  December gold dropped 5.10 to close at 370.90, printing
an intraday low of 368.30, high of 377.70.

Daily chart of the ten year note yield


 

There's little to say about what is developing into a very neat, 
textbook bullish descending wedge breakout for the daily ten year 
note yield.  The TNX added 6 basis points to close at 4.302%.  
The daily cycle oscillators are on buy signals, lined up from a 
bottom that coincides with the lower wedge trendline.  Like with 
gold, the TNX is approaching a Bollinger band, which could 
provide resistance in this case.  However, the trend remains 
higher for the yield, lower for bonds. 

Daily NQ candles


 

The NQ hit a high of 1420, at a level that felt like the top of a 
ladder precariously perched atop a stack of milk crates on a 
windy day.  The top was not a brief intraday spike, though, as 
the top printed a sloppy intraday head and shoulders with various 
trips above and below the neckline before it fell apart.  
Yesterday's low in the 1378 area was not touched, with today's 
higher low printed at 1381 and the spike low on the afternoon 
decline at 1386.  On this basis, bulls will be declaring victory.  
Bears will point to the sharp doji reversal on the daily chart 
(above).  Meanwhile, the daily chart oscillators continue to 
strengthen in their ongoing upphase, and on this timeframe, bears 
are far from out of the woods.


30 minute 20 day chart of the NQ


 

The 30 minute NQ chart is awash with expanding formations, none 
of which are bullish.  The 30 minute chart oscillators printed 
perfect rollovers from overbought territory, with the MACD 
setting up a beautiful bearish divergence against the sharp price 
highs.  Lower trendline support at 1386 remains a key support 
level, followed by 1377 and 1362 below.  With the intraday 
oscillators on a divergent sell signal, I'm expecting lower 
prices immediately from here.  The depth achieved on that bottom 
will give us a good clue as to whether we saw the top of the 
rally today, or whether higher highs are in the cards.


Daily ES candles


 

The daily ES not only penetrated the lower wedge trendline, but 
made it all the way to the upper line before falling back out of 
the wedge.  It left us with a relatively higher low than that 
printed on the NQ, but revisited that low following the afternoon 
spike low to 1033.  Despite the long doji upper shadow, today was 
still a green day for the ES, with a higher low than yesterday.  
The bulls got their knuckles rapped above 1040, but the longer 
term daily trend remains higher for the time being. 


20 day 30 minute chart of the ES


 

We have the same bearish divergence on the 30 minute chart MACD, 
with the oscillators on this intraday timeframe on sell signals.  
The lower trendline support at 1033 remains intact, as does key 
resistance at 1044, the site of the head and shoulders neckline 
(see below) and the lower rising trendline on the bulloney 
bullhorn.  This is a higher 10 point range than that noted last 
night, and so while the afternoon was refreshingly bearish, it 
would be unwise to write off the bullish case just yet.

150-tick ES


 

The one day 150-tick ES shows the action and the finer 
support/resistance levels. 1039.75, 1044.25 and 1047 are the key 
numbers to watch to the upside, 1036.50, 1033 and 1029 below.


Daily YM candles


 

Same story on the YM.

20 day 30 minute chart of the YM


 


While initial claims and the unemployment issue remains certainly 
significant, it's difficult to pin this morning's buying frenzy 
on that news alone.  Nevertheless, markets were moved, bears 
stopped out, bulls rewarded.  Note that bears got blown out this 
morning, and then all the buyers got blown out next.  The 
majority of traders who bought and held from 8:30 onward were 
flat or underwater as of the close.  This alone states the case 
most eloquently for active stops on your trades.  The decline was 
sharp and unforgiving this afternoon, as was the pop this 
morning.  A mental stop would have let you down unless your 
reflexes were quick and your fingers steady.  Trade safe, and 
we'll see you tomorrow morning in the Futures Monitor.


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

Happy Anniversary
- J. Brown

It was one year ago today that both the DJIA and the NASDAQ 
Composite marked their closing lows for the bear market.  The 
following session, October 10th, 2002, saw additional weakness in 
the morning and then a surge higher.  That rally was the 
beginning to a bull market that has lifted the DJIA almost 2400 
points or nearly 33%.  The NASDAQ has gained almost 800 points or 
more than 71%.   How appropriate that both indices tagged new 
one-year highs today.  

As one can imagine the current bull market both excites and 
scares some investors.  Is it too late to get in?  Did I miss it? 
Are some of the concerns that patient investors have been feeling 
as they watch the markets climb.  Others dove in and are 
relishing the heady gains in tech stocks.  Yahoo's earnings news 
after the bell last night brought back fond memories of the 
bubble days (if you're bull) and concerns that it could all pop 
(if you're a bear).  Considering that AMZN is trading near levels 
not seen since May of 2000 and EBAY came within a couple of 
points of its all-time bubble highs near March of 2000 it's not a 
surprise why some might fear for valuations.

Fortunately, we have some enthusiastic economic news to support 
much of the positive attitude.  This morning opened with a 
positive surprise in the initial jobless claims.  First-timers 
dropped to 382,000, which is the lowest level since February 8th.  
Enthusiasm that corporations might begin hiring again could 
really keep the rally going.  The super strong September same-
store sales numbers is another encouraging factor for investors.  
Many analysts are now very positive on the upcoming Q4 holiday 
sales season.  Plenty of stores do the vast majority of their 
yearly revenues in just the last two months of the year.  It's no 
secret that more than 2/3rds of this country's GDP is based on 
the consumer so it's good news that we're actually seeing an 
increase in sales.  However, not everyone was cheering.  Skeptics 
were quick to point out that September's same-store sales numbers 
only look this good because last September was so bad.  

Market internals today were bullish with advancers out numbering 
decliners almost 18 to 10 on the NYSE and 18 to 12 on the NASDAQ.  
Up volume was very strong today.  Readers hear us talk about the 
strong breadth of the markets but may not realize what this means 
or looks like.  The bullish percent is a measure of how many 
stocks are currently on a point-and-figure chart buy signal.  
Currently, the bullish percent reading for the S&P 500 has been 
and is still at 5-year extremes near 80 (out of 100) and actually 
looks poised to climb higher.  This technically a bearish 
reading, but it's been pegged there for quite some time.

Tomorrow will bring the September PPI numbers but Wall Street 
will also be watching for General Electric's earnings report.  GE 
used to be considered a proxy for the market as a whole because 
it is so big and has so many different business divisions across 
different sectors.  The last couple of years there has been a 
disconnect but once again commentators are looking to GE as a 
market indicator.

It certainly brings back (bullish) memories but be careful.  The 
markets are definitely short-term overbought and are in need of a
rest.  The new low on the VIX is concerning and the candlestick on
on the DJIA looks like a potential one-day reversal pattern.  There 
is no reason to chase new highs.  Be patient and wait for your entry 
point.  As one financial commentator said today, this bull market 
could easily have another 12 to 24 months to go.  If you missed your 
entry point there will be another one.



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

Market Averages

DJIA ($INDU)

52-week High:  9768
52-week Low :  7197
Current     :  9680

Moving Averages:
(Simple)

 10-dma: 9507
 50-dma: 9406
200-dma: 8733



S&P 500 ($SPX)

52-week High: 1048
52-week Low :  768
Current     : 1038

Moving Averages:
(Simple)

 10-dma: 1021
 50-dma: 1007
200-dma:  936



Nasdaq-100 ($NDX)

52-week High: 1418
52-week Low :  795
Current     : 1396

Moving Averages:
(Simple)

 10-dma: 1356
 50-dma: 1322
200-dma: 1159



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

The DJIA and the NASDAQ Composite both tagged new highs today 
and in a mirrored reflection of the two, the VIX hit a new low.
Bullish traders should be careful.  The candlesticks on the
indices above look like potential one-day reversal patterns and
the new low in the VIX doesn't help matters.  

CBOE Market Volatility Index (VIX) = 18.82 -0.36
Nasdaq Volatility Index (VXN)      = 28.84 -0.32

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

          Put/Call Ratio  Call Volume   Put Volume

Total          0.76        789,341       601,330
Equity Only    0.61        633,635       387,421
OEX            1.16         36,187        41,950
QQQ            3.89         18,087        70,429


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

Bullish Percent Data

           Current   Change   Status
NYSE          73.2    + 0     Bull Confirmed
NASDAQ-100    77.0    + 3     Bear Confirmed
Dow Indust.   83.3    + 0     Bull Correction
S&P 500       80.0    + 2     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  0.89
10-Day Arms Index  1.05
21-Day Arms Index  1.18
55-Day Arms Index  1.07


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    1787      1859
Decliners    1041      1227

New Highs     274       216
New Lows       13         5

Up Volume   1289M     1352M
Down Vol.    596M      658M

Total Vol.  1913M     2061M
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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The Option Investor Newsletter                 Thursday 10-09-2003
Copyright 2003, All rights reserved.                        2 of 3
Redistribution in any form strictly prohibited.


In Section Two:

Dropped Calls: None
Dropped Puts: ITT
Call Play Updates: BBY, BSC, CAT, CBE, EXC, RYL, UTX
New Calls Plays: FD
Put Play Updates: MRK
New Put Plays: None


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

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


CALLS:
*****

None


PUTS:
*****

I T T Industries - ITT - cls: 61.66 chg: +0.16 stop: 62.51

After days of churning between our stop loss at 62.51 and its
simple 200-dma near 60.65 shares of ITT reluctantly rallied with
the markets today and tagged our stop loss closing the play.  The
stock quickly fell into the afternoon's closing bell just as it
had several times before.  There really appears to be no
conviction behind the recent rebound from the late September lows
and volume on today's failed rally was strong at 860 thousand.
The overall trend is still negative and its point-and-figure
chart still shows strong resistance in the 63-64 range.  Would we
recommend new plays here?  Probably not.  Interested bears can
watch for a failed rally at its simple 50-dma or a move back
under its 200-dma.  The company did confirm its earnings date for
October 23rd, before the opening bell.

Picked on September 28 at $59.64
Change since picked:       +2.02
Earnings Date           10/23/03 (confirmed)
Average Daily Volume:        546 thousand
Chart =



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

Best Buy Co. - BBY - close: 53.24 change: +2.39 stop: 50.25*new*

Retail stocks got a serious boost from the positive employment
data this morning and BBY surged 4.7% to post its best close
since March of 2002.  The Retail index (RLX.X) was the second
best performing sector on Thursday, but it's 2.4% advance pales
next to BBY's performance, which came on very strong volume over
5 million shares.  Following such a strong breakout, the stock
should now find support at former resistance near $51.50-51.75
and a pullback and rebound from that area would be the next point
at which we would look for pullback entries.  But given today's
action, BBY might just decide to power higher and keep on
running.  For those interested in a momentum entry, a trade over
$54.10 (the 9/05 intraday high) ought to do the trick.  Recall
that our upside target for BBY is $57 and at this rate, BBY could
reach that level by early next week.  Note that we've raised our
stop to $50.25 tonight, which is just below the top of the 10/03
gap ($50.53), as well as the 20-dma ($50.41).

Picked on October 5th at     $51.00
Change since picked:          +2.24
Earnings Date              12/17/03 (unconfirmed)
Average Daily Volume =     3.86 mln
Chart =


---

Bear Stearns Cos - BSC - close: 76.69 chg: -0.07 stop: 73.50

Unfortunately, this is not a good start for our call play in BSC.
Shares did jump higher in the early market surge today and
triggered us when it traded above $77.50 but BSC gave it all back
by the close.  Meanwhile the XBD broker dealer index hit a new
52-week high.  We mentioned on Tuesday that this was somewhat of
a riskier play because BSC was butting right against its bearish
resistance on its point-and-figure chart.  Looking at the chart
of BSC I wouldn't be surprised to see a dip back to the $75 level
before it continues higher.  We suggest patience in picking your
entry point. In the news, a Reuters article came out yesterday
stating that profits for NYSE member firms (BSC is one of them)
would probably triple from last year.  Last year, being the third
year in a bear market, profits for Wall Street firms were just
under $7 billion.  Now, with a new bull market underway, low
interest rates and a resurgence in investor confidence (and
volume) profits could peak to a record level near $22.45 billion
(this is for all the member firms together).  That's more than
the $21 billion hit at the peak in 2000 during the bubble.  We've
already seen incredible earnings performance from BSC.  Now we
just need some more momentum.

Picked on October 9 at $77.50
Change since picked:   - 0.81
Earnings Date        09/18/03 (confirmed)
Average Daily Volume:    1.2 million
Chart =


---

Caterpillar Inc - CAT - close: 76.08 chg: +0.77 stop: 71.90*new*

Just like the heavy-duty earth moving machines they build, shares
of CAT continue to plow their way higher.  The trend of higher
lows is a sight to see but makes us wary of new entry points.
The general trend is great and the MACD is gaining strength but
short-term the stock is overbought and needs a rest.  That's not
to say it can't become more overbought but we would probably not
initiate any new positions here, especially with earnings around
the corner.  Profitable bulls need pay attention to their risk
and some short-term traders can begin to look for the exits.  CAT
has one week before they announce and we'll probably drop the
play Tuesday or Wednesday next week. We are raising our stop loss
to $71.90, which is just under the $72 level of support/
resistance.  In the news, CAT raised their quarterly cash
dividend by two cents to 37 cents a share.  The dividend is
payable on Nov. 20th to shareholders on record as of Oct. 20th.

Picked on October 2 at $72.70
Change since picked:   + 3.38
Earnings Date        10/16/03 (confirmed)
Average Daily Volume:    2.9 million
Chart =


---

Cooper Industries - CBE - cls: 50.57 chg: +0.26 stop: 48.00

That's not exactly what we were expecting to see in CBE.  The
stock traded sideways the first two days of the week, slipped
backward during Wednesday's weakness and now fails to participate
in any bounce today.  Well, there was a little bounce but we
would have liked to see CBE trade above the $51.20 mark.  Right
now the stock is just consolidating between 50-51.  We're going
to let our stop do its work for us as long as CBE remains above
the $50 level.  In reality, we shouldn't be complaining.  The dip
to the 50 area is a better entry point for any continued rally.
There have been no new headlines.  Momentum traders may want to
wait for a move above the $52 mark.

Picked on October 5 at $51.00
Change since picked:   - 0.43
Earnings Date        10/23/03 (confirmed)
Average Daily Volume:    539 thousand
Chart =


---

Exelon Corp. - EXC - close: 64.50 change: +0.44 stop: 62.75*new*

Continuing its pattern of higher lows and higher highs, EXC has
been in the process of consolidating over the past week after
being turned back from the $65 level at the top of the rising
channel and the upper Bollinger band.  Apparently a week of rest
was all the bulls needed, as they shot the stock right up to that
$65 resistance early today before falling back in the late
afternoon.  Remember our initial comments on the stock that it
would be a slow mover?  Well, it is certainly living up to that
expectation, but it is moving higher.  After the early-October
foray to the $65 level, EXC pulled back to find support at the
10-dma (now $64.01) and bulls have got to be encouraged to see
the stock not only holding above that average, but to be spending
its time in the upper half of that rising channel.  Pullbacks
near $64 still look good for new entries, while those preferring
to enter on strength can use a trade over $65.10 to enter the
fray.  Watch for continued strength from the Utility Sector index
(UTY.X) before playing.  We continue to raise our stop just below
the 20-dma ($62.90), so the stop moves up to $62.75 tonight.

Picked on September 28th at  $62.64
Change since picked:          +1.86
Earnings Date              10/28/03 (unconfirmed)
Average Daily Volume =     1.22 mln
Chart =


---

The Ryland Group - RYL - cls: 81.90 chng: +0.65 stop: 79.25*new*

It feels like the Housing stocks are just going to keep on
running with no end in sight.  The Dow Jones Home Construction
index ($DJUSHB) didn't really stand out today, as it's gains only
amounted to 0.78%, but following the 15.6% advance since 9/29,
it's impressive that the index just continues to plow to new
highs.  Our RYL play hasn't been any laggard either, with today's
0.80% advance bringing the stock to a new all-time high just
below $82.  With nearly a $9 gain from the point we initiated
coverage, it is getting difficult to advocate initiating new
positions.  Instead, our attention needs to be directed towards
maximizing the realized gains from the play when the dust
settles.  RYL is set to report earnings on October 21st, so that
means there are less than 2 weeks left to play.  As we've been
mentioning lately, conservative traders should be using the
stock's current strength to harvest gains in the $82-84 area.
For traders willing to hold for more upside, we're recommending a
tighter stop to prevent giving back too many gains in case of a
negative surprise.  We're raising our stop to $79.25, which is
just below the intraday lows of the past four sessions.

Picked on September 4th at  $72.18
Change since picked:         +8.79
Earnings Date             10/21/03 (confirmed)
Average Daily Volume =       846 K
Chart =


---

United Technologies - UTX - cls: 82.62 chg: +0.60 stop: 78.50*new*

The good news is we finally saw UTX surge up past its recent
consolidation.  The bad news is the stock gave most of its gains
back as the markets faded backwards into the afternoon.  The $82
level might hold as new support but we would be cautious.  We're
going to inch up our stop loss to 78.50 but more conservative
traders could probably use the $80 level as a guide.  Stock
moving news remains quiet.  We would be VERY careful about any
new plays in UTX since we'll probably close the play Tuesday or
Wednesday next week ahead of its Oct. 16th earnings announcement.

Picked on October 2 at $80.45
Change since picked:   + 2.17
Earnings Date        10/16/03 (confirmed)
Average Daily Volume:    1.9 million
Chart =



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

Federated Dept Stores - FD - cls: 45.60 chng: +1.20 stop: 41.75

Company Description:
Federated Department Stores, Inc. is a retail organization
operating department stores that sell a range of merchandise,
including men's, women's and children's apparel and accessories,
cosmetics, home furnishings and other consumer goods.  As of
February 2003, the company, through its subsidiaries, operated
394 department stores and 61 furniture galleries and other
specialty stores under the names Bloomingdale's, The Bon Marche,
Burdines, Goldsmith's, Lazarus, Macy's and Rich's.  In addition
to its stores in 34 states, Puerto Rico and Guam, the company
conducts direct-to-customer mail catalog and e-commerce business
under the Bloomingdale's By Mail and macys.com names.

Why we like it:
It was just over a week ago that the bulls in the Retail sector
(RLX.X) looked to be on the run, with the ascending channel
soundly broken and the $340 support level in danger of being
broken as well.  Fast forward to today, and the RLX was the
second-best performing sector with a 2.40% gain, pushing it not
only to a new 52-week high, but its best close since April of
2000!  That's right, the bubble highs are being challenged in the
land of Retail.  The all-time closing highs from 1999/2000 are in
the $383-384 area and if today's action is any indications, the
bulls fully intend to test that level.  Our new play on FD has
been percolating on our radar screen for a couple weeks now and
we've just been waiting for that definitive breakout over
resistance to show there's some strength at work.  Well today's
2.70% gain on volume that was strongly above the daily average
certainly seems to fulfill that criteria.  The stock has been
consolidating its rally off the March lows for the past several
weeks and with today's breakout, is definitely gaining the
attention of investors.  Next resistance appears near $48, with
the early 2001 highs up at $50.

Following this breakout, there should be fairly strong support
now in the $43-44 area and a pullback and rebound from there
would make for a gift of an entry point, with the 10-dma
($43.25), 20-dma ($43.34) and 30-dma ($43.43) all converging to
reinforce that support.  The PnF chart certainly gives its
blessing to the bulls, with FD on a Buy signal, in a column of X
and with a bullish price target of $52.  Aggressive traders can
enter on a continued bullish move over $46, but will probably do
better waiting for a pullback to at least the $45 area rather
than chasing it higher.  FD doesn't report earnings for over a
month, so that means we have plenty of time to find a solid entry
point and then hold on for the expected bullish price action.
We're initiating coverage with a fairly wide stop to allow for
some near-term consolidation.  Set stops at $41.75, just under
the closing highs from the most recent dip.

Suggested Options:
Shorter Term: The October 45 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 just over a
week.

Longer Term: Aggressive traders looking to capitalize on an
extended rally will want to look to the November 47 Call or even
the January 50.  These options are 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
45 Call.

BUY CALL OCT-45 FD -JI OI=218 at $1.25 SL=0.60
BUY CALL OCT-47 FD -JW OI=  0 at $0.35 SL=0.00
BUY CALL NOV-45 FD -KI OI=229 at $2.40 SL=1.25
BUY CALL NOV-47 FD -KW OI= 60 at $1.15 SL=0.50
BUY CALL JAN-50 FD -AJ OI=769 at $1.35 SL=0.75

Annotated Chart of FD:




Picked on October 9th at     $45.60
Change since picked:          +0.00
Earnings Date              11/12/03 (unconfirmed)
Average Daily Volume =     1.87 mln
Chart =



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


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

Merck & Co - MRK - close: 48.99 chg: -0.99 stop: 51.50*new*

Now that's what we like to see.  Aside from a brief trade higher
near very short-term resistance at $50.50, shares of MRK fell
lower throughout most of the session.  This breaks support at $50
and surpasses the August low (49.48).  Volume was strong at 9.9
million shares.  Was there any specific news to attribute to the
move?  None that we can readily find.  Merck did open a new $100
million plant in Singapore to manufacture cholesterol medication
but that hardly seems like a catalyst for today's drop.  Most of
the big cap drug stocks are still under performing (just look at
JNJ and LLY, they both look like put candidates) so money could
be rotating out of drugs and into more "exciting" stocks like
Internets and technology.  We're going to inch our stop loss down
to 51.50.  Our short-term target at $45 still looks good.

Picked on October 6 at $49.90
Change since picked:   - 0.91
Earnings Date        10/22/03 (confirmed)
Average Daily Volume:    6.2 million
Chart =



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

None


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**********

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The Option Investor Newsletter                 Thursday 10-09-2003
Copyright 2003, All rights reserved.                        3 of 3
Redistribution in any form strictly prohibited.


In Section Three:

Play of the Day: CALL - FD
Traders Corner: Trolling For Trades – Using Trolls & Anything Else
     That's Handy


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

Federated Dept Stores - FD - cls: 45.60 chng: +1.20 stop: 41.75

Company Description:
Federated Department Stores, Inc. is a retail organization
operating department stores that sell a range of merchandise,
including men's, women's and children's apparel and accessories,
cosmetics, home furnishings and other consumer goods.  As of
February 2003, the company, through its subsidiaries, operated
394 department stores and 61 furniture galleries and other
specialty stores under the names Bloomingdale's, The Bon Marche,
Burdines, Goldsmith's, Lazarus, Macy's and Rich's.  In addition
to its stores in 34 states, Puerto Rico and Guam, the company
conducts direct-to-customer mail catalog and e-commerce business
under the Bloomingdale's By Mail and macys.com names.

Why we like it:
It was just over a week ago that the bulls in the Retail sector
(RLX.X) looked to be on the run, with the ascending channel
soundly broken and the $340 support level in danger of being
broken as well.  Fast forward to today, and the RLX was the
second-best performing sector with a 2.40% gain, pushing it not
only to a new 52-week high, but its best close since April of
2000!  That's right, the bubble highs are being challenged in the
land of Retail.  The all-time closing highs from 1999/2000 are in
the $383-384 area and if today's action is any indications, the
bulls fully intend to test that level.  Our new play on FD has
been percolating on our radar screen for a couple weeks now and
we've just been waiting for that definitive breakout over
resistance to show there's some strength at work.  Well today's
2.70% gain on volume that was strongly above the daily average
certainly seems to fulfill that criteria.  The stock has been
consolidating its rally off the March lows for the past several
weeks and with today's breakout, is definitely gaining the
attention of investors.  Next resistance appears near $48, with
the early 2001 highs up at $50.

Following this breakout, there should be fairly strong support
now in the $43-44 area and a pullback and rebound from there
would make for a gift of an entry point, with the 10-dma
($43.25), 20-dma ($43.34) and 30-dma ($43.43) all converging to
reinforce that support.  The PnF chart certainly gives its
blessing to the bulls, with FD on a Buy signal, in a column of X
and with a bullish price target of $52.  Aggressive traders can
enter on a continued bullish move over $46, but will probably do
better waiting for a pullback to at least the $45 area rather
than chasing it higher.  FD doesn't report earnings for over a
month, so that means we have plenty of time to find a solid entry
point and then hold on for the expected bullish price action.
We're initiating coverage with a fairly wide stop to allow for
some near-term consolidation.  Set stops at $41.75, just under
the closing highs from the most recent dip.

Suggested Options:
Shorter Term: The October 45 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 just over a
week.

Longer Term: Aggressive traders looking to capitalize on an
extended rally will want to look to the November 47 Call or even
the January 50.  These options are 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
45 Call.

BUY CALL OCT-45 FD -JI OI=218 at $1.25 SL=0.60
BUY CALL OCT-47 FD -JW OI=  0 at $0.35 SL=0.00
BUY CALL NOV-45 FD -KI OI=229 at $2.40 SL=1.25
BUY CALL NOV-47 FD -KW OI= 60 at $1.15 SL=0.50
BUY CALL JAN-50 FD -AJ OI=769 at $1.35 SL=0.75

Annotated Chart of FD:




Picked on October 9th at     $45.60
Change since picked:          +0.00
Earnings Date              11/12/03 (unconfirmed)
Average Daily Volume =     1.87 mln
Chart =



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


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

Trolling For Trades – Using Trolls & Anything Else That's Handy

By Mike Parnos, Investing With Attitude

Trading is an equal opportunity vocation.  It doesn't matter of
you're Shaquille O'Neal or Mini Me, Fat Albert or Twiggy, Jack
Welch or Jack Kevorkian, or Brittany Spears or Madonna (tongue in
cheek, of course).

The point that I'm making is that trading is a skill that you can
learn and have for the rest of your life.  All you need is a
computer, a little bankroll, a willingness to learn and some
common sense – plus a smattering of self-discipline.  You don't
have to spend your life running east looking for a sunset.

Case In Point:  I was a rebellious kid (does that surprise you?).
My parents wanted me to be anything with a tie – doctor, lawyer,
broker, etc.  Always in character, I would go to any lengths to
prove that I could be successful by using my head and not a three-
piece suit.  I did it my way.  I learned – by reading, by
listening and (unfortunately) by a lot of trial and error.  So,
CPTI students, here we are.  We're in this together.  Hopefully,
you'll be able to avoid some of the trial and error.  However,
human nature tells us that, despite what you read, the lessons
that you'll learn from are the most expensive ones.

I've often been asked about my method of selecting trades and
trading vehicles.  Fortunately, I'm better at selecting trades
than wives.  Wives may come and go, but bills are always going to
be there.  So, unless you want to know how I pick out wives (which
might be good for a few laughs), let's proceed with the
stock/index selection process.

A Place To Start
Examine the strategies in your arsenal.  I don't mean go to a how-
to book on options and take your pick.  Rather, ask yourself:
Which strategies do you know thoroughly?  Which strategies do you
know how to enter and monitor?  Do you know when and how to exit?
Do you know how to fix the trade if it goes bad?  Do you know when
to cut your losses and move on?  Each strategy has its own set of
answers to the above questions.  If you're confident that you can
handle all of the above in one or more strategies, you're probably
ready to proceed.

The Next Step – Pick A Strategy
Since we look to take in premium on the vast majority of our
positions, I start by looking at indexes and stocks in sectors
that are less likely to make major moves.   You'll find that you
may get comfortable trading a few stocks or indexes.  In our CPTI
portfolio, many stocks and indexes keep reappearing month after
month – like the QQQs. SPX, OEX, etc.

The Index Iron Condor
Each month we try to construct an Iron Condor using the SPX.  The
objective is to create as large a maximum profit range as
possible, taking support and resistance into consideration.  In
recent months, our ranges have been 85-95 points.  I like to take
in a potential profit of $2,000-$2,500 on a 10-point exposure.
That generates a 25-35% return on risk.

For those who can't stand the stress when the SPX approaches the
short options, consider expanding the range of your Condor 5-10
points on each side.  The price you pay is taking in less premium,
but you may sleep better.

The Equity Siamese Condor
With indexes, the Siamese Condors aren't practical.  Although we
may take in significant premium selling at the money puts and
calls, the cost of protection is much too high.  The range we
would create would be much to small for the market swings we've
been having lately.

The Siamese Condor is best utilized with stocks that don't make
dramatic moves.  Remember, we will make more money the closer the
underlying finishes to the sold strike price.

The first thing to look for is a liquid stock that's trading near
a strike price.  Check out the support and resistance levels.
Take a look at the premiums.  On a 10-point exposure, you'll want
to take in $4.50-$5.00 selling the at-the-money puts and calls and
buying the protective puts and calls 10 points out.  On smaller
stocks, use your discretion.  You may want to go out only 5
points.  Make sure you take in enough premium to provide you a
decent trading range.  Remember, we're looking for profit – not
stress.

Get an idea of the stock's average daily move.  Ideally, it will
be trading somewhere in the middle.  Then, look at an option chain
for the stock.  See, in the near term cycle, what strike price has
the highest open interest.  If the stock is trading at that strike
price, we may have a good candidate.

Now, check the company's news.  Is there an earning announcement
during the near term cycle?  If you can't find all the news you
want, call the company's "Investor Relations" department of the
company.  Don't be shy.  That's what they're there for.  The phone
number can be found in dozens of places on the Internet.  Go to
"Google" and type in the company name.

If you have a good candidate, go for it.  Don't compromise much on
the indicators, though.  Sometimes, the best thing you can do is
stay on the sidelines.

In future columns, we'll explore the underlying selection process
for other CPTI strategies.
___________________________________________________________

Siamese Condor Checklist
I've created a checklist for those of you who are trolling for
trades.  It should simplify the selection (and elimination)
process.  Send me an email requesting it
(mparnos@OptionInvestor.com) and I'll send it to you.  It's in a
Microsoft Word file.  Print it out, make a lot of copies and have
fun.  Do your homework and it will pay off in the end (which
end?).
____________________________________________________________

OCTOBER & ONGOING POSITIONS
October Position #1 – SPX Iron Condor – Trading @ 1038.73
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 1067.30.  We're at 1038.73 – about a 30-
point cushion on our upside.

October Position #2 – QQQ – Put Calendar Spread – Trading @ $34.69
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 $39.35.
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 @ $518.48
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 -- $34.69.
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 $21.04.
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
#3 – INTC "Siamese" Iron Condor:  $250 Loss
__________________________________________________________

New To The CPTI?
Are you a new Couch Potato Trading Institute student?  Do you have
questions about our educational plays or our strategies?  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


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