The Option Investor Newsletter Sunday 10-19-2003 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: Happy Anniversary Futures Market: Early Reversals Index Trader Wrap: Bear Tracks Editor's Plays: Place Your Bets Market Sentiment: Earnings Sentiment Ask the Analyst: "High Pole" warning 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 10-17 WE 10-10 WE 10-03 WE 9-26 DOW 9721.79 + 47.11 9674.68 +102.37 9572.31 +259.23 -331.74 Nasdaq 1912.36 - 2.95 1915.31 + 34.74 1880.57 + 88.50 -113.63 S&P-100 518.12 + 0.07 518.05 + 2.88 515.17 + 15.56 - 21.01 S&P-500 1039.32 + 1.26 1038.06 + 8.21 1029.85 + 33.00 - 39.45 W5000 10098.38 + 13.06 10085.3 + 95.02 9990.30 +343.82 -407.59 RUT 520.36 + 1.30 519.06 + 6.78 512.28 + 27.00 - 34.92 TRAN 2847.28 + 23.73 2823.55 + 38.70 2784.85 +121.02 -130.88 VIX 17.62 - 0.83 18.45 - 1.05 19.50 - 2.73 + 3.16 VXO 19.19 - 0.05 19.24 20.49 VXN 25.33 - 2.29 27.62 - 1.58 29.20 - 1.68 + 1.14 TRIN 1.59 1.24 0.60 1.42 Put/Call 0.64 0.93 0.75 0.98 ****************************************************************** Happy Anniversary by Jim Brown Last week we celebrated the one-year birthday of the new bull market. This week we celebrate the 16 year anniversary of the October-19th market crash of 1987. Stocks dropped -508 points, -23%, on that Monday and traders were caught completely off guard. The market had just set a new all time high and the drop was made worse by an all time high of stocks bought on margin. With stocks only a couple days from recent highs and margin debt at an all time high again some traders felt the drop on Friday could have been fears of a repeat. Dow - October 1987 October Crash - Intraday While nobody expects 1987 to repeat 16 years later there are professional traders who remember that day and probably take precautions each October. Some of those precautions this week could have been taking some profits off the table on Friday. After all the markets are very extended and many traders could quit today and have a very good year. Unlike 1987 we are doing much better economically than we were just a few months ago. On Friday Residential Construction rose to 1.89 million units amid another spurt in buying prompted by last months temporary dip in interest rates. This is a huge number for this late in the cycle and only 2,000 away from the record June rate. Building permits declined slightly as we near the fall weather slow down. The new highs in the market helped boost Consumer Sentiment to 89.4 from 87.7 in September. Both current conditions and expectations rose with present conditions soaring to 102.2. This is a very strong survey and represents a widespread feeling of economic improvement by consumers. Despite the war, yes it is still underway, unemployment and rising energy prices the average consumer feels pretty good about the future. The market is strong, interest rates although higher are still very low and you have dozens of talking heads on daily TV talking about the economic recovery and +6% GDP. The yellow brick road could need to be widened if this euphoria gets any stronger. Despite the prior comments that euphoria could evaporate in a moment with another terrorist attack, market crash or the failure of the economic recovery to appear. Yes, despite the better than expected earnings in this cycle there are still hushed conversations in dark places about the chances of a real recovery. Those conversations are likely taking on much more relaxed tones with the top line revenue numbers for S&P companies rising +8% for those already reported. Actually the pressure to perform is easing as the earnings parade continues to build. Estimates for the 3Q were +16% two weeks ago and with 92% of the companies meeting or beating that number has risen to +20%. Very strong earnings even if they are being compared to a weak quarter in 2003. There have been some stumbles and there are some clouds on the horizon. The misses have been spotty and sporadic with only a few in the high profile names. On Friday Mohawk Industries warned that there was still uncertainty in consumer confidence trends and unemployment continued to depress sales. The carpet company lost -$4.60 or -6% in heavy trading. XL Capital, a reinsurance business, slashed forecasts for the 3Q due to stronger than expected losses. The company lost -$6.03 or -7.6% on the news. SUNW and EBAY were under pressure after their earnings reports despite the earnings meeting or exceeding estimates. EBAY dropped -5% after giving guidance that was less than what the street expected. As companies like EBAY become more mature the astronomical growth rates of the early years fade and while still good they do not live up to investor hopes. EBAY is currently trading at a PE of 78 using 2003 earnings. CAT lost several of its lives with a drop of nearly -$6 after failing to reward investors to the level they expected. In Q2 CAT earnings increased +75% and CAT closed at a new 52-week high the day before announcing earnings this week. Everyone expected another blowout performance. Instead they only saw a gain of +4% this quarter and raised estimates to $3.00 for the year and guided to a +10% growth rate. Analysts were expecting $3.15 for the year because of the 2Q gains. They also missed street estimates substantially for the 3Q. DCLK missed estimates and guided lower and added pressure to the Internet sector in front of the AMZN earnings next week. After months of market gains the "valuation" downgrades are beginning to fly. Sears was cut by Prudential despite strong improvements in their retail model. This is just an example but the trend is beginning to heat up. With many stocks up +50% or even +100% from their bear market lows they are low hanging fruit for analysts trying to get their name in print. This trend will intensify by the end of next week when nearly 70% of companies will have completed their earnings confession. Friday's market action was not unexpected. The lack of a real and sustainable bounce over the last five days was beginning to suggest that all the good news was priced into the market and the bullish bloom was fading. The sell off did not occur on strong volume with only 3.6 billion shares traded across all markets but that volume was 4:1 to the downside. That was the strongest ratio in either direction since Sept-26th. Decliners beat advancers over 2:1. The worst indicator for the health of the market was one I discussed positively just a few days ago. The Russell 2000 lost -9.28 (-1.7%) after stalling for four days at a new three year highs. By itself this would not be a material move but it is a reversal of the strong trends from last week. Funds were pouring money into small caps when they would normally be cutting back on positions before their fiscal year end in two weeks. We do not know if this was just profit taking by different funds or the leading edge of that suspected portfolio reshuffle. It was a dramatic move from an index that has been so strong. Russell 2000 The Dow has tried to climb over 9800 for four consecutive days and on Friday it lost ground to trade at 9701 before seeing some short covering at the close. A -69 point Dow drop after +500 points of gains over the last two weeks is nothing. It is barely legitimate profit taking and should not be construed as anything else. We can speculate that it could be the leading edge of a bigger October event but it would just be speculation. Dow 60 min Chart The Nasdaq suffered more than the Dow by losing nearly -2% or -38 points and closing in on 1900 once again. Tech stocks that disappointed or in some cases surprised with earnings this week were getting killed as investors raced for the exits. Losers on Friday for instance included DCLK -24%, RSAS -20%, WEBX -18%, SPRT -17%, BRCM -8%, PXLW -8%, MRVL -6%, RMBS -6%, ALTR -6%. Add in EBAY -5% and AAPL -8% and the index never had a chance. If anything this could be the leading indicator for the future of the market. These companies were sold despite good news from several. The tech sector and the market have very high hopes already priced in and once those earnings are out those hopes are meeting reality. The reality is great earnings across the board but not great enough to protect stocks from potential profit taking. Nasdaq Chart Next week we have over 700 companies reporting earnings, most in the first four days. Most will meet or beat the street if the current 92% average hold true. There are no material economic reports and we will be left to fixate on the individual earnings and watch as the winners and sinners hit the tape after earnings. Whether those stocks will be rewarded with cheers or catcalls is up to investor expectations. Intel, helped power techs on Wednesday with its very strong report but closed Friday at a three day low. The 15 min of fame can be very fleeting and investors are very demanding. With options expiration on Friday we should see a very active open on Monday. Funds who sold covered calls on stocks while hoping to squeeze a couple more dollars of profit out at the top should have those stocks called away because of the market gains over the last four weeks. If they do this on stocks they are planning to sell anyway then being called away prevents having to sell them. Depending on how widespread this tactic was it could be a volatile Monday as those stocks are put back into circulation by the option holders. Either way next week promises to be very volatile. With 700 earnings reports, almost no economic reports and only two weeks to go before fund year end anything can happen. Based on my email I know the bullish sentiment is alive and well. With margin debt at an all time high many of those bulls have bet it all on the 4Q recovery. That puts a lot of stock in weak hands and according to all reports economic conditions are improving but still challenging. GE, CAT, INTC, IBM and many others all repeated the same story. "Signs of economic stabilization but too soon to call it a recovery." It is like they all have the same speech writers. If you are a hard core bull you are thinking I am crazy. I had an email to that effect on Friday. Something along the lines of "Are you on drugs? Everybody knows we will be at 11,000 before the end of the month." You know, it is possible. I cannot concoct a scenario that would make it happen but then the market does not ask me for direction. I just try to paint the picture as I see it and let the readers make their own decisions. I thought Thursday would be the high for the week but CAT and IBM spoiled the party and Wednesday turned out to be the winner. I guess it all boils down to this. We know that some companies will beat estimates next week and some will miss. The question is whether enough companies best estimates by a wide enough margin to offset the negative sentiment from those who don't. Who is announcing next week that has the power to explode the market over 9800? MMM, MSFT? What could they say that would be better than the Intel earnings? At this point it would have to be a lot better because the excitement is beginning to fade. Even if we do see some profit taking over the next couple of weeks it is just PROFIT taking. It will not be the end of the world. Just think of it as a buying opportunity. There are millions of investors sitting by their PC this weekend just hoping there will be a normal October buying opportunity so they can get that second chance for a cheaper entry. Those reluctant investors who missed the last several dips and have been watching the Dow close in on 10,000 are chomping at the bit to go long. If it comes there is a lot of money still on the sidelines and I would be very surprised if that 10K level was not in our rear view mirror by year end. Until then keep those seat belts fastened because the lead car in this thrill ride may be just about to disappear from sight. Enter Very Passively, Exit Very Aggressively! Jim Brown ************** FUTURES MARKET ************** Early Reversals Jonathan Levinson This week brought early potential reversal candles in equities, treasuries, gold and the US Dollar Index. Next week will provide either confirmation or rejection of these preliminary prints, while opex Friday left traders contemplating the bigger picture to try to make sense of the day's action. 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 was back to its old tricks on Friday following Wednesday's countertrend bounce. A steep selloff following the release of the Michigan sentiment data brought the index back to 92.40, with the USD trading 92.20 as of this writing. The commodities index (CRB) dropped 2.69 to 243.30, led by weakness in natural gas, crude and heating oil, and cocoa futures. For the week, the US Dollar Index printed a bullish harami at the bottom of an eight week downtrend. This inside week will either resolve itself in a bullish reversal off the higher low just printed, or extend the downtrend further. Daily chart of December gold December gold dropped 1.20 on Friday, testing the range lows with a spike to 367.30 but recovering most of its losses as the session progressed. The move continued what has been developing into a negative sloping range on the bounce from the spike lows printed two weeks ago. The bounce off the intraday low on Friday was enough to turn the daily chart oscillators toward bullish kisses, after a bearish-looking Thursday. Suffice it to say that gold remains a toss up at current levels. For the week, the December gold contract printed a possible bullish doji bottom, but the 370 level is going to have to hold for that interpretation to remain valid. Daily chart of the ten year note yield The TNX dropped 6.7 basis points to 4.388% on Friday, touching but not violating the rising trendline that has supported the yield for the duration of its bullish descending wedge breakout. The decline was enough to suggest the beginning of a top on the 10 day stochastic, but until the trendline breaks, the trend remains up. For the week, the TNX printed a possible doji top, but it will take a continuation of Friday's decline to confirm. This week, a firming in the dollar corresponded with firmness in treasuries, and, as we will see, a weakening in equities. Daily NQ candles The NQ has favored us with a clear, obvious bear wedge breakout coinciding with rolling overbought oscillators at the end of a week that featured a blowoff spike to new 52 week highs. The weekly candle is a shooting star doji with a tall upper shadow, and the high on the daily chart failed right at the upper Bollinger band. The decline was sufficiently orderly to leave the QQV and the VXN, which are the volatility indices for the NDX and COMPX respectively, both negative on the day despite a 2.38% bath for the NQ. The implied price target on this bear wedge breakdown is 1300, and the rolling oscillators confirm the chart pattern. Despite this nearly perfect bearish picture on the daily chart, I do not expect a straight line down, as the intraday oscillators had grown predictably oversold by session's end on Friday. 30 minute 20 day chart of the NQ The trendline break on the 30 minute chart was rendered trickier by the continued climb beneath it on Thursday, but bulls on Friday didn't have a chance. An opening spike was sold immediately following the Michigan sentiment data, and the only variable from that point on was the speed of the decline and the weakness of the bounces. The bearish divergences on the oscillators on this shorter timeframe were predicting trouble to come, and it arrived on Friday. That said, the oscillators are as oversold as they've been in nearly three weeks, and price has advanced considerably since then. The shape of the anticipated bounce from here will tell all. If the NQ doesn't bounce on Monday, then the 30 minute chart oscillators will begin trending, and the herding of the bulls will have officially begun. Daily ES candles The break is even more inspiring on the ES, helped along by the impressive Dow weakness. The 10 day stochastic rollover is an early but nonetheless complete sell signal, awaiting confirmation on the Macd. Support on Friday's decline came at the low of 1034.75, which lines up with Fibonacci support off the Wednesday spike high. The downside bear wedge target is at 987.75. 20 day 30 minute chart of the ES As on the NQ, the break on the ES was telegraphed by the bearish oscillator divergences on the 30 minute chart. However, unlike with the NQ, there was no troublesome secondary drift along the bottom of the trendline. The ES broke down on Friday and never looked back, bouncing twice from the level 1039 before hitting a low at 1034.75. 1039 was a level tested throughout the past two weeks, and on the shorter timeframes, 1041 appeared as the neckline of a head and shoulders formation. The downside formation target would be 1028, which is the next significant confluence and Fibonacci support. Daily YM candles Same picture on the YM. 20 day 30 minute chart of the YM For the week, we had bearish reversals in equities breaking out of bearish patterns from oversold territory on the daily charts, with a potential bullish reversal in treasuries, gold and the US Dollar Index. I don't expect gold and the US Dollar Index to rise together for long, but that's the early message this week on the weekly candles. To my mind, Monday's either going to tank or bounce. This isn't as trite as it seems. The 30 minute and shorter intraday timeframes are all quite oversold, and a technical bounce is expected by the charts if the markets remain orderly. If so, I'll be looking for resistance between 1039 and 1044 ES, above which the bulls will have a lot of shorts running for cover. However, markets are not always orderly, and if it does not bounce, then the potential is there for this week's technical damage to develop into a rout. Bulls have amassed considerable profits this year, and any further profit-taking would become a trending move on the intraday cycles. ******************** INDEX TRADER SUMMARY ******************** Bear Tracks Jonathan Levinson Unlike a doji day, which features an abrupt 180-degree change in price and mood, a doji week accomplishes the same end but over a span of 5 days. What looked like a very bullish market on Wednesday morning looked just as bearish on Friday afternoon, coinciding with a doji top printed on the weekly candle chart. Weekly COMPX candles The heavier volume this week was on the sell side for both the Nasdaq and the Dow. The week began quite bullishly, and although it's just a speck on this three year weekly chart of the Nasdaq, we see this week having made a new high of the year, pushing against the upper 20-week Bollinger band and pinning the weekly chart oscillators in overbought territory. The 10 week stochastic had been printing a negative divergence, but Wednesday's spike high, subsequently reversed on Thursday and Friday, began the process of reversing that negative oscillator slope. Nevertheless, the weekly oscillators are overbought and waiting to begin their downphases. The Nasdaq's 37.78 point, 1.9% drop on Friday, following Wednesday afternoon's and Thursday's weakness may have provided the push. Daily COMPX candles The daily COMPX candles show the index pinned to the upper resistance trendline of a large bear wedge covering the duration of the rally off the March lows. The selling that commenced Wednesday and accelerated on Friday was sufficient to end the oscillator upphase that has carried this leg of the rally. As we've been discussing in the nightly Futures Wraps, this cycle upphase had been dominating the 30 minute chart cycle, as those oscillators had been consistently aborting their downphases during the past two weeks. With this oscillator now rolling over, uncertainty should resolve itself to the downside. Weekly INDU candles Impressive weakness in a number of Dow components this week prevented the Wednesday spike from tilting the 10 week stochastic to the same extent as it did on the COMPX. We see upper wedge trendline resistance touched but not broken this week, and while the apex of the wedge could be at higher prices, the oscillators on this long timeframe are signaling a significant challenge for bull to take it there from here. A bear wedge breakdown below the 9400 level targets a possible retest of the March lows, 2000 points below. Daily INDU candles The weekly oscillators are topped out and sport a bearish divergence. The daily chart oscillators appear to have topped on Wednesday, but longer timeframes take longer to complete and confirm the top. With trend-following oscillators, key reversal points are always confirmed in the rearview mirror, and we're forced to intuit the moment at which such occurs. Most often, the end of a cycle will see a blowoff move in the direction of that cycle, and while Wednesday's top lacked the intensity and drama that I expected, the change in mood from Monday to Friday was impressive. Next week will tell the tale. Daily OEX candles Moving down to our primary trading vehicles, we see the same downphase setting up on the daily OEX chart. Resistance at 525 will be the maginot line, and while the rolling longer term oscillators and unbroken upper resistance lines suggest that the rally highs have been seen, the topping process may not be over. A move to 525 would not over disturb the daily oscillators, and as can be partially seen in the 30 minute chart below, all of the intraday oscillators were oversold and beginning upphases heading into Friday's close. The broken trendline will provide strong resistance at 522, and the 520 confluence / Fibonacci line will give bulls a struggle. Note that the 300 minute stoch on the 30 minute chart has not been this oversold in more than two weeks, since before this leg of the rally began. For these reasons, a possibly meaningful bounce cannot be ruled out. The difference between now and then is that the daily oscillator had not topped three weeks ago but it has now, which implies that another stage to significantly higher highs in unlikely. Furthermore, while the 300 minute and 10 day stochastics are now opposed, the shorter the cycle, the more susceptible it is of trending. I'd expect some kind of bounce on Monday to a lower high, followed by a renewed plunge to lower lows. The weakness in bellwethers, notable GE and more recently, IBM, combined with the sustained sub-20 VXO readings this week has me far from thinking bullish thoughts for next week. 20 day 30 minute chart of the OEX Daily QQQ candles The Qubes look every bit as weak as the OEX, and what is the beginning of a bounce on the 300 minute stochastic for the OEX is a weak twitch on that of QQQ (below). The stage looks set as of Friday's close for further decline on Monday morning, but a weaker bounce, possibly starting from 34.50 support would be easiest to imagine. 35.70 should no be exceeded to the upside, and below 34.50, 33.30 is the next downside target. 20 day 30 minute chart of the QQQ For next week, there's the additional uncertainty of the unwinding of October option positions, which should skew Monday morning's trading. Given how extreme the sentiment, volatility, breadth and even price-based indicators have become, it's almost irresistible to read the above charts with a bearish bias, as I have done. The cycle configuration has not been this well aligned for a sustained downside move in a long time. The Fed drained 5B via expiring repos on Friday, most likely to support the struggling dollar but in any event displaying a willingness to let the markets sink or swim on their own, and rates have been rising. These factors as well support a bearish bias. If the 2003 rally has taught traders anything, it is to not get married to a point of view. Good traders can change perspective jion a dime, just as the market can do. While I believe that the conditions are ripe for a washout, I won't hesitate to change my stance should prices reverse strongly. Caution and capital preservation remain key, but as we've been urging for days now, bulls need to keep those stops active and snugged up (if they didn't trigger on Friday). See you at the bell! ************************Advertisement********************************** Option traders, check what PreferredTrade offers: - true direct access to each option exchange - stop and stop loss online option orders - contingent option orders based on the price of the option or stock - online spread order entry for net debit or credit - fast option executions - rates as low as $1.50 per contract ($14.95 min) PreferredTrade, Inc. Call 888-889-9178 or Click http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN Member NYSE, Other Principal Exchanges, NFA, MSRB and SIPC *********************************************************************** ************** Editor's Plays ************** Place Your Bets The DJX put play from last week did not go off exactly as expected. The Dow did not reach 9975 as we hoped and there is a good possibility the trend has already changed. We did get triggered on one third of the suggested DJX-96 puts and your fill should have been in the $1.35 range. You should still have the orders at 99.00 and 99.75 but we may not see those numbers next week. If the trend has changed the potential for getting over 98.00 again could be slim. Our current stop loss is a distant 10,100. Should the Dow trade under 9600 the plan was to lower the stop loss to 9700. The profit targets were to sell 1/2 position at Dow 9500 and another 1/2 at 9300. If we do not fill any more positions then I would suggest selling them all at Dow 9500. There is not enough with only 5 contracts to break them up. If you went out on the limb for more than five then break up the exit any way you like. Dow 9300 seems like a long way off but we were below that level on October 1st. My best guess for the beginning of a market event was next Tuesday Oct-21st give or take a couple days. Just a guess based on option expiration settlement and the mutual fund year end cycle in two weeks. Got Books? Toys, Trains, TVs, Telephones? It is that time again. Amazon earnings. Amazon has evolved from just a book seller to a seller of anything that is not illegal or controlled. They have struck up partnerships with almost every major retailer in the country and they take orders for instant shipment of anything on the net. My how times have changed. Amazon is the favorite of short sellers because of their extreme valuations for a book seller. Favorite is a strange term because shorting AMZN stock has been a very expensive hobby for years. Regardless of the earnings or non earnings it just keeps going up. Now that they actually have earnings they are faced with the same problem as EBAY. There is something to measure them against and they are a maturing business model. The competition on the Internet is increasing with multiple ways for any hobby trader to sell anything to anybody. AMZN is at a three year high at $60.00 and is begging to be shorted again. AMZN is currently the 9th most shorted stock with 43 million shares short. Average daily volume is 8 million shares. This represents a huge potential for a short squeeze. However with the stock up +272% in the last 12 months there is also a huge potential for some profit taking. If AMZN should disappoint it could hit $50 in a day. It was just there ten days ago to going back would not be tough. I wrestled with how to play this and tried several different combinations but the premiums are so high on AMZN options that nothing made sense other than just a straight put option. If you bought the stock and sold a covered call you are at risk of the stock dropping. If you sold the call naked you are at risk of a short squeeze. Because AMZN is exactly $60 the options on either side of the price are $10 apart and the difference in prices make credit spreads impractical. I could not make any combination work without going to extremes. I settled on a simple directional put. The Jan-$55 put at $3.80. The Nov $55 put is $1.75 and actually should be a little cheaper on Monday afternoon now that October has expired. The only challenge is price movement in AMZN on Monday. Earnings are on Tuesday night after the close. To avoid escalation in price if the market weakness carries over to Monday I think we should just bite the bullet and buy them at the Monday open. We can watch the market and the stock and if there is no negative movement we could let the premium bleed off a little bit before making the buy but these are volatile options on a volatile stock and anything is possible. Buy AMZN Nov-$55 PUT ZQN-WK $1.75 at Friday's close Buy AMZN Jan-$55 PUT ZQN-MK $3.80 at Friday's close I personally like the NOV put but many readers do not like to speculate on the shorter time frames. Going a little farther out to January costs about $2 more but the time decay would be much slower. I suspect that any drop in AMZN will be brief unless they really miss badly. That gives us 2-3 weeks before the Q4 ramp begins. A $5 drop in AMZN would bump the Jan put premium from $3.80 to $6.00. Only a +2.10 gain but the risk of premium deflation would be safer. A $5 drop would jump the Nov put from $1.75 to $3.75 "IF" it happened next week. If it took two weeks the time premium could decay as fast as the price of the stock decreased. Choose the one you like but for the official recommendation I am going with the Jan option. The optimistic price target would be $50 but the realistic target is $55. Choose your own exit here and I strongly suggest you put a limit order in immediately after you buy the option. We could get a spike dip on the open after the announcement to some obscene level only to be bought several seconds later. Amazon Chart ******************************** Play Recaps MMM Bull Put Spread (recommended 10/05) Still patiently waiting. http://members.OptionInvestor.com/editorplays/edply_100503_1.asp LUV Calls (recommended 9/14) With oil prices hovering around $32 a barrel and OPEC cutting back on production I am going to close this play. It is right where we started it four weeks ago. Call it a breakeven and let it go. http://members.OptionInvestor.com/editorplays/edply_091403_1.asp Powerball We lost a little ground with EMC buying Documation but still holding our own. We are likely to lose some value over the next couple weeks before any 4Q ramp begins. TLAB still the black sheep in the portfolio. 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 **************** Earnings Sentiment - J. Brown I hope everyone is familiar with the term "sell the news" because we may be seeing that on a market-wide scale soon. For weeks we've been told about how great the Q3 earnings were going to be. Thankfully, not only have they been good but most companies are beating even the strong estimates for 16 percent improvement. Sure there are a few misses here and there but there always will be. Yet now that earnings are here it tends to be anticlimactic. We'll get some earnings announcement spikes but many times we'll be left with a post-earnings depression. Momentum traders pull out looking for their next ride and the markets are left with the thought "what's next?" Of course I'm a little early to be discussing the denouement to Q3 earnings season. This coming week we'll hear from hundreds of companies and as Jim alludes to in his wrap the roller coaster is just getting started. Like many coasters we tend to have a long, slow grind higher setting us up for the thrilling, sometimes terrifying drop. Of course it's the big fall that gives us enough velocity to make it up the next hill. Judging from the market internals on Friday we could see a continuation of the selling early next week. On both the NYSE and the NASDAQ decliners outnumbered advancers by more than 2 to 1 and down volume out paced up volume by more than 3 to 1 on the NYSE and 4 to 1 on the NASDAQ. We haven't seen bearish internals like that in a while. Traders should be double-checking their stops and looking at their favorite stocks for the next support level. There's still going to be a lot of dip buying but the question is how deep will the dip be. It can be painful to try and pick the bounce before it's truly begun so use extreme caution. ----------------------------------------------------------------- Market Averages DJIA ($INDU) 52-week High: 9850 52-week Low : 7197 Current : 9721 Moving Averages: (Simple) 10-dma: 9712 50-dma: 9480 200-dma: 8774 S&P 500 ($SPX) 52-week High: 1053 52-week Low : 768 Current : 1039 Moving Averages: (Simple) 10-dma: 1041 50-dma: 1016 200-dma: 940 Nasdaq-100 ($NDX) 52-week High: 1439 52-week Low : 795 Current : 1394 Moving Averages: (Simple) 10-dma: 1403 50-dma: 1342 200-dma: 1171 ----------------------------------------------------------------- Normally when the markets slide the volatility or fear indices tend to move higher. We do see some small gains but investors are still feeling pretty fear-less. CBOE Market Volatility Index (VIX) = 17.62 +0.43 CBOE Market Volatility Index (VXO) = 19.19 +0.07 Nasdaq Volatility Index (VXN) = 25.33 -0.14 ----------------------------------------------------------------- Put/Call Ratio Call Volume Put Volume Total 0.64 1,152,086 733,258 Equity Only 0.46 1,017,225 463,135 OEX 1.24 43,281 53,726 QQQ 0.97 79,996 77,558 ----------------------------------------------------------------- Bullish Percent Data Current Change Status NYSE 73.8 + 0 Bull Confirmed NASDAQ-100 79.0 + 0 Bear Correction Dow Indust. 83.3 + 0 Bull Correction S&P 500 80.8 + 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 1.09 10-Day Arms Index 1.04 21-Day Arms Index 1.16 55-Day Arms Index 1.06 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 839 927 Decliners 1944 2130 New Highs 100 119 New Lows 10 3 Up Volume 350M 310M Down Vol. 1173M 1412M Total Vol. 1561M 1737M M = millions ----------------------------------------------------------------- Commitments Of Traders Report: 10/14/03 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 Unfortunately we're still not seeing much change in sentiment for the Commercials in the big S&P futures. They remain slightly net short. Small traders aren't making many moves either and they remain net long. Commercials Long Short Net % Of OI 09/23/03 395,123 397,858 ( 2,735) (0.0%) 09/30/03 395,713 397,577 ( 1,864) (0.0%) 10/07/03 390,232 402,964 (12,732) (1.6%) 10/14/03 391,972 410,299 (18,327) (2.3%) 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 09/23/03 139,482 87,981 51,501 22.6% 09/30/03 144,681 96,801 47,880 19.8% 10/07/03 138,644 88,018 50,626 22.3% 10/14/03 133,940 86,418 47,522 21.6% 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 It's the same story here. Commercials increased their positions in both longs and shorts but remains slightly net short. Small traders trimmed some short positions and opened 30K more long contracts just in time for the late week weakness. Commercials Long Short Net % Of OI 09/23/03 109,417 204,026 ( 94,609) (30.2%) 09/30/03 163,828 218,991 ( 55,163) (14.4%) 10/07/03 212,273 225,377 ( 13,104) ( 3.0%) 10/14/03 221,897 233,066 ( 11,169) ( 2.5%) 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 09/23/03 175,750 62,558 113,192 47.5% 09/30/03 131,698 65,259 66,439 33.8% 10/07/03 134,990 63,560 71,430 36.0% 10/14/03 161,208 59,213 101,995 46.3% Most bearish reading of the year: (77,385) - 09/02/03 Most bullish reading of the year: 449,310 - 06/10/03 NASDAQ-100 Sorry...no big changes for the Commercial traders here either. They remain net short while the Small Trader remains net long. Commercials Long Short Net % of OI 09/23/03 32,648 42,565 ( 9,917) (13.2%) 09/30/03 33,571 42,993 ( 9,422) (12.3%) 10/07/03 33,253 40,861 ( 7,608) (10.3%) 10/14/03 34,639 41,880 ( 7,241) ( 9.5%) 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 09/23/03 17,862 9,880 7,982 28.8% 09/30/03 19,803 9,917 9,886 33.3% 10/07/03 18,182 9,688 8,494 30.5% 10/14/03 16,822 9,046 7,776 30.1% 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 No one seems willing to make any big bets. Commercials have been stuck in the same range for weeks now and remain net long the DJ futures. Small traders took some money out of their long and dumped some of it into shorts but not much. Commercials Long Short Net % of OI 09/23/03 15,911 9,123 6,788 27.1% 09/30/03 16,561 8,932 7,629 31.5% 10/07/03 16,277 9,528 6,749 26.2% 10/14/03 16,595 9,433 7,162 27.5% 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 09/23/03 7,505 7,779 ( 274) ( 1.8%) 09/30/03 7,578 8,125 ( 547) ( 3.5%) 10/07/03 7,392 7,910 ( 518) ( 3.4%) 10/14/03 6,427 8,495 (2,068) (13.9%) Most bearish reading of the year: (8,777) - 10/12/01 Most bullish reading of the year: 8,523 - 8/26/03 ----------------------------------------------------------------- ************************Advertisement********************************* Option Traders: Pay Attention Use the online options trading system built by option traders for options traders. Featuring direct access to each option exchange, stop and stop loss option orders, contingent option orders, online spreads, fast executions, and rates as low as $1.50 per contract ($14.95 min.). PreferredTrade, Inc. Call 888-889-9178 or Click http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN Member NYSE, Other Principal Exchanges, NFA, MSRB and SIPC ******************************************************************** *************** ASK THE ANALYST *************** "High Pole" warning I would appreciate it if would explain "high pole warning" now showing in eBay regarding your comments ... "after retracing more than 50% of the stock's recent rise from $54 to $61. The first sign of weakness would be a trade at $52." I also noticed the "high pole warning" in your StockCharts.com link. This is a great question and one that I get asked quite often, especially by those traders/investors that are using www.stockcharts.com's point and figure charts, where they will sometimes see "Alert High Pole Warning" or "Alert Low Pole Warning" in the upper left-hand corner of StockCharts.com's point and figure charts. In their most basic form, these are "warnings" that a potential reversal of trend may be in the making. But I always urge great caution in any rush to judgment when we see such an alert or point and figure chart formation develop. It is very rarely used as a "take trade action" pattern, but used as an alert to the potential reversal back lower from a bullish trend. It is extremely important to perform SECTOR and or MARKET analysis when trying to ascertain the potential implications of the "high pole" or "low pole" warning, with most common sector/market analysis using the bullish percent. The "high pole warning" pattern is most reliable in a bear-configured market. I put greater importance on a high pole warning when .... 1) A stock has recently achieved, exceeded, or come close to achieving its bullish vertical count, where the "high pole" warning may then be signaling the stock may have achieved the market's target for the stock and is now looking to distribute or sell the stock back lower as the market's price goal has been achieved. 2) A sector or like-market bullish % is at overbought levels, which is a higher level of risk condition for bulls, and the "high pole" warning develops as if the market has suddenly deemed the stock too risky based on the information at hand. I will show eBay's point and figure chart a little later, but I want to show you an example of an accurate and inaccurate high pole warning that would have been issued in SanDisk (NASDAQ:SNDK) $74.68 back in December of 2003 and March of this year. The "high pole" warning is issued whenever a point and figure chartist observes a long column of X that gets retraced by more than 50%. In SanDisk's (SNDK) chart, we're going observe the accurate high pole warning, where SNDK's PnF chart built a column of X from $19 to $29 (12 Xs) and then retraced more than 50% (more than 6 Xs) with a column of 0 from $28 to $21. Here is a chart of Sandisk (SNDK) on the left, and the ever- important NASDAQ-100 Bullish % ($BPNDX) on the right, where that market's risk would be evaluated. SanDisk and NASDAQ-100 Bullish % Chart comparisons On the left, I've shown 2 separate "high pole warning" formations where we can see a long column of X being retraced by more than 50%. In December of last year (Red C on a PnF chart) the "high pole warning" on SNDK's PnF chart may have deserved greater attention as the chart on the right, the NASDAQ-100 Bullish % ($BPNDX) was at high levels of bullish risk at 82%. In December of 2002, the NASDAQ-100 Bullish % was reading "bull confirmed" at 82%, but when it reversed back below 70%, it would have then read "bear alert." This "bear alert" status is what is referenced as a bear-configure market, where the "high pole warning" is given greater importance. However, in mid-March (between RED 3 and RED 4) the "high pole warning" could have still been observed, but may not have received as much credence and the NASDAQ-100 Bullish % ($BPNDX) was reversing up from 30% in March (RED 3), had turned "bull alert" status and the NASDAQ-100 internals looked to be building strength with 50 of the stocks (50% of 100 stocks is 50 stocks) showing PnF buy signals on their charts. Furthermore, when SNDK's PnF chart gave in inaccurate "high pole warning" it had just achieved its bearish vertical count. Today, after the October 17, 2003 close, the NASDAQ-100 Bullish % ($BPNDX) is currently in "bear correction" status at 79% bullish. Levels above 70% are deemed higher risk levels for bulls, and for the better part of the last 5-months, the NASDAQ-100 would have been and still is deemed very bullish, but also at a very high risk level for bulls. Therefore, we should give greater credence to "high pole warnings." Now, before we proceed with a chart of eBay (NASDAQ:EBAY) $54.86 -4.59%, where its chart gave the "high pole warning," just re- study the SNDK chart above in December (RED C) and January (RED 1) on its PnF chart. It's Friday night when I'm writing this column and I just got through listening to William J. O'Neil talking about how his paper, Investor's Business Daily uses models that are based on history, where they look for history to repeat. This "look to history to repeat" is a strong belief of mine, but I also look for DIVERGENCE to history, where greater profits are often found (to the upside and downside). When I recently profiled a bullish trade in eBay (NASDAQ:EBAY) near $55 dollars, I was looking for an Internet stock, that was NOT overextended on its point and figure chart, or was in some resemblance of a base of consolidation. The reason I wanted to find an Internet or Internet-related stock in a base was that we were making constant observations of various Internet stocks still surging to new 52-week highs despite the higher levels of BULLISH RISK as depicted by the various bullish % charts, like the NASDAQ-100 Bullish % ($BPNDX) above. With BULLISH RISK high, I wanted to at least look for an Internet stock that was in a base of accumulation, and a stock that was showing signs of breaking out of that base of accumulation. With that in mind, lets now look at eBay's PnF chart. I'm hoping that those of you reading this article will also look to apply some of the items discussed in today's column to other stocks you currently hold, or are thinking about buying. eBay (EBAY) Chart - $1 box The "high pole warning" on EBAY's PnF chart wasn't developed until today and came after the company reported quarterly earnings, where a gap lower situation occurred. Bears have been warning bulls all year and even late last year that EBAY was or has been overvalued, but the market simply hasn't been listening. Perhaps today's "high pole warning" is just that, a warning that the euphoric bullish that began in October of last year at $31, when EBAY gave a triple-top buy signal is about to come to an end. I would suggest a BULL that is holding a FULL position (if you normally buy $5,000 worth of stock as a FULL position) then they should most likely give credence to the current "high pole warning" and look for a rally point, which I've marked at $57, as a point to lighten up on positions. With the stock gapping lower at today's open, it may have been worth hanging onto the bullish position, until a trade at $52, where a sell signal would be generated, would then have the trader looking to hedge their bullish position, just in case the stock were to violated more critical support above $50, which is something the MARKET has not allowed EBAY to do since August. So.. there you have it. That's what a point and figure chartist describes as a "high pole warning," and how a trader/investor might look to combine a bullish % chart when attempting to interpret this warning or weigh its credence. Neither StockCharts.com or DorseyWright.com has searches for the high pole warning, as it isn't really a "pattern" to screen for, but more of an "alert." The high pole warning is probably more analogous to a flashing yellow street light that says... "hey... slow down a bit and be careful. There may be danger just around the corner." The yellow light would be flashing a little faster in a bear- configured market/sector environment. In Friday's 01:00 PM EST update, I invited subscribers at both OptionInvestor.com and premierinvestor.net to send me some technology stocks that might have been left behind in the recent technology stock advance, where the Stock Trader's Almanac points out that late October is the time to begin buying DEPRESSED high tech stocks. I didn't get receive any e-mail so I decided to tackle the "high pole warning" as I had received several questions regarding its referance in EBAY's PnF chart. Now... there is also the "low pole warning," which as you can probably guess, is a warning to BEARS that a stock might be coming back into favor with the market on a longer-term basis, as it retraces more than 50% of a decline, and long column of O (supply). This is a good point and figure "warning" pattern to be looking for this time of year to perhaps signal a stock where demand is beginning to outstrip supply, and a longer-term change of bearish trend may be taking place. Over the course of this week, try thinking back to some of the "old favorites" among technology stocks, that just haven't participated in the rally since March. Maybe there is one or two where we can quickly look at some PnF charts and maybe, just maybe there's a "low pole warning" that has been developing. While I've discussed the "high pole warning" think just the inverse as it relates to a "low pole warning." One "low pole warning" that comes to mind is Geron (NASDAQ:GERN) $14.90 -2.48%, where its PnF chart developed a "low pole warning" in February of this year, when it retraced more than 50% of a long column of O from $4.25 to $1.50. It wasn't until this spring that we actually picked up on the stock's PnF chart at the $5 level, but that "low pole warning" and bullish supply/demand characteristics that were developing sure proved correct. Again... I don't have any PnF stock screens available to find this low pole warning, which might hint of a longer-term reversal of fortune for a stock, and I've got just two eyeballs. Try to think of stocks that were high flyers like GERN, which used to fetch over $70 per share, and even though the stock you think of may have rising from $5 to $10 and is up 100%, I would still consider it to be a "beaten down" tech stock, and perhaps not unlike GERN, there's some old bulls still around that even at $10.00 can still see $70 at some point in the future. We don't care if the stock can go from $10 back to $70, but $10 to $25 would be just fine. Did you see Brooktrout (NASDAQ:BRKT) $12.75 +50% today? I remember this "old favorite" fetching $50 just over 3-years ago! Jeff Bailey ************* COMING EVENTS ************* ----------------- Earnings Calendar ----------------- Symbol Company Date Comment EPS Est ------------------------- MONDAY ------------------------------- MMM 3M Company Mon, Oct 20 Before Market Open 0.79 ALTR Altera Corporation Mon, Oct 20 After Market Close 0.11 AME AMETEK Inc. Mon, Oct 20 After Market Close 0.64 ACI ARCH COAL INC Mon, Oct 20 Before Market Open 0.02 CD Cendant Corporation Mon, Oct 20 After Market Close 0.45 CHKP Check Point Sftwr TechMon, Oct 20 Before Market Open 0.23 C Citigroup Inc. Mon, Oct 20 Before Market Open 0.85 CNF CNF Inc. Mon, Oct 20 After Market Close 0.48 EW Edwards Lifesciences Mon, Oct 20 After Market Close 0.35 RE Everest Re Group, Ltd Mon, Oct 20 After Market Close 2.05 FBP First BanCorp Mon, Oct 20 Time Not Supplied 0.53 HAS Hasbro, Inc. Mon, Oct 20 Before Market Open 0.42 HRH Hilb Rogal Hobbs Com Mon, Oct 20 After Market Close 0.55 IDXX Idexx Laboratories Mon, Oct 20 Before Market Open 0.41 ICBC Independ Comm Bank Mon, Oct 20 After Market Close 0.64 JCOM j2 Global Commu Mon, Oct 20 Time Not Supplied 0.27 KEM Kemet Mon, Oct 20 After Market Close -0.12 LXK Lexmark International Mon, Oct 20 Before Market Open 0.69 LRY Liberty Property TrustMon, Oct 20 After Market Close 0.79 LNCR Lincare Holdings Mon, Oct 20 After Market Close 0.55 MEOH Methanex Mon, Oct 20 Time Not Supplied 0.28 NE Noble Corporation Mon, Oct 20 Time Not Supplied 0.39 NHY Norsk Hydro Mon, Oct 20 Before Market Open 1.05 NVS Novartis Corporation Mon, Oct 20 Before Market Open 0.52 PCL Plum Creek Timber Mon, Oct 20 After Market Close 0.28 SLAB Silicon Laboratories Mon, Oct 20 After Market Close 0.24 LUV Southwest Airlines Mon, Oct 20 Before Market Open 0.13 SWBT Southwest Bank Texas Mon, Oct 20 After Market Close 0.48 TXN Texas Instruments Mon, Oct 20 After Market Close 0.09 TNB Thomas & Betts Mon, Oct 20 After Market Close N/A TMA Thornburg Mortgage Mon, Oct 20 After Market Close N/A UHS Universal Health Serv Mon, Oct 20 After Market Close 0.76 WWY Wm. Wrigley Jr. Co. Mon, Oct 20 Time Not Supplied 0.50 ------------------------- TUESDAY ------------------------------ NDN 99 CENTS Only Tue, Oct 21 Before Market Open 0.18 ABGX Abgenix Tue, Oct 21 Time Not Supplied -0.39 AFCI Advanced Fibre Comm Tue, Oct 21 After Market Close 0.10 ACS Affiliated Comp Serv Tue, Oct 21 Before Market Open 0.60 ALB Albemarle Corporation Tue, Oct 21 Time Not Supplied 0.40 AED Allied Domecq PLC Tue, Oct 21 Before Market Open N/A0 AMZN Amazon.com, Inc. Tue, Oct 21 Time Not Supplied 0.10 AMX America Movil, S.A. Tue, Oct 21 After Market Close 0.39 AMTD Ameritrade Holding Tue, Oct 21 Before Market Open 0.13 AMGN Amgen Tue, Oct 21 After Market Close 0.51 ARB Arbitron Inc. Tue, Oct 21 Before Market Open 0.54 ARMHY ARM Holdings Plc. Tue, Oct 21 Before Market Open 0.02 AJG Arthur J. Gallagher Tue, Oct 21 After Market Close 0.51 ASH Ashland Tue, Oct 21 Time Not Supplied 1.30 T AT&T Tue, Oct 21 Before Market Open 0.53 AVB Avalonbay Communities Tue, Oct 21 After Market Close 0.78 AV Avaya Tue, Oct 21 After Market Close 0.04 AVY Avery Dennison Corp Tue, Oct 21 During the Market 0.66 ONE Bank One Tue, Oct 21 Before Market Open 0.75 BSG BISYS GROUP INC Tue, Oct 21 After Market Close 0.15 BCC Boise Cascade Tue, Oct 21 Before Market Open 0.41 BXP Boston Properties Tue, Oct 21 After Market Close 0.97 BSX Boston Scientific CorpTue, Oct 21 After Market Close 0.29 EAT Brinker International Tue, Oct 21 Before Market Open 0.47 BNI Burlington No Santa FeTue, Oct 21 Before Market Open 0.55 CHRW C.H. Robinson Wrldwde Tue, Oct 21 After Market Close 0.34 CARS Capital Automotive Tue, Oct 21 Before Market Open 0.59 CECO Career Education Tue, Oct 21 Time Not Supplied 0.21 CNP CenterPoint Energy Tue, Oct 21 Before Market Open 0.31 CTX Centex Corporation Tue, Oct 21 After Market Close 2.33 CKFR CheckFree Tue, Oct 21 After Market Close 0.20 CPS ChoicePoint, Inc. Tue, Oct 21 Before Market Open 0.35 COH Coach, Inc. Tue, Oct 21 Before Market Open 0.18 CTSH Cognizant Tech Solut Tue, Oct 21 Time Not Supplied 0.22 CPWR Compuware Corporation Tue, Oct 21 Time Not Supplied -0.01 CPO Corn Products Intl Tue, Oct 21 Before Market Open 0.54 CYMI Cymer, Inc. Tue, Oct 21 After Market Close -0.07 DCX DaimlerChrysler Tue, Oct 21 Before Market Open 0.63 DFG Delphi Financial Grp Tue, Oct 21 After Market Close 1.06 XRAY DENTSPLY InternationalTue, Oct 21 After Market Close 0.49 DV DeVry Tue, Oct 21 Time Not Supplied 0.17 DCTM Documentum Tue, Oct 21 After Market Close 0.08 D Dominion Resources IncTue, Oct 21 Before Market Open 1.29 ELNK EarthLink Tue, Oct 21 Before Market Open 0.06 ECL Ecolab Inc. Tue, Oct 21 Before Market Open 0.31 ELUX Electrolux AB Tue, Oct 21 Time Not Supplied 0.89 ESV ENSCO International Tue, Oct 21 Before Market Open 0.19 FHR Fairmont Htl & ResortsTue, Oct 21 Time Not Supplied 0.20 FII Federated Investors Tue, Oct 21 After Market Close 0.46 FISV Fiserv Tue, Oct 21 After Market Close 0.41 FLS Flowserve Corporation Tue, Oct 21 Before Market Open 0.25 FULT Fulton Financial Tue, Oct 21 Time Not Supplied 0.33 GG Goldcorp Tue, Oct 21 After Market Close 0.10 GDW Golden West Financial Tue, Oct 21 Time Not Supplied 1.77 HRS Harris Tue, Oct 21 After Market Close 0.36 HCA HCA Tue, Oct 21 Before Market Open 0.61 HMA Health Management Ass Tue, Oct 21 Before Market Open 0.28 HUBb Hubbell Incorporated Tue, Oct 21 During the Market 0.49 HYSL Hyperion Tue, Oct 21 After Market Close 0.21 N Inco Tue, Oct 21 Time Not Supplied -0.06 IPCR IPC Holdings Tue, Oct 21 After Market Close 1.04 LF LeapFrog Enterprises Tue, Oct 21 After Market Close 0.60 LOGI Logitech InternationalTue, Oct 21 Time Not Supplied 0.23 LZ Lubrizol Tue, Oct 21 Before Market Open 0.60 MHM Masonite InternationalTue, Oct 21 Time Not Supplied 0.56 MXO Maxtor Corp Tue, Oct 21 After Market Close 0.16 MDCO MEDICINES CO Tue, Oct 21 After Market Close -0.11 MEL Mellon Financial Corp Tue, Oct 21 After Market Close 0.42 MRBK Mercantile Bankshares Tue, Oct 21 Before Market Open 0.66 MGG MGM MIRAGE Tue, Oct 21 Before Market Open 0.37 MKSI MKS Instruments Tue, Oct 21 After Market Close -0.02 JNC Nuveen Investments Tue, Oct 21 Before Market Open 0.39 OXY Occidental Petroleum Tue, Oct 21 Before Market Open 1.01 OI Owens Illinois Tue, Oct 21 After Market Close 0.40 PTZ Pulitzer Inc. Tue, Oct 21 Before Market Open 0.46 DGX Quest Diagnostics Tue, Oct 21 Before Market Open 1.08 RSH RadioShack CorporationTue, Oct 21 Before Market Open 0.32 RJF Raymond James Tue, Oct 21 During the Market 0.44 RYN Rayonier Inc. Tue, Oct 21 After Market Close 0.12 RGC Regal Entertainment Tue, Oct 21 Before Market Open 0.32 RNR RenaissanceRe HoldingsTue, Oct 21 After Market Close 1.44 RFMD RF Micro Devices, Inc.Tue, Oct 21 Time Not Supplied 0.00 RYL Ryland Group Tue, Oct 21 After Market Close 2.14 SBC SBC Communications Tue, Oct 21 Before Market Open 0.39 SLB Schlumberger Tue, Oct 21 After Market Close 0.40 STX Seagate Technology Tue, Oct 21 After Market Close 0.36 SIAL Sigma-Aldrich Corp Tue, Oct 21 After Market Close 0.65 SSD Simpson Manufacturing Tue, Oct 21 After Market Close 0.70 SLG SL Green Realty Tue, Oct 21 After Market Close 0.87 SO Southern Company Tue, Oct 21 Before Market Open 0.78 STK Storage Technology Tue, Oct 21 After Market Close 0.28 SUSQ Susquehanna BancsharesTue, Oct 21 Time Not Supplied 0.41 TLTOB Tele2 AB Tue, Oct 21 Before Market Open N/A TGN Texas Genco Holdings Tue, Oct 21 Before Market Open N/A CAKE The Cheesecake FactoryTue, Oct 21 After Market Close 0.28 TSFG The South Financial Tue, Oct 21 Before Market Open 0.44 JOE The St. Joe Company Tue, Oct 21 Before Market Open 0.16 TMO Thermo Electron Corp Tue, Oct 21 After Market Close 0.27 TMIC Trend Micro Tue, Oct 21 Time Not Supplied N/A TRMK Trustmark Corporation Tue, Oct 21 Time Not Supplied 0.50 USB U.S. Bancorp Tue, Oct 21 Time Not Supplied 0.51 UBSI United Bankshares Tue, Oct 21 Time Not Supplied 0.55 UPS UNITED PARCEL SERVICE Tue, Oct 21 Before Market Open 0.60 VVC Vectren Corporation Tue, Oct 21 After Market Close 0.20 WFSL Washington Federal Tue, Oct 21 Before Market Open 0.52 WM Washington Mutual Tue, Oct 21 After Market Close 1.12 WFC Wells Fargo & Company Tue, Oct 21 Time Not Supplied 0.93 WSTC West Corporation Tue, Oct 21 After Market Close 0.35 WES Westcorp Tue, Oct 21 After Market Close 0.67 XTO XTO Energy Inc. Tue, Oct 21 Before Market Open 0.44 YCC Yankee Candle Tue, Oct 21 After Market Close 0.24 ----------------------- WEDNESDAY ----------------------------- EK Eastman Kodak Company Wed, Oct 22 Before Market Open 0.57 ERTS Electronic Arts Wed, Oct 22 After Market Close 0.44 EDS Electronic Data Sys Wed, Oct 22 After Market Close 0.32 EFII Electronics for Imag Wed, Oct 22 After Market Close 0.22 LLY Eli Lilly Wed, Oct 22 Time Not Supplied 0.66 EEP Enbridge Energy Part Wed, Oct 22 After Market Close 0.46 ELE Endesa, S.A. Wed, Oct 22 Before Market Open N/A FMBI First Midwest Bancorp Wed, Oct 22 Before Market Open 0.49 FTN First Tennessee Natl Wed, Oct 22 Before Market Open 0.91 FBC Flagstar Bancorp Wed, Oct 22 After Market Close 1.33 FLEX Flextronics Wed, Oct 22 After Market Close 0.07 FLA Florida East Coast IndWed, Oct 22 Before Market Open N/A FDG Fording Inc. Wed, Oct 22 Time Not Supplied N/A FDRY Foundry Networks Wed, Oct 22 Time Not Supplied 0.12 FBN Furniture Brands Wed, Oct 22 After Market Close 0.35 GYI GETTY IMAGES INC Wed, Oct 22 After Market Close 0.25 GSK GlaxoSmithKline Wed, Oct 22 Before Market Open 0.59 GSF GlobalSantaFe Corp. Wed, Oct 22 Before Market Open 0.06 GLK Great Lakes Chemical Wed, Oct 22 After Market Close 0.15 GXP Great Plains Energy Wed, Oct 22 After Market Close 0.97 GBBK Greater Bay Bancorp Wed, Oct 22 Before Market Open 0.38 TV Grupo Televisa, S.A. Wed, Oct 22 Time Not Supplied 0.37 HAR Harman Intl Ind Wed, Oct 22 Time Not Supplied 0.37 HET Harrah's EntertainmentWed, Oct 22 Time Not Supplied 0.89 HHS Harte-Hanks Wed, Oct 22 Before Market Open 0.26 HLT Hilton Hotels Corp Wed, Oct 22 Before Market Open 0.09 HNI HON INDUSTRIES, Inc. Wed, Oct 22 Time Not Supplied 0.47 RX IMS Health Wed, Oct 22 After Market Close 0.28 IR Ingersoll-Rand Co. LtdWed, Oct 22 Before Market Open 0.75 ICST Integrated Cir Sys Wed, Oct 22 Before Market Open 0.24 ISIL Intersil Corporation Wed, Oct 22 After Market Close 0.15 JPM J.P. Morgan Chase & CoWed, Oct 22 Before Market Open 0.75 JCI Johnson Controls Wed, Oct 22 Before Market Open 2.27 KMB Kimberly Clark Wed, Oct 22 Before Market Open 0.84 KLAC KLA-Tencor Wed, Oct 22 After Market Close 0.17 NITE Knight Trading Group Wed, Oct 22 Before Market Open 0.19 LLL L-3 Communications Wed, Oct 22 Time Not Supplied 0.73 LM Legg Mason Wed, Oct 22 Before Market Open 0.88 LIN Linens 'n Things Inc. Wed, Oct 22 Before Market Open 0.46 LPX LP Corp Wed, Oct 22 Before Market Open 0.90 LSI LSI Logic Wed, Oct 22 After Market Close 0.02 LU Lucent Technologies Wed, Oct 22 Before Market Open -0.04 MACR Macromedia Wed, Oct 22 After Market Close 0.13 MCD McDonalds Corporation Wed, Oct 22 Time Not Supplied 0.40 MWV MeadWestvaco Wed, Oct 22 Before Market Open 0.09 MHS Medco Health SolutionsWed, Oct 22 After Market Close 0.42 MENT Mentor Graphics Wed, Oct 22 After Market Close 0.05 MRK Merck & Co., Inc. Wed, Oct 22 Before Market Open 0.85 MERQ Mercury Interactive Wed, Oct 22 After Market Close 0.23 MDG Meridian Gold Inc. Wed, Oct 22 After Market Close 0.09 MCRL Micrel Semiconductor Wed, Oct 22 After Market Close 0.01 MTGNY Modern Times Group Wed, Oct 22 Time Not Supplied N/A NHP Nationwide Health PropWed, Oct 22 Before Market Open 0.41 NCEN New Century Financial Wed, Oct 22 After Market Close 1.72 NYB New York Comm Bancorp Wed, Oct 22 Before Market Open 0.53 NXTP Nextel Partners Wed, Oct 22 Before Market Open -0.10 NCX NOVA Chemicals Wed, Oct 22 Before Market Open -0.45 PFCB P.F. Chang's Wed, Oct 22 Before Market Open 0.25 PTV Pactiv Wed, Oct 22 After Market Close 0.38 PMTC PARAMETRIC TECHNOLOGY Wed, Oct 22 Before Market Open -0.11 PAS PepsiAmericas Wed, Oct 22 Before Market Open 0.40 PKI PerkinElmer Wed, Oct 22 After Market Close 0.14 PFE Pfizer Wed, Oct 22 Before Market Open 0.44 PMI PMI Group Wed, Oct 22 Before Market Open 0.78 POT Potash Corp of Saskat Wed, Oct 22 Before Market Open 0.30 POWI Power Integrations Wed, Oct 22 After Market Close 0.15 PGN Progress Energy Wed, Oct 22 Before Market Open 1.41 PLD ProLogis Trust Wed, Oct 22 After Market Close 0.58 PEG PSEG Wed, Oct 22 Before Market Open 0.79 PHM Pulte Homes Inc. Wed, Oct 22 After Market Close 2.36 QSFT Quest Software Inc. Wed, Oct 22 After Market Close 0.04 QUIK QuickLogic CorporationWed, Oct 22 After Market Close -0.07 QVDX Quovadx Wed, Oct 22 Time Not Supplied -0.04 R Ryder System, Inc. Wed, Oct 22 Before Market Open 0.60 SGP Schering-Plough Wed, Oct 22 Before Market Open 0.10 POOL SCP Pool Corporation Wed, Oct 22 Before Market Open 0.46 SEE Sealed Air Wed, Oct 22 Time Not Supplied 0.65 SJR Shaw Communications Wed, Oct 22 Before Market Open N/A SSTI Silicon Storage Tech Wed, Oct 22 After Market Close -0.01 SNA Snap-on Incorporated Wed, Oct 22 Before Market Open 0.31 STM STMicroelectronics Wed, Oct 22 After Market Close 0.10 SDS SunGard Data Systems Wed, Oct 22 After Market Close 0.32 SWBD Switchboard Incorp Wed, Oct 22 Before Market Open N/A SYMC Symantec Wed, Oct 22 Time Not Supplied 0.45 TKLC Tekelec Wed, Oct 22 After Market Close 0.08 TDS Telephone Data Wed, Oct 22 Before Market Open 0.60 TEX Terex Corporation Wed, Oct 22 After Market Close 0.32 BK The Bank of New York Wed, Oct 22 Before Market Open 0.42 FAF The First American Wed, Oct 22 Before Market Open 1.42 MNI The McClatchy Company Wed, Oct 22 Before Market Open 0.71 PGR The Progressive Wed, Oct 22 After Market Close 1.38 SWK The Stanley Works Wed, Oct 22 Before Market Open 0.62 USM U.S. Cellular Wed, Oct 22 Before Market Open 0.43 WOOF VCA Antech, Inc. Wed, Oct 22 After Market Close 0.31 VRTS VERITAS Software Corp Wed, Oct 22 After Market Close 0.18 EYE VISX Inc. Wed, Oct 22 Time Not Supplied 0.11 WAT Waters Corporation Wed, Oct 22 Before Market Open 0.33 WHR Whirlpool Corporation Wed, Oct 22 Before Market Open 1.47 WSH Willis Group Holdings Wed, Oct 22 After Market Close 0.36 WYE WYETH Wed, Oct 22 Before Market Open 0.59 YRK York International Wed, Oct 22 Before Market Open 0.67 ZMH Zimmer Inc. Wed, Oct 22 After Market Close 0.41 ------------------------- THURSDAY ----------------------------- SE 7-Eleven Thu, Oct 23 Before Market Open 0.31 RKY Adolph Coors, Co. Thu, Oct 23 Before Market Open 1.51 ACV Alberto-Culver Co. Thu, Oct 23 Time Not Supplied 0.73 ALEX Alexander & Baldwin Thu, Oct 23 Time Not Supplied 0.53 AT ALLTEL Corp. Thu, Oct 23 After Market Close 0.80 AEP American Electric Pow Thu, Oct 23 Before Market Open 0.86 AIG American InternationalThu, Oct 23 Before Market Open 0.98 APPX American Pharm Part Thu, Oct 23 Time Not Supplied 0.23 ACF AmeriCredit Corp. Thu, Oct 23 After Market Close 0.18 AVZ AMVESCAP PLC Thu, Oct 23 Before Market Open 0.22 APA Apache Corporation Thu, Oct 23 Before Market Open 1.77 AMCC Applied Micro CircuitsThu, Oct 23 After Market Close -0.03 ARW Arrow Electronics, IncThu, Oct 23 Time Not Supplied 0.15 ASCL Ascential Software Thu, Oct 23 After Market Close 0.03 AZN AstraZeneca PLC Thu, Oct 23 Before Market Open 0.35 BHI Baker Hughes Incorp Thu, Oct 23 Before Market Open 0.24 BMS Bemis Company, Inc. Thu, Oct 23 Before Market Open 0.74 BHE Benchmark Electronics Thu, Oct 23 Time Not Supplied 0.47 BMY Bristol-Myers Squibb Thu, Oct 23 Before Market Open 0.41 BOBJ Business Objects Thu, Oct 23 After Market Close 0.16 CCMP Cabot MicroelectronicsThu, Oct 23 Before Market Open 0.44 ELY Callaway Golf Thu, Oct 23 After Market Close 0.02 CAH Cardinal Health, Inc. Thu, Oct 23 During the Market 0.77 CLS Celestica Thu, Oct 23 Before Market Open -0.02 CELG Celgene Corp. Thu, Oct 23 Before Market Open 0.04 CEY Certegy Thu, Oct 23 Before Market Open 0.40 CSB Ciba Specialty Chem Thu, Oct 23 Time Not Supplied 0.47 CIN Cinergy Corp. Thu, Oct 23 Time Not Supplied 0.70 CIT CIT Group Thu, Oct 23 Before Market Open 0.67 CNH CNH Global N.V. Thu, Oct 23 Before Market Open -0.13 KOF COCA-COLA FEMSA S A Thu, Oct 23 Before Market Open 0.49 CL Colgate-Palmolive Thu, Oct 23 Before Market Open 0.63 COLT COLT Telecom Group Thu, Oct 23 Before Market Open N/A COLM Columbia Sportswear Thu, Oct 23 After Market Close 1.51 CYH Community Health Sys Thu, Oct 23 After Market Close 0.30 CTC Compania de Telecom Thu, Oct 23 After Market Close 0.04 CE Concord EFS Thu, Oct 23 Before Market Open 0.18 CBE Cooper Industries Ltd.Thu, Oct 23 Before Market Open 0.74 CFC Countrywide Financial Thu, Oct 23 Before Market Open 5.02 CR Crane Thu, Oct 23 After Market Close 0.45 DASTY Dassault Systemes SA Thu, Oct 23 Time Not Supplied 0.28 DP Diagnostic Products Thu, Oct 23 Before Market Open 0.46 DQE DQE Thu, Oct 23 After Market Close 0.35 EMN Eastman Chemical Thu, Oct 23 After Market Close 0.28 ELX Emulex Thu, Oct 23 Time Not Supplied 0.23 ENDP Endo Pharmaceuticals Thu, Oct 23 Before Market Open 0.26 EC Engelhard Corporation Thu, Oct 23 Before Market Open 0.47 ETR Entergy Thu, Oct 23 Before Market Open 1.53 ELAB Eon Labs Thu, Oct 23 Before Market Open 0.31 FMX FEMSA Thu, Oct 23 Before Market Open 1.48 FR First Indl Realty TrstThu, Oct 23 Time Not Supplied 0.87 FE FirstEnergy Thu, Oct 23 Time Not Supplied 0.89 FPL FPL Group Thu, Oct 23 Before Market Open 1.81 BEN Franklin Resources Thu, Oct 23 Time Not Supplied 0.56 FDP Fresh Del Monte PrduceThu, Oct 23 Before Market Open 0.57 GTW Gateway, Inc. Thu, Oct 23 After Market Close -0.19 GMT GATX Corporation Thu, Oct 23 Before Market Open 0.28 GR Goodrich Corporation Thu, Oct 23 Before Market Open 0.20 GT Goodyear Tire & RubberThu, Oct 23 Before Market Open -0.14 HSC Harsco Corporation Thu, Oct 23 Before Market Open 0.63 HCN Health Care REIT, Inc.Thu, Oct 23 Time Not Supplied 0.70 IMN Imation Corp. Thu, Oct 23 Before Market Open 0.49 IDC Interactive Data Corp Thu, Oct 23 Before Market Open 0.19 IFF Intl Flav Fragrances Thu, Oct 23 Before Market Open 0.61 IVGN Invitrogen CorporationThu, Oct 23 Before Market Open 0.52 SFI iStar Financial Thu, Oct 23 Before Market Open N/A ITT ITT Industries Thu, Oct 23 Before Market Open 0.96 JDSU JDS Uniphase Corp Thu, Oct 23 After Market Close -0.02 JBLU JetBlue Airways Thu, Oct 23 Before Market Open 0.37 KZL Kerzner International Thu, Oct 23 Time Not Supplied 0.18 KIM KIMCO REALTY CORP Thu, Oct 23 After Market Close 0.81 LH Laboratory Corp of Am Thu, Oct 23 Before Market Open 0.59 LVLT Level 3 CommunicationsThu, Oct 23 Time Not Supplied -0.43 LYO Lyondell PetrochemicalThu, Oct 23 Before Market Open -0.33 MRO Marathon Oil Corp Thu, Oct 23 Time Not Supplied 0.84 MEE Massey Energy Company Thu, Oct 23 After Market Close -0.19 MCK McKesson Corporation Thu, Oct 23 After Market Close 0.52 MEDI MedImmune Thu, Oct 23 Before Market Open -0.08 MSFT Microsoft Thu, Oct 23 Time Not Supplied 0.29 MTX MINERALS TECHNOLOGIES Thu, Oct 23 After Market Close 0.63 NBG National Bank Greece Thu, Oct 23 Before Market Open N/A NFG National Fuel Gas Co Thu, Oct 23 After Market Close 0.00 NATI National Instruments Thu, Oct 23 After Market Close 0.15 NCR NCR Corporation Thu, Oct 23 Before Market Open 0.12 NET Network Associates Thu, Oct 23 Time Not Supplied 0.11 NRD NORANDA INC Thu, Oct 23 Time Not Supplied N/A NT Nortel Networks Thu, Oct 23 Time Not Supplied 0.00 NST NSTAR Thu, Oct 23 Time Not Supplied 1.27 NUE Nucor Thu, Oct 23 Before Market Open 0.15 ONB Old National Bancorp Thu, Oct 23 Before Market Open 0.40 PCBC Pacific Cap Bancorp Thu, Oct 23 Before Market Open 0.39 PPE Park Place Entertain Thu, Oct 23 Before Market Open 0.16 PRX Pharmaceutical Res Thu, Oct 23 Before Market Open 1.06 PHLY Phil Consolidated Thu, Oct 23 Time Not Supplied 0.87 PBI Pitney Bowes Inc. Thu, Oct 23 After Market Close 0.62 PSD Puget Energy Thu, Oct 23 After Market Close 0.08 QLTI QLT Inc. Thu, Oct 23 Before Market Open 0.13 IQW Quebecor World Thu, Oct 23 Time Not Supplied 0.49 RTN Raytheon Thu, Oct 23 Before Market Open 0.43 RBK Reebok Thu, Oct 23 Time Not Supplied 0.93 RGA Reinsurance Grp Am Thu, Oct 23 After Market Close 0.78 RESP Respironics, Inc. Thu, Oct 23 Before Market Open 0.38 RD Royal Dutch Petroleum Thu, Oct 23 Time Not Supplied 0.93 TSG Sabre Holdings Corp. Thu, Oct 23 Before Market Open 0.23 SANM Sanmina-SCI Corp. Thu, Oct 23 Time Not Supplied 0.02 SLE Sara Lee Thu, Oct 23 Before Market Open 0.26 SAY Satyam Comp Serv LmtedThu, Oct 23 Time Not Supplied 0.15 SFA Scientific-Atlanta IncThu, Oct 23 After Market Close 0.26 SRA Serono S.A. Thu, Oct 23 Before Market Open 0.16 SCRI SICOR Thu, Oct 23 Time Not Supplied 0.24 SNE Sony Corporation Thu, Oct 23 Before Market Open N/A PCS Sprint Corp Thu, Oct 23 Before Market Open -0.07 FON Sprint FON Group Thu, Oct 23 Before Market Open 0.34 SFG StanCorp Financial GrpThu, Oct 23 Time Not Supplied 1.21 STE Steris Thu, Oct 23 Before Market Open 0.29 SEO Stora Enso Thu, Oct 23 Before Market Open 0.09 SUN Sunoco Thu, Oct 23 Before Market Open 1.36 SWMAY Swedish Match Thu, Oct 23 Time Not Supplied N/A SLVN Sylvan Learning Sys Thu, Oct 23 Before Market Open 0.14 TECH Techne Thu, Oct 23 Before Market Open 0.29 TE TECO Energy Inc. Thu, Oct 23 Time Not Supplied 0.39 DOW The Dow Chemical Co Thu, Oct 23 Before Market Open 0.25 MHP The McGraw-Hill Co Thu, Oct 23 Before Market Open 1.50 TKR The Timken Company Thu, Oct 23 Before Market Open 0.02 TDW Tidewater Thu, Oct 23 Before Market Open 0.24 TTN Titan Corp. Thu, Oct 23 Before Market Open 0.19 TMK Torchmark Thu, Oct 23 Before Market Open 0.97 TAC TRANSALTA CORP Thu, Oct 23 Time Not Supplied N/A TRH Transatlantic HoldingsThu, Oct 23 Time Not Supplied 1.40 TRYF Troy Financial Thu, Oct 23 Before Market Open 0.40 TUES Tuesday Morning Corp Thu, Oct 23 Before Market Open 0.15 UNP Union Pacific Thu, Oct 23 Before Market Open 1.15 UDI United Defense Ind Thu, Oct 23 Before Market Open 0.48 URI United Rentals Thu, Oct 23 Before Market Open 0.40 USTR United Stationers Inc.Thu, Oct 23 After Market Close 0.70 UPM UPM-Kymmene Group Thu, Oct 23 Time Not Supplied 0.14 UTSI UTStarcom Thu, Oct 23 After Market Close 0.45 VRSN VeriSign, Inc. Thu, Oct 23 After Market Close 0.14 VFC VF Thu, Oct 23 Time Not Supplied 0.98 VVI Viad Corp Thu, Oct 23 Before Market Open 0.26 VTSS Vitesse Semiconductor Thu, Oct 23 After Market Close -0.03 VOLVY Volvo AB Thu, Oct 23 Time Not Supplied N/A WC WellChoice, Inc. Thu, Oct 23 After Market Close 0.58 WEN Wendy's International Thu, Oct 23 Time Not Supplied 0.54 WDC Western Digital Corp. Thu, Oct 23 After Market Close 0.19 WWCA Western Wireless Thu, Oct 23 After Market Close 0.00 WEC Wisconsin Energy Corp Thu, Oct 23 Before Market Open 0.43 XEL Xcel Energy Thu, Oct 23 Before Market Open 0.40 XRX Xerox Corporation Thu, Oct 23 Before Market Open 0.10 ZBRA Zebra Technologies Thu, Oct 23 Before Market Open 0.48 ------------------------- FRIDAY ------------------------------- ALE Allete Fri, Oct 24 Before Market Open 0.52 AEE Ameren Corporation Fri, Oct 24 Before Market Open 1.44 ANZ Australia New Zeal BnkFri, Oct 24 Time Not Supplied N/A AVX AVX Corporation Fri, Oct 24 Before Market Open -0.06 BC Brunswick Corporation Fri, Oct 24 Before Market Open 0.37 CLP Colonial Prop Trust Fri, Oct 24 Time Not Supplied 0.82 CSX CSX Fri, Oct 24 Before Market Open 0.54 DCN Dana Fri, Oct 24 Before Market Open 0.26 EAS Energy East Corp Fri, Oct 24 After Market Close 0.16 HCR MANOR CARE INC NEW Fri, Oct 24 Before Market Open 0.36 MDU MDU Resources Fri, Oct 24 Time Not Supplied 0.90 NBP Northern Border Part Fri, Oct 24 Before Market Open 0.62 PNW Pinnacle West Capital Fri, Oct 24 Before Market Open 1.20 ROP Roper Industries Fri, Oct 24 After Market Close 0.62 SCG SCANA Fri, Oct 24 Before Market Open 0.81 TROW T. Rowe Price Fri, Oct 24 Before Market Open 0.48 UNA UNOVA Inc. Fri, Oct 24 After Market Close -0.13 WY Weyerhaeuser Co. Fri, Oct 24 Time Not Supplied 0.53 WPS WPS Resources Fri, Oct 24 After Market Close 0.80 ---------------------------------------------- Upcoming Stock Splits In The Next Two Weeks... ---------------------------------------------- Symbol Company Name Ratio Payable Executable ATU Atuant Corp 2:1 Oct 21st Oct 22nd OTEX Open Text Corp 2:1 Oct 28th Oct 29th GBR Greenbriar Corporation 2:1 Oct 28th Oct 29th MDU MDU Resources Group Inc 3:2 Oct 29th Oct 30th USNA USANA Health Sciences Inc 2:1 Oct 30th Oct 31st AMRB Am River HoldingsCorp 3:2 Oct 31st Nov 3rd UNTD United Online 3:2 Oct 31st Nov 3rd EASI Engineered Support Systems3:2 Oct 31st Nov 3rd MNRO Monro Muffler Brake Inc 3:2 Oct 31st Nov 3rd -------------------------- Economic Reports This Week -------------------------- Earnings will take center stage again this week with little on the Economic front. ============================================================== -For- ---------------- Monday, 10/20/03 ---------------- Leading Indicators (DM) Sep Forecast: 0.0% Previous: 0.4% Treasury Budget (DM) Sep Forecast: $20.8B Previous: $42.5B Semiconductor Book-to-Bill ----------------- Tuesday, 10/21/03 ----------------- None ------------------- Wednesday, 10/22/03 ------------------- API Weekly Statistics ------------------ Thursday, 10/23/03 ------------------ Initial Claims (BB) 10/18 Forecast: N/A Previous: 384K Natural Gas Inventories ---------------- Friday, 10/24/03 ---------------- None Definitions: DM= During the Market BB= Before the Bell AB= After the Bell NA= Not Available ************************Advertisement************************* Full Service Brokers Man Financial announces the formation of the OneStopOption Brokerage Group, addressing the demand for personalized, experienced service for both securities* and futures trading within the same firm. 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To subscribe you may go to our website at www.OptionInvestor.com and click on "subscribe" to use our secure credit card server or you may simply send an email to Contact Support with your credit card information,(number, exp date, name) or you may call us at 303-797-0200 and give us the information over the phone. You may also fax the information to: 303-797-1333 ********** DISCLAIMER ********** Please read our disclaimer at: http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html ************************************************************** ADVERTISING INFORMATION For more information on advertising in OptionInvestor Newsletter, or any Premier Investor Network newsletter please contact: Contact Support
The Option Investor Newsletter Sunday 10-19-2003 Sunday 2 of 5 In Section Two: Watch List: Plenty of Contenders Put Play of the Day: ATK Dropped Calls: BSC, EXC Dropped Puts: None ************************Advertisement************************* Live Securities Brokerage Service with Licensed Option Principals OCO Stop & Profit Orders OneStopOption All types of Spreads and Buy Writes 888-281-9569 Auto-Trade Market Monitor Signals Personal Service and Education **Services available for Foreign Traders including Canada** http://www.OneStopOption.com ************************************************************** ********** Watch List ********** Plenty of Contenders Amazon.com - AMZN - close: 59.69 change: -0.22 WHAT TO WATCH: There are going to be a lot of traders eyeing shares of AMZN this week. The company announces earnings after the close on Tuesday and estimates are for 10 cents/share. The stock has surged higher in October partly due to the very strong earnings performance from fellow Internet darling Yahoo (YHOO). Yet now there is some question about how AMZN might do or say in their conference call after EBAY's announcement this last week. EBAY hit their numbers but warned for the future. We think that one way to play AMZN might be a straddle but option premium is pretty high. Definitely one to watch. Chart= --- Golden West Financil - GDW - close: 95.91 change: -0.89 WHAT TO WATCH: One of the strongest stocks in the banking sector has been GDW. The stock has enjoyed a very strong October and the company announces earnings on Tuesday before the opening bell. Estimates are for $1.77/share. Because of the big ramp up the stock could see a sell the news round of profit taking and the technicals are looking a little tired. A breakdown under $95 might lead to a retest of its simple 50-dma or at least $90. Chart= --- Electronic Arts - ERTS - close: 103.04 change: -1.79 WHAT TO WATCH: ERTS has been a frequent guest on our watch list. Shares have rallied from the low 90s in late September to nearly 105 as of Thursday. There is a lot of expectation for the company's earnings announcement after the bell on Wednesday this week. Estimates are for 44 cents/share. If ERTS fails to perform or says something negative in their conference call there is a lot of profit in this stock that could vanish as traders run for the exits on any bad news. Chart= --- Countrywide Financial Corp - CFC - close: 94.42 change: -0.88 WHAT TO WATCH: Wow! Talk about your bottle-rocket trajectories. This stock has been in rally-mode almost non-stop from the $70 level in mid September. The company announced a positive earnings warning on October 10th and shares vaulted over the $90 level. Now the stock is a contender for valuation downgrades and we've already seen one of them this last week. Traders will be watching CFC because the company announces earnings before the bell on Thursday. Estimates are for $5.25/share. Chart= --- Symantec Corp - SYMC - close: 64.95 change: -1.24 WHAT TO WATCH: SYMC is yet another company announcing earnings this week. The stock is very extended and has been trading sideways as investors wait to hear the company report. Odds of a sell the news type of reaction are high but SYMC could blow away earnings and spook the shorts too. It is a potential for a straddle at the $65 strike. Look for earnings on Wednesday after the market's close. Estimates are 45 cents/share. Chart= ---------------------------------- RADAR SCREEN: more stocks to watch ---------------------------------- PCAR $77.50 -1.21 - PCAR has been a popular stock on our watch lists and shares have run into resistance at its simple 50-dma during the month of October. Now watch for a reaction to earnings on Oct. 21st. HOT $36.29 -0.49 - Shares of HOT are in a very nice ascending channel but the stock is looking a little weak and could be heading toward the bottom of said channel. Look for a bounce from the 30 or 50-dma. SFA $35.00 -1.65 - Is that a double-top in shares of SFA at the $37.00 mark? It certainly could be. The company announces earnings on Oct. 23rd. SANM $10.47 -0.50 - SANM is also in a nice ascending channel but has found resistance at the $11.00 level. Stock traders may want to watch for a bounce form its simple 30-dma near the $10 mark. PD $56.15 -0.91 - Can you say overextended? The stock has been in rally mode since the bounce off its 50-dma in late September. That was about $10 ago. There is some potential support at $54 but we'd be watching for a break under $55. BWA $77.65 -1.24 - Shares of BWA are also looking a little tired. Watch out for earnings on Oct. 27th. RYL $80.60 -1.20 - RYL is also looking a lot like a short candidate, especially on a breakdown below the $80 mark. Unfortunately, the company announces earnings on Oct. 21. Hmm... it may be another straddle candidate. ************************Advertisement************************* No time to follow the Market Monitor? Tired of missing good Trades because you stepped away from your computer? OneStopOption Group can follow the Market Monitor for you. You choose the number of contracts, we take care of the rest!! Trade Stock Options, Stocks and ALL Futures with the same Group. Call us 888 281-9569 to see if you qualify to have us rebate your subscription cost. http://www.OneStopOption.com ************************************************************** ******************* THE PLAY OF THE DAY ******************* Put Play of the Day: ******************** Alliant Tech Systems - ATK - cls: 49.12 change: -0.38 stop: 50.51 See details in play list ************************** PICKS WE DROPPED THIS WEEK ************************** Remember that historically, when we drop a pick it will go up 10 to 15% the very next week. It is part of Murphy's Law. Just because we drop a stock as a pick does not mean we are advocating a "sell" on any position you have. We are simply dropping our recommendation as a new play. Existing plays can and do continue on and are usually profitable. CALLS ^^^^^ Bear Stearns Cos - BSC - close: 75.32 chg: -1.94 stop: 75.25 The new scandal du' jour concerning specialists at the NYSE and BSC's connection through the Bear Wagner specialist firm may have contributed to BSC's weakness on Friday. Or it could just be profit taking from two and a half weeks of slowly climbing higher. Or it could be a reaction to BSC's announcement on Friday to sell $5 billion in mixed securities and debt. Whatever the case the tone for BSC has turned more bearish and shares actually traded below our stop during Friday's weakness. We're closing the play for a loss. Picked on October 9 at $77.50 Change since picked: - 2.18 Earnings Date 09/18/03 (confirmed) Average Daily Volume: 1.2 million Chart = --- Exelon Corporation - EXC - close: 63.67 change: -0.63 stop: 63.25 We haven't officially been stopped out of EXC but the weakness on Friday and close under the $64 level is enough to scare us out of the play. Technicals have turned bearish and with the market's recent weakness we could see EXC consolidate back towards the $61-62 region. An additional reason to close the play is EXC's upcoming earnings announcement on Thursday. We traditionally choose not to hold over an earnings announcement with straight puts or calls. Picked on September 28th at $62.64 Change since picked: +1.03 Earnings Date 10/23/03 (confirmed) Average Daily Volume = 1.22 mln Chart = PUTS ^^^^ None *********** DEFINITIONS *********** SL = Suggested stop loss. Sell if bid breaks this price. OI = Open Interest - the number of open contracts outstanding. ITM = In the money ATM = At the money OTM = Out of the money ADV = Average Daily Volume The options with a "*" by the strike price are our choices from the group. If the stock moves as expected we feel they have the best chance to substantially increase or double in price with the best risk/reward ratio compared to the other options for the same stock. You must determine if they fit your risk profile for time and price. Analysts ratings: 1-2-3-4-5 Analysts who follow each stock rate it and these rating are accumulated and displayed as follows; Position 1 = number of analysts recommending "strong buy" Position 2 = number of analysts recommending "moderate buy" Position 3 = number of analysts recommending "hold" or "neutral" Position 4 = number of analysts recommending "moderate sell" Position 5 = number of analysts recommending "strong sell" Example rating 5-3-1-0-0 would be 5 "strong buys", 3 "moderate buys", 1 "hold" recommendation. RISKS of SELLING PUTS: The risk of selling naked puts is always the possibility of a catastrophic event that drops the stock below the strike price and could result in the stock being PUT to you. Always protect yourself with a "buy to cover" limit order to take you out before this can happen. ************************Advertisement************************* Stock Option and Futures Brokerage OneStopOption teams the best trading technology with varying levels of professional assistance at very competitive prices. Commission costs are comparable to discount brokerage and tailored to individual customer needs. The power of one brokerage group with experience and expertise in the Securities* and Futures Markets offers unprecedented convenience for traders. Access To All Futures Markets Toll Free 888-281-9569 Stock Option Principals www.OneStopOption.com ************************************************************** ********** DISCLAIMER ********** Please read our disclaimer at: http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html ************************************************************** ADVERTISING INFORMATION For more information on advertising in OptionInvestor Newsletter, or any Premier Investor Network newsletter please contact: Contact Support
The Option Investor Newsletter Sunday 10-19-2003 Sunday 3 of 5 In Section Three: Current Calls: AZO, BBY, CBE, COO, FD New Calls: None Current Put Plays: COCO, MATK, MRK New Puts: ATK, DNA ************************Advertisement************************* OneStopOption.com Trade: Securities, Stock Options, Futures Contracts Service: Experienced Brokers Personal Assistance Convenience of One Brokerage Online and Live Broker Trading Experience... The Difference OneStopOption.com 888-281-9569 *************************************************************** ****************** CURRENT CALL PLAYS ****************** AutoZone, Inc. - AZO - close: 93.06 change: -0.88 stop: 91.95 Company Description: AutoZone is a retailer of automotive parts and accessories, primarily focusing on do-it-yourself customers. Each of its more than 2900 stores in 42 states and Mexico carries an extensive product line for cars, vans and light trucks, including new and re-manufactured automotive hard parts, maintenance items and accessories. Approximately half of its domestic stores also have a commercial sales program, which provides commercial credit and prompt delivery of parts and other products to local repair garages, dealers and service stations. Why we like it: The October consolidation between 92.00 and 95.00 continue for shares of AZO. Tuesday the stock was close to breaking out but the general weakness or drift lower in the broader indices was too heavy an influence on AZO. We remain untriggered and wait for AZO to trade above the $95.00 mark. Should this occur our first target is $100.00 and we'll initiate the play with a stop loss at 91.95. More aggressive traders who prefer to target an entry on a dip can look for a bounce from the $92.00 level, especially if the markets continue to slip on Monday. Suggested Options: Shorter Term: The November 95 Call will offer short-term traders the best return on an immediate move, as it is currently at the money. Longer Term: Aggressive traders looking to capitalize on an extended rally will want to look to the November 100 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 December 100 Call. BUY CALL NOV 90 AZO-KR OI= 603 at $5.10 SL=3.00 BUY CALL NOV- 95 AZO-KS OI= 623 at $2.45 SL=1.25 BUY CALL NOV-100 AZO-KT OI= 438 at $0.90 SL=0.45 BUY CALL DEC- 95 AZO-LS OI= 651 at $3.70 SL=1.75 BUY CALL DEC-100 AZO-LT OI= 427 at $1.95 SL=1.00 Annotated Chart of AZO: Picked on October xxth at $xx.xx Change since picked: -0.00 Earnings Date 12/22/03 (unconfirmed) Average Daily Volume = 989 K Chart = --- Best Buy Company - BBY - cls: 52.65 chng: -0.97 stop: 51.75 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: Both the RLX retail index and BBY hit highs this week not seen since April of 2000. As we expected with BBY the stock has begun to pull back with some profit taking. Hopefully, this will set us up for another entry point on a bounce but we need to be careful with our timing. This coming week is full of earnings reports with nearly 700 companies reporting and BBY could be influenced by any strong or weak retail announcements. Another item that makes us cautious is the RLX, which had been struggling with the 382 level most of this last week, still looks like it could consolidate further. This may weigh on shares of BBY and we wouldn't be surprised to see BBY pull back to its simple 50- dma. The bad news is this would stop us out and we hate to adjust our stop losses backwards. That's a bad habit we don't want to start. We are NOT going to recommend any new positions in BBY at this moment. We may change our tune if BBY can bounce from the $52.00 level again. Currently our stop is at 51.75. Suggested Options: We are not suggesting new bullish entries at this time. The options listed below are only a reference should BBY bounce from the $52.00 level. BUY CALL NOV-50 BBY-KJ OI= 1533 at $4.00 SL=2.25 BUY CALL NOV-55 BBY-KK OI= 5155 at $1.40 SL=0.70 BUY CALL DEC-55 BBY-LK OI= 5384 at $2.45 SL=1.20 Annotated Chart of BBY: Picked on October 5th at $51.00 Change since picked: +1.65 Earnings Date 12/17/03 (unconfirmed) Average Daily Volume = 3.87 mln Chart = --- Cooper Industries - CBE - cls: 51.41 chg: -0.98 stop: 49.99*new* 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 initially added CBE to the call list on a nice breakout from its bull flag consolidation pattern. Soon thereafter the stock spent several days consolidating sideways between $50.00 and 51.20. This Wednesday finally produced the upside move we have been waiting for but the general market weakness late this week has turned CBE around. We certainly don't like the three-day candlestick pattern in CBE now and suggest bulls tread cautiously. If the markets pull back again on Monday we'd look for CBE to slip towards the psychological $50 level. A bounce from $50.00 might work but we have a deadline approaching that may not sit well with traders. CBE is expected to announce earnings on Thursday and we don't plan to hold over the event. That means we'll be dropping the play in the next two or three days. Due to the short time frame with CBE's earnings we are NOT suggesting new bullish entries at this time. We are going to raise our stop loss to 49.99 but more conservative traders may want to put theirs under $51.00 to escape closer to breakeven. Suggested Options: We are not suggesting new bullish entries at this time. Annotated Chart: Picked on October 5 at $51.00 Change since picked: + 0.41 Earnings Date 10/23/03 (confirmed) Average Daily Volume: 539 thousand Chart = --- Cooper Cos - COO - close: 42.05 chg: -0.85 stop: 39.99 Company Description: The Cooper Companies, Inc. manufactures and markets specialty healthcare products through its CooperVision and CooperSurgical units. CooperVision markets a broad range of contact lenses for the vision care market. Headquartered in Lake Forest, Calif., it manufactures in Huntington Beach, Calif., Rochester, N.Y., Norfolk, Va., Adelaide, Australia, Farnborough and Hamble, England, Madrid, Spain and Toronto. CooperSurgical supplies diagnostic products, surgical instruments and accessories to the gynecology market. With headquarters in Trumbull, Conn., it also manufactures in Bedminister N.J., Cranford, N.J., Fort Atkinson, Wis., Malmo, Sweden, Montreal and Berlin. (source: company press release) Why We Like It: Bulls in COO can't complain about the recent week. The stock confirmed the recent breakout from a five-week consolidation. We were encouraged to see the stock climb higher but after six days in a row and the mood of the markets turning on Thursday we suspected Friday would be a down day. Thursday's update suggested traders look for the $42.00 level to hold as support. So far it has but market action in Monday will be key. If the markets continue to drop on profit taking then we may see COO drift towards the $41.00 level. News this week was light. Diligent investors may have seen the press release about these Optistock reports. A new financial report is highlighting the potential for double-digit growth for higher-margin specialty contact lenses. Gosh, who would benefit from such an improvement? Probably Coooper who just happens to be one of the "sponsors" of said investment report. Suggested Options: Short-term traders should probably look over the November options while longer-term traders can evaluate the February strikes. BUY CALL NOV 40 COO-KH OI= 843 at $3.20 SL=1.60 BUY CALL NOV 45 COO-KI OI=1547 at $0.70 SL= -- BUY CALL FEB 45 COO-BI OI= 430 at $2.10 SL=1.05 Annotated chart: Picked on October 12 at $41.40 Change since picked: + 0.65 Earnings Date 09/03/03 (confirmed) Average Daily Volume: 391 thousand Chart = --- Federated Dep Store - FD - cls: 46.41 chng: -0.57 stop: 44.25 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: Would you like another chance? Shares of FD tagged a fresh 52- week high early Friday morning before sliding lower throughout the remainder of the day. The stock has been very strong from its late September low and is overdue for some profit taking. We think the Friday weakness will continue into next week and bulls should get another chance to buy the dip. We'd look for a pull back towards the 45.25-to-45.75 region (FYI: the simple 10-dma is at 45.75). Keep an eye on the RLX retail index. It too looks top heavy after fighting with the 382 level all week. As the RLX slips so should FD. Traders can be patient and wait for the bounce. Suggested Options: Short-term traders will probably be served best by the November 45 or 47.50 strikes. Longer-term investors may want to look over the January options. BUY CALL NOV-45.00 FD -KI OI=287 at $2.70 SL=1.35 BUY CALL NOV-47.50 FD -KW OI=312 at $1.30 SL=0.65 BUY CALL JAN-47.50 FD -AW OI= 58 at $2.60 SL=1.30 BUY CALL JAN-50.00 FD -AJ OI=848 at $1.45 SL=0.75 Annotated Chart of FD: Picked on October 9th at $45.60 Change since picked: +0.81 Earnings Date 11/12/03 (unconfirmed) Average Daily Volume = 1.89 mln Chart = ************** NEW CALL PLAYS ************** None ************************Advertisement********************************* Option Traders: Pay Attention Use the online options trading system built by option traders for options traders. Featuring direct access to each option exchange, stop and stop loss option orders, contingent option orders, online spreads, fast executions, and rates as low as $1.50 per contract ($14.95 min.). PreferredTrade, Inc. Call 888-889-9178 or Click http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN Member NYSE, Other Principal Exchanges, NFA, MSRB and SIPC ******************************************************************** ***************** CURRENT PUT PLAYS ***************** Corinthian Colleges - COCO - cls: 53.70 chg: -0.12 stop: 56.61 Company Description: Corinthian Colleges, Inc. is one of the largest for-profit post- secondary education companies in North America, and serves the large and growing segment of the population seeking to acquire career-oriented education to become more qualified and marketable in today's increasingly demanding workplace. Corinthian's colleges offer master's, bachelor's and associate's degrees and diploma programs in a variety of fields, with a concentration on careers in health care, business, criminal justice and technology. (source: company press release) Why We Like It: COCO was one of the big losers this week. The stock finally cracked its simple 50-dma and then broke through the bottom of its rising channel. Traders were quick to sniff out weakness and shares fell quickly in profit taking after a very strong run this year. The stock almost hit our initial target near $50.00 on a big intraday spike this last Wednesday. Since then shares have been trading sideways near its simple 100-dma but below old support now new resistance at $55.00. Traders might want to consider new positions on failed rallies in the $54.50-55.00 range. Meanwhile we're going to keep our stop at 56.61, the high from Tuesday and just above its simple 10-dma. This week brings an earnings announcement from another education stock Career Education (CECO). They announce on Oct. 21st after the closing bell. Estimates are for 21 cents. If CECO fails, misses or warns in any way then our play in COCO should continue to do well. If CECO turns in some sort of miraculous result then we, as bears in COCO, could be in trouble. Investors are obviously optimistic about earnings for the group (just look at their performances this year) but the sector has sold off this past week with some very overdue profit taking. Keep this in mind when consider your current play or new positions. COCO is set to announce about 10 days from now. Suggested Options: Our preference for short-term trades will be the November puts. Longer-term traders can look to the February strikes. We'd probably lean towards the $55 and $50 puts. BUY PUT NOV 50 UCS-WJ OI=1392 at $1.45 SL=0.75 BUY PUT NOV 55 UCS-WK OI= 524 at $3.60 SL=1.75 BUY PUT FEB 55 UCS-NK OI= 128 at $5.80 SL=3.50 BUY PUT FEB 50 UCS-NJ OI= 178 at $3.20 SL=1.75 Annotated chart: Picked on October 14 at $55.24 Change since picked: - 1.54 Earnings Date 10/29/03 (confirmed) Average Daily Volume: 686 thousand Chart = --- Martek Biosciences - MATK - cls: 46.64 chg: -2.84 stop: 51.32*new* Company Description: Martek Biosciences Corporation develops, manufactures and sells products from microalgae. The Company's products include: (1) specialty, nutritional oils for infant formula that aid in the development of the eyes and central nervous system in newborns; (2) nutritional supplements and food ingredients that may play a beneficial role in promoting mental and cardiovascular health throughout life; and (3) new, powerful fluorescent markers for diagnostics, rapid miniaturized screening, and gene and protein detection. (source: company press release) Why We Like It: (Original Write up from Thursday) It's been quite a ride for MATK investors. Near its highs last month the stock had appreciated 350% from its August '02 lows. It had almost tripled just from its March '03 lows near $21.00. Since the bottom in March the stock has not closed below its simple 50-dma. That technical strength failed this week. Shares peaked above $58 in late September and we've seen a trend of lower highs ever since. That trend has blossomed into a technical breakdown below its 50-dma and the $50 mark, a psychological level of support and resistance. Volume has been rather strong on the recent declines through support indicating some conviction by sellers. We're going to target a simple 38.2% retracement of the March to September run. That should bring MATK back towards the $44 level. A secondary target could be the $40 mark. A quick look at the point-and-figure chart also shows MATK on a fresh triple- bottom sell signal. However, P&F traders have been fooled before when MATK turned a bear sell signal into a bear trap in mid August. We do have to state that MATK is not without its own element of danger for bears. The latest data (as of September) showed short interested measured almost 19% of the float. ! Weekend Update: Right on target! The weakness in the broader markets helped give MATK a little push and shares lost 5.7% on the session. Volume has been strong the last three days in a row lending some conviction to the move. Remember that our first target is the $44.00 level. Once reached, short-term traders can close the play or attempt to capture any potential move to $40. We do have to stress that there were a couple of articles recently suggesting MATK is a great choice for long-term stock investors and they may be right but short-term we see future weakness. We are going to lower our stop to Thursday's high of 51.32. No chance of a bear trap on the P&F chart now! The point-and-figure chart's sell signal is now forecasting a price objective near $37.00. Suggested Options: Short-term traders can choose between the November and December options for MATK while longer-term traders can look over the March 04 options. Our preference is the DEC 50's or 45's. (the NOV 45s were not available on Thursday, they are a new strike for the weekend). BUY PUT NOV 45 KQT-WI OI= 0 at $1.95 SL=1.00 BUY PUT NOV 50 KQT-WJ OI=116 at $4.70 SL=2.35 BUY PUT DEC 40 KQT-XH OI= 46 at $1.20 SL=0.60 BUY PUT DEC 45 KQT-XI OI=470 at $2.85 SL=1.50 BUY PUT DEC 50 KQT-XJ OI=160 at $5.50 SL=3.25 Annotated Chart: Picked on October 16 at $49.48 Change since picked: - 2.84 Earnings Date 09/09/03 (confirmed) Average Daily Volume: 466 thousand Chart = --- Merck & Co - MRK - close: 48.63 chg: -0.46 stop: 50.51*new* 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: Uh-oh. We're running out of time in our put play for MRK. The stock continues to drift lower as drug stocks under perform the broader markets. Shares of MRK closed at new relative lows on Friday but the velocity of its descent may be slowing as investors pause to hear its earnings news on Wednesday, October 22nd. We are not suggesting new plays because do not plan on holding over the earnings announcement even though we don't expect much. We'll close MRK by Tuesday afternoon at the latest and potentially at Monday's close. Suggested Options: MRK continues to sink but we're not going to hold over its earnings announcement on Wednesday. No new plays are suggested. Annotated Chart: Picked on October 6 at $49.90 Change since picked: - 1.27 Earnings Date 10/22/03 (confirmed) Average Daily Volume: 6.2 million Chart = ************* NEW PUT PLAYS ************* Alliant Tech Systems - ATK - cls: 49.12 change: -0.38 stop: 50.51 Company Description: ATK is a $2.2 billion aerospace and defense company with strong positions in propulsion, composite structures, munitions, precision capabilities, and civil and sporting ammunition. The company, which is headquartered in Edina, Minn., employs approximately 12,200 people and has three business groups: Precision Systems, Aerospace, and Ammunition and Related Products. (source: company press release) Why We Like It: Shares of ATK have been under performing the markets and the defense sector for the last three months. The stock recently bounded up through its declining channel but ran straight into resistance at its simple 50-dma. This was early October and ATK has slowly been producing a trend of lower highs against its declining 50-dma. The stock looks ready to fall again and we want to capture any weakness before its October 30th earnings report. Current positioning gives us a relatively low-risk entry point with a stop loss at 50.51. Some traders may want to use a move below Friday's low at 48.98 as a trigger. We're going to open the play at current levels. Our first target is $45.00. Suggested Options: We're going to suggest the November 50's and 45's for short-term traders and the December or January's for longer-term trades. Take note, December's don't have much interest yet. BUY PUT NOV 45 ATK-WI OI= 156 at $0.45 SL= -- BUY PUT NOV 50 ATK-WJ OI= 376 at $2.15 SL=1.10 BUY PUT DEC 45 ATK-XI OI= 0 at $ -- SL= BUY PUT DEC 50 ATK-XJ OI= 0 at $ -- SL= BUY PUT JAN 45 ATK-MI OI= 86 at $1.15 SL=0.55 BUY PUT JAN 50 ATK-MJ OI= 351 at $3.00 SL=1.65 Annotated Chart: Picked on October 19 at $49.12 Change since picked: - 0.00 Earnings Date 10/30/03 (confirmed) Average Daily Volume: 385 thousand Chart = --- Genentech Inc - DNA - close: 79.08 change: -1.14 stop: 82.30 Company Description: Genentech is a leading biotechnology company that discovers, develops, manufactures, and commercializes biotherapeutics for significant unmet medical needs. Sixteen of the currently approved biotechnology products originated from or are based on Genentech science. Genentech manufactures and commercializes 11 biotechnology products in the United States. The company has headquarters in South San Francisco, California, and is traded on the New York Stock Exchange under the symbol DNA. (source: company press release) Why We Like It: Right off the bat let us state this is a rather gutsy play. DNA is a perfect example of why you trade with stop losses whether you're trading stocks or options and especially any time you're trading drug or biotech stocks. A quick look at the chart for DNA and you'll notice the booster-rocket trajectory from mid-May. It was a very painful day for the bears and it hasn't ended. It has been a very good six months for DNA. Last May they announced very positive results for their colorectal cancer treatment Avastin. Many analysts believe it will be approved by the FDA in 2004 and sales could reach $1.5 to $2 billion. On top of the Avastin news, DNA has also benefited from a successful Xolair launch and an FDA approval for their Raptiva treatment. Earnings were on October 8th and DNA beat estimates by 2 cents with 27 cents/share. With all this good news why are we trying to "short" it? Well nothing goes up forever and DNA is hinting at a potential breakdown. We're going to protect ourselves by ONLY opening bearish plays if DNA trades through our TRIGGER at $77.50. Should that occur then a retracement to the $70 level could be fast with a potential for weakness towards the $65 area. A move under $77.00 would produce a quadruple bottom breakdown on its P&F chart. If we are triggered we'll start the play with a stop at 82.30. More conservative traders might be able to use a stop closer to $81.00. This is high risk and not suggested for all traders. Suggested Options: Remember we're ONLY suggesting bearish positions if DNA trades at or below our trigger at $77.50. We like the November 80's and 75s for short-term trades and December or January's for longer- term trades. BUY PUT NOV 75 DNA-WO OI= 906 at $1.60 SL=0.80 BUY PUT NOV 80 DNA-WP OI=1619 at $3.70 SL=1.80 BUY PUT DEC 75 DNA-XO OI=1669 at $2.90 SL=1.50 BUY PUT DEC 80 DNA-XP OI=3490 at $5.10 SL=3.00 Annotated Chart: Picked on October xx at $xx.xx Change since picked: - 0.00 Earnings Date 10/08/03 (confirmed) Average Daily Volume: 2.5 million Chart = ************************Advertisement********************************** Option traders, check what PreferredTrade offers: - true direct access to each option exchange - stop and stop loss online option orders - contingent option orders based on the price of the option or stock - online spread order entry for net debit or credit - fast option executions - rates as low as $1.50 per contract ($14.95 min) PreferredTrade, Inc. Call 888-889-9178 or Click http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN Member NYSE, Other Principal Exchanges, NFA, MSRB and SIPC *********************************************************************** ********** DISCLAIMER ********** Please read our disclaimer at: http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html ************************************************************** ADVERTISING INFORMATION For more information on advertising in OptionInvestor Newsletter, or any Premier Investor Network newsletter please contact: Contact Support
The Option Investor Newsletter Sunday 10-19-2003 Sunday 4 of 5 In Section Four: Leaps: See Note Traders Corner: Reach Into Your Pocket – Do You Feel It? Traders Corner: Where is the Dow Going? ************************Advertisement************************* Full Service Brokers Man Financial announces the formation of the OneStopOption Brokerage Group, addressing the demand for personalized, experienced service for both securities* and futures trading within the same firm. Licensed Option Principals Andrew Aronson and Alan Knuckman specialize in live assistance of stock*, option* and futures traders. The combination of the proven Man Financial global presence and the convenience of one group for all trading needs provide customers with the tools needed for success. Live Broker and Online Trading Available 888-281-9569 http://www.OneStopOption.com ************************************************************** ***** LEAPS ***** * No Leaps Article this weekend * Mark Phillips is on a short vacation this weekend and his LEAPS column will continue next week. ************************Advertisement************************* Live Securities Brokerage Service with Licensed Option Principals OCO Stop & Profit Orders OneStopOption All types of Spreads and Buy Writes 888-281-9569 Auto-Trade Market Monitor Signals Personal Service and Education **Services available for Foreign Traders including Canada** http://www.OneStopOption.com ************************************************************** ************** TRADERS CORNER ************** Reach Into Your Pocket – Do You Feel It? By Mike Parnos, Investing With Attitude Besides feeling some lint, a key chain, one Tylenol tablet and a crumbled up dry cleaning bill, I bet you'll find a roll of US currency that could choke a horse – well, maybe a pony. Above and beyond, if you feel anything else, well, good for you. This is my favorite column of the month. Thus far, out of the dozen CPTI educational portfolios we've monitored, eleven have been profitable. After a year, we've put $33,160 of "hypothetical" CPTI money into our pockets. Hey, check out our "quickie" results this month. Those were even more than our monthly positions. Note: we don't include "quickie" results in our CPTI portfolio figures. Rome wasn't built in a day. Neither were the Pyramids. Why? They probably took long lunches and only lived till they were 30. However, a lot of hard work went into both, but the end product was worth it – except to those who didn't survive. The same can be said about our ongoing CPTI Portfolio. The "mierde" that often happens, has been happening less and less. Even when it does happen, we're prepared. We're trading smarter. However, the market may be lulling us into a false sense of security. Our losses (when we have to take them) are pretty small. Still, we have to be careful. We can't be complacent. I've been accused of being a cynic. However, my type of cynic is a lot like a grilled cheese sandwich – crunchy on the outside, soft and gooey on the inside. Okay, so I'm a softie on the inside. What did you expect? Big Macs don't turn into muscle (damn it!). OCTOBER CLOSED POSITIONS #1 – APPX Short Term Straddle: $1,400 Profit #2 – BBH "Siamese" Condor: $300 Loss #3 – INTC "Siamese" Condor: $250 Loss #4 – FDC "Siamese " Condor: $350 Loss #5 – SPX Iron Condor: $2,300 Profit CPTI Portfolio Positions: $2,800 PROFIT!!! OCTOBER "QUICKIE" CLOSED POSITIONS #1 – ADTN Bear Call Spread: $1,800 Profit #2 – QLGC "Siamese" Condor: $650 Profit #3 – SPX Iron Condor: $1,400 Profit #4 – QQQ Lottery Play: $150 Loss Quickie Totals: $3,700 PROFIT!!! _________________________________________________________________ REVIEW OF OCTOBER POSITIONS October Position #1 – SPX Iron Condor – Trading @ 1050.07 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 was 980 to 1065. Our safety range is 977.70 was 1067.30. The SPX closed comfortably within the range and we banked a $2,300 profit (hypothetically of course). October Position #2 – QQQ Put Calendar Spread – Trading @ $34.61 We decided to risk a buck. Since many folks think the market is due to correct. We created a cheap play that will let us take advantage of a nice down move. Meanwhile, we can continue to sell against the January put while we wait. 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). The October $32 puts expired worthless and we'll roll out to the November $32 – when the QQQs trade down to about $34 on Monday or Tuesday. We should be able to take in at least $.30. If/when we do this, we'll have a new cost basis of about $.70. OEX – Bearish Calendar Spread – OEX @ $518.12 We own 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 sold the October 490 puts, took in another $3.10 and those also expired worthless. Now let's roll out and sell the November 485 puts for about $2.50. Our cost basis is now $2.80. If we're going to make money on this position, we'll need some cooperation from the market. The OEX will have to trade down to about 490 in the next few weeks. Then, we'll have to make an adjustment. This may get a bit tricky – another adventure and learning experience. QQQ ITM Strangle – Ongoing Long Term -- $34.61. We bought 10 contracts of the 2005 QQQ $39 puts and 10 contracts of the 2005 QQQ $29 calls for a total debit of $14,300. Then we sold 10 contracts of the QQQ Oct. 33 puts and 10 contracts of the QQQ Oct. 34 calls for a total credit of $1,900. We bought back our $33 puts and $34 calls and rolled out to November $34 puts and $34 calls, taking in another $1.15 ($1,150). So far, so good. HPQ (Hewlett Packard) Bear-Put Spread – HPQ at $20.95. This is a directional bet. We anticipate HPQ may return to the $15 range. We own 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. __________________________________________________________ NEW POSITIONS FOR NOVEMBER Position #1 – SPX Iron Condor – Trading @ 1039.32 Sell 10 contracts of the SPX November 1090 calls and buy 10 contracts of the November 1100 calls for a credit of about $1.00 ($1,000). Then sell 10 contracts of the SPX November 985 puts and buy 10 contracts of the November 975 puts for a credit of about $1.10 ($1,100). Our total net credit is $2,100. Our maximum profit range is 985 to 1090 – 105 points! That's large. Since November is a 5-week option month, we may be taking in a little less, but we can sleep a little better. Position #2 – AFCI Iron Condor – Trading @ $26.70 Sell 10 contracts of the AFCI November $25 puts and buy 10 contracts of the AFCI November $20.00 puts for a credit of $1.05. Then sell 10 contracts of the AFCI November $30 puts and buy 10 contracts of the AFCI November $30.00 calls for a credit of $.60. Our total net credit is $1.65. Our maximum profit range is $25 - $30. Our safety range is $23.35 to $31.65. Those will also be our exit parameters. Position #3 – OEX Iron Condor (By Request) – 518.12 Sell 10 contracts of the OEX November 490 puts and buy 10 contracts of the OEX November 480 puts for a credit of about $.90. Then, sell 10 contracts of the OEX November 545 calls and buy 10 contracts of the OEX November 555 calls for a credit of about another $.90. Our total net credit will be about $1.80. Our maximum profit range is 490 to 545. Position #4 – BBH – Siamese Condor - $128.30 Sell 10 contracts of the BBH November $130 puts and 10 contracts of the BBH November $130 calls for about $8.50. Then, buy 10 contracts of BBH November $140 calls and 10 contracts of the BBH November $120 puts for about $2.40. The net credit should be about $6.10. Our profit range is $123.90 to $136.10 and those are also our exit parameters. For those who are not able to monitor their positions closely, an alternative to the BBH Siamese Condor is a BBH Iron Condor. This one will have a large (20-point) range. Establish a $120/$115 bull put spread for a credit of about $.60 and then the $140/$145 bear call spread for a credit of about $.35. Trading 10 contracts will give you about $950 and a huge range. Those Friendly Reminders November is a five-week option cycle. Therefore, the Siamese Condors may be a little more at risk. The premiums quoted on the above educational trades are based on Friday's closing bid/ask prices. In a few instances, when the bid/ask spread is wide, we figure you may be able to shave off a nickel here and there. Also, remember, on Monday the premiums may be different due to market movement and/or the additional two days of time erosion. Be careful. If a stock gaps up or down, it may change the entire dynamic of the trade. Don't skydive without your parachute. And make sure you know the intricacies of a strategy before you trade. __________________________________________________________ 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 Couch Potato Trading Institute Disclaimer All results reported in this section are hypothetical. While the numbers represented here may have been achieved or beaten by our readers we make no representation that any individual investor achieved these exact results. The tracking for the plays listed in this section uses closing prices for the day the newsletter is published and it is not meant to imply that any reader actually received those prices or participated in these recommendations. The portfolio represented here is hypothetical and for investment education purposes only. It is only an illustration of what type of gains a knowledgeable investor might receive utilizing these strategies. ************** TRADERS CORNER ************** Where is the Dow Going? By Steve Gould I received a letter last Sunday from a reader who did not quite understand how I could go from a 99% confidence level that the market had finally reversed to a completely uncertain level after the market had made a relatively minor new high. After responding to her email, I realized that there must be many others out there who are equally perplexed. Before I answer that concern, let me relate a story to you. Early on in my trading endeavors, I had a broker who would never give me a straight answer when the market went down. (This was before I knew about puts and how to profit from them.) He always had an excuse as to why the market went lower. I could rattle off his litany of excuses but that is all they ever were -- excuses. He always took credit when the market went up, but always blamed something or someone when it went down. I have always disdained those types of people who could not own up to the bad as well as take credit for the good. (Ask my kids.) I have tried to make it my practice not to give excuses as to why my analysis may at times go haywire. Things happen. Remember that my analysis may be wrong, but the market never is. With that said, it wasn't my fault! No, just kidding. :) When I wrote the 9/30/2003 column, the wave count could not have been more perfect for the end of the 4 wave and the beginning of the 5 wave. Reread the analysis. The chart pattern was absolutely classic. I have seen this set up so many times that I did indeed have a very high confidence level that this was indeed the moment. And I was not the only one. Many other Elliotticians had the same view. The wave count was just that perfect. Then things changed. It was not just a matter of a few extra points when the market made a new high, it is the wave count. When the market started going down, it went down in such a characteristic way that every Elliottician's confidence soared. However, when the market reversed course and made a new high, it did more than just make a new high. It altered the wave count. As I mentioned in last week's article, the wave count is just not consistent with a top as of yet. Something else is going on and I believe time will prove that out. (Actually, I know exactly what it is. I put a lot of money into S&P 500 puts. It was all my fault. Had I bought calls, we would not be at 650 by now.) Don't lose faith. Just be fluid when the market does not do what you expect it to. What the wave count is telling us now is that we need to see what happens next at the 1060-1090 level. That is going to be the juncture. If we burst through that, look to see an S&P 500 of 1275. If not, look out below. You can make money on that. You just need not pull any triggers until you see the white of the market's eyes. With that said, let's see where the S&P 500 is. Chart: S&P 500 Weekly 10/17/2003 The problem with looking at weekly charts after only one week is that only one bar is new. We can see that the new bar has not yet reached the 1060 level. Other than that it is rather difficult to read anything else into this new bar. One thing that we can see of note is that the oscillator has broken the 138% retracement level. Although "officially" the S&P 500 can retrace to 162%, piercing the 138% retracement level is usually a sign that a continued upward movement is eminent. We shall see. But first let's take a close up look of the 4 wave. Chart: S&P 500 Weekly 10/17/2003 Close-up A close up view of the S&P 500 shows that the 138% oscillator level has just barely been pierced. It may not be technically significant just yet, or it may. Any further movement past this oscillator level is a bad omen for a reversal of direction. The C wave is comfortably past the 1.38 level of the wave A (think expanded flat corrections) and almost to the 38% retracement level of wave 3. The conditions are ripe for a downward reversal, but we will have to look at a higher resolution charts to see if this final five wave basic pattern is indeed complete. Chart: S&P 500 Daily 10/17/2003 Take a close look at this chart of the daily S&P 500. Quiz time. Let's see how well you have been studying your Elliott Waves. What is wrong with the labeling of this chart? If you said that the 4 wave of the 5 (circle) wave overlaps into the territory of wave 1, then you get to put a smiley face on your brokerage statement this month. I like things to be simple. If an explanation gets too complicated or we have to make too many exceptions to the rules, then that solution is probably the wrong answer to the situation. Sometimes rules have to be broken, but only as a last resort. In this case, this may possibly be the case. I do not know the exact numbers, but for the sake of illustration, let's say that Elliott's published works encompasses 1000 pages. The first 100 pages or so are all the simple rules and guidelines. You would do very well just to master those. Then as you read further into the text, very rare conditions start to appear. These are the exceptions to the rules and happen on only the most infrequent of cases. Yet, we need to know about them. If you read somewhere into the 800th page, the place where your eyes are bleary and your brain is not functioning properly, you will read about an expanding triangle in the 5th wave of a C wave of an A-B- C correction from only a 4 wave. Ya. See what I mean. For some reason, this 5 wave can take on special characteristics that allow it to violate basic rules of Elliott Wave theory. It may be or it may not be, but some Elliotticians believe that this final formation is a 5th wave expanding triangle. I hate exceptions, but this may just be the ticket to the reversal. But are we at the top yet? Has this recent decline signaled the start of reversal? In order to find out, we must take a look at the hourly chart. Chart: S&P 500 Hourly 10/17/2003 The hourly chart of the S&P 500 tells me that we are not quite done with a final thrust up. We should see a slight rise in the S&P 500 (perhaps to 1043) followed by a further decline to about 1031-1024 to complete the five wave basic pattern of the C wave of the 4 wave. Next will come a 5 (square) rally to about the 1060 level making yet another new high. Then, if this expanded triangle is really an expanded triangle, we should see the beginning of the decline to 650. Bottom line, I see a new high for the S&P 500 (and the rest of the markets, of course) over the coming week and maybe into the beginning of the next week. At that point, we will be at that important juncture that should be the beginning of the decline of the markets into the end of the year. Or not... Finally, I just want to let all my readers know that I appreciate getting all your emails and any questions, concerns or feedback you may have. So in the famous words of Dean Martin (yes, I am dating myself) keep those cards and letters coming in. ************************Advertisement************************* No time to follow the Market Monitor? Tired of missing good Trades because you stepped away from your computer? OneStopOption Group can follow the Market Monitor for you. You choose the number of contracts, we take care of the rest!! Trade Stock Options, Stocks and ALL Futures with the same Group. Call us 888 281-9569 to see if you qualify to have us rebate your subscription cost. http://www.OneStopOption.com ************************************************************** ********** DISCLAIMER ********** Please read our disclaimer at: http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html ************************************************************** ADVERTISING INFORMATION For more information on advertising in OptionInvestor Newsletter, or any Premier Investor Network newsletter please contact: Contact Support
The Option Investor Newsletter Sunday 10-19-2003 Sunday 5 of 5 In Section Five: Covered Calls: Adjustment Strategies For Covered-Calls Naked Puts: Q&A With The Editor Spreads/Straddles/Combos: Rally Pauses As Investors Take Profits Updated In The Site Tonight: Market Posture: Finally Some Overdue Profit Taking ************************Advertisement************************* Stock Option and Futures Brokerage OneStopOption teams the best trading technology with varying levels of professional assistance at very competitive prices. Commission costs are comparable to discount brokerage and tailored to individual customer needs. The power of one brokerage group with experience and expertise in the Securities* and Futures Markets offers unprecedented convenience for traders. Access To All Futures Markets Toll Free 888-281-9569 Stock Option Principals www.OneStopOption.com ************************************************************** ************* COVERED CALLS ************* Trading Basics: Adjustment Strategies For Covered-Calls By Mark Wnetrzak One of our readers asked for some suggestions on how to manage a covered-call position when the underlying stock doesn't move as expected. Attn: mark@OptionInvestor.com Subject: Exits for Covered-Calls? Hello, I like your covered call strategy and recommendations -- what I would like to know is when to exit the strategy if the underlying stock price is heading way over the strike price or when the underlying stock price starts heading down. Please address answer based on remaining time and also based on price increase/decrease of the underlying stock. Thank you Mo Hello Mo! First, it is very important to remember that our strategy uses a conservative covered write that views the entire position as a single entity. We are not interested so much in stock ownership or upside movement, but in obtaining a monthly return on our investment. Therefore, by using In-The-Money (ITM) covered-calls, we expect the underlying equity to be "called" away at expiration (because the stock price is above the sold strike). Generally when a stock price rises, there are several choices available to the covered-call writer: One, do nothing, let the underlying stock be assigned after expiration (called away) and accept the original profit; Two, after evaluating the cost of extra commissions verses the increase in the annualized return (because of the shorter time frame), close the position early if the call is trading near parity (usually this needs to occur quickly after the entering the position); Three, an investor can attempt to increase the potential profit by rolling the sold calls forward and/or up. Rolling-up or buying back the current calls and selling new calls with a higher striking price (usually incurring a debit), is one method to increase the profit potential at the expense of losing downside protection. The cost basis or break-even point will be raised by the amount of debit required to roll-up (cost of buying back the original calls less the premium of selling the new calls). Many professional traders frown at putting more money on the table (by increasing the cost basis) to increase the potential profit. In an attempt to limit the debit of rolling up, investors may find it advantageous to roll forward (and up) to a later expiration. Moving to a future time frame or even a LEAP can more than offset the cost of buying back the original calls. Again, evaluating the annualized return of the new position with the increased commission costs and time frame is a must. Generally, professionals do not roll up if a 10% correction in the stock price cannot be withstood (though this percentage may not be applicable to the more volatile stocks). If an investor is defensive and is trying to lower their cost basis in their covered-call position, they would roll down and/or forward. If this is done before expiration, they would need to buy back their current "sold" calls, which should be relatively cheap. An investor who remains bullish in the long-term will do this to protect for short-term weakness, but ultimately, he expects the stock to recover. Usually, you will have to move forward several months or use LEAPs in order to obtain a credit in the new position. Of course, in the case of a catastrophic drop in price, the best that can be accomplished is to lock-in a loss (until expiration), which would still be less than the current loss, "if" the stock doesn't drop further. A "ratio-call" spread can also be used as a repair technique for long-term covered call stocks that have slumped in the recent market. The goal is to allow the stock owner to lower the break-even price while significantly increasing the profit potential through the addition of a bull-call spread. The idea is to buy an equivalent amount of calls as one owns in shares of stock so that twice as many "covered" calls can be sold: half the short calls are covered by the original stock position while the other half are obligated in a "bull-call" spread. As for exiting covered-call positions, there are many stop loss signals an investor can employ: a strict percentage of one’s overall portfolio; a fixed dollar amount; a technical violation; etc. Once you decide to close a covered-call position, you simply buy back the calls (at the "ask") and then sell the stock (at the "bid"). A "net" order could also be used in closing a covered-write to ensure a proper exit. You would place an order with your broker to "sell" the stock and "buy to close" the calls for a net credit -- a price reasonably close to parity. Timing the adjustment is also important. Professionals will wait for the time premium to dissipate from the written calls before rolling forward and/or up. Be advised that with deep in-the-money calls, the time premium can disappear quickly and well before expiration. As long as there is time premium left in the calls, there is little risk of early assignment (and you are earning time premium by staying with the original position). However, once the option trades at parity or a discount, there is a significant probability of exercise by arbitrageurs (floor traders who don't pay commissions). As always, you need to evaluate the risk-reward scenarios above and make a decision that fits your trading plan based on your outlook for the underlying equity and stock market. Larry McMillan's book, "Options: As a Strategic Investment," is an excellent resource for option traders. In Chapter 2, he explains the various strategies (and possible adjustments too) involved in writing covered-calls. Best Regards, Mark W. OIN 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 7.99 OCT 5.00 0.80 0.32* 9.9% SCMR 5.20 5.09 OCT 5.00 0.65 0.45* 8.6% STEC 7.73 9.62 OCT 7.50 0.50 0.27* 8.1% BEAV 5.12 5.29 OCT 5.00 0.45 0.33* 7.7% CHU 7.43 9.17 OCT 7.50 0.50 0.57* 7.1% QSFT 12.44 13.71 OCT 12.50 0.50 0.56* 6.8% ARIA 5.24 6.57 OCT 5.00 0.60 0.36* 6.7% PVN 12.60 12.39 OCT 12.50 0.55 0.34 6.1% MXO 12.90 15.10 OCT 12.50 1.05 0.65* 6.0% OXGN 11.17 10.92 OCT 10.00 1.55 0.38* 5.7% VXGN 6.50 11.86 OCT 5.00 1.80 0.30* 5.5% XING 8.43 9.25 OCT 7.50 1.20 0.27* 5.4% NTPA 7.97 8.45 OCT 7.50 0.65 0.18* 5.3% CHKP 17.88 17.40 OCT 17.50 0.85 0.37 4.7% CREE 19.21 17.96 OCT 17.50 2.25 0.54* 4.6% NABI 8.22 10.76 OCT 7.50 0.95 0.23* 4.6% SEAC 13.18 15.57 OCT 12.50 1.05 0.37* 4.4% DSCM 7.99 7.74 OCT 7.50 0.85 0.36* 4.4% ALKS 14.23 14.33 OCT 12.50 2.20 0.47* 4.2% ALKS 15.28 14.33 OCT 15.00 1.00 0.05 0.8% ISRG 17.75 16.64 OCT 17.50 0.70 -0.41 0.0% BVSN 5.31 5.34 NOV 5.00 0.65 0.34* 5.3% ALGN 15.60 15.21 NOV 15.00 1.60 1.01* 5.2% PUMA 5.54 5.92 NOV 5.00 0.85 0.31* 4.8% IBIS 14.42 14.01 NOV 12.50 2.65 0.73* 4.5% BRCD 6.33 6.00 NOV 6.00 0.65 0.32 4.1% TLAB 7.83 7.50 NOV 7.50 0.70 0.37 3.8% ALKS 15.16 14.33 NOV 12.50 3.20 0.54* 3.3% * Stock price is above the sold striking price. Comments: Is it the beginning of the end of this year's bull rally? Can the indices really move higher through two-year old resistance? Well, the next few weeks should offer some clues. In the near term however, some consolidation appears to be warranted as Friday's sell-off was a bit worrisome. Intuitive Surgical (NASDAQ:ISRG) could have been closed this week though investors with a neutral to bullish outlook may consider rolling into next month. Just depends on your outlook and personal risk tolerance. Positions Previously Closed: Hollis-Eden Pharma (NASDAQ:HEPH), Incyte (NASDAQ:INCY) and ID Biomedical (NASDAQ:IDBE) -- both of which ended up being profitable (Murphy's Law again!), ISIS Pharmaceuticals (NASDAQ:ISIS), Ecollege.com (NASDAQ:ECLG), and Thoratec (NASDAQ:THOR) -- profitable but an ugly looking chart. 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 SGMO 5.10 NOV 5.00 USJ KA 0.55 9 4.55 35 8.6% TMM 3.44 NOV 2.50 TMM KZ 1.10 260 2.34 35 5.9% SEAC 15.57 NOV 15.00 UEG KC 1.50 219 14.07 35 5.7% ALKS 14.33 NOV 12.50 QAL KV 2.50 5310 11.83 35 4.9% CMNT 9.22 NOV 7.50 QDO KU 2.10 25 7.12 35 4.6% VECO 25.67 NOV 25.00 QVC KE 1.85 144 23.82 35 4.3% SSTI 11.21 NOV 10.00 SJV KB 1.65 3560 9.56 35 4.0% 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). ***** SGMO - Sangamo $5.10 *** Biotech Speculation *** Sangamo Biosciences NASDAQ:SGMO) is engaged in the research, development and commercialization of engineered transcription factors for the regulation of gene expression. The company's proprietary technology platform is based on the engineering of a naturally occurring class of DNA transcription factors referred to as zinc finger DNA-binding proteins (ZFPs). The DNA recognition and binding function of ZFPs can be used to target a variety of functional domains to a gene-specific location. Its scientists engineer ZFP transcription factors (ZFP TFs) that are able to regulate genes in a targeted fashion by attaching ZFPs to certain functional domains that either turn genes on or off. Through several collaborations, the company is applying its ZFP TF technology to assist in the identification of new small-molecule drugs and to develop fully human monoclonal antibodies. Sangamo is once again testing resistance near $5 as the stock continues to forge a year-long Stage I base. Investors can use this position to target-shoot an entry point from which to speculate on the company's future. NOV-5.00 USJ KA LB=0.55 OI=9 CB=4.55 DE=35 TY=8.6% ***** TMM - Grupo TMM $3.44 *** Bottom Fishing *** Grupo TMM (NYSE:TMM) is an integrated logistics and transportation company in Mexico whose main activity is providing maritime, land and rail freight transportation, storage and agent services, as well as attending to cruise ships and other similar activities appropriate to the shipping and cargo transport business. The company organizes its businesses into four segments: specialized maritime transportation, land transportation, operation of ports and terminals and railroad transportation. Specialized maritime transportation operations include liquid petroleum products in bulk, materials and supplies for drilling platforms and vehicle transportation operations, as well as tugboat services. Land transportation includes truck services and logistics. Their Port operations include terminal activities, both cargo and passenger. Rail transportation includes interline connections, consisting of United States and Mexican railroad lines and traffic. Grupo TMM continues to build a base with support near $2 and this position allows speculators to profit from that trend. Target-shooting a lower net-debit will lower the cost basis and raise the potential yield in the position. Earnings are due October 28. NOV-2.50 TMM KZ LB=1.10 OI=260 CB=2.34 DE=35 TY=5.9% ***** SEAC - SeaChange $15.57 *** Rally Mode! *** SeaChange International (NASDAQ:SEAC) is a developer, manufacturer and marketer video storage servers that automate the management and distribution of long-form video streams, such as movies or other feature presentations, and short-form video streams, such as advertisements. The company sells its products and services to cable system operators, telecommunications companies and broadcast television companies. The company's broadband network segment includes its VOD (video-on-demand) System, which digitally manages, stores and distributes digital video, allowing cable system operators and telecommunications companies to offer VOD and other interactive television services, including interactive electronic advertising and retrieval of Internet content, through TV. SEAC rallied this week after Cox Communications (NYSE:COX) selected SeaChange as a provider of VOD technology, which Cox plans to install in select systems early next year. Our outlook is bullish due to the recent technical strength and this position offers a reasonable cost basis in the issue. Earnings are due November 25. NOV-15.00 UEG KC LB=1.50 OI=219 CB=14.07 DE=35 TY=5.7% ***** ALKS - Alkermes $14.33 *** Entry Point *** 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 recently 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 at the risk of owning this Alkermes near its long-term (150-day) MA. NOV-12.50 QAL KV LB=2.50 OI=5310 CB=11.83 DE=35 TY=4.9% ***** CMNT - Computer Network $9.22 *** Historical Support *** Computer Network Technology (NASDAQ:CMNT) provides end-to-end storage solutions, including hardware and software products, related consulting and integration services and managed services, in the storage networking market. The company focuses primarily on helping its customers design, develop, deploy and manage storage networks, including storage area networks, which are high-speed networks within a business' existing computer system that allow the business to manage its data storage needs with greater efficiency and less disruption to its overall network. The company designs, manufactures, markets and supports a wide range of solutions for critical storage networking applications such as remote data replication and remote tape vaulting. It also supplies storage systems, fiber channel switches, telecommunications capacity and storage application software. CMNT has been in a Stage I base for over a year and this position allows investors to speculate on the company's future with a cost basis near a long-term support area. NOV-7.50 QDO KU LB=2.10 OI=25 CB=7.12 DE=35 TY=4.6% ***** VECO - Veeco $25.67 *** Rally Mode: Part II *** Veeco Instruments (NASDAQ:VECO) designs, manufactures, markets and services a line of equipment primarily used by manufacturers in the data storage, semiconductor and telecommunications/wireless industries. The company's line of products allows customers to improve time to market of next-generation products. The company's products are also enabling advancements in the field of nanoscience and other areas of scientific and industrial research. VECO offers two principal product lines: process equipment and metrology. The company divested its leak detection business in January 2000, and its remaining industrial measurement business (NeXray) in May 2002. Veeco continues to rally off of last October's low and investors who believe the trend will continue can use this position to profit from that outcome. Earnings are due October 27. NOV-25.00 QVC KE LB=1.85 OI=144 CB=23.82 DE=35 TY=4.3% ***** SSTI - Silicon Storage $11.21 *** Rally Mode: Part III *** Silicon Storage Technology (NASDAQ:SSTI) operates as a supplier of flash memory semiconductor devices for the digital consumer, networking, wireless communications and Internet markets. The company has over 90 products based on its proprietary SuperFlash design and manufacturing process technology. These include include standard flash products, application specific memory products, embedded controllers and mass data storage products. Here is another stock that has rallied strongly since last May and investors can speculate on the near-term performance of the issue with this position. Earnings are due on October 22. NOV-10.00 SJV KB LB=1.65 OI=3560 CB=9.56 DE=35 TY=4.0% ***** ***************** 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 GNSS 16.01 NOV 15.00 QFE KC 2.25 2495 13.76 35 7.8% ASYT 18.20 NOV 17.50 QQY KW 1.90 526 16.30 35 6.4% SCMR 5.09 NOV 5.00 SMZ KA 0.40 1631 4.69 35 5.7% NEOL 16.12 NOV 15.00 UOE KC 2.00 799 14.12 35 5.4% CYD 24.30 NOV 22.50 CYD KX 3.10 404 21.20 35 5.3% AFCI 26.70 NOV 25.00 AQF KE 3.10 705 23.60 35 5.2% IBIS 14.01 NOV 12.50 UIB KV 2.15 171 11.86 35 4.7% AZPN 5.75 NOV 5.00 ZQP KA 1.00 426 4.75 35 4.6% NABI 10.76 NOV 10.00 NIQ KB 1.25 289 9.51 35 4.5% CRGN 5.31 NOV 5.00 CQX KA 0.55 53 4.76 35 4.4% VXGN 11.86 NOV 10.00 UWG KB 2.30 1682 9.56 35 4.0% CCBL 7.87 NOV 7.50 LQE KU 0.70 186 7.17 35 4.0% CE 13.95 NOV 13.00 CE KO 1.50 1444 12.45 35 3.8% ISSX 13.70 NOV 12.50 ISU KV 1.70 452 12.00 35 3.6% XING 9.25 NOV 7.50 QAE KU 2.05 25 7.20 35 3.6% NWAC 13.86 NOV 12.50 NAQ KV 1.80 211 12.06 35 3.2% ***************** NAKED PUT SECTION ***************** Options 101: Q&A With The Editor By Ray Cummins This week's question concerns trading inside the bid/ask spread. Attn: Contact Support Subject: Execution/Fill related question Hello Ray, Hope all is well with you. I would like to ask you a practical question. If the bid/ask spread is very wide, is it possible in real world to get in a fill by splitting the quote between them?. Today on ELAB, I was planning to buy the Jan 40 straddle when the bid/ask was 7.20 x 8.00...I placed a limit order @ 7.60...never got a fill...then raised to 7.70 and never got a fill. Finally, I placed a market order and got filled @ 7.90. Same situation with KSWS...was not able to get a fill by splitting the Bid/Ask spread. I have heard that one can get fills by placing a price between the bid and ask. Is that True? I use OptionsXpress and Preferred Trade and have never been able to get a fill by splitting the quote. Have you encountered this? Thanks and appreciate you sharing your experience with me. Have a good one. Cheers, PA First, here are some comments from other traders on the OIN staff: In answer to the reader's question about splitting the bid/ask spread, I can say that I have been successful at times in splitting the bid and the ask, but it's often a question of how thinly traded the option might be. I'm fairly patient and if conditions are right will let my order sit for a while, and sometimes someone finally takes it. If an issue's options are thinly traded however, that's not going to happen. You're at the mercy of that wide bid/ask spread. Those wide spreads in some issues have sometimes kept me from initiating a credit spread I wanted to open. I'm paying too much for the bought option and not getting enough credit for the sold one to make it worthwhile. Linda Piazza Most of the times I have achieved a fill by "splitting the bid" occurred when the stock moved in the appropriate direction, but the potential for this event to occur also depends on how liquid the option series is. If the option series is getting a lot of action, you can probably shave off a small amount, but then the bid/ask spread would likely be closer as well. When the spreads are wide, there is obviously no market. Therefore, if you want in, you generally have to "be the market" with a market order. Mark Wnetrzak From my perspective, you can get an occasional fill by splitting the quotes on higher priced options with large Bid/Ask spreads. Keep in mind though, your fill may simply be the result of an opposing trader's order and not the market-maker moving to your price. Also, you must remember that a market-maker or specialist (who is not trading for his own account) must be able to complete a risk-free transaction, either through a conversion or reversal (reverse conversion) before he will agree to buy or sell an option at a particular price. More about that subject here: http://www.OptionInvestor.com/archive/coveredcalls/2001/031801_1.asp One of the most common problems in option trading is "slippage" and the condition exists in all major financial markets. However, the effects of slippage are more noticeable when a number of trades are grouped together in a short time, such as often occurs in a recovery strategy like covering/uncovering a short option in a "range-bound" issue. Losses due to slippage are amplified by a number of factors including: large bid/ask spreads (mostly due to illiquid markets), incorrect or inaccurate pricing (inefficient data provider) and delayed execution of trades (ineffective/untimely brokerage service or trading platform). Since there is no way to alter the price activity of the underlying instrument, the key to success (or achieving the maximum amount of success under the circumstances) is to limit the consequences of slippage as much as possible when opening/closing new positions and executing "stop" orders. In addition, you must always be concerned with volume and open interest when trading options, especially when the positions involve straight puts and calls. These components are slightly less important when executing spread/combination trades through "limit" orders and with "net" credit or debit orders, moderate activity and/or robust volume is a plus, but it is not necessary to initiate a favorable trade. The reason is, market-makers are required by the exchanges to trade options, in a fair and equitable manner, with all retail participants, regardless of whether or not there is any public interest in the class or series. Of course, that does not mean they have to give you a "good" price, but since these specialists use risk-less positions to "make a market," they have no reason to avoid trading. Readers often ask how some of the (Spreads/Combos/Premium Selling) plays are entered when the volume of not only the underlying but the option chains are low, or nonexistent, and how plays with so little volume can be executed by more than just a few members, if any. The truth is, some of the positions offered in these sections are NOT available for more than a few contracts, and some may offer only one trade, or none at all, before the premium is gone. At the same time, that doesn't mean they are unfavorable plays. In fact, the general focus of the research for positions in these categories is "premium disparities" in out-of-the-money options. But, as you know, you will rarely find mis-priced options in series that have high volume and open interest because the liquidity in those series keeps the market accurately priced. Hope that helps! Ray 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 6.30 OCT 5.00 0.35 0.35* 6.5% 18.6% RMBS 18.73 25.25 OCT 15.00 0.30 0.30* 4.4% 16.0% CERN 35.47 36.20 OCT 30.00 0.55 0.55* 4.1% 12.9% GERN 12.98 14.90 OCT 10.00 0.25 0.25* 3.7% 12.7% ADLR 15.95 17.96 OCT 12.50 0.50 0.50* 3.6% 11.8% USG 17.51 17.48 OCT 12.50 0.35 0.35* 3.1% 9.9% SEAC 14.34 15.57 OCT 12.50 0.35 0.35* 3.1% 9.0% LRCX 22.81 26.15 OCT 20.00 0.40 0.40* 3.0% 8.6% STAT 14.58 12.47 OCT 12.50 0.40 0.37 2.7% 7.7% MSTR 50.03 50.42 OCT 45.00 0.55 0.55* 2.7% 7.7% NFLX 40.15 52.13 OCT 32.50 0.30 0.30* 2.0% 7.5% PDII 25.06 24.45 OCT 22.50 0.40 0.40* 2.6% 7.4% NKTR 13.83 14.63 OCT 10.00 0.25 0.25* 2.2% 7.2% ONXX 23.92 25.93 OCT 20.00 0.40 0.40* 2.2% 7.2% ERES 36.70 40.10 OCT 32.50 0.35 0.35* 2.4% 7.0% RIMM 37.29 42.46 OCT 32.50 0.50 0.50* 2.3% 6.8% BRCM 28.79 29.84 OCT 25.00 0.25 0.25* 2.2% 6.8% CEPH 49.62 45.77 OCT 40.00 0.65 0.65* 1.8% 6.5% ERES 33.63 40.10 OCT 27.50 0.30 0.30* 1.6% 5.7% AMHC 41.98 42.50 OCT 35.00 0.40 0.40* 1.7% 5.7% MERQ 45.76 47.54 OCT 40.00 0.50 0.50* 1.8% 5.6% IDXC 26.02 24.30 OCT 22.50 0.35 0.35* 1.7% 5.3% INSP 19.92 22.05 OCT 17.50 0.35 0.35* 1.8% 5.2% GOLD 23.93 22.80 OCT 20.00 0.35 0.35* 1.5% 5.1% ATMI 27.52 24.30 OCT 25.00 0.30 -0.40 0.0% 0.0% XMSR 19.10 19.99 NOV 17.50 0.85 0.85* 3.7% 8.9% FCEL 14.35 14.18 NOV 12.50 0.50 0.50* 3.0% 8.2% PXLW 12.10 11.71 NOV 10.00 0.30 0.30* 2.2% 7.1% MTZ 12.81 13.30 NOV 10.00 0.25 0.25* 1.9% 6.4% NWAC 12.18 13.86 NOV 10.00 0.25 0.25* 1.9% 6.2% CNX 21.88 22.23 NOV 20.00 0.55 0.55* 2.0% 5.4% CY 20.44 19.72 NOV 17.50 0.40 0.40* 1.7% 5.1% * Stock price is above the sold striking price. Comments: Stocks moved lower Friday as profit-taking overcame news of upbeat economic data. A slew of less-than-outstanding profit reports prompted traders to take profits from the recent rally and the selling pressure did not abate until late in the day. With the potential for further downside activity, traders are encouraged to use diligent portfolio management in the coming week. Previously Closed Positions: Ask Jeeves (NASDAQ:ASKJ) and Nps Pharmaceuticals (NASDAQ:NPSP), both of which remained profitable, and Atmi Inc. (NASDAQ:ATMI) and Thoratec (NASDAQ:THOR). 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 ONXX 25.93 NOV 20.00 OIQ WD 0.60 636 19.40 35 2.7% 9.0% AFCI 26.70 NOV 22.50 AQF WX 0.60 1420 21.90 35 2.4% 7.4% ALGN 15.21 NOV 12.50 CUA WV 0.25 15 12.25 35 1.8% 6.0% SCUR 14.09 NOV 12.50 UQU WV 0.30 38 12.20 35 2.1% 6.0% FCS 20.04 NOV 17.50 FCS WW 0.40 447 17.10 35 2.0% 5.9% AVCT 36.00 NOV 32.50 QVX WZ 0.75 472 31.75 35 2.1% 5.6% IDXC 24.30 NOV 20.00 XQW WD 0.35 11 19.65 35 1.5% 5.3% 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). ***** ONXX - Onyx Pharmaceuticals $25.93 *** Multi-Year High! *** Onyx Pharmaceuticals (NASDAQ:ONXX) is engaged in the discovery and development of novel cancer therapies utilizing two primary technology platforms, small molecules that inhibit the proteins involved in excess growth signaling, and therapeutic viruses that selectively replicate in cells with cancer-causing genetic mutations. The firm is developing a new small molecule compound, BAY 43-9006, in collaboration with Bayer Pharmaceuticals. Using its proprietary virus technology, the company is also developing ONYX-411, a second-generation product that targets cancers with abnormal function of the retinoblastoma tumor-suppressor gene, and is developing Armed Therapeutic Virus products. Onyx is set to present additional findings from one or more Phase II studies of its experimental cancer drug BAY 43-9006 at a European cancer research meeting later this month and investors are hoping for a favorable report. Traders who believe the reception will be positive, and the recent upside activity will continue, should consider this position. NOV-20.00 OIQ WD LB=0.60 OI=636 CB=19.40 DE=35 TY=2.7% MY=9.0% ***** AFCI - Advanced Fibre Comm. $26.70 *** New 2-Year High! *** *** Advanced Fibre Communications (NASDAQ:AFCI) develops, manufactures and supports a family of telecommunications access products and services. The firm's products and services enable the connection between the central office switches of telecommunications service providers and their end users for voice and high-speed Internet, data and video communications. Their products include integrated multi-service access platforms, central office switching platforms, optical add-drop multiplexers, integrated access devices, network element management systems and cabinets, as well as many related professional services. Networking stocks have been among the top performers recently and last week's price activity in Advanced Fibre put the issue at a new 2-year high. Traders can speculate on the outcome of the company's earnings report (due 10/21) with this position. NOV-22.50 AQF WX LB=0.60 OI=1420 CB=21.90 DE=35 TY=2.4% MY=7.4% ***** ALGN - Align Technology $15.21 *** Entry Point? *** Align (NASDAQ:ALGN) is engaged in the design, manufacture and marketing of Invisalign, a proprietary system for treating malocclusion, or the misalignment of teeth. Invisalign offers ClinCheck, an Internet-based application that allows dental professionals to simulate treatment, in three dimensions, by modeling two-week stages of tooth movement, and Aligners, which are thin, clear plastic, removable dental appliances that are manufactured in a series to correspond to each two-week stage of the ClinCheck simulation. As of December 31, 2002, over 80,000 patients worldwide had started treatment with Invisalign. Align will announce earnings next week and the stock price is likely to be volatile prior to, and possibly after, the report. Investors can use that activity to establish a conservative entry point in this unique growth stock. NOV-12.50 CUA WV LB=0.25 OI=15 CB=12.25 DE=35 TY=1.8% MY=6.0% ***** SCUR - Secure Computing $14.09 *** Rally Mode! *** Secure Computing (NASDAQ:SCUR) has been protecting the most important networks in the world for over 20 years. With broad expertise in security technology, they develop network security products that help their customers create a trusted environment both inside and outside of their organizations. Their global customers and partners include the majority of the Dow Jones Global 50 Titans and the most prominent organizations in banking, financial services, healthcare, telecommunications, manufacturing, public utilities, and federal and local governments. SCUR moved to a new 52-week high Friday and the high-volume rally suggests further upside activity in the near-term. Traders can speculate on that outcome in a conservative manner with this position. NOV-12.50 UQU WV LB=0.30 OI=38 CB=12.20 DE=35 TY=2.1% MY=6.0% ***** FCS - Fairchild Semi $20.04 *** Chip Sector Speculation! *** Fairchild Semiconductor (NYSE:FCS) is a leading global supplier of high performance products for multiple end markets. With a focus on developing leading edge power and interface solutions to enable the electronics of today and tomorrow, Fairchild's components are used in computing, communications, consumer, industrial and automotive applications. Fairchild's employees design, manufacture and market power, analog & mixed signal, interface, logic, and optoelectronics products from its company headquarters in South Portland, Maine, USA and numerous locations around the world. FCS recently posted a third-quarter loss that included a significant restructuring charge, but the company also predicted gains in fourth-quarter revenue and profit as a result of strong bookings, including regional strength in Asia. The recent consolidation area near $18 should give the stock some support in the event of a share value slump and investors can establish a cost basis slightly below that price range with this position. NOV-17.50 FCS WW LB=0.40 OI=447 CB=17.10 DE=35 TY=2.0% MY=5.9% ***** AVCT - Avocent $36.00 *** Technical Break-Out! *** Avocent Corporation (NASDAQ:AVCT), together with its wholly owned subsidiaries, designs, manufactures and sells analog and digital KVM (keyboard, video and mouse) switching systems, as well as serial connectivity devices, extension and remote access products and also display products for the computer industry. The firm's switching and connectivity solutions provide information technology managers with access and control of multiple servers and network data centers from any location. AVCT shares soared to multi-year highs last week after the company reported higher sales, margins and net income for the third quarter. Investors who believe the bullish trend will continue should consider this position. NOV-32.50 QVX WZ LB=0.75 OI=472 CB=31.75 DE=35 TY=2.1% MY=5.6% ***** IDXC - IDX Systems $24.30 *** Earnings Are Due! *** IDX Systems Corporation (NASDAQ:IDXC) is a provider of software, services and technologies for healthcare organizations. IDX's core business segment, providing information systems, services and connectivity for group physician practices, hospitals and integrated delivery networks, operates under the IDX brand name and consists of software licensing, services and hardware sales. Shares of IDXC are in a consolidation phase as investors await the company's earnings report next week. W.R. Hambrecht & Co. also recently said that IDXC is "well-positioned for success in two of the five contracts to be awarded by the U.K.'s National Health System." Investors who agree with an optimistic outlook for the company's future profits should consider this position. NOV-20.00 XQW WD LB=0.35 OI=11 CB=19.65 DE=35 TY=1.5% MY=5.3% ***** ***************** 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 CYD 24.30 NOV 20.00 CYD WD 0.55 554 19.45 35 2.5% 8.0% NFLX 52.13 NOV 40.00 QNQ WH 1.05 2715 38.95 35 2.3% 8.0% FLSH 20.58 NOV 17.50 FFU WW 0.45 55 17.05 35 2.3% 7.0% PKTR 16.48 NOV 15.00 XOU WC 0.45 60 14.55 35 2.7% 7.0% USG 17.48 NOV 10.00 USG WB 0.30 19648 9.70 35 2.7% 6.9% DRIV 31.65 NOV 25.00 DQI WE 0.55 201 24.45 35 2.0% 6.9% NITE 14.12 NOV 12.50 QTN WV 0.30 370 12.20 35 2.1% 6.0% ERES 40.10 NOV 32.50 UDB WZ 0.60 116 31.90 35 1.6% 5.8% MANH 30.82 NOV 25.00 MQR WE 0.45 214 24.55 35 1.6% 5.6% JNPR 17.09 NOV 15.00 JUX WC 0.30 957 14.70 35 1.8% 5.2% SEE DISCLAIMER IN SECTION ONE ***************************** ************************ SPREADS/STRADDLES/COMBOS ************************ Rally Pauses As Investors Take Profits By Ray Cummins The major equity averages plunged Friday amid a slew of mediocre earnings forecasts and concerns over share valuations. The blue-chip Dow Jones industrial average fell 69 points to 9,721 on weakness in its financial, retail, transportation, and drug components. The technology-laden NASDAQ composite index slid 37 points to 1,912 due to robust profit-taking in computer hardware, semiconductor and internet shares. The broader Standard & Poor's 500-stock index lost 10 points to close at 1,039, with virtually all sectors enduring to selling pressure. Trading was volatile as options expired for the month of October. Over 1.3 billion shares changed hands on the Big Board and more than 1.7 billion shares were crossed on the NASDAQ. Declining stocks trounced advancers by a ratio of more than 2 to 1 on both the New York Stock Exchange and the technology exchange. The bond market rebounded as stocks faded. The 10-year note closed up 18/32 with its yield at 4.39%. ***************** 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 27.00 OCT 22 25 0.30 24.70 $0.30 Closed MERQ 49.41 47.54 OCT 40 42 0.30 42.20 $0.30 Closed BBH 137.69 128.30 OCT 120 125 0.45 124.55 $0.45 Closed CELG 45.48 42.00 OCT 35 40 0.50 39.50 $0.50 Closed MYL 27.74 27.01 OCT 22 22 0.13 22.97 $0.13 Closed SINA 37.41 40.00 OCT 25 30 0.45 29.55 $0.45 Closed COGN 33.16 33.64 OCT 27 30 0.40 29.60 $0.40 Closed CTSH 40.41 42.23 OCT 30 35 0.55 34.45 $0.55 Closed IMDC 76.91 85.03 OCT 60 65 0.55 64.45 $0.55 Closed NEM 40.66 39.13 OCT 35 37 0.30 37.20 $0.30 Closed EBAY 54.22 54.86 OCT 47 50 0.25 49.75 $0.25 Closed GENZ 46.00 49.67 OCT 40 42 0.35 42.15 $0.35 Closed RIMM 37.29 42.46 OCT 30 32 0.20 32.30 $0.20 Closed ADTN 72.64 68.57 OCT 60 65 0.35 64.65 $0.35 Closed MRVL 40.61 40.84 OCT 35 37 0.20 37.30 $0.20 Closed SNDK 71.18 74.68 OCT 60 65 0.50 64.50 $0.50 Closed SMH 36.92 38.55 OCT 33 35 0.25 34.75 $0.25 Closed AET 62.76 63.07 NOV 50 55 0.55 54.45 $0.55 Open MXIM 44.82 44.29 NOV 35 40 0.50 39.50 $0.50 Open PHS 54.50 53.91 NOV 45 47 0.30 47.20 $0.30 Open PIXR 71.56 67.79 NOV 60 65 0.70 64.30 $0.70 Open LP = Long Put SP = Short Put CB = Cost Basis G/L = Gain/Loss Adtran (NASDAQ:ADTN) did not offer the target credit, however it may have been a viable position for conservative spread traders. Pixar (NASDAQ:PIXR) is the first candidate on the "early-exit" watch-list for November. CALL CREDIT SPREADS ******************* Symbol Pick Last Month LC SC Credit CB G/L Status CAH 56.36 58.52 OCT 65 60 0.65 60.65 $0.65 Closed PFE 30.51 30.56 OCT 35 32 0.25 32.75 $0.25 Closed XL 76.05 73.37 OCT 85 80 0.60 80.60 $0.60 Closed APC 42.70 41.35 OCT 47 45 0.35 45.35 $0.35 Closed CI 47.15 47.26 OCT 55 50 0.50 50.50 $0.50 Closed FRX 48.93 49.92 OCT 60 55 0.50 55.50 $0.50 Closed BVF 36.75 28.14 OCT 45 40 0.50 40.50 $0.50 Closed CERN 31.42 36.20 OCT 40 35 0.60 35.60 ($0.60) Closed GPRO 51.70 24.10 OCT 65 60 0.50 60.50 $0.50 Closed IMCL 37.73 33.38 OCT 50 45 0.40 45.40 $0.40 Closed DNA 79.82 79.08 OCT 90 85 0.55 85.55 $0.55 Closed FFH 157.95 155.50 OCT 175 170 0.45 170.45 $0.45 Closed IMCL 39.64 33.38 OCT 50 45 0.40 45.40 $0.40 Closed AVCT 31.20 36.00 NOV 37 35 0.35 35.35 ($0.65) Closed CA 23.50 24.81 NOV 30 27 0.35 27.85 $0.35 Open MTG 53.79 51.28 NOV 65 60 0.55 60.55 $0.55 Open LC = Long Call SC = Short Call CB = Cost Basis G/L = Gain/Loss Cerner (NASDAQ:CERN) has previously been closed to limit losses. Avocent (NASDAQ:AVCT) soared higher Monday in conjunction with the rally in technology stocks, changing it's character from a trading-range issue to a bullish "break-out." Needless to say, the position should have been closed during the subsequent upside activity. CALL DEBIT SPREADS ****************** Symbol Pick Last Month LC SC Debit B/E G/L Status HTCH 33.02 34.70 OCT 25 30 4.50 29.50 0.50 Closed AVII 5.54 4.95 DEC 5 7 0.90 5.90 (0.90) Closed DELL 34.91 36.41 OCT 30 32 2.40 32.40 0.10 No Play LLTC 40.77 40.49 NOV 35 37 2.20 37.20 0.30 Open LC = Long Call SC = Short Call B/E = Break-Even G/L = Gain/Loss Dell (NASDAQ:DELL) didn't offer a viable entry in the bullish play. 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, however with the near-term change in (technical) character, it may be prudent to close the position. PUT DEBIT SPREADS ***************** Symbol Pick Last Month LP SP Debit B/E G/L Status LMT 48.70 45.90 OCT 55 50 4.60 50.40 0.40 Closed CCMP 55.83 58.07 OCT 65 60 4.35 60.65 0.65 Closed 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. SYNTHETIC (BULLISH) ******************* Stock Pick Last Expir. Long Short Initial Max. Play Symbol Price Price Month Call Put Credit Value Status XING 9.13 9.40 DEC 12 7 0.10 0.30 Open JNPR 16.63 17.62 NOV 19 14 (0.20) 1.00 Open? LRCX 24.38 26.24 DEC 30 20 0.15 0.80 Open? PHTN 32.40 31.09 JAN 40 25 0.00 0.00 Open Juniper Networks (NASDAQ:JNPR), which cost slightly more to enter than expected, and Lam Research (NASDAQ:LRCX) offered favorable profits in less than one week. Gene Logic (NASDAQ:GLGC), 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 30.54 OCT 20P 30C 0.10 0.00 Closed The "Reader's Request" position in Nam Tai Electronics (NYSE:NTE) was closed early to limit potential losses. CALENDAR & DIAGONAL SPREADS *************************** Stock Pick Last Long Short Current Max. Play Symbol Price Price Option Option Debit Value Status PRU 36.41 38.52 DEC-37C NOV-37C (0.20) 0.10 Open MSFT 27.31 28.91 JAN-27C NOV-30C 1.70 2.40 Open Positions in both Ing Groep (NYSE:ING) and The Medicines Company (NASDAQ:MDCO) offered profitable opportunities prior to be closed. Prudential (NYSE:PRU) now has a "locked-in" profit of $0.20, based on the overall credit for the position. DEBIT STRADDLES *************** Stock Pick Last Exp. Long Long Initial Max Play Symbol Price Price Month Call Put Debit Value Status CLS 17.55 16.96 OCT 17 17 2.35 3.10 Closed NVDA 18.17 16.66 OCT 17 17 2.90 3.50 Closed AFCI 22.66 26.70 OCT 22 22 3.10 4.50 Closed YHOO 37.24 42.24 OCT 37 37 3.75 5.75 Closed COF 59.70 60.50 OCT 60 60 2.80 3.75 Closed TTWO 39.18 39.34 OCT 40 40 2.45 2.45 Closed PII 79.35 83.25 OCT 80 80 2.80 3.70 Closed WEBX 22.54 20.77 OCT 22 22 1.75 2.75 Closed TRI 30.50 28.93 NOV 30 30 4.90 5.00 Open? EASI 59.70 64.59 NOV 60 60 8.50 9.00 Open ZMH 55.52 58.55 DEC 55 55 5.20 5.70 Open Both of our new positions: Webex Communications (NASDAQ:WEBX) and Polaris (NYSE:PII), offered excellent short-term profits. Yahoo! (NASDAQ:YHOO) was a big winner this month after the firm rallied on favorable earnings. Capital One (NYSE:COF) was also volatile in conjunction with the finance group and the position yielded a great short-term gain. Celestica (NYSE:CLS), Nvidia (NASDAQ:NVDA), Zimmer Holdings (NYSE:ZMH) and Engineered Support Systems (NASDAQ:EASI) have achieved small profits. Advanced Fibre Communications (NASDAQ:FIBR) was a very active issue and it finally became a winner with a big gain on Thursday. Triad Hospitals (NYSE:TRI) made a $5 move in one day, but it has also been unprofitable on a simultaneous order basis. The 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 30.82 Oct 30 25 1.40 0.85 Closed 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. ***** COH - Coach $31.43 *** Technicals Only! *** Coach (NYSE:COH) is a designer, producer and marketer of modern American classic accessories. Coach's primary product offerings include handbags, women's and men's accessories, business cases, weekend and travel accessories, leather outerwear, gloves, hats, scarves and personal planning products. Together with its many licensing partners, the company also offers watches, footwear, jewelry, eyewear and home and office furniture with the Coach brand name. Coach's products are sold through a number of direct to consumer channels, which, at the end of the fiscal year ended June 28, 2003, included 156 United States retail stores, direct mail catalogs, online store and 76 United States factory stores. COH - Coach $31.43 PLAY (conservative - bullish/credit spread): BUY PUT NOV-27.50 COH-WY OI=1505 ASK=$0.40 SELL PUT NOV-30.00 COH-WF OI=384 BID=$0.70 INITIAL NET-CREDIT TARGET=$0.30-$0.40 POTENTIAL PROFIT(max)=14% B/E=$29.70 ***** CYMI - Cymer $44.99 *** Earnings Speculation! *** Cymer (NASADQ:CYMI) is a supplier of excimer light sources, the essential light source for deep ultraviolet photolithography systems. DUV lithography is a key technology that has allowed the semiconductor industry to meet the exact specifications and manufacturing requirements for volume production of advanced semiconductor chips. The firm's light sources are incorporated into step-and-repeat (steppers) and step-and-scan (scanners) photolithography systems for use in the manufacture of various semiconductors with critical feature sizes below 0.35 microns. Cymer's products consist of photolithography light sources, replacement parts and service. The firm maintains a worldwide service organization that supports its installed base of light sources. CYMI - Cymer $44.99 PLAY (conservative - bullish/credit spread): BUY PUT NOV-35.00 CQG-WG OI=968 ASK=$0.45 SELL PUT NOV-40.00 CQG-WH OI=512 BID=$1.05 INITIAL NET-CREDIT TARGET=$0.60-$0.70 POTENTIAL PROFIT(max)=14% B/E=$39.40 ***** SAP - SAP AG $36.00 *** Strong Sector! *** SAP AG (NYSE:SAP) operates as a business software company. The firm primarily offers the mySAP Business Suite, which is a suite of unique business software applications and an application and integration platform designed to enable companies to manage the entire value chain across business networks, allowing SAP to adapt quickly and remain flexible when faced with changing business conditions. In addition to its software solution portfolio, the company provides service offerings such as business solutions consulting, solution operations services, educational services, hosting services and support services including project planning, implementation assistance, ongoing post-implementation support activities and virtual classroom training for new and existing customers. SAP's customers include multi-national enterprises, as well as small and mid-sized businesses. SAP - SAP AG $36.00 PLAY (conservative - bullish/credit spread): BUY PUT NOV-30.00 SAP-WF OI=862 ASK=$0.25 SELL PUT NOV-32.50 SAP-WZ OI=106 BID=$0.55 INITIAL NET-CREDIT TARGET=$0.30-$0.40 POTENTIAL PROFIT(max)=14% B/E=$32.20 ***** BJS - BJ Services Company $32.50 *** Oil Services Slump! *** BJ Services Company (NYSE:BJS) is a provider of pressure pumping and oilfield services serving the petroleum industry worldwide. The company's pressure pumping services consist of cementing and stimulation services used in the completion of new oil and gas wells and in remedial work on existing wells, both onshore and offshore. Other oilfield services include completion products and tools, completion fluids and tubular services provided to the oil and gas exploration and production industry, commissioning and inspection services provided to refineries, pipelines and offshore platforms, as well as specialty chemical services. In 2002, the company acquired OSCA, a completion services (pressure pumping), completion tools and completion fluids company with operations primarily in the Gulf of Mexico, Brazil and Venezuela. BJS - BJ Services Company $32.50 PLAY (conservative - bearish/credit spread): BUY CALL NOV-37.50 BJS-KU OI=684 ASK=$0.20 SELL CALL NOV-35.00 BJS-KG OI=259 BID=$0.50 INITIAL NET-CREDIT TARGET=$0.30-$0.40 POTENTIAL PROFIT(max)=14% B/E=$35.30 ***** CEPH - Cephalon $45.77 *** Trading Range? *** Cephalon (NASDAQ:CEPH) is an international biopharmaceutical firm dedicated to the discovery, development and marketing of products to treat sleep disorders, neurological disorders, cancer and pain. In addition to conducting a very active research and development program, the company markets three products in the United States and a number of products in various countries throughout Europe. Cephalon's United States products are comprised of Provigil, for the treatment of excessive daytime sleepiness associated with narcolepsy, Actiq for cancer pain management, and Gabitril for the treatment of partial seizures associated with epilepsy. CEPH - Cephalon $45.77 PLAY (conservative - bearish/credit spread): BUY CALL NOV-55.00 CQE-KK OI=9067 ASK=$0.25 SELL CALL NOV-50.00 CQE-KJ OI=8134 BID=$0.75 INITIAL NET-CREDIT TARGET=$0.55-$0.60 POTENTIAL PROFIT(max)=12% B/E=$50.55 ***** HDI - Harley-Davidson $47.26 *** Mediocre Outlook! *** Harley-Davidson (NYSE:HDI) operates in two primary business groups, the motorcycles and related products segment and the financial services segment. The motorcycles and related products segment includes the companies doing business as Harley-Davidson Motor Company (Motor Company), subsidiaries of H-D Michigan, Inc. and Buell Motorcycle Company LLC. The motorcycles segment designs, manufactures and sells primarily heavyweight (engine displacement of 651plus cubic centimeters) touring, custom and performance motorcycles, as well as a complete line of motorcycle parts, accessories, clothing and collectibles. The financial services segment consists of the company's subsidiary, Harley-Davidson Financial Services, and its subsidiaries. HDFS is engaged in the business of financing and servicing wholesale inventory receivables and consumer retail installment sales contracts (motorcycles and aircraft). HDI - Harley-Davidson $47.26 PLAY (conservative - bearish/credit spread): BUY CALL NOV-55.00 HDI-KK OI=4129 ASK=$0.10 SELL CALL NOV-50.00 HDI-KJ OI=6777 BID=$0.60 INITIAL NET-CREDIT TARGET=$0.50-$0.55 POTENTIAL PROFIT(max)=11% B/E=$50.50 ***** SEPR - Sepracor $26.98 *** Profit-Taking Underway! *** Sepracor (NASDAQ:SEPR) is a research-based pharmaceutical company dedicated to treating and preventing human disease through the discovery, development and commercialization of pharmaceutical compounds, including product candidates directed toward serving unmet medical needs. The firm's proprietary compounds are either single-isomer or active metabolite forms of existing drugs, which Sepracor refers to as improved chemical entities, or new chemical entity compounds, which are unrelated to current products. SEPR - Sepracor $26.98 PLAY (conservative - bearish/credit spread): BUY CALL NOV-35.00 ERQ-KG OI=2257 ASK=$0.45 SELL CALL NOV-32.50 ERQ-KZ OI=522 BID=$0.70 INITIAL NET-CREDIT TARGET=$0.25-$0.35 POTENTIAL PROFIT(max)=11% B/E=$32.75 ************* 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. ***** NPSP - NPS Pharmaceuticals $25.45 *** Drug Problems? *** NPS Pharmaceuticals (NASDAQ:NPSP) is a biopharmaceutical company engaged in discovering, developing and commercializing small molecule drugs and recombinant proteins. The company's product candidates are primarily for the treatment of bone and mineral disorders, gastrointestinal disorders and central nervous system disorders. NPS Pharmaceuticals has three product candidates in active clinical development and several pre-clinical product candidates. Two of these product candidates, Preos and AMG 073, are in Phase III clinical trials. The company's third product candidate, ALX-0600, is in a pilot Phase II clinical trial. NPSP - NPS Pharmaceuticals $25.45 PLAY (conservative - bearish/debit spread): BUY PUT NOV-35.00 QKK-WG OI=30 ASK=$10.00 SELL PUT NOV-30.00 QKK-WF OI=1181 BID=$5.60 INITIAL NET-DEBIT TARGET=$4.30-$4.40 POTENTIAL PROFIT(max)=14% B/E=$30.60 **************** CALENDAR SPREADS **************** A calendar spread (or time spread) consists of the sale of one option and the simultaneous purchase of an option of the same type and strike price, but with a future expiration date. The premise in a calendar spread is simple: time erodes the value of the near-term option at a faster rate than the far-term option. The positions in this section are speculative (out-of-the-money) spreads with low initial cost and large potential profit. ***** SCRI - Sicor $20.52 *** Promising Product Pipeline! *** Sicor (NASDAQ:SCRI) is a vertically integrated, multinational specialty pharmaceutical firm that focuses on generic finished dosage injectables, active pharmaceutical ingredients and generic biopharmaceuticals. Using its internal research and development capabilities, together with its operational flexibility and manufacturing and regulatory expertise, the company is able to take a variety of products from the laboratory to the worldwide market. Leveraging these capabilities, Sicor concentrates on products and technologies that present significant barriers to entry or offer first-to-market opportunities. The company is developing generic equivalents to existing biopharmaceutical products, including granulocyte colony stimulating factor, erythropoietin, and interferon. SCRI - Sicor $20.52 PLAY (speculative - bullish/calendar spread): BUY CALL FEB-22.50 UEC-BX OI=2794 ASK=$1.65 SELL CALL NOV-22.50 UEC-KX OI=4289 BID=$0.70 INITIAL NET DEBIT TARGET=$0.80-$0.90 INITIAL TARGET PROFIT=$0.45-$0.75 *********************** 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. ***** PCLN - Priceline.com $30.45 *** Earnings Speculation! *** Priceline.com (NASDAQ:PCLN) offers products for sale in two major categories: a travel service that offers leisure airline tickets, hotel rooms, rental cars, packaged vacations and cruises; and a personal finance service that offers home mortgages, refinancing and home equity loans through an independent licensee. PCLN also owns travel Web sites Lowestfare.com and Rentalcars.com. The firm is part-owner of Internet travel service Travelweb. Priceline.com licenses its business model to independent licensees, including pricelinemortgage and certain international licensees. PCLN - Priceline.com $30.45 PLAY (very speculative - neutral/debit straddle): BUY CALL NOV-30.00 PUZ-KF OI=261 ASK=$2.40 BUY PUT NOV-30.00 PUZ-WF OI=268 ASK=$2.90 INITIAL NET-DEBIT TARGET=$5.00-$5.10 INITIAL TARGET PROFIT=$1.60-$1.95 ***** ************************Advertisement************************* OneStopOption.com Trade: Securities, Stock Options, Futures Contracts Service: Experienced Brokers Personal Assistance Convenience of One Brokerage Online and Live Broker Trading Experience... 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