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Daily Newsletter, Sunday, 10/26/2003

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The Option Investor Newsletter                   Sunday 10-26-2003
Copyright 2003, All rights reserved.                        1 of 5
Redistribution in any form strictly prohibited.


In Section One:

Wrap: Old bear was a bull's best friend
Futures Market: Never a Dull Moment
Index Trader Wrap: Magoo Market
Editor's Plays: Two for Two, What Did I Do Wrong?
Market Sentiment: Whispering October Winds
Ask the Analyst: Who's side are you on?
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 10-24        WE 10-17        WE 10-10        WE 10-03
DOW     9582.46 -139.33 9721.79 + 47.11 9674.68 +102.37 +259.23
Nasdaq  1865.59 - 46.77 1912.36 -  2.95 1915.31 + 34.74 + 88.50
S&P-100  511.25 -  6.87  518.12 +  0.07  518.05 +  2.88 + 15.56
S&P-500 1028.91 - 10.41 1039.32 +  1.26 1038.06 +  8.21 + 33.00
W5000   9983.50 -114.8810098.38 + 13.06 10085.3 + 95.02 +343.82
RUT      506.43 - 13.93  520.36 +  1.30  519.06 +  6.78 + 27.00
TRAN    2827.25 - 20.03 2847.28 + 23.73 2823.55 + 38.70 +121.02
VIX       17.71 +  0.09   17.62 -  0.83   18.45 -  1.05 -  2.73
VXO       18.93 -  0.26   19.19 -  0.05   19.24
VXN       25.45 +  0.12   25.33 -  2.29   27.62 -  1.58 -  1.68
TRIN       1.44            1.59            1.24
Put/Call   0.91            0.64            0.93
WE= Week Ending
******************************************************************

Old bear was a bull's best friend

A late session rally, which I feel may have been largely
attributed to short covering, had the major indices recouping the
bulk of their session's losses, but still finishing lower as
investors pondered stock valuations and another session largely
driven my corporate earnings.

The negative tone to Friday's trade was put in place Thursday
evening when Microsoft (NASDAQ:MSFT) $26.61 -7.95% told analysts
that it wasn't going to be the 20% annual revenue grower it used
to be, and for some technology bulls those revelations may have
been too much to swallow.

It has been awhile since I've written a market wrap, so I was
reading Jim Brown's wrap from last Sunday.  Imagine the mental
state of bulls this morning after reading that wrap, where Jim
reminded us all about the crash of 1987.

While Jim noted that the "Crash of 87" began on Monday October 9,
1987, the party for the bears didn't reach full swing until the
28th and 29th when the Dow Industrials fell 23.9% in two days.

As I sat at my trading desk today, I had set some program trading
buy/sell premium alerts on my QCharts trading software.  This
isn't something I do on a regular basis, but for those subscriber
that read the Index Trader Wrap at OptionInvestor.com, you will
know that the major indices were flirting with some weekly pivot
matrix support levels, where in recent months, it has been an
observation that the major indices would normally find some
pretty good support, especially after having traded a 52-week
high in a prior week or two.

Today, the buy/sell program premium alerts, which we report in
every morning's 09:00 AM EDT Update, were being triggered at the
sell side as fast as I could reset them.  When I looked at an
intra-day chart of these alerts on 5-minute intervals, I counted
19 sell program alerts and just 2 buy program premium alerts,
where the alerts are created when there is an arbitrage
discrepancy seen between the futures and the cash market.

I want to take note of this in today's trade, as it may come in
handy in the days or weeks to follow.

I was thinking to myself... "gosh, with all these sell program
premium alerts being triggered, how the heck are these markets
hanging in here like they are."  Now some traders may not think
the markets were hanging in there during the bulk of today's
trade, but I think there was one heck of a lot of short covering
taking place today, as short interest continued to build through
the middle of October, as the major indices were still setting
new 52-week highs.

Intra-day SPY and Premium of S&P Futures - 5-min



There were plenty of sell programs in today's session, and with
so many sell programs taking place, its my feeling that some old
bears were using today's weakness to cover some positions after
seeing new 52-week highs again last week.

Should the S&P Depository Receipts (AMEX:SPY) $103.58 +0.22% come
back into the better part of today's range of $103.24-$102.18,
and move QUICKLY or sharply through this range, then my thoughts
that today's buying was largely short covering related may be
correct.  This could be an important observation in coming weeks
as it takes BULLISH buying to keep stocks trending higher.

Yesterday I profiled a bullish trade in the above SPY at $103.40,
with a stop loss at $103.20 and was stopped out almost right at
the bottom of today's trade.  While frustrating, I'll also take
note of this and in coming sessions, if the SPY were to move
quickly through today's range and further below these lows, I'm
going to sense that today's stability was largely attributed to
BEARISH buying, not bullish buying.

Here's a quick look at short interest on the S&P Depository
Receipts (AMEX:SPY).  Last month's data, tallied on the 15th of
each month, show short interest fell for the first time since the
March lows, but showed an increase in the latest month.

If you're a trader, you've probably shorted or bought a put on
some security since the March lows, and may have lost money on
the trade.  There's probably some old bears out there from April,
May, June, July, or even August that may have been doing some
buying.  One way to try determine who is doing the bulk of the
buying, which will hold stocks steady or drive prices higher is
to monitor areas of irregular or heavy institutional activity,
like I think we saw today with a rather large number of program
trading alerts, make a note of the area or range of that
activity, and if the range is traded, try and observe the pace or
how quickly or slowly price moves when the range is retested.

Monthly Short Interest on the SPY



Sometimes it is helpful to see the market as a football game.
One team is the bulls and the other team is the bears.  Then look
at the markets from both sides (bullish and bearish) to determine
who has been winning.  Then, put yourself on the winning team,
which we will show has been the BULLS, but identify a point where
you might want to switch teams and changes of allegiance.

Let's take today's range of the SPY and observations made of
active buy/sell program premium alerts, and see if that
observation may have any significance in the future, but just as
important, see if it might make any historical sense with the
above short interest data.

Just for grins, imagine your short 100,000 shares of SPY, and
established that short position on August 15th.  If you were a
baseball manager, or football coach, aren't you always trying to
figure out what the other team is thinking and what there next
move will be?

S&P Depository Receipts (AMEX:SPY) - Daily Interval



Boom!  Had I been paying more attention to the June 17 and 18
relative highs when I set up the bullish trade in the SPY on
Thursday, with a stop at $102.20, I might have set the stop lower
to $102.10 or just under $102.00.  In horizontal red lines, I've
just extended to the left, Friday's active program trading range.
There is definitely some technical significance at, or just above
the $102.00 level isn't there?

You've heard of "counting cards" haven't you?  If you are caught
counting cards in Vegas, the casino will ask you to leave.

However, counting short interest in the stock market, and trying
to figure out what a bear is doing, especially the SMART ones, is
not illegal, and in trading and investing, all is fair in love
and war.

Starting at the recent 52-week high on October 15, and comparing
that high to the Sept. 18 relative high of $104.70, we get a
rough idea that there is just over 3.2 million shares of short
interest that is profitable.  That's not a lot of profitable
bears at this point when we see from the short interest that
bears have been shorting all the way up the scale since March.
Please note that there is a difference between a SMART bear and a
normal everyday run-of-the-mill bear.

True you are!  At some point, a bear, just like a bull, will be
proven correct.  Going into next weeks trade, I will say that
some bears (those from $104.70-$105.89) will begin to look SMART
if the SPY breaks below $102.00, which would be a break of trend,
but also give those BEARS that were short the SPY dating clear
back to mid-June a chance to cover on further weakness to the
$100.00 level.

If I'm a bull, and I was in the SPY until I got stopped out at
$102.20, I could put myself in the paws of a bear that has been
short the SPY since mid-June, even at the then 52-week high of
$102.17 and perhaps get the sense that on Friday, he/she didn't
care what the heck Microsoft (NASDAQ:MSFT) said about future
earnings has they had the chance to get squared up after seeing a
new 52-week high.  Maybe, MSFT's news will have a negative impact
on the other 499 stocks in the S&P 500 (SPX.X) 1,028.91 -0.47%,
but what if it doesn't?

OK, so we've determined that it may be best to be bullish above
$102.00, but CAUTIOUSLY more bearish below $102.00.

Below SPY=$102.00 (this is roughly equivalent to SPX 1,020) I've
marked two prior relative lows of $99.25-$98.83.  In actuality,
this marks a zone of support, which oddly enough is just below
July 15 and August 15 closing values.  Couldn't we say the REASON
the SPY found both of those relative lows was because SMART
bears, especially those still short on the pullback to $99.25
that had now seen a new 52-week high thought... "gosh darn it!  I
didn't think the SPY would trade a new high when I shorted it at
$102.17 in June, so I'd better cover some of that position around
$100.00, just in case the SPY trades another new high."

Do you sense the point I'm trying to get across?  Until a bear or
even a bull sees a LOWER HIGH and a LOWER LOW, he/she is just as
uncertain about a MARKET'S valuation as any bull is at this
point.  A bearish trader has seen just as many higher and
higher lows as a bullish trader has.  Haven't they?

If simply thinking about the MARKET in this respect, the first
sign of any near-term trouble is a break below $102.00, which
most likely finds support at $98.83-$99.25, and as I learned
today, those levels may be off by a couple of pennies.

It's always nice to sell short a rally than the breakdown, but
where does a bear that does know for fact that the market is
overvalued, look to short at?  Most bears at this point are tired
of guessing, but my best guess would be to look for a bounce back
near, or just above the $104.70 level (SPX = 1,047) and a
reversal back lower, where a mandatory stop of $106.50 might be
placed.  Then and only then, a good trade would be sensed on a
decline back below $102, with a bearish cover target of $100.00.

Below the SPY $98.83 level, I've followed with a red arrow, to
depict increasing weakness.  This would depict a MARKET now
seeing its first relative low after a 52-week high and a
DIVERGENCE of pattern since the March lows.

Since I'm combining tonight's Market Wrap with this weekend's Ask
the analyst column, this would a level where a portfolio of
stocks should be hedged at currently.

I received several questions from subscribers this week that felt
the markets were getting a little top heavy, and were ready for a
reversal, and wondered at what level would a meaningful breakdown
occur.  My best thought would be the equivalent of SPY $96.00, or
S&P 500 (SPX) 960.

In percentage terms, a 10% pullback in a major index is
considered a healthy correction.  If I were to assume the top is
in at $105.89 on the SPY, a 10% pullback would be equivalent to
$95.30 on the SPY, or 953 SPX.

For the tax-sensitive bull, that is hesitant to sell current
holding for capital gains reasons (tax consequences is an
important part of an investors overall plan, but should NEVER be
the ultimate decision making tool for not selling and profiting
from the risk taken), the use of a put option with January
expiration, may be your best strategy.  By purchasing a January
expiration, tax consequences may be pushed into the 2004 tax
year.  So, if you do NOT want to take some profits off the table
today, or a break below SPX 1,020 and option would be to hedge
part of the portfolio with a January put option.

What is the worst thing that happens for a capital gains
sensitive bull that buys a protective put to hedge a portfolio of
stocks?  The market moves higher and your current holding most
likely increases in value by January 2004 expiration.  You sell
your PUT for a loss and you take that loss against capital gains,
and reduce your capital gains tax amount.

Russell-2000 Index (RUT.X) - Daily Interval Chart



Note the upward trend on the RUT.X looking striking similar to
that of the upward trend on the S&P Depository Receipts
(AMEX:SPY) we just looked at.  I carried over Jim's 515 initial
support level from last Sunday's wrap, but added a little twist
to the above chart.

It is this kind of retracement that lead me to the "fitted
retracement technique.  Why in the world would the RUT.X see a
double top at 534.25?  Who picked that level as a selling point.
If I anchored a retracement from the August 7 low and "fit" the
61.8% retracement near the September 29 low, which was 482.13,
then I can perhaps make some sense out of the recent 52-week
high.  It is also notable how nicely the 38.2% retracement came
into play PRIOR to the 52-week high, when the RUT.X pulled into
support.

Conclusion:  The RUT.X should find support near 502.05, if it
doesn't, the RUT.X vulnerable to 61.8% retracement and match the
recent relative low.  Should the RUT.X break much below the 500
level this week, then break of trend that has held since August 7
(the attachment point for trend and retracement), is an alert to
a change in trend.  If RUT.X were to fall to 480-482 level, then
look for resistance right back higher at 518.

Anytime a stock or index breaks an upward trend, be cognizant
that the potential bounce back higher finds that broken support
trend coming into play as resistance.

Dow Industrials ($INDU) Chart - 50-point box



Today's trade in the Dow saw an additional 2-box decline with
MSFT -7.95%, HPQ -2.52% offsetting gains in T +3.91% and SBC
+2.68%.  While 9,500 may be psychological support, more
formidable support found at 9,400.

Gains in AT&T (NYSE:T) $19.91 +3.91% were found after the Wall
Street Journal reported that it and Bell South (NYSE:BLS) $25.83
-0.34% had recently renewed talks of a merger and that a merger
between the two makes strategic sense in the very highly
competitive telecom services industry, where price competition is
high.  AT&T continues to see revenues decline and has cut costs
to the bone.  A merger with price talk of mid-$20 per share may
be best for T shareholders, and allow further cost reductions to
be seen when combined with another bell.  Bell South is said to
have a very strong balance sheet, and can afford to take on debt
to further gain market share and T's coveted long distance
business.  Some say the talk were revived as it looks like
WorldComm will come out of bankruptcy.  The talks between T and
BLS stopped when it was questioned whether WorldComm was going to
survive, if not allowed by the bankruptcy courts.

NASDAQ-Composite (COMPX) Chart - Daily Intervals



The broader NASDAQ found support at its rising 50-day SMA and
PINK trend from the March lows, which I've attached to the August
7 lows.  This PINK trend would be considered significant as it
looks to have provide support for a rebound to new highs on the
late September pullback.  First sign of weakness would be a move
below 1,835 which would then have 1,775 in play as support.

The RED regression channel was a channel I had placed on the
COMPX months ago, that seemed to represent the aggressive bullish
nature of the broader NASDAQ and other major indices.  Only today
do I see that the base of this old trend may have come into play
as resistance at the recent 52-week highs.

This may make some sense in the scope of an early economic
recovery when the markets anticipate and accurately reflect a
growing economy.  However, there is always some "finite second"
when the markets realize a point of perfect price, that fully
reflects true price perfection, then awaits further information
to try and figure out if their is further upside fundamentals,
which are always depicted by the charts.

The markets have been inundated with fundamental data from
corporate earnings this week, and I get the sense from the NASDAQ
chart that it is digesting the plethora of information it has
been given and ready to make a decision.  The trend is higher
from what I can see, but the suspicious 52-week high that found
the base of regression may hint it is time for a rest.

This week, the only economic report (other than a lot of
corporate earnings) was weekly jobless claims, which were in line
with forecast at 386,000.  With all the earnings being released,
the jobless claims data really had little impact, but still
showed some sign of an improving labor market.

While last week was rather void of economic data, next week will
heat up with Monday's report for September existing home sales
forecasted at a 6.3 million unit annual rate and new home sales
forecasted at 1,113K annual rate.  The MARKET seems to be looking
for good numbers from the new homes data as the Dow Jones Home
Construction Index (DJUSHB) 537.39 traded an all-time high on
Thursday.

Then on Tuesday, September durable goods data, October consumer
confidence and the FOMC meeting will intrigue investors.

Most Fed watchers do not expect the Fed to raise rates, and with
Gold still below $400.00, Steve Forbes would agree.

For some thoughts on why the Fed should not raise interest rates
because gold is trading under $400/oz. I wrote an Ask the Analyst
column on Steve Forbes' thoughts, and we back tested these
thoughts as to what the Fed had been doing over the years, where
gold was trading, and wanted to see what the stock market's
reaction was to the Fed's decisions.  Here is the
http://www.OptionInvestor.com/ask/ask_083103_1.asp to that article.

Have a great weekend!

Jeff Bailey


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

Never a Dull Moment
Jonathan Levinson

Friday's trading produced its share of quiet spaces, but they
were colored with sufficient anxiety of the inevitable next move
to keep traders on the edge of their seats.  Equities fell and
were trading in the red until a sharp bounce commencing at 3:40PM
drove the indices back into positive territory.  Treasuries,
precious metals and the CRB all rose on weakness in the US Dollar
Index.

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


MSFT's disappointment on Thursday cast the US markets under the
darkest of clouds Friday, and the US Dollar Index sold off
sharply at 8:30AM.  It bounced from a low of 91, trading 91.34 as
of this writing.  The CRB challenged the 250 level, HUI the 220
level, and gold the 390 level.  For the week, the US Dollar Index
completed a bearish star at a new low for the now- 9 week
decline.

Daily chart of December gold


December gold bludgeoned more shorts Friday, extending its
upphase on the daily charts and challenging lower wedge
resistance, a return to the scene of the previous breakdown.  In
so doing, it printed a massive bullish engulfing candle on the
weekly chart, nearing but not touching its September high.  The
HUI hit 220 before pulling back, and the move was matched by
strength in silver and the broader CRB for the week.


Daily chart of the ten year note yield


The ten year note yield extended its slide on Friday, continuing
the downtrend since breaking what now appears to be a narrow bear
wedge on the daily chart.  The rally in bonds appears to project
to a low yield either at Fibonacci support in the 4.3% area,
coincident with the start of price confluence at that level, or
just below it at 3.9%, the downside bear wedge target.  For the
week, the TNX printed a bearish engulfing candle from a lower
high, boding well for treasury bulls.


Daily NQ candles


Never turn your back on a bull.  Friday was an awe-inspiring
display of either short panicking, tape-painting, robot-jamming,
or, as I can almost hear Paul Kangas barking, "bargain-hunting".
The doji hammer tells the whole story.  It bounced from the
rising trendline on the daily chart, not repairing any of the
technical damage caused by this week's impressive selloff, but at
least avoiding the deleterious impact of Joe- and Jane Sixpack's
Saturday-morning newspaper rendezvous with the fact that they
once again (according to Trimtabs) parked a huge amount of money
into mutual funds just in time (according to me) to catch the top
of yet another bear market rally.  MSFT got smoked for 7.81%,
following in GE's recent footsteps, and if anyone thinks that a
quick 20 minute jam job on Friday afternoon can erase the writing
on the wall, they should think again. For the week, the NQ
printed a lower low and lower high, with sharp candle spikes in
both directions.

30 minute 20 day chart of the NQ


Volume was heavy on Friday, with 1.98B Nasdaq shares again
traded.  The majority of the volume I saw came in on the sell
side, however, and I'll reiterate that the closing bids smelled
more of desperation than of renewed bullishness to me.
Nevertheless, we were writing about the likelihood of a bounce in
the Futures Monitor as indicated by the 30 minute chart
oscillators, and it arrived.  The bounce will have to contend
with the recent trend of lower oscillator highs, but it has the
possibility of a bull wedge breakout projecting to 1430 in its
favor.  That said, the trend on this chart is no longer up, and
1390 is not going to fall easily.  With downphases on the daily
and weekly (not shown) chart oscillators, this 30 minute chart
upphase should do no more than relieve the oversold condition
short term before the slide begins anew.  I expect a failure at
1390 or 1410 at the outside, and if 1410 is breached, then we'll
have to reevaluate.


Daily ES candles


The ES never made it to the lower support line, bouncing instead
from the 38.2% retracement from the rally high.  As on the NQ, we
had a lower low and lower high, within the context of the ongoing
daily downphase.  It will take a decisive move above 1040 to
begin to complicate what continues to appear to be a clear
bearish picture.  By the same token, however, until 1008 fails,
bulls can bide their time.  Below 1008, bears will have
confirmation that this is more than a mere pullback in the
grander scheme of this year's rally.


20 day 30 minute chart of the ES


Like the NQ, we see a possible bull wedge breakout in effect.
Note the bullish divergence on the stochastic, telegraphing the
possible bounce.  All afternoon we were expecting one, but the
buying was so abysmal that it was very difficult to buy.  The
last surge was the strongest of the day.  1030 is solid
resistance, followed by 1038-40 which I expect to hold for this
intraday upphase.  The broader head and shoulders pattern about
which I was writing throughout the week is still in play, with
the preliminary target of 1014 missed by a point and a half on
Friday.  However, I believe that the 1021 neckline is in play,
projecting to a low in the 987 area.  So long as the daily chart
downphase continues, I expect lower highs on the 30 minute chart.

Daily YM candles


Same setup on the YM.

20 day 30 minute chart of the YM


This week saw new lows reached on the US Dollar Index matching
new year highs for the HUI, a revisit of the year high for gold
and the CRB, and relative highs for treasuries within their most
recent upleg.  Equities printed bearish candles, despite the end
of Friday ramp job.  While I expect an unceremonious end to this
bounce, next week is the end of the month, and mutual fund
window-dressing has become sufficiently accepted as a concept to
have made a headline on my news ticker last month (seriously).
With GE and MSFT now being sold together, I don't see much
reasonable hope for a resurgence of the rally, but anything is
possible.  We will continue to trade what we see, but the
intermarket relationships combined with this week's price action
bodes ill for equities.



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

Magoo Market
Jonathan Levinson

With the volatility indices hitting extreme lows this week (VXO
sub-18), an oblivious, complacent market was miraculously saved
in the closing minutes of Friday's session by a vertical spurt of
bids.  Volume was strong, with 1.4B NYSE shares and 1.98B Nasdaq
shares changing hands, with numerous surprises to the upside and
downside to tempt every trader.  Despite the apparent chaos,
however, the markets behaved in an orderly fashion.

In an effort to simplify and clarify, I've begun with the weekly
views of the Nasdaq and the Dow.  I then review the shorter
timeframes pertinent to our primary trading vehicles, the QQQ and
OEX, focusing in on the daily and 30 minute candle charts.

As noted, complacency remains high.  This bear market in
volatility/fear has dominated for the past several weeks, and
Friday's negative closing prints on the VXN, VXO, QQV and almost
VIX (+.03 at 17.71) is as close to a technical indictment of the
current equities prices as one is likely to find anywhere.  With
the market's bellwethers, GE and MSFT being sold precipitously,
option premium remains ready collapse on the slightest hint of
short covering.  This virtually guarantees that the markets will
be slow to react to further downside, which in turn should
exacerbate that downside when it does come.

A different facet of this low volatility/low premium environment
is that most participants have developed strong faith in the
cycle upphases when they are due.  This is a Pavlovian response
to this long year of surprise flagpole rallies and robot jams off
the flimsiest of buy signals.  All participants, this author
included, expected a bounce all afternoon and were reluctant to
short/ eager to get long or hedge open shorts in anticipation of
a nice upside run.  Fortunately for the market it came, if
somewhat later than expected.  I expect this to prove disastrous
in the long run, because when a big drop does come, there will be
fewer shorts to provide buying (covering) on the way down.

I had prefaced this with the statement that the markets behaved
themselves this week and on Friday.  Let's take a look:


Weekly COMPX candles


The Nasdaq moved lower this week, dropping 2.4% this week and
1.1% or 19.92 points on Friday.  The Naz is down 1.9% for the
month.  This weakness reflects itself with lower low for the
weekly candle print above, and the general weakening of upward
momentum shows up as a bearish stochastic divergence since the
end of June.  Despite the higher price highs, the stochastic
oscillator has been weakening, and continues to await the
beginning of its downphase.  A break below 1800 could kick off
the move from what have become very overbought levels on the
weekly oscillators.


Weekly INDU candles


We see a similar picture on the Dow weekly candles, with a
clearer bear wedge pattern off the March low.  9500 looks like
the key support at current levels, tested but not broken on
Friday.  For the week, the Dow lost 1.4% and is up .1% for the
month.  The same bearish stochastic divergence as we see on the
Nasdaq is evident here.



Daily QQQ candles


The weakness in the Qubes this week lined up perfectly with the
oscillator downphase on the daily chart oscillators.  This
downphase confirmed the rally high as an actual high for the time
being, and a lower price high for the next oscillator upphase
will seal it.  Trendline support at 32.90 was not tested, and the
trend on this six month chart is clearly still up despite this
week's bearishness.  However, the increasingly underdone
sentiment readings combined with the toppy, divergent weekly
oscillators are keeping score, and the markets shouldn't rise
forever.  We await the test of 32.90 to give us a clearer view of
what to expect, but for the time being, the stronger-than-recent
price declines derived from the coincident downside cyclicality
of the weekly and daily oscillators.

20 day 30 minute chart of the QQQ


The weakness mentioned above is most evident on the 30 minute
charts, with a trend of lower oscillator highs under the
influence of the dailies.  Price fell far more easily than it
rose this week, Friday's end of session ramp job notwithstanding.
If my interpretation is correct, the bull wedge on this chart
should not play out to its full 35.40 target, and I expect a
battle at 34.50.  The Friday bounce was anticipated by the
oversold 300 minute stochastic on this chart, which continues to
track the price very efficiently.

Daily OEX candles


We see the same setup on the OEX, with this week's weakness
following the daily oscillator path perfectly.  Meaningful
support is at 505, below which 497 should provide some bids.  The
trend remains up until those break, but note that the last
upphase in October was much shorter than the previous one from
August to September.


20 day 30 minute chart of the OEX


Same story on the 30 minute chart.  515 looks like the next
problem area for bulls, and as the 30 minute chart oscillators
are fighting the downphase on the daily, I expect a lower high
from the current upphase.  Above 517, my picture will become more
complicated than this, and we'll have to reassess.


For next week, the bias is short term strength as the 30 minute
upphases play out, but within the context of overriding weakness
under the influence of the downphasing daily and weekly chart
oscillators.



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

Two for Two, What Did I Do Wrong?

The DJX put play from Oct-12th never filled the second and
third level of the Nov-96 puts like we hoped but we did get
a drop to our sell target of 9500 on Friday. The puts we
did get a trigger on should have filled in the $1.35 range
depending on your broker on Monday the 13th. They were
trading at $2.20 on Friday when the Dow hit our target of
9500. Initially we were going to sell 1/2 at 9500 and 1/2
at 9300 but last week I suggested selling them all at 9500
since we never triggered on the two remaining entries.
Either way if finished as a successful play.

AMZN posted a profit for the first non holiday quarter
ever but gave some tame guidance and investors returned
the stock for a refund. The stock was trading near $60
when puts were recommended last Sunday. It traded as
high as $61 on Tuesday giving traders plenty of opportunity
to pick up a few of the recommended Jan-$55 put as suggested.
That put closed at $3.80 the Friday before the recommendation
and traded as low as $2.95 by Tuesday.

AMZN has traded as low as 52.91 since earnings and those
puts rocketed to $5.50 as investors continue to sell the
stock. Regardless of where you bought the puts you would
have been profitable.



OK, now what? We hit Dow 9500, not really a magic number
but more of a psychological level. We bounced slightly but
without conviction. Unfortunately that is what I have today,
a lack of conviction about direction.

It is tough to suggest a play for this week with the Dow
right in the middle of its expected range. That range for
next week could run from 9000 to 10,000 and while I am
still leaning to the downside I cannot see entering a
play from here. My actual personal target is 9300. However,
I am not confident enough in the bounce potential to
suggest calls at any level. It would be really easy to
suggest buying laddered calls at 9300, 9200, 9100 and
9000 but I have no confidence that the rebound will be
soon. We could wander in the 9000-9500 range for a month
if investors decide the earnings were not as exciting as
they expected.

The bullish case says the funds buy the dip the first week
of November and we are off to the races again. With this
the last week in October and the mutual fund year end
anything is possible.

When you have no bias it is best not to play. Otherwise
it is just a coin flip. My suggestion for this weekend
is to pass. If you feel led then buy the dip under 9300.
Dow 9000 is massive support and I do not see that cracking.
If I thought we were just going to dive to that level next
week I would not hesitate to buy the dip. I am just not
convinced. My choice would probably be the DJX 92.00 calls
at 9000. Far enough out of the money to sell for a buck
and close enough to be in the money quickly on any rebound.

Good luck!


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

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)


PowerBall

Technical problems on the portfolio quotes today. I will update
it again next Sunday.

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

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

Good Luck

Jim Brown


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

Whispering October Winds
- J. Brown

Wow!  What a week for the markets.  A week ago Friday many
thought we would have seen Dow 10,000 and NASDAQ 2000 this last
week.  Instead we're left with a bounce from 9500 and 1841,
respectively.  The declines were widespread with Europe and Asia
suffering along with us.  Actually, Japanese NIKKEI has fallen
more than 820 points in the last few days with more than 500 of
that decline in one session.  More than a few traders were
spooked that we would see similar declines in the U.S. markets
but in an amazing show of strength (or manipulation) the $INDU
and COMPX slid lower in a much more orderly fashion.

Of course we shouldn't be too surprised that the markets
witnessed some profit taking this week.  The Q3 earnings season
has pretty much delivered on the promise to turn in strong
earnings growth and investors tend to sell the news.  Hastening
the urge to lock in profits were disappointing earnings and
comments from several major drug companies mid-week and then
MSFT's lackluster report on Thursday.  Throw in some new multi-
year lows for the fear indices (VIX, VXO and VXN) and combine it
with growing valuation concerns and the market pull back looks
down right sedate.

Did you hear it?  This week I heard something that I probably
haven't heard for a couple of years.  That's right, I heard
traders and market pundits talking about companies meeting the
"whisper number".  The whisper number was a staple of bull market
earnings seasons and a force to be reckoned with.  Companies that
have been managing earnings to just meet or beat the estimates
now have even more pressure to deliver and investors' urge to
sell the news on positive reports will only grow stronger.

Speaking of earnings reports there are three Dow components
announcing on Monday.  Those are American Express (AXP),
International Paper (IP) and Procter & Gamble (PG).  They will
certainly set the tone for the DJIA.  Let's hope it's a positive
one and we get a tradable bounce off the 9500 level.


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

Market Averages

DJIA ($INDU)

52-week High:  9850
52-week Low :  7197
Current     :  9582

Moving Averages:
(Simple)

 10-dma: 9721
 50-dma: 9528
200-dma: 8803




S&P 500 ($SPX)

52-week High: 1053
52-week Low :  768
Current     : 1028

Moving Averages:
(Simple)

 10-dma: 1041
 50-dma: 1021
200-dma:  943



Nasdaq-100 ($NDX)

52-week High: 1439
52-week Low :  795
Current     : 1370

Moving Averages:
(Simple)

 10-dma: 1404
 50-dma: 1358
200-dma: 1179




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


Hmm... interesting development in the fear indices on Friday.
The afternoon bounce in the markets had the VXO and VXN rolling
over.  Could we still see another surge higher for stocks?

CBOE Market Volatility Index (VIX) = 17.71 +0.03
CBOE Mkt Volatility old VIX  (VXO) = 18.93 -0.17
Nasdaq Volatility Index (VXN)      = 25.45 -0.64


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

          Put/Call Ratio  Call Volume   Put Volume

Total          0.91        690,948       630,758
Equity Only    0.79        567,785       447,421
OEX            0.93         26,319        24,572
QQQ            2.28         21,291        48,493


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

Bullish Percent Data

           Current   Change   Status
NYSE          72.9    + 0     Bull Confirmed
NASDAQ-100    75.0    + 0     Bear Correction
Dow Indust.   83.3    + 0     Bull Correction
S&P 500       78.6    - 1     Bull Confirmed
S&P 100       78.0    - 1     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-dma: 1.16
10-dma: 1.13
21-dma: 1.09
55-dma: 1.07


Extreme readings above 1.5 are bullish, and readings below .85
are bearish.  These signals don't occur often and tend be early,
but when they do, they can signal significant market turning
points.

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

Market Internals

            -NYSE-   -NASDAQ-
Advancers    1147      1201
Decliners    1632      1823

New Highs     110        97
New Lows       12        10

Up Volume    559M      520M
Down Vol.   1144M     1376M

Total Vol.  1730M     1942M
M = millions


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

Commitments Of Traders Report: 10/21/03

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
09/30/03      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%)
10/21/03      394,176   411,246   (17,070)   (2.1%)

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
09/30/03      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%
10/21/03      136,643    88,290    48,343    21.5%


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
09/30/03      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%)
10/21/03      226,985   236,906    ( 9,921)  ( 2.2%)

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
09/30/03      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%
10/21/03      168,236    56,564   111,672    49.7%


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
09/30/03       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%)
10/21/03       36,314     43,305   ( 6,991) ( 8.8%)

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
09/30/03       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%
10/21/03       16,917     9,750     7,167    26.9%

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
09/30/03       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%
10/21/03       16,876     9,037    7,839      30.3%

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
09/30/03        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%)
10/21/03        5,392     8,842   (3,450)   (23.1%)

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


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

Jeff was pretty busy this week and was asked
to fill in for this weekend's Market Wrap.  In that
wrap, Jeff encorporates short interest observations,
use of retracement and a "high pole warning" that has
developed in the Dow Industrials.  Each of these
applications have been discussed in prior Ask the Analyst
columns and now may be the time to use these techniques.


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

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

Symbol  Co               Date           Comment      EPS Est

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

ADVP   AdvancePCS            Mon, Oct 27  After the Bell    0.52
AIN    Albany International  Mon, Oct 27  Before the Bell   0.48
AFC    Allmerica Financial   Mon, Oct 27  After the Bell    0.43
AXP    American Express Co   Mon, Oct 27  -----N/A-----     0.58
AMKR   Amkor Technology, Inc Mon, Oct 27  After the Bell    0.01
BOH    Bank of Hawaii Corp   Mon, Oct 27  Before the Bell   0.56
ABX    Barrick Gold          Mon, Oct 27  -----N/A-----     0.06
BWA    BorgWarner, Inc.      Mon, Oct 27  -----N/A-----     1.28
CSE    CAPITALSOURCE INC     Mon, Oct 27  After the Bell    0.15
CB     Chubb Corp            Mon, Oct 27  After the Bell    1.25
CUZ    Cousins Prop Incorp   Mon, Oct 27  After the Bell    0.44
DNB    D&B                   Mon, Oct 27  After the Bell    0.53
FCNCA  First Citizens BancSh Mon, Oct 27  -----N/A-----      N/A
FTI    Fmc Technologies, Inc Mon, Oct 27  After the Bell    0.28
GGP    General Growth Prop   Mon, Oct 27  -----N/A-----     1.65
HMY    Harmony Gold Mining   Mon, Oct 27  Before the Bell   0.07
HE     Hawaiian Electric     Mon, Oct 27  -----N/A-----     0.82
HUM    Humana Inc.           Mon, Oct 27  Before the Bell   0.38
IKN    Ikon Office Solutions Mon, Oct 27  Before the Bell   0.16
IP     International Paper   Mon, Oct 27  Before the Bell   0.25
JP     Jefferson-Pilot       Mon, Oct 27  After the Bell    0.89
LIHRY  LIHIR GOLD LTD        Mon, Oct 27  -----N/A-----      N/A
MXICY  Macronix Intl         Mon, Oct 27  -----N/A-----      N/A
WFR    MEMC Elec Materials   Mon, Oct 27  -----N/A-----     0.12
NU     Northeast Utilities   Mon, Oct 27  Before the Bell   0.27
IX     Orix Corp             Mon, Oct 27  -----N/A-----      N/A
PG     Procter & Gamble Co   Mon, Oct 27  Before the Bell   1.25
PTZ    Pulitzer Inc.         Mon, Oct 27  Before the Bell   0.46
QGENF  Qiagen N.V.           Mon, Oct 27  During the Market 0.08
RCII   Rent-A-Center         Mon, Oct 27  After the Bell    0.57
RCL    Ryl Caribbean Cruises Mon, Oct 27  Before the Bell   0.98
SAFC   Safeco Corp.          Mon, Oct 27  Before the Bell  -0.18
SHR    Schering AG           Mon, Oct 27  Before the Bell    N/A
SINA   SINA CORP             Mon, Oct 27  After the Bell    0.19
SPF    Standard Pacific Corp Mon, Oct 27  Before the Bell   1.48
STO    Statoil ASA           Mon, Oct 27  Before the Bell    N/A
SYY    SYSCO Corp            Mon, Oct 27  Before the Bell   0.31
TCP    Telesp Celular Part   Mon, Oct 27  -----N/A-----     0.01
TIN    Temple-Inland, Inc.   Mon, Oct 27  After the Bell    0.19
TP     TPG NV                Mon, Oct 27  -----N/A-----     0.24
TRI    Triad Hospitals, Inc  Mon, Oct 27  Before the Bell   0.46
UDR    United Dom Realty Tr  Mon, Oct 27  After the Bell    0.38
VTR    Ventas                Mon, Oct 27  After the Bell    0.39
VMC    Vulcan Materials      Mon, Oct 27  After the Bell    0.89
BER    W.R. Berkley          Mon, Oct 27  After the Bell    0.80
WRI    Weingarten Realty Inv Mon, Oct 27  Before the Bell   0.86
WLP    WellPoint Health Net  Mon, Oct 27  After the Bell    1.45


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

ABB    ABB                   Tue, Oct 28  Before the Bell    N/A
ACE    ACE LTD               Tue, Oct 28  After the Bell    1.02
ATE    Advantest Corp        Tue, Oct 28  -----N/A-----      N/A
APD    Air Products & Chem   Tue, Oct 28  Before the Bell   0.59
AMI    ALARIS Medical, Inc.  Tue, Oct 28  Before the Bell   0.12
ALD    Allied Capital Corp   Tue, Oct 28  Before the Bell   0.52
AW     Allied Waste Ind      Tue, Oct 28  After the Bell    0.17
AMB    AMB Property Corp     Tue, Oct 28  After the Bell    0.50
ARI    Arden Realty Inc      Tue, Oct 28  After the Bell    0.63
AVP    Avon Products Inc.    Tue, Oct 28  Before the Bell   0.54
BLL    Ball Corp             Tue, Oct 28  Before the Bell   1.28
STD    Bnco Sntndr Cntrl HispTue, Oct 28  Before the Bell    N/A
BHP    BHP Billiton Ltd      Tue, Oct 28  After the Bell    0.16
BGEN   Biogen, Inc.          Tue, Oct 28  Before the Bell   0.43
BP     Bp PLC                Tue, Oct 28  Before the Bell   0.83
BTI    British Am Tobacco    Tue, Oct 28  Before the Bell   0.62
BPO    BROOKFIELD PPTYS CORP Tue, Oct 28  After the Bell    0.55
CCJ    Cameco                Tue, Oct 28  -----N/A-----      N/A
CMX    CareMark Rx, Inc.     Tue, Oct 28  Before the Bell   0.28
CINF   Cincinnati Finl Corp  Tue, Oct 28  -----N/A-----     0.50
BVN    Comp Minas Buenavent  Tue, Oct 28  -----N/A-----     0.80
CNX    CONSOL Energy         Tue, Oct 28  Before the Bell   0.03
CAM    Cooper Cameron        Tue, Oct 28  Before the Bell   0.53
COX    Cox Communications    Tue, Oct 28  Before the Bell   0.04
CCI    Crown Castle Intl     Tue, Oct 28  After the Bell   -0.30
CUM    Cummins Inc.          Tue, Oct 28  Before the Bell   0.67
RDY    Dr. Reddy's Labs      Tue, Oct 28  Before the Bell    N/A
EDMC   Education Mgmnt Corp  Tue, Oct 28  After the Bell    0.10
ECA    EnCana Corp           Tue, Oct 28  -----N/A-----     0.68
EOP    Equity Office Prop    Tue, Oct 28  Before the Bell   0.70
ESA    Extended Stay America Tue, Oct 28  After the Bell    0.20
FLR    Fluor Corp            Tue, Oct 28  After the Bell    0.56
FBR    Fredmn Bill, Rmsy Grp Tue, Oct 28  After the Bell    0.40
GILD   Gilead Sciences       Tue, Oct 28  After the Bell    0.35
HMC    Honda Motor Co. Ltd.  Tue, Oct 28  Before the Bell   0.54
HGSI   Human Genome Sciences Tue, Oct 28  Before the Bell  -0.42
IRF    Intl Rectifier        Tue, Oct 28  After the Bell    0.28
JNY    Jones Apparel Group   Tue, Oct 28  Before the Bell   0.68
KG     King Pharmaceuticals  Tue, Oct 28  Before the Bell   0.41
KRON   Kronos Incorporated   Tue, Oct 28  After the Bell    0.55
LMT    Lockheed Martin       Tue, Oct 28  Before the Bell   0.58
LUX    Luxottica Group       Tue, Oct 28  -----N/A-----      N/A
MFC    Manulife Finl Corp    Tue, Oct 28  During the Market 0.54
MC     Matsushita Elec Ind   Tue, Oct 28  Before the Bell    N/A
MXIM   Mxm Integrated Prod   Tue, Oct 28  After the Bell    0.25
MNT    Mentor                Tue, Oct 28  After the Bell    0.29
MGM    Metro-Goldwyn-Mayer   Tue, Oct 28  -----N/A-----    -0.15
MNST   Monster Worldwide     Tue, Oct 28  After the Bell    0.11
MRH    Montpelier Re Holding Tue, Oct 28  After the Bell    0.88
MCO    Moody's Corp          Tue, Oct 28  After the Bell    0.51
MPS    MPS Group             Tue, Oct 28  Before the Bell   0.06
MUR    Murphy Oil Corp       Tue, Oct 28  After the Bell    0.65
NOI    National Oilwell      Tue, Oct 28  Before the Bell   0.27
NTES   Netease.com Inc       Tue, Oct 28  -----N/A-----     0.32
ORLY   O'Reilly Automotive   Tue, Oct 28  After the Bell    0.54
OMC    Omnicom Group         Tue, Oct 28  Before the Bell   0.71
OSK    Oshkosh Truck         Tue, Oct 28  -----N/A-----     0.59
OHP    Oxford Health Plans   Tue, Oct 28  Before the Bell   1.15
PY     Pechiney              Tue, Oct 28  -----N/A-----     0.24
PFGC   PERFORMANCE FOOD GROUPTue, Oct 28  Before the Bell   0.46
PAA    Plains All Am PipelineTue, Oct 28  Before the Bell   0.38
PCO    Premcor Inc.          Tue, Oct 28  Before the Bell   0.77
RHD    R.H. Donnelley Corp   Tue, Oct 28  After the Bell    0.66
RJR    R.J. Reynolds Tobacco Tue, Oct 28  Before the Bell   0.92
RNWK   RealNetworks          Tue, Oct 28  After the Bell   -0.02
RGS    Regis Corp            Tue, Oct 28  Before the Bell   0.53
RCI    Renal Care Group, Inc.Tue, Oct 28  After the Bell    0.53
RMD    ResMed Inc.           Tue, Oct 28  After the Bell    0.36
SHW    Sherwin-Williams      Tue, Oct 28  Before the Bell   0.78
SAH    Sonic Automotive      Tue, Oct 28  Before the Bell   0.81
SPW    SPX                   Tue, Oct 28  -----N/A-----     0.95
STTS   ST Assembly Test Serv Tue, Oct 28  After the Bell    0.00
SLF    Sun Life Financial    Tue, Oct 28  -----N/A-----     0.46
SY     Sybase                Tue, Oct 28  Before the Bell   0.25
TPP    Teppco                Tue, Oct 28  After the Bell    0.37
EL     Estie Lauder Comp Inc Tue, Oct 28  Before the Bell   0.32
RSE    The Rouse Co          Tue, Oct 28  -----N/A-----     0.93
TWTC   Time Warner Telecom   Tue, Oct 28  -----N/A-----    -0.26
TRP    TransCanada Corp      Tue, Oct 28  -----N/A-----      N/A
RIG    Transocean Inc.       Tue, Oct 28  Before the Bell   0.06
TSM    TSMC                  Tue, Oct 28  -----N/A-----     0.10
X      United States Steel   Tue, Oct 28  Before the Bell  -0.07
UVV    Universal Corp        Tue, Oct 28  -----N/A-----      N/A
VCI    Valassis Comm         Tue, Oct 28  Before the Bell   0.52
VAR    Varian Medical SystemsTue, Oct 28  After the Bell    0.59
VZ     Verizon               Tue, Oct 28  Before the Bell   0.62
WPC    W. P. Carey & Co. LLC Tue, Oct 28  Before the Bell   0.68
WDR    Waddell & Reed Finl   Tue, Oct 28  Before the Bell   0.30


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

AAP    Advance Auto Parts    Wed, Oct 29  After the Bell    1.22
AEM    Agnico-Eagle Mines LtdWed, Oct 29  After the Bell    0.02
ARG    Airgas                Wed, Oct 29  After the Bell    0.28
AHC    Amerada Hess          Wed, Oct 29  Before the Bell   1.30
AHM    Amersham              Wed, Oct 29  -----N/A-----      N/A
ANT    Anteon Intl Corp      Wed, Oct 29  Before the Bell   0.30
ATH    Anthem, Inc.          Wed, Oct 29  Before the Bell   1.33
APPB   Applebee's Intl       Wed, Oct 29  After the Bell    0.43
BLDP   Ballard Power Systems Wed, Oct 29  -----N/A-----    -0.29
BCE    BCE                   Wed, Oct 29  -----N/A-----     0.47
CBL    CBL & Associates Prop Wed, Oct 29  After the Bell    1.14
CRL    Charles River Labs    Wed, Oct 29  After the Bell    0.40
CHIR   Chiron                Wed, Oct 29  -----N/A-----     0.53
COP    ConocoPhillips        Wed, Oct 29  Before the Bell   1.59
COCO   Corinthian Colleges   Wed, Oct 29  Before the Bell   0.37
TEU    CP Ships              Wed, Oct 29  Before the Bell   0.35
CVS    CVS Corp              Wed, Oct 29  Before the Bell   0.46
DRE    Duke Realty Corp      Wed, Oct 29  After the Bell    0.62
EDS    Electronic Data Sys   Wed, Oct 29  After the Bell    0.32
EGN    Energen               Wed, Oct 29  -----N/A-----     0.24
EQY    Equity One            Wed, Oct 29  After the Bell    0.37
ERIE   Erie Indemnity        Wed, Oct 29  After the Bell    0.74
ESS    Essex Property Trust  Wed, Oct 29  After the Bell    1.08
ESRX   Express Scripts, Inc. Wed, Oct 29  After the Bell    0.81
FSH    Fisher Scientific IntlWed, Oct 29  After the Bell    0.62
FMT    Fremont General       Wed, Oct 29  Before the Bell    N/A
GRMN   Garmin Ltd.           Wed, Oct 29  Before the Bell   0.36
GEMP   Gemplus International Wed, Oct 29  -----N/A-----    -0.10
GGB    Gerdau S.A.           Wed, Oct 29  -----N/A-----     0.85
HAL    Halliburton Co        Wed, Oct 29  Before the Bell   0.28
HTV    Hearst-Argyle TV, Inc Wed, Oct 29  Before the Bell   0.20
HIT    Hitachi Limited       Wed, Oct 29  -----N/A-----      N/A
IMDC   INAMED                Wed, Oct 29  After the Bell    0.58
INGR   Intergraph            Wed, Oct 29  After the Bell    0.07
IRM    Iron Mountain Incorp  Wed, Oct 29  Before the Bell   0.18
JNS    Janus Capital Group   Wed, Oct 29  Before the Bell   0.26
KMT    Kennametal Inc.       Wed, Oct 29  Before the Bell   0.34
KMG    Kerr-McGee            Wed, Oct 29  Before the Bell   0.73
KEG    Key Energy Services   Wed, Oct 29  Before the Bell   0.08
LNC    Lincoln National      Wed, Oct 29  After the Bell    0.79
MKL    MARKEL CORP           Wed, Oct 29  -----N/A-----     0.26
MDP    Meredith Corp         Wed, Oct 29  Before the Bell   0.38
MX     Metso Corp            Wed, Oct 29  -----N/A-----      N/A
MWI    Moore Wallace Incorp  Wed, Oct 29  After the Bell    0.22
MYL    Mylan Laboratories    Wed, Oct 29  After the Bell    0.27
NBR    Nabors Industries     Wed, Oct 29  -----N/A-----     0.32
NSCN   NetScreen Tech        Wed, Oct 29  After the Bell    0.13
NEM    Newmont Mining Corp   Wed, Oct 29  After the Bell    0.24
NIHD   NII Holdings          Wed, Oct 29  Before the Bell   1.23
NBL    Noble Energy, Inc.    Wed, Oct 29  Before the Bell   0.49
NSC    Norfolk Southern Corp Wed, Oct 29  Before the Bell   0.34
NOC    Northrop Grumman      Wed, Oct 29  Before the Bell   1.01
NVO    Novo-Nordisk          Wed, Oct 29  -----N/A-----      N/A
PTNR   Partner CommunicationsWed, Oct 29  Before the Bell    N/A
POG    Patina Oil & Gas      Wed, Oct 29  After the Bell    0.66
PTEN   Patterson-UTI Energy  Wed, Oct 29  Before the Bell   0.18
PD     Phelps Dodge          Wed, Oct 29  -----N/A-----     0.06
PDG    Placer Dome           Wed, Oct 29  After the Bell    0.09
PX     Praxair Inc           Wed, Oct 29  Before the Bell   0.90
PVN    Providian Finl Corp   Wed, Oct 29  After the Bell    0.21
STR    Questar.com           Wed, Oct 29  After the Bell    0.33
ROH    Rohm and Haas Co      Wed, Oct 29  -----N/A-----     0.43
SEM    Select Medical Corp   Wed, Oct 29  After the Bell    0.31
SILI   Siliconix             Wed, Oct 29  Before the Bell   0.39
SIRI   Sirius Sat Radio      Wed, Oct 29  Before the Bell  -0.11
SSCC   Smurfit-Stone Cont    Wed, Oct 29  Before the Bell  -0.04
SUG    Southern Union Co     Wed, Oct 29  -----N/A-----    -0.18
TDK    TDK                   Wed, Oct 29  -----N/A-----      N/A
TLSN   TeliaSonera AB        Wed, Oct 29  -----N/A-----      N/A
BA     The Boeing Co         Wed, Oct 29  Before the Bell   0.28
UN     Unilever N.V.         Wed, Oct 29  Before the Bell   1.21
UL     Unilever PLC          Wed, Oct 29  Before the Bell   0.73
UMC    United Microelec Corp Wed, Oct 29  Before the Bell   0.02
VLI    Valero L.P.           Wed, Oct 29  Before the Bell   0.80
VSH    Vishay IntertechnologyWed, Oct 29  Before the Bell   0.09
WON    Westwood One          Wed, Oct 29  Before the Bell   0.26
XL     XL Capital Ltd        Wed, Oct 29  After the Bell    1.01


------------------------- THUSDAY -----------------------------

SE     7-Eleven              Thu, Oct 23  Before the Bell   0.31
ASX    Advanced Semi Engin   Thu, Oct 30  Before the Bell   0.03
AES    AES Corp              Thu, Oct 30  Before the Bell   0.12
AET    Aetna Inc.            Thu, Oct 30  Before the Bell   1.22
ATG    AGL Resources         Thu, Oct 30  Before the Bell   0.22
AGU    Agrium, Inc.          Thu, Oct 30  After the Bell    0.09
ALA    Alcatel               Thu, Oct 30  -----N/A-----    -0.01
AC     Alliance Cap Mgmt     Thu, Oct 30  -----N/A-----     0.53
LNT    Alliant Energy        Thu, Oct 30  Before the Bell   0.63
ATK    Alliant Techsystems   Thu, Oct 30  Before the Bell   0.83
AXL    Am Axle & Manu        Thu, Oct 30  Before the Bell   0.69
APCC   Am Power Conversion   Thu, Oct 30  After the Bell    0.21
AMT    American Tower Corp.  Thu, Oct 30  Before the Bell  -0.20
ASL    ASHANTI GOLDFIELDS LTDThu, Oct 30  Before the Bell   0.10
AN     AutoNation            Thu, Oct 30  Before the Bell   0.36
AVE    Aventis               Thu, Oct 30  -----N/A-----     0.87
AVT    Avnet                 Thu, Oct 30  -----N/A-----     0.09
SAN    Banco Santander-Chile Thu, Oct 30  -----N/A-----     0.42
BOL    Bausch & Lomb         Thu, Oct 30  Before the Bell   0.58
BEC    Beckman Coulter       Thu, Oct 30  Before the Bell   0.61
BVF    Biovail Corp          Thu, Oct 30  Before the Bell   0.39
BKH    Black Hills Corp      Thu, Oct 30  -----N/A-----     0.59
BMC    BMC Software          Thu, Oct 30  Before the Bell   0.05
BOW    Bowater Incorporated  Thu, Oct 30  Before the Bell  -0.88
BG     BUNGE LIMITED         Thu, Oct 30  Before the Bell   0.76
CP     Canadian Pac Railway  Thu, Oct 30  Before the Bell   0.45
CAJ    Canon                 Thu, Oct 30  Before the Bell   N/A0
CZ     Celanese AG           Thu, Oct 30  Before the Bell   0.65
CTL    CenturyTel, Inc.      Thu, Oct 30  Before the Bell   0.59
CHK    Chesapeake Energy CorpThu, Oct 30  After the Bell    0.30
CBI    Chicago Bridge & Iron Thu, Oct 30  Before the Bell   0.36
CBB    Cincinnati Bell Inc.  Thu, Oct 30  Before the Bell   0.09
CMCSA  Comcast Corp          Thu, Oct 30  Before the Bell   0.00
CFB    Commercial Federal    Thu, Oct 30  Before the Bell   0.50
CNXT   Conexant Systems Inc. Thu, Oct 30  After the Bell    0.01
CEG   Constellation NRG Grp  Thu, Oct 30  Before the Bell   1.15
CVH    Coventry Health Care  Thu, Oct 30  Before the Bell   1.06
DADE   Dade Behring          Thu, Oct 30  After the Bell    0.24
DB     Deutsche Bank         Thu, Oct 30  Before the Bell    N/A
DDR    DEVELOP DVRSFED RLTY  Thu, Oct 30  After the Bell    0.59
DTC    Domtar Inc.           Thu, Oct 30  Before the Bell    N/A
DUK    Duke Energy Corp      Thu, Oct 30  Before the Bell   0.37
DYN    Dynegy Inc.           Thu, Oct 30  Before the Bell   0.09
ENB    Enbridge Inc.         Thu, Oct 30  After the Bell     N/A
ERICY  Ericsson LM Telephone Thu, Oct 30  -----N/A-----    -0.18
EVG    Evergreen Resources   Thu, Oct 30  -----N/A-----     0.42
XOM    ExxonMobil Corp       Thu, Oct 30  -----N/A-----     0.62
GPRO   Gen-Probe             Thu, Oct 30  After the Bell    0.14
GFI    Gold Fields Limited   Thu, Oct 30  -----N/A-----     0.10
HR     Healthcare Realty TrstThu, Oct 30  After the Bell    0.69
HPC    Hercules              Thu, Oct 30  Before the Bell   0.23
HIW    Highwoods Properties  Thu, Oct 30  After the Bell    0.64
ICI    Imperial Chemical Ind Thu, Oct 30  Before the Bell   0.36
IM     Ingram Micro          Thu, Oct 30  -----N/A-----     0.16
IVX    Ivax                  Thu, Oct 30  Before the Bell   0.16
JEC    Jacobs Engineering GrpThu, Oct 30  Before the Bell   0.60
JHF    John Hancock FinancialThu, Oct 30  After the Bell    0.76
LAF    Lafarge North America Thu, Oct 30  After the Bell    2.06
LANC   Lancaster Colony Corp Thu, Oct 30  Before the Bell   0.61
TVL    LIN TV Corp.          Thu, Oct 30  Before the Bell   0.14
LIZ    Liz Claiborne         Thu, Oct 30  Before the Bell   0.87
MLM    Martin Marietta Mat   Thu, Oct 30  Before the Bell   0.90
MTD    Mettler-Toledo Intl   Thu, Oct 30  After the Bell    0.52
NXL    New Plan Excl Rtl TrstThu, Oct 30  Before the Bell   0.47
NWL    Newell Rubbermaid     Thu, Oct 30  Before the Bell   0.41
NFX    Newfield Exploration  Thu, Oct 30  Before the Bell   0.92
GAS    Nicor Inc.            Thu, Oct 30  After the Bell    0.28
ORH    Odyssey Re Holdings   Thu, Oct 30  After the Bell    0.43
OCR    Omnicare              Thu, Oct 30  Before the Bell   0.53
OKE    ONEOK Inc.            Thu, Oct 30  After the Bell   -0.18
PNP    Pan Pacific Rtl Prop  Thu, Oct 30  Before the Bell   0.81
PNRA   Panera Bread          Thu, Oct 30  Before the Bell   0.23
PCZ    Petro-Canada          Thu, Oct 30  -----N/A-----     1.04
PIO    Pioneer Corp          Thu, Oct 30  -----N/A-----      N/A
PXD    Pioneer Natural Res CoThu, Oct 30  Before the Bell   0.56
PNM    PNM Resources         Thu, Oct 30  After the Bell    0.67
PT     Portugal Telecom SGPS Thu, Oct 30  Before the Bell    N/A
PDS    Precision Drilling    Thu, Oct 30  -----N/A-----     0.51
PDE    Pride International   Thu, Oct 30  After the Bell    0.16
PL     Protective Life Corp  Thu, Oct 30  Before the Bell   0.69
PFS    Provident Finl Serv   Thu, Oct 30  After the Bell    0.16
RDA    READERS DIGEST ASSN   Thu, Oct 30  Before the Bell  -0.12
O      Realty Income Corp    Thu, Oct 30  -----N/A-----     0.72
SEPR   Sepracor              Thu, Oct 30  -----N/A-----    -0.61
SPIL   SILICONWARE PRECISION Thu, Oct 30  -----N/A-----     0.05
SPG    Simon Property Group  Thu, Oct 30  -----N/A-----     0.98
SWKS   Skyworks              Thu, Oct 30  After the Bell   -0.08
HOT    Starwood Hotels ResortThu, Oct 30  Before the Bell   0.20
STN    Station Casinos       Thu, Oct 30  -----N/A-----     0.35
SRCL   Stericycle            Thu, Oct 30  -----N/A-----     0.36
SU     Suncor Energy         Thu, Oct 30  Before the Bell   0.39
TARO   Taro Pharmaceutical   Thu, Oct 30  Before the Bell   0.52
TNE    Tele Norte Leste Prtc Thu, Oct 30  Before the Bell   0.10
TELN  Telenor ASA            Thu, Oct 30  -----N/A-----      N/A
BCO    The Brink's Co        Thu, Oct 30  Before the Bell   0.24
SMG    The Scotts Co         Thu, Oct 30  Before the Bell   0.03
SPC    The St. Paul CompaniesThu, Oct 30  Before the Bell   0.92
TOC    The Thomson Corp      Thu, Oct 30  -----N/A-----     0.40
TKC    Trkcl Iletsim Hizmetl Thu, Oct 30  -----N/A-----      N/A
UNTD   United Online Inc.    Thu, Oct 30  Before the Bell   0.22
UCL    Unocal                Thu, Oct 30  Before the Bell   0.68
VLO    Valero Energy Corp.   Thu, Oct 30  Before the Bell   1.43
VRC    Varco International   Thu, Oct 30  Before the Bell   0.24
VSEA   Varian Semicon Equip  Thu, Oct 30  After the Bell    0.00
WPL    W.P. Stewart & Co.    Thu, Oct 30  Before the Bell   0.27
WMI    Waste Management      Thu, Oct 30  Before the Bell   0.37
WFT    Weatherford Intl      Thu, Oct 30  -----N/A-----     0.38
WTM    White Mountain Ins GrpThu, Oct 30  After the Bell    5.61


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

ABN    ABN Amro Holdings     Fri, Oct 31  Before the Bell    N/A
APC    Anadarko Petroleum    Fri, Oct 31  Before the Bell   1.20
ANDW   ANDREW CORP           Fri, Oct 31  Before the Bell   0.05
AU     Anglogold Limited     Fri, Oct 31  Before the Bell   0.29
ADM    Archer Daniels MidlandFri, Oct 31  Before the Bell   0.19
CVX    ChevronTexaco         Fri, Oct 31  Before the Bell   1.62
CI     CIGNA                 Fri, Oct 31  Before the Bell   1.17
ENI    Enersis SA ADS        Fri, Oct 31  After the Bell    0.03
FFH    Fairfax Financial HoldFri, Oct 31  -----N/A-----      N/A
FIA    Fiat S.p.A.           Fri, Oct 31  During the Market  N/A
FUJIY  Fuji Photo Film       Fri, Oct 31  -----N/A-----      N/A
HME    Home Properties       Fri, Oct 31  Before the Bell   0.78
NDE    IndyMac Bancorp, Inc. Fri, Oct 31  Before the Bell   0.73
PGL    Peoples Energy Corp.  Fri, Oct 31  Before the Bell   0.02
TU     TELUS                 Fri, Oct 31  During the Market  N/A
WPO    The Washington Post   Fri, Oct 31  -----N/A-----     5.46


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

Symbol  Co Name              Ratio    Payable     Executable


OTEX    Open Text Corp            2:1      Oct  28th   Oct  29th
GBR     Greenbriar Corp           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
CETV    Cntrl Euro Media Ent Ltd. 2:1      Nov   4th   Nov   5th


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

We have a VERY full week with plenty of economic reports and
another round of corporate earnings.  Look for Wall Street to
pause for the FOMC meeting on Tuesday.


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

----------------
Monday, 10/27/03
----------------
Existing Home Sales(DM) Sep  Forecast:   6.30M  Previous:    6.47M
New Home Sales (DM)     Sep  Forecast:   1113K  Previous:    1150K


-----------------
Tuesday, 10/28/03
-----------------
Durable Orders (BB)     Sep  Forecast:    1.2%  Previous:    -1.1%
Consumer Confidence(DM) Oct  Forecast:    79.0  Previous:     76.8
FOMC Meeting (DM)


-------------------
Wednesday, 10/29/03
-------------------
None


------------------
Thusday, 10/30/03
------------------
Initial Claims  (BB)  10/25  Forecast:     N/A  Previous:     386K
Employment Cost Index(BB)Q3  Forecast:    0.9%  Previous:     0.9%
GDP-Adv. (BB)            Q3  Forecast:    5.8%  Previous:     3.3%
Chain Deflator-Adv. (BB) Q3  Forecast:    1.4%  Previous:     1.0%
Help-Wanted Index (DM)  Sep  Forecast:      38  Previous:       37
FOMC Minutes (DM)


----------------
Friday, 10/31/03
----------------
Personal Income (BB)    Sep  Forecast:    0.2%  Previous:     0.2%
Personal Spending (BB)  Sep  Forecast:   -0.1%  Previous:     0.8%
Mich Sentiment-Rev. (DM)Oct  Forecast:    89.5  Previous:     89.4
Chicago PMI (DM)        Oct  Forecast:    54.5  Previous:     51.2


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


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The Option Investor Newsletter                   Sunday 10-26-2003
Sunday                                                      2 of 5


In Section Two:

Watch List: New Highs & Relative Strength
Call Play of the Day: ICOS
Dropped Calls: None
Dropped Puts: ATK


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

Fortune Brands - FO - close: 63.37 change: +0.47

WHAT TO WATCH: If you're looking for stocks with good relative
strength then FO qualifies.  The markets went south this week and
FO managed to trade sideways and bounce from its rising 10-dma.
Actually the last few sessions almost look like a short-term
bullish flag pattern.

Chart=


---

Hershey Foods - HSY - close: 76.38 change: +0.70

WHAT TO WATCH: In the spirit of Halloween we have a sweet
breakout in shares of HSY.  The stock has been consolidating
sideways between 75 and 76 for several days.  Friday the stock
broke out to a new yearly high.  HSY does have some resistance
near its all time high under 80.00.

Chart=


---

Eaton Corp - ETN - close: 97.96 change: +1.86

WHAT TO WATCH: Shares of ETN surged from $88 to over $100 prior
to its earnings report.  Now shares have consolidated back to the
$95 level (previous resistance) and bounced.  The rebound looks
pretty tempting, having broken the short-term (one week) trend of
lower highs.

Chart=


---

Netease.com - NTES - close: 64.55 change: +5.75

WHAT TO WATCH: NTES has been on our watch list recently and we're
re-adding it again.  The stock bounced from its 50-dma and the
$60 level on very big volume of 7.8 million shares.  The short-
term trend of lower highs is still in effect but a move over
$67.00 might be playable.  Trade with caution.  NTES is volatile.

Chart=


---

T.Rowe Price - TROW - close: 39.50 change: -1.05

WHAT TO WATCH: We came "this close" to adding TROW to the OI play
list as a put.  Earnings were announced on Friday and the numbers
were good but investors sold the news anyway.  The growing
proble/scandal in the mutual fund industry is a sure-fire turn
off for new money in this group.  The breakdown under $40.00
looks like a good entry point for bears but front month option
interest is zero.

Chart=




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

STJ $58.00 +0.83 - This medical equipment stock has been edging
higher but still has resistance at $59.00.  A breakout might be
playable.

SINA $42.00 +4.72 - This Chinese Internet stock looks pretty
tempting.  Shares rocketed higher on Friday and broke the month-
long trend of lower highs.  Aggressive bulls can consider new
plays at current levels.



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

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

ICOS Corp - ICOS - close: 45.42 chg: +3.02 stop: 41.99

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
^^^^^

None


PUTS
^^^^

Alliant Tech Systems - ATK - cls: 48.44 change: -0.02 stop: 50.51

Boredom has certainly been the name of the game with ATK this
week, as the stock has traded in a very tight 67-cent range for
the past three days, as volume has withered to the point of being
almost non-existent.  When that sort of thing happens, it becomes
very difficult to analyze the price action and very hazardous to
have an open position.  With daily Stochastics looking ready to
turn up from oversold and no apparent downside conviction, we're
going to err on the side of caution and exit our ATK play before
it can move against us.  Use any early weakness on Monday to
effect a more favorable exit point.

Picked on October 19th at $49.12
Change since picked:       -0.68
Earnings Date           10/30/03 (confirmed)
Average Daily Volume:      386 K





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

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

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

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

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

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

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


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The Option Investor Newsletter                   Sunday 10-26-2003
Sunday                                                      3 of 5


In Section Three:

Current Calls: ABC, AZO, BBY, COO, FD, LOW, QLGC
New Calls: ICOS, SYK
Current Put Plays: AVID, DNA, MATK, WFT
New Puts: None


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******************
CURRENT CALL PLAYS
******************
AmerisourceBergen - ABC - close: 57.01 change: -1.78 stop: 55.75

Company Description:
AmerisourceBergen is a pharmaceutical services company dedicated
solely to the pharmaceutical supply chain.  The company markets
its products and services to hospital systems (hospitals and
acute care facilities), alternate care customers (mail order
facilities, physicians' offices, long-term care institutions and
clinics), independent community pharmacies, and regional
drugstore and food merchandising chains.  ABC also provides
outsourced pharmacies to long-term care and workers' compensation
programs.  ABC perates in two segments: Pharmaceutical
Distribution and PharMerica.  The Pharmaceutical Distribution
division is primarily the company's wholesale and specialty drug
distribution business, and PharMerica is the company's
institutional pharmacy business.

Why we like it:
Validating the wisdom of using a trigger on this play, ABC made a
pretty convincing breakout attempt on Thursday, only to be
knocked back into its consolidation zone on Friday.  Thursday's
gain looked encouraging with the close over the 200-dma and at
the high of the day.  But the negative market sentiment at the
start of Friday's session resulted in an intraday dip to just
above $56 before the afternoon rebound took it right back to $57,
which is right in the middle of the consolidation zone of the
past few weeks.  Our gameplan remains the same.  We will require
ABC to trade over $59 in order to trigger the play to live
status.  Momentum traders can enter on the initial breakout,
while the bargain hunters can wait for a subsequent pullback to
test support in the $57-58 area.  Remember, the clock is ticking,
as we only have until November 5th for ABC to perform for us
before we have to exit ahead of the company's earnings report.
The initial upside target is $62, at which point we can re-
evaluate to see if the stock appears headed for higher levels.

Suggested Options:
Shorter Term: The November 55 Call will offer short-term traders
the best return on an immediate move, as it is currently in the
money.

Longer Term: Aggressive traders looking to capitalize on an
extended rally will want to look to the November 60 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 60 Call, although
we must advise caution due to the very low open interest.

BUY CALL NOV-55 ABC-KK OI= 744 at $3.40 SL=1.75
BUY CALL NOV-60 ABC-KL OI=3563 at $0.80 SL=0.40
BUY CALL DEC-55 ABC-LK OI=  24 at $4.00 SL=2.50
BUY CALL DEC-60 ABC-LL OI=  28 at $1.45 SL=0.75

Annotated Chart of ABC:



Picked on October 21st at    $58.44
Change since picked:          -1.43
Earnings Date              11/05/03 (confirmed)
Average Daily Volume =     1.70 mln


----

AutoZone, Inc. - AZO - close: 95.45 change: -0.13 stop:
93.00*new*

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:
It wasn't the runaway breakout we were hoping for, but last week
AZO finally managed a decisive breakout over $95.  The first
foray over that level occurred on Tuesday, with real conviction
not showing itself until Thursday when the stock managed to hit
$96 intraday before pulling back slightly into the close.
Despite the negative market action throughout most of Friday's
session, AZO held up fairly well and with the late-day rebound,
delivered its second consecutive close over $95.  Intraday
pullbacks near $94 look viable for continuation entries, with
aggressive momentum entries advisable on a breakout over $96.10,
the 9/24 intraday high.  At this point, it should be safe to
raise our stop to $93, as that is below the 20-dma ($93.32), the
rising trendline from the July lows, and last week's intraday
lows.

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- 95 AZO-KS OI=1493 at $2.85 SL=1.50
BUY CALL NOV-100 AZO-KT OI=1600 at $0.90 SL=0.40
BUY CALL DEC- 95 AZO-LS OI= 785 at $4.50 SL=2.75
BUY CALL DEC-100 AZO-LT OI= 473 at $2.20 SL=1.00

Annotated Chart of AZO:



Picked on October 14th at    $94.42
Change since picked:          +1.03
Earnings Date              12/22/03 (unconfirmed)
Average Daily Volume =        917 K


---

Best Buy Company - BBY - close: 53.64 change: -1.17 stop: 52.50

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:
Without Dramamine, the past couple weeks of trading in shares of
BBY have been enough to induce motion sickness.  The stock has
been bouncing between firm resistance at $55 and equally firm
support at $52.50.  While Thursday's rally had us expecting an
imminent breakout, the early action on Friday induced thoughts of
a potential breakdown.  Fortunately, the bulls arrived just in
time and bought that dip just above our $52.50 stop and lifted
the stock into the middle of that consolidation range by the
close.  Until this range breaks, we're stuck with two potential
strategies.  The first is to buy rebounds near the $53 level and
the second is to wait for a breakout over $55 before playing.
Our target for the play remains a run to $57, at which point we'd
recommend exiting open positions with a tidy gain.  Should the
bears win the current tug-of-war, our $52.50 stop will still
result in a small gain from our picked price of $51.

Suggested Options:
Shorter Term: The November 50 Call will offer short-term traders
the best return on an immediate move, as it is currently in the
money.

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

BUY CALL NOV-50 BBY-KJ OI= 2405 at $4.40 SL=2.75
BUY CALL NOV-55 BBY-KK OI= 6755 at $1.35 SL=0.75
BUY CALL DEC-55 BBY-LK OI= 6256 at $2.55 SL=1.25

Annotated Chart of BBY:



Picked on October 5th at     $51.00
Change since picked:          +2.64
Earnings Date              12/17/03 (unconfirmed)
Average Daily Volume =     3.94 mln


---

Cooper Cos - COO - close: 40.76 chg: -0.17 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:
Friday's session wasn't awe inspiring by any measure so we're not
surprised to see COO still languishing near its simple 50-dma.
If you're feeling impatient then closing the play here may not be
a bad idea.  If the markets can build on the Friday afternoon
bounce then we'd expect to see some follow through on the bounce
for COO as well.  Technically this smells like an entry point but
we're reluctant to encourage new positions.  An upward move back
through the $41.25-41.50 level would do a lot to renew our
confidence and encourage new plays.  Should that fail to appear
soon we may drop COO for lack of performance.

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= 869 at $2.10 SL=1.00
BUY CALL NOV 45 COO-KI OI=1544 at $0.35 SL= --
BUY CALL FEB 40 COO-BH OI= 816 at $3.60 SL=1.80
BUY CALL FEB 45 COO-BI OI= 426 at $1.35 SL=0.70

Annotated chart:



Picked on October 12 at $41.40
Change since picked:    - 0.64
Earnings Date         09/03/03 (confirmed)
Average Daily Volume:      391 thousand


---

Federated Dep Store - FD - cls: 45.92 chng: -0.58 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:
Retail stocks stumbled early on Friday with the rest of the broad
market, but the tireless bulls bought the dip yet again, trimming
the loss in the Retail index (RLX.X) to a mere 0.58% by the
close.  Our FD play wasn't looking too hot as the lunch hour
progressed, with the stock puncturing the $45 level for the first
time since October 9th.  But once again the dip was bought and FD
ended the day just below that pivotal $46 level.  That leaves the
stock right in the middle of its recent consolidation range,
leaving us with our preferred entry strategy of buying the dips
in anticipation of a breakout to new highs.  So long as the
$44.50 level is not broken, then the dips look like attractive
buying opportunities, so long as the RLX doesn't break below its
50-dma ($362).  Traders looking for a momentum entry will need to
wait for a breakout over $48 before playing.  Keep in mind that a
breakout trade is likely to be short-lived because of the
proximity of our $50 profit target.  Maintain stops at $44.25.

Suggested Options:
Shorter Term: The November 45 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 47 Call or even
the December 47.  These options are currently out of the money,
but should provide sufficient time for the stock to move higher
without time decay becoming a dominant factor over the short run.
More conservative long-term traders may want to use the January
47 Call due to its greater open interest than the December
strikes.

BUY CALL NOV-45 FD -KI OI=283 at $2.05 SL=1.25
BUY CALL NOV-47 FD -KW OI=389 at $0.90 SL=0.50
BUY CALL DEC-45 FD -LI OI= 10 at $2.75 SL=1.25
BUY CALL DEC-47 FD -LW OI=  7 at $1.45 SL=0.75
BUY CALL JAN-47 FD -AW OI=112 at $2.05 SL=1.00

Annotated Chart of FD:



Picked on October 9th at     $45.60
Change since picked:          +0.32
Earnings Date              11/12/03 (unconfirmed)
Average Daily Volume =     1.89 mln



---

Lowe's Companies - LOW - close: 57.85 change: -0.80 stop: 57.00

Company Description:
As a retailer of home improvement products, Lowe's has a specific
emphasis on retail do-it-yourself and commercial business
customers.  The company specializes in offering products and
services for home improvement, home decor, home maintenance, home
repair and remodeling and maintenance of commercial buildings.

Why we like it:
We knew when we added bullish coverage of LOW on Thursday that it
was an aggressive trade, as we were looking for a breakout move I
a stock that was already pretty extended to the upside.  Sure
enough, the broad market weakness on Friday nearly killed the
play before it ever got started.  Recall that we're waiting for a
trade at $59 to trigger the play, and that level has not yet been
traded.  At the same time, we've set a tight stop of $57, and the
stock traded within 6 cents of that level during the lunch hour
on Friday.  LOW still looks like a solid breakout candidate, and
Friday's price action proved the wisdom of using that entry
trigger.  Once the $59 level has been traded, momentum traders
can enter on the initial breakout, while more cautious players
can wait for a subsequent pullback and rebound from the $58-59
area, confirming old resistance as new support.  The initial
upside move following the anticipated breakout should carry LOW
to $61, at which point we can re-evaluate whether the stock looks
capable of achieving our aggressive $65 target.

Suggested Options:
Shorter Term: The November 55 Call will offer short-term traders
the best return on an immediate move, as it is currently in the
money.

Longer Term: Aggressive traders looking to capitalize on an
extended rally will want to look to the November 60 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 60 Call.

BUY CALL NOV-55 LOW-KK OI= 2230 at $3.90 SL=2.50
BUY CALL NOV-60 LOW-KL OI=11305 at $1.10 SL=0.50
BUY CALL DEC-55 LOW-LK OI=   30 at $4.60 SL=2.75
BUY CALL DEC-60 LOW-LL OI=  282 at $1.80 SL=0.90

Annotated Chart of LOW:



Picked on October 23rd at    $58.65
Change since picked:          -0.80
Earnings Date              11/17/04 (unconfirmed)
Average Daily Volume =     3.90 mln



---

QLogic Corp. - QLGC - close: 52.44 change: +0.54 stop: 50.00

Company Description:
Somebody has to make the equipment that lets your computer talk
to all its peripheral equipment, and QLGC does it well.  A
leading designer and supplier of semiconductor and board-level
input/output (I/O) management products, QLGC has been providing
SCSI-based connectivity solutions to this market sector for over
12 years.  QLGC's I/O products provide a high performance
interface between computer systems and their attached data
storage peripherals, such as hard disk and tape drives, removable
disk drives and RAID (redundant array of independent disks)
subsystems.  The company is also the market share leader in Fibre
Channel host bus adapters, a market segment that is receiving
tremendous attention from investors.

Why we like it:
The earnings warning from KLAC hit the Semiconductor stocks hard
in the latter part of last week and our QLGC play was no
exception.  The initial reaction to the news drove the stock
below $52 on Thursday, with the slide continuing down to $51.10
on Friday before the bulls finally stepped in to support the
stock above $51 support and the 20-dma (currently $50.87).
Despite the near-term weakness, QLGC still looks like a strong
bullish candidate, having found apparent support at former
resistance, and the late day surge on Friday certainly looked
convincing, gaining nearly $1 in the final hour.  That rebound
off the lows could certainly be viewed as a viable (albeit
aggressive) entry heading into the weekend.  For those unwilling
to enter so close in front of the weekend, look for upside
continuation above $52.75 as a decent entry on Monday.  Traders
waiting to enter on a breakout will still need to keep their
sights set on $55.10.  A move through that level would be
significant and would have us then looking for a continued rally
up to our initial target at $58.  For now, we'll maintain our
stop at $50, which should be below the 50-dma (currently $49.90)
on Monday.

Suggested Options:
Shorter Term: The November 55 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 December 60 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 55 Call.

BUY CALL NOV-50 QLC-KJ OI=1659 at $3.90 SL=2.50
BUY CALL NOV-55 QLC-KK OI=6837 at $1.35 SL=0.75
BUY CALL DEC-55 QLC-LK OI= 400 at $2.25 SL=1.00
BUY CALL DEC-60 QLC-LL OI= 358 at $0.90 SL=0.45

Annotated Chart of QLGC:



Picked on October 21st at    $54.21
Change since picked:          -1.76
Earnings Date               1/14/04 (unconfirmed)
Average Daily Volume =     4.78 mln




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

ICOS Corp - ICOS - close: 45.42 chg: +3.02 stop: 41.99

Company Description:
ICOS is a product-driven company that has expertise in both
protein-based and small molecule therapeutics. ICOS combines its
capabilities in molecular, cellular and structural biology, high
throughput drug screening, medicinal chemistry and gene
expression profiling to develop highly innovative products
expected to have significant commercial potential. ICOS applies
its integrated approach to erectile dysfunction and other
urologic disorders, and sepsis and other inflammatory diseases.
ICOS' strategy targets multiple therapeutic areas with drugs that
act through distinct molecular mechanisms, increasing
opportunities to market breakthrough products.
(source: company press release)

Why We Like It:
The drug battle royale has yet to begin in the U.S. but storms of
conflict are on the horizon.  The battle between ED drugs
(erectile dysfunction) is coming.  Pfizer has enjoyed a monopoly
in the U.S. markets but the little blue pill is about to get some
tough competition from the Eli Lilly-ICOS treatment Cialis.
Cialis is already doing well in Europe and analysts have big
expectations for the drug in the U.S.


Not only are bulls gunning for ICOS' upside related to the
upcoming Cialis launch but technically the stock looks good too.
Shares just burst through major resistance on its weekly, daily
and P&F charts.  To make it even more appealing the daily chart
appears to be showing a reverse head-and-shoulders pattern.  If
this pattern holds true then bulls can target a move near $60.00.
Our short-term target is $50.00 but we'll happily let the stock
run as far as it wants to.. that is until earnings appear on Nov.
4th, which means we'll probably close it on the 3rd.

Suggested Options:
We like the November 45s and 50s for short-term traders.  If
you're willing to risk holding over the earnings report then the
December and January strikes look good too.

BUY CALL NOV 45 IIQ-KI OI=2300 at $2.90 SL=1.50
BUY CALL NOV 50 IIQ-KJ OI= 565 at $1.05 SL=0.55
BUY CALL DEC 45 IIQ-LI OI= 842 at $4.20 SL=2.15
BUY CALL DEC 50 IIQ-LJ OI= 374 at $2.05 SL=1.00

Annotated Chart:




Picked on October 26 at $45.42
Change since picked:    + 0.00
Earnings Date         11/04/03 (confirmed)
Average Daily Volume:      1.5 million
Chart =


---

Stryker Corp. - SYK - close: 81.51 change: +0.57 stop: 78.00

Company Description:
Stryker Corporation and its subsidiaries develop, manufacture and
market specialty surgical and medical products, including
orthopaedic reconstructive implants. the company operates in two
reportable segments.  Orthopaedic Implants sells orthopaedic
reconstructive, trauma and spinal implants, bone cement and the
bone growth factor osteogenic protein-1.  The Medsurg Equipment
segment sells powered surgical instruments, endoscopic systems,
medical video imaging equipment, craniomaxillofacial implants,
image-guided surgical systems and hospital beds and stretchers.

Why we like it:
The weekly chart of SYK certainly looks different from most other
stocks, as it has been in an almost non-stop rising trend since
late 1998, more than quadrupling since then.  After running to a
new high in late July, the stock spent more than 2 months
consolidating and building its strength for the next breakout.
That move arrived earlier this month, as SYK cleared $78.50 and
quickly surged to just below $82.  Despite some valuation
concerns (the stock's trailing PE ratio is 39, which is high for
a cardiovascular stock), SYK appears to have built another higher
base in preparation for another breakout.  The PnF chart
certainly gives the impression of higher prices ahead, as it is
still on a strong Buy signal and has a vertical price target of
$94.  We aren't expecting to see that level reached in the near-
term, but a run to $86 certainly seems viable.

Aggressive traders can use a dip and rebound from the $80 level
to enter the play ahead of the expected breakout, while traders
looking for some confirmed strength first will want to see that
breakout over $82 before playing.  Based on the increasing volume
trend over the past few sessions, that breakout entry may be the
most likely setup early next week.  Owing to the aggressive
nature of the play, we're setting a rather wide stop at $78,
which is just below the top of the 10/15 gap.  This level will
also be below the 20-dma (currently $77.92) by Monday.

Suggested Options:
Shorter Term: The November 80 Call will offer short-term traders
the best return on an immediate move, as it is currently in the
money.

Longer Term: Aggressive traders looking to capitalize on an
extended rally will want to look to the December 85 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 80 Call.

BUY CALL NOV-80 SYK-KP OI= 590 at $2.65 SL=1.25
BUY CALL NOV-85 SYK-KQ OI= 118 at $0.55 SL=0.25
BUY CALL DEC-80 SYK-LP OI=1077 at $3.40 SL=3.00
BUY CALL DEC-85 SYK-LQ OI=  66 at $1.00 SL=1.00

Annotated Chart of SYK:



Picked on October 26th at    $81.51
Change since picked:          +0.00
Earnings Date               1/15/04 (unconfirmed)
Average Daily Volume =        701 K



------------------------------------------------------------
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*****************
CURRENT PUT PLAYS
*****************

Avid Technology - AVID - cls: 49.00 chg: -2.40 stop: 52.51

Company Description:
Avid Technology, Inc. is the world leader in digital nonlinear
media creation, management and distribution solutions, enabling
film, video, audio, animation, games, and broadcast news
professionals to work more efficiently, productively and
creatively. For more information about the company's Oscar.,
Grammy., and Emmy. award-winning products and services, please
visit: www.avid.com.  (source: company press release)

Why We Like It: (Thursday's Original Write up)
Why do we like AVID as a put play?  That's a good question
because longer-term we're pretty bullish on the stock.  The
company recently announced earnings earlier this month and beat
estimates by 5 cents.  Not only were revenues up more than 10%
for the quarter but AVID guided higher for the fourth quarter's
revenues and income.  That certainly doesn't sound like a bearish
play to us.  However, nothing goes up forever and we want to try
and capture any profit taking in this technology stock.

Shares of AVID have tripled from the March '03 lows and have run
up more than 600% from early October a year ago.  Now it looks
like investors are ready to take some money off the table.  The
stock just broke its simple 50-dma for the first time since March
and technical indicators have all turned negative.  It's point-
and-figure chart just produced its first bearish sell signal
since last March as well.  However, we're concerned that traders
might try and buy the dip at $50.00 so we're going to use a
TRIGGER at $49.90 to open the play for us.  Until then we're just
spectators.

A 38.2% retracement of the March '03 to October run up should put
AVID near $43.25, which coincides with the early August support.
Once we are triggered we'll initiate the play with a stop loss at
52.51.

Weekend Update: Right on target!  AVID continued higher Friday
morning while the NASDAQ was dropping.  Yet once AVID traded up
towards the $52 level the trend reversed.  Mid-day there was a
huge volume spike on the drop below the $50 mark and we were
triggered at $49.90.  We're very encouraged that AVID remained
under the $50.00 in spite of the afternoon bounce in the major
market averages.  Traders can initiate new positions here or look
for failed rallies under $50.00.  Our initial stop loss is 52.51
but 52.00 or 51.50 also look okay.  There may be some small
support at 47.50 and 45.00 but our first target (as mentioned
above) remains $43.25.

Suggested Options:
Short-term traders can look at the November and December 55's,
50's and 45's.  Longer-term traders can choose from the March '04
strikes.  We probably like the November 50's best or 45's if
you're more aggressive.

BUY PUT NOV 45 AQI-WI OI= 556 at $1.50 SL=0.75
BUY PUT NOV 50 AQI-WJ OI= 756 at $3.70 SL=1.85
BUY PUT DEC 40 AQI-XH OI= 619 at $1.30 SL=0.65 *risky*
BUY PUT DEC 45 AQI-XI OI= 386 at $2.55 SL=1.25
BUY PUT DEC 50 AQI-XJ OI= 427 at $4.80 SL=2.50

Annotated chart:



Picked on October 24 at $49.90
Change since picked:    - 0.90
Earnings Date         10/16/03 (confirmed)
Average Daily Volume:      628 thousand
Chart =


---

Genentech Inc - DNA - close: 79.80 change: +0.67 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 initiated this play last week with a TRIGGER at
$77.50 in hopes of catching this stock on the way down.  It soon
broke its rising trendline of support and traded below our
trigger.  Unfortunately, DNA has spent the last few days now
consolidating sideways between $76 and $80.  More aggressive
traders can use these failed rallies under $80 as entry points
but be disciplined with your stop.  Currently our stop loss is at
82.30.  It might be tested soon as DNA rallied strongly on Friday
afternoon and looks ready to trade back above the $80 level.

This last week we did see shares of DNA produce a fresh
quadruple-bottom sell signal on its P&F chart.  These are usually
very profitable patterns to trade but nothing is 100% accurate
all the time.  For the time being, DNA still has our attention
but we're a little cautious and a little more patient picking any
new entries.  We suggest you do the same.


Suggested Options:
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=2928 at $1.15 SL=0.60
BUY PUT NOV 80 DNA-WP OI=1959 at $3.00 SL=1.50
BUY PUT DEC 75 DNA-XO OI=2229 at $2.45 SL=1.25
BUY PUT DEC 80 DNA-XP OI=3788 at $4.50 SL=2.25

Annotated Chart:



Picked on October 20 at $77.50
Change since picked:    + 2.30
Earnings Date         10/08/03 (confirmed)
Average Daily Volume:      2.5 million
Chart =


---

Martek Biosciences - MATK - cls: 45.69 chg: -0.31 stop: 48.01*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:
We initially added MATK to the put list a week ago Thursday in an
effort to capture any profit taking from its 350% rise from
August '02 and its 200% jump from this last March.  The rising
trend had broken down and shares closed below their simple 50-dma
and round-number psychological support at $50.00.  Seller's
pounced on the weakness and shares quickly dropped almost hitting
our initial target of $44.00 in a couple of days.  Since then the
stock has consolidated sideways with a trend of higher lows and
lower highs.  This pennant formation has boiled down into a very
narrow wedge at Friday's close.  We can expect a move (up or
down) very soon for MATK and we're betting on down.  But
remember, MATK is not without risk.  The stock tends to carry a
very high amount of short-interest and while they haven't moved
into cover shorts lately they could at any time.

Short-term traders who caught the early move can begin planning
their exits.  New positions can be considered on a break below
$45.00.  We're going to lower our stop loss to 48.01 to reduce
our risk.

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 and 40s were not available until just recently).

BUY PUT NOV 40 KQT-WH OI= 10 at $0.60 SL= --
BUY PUT NOV 45 KQT-WI OI=405 at $2.00 SL=1.00
BUY PUT NOV 50 KQT-WJ OI=205 at $5.10 SL=2.50
BUY PUT DEC 40 KQT-XH OI=301 at $1.25 SL=0.65
BUY PUT DEC 45 KQT-XI OI=465 at $3.00 SL=1.65
BUY PUT DEC 50 KQT-XJ OI=169 at $5.90 SL=3.50

Annotated Chart:



Picked on October 16 at $49.48
Change since picked:    - 3.79
Earnings Date         09/09/03 (confirmed)
Average Daily Volume:      466 thousand
Chart =


---

Weatherford Intl - WFT - close: 34.03 change: -0.67 stop: 36.01

Company Description:
Weatherford is one of the largest global providers of innovative
mechanical solutions, technology and services for the drilling
and production sectors of the oil and gas industry. Weatherford
operates in over 100 countries and employs approximately 16,000
people worldwide. (source: company press release)

Why We Like It: (Original Write up from Thursday)
Shares of WFT have been under performing the market for quite
some time.  We've had our eye on it lately for a break under
long-time support at $35.00.  That breakdown came today after the
company warned that Q3 earnings would not meet expectations.
Consensus analyst estimates for WFT's Q3 performance were for
revenues of $672 million and net income at 38 cents a share.
WFT's new guidance puts revenues at $660 million and 35 cents a
share.  It's not a huge miss but it should be enough to spark a
new round of selling.

There is potential support in the $32.50 range but our target is
the round-number support at $30.00.  We'll initiate the play with
a stop loss at 36.01.

Weekend Update: The breakdown continues for WFT as the stock gaps
down at the open on Friday.  Merrill Lynch is helping our cause
with a downgrade for WFT on Friday.  MER has cut WFT from "buy"
to "neutral" after the company warned.  We're encouraged by WFT's
lack of participation in the late Friday afternoon market bounce.
More conservative traders can probably get by with a stop loss
closer to $35.00 than $36.00.

Suggested Options:
Short-term traders can choose between the November and December
options while longer-term players can evaluate the January and
February strikes.  The $35 and 30's look good to us but don't buy
too many 30's just because they look cheap!  Trade carefully.

BUY PUT NOV 30 WFT-WF OI= 2268 at $0.45 SL= --
BUY PUT NOV 35 WFT-WG OI= 2124 at $2.05 SL=1.00
BUY PUT DEC 30 WFT-XF OI=   30 at $0.70 SL= --
BUY PUT DEC 35 WFT-XG OI=   30 at $2.50 SL=1.25

Annotated chart:



Picked on October 23 at $34.70
Change since picked:    - 0.67
Earnings Date         10/30/03 (confirmed)
Average Daily Volume:      1.3 million
Chart =



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

None




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The Option Investor Newsletter                   Sunday 10-26-2003
Sunday                                                      4 of 5


In Section Four:

Leaps: Didn't Miss A Thing
Traders Corner: Racking Up Profits By Sinking One Ball At A Time
Traders Corner:  Where is the Dow Going?


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*****
LEAPS
*****

Didn't Miss A Thing
By Mark Phillips
mphillips@OptionInvestor.com

Last week was my first week back from my little "vacation" and what
impressed me throughout the week was the fact that I could have
taken two weeks off and still not missed anything of consequence.
Sure, there were the usual daily gyrations, but the basic tone of
the market remains the same as it has for months on end.  Some
things have changed, but nothing significant has been altered in
the big picture view.  The bulls are still clicking up their hooves
and bears looking to make some coin are forced to make quick hit-
and-run plays.  That's definitely not what we're attempting to do
in this column, so our best course of action is still to be
exceedingly stingy about exposing capital in new long-term plays.

The landscape for the week ahead should be determined by two
opposing forces.  On one side, we have seen a huge portion of the
earnings results for the quarter, and for the most part they have
been respectable.  But there have been a few high-profile
bombshells like KLAC and MSFT to inject a bit of reality into the
mix.  But any attempt at a major selloff next week seems a remote
possibility with mutual funds likely to try to prop things up into
the end of the quarter.  Basically, it is more of the same and
we're once again in a holding pattern until November rolls around.
Of course then we'll start hearing about expectations for the
holidays and then it will be time to start dragging out the tired
old excuse of "The Santa Claus Rally" as a justification to
continue pushing stocks higher.

At some point in the near future, the investing public will be
forced to acknowledge that at current valuations, stocks are about
as attractive as the emperor in his new (and nonexistent) set of
clothes.  I've been harping on this for awhile now, but I think it
bears repeating.  The valuation of the overall market right now is
MORE INFLATED than it was at the peak of the bubble that burst in
early 2000.  There's no doubt that prices have come down
considerably, but the problem is that earnings have fallen even
further.

The nonsense of comparing this quarter's earnings to what the
expectations were or what was reported last quarter or last year is
just an extension of the greater fool theory.  Now don't get me
wrong, playing the momentum game can work quite nicely for intraday
or swing trading.  But that isn't the game we're playing here.  As
stated numerous times in the recent past, we're trying to establish
positions in moves that can work in our favor for a period of
months.  In terms of the broad market, there hasn't been a tradable
pullback or continuation entry to the upside since the first upward
thrust concluded in mid-June with the SPX reaching the 1015 area
and the DOW topping out near 9350.

I won't argue that a blind buy and hold strategy from then until
now would have delivered some moderate gains, but it would have
been awfully difficult to hold those positions, especially through
the late-September drop.  And in all seriousness, how advisable
would such a strategy have been with all the bullish percent
readings topped out near multi-year bullish extremes, the VIX
nearing 'bear alert' levels and other sentiment indicators tipping
the scales at dangerously bullish/complacent?

So what's changed since June?  The SPX has extended its advance
from 1015 to as high as 1053 and the DOW has actually traded up to
the 9850 area.  So let's see, that translates to a total of 38 S&P
points and 500 DOW points in a period of 18 weeks for an average of
2.1 S&P points and 27 DOW points per week.  Are you excited yet?  I
can tell you this though.  Time decay (even on LEAPS) would have
eaten up a large portion of our gains between mid-June and now,
even if we had possessed the intestinal fortitude to hold through
the volatility.

The bulls' liquidity-driven party is doomed to an unpleasant end,
as the ever-mounting debt levels, trade imbalances and job
displacements are creating a very unhealthy economic backdrop.  The
underlying problems are not being dealt with, namely that we're in
the process of destroying our own currency and in the process, our
national economy.  Like the man says, "Pay me now, or pay me later,
but later is going to be much more expensive!"

Using a medical analogy, let's say our economy is the equivalent of
a man with cancer.  He can choose to either suffer the painful and
unpleasant process of Chemotherapy and Radiation treatments, or
hope for the best and not be plagued by all the physical and
emotional discomfort that comes with traditional cancer treatments.
The treatment may be unpleasant, but it gives our hypothetical
patient the knowledge that he has a good chance of eventually
kicking the cancer and going on to live out the remainder of his
life in a fulfilling manner.  It isn't a guarantee, of course, but
it is definitely an option worth considering.  On the other hand,
if our patient decides to ignore the cancer and just live out his
life in denial of the fact that his body is destroying itself from
the inside, he'll feel better in the near-term, but eventually feel
much worse as the disease takes its toll.

In our analogy, our 'patient' is the U.S. economy, with decisions
about 'treatment' being made by the current administration and the
Federal Reserve.  Both have chosen to "fight" the disease by
engaging in more of the same activities that brought on the
"cancer" in the first place.  One of the biggest problems is excess
debt.  What is our 'fix' for the problem?  Print more money and
issue more debt.  It seems ludicrous when we look at it this way,
but that is the direction our leaders are taking us.  It's kind of
like giving a lung cancer patient a pack of smokes in the hopes it
will make them feel better.  It may work short-term, but in the end
it only exacerbates the underlying problems.  This house of cards
may come down next month, next year, or 3 years from now, but I
have no doubt it is coming down.

That keeps me focused on bearish long-term plays, except where I
can find a compelling valuation or technical setup.  There are very
few candidates that I would say qualify for this distinction right
now, as downside risks greatly outweigh the upside potential in the
current climate.

I could go on about this topic, but we don't have either the time
or space to fully address it today.  Consider this a brief teaser,
which I will further expand on in a 2-part article next week on
Monday and Wednesday.  We'll cover where the market is in its rally
phase and where all this fits within the larger economic context.
Let's take the remainder of our time together and take a look at
our short list of plays.

Portfolio:

WMT - Either WMT is putting in a lower high and prepping for a
decent downward move or we'll see it rebound again from the $56
area to make another assault on the descending trendline, now at
$59.80.  There hasn't yet been a bearish shift in the overall
Retail index (RLX.X), as it continues to hold within its rising
channel, and very near its highs in the $380 area.  Failed rallies
below $59.50 can still be used for new entries into this bearish
play, and stops should remain at $61.  Until the broad market
decides which way it wants to go, WMT is probably going to be stuck
in this $56-60 range, but both fundamental and technical factors
are favoring a breakdown.

Watch List:

QQQ - Here we go again.  The QQQ topped out just under $36 this
time and then plunged back to the bottom of the months-long rising
channel.  Friday's selloff found eager buyers willing to prop up
the Technology market and that resulted in the QQQ reversing an
intraday breakdown below both the 50-dma and the bottom of the
channel.  Look back to the end of September, and we can see what
happened last time there was a bounce from these measures of
support.  Despite my fundamental view that the QQQ should drop
sharply, it isn't yet ready to do so from a technical standpoint.
That means we continue to wait on the sidelines, with the play on
HOLD.  For those aggressive risk-takers out there, another failure
below $36 could be used for opening new positions, but for right
now that approach is too aggressive for the LEAPS Portfolio.  At a
minimum, we need to see a break in the pattern of higher lows and
higher highs.

SMH - Semiconductors are the lifeblood of the Technology sector,
and despite a stiff blow in the middle of last week from the KLAC
earnings warning, the SMH found support at its 20-dma, and well
above the 50-dma and the bottom of its rising channel.  There's no
question the SMH is overextended and pricing in business
improvements that are unlikely to materialize, but there isn't yet
the compelling technical setup we're looking for.  Just like with
the QQQ, we need to at least have a break in the pattern of higher
lows and higher highs before trying to play the downside in what
has been a consistent leader to the upside for the past several
months.  Our SMH play remains on HOLD until it shows the requisite
weakness.

FRX - It is actually encouraging to see that FRX has once again
found support near the $46 level and rebounded back near $50 and
over the 200-dma.  The more I look at the price action though, the
less conviction I have in the stock's upside potential.  Over the
past month, we've seen a failed breakout and a failed breakdown,
and now FRX is sitting well inside the range of the past 6 weeks.
we may miss a solid entry into the play, but I'm going to stick
with a conservative entry strategy.  Look to initiate new positions
in the $46-47 area on a pullback and rebound, using a stop at $44.

NEM - So much for a controlled pullback!  Just when it looked like
we'd see some decent profit taking in the gold stocks, the dollar
stumbled to new multi-year lows, giving gold stocks the lift they
needed.  NEM vaulted back up near $42 and any thoughts of a near-
term entry quickly vaporized.  While aggressive traders might
attempt a short-term bullish play on a rebound from the $38 area,
given our typical timeframe here, I'm really not interested in
anything higher than $36 for an entry.  Time will tell whether
waiting for that pullback is prudent or foolish

SBUX - Steady as she goes.  Two weeks after adding SBUX to the
Watch List, there hasn't been any appreciable price action and that
leaves us in a holding pattern.  It doesn't seem a prudent strategy
to chase an entry at current price levels, but a pullback into our
targeted entry zone should prove quite lucrative, as the company
continues to build out its franchise in a profitable manner.

Radar Screen:

FNM - There just isn't anything left to focus on to the bearish
side in FNM, as the stock broke above its descending trendline in
the past week and appears destined for $80.  Even significantly bad
news regarding the company's borrowing abilities didn't result in
anything more than an intraday dip.  I still like the downside in
this stock from a fundamental standpoint, but only when we get a
favorable technical setup.  We aren't anywhere near there, so I'm
going to jettison FNM from my radar screen.

QCOM - Two weeks of sideways consolidation has been healthy for
QCOM, but I don't see anything approaching an entry point.  The 50-
dma may provide some support near-term, but with the weekly
Stochastics oscillator just turning down from overbought, it seems
a bit too aggressive for a position trade.  The better approach
will be to target a drop to the $39-40 area, and that is
exceedingly unlikely to occur over the next week.

DJX - I'm starting to like the downside potential for the DJX play
a lot more than I was two weeks ago, as we've finally seen it tag
the $98.50 level.  While there was a decent pullback (to $95)
following that runup, we still don't have a real crack in the
market's bullishness.  I'm expecting next week to hold in the
current range as the forces of earnings disappointment and mutual
fund window dressing go head to head.  Next weekend, look for DJX
to move back onto the Watch List.

Closing Thoughts:

I normally try to find something quick and pithy to wrap up my
commentary in this section.  This week, I actually threw out what I
had written and decided to copy what I had put here two weeks ago.
It so clearly sums up where I think we are and where we are headed.
Perhaps next week (when I've had more sleep), I'll be able to see
more clearly!

"Here we are midway through the month of October, and I don't feel
like we are any nearer to resolution of how high is high for the
broad market averages.  The DOW still feels like it wants to test
10,000, the NASDAQ Composite appears headed for 2100 and the S&P
500 is still seeking the 1070 area.  Until those measures are
reached, the bullish sentiment is likely to remain undaunted and
playing the downside for more than a quick swing trade is likely to
be met with failure.  I have no doubt that trending markets will
return, but it is unlikely to occur over the next couple weeks
unless there are some really ugly earnings disappointments.  That
means the bulls still have the ball and their grip is unlikely to
loosen over the near-term."

Have a great week!

Mark


LEAPS Portfolio

Current Open Plays

SYMBOL OPENED     LEAPS    SYMBOL  ENTRY   CURRENT  CHANGE  STOP

Calls:
None

Puts:
WMT    10/03/03  '05 $ 55  ZWT-MK  $ 5.10  $ 4.70  - 7.84%  $61
                 '06 $ 55  WWT-MK  $ 7.20  $ 6.50  - 9.72%  $61


LEAPS Watchlist

Current Possibles

SYMBOL  SINCE    TARGET PRICE  TARGETED LEAP  SYMBOL

CALLS:
FRX    09/21/03   $46-47       JAN-2005 $ 50  ZML-AJ
                            CC JAN-2005 $ 45  ZML-AI
                               JAN-2006 $ 50  WRT-AJ
                            CC JAN-2006 $ 40  WRT-AH
NEM    10/05/03   $33-34       JAN-2005 $ 35  ZIE-AG
                            CC JAN-2005 $ 30  ZIE-AF
                               JAN-2006 $ 35  WIE-AG
                            CC JAN-2006 $ 30  WIE-AF
SBUX   10/12/03   $27.50-28.00 JAN-2005 $ 30  ZIE-AG
                            CC JAN-2005 $ 25  ZIE-AF
                               JAN-2006 $ 30  WIE-AG
                            CC JAN-2006 $ 25  WIE-AF



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


New Portfolio Plays

None


New Watchlist Plays

None



Drops

AGN - $77.20 Hopefully, it comes as no surprise that we're dropping
AGN from consideration as a bullish play.  The stock was never able
to trade the $82 level to create that PnF Buy signal and then last
week, it broke down below $76, generating a PnF Sell signal.  AGN
has become very volatile in the past couple weeks and it would be
difficult to divine a solid trade either bullish or bearish.
Rather than continue to struggle with what is clearly a broken
play, we'll remove it from consideration to make room for better
possibilities.


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

Racking Up Profits By Sinking One Ball At A Time

By Mike Parnos, Investing With Attitude

Something very unexpected happened on Monday night.  It was highly
unlikely and completely unexpected.  No, I didn't win the lottery,
get lucky or give birth.   There wasn't an eclipse, but one might
happen just as often. I won't keep you in suspense.  What happened
was that I won a pool (9-ball) tournament.

Don't worry, you're not going to see any of my matches on ESPN (or
the Playboy Channel).  This was just a local handicap tournament
with about 40 participants of varying skill levels.  The lesser
players (of which I'm one) are given a spot to help even things out
and make the matches competitive.  The tournaments are double-
elimination – which means you can lose a match without being
eliminated.  You get a second chance.  Then, if you win, you move
on to another match, etc.

When, I started playing pool seriously about 18 months ago, I
sucked.  I had played on those little coin-operated tables found in
bars on occasion.  Being a novice, I might make a ball or two and
then miss three or four. In reality, I had no idea what went into
being a real pool player and not just a recreational player.

I started watching players who knew what they were doing.  Playing
on a professional 9-foot table, they made it seem so simple –
making shot after shot.  It seemed to come as easily to them as did
breathing.  The majority shots were all 18 inches to two feet in
length.

When practicing, I might make a ball or two, but the first one was
two feet away and the next may have been six feet away.  But the
likelihood of me consistently making six-foot shots is the same as
Carmen Electra showing up at my front door with "yes, yes" in her
eyes.   How do the "real" pool players manage to have most of their
shots be two-feet (or less) shots?

The secret (and it's certainly not classified information) is that,
while making one ball, they are manipulating the cue ball into
position to make the next ball.  There's a certain amount of skill
in hitting a ball into a pocket, but simultaneously sending the cue
ball on a predetermined path to simplify the next shot is a skill
(and art) unto itself.

I decided to take the game seriously.  Pool is a wonderful sport in
that almost anyone can play – fat or thin, old or young, pretty or
pretty ugly.  To improve, however, you have to be able to
assimilate information, add some common sense and be able to put it
together and act.

I took some lessons from a professional.  He began at square one –
taking any preconceived ideas I may have had about the game and
throwing them out the window -- my stance, my stroke, my aiming, my
thinking – everything!  Then, he proceeded to build me back up, one
step at a time.  Establishing a solid foundation of fundamentals is
essential.  From there, you can build, learn strategies, and become
a "real" pool player instead of a "recreational" player.  I've been
practicing ever since – and improving.

Notice any similarities to option trading?  Reread everything
above.  Don't the same basic steps apply to the development of
trading skills?   Almost anyone can play.  Amateurs buy and sell
options arbitrarily – making a few and missing more.  Then,
hopefully, the decision is made to learn the "right" way to trade.
It takes time.  It takes a lot of practice.  And, it takes a
professional's guidance.

Well, you're here and that's encouraging.  You have to pick a
professional who teaches, not only the basics, but a style of
playing (trading) with which you are comfortable.  It will likely
require you to abandon other things you "think you know" and
embrace some new ideas.  Envision the learning process as a boot
camp setting -- where they break you down and then build you back
up with know-how, discipline, and, ultimately, ready for action.

The accomplished pool players have learned how to position
themselves (with the cue ball) for consistent success.  The same
holds true for trading.  If you position yourself for success,
you've increased your chances exponentially (big word, huh?).

I'm particularly proud of the many CPTI readers who have been with
us for quite some time.  They've learned -- sometimes the hard way.
They've practiced and learned lessons -- sometimes expensive ones.
And now they're spending all those "hypothetical" profits and
smiling all the way to the bank.  They've learned a skill and have
increased their chances for success exponentially (I couldn't
resist.  Hey, it's five syllables).

Will I ever win another pool tournament?  Who the hell knows?  But
I know that, as I improve, I'll be winning a lot more smaller
victories.  And those "smaller" victories certainly do add up.  So
do our small victories in the options market.   A word of warning
to the pool players and option traders of the world – HERE WE COME!
____________________________________________________________

November's First Casualty
We exercised our self-discipline and implemented our money-
management skills on Wednesday when AFCI violated the $23.35
parameter.  We bought back our short November $25 put for $2.65 and
sold our long Nov. $20 put for $.30.  The net cost to bail was
$2,350.  Since we took in $1,650, our loss on this position was
$700.  Unfortunately, we had to close this out early in the option
cycle, so it cost us more than if some time premium had eroded
away.  Don't think of it as a loss, but rather a cost of doing
business.
_____________________________________________________________

NOVEMBER AND ONGOING POSITIONS
Position #1 – SPX Iron Condor – Trading @ 1028.91
We sold 10 contracts of November SPX 985 puts and bought 10
contracts of November SPX 975 puts for a credit of $1.10 ($1,100).
Then we sold 7 contracts of November SPX 1075 calls and bought 7
contracts of November SPX 1090 calls for a credit of $1.50 ($1,050)
and a total net credit of $2,150.
We've created a maximum profit range of 985 to 1075.  With four
weeks left, that's a reasonable range.

Position #2 – AFCI Iron Condor – Trading @ $22.88
We sold 10 contracts of the AFCI November $25 puts and bought 10
contracts of the AFCI November $20.00 puts for a credit of $1.05.
Then sold 10 contracts of the AFCI November $30 calls and bought 10
contracts of the AFCI November $35.00 calls for a credit of $.60.
Our total net credit was $1.65.  Our safety range was $23.35 to
$31.65.  Position closed for $700 loss.  (see explanation above)

Position #3 – OEX Iron Condor (By Request) – 511.25
We sold 10 contracts of the OEX November 490 puts and bought 10
contracts of the OEX November 480 puts for a credit of about $.90.
Then, sold 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 - $128.17
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.  The closer BBH finishes to $130, the more we
can make.

Position #5 – QQQ Put Calendar Spread – Trading @ $34.20
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 will 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, on Wednesday, we rolled
out to the November $32 and took in a $.30 credit.  We now have a
new cost basis of $.70.

OEX – Bearish Calendar Spread – OEX @ $511.25
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.  On Thursday we sold the November 485 puts for $2.60.
Our cost basis is now $2.70.

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 may have to make an
adjustment.  This may get a bit tricky – another adventure and
learning experience.

QQQ ITM Strangle – Ongoing Long Term -- $34.20.
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 $20.47
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 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?
Steve Gould

My daughter, who is 12 and knows better, has started playing a new
game while we are driving somewhere.  She will ask, "Are we there
yet?"  I will reply, "No", at which point she will immediately ask
again, "Are we there yet?"  This will go on for a few moments until
at one point I will respond, "Yes".  Her next question is,
"Really?"  I would then reply, "Yes, really."

Many traders have been asking, "Are we there yet?" referring, of
course, to a top in the market.  I think it is time to say, "Yes".
Should you ask me, "really?" I would reply, "Maybe".

It looks like the market has indeed topped and is starting its
decline down. However, I want to reserve judgment for just a little
bit longer to see what happens over the next week because there is
still a chance that the S&P 500 will make a new high.

Chart: S&P 500 Weekly 10/24/2003



For those of you who are new to this column, let me explain that
even though the title of the column is "Where is the Dow Going?" I
am using the S&P 500 because the wave picture is significantly
clearer.  Since all the markets essentially move in lock step, what
I say for the S&P 500 can easily be applied to the Dow or the
NASDAQ.

The last bar printed on this weekly S&P 500 chart shows a
significant dip in the overall progression of the trend.  Since no
trend lines have been broken, it is hard to say whether this is as
of yet technically significant.  We can clearly see that the S&P
500 has not yet touched the 38% retracement level of wave 3.  More
significantly, though, is the oscillator.  It has substantially
pierced the 138% retracement level although it is far from the 162%
level.  Another down week like this one and the oscillator should
be reversing directions.

Chart: S&P 500 Weekly Close-up 10/24/2003




Recall that the 4 wave is unfolding as an expanded flat and we
expect the S&P 500 to reach a level of 1046-1090. These levels
represent Fibonacci ratios of 1.38 x wave A and 1.62 x wave A
respectively.  (See previous analyses for a more detailed
explanation.)

A close up view of the weekly S&P 500 shows more visibly that the 4
wave made no additional progress toward the 1090 level.  The S&P
500 is parked solidly between the 38% retracement level of the 3
wave and the level of 1046 at the 1.38 mark.  Ellioticians can go
home happy at this level, but the more usual level would be closer
to the 1.62 mark.

The daily chart of the S&P 500 will allow us to see the
subdivisions of this five wave basic pattern in more detail and to
allow Advanced Get to make some predictions.

Chart: S&P 500 Daily 10/24/2003




This daily chart of the S&P 500 shows that the oscillator is still
developing the characteristic pattern of a topping five wave basic
pattern.

Also of interest is the MOB (make or break) bars.  The MOB predicts
where the next resistance level will be.  It is called make or
break because either the stock will make the MOB and reverse
direction or it will break right through it.  The first MOB is
taken from the (red) B wave of the 4 (blue circle) wave.  Note that
the 5 wave of the 5 (blue circle) wave coincides nicely with the
MOB.  The other MOB taken at the 3 wave of the 5 (blue circle) also
coincides at the lower boundaries of the MOB.  The confluence of
these two MOBS bodes well for a top around this level.  The key
question now is, is this really the top of the 5 (blue circle) wave
or should we see a top around the 1060 level as predicted in last
week's analysis?  In order to determine that, we need to look at
the 5 wave of the 5 (blue circle) wave on an hourly basis.

As a review, here is what I predicted last week.


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."

Chart: S&P 500 Hourly 10/24/2003



(The red bar marks the end of last week.)

What ended up happening is the S&P 500 took a much larger decline
and the A-B-C correction relabeled.  This chart is rather cluttered
so let's look at a more updated chart where we can actually see
things.

Chart: S&P 500 Hourly 10/24/2003 Updated



The S&P 500 retraced to the 61.8% level and has started a small
rally.  The S&P 500 has a perfectly formed A-B-C zigzag correction
and should rally to 1060 to complete the 5 (green square)
wave...except for one small problem.  The oscillator is not
consistent with a wave 4 correction.  Advanced Get guidelines say
that the oscillator must retrace somewhere between 90 – 138% of the
peak at wave 3.  Occasionally, if all the other ducks line up in a
perfect row, 162% will be allowed.  However, once the 162% level is
pierced, the odds of this formation being a 4 wave is drastically
reduced.  In fact, it is almost zero.  As we can see from this
chart the oscillator has significantly pierced the 162% level.
Chances are very good that this is not a wave 4 correction.

At this point, we need to be considering an alternative analysis.

Chart: S&P 500 Hourly 10/24/2003 Alternate




This labeling is more consistent with what is happening with the
oscillator, although I have some issues with the labeling of the
five wave basic pattern from 990 to 1055.  This is not a perfect
correlation between wave formation and oscillator, but this
unfolding wave pattern is more likely.

What this chart is saying is that the S&P 500 has peaked and that
the beginning wave down has indeed started.  So far, the first
three of the 5 waves have formed and if this pattern continues with
a solid five wave basic pattern, then we can be confident that the
top has hit on 10/15/2003.

Unless it isn't.  The possibility still exists, although small,
that the S&P 500 could rally and make a new high over the next
several days.  The critical level will be 1036 which is the low of
the 1 (blue circle).  If the S&P 500 prints higher than that before
completing the 5 (blue circle) wave, the wave count is invalidated
and the S&P 500 will most likely trend higher to 1060 – 1090 level.

Bottom line, I am going to reserve judgment for a few days to see
how the pattern unfolds.  In either case, I believe the S&P 500
(and the rest of the markets, of course) have either topped or is
very close to a top.


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The Option Investor Newsletter                   Sunday 10-26-2003
Sunday                                                      5 of 5


In Section Five:

Covered Calls: Trading Basics: Covered-Call Fundamentals
Naked Puts: Options 101: Economics & Stock Prices -- Part II
Spreads/Straddles/Combos:  Rally Pauses As Doubts Surface Over
           Future Earnings

Updated In The Site Tonight:
Market Posture:  Investors Sleep through Friday's Session


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

Trading Basics: Covered-Call Fundamentals
By Mark Wnetrzak

These recent E-mails may help new readers understand some of the
basic ideas behind the covered-call strategy.


Attn: questions@OptionInvestor.com
Subject: Selling covered-calls

I am new to covered calls, having only initiated a few CC
trades.

Question?  When you sell a covered call you must wait until
expiration of the option - whereupon your accounted is settled,
either called out or not.  BUT, on the other side, the buyer
of your call option can sell the option at anytime they wish.
How does this work?  I have bought straight options before and
sometimes sold them well before expiration.

I have also heard that you can buy back a covered call that you
have sold - can you always do this? When? and Why? and How?

Any help you could provide with these queries would be greatly
appreciated.

Thanks,

Mark


Hello Mark!

First off, and I think Mr. Phillips (LEAPS) will agree, what a
great name!  American style options can be bought back at any
time prior to expiration or assignment.  So, if an investor has
sold covered-calls, he can buy back (to-close) the sold options
before expiration as long as the stock hasn't been assigned.
The whole position can be bought back, or just one call, or any
number as desired.  When the sold option is bought back, it
removes the obligation to sell the underlying stock (or other
security) at a specific price and time.  Doing this would allow
an investor to:  sell the stock and cut short a losing position;
retain the stock in his/her portfolio; sell new options to either
try for a higher potential return or protect for a short-term
draw down.

The various option exchanges provide the "other-side" of the
trade either electronically or through market-maker specialists.
To learn more about how options work and the various strategies
available, you can visit the CBOE website learning center at:

http://www.cboe.com/LearnCenter

Larry McMillan's "Options: As A Strategic Investment," is an
excellent book and the chapter on covered-calls is highly
recommended.  As a new option trader, it is very important to
thoroughly understand any strategy you intend to use.

Regards,

Mark W.
OIN


Attn: questions@OptionInvestor.com
Subject: Covered-call strategy

I've sold covered calls at $27.50; my b/e on the stock is $26.
As you noted [recently in the newsletter], there has been heavy
resistance here for a while.  I could cover and sell Nov-$30
calls, but $30 is iffy based on the charts as I see them.  What
would a typical pro do?

Thanks,

Don


Hello Don,

As soon as I find a typical pro I'll let you know!  I think you
could find as many answers as there are personalities.  It will
always depend on what fits "your" personal preference and risk-
verses-reward tolerance; not mine, not the pros, nor hedge fund
managers, etc.

You will need to weigh the probability of a successful outcome
with the amount of risk you are willing to take.  Is the stock
still in an uptrend?  Is volume increasing as the stock rises?
What is your technical outlook for the time frame involved?
Where is the potential support area if the current trend is
broken?  Around $25 which correlates with several highs prior
to the recent rally (or closer to $23) and the long-term MA?
Maybe lower?  What is your outlook for the overall Market?  Are
you expecting a correction or do you expect the major averages
to rally higher?

Only you can answer these questions and then act accordingly.
The following link will take you to a general narrative on
covered-call adjustments that may be helpful:

http://members.OptionInvestor.com/coveredcalls/cc_101903_1.asp

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

SGMO     5.10    4.88  NOV  5.00  0.55    0.33    6.3%
TMM      3.44    3.06  NOV  2.50  1.10    0.16*   5.9%
BVSN     5.31    5.15  NOV  5.00  0.65    0.34*   5.3%
ALKS    14.33   13.75  NOV 12.50  2.50    0.67*   4.9%
PUMA     5.54    5.81  NOV  5.00  0.85    0.31*   4.8%
CMNT     9.22    8.89  NOV  7.50  2.10    0.38*   4.6%
VECO    25.67   25.49  NOV 25.00  1.85    1.18*   4.3%
BRCD     6.33    6.06  NOV  6.00  0.65    0.32*   4.1%
SSTI    11.21   10.28  NOV 10.00  1.65    0.44*   4.0%
ALKS    15.16   13.75  NOV 12.50  3.20    0.54*   3.3%
ALGN    15.60   14.62  NOV 15.00  1.60    0.62    3.2%
SEAC    15.57   14.37  NOV 15.00  1.50    0.30    1.9%
TLAB     7.83    7.00  NOV  7.50  0.70   -0.13    0.0%
IBIS    14.42   11.10  NOV 12.50  2.65   -0.67    0.0%

*   Stock price is above the sold striking price.

Comments:

The major averages put in an ugly week as investors began to take
profits amid uninspiring earnings and forecasts, which suggests
that signs of a strong recovery remain illusive.  A defensive
outlook appears in order near-term as several issues are testing
key support areas.  One issue that will be shown closed next week
is Ibis Technology (NASDAQ:IBIS), which was canned by investors
after Wednesday's earnings report.  Closing other positions that
violate their technical support areas may be prudent, depending
on your outlook for the stock as well as the overall market.

Positions Previously Closed: None


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

XOMA    7.83  NOV  7.50  MBU KU  0.80  4108   7.03  28   7.3%
OXGN   10.51  NOV 10.00  QYO KB  1.10  513    9.41  28   6.8%
MONE    5.14  NOV  5.00  MOU KA  0.40  171    4.74  28   6.0%
PLUG    5.91  NOV  5.00  PQL KA  1.15  198    4.76  28   5.5%
GSS     5.49  NOV  5.00  GSS KA  0.70  366    4.79  28   4.8%
QSFT   14.90  NOV 15.00  QUD KC  0.55  151   14.35  28   4.2%
CRYP   10.84  NOV 10.00  UFW KB  1.20  21     9.64  28   4.1%


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).

*****
XOMA - XOMA  $7.83  *** New Drug Speculation ***

XOMA (NASDAQ:XOMA) is a biopharmaceutical company that develops
and manufactures products to treat cancer, immunologic and
inflammatory disorders and infectious diseases.  The company's
products are in various stages of development and all are
subject to regulatory approval before it or its collaborators
can commercially introduce any products.  In addition, XOMA has
proprietary technologies relating to recombinant antibodies and
proteins, including bacterial cell expression systems and the
Human Engineering method for creating human-like antibodies,
both of which are available for licensing.  XOMA also uses these
technologies in developing its own products.  We simply favor
the technical support (150-day MA) near the cost basis in this
position and investors who are interested in a long-term portfolio
holding in the biotech sector should consider this issue.  The
company's earnings are due November 12.

NOV-7.50 MBU KU LB=0.80 OI=4108 CB=7.03 DE=28 TY=7.3%


*****
OXGN - OXiGENE  $10.51  *** New Drug Speculation: Part II ***

OXiGENE (NASDAQ:OXGN) is a biopharmaceutical company engaged
principally in research into, and the development of, products
for use in the treatment of cancer.  The company's efforts are
focused on developing products for application as direct cancer
treatment agents, particularly vascular targeting agents (VTAs).
These agents attack a tumor's network of existing and emerging
blood vessels, which are its main life support system.  Oxigene
is also investigating the use of certain products for other
applications in the field of ophthalmology, in particular,
age-related macular degeneration and diabetic retinopathy.
The company is in various stages of clinical and pre-clinical
development for multiple therapeutic product candidates that
were derived from its principal vascular targeting platform.
Oxigene's main technology is based on Combretastatin, a family
of proprietary small molecule anti-tumor VTAs.  Oxigene jumped
on favorable news earlier this year and has since traded in a
lateral range with support near $10.  Traders who believe the
trend will continue can profit from that outcome with this
position.

NOV-10.00 QYO KB LB=1.10 OI=513 CB=9.41 DE=28 TY=6.8%


*****
MONE - MatrixOne  $5.14  *** Stage I Base ***

MatrixOne (NASDAQ:MONE) is a provider of collaborative product
lifecycle management (PLM) solutions.  The company's solutions
enable companies from a broad range of industries to accelerate
product innovation and time-to-market by collaboratively managing
product development efforts.  MatrixOne's PLM solutions are based
on its suite of software products, collectively referred to as
Matrix10.  The Matrix10 solution is a comprehensive and flexible
PLM environment that consists of four components: the Matrix PLM
Platform, collaborative applications, lifecycle applications and
enterprise interoperability products.  The company also offers a
variety of services that complement its PLM software.  MatrixOne
offers professional services, training, maintenance and customer
support directly through its own services organization and
indirectly through a third-party network.  MatrixOne has been
forging a Stage I base for over a year and it appears that
Wednesday's earning's report was well received.  We simply favor
the bullish technical indications and our position offers a
method to participate in the future movement of the issue with
a cost basis closer to technical support.  Target-shooting a
lower "net" debit will increase the potential yield and lower
the cost basis in the position.

NOV-5.00 MOU KA LB=0.40 OI=171 CB=4.74 DE=28 TY=6.0%


*****
PLUG - Plug Power  $5.91  *** Fuel Cell Speculation ***

Plug Power (NASDAQ:PLUG) designs, develops and manufactures on-
site electric power generation systems utilizing proton exchange
membrane (PEM) fuel cells for stationary applications.  Plug is
focused on fuel-cell systems with electrical output of 1 to 100
kilowatts (kW), fueled by natural gas, liquid petroleum gas (LPG)
and hydrogen gas, for a variety of stationary applications.  The
company is developing an architected technology platform from
which it expects to offer multiple point products, ranging from
direct current (DC) back-up power for telecom applications, to
alternating prime power for residential and light commercial
applications.  Plug Power has been forging a Stage I base near
$5 for over a year and traders can use the inflated premiums to
establish a bullish, low-risk position in the issue.

NOV-5.00 PQL KA LB=1.15 OI=198 CB=4.76 DE=28 TY=5.5%


*****
GSS - Golden Star  $5.49  *** Gold Is Hot! ***

Golden Star Resources (AMEX:GSS) is an international gold mining
and exploration company producing gold in Ghana in West Africa.
Through its various subsidiaries and joint ventures the company
owns a controlling interest in four gold properties in Ghana:
the Bogoso property, the Prestea property, the Wassa property
and the Prestea underground property.  Bogoso and Prestea are
adjoining properties and both are owned by Golden's 90%-owned
subsidiary, Bogoso Gold Ltd.  These two properties function as
a single operation referred to as Bogoso/Prestea.  The company
also holds other active exploration properties in Suriname and
Ghana through its 73%-owned subsidiary, Guyanor Ressources S.A.
In addition, Golden has interests in several gold exploration
properties in French Guyana.  Golden Star rallied to a new
52-week high Friday and the high-volume rally suggests further
upside activity in the future.  Traders can speculate on
that outcome with this position and target-shooting a lower
"net" debit will improve the cost basis and target yield in the
position.  The company's earnings are due October 30.

NOV-5.00 GSS KA LB=0.70 OI=366 CB=4.79 DE=28 TY=4.8%


*****
QSFT - Quest Software  $14.90  *** Earning's Rally! ***

Quest Software (NASDAQ:QSFT) is an independent software vendor
for the primary database management systems and packaged and
custom applications used by large and medium-sized enterprises.
The company generates revenues by licensing its products, mainly
on a perpetual basis, and by providing support, maintenance and
implementation services for these products.  Quest's products
improve the quality of service of its customers' key software
applications.  Many of its products also initiate reduction in
associated capital and operating expenses by minimizing hardware,
software and/or personnel costs.  The company markets over 50
products grouped into three main categories: database products,
application performance management products and Microsoft
infrastructure products.  Apparently investors were pleased
with Wednesday's earnings report as the stock rallied strongly
on heavy volume, breaking through near-term resistance.  Traders
who believe the rally will continue can use this position to
establish a reasonable cost basis in the issue.

NOV-15.00 QUD KC LB=0.55 OI=151 CB=14.35 DE=28 TY=4.2%


*****
CRYP - CryptoLogic  $10.84  *** Internet Gaming ***

CryptoLogic (NASDAQ:CRYP) is an Internet software and services
provider (ISP) with proprietary e-commerce enabling technology
that permits financial transactions over the Internet.  They are
focused on providing proprietary software technology and related
support services to the Internet gaming industry.  As of December
31, 2002, through its wholly owned subsidiary, WagerLogic, the
company licensed and supported proprietary Internet-based software
package to 18 licensees worldwide.  These licensees include a
number of brand name and land-based gaming organizations in the
United Kingdom that hold Internet gaming licenses issued by
governments where the licensees' online gaming operations are
domiciled.  With earnings due on November 5, investors can use
this position to speculate on the company's quarterly results
with a cost basis below CRIP's 50-day MA.

NOV-10.00 UFW KB LB=1.20 OI=21 CB=9.64 DE=28 TY=4.1%


*****


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

ZIXI    7.92  NOV  7.50  HQU KU  1.00  3347   6.92  28   9.1%
ENER   10.04  NOV 10.00  EQI KB  0.65  177    9.39  28   7.1%
OPSW    7.99  NOV  7.50  UWA KU  0.90  265    7.09  28   6.3%
MTSN   12.75  NOV 12.50  QQM KV  0.90  174   11.85  28   6.0%
GERN   13.70  NOV 12.50  GQD KV  1.80  1091  11.90  28   5.5%
AKAM    5.76  NOV  5.00  UMU KA  1.00  3552   4.76  28   5.5%
JDAS   20.50  NOV 20.00  QAH KD  1.45  165   19.05  28   5.4%
NABI   10.80  NOV 10.00  NIQ KB  1.20  314    9.60  28   4.5%
MANH   31.08  NOV 30.00  MQR KF  2.25  631   28.83  28   4.4%


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

 Options 101: Economics & Stock Prices -- Part II
By Ray Cummins

This week, we continue our discussion on the Federal Reserve and
how the FOMC uses basic economics to effect monetary policy.

In the United States, the federal government is responsible for
many things but one of its most important tasks is managing the
economy.  In that regard, the fundamental objectives are robust
employment, stable prices, and continued growth.  In order to
achieve these goals, the government establishes guidelines for
both fiscal and monetary policy.  The term fiscal policy refers
to the expenditures made to provide goods and services and how
these expenditures are financed.  Monetary policy refers to the
way the government controls the supply and value (or cost) of
money.  Since both fiscal and monetary initiatives are used to
influence our economy, it's essential for investors to have a
basic knowledge of how changes in the fundamental policies can
affect the financial markets.

Under the current system, the government is chiefly responsible
for fiscal policy and the Federal Reserve Board, which oversees
the Federal Reserve Bank, is the entity responsible for monetary
policy.  The goal of the Federal Reserve Board is macroeconomic
stability, however the Board's influence is also used to help
achieve the political objectives of the current administration
through the regulation of economic activity.  The inimitable
ability of this 'central bank' to affect and control the domestic
output of an entire country stems from the legislated power to
issue currency.  By adjusting the amount of money available,
the Federal Reserve can influence the primary aspects of credit
and the overall level of economic activity.  Of course, the Fed
has also been tasked to maintain the purchasing power of the U.S.
dollar and its comparative worth to other currencies, however
this duty has become increasingly complex task in an age where
huge amounts of money travel around the world electronically in
a few seconds.

From a laymen's view, monetary policy focuses on the setting of
interest rates as the key instrument, along with the adoption of
inflation targets and the use of initiatives to control economic
output.  Experts debate the relevant efficacy of using changes in
money supply to implement and effect monetary policy but it is a
potent force when utilized to extremes.  A good example of this
influence occurred when Chairman Paul Volcker of the U.S. Federal
Reserve applied the monetary brakes during the 1980s, a period of
increasingly high consumer prices, and the result was an economic
downturn with a significant drop in inflation.  Another key event
occurred in 1987, two months after current Federal Reserve Chair
Alan Greenspan took office.  That was the year the stock market
plunged 22% on "Black Monday" -- the worst single-day decline in
the history of equities.  The Fed reacted by flooding the economy
with liquidity, lowering interest rates and averting a recession.
But soon inflation became the more pressing concern and the FOMC
started raising interest rates.  The federal funds rate rose from
6.7% in November 1987 to 9.8% in May 1989.  This Fed tightening,
together with other factors, pushed the economy into a recession
the following year.  Certainly, there is less argument that the
effectiveness of monetary policy, and its timing and its eventual
impacts on the economy, are not very obvious.  At the same time,
insights into monetary policy are very important to the investor
as the availability of money and credit are key considerations in
the pricing of an investment.

Next week, we'll discuss the three primary instruments that the
Federal Reserve uses to initiate monetary policy.  These tools,
which help the Fed achieve economic stability by varying the
quantity of money in circulation, and the cost and availability
of credit, include: Open Market Operations, Reserve Requirements,
and the "Discount Window."

Good Luck!


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

ONXX    25.93   24.76  NOV 20.00  0.60    0.60*   2.7%   9.0%
XMSR    19.10   18.21  NOV 17.50  0.85    0.85*   3.7%   8.9%
FCEL    14.35   13.86  NOV 12.50  0.50    0.50*   3.0%   8.2%
AFCI    26.70   22.88  NOV 22.50  0.60    0.60*   2.4%   7.4%
PXLW    12.10   10.74  NOV 10.00  0.30    0.30*   2.2%   7.1%
MTZ     12.81   12.61  NOV 10.00  0.25    0.25*   1.9%   6.4%
NWAC    12.18   13.07  NOV 10.00  0.25    0.25*   1.9%   6.2%
SCUR    14.09   14.02  NOV 12.50  0.30    0.30*   2.1%   6.0%
ALGN    15.21   14.62  NOV 12.50  0.25    0.25*   1.8%   6.0%
FCS     20.04   19.93  NOV 17.50  0.40    0.40*   2.0%   5.9%
AVCT    36.00   35.92  NOV 32.50  0.75    0.75*   2.1%   5.6%
CNX     21.88   21.57  NOV 20.00  0.55    0.55*   2.0%   5.4%
IDXC    24.30   24.92  NOV 20.00  0.35    0.35*   1.5%   5.3%
CY      20.44   19.64  NOV 17.50  0.40    0.40*   1.7%   5.1%

*  Stock price is above the sold striking price.

Comments:

The major equity averages rallied late in the day to end the
session with minimal losses after a predictably tough week for
stocks.  Investors were looking for optimistic forecasts from
industry leading companies and although that occurred in many
cases, there were a few firms that offered mediocre outlooks.
A number of issues are suspect in light of the recent market
slump including Advanced Fibre (NASDAQ:AFCI), which is now an
early-exit candidate after reporting that third-quarter sales
fell 7% and issuing a lower current quarter revenue forecast.
XM Satellite Radio (NASDAQ:XMSR) appears to be in the early
stages of a consolidation period and Pixelworks (NASDAQ:PXLW)
may also be in for further selling after posting earnings that
were lower than consensus expectations.  Other stocks to watch
are Cypress Semi (NYSE:CY) and Fuelcell Energy (NASDAQ:FCEL).

Previously Closed Positions: None


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   24.76  NOV 20.00  OIQ WD 0.50 923  19.50  28   2.8%   9.6%
ESPR   23.02  NOV 20.00  SPU WD 0.60 65   19.40  28   3.4%   9.6%
CYD    27.57  NOV 22.50  CYD WX 0.50 568  22.00  28   2.5%   8.4%
CVTX   23.42  NOV 17.50  UXC WT 0.30 939  17.20  28   1.9%   6.5%
SCRI   25.49  NOV 22.50  UEC WX 0.40 3268 22.10  28   2.0%   5.7%
PALM   25.06  NOV 22.50  UPY WX 0.40 1425 22.10  28   2.0%   5.5%
SCHN   36.92  NOV 30.00  SQQ WF 0.40 281  29.60  28   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  $24.76  *** Encouraging Results! ***

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.  Shares of
ONXX moved higher Friday after analyst Mark Schoenebaum at US
Bancorp Piper Jaffray said that Onyx and its pharmaceutical
partner Bayer would soon release some significant results from
midstage patient testing of their experimental anti-cancer drug,
BAY 43-9006.  On Saturday, Bayer and Onyx announced that initial
studies for their kidney cancer treatment had been encouraging,
and that they had begun the next phase of trials.  Investors can
speculate on the future success of the company and its products
with this position.

NOV-20.00 OIQ WD LB=0.50 OI=923 CB=19.50 DE=28 TY=2.8% MY=9.6%


*****
ESPR - Esperion Therapeutics  $23.02  *** Drug Speculation ***

Esperion Therapeutics (NASDAQ:ESPR) discovers and develops
pharmaceutical products for the treatment of cardiovascular
disease.  Esperion intends to commercialize a novel class of
drugs that focuses on a new treatment approach called "HDL
Therapy," which is based on the company's understanding of
high- density lipoprotein, or HDL, function.  HDL is the
primary facilitator of the reverse lipid transport, or RLT,
pathway by which excess cholesterol and other lipids are
removed from artery walls and other tissues and are thus
transported to the liver for elimination from the body.
Esperion's primary goal is to develop drugs that exploit the
beneficial functions of HDL within the RLT pathway and the
company currently has four product candidates in clinical
development.  ESPR is a unique issue, both because of its
proprietary drug products and because it is involved in a
lawsuit in which a large portion of the common stock float
is frozen due to alleged improper trading activity of the
Durus Capital Management hedge fund.  Investors are advised
to investigate this company thoroughly before entering any
positions.

NOV-20.00 SPU WD LB=0.60 OI=65 CB=19.40 DE=28 TY=3.4% MY=9.6%


*****
CYD - China Yuchai  $27.57  *** Rally Mode! ***

China Yuchai International (NYSE:CYD) is a medium-duty diesel
engine manufacturer in China that also produces diesel power
generators and diesel engine parts.  The firm owns a primary
interest in Guangxi Yuchai Machinery and owns, through six
subsidiaries, 76.4% of the outstanding common shares of Yuchai.
Yuchai makes and sells diesel engines for medium-duty trucks
in China.  Yuchai's primary products are its 6105QC and 6108
medium-duty engines, which are principally used in medium-duty
trucks with a load capacity of five to seven tons.  In addition,
Yuchai also offers the 4-Series light-duty engines and the 6112
heavy-duty engines.  Besides diesel engines, Yuchai produces a
limited number of diesel power generators and engine parts.
Yuchai's products are in high demand due to China's rapidly
growing infrastructure and the modernization of the world's
most populous country bodes well for the company's bottom-line
in the near-term.

NOV-22.50 CYD WX LB=0.50 OI=568 CB=22.00 DE=28 TY=2.5% MY=8.4%


*****
CVTX - CV Therapeutics  $23.42  *** Biotech Bottom-Fishing ***

CV Therapeutics (NASDAQ:CVTX) is a biopharmaceutical company
focused on applying molecular cardiology to the discovery,
development and commercialization of novel, small molecule
drugs for the treatment of cardiovascular diseases.  CVTX
currently has four compounds in clinical trials.  Ranexa,
which represents the first new class of anti-anginal therapy
in more than 20 years.  Tecadenoson, an A1-adenosine receptor
agonist, is being developed for the potential reduction of
rapid heart rate during atrial arrhythmias.  CVT-3146 is a
selective A2A-adenosine receptor agonist developed for use
as a pharmacologic stress agent in cardiac perfusion imaging
studies.  Adentri(TM), an A1-adenosine receptor antagonist
for the potential treatment of acute and chronic congestive
heart failure, is licensed to Biogen.  Shares of CVTX soared
this weak after the company announced that an FDA advisory
committee will review experimental heart drug Ranexa on 12/9.
Traders can speculate on the recovery in the issue, prior to
the actual meeting, with this position.

NOV-17.50 UXC WT LB=0.30 OI=939 CB=17.20 DE=28 TY=1.9% MY=6.5%


*****
SCRI - Sicor  $25.49  *** Merger/Buyout Speculation! ***

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.  Sicor announced on Wednesday
that it is in early talks on a possible merger or other business
combination.  The Israeli newspaper Ha'aretz reported that the
suitor could be Israel's Teva Pharmaceutical Industries with a
buyout offer of more than $2.5 billion.  Swiss pharmaceutical
concern Novartis AG's Sandoz unit may also be interested in the
generic drug maker and traders can speculate on the outcome of
the rumors with this position.

NOV-22.50 UEC WX LB=0.40 OI=3268 CB=22.10 DE=28 TY=2.0% MY=5.7%


*****
PALM - Palm  $25.06  *** Handspring Lawsuit Settlement ***

Palm (NASDAQ:PALM) develops, designs and markets Palm-branded,
hand-held devices, accessories and the Palm operating system.
The firm is organized into two operating segments: the Solutions
Group and PalmSource.  The Solutions Group develops and markets
hand-held devices and accessories to provide the user with a
simple, elegant and useful productivity tool.  PalmSource makes
and licenses the Palm OS and related software, which is referred
to as the Palm platform.  The Palm platform is the foundation for
Palm devices, as well as for devices manufactured by third-party
licensees.  Over 30 million Palm-powered devices have been sold
worldwide.  Earlier this month, Palm and Handspring announced
that they had entered into a memorandum of understanding with
counsel to the plaintiffs in lawsuits relating to the proposed
acquisition of Handspring by Palm.  After it completes the
acquisition of rival Handspring, Palm is set to split into two
public entities: hardware maker PalmOne and software company
PalmSource.  Investors who wouldn't mind owning a little bit of
both companies should consider this position.

NOV-22.50 UPY WX LB=0.40 OI=1425 CB=22.10 DE=28 TY=2.0% MY=5.5%


*****
SCHN - Schnitzer Steel  $36.92  *** On The Move! ***

Schnitzer Steel Industries (NASDAQ:SCHN) collects, processes and
recycles metals by operating a metals recycling business in the
United States.  The company also owns a chain of self-service
auto parts stores in the United States, operating under the name
of Pick-N-Pull, and is also a maker of finished steel products at
its technologically advanced steel mini-mill.  As a result of its
vertically integrated business, Schnitzer is able to transform
obsolete or wrecked auto bodies and other unprocessed metals into
finished steel products.  In addition, it is a partner in joint
ventures that are either in the metals recycling business or are
suppliers of unprocessed metals.  The company owns interests in
five joint ventures that are engaged in buying, processing and
selling primarily ferrous metal.  Another joint venture is an
industrial plant demolition contractor that dismantles industrial
plants, performs environmental remediation and sells recovered
metals and machinery.  SCHN shares have been "on the move" in
recent weeks and the company's record quarterly revenues should
help the rally continue in the near-term.  Traders can establish
a reasonable cost basis in the issue with this position.

NOV-30.00 SQQ WF LB=0.40 OI=281 CB=29.60 DE=28 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

NCEN   35.34  NOV 22.50  NWR WX 1.00 93   21.50  28   5.1%  13.5%
RETK   10.36  NOV 10.00  QRD WB 0.50 118   9.50  28   5.7%  12.7%
MTZ    12.61  NOV 10.00  MTZ WB 0.30 84    9.70  28   3.4%  11.5%
ADEX   22.10  NOV 20.00  QDE WD 0.55 68   19.45  28   3.1%   8.2%
NFLX   51.99  NOV 45.00  QNQ WI 0.85 2677 44.15  28   2.1%   6.3%
PLCE   28.07  NOV 25.00  TUY WE 0.45 396  24.55  28   2.0%   5.7%
THER   16.68  NOV 15.00  UKT WC 0.25 0    14.75  28   1.8%   5.2%
ERES   43.80  NOV 37.50  UDB WU 0.55 1439 36.95  28   1.6%   5.1%
RIMM   43.46  NOV 37.50  RUL WS 0.50 788  37.00  28   1.5%   4.6%


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



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

Rally Pauses As Doubts Surface Over Future Earnings
By Ray Cummins

Stocks closed lower Friday, despite a late-session rally, as
investors showed their concerns over the earnings outlook for
the coming year.

The Dow finished the day 30 points lower at 9,582 with Hewlett
Packard (NYSE:HPQ), DuPont (NYSE:DD), Merck (NYSE:MRK), Alcoa
(NYSE:AA), International Paper (NYSE:IP) and Wal-Mart (NYSE:WMT)
among the worst performing blue-chip components.  The NASDAQ
dropped 19 points to close at 1,865 with technology bellwethers
Intel (NASDAQ:INTC) and Microsoft (NASDAQ:MSFT) leading the
sell-off.  Across the broader market, internet and gold were the
only sectors seeing advances while airlines, software, chemicals,
networkers and oil services enduring the biggest losses.   The
S&P 500-stock index slid 4 points to 1,028.  Declining issues
outpaced advancing stocks by roughly 3 to 2 on the major equity
exchanges.  Volume was active with 1.9 billion shares crossed on
the NASDAQ while 1.4 billion shares traded on the NYSE.  Bonds
were broadly higher with the benchmark 10-year Treasury note up
12/32 at 99 26/32 to yield 4.27%.

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

AET     62.76   63.30  NOV   50  55   0.55  54.45  $0.55   Open
MXIM    44.82   44.75  NOV   35  40   0.50  39.50  $0.50   Open
PHS     54.50   55.88  NOV   45  47   0.30  47.20  $0.30   Open
PIXR    71.56   67.46  NOV   60  65   0.70  64.30  $0.70   Open
COH     31.43   33.65  NOV   27  30   0.35  29.65  $0.35   Open
CYMI    44.99   40.80  NOV   35  40   0.65  39.35  $0.65   Open
SAP     36.00   35.85  NOV   30  32   0.30  32.20  $0.30   Open

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

This week, Cymer (NASDAQ:CYMI) replaces Pixar (NASDAQ:PIXR) on
the early exit "watch" list.


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

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

CA      23.50   23.00   NOV   30  27   0.35  27.85  $0.35   Open
MTG     53.79   49.69   NOV   65  60   0.55  60.55  $0.55   Open
BJS     32.50   32.27   NOV   37  35   0.30  35.30  $0.30   Open
CEPH    45.77   47.55   NOV   55  50   0.55  50.55  $0.55   Open
HDI     47.26   47.33   NOV   55  50   0.50  50.50  $0.50   Open
SEPR    26.98   27.44   NOV   35  32   0.25  32.75  $0.25   Open

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


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

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

LLTC    40.77  40.90   NOV   35  37   2.20   37.20  0.30   Open

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


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

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

NPSP    25.45  26.10  NOV   35  30   4.40   30.40  0.60   Open


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

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

XING     9.13   9.08   DEC     12      7     0.10    0.30   Open
JNPR    16.63  16.49   NOV     19     14    (0.20)   1.00   Open?
LRCX    24.38  25.16   DEC     30     20     0.15    0.80   Open?
PHTN    32.40  29.51   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.  Photon Dynamic (NASDAQ:PHTN) will
be closed on any further downside movement.


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

No Open Positions


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

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

PRU     36.41  38.69   DEC-37C   NOV-37C  (0.20)   0.10    Open
MSFT    27.31  26.61   JAN-27C   NOV-30C   1.70    2.40   Closed
SCRI    20.52  25.49   FEB-22C   DEC-22C   1.40    2.00    Open

Sicor (NASDAQ:SCRI) was an interesting position, having offered a
reasonable entry point early in the week, only to "gap" higher on
news of a potential merger.  However, adept traders had ample time
to make a bullish adjustment and the new (diagonal) position is
reflected in the summary.  Microsoft (NASDAQ:MSFT) shares plunged
after its earnings report was released but Thursday's drop, prior
to the announcement, should have prompted conservative traders to
exit the position and "lock-in" profits.  The spread in Prudential
(NYSE:PRU) has a no-risk gain of $0.20 with the issue above $37.50.


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

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

TRI     30.50  28.60   NOV    30    30     4.90    5.00   Closed
EASI    59.70  62.50   NOV    60    60     8.50    9.00   Closed
ZMH     55.52  61.17   DEC    55    55     5.20    7.10    Open
PCLN    30.45  27.53   NOV    30    30     4.90    5.00    Open

Zimmer Holdings (NYSE:ZMH) was a big mover this week, achieving a
nice "early-exit" profit for conservative traders.  Engineered
Support Systems (NASDAQ:EASI) has retreated from its recent highs
and moved back into a neutral trend, thus traders should consider
closing the play to preserve portfolio capital.  Triad Hospitals
(NYSE:TRI) is in a similar situation despite the issue's recent
volatility, and the play has been unprofitable on a simultaneous
order basis.


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

No Open Positions


Questions & comments on spreads/combos to Contact Support
*************
READERS WRITE
*************

Attn: ray@optinvestor.com
Subject: Trade Executions

Hello Ray,

Could you please help me out on this?  Several weeks ago I bought
call options on XYZ stock.  Several days later I entered a limited
order to sell these calls in the spread.  Three times during the
day it hit the bid price that matched my price, however my order
was never filled!  My question is; does the market maker has the
responsibility to fill this at the bid?

Thanks in advance!

TG


Hello TG,

In theory you should have been filled.  All of the exchanges are
now linked to one another and if a bid matches an offer at a
different exchange, the quote board highlights the match.  The
market maker then has the option of sending your order to the
exchange that is bidding your price, if he/she does not wish to
fill it.  However if the order had a qualifier such as "All or
None," these orders do not have to be filled.  My guess is your
order was on a different exchange than the one bidding your price
for the option.  Your quote system may only give you the best bid
and offer regardless of the exchange.  In other words, your order
may have been on the CBOE and the bid was on the AMEX.

At OneStopOption, we offer clients the ability to route their
order to the exchange of their choice.  In the future you could
call the brokerage firm and inquire where your order is placed.
Then ask if you could move your order to the exchange that is
bidding your price.  This should help you get filled when the
market trades at your price.

Andrew Aronson
V.P. Investments
OneStopOption
Division of Man Financial
141 W. Jackson Blvd Ste 1800-A
Chicago, IL 60604

Andrew Aronson and Alan Knuckman are skilled option principles,
as well as long-time OIN associates, and they recently started a
specialty brokerage for derivatives traders.  Their personalized
service will enable traders to be more confident, comfortable and
successful with options.  They will also help new market players
learn the "right" way to trade options with education and coaching
for maximum portfolio performance.  Alan and Andrew's expertise is
a valuable resource that will easily pay for itself through timely
executions and the piece of mind that comes from someone watching
your trades throughout the day.  The commissions are comparable to
those of discount brokers but you get to speak directly with option
professionals, not customer service clerks.  Clients can call them
directly to review positions and update orders and they also offer
"auto-trading" for many of the plays in the newsletter.

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

*****
ICOS - ICOS Corporation  $45.42  *** Rally Underway! ***

ICOS Corporation (NASDAQ:ICOS) develops pharmaceutical products
with significant commercial potential by combining its unique
capabilities in molecular, cellular and structural biology,
high-throughput drug screening, medicinal chemistry and gene
expression profiling. The firm applies its integrated approach
to erectile dysfunction and other urologic disorders, sepsis,
pulmonary arterial hypertension and cardiovascular diseases, as
well as inflammatory diseases. The company has established
collaborations with pharmaceutical and biotechnology companies
to enhance its internal development capabilities and to offset
a substantial portion of the financial risk of developing its
product candidates.

ICOS - ICOS Corporation  $45.42

PLAY (conservative - bullish/credit spread):

BUY  PUT  NOV-35.00  IIQ-WG  OI=4405  ASK=$0.25
SELL PUT  NOV-40.00  IIQ-WH  OI=1706  BID=$0.75
INITIAL NET-CREDIT TARGET=$0.50-$0.60
POTENTIAL PROFIT(max)=11% B/E=$39.50


*****
SINA - SINA Corporation  $42.00  *** The Uptrend Resumes! ***

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

SINA - SINA Corporation  $42.00

PLAY (conservative - bullish/credit spread):

BUY  PUT  NOV-35.00  NOQ-WG  OI=1683  ASK=$0.30
SELL PUT  NOV-40.00  NOQ-WH  OI=4530  BID=$0.75
INITIAL NET-CREDIT TARGET=$0.50-$0.60
POTENTIAL PROFIT(max)=11% B/E=$39.50


*****
SMH - Semiconductor Holdrs Trust  $38.55  *** Chip Sector! ***

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

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

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

SMH - Semiconductor Holders Trust  $38.55

PLAY (conservative - bullish/credit spread):

BUY  PUT  NOV-32.50  SMH-WZ  OI=19715  ASK=$0.15
SELL PUT  NOV-35.00  SMH-WG  OI=98227  BID=$0.40
INITIAL NET-CREDIT TARGET=$0.25-$0.30
POTENTIAL PROFIT(max)=11% B/E=$34.75


*****
AMZN - Amazon.com  $54.51  *** A Necessary Consolidation! ***

Amazon.com (NASDAQ:AMZN) is a website where customers can find
and discover anything they may want to buy online.  The company
lists millions of items in categories such as books, music, DVDs,
videos, consumer electronics, toys, camera and photo items, PC
software, computer and video games, tools and hardware, outdoor
living items, kitchen and house-wares products, toys, baby and
baby registry, travel services and magazine subscriptions.  At
its Amazon Marketplace, Auctions and zShops services, businesses
and individuals can sell virtually any product to millions of
customers, and with Amazon.com Payments, sellers are able to
accept credit card transactions in addition to other methods of
payment.  The company operates a U.S.-based Website: amazon.com,
and four internationally focused Websites: www.amazon.co.uk,
www.amazon.de, www.amazon.fr and www.amazon.co.jp.

AMZN - Amazon.com  $54.51

PLAY (conservative - bearish/credit spread):

BUY  CALL  NOV-65.00  ZQN-KM  OI=27454  ASK=$0.20
SELL CALL  NOV-60.00  ZQN-KL  OI=23926  BID=$0.65
INITIAL NET-CREDIT TARGET=$0.50-$0.60
POTENTIAL PROFIT(max)=11% B/E=$60.50


*****
OEX - S&P 100 Index  $511.25  *** For Market "Bears" Only! ***

Standard & Poor's 100 Index is a capitalization-weighted index
of 100 stocks from a broad range of industries.  The component
stocks are weighted according to the total market value of their
outstanding shares.  The impact of a component's price change is
proportional to the issue's total market value, which is the
share price times the number of shares outstanding.  Traders who
participate in (OTM) credit-spreads often utilize S&P 100 options
because they generally contain robust premiums and also provide
an underlying instrument less prone to "gapping" moves.  Review
the OIN's Market Sentiment section for more specific technical
information on the current trends in equities.

OEX - S&P 100 Index  $511.25

PLAY (conservative - bearish/credit spread):

BUY  CALL  NOV-540.00  OEX-JH  OI=4973  ASK=$1.00
SELL CALL  NOV-535.00  OEX-JG  OI=2013  BID=$1.40
INITIAL NET-CREDIT TARGET=$0.45-$0.55
POTENTIAL PROFIT(max)=9% B/E=$535.45


*****
MERQ - Mercury Interactive  $44.23  *** Mediocre Outlook! ***

Mercury Interactive (NASDAQ:MERQ) is a global leader in business
technology optimization, and is committed to helping customers
optimize the business value of information technology.  Founded
in 1989, Mercury Interactive conducts business in more than 35
countries and is one of the fastest growing enterprise software
companies today.  Mercury Interactive offers a range of software
and services to govern the priorities, people, and practices of
IT; deliver and manage applications; and integrate IT strategy
and execution.  More than 30,000 customers rely on the company's
offerings to improve quality and performance of applications and
manage IT costs, risks and compliance.

MERQ - Mercury Interactive  $44.23

PLAY (less conservative - bearish/credit spread):

BUY  CALL  NOV-50.00  RQB-KJ  OI=3222  ASK=$0.40
SELL CALL  NOV-47.50  RQB-KR  OI=543   BID=$0.75
INITIAL NET-CREDIT TARGET=$0.35-$0.45
POTENTIAL PROFIT(max)=16% B/E=$47.85


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

*****
CVC - Cablevision Systems  $18.70  *** Risky Spin-Off Plan? ***

Cablevision Systems (NYSE:CVC) is a holding company whose only
asset is all of the outstanding common stock of CSC Holdings,
which became its subsidiary in 1998.  CSC Holdings is a cable
operator in the United States with various investments in cable
programming networks, entertainment businesses and telco firms.
The company serves over 3 million cable television subscribers
in and around the New York City metropolitan area.  Through a
wholly owned subsidiary, Rainbow Media Holdings, the company
owns interests in, and manages, numerous national and regional
programming networks.  Cablevision classifies its business
interests into four segments: telecommunications services,
Rainbow, Madison Square Garden and retail electronics.

CVC - Cablevision Systems  $18.70

PLAY (conservative - bearish/debit spread):

BUY  PUT  NOV-22.50  CVC-WX  OI=326   ASK=$4.00
SELL PUT  NOV-20.00  CVC-WD  OI=2348  BID=$1.75
INITIAL NET-DEBIT TARGET=$2.20-$2.25
POTENTIAL PROFIT(max)=11% B/E=$20.25


*****
CVTX - CV Therapeutics  $23.42  *** Ranexa Review = Rally! ***

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

CVTX - CV Therapeutics  $23.42

PLAY (speculative - bullish/debit spread):

BUY  CALL  NOV-20.00  UXC-KD  OI=30    ASK=$4.20
SELL CALL  NOV-22.50  UXC-KX  OI=1181  BID=$2.25
INITIAL NET-DEBIT TARGET=$1.90-$2.00
POTENTIAL PROFIT(max)=25% B/E=$22.00


***********************
STRADDLES AND STRANGLES
***********************

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

*****
ADVP - AdvancePCS  $49.05  *** Earnings Speculation! ***

AdvancePCS (NASDAQ:ADVP) is a provider of health improvement
services.  As a pharmacy benefit-management company, the firm
serves more than 75 million health plan members and manages
prescription drug spending on behalf of its many health plan
sponsors.  In addition, the company offers a range of other
health improvement products and services, such as prescription
discount cards for the uninsured and under-insured, Web-based
programs, disease management, clinical trials and outcomes
studies.  The firm generates revenues by providing its health
improvement services to two primary customer groups: health
plan sponsors and pharmaceutical manufacturers.  Earnings are
due on 10/28/03.

ADVP - AdvancePCS  $49.05

PLAY (very speculative - neutral/debit straddle):

BUY CALL  NOV-50.00  QVD-KJ  OI=405  ASK=$1.35
BUY PUT   NOV-50.00  QVD-WJ  OI=600  ASK=$2.35
INITIAL NET-DEBIT TARGET=$3.50-$3.60
INITIAL TARGET PROFIT=$1.45-$1.95


*****
TM - Toyota Motor Corporation  $59.45  *** Probability Play ***

Toyota Motor Corporation (NYSE:TM) is engaged in the design,
manufacture, assembly and sale of passenger cars, recreational
and sport-utility vehicles, minivans, trucks and related parts
and accessories worldwide.  In addition, Toyota provides retail
and wholesale financing, retail leasing and other financial
services primarily to its dealers and their customers related to
vehicles manufactured by Toyota.  The major portions of Toyota's
operations on a worldwide basis are derived from the Automotive
and Financial Services business segments.  The company also has
an All Other segment, which includes its non-automotive business
activities.  The most significant of Toyota's other operations
are its information technology businesses and pre-fabricated
housing.  Toyota operates through 500 consolidated subsidiaries
and 225 affiliated companies.  Earnings are due on 11/5/03.

TM - Toyota Motor Corporation  $59.45

PLAY (very speculative - neutral/debit straddle):

BUY CALL  NOV-60.00  TM-KL  OI=8    ASK=$1.65
BUY PUT   NOV-60.00  TM-WL  OI=107  ASK=$2.05
INITIAL NET-DEBIT TARGET=$3.50-$3.60
INITIAL TARGET PROFIT=$1.25-$1.75

Editor's note: Traders should be aware of the low Open Interest
in TM call options and plan to use alternative methods (exercise
the call, etc.) of closing the position to avoid excess slippage.


*****



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MARKET POSTURE
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Minor Signs of Profit Taking


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