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Daily Newsletter, Sunday, 11/02/2003

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The Option Investor Newsletter                   Sunday 11-02-2003
Copyright 2003, All rights reserved.                        1 of 5
Redistribution in any form strictly prohibited.

Entire newsletter best viewed in COURIER 10 font for alignment

In Section One:

Wrap: October Escape
Futures Market: Nothing Day
Index Trader Wrap: Deadlock
Editor's Plays: Time to Bet on the General
Market Sentiment: A Great Escape
Ask the Analyst: 5 "beaten down" stocks for late October bull
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 10-31        WE 10-24        WE 10-17        WE 10-10
DOW     9801.12 +218.66 9582.46 -139.33 9721.79 + 47.11 +102.37
Nasdaq  1932.21 + 66.62 1865.59 - 46.77 1912.36 -  2.95 + 34.74
S&P-100  519.98 +  9.73  511.25 -  6.87  518.12 +  0.07 +  2.88
S&P-500 1050.71 + 21.80 1028.91 - 10.41 1039.32 +  1.26 +  8.21
W5000  10224.52 +241.02 9983.50 -114.88 10098.3 + 13.06 + 95.02
RUT      528.22 + 21.79  506.43 - 13.93  520.36 +  1.30 +  6.78
TRAN    2913.11 + 85.86 2827.25 - 20.03 2847.28 + 23.73 + 38.70
VIX       16.10 -  1.61   17.71 +  0.09   17.62 -  0.83 -  1.05
VXO       17.15 -  1.78   18.93 -  0.26   19.19 -  0.05   19.24
VXN       24.89 -  0.56   25.45 +  0.12   25.33 -  2.29 -  1.58
TRIN       1.02            1.44            1.59            1.24
Put/Call   1.12            0.91            0.64            0.93
******************************************************************



October Escape
by Jim Brown

October 2003 will go down in the record books as one of the
least volatile Octobers on record. As if to punctuate this
fact the VXO closed at 17.15 on Friday after reaching a five
year intraday low of 17.02. More than a few professional
traders are scratching their heads over the combination of
factors that produced these numbers. The good news remains
that October went out with a strong gain with a Dow close
over 9800 and the Nasdaq at 1932. The biggest drop for the
month was a meager -2.5% in three days and far from the
monster dips that dot prior Octobers.

Dow Chart



Nasdaq Chart



S&P Chart



Russell Chart




What economics? One day after the GDP blew out estimates
the reports were positive but less than exciting. The
NY-NAPM came in at 226.4 and slightly more than the
222.2 in September. Not a blowout but it was the second
consecutive monthly gain. The expectations component was
not showing that much excitement. For the fourth time in
five months the expectation component registered 62.5 and
only slightly higher than the prior months. Current
conditions is where the big gains were made with the
component jumping from 51.1 to 58.2. This is the first
time since Q2-2002 that the current conditions has been
over 50 for two consecutive months. 62% of the respondents
said they thought the recession in the NY area was not
caused by the 9/11 attacks but by a longer term problem
of general economic weakness. Manufacturing in the area
slowed only slightly and still remained strong at 90.
Employment grew for the month despite the high 9%
unemployment rate in the city of NY.

Shifting geography the Chicago PMI report was inline with
expectations at 55.0 and was a jump from 51.2 last month.
This would indicate that manufacturing activity accelerated
rapidly in October. This is a strong supporting factor in
believing that the Q3 GDP may be the start of something big.
September had seen a sharp drop to 51.2 from 58.9 and the
rebound to 55.0 may be a good indication that the dip was
an anomaly. Prices paid did jump +19% to a seven-month high
and that could be the first signs of the inflation monster
returning. The Fed would be eager to shift their focus from
unwanted disinflation to unwanted inflation. It is a much
easier battle to fight. Also, inflation produces tax revenue
and deflation subtracts it. Inventories continued to fall
and the case for a huge buildup cycle is still improving.
New orders jumped to 59.2 from 53.2 but backlogs fell due
to a spike in production. It was still a good report.

Personal Income rose +0.3% for September but personal spending
fell -0.3%. This was the largest drop in spending since Sept.
2002. This was not a good sign. We already know that retail
sales fell off a cliff in October and this spending number
was for September. This would suggest that October could be
down even further. In real dollars the drop in spending was
close to -0.6% and that is a significant drop. The slowdown
in personal income would suggest the wage cycle is weakening
again with less overtime and more competition for jobs
impacting income. The exporting of high paying jobs overseas
is forcing workers to retrain and accept lower paying entry
level positions in other professions. This type of report is
seen as more long term negative than short term because most
investors are only looking 3-6 months ahead. Should this trend
continue for the next year it would draw significantly more
attention.

Contrary to the Personal Income/Spending news the Michigan
Consumer Sentiment rose to 89.6 for the final October reading.
This was two points above September but only slightly above
the 89.4 preliminary reading. The sentiment has been flat
since May and if the GDP numbers are real then the good news
should have been flowing through to the consumer. We just saw
that the consumer cut spending drastically in September and
despite the growing list of good economic news it does not
seem to be translating into higher sentiment. Analysts point
to the more than nine million workers still unemployed,
rising interest rates, oil prices and the worsening war in
Iraq. The daily litany of several dead soldiers each day is
continuing to drag on the overall feeling of well being.
Almost everyone knows several families with members overseas
and the daily attacks are killing soldiers with such
randomness that nobody feels safe.

Ok, everybody exhale. October is over and it was a good
month. The Dow was up +2.5%, Nasdaq +8.2% and SOX +18%.
Very good numbers for a month that is known for drops.
The Nasdaq has only had 2 down months this year, Jan and
Sept. The most bullish event for the week was a +4.3%
gain for the Russell this WEEK! This is clearly mutual
funds putting money to work at month end. Mutual fund
selling was nonexistent and most funds should have booked
very good returns. ICI reported Friday that cash inflows
for September were in excess of $17 billion and TrimTabs is
estimating those inflows rose to $30 billion for October.
This is consumer sentiment in its purest form.

As we move into November there will be outflows in at least
one major fund. Putman, owned by Marsh Mclennan, is under
direct attack by pension funds with huge amounts of money
invested in Putman. Since Monday organizations with nearly
$5 billion in pension deposits at Putman have said they
will be withdrawing those funds due to the illegal trade
practices currently under investigation. $5 billion in only
a week and the snowball is just beginning to gain speed.
Massachusetts is pulling out $1.7B, Rhode Island $69 million,
Vermont $91 million, NY $395 million and the list continues
too far to print. Numerous other states and pension
organizations have expressed concern and will make decisions
next week. One analyst was speculating the outflows could
exceed $20 billion or more. Add to that the individual mom
and pop accounts and it could turn into a flood. According
to Morningstar, Putman's New Opportunities Fund top 5
holdings are ... PFE, QLGC, INTC, AZO, MSFT.  Janus was
accused of far less and they lost nearly $5 billion in Sept
according to some estimates. Strong funds are also on the
hit list and the ball is just starting to roll in their
direction.

This money is not all in U.S. equities but by far the
majority. The current withdrawal amount for Putman at $5B
is less than 2% of their assets. It is far from a life
threatening event for Putman but is will impact the markets
on a short term basis. If the withdrawals continue to grow
at the same pace and do reach $20 billion over the next two
weeks then the funds under attack will have to sell stocks
to raise cash. $20 billion in sales is more than 60% of the
estimated inflows from October and more than all of Sept.
Most of this money will be reinvested back into the markets
but there should be a 2-3 week lag time between selling to
raise cash, transferring that cash, new funds being chosen
and then reinvesting the received cash. This scenario should
play out over the next couple weeks and there is always the
potential for a workout period between the funds and the
agencies to allow them to distribute funds over time to
avoid impacting the market for the rest of the investors.

Next week we should get a feeling for how November should
go. Is it going to be a November to remember or a month
of consolidation from seven months of gains? The caution
comes from the market action the last two days. Art Cashin
commented on Friday that floor traders were concerned about
the lack of advancement after the excellent economic results.
The Dow has not advanced more than a handful of points since
Wednesday and traders are unsure why. The general consensus
is that the good news was already baked into the cake. Most
are very happy that there has been no sell off and almost
all expect some profit taking next week.

The stock traders almanac suggests that the first three
days of November are bullish as new retirement cash is put
to work and funds reinvest cash received from October sales.
Without any October sell off to speak of there may or may
not be any excess cash floating around. Any funds hoarding
money for the "drop" may still be holding some cash. The
incoming deposits could be offset by the withdrawals from
funds like Putman mentioned above. This makes for a cautious
atmosphere for next week. There is still a train of thought
that has some funds adjusting their portfolios now that the
October year end is over. They were able to close their
year within 50 points of the Dows highs and fully invested.
Many of those investments have increased +30, +50, even
+100% over the last year and could easily stand to be
rebalanced.

This leaves investors with many decisions for next week.
Do they put new money to work now with the market only a
few points from new highs or do they wait for a pull back
that may never come? Those that expected a bigger drop in
Oct and held off making purchases are now cussing themselves
as the markets pulled back to the highs. This problem is
being faced by more than a few traders and I am sure more
than a few funds that expected a dip as well.

If I was a fund holding a lot of money and trying to get
into the market I would be looking at the economic reports
for next week and hoping for an upset. Hoping for anything
to take the edge off and let me sleep better after making
my entry. Those reports include some majors with the ISM
at 10:AM on Monday, the ISM Services on Wednesday and the
Nonfarm Payrolls on Friday. If I had to key on one it
would be the ISM on Monday.

Monday is the key day. If there is going to be any fund
selling or window undressing it should be on Monday. If
the ISM report is the slightest bit below expectations
then we could see an acceleration of that selling. However,
I doubt it will be serious in the overall context. There
is simply too much good news and too much money flowing
into the markets. Everybody has their eyes on a typical
4Q rally and it could turn into a self-fulfilling prophecy.

Any continued rally into the 4Q would have a steeper road
to climb. The earnings comparisons for 4Q-2003 will be a
lot tougher and unless the economy catches fire we may see
a cycle where the number of companies beating estimates
drops substantially. Success breeds optimism and analysts
fall all over themselves trying to up their estimates for
the next cycle. Eventually they get ahead of reality and
the whole things grinds to a halt. While I am not making
any dire predictions for the 4Q there are already rumblings
that earnings may not be as positive.

The market is a forward-looking mechanism that typically
focuses 3-6 months ahead. It has been focused on the 3Q
expected GDP for the last three months. Now that it has
passed the focus is on the current ISM numbers and any
GDP revisions ahead. The 4Q advance GDP is not until Jan
27th and there is still plenty of time for it to be revised
many times. Don't forget that tax cuts, tax rebates and
a refinancing boom from rates at historic lows helped to
power the 3Q GDP. Only a very little of that will carry
forward into the 4Q. The major boost to the 4Q should be
the beginning of the inventory rebuild as it appears the
demand is beginning to accelerate faster than businesses
anticipated. With inventories already extremely low any
real demand should drive that rebuilding phase.

The current estimates of 4Q GDP are between 4-5% depending
on who you ask and what day of the week you ask. There is
no credible estimate and that is part of the problem. What
do you do with a +4% 4Q GDP estimate when the 3Q blew out
at +7.2%. How do you relate it to the estimate for +4% GDP
growth for the entire year? While economists and analysts
are crunching numbers to come up with the "new" 4Q estimate
for investors everyone is in a holding pattern. If the
current estimate does not grow substantially then sentiment
could fade. If economic reports begin to cool from the
current positive trend then the Q3 GDP could start to
look like a blip instead of a boom. All of these factors
will weigh on stocks over the next couple weeks.

I am going to try really hard to reduce the paragraphs
above to as simple an outlook as possible. Sunshine with
scattered clouds and intermittent showers. The overall
trend should remain up. We are an optimistic bunch and
until a series of bad economic reports spoil the party
we will continue drinking from the Fed punchbowl. The
month of November begins the best three months of the
year for the S&P on a historic basis and this fact is
not going to be lost on many traders. Add in a rebounding
economy and a Fed on hold until May of 2004 and you have
the fuel for a fire that could put California to shame.
Is that bullish enough for you?

The problems of the past are not gone but once investors
have $ signs in their eyes they are going to overlook all
but the most dire economic numbers. Assuming the ISM on
Monday does not implode the stage should be set for the
month. Even a negative jobs report on Friday should not
spoil investor sentiment if the ISM was positive. We have
heard jobless recovery so many times it has been completely
discounted. If we happened to tack on more than 50,000 jobs
in Oct we could really see some momentum build.

At the risk of seeming too bullish I will close with the
obligatory warning. For the first time in months the bulls
really have something to cheer about and they were unable
to mount a charge. Chalk it up to October uneasiness. One
thing you cannot ignore is the VXO. It printed a 17.02 low
and closed at 17.15 on Friday. It is showing exactly what
I explained above, extreme bullishness. Traders are seeing
the potential for another leg up in the current bull market
and they have completely lost all fear. This is exactly
when unexpected lightning normally strikes.

To use another analogy everybody is standing in the front
of the boat and that boat is struggling to make headway
without dipping under the waves. Visualize waves breaking
over the bow while the engine is sitting out of the water
in the rear. We can't get any forward motion because the
bullish sentiment in the front is too heavy. There needs
to be balance in the boat to move forward and that means
any rough water ahead could cause sudden and unexpected
dips. Those dips should just be a balance adjustment that
allows us to pick up speed. Grab a life jacket and keep
your eyes open for rough water and maybe we can get through
November without the seasick pills.

Enter Very Passively, Exit Very Aggressively!

Jim Brown


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

Nothing Day
Jonathan Levinson

Friday was a fascinating study in cycle juxtaposition, with the
intraday cycles becoming sufficient opposed to prevent any
meaningful movement in equity futures for the entire session.
Bonds advanced, gold moved sideways, and the US Dollar Index
closed its first positive week in months at its high.

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

oifm103103_01.gif


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.

10 minute chart of the US Dollar Index


The US Dollar Index finished the week strong, trading up to its
high above 92.50 on weakness in the euro and CDN dollar.  This is
the first bullish week in 2 months, and added credence to the 90
level being a noteworthy bottom on this move.  All those who
shorted the dollar weakness below 92, which coincided with the
first widespread publicity of the sinking dollar in the
mainstream media, would now be at a loss.  For the week, the US
Dollar Index printed a higher low and lower high.


Daily chart of December gold


December gold managed to hold above 383 support on Friday,
printing an inside week with a much higher low and slightly lower
high.  For the day, Dec gold gave us a high of 389.80, low of
382.50 and a flat close up .20 at 384.60.  As discussed in
Thursday’s Futures Wrap, overall bullishness on the sector is
yielding to short term concern on my part, with the 390-410
resistance level looming large overhead and the daily chart
oscillators looking tired.  An email from a reader for whom I
have great respect sums it up well with respect to the PHLX
Gold and Silver Index (XAU):

"I'm out waiting for the early bulls to be done selling.  I will
miss the first day of the next rally (which with $Xau may mean
missing 5%!) but the whipsaws are too much for a MOC trader like
me. I could ignore my system and go with my gut, but since the
system is a 2000+ hour formalization of that gut, that wouldn't
be too smart :-)"


Daily chart of the ten year note yield


The ten year note yield (TNX) dropped 3.8 basis points on Friday
to close at 4.301%, holding within the midrange of the neutral
pennant we've been following.  The downphase on the daily
oscillators lost some of its vigor this week with what turned out
to be post-FOMC selling of treasury bonds.  For the week, the TNX
printed a doji star with a lower low and lower high.  Bonds are
looking as close to neutral as I've seen them in recent months,
which I expect to continue until either the upper or lower
trendline on the daily pennant gets broken.


Daily NQ candles


Like its peers, the NQ went nowhere on Friday, and it did so most
uninterestingly.  The daily chart oscillators ticked up to leave
us with more "intimate" bullish kisses verging on buy signals,
but there was absolutely no conviction in any direction.  The NQ
finished lower, and printed what was either a bearish "belt hold"
or " dark cloud cover" candle on for the week- in any event, it
was a bearish weekly print owing principally to the shooting star
failure printed on Thursday below the rally high.  The week
finished positive, but the failure below the 52 week highs left a
distinctly bearish flavor to the weekly candlestick.


30 minute 20 day chart of the NQ


The NQ drifted sideways today, closing lower by 9.50.  If the
relentless supportive bids were caused by mutual funds keeping
prices propped up to make their closing statement prints, it was
an impressive display.  The range was sufficiently tight to avoid
triggering any of the range-limit orders I had set at the upper
and lower Keltner bands (see the 150-tick ES chart below).
Unfortunately for bears, this lack of movement coincided with a
downphase on the 30 minute chart oscillators.  This sideways
downphase can portend an explosive upphase, as it is indicative
of divergent demand on the buy side.  Support at 1410, noted on
Thursday, appears to be key, and after today's price action looks
like the potential neckline of a head and shoulders pattern.

Daily ES candles


Again, a golfclap for those interested in higher closing prices
for the week and month, as Friday's narrow range successfully
limited the ES to a .75 point loss with a closing print of
1047.75.  We have another doji star at the top of this impressive
upleg, just below the 52 week high.  The lack of pullback allowed
the bullish kiss to inch toward a sell signal, but any downside
on Monday should negate that.  If, however, buyers emerge on
Monday, we will have a truncated downphase at a much higher price
level than the 987.75 from which the last daily oscillator
downphase ended.  This would likely precede a strong upleg,
complete with short covering panic and new rally highs.  In this
regard, Monday is set up to be a very significant day for bulls
and bears alike.


20 day 30 minute chart of the ES


The 30 minute candle chart of the ES did not display particular
strength today, but the lack of pullback atop the strong upleg
was impressive.  Bears will point to the rapid failure at the 52
week high, while bulls emphasize the pattern of higher lows.
Both are right, and that dispute caused Friday's cycle
juxtaposition.  The market, as always, will have to settle it.  A
move below 1046 or above 1056 should get the ball rolling one way
or the other.  The 300 minute stochastic has plenty of room to
the downside, but the lack of price traction on Friday's portion
of the downphase is not bearish and could portend a strong
upphase to follow.

150-tick ES


There's not much to see on the 150-tick chart of the ES, which is
the point. Cries of agonized frustration were doubtless heard
above workstations everywhere, as they were over mine with price
refusing to commit to a direction for longer than a few minutes.

Daily YM candles



20 day 30 minute chart of the YM


For the week, we had a bullish candlestick formation printed on
the US Dollar Index, with ambiguous formations on gold and
treasuries, and technically bearish candles on the otherwise
bullishly-advancing equities.  The lack of clarity on the candle
patterns indicates a pause or hiccup in the prevailing trend, and
the uncertainty derives from the possibility of either a
resumption of the trend or a reversal.  The strength of the rally
in equities this week was sufficient to cause the intraday
oscillators to trend in overbought, which has in turn caused the
daily chart oscillators to hit a bump in their downphase.  I will
be watching Monday carefully, because a down day should be
sufficient to restore the daily downphase, while an up day should
kick off at least a short covering rally and set the daily onto a
new upphase.  If Monday drifts sideways, I will tear out what
remains of my graying hair.

Bonds and gold are equally uncertain, and while gold feels toppy
to me, that's the been the theme through much of the past two
months in gold.  Again, I'm looking to Monday to provide answers.

With this much flux in the different markets currently, the
prescription is a nimble outlook and either patience on the
sidelines or well-placed stops in the fray.  I didn't trade the
futures on Friday because I was unwilling to get ground up in the
aimless drift.  A break of any of upside resistance or downside
resistance should change that and reward us with tradeable
markets.  See you at the bell!


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

Deadlock
Jonathan Levinson

Friday gave us a trading range tight enough to be difficult to
even scalp.  The Dow added 14.51 points to close at 9801.12, the
Nasdaq dropped .48 to close at 1932.21, and the SPX added 3.77 to
1050.71.  It was a session in which traders counted the decimals.

Volume was surprisingly strong given the lack of range, with 1.86B
Nasdaq and 1.44B NYSE shares changing hands.  The VXO (OEX
volatility, the "old" VIX) went out at 17.15, down .35, with the
VIX (SPX volatility index) dropped .23 to close at 16.1.  There
were some extraordinary put to call readings toward the close,
with the ratio spiking to 1.13 at 2PM EST and remaining high for
the remainder of the session.  This was distinct from the sub-.50
readings earlier in the week.

For the week, the Dow added 2.3%, with a 5.2% gain for the month
and a 17.5% gain year to date.  The SPX is up 2.1% for the week,
5% for the month and 19.4% for the year, while the Nasdaq added
3.6% for the week, 7.1% for the month and 44.7% for the year.

This was a difficult week for most traders, both bearish and
bullish alike, with the more ignorant blissfully aware of only the
rising prices.  The volatility indices have reached and are
continuing to sustain levels from which even the most technically
challenged are on guard for a pullback, and combined with the
various oscillator divergences that dominated most of the week,
there's good reason to expect that pullback to be serious.  The
lack of upside followthrough to the blowout, credibility-testing
GDP number was bearish in the extreme, and yet price simply would
not retreat.  By the same token, there was an absence of short
covering hysteria, no sustained vertical flagpole rallies.  I can
recall seeing rallies begin this year that blew through so many
resistance levels so quickly as to render the numbers meaningless.
With this many traders eyeing the low VXO and the intact-52 week
highs, there have to plenty shorting the market, but so far, no
short covering rallies either.

The market feels as though most had priced in a great GDP number,
and sheer well-placed disbelief was enough to prevent a rally on
the news.  There is no shortage of bad news in the markets either,
and it appears for the moment that all are waiting for the next
move before placing their bets.  Perhaps the lack of movement on
Friday was caused by support from mutual fund window-dressing.  In
any event, Monday is shaping up to be a key day, as our
examination of the charts will show.

Weekly COMPX candles


The weekly Nasdaq shows a doji for the latest week below the 38.2%
Fibonacci resistance line, always within the now-interminable
rising wedge off the March 2003 low.  The bearish divergence on
the 10 week stochastic remains in play and portends a drop into a
bear wedge breakdown, with the Macd topped out and on the verge of
a sell signal.  This is a toppy market, but it remains
disturbingly firm at current levels.


Weekly INDU candles


The Dow shows the same characteristics, with the oscillators
maxxed out and diverging within a typically bearish price pattern.
9600 is the key support on the Dow, coinciding with 1825  on the
Nasdaq.

Daily OEX candles


The daily OEX candles show Friday's session at the apex of a
pennant within the broad rising summer's range.  The bounce from
the lower trendline this week was sufficient to turn the daily
chart oscillators to a preliminary buy signal, and if it sticks,
OEX bulls will have an aborted downphase from a higher low than
the previous daily cycle trough.  519-523 appears as the critical
range in this timeframe.

20 day 30 minute chart of the OEX


Zooming in to the 30 minute candles we see the bounce off the lows
last week taking on another bear wedge pattern.  The cycles on
this timeframe have become juxtaposed by the sideways drift, with
the Macd bearishly diverging from the uptrending stochastic.  To
my mind, the nascent upphase on the daily chart is key, and if
Monday sees a positive close, the daily upphase will get
confirmed.  If the day closes lower, the downphase should reassert
itself, and the 30 minute chart downphase will break the bear
wedge, bringing in a wedge target of 506.  In the meantime, with
the stochastic and Macd fighting it out on the intraday chart,
there wasn't much to be done on Friday.  Monday should break the
deadlock.


Daily QQQ candles


We have the same picture on the Qubes, with Friday's 19 cent loss
absorbed by the tentative buy signal on the daily chart
oscillators.  On the 30 minute chart below, we have the
oscillators in gear to the downside, unlike on the OEX, but with
very little price traction.  35.05 is a potential head and
shoulders neckline, with resistance above at 35.60.  A decisive
break either higher or lower will decide the fate of the nascent
upphase on the daily oscillator above.

20 day 30 minute chart of the QQQ



With the bearish divergence on the weekly cycles and indecisive
downphases on the daily and 30 minute charts and 52 week highs
looming overhead, Monday will be a critical day.  Any buying could
touch off a short covering rally, while selling will cause bulls
to protect profits and encourage bears to press.  The oscillators
that have served us so well are waiting for the next move, and the
key will be to remain nimble and open to either outcome.  See you
at the bell!


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

Time to Bet on the General

Glad I stayed neutral last week. We gapped open on Monday
from 9600 and never looked back. October closed with a bang
and we are looking eye to eye with November and not a bear
in sight. Scary thought.

Now that everyone from the shoeshine boy to the cab driver
is convinced that the economy is recovering and the market
is about to blow its top it may be time to bet on the
general. GE is the proxy for the economy and it has been
beaten severely recently. With the GDP blowing the doors
off estimates GE may have found a bottom at $28.

We will not have a 4Q rally without participation from GE.
It is the biggest of the big caps and the widest representation
of economic sectors. If the GDP was really a boom and not
a blip then investors will start betting on the general to
produce results in the 4Q.

The recent high was $32.42 and the recent low of $28 was
just a week ago during the temporary market dip. It has
rebounded to $29 over the last three days and held with
the market.

I am looking at the Jan-$30 calls for $.85 cents. If we
really do get a year end rally then GE should find some
buyers. Hitting $32 again on some more positive economic
data should not be a problem and if we do move over Dow
10,000 then $35 would be my target.

This is simply a play on the market. We are betting 85
cents that we are going to close 2003 over Dow 10,000
and GE will be at $32 or better if we do.

GE Chart





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

Play Recaps

MMM Bull Put Spread (recommended 10/05)

Dropping the MMM put spread. Once it broke $76 it never
looked back. If we were to see a market event MMM would
be the stock I would buy on the dip.

http://members.OptionInvestor.com/editorplays/edply_100503_1.asp



Powerball

Now it is starting to get exciting. We are over the potential
October dip without taking any serious hit. We have two
months until the end of 2003 and all the economic factors
appear to be positive. If we can just get over Nasdaq 2000
we could really get some tech momentum going. TLAB is the
only real slacker and EMC has recovered from the acquisition
hit two weeks ago.

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

Powerball Chart




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

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

Good Luck

Jim Brown


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

A Great Escape
- J. Brown

That's it!  Investors can stop fearing the traditional October
sell-off.  Other than the dip a week ago the month was firmly in
the bulls' control.  The major averages are up between 4%-8% for
the month.  The only traders who had anything to fear were the
bears and it seems like each passing economic report scares them
deeper and deeper into their caves.

So now the question some investors are asking, "did we escape the
seasonal sell-off or did we just postpone it?"  A few weeks ago
there was a growing murmur among many analysts on Wall Street who
expected Q3 earnings to be good but they expected short-term
market weakness (a.k.a. profit taking) in November.  After the
most recent round of economic reports, namely the FOMC meeting
and the GDP numbers, those whispers have disappeared.  However,
if you're a contrarian that may be just another clue.

Investor sentiment is extremely bullish as evidenced by the
multi-year low in the VXO (or old VIX).  Let me repeat, the fear
index, a tried-and-true indicator, is at a multi-year low.  There
is nothing in the rulebooks that say it can't continue to slip
but it's a huge warning flag for bullish traders that the markets
are toppy and vulnerable.  This is not the type of environment we
want to be making big bullish bets.

So what are we supposed to do with all this conflicting data?
Consumer confidence is up but spending is down.  Initial jobless
claims are still high but have spent weeks now under the pivotal
400K level.  The FOMC is on hold for several more months to a
year before they even consider raising rates.  Manufacturing is
expanding and all signs point to economic improvement.  Meanwhile
investors poured nearly $30 billion into mutual funds this
October despite the growing Putnam illegal-trading scandal.  The
markets are long-term overbought and just under major resistance
points at 10K and 2K for the DJIA and NASDAQ, respectively.  On
top of it all we are beginning the best three months of the year.

I suggest caution.  It can be dangerous to chase a trade (market)
when normally if we're patient the right entry point will make
itself available.  I realize that anyone that was waiting for the
big October dip is probably saying "yeah, right" but capital
preservation is key to being a successful investor/trader.
Influencing my cautious stance is the VXO but also the 5-dma on
the ARMS index is approaching a bearish signal and we're seeing
short interest up in the e-minis by commercial traders.  Now may
be a good time to re-evaluate those stop losses.



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

Market Averages

DJIA ($INDU)

52-week High:  9850
52-week Low :  7197
Current     :  9801

Moving Averages:
(Simple)

 10-dma: 9703
 50-dma: 9563
200-dma: 8827



S&P 500 ($SPX)

52-week High: 1053
52-week Low :  768
Current     : 1050

Moving Averages:
(Simple)

 10-dma: 1040
 50-dma: 1025
200-dma:  946



Nasdaq-100 ($NDX)

52-week High: 1439
52-week Low :  795
Current     : 1416

Moving Averages:
(Simple)

 10-dma: 1401
 50-dma: 1307
200-dma: 1187



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

Extreme bullishness is normally a sign for veteran traders to
begin adjusting their outlook from bullish to bearish.  When
investors become complacent and fearless the markets normally
knock the wind out of them in sharp bouts of selling.  All three
fear indices are suggesting the sort of extremes that should have
us turning very cautious and protective with our capital.

CBOE Market Volatility Index (VIX) = 16.10 -0.23
CBOE Mkt Volatility old VIX  (VXO) = 14.15 -0.35
Nasdaq Volatility Index (VXN)      = 24.89 +0.15


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

          Put/Call Ratio  Call Volume   Put Volume

Total          1.12        578,348       647,265
Equity Only    1.03        491,689       504,173
OEX            0.87         15,064        13,148
QQQ           14.02         19,435       272,537


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

Bullish Percent Data

           Current   Change   Status
NYSE          73.3    + 0     Bull Confirmed
NASDAQ-100    77.0    - 1     Bear Correction
Dow Indust.   80.0    - 3     Bull Correction
S&P 500       80.0    + 0     Bull Confirmed
S&P 100       79.0    - 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: 0.95
10-dma: 1.06
21-dma: 1.03
55-dma: 1.08


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    1500      1489
Decliners    1280      1579

New Highs     294       296
New Lows       10         6

Up Volume    908M      986M
Down Vol.    873M      777M

Total Vol.  1815M     1811M
M = millions


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

Commitments Of Traders Report: 10/28/03

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

It's been a long week since last we looked at the COT data
and we're still not seeing any big moves by the Commercial
traders.  The same holds true for small traders but they did
reduce some of their short positions.


Commercials   Long      Short      Net     % Of OI
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%)
10/28/03      391,596   412,498   (20,902)   (2.6%)

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
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%
10/28/03      137,791    76,791    61,000    28.4%

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

Hmm... we are seeing some movement in the e-minis.  Commercials
have upped their short positions by 24K contracts.  Small Traders
may have gotten the hint too.  Short interest is up but the real
change is the 45K drop in long contracts.


Commercials   Long      Short      Net     % Of OI
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%)
10/28/03      220,171   260,644    (40,473)  ( 8.4%)

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

Small Traders Long      Short      Net     % of OI
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%
10/28/03      123,569    59,742    63,827    34.8%

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


NASDAQ-100

This time it's the Small Traders making a move in the NDX
futures.  Long contracts are up nearly a third to more than
21K.  Commercials are still comatose but the trend is growing
slowly more bearish with a small bump in short positions.


Commercials   Long      Short      Net     % of OI
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%)
10/28/03       36,168     46,272   (10,104) (12.3%)

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

Small Traders  Long     Short      Net     % of OI
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%
10/28/03       21,640     8,830    12,810    42.0%

Most bearish reading of the year: (10,769) - 06/11/02
Most bullish reading of the year:  19,088  - 01/21/02

DOW JONES INDUSTRIAL

There is very little change here for the Small Trader but
Commercial Traders have upped both their longs and their shorts.


Commercials   Long      Short      Net     % of OI
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%
10/28/03       20,504    11,366    9,138      28.7%

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
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%)
10/28/03        5,295     8,864   (3,569)   (25.2%)

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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5 "beaten down" stocks for late October bull

The Stock Trader's Almanac notes that late October is a great
time to for bulls to be buying stocks, "especially beaten down
high-tech stocks" as October marks the end of the worst six
months of the year.

And while a call for subscribers to send me some lists of beaten
down tech-stocks found just a few interested bulls replying, as
there probably aren't any beaten down technology stocks to buy
anymore, and the party is over, some said the bullish party was
over more than 3-months ago!

Here's a list of 5 stocks that look to have HUGE upside.  Sure,
some have more than doubled from their recession lows, but
there's a few stocks out there that traded more than 500% higher
at their peak, and if an online book seller like Amazon.com
(NASDAQ:AMZN) $54.43 can gain 181% from its October 31, 2002
close, when the stock was "overvalued" at $19.35, then I'm
looking for some other "overvalued" diamonds in the rough.

S1 Corporation (SONE) - $0.25 and $0.50 box




In a recent Ask the Analyst column on October 19, 2003 we
discussed the "high pole warning."  The chart of SONE intrigued
me for a late October beaten down technology stock after seeing
two prior "low pole warnings" find continued support at $3.50 as
if bulls were starting to show some commitment to the stock.  The
recent triple-top buy at $6.00 on October 13 may be sign that
this is one of the "favored" stocks for a turnaround.

I was a little frustrated this morning to see the stock jumping
17% at the open after reporting earnings and announcing a $15
million share buyback program.  It would have been nice to get
that type of pop AFTER profiling the stock as a late October
beaten down tech stock.

Ciena Corp. (CIEN) Chart - Daily intervals




One trader/investor asked about Ciena Corp. (CIEN) $6.41 as a
late October beaten down tech candidate.  The point and figure
chart has sloooowly been building a long column of X up to $7.25.
What intrigued me about CIEN is that the stock does look to be
under accumulation.  I could find no stock specific news on July
9 when the stock jumped from $5.75 to $6.75 to explain that day's
trade.  Then in mid-August, CIEN reported a quarterly loss of
$0.09 per share, but for the first time in 6 quarters, CIEN
reported quarterly revenue growth on a year-over-year basis.

Brokers have been mixed with upgrades and downgrades, and a
pattern of higher lows and higher highs looks bullish for a trade
on a break above $6.75.  On August 21, CIEN also announced its
intent to buy privately held Akara, which is an emerging leader
in the growing market of SONET/SDH-based extended storage area
networks.

On a break above $6.75, a stock trader/investor would look long
the stock on the break and use upward trend, which was recent
tested as support as a trailing stop.  Options traders might look
at the out the money April 04 $7.50 calls (EUQDU) or the in the
money April 04 $5.00 calls (EUQDU) for partial positions.  Should
CIEN muster a CLOSE above $7.40, can round up positions, with an
on or before April expiration target of $10.25.  I would prefer
April expiration, to try and allow for any potential carryover
bullishness from the December (Q4) earnings, which tends to be
the more seasonally strong quarter for technology stocks, as
corporations will try and "last minute" spend on new equipment,
and begin announcing 2004 annual budgets.  In what certainly
appears to be a recovering economy, CIEN's stock price may
benefit from some anticipatory benefit for IT spending.

I'm going to slow down a bit and profile an also "beaten down"
stock, that you're probably familiar with.  It's probably not
exciting, but YUM! Brands (NYSE:YUM) $34.14 +0.53% didn't seem
all that exciting at $26 earlier this spring.

Darden Restaurants (DRI) Chart - Daily Intervals




It is so tough to find some good "beaten down" stocks, that I
really feel comfortable discussing for bullish trades.  DRI just
has what I feel are the making for a very bullish trade over the
next 8 to 12 months.  Somebody, or so it would seem, continues to
gobble up DRI's shares on sharp drops lower, yet each drop
continues to find a higher low.  DRI caught my eye in late
September after the company reported downside earnings, only
because one of its all you can eat crab promotions at its Red
Lobster unit was too popular, and customer ate too much crab.  I
thought to myself as the stock gapped lower, below its 200-day
SMA, but right to its point and figure chart's bullish support
trend, if this stock gets back above its 200-day in quick
fashion, then it is most likely "sold out," and that's the last
of any bad news (if having too many customers eating crab is bad
news).  I like DRI as a longer-term play, with a bullish 8-month
objective of $27, stop $18.50 to begin.

Earlier this year I had profiled share of online Internet service
provider United Online (NASDAQ:UNTD) $28.85 +2.81% as bullish
near the $15.00 level when the stock looked to be breaking out of
a nice base.

The stock has been under pressure in recent weeks after Time
Warner's (NYSE:TWX) $15.29 AOL unit (Time Warner is proud of AOL
it removed the AOL from its name and stock symbol) said it was
going to offer a discount version of its online service.  I
thought to myself.... "AOL's had trouble defending its market
share or making money in the premium service area, how does it
plan to compete in the discount area?"  Today, several brokers
upgraded United Online saying AOL isn't a threat.

United Online (UNTD) - $0.50 and $1 box




UNTD's point and figure chart has been giving some mixed signals
in recent weeks as market participants try and figure out just
what impact if any a discount version of its Internet service
might have on other discount Internet service providers.

I was hesitant to profile a bullish trade on the now post split
gap lower to $16.50, which was just above UNTD's bullish support
trend and rising 200-day SMA, where both of these longer-term
technicals often provide strong support for a bounce when first
tested.

Now that I've been able to see the stock reverse the bulk of its
recent October decline, I think a good late-October or early
November entry point is found at $17.50, using support above $16,
to get another bounce going back higher with a target back to
$28.  Once long at $17.50, be reading for some volatility and
prepared for the stock to work its way back and forth between $21
and $17.50, possibly setting up a triangle pattern.  I'm willing
to look long with support above $16.50 as October 15 short
interest was high at 3.323 million shares, with days to cover at
9.27.

My AdobePhotoshop conked out on me tonight, and I use it to
capture the charts I display in my updates, but a 5th stock I was
looking at for a late October rally is retailer Kohls (NYSE:KSS)
$56.07 -0.03%.  I've had a retracement bracket on KSS from $78.83
(05/20/02 high) to $44.00 (10/10/02 low) for quite sometime, and
last week, the stock came down (from the 61.8% retracement
relative high of $65.52) and settled right on top of the 19.1%
retracement level of $50.65 all last week, along with an upward
trend from the October 2002 low.  I'd like a bullish entry on KSS
for a partial position on a pullback into the curling higher 21-
day SMA of $53.50, stop $49.00, then look for bullishness and
strength above the 38.2% retracement of $57.30 to have the stock
making headway above the currently trending lower 50-day SMA.  A
bullish target would be the recent relative high of $65.52, which
has been a higher high from a pattern of higher lows, over the
course of the next 2.5 months.

We will revisit these 5-stocks in the intra-day updates at 01:00
PM EST from time to time to see how they are doing.

**Disclosure:  I currently hold a bullish position in Darden
Restaurants (NYSE:DRI).  I also hold a bullish position in YUM!
Brands (NYSE:YUM).

Jeff Bailey


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

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

Symbol  Co               Date           Comment      EPS Est

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

ACDO   Accredo Health        Mon, Nov 3  Before the Bell    0.35
ACGL   Arch Capital Group    Mon, Nov 3  After the Bell     0.85
CEPH   Cephalon, Inc.        Mon, Nov 3  After the Bell     0.41
CHTR   Charter Comm          Mon, Nov 3  Before the Bell   -0.34
CHD    Church & Dwight Co    Mon, Nov 3  -----N/A----    -  0.41
DVA    DaVita                Mon, Nov 3  -----N/A-----      0.56
EPD    Enterprise Prdct Part Mon, Nov 3  Before the Bell    0.08
FIC    Fair Isaac Corp       Mon, Nov 3  After the Bell     0.65
FRT    Fed Rlty Invstmnt TrstMon, Nov 3  -----N/A-----      0.65
FHCC  First Health Group     Mon, Nov 3  -----N/A-----      0.39
GLG    Glamis Gold Ltd       Mon, Nov 3  Before the Bell    0.04
GTM    GULFTERRA ENERGY PART Mon, Nov 3  Before the Bell    0.43
HCP    Health Care Prop.     Mon, Nov 3  Before the Bell    0.90
HTG    Heritage Prop. Inv    Mon, Nov 3  -----N/A-----      0.66
K      Kellogg Co.           Mon, Nov 3  Before the Bell    0.51
MCY    Mercury General       Mon, Nov 3  -----N/A-----      0.76
MET    MetLife Inc.          Mon, Nov 3  After the Bell     0.73
NFS    Nationwide Finl Serv  Mon, Nov 3  After the Bell     0.68
NBIX   NEUROCRINE BIOSCIENCESMon, Nov 3  After the Bell    -0.36
PRE    PartnerRe Ltd.        Mon, Nov 3  After the Bell     1.46
PKZ    PETROKAZAKHSTAN INC   Mon, Nov 3  -----N/A-----      1.04
PDLI   Protein Design        Mon, Nov 3  After the Bell    -0.21
RSG    Republic Services, IncMon, Nov 3  After the Bell     0.27
SRX    SRA Intl, Inc.        Mon, Nov 3  After the Bell     0.27
STRA   Strayer Education     Mon, Nov 3  Before the Bell    0.23
TEVA   Teva Pharmaceutical   Mon, Nov 3  Before the Bell    0.49
PFG    The Principal Finl GrpMon, Nov 3  After the Bell     0.61
WRE    Wash. Rl Est Invst TstMon, Nov 3  After the Bell     0.51
WRC    Westport Resources    Mon, Nov 3  After the Bell     0.20
WGL    WGL Holdings          Mon, Nov 3  Before the Bell   -0.45


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

ACAS   American Capital StratTue, Nov 4  After the Bell     0.64
AMH    AmerUs Group Co.      Tue, Nov 4  After the Bell     0.95
AMLN   Amylin Pharm, Inc.    Tue, Nov 4  During the Market -0.40
AOC    Aon Corp              Tue, Nov 4  Before the Bell    0.45
ASN    Archstone-Smith Trst  Tue, Nov 4  Before the Bell    0.45
ITU    Banc Itau Hldng FinancTue, Nov 4  -----N/A-----      1.14
BJS    BJ SVCS CO            Tue, Nov 4  Before the Bell    0.40
VNT    C. A. Nacl Tele de VenTue, Nov 4  After the Bell      N/A
CWG    CanWest Global Cmmu   Tue, Nov 4  -----N/A-----       N/A
CPG    Chelsea Prop. Group   Tue, Nov 4  After the Bell     0.87
CDL    Citadel Broadcasting  Tue, Nov 4  -----N/A-----     -0.20
CCU    Clear Channel Cmmu    Tue, Nov 4  Before the Bell    0.39
CSR    Credit Suisse Group   Tue, Nov 4  Before the Bell     N/A
CEI    Crescent Rl Estte EqtyTue, Nov 4  Before the Bell    0.32
EMR    Emerson Electric      Tue, Nov 4  Before the Bell    0.62
ENH    Endurance Spclty Hold Tue, Nov 4  After the Bell     0.74
EOG    EOG Resources         Tue, Nov 4  Before the Bell    0.71
EOP    Equity Off Prprty TrstTue, Nov 4  Before the Bell    0.70
EQR    Equity Residential    Tue, Nov 4  Before the Bell    0.55
EXPD   Expeditors Intl WA    Tue, Nov 4  -----N/A-----      0.29
FST    Forest Oil Corp       Tue, Nov 4  After the Bell     0.52
FMS    Fresenius Medical CareTue, Nov 4  Before the Bell     N/A
GRP    Grant Prideco Inc     Tue, Nov 4  -----N/A-----      0.06
HNT    Health Net, Inc.      Tue, Nov 4  Before the Bell    0.71
HSIC   Henry Schein          Tue, Nov 4  Before the Bell    0.92
ICOS   ICOS Corp             Tue, Nov 4  After the Bell    -0.80
IGT    Intl Game Technology  Tue, Nov 4  -----N/A-----      0.28
MAC    Macerich Co           Tue, Nov 4  -----N/A-----      0.86
MVL    Marvel Enterprises    Tue, Nov 4  Before the Bell    0.39
MAS    Masco                 Tue, Nov 4  Before the Bell    0.52
MBI    MBIA Inc.             Tue, Nov 4  Before the Bell    1.17
MSM    MSC Industrial Direct Tue, Nov 4  -----N/A-----      0.17
PY     Pechiney              Tue, Nov 4  -----N/A-----      0.24
PER    Perot Systems         Tue, Nov 4  Before the Bell    0.12
PCLN   Priceline.com         Tue, Nov 4  After the Bell     0.21
PRU    Prudential Finl, Inc. Tue, Nov 4  After the Bell     0.56
RA     Reckson Ass Rlty Corp Tue, Nov 4  After the Bell     0.54
REG    REGENCY CTRS CORP     Tue, Nov 4  After the Bell     0.79
RYAAY  Ryanair Holdings      Tue, Nov 4  Before the Bell    0.92
SPI    Scottish Power        Tue, Nov 4  Before the Bell     N/A
SBL    Symbol Technologies   Tue, Nov 4  -----N/A-----      0.06
TLM    Talisman Energy       Tue, Nov 4  -----N/A-----      0.48
TLD    TDC A/S               Tue, Nov 4  -----N/A-----       N/A
TI     Telecom Italia        Tue, Nov 4  -----N/A-----       N/A
G      The Gillette Co       Tue, Nov 4  Before the Bell    0.36
MNY    The MONY Group Inc.   Tue, Nov 4  Before the Bell    0.07
PNX    The Phoenix Companies Tue, Nov 4  Before the Bell    0.11
TYC    Tyco Intl             Tue, Nov 4  Before the Bell    0.33
UPL    Ultra Petroleum Corp  Tue, Nov 4  -----N/A-----      0.11
UAG    United Auto Group     Tue, Nov 4  Before the Bell    0.61


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

Y      Alleghany             Wed, Nov 5  -----N/A-----       N/A
DOX    Amdocs Ltd            Wed, Nov 5  -----N/A-----      0.23
AFR    American Finl Rlty    Wed, Nov 5  Before the Bell    0.21
ABC    AmeriSourceBergen     Wed, Nov 5  Before the Bell    1.05
AXS    Axis Capital Holdings Wed, Nov 5  After the Bell     0.56
BZH    Beazer Homes USA Inc  Wed, Nov 5  Before the Bell    3.90
CPN    Calpine Corp          Wed, Nov 5  Before the Bell    0.24
CNQ    Canadian Natural Res  Wed, Nov 5  Before the Bell    1.32
CRE    Carramerica Rlty Corp Wed, Nov 5  After the Bell     0.77
CSCO   Cisco Systems         Wed, Nov 5  After the Bell     0.15
CXR    COX RADIO INC         Wed, Nov 5  Before the Bell    0.18
DF     Dean Foods            Wed, Nov 5  Before the Bell    0.52
EIX    Edison Intl           Wed, Nov 5  Before the Bell    1.09
FOX    Fox Entertainment Grp Wed, Nov 5  After the Bell     0.28
HIG    Hartford Finl ServicesWed, Nov 5  After the Bell     1.17
IACI   INTERACTIVECORP       Wed, Nov 5  Before the Bell    0.18
LAMR   LAMAR ADVERTISING CO  Wed, Nov 5  Before the Bell   -0.01
MGA    Magna Intl Inc.       Wed, Nov 5  -----N/A-----      1.19
MME    Mid Atlantic Medical  Wed, Nov 5  After the Bell     0.99
MLS    Mills Corp            Wed, Nov 5  Before the Bell    0.82
PHS    PacifiCare Health Sys Wed, Nov 5  After the Bell     1.45
PDX    Pediatrix Medical Grp Wed, Nov 5  Before the Bell    0.97
PSC    Philadelphia Suburban Wed, Nov 5  Before the Bell    0.32
RL     Polo Ralph Lauren     Wed, Nov 5  Before the Bell    0.51
QCOM   QUALCOMM Inc.         Wed, Nov 5  After the Bell     0.29
DNY    RR Donnelley          Wed, Nov 5  Before the Bell    0.45
SRV    Service Corp Intl     Wed, Nov 5  Before the Bell    0.05
SHPGY  Shire Pharm Group     Wed, Nov 5  Before the Bell    0.36
SSI    SpectraSite, Inc.     Wed, Nov 5  After the Bell      N/A
NWS    The News Corp Ltd     Wed, Nov 5  After the Bell     0.20
REY    The Reynolds & ReynoldWed, Nov 5  Before the Bell    0.44
SVM    The ServiceMaster Co  Wed, Nov 5  Before the Bell    0.22
TOM    Tommy Hilfiger        Wed, Nov 5  Before the Bell    0.58
TM     Toyota Motor Corp     Wed, Nov 5  Before the Bell     N/A
TRN    Trinity Industries    Wed, Nov 5  After the Bell     0.08
TXU    TXU Corp.             Wed, Nov 5  Before the Bell    0.93
UNM    UnumProvident Corp    Wed, Nov 5  After the Bell     0.42
VARI   Varian, Inc.          Wed, Nov 5  After the Bell     0.39
WPI    Watson Pharm, Inc.    Wed, Nov 5  Before the Bell    0.45
WTW    Weight Watchers Intl  Wed, Nov 5  After the Bell     0.38


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

ATVI   Activision            Thu, Nov 6  After the Bell    -0.12
AEG    AEGON N.V.            Thu, Nov 6  -----N/A-----      0.35
AAA    Altana AG             Thu, Nov 6  -----N/A-----       N/A
BRL    Barr Labs, Inc.       Thu, Nov 6  Before the Bell    0.67
BDX    Becton, Dickinson     Thu, Nov 6  Before the Bell    0.60
BRG    BG Group              Thu, Nov 6  Before the Bell    0.38
BIO    Bio-Rad Labs, Inc.    Thu, Nov 6  -----N/A-----      0.74
BNN    BRASCAN CORP          Thu, Nov 6  -----N/A-----      0.41
CPT    Camden Prop. Trst     Thu, Nov 6  After the Bell     0.76
CZN    Citizens Cmmu Co.     Thu, Nov 6  Before the Bell    0.10
CLX    Clorox                Thu, Nov 6  -----N/A-----      0.60
CNA    CNA Finl Corp         Thu, Nov 6  Before the Bell   -1.97
CMLS   Cumulus Media Inc.    Thu, Nov 6  After the Bell     0.10
DEG    Delhaize Group        Thu, Nov 6  -----N/A-----       N/A
DVN    Devon Energy Corp     Thu, Nov 6  Before the Bell    1.47
ETM    Entercom Cmmu         Thu, Nov 6  Before the Bell    0.39
FLO    Flowers Foods         Thu, Nov 6  Before the Bell    0.28
FS     Four Seasons Hotels   Thu, Nov 6  Before the Bell    0.11
HCC    HCC Insurance HoldingsThu, Nov 6  After the Bell     0.56
HEW    Hewitt Associates     Thu, Nov 6  Before the Bell    0.31
THX    Houston Exploration   Thu, Nov 6  Before the Bell    1.02
ICN    ICN Pharm, Inc.       Thu, Nov 6  Before the Bell    0.24
IDA    Idacorp Holding       Thu, Nov 6  Before the Bell    0.46
IN     Infonet Services Corp Thu, Nov 6  After the Bell    -0.03
KSE    KeySpan               Thu, Nov 6  Before the Bell   -0.01
KGC    Kinross Gold          Thu, Nov 6  -----N/A-----      0.02
LTR    Loews Corp.           Thu, Nov 6  Before the Bell    1.17
CLI    Mack-Cali Rlty Corp   Thu, Nov 6  Before the Bell    0.94
NSANY  Nissan Motor Co. Ltd. Thu, Nov 6  -----N/A-----       N/A
NVDA   NVIDIA Corp           Thu, Nov 6  After the Bell     0.12
PIXR   Pixar Animation Stud  Thu, Nov 6  After the Bell     0.13
PSA    Public Storage        Thu, Nov 6  -----N/A-----      0.74
SRE    Sempra Energy         Thu, Nov 6  -----N/A-----      0.92
TEM    Telefonica Moviles    Thu, Nov 6  Before the Bell     N/A
TBI    Tom Brown             Thu, Nov 6  Before the Bell    0.44
TRZ    Trizec Prprty, Inc.   Thu, Nov 6  Before the Bell    0.41
HLTH   WebMD                 Thu, Nov 6  After the Bell     0.09
WMB    Williams Companies IncThu, Nov 6  Before the Bell    0.04
XMSR   XM Satellite Radio    Thu, Nov 6  Before the Bell   -1.17


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

AXA    AXA                   Fri, Nov 7  -----N/A-----       N/A
BUH    Buhrmann NV           Fri, Nov 7  -----N/A-----       N/A
DYS    Dist y Servicio D&S SAFri, Nov 7  -----N/A-----      0.14
DTE    DTE Energy Co         Fri, Nov 7  Before the Bell    0.58
AHO    Koninklijke Ahold NV  Fri, Nov 7  -----N/A-----       N/A
MITSY  Mitsui & Co Ltd       Fri, Nov 7  -----N/A-----       N/A
TEO    Telecom Argentina     Fri, Nov 7  After the Bell      N/A
TOT    Total                 Fri, Nov 7  Before the Bell    1.61
VNO    Vornado Rlty Trst     Fri, Nov 7  Before the Bell    1.02
WSC    Wesco Finl            Fri, Nov 7  -----N/A-----       N/A

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

Symbol  Co Name              Ratio    Payable     Executable

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
BHE     Benchmark Electronics Inc 3:2      Nov  13th   Nov  14th
LSTR    Landstar System, Inc      2:1      Nov  13th   Nov  14th
BLUD    Immucor, Inc              3:2      Nov  14th   Nov  17th
LYTS    LSI Industries Inc        5:4      Nov  14th   Nov  17th


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

Q3 Earnings are finally starting to fade as we move into the
first week of November.  Monday reveals the latest auto sales
numbers, Construction spending and the ISM index.  Wednesday
will see the ISM services number and Friday has several smaller
economic reports.


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

----------------
Monday, 11/3/03
----------------
Auto Sales (NA)         Oct  Forecast:    5.5M  Previous:     5.4M
Truck Sales (NA)        Oct  Forecast:    7.9M  Previous:     7.9M
ISM Index (DM)          Oct  Forecast:    55.8  Previous:     53.7
Construction Spnding(DM)Sep  Forecast:    0.2%  Previous:     0.2%


-----------------
Tuesday, 11/4/03
-----------------
Goldman Sachs Capital Good Conf.


-------------------
Wednesday, 11/5/03
-------------------
ISM Services (DM)       Oct  Forecast:    62.0  Previous:     63.3
Factory Orders (DM)     Sep  Forecast:    0.6%  Previous:    -0.8%


------------------
Thusday, 11/6/03
------------------
Initial Claims  (BB)  11/01  Forecast:     N/A  Previous:     386K
Productivity-Prel (BB)   Q3  Forecast:    7.3%  Previous:     6.8%
October Same-Store Sales
Merrill Lynch Tech Conference

----------------
Friday, 11/7/03
----------------
Personal Income (BB)    Sep  Forecast:    0.2%  Previous:     0.2%
Nonfarm Payrolls (BB)   Oct  Forecast:     50K  Previous:      57K
Unemployment Rate (BB)  Oct  Forecast:    6.1%  Previous:     6.1%
Hourly Earnings (BB)    Oct  Forecast:    0.2%  Previous:    -0.1%
Average Workweek (BB)   Oct  Forecast:    33.8  Previous:     33.7
Wholesale Invntories(DM)Sep  Forecast:    0.2%  Previous:    -0.2%
Consumer Credit (DM)    Sep  Forecast:   $5.5B  Previous:    $8.2B


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


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Contact Support
The Option Investor Newsletter                   Sunday 11-02-2003
Sunday                                                      2 of 5


In Section Two:

Watch List: Earnings & Strength
Put Play of the Day: JBLU
Dropped Calls: SYK
Dropped Puts: None


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

Earnings & Strength

Barr Labs - BRL - close: 76.77 change: +0.07

WHAT TO WATCH: This is one drug stock that is out performing its
peers.  BRL has painfully climbed higher over the last twelve
months and is now trading at all-time highs.  The trend of higher
lows in October look ready to carry over into November.  It will
be interesting to see how investors react to BRL's earnings
report on November 6th.

Chart=


---

Countrywide Financial Corp - CFC - close: 105.12 chg: +0.67

WHAT TO WATCH: After smashing earnings last week (10/23) by $1.45
per share, CFC vaulted higher again to break the $100 mark.  Now
shares are consolidating sideways between 102.50 and 107.
Bullish traders can look for a bounce from 100-102 or a breakout
over 107.  Bears are probably waiting for a slide under the $100
mark.  CFC splits 4-for-3 in December.

Chart=


---

Magna Intl - MGA - close: 80.23 change: +1.00

WHAT TO WATCH: After a month-long decline in September, shares of
MGA have roared back through most of October, minus a few days of
consolidation.  The recent support at the 50-dma looks good and
the close over $80 is a tempting trigger for new bullish plays.
With earnings expected on November 5th we're going to keep this
one on our watch list.

Chart=


---

Digene Corp - DIGE - close: 35.10 change: -0.65

WHAT TO WATCH: Ouch!  The bullish momentum reversed for biotech
stock DIGE in late September after soaring towards the $50 mark.
The stock finally broke its bullish technical support in October
and now DIGE has failed under its 50-dma.  Furthermore DIGE's P&F
chart is showing a fresh triple-bottom sell signal and a price
objective pointing towards the $25 mark.  Earnings are on
November 6th.  This could be a stock to watch.

Chart=


---

Lehman Brothers - LEH - close: 72.00 change: +1.65

WHAT TO WATCH: Can LEH breakout above resistance at 72.50?  If so
bulls might be able to target the old highs near $76.  Volume was
pretty strong on Friday's gain and the broker/dealer index has
been a leader for the markets, especially now given the spat of
M&A activity and stronger trading volumes.

Chart=



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

BCR $80.05 +0.80 - Earnings in mid-October were strong and sent
BCR to new all-time highs.  Momentum traders may want to go long
over 81 or short under 78.

ING $20.84 +0.14 - This insurance stock might still have some gas
in its tank if it can break through the 21.25 level.

BZH $99.50 +0.97 - Homebuilders are hot and BZH is at new all-
time highs.  The $100 level should be round-number psychological
resistance but shares may not stop, not with that trend of lower
highs on its intraday chart.


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

Put Play of the Day:
********************

JetBlue Airways - JBLU - cls: 57.67 chg: -1.70 stop: 60.51

See details in play list




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

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


CALLS
^^^^^

Stryker Corp. - SYK - close: 81.11 change: -0.05 stop: 79.00

Early last week, SYK looked like an ideal breakout candidate, the
way the stock had wedged itself up against major resistance at
$82.  After numerous attempts, the stock isn't any closer to
making that breakout a reality, having been repeatedly turned
back as the stock wedges into a tighter and tighter neutral
wedge.  While a breakout is still possible, with the way the
daily oscillators are peeling off and the complete lack of
bullish follow-through last week, we're going to err on the side
of caution and pull the plug this weekend.  There are plenty of
better plays out there, so we'll clear this non-performer off the
playlist to make room for them.  Use any sort of intraday rally
back near $82 to effect a more favorable exit from any open
positions.

Picked on October 26th at    $81.51
Change since picked:          -0.40
Earnings Date               1/15/04 (unconfirmed)
Average Daily Volume =        674 K
Chart =



PUTS
^^^^

None


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

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

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

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

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

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

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


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**********
DISCLAIMER
**********

Please read our disclaimer at:
http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html


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Contact Support
The Option Investor Newsletter                   Sunday 11-02-2003
Sunday                                                      3 of 5


In Section Three:

Current Calls: COO, FD, ICOS, JCI, LOW, QLGC, VRTS
New Calls: APA, IMDC
Current Put Plays: COF
New Puts: JBLU


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

Cooper Cos - COO - close: 43.45 chg: +0.05 stop: 41.15 *new*

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:
Boy, it was just a week ago we were pretty concerned with COO's
slide back towards the $40 level.  Thankfully, support at its
simple 50-dma held up and the market strength boosted COO over
the mid-October highs.  The recent consolidation on Thursday-
Friday is encouraging because investors have kept the stock above
the $43.00 level, although we will note volume was pretty light.
Short-term traders can begin planning their exit point as the
stock approaches our first target at $45.00.  One good day and
COO could be there.  We're encouraged by the bullish technical
indicators on COO's chart but a couple of the short-term
oscillators are already looking overbought.  We would probably
not suggest new bullish positions unless COO offered a bounce
from the $42.00 level.  We are going to raise our stop up a tad
to $41.15, which is still below its simple 50-dma.  Just an
observation but those traders brave enough to buy the dip to the
50-dma last week have seen the November options double.

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 $4.00 SL=2.00
BUY CALL NOV 45 COO-KI OI=1551 at $0.75 SL= --
BUY CALL FEB 40 COO-BH OI= 795 at $5.30 SL=3.20
BUY CALL FEB 45 COO-BI OI= 421 at $2.45 SL=1.25

Annotated chart:




Picked on October 12 at $41.40
Change since picked:    + 2.05
Earnings Date         09/03/03 (confirmed)
Average Daily Volume:      391 thousand
Chart =


---

Federated Dep Store - FD - cls: 47.55 chng: +0.59 stop: 45.50

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:
After another dip to support just above the 20-dma, FD spend last
week wedging back up against the $48 resistance level, as the
Retail index (RLX.X) pushed to new multi-year highs and then
consolidated near the $385 level into the end of the week.  With
the RLX looking strong and the DOW closing back at 9800 and the
SPX at 1050 on Friday, FD looks poised to finally break out over
that $48 resistance next week.  Another dip and rebound from
above $46 can be used for new entries here, although the better
approach would seem to be entering on the breakout.  With
earnings set to be released on November 12th, there should still
be enough time to reach our $50 price target.  We're recommending
an exit from the play once that level is reached, as the first
test of the 2001 highs will likely produce a bout of selling.
Aggressive traders might hold out for a breakout move above that
level, but with the rest of the market feeling like it is near an
important top, we don't feel like pressing our luck.  Maintain
stops at $45.50.

Suggested Options:
Shorter Term: The November 45 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 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=269 at $3.10 SL=1.50
BUY CALL NOV-47 FD -KW OI=389 at $1.35 SL=0.75
BUY CALL DEC-45 FD -LI OI= 50 at $3.80 SL=2.25
BUY CALL DEC-47 FD -LW OI=  9 at $2.15 SL=1.00
BUY CALL JAN-47 FD -AW OI=127 at $2.85 SL=1.50

Annotated Chart of FD:




Picked on October 9th at     $45.60
Change since picked:          +1.95
Earnings Date              11/12/03 (unconfirmed)
Average Daily Volume =     1.90 mln
Chart =


---

ICOS Corp - ICOS - close: 46.72 chg: +0.76 stop: 42.49

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.

We don't have much time left in this ICOS call play.  The company
is due to report earnings after the bell on Tuesday, November
4th.  Regular readers know we do not like to hold over an
earnings announcement.  Thus we will be closing this play on
Monday or at the very latest on Tuesday afternoon.  For this
reason we are not suggesting new bullish positions in the stock.

Hopefully, ICOS will have good news to say in their conference
call and they will announce better than the expected 79 cent loss
per share.  Unfortunately, there are too many variables than can
sabotage a bullish option position so we choose to step back and
watch.  We will be keeping ICOS on our watch list because the big
inverse head-and-shoulders pattern is a very tempting bullish
play.  A post-earnings bounce from the $44.00 level might be a
new entry point but then we'll have more data to digest to make a
more informed decision.

Suggested Options:
Earnings are expected on November 4th after the bell.  We are not
suggesting new positions.  OptionInvestor will close this play on
Monday or Tuesday('s close) at the latest.

Annotated Chart:



Picked on October 26 at $45.42
Change since picked:    + 1.30
Earnings Date         11/04/03 (confirmed)
Average Daily Volume:      1.5 million
Chart =


---

Johnson Controls - JCI - close: 107.53 chg: +0.46 stop: 102.99

Company Description:
Johnson Controls is a global market leader in automotive systems
and facility management and control. In the automotive market, it
is a major supplier of integrated seating and interior systems,
and batteries. For non- residential facilities, Johnson Controls
provides control systems and services including comfort, energy
and security management.  (source: company press release)

Why We Like It: (original play description from Thursday)
Building on the bullish wave in the markets and growing net
income, shares of JCI have propelled themselves from the $72.50
level in April to $107 in October.  The month of October has been
exceptionally strong after Bank of America raised their price
target on JCI to $125.  Fellow vehicle-interior maker Lear Corp
(LEA) also benefited from a strong start in October and positive
analyst coverage.  When the markets pulled back JCI investors saw
shares dip toward the $103 level but dip buyers moved albeit on
lower volume.  Earnings were on Oct. 22nd and the company's
fiscal Q4 profits rose 16% while they beat estimates by 3 cents
with $2.31 a share.

We will admit that the daily and weekly chart on JCI looks
extended and overdue for a deeper correction.  However, until
that time comes we're going to play the trend, which is up, and
see how far it can run.  Its point-and-figure chart is currently
showing a triple-top buy signal after faking out the shorts with
a bear trap.  We like entries at the current level but momentum
traders can look for a new high over $107.40.  If you prefer to
enter on a dip wait for a pull back to $105 or $106.  We're going
to initiate the play with a stop loss at $102.99.

We also note that JCI is a split candidate.  The company last
split its stock 2-for-1 on April 1, 1997 at the $80 level.  There
has been ample opportunity to split since and they did not.
However, shares are now trading at all-time highs and October was
the first time they broke the century mark.

! Weekend Update: JCI continued to stretch its winning streak
through Friday and closed at a new all-time high.  Dips to $105
or $106 still look attractive but the next stop may be $110.

Suggested Options:
Short-term traders can choose from the November and December
options while longer-term investors may want to look at January
04 and April 04 strikes. We like the 105s and 110s.

BUY CALL NOV 105 JCI-KA OI=563 at $3.70 SL=1.85
BUY CALL NOV 110 JCI-KB OI=249 at $1.00 SL= --
BUY CALL NOV 115 JCI-KC OI=  0 at $0.25 SL= -- riskier
BUY CALL DEC 105 JCI-LA OI=  5 at $4.70 SL=2.50
BUY CALL DEC 110 JCI-LB OI= 10 at $2.00 SL=1.00
BUY CALL DEC 115 JCI-LC OI=  0 at $0.65 SL= --

Annotated chart:




Picked on October 30 at $107.07
Change since picked:     + 0.46
Earnings Date          10/22/03 (confirmed)
Average Daily Volume:      432 thousand
Chart =


---

Lowe's Companies - LOW - close: 58.93 change: -0.52 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:
As we expected, LOW gave us that breakout over $59 last week,
with price stretching all the way up to $59.95 before the bulls
lost their nerve.  Since achieving that peak on Tuesday, the
stock has been gradually drifting back down, and it looks like
old resistance in the $58.00-58.50 area is being tested to see if
it can now hold as new support.  Traders that didn't take the
initial breakout over $59 are now getting a second chance to
enter the play.  Rebounds from above $58 look viable as new entry
points, so long as our $57 stop is not violated.  With just over
2 weeks to go until the company reports earnings on November
17th, there's still plenty of time for the stock to achieve our
upside target of $65.  More cautious traders may want to wait for
a break above $60 before jumping aboard with new positions.
Watch for continued strength in the Dow Jones Housing index
($DJUSHB) and the Retail index (RLX.X) to confirm continued
bullishness in shares of LOW.

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= 2334 at $4.50 SL=2.75
BUY CALL NOV-60 LOW-KL OI=11019 at $1.20 SL=0.60
BUY CALL DEC-55 LOW-LK OI=  148 at $5.20 SL=3.25
BUY CALL DEC-60 LOW-LL OI=  981 at $2.05 SL=1.00

Annotated Chart of LOW:




Picked on October 23rd at    $58.65
Change since picked:          +0.28
Earnings Date              11/17/04 (unconfirmed)
Average Daily Volume =     3.91 mln
Chart =


---

QLogic Corp. - QLGC - close: 56.05 change: -0.14 stop: 52.99

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:
We had a strong feeling that QLGC was setting up for a major
breakout, especially with the Semiconductor index (SOX.X) still
looking strong.  The SOX had a stellar day on Tuesday, blasting
through resistance to new highs for the year, and QLGC went along
for the ride, handily taking out resistance near $54 and
stretching above $56 by the close.  That wasn't all this play had
in store though, as the stock shot higher at the open on
Thursday, hitting a high of $58.30 before falling back throughout
the remainder of the day.  Since clearing that level, QLGC has
been finding intraday support just below $56 for the past few
days and if that support gives way, then odds are good that we'll
see a test of $54 as support.  Should that rebound take place
from the $56 area, it would be a mediocre entry into the play,
but a dip and rebound from above $54 (old resistance becomes
support) should be used for aggressive entries enroute to
achieving our upside target of $60.  Note that the 10-dma
($54.36) has now edged above $54, which should reinforce that
support level.  Maintain stops at $52.99.

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-55 QLC-KK OI=5679 at $2.65 SL=1.25
BUY CALL NOV-60 QLC-KL OI=7079 at $0.70 SL=0.35
BUY CALL DEC-55 QLC-LK OI= 865 at $3.80 SL=2.25
BUY CALL DEC-60 QLC-LL OI=1311 at $1.65 SL=0.75

Annotated Chart of QLGC:




Picked on October 21st at    $54.21
Change since picked:          +1.85
Earnings Date               1/14/04 (unconfirmed)
Average Daily Volume =     4.70 mln
Chart =


---

Veritas Software -VRTS - close: 36.08 change: -0.26 stop: 34.00

Company Description:
As an independent supplier of storage management software, VRTS
develops and sells products that protect against data loss and
file corruption, allowing rapid recovery after disk or computer
system failure.  The company's products provide continuous data
availability in clustered computer systems with shared resources.
This enables IT managers to work efficiently with large file
systems, making it possible to manage data distributed on large
computer network systems without harming productivity or
interrupting users.  VRTS provides products for most popular
operating systems, including UNIX and Windows NT, as well as a
full range of services to assist its customers in planning and
implementing their storage management solutions.

Why we like it:
Last week's breakout over $36 resistance was just the catalyst we
needed to look for another bullish play in VRTS, especially with
the creation of yet another PnF Buy signal on the trade at $37.
But with the stock having doubled in the past 6 months, it is
getting harder for the bulls to just stage a breakout that can
run higher.  What that told us was that when VRTS broke out, it
was likely to pull back and confirm that old resistance would act
as new support.  Sure enough, the stock has been pulling back
over the past couple sessions and ended on Friday just a few
pennies above that $36 level.  Whether it holds as support next
week will give us a lot of answers as to the play's viability.
Intraday dips as low as $35 can be used for entry into the play,
although more conservative traders will want to wait for price to
recover back over $36 before playing.  Assuming the breakout last
week wasn't the end of the line for the bulls, our $40 initial
target should be easily reached on the next move up the chart.
The ease with which that target is reached will give us a clearer
picture of whether our aggressive $45 target is possible or just
wishful thinking.  Maintain stops at $34, which is still just
below the 50-dma at $34.25.

Suggested Options:
Shorter Term: The November 35 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 40 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 35 Call.

BUY CALL NOV-35 VIV-KG OI=15445 at $2.25 SL=1.00
BUY CALL NOV-40 VIV-KH OI= 6621 at $0.35 SL=0.00
BUY CALL DEC-35 VIV-LG OI= 1467 at $2.95 SL=1.50
BUY CALL DEC-40 VIV-LH OI=10835 at $0.85 SL=0.40

Annotated Chart of VRTS:




Picked on October 28th at    $37.27
Change since picked:          -1.19
Earnings Date               1/21/04 (unconfirmed)
Average Daily Volume =     6.21 mln
Chart =



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

Apache Corp. - APA - close: 69.72 change: +0.54 stop: 66.25

Company Description:
Apache Corporation is an independent energy company that explores
for, develops and produces natural gas, crude oil and natural gas
liquids. In North America, the company's exploration and
production interests are focused in the Gulf of Mexico, the Gulf
Coast, the Permian Basin, the Anadarko Basin and the Western
Sedimentary Basin of Canada. Outside of North America, Apache has
exploration and production interests offshore western Australia,
offshore and onshore Egypt, offshore The People's Republic of
China and onshore Argentina, as well as exploration interests in
Poland.

Why we like it:
As a rule Oil and Gas exploration stocks haven't really done that
well in recent months.  Sure there are many that have made some
upward progress, but few have shown the steady gains demonstrated
by shares of APA.  The stock bottomed near $35 in September 2001
and since then has been steadily working higher in a broad
ascending channel.  There have been dips and troughs, but t the
trend of higher lows and higher highs remains intact.  Each new
high is followed by a period of consolidation, before APA then
turns higher to rally through to a new high.  The most recent
peak was more than 3 weeks ago, when the stock topped out near
$73, and it has been slowly pulling back to support at the 50-dma
($68.98), which is reinforced by the midline of the rising
channel ($68.40).  The company handily beat earnings estimates
just over a week ago on strong revenues and with the Natural Gas
component in the company's repertoire, business looks to continue
to be strong for some time to come.

The PnF chart just reinforces the bullish picture, as the Buy
signal back in August generated a bullish price target of $86,
giving plenty of upside potential to the stock.  We're looking to
take an entry near current levels, but we want to make the stock
prove that it really is going to bounce before we actually enter
the play.  So we're setting an entry trigger of $70.50, just over
the intraday highs of the past 3 days, as well as the 20-dma
($70.41).  Once the trigger is satisfied, momentum traders can
enter on the initial breakout, while those with a more
conservative style can look for a dip and rebound above the 50-
dma as their entry trigger. Because we're looking for the rebound
to commence from near current levels and using an entry trigger,
we can use a tight stop of $67.95, which is below both the
center-line of the rising channel and last Tuesday's intraday
low.

Suggested Options:
Shorter Term: The November 70 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 75 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 70 Call.

BUY CALL NOV-65 APA-KM OI= 371 at $5.10 SL=3.00
BUY CALL NOV-70 APA-KN OI=2688 at $1.30 SL=0.65
BUY CALL DEC-70 APA-LN OI= 134 at $2.15 SL=1.00
BUY CALL DEC-75 APA-LO OI= 222 at $0.55 SL=0.25

Annotated Chart of APA:




Picked on November 2nd at    $69.72
Change since picked:          +0.00
Earnings Date               1/22/04 (unconfirmed)
Average Daily Volume =     1.39 mln
Chart =


---

Inamed Corp - IMDC - cls: 86.16 chg: +3.04 stop: 79.99

Company Description:
Inamed is a global healthcare company with over 25 years of
experience developing, manufacturing and marketing innovative,
high-quality, science-based products. Current products include
breast implants for aesthetic augmentation and for reconstructive
surgery; a range of dermal products to treat facial wrinkles; and
minimally invasive devices for obesity intervention, including
the Lap-Band System for morbid obesity.
(source: company press release)

Why We Like It:
Bulls are chasing strength again and IMDC has a 9-month head
start on its rival for the re-introduction of silicone breast
implants into the U.S. markets.  Silicone was banned for implant
usage back in 1992 in the belief that leaking implants lead to a
number of autoimmune disorders.  Yet most of the world still uses
silicone implants due to their more natural feel.  One article
stated that 9 out of 10 European women chose silicone implants
over saline.  Inamed believed that silicone was safe to use and
sponsored a clinical study to cover the issue.  That data was
discussed and voted on by an FDA advisory panel in October.

So why all the buzz over the October 14-15 FDA advisory panel
decision, where they voted 9-to-6 to approve silicone implants
for U.S. usage?  Wall Street is watching because breast implants
are big business.  In the last ten years the number of breast
augmentations has soared more than 500%.  Doctors performed more
than 236,000 operations in 2002 alone.  Now that the advisory
panel has voted there is a 3-to-6 month wait before the FDA rules
on the issue.  Should it be approved then silicone sales could
soar to $100 million after hitting the markets in mid-2004.

Shares of IMDC were halted during the two-day panel meeting in
October and on news of their approval the stock jumped more than
22%.  Since the announcement we've seen shares of IMDC slide back
to the $80 level before investors bought the dip and pushed it
back up to a new all-time high by this last Friday.  The company
did announce earnings a couple of days ago and the results beat
estimates by 3 cents with net income reaching 61 cents per share.
Revenues were up almost 20% to $80.1 million.

Bullish traders should note that IMDC is not without risk.
Normally the FDA does follow the advice of their advisory panels
but they could still choose to not approve silicone implants for
the U.S. market.  The FDA approval is probably still a few months
away but a risk we're more likely to deal with are analyst
downgrades based on valuation concerns.  Shares of IMDC have
soared and that makes it an easy target.  Fortunately, when the
markets were weak two weeks ago IMDC faded slowly to the $80
level before traders jumped in.  We feel if the markets can
cooperate IMDC might turn out to be a $100 stock.  Let's not
forget to mention it's a prime candidate for a stock split.

We like bullish positions at current levels but if a pull back
appears then a bounce anywhere above $82.50 should be playable.
We're going to stick our initial stop loss at 79.99, which might
feel a little wide.  More conservative traders could attempt a
play with a stop closer to $82.  Very short-term traders may want
to look for a dip then target $90, IMDC's next logical resistance
point.

Suggested Options:
Short-term traders can choose the November or December options.
January or Aprils are also available.  We like the 85s but the
80s might work on a pull back.

BUY CALL NOV 80 UZI-KP OI= 515 at $7.40 SL=4.50
BUY CALL NOV 85 UZI-KQ OI= 965 at $3.80 SL=1.50
BUY CALL NOV 90 UZI-KR OI= 123 at $1.40 SL=0.70
BUY CALL DEC 85 UZI-LQ OI= 205 at $5.60 SL=3.00
BUY CALL DEC 90 UZI-LR OI= 205 at $3.20 SL=1.60

Annotated Chart:




Picked on November 02 at $86.16
Change since picked:     + 0.00
Earnings Date          10/29/03 (confirmed)
Average Daily Volume:      514 thousand
Chart =



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Capital One Fin. - COF - close: 60.80 change: +1.12 stop: 62.00

Company Description:
As one of the top 10 credit card issuers in the U.S., Capital
One's secret weapon is its vast databases.  The company uses this
data to match a potential Visa or MasterCard customer to any one
of its thousands of cards, varying in annual percentage rates,
credit limits, finance charges and fees.  Ranging from platinum
and gold cards for preferred customers to secured and unsecured
cards for customers with poor credit histories, the company has a
credit card for just about anyone.  The company also sells
wireless phone services, mortgage services, and consumer lending
products.

Why we like it:
We debated about whether to add COF to the put list on Thursday
because of the stock's propensity to dole out bear traps.  But in
the end, the potential for a major breakdown outweighed the
risks.  Those risks were mitigated by using an entry trigger of
$59, requiring COF to show us some weakness before we'd be lured
into the play.  That weakness never materialized on Friday, with
the stock bouncing right from the opening bell and gaining 1.87%
into the close.  With the trigger, we're still safely waiting on
the sidelines, rather than trapped in a losing position.  We're
going to stick with the initial game plan, requiring COF to break
below $59 to make it a live play.  That initial breakdown looks
like a solid entry point, although more conservative traders may
want to wait for the 50-dma ($58.82) to give way as well before
playing.  Stick with the $62 stop, as a move above Thursday's
intraday high, as well as the 10-dma and 20-dma would be a clear
sign that down is not the path of least resistance.

Suggested Options:
Aggressive short-term traders will want to focus on the November
55 Put, as it will provide the best return for a short-term play.
Longer term traders will want to look to the December 55 Put, as
it should provide ample time for the play to move in our favor
without time decay becoming a major factor.

BUY PUT NOV-60 COF-WL OI=6652 at $1.85 SL=1.25
BUY PUT NOV-55 COF-WK OI=4944 at $0.55 SL=0.40
BUY PUT DEC-55 COF-XK OI=3789 at $1.40 SL=0.75

Annotated Chart of COF:




Picked on October 30th at    $59.68
Change since picked:          +1.12
Earnings Date               1/21/04 (confirmed)
Average Daily Volume =     2.62 mln
Chart =



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

JetBlue Airways - JBLU - cls: 57.67 chg: -1.70 stop: 60.51

Company Description:
JetBlue is a low-fare, low-cost passenger airline, which provides
high-quality customer service. JetBlue operates a fleet of 48 new
Airbus A320 aircraft and is scheduled to place into service
another five A320s by the end of 2003.  Based out of New York
City's John F. Kennedy International Airport, JetBlue currently
operates 184 flights a day and serves 22 destinations in 11
states and Puerto Rico and plans to commence service in January
from Boston to Orlando, Tampa and Ft Lauderdale, FL, LA/Long
Beach, CA, and Denver, CO. With JetBlue, all seats are assigned,
all travel is ticketless, all fares are one-way, and a Saturday
night stay is never required. (source: company press release)

Why We Like It:
It's been a tough gig to try and pick successful bearish plays
with the markets near one-year highs.  The recent week was truly
rough with the INDU up five days in a row.  However, the market
strength may have helped set up this bearish play for JBLU.  But
first a little background.  For months shares of this discount
airlines appeared immune to profit taking and normal stock
cycles.  When JBLU finally hit the $70 level in early October we
began to see some consolidation ahead of its earnings report.
Once JBLU reported its Q3 numbers the stock was dumped as
investors "sold the news".  Prior to the earnings report UBS
downgraded the stock to "reduce" from "neutral" on valuation
concerns and after the report JPM did the same with a downgrade
from "neutral" to "under weight" (a.k.a. sell).

We don't think the profit taking is over yet and JBLU appears to
be trading in a bear flag with a little benefit from the market
strength this last week.  This is somewhat of an aggressive play
because the XAL airlines index is still in a bullish trend higher
and JBLU might find some dip buyers.  Yet somehow we don't think
so.  The failed rally on Thursday traded to the simple 50-dma
just above the 60 mark before rolling over again.  There is some
support at $55 but our initial target is $50.00.  We'll open the
play with a stop loss above Thursday's high at 60.51.

Suggested Options:
Short-term traders can choose from the November or December
options while longer-term players can check out the Januarys.  We
like the 60s and 55s.

BUY PUT NOV 60 JGQ-WL OI=1452 at $3.90 SL=2.00
BUY PUT NOV 55 JGQ-WK OI=1759 at $1.45 SL=0.75
BUY PUT NOV 50 JGQ-WJ OI=1470 at $0.50 SL= -- riskier
BUY PUT DEC 60 JGQ-XL OI= 814 at $5.30 SL=3.00
BUY PUT DEC 55 JGQ-XK OI= 368 at $2.75 SL=1.40
BUY PUT DEC 50 JGQ-XJ OI= 917 at $1.30 SL=0.65

Annotated Chart




Picked on November 02 at $57.67
Change since picked:     - 0.00
Earnings Date          10/23/03 (confirmed)
Average Daily Volume:      1.5 million
Chart =



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The Option Investor Newsletter                   Sunday 11-02-2003
Sunday                                                      4 of 5


In Section Four:

Leaps: Charge Up Your Force Field
Traders Corner: Horatio Was The Founder – And The Loser
Traders Corner: Where is the Dow Going?
Traders Corner: In Quest of the Perfect Donchian Channel Breakout
     Signal
Futures Corner: The New and The Old


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*****
LEAPS
*****

Charge Up Your Force Field
By Mark Phillips
mphillips@OptionInvestor.com

As I idly speculated some weeks back, the broad market indices are
nearing important resistance that I expect to be a well-charged
electric fence on the first attempt or two.  Once again on Friday,
the DOW closed over 9800 and it seems almost a guarantee that
we'll see that 10K mark tested over the next couple weeks as it
will now act as a price magnet.  At the same time, the S&P 500
closed over 1050 and the 1065-1070 is beckoning to the bulls with
its siren song of further gains.  As I spoke of back in January,
the NASDAQ has indeed been the leader to the upside in this
cyclical bull market recovery and 2000 appears to be in the cards
in the near future.

There are doubtless a lot of traders that have those three
measures of overhead resistance on their radar screens just as I
do and I'm expecting that at least on the first attempt at a
breakout those measures will act as a veritable electric fence.
So if you're betting on a breakout to higher levels, it would seem
to be prudent to charge up those force fields!  The last time any
of these measures of resistance were visited was in June of 2002
and a cursory glance at any of those charts shows just how strong
resistance becomes on any push above there.  The DOW has strong
resistance from 10,000-10,300, the SPX from 1070-1100 and the
NASDAQ from 2000-2100.

While I won't argue that higher levels are impossible, the ability
of the market to continue significantly higher with the incredibly
low levels of the VIX appears doubtful.  Regardless of whether
we're looking at the OEX volatility index (VXO.X) or the SPX
volatility (VIX), these levels are screaming "extreme complacency"
on the part of the bulls.  Using the higher reading of the VXO at
17.15, we haven't seen volatility this low since late 1998.

I remember a few months back talking about one prominent analyst's
prognostication of VIX levels in the 12-15 area as patently
ridiculous, but yet here we go, approaching those levels that
haven't been seen since 1992-1994.  I pointed out that those
levels should be impossible to achieve due to the fact that those
low VIX readings were accompanied by a very narrow range of
fluctuation in the underlying index, the OEX.  Well, now our VIX
is calculated on the SPX and looking at the movement over the past
few months, I'm forced to concede that lower VIX levels may indeed
be possible.  Since early June, the SPX has traded in the range of
960-1050, which is only a little over 9% in a period of 5 months.
Should this narrow range continue, then I think it is entirely
possible that the VIX could continue to drop.

Let me be clear though.  Just because I concede that such a course
of events is possible, does not mean that I think it is likely.
Rather than the underlying fundamental conditions that prevailed
in the early 1990s, the economic landscape feels a lot more like
what we experienced at the end of 1999 and leading into early 2000
before the great bubble finally popped.  During that period, money
supply growth had been excessive and then the bubble popped as the
Fed pulled back on the availability of money by raising interest
rates and reducing the actual money supply.

There's no hint of a rise in interest rates yet, but the rate of
money supply growth has been falling significantly in recent
weeks, as the Fed looks to walk the fine line between being
accommodative enough and too accommodative.  My prediction is that
they will eventually fail in their attempts to engineer a recovery
through monetary policy, but time will tell.  I delved into my
thoughts a bit last Monday and had intended to finish up that
topic last Wednesday.  Unfortunately, I spent most of last
Wednesday preparing to evacuate due to the California firestorms
and had to put that project on hold.  I'll deliver the "rest of
the story" this week.

The bottom line for me is that there's still more upside potential
for this rally, but it is getting very close to the point where it
once again makes sense to attempt selling the top.  I know a few
weeks ago I said that I was done trying to pick a top in this
market, but with the approach of major resistance levels,
amazingly low VIX readings and a domestic economy that is growing
according to government statistics, but really appears stagnant to
me, this opportunity is too good to pass up.

Bullish percent readings are still all very near their cycle
highs, with the exception of the NASDAQ-100, currently in a bear
correction condition, but have in all cases refused to give us
confirmed bearish or reversal top readings.  In my opinion, these
readings are still telling us that the bulk of the risk is being
carried by the bulls, but until we see some true weakness, trying
to pick a top is still a risky venture.  But I'm willing to give
it a go.  Care to join me for the ride?

Portfolio:

WMT - Despite the fact that WMT has failed to deliver any real
downside action and bounced again last week, I'm encouraged by the
stock's lack of relative strength.  The DOW is pushing to new
highs, the Retail index (RLX.X) broke out to new multi-year highs
last week and WMT is still trolling along below descending
trendline resistance.  That trendline is now at $59.75, just above
the mid-October high of $59.64.  While this play hasn't yet begun
to perform, I'm pretty happy with the point at which we took our
position.  Failed rally attempts below $59.50 still look good for
new entries, and we'll maintain our stop at $61 for now.  One note
that I think is important to make is with respect to the decay in
option premiums.  We entered this Portfolio position when WMT was
trading at $57.48 and it is now $58.95, for a rise of roughly
$1.50.  Yet our LEAP premiums have decayed by 18-20%!  Welcome to
the effect of what diving VIX readings will do, even to stocks
that haven't historically been all that volatile.  In my opinion,
that makes entry at these depressed volatility levels more
attractive, as ANY move will increase the volatility component of
the option's price.

Watch List:

QQQ - Alright, it is time to bite the bullet here and either go
for it or let it go.  With the NASDAQ Composite getting close to a
test of the 2000 level, QQQ has now tested the $36 level on a
couple of occasions.  The QQQ is still solidly within its rising
channel, but on this last breakout attempt, was turned back from
the center of the rising channel.  Drawing things a bit
differently, it is possible to draw a rising trendline connecting
the peaks since the middle of June and last week's rally failed to
reach that line as well.  We're clearly getting more aggressive
here and trying to pick a top, but I think the potential rewards
if we're right outweigh the risks.  I'm going to reinstate this
play to active status this weekend, with dual entry triggers.  The
first is for the aggressive players, where we'll look to initiate
a bearish position on a foray into the $36.50-37.00 area, looking
to pick a top.  To give the play some room to move before the
decline gets underway, we'll set the initial stop at $39.25, just
above the March 2002 relative highs.  More conservative traders
will want to stick with the initial plan we've been discussing,
which is to wait for breakdown out of the channel.  The bottom of
the channel is currently $34.30, so the trigger there will be $34,
which is also below the 50-dma.  If entry is taken on the
breakdown, stops should be placed just above the relative high.
For instance, if the QQQ broke down early next week, our stop
would go at $36.25.  I personally don't think selling breakdowns
is a viable strategy until the market gives up some of its
ingrained bullishness, so the only entry we'll take in the
Portfolio will be trying to short the top of this move.

SMH - Isn't it amazing how the bulls can shake of a single report
from KLAC and propel the Semiconductor index (SOX.X) to fresh
highs?  The SOX continues to trade very strongly within its rising
channel, currently pressing against the upper edge of that channel
at the end of last week.  We're still premature to be considering
shorting the top of this move, so we'll leave our SMH play on HOLD
for another week.  Our day will come and when it does, it should
be quite exciting.  Our primary task right now is to not jump in
prematurely and consequently lose our confidence when the real
entry arrives.

NEM - Well, it's safe to say we're not going to see my desired
entry point anytime soon.  But at the same time, I'm just not
willing to chase this stock higher.  Gold and gold stocks are
trading at or near recent highs and still appear vulnerable to a
downside correction.  The bull market in gold has plenty of room
to run and I think that gives us the luxury of time.  Let's
continue to wait for an attractive entry.  With the recent
breakout above $40-42, I think the odds of a drop below $37 are
slim.  So I'll revise that entry strategy up to look for entry in
the $37-38 area on the next significant pullback and rebound.

SBUX - Crud!  No hint of a pullback for us to buy and then SBUX
launches higher, rallying through $31 and the top of its rising
channel last week.  Maybe this is the beginning of a runup ahead
of the company's earnings report on November 13th, or maybe it was
time.  In either case, it appears we won't have an opportunity to
play ahead of that earnings statement.  We'll leave our entry
strategy in place for now and re-evaluate after earnings have been
released.

Radar Screen:

QCOM - QCOM broke out last week and for the most part managed to
hang onto its gains heading into the weekend.  This looks like a
pre-earnings run, as the company is set to release its quarterly
results on Wednesday.  I still really like the bullish prospects
for the stock, but we need to see a pullback before it will make
any sense to play.  The ideal scenario would now be a pullback and
rebound from the $42-43 area, but it is hard to gauge if we will
get the chance.  I'm content to wait until after the earnings
reaction settles out before placing any bets.  Provided there are
no nasty surprises in the earnings statement, a "sell the news"
drop near the $43 area could prove to be a very attractive entry
opportunity ahead of a continued rally up into strong resistance
in the $60-65 area.  Note that the PnF Bullish vertical count
weighs in with a target of $67.

Closing Thoughts:

The longer we go in this agonizing rally with volatility levels
continuing to plunge, the more bearish my overall view becomes.
There are many problems in the current market, not the least of
which is valuations.  But I've beaten that horse to death over the
course of the past few months, and I won't torture you with it
here again tonight.  Besides, if you're looking for commentary
along those lines, you can tune into my article later this week
which will build on the theme of the unintended consequences
wrought by the Fed's meddling in affairs that they have no real
hope of controlling over the long term.

Take advantage of any continued strength over the next couple
weeks to harvest gains in any bullish positions you might have and
I think we can start aggressively leaning into the bearish camp,
at least for longer-term positions.

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  $ 4.10  -19.61%  $61
                 '06 $ 55  WWT-MK  $ 7.20  $ 5.90  -18.06%  $61


LEAPS Watchlist

Current Possibles

SYMBOL  SINCE    TARGET PRICE  TARGETED LEAP  SYMBOL

CALLS:
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  $36.50-37.00  JAN-2005 $ 32  ZWQ-MF
                 $34           JAN-2006 $ 32  WD -MF
SMH    08/24/03  HOLD          JAN-2005 $ 35  ZTO-MG
                               JAN-2006 $ 35  YRH-MG
DJX    11/02/03  $99.50-100.00 DEC-2004 $ 96  YDK-XR
                               JUN-2005 $ 96  ZDK-RR


New Portfolio Plays

None


New Watchlist Plays

DJX - Dow Jones Industrials $98.01  **Put Play**

As I mentioned above, the DOW looks headed for the 10,000 level
and it wouldn't surprise me a bit to see that level achieved next
week.  It might take longer, but we need to be ready.  While that
level is acting like a price magnet right now, with the VIX
hitting multi-year lows, my expectation is that that magnet will
become an electric fence when first reached.  Weekly Stochastics
have effectively been overbought for 6 consecutive months,
something I've only seen a couple times in the historical charts
and odds favor a sizable downside correction when Stochastics
finally do drop down out of overbought.  But the way the market is
acting, if we wait for the breakdown before playing, we'll miss
the majority of the move unless it really does turn out to be the
END of this bull market correction.  So we're going to play a bit
on the aggressive side with this play, targeting entries where we
expect to see a top put in.  My entry target will be for a move
into the $99.50-100.00 area.  In order to allow for the expected
volatility in that area, we'll use a fairly wide stop at $104,
which should be sufficiently above next resistance in the $103.00-
103.50 area to keep us from being stopped out unless the bulls
just continue to power higher.  Our initial downside target will
be for a return to major support at $89-90.  Note that we've
listed June contracts for 2005.  This is because of that
expiration month being the furthest out we can go.  So far, there
are no December 2005 contracts available.

BUY LEAP DEC-2004 $96 YDK-XR
BUY LEAP JUN-2005 $96 ZDK-RR


Drops

FRX - $50.01 I have to say that I haven't been impressed with the
price action in FRX.  Most areas of the market are continuing to
push higher and this stock seems to be finding a stiff wall of
resistance near $50-52, with the relative highs dropping over the
past month.  Oscillators have become muddled, and price action has
been weak.  This certainly isn't the recipe for a winning bullish
play, and I think the best decision is to pull the plug here,
before anyone gets the inclination to enter the play.  Better safe
than sorry, and FRX is not looking safe for the bulls right now.


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

Horatio Was The Founder – And The Loser
By Mike Parnos, Investing With Attitude

Did you dress up for Halloween?  I dressed up as a (surprise,
surprise) couch potato.  But it was a bitch dragging the couch
from house to house.  It was worth it.  I scared the hell out of
the neighbors and scored a 3 Musketeers bar, a caramel apple and
65-cents in change.  Do I know how to have fun, or what?

This week the market wasn't particularly scary either – at least
not enough to seriously threaten our CPTI portfolio.   Actually,
we're in pretty good shape with our "hypothetical" trades.  If the
market would finish at current levels, we'd make a lot of
"hypothetical" money.
_____________________________________________________________

The History Of A Strategy
This strategy was named after an obscure Civil War General,
Horatio Backspread.  His friends call him "Ratio" -- hence the
strategy that has become known as the "ratio backspread."

General Backspread was not very popular with his troops.  Why?
Because he used the same game plan as boxer Rocky Marciano.  He
believed it was worth taking two blows to land one.  Marciano won
many bouts, but his face looked like a Sloppy Joe without the bun.
Horatio Backspread was a general for the Confederate army.  It
could be why they lost.

The Ratio Backspread
Let's start out by saying that ratio backspreads are directional
plays.  A put ratio backspread anticipates a downward movement of
the stock.  Conversely, a call ratio backspread anticipates an
upward movement of the stock.  Backspreads are not endorsed by the
CPTI.  Plus, if you do them, I want to be your bookie.  However,
in the spirit of fairness to "Ratio" and "Rocky," and in an
attempt to make your option education complete, let's take a look
and see how these buggers are supposed to work.

For our example, let's assume we expect Netflix (NFLX) to move
down significantly prior to November expiration.  With NFLX
trading at $57.30, we would:
a) Sell one November $60 put for $4.90, then
b) Buy two November $55 puts for $2.40 each = $4.80
We have a net credit of a dime (BFD).  However, we are now in
position to take advantage of the downward movement and it didn't
cost us anything.

How Low Must It Go?
How large of a move is necessary for the backspread to be
profitable?  Let's take a look.  First, we are short the $60 put
and long a $55 put.  That's a $5 exposure.  NFLX has to go down
far enough for the second long $55 put to have enough value to
make up the $5.  That means NFLX has to go below $50 for the
second $55 put to have a value of $5.00.   It's free sailing from
there.  The profit potential is unlimited – IF you guessed right.

More What Ifs . . .
If NFLX goes the wrong direction and finishes above $60, all three
puts expire worthless.  Nothing ventured, nothing gained.   The
worst-case scenario would be if NFLX finished right at $55.  Then
you'd have the $5 obligation from the difference between the short
$60 put and your long $55 put.  The other long $55 put would
expire worthless.  It's not quite as bad as that.  Don't forget
your dime credit.  I bet that makes it more palatable.

Warning!
If, for some reason, this strategy appeals to you, I can't
emphasize enough that the example above is not even hypothetical.
It's absurd.  I suggest we stick to what we know best – having
time work for us.

Now, I'm going to spend some quality time with my 3 Musketeers
bar, my caramel apple, and, of course, my couch.  Next year I'll
need a new costume – or at least a lighter couch.  Any suggestions
on what I should buy with the $.65?

By The Way
If you believe the Horatio Backspread story, we need to talk.  I
have some prime swamp-land in Florida for sale and . . .
_____________________________________________________________

NOVEMBER AND ONGOING POSITIONS
Position #1 – SPX Iron Condor – Trading @ 1050.71
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 three
weeks left, that's a reasonable range.

Position #2 – AFCI Iron Condor – Position closed for $700 loss.
Que sera, sera.

Position #3 – OEX Iron Condor (By Request) – 519.98
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 - $128.75
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 @ $35.20
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 @ $519.98
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 -- $35.20.
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 $22.08
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.
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?
By Steve Gould

Many moons ago I saw a comedy skit about a highly publicized
boxing match.  This was to be the match of the decade.  The first
contestant was the up and coming superstar.  Dedicated, intense
and committed, it was all a matter of time before he won the
championship.  The other contestant was a former champion and had
been retired for a few years. He had to go back into training to
prepare for the match which he did not take it too seriously.
Privately, all the sportscasters had always thought of this guy as
a buffoon.  In the back of their minds they never really
understood how he ever won the championship title.

As the fight commenced, the two contestants came out of their
respective corners and faced each other.  Immediately the up and
coming superstar threw one punch and the former champion was out
cold.  Total time of fight: 3 seconds.  The camera cut back to the
sportscasters who were totally unprepared for such a short fight.
One guy was getting a coffee and donut.  The camera caught him
with a donut stuffed in his mouth and a look of panic on his face.
The other sportscaster was seen running out of the bathroom with
his zipper still open.  It was even funnier than I could ever
describe.

I mention all this because last week I wrote:

"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."

(As I reread this, I realize that I had better specify that I am
portraying one of the sportscasters, not the buffoon!)  The 1036
level was violated within minutes of the Monday opening.  Not only
was I not expecting this to happen, should it happen, I would not
have expected it to have happened so quickly.  I was caught off
guard with a mouthful of coffee and dang near choked to death when
I saw that level violated so quickly.  Do you know what coffee
does to a monitor screen and keyboard?  You don't want to know.

Now that my desk is cleaned up, let's see where we are now.

Chart: S&P 500 Weekly 10/31/2003





It may not look like a lot has changed and much of what I noted
last week still holds.  For example, the S&P 500 has not yet
touched the 38% retracement level of the wave 3 and no trend lines
have been broken. Technically speaking, nothing significant has
happened. (This is why trading off of weekly charts is not
terribly exciting.)

The one noteworthy change is in the oscillator.  It is well on its
way to the 1.62 level and showing no sign of slowing down.  This
could have important implications about whether the S&P 500 has
completed the five wave basic pattern with a failed 5th wave or
not. But I am going to withhold judgment until the daily and
hourly chart confirm this.


Chart: S&P 500 Weekly Close-up 10/31/2003





A close up view of the 4 wave shows that the S&P 500 is hovering
between the 38.2% retracement level and the 1.38 expanded flat
level.  (For a more detailed explanation on the significance of
these levels, see the last few articles.)  This view also allows
us to see in more detail that the oscillator is indeed still on an
up trend.


Chart: S&P 500 Daily 10/31/2003





The daily S&P 500 chart shows that the five wave basic pattern
within the 5 (blue circle) is still intact.  Until this pattern is
invalidated, it will remain the preferred count.  Right now
nothing else makes sense.  All the ducks are lined up, albeit not
completely straight, to set up the topping pattern.  The next
week, maybe two, should determine just how high the S&P 500 will
go before it completes the 5 (blue circle) wave and reverses
direction.  If the S&P 500 is going to follow Elliott Wave theory,
there is really nothing else it can do.


Chart: S&P 500 Hourly 10/31/2003




Always saving the best for last, the hourly S&P 500 chart is the
most interesting because it is the most paradoxical.  How this
plays out will determine whether all the charts leading up to this
one are valid or not.

This chart spans the 5 wave of the 5 (blue circle) wave on the
daily.  The Elliott Wave pattern is far from ideal, but still
valid...maybe.  Some factors that invalidate the ideal form of an
Elliott Wave five wave basic pattern all relate to the 4 (green
square) wave.  Note the red railroad tracks.  Statistical analysis
by Advanced Get shows that when the 4 wave surpasses the red
railroad tracks, the probability that this is a four wave
formation decreases to almost zero.  Add on top of that the
oscillator pierced the 1.62 mark and I am not feeling really
confident about this wave count.

So what are the options?

1. Even though the Elliott Wave five wave basic pattern violates
all sorts of guidelines (not rules, mind you), this can still be a
valid wave count.

2. This wave count is all wrong and something else is going on.
However, I really have to stretch as to think about what that
could be.  Even if we consider the weekly pattern to be a
completed five wave basic pattern with a failed 5th wave, the
daily still prints out as a five wave basic pattern.  It would
just be an A wave instead of the C wave.  It just doesn't seem
likely that the S&P 500 is going to print this out as anything
less than an ill formed five wave basic pattern that is going to
be an exception to all the guidelines.

So I predict over the next week or two that the S&P 500 will print
out a new high to about the 1060 level to complete the 5 (blue
circle) wave on the daily which would complete the C wave on the
weekly which completes the 4 (green square) wave on the weekly.
At that point, we should see the start of the 5 (green square)
wave down to the 650 level.

Bottom line is that even though not every Elliott Wave pattern is
ideal, all the evidence suggests that the S&P 500 will top around
the 1060-1090 level.  This should happen next week, the week after
at the latest.  At that point the S&P 500 should be starting its
long awaited trek down to the 650 level.


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

In Quest of the Perfect Donchian Channel Breakout Signal
Linda Piazza

If you happen upon a middle-aged woman jogging down the highway
wearing full armor and muttering "match the offset to the ADX,"
that's me.  I'm a woman in quest of the perfect Donchian channel
breakout signal.

My quest began, appropriately enough, on a day of rest and
reflection.  As an OEX trader, I avoid trading during low-volume
days, using those days to tweak settings and perform research.  On
a recent day, that research centered on Donchian channels.

Pegged one of the simplest of trend-following systems, Donchian
channels pinpoint breakouts.  Richard Donchian expounded on the
system in a 1970 booklet, using the channels to employ his four-
week rule.  He constructed the Donchian channels with the top
boundary set at the highest high for the previous four weeks and
the lower boundary at the lowest low for that period.  He
advocated always being in the market, covering short positions and
entering long ones when price exceeded the top channel and
liquidating long positions and entering short ones when price
declined below the bottom channel.  The default 20 setting on most
Donchian channels reflects that four-week setting, with twenty
days composing four trading weeks.

This system does prove simple, but don’t confuse simplicity with
ineffectiveness.  Studies comparing various trading systems
consistently identify breakout systems as those that produced the
most profits.  That information convinced me to take a serious
look at Donchian channels.  I had no intention of constantly
trading the OEX, but was interested in identifying breakouts.  To
my confusion, applying the default Donchian channel 20-period, no-
offset configuration to a 30-minute OEX chart produced no breakout
signals.

30-minute OEX chart with Donchian Channel with Default (20,0)
Setting




I scrolled back through a chart.  Still no breakouts.  How could a
tool used to trigger breakout trades be helpful if it identified
no breakouts?  I experimented with the offsets, finally settling
on an offset of +2.  That offset translates the channel two
periods to the right.  Aha!  Breakouts.

30-minute OEX chart with Donchian Channel with (20,2) Setting




A quick calculation across several time periods showed some
breakouts running for 5-10 OEX points, some far more.  The quest
had begun.  I needed backtests to confirm that the (20,2) setting
on a 30-minute OEX chart identified tradable breakouts.  An
effective exit strategy had to be determined.

Over the next weeks, I chose a two-month test period at random and
applied various test strategies to that time period.  My first
test of the Donchian channels proved disappointing.  This test
entered a trade on the first 30-minute close outside the Donchian
channel and exited the trade on the first 30-minute close inside
the channel.  Fifty-four trades over that two-month period
resulted in a total loss of 5.84 points.  The maximum gain was
14.89 points and the maximum loss was 7.91 points.

A second test covered the same period, but employed a different
exit strategy.  This strategy exited the trade when a 30-minute
candle closed two points below the previous 30-minute close on a
bullish trade and two points above on a bearish trade.  That
system resulted in 54.64 OEX points during the same time period,
with a maximum gain of 35.93 points and a maximum loss of 8.54
points.  I was onto something.

When running the tests, I noticed peculiarities relating to the
first 30-minute period of the day.  If the OEX opened outside the
Donchian channel, it often ran for several points, but such trades
usually proved more profitable if entered at the open.   An entry
at the close of that first 30-minute period lopped off several
possible points before what often turned out to be a quick
reversal.  Conversely, if a trade was carried overnight and the
OEX opened inside the channel, it usually proved best to exit at
the open.  This anecdotal evidence needed to be verified in a
backtest.  I also decided to limit losses to four points from the
entry, stopping the trade on a four-point move away from the entry
rather than on a four-point close.  Applying those parameters to
the previously chosen time period and otherwise using the same
exit strategy produced 91.34 OEX points, with the same maximum
gain of 35.93 points and a maximum loss of 4 points.  The maximum
drawdown was 12.36 points.

Now I had the right system.  My quest had succeeded.  However, a
troubling 52 percent of the 33 trades resulted in losses.  Perhaps
I could tweak my methodology, using 100-sma/100-ema crossovers to
guide entries.  Bullish moving-average crossovers would mean no
bearish entries would be taken, and bearish crossovers would mean
no bullish entries would be taken.  That methodology resulted in
far fewer trades.  The maximum gain remained 35.93 points and the
maximum loss was four points, with a maximum drawdown of 8.36
points.  The total gain was 75.08 points.  A hefty 47 percent of
the 19 trades still resulted in losses, however.

Switching to a 10-sma/10-ema crossover and applying the same
standards resulted in a total gain of 89.71 points for the period,
with a maximum gain of 35.93 points and a maximum loss of 4
points.  The maximum drawdown was 8.36 points, but 48 percent of
the 25 trades resulted in losses.

Another test used an exit system that I later learned was a
recommended methodology.  I added a short-term (5,2) Donchian
channel to the chart, nested inside the longer-term chart.
Bullish exits occurred when the OEX closed a thirty-minute period
below the short-term channel.  Bearish exits occurred when the OEX
closed a thirty-minute period above the short-term channel.  I
tested the same two-month period and found that the trailing stop
method produced the largest gains over the entire period.
However, the maximum gain on a single trade expanded to 41.34
points when a (5,2) channel was used to trigger exits, and 50
percent fewer trades resulted in almost the same total gain for
the period, 88.64 points.   Fifty-five percent of the 22 trades
resulted in losses, however.

Next I tested the system against a control period.  The control
period I chose was the two-month period that had recently
concluded at the time of the test.  Applying the same standards
with a trailing-stop exit that had resulted in a gain of 91.34 OEX
points, the second test period resulted in a loss of 0.68 points.
Sixty-one percent of the 18 trades resulted in losses.  Ouch.

Several modifications eventually produced modest gains for that
period, but I ultimately concluded that the Donchian channel
breakout system suffered from the shortcomings of all
methodologies that work well in a trending market.  They perform
poorly in a range-bound one.  Has my quest ended?  No way.  I just
need a way to distinguish those trades likely to perform poorly
from those likely to perform well.

I have clues to help in my quest.  I observed that trades tended
to perform best when 21(3)3 stochastics were already pinned at
overbought or oversold levels at the time the trade was triggered.
That made sense.  This evidence suggested that the trend was
strong and I already knew that a breakout system did not trigger a
trade until the trend had been in place over a few points.  That
observation also hinted that ADX might be useful in determining
which trades should be entered and which avoided.  I assumed that
high ADX values, indicating a strong trend in place, would
accompany the most profitable trades.

I assumed wrong.  Initial scans have not confirmed my impression,
with below-18 ADX values being associated with some of the most
profitable trades.   My initial scans also show that ADX values
near 20 produced trades that often settled at breakeven at best.
Those clues must be pursued in future quests.

An example occurred with a trade triggered on October 22.  ADX
measured 22.46 at the time the trade triggered and stochastics
lines measured 49.12 and 70.21.  My observations concluded that
this trade likely would not be an optimal trade.  One type of exit
produced a 1.13-point gain and the other a more satisfactory 4.61
gain.  The chart below follows the trade.

30-minute OEX chart with Donchian Channels Set at (20,2) and (5,2)




In conclusion, my impressions, still to be verified, include the
following:

Donchian channel breakouts miss the first few points of a move, of
course, but identify the big moves.  These breakouts, using a 20-
period channel with an offset of 2, also produce many false
signals, during both trending and range-bound markets.  When
markets trend, however, the big gains more than offset smaller
losses.  Losing trades usually amounted to 45-55 percent of the
total trades, but that percentage might be lessened as the entry
and exit methodologies are perfected.

An open above or below the (20,2) Donchian channel often runs for
several points, with a trade best entered at the open.  However,
that first thirty-minute range often quickly reverses, so that a
different exit system might be needed for such entries.

If a trade was active at the open and the first OEX price gapped
inside the channel, closing the trade at the open often proved to
be a wise choice.

Trades tended to perform best when the 21(3)3 stochastics were
already pinned at overbought (in a bullish breakout) or oversold
(in a bearish breakout) at the time a Donchian channel breakout
triggered a trade, but further tests may refute this observation.

Contrary to logic, the trades may perform best when ADX measures
less than 18 at the time a breakout triggers a trade.  Further
tests may refute this observation.

Many trades, once triggered, saw the OEX run for many points in
the direction of the trade, but exit strategies still do not
appear optimal.  Future testing needs to focus on a SAR exit or on
tightening the trailing stop on the trailing-stop method.

Donchian channels prove simple to construct and simple to
evaluate, so perhaps should be part of each technical trader’s
toolkit.  For now, I conclude that Donchian channel breakouts
might best be used as adjuncts to other technical trading tools,
confirming entries already suggested by those other means, but my
quest continues.  The hope of capturing 90 OEX point moves in one
two-month period keeps me going.  What if ADX levels correlate
closely with the trade’s success?  What if the channels might be
offset to the left, using negative numbers, during periods
identified as range-bound, so that no signals would be triggered
until and unless a breakout proved particularly strong?

Next week, I strap my armor on again and set out to finish my
quest.  If you spot me jogging along, muttering about the
correlation of ADX levels to the offset, you’ll know I’m planning
my next backtest of Donchian channel breakouts.


**************
FUTURES CORNER
**************

The New and The Old
Keene Little

I have been trading full time for a living the last four years
but having survived for these particular four years, I feel like
it has been at least eight. During this time, I've zeroed in a
trading style that might seem new and yet it's one of the oldest
forms of pattern recognition. I will be working with all of you
in the Futures Monitor on a daily basis helping identify good
swing trading opportunities and the occasional position trade
as well. This is an introduction to me, my style of trading
and risk management that I use and how I'll be guiding you in
your trading.

I will write some educational articles over time for those of
you who would like to understand a little more about what Mr.
R. N. Elliott discovered almost seventy years ago. That's
pretty old. Yet for many of us, following Elliott Wave Theory
is a very new experience. Human nature is what it is because
it does not change. We are truly creatures of habit. The
pattern of our behavior repeats time after time and has done
so through the ages. One of the best reflections of our
behavior, our psychological responses, is the stock market
because it truly reflects our emotions.

These patterns repeat in many different time frames and can be
used to guide one's trading decisions whether you trade using
monthly signals or 5-minute signals. For our swing trades, we
will typically be taking signals from the 1-minute to the 10-
minute charts while we use the longer 30-minute, 60-minute, daily
and weekly to help us trade in the direction of least resistance.
The longer-term charts will obviously be most helpful for the
position trades.

For those of you who will be working with us live in the Futures
Monitor, I will be giving trade recommendations based on multiple
inputs and I look for confirmation of the various signals to both
increase my confidence in taking the trade and to lower my risk
in identifying a stop-loss level. Elliott Wave (EW) is my primary
"indicator" which I then back up by using more common indicators
such as oscillators, trend lines and moving averages. It is a
well-known fact that professional futures traders typically have
only a 40% win/loss ratio, meaning they have more losing trades
than winners. The only real secret to success is to keep your
losses small so that the value of your winners will exceed the
value of your losers. EW analysis gives me logical stop-loss
points because the wave count is based on turning points. If
after entering a trade the price turns around and takes out the
last turning point, then the supposed count I was using is wrong
and it's time to step aside and wait for the count to clear up.

I will typically be trading the index futures, the e-minis for
the DOW (YM), the SPX (ES) and the NDX (NQ). Once the e-mini
futures for the Nasdaq (QCN) becomes more actively traded, we
may try that one sometimes as well. My favorite index changes
based on how well I can identify the EW pattern, how well it's
behaving (or not) and how well I can control my risk. I like
the YM because I can lower my risk  it has a much tighter price
between ticks. But sometimes I expect the techies to outperform
the other indexes and therefore will prefer to trade the NQ. In
all likelihood, I will also call out the value of the ES when we
make a trade so that we're all singing off the same music sheet
and can easily compare notes.

As for the other vehicles to trade, such as bonds, metals, and
other commodities, I only follow bonds, gold and silver. Silver
e-mini futures (YI) trades thin and so I tend to leave it alone.
Gold e-mini futures (YG) doesn't have a lot of volume but I've
had pretty good luck getting in and out without any problems. I
tend to position trade this when I see a significant turn coming.
I actively trade the bonds because they're highly liquid and
lately we've been seeing much more movement in them than we're
seeing in equities. I follow the 30-year because it's the choice
of many professionals and the movements follow fibonacci and EW
patterns very nicely. But I prefer to trade the 10-year Notes'
e-mini futures (ZN) because they have tighter pricing between
ticks and I can better control my risk. To me it's a similar
choice as between ES and YM. One tick in the 30-year bond (e-mini
for it is ZB) is $31.25 whereas one tick in the ZN is half that
at $15.63. The ZB will tick one point, the ZN will tick a half
point. Trading the bonds is done exactly the same way as trading
the equity futures so follow along if you haven't trade them
before.

So as not to complicate matters during the day, I will try to
keep comments as concise as possible. Jim uses a good technique
of calling out the trade and then as quickly as possible coming
back and giving the value of the trade and the location of the
stop. This is particularly useful for his momentum style of
trading. I like to identify a value that if hit, I execute the
trade. One could use a stop order to enter a trade in this case,
but I like to give it one more look-see before jumping in.
However, by identifying this value I can give you a heads up that
I'm getting ready to trade and you can key up your order with me
if you'd like. Be aware that you will sometimes see exactly
opposite trading signals from Jim and I. We're trading different
techniques and watching different indicators and therefore we may
be forming different opinions (I think that's why they call it a
market). This will create conflict in your mind and unless you're
sure about the direction you want to take, that conflict may be a
signal to stay on the sidelines and wait for better clarity.
Initially I would recommend you paper-trade with me until you're
comfortable enough with my trading style.

In the interest of fairness, please don't blame me or give me
credit for how your balance sheet looks at the end of the day. We
provide a service at OptionInvestor but it is you who pulls the
trigger and controls your risk. Do not take a trade just because
I say so. You may want to exit a trade sooner than I'm
recommending (can't go broke taking a profit). If you're not
comfortable with my logic or risk in entering a trade, wait for
the next bus. The wonderful thing about our profession is that
if I don't like the looks of the bus that's pulling into the
station, I can let it leave without me and I'll just grab the
next one--they just keep sending me another bus if I miss the
last one. The amount of profits I haven't taken would've made me
a very rich man by now. But, the amount of losses I've not taken
has kept me in the game. Someone's quote that I like is "I'd
rather not be in a trade I should have taken than to be in a
trade I should not have taken." Finding a new trade is much
easier than finding new money. Only you can decide how you want
to play this game.

I hope you're all in the habit of immediately entering your stop
order so that a communication glitch doesn't leave you exposed.
Especially right now, this market is getting extremely twitchy
(ok, Friday wasn't) and a trade can go huge against you in a
heartbeat. I will be recommending stop levels but each person
needs to assess their own risk tolerance. Depending on an entry
point and a logical stop-loss level I may recommend a 4-point
stop loss on the ES. That's $200 per contract. Your personal pain
threshold may be only $100 per trade. In that situation I would
recommend you not take the trade since a 2-point stop-loss level
may not keep you out of danger of getting stopped out and then
find it turn right around and go in the expected direction,
leaving you behind and $100 poorer.

My pain tolerance happens to be pretty low so I take fewer trades
and have tighter stops based on higher confidence about the
trade. For example, I try to keep my stops at about $50-100 per
contract. If I put on a YM trade, I try to keep the stop to 10-15
points ($50-75 per contract), for an NQ trade I like to stay
within 3 points ($60) and for ES, 1.50-2.00 points ($75-100). If
the natural stop level will be more than this, I tend to pass on
the trade and wait for the next bus.

The only other recommendation I'll make to control risk is that
you determine how many contracts you want to trade and how you
enter and exit. We are working with many traders who trade one
contract while others are trading lot sizes of 20 or more. I will
not be offering trade recommendations about where to enter or
exit partial positions. My signals are all or nothing. I'm either
in or I'm out. However, what I will do is offer advice to those
who are trading multiple contracts where I think some money
should be taken off the table. These recommendations will result
from an identified support level or wave count where I see the
risk of reversal is high enough to get some money off the table
but maybe not high enough to exit the trade.

I was going to get into a chart to use as an example of what I
watch for and how I develop my trading signals. This article
became longer than I thought it would so I'll go into more of
that kind of detail in my next article. My intention is to use
these articles to get you more familiar with what I believe is a
powerful trading tool  Elliott Wave analysis. Many peoples' eyes
glaze over as soon as I mention EW so I intend to take it slow. I
will offer charts throughout the day and in articles that have
wave counts on them, and I'll explain why they're labeled the way
they are and what the alternative wave labels might be. This is
not an exact science (otherwise we'd have no market) which is why
I bring in many other tools for confirmation.

This is a chart of how I see the market setting up for next
week. We will expand on this on Monday in the monitor and I
will begin to explain what you are looking at.

ES Chart - 30 min





So, until the next article, I look forward to working with all
of you daily in the futures monitor. Please give me your feedback
about what you like, dislike, what you'd like to see more of,
less of, and I'll do my best to take care of the needs of our
readers. I've been an OIN reader since 1998 and frankly doubt
I'd be here today if not for the fantastic education I've
received from the OIN writers. I'm honored to be joining the
OIN team. I'll see you Monday morning before the bell and like
they used to say during one of my favorite shows, "let's be
careful out there."


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The Option Investor Newsletter                   Sunday 11-02-2003
Sunday                                                      5 of 5


In Section Five:

Covered Calls: Our Selection Process
Naked Puts: Terms and Definitions
Spreads/Straddles/Combos: No Fear Among Investors On "All Hallows Eve"

Updated In The Site Tonight:
Market Posture: So Ends Another Bullish Month for Wall Street


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

Trading Basics: Our Selection Process
By Mark Wnetrzak

One of the most common questions we receive from new readers
concerns the methods we use to pick stocks for covered-calls.

There many important aspects in the stock selection process
however for most short-term trading strategies, the technical
health of the underlying issue is generally the most critical
factor.  In order to forecast the future trend for any financial
issue, you must be able to identify the most common historical
patterns and understand the implications of technical indicators.
There are a number of advantages to this type of approach but
most importantly, it eliminates the need to review and assess
the infinite components of fundamental valuation.  In addition,
a selection process based on historical price analysis provides
precise entry and exit signals, a major benefit to investors who
participate in short-term positions such as "in-the-money"
covered-calls.

Technical analysis makes three basic assumptions.  First, simple
market data such as price and volume can indicate the true value
of a specific security or financial instrument.  Second, prices
historically exhibit trends or distinctive patterns and third,
history eventually repeats itself.  These assumptions can be
combined with the study of price and volume to provide investors
the basic information they need to initiate profitable trading
strategies.  The technical indicators that identify buy or sell
signals are contained in various chart formations and patterns
and since the goal of any trader is to eventually profit from
their predictions, most experts suggest that the best place to
begin is with a thorough evaluation of the issue's recent price
history or trend.

Professional technicians say the ideal time to buy a stock is
when it starts to move out of a well-defined base into a dynamic
stage II pattern.  The break-out above the top of the resistance
area (and/or a long-term moving average) should be supported by
heavy volume.  As this cycle begins, the 30-week MA generally
starts turning up shortly after the breakout.  The initial rally
is often followed by at least one significant pullback and that
decline brings the stock price back to area near the break-out
point, offering another opportunity to purchase the issue.  The
less the stock retreats into the underlying support area, the
more strength inherent in the move.  The potency of the pattern
really becomes evident when each successive peak eclipses the
previous one, and the corrections are progressively higher.  As
long as these gyrations continue to occur above the short-term
(18-30 day) moving average, the bullish trend remains intact and
long positions should be maintained until the target exit point
is achieved.  After the trend is well established and favorable
profits are guaranteed, the primary objective is to manage the
position for maximum return while avoiding potential losses.

Despite the similarities in the initial evaluation process, the
strategy we utilize in choosing positions for the Covered-Calls
section is much different that an investor would use to select
stocks for short-term trading.  Our goal is to find stocks that
have a high probability of remaining above a given price for a
specific (short) period of time.  In contrast, an investor who is
purchasing stocks for upside potential should first assemble a
collection of bullish candidates and then identify the best entry
opportunity for each issue through chart reading and other types
of timing analysis.  Of course, learning when to buy and sell for
maximum profit requires a thorough understanding of technical
indicators and market trends.  It is also crucial to utilize
consistent, proven trading techniques to make the most of any
favorable opportunities, whether they are in stocks, options,
or other financial instruments.

Trade Wisely!


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    4.96  NOV  5.00  0.55    0.41    7.8%
XOMA     7.83    7.49  NOV  7.50  0.80    0.46    7.1%
OXGN    10.51   10.21  NOV 10.00  1.10    0.59*   6.8%
MONE     5.14    5.54  NOV  5.00  0.40    0.26*   6.0%
TMM      3.44    3.20  NOV  2.50  1.10    0.16*   5.9%
SEAC    15.57   15.45  NOV 15.00  1.50    0.93*   5.7%
PLUG     5.91    6.32  NOV  5.00  1.15    0.24*   5.5%
BVSN     5.31    5.03  NOV  5.00  0.65    0.34*   5.3%
ALGN    15.60   15.41  NOV 15.00  1.60    1.01*   5.2%
ALKS    14.33   12.97  NOV 12.50  2.50    0.67*   4.9%
PUMA     5.54    6.99  NOV  5.00  0.85    0.31*   4.8%
GSS      5.49    5.79  NOV  5.00  0.70    0.21*   4.8%
CMNT     9.22    9.89  NOV  7.50  2.10    0.38*   4.6%
VECO    25.67   25.30  NOV 25.00  1.85    1.18*   4.3%
QSFT    14.90   14.90  NOV 15.00  0.55    0.55    4.2%
BRCD     6.33    6.56  NOV  6.00  0.65    0.32*   4.1%
CRYP    10.84   11.00  NOV 10.00  1.20    0.36*   4.1%
SSTI    11.21   11.20  NOV 10.00  1.65    0.44*   4.0%
TLAB     7.83    7.53  NOV  7.50  0.70    0.37*   3.8%
ALKS    15.16   12.97  NOV 12.50  3.20    0.54*   3.3%

*   Stock price is above the sold striking price.

Comments:

The major averages rebounded after last week's drop but have
yet to move above the mid-October highs -- even on the heels
of an outstanding GDP report.  Will the bullish momentum
continue next month or is some consolidation due?  Time will
tell!  In either case, re-evaluate any stocks you are holding
and be ready to act accordingly.

Positions Previously Closed: Ibis Technology (NASDAQ:IBIS).


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

ITMN   20.03  NOV 20.00  IQY KD  0.85  390   19.18  21   6.2%
TLAB    7.53  NOV  7.50  TEQ KU  0.30  4729   7.23  21   5.4%
CMOS   16.31  NOV 15.00  CQS KC  1.80  456   14.51  21   4.9%
RTEC   26.15  NOV 25.00  UXH KE  1.95  62    24.20  21   4.8%
EMBT   12.90  NOV 12.50  MBQ KV  0.75  55    12.15  21   4.2%
CDN    15.39  NOV 15.00  CDN KC  0.80  2920  14.59  21   4.1%
AFFX   25.63  NOV 25.00  FIQ KE  1.30  4109  24.33  21   4.0%


Company Descriptions

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

*****
ITMN - Intermune  $20.03  *** Bottom Fishing: Part I ***

InterMune (NASDAQ:ITMN) develops and commercializes products for
the treatment of serious pulmonary and infectious diseases and
cancer.  The company has three marketed products, growing product
revenues and advanced-stage clinical programs addressing a range
of diseases with attractive markets.  Its three marketed products
are Actimmune, Infergen and Amphotec.  Actimmune is approved in
the United States for two rare congenital disorders: chronic
granulomatous disease and severe malignant osteopetrosis.  ITMN
markets Infergen in the U.S. and Canada for the treatment of
chronic hepatitis C infections.  It markets Amphotec worldwide
for the treatment of invasive aspergillosis.  InterMune has
established a long-term support area near $18 and the recent
technical indications suggest a reasonable entry point can
be established with this position.

NOV-20.00 IQY KD LB=0.85 OI=390 CB=19.18 DE=21 TY=6.2%


*****
TLAB - Tellabs  $7.53  *** Bottom Fishing: Part II ***

Tellabs (NASDAQ:TLAB) designs, makes and markets communications
equipment to telecommunications service providers worldwide.
Their products include optical networking systems, broadband
access systems and voice-quality enhancement systems. Tellabs'
optical networking systems are designed to help service providers
reduce operating costs, generate greater revenues and efficiently
manage bandwidth.  The company's broadband access systems consist
of managed access and transport systems used to deliver wireless
and business services.  The company's voice-quality enhancement
systems consist primarily of the Tellabs 3000 family of broadband
and narrowband echo cancellers and its voice-quality enhancement
solutions, which enable wireless and landline providers to improve
voice quality in long distance, wireless and private networks.
Tellabs has been in a Stage I base for almost a year and investors
interested in the communications sector can use this position to
speculate on the near-term performance of the issue.

NOV-7.50 TEQ KU LB=0.30 OI=4729 CB=7.23 DE=21 TY=5.4%


*****
CMOS - Credence  $16.31  *** Rally Mode ***

Credence Systems (NASDAQ:CMOS) designs, manufactures, sells and
services engineering validation test and automatic test equipment
(ATE) used for testing semiconductor ICs.  They also develop,
license and distribute software products that provide automation
solutions in the design and test flow fields.  Credence's hardware
products are designed to test semiconductors at two stages of
their lifecycle: at the prototype stage and as they are produced
in high volume.  Their software products enable design and test
engineers to develop and troubleshoot production test programs
prior to fabrication of the device prototype.  Collectively, the
company's customers include major semiconductor manufacturers,
fabless design houses, foundries and assembly and test services
companies.  Credence is in a stage II climb that is showing no
signs of slowing down.  Investors who believe the rally will
continue can profit from that outcome with this position.  The
company's earnings are expected on November 24.

NOV-15.00 CQS KC LB=1.80 OI=456 CB=14.51 DE=21 TY=4.9%


*****
RTEC - Rudolph Tech  $26.15  *** Breaking Out! ***

Rudolph Technologies (NASDAQ:RTEC) markets and sells products
to all major logic, memory and application-specific integrated
circuit (ASIC) device manufacturers.  The company provides its
customers with versatile full-fab metrology solutions by offering
families of systems that meet their metrology needs.  Its systems
are designed for semiconductor manufacturing facilities and offer
automated wafer handling and 200- and 300-millimeter configurations
to satisfy customers' manufacturing needs.  Its MetaPULSE, S-ultra
and S products are all built on the Vanguard automation platform
that provides a common software system, user interface and hardware
base.  RTEC's products involve three main categories:  transparent
thin films, opaque thin films and macro-defect inspection.  Shares
of Rudolph exploded higher after this week's earnings report.  The
bullish move on heavy volume suggests further upside potential and
traders can use this position to speculate on that outcome.

NOV-25.00 UXH KE LB=1.95 OI=62 CB=24.20 DE=21 TY=4.8%


*****
EMBT - Embarcadero  $12.90  *** Next Leg Up? ***

Embarcadero Technologies (NASDAQ:EMBT) provides software products
that enable organizations to effectively manage their database
infrastructure and manage the underlying data housed within that
infrastructure.  The company's database administration, enterprise
data architecture, enterprise data integration and performance
management products offer customers comprehensive solutions
for managing the database life cycle, which is the process of
creating, optimizing and managing the databases that support
critical business applications.  By simplifying management of
the database life cycle, Embarcadero's products allow their
customers to ensure the availability, performance and reliability
of their critical business applications and extract maximum value
from their corporate data.  Shares of Embarcadero continue to
"stair-step" higher as the market exhibits its delight with the
company's recent earnings report.  Investors who have a bullish
outlook for the company can establish a reasonable cost basis
in the issue with this position.

NOV-12.50 MBQ KV LB=0.75 OI=55 CB=12.15 DE=21 TY=4.2%


*****
CDN - Cadence  $15.39  *** New 52-week High ***

Cadence Design Systems (NYSE:CDN) provides a range of software
and other technology and offers design and methodology services
for the product development requirements of electronics companies.
Cadence licenses its electronic design automation (EDA) software
and hardware technology and provides a range of services to
companies worldwide to help accelerate and manage their product
development processes.  Their products and services are used by
firms to design and develop complex ICs and electronic systems,
including semiconductors, computer systems and peripherals,
telecommunications and networking equipment, mobile and wireless
devices, automotive electronics, consumer products and other
advanced electronics.  Cadence continues to rally and the stock
made another new 52-week high this week.  This position offers a
reasonable entry point in a bullish stock with a cost basis close
to technical support.

NOV-15.00 CDN KC LB=0.80 OI=2920 CB=14.59 DE=21 TY=4.1%


*****
AFFX - Affymetrix  $25.63  *** Bottom Fishing: Part III ***

Affymetrix (NASDAQ:AFFX) develops, makes, sells and services
systems for genetic analysis in the life sciences.  The company
has developed and intends to establish its GeneChip system and
related microarray technology as the platform of choice for
acquiring, analyzing and managing complex genetic information.
Affymetrix's integrated GeneChip platform consists of disposable
DNA probe arrays containing gene sequences on a chip, certain
reagents for use with the probe arrays, a scanner and other
instruments to process the probe arrays, as well as software to
analyze and manage genetic information from the probe arrays.
Their related microarray technology includes instrumentation,
software and licenses for fabricating, scanning and collecting
and analyzing results from low-density microarrays.  Shares of
Affymetrix have been in a Stage I base for almost two years.
Investors can use this position to speculate on the company's
future with a cost basis near a long-term support area.

NOV-25.00 FIQ KE LB=1.30 OI=4109 CB=24.33 DE=21 TY=4.0%


*****


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

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

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

ADAT   11.51  NOV 10.00  HAU KB  2.25  14     9.26  21  11.6%
RETK   10.02  NOV 10.00  QRD KB  0.60  63     9.42  21   8.9%
RHAT   15.01  NOV 15.00  RCV KC  0.80  1161  14.21  21   8.1%
FALC    7.52  NOV  7.50  XMQ KU  0.40  1051   7.12  21   7.7%
ELN     5.13  NOV  5.00  ELN KA  0.35  3999   4.78  21   6.7%
CCBL   10.08  NOV 10.00  LQE KB  0.50  101    9.58  21   6.4%
LNUX    5.10  NOV  5.00  UKF KA  0.30  1274   4.80  21   6.1%
ALSC    7.70  NOV  7.50  ASU KU  0.50  64     7.20  21   6.0%
SUPG   10.32  NOV 10.00  UQG KB  0.70  1443   9.62  21   5.7%
NEOL   15.28  NOV 15.00  UOE KC  0.85  1134  14.43  21   5.7%
ASML   17.55  NOV 17.50  MFQ KW  0.70  1619  16.85  21   5.6%
PLCM   20.01  NOV 20.00  QHD KD  0.75  1096  19.26  21   5.6%
OPSW    8.22  NOV  7.50  UWA KU  1.00  247    7.22  21   5.6%
FCEL   15.28  NOV 15.00  FQG KC  0.80  1491  14.48  21   5.2%
CCRD   17.91  NOV 17.50  UCD KW  1.00  63    16.91  21   5.1%
AKAM    7.90  NOV  7.50  UMU KU  0.65  1905   7.25  21   5.0%
APCC   20.29  NOV 20.00  PWQ KD  0.90  1217  19.39  21   4.6%




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

Options 101: Terms and Definitions
By Ray Cummins

A few weeks ago, we began a review of option pricing concepts
for new traders.  That series continues today with a simple
explanation of volatility and probability.

Traders without knowledge of the way volatility and probability
affect option pricing and potential risk-reward have little
chance of surviving in the derivatives market.  Volatility is
one of the most important factors in option trading because it
measures the amount by which the underlying asset fluctuates in
a given period of time.  Before you can estimate the future
volatility of an issue, or the probability of the issue reaching
a certain price, you must understand how a stock's movement is
quantified from a statistical standpoint.  Historical volatility
is calculated by using the Standard Deviation of an underlying
asset's price changes (from close of trading each day) for a
certain time period.  By definition, standard deviation of a
collection of numbers is the square root of the difference
between the mean of the squares of the numbers and the square
of the mean of the numbers.  In simpler terms, the standard
deviation is basically the "mean of the mean," and it can often
help you find the story behind the historical data.  To better
understand this unique concept, you must learn more about what
statisticians call "normal" distribution.  A normal distribution
of data means that most of the examples in a set of data are
close to the "average," while relatively few examples tend to
one extreme or the other.  If you depicted normally distributed
data on a graph, it would look something like this (the infamous
bell-curve):

Normal Distribution Chart:




The x-axis (the horizontal one) is the value in question, and the
the y-axis (the vertical one) is the number of data points for
each value on the x-axis.  Not all sets of data will have graphs
that look this perfect.  Some will have relatively flat curves,
while others will be steeper.  Sometimes the mean will lean a
bit to one side or the other.  However, all normally distributed
data will have something like this same bell-curve shape.  The
standard deviation is a statistic that tells you how tightly all
the various examples are clustered around the mean in a set of
data.  When the examples are fairly tightly bunched together and
the bell-shaped curve is steep, the standard deviation is small.
When the examples are spread apart and the curve is relatively
flat, that suggests a relatively large standard deviation in the
data.  Computing the value of a standard deviation is complicated
but here what a standard deviation represents graphically:

Standard Deviations Chart:



One standard deviation away from the mean in either direction on
the horizontal axis (the red area on the above graph) accounts for
somewhere around 68% of the possible outcomes in this group.  Two
standard deviations away from the mean (the red and green areas)
account for roughly 95% of the outcomes.  Three standard deviations
(the red, green, and blue areas) account for about 99% of all the
possible outcomes.  If this curve were flatter and more spread out,
the standard deviation would have to be larger in order to account
for the number of possible outcomes.  That is why the standard
deviation can tell you how dispersed the results in a set are from
the mean.

Without going into a complex study of probability analysis, you can
use a simple probability calculator (or preferably, a "monte-carlo"
style calculator) to determine the likelihood of the issue trading
above or below a specific number or within a given profit range.
Of course, the fact that it "should" remain in a particular range
doesn't mean it will and that's the reason traders have to learn to
manage losing plays effectively -- so they don't create catastrophic
draw-downs on one's portfolio.

It should be obvious by now that volatility is an important piece
of the trading puzzle, not only for assessing an issue's potential
for price movement but also for analyzing an option's fair value.
Although prices for exchange-listed options are established in the
marketplace by computerized pricing models, buyers and sellers do
exert a strong influence on actual market values.  More importantly,
pricing models are based upon the mistaken assumption that all stock
price movement is "random."  Clearly, there are many stocks that are
moving in well-defined price trends, as opposed to moving randomly,
and if you can identify those stocks whose price trends are likely
to continue, you can achieve an edge against the option-pricing
model.  Much of our effort at the OIN is devoted to finding stocks
that exhibit such trends, so our subscribers can profit from buying
undervalued options, selling overvalued options, or initiating
limited-risk spreads on these issues.

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    24.76   24.42  NOV 20.00  0.50    0.50*   2.8%   9.6%
ESPR    23.02   23.87  NOV 20.00  0.60    0.60*   3.4%   9.6%
ONXX    25.93   24.42  NOV 20.00  0.60    0.60*   2.7%   9.0%
XMSR    19.10   20.25  NOV 17.50  0.85    0.85*   3.7%   8.9%
CYD     27.57   29.90  NOV 22.50  0.50    0.50*   2.5%   8.4%
FCEL    14.35   15.28  NOV 12.50  0.50    0.50*   3.0%   8.2%
AFCI    26.70   24.07  NOV 22.50  0.60    0.60*   2.4%   7.4%
PXLW    12.10   12.08  NOV 10.00  0.30    0.30*   2.2%   7.1%
CVTX    23.42   17.70  NOV 17.50  0.30    0.30*   1.9%   6.5%
MTZ     12.81   12.89  NOV 10.00  0.25    0.25*   1.9%   6.4%
NWAC    12.18   13.70  NOV 10.00  0.25    0.25*   1.9%   6.2%
SCUR    14.09   14.38  NOV 12.50  0.30    0.30*   2.1%   6.0%
ALGN    15.21   15.41  NOV 12.50  0.25    0.25*   1.8%   6.0%
FCS     20.04   22.60  NOV 17.50  0.40    0.40*   2.0%   5.9%
SCRI    25.49   26.78  NOV 22.50  0.40    0.40*   2.0%   5.7%
AVCT    36.00   37.80  NOV 32.50  0.75    0.75*   2.1%   5.6%
PALM    25.06   27.24  NOV 22.50  0.40    0.40*   2.0%   5.5%
CNX     21.88   21.70  NOV 20.00  0.55    0.55*   2.0%   5.4%
IDXC    24.30   26.20  NOV 20.00  0.35    0.35*   1.5%   5.3%
SCHN    36.92   37.54  NOV 30.00  0.40    0.40*   1.5%   5.3%
CY      20.44   21.46  NOV 17.50  0.40    0.40*   1.7%   5.1%

*  Stock price is above the sold striking price.

Comments:

A fear of "sky-high" share valuations crept into the market on
Halloween Friday, holding the major equity averages to minimal
gains despite news of favorable economic data.  The long-term
outlook continues to be one of "cautious optimism" but traders
are cautioned to be ever-vigilant in their portfolio management
as complacency is a sure route to ruin.  The most obvious issue
on the early-exit list is CV Therapeutics (NASDAQ:CVTX), which
was hammered by investors on Friday after the U.S. FDA said it
would grant conditional approval for the company's angina drug
Ranexa, but also indicated that it wants "additional clinical
information" before it grants final marketing clearance.  The
announcement was a total surprise and based on the heavy-volume
sell-off, there appears to be little hope of a rebound in the
near-term.  Advanced Fibre (NASDAQ:AFCI) remains on the "watch"
list.

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

CYD    29.90  NOV 25.00  CYD WE 0.65 1004  24.35  21   3.9%  12.2%
ESPR   23.87  NOV 20.00  SPU WD 0.35 628   19.65  21   2.6%   8.4%
XMSR   20.25  NOV 17.50  QSY WW 0.30 7339  17.20  21   2.5%   7.7%
INSP   26.05  NOV 22.50  IOU WX 0.35 599   22.15  21   2.3%   7.0%
CELL   28.65  NOV 23.38  UKE WX 0.30 226   23.08  21   1.9%   6.7%
FFIV   25.01  NOV 22.50  FLK WX 0.35 428   22.15  21   2.3%   6.5%
FCS    22.60  NOV 20.00  FCS WD 0.25 242   19.75  21   1.8%   5.4%


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).

*****
CYD - China Yuchai  $29.90  *** Uptrend Intact! ***

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-25.00 CYD WE LB=0.65 OI=1004 CB=24.35 DE=21 TY=3.9% MY=12.2%


*****
ESPR - Esperion Therapeutics  $23.87  *** 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=0.35 OI=628 CB=19.65 DE=21 TY=2.6% MY=8.4%


*****
XMSR - XM Satellite Radio  $20.25  *** The Rally Continues! ***

XM Satellite Radio (NASDAQ:XMSR) is America's #1 satellite radio
service.  With nearly 930,000 subscribers, XM is on pace for 1.2
million subscribers later this year.  Broadcasting live daily from
studios in Washington, DC, New York City and Nashville, Tennessee
at the Country Music Hall of Fame, XM provides its loyal listeners
with 101 digital channels of choice: 70 music channels, more than
35 of them commercial-free, from hip hop to opera, classical to
country, bluegrass to blues; and 31 channels of premiere sports,
talk, comedy, kid's and entertainment programming.  Compact and
stylish XM satellite radio receivers for the home, the car, the
computer and even a "boom-box" for on the go are available from
retailers nationwide.  In addition, XM is available in more than
80 different 2004 car models.  XMSR is once again in "rally mode"
and traders who think the trend will continue in the coming weeks
can profit from that outcome with this position.

NOV-17.50 QSY WW LB=0.30 OI=7339 CB=17.20 DE=21 TY=2.5% MY=7.7%


*****
INSP - InfoSpace  $26.05  *** On The Move! ***

InfoSpace (NASDAQ:INSP) develops and delivers a wireless and
Internet platform of software and application services to a
range of customers that span each of its wireline, merchant
and wireless business units.  Many of the company's products
and application services are offered to its customers, which,
in turn, offer these products and application services to
their customers as their own solutions.  InfoSpace provides
its services across multiple platforms, including personal
computers and non-PC devices.  INSP soared to a new 52-week
high this week after posting better-than-expected results for
the third quarter and issuing a solid fourth-quarter outlook.
Wedbush Morgan upgraded InfoSpace to a "buy" with a 12-month
price target of $30 a share, based on "management's solid
balance-sheet management and ability to wring profits out of
the business."  Traders who agree with that bullish assessment
should consider this position.

NOV-22.50 IOU WX LB=0.35 OI=599 CB=22.15 DE=21 TY=2.3% MY=7.0%


*****
CELL - Brightpoint  $28.65  *** New 2-Year High! ***

Brightpoint (NASDAQ:CELL) is one of the largest distributors
of mobile phones.  Brightpoint supports the worldwide wireless
telecommunications and data industry, providing quickly deployed,
flexible and cost effective third party solutions.  The firm's
innovative services include distribution, channel management,
fulfillment, eBusiness solutions and other outsourced services
that integrate seamlessly with its customers.  The company has
recently split its common stock 3-for-2 and they also reported
revenues that grew 58% to $533 million this year.  Investors
who like the outlook for this volatile issue can establish an
entry point closer to technical support with this position.

NOV-23.38 UKE WX LB=0.30 OI=226 CB=23.08 DE=21 TY=1.9% MY=6.7%


*****
FFIV - F5 Networks  $25.01  *** New Trading Range? ***

F5 Networks Inc. (NASDAQ:FFIV) provides integrated products and
services to manage, control and optimize Internet traffic.  FFIV's
core products, the BIG-IP Controller, the 3-DNS Controller and the
BIG-IP Link Controller, help manage traffic to servers and network
devices in a way that maximizes availability and throughput.  The
company's iControl Architecture integrates its products and also
allows its customers to integrate them with other third-party
products.  FFIV's solutions address many elements required for
successful Internet and Intranet business applications, including
high availability, high performance, intelligent load balancing,
fault tolerance, security and streamlined manageability.  FFIV
spiked to a two-year high this week after the company said it
returned to profitability in the fourth quarter due to an increase
in sales across all product lines.  The technical indications
suggest a bullish bias in the near-term and this position offers
traders a way to profit from upside movement in the issue with
relatively low risk.

NOV-22.50 FLK WX LB=0.35 OI=428 CB=22.15 DE=21 TY=2.3% MY=6.5%


*****
FCS - Fairchild Semiconductor  $22.60  *** Entry Point? ***

Fairchild Semiconductor (NYSE:FCS) is a leading global supplier
of high performance products for multiple end markets.  With a
focus on developing leading edge power and interface solutions
to enable the electronics of today and tomorrow, Fairchild's
components are used in computing, communications, consumer,
industrial and automotive applications.  Fairchild's employees
design, manufacture and market power, analog & mixed signal,
interface, logic, and optoelectronics products from its company
headquarters in South Portland, Maine, USA and numerous locations
around the world.  FCS recently posted a third-quarter loss that
included a significant restructuring charge, but the company also
predicted gains in fourth-quarter revenue and profit as a result
of strong bookings, including regional strength in Asia.  The
recent consolidation area near $19 should give the stock some
support in the event of a share value slump and investors who
wouldn't mind owing the issue can establish a cost basis near
that price range with this position.

NOV-20.00 FCS WD LB=0.25 OI=242 CB=19.75 DE=21 TY=1.8% MY=5.4%


*****


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

SSTI   11.20  NOV 10.00  SJV WB 0.25 6949   9.75  21   3.7%  10.3%
APCC   20.29  NOV 20.00  PWQ WD 0.60 258   19.40  21   4.5%  10.3%
OIIM   21.31  NOV 20.00  XQQ WD 0.55 4     19.45  21   4.1%  10.3%
PHTN   37.82  NOV 35.00  PDU WG 0.85 70    34.15  21   3.6%   9.4%
CMVT   18.04  NOV 17.50  CQV WW 0.45 604   17.05  21   3.8%   9.1%
NPSP   26.33  NOV 20.00  QKK WD 0.30 10117 19.70  21   2.2%   7.8%
NLS    15.61  NOV 15.00  NLS WC 0.25 582   14.75  21   2.5%   6.2%
QCOM   47.49  NOV 45.00  AAO WI 0.70 13972 44.30  21   2.3%   5.9%
LPX    19.02  NOV 17.50  LPX WW 0.25 153   17.25  21   2.1%   5.7%
HON    30.61  NOV 30.00  HON WF 0.45 1354  29.55  21   2.2%   5.4%



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


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

No Fear Among Investors On "All Hallows Eve"
By Ray Cummins

The major equity averages traded higher Friday with blue-chip
shares closing "in the black" for a fifth consecutive session.

The Dow Jones industrial average finished 14 points higher at
9,801, closing out its seventh month of gains in the last eight.
The technology-laced NASDAQ Composite ended unchanged at 1,932
with profit-taking emerging in semiconductor, internet, and
computer hardware issues.  The broader Standard & Poor's 500
index ended 3 points higher at 1,050 on strength in retail,
brokerage, managed care, and oil service shares.  Activity was
moderate with 1.4 billion shares swapped on the New York Stock
Exchange and 1.8 billion shares crossed on the NASDAQ.  Breadth
was neutral with advancers outpacing decliners 5 to 4 on the
Big Board while decliners narrowly outnumbered advancers on the
technology exchange.  Treasuries closed higher with the 10-year
note up 11/32 to yield 4.29%.


*****************
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   57.41  NOV   50  55   0.55  54.45  $0.55   Open
MXIM    44.82   49.64  NOV   35  40   0.50  39.50  $0.50   Open
PHS     54.50   59.50  NOV   45  47   0.30  47.20  $0.30   Open
PIXR    71.56   68.77  NOV   60  65   0.70  64.30  $0.70   Open
COH     31.43   35.47  NOV   27  30   0.35  29.65  $0.35   Open
CYMI    44.99   45.66  NOV   35  40   0.65  39.35  $0.65   Open
SAP     36.00   36.54  NOV   30  32   0.30  32.20  $0.30   Open
ICOS    45.42   46.72  NOV   35  40   0.50  39.50  $0.50   Open
SINA    42.00   38.65  NOV   30  35   0.45  34.55  $0.45   Open
SMH     38.55   41.65  NOV   33  35   0.20  34.80  $0.20   Open

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

Sina Corporation (NASDAQ:SINA) is the new issue on the early exit
"watch" list.


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

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

CA      23.50   23.52   NOV   30  27   0.35  27.85   $0.35   Open
MTG     53.79   51.31   NOV   65  60   0.55  60.55   $0.55   Open
BJS     32.50   32.81   NOV   37  35   0.30  35.30   $0.30   Open
CEPH    45.77   47.07   NOV   55  50   0.55  50.55   $0.55   Open
HDI     47.26   47.41   NOV   55  50   0.50  50.50   $0.50   Open
SEPR    26.98   26.62   NOV   35  32   0.25  32.75   $0.25   Open
AMZN    54.51   54.43   NOV   65  60   0.50  60.50   $0.50   Open
OEX    511.25  519.98   NOV  540 535   0.45 535.45   $0.45   Open
MERQ    44.23   46.61   NOV   50  47   0.40  47.90   $0.40   Open

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

Mercury Interactive (NASDAQ:MERQ) rallied this week in conjunction
with technology stocks but the resistance area near $48 is intact
for now.  Any further upside activity would be cause for an early
exit in the bearish position.


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

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

LLTC    40.77  42.61   NOV   35  37   2.20   37.20  0.30   Open
CVTX    23.42  17.70   NOV   20  22   1.90   21.90 (1.60)  Open?

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

CV Therapeutics (NASDAQ:CVTX) was crushed by investors on Friday
after the U.S. Food and Drug Administration said it would grant
conditional approval for the company's angina drug Ranexa, but
also indicated that it wants "additional clinical information"
before it issues final marketing clearance.  The announcement was
totally unexpected and based on the heavy-volume sell-off, there
appears to be little hope of a rebound in the near-term.


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

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

NPSP    25.45  26.33  NOV   35  30   4.40   30.40  0.60   Open
CVC     18.70  20.20  NOV   22  20   2.20   20.30  0.10   Open?

Cablevision (NYSE:CVC) is testing a recent resistance area near
$20 and further upside activity would suggest an early exit in
the position.


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

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

XING     9.13   8.90   DEC     12      7     0.10    0.30   Open
JNPR    16.63  18.00   NOV     19     14    (0.20)   1.00   Open?
LRCX    24.38  28.75   DEC     30     20     0.15    1.30   Open?
PHTN    32.40  29.51   JAN     40     25     0.00    2.00   Open?

Juniper Networks (NASDAQ:JNPR), which cost slightly more to enter
than expected, Lam Research (NASDAQ:LRCX), and Photon Dynamic
(NASDAQ:PHTN) have all provided excellent profits for speculative
traders.


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  38.64   DEC-37C   NOV-37C  (0.20)   0.10    Open
SCRI    20.52  26.78   FEB-22C   DEC-25C   1.40    2.10    Open

Sicor (NASDAQ:SCRI) was an interesting position, having offered a
reasonable entry point 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.  The Microsoft (NASDAQ:MSFT) spread, which offered a
number of profitable opportunities, has previously been closed.
The Prudential (NYSE:PRU) position has a minimum "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

ZMH     55.52  63.81   DEC    55    55     5.20    9.00    Open?
PCLN    30.45  28.18   NOV    30    30     4.90    5.00    Open
ADVP    49.05  51.47   NOV    50    50     3.40    3.90    Open
TM      59.45  58.02   NOV    60    60     3.40    3.25    Open

Zimmer Holdings (NYSE:ZMH) was a big mover again this week, adding
to its previous profits.  Advance PCS (NASDAQ:ADVP) achieved gains
in less than one week.  The straddle in Engineered Support Systems
(NASDAQ:EASI) has previously been closed, however the issue traded
at a multi-year high Friday, allowing traders to take advantage of
another profitable exit opportunity in the play.  Triad Hospitals
(NYSE:TRI) has been very volatile, but the straddle has yet to be
profitable on a simultaneous order basis.


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

No Open Positions


Questions & comments on spreads/combos to Contact Support

*************
NEW POSITIONS
*************

This following group of plays is simply a list of candidates to
supplement your search for profitable trading positions.  As
with any 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.

*****
BBY - Best Buy  $58.31  *** Electronics Retailer! ***

Best Buy Company (NYSE:BBY) is specialty retailer of consumer
electronics, personal computers, entertainment software and
appliances.  Best Buy operates retail stores and commercial
Websites under the brand names Best Buy, Media Play, On Cue,
Sam Goody, Suncoast, Magnolia Hi-Fi and Future Shop.  The firm
operates three segments: Best Buy, Musicland and International.
Best Buy is mainly a specialty retailer of consumer electronics,
home office equipment, entertainment software and appliances.
Also included in the Best Buy segment is Seattle-based Magnolia
Hi-Fi, a high-end retailer of audio and video products.  Their
Musicland segment is primarily a mall-based retailer of movies,
prerecorded music, video games and other entertainment-related
products.  The International segment consists of Future Shop, a
specialty retailer of consumer electronics, home office equipment,
entertainment software and appliances with operations in Canada.

BBY - Best Buy Company  $58.31

PLAY (conservative - bullish/credit spread):

BUY  PUT  NOV-50.00  BBY-WJ  OI=6521  ASK=$0.20
SELL PUT  NOV-55.00  BBY-WK  OI=5432  BID=$0.65
INITIAL NET-CREDIT TARGET=$0.50-$0.60
POTENTIAL PROFIT(max)=11% B/E=$54.50


*****
CTX - Centex  $97.50  *** Bullish Industry! ***

Centex Corporation (NYSE:CTX) is a multi-industry company with
operates in six principal business segments.  Conventional Homes
operations involve the construction and sale of single-family
homes, town homes and low-rise condominiums, and the purchase and
development of land.  Investment Real Estate operations involve
the acquisition, development and sale of land, and the development
of industrial, office, retail and mixed-use projects.  Financial
Services operations involve the financing of homes, home equity
and sub-prime lending, and the marketing of insurance coverage.
Construction Products involves cement production and distribution,
and the production, distribution and sale of gypsum wallboard,
concrete, aggregates and recycled paperboard.  Contracting and
Construction Services involves the construction of buildings.
Centex HomeTeam Services is involved in pest and termite control,
lawn and landscape care, electronic security, alarm monitoring
and homewiring services.

CTX - Centex Corporation  $97.50

PLAY (less conservative - bullish/credit spread):

BUY  PUT  NOV-85.00  CTX-WQ  OI=725   ASK=$0.30
SELL PUT  NOV-90.00  CTX-WR  OI=1447  BID=$0.85
INITIAL NET-CREDIT TARGET=$0.60-$0.70
POTENTIAL PROFIT(max)=14% B/E=$89.40


*****
VSEA - Varian Semiconductor  $48.40  *** Rally In Progress! ***

Varian Semiconductor Equipment Associates (NASDAQ:VSEA) designs,
manufactures, markets and services semiconductor processing
equipment used in the fabrication of integrated circuits.  As a
supplier of ion implantation systems, the company has shipped
over 3,100 systems worldwide.  The company's VIISta product line
leverages single-wafer processing technology pioneered on its
successful E200 and E500 lines of medium current implanters to
the entire spectrum of energies and implant applications.  Single
wafer technology is differentiated from batch-type implanters by
its processing capabilities, more precise angle control and more
improved process yields, allowing processing of 200-millimeter or
next-generation 300-millimeter wafers on the same tool.

VSEA - Varian Semiconductor  $48.40

PLAY (less conservative - bullish/credit spread):

BUY  PUT  NOV-40.00  UES-WH  OI=242  ASK=$0.25
SELL PUT  NOV-45.00  UES-WI  OI=372  BID=$0.85
INITIAL NET-CREDIT TARGET=$0.65-$0.70
POTENTIAL PROFIT(max)=15% B/E=$44.35


*****
EBAY - eBay Inc.  $55.93  *** A "Reader's Request" Play ***

eBay (NASDAQ:EBAY) is a Web-based community in which buyers and
sellers are brought together to browse, buy and sell items such
as collectibles, automobiles, high-end or premium art items,
jewelry, consumer electronics and a host of practical and other
miscellaneous items.  The eBay trading platform is an automated,
topically arranged service that supports an auction format in
which sellers list items for sale and buyers bid on items of
interest, and a fixed-price format in which sellers and buyers
trade items at a fixed price established by sellers.  Through
its wholly owned and partially owned subsidiaries and affiliates,
the Company operated online trading platforms directed towards
the United States, Australia, Austria, Belgium, Canada, France,
Germany, Ireland, Italy, Japan, the Netherlands, New Zealand,
Singapore, South Korea, Spain, Sweden, Switzerland and also the
United Kingdom.

EBAY - eBay Inc.  $55.93

PLAY (conservative - bearish/credit spread):

BUY  CALL  NOV-65.00  XBA-KM  OI=8068   ASK=$0.15
SELL CALL  NOV-60.00  XBA-KL  OI=22048  BID=$0.55
INITIAL NET-CREDIT TARGET=$0.45-$0.55
POTENTIAL PROFIT(max)=9% B/E=$60.45


*****
FNM - Fannie Mae  $71.69  *** $1.2 Billion Accounting Mistake ***

Federal National Mortgage Association (NYSE:FNM), commonly known
as Fannie Mae, is a company that works to assure that mortgage
money is readily available for existing and potential homeowners
in the United States.  Fannie Mae does not directly lend money
to homebuyers, but works with lenders to ensure that there is no
shortage of funds available for mortgage loans.  The method in
which Fannie Mae accomplishes this is by purchasing mortgages
from a variety of institutions that make up the primary mortgage
market.  Primary market lenders include mortgage companies,
savings and loans, commercial banks, credit unions and state and
local housing finance agencies. These are the businesses where
the mortgages are originated and the funds are loaned directly
to the borrower.  Fannie Mae then purchases the mortgage, thus
allowing the primary market lender to replenish their funds and
lend more money to homebuyers.

FNM - Fannie Mae  $71.69

PLAY (conservative - bearish/credit spread):

BUY  CALL  NOV-80.00  FNM-KP  OI=1081   ASK=$0.10
SELL CALL  NOV-75.00  FNM-KO  OI=11579  BID=$0.50
INITIAL NET-CREDIT TARGET=$0.45-$0.55
POTENTIAL PROFIT(max)=9% B/E=$75.45


*****
KSS - Kohl's  $56.07  *** In A Trading Range? ***

Kohl's (NYSE:KSS) operates family-oriented, specialty department
stores.  The company's stores sell moderately priced apparel,
shoes, accessories and home products targeted to middle-income
customers shopping for their families and homes.  Kohl's stores
have fewer departments than traditional, full-line department
stores, but offer customers assortments of merchandise displayed
in complete selections of styles, colors and sizes.  Since 1992,
the company has increased square footage an average of 22% per
year, expanding from 79 stores located in the Midwest to a total
of 420 stores with a presence in six regions.  Of the 420 stores
it operates, 116 are take-over locations, which facilitated the
entry into several new markets, including Chicago, Illinois;
Detroit, Michigan; Ohio; Boston, Massachusetts; Philadelphia,
Pennsylvania; St. Louis, Missouri, and the New York region.

KSS - Kohl's  $56.07

PLAY (conservative - bearish/credit spread):

BUY  CALL  NOV-65.00  KSS-KM  OI=254   ASK=$0.15
SELL CALL  NOV-60.00  KSS-KL  OI=4213  BID=$0.55
INITIAL NET-CREDIT TARGET=$0.45-$0.55
POTENTIAL PROFIT(max)=9% B/E=$60.45


*****
NBIX - Neurocrine Biosciences  $46.88  *** Earnings Speculation ***

Neurocrine Biosciences (NASDAQ:NBIX) is a unique, product-based
biopharmaceutical company focused on neurological and endocrine
diseases and disorders.  Their product candidates address some
of the largest pharmaceutical markets in the world including
insomnia, anxiety, depression, diabetes, multiple sclerosis,
irritable bowel syndrome, eating disorders, pain, autoimmunity
and certain female and male health disorders.  The company has
a large number of programs in various stages of research and
clinical development, including a drug for the treatment of
insomnia.  The company's other products are altered peptide
ligand, gonadotropin-releasing hormone antagonist, interleukin
4 fusion toxin and corticotropin-releasing factor.  Quarterly
earnings are due 11/4/03.

NBIX - Neurocrine Biosciences  $46.88

PLAY (conservative - bearish/credit spread):

BUY  CALL  NOV-55.00  UOT-KK  OI=1351  ASK=$0.20
SELL CALL  NOV-50.00  UOT-KJ  OI=2462  BID=$0.65
INITIAL NET-CREDIT TARGET=$0.50-$0.60
POTENTIAL PROFIT(max)=11% B/E=$50.50


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

*****
ICAI - InterActiveCorp  $36.81  *** Range-Bound? ***

InterActiveCorp (NASDAQ:ICAI), formerly known as USA Interactive,
is a multi-brand interactive commerce company transacting firm
worldwide via the Internet, television and the telephone.  The
company's portfolio of companies collectively enables direct-to
-consumer transactions across many areas, including home shopping,
ticketing, personals, travel, tele-services and local services.
During 2002, InterActiveCorp completed two major transactions
including the acquisition of a majority interest in Expedia.com,
and the sale of its entertainment segments to Vivendi Universal
Entertainment.  The firm's business is organized into three major
groups: Electronic Retailing; Information and Services, and Travel
Services.

ICAI - InterActiveCorp  $36.81

PLAY (conservative - bearish/debit spread):

BUY  PUT  NOV-42.50  QTH-WV  OI=264  ASK=$6.00
SELL PUT  NOV-40.00  QTH-WH  OI=518  BID=$3.80
INITIAL NET-DEBIT TARGET=$2.20-$2.25
POTENTIAL PROFIT(max)=11% B/E=$40.25


*****
QCOM - Qualcomm  $47.49  *** Wireless Sector Leader! ***

Qualcomm (NASDAQ:QCOM) is a developer and supplier of code division
multiple access (CDMA)-based integrated circuits and system software
for wireless voice and data communications and global positioning
system (GPS) products.  Qualcomm offers complete system solutions,
including software and integrated circuits for wireless handsets and
infrastructure equipment.  This complete system solution approach
provides customers with advanced wireless technology and enhanced
component integration and interoperability, as well as reduced time
to market.

QCOM - Qualcomm  $47.49

PLAY (conservative - bullish/debit spread):

BUY  CALL  NOV-42.50  AAO-KV  OI=3431   ASK=$5.30
SELL CALL  NOV-45.00  AAO-KI  OI=15293  BID=$3.10
INITIAL NET-DEBIT TARGET=$2.15-$2.20
POTENTIAL PROFIT(max)=14% B/E=$44.70


****************
CALENDAR SPREADS
****************

A calendar spread (or time spread) consists of the sale of one
option and the simultaneous purchase of an option of the same
type and strike price, but with a future expiration date.  The
premise in a calendar spread is simple: time erodes the value of
the near-term option at a faster rate than the far-term option.
The positions in this section are speculative (out-of-the-money)
spreads with low initial cost and large potential profit.

*****
GPRO - Gen-Probe  $26.77  *** On The Rebound! ***

Gen-Probe (NASDAQ:GPRO) is a leader in the development, manufacture
and marketing of rapid, accurate and cost-effective nucleic acid
testing products used for the clinical diagnosis of human diseases
and for screening donated human blood.  Using its patented NAT
technology, Gen-Probe has received FDA approvals or clearances for
over 60 products that detect a variety of infectious microorganisms,
including those causing sexually transmitted diseases, tuberculosis,
strep throat, pneumonia and fungal infections.  Additionally, the
company developed and manufactures the only FDA-approved blood
screening assay for the simultaneous detection of HIV-1 and HCV,
which is marketed by Chiron Corporation.  Gen-Probe and Bayer
Corporation have formed a collaboration to develop, manufacture and
market nucleic acid diagnostic tests for certain viral organisms,
and under the agreement Bayer has the right to distribute these
tests.  Gen-Probe has 20 years of nucleic acid detection research
and product development experience, and its products are used daily
in clinical laboratories and blood collection centers throughout the
world.

GPRO - Gen-Probe  $26.77

PLAY (speculative - bullish/calendar spread):

BUY  CALL  FEB-30.00  PSU-BF  OI=580   ASK=$2.50
SELL CALL  NOV-30.00  PSU-KF  OI=1411  BID=$0.40
INITIAL NET DEBIT TARGET=$1.90-$2.00
INITIAL TARGET PROFIT=$0.65-$0.90


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

*****
DIGE - Digene  $35.10  *** Earnings Play! ***

Digene (NASDAQ:DIGE) develops, manufactures and sells proprietary
gene-based testing systems for screening, monitoring and diagnosis
of human diseases.  Its primary focus is in women's cancers and
infectious diseases.  The firm has applied its proprietary Hybrid
Capture technology to develop a unique diagnostic test for human
papillomavirus, which is the primary cause of cervical cancer and
is found in greater than 99% of all cervical cancer cases.  In
addition to its HPV Test, the company's product portfolio includes
gene-based tests for detecting chlamydia, gonorrhea, hepatitis B
virus and cytomegalovirus.  Quarterly earnings are due on 11/6/03.

DIGE - Digene  $35.10

PLAY (very speculative - neutral/debit straddle):

BUY CALL  NOV-35.00  QDG-KG  OI=186  ASK=$2.40
BUY PUT   NOV-35.00  QDG-WG  OI=272  ASK=$2.30
INITIAL NET-DEBIT TARGET=$4.50-$4.60
INITIAL TARGET PROFIT=$1.35-$2.20


*****
PLCE - The Children's Place  $30.10  *** Another Earnings Play! ***

The Children's Place Retail Stores (NASDAQ:PLCE) is a specialty
retailer of apparel and accessories for children from newborn to
12 years of age.  The company designs, sources and markets its
products under the proprietary The Children's Place brand name
for sale exclusively in its stores and on its web-site.  The
Children's Place, babyPLACE, Place, The Place, TCP, and PLC are
a few of its registered brands.  The company operates over 600
stores in the United States and Canada, most of which are in and
around major metropolitan areas.  The Children's Place stores are
established in major regional malls, strip centers, outlets and
street stores.  Quarterly earnings are due on 11/13/03.

PLCE - The Children's Place  $30.10

PLAY (very speculative - neutral/debit straddle):

BUY CALL  NOV-30.00  TUY-KF  OI=671  ASK=$1.70
BUY PUT   NOV-30.00  TUY-WF  OI=177  ASK=$1.55
INITIAL NET-DEBIT TARGET=$3.00-$3.10
INITIAL TARGET PROFIT=$0.95-$1.65


*****
RMBS - Rambus  $24.79  *** Ongoing Litigation Speculation! ***

Rambus (NASDAQ:RMBS) is one of the world's leading providers of
chip-to-chip interface products and services.  The company's
breakthrough technology and engineering expertise have helped
leading chip and system companies to solve their challenging I/O
problems and bring industry-leading products to market.  Rambus'
interface solutions can be found in numerous computing, consumer
electronic and networking products.

RMBS - Rambus  $24.79

PLAY (very speculative - neutral/debit straddle):

BUY CALL  NOV-25.00  BNQ-KE  OI=6390  ASK=$1.20
BUY PUT   NOV-25.00  BNQ-WE  OI=5189  ASK=$1.55
INITIAL NET-DEBIT TARGET=$2.50-$2.65
INITIAL TARGET PROFIT=$0.80-$1.35


*****


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

So Ends Another Bullish Month for Wall Street


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Option Investor Inc is neither a registered Investment Advisor nor a Broker/Dealer. Readers are advised that all information is issued solely for informational purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy, nor is it to be construed as a recommendation to buy, hold or sell (short or otherwise) any security. All opinions, analyses and information included herein are based on sources believed to be reliable and written in good faith, but no representation or warranty of any kind, expressed or implied, is made including but not limited to any representation or warranty concerning accuracy, completeness, correctness, timeliness or appropriateness. In addition, we do not necessarily update such opinions, analysis or information. Owners, employees and writers may have long or short positions in the securities that are discussed.

Readers are urged to consult with their own independent financial advisors with respect to any investment. All information contained in this report and website should be independently verified.

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Option Investor Inc
PO Box 630350
Littleton, CO 80163

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