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Daily Newsletter, Sunday, 11/23/2003

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The Option Investor Newsletter                   Sunday 11-23-2003
Copyright 2003, All rights reserved.                        1 of 5
Redistribution in any form strictly prohibited.


In Section One:

Wrap: Support Holds Again
Futures Market: TGIF
Index Trader Wrap: Standoff
Editor's Plays: Clear Signal
Market Sentiment: Event Risk
Ask the Analyst: Trading a hedge when times are uncertain
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 11-23        WE 11-14        WE 11-07        WE 10-31
DOW     9628.53 -140.15 9768.68 - 41.11 9809.79 +  8.67 +218.66
Nasdaq  1893.88 - 36.38 1930.26 - 40.48 1970.74 + 38.53 + 66.62
S&P-100  511.77 -  7.24  519.01 -  1.69  520.70 +  0.72 +  9.73
S&P-500 1035.28 - 15.07 1050.35 -  2.86 1053.21 +  2.50 + 21.80
W5000  10098.88 -145.78 10244.6 - 45.10 10289.7 + 65.24 +241.02
RUT      525.93 -  7.03  532.96 - 10.00  542.96 + 14.74 + 21.79
TRAN    2845.32 - 82.32 2927.64 - 51.65 2979.29 + 66.18 + 85.86
VIX       18.98 +  2.04   16.94 +  0.01   16.93 +  0.83 -  1.61
VXO       19.89 +  2.26   17.63 +  0.07   17.56 +  0.41 -  1.78
VXN       29.08 +  2.92   26.16 +  0.96   25.20 +  0.31 -  0.56
TRIN       1.04            1.35            1.21            1.02
Put/Call   0.80            0.69            0.78            1.12
******************************************************************



Support Holds Again
by Jim Brown

Buyers circled the wagons at Dow 9600 and fought off all
the attackers. Threats of increased terror attacks, downgrade
to a Dow component, option expiration and new mutual fund
allegations failed to push the indexes lower. Sellers tried
to run over buyers but were turned back each time.

Dow Chart


Nasdaq Chart



The was no major economic news on Friday with Internet Sales
the most noteworthy report. Sales climbed to $13.29 billion
for the 3Q and the second highest volume ever. The current
quarter is expected to be the best ever as consumer acceptance
of the web continues to grow. YHOO rose on the news but AMZN
lost ground. EBAY was still reeling from the suit filed
yesterday by AT&T but closed well off the lows at $51.90.
AT&T sued EBAY claiming that PayPal violated their patent on
ecommerce payments. Seems AT&T patented the third party pmt
process where an uninterested 3rd party handles payments for
a two other unrelated parties. This boggles my mind how they
could patent a concept as broad as that. They are asking for
all profits made using their concept as well as damages and
that PayPal cease taking payments or pay license fees. AT&T
was granted the "Mediation of Transactions by a Communication
System" patent in 1994.

Considering PayPal is not doing anything different than Visa
and MasterCard have been doing for years, handling payments
between two parties, it is hard to understand how AT&T can
win this suit. However, EBAY was just hit with a $29 million
judgment for offering "Buy it Now" auctions. Seems somebody
else patented the concept of offering to end an auction early
for a fixed price. Amazon and Barnes and Noble went to court
over the "1-click" option on Amazon. The suit was eventually
settled out of court. Amazing. Let's go one step further.
Option Investor was threatened a couple years ago for using
the phrase "knowledge is power" in an article because it had
been trademarked. A quick search on Google comes up with
8,670,000 pages with that phrase in print. Selling license
rights for $100 per occurrence would be highly lucrative.
It appears you can copyright, patent or trademark anything
and once done you lay in wait for somebody to trip over your
rights and allow you to sue them. Now if I could just figure
out how to patent air.

The only other economic report was the ECRI Weekly Leading
Index which rose to 130.9 from 129.2. The six-month growth
rate rose to 11.1%. The index had stalled for about a month
but over the last three weeks has begun moving up again.
The +11.1% growth rate is down from the high of +13.5%
back in August and the drop was mostly due to the jump in
interest rates. Now that the index is rising again it is
another indication that there is a recovery underway.

In stock news Dow component MRK set another 52-week low
after scrapping a late stage diabetes drug. MRK was hit
with downgrades, some very negative in tone, and dropped
nearly -$3 to close just above $42.00. On Nov-12th MRK
pulled another drug which it had been testing for six years
for depression. MRK has been on the sell list since July
and the bargain hunters were starting to pay attention with
the spike to $47 last week but now even the bottom fishers
are deserting it.

FRE made history by restating earnings to the upside by
nearly $5 billion dollars. $4.4 billion came from 2000-2002
and $600 million from periods before that. FRE said that
they may not be able to complete 2003 accounting until
next June. The company claims it had previously understated
earnings to smooth the volatility and warned that the new
accounting will show that much higher volatility in future
releases. Because FRE uses derivatives to hedge its interest
exposure it has massive swing potential depending on the
current rate environment. Needless to say regulators are
not impressed and wonder what other mushrooms might be
growing in the FRE accounting dept. Since they under
reported instead of over reported they are not in the
Enron or WorldCom category but breaking the rules is
still breaking the rules. FRE spiked +$5 on the news over
the last three days and then gave up nearly half as the
smoke cleared.

The mutual fund scandal continued with Bear Stearns hit
with a subpoena for mutual fund trading records. Innocent
until proven guilty of course. Wal-Mart announced that it
was pulling two Putman funds out of the 401K options for
employees. Revlon and Interpublic Group also said they
were pulling assets from Putman. Based on the latest
estimates Putman has seen withdrawals of over $25 billion
over the last three weeks and more companies are fleeing
the fund daily. This is continuing to pressure the broader
market as the fund family churn is removing some of the
upward bias.

The mutual fund pressure on the market took a back seat
to the weekend terror prospects. Homeland Security warned
that there was an increased chance of an attack against
the U.S. both at home and abroad over the weekend due to
the Ramadan holiday. The government stressed concerns that
Al-Qaeda could try to hijack cargo jets and crash them into
targets. They issued that warning as well as warnings of
an increased bombing alert to law enforcement agencies
world wide. They specifically warned that bridges, dams,
chemical and energy plants were at higher risk. They told
Americans worldwide to maintain a heightened state of
vigilance for possible attacks this weekend. They expressed
concern that the ending of Ramadan and the beginning of
the heavy Thanksgiving travel season could produce higher
risk. Ramadan was kicked off with multiple attacks and
officials fear it could end with a series of coordinated
attacks. Ramadan ends on Tuesday.

Despite the heightened terror alert the markets held their
ground. Volume was light and advancers beat decliners by a
ratio of 4:3. The option expiration Friday may have helped
defuse the selling by providing a mixture of position
closings. The markets tracked pretty closely to the maximum
pain points for the index options. Most closed within a
strike of the point where the most options would expire
worthless. This shows a fairly level bias and was one of
the closest expirations we have seen lately.

The Dow hit support at 9600 and bounced briefly before a
strong sell program managed to punch through that level for
a few ticks but the index was quickly bought in strength.
While the buyers rushed to buy the morning dip they were
content to maintain their positions around the 9620 level
instead of chasing sellers higher. The index traded in
barely more than a 30 point range from 11:00 until the
close. The Dow closed around 20 points below its 50 DMA
at 9656 and on solid support.

The Nasdaq also closed positive +12 and only traded in
negative territory for about 25 minutes in early trading.
The Nasdaq has tested support at 1880 for three days and
each time returned to rest just below 1900. The 50 DMA
is 1903 and well within striking distance.

There are so many conflicting opinions about market
direction next week that it can be very confusing. There
are ten analysts in the Market Monitor each day and I think
there were ten different market views on Friday. Some view
the next week as the potential cliff with Friday as the
last step before taking the plunge. I believe the opposite.

I think the dead stop on support this week has relieved
the selling pressure and the lack of a bounce was due to
the terror wild card. Who in their right mind would invest
serious money on a day that the U.S. is warning about a
high risk of attack over the next three days? That kept
many people out of the market but just enough stayed in
to maintain a strong bid just under Dow 9600. Last week
had been up for the last ten years and the trend has been
broken. Next week has a very bullish record over the last
50 years and I think that Friday was a setup day. Traders
are positioned for the worst with a sharp increase in the
VXO at Friday's close as put buying increased sharply.
They refused to sell and protected positions instead.
Futures went out near the high of the day after the cash
close.

I believe the stage is set and Monday could be a bullish
day with Tuesday even stronger. Monday could still have a
cloud over it with Ramadan ending on Tuesday. The flaw in
this view is the weekend event risk. If we have an event
close to home then the markets could break support and
we could see another leg down. If we have an event overseas
like the Turkey attacks then the market should hold its
ground and should see any dip bought. If we have no event
then the markets should breathe a sigh of relief and begin
a rebound into Thanksgiving. If this does not come to
pass I will be eating crow instead of turkey on Thursday.

My rationale for this is the continuing strong economic
reports, the Fed going out of their way to stress low rates
for a long time, the holiday mood and historical trend. We
have sold off substantially from the 9900 level by nearly
300 points yet the Dow refuses to turn lose of the 50 DMA
at 9650. Friday the Dow traded at or below the 50 DMA all
day but closed only about 20 points below it on very
negative news. If you look at the Dow since March it has
not traded a single day below the 50 DMA all day. It has
traded below it but never without touching it intraday.
Obviously trends are only trends until they change but
this trend has held the line during a very rough week. It
could easily change on Monday but without a weekend event
I am betting against it.

Now the bad news. I do not think that the bounce, if we
get one, will take us to new highs. I still think we are
going to be range bound for the rest of the year between
9600-9900. Using the Fed's comment format I will phrase
it this way. The author perceives that the upside and
downside risks are roughly equal. In contrast, the
probability, though minor, of an unwelcome fall in the
markets exceeds that of a rise above its recent highs.
While I say that jokingly it is how I view the future.
Should we get a bounce next week we will end it only a
week ahead of the next Fed meeting and that one will have
some serious rate stress attached to it. We will also be
entering the earnings warning season again as well as the
year end portfolio rebalancing process. However, a rally
next week will have commentators talking about a Santa Claus
rally and that could offset the negatives and have retail
investors jumping back on the train. Remember, cash inflows
into mutual funds were near +$4 billion last week despite
all the scandal news and the shuffling of money into
different fund names. This is very bullish in light of
the conditions.

I keep telling you to watch the internals and despite the
terror threats and the -140 Dow drop for the week there
were still 275 new highs and only 36 new lows on Friday.
The entire week was down significantly with the new high
average about 300 per day, down from around 580 the prior
week, but still strong. Bottom line, until the Dow and
Nasdaq lose their grip on the 50 DMA we are just profit
taking. Should that grip fail the outlook could change
rapidly unless it is event related. Next support on the
Nasdaq is 1800 and 9500 on the Dow. Keep your fingers
crossed that there are no weekend events and look for a
relief bounce at the open on Monday. Should this work out
like I expect the bounce should run into resistance around
9700-9725. It may not be earth shaking but any rebound
after the week we had would be gladly accepted.

Most trading will take place on the first two days of
the week. Wednesday is a full day for the markets but
afternoon volume should be very light. Friday is a half
day and the markets close at 1:PM ET. Despite the
shortened week and the scarcity of traders the economic
calendar is more stuffed than Thursday's turkey. Monday
is a pass but Tuesday we have the GDP revision, Consumer
Confidence and Existing Home Sales. On Wednesday, with
most traders wanting to either leave early or not show
up at all there are no less than 13 economic reports.

Mortgage Applications
Jobless Claims
Consumer Comfort Index
Durable Goods
Personal Income
NY-NAPM
Consumer Sentiment
Chicago PMI
Help Wanted Index
New Home Sales
Monthly Mass Layoffs
ECRI Weekly Leading Index
Fed Beige Book

They have taken all the reports for the rest of the week
and lumped them all into one day. If traders do show up
at work the economics will be over by 10:30 with only the
Beige Book in the afternoon. Despite the low volume the
Wednesday before and Friday after Thanksgiving have
produced some upside surprises in the past.

There are only 26 trading days left in the year and we
are almost equal distance between Dow 9000 and 10,000 and
analysts are almost equally divided on which one will be
touched first. The economics on Wednesday along with the
ISM and Jobs the following week should provide the
direction for the rest of the year. Let's hope those
reports have not changed direction since last month.

Enter Very Passively, Exit Very Aggressively!

Jim Brown


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

TGIF
Jonathan Levinson

Opex week came to a close, in a relatively tame session that saw
equities and metals advance, treasuries, commodities and the US
Dollar Index decline.

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


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

10 minute chart of the US Dollar Index


The US Dollar Index gave back most of Thursday's gains on Friday,
but found support at a higher low, trading 90.60 as of this
writing.  For the week, the US Dollar Index printed a bearish
doji, setting a new bear market low but failing to break below
90.  The CRB, despite strength in wheat, copper and silver
futures, fell back below 249 on Friday.


Daily chart of December gold


December gold had a good day on Friday, adding 2.30 to close at
396.70 with a session high of 398.30, no doubt aided by news that
Barrick (NYSE:ABX) has announced an end to its hedging program.
With Barrick no longer shorting gold futures, a significant
seller has removed itself from the market.  Whether this is the
kind of capitulation event that markets the end of the upphase,
or if it is an insider's acknowledgment of the irresistible force
beneath the gold market, we cannot know.  Gold spent the week
trying unsuccessfully to break 400, and expended most of its
oscillator upphase in the attempt.  This continues to appear to
be a short-term toppy market to me on a technical basis.
Fundamentally, I see no compelling reason why gold should not be
trading at several times its current price.  The money supply has
multiplied by several orders of magnitude during the past
decades.  I intend to be a buyer of any significant pullback.


Daily chart of the ten year note yield


The ten year note yield dropped .7 bps to close at 4.147% on
Friday, completing another bearish weekly candle.  We saw bonds
trading inversely to equities all week, and I've become convinced
that the Fed's dealers' support of equities is in its last days.
The Fed's recent attempts to jawbone yields lower have been
laughably ineffectual, but a good panic bid, a flight to quality,
is another way to accomplish the same end.  Has anyone noticed
how visible the Fed governors have become?  Years ago, it was
difficult to name more than the Chairman.  Now, there is daily
bullhorning on the wires from the different representatives of
the different districts.  Things that make you go "hmmm".


Daily NQ candles


The session opened with the NQ lining up to take the dunking it
so richly deserved, with a quick revisit to Thursday's lows.
There was a moderate bid under the market, just enough to defend
the bottom without convincing either bulls or bears that it would
hold.  It did hold, and was not retested again during the
session.  A choppy drift higher ensued, with the NQ and its peers
all closing near their session highs, well below Thursday's high.
The daily cycle oscillators gave hints of a bottom forming above
1350, and the weekly candle, though oriented as a bullish hammer,
printed significantly below those of the prior two weeks, and the
weekly oscillators are rolling over on strong sell signals that
were confirmed this week.  The lower wedge support line was
decisively broken.


30 minute 20 day chart of the NQ


The short term frames offer the most hope to bulls, as the 30
minute candles attest.  The triple bottom held on Thursday and
Friday, and a gap up open could kick off a bull wedge breakout
projecting potentially back to the 52 week high.  The 30 minute
cycle oscillators are in upphases, and if nothing blows up over
the weekend, a post-opex relief rally could ensue.  If so, it
could convert the daily cycle oscillators above onto a new
upphase.

On the other hand, the 300 minute stochastic on this timeframe
got poor price traction on Friday afternoon, and the weekly
oscillators (not shown) are not only topped out but now
downphasing.  The bears could have done better by cracking
support on Friday morning, but so it goes.  The daily cycle
downphase is still active, lower support now at 1400 will be very
difficult to crack, volatility has risen, and bulls are no longer
laughing out loud at bearish arguments.  Next week will be very
educational.  Despite Friday's 1.06% gain, bulls are no longer
enjoying the wind at their backs.  Resistance is currently at
1380, followed by 1392 and 1400.  Support is at 1355-58.


Daily ES candles


The ES gained 4.50 or .44% on Friday, bouncing from support at
1030, gaining ground but nevertheless setting a lower high and
lower low.  The cycle downphase on the daily chart has plenty of
room to run, but like the NQ hesitated with the tenacity of the
morning bounce.  It will take a move back to 1048 level to abort
this downphase, but the doji bounce from the trendline at 1030 is
a step in the right direction.


20 day 30 minute chart of the ES


That step in the right direction exhausted most of the intraday
energy that the bulls could must off a triple bottom low,
supported by opex pinning of prices around the projected 1035
level.  It did not strike me as a particularly bullish day, but
if bulls can clear 1040, they have a chance at a bull wedge
breakout.  I expect the 300 minute stochastic to be in topping
territory by then, and so for the moment, indecision reigns.
Always barring a terror attack or other such external calamity, I
expect followthrough to the current upphase, likely to encounter
resistance at 1038.  If it fails there, then look for a move to
1027-8.  If it breaks out, 1046-48 is the next confluence zone.
It should fail there, but if not, then the daily cycle oscillator
will have turned up, in which case the bulls will have the ball,
with an eye to the year highs.  I don't expect that to happen,
but the market will tell us.


150-tick ES


The two day 150-tick ES shows the pinned prices on Friday.  The
short cycle oscillators are in an upphase, supporting a good open
on Monday barring any untoward surprises.


Daily YM candles


Same view on the YM as on the ES.


20 day 30 minute chart of the YM


On Monday, the 9570-9660 range will be key for YM.


I believe that the real story this week was the strength in
treasuries, as equities sputtered and gasped.  Forgetting how
extended equities appear to be, both technically and
fundamentally, the strength in treasuries at every equity
downtick should have bulls sleeping with one eye open.  The real
story in the economy is debt, and the Fed will stop at nothing to
prevent an "unwelcome" rise in rates.  If that means crashing
stocks, I don't believe they'd hesitate for an instant.  Bernanke
could not have intended to support the share prices of SINA and
SOHU or NTES and the current account deficit when he spoke so
flippantly about his printing presses and the value of the
dollar.  I believe that we saw the writing on the wall this week.

However, it was opex week, and anything can and routinely does
happen during such times.  Next week is a holiday, traditionally
bullish as Jim has told us, and there will end-of-month windows
for fun(d) managers to dress.  There are technical factors to
justify a bounce.  So, either way, flexibility and meticulous
stops are the strategy for traders in either direction.  See you
in the Futures Monitor.


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

Standoff
Jonathan Levinson

Bulls and bears came nose-to-nose this week, and it wasn't
pretty.  Fear, notably absent last week, returned with the VXO
making all the way up to 19.89 as of Friday's close, QQV 26.95
and VXN 29.08.  The tape gave both sides of the market cause for
cheer.

Volatility was way up this week, and those sub-17 VXO readings
faded quickly into the rearview mirror.  The VXN made it back
above 30 on Thursday, the VXO above 20.  These are still
laughably low volatility levels, and while the cycles don’t rule
out the possibility of even a retest of the rally highs, it
appears clear that all will not go according to the bullish plan.
No matter how much the likes of Ruckheyser may wink and
insinuate, this is and continues to be one very toppy market for
equities, and the lessons of 1999-2000 are still with many of us.

The Dow advanced 0.1% or 9.1 points to close at 9628 on Friday,
the S&P 500 +.2% or 1.63 to close at 1035.28, and the Naz added
6% or 11.96 to close at 1893.  For the week, the Dow and S&P
were down 1.4% each, the Nasdaq -1.9%.  For the year, the Dow is
up 15.4%, the S&P 17.7%, and the Naz 41.8%.  The decline for this
week compounded that last week to cause some significant
technical damage on the charts we've been following:


Weekly COMPX candles


The apparently endless weekly top gave us some confirmation this
week, with a sell signal printed on the 10 week stochastic and
Macd.  But the break of the rising bear wedge trendline, so long
awaited, was the real news.  This is the first break of that
rising trendline since March '03, and brings into play our
downside projection of 1270.

That said, the price trend is still obviously higher, but traders
will want to see the rising trendline regained before taking
aggressive bullish bets.  A return to the scene of the crime will
see resistance at 1930 tested, which is the current level of the
trendline.


Weekly INDU candles


We got the same sell signal and trendline breajk on the Dow, with
9750 the current level of trendline resistance.  This break
implies a trip to the March lows, ultimately, but we can be sure
that it will be a fascinating journey in the meantime.  Once
again, caution is warranted on this long timeframe, but this week
was unquestionably a victory for bears.


Daily OEX candles


We approach the daily charts from the perspective of the weekly
downphase now in progress and the first bullish blood now drawn
on a closing basis.  On the day charts, we saw the OEX hold
trendline support above 510, and while we're a long way from the
highs at 525, the daily cycle downphase achieved poor price
traction this week, exhausting much of its energy without being
able to crack 510.  If 510 holds next week, I expect to see a new
upphase on the daily cycle oscillator.

Such implies a possible retest of the rally highs-  the top of
that daily cycle upphase will tell us volumes about the future of
this year's rally.  If the upphase fails from here, 500 is the
next support to watch.  If it bounces and fails at a lower high,
then the weekly downphase is dominating and 500 should be the
next significant support.  If it makes a higher high, the weekly
downphase could abort.  I consider this latter scenario to be the
least likely of the three.


20 day 30 minute chart of the OEX


The 30 minute chart shows the wide swings of the past two weeks,
and the persistence of 510 support.  It looks vaguely like a head
and shoulders-esque topping formation, neckline either at 510,
512 or 516.  In any event, the 30 minute chart oscillators he
gave us bullish divergences this week, and commenced an upphase
on the move off the Friday morning low.  A break back above 515
will set up a possible bull wedge breakout targeting the rally
high just above 525.  However, the cycle configuration is such
that I expect 515 to find significant resistance and the move
could well fail there.  Next week will tell the story.


Daily QQQ candles


The Qubes look a lot worse than the OEX on a daily basis, with
the rising trendline decisively broken.  33.60 is key support
under this move, 35 now resistance at the "scene of the crime".
The daily cycles look bottomy here, and as with the OEX, the next
upphase, if it arrives on time, will tell us all we need to know
about this rally.  I expect any real bounce here to fail from a
lower high, and that failure should be an ideal place for QQQ
shorts to enter as it will represent the top of the daily cycle,
failing in gear with the weekly downphase.


20 day 30 minute chart of the QQQ


The 30 minute QQQ is also sporting a bullish divergence, with a
higher oscillator low against lower price lows.  Barring any
weekend disasters, the next move should be to the upside, and if
so, we'll have a bull wedge breakout printed.  34.60-34.80 is the
next major confluence zone, and it should coincide with a 30
minute cycle top.  If that resistance doesn't hold, I expect the
daily cycles to turn back up, and the showdown between bulls and
bears will be on.

I expect the bullish raving to reach a crescendo at the top of
the next daily cycle upphase if one kicks off next week.  Things
always look brightest at the top, and with the weekly cycle
rolling over, it's very possible that we've either seen the top
already, or that we'll see it on this next daily cycle upphase.
Of course, this assumes that the market doesn't simply get sold
on Monday, which is a distinct possibility.  See you at the bell!


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

Clear Signal

At least it is clear to me. If you read my market wrap
today you know that I am expecting a rebound next week.
The Dow has traded above the 9600 level for a week and
appears ready to rally if there are no terrorist events
this weekend.

This suggests that a short-term call play could have
a decent chance of success. The index I want to use is
the DJX since I am keying off the Dow 9600 level.

I am seeing resistance at the 9725 level and would
be thrilled to see a move above that. Thrilled and
surprised.

The Dec 97-DJX Call closed on Friday at 1.20 x 1.35
and depending on Monday's open we should get it for
1.35 or possibly a little cheaper.

If we do see a bounce to Dow 9725 we should see the
DJX 97 call rise to $1.95. Check out the DJX 96 call
currently with the Dow at 9625.

This is going to be a really simple play.

If there is no terrorist event over the weekend buy
the call at the open on Monday with the Dow in the
9625 range.

If there is an event that knocks the Dow down then
buy the dip and try to stay one strike over the Dow
low. If we got knocked back to 9500 then buy the
DJX 96 call.

We are looking for a 50-60 cent profit. If the market
does bounce and continues up then follow the call up
with a trailing stop. Let the market take you out when
it rolls over.

We want to risk only about 35 cents. Once you enter
the position set a stop about 35 cents below your entry.

If we get any decent bounce then 9725 should be the
target. If the bounce has legs then 9750 could be the
next pause point. If we got a wildly bullish bounce I
would not hesitate to exit in the 9800-9850 range.
(don't hold your breath on that possibility)

Play it conservatively and exit on any weakness.

Dec DJX $97.00 Call DJV-LS

DJX Chart




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

Play Recaps

SUNW Lottery Play

For those that bought the 20 cent announcement call, Scott
McNealy did not have an ace up his sleeve and it was mostly
hype. SUNW sold off on the news on Monday but then rallied
strong on Tuesday on the China initiative. If you had bought
the Monday call you would have been happy to exit for a
breakeven on Tuesday.

http://members.OptionInvestor.com/editorplays/edply_111603_1.asp



Powerball

The significant drop in tech stocks over the last week
knocked out portfolio back about -$300 but we were expecting
that based on the market conditions. Still two months to go
and we need to start hoping for a real 4Q rally to appear.
Each down day from here could really impact the value in
January. We need to launch from this level and press
Nasdaq 2000 once again.

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

Event Risk
- J. Brown

Economic recovery, expansion, corporate earnings and jobs have
been the main concerns influencing investor sentiment for months.
Now an old foe has risen again and investors have to readjust
their risk management and style to consider the possibility of
terrorism.

It has been more than two years since the 9/11 attack on America.
We've seen the creation of the Department of Homeland Defense.
We've been witness to both a war in Afghanistan and Iraq.
Television has brought us numerous reports of terrorist bombings
across the world.  Yet so far there has not been another "event"
on our home soil.

A couple of weeks ago major news media shied away from a new
threat that terrorists would strike the U.S. during the holy
month of Ramadan.  Maybe they didn't want to lend credence to the
threat by airing it but word got around anyway.  The two recent
bombings in Turkey suddenly refocused our attention on a possible
attack here at home.  The U.S. government has asked citizens to
be extra alert this weekend as we near the end of Ramadan this
Tuesday.

Some of you might be thinking "enough already, how does this
apply to the stock market?"  Fair enough.  Terrorism concerns
have been hampering an already weak dollar, which hit all time
lows against the euro and new five year lows against the yen this
last week.  As the dollar falls some investors have chosen to
hedge their bets by buying gold, which has been flirting with
$400 an ounce.  There has been a pick up in bonds as some choose
to move money to the perceived safety of U.S. debt (at least
safer than stocks).  The recent threat last weekend from Al Qaeda
about bombing Tokyo should Japan send troops to Iraq sent the
NIKKEI reeling.

If an event does occur here at home there won't be a rush to the
exits.  It will be a stampede and plenty of investors will get
hurt.  Countless funds and money managers are looking at very
good gains this year after three years of losses and they'll do
whatever they can to try and lock in those gains.  This concern
about locking in gains could easily keep the markets in a
sideways trading range.  There is nothing to inspire buyers to
chase stocks higher when they're too focused on avoiding losses
through the year-end.

That's not to say that some stocks won't maintain their bullish
trajectories but the rally may narrow as we head into what has
been traditionally one of the most bullish seasons of the year.

Hopefully, the Islamic month of Ramadan ends peacefully and Wall
Street can do its best to stir up a good old-fashioned Santa
Claus rally.


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

Market Averages

DJIA ($INDU)

52-week High:  9903
52-week Low :  7197
Current     :  9628

Moving Averages:
(Simple)

 10-dma: 9722
 50-dma: 9656
200-dma: 8949

S&P 500 ($SPX)

52-week High: 1063
52-week Low :  768
Current     : 1035

Moving Averages:
(Simple)

 10-dma: 1045
 50-dma: 1036
200-dma:  961

Nasdaq-100 ($NDX)

52-week High: 1453
52-week Low :  795
Current     : 1373

Moving Averages:
(Simple)

 10-dma: 1398
 50-dma: 1390
200-dma: 1219


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

The surge in amount and premium for put buying appeared to falter
on Friday as the VIX and VXO both pulled back from the 20 level.
Together they are still at extremely low readings, which suggests
the markets are vulnerable.  However, it would not surprise us to
see the markets bounce higher again and send the volatility
indices back toward their recent extremes.

CBOE Market Volatility Index (VIX) = 18.98 -0.50
CBOE Mkt Volatility old VIX  (VXO) = 19.61 -0.59
Nasdaq Volatility Index (VXN)      = 29.08 -1.41


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

          Put/Call Ratio  Call Volume   Put Volume

Total          0.80        856,787       689,308
Equity Only    0.66        693,747       461,316
OEX            1.15         59,472        68,207
QQQ            1.01         46,942        47,295


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

Bullish Percent Data

           Current   Change   Status
NYSE          72.5    + 0     Bull Confirmed
NASDAQ-100    68.0    - 1     Bear Confirmed
Dow Indust.   80.0    + 0     Bull Correction
S&P 500       78.8    + 0     Bull Confirmed
S&P 100       78.0    + 0     Bull Correction


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

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


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

 5-dma: 1.41
10-dma: 1.27
21-dma: 1.15
55-dma: 1.16


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    1711      1657
Decliners    1088      1356

New Highs     123       104
New Lows       22        15

Up Volume    838M      888M
Down Vol.    618M      662M

Total Vol.  1489M     1594M
M = millions


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

Commitments Of Traders Report: 11/18/03

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

Will it never end?  The commercial traders refuse to move any
positions or make any more big bets in the full S&P futures
contracts.  They've been oscillating in the current range for
weeks.  Small traders have bumped up both their short and long
positions but they remain relatively equidistance from each other.


Commercials   Long      Short      Net     % Of OI
10/28/03      391,596   412,498   (20,902)   (2.6%)
11/04/03      391,079   415,136   (24,057)   (3.0%)
11/11/03      389,965   415,259   (25,294)   (3.1%)
11/18/03      393,893   414,442   (20,549)   (2.5%)

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
10/28/03      137,791    76,791    61,000    28.4%
11/04/03      137,829    78,206    59,623    27.6%
11/11/03      136,072    74,249    61,823    29.4%
11/18/03      147,842    80,047    67,795    29.7%

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

The e-minis are seeing some action.  Commercials upped their
short positions but not by too much.  Small traders also
raised their short positions by 10K contracts (almost 20% of
outstanding shorts).


Commercials   Long      Short      Net     % Of OI
10/28/03      220,171   260,644    (40,473)  ( 8.4%)
11/04/03      242,409   270,785    (28,376)  ( 5.5%)
11/11/03      249,864   258,503    ( 8,639)  ( 1.7%)
11/18/03      249,286   264,083    (14,797)  ( 2.9%)

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
10/28/03      123,569    59,742    63,827    34.8%
11/04/03      135,525    63,006    72,519    36.5%
11/11/03       94,649    51,815    42,834    29.2%
11/18/03       95,119    61,975    33,144    21.1%

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


NASDAQ-100

Commercial traders are still stuck in limbo with outstanding
longs and shorts in NDX futures barely budging the last few
weeks.  Meanwhile small traders have turned more bullish with
a nice jump in outstanding long positions.


Commercials   Long      Short      Net     % of OI
10/28/03       36,168     46,272   (10,104) (12.3%)
11/04/03       34,159     48,293   (14,134) (17.1%)
11/11/03       35,889     49,201   (13,312) (15.6%)
11/18/03       35,608     49,689   (14,081) (16.5%)

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

Small Traders  Long     Short      Net     % of OI
10/28/03       21,640     8,830    12,810    42.0%
11/04/03       24,132     9,703    14,429    42.6%
11/11/03       26,212    10,730    15,482    41.9%
11/18/03       32,034    10,356    21,678    51.3%

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

DOW JONES INDUSTRIAL

Ditto here as well...commercials are not making any new big
bets and keeping the number of long and short contracts
relatively unchanged.  Small traders appeared to have scaled
back on longs and inched up their shorts.


Commercials   Long      Short      Net     % of OI
10/28/03       20,504    11,366    9,138      28.7%
11/04/03       21,756    11,903    9,853      29.3%
11/11/03       20,209    11,660    8,549      26.8%
11/18/03       20,746    11,080    9,666      30.4%

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
10/28/03        5,295     8,864   (3,569)   (25.2%)
11/04/03        5,099     9,160   (4,061)   (28.5%)
11/11/03        6,105     8,201   (2,096)   (14.7%)
11/18/03        5,655     8,607   (2,952)   (20.7%)

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

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


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

Trading a hedge when times are uncertain

Your comments in the Market Monitor about creating a short-term
hedge with the SPX put option and a QQQ long sounds interesting.
I'm rather torn between the strengthening economy here in the
U.S. still giving further upside to stocks, but with the dollar
falling and potential trade wars with China developing, not to
mention terrorist bombings, I can see stocks going either way.
My question is... how does a trader control this type of hedge?

This is just one of several questions I received from traders on
Wednesday, but I've also received multiple questions on hedging
larger portfolios of stocks against a decline.

In today's column, my main point of emphasis I will want to get
across, is that any time a trader or investor develops a hedge,
your MAIN FOCUS is on the bottom line of the account.

In essence, what a hedge trader MUST do is monitor how the trade
is working as it relates to the REASON the hedge was initiated.

Before we begin, some background is needed for this article to
make sense.

On Tuesday, November 18th, I profiled a bearish trade for the S&P
500 Index (SPX.X) when the index itself was trading at
approximately 1,042 in the December 1,040 puts (SPQXH).  After
having seen some of the major indices trade down to their WEEKLY
S2s in the Pivot Matrix, and seeing the U.S. Dollar Index (dx00y)
falling rather precipitously to new lows, I thought a bearish
trade in the SPX was warranted, "just in case" Asian markets
unraveled when they opened for trading on Wednesday, November
19th, and if so, might have U.S. markets potentially gapping
lower when they opened for trade on Wednesday, November 19, 2003.

A trader or investor may have had to weigh the risk/reward of a
gap lower event as it related to either a trade, or even a
bullish portfolio of stocks.  With the information at hand, and
seeing the dollar falling to new lows, I felt a December SPX put
trade made sense.

When markets opened for trading here in the U.S. on November 19,
2003, it was reported that the Bank of Japan had intervened in
the currency markets by buying dollars and selling yen, which did
seem to have the major U.S. Indices (like the SPX) opening
marginally higher, from its November 18 close of 1,034.15.

This had me thinking (I didn't predict that Japan would intervene
in the currency markets) that U.S. equity markets might rebound.

Instead of closing out the SPX December 1,040 Put(s) why not
create a short-term hedge, by trading a higher volatility
security like the QQQ from the long side, but instead of trading
an option, where my intention for creating the hedge was now from
a shorter-term perspective, buy the underlying QQQ.  (A
trader/investor already long/bullish a portfolio of stocks, was
already hedged if he/she had just purchased the SPX December
1,040 put option).

At 10:34:28 AM EST (11/19/2003) I began setting up a short-term
trade in the QQQ with a bullish action point at $34.24, with a
bounce target level of $34.57.  It was at that time that I also
mentioned that those traders that may have taken my 11/18/2003
bearish trade in the SPX December 1,040 put(s) might like the QQQ
as a short-term bullish trade.

Later that day (11/19/03) the QQQ did indeed trade the $34.24
price level (approx. 01:31 PM EST).  I went back to an intra-day
chart of the SPX and on 11/19/03 at approximately 01:31 PM EST,
the SPX was trading 1,040.  This was COMPLETE COINCIDENCE that
the SPX was trading at the same level as the profiled SPX
December 1040 put strike.

But what better example to begin benchmarking this type of hedge
trade from!

This is where the real work and managing of a hedge comes into
play.

One question that I have a very difficult time answering, based
on lack of knowledge, is "how much" of a put option is needed in
order to hedge against a basket of stocks.  There are various
calculations out there that will portend to tell a
trader/investor just how many puts you need to hedge a portfolio
of stock, but what is rarely discussed is how Market Volatility,
which changes minute my minute, hour by hour, day by day, and
week by week can impact an option's price.

Sure, there's this think called "implied volatility," but
volatility can change quickly and premiums can escalate or
collapse quickly.  Where a trader gets in trouble with a hedge,
is when he/she doesn't monitor how the hedge is performing.

When a trader or investor thinks simplistically about a hedge,
two basic question should first be ask.  How will the hedge
perform if everything falls to zero (max decline).  How will the
hedge perform if everything rises to infinity (max advance).  The
very BASIC rule/test for a hedge, is that at the extremes, the
hedge should either break even, or produce a gain for the
trader/investor.

In the following tables, you're going to see first hand, on a
very short-term basis how a hedge can perform.  Please do NOT
think that you have to monitor a hedge hour by hour as is shown
below, but do take note of how I've set up this portfolio, which
my trading software QCharts, allows me to do in real-time.
Traders/investors that hold several stocks will find this feature
very useful when tracking and monitoring their
trades/investments.

Here is a snapshot of the SPX December 1040 put (SPQXH) where the
trade was initiated when profiled (11/18/2003), and the
underlying bullish position in the QQQ when profiled and
triggered long at $34.24 (11/19/2003) at the close of trade on
November 19, 2003.

SPX put versus QQQ underlying long - Market close 11/19/03



At the top of my portfolio, I wanted to take note of the Market
Volatility Index (VIX.X), where in general terms as the number
increases, option premiums should be expect to be increasing
(during market hours, this will update in real time).  Make note
here that Market Volatility, which can impact option premium is a
VARIABLE, which can change markedly over time and any time you
have a VARIABLE in an equation, this can create complexities
difficult to project into the future.  As a check against this
logic, I also added the SPX.X and it last trade (which is updated
with each trade during market hours).  At the close of trade on
November 19, you will note that the SPX Dec. 1,040 put (SPQZH)
where I paid $18.70 for 1 contract (100 share equivalent) was
right back to roughly break-even (only if taken from the Best
Ask) a day after I had purchased it.  I've then subtotaled the
SPX put and placed the text "Bearish" by that subtotal, only to
note this is the bearish part of the hedge.

Working lower I've place 500 shares of QQQ that were purchased
long at $34.24.  Only for educational purposed did I add the
NASDAQ-100 Volatility Index (VXN.X), where an options trader
might see how this volatility tool changes and can impact option
prices.

As I monitor this hedge, I can see that a "perfect" hedge by the
close is not found as the trade is running a $75.00 loss, but a
$75.00 loss represents a rather fractional -0.39% margin of error
based on the November 19, 2003 close.

Now, that was boring!  Let's add some overnight terrorist attacks
in Turkey, and evacuate the White House and see if things don't
liven up a bit, and begin testing and MONITORING this hedge.
Does it work under times of uncertainty?

Below is a snapshot of the hedge on Thursday morning at
approximately 09:54 AM EST.

SPX Put vs. QQQ long - 11/20 09:54: After White House evacuation



Quick analysis and focus on the BOTTOM LINE (Total) looks to have
the hedge working nicely if PRICES are FALLING.  If the trade
were closed out at this snapshot a $115.00 gain (less
commissions) would be found.  Note how both the Market Volatility
Index (VIX.X) and NASDAQ-100 Volatility Index (VXN.X) have risen.

Another note could be made that since the prior session's close,
the SPX itself has fallen 6.54 points (1,042.44 - 1,035.90 =
6.54) and would represent a $654.00 price move if I had shorted
the SPX itself.  However, options, which were designed as a tool
to manage RISK (expose less capital) show a more modest $210.00
gain.  This makes sense as it relates less risk/less reward.

OK, there's an example of some "bad news" and a market reaction.
How about some "good news" and a better than forecasted October
Leading Indicators report?

SPX Put vs. QQQ long - 11/20 10:05: After Leading Indicators



Quick analysis and focus on the BOTTOM LINE (TOTAL) now clearly
shows this hedge becomes vulnerable on a price advance.  Boom!
In just 11-minutes, a TOTAL $115.00 profit now shows just a
$40.00 profit for the hedge.  Market Volatility (VIX.X) is little
changed during this 11-minute time span, while the NASDAQ-100
Market Volatility Index (VIX.X) has slipped lower.  The SPX
itself has risen 4-points and while this would have equated to a
-$400 erosion in profit for and SPX short in just 11-minutes, the
put option, which is a tool for limiting risk has lost a more
modest $180 in the last 11-minutes.

The table that follow was taken 10-minutes after the October
Leading Indicators report, which should now have given enough
time for a market reaction.

SPX Put vs. QQQ long - 11/20 10:15: 10-min After L.I



Hey... look there!  Quick analysis and focus on the BOTTOM LINE
(TOTAL) now shows an $80 profit.  Both the SPX and QQQ were
little changed, but the slight up-tick in the SPX put option
(SPQXH) gives a little pop to the hedge portfolio.

In the table below, I took a snapshot of the hedge portfolio just
prior to another economic release and the November Philadelphia
Fed Survey.

Prior to Philadelphia Fed - SPX/QQQ Both trade WEEKLY S1s



Just about an hour and 45-minutes later, the hedge portfolio is
back to unchanged.  But now the higher beta of the QQQ has kicked
in, where the QQQ has risen $0.30 per share, and while the SPX
has risen 5-points and Market Volatility (VIX.X) has fallen the
hedge seems to be working almost to perfection with a $0.00 TOTAL
BOTTOM LINE result showing.  I highlighted in PINK the SPX and
QQQ trades here as both were trading right at their WEEKLY S1s in
their WEEKLY Pivot matrix.

One question here.  Now that the QQQ has traded my original
bullish short-term target of $34.57, do I remove the hedge?  Do I
lock in the $170 gain, and look for the WEEKLY R1 to find
selling?  That's a tough answer to come up with just 1-minute to
go until the Philadelphia Fed Survey is due to be released.

Let's give the hedge portfolio another test as the Philadelphia
Fed Survey is set to be released in 1-minute.

After Philadelphia Fed - market responds to new information



I let 10-minutes pass when the above table of the hedge portfolio
was captured.  Hey look at that BOTTOM LINE with a $65.00 profit
showing and I haven't decided at this point to sell the QQQ in
the hedge portfolio.

However, at 12:11:34 PM EST, I did profile a day trade short in
the QQQ at $34.52, stop $34.65 and target of $34.30.

All be darned if the QQQ didn't trade may stop at $34.65 and
trade higher to its DAILY S2 of $34.68.  Good thing I kept the
QQQ long trade in the hedge portfolio wasn't it?  Keep reading!

I then turned and profiled a bullish trade at 01:02:50 PM EST,
with instruction that the QQQ must show a 5-minute bar chart
interval close ABOVE $34.68, and if it did would then bid the QQQ
at $34.69, stop $34.55, and target $34.99.  I was beginning to
think the QQQ could rally to an option expiration peg level of
$35.00.

All be darned if $34.68 didn't turn out to be the session high.

Now we scroll forward to 03:45 PM EST.  By now, Michael Jackson
has arrived at the Santa Barbara airport and turned himself into
authorities, the OptionInvestor.com Market Monitor server has
crashed, Drake the dog (my yellow Labrador Retriever) has just
chewed a laptop computer cord in half, and all heck has broken
loose intra-day.

SPX Put vs. QQQ long - 11/20 03:45 PM EST



Drake the dog is locked in his sky kennel, the OptionInvestor.com
Market Monitor is up and running, but now the web site server
where I'm trying desperately to upload the OI 03:15 Update isn't
working.  I've just gotten off the phone with the IT department
and problems look to be resolved.

Hey!  Look there.  The BOTTOM LINE (Total) is back in positive
territory, and the hedge portfolio looks to be doing OK again.

I've just about made it through another day, but there's 30-
minutes still left to go.  What else can be thrown at us before
the closing tick in the QQQ of 04:15 PM EST?

SPX Put vs. QQQ long - 11/20 04:15 PM EST



We're closed!  And the despite a rather full day of news and
volatility, the hedged portfolio didn't perform all that bad at
the BOTTOM LINE (Total) settled with a $180 gain by the close.

Now all of the above was an intra-day observation of a hedge
portfolio, but if an investor were to pretend that each of the
screen captures of the hedged portfolio was a screen capture of
each day at the close, or each week at the close, they could
begin to envision how a hedged portfolio could be monitored and
adjustments made.

What do we KNOW about the hedged portfolio?

It performs "best" in a downward or BEARISH market environment,
but seems to perform OK in an upward moving environment.

With just one SPX put option, the hedge portfolio CANNOT have any
BEARISH part of the hedge being removed, so we KNOW that the QQQ
position, with 500 shares becomes the "tuning fork" for the
hedged portfolio.

I KNOW that if the markets decline, the QQQ is going to be a drag
on results.  Just like a mechanic will tweak a few screws on a
car's carburetor or fuel injection systems to get the engine
running just right, in the above portfolio, the QQQ can be leaned
back (sold) or enriched (bought) to have the portfolio fine
tuned.

But just as a mechanic will hook up a car to a computer
diagnostics machine to get readings on how efficiently an engine
is running, and to try and pinpoint areas that aren't working
correctly, the trader/investor performs similar task by checking
in on things from time to time.

An investor that might hold 10 bullish positions in his/her
account that uses an index option as a hedge should KNOWS that
the index option is about as fine tuned as it is going to get, as
the index option should represent the index, where the only real
inefficiency is the VARIABLE knows as premium, which we have
little control over, but understand that PREMIUM erodes as option
expiration nears.

It's the 10 bullish positions that must be fine tuned, and just
as a car mechanic looks to fix what appears to be broken, it is
often times the portfolio manager that needs to either "fix" the
stock (sell it) if it is the broken part of the portfolio.

This is where the relative strength of a stock versus the INDEX
is would most closely be associated with can become important.

A trader/investor that has purchased a put option on the SPX,
which then represent the BEARISH part of a hedge portfolio, will
most likely use that index (the SPX) as the index from which to
measure relative strength against.

An investor/trader that doesn't want to sell a weak stock that is
falling faster, or falling faster than the hedge the SPX put can
provide, the investor/trader has only one alternative.  The
trader/investor must then purchase a greater portion of the
BEARISH hedge instrument (SPX Put).

This can be analogous to throwing good money at an investment to
try and save a bad investment (the weak stock).

We certainly hope that NOBODY thought the way to save a hedged
portfolio that has a weak stock in it, is to buy more of the weak
stock!  Oh but you'd be surprised at the number of investors and
traders that buy more shares in a falling stock.  The inverse is
true where a trader/investor will sell short more and more of a
strong stock that keeps moving against them.

After reading the above article, I could generate multiple
question that still need to be answered.

One would be... if the markets continue to decline, at what point
do you call it quits in some of the QQQ?  (Think about using the
NASDAQ-100 Bullish %)  Ideally, when the bullish is at 0% you
wouldn't have wanted to have a single share of QQQ, if it had
been at 100% months ago.  What if a the bullish % were at 80% one
week, and 75% the next week?

What's 100% minus 75%?  I come up with 25%.  Maybe I could fine
tune the QQQ by reducing my 500 initial long position by 25%, or
cut/sell 125 shares from the account.  I'd certainly want to
monitor the BOTTOM LINE (Total) over the next week or two to see
how things are running.

Another question is... That December option is going to expire on
December 19, and that's not too far away.  How does this short
time frame come into play?  With a December option, you are
correct that this is a very short time frame and must be
monitored on a more frequent basis as the passage of time eats
away at the options premium faster with time decay.  A shorter-
term trader that buys a near-month expiration has to be willing
to spend more time monitoring the BOTTOM LINE, which can easily
be tracked at the close of each trading day.

Some shorter-term hedge traders will actually hand chart the end
of day account value using a point and figure chart.  All that is
needed is a piece of graph paper and a pencil.  A horizontal line
is drawn in the middle of the page, with base value of $0.00
(zero) and each day, the end of day portfolio BOTTOM LINE (Total)
could be charted.  What will most likely be found is the chart
will begin producing MAX inflexion points of profitability or
loss for the hedge portfolio.  It is the MAX profit that keeps
showing up, which becomes the trader/investor's clue that a max
point of efficiency or profit has been obtained from the hedge.
It is at that observation when a SELL AT OPEN on the put is
placed with the broker, and a new put, with extended duration can
then be purchased in order to once again establish a hedged
portfolio.

If you can think of any other questions, I'd love to try and
address them in a future column.

Traders/investors trying to get comfortable with this type of
strategy can easily establish a "paper trade" portfolio to star
out with.

Place your stocks in a portfolio tracker and begin testing it
NOW!  If you have an Excel spreadsheet, you can also build a
quick portfolio tracker of your own if you don't have trading
software like QCharts that has a portfolio tracker built in.

Then, either each night, ever other day, or once a week, sit down
at your computer and simply update the closing values of your
stocks, and the put option you have selected.  You may find you
become more intimate with your holdings and get a feel for how
the market and your stocks are trading.

Wow!  That's a lot to digest isn't it?  Again... send me some
questions you might have.  I don't know everything, but I'll try
to answer those that I can.

Drake!  Don't chew on that ..... Bzzzzzzzzzzzzz

Jeff Bailey


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

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

Symbol  Co               Date           Comment      EPS Est

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

CPB    Campbell Soup         Mon, Nov 24  -----N/A-----     0.49
DY     Dycom Industries      Mon, Nov 24  After the Bell    0.25
SMTC   Semtech               Mon, Nov 24  After the Bell    0.11
VAL    Valspar               Mon, Nov 24  Before the Bell   0.73


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

ADI    Analog Devices Inc.   Tue, Nov 18  After the Bell    0.23
BMO    Bank Of Montreal      Tue, Nov 25  -----N/A-----      N/A
BFb    Brown-Forman Corp     Tue, Nov 25  Before the Bell   1.39
DE     Deere & Company       Tue, Nov 25  Before the Bell   0.18
DLTR   Dollar Tree Stores    Tue, Nov 25  After the Bell    0.31
EV     Eaton Vance Corp.     Tue, Nov 25  Before the Bell   0.43
HRB    H&R Block, Inc.       Tue, Nov 25  After the Bell   -0.06
HNZ    H.J. Heinz Company    Tue, Nov 25  Before the Bell   0.54
HUG    Hughes Supply         Tue, Nov 25  After the Bell    0.75
KWD    Kellwood Company      Tue, Nov 25  1:00 pm ET        1.07
MIK    Michaels Stores       Tue, Nov 25  After the Bell    0.48
NPSN   NASPERS LTD           Tue, Nov 25  Before the Bell    N/A
RY     ROYAL BK CDA MONTREAL Tue, Nov 25  -----N/A-----      N/A
SIGY   Signet Group          Tue, Nov 25  07:00 am ET        N/A
TECD   Tech Data Corporation Tue, Nov 25  After the Bell    0.43


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

BCM    Canadian Impl Bank ComWed, Nov 26  Before the Bell    N/A
OTE  Hellenic Telecomm       Wed, Nov 26  Before the Bell    N/A
HRL  Hormel Foods CorporationWed, Nov 26  Before the Bell   0.49
AHO  Koninklijke Ahold NV    Wed, Nov 26  -----N/A-----      N/A
TD  Toronto Dominion Bank    Wed, Nov 26  -----N/A-----      N/A


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

None


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

None


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

Symbol  Co Name              Ratio    Payable     Executable

DIOD    Diodes Inc                3:2      Nov  25th   Nov  26th
JAH     Jarden Corporation        3:2      Nov  26th   Nov  27th
MFLR    Myflwr Co-operative Bank  3:2      Nov  28th   Dec   1st
LABL    Multi-Color Corporation   3:2      Nov  30th   Nov  31st
NFI     NovaStar Financial, Inc   2:1      Dec   1st   Dec   2nd
MMSI    Merit Medical Systems Inc 4:3      Dec   2nd   Dec   3rd
MRTN    Marten Transport, Ltd     3:2      Dec   5th   Dec   8th
CRRC    Courier Corporation       3:2      Dec   5th   Dec   8th


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

The Thanksgiving holiday is Thursday and Wall Street has a lot of
economic reports to digest both Tuesday and Wednesday.  GDP,
consumer confidence, personal income & spending, durable orders
and more.


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

----------------
Monday, 11/24/03
----------------
None


-----------------
Tuesday, 11/25/03
-----------------
GDP-Prel. (BB)           Q3  Forecast:    7.3%  Previous:     7.2%
Chain Deflator Prel.(BB) Q3  Forecast:    1.7%  Previous:     1.7%
Consumer Confidence (DM)Nov  Forecast:    82.8  Previous:     81.1
Existing Home Sales (DM)Nov  Forecast:   6.50M  Previous:    6.69M


-------------------
Wednesday, 11/26/03
-------------------
Initial Claims (BB)   11/22  Forecast:     N/A  Previous:     355K
Personal Income (BB)    Oct  Forecast:    0.3%  Previous:     0.3%
Personal Spending (BB)  Oct  Forecast:    0.0%  Previous:    -0.3%
Durable Orders (BB)     Oct  Forecast:    0.5%  Previous:     0.8%
Mich Sentiment-Rev (DM) Nov  Forecast:     N/A  Previous:     93.5
Help-Wanted Index (DM)  Oct  Forecast:      38  Previous:       37
New Home Sales (DM)     Oct  Forecast:   1133K  Previous:    1145K
Chicago PMI (DM)        Nov  Forecast:    56.5  Previous:     55.0
Fed's Beige Book (DM)

------------------
Thursday, 11/27/03
------------------
None


----------------
Friday, 11/28/03
----------------
None


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


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The Option Investor Newsletter                   Sunday 11-23-2003
Sunday                                                      2 of 5


In Section Two:

Watch List:
Call Play of the Day: UTX
Dropped Calls: APA
Dropped Puts: AVID, AZO


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

Potential Trades Developing

Saint Jude Medical - STJ - close: 59.85 change: +0.48

WHAT TO WATCH: Shares of STJ have slowly been edging higher and
after bouncing from 58.50 near its 21-dma the stock looks poised
to rally higher.  Traders might want to use a trigger above
$60.50 or 60.55 to open the play and target a move to the $65.00
area.  STJ's point-and-figure chart shows a bullish catapult
breakout so the upside could be even higher.

Chart=


---

Sealed Air Corp - SEE - close: 50.45 change: +0.09

WHAT TO WATCH: SEE may be hinting at an entry point soon.  The
stock burst out over resistance in mid-October but found the $54
level too tough to break.  The recent consolidation has brought
it back to the psychological round-number level at $50 and its
50-dma.  Bulls might want to consider plays on a move up and
through the 51.50 area.  Bear might want to consider plays on a
drop below its 100-dma near 49.50.  A bearish target would be the
$45 mark near its 200-dma.

Chart=


---

Briggs Stratton - BGG - close: 66.26 change: +2.71

WHAT TO WATCH: We mentioned BGG as a potential bullish trade in
the MarketMonitor on Thursday and it looks like someone was
listening.  Investors bought the dip and BGG added 4.26% on
strong volume Friday.  The strong close over $66 looks tempting
but conservative traders may not want to chase it.  A short-term
bullish target would be $70.  Watch out for resistance at $68.

Chart=


---


Harrah's Entertainment - HET - close: 45.60 change: +0.53

WHAT TO WATCH: HET broke out over resistance at $45 two weeks ago
and traded to $48 in short order.  Since then it has pulled back
only to bounce at $45 again.  Bullish traders might want to use a
trigger over $46.00 or 46.05 to open new long positions.  A tight
stop under the 21-dma should limit risk.

Chart=


---

Bard C.R.Inc - BCR - close: 74.35 change: -0.43

WHAT TO WATCH: BCR has reversed its momentum and Friday's session
confirmed the breakdown under its simple 50-dma.  Volume was
strong on Friday at 530K.  There is some support near 72.50 but
bearish traders could target the $70.00 or 200-dma near $68.

Chart=



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

AHC $47.02 -0.60 - AHC recently failed at the $50 level and the
ensuing sell-off was powered on big volume.  Friday's drop under
the 200-dma looks bad but support is only $2.00 away at $45.00.

NSM $39.90 +0.18 - Shares of chip stock NSM have been hovering
around the 40 mark for five days now.  Bears can go short under
$39.00.  Bulls can go long over 41.25.

WEN $37.40 +0.41 - Wendy has been bouncing off its simple 30-dma
for months now and bulls are getting another shot to buy the dip.
Use a tight stop under Thursday's low.


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

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

United Technologies - UTX - cls: 83.90 chng: +0.60 stop: 82.00

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
^^^^^

Apache Corp. - APA - close: 69.41 change: -0.89 stop: 70.00

Our APA play capped off a disappointing week on Friday by falling
through our $70 stop in the first hour of trade.  While weakness
in energy prices certainly played a role, APA's weakness was
greater than should have been warranted by the mild pullback in
the price of crude oil and natural gas.  Our stop had been placed
just below the initial breakout level, so APA's break and close
below there (not to mention the 50-dma) is an ominous sign.
Needless to say, we're dropping the play now that it has come
back near where we initiated coverage nearly 3 weeks ago.  Any
rebound early next week should be used as a gift of an exit point
on any remaining open positions.

Picked on November 2nd at    $69.72
Change since picked:          -0.31
Earnings Date               1/22/04 (unconfirmed)
Average Daily Volume =     1.29 mln



PUTS
^^^^

Avid Technology - AVID - cls: 49.46 chg: +0.31 stop: 51.26

We're going to throw in the towel on AVID.  We haven't been
stopped out and the stock's weekly and P&F charts still look very
bearish.  Yet something doesn't sit right with us and we've been
looking for a breakdown that has yet to materialize.  If you're
willing to take the heat a stop loss at $51.00 should keep the
pain to a minimum.  Even a stop at 50.25 wouldn't hurt since the
stock hasn't traded above $50 in a week.  We will keep an eye on
it and we might bring AVID back to the play list on a move below
48.00-47.50.  Good luck.

Picked on November 16 at $48.45
Change since picked:     + 1.01
Earnings Date          10/16/03 (confirmed)
Average Daily Volume:       637 thousand
Chart =


---

AutoZone, Inc. - AZO - close: 92.95 change: +1.59 stop: 94.00

After plunging from its lofty height above $100 in late October,
AZO looked like a great breakdown play.  Unfortunately, every
bearish push lower was met with eager buyers just above the $90
support level.  When the first rebound failed, it looked like the
stock really was ready to head south.  Alas, it wasn't to be, and
the rebound over the past couple sessions definitely looks
bullish with buying volume starting to increase again.  Friday's
close just below the $93 resistance level, and at the high of the
day looks like the precursor to a breakout over that resistance
and the 50-dma early next week.  We're not going to take that
chance though, and are closing the play this weekend near where
we initiated coverage a couple weeks ago.  If not closing out
positions at the open on Monday, make sure to keep stops in place
just over the 50-dma.

Picked on November 9th at    $93.30
Change since picked:          -0.35
Earnings Date              12/22/04 (unconfirmed)
Average Daily Volume =     1.13 mln



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

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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Contact Support
The Option Investor Newsletter                   Sunday 11-23-2003
Sunday                                                      3 of 5


In Section Three:

Current Calls: DGX, HOV, MME, PGR
New Calls: DHR, UTX
Current Put Plays: GDW, MXIM, NFLX
New Puts: None


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

Quest Diagnostics - DGX - cls: 71.60 chng: +0.39 stop: 68.40*new*

Company Description:
Quest Diagnostics was the result of a 1996 Corning spinoff, and
currently holds the title of the world's #1 clinical laboratory.
DGX performs more than 100 million routine tests annually,
including cholesterol, HIV, pregnancy, alcohol, and pap smear
tests.  Operating laboratories throughout the US and in Brazil,
Mexico, and the UK, DGX also performs esoteric testing (complex,
low-volume tests) and clinical trials.  The company serves
doctors, hospitals, HMOs, and other labs as well as corporations,
government agencies, and prisons.

Why we like it:
After its initial breakout over $70, DGX has been consolidating
in a very clear continuation "flag" pattern between $70.25-72.00.
Friday's session continued that pattern and the push to close
near the high of the day looks decidedly bullish.  The stock
appears about ready to break that pattern to the upside and when
it does, it should provide a solid opportunity to initiate new
momentum-based positions.  Since the break above the flag should
initiate a move of roughly the same magnitude as that which
preceded the consolidation, we're looking for roughly a $5 move
above the $72 breakout level.  Actually, in an effort to not get
too greedy, we've set our target a bit lower at the $75 level.
In the event of one more dip towards the bottom of the range
before the actual breakout, new positions can be taken on a
rebound from above the bottom of the flag.  We're still giving
DGX some room to move in the event of a slightly deeper dip,
steadily raising our stop just below the 20-dma ($68.49).  So our
stop now rises to $68.40.  Once DGX breaks out above $72, the
stop will rise to just below $70.

Suggested Options:
Shorter Term: The December 70 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 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 January 70 Call.

BUY CALL DEC-70*DGX-LN OI=1180 at $3.40 SL=1.75
BUY CALL DEC-75 DGX-LO OI= 475 at $1.15 SL=0.50
BUY CALL JAN-70 DGX-KN OI=2046 at $4.00 SL=2.50
BUY CALL JAN-75 DGX-AO OI= 384 at $1.70 SL=0.75

Annotated Chart of DGX:



Picked on November 13th at   $69.46
Change since picked:          +2.14
Earnings Date               1/20/04 (unconfirmed)
Average Daily Volume =        876 K


---

Hovnanian Enterprises - HOV - cls: 86.50 chg: +1.99 stop: 81.99

Company Description:
Hovnanian Enterprises, Inc. was founded in 1959 by Kevork S.
Hovnanian, Chairman, and is headquartered in Red Bank, New
Jersey. The Company is one of the nation's largest homebuilders
with operations in Arizona, California, Maryland, New Jersey, New
York, North Carolina, Ohio, Pennsylvania, South Carolina, Texas,
Virginia and West Virginia. The Company's homes are marketed and
sold under the trade names K. Hovnanian, Washington Homes,
Goodman Homes, Matzel & Mumford, Diamond Homes, Westminster
Homes, Fortis Homes, Forecast Homes, Parkside Homes, Brighton
Homes, Parkwood Builders, Summit Homes and Great Western Homes.
As the developer of K. Hovnanian's Four Seasons communities, the
Company is also one of the nation's largest builders of active
adult homes. (source: company press release)

Why We Like It: (Original write up from Thursday)
Wow! It's hard to pick another sector that has been as strong or
resilient as the homebuilders.  The group has been hot, hot, hot
and shows no signs of slowing down. Historically low mortgage
rates have been drawing more and more homebuyers and the 30-year
mortgage just dipped again last week to levels not seen since
mid-summer.  I know that many had been calling an end to the run
in homebuilders, claiming these stocks would collapse under their
own weight.  Shoot, I may have said that myself at one time or
another.  Evidently, there is an insatiable appetite for these
stocks, especially with the Fed still quoting their "considerable
period of time" mantra (for keeping interest rates low).  Of
course mortgage rates aren't just affected by the Fed.  If
stock's sell off and investors run to bonds it will drive yields
lower, which will drive mortgage rates lower and should push
homebuilders even higher.  If stocks run higher it will probably
be due to a renewed encouragement for the economy and
homebuilders should run with them.  The caveat there is that
rising bond yields, as money rotates from bonds back to stocks,
may slow the homebuilders' ascent.

Recently, rival homebuilder Centex (CTX) said things look very
favorable not just through 2004 but through 2005.  The company
(CTX) also announced a 2-for-1 stock split.  We think HOV might
be a good candidate for a stock split as it approaches its early
December earnings announcement.  The last time HOV split its
stock was a 2-for-1 back in 1987.  I know many traders are too
wary to chase a stock that is up more than 160% this year alone.
I would be too.  However, despite the price appreciation HOV
still has a P/E under 13.  In a recent interview a senior
director for Standard & Poor's portfolio advisers said they like
HOV and had a 12-month price target of $96 for the stock.  We
think if HOV can break $90 it will head straight to $100.

! Weekend Update:
Excellent!  Shares of HOV powered higher and broke out above
short-term resistance at $85.50.  This means our call play was
triggered at 85.51 with a stop at 81.99.  We're going to leave
the stop in place for the moment.  Fortunately, the stock didn't
run too far and still looks appealing for new bullish positions.
Checking the P&F chart shows that HOV did confirm the bullish
triangle breakout - a very successful pattern to trade.


Suggested Options:
Short-term traders can probably do well using December strikes
while longer-term traders can look over the February '04 strikes.
We like the 80s, 85s and 90's.  We realize ATM strikes have the
highest premium but the DEC 85 looks like the best pick.

BUY CALL DEC 80 HOV-LP OI= 514 at $8.30 SL=5.25
BUY CALL*DEC 85 HOV-LQ OI= 996 at $4.90 SL=2.50
BUY CALL DEC 90 HOV-LR OI= 665 at $2.55 SL=1.20
BUY CALL DEC 95 HOV-LS OI= 469 at $1.15 SL= --
BUY CALL FEB 85 HOV-BQ OI= 273 at $8.10 SL=6.00
BUY CALL FEB 90 HOV-BR OI= 407 at $5.70 SL=3.65

Annotated Chart:




Picked on November 21 at $85.51
Change since picked:     + 0.99
Earnings Date          12/08/03 (unconfirmed)
Average Daily Volume:      827  thousand
Chart =


---

Mid Atlantic Med. - MME - cls: 59.30 chng: +0.60 stop: 57.75*new*

Company Description:
Mid Atlantic Medical Services is a holding company for
subsidiaries active in managed healthcare and other life and
health insurance related activities.  MME and its subsidiaries
offer a broad range of managed healthcare coverage and related
ancillary insurance and other products and deliver these services
through health maintenance organizations, a preferred provider
organization, and a life and health insurance company.  MME owns
a home healthcare company, a pharmaceutical services company and
a hospice company.  The company also owns a collections company
and maintains a partnership interest in an outpatient surgery
center.

Why we like it:
The past week has certainly been favorable for our MME play, as
we've gamed the rebound off of strong support just below $56.
The stock gained a bit of ground early in the week, but it really
got a shot in the arm on Wednesday when UNH made bullish comments
about its outlook for 2004.  Recall that the two stocks are now
linked due to the pending merger and what is good for UNH is also
good for MME.  With UNH breaking above the $50 resistance level,
MME shot higher, tagging $59 and holding onto that level into the
end of the week.  Our target for the play is $60-61 in an
expected return to the late October highs and that target is
looming nearer by the day.  We're no longer advocating new
positions as our focus is now turning to maximizing gains in the
play.  In order to keep our risk to reward ratio roughly balanced
from here on out, we're raising our stop to $57.75, which is just
below where the 10-dma ($57.72) will be on Monday.  Should the
bulls start the week out in a jaunty mood, we're advocating exits
on a rally into our $60-61 target zone.

Suggested Options:
With the rapid approach of our exit target, we are not
recommending new positions in MME.

Annotated Chart of MME:



Picked on November 11th at   $56.65
Change since picked:          +2.65
Earnings Date               2/04/04 (unconfirmed)
Average Daily Volume =        713 K


---

Progressive - PGR - close: 77.02 chg: +0.28 stop: 74.99

Company Description:
The Progressive group of insurance companies ranks third in the
nation for auto insurance based on premiums written, offering its
products by phone at 1-800-PROGRESSIVE, online at progressive.com
and through more than 30,000 independent insurance agencies.
(source: company press release)

Why We Like It:
PGR has thus far performed as expected but trading it has been a
test of patience.  The upside breakout took longer to develop
than we had hoped and so far the bounce from $76 has yet to
appear.  Looking back we see the surge higher a week ago from
Friday.  That 4% jump was fueled by news from PGR that October
2003 results were outstanding.  Net premiums had jumped 21% over
the previous year and net income had soared 53%.  A couple of
analysts came out with positive comments and PGR was off to the
races.

Then last weekend there were the two bombings in Turkey and it
sucked the air from the market's sails.  Profit taking was the
name of the game last week and PGR was not immune.  Fortunately,
the pull back in PGR has been orderly and is setting up for
another bullish entry point above the $76 level.  However, we'd
like to see a bounce higher before initiating any new long
positions.  A move over $77.50 might suffice or maybe $78 for the
more conservative hearted.  We will leave our stop loss at 74.99.

Suggested Options:
Short-term traders can choose from the December options while
longer-term traders can look over the February or May strikes.
We like the 75's and 80s but our suggested call is the DEC 75.


BUY CALL DEC 75*PGR-LO OI= 87 at $3.40 SL=1.75
BUY CALL DEC 80 PGR-LP OI=169 at $0.80 SL= --
BUY CALL FEB 80 PGR-BP OI=404 at $2.40 SL=1.35
BUY CALL FEB 85 PGR-BQ OI=151 at $0.85 SL= --

Annotated Chart:



Picked on November 07 at $76.25
Change since picked:     + 0.77
Earnings Date          10/22/03 (confirmed)
Average Daily Volume:      654  thousand
Chart =



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

Danaher Corp - DHR - close: 81.95 chg: +1.41 stop: 79.50

Company Description:
Danaher, a leading industrial company, designs, manufactures, and
markets innovative products, services and technologies with
strong brand names and significant market positions.  The company
was previously known as DMG Inc.  In addition to process/
environmental tools the company also supplies aircraft safety
equipment.  Its general-purpose tools include hand tools,
ratchets, sockets, wrenches and more.

Why We Like It:
Dip buying is still a popular past time these days on Wall Street
and investors are fond of playing the game in shares of DHR.  The
stock has done very well since late summer and strong earnings in
October, where DHR beat by 3 cents, didn't hurt.  The recent
profit taking in DHR has brought the stock back to round-number
support near $80 and its simple 50-dma.  We mentioned DHR as a
stock to watch as a bullish play in the MarketMonitor on Thursday
and sure enough the stock bounced higher Friday from support.

DHR's MACD is suggesting we're a little early for new long
positions but its stochastics, RSI and momentum indicators are
already turning positive.  Conservative traders might want to use
a trigger above $82.00 or 82.50 but we like the stock at current
levels and won't use a trigger.  Our initial stop loss will be at
the 50-dma ($79.50).  Short-term traders just looking for a quick
move can target $85.00 but we think DHR can make it to the
$87.50-90.00 region.  The stock is a split candidate.  DHR last
split 2-for-1 on June 1st, 1998 at the $72 level.

Suggested Options:
Traders can choose from the December, January or March options.
We like the December 80s and 85s but will suggest the DEC 80
strike as our favorite.

BUY CALL DEC 80*DHR-LP OI= 769 at $3.60 SL=1.80
BUY CALL DEC 85 DHR-LQ OI= 756 at $1.00 SL= --
BUY CALL JAN 80 DHR-AP OI= 557 at $4.40 SL=2.40
BUY CALL JAN 85 DHR-AQ OI=1222 at $1.75 SL=0.90

Annotated Chart:



Picked on November 23 at $81.95
Change since picked:     + 0.00
Earnings Date          10/16/03 (confirmed)
Average Daily Volume:       829  thousand
Chart =


---

United Technologies - UTX - cls: 83.90 chng: +0.60 stop: 82.00

Company Description:
As a diversified manufacturing company, UTX has four principal
operating segments: Otis (elevators and escalators), Carrier
heating, ventilation and air conditioning systems), Pratt &
Whitney (aircraft engines and space propulsion), Flight Systems
helicopter electrical systems).  Between the Pratt & Whitney and
Flight Systems divisions, UTX participates in virtually all
aspects of the design and manufacture of aircraft propulsion
systems, from engines and their associated flight controls to
auxiliary power units, compressors and instrumentation.

Why we like it:
Ever since bottoming near $54 in early March, UTX has been
marching steadily higher on the premise of economic recovery
later this year and into 2004.  So strong has been the rally,
that in early November the stock came within a nickel of $88,
eclipsing the prior all-time high of $87.50, set back in early
2001.  A measured pullback certainly makes sense after that feat
and that's precisely what transpired, with the stock falling back
to the 50-dma (now at $82.72) earlier this week.  The early
August and late September pullbacks also found support right at
the 50-dma before UTX rebounded and went on to set new 52-week
highs.  Until price action proves otherwise, we're going to set
our sights on a continued rebound and a rally to new all-time
highs over the next couple weeks.  While the PnF chart is still
quite bullish, it is really no help in picking a price target as
the first buy signal in this series gave a target of $85, which
has already been exceeded.  We'll pick $90 as our target,
although it's a safe bet the bulls will have their work cut out
for them as UTX nears the $88 level.

Clearly, the ideal entry point into the play would have been
yesterday's rebound from the 50-dma, which just happens to be
right on top of the upward-sloping (and therefore supportive)
lower Bollinger band ($82.66).  Adding to the support near this
level is the dip back to just above $82 in late October before
the rebound and run to new highs earlier this month.  Another dip
and rebound from the vicinity of the 50-dma would be ideal for
entry into the play, but more realistically, we'll have to settle
for an entry near current levels.  More conservative traders may
want to wait for a break above the 30-dma ($84.65) before
playing, as that would also get the stock over the $84.50
resistance level from mid-October.  It may seem a bit tight, but
we're setting our stop initially at $81.25, which is below
several layers of support, including the 50-dma, and support from
early October.

Suggested Options:
Shorter Term: The December 85 Call will offer short-term traders
the best return on an immediate move, as it is just slightly out
of the money.

Longer Term: Aggressive traders looking to capitalize on an
extended rally will want to look to the January 90 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 January 85 Call.

BUY CALL DEC-80 UTX-LP OI= 376 at $4.80 SL=2.75
BUY CALL DEC-85 UTX-LQ OI=2077 at $1.45 SL=0.75
BUY CALL JAN-85 UTX-AQ OI=1367 at $2.45 SL=1.25
BUY CALL JAN-90 UTX-AR OI=4370 at $0.75 SL=0.30

Annotated Chart of UTX:



Picked on November 23rd at   $83.90
Change since picked:          +0.00
Earnings Date               1/15/04 (unconfirmed)
Average Daily Volume =     1.84 mln



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Golden West Fincl - GDW - cls: 100.18 chg: -0.09 stop: 101.75*new*

Company Description:
Headquartered in Oakland, California, Golden West is one of the
nation's largest financial institutions with assets of over $75
billion as of October 31, 2003. Currently operating 476 savings
and lending offices in 38 states under the World name, the
Company has one of the most extensive thrift branch systems in
the country.  (source: company press release)

Why We Like It:
We are feeling a lot more cautious on GDW than we did just a
couple of days ago.  Initially, we wrote GDW to capture any
profit taking as it and the BIX and BKX banking indices looked
poised to breakdown.  That breakdown has not yet occurred.  While
GDW still looks weak with a short-term trend of lower highs the
BIX and BKX actually look ready to bounce.  If the weekend
survives without any major terrorist incident the broader markets
could easily bounce higher taking the financials with them.  We
strongly considered closing GDW but its trend of lower highs
still makes it a tempting short play.

We are NOT going to suggest any new bearish positions in GDW
until the stock trades back below the $99.00 mark.  In the
meantime we ARE going to lower our stop loss to $101.75.  That
way if the market does bounce and GDW with it we'll be taken out
of the play somewhat quickly.

Take note...there is the potential risk that GDW could surprise
us with a split announcement.  The company last announced a 3-
for-1 split on Nov. 2nd, 1999 when shares were trading near $114.
We do *not* feel it's a very high risk for our short-term trade
but it does exist and a good reason to use a stop loss.

Suggested Options:
Stocks tend to fall faster than they rise so we like the December
puts but longer-term traders can mull over the February '04
strikes.  We hate to suggest the ATM strike but the DEC 100 looks
the best.

BUY PUT DEC  95 GDW-XS OI= 82 at $0.75 SL= --
BUY PUT DEC 100*GDW-XT OI= 64 at $2.40 SL=1.20
BUY PUT DEC 105 GDW-XA OI=  7 at $5.40 SL=3.50

Annotated Chart:



Picked on November 18 at $99.54
Change since picked:     + 0.64
Earnings Date          10/21/03 (confirmed)
Average Daily Volume:       608 thousand
Chart =


---

Maxim Int. Prod. - MXIM - close: 50.36 change: +1.21 stop: 52.30

Company Description:
MXIM designs, develops, manufactures and markets a broad range of
linear and mixed-signal integrated circuits, commonly referred to
as analog circuits.  The company also provides a range of high-
frequency design processes and capabilities that can be used in
custom design.  MXIM's objective is to develop and market both
proprietary and industry-standard analog integrated circuits that
meet the increasingly stringent quality standards demanded by
customers.

Why we like it:
Going down?  Or is it going up?  Both the Semiconductor index
(SOX.X) and our MXIM play have had a hard time making up their
minds over the past few days.  The SOX has been oscillating
around the $500 support/resistance level and MXIM has been
playing the same game around the $50 level.  Part of this lack of
conviction could be related to option expiration on Friday, but
now that it is out of the way, the true direction should reveal
itself early next week.  Friday's rebound from the $49 level
looks like a convincing bullish move and along with the SOX
closing back over $500, our play may be in trouble.  We're
counting on the top of the channel (now at $51.00) and the 10-dma
($51.09) to provide resistance and to send the stock back down
towards our target at the 50-dma ($45.89).  But with daily
Stochastics attempting to turn back up from oversold, the best
approach for new entries will be to wait for a break below $49
with the SOX dropping below the $495 level that has been acting
as support.  Maintain stops at $52.30.

Suggested Options:
Aggressive short-term traders will want to focus on the December
50 Put, as it will provide the best return for a short-term play.
Longer term traders will want to look to the January 45 Put, as
it should provide ample time for MXIM to move in our favor
without time decay becoming a major factor.

BUY PUT DEC-50*XIQ-XJ OI=1911 at $2.00 SL=1.25
BUY PUT DEC-45 XIQ-XI OI=1259 at $0.50 SL=0.40
BUY PUT JAN-45 XIQ-MI OI=1789 at $1.20 SL=0.60

Annotated Chart of MXIM:



Picked on November 18th at   $49.89
Change since picked:          +0.44
Earnings Date                1/27/04 (unconfirmed)
Average Daily Volume =      6.43 mln


---

Netflix Inc - NFLX - close: 45.65 change: +0.09 stop: 48.50

Company Description:
Launched in 1998, Netflix is the world's largest online movie
rental service, providing more than one million subscribers with
access to a comprehensive library of more than 15,000 DVD titles.
For $19.95 a month, Netflix subscribers can rent as many DVDs as
they want, with three movies out at a time, and keep them for as
long as they like. There are no due dates and no late fees. DVDs
are delivered directly to the subscriber's address by first-class
mail from shipping centers throughout the United States. Netflix
can reach more than seventy percent of its subscribers with
generally overnight delivery. The Company also provides
background information on DVD releases, including critic reviews,
member reviews and ratings and personalized movie
recommendations.  (source: company press release)

Why We Like It:
The tug-of-war at $45 for NFLX continues.  We initially added
NFLX as a speculative put play two weeks ago due to its
incredible gains (it was $5 about a year ago) and technical
reversal pattern.  The profit taking continued for a couple of
days before NFLX found support at its simple 50-dma and the $45
mark.  We new this level would be a fight between the bulls and
the bears and the struggle continues today.

Traders might be a little perplexed.  A potentially negative
article in the WSJ mid-week and a new broker "buy" rating on
Friday have failed to produce any moves in NFLX.  Bullish traders
might be encouraged by its inability to drop bears are noting the
trend of lower highs.  Its simple 10-dma continues to be overhead
resistance, which is good news for the shorts.  We're still
suggesting that new trades are probably best considered on a move
below the $44.00 mark but more aggressive traders might want to
make that judgment call if NFLX trades under $45 again.

Remember, this is more of a speculative technical play.  There
are a lot of fans out there and the company has a very strong
growth rate.


Traders should note that this is an aggressive play and not for
everyone.  NFLX typically carries an EXTREMELY high amount of
short-interest and when they cover it gets painful.  The need for
good stop loss is important.  Plus, after such a strong rise from
its IPO price less than two years ago there is the remote risk of
a stock split announcement.

Suggested Options:
The December 50s and 45s have the better open interest but our
favorite is probably the DEC 47.50.

BUY PUT DEC 50.00 QNQ-XJ OI=1365 at $6.40 SL=3.85
BUY PUT DEC 47.50*QNQ-XS OI= 825 at $4.70 SL=2.50
BUY PUT DEC 45.00 QNQ-XI OI=1860 at $3.40 SL=1.75
BUY PUT DEC 42.50 QNQ-XT OI= 654 at $2.20 SL=1.10

Annotated chart:



Picked on November 13 at $48.50
Change since picked:     - 2.85
Earnings Date          10/15/03 (confirmed)
Average Daily Volume:       1.7 million
Chart =



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

None


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The Option Investor Newsletter                   Sunday 11-23-2003
Sunday                                                      4 of 5


In Section Four:

Leaps: Ready For The Rebound?
Traders Corner: Ka-Ching, Ka-Ching, Ka-Ching – The Sweet Sound of
    CPTI Profits


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*****
LEAPS
*****

Ready For The Rebound?
By Mark Phillips
mphillips@OptionInvestor.com

Finally, the floodgates opened and we got some selling in these
pesky markets.  To be sure it was orderly and relatively mild,
accomplishing the task it needed to -- that of taking the
overbought edge off of this market.  But the beginning of a major
downleg?  I'm sorry, but I'm having a hard time with that idea.
Don't get me wrong, this market is overvalued by at least 30-40%,
and I'm not excited about much it has to offer on the long side.
However, I also understand that sentiment is still strongly biased
towards the bulls.

The Fed wants the market to go up and has been fueling its rise
with monetary creation.  Regardless of what shows up in the
official government propaganda, er I mean reports, there is
significant inflation occurring right now.  The CRB index is very
near 7 year highs and looking quite strong.  Copper, platinum,
gold, silver and numerous other commodities are hitting multi-year
highs, along with many agricultural and energy sector commodities
like cattle, soybeans, crude oil and natural gas.

Each of these commodities are surging higher for their own
individual reasons.  Cattle prices have seen a boost due to the
Canadian beef ban, and natural gas is running higher due to the
reality of a changed supply/demand dynamic.  Copper prices are a
good measure of increasing business in the technology arena and
right now the price of the orange metal is testing the 2000 high
and then will be into territory not seen since 1997.  The
interesting thing about this dynamic is that it is clearly and
unequivocally inflationary.

Commodities respond to global demand, not just demand here in the
U.S.  So trying to connect the dots and say that strong demand for
copper means that the domestic technology sector is improving is a
nonsequitor that requires a real knot in the space time continuum.
It's the equivalent of this bit of "logic" -- olives are black, I
do not like olives, so therefore I do not like anything black.
The GLOBAL economy is where the growth is, -- most of it in Asia.
Fed-induced liquidity has fueled that growth via the law of
unintended consequences.

In its attempt to reignite business growth here at home, the Fed
has pumped up several foreign economies and built twin housing and
debt bubbles here at home.  Those bubbles WILL pop -- it's just a
matter of when.  Until they do, the market and the economy can go
merrily along its way.  Just remember that playing bullish right
now is just like going ice-skating as the spring thaw approaches.
There are now thin patches and cracks are beginning to appear.
Fun can still be had, but we need to be extra vigilant in looking
out for new cracks nearby.  How did we get here?  Aaah yes, the
market was due for a correction.

But that's all I believe this little dip is.  All the major
indices broke their respective 50-dmas last week, but we've seen
this before -- in early August and then again in late September.
There was an intraday break of the 50-dmas in late October, but
that really isn't the same thing, now is it?  Let's take a look at
some of the signs we're looking for.  Has the market broken the
months-long pattern of higher highs and higher lows?  No.  Have we
seen a surge in volume on this downward move of the past week?
No.  Are bellwether stocks like MSFT, CSCO, DELL, INTC etc. seeing
heavy selling pressure and violating important support levels?
Well, MSFT is, but then it has been trading poorly for most of the
past year.  CSCO is near multi-year highs, DELL has just pulled
back to support and INTC is just below its recent highs, having
not touched its 50-dma since June.

Another metric we can use is the Russell 2000 index, and in
contrast to the other major indices, the RUT rebounded from its
own 50-dma ($520) last week.  In every way I can look at it, the
broad market has simply gone through the latest correction in its
bull run off the March lows.  The volatility indices VIX/VXO/VXN
reflect this reality as well.  While they're off their multi-year
lows of a few weeks ago, they are all still very low on a
historical basis.  The market still looks bullish, even though
this months-long upward move does look a bit long in the tooth.

The underlying problems still exist -- record budget and trade
deficits, the dollar continues to drill to multi-year lows (a
direct indication of the liquidity induced asset inflation that is
ongoing) and signs of a strong recovery in business spending are
still largely absent.

But sentiment is still rampantly bullish and that will likely keep
the broad market from experiencing a dramatic fall through the end
of the year.  Bullish percent readings are still holding very near
their cycle highs and the weekly Stochastics on the major indices
are still holding in or near overbought territory, just as they
have since the end of April.  Absent a sharp change in sentiment,
I think we are destined to maintain the upward trend for now.

That said, we are near enough to major resistance levels and there
is enough of a lack of upside pressure to make failed rallies in
the current environment attractive for the initiation of longer-
term bearish positions.  At the same time, there are stocks that
will likely continue to behave in a bullish manner, even if we do
see some renewed weakness in the overall market.  Our job in the
near-term is to take advantage of the dips to establish those
bullish positions and failed rallies to establish bearish
positions in anticipation of the broad market heading lower next
year and a few individual issues continuing higher. So let's take
a look and see what developed over the past week with respect to
our listed plays.

Portfolio:

WMT - After the post-earnings drop, WMT has held up remarkably
well, with the $55 level acting as a price magnet.  That magnetism
should come as no surprise, with support coming in the form of the
200-dma ($55.14) and expiration shenanigans keeping the stock
pinned to that level through Friday.  But that artificiality will
be gone next week and with Friday's close back under the 200-dma,
conditions look ripe for another leg down the chart.  Note that
the weekly Stochastics is really starting to make some definite
downward progress and at the current rate, we could be looking at
it bottoming in oversold sometime in the next 2-4 weeks.  The key
metric to watch will be whether price action heads south in
concert with the Stochastics or if support holds firm in the $53-
54 area.  We're still looking for a decline down to the $48-50
area, but at this juncture, new positions do not make sense.
Maintain stops at $58.50.


Watch List:

QQQ - Last week's decline was definitely the most convincing bout
of weakness yet witnessed in the NASDAQ since the rebound off the
March lows got underway.  Monday's drop under the bottom of the
rising channel was underscored by Tuesday's violation of the 50-
dma in the QQQ and then the stock spent the rest of the expiration
week hovering near $34.  So was that breakdown our best entry into
the play?  I sincerely doubt it.  The weekly Stochastics (10,5,3)
are just starting to poke down out of overbought (long-term
bearish), but at the same time, the daily Stochastics are
bottoming in oversold and getting ready to turn up (near-term
bullish).  There should now be solid resistance near $35.00,
getting even stronger up at $36.  That means we want to take
advantage of the next failed rally on the daily chart (preferably
in the $35.00-35.50 area) to initiate new positions.  One other
note that I think is pertinent has to do with the broken channel.
There have been a lot of stocks that have broken down out of their
rising channels lately, only to rebound right back into them on
the first bounce.  So we're going to want to be on the lookout for
similar behavior from the QQQ.  Ideally, the stock should rebound
to the bottom of the channel (currently $35.25) and rollover,
providing our ideal entry point.  If the QQQ shoots right back
inside the channel though, we'll have our warning that we still
may be a bit too early on this bearish play.  Either way, the next
week or two should prove interesting and enlightening.  If we do
get an entry, then we'll use a fairly tight initial stop at $37,
which is safely above the recent highs.

SMH - Despite the weakness last week, I remain wholly unconvinced
as to the downside potential in the SMH over the near term.  While
I could make a fundamental case for the downside, the bottom line
is that bullish sentiment is still strong.  Technically, price is
still above the channel that held until the upside break in late
August.  Since early August, the SMH has been trading in an even
steeper ascending channel, the bottom of which is right at $40
support.  Additionally, this is just below the top of the initial
channel and then there is additional support coming in from the
50-dma ($39.39) and the lower Bollinger band (daily) at $39.65.
Taken all together, it makes the odds of a major downside break
pretty slim, especially with last week's Semiconductor book-to-
bill number coming in at 1.0.  I don't want to eject the play from
consideration, but neither do I want to place money at risk in the
play until we see some real sign of weakness in the form of a
significant support break.   We'll continue to monitor the SMH,
but for now, this play remains on hold.

NEM - With the dollar continuing to plunge relative to other
currencies, it is really no great surprise to see gold holding
just below the $400 level.  As long as the price of the yellow
metal holds up, the chances of a significant pullback in NEM are
pretty low.  But I sense that we're nearing a significant
correction in both the price of gold and gold stocks, most likely
during the month of December.  I'm still kicking myself for
hanving missed the entry point last spring before this powerful
rally took off, but I'm hesitant to chase it higher, especially
with NEM coming into strong historical resistance in the $45-47.50
area.  Given the global financial picture, I continue to believe
gold is headed much higher over the next few years, but we need to
establish our positions on the elusive and infrequent pullbacks.
Support for NEM should be solid in the $40 area, becoming
formidable down at $38.  So those remain our lines in the sand,
where we'll look to get onboard.  Once filled, we'll use a wide
stop at $35, as I think it is very likely that NEM will take out
its 1996 highs near $60 next year.

SBUX - I vacillated back and forth for the last three days of last
week about whether to take an entry into our SBUX play.  Our
initial entry target never arrived, as we were looking for a
rebound from the $28 area.  Over the past week, the stock has
finally felt a bit of selling pressure, coming right down to the
$30 level, at the upper edge of raised targeted entry zone.
That's the good news, but the bad news is that you've got to
squint pretty hard (even on the intraday charts) to call it a
bounce.  More than anything, the action of the past few days looks
like typical option expiration monkey business and I'd prefer to
wait for clarity next week and see what price action transpires.
SBUX is now back inside its ascending channel, and resting right
on the 50-dma ($30.53).  Right now, I've got my eye on a continued
slide down to the center of the rising channel at $29, as a
rebound from that level would be preferable to an entry at
Friday's closing price.  However, if SBUX does rebound from the
$30 level early next week, we will take that as an entry point.
In either case, our initial stop will be set rather wide at
$26.50, just below both the bottom of the channel and the 200-dma
($26.53).

DJX - Just like the other major indices, the DOW had a rough time
last week, breaking down below the 50-dma.  The all-important
question is whether this is the beginning of a major trend change
or just the latest buying opportunity in this cyclical bull
market.  I happen to think it is a little bit of both.  I expect
this dip below the 50-dma to be bought just like the ones from
early August, late September and late October.  But I'm also
looking for the next rally attempt to fail at a lower high, giving
us a potential H&S top formation.  I still think the DOW is
destined to tap that 10K level, but just in case I'm wrong, I've
decided to lower that entry target just a bit.  Let's lower our
entry target on the DJX to $98.50-99.00 and then we'll let the
chips fall where they may.  I expect we may have to take some heat
up to the $100-101 area, but that's about it.  More conservative
traders might opt to open a half position at the listed target and
then round out to a full position on a run into the $100-101 area.
Remember, we're using a wide stop on this play up at $104 to
prevent getting stopped out before the larger decline we expect
gets underway.

QCOM - Just like clockwork!  I finally add QCOM to our Watch List
and then the stock sees some weakness.  The past two days have
been particularly ominous, with QCOM breaking both the bottom of
the channel and the 50-dma and closing under the $44 level for the
first time in nearly a month.  I'll stick with the play and the
entry target in the $42-43 area.  But we'll need to see a
convincing bounce to enter the play.  This is not one in which
we'll want to take a chance at catching a falling knife.  I like
the underlying fundamentals at QCOM, but when the PE ratio is
north of 40, anything can happen.  Remember, there's strong
support near $42 and the PnF chart shows that if the uptrend still
has life in it, buying should appear in the $42-43 area.  We've
picked the right point to take action on this pullback and we can
play it with a reasonably tight stop at $39.50.  If QCOM prints
$40, that will give a new PnF Sell signal, obliterating the
current bullish price target and have us dropping the play like a
hot potato.

Radar Screen:

AIG - As it should, AIG lost more ground last week, finally
closing below the 200-dma ($57.00) on both Thursday and Friday.
That definitely looks bearish, but I wouldn't advocate new
positions on weakness, especially with strong support in the $54-
55 area.  After looking at the charts in greater detail, I'm more
convinced that the only way to play it is on a failed rally.  With
strong resistance at the descending trendline just over $61 and
the 50-dma at $59.90, I think a failed bounce in the $59-60 area
is a good target to shoot for.  It is unlikely to occur during the
holiday shortened week just ahead, but the first couple weeks of
December hold promise.  Look for AIG to hit the Watch List next
week.

AMGN - The more I looked at it last week, the less I liked AMGN as
a long-term bearish play.  While the price action has certainly
been weak, look at how well the $58 support level was defended.
And that is before we get to really strong support at $55.  There
are better bearish candidates out there, so we'll remove AMGN from
our radar screen this week.

GENZ - Look at that support at the 200-dma!  GENZ has been
bouncing from the 200-dma for close to 2 weeks now, with little to
show for the effort.  The stock has been unable to either
penetrate the 200-dma or to bounce significantly, as weekly
Stochastics are now nearing oversold.  I expect we'll see another
solid rebound in the weeks ahead and the actionable play will be
on a failed rally, ideally near the bottom of the broken channel.
We might not get quite that high, but perhaps a failure at the 50-
dma near $47 would do the trick.  In either case, I would be very
surprised if anything transpires in the next 3 days, and quite
honestly two weeks from now may be an ambitious time target.  But
with the PnF chart giving us a $33 price target, this one
definitely bears watching.

MEL - Isn't it amazing with all that weakness in the overall
market that MEL just held onto $28 support last week and actually
rebounded on Friday?  This Financial stock does look to have some
attractive potential from the bearish side, but I want to see how
this bounce plays out before adding it to our Watch List.  MEL
should now find formidable resistance near $30.  If it doesn't,
then we'll be looking at a double bottom at $28 and have to
concede that a run back to the recent highs in the $33-34 area is
likely.  Watch and wait here too.

EK - Is there any enterprise out there that is more doomed than
EK?  The company completely failed in its attempt to compete in
the digital camera industry, ignoring that clear and present
danger, instead focusing its efforts on going head to head with
competition (namely Fuji) in the film business.  Having lost on
both fronts, the company is trying to regroup and make another
stab at the digital camera industry.  I'm not holding my breath
for success, as this one seems destined for the scrapheap.  That
said, the price action has been impressively resilient in recent
years, despite continuing to fall to multi-year lows.  There have
been several occasions where I've tried to play the downside with
long-term positions and been stymied on most of them.  But I think
the charts may be setting us up for an opportunity that is too
good to pass up.  The top of the late September gap will soon line
up with the 200-dma near $27 and if price can claw its way up to
that level, it looks like a high-odds short that we can hold onto
as the stock continues to drill down to new lows.  It won't be a
fast-moving play and we'll have to exercise a lot of patience, but
isn't that what LEAPS are designed for?

Closing Thoughts:

I've spent a lot of time reading in the past few weeks, trying to
gain a clearer perspective on the market.  In short, I've found
that there are as many opinions on what we should expect over the
next week/month/year as there are analysts.  And the opinions run
the gamut from "Run for the hills, the sky is falling" to "Buy
now, because the presidential election cycle is going to drive the
DOW to new all-time highs".  I fall somewhere in the middle -- I
see huge problems for the market and the economy, but I don't see
the bottom falling out and sending the market to new lows anytime
soon.  I have no doubt that before this secular bear market is
over, both the DOW and the S&Ps will hit new lows (I'm not sure
about the NASDAQ), but I don't see that in the next few months.
The markets are still being held up by hype, hope and liquidity.
Until one and preferably two of the legs on that stool give way,
any meaningful downside action is more likely to be a buying
opportunity rather than the beginning of a major decline.

There are lots of tools we can use to measure what is happening in
the market -- some give evidence of overt strength/weakness, while
others tell us where the bulk of the risk lies.  Right now (and
for the past several months) these barometer-type indicators have
told us that the bulk of the risk is being carried by the bulls.
At the same time, the indicators that show actual
strength/weakness have failed to show an imminent end to the
bullish party.  It is when both sets of data are in alignment that
powerful market moves can unfold.  In the meantime, we have to
carefully pick and choose.  Choose carefully!

Have a great week!

Mark


LEAPS Portfolio

Current Open Plays

SYMBOL OPENED     LEAPS    SYMBOL  ENTRY   CURRENT  CHANGE  STOP

Calls:
None

Puts:
WMT    10/03/03  '05 $ 55  ZWT-MK  $ 5.10  $ 5.20  + 1.96%  $58.50
                 '06 $ 55  WWT-MK  $ 7.20  $ 6.90  - 4.17%  $58.50


LEAPS Watchlist

Current Possibles

SYMBOL  SINCE    TARGET PRICE  TARGETED LEAP  SYMBOL

CALLS:
NEM    10/05/03   $37-38, $40  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   $29-30       JAN-2005 $ 30  ZIE-AG
                            CC JAN-2005 $ 25  ZIE-AF
                               JAN-2006 $ 30  WIE-AG
                            CC JAN-2006 $ 25  WIE-AF
QCOM   11/16/03   $42-43       JAN-2005 $ 45  ZLU-AI
                            CC JAN-2005 $ 40  ZLU-AH
                               JAN-2006 $ 45  WLU-AI
                            CC JAN-2006 $ 40  WLU-AH



PUTS:
QQQ    08/10/03  $35.00-35.50  JAN-2005 $ 32  ZWQ-MF
                               JAN-2006 $ 32  WD -MF
SMH    08/24/03  HOLD          JAN-2005 $ 35  ZTO-MG
                               JAN-2006 $ 35  YRH-MG
DJX    11/02/03  $98.50-99.00  DEC-2004 $ 96  YDK-XR
                               JUN-2005 $ 96  ZDK-RR


New Portfolio Plays

None


New Watchlist Plays

None


Drops

None


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

Ka-Ching, Ka-Ching, Ka-Ching – The Sweet Sound of CPTI Profits
By Mike Parnos, Investing With Attitude

Calculating This Month's CPTI Booty
Again, this is the fun part of our monthly summary column.  It
would have been even more fun if I didn't have a lapse of
stupidity and put on the directional OEX position a few months
back.  Oh, WTF?  We still came out smelling sweet despite stepping
in a pile of it on the way.  Let's scrape it off our shoe and get
back to the calculations.

When all is said and done, our Couch Potato Trading Institute
portfolio register rang up "hypothetical" profits of  $4,690
($6,850 if you didn't get into the directional trade).  That will
buy some nice "hypothetical" toys for the kids – and mommy and
daddy too!   Now, if we can just figure out a way to fit Heather
Locklear into my Christmas stocking . . .

Adding It Up
A brief review of our CPTI portfolios tells us that, in our first
year, we generated over $33,000.  This month's $4,690 is a nice
start on our new fiscal year (Nov. to Nov.).
_____________________________________________________________

November Position Synopsis – Total Profit: $4,690
BBH Siamese Condor – Closed for profit of $3,600
SPX Iron Condor – Closed for profit of $2,150
OEX Iron Condor – Closed for profit of $1,800
AFCI Siamese Condor – Closed for loss of $700
OEX Bearish Calendar Spread – Closed for loss of $2,160 (Boo,
Hiss)

Quickie Position Synopsis – Total Profit: $3,050
SPX Iron Condor – Closed for profit of $2,000
LOW Siamese Condor – Closed for profit of $900
IBM Siamese Condor – Closed for profit of $350
QQQ Lottery Play – Closed for loss of $50
MMM Lottery Play – Closed for loss of $150
____________________________________________________________

NOVEMBER POSITIONS
BBH – Siamese Condor - $126.22
Sold 10 BBH November $130 puts and 10 BBH November $130 calls for
about $8.50.  Bought 10 BBH November $140 calls and 10 BBH
November $120 puts for about $2.40.  The net credit was $6.00.  We
closed the position Thursday at a cost of $2,400.   Profit:
$3,600.

SPX Iron Condor – Trading @ 1035.28
Iron Condor. Range of 985 to 1075 for total net credit of $2,150.
SPX closed well within the trading range.  Profit:  $2,150.

OEX Iron Condor (By Request) – 511.77
We sold 10 contracts of the November 490 puts and bought 10
contracts of the OEX November 480 puts.  Then, sold 10 contracts
of the OEX November 545 calls and buy 10 contracts of the OEX
November 555 calls. Total net credit was $1.80.  Closed inside the
range.  Profit: 1,800.

OEX – Bearish Calendar Spread – OEX @ $511.77
In September I anticipated a substantial downward move.  We put on
a calendar spread, sold against it twice.  The move didn't happen
and we lost our derriere.  In some trades we learn what TO do.  In
other trades we learn what NOT to do.  Unfortunately, this was the
latter.  The loss: $2,160.

AFCI Iron Condor – Position closed early for $700 loss.
_____________________________________________________________

LONGER TERM POSITIONS
QQQ ITM Strangle – Ongoing Long Term -- $34.23
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.   We're
going to make money by selling near term puts and calls every
month.  Here's what we've done so far – all in 10 contract
quantities.
October: Sold Oct. $33 puts and Oct. $34 calls -- total credit of
$1,900. November: Sold Nov. $34 puts and calls – total credit of
$1,150.
December: Sold Dec. $34 puts and calls – total credit of $1,500.

Note:  Each month, near expiration, we buy back the expiring
options and sell options for the next option cycle.   We haven't
included any of the proceeds from this long term QQQ ITM Strangle
in our profit calculations.  It's a bonus!

QQQ Put Calendar Spread – Ongoing -- Trading @ $34.23
We created a cheap play that will let us take advantage of a nice
down move.  Meanwhile, we sell against the January puts while we
wait. Bought 10 January 04 QQQ $32 puts and sold 10 October 03 QQQ
$32 puts for a total debit of $1.00 ($1,000). We rolled out to the
November $32 and took in a $.30 credit and then rolled to the
December $32 puts for another credit of $.40.  Our cost basis is
now only $.30.
______________________________________________________________

NOVEMBER QUICKIE RESULTS – Total Profit: $3,050.
SPX Iron Condor – 1035.28
Iron Condor. Range of 1030 to 1070 for total net credit of $2,000.
SPX closed within the trading range.  Profit:  $2,000.

QQQ Lottery Strangle -- $34.23
Bought 10 Nov. QQQ $34 puts for $.15 and 10 Nov. $36 calls for
$.15.  Total risk of $.30 ($300).  QQQs moved down, but not too
far. On Friday, closed position for $250.  Loss:  $50.

IBM Siamese Condor -- $88.63
Sold 10 Nov. IBM $90 puts and 10 Nov. $90 calls for $1.75.  Buy
corresponding protective $100 calls and $80 puts for $.10.  Net
credit of $1.65.  Friday morning closed position for $1.30.
Profit: $350.

MMM Lottery Put -- $77.51
Bet $.15 on a longshot.  Bought a $75 Nov. put for $.15.  It came
down, but not far enough to do us any good.  Loss:  $150.  Shoulda
bought the $77.50.  Woulda made $$$.  Don't you just hate those
shoulda, woulda, and coulda?

LOW Siamese Condor -- $57.51
Sold 10 contracts of Nov. $60 puts and $60 calls for about $3.00.
Bought the corresponding protective $50 puts and $70 calls for a
total of $.10.  Net credit of $2.90.  LOW spiked to $58.17 Friday
morning.  Closed position for $2.00.  Profit: $900.
_____________________________________________________________

DECEMBER CPTI PORTFOLIO POSITION IDEAS
SPX Iron Condor – 1035.28
Sell 10 contracts of December 1075 SPX calls and buy 10 contracts
of December 1085 calls for net credit of about $1.35 ($1,350).
Then, sell 7 contracts of December 990 SPX puts and buy 10
contracts of December 975 puts for net credit of about $1.40
($980).  Total credit $2,330.  Maximum profit range of 990 to
1075.  Max profit potential of $2,330.

BBH Siamese Condor -- $126.22
It worked nicely for November.  Let's dive back in with slightly
lower expectations.  We'll use $125 as the magic number. So let's
sell 10 contracts of BBH December $125 puts and sell 10 contracts
of BBH December $125 calls for a credit of $7.30.  Now, buy 10
contracts of the BBH December $115 puts and $135 calls for a debit
of about $1.70.  Our total credit is about $5.60.  The closer BBH
finishes to $125, the more we make.  Our suggested bailout points
are $119.40 and $130.60.

BBH Alternative Play -- Baby Iron Condor - $126.22
You could sell the $130 calls and buy the $140 calls for a credit
of about $2.20.  Then, sell the $125 puts and buy the $115 puts
for a credit of about $1.65.  Total credit and maximum potential
profit of $3.85 if BBH finishes between $125 and $130.  Safety
range and suggested bailout points would be $121.15 and $133.85.
With the Baby Iron Condor, our safety range is $1.50 wider than
the Siamese Condor.  However, the potential profit in the Siamese
Condor is $5.60 as opposed to $3.85 in the Baby Iron Condor.

DJX Baby Iron Condor - $96.29
The DJX mirrors the DOW 30 stock index.  A nice feature about
playing the DJX is the $1 price increments.  Will the DOW stay
within a 500-point trading range?  Let's find out.

Sell 15 contracts of the December DJX $99 calls and buy 15
contracts of the December DJX $102 calls for a credit of about
$.35.  Then, Sell 15 contracts of the December DJX $94 puts and
buy 15 contracts of the December DJX $91 puts for a credit of
about $.45.  Our total net credit will be about $.80 or $1,200
($.80 x 15 contracts).  We're only exposed for $2.20 – the $3.00
difference between the strikes less the $.80 we took in.  Good
risk vs. reward.

OEX Credit Spread Boogie - 511.79
We sold 2 December OEX 520 calls @ $9.00
We bought 2 December OEX 545 calls @ $1.55
Total credit and potential maximum profit of $7.45 ($1,490).
Exposure $17.55 ($3,510).  Maintenance $25.00 ($5,000).

Note:  We put this trade on last week and things are looking good
– so far.  If you didn't get in last week, you could enter a new
Credit Spread Boogie by selling two contracts of the December OEX
515 calls and buying two contracts of the December OEX 540 calls
for a total credit of $7 ($1,400).  All the same principles of the
trade apply.  We will, however, only be monitoring and adjusting
(if necessary) the original 520/545 position.
_____________________________________________________________

Those Friendly Reminders
November is a standard four-week option cycle.  The premiums
quoted on the above educational trades are based on Friday's
closing bid/ask prices.  On Monday the premiums may be different
due to market movement and/or the additional two days of time
erosion.  In a few instances, when the bid/ask spread is wide, we
figure you may be able to shave off a nickel here and there.  Be
careful.  If a stock gaps up or down, it may change the entire
dynamic of the trade.  Don't skydive without a parachute.  Just
because you have a pulse and evidence of brain activity doesn't
mean you a trader.  And make sure you know the intricacies of a
strategy before you trade.
__________________________________________________________

A Real Handful
As we know, Michael Jackson has a variety of questionable
positions.  Recently, he's been experiencing a short squeeze.
Unfortunately, the shorts may have been worn by a 12-year-old boy.
______________________________________________________________

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.


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The Option Investor Newsletter                   Sunday 11-23-2003
Sunday                                                      5 of 5


In Section Five:

Covered Calls: More Covered-Call Q&A
Naked Puts: Selling "Naked" Puts
Spreads/Straddles/Combos: Market Consolidation Continues Amid
    Global Concerns

Updated In The Site Tonight:
Market Posture: Options Expirations and Terrorist Threats


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

Trading Basics: More Covered-Call Q&A
By Mark Wnetrzak

One reader asked about adjustment strategies and another reader
wants to know why we focus mainly on low-priced stocks for our
covered-call plays.


Attn: mark@OptionInvestor.com
Subject: Covered-calls on cheap stocks

Mark,

I like the success of your covered-call plays but I noticed that
you rarely list stocks that are more than $25.  Is this because
of the type of people who use your picks - newer investors with
less portfolio capital - or is it something about the risk/reward
of owning higher priced shares?  I would love to see some stable
stocks in the mid-cap range that give the same returns.  These
would be great for long-term portfolios such as my IRA and my
kid's college fund.

Thanks for excellent service!

JW


Hello JW,

First, let me say that the past few months have provided some of
the most productive periods since we began offering covered-calls
and naked-puts as part of the regular OIN candidate lists.  While
we have received far more requests for "premium selling" plays on
recent "high-flying" issues (NFLX, PHTN, ERES, MSTR, SINA, MGAM),
the motive for any lack of covered-calls on more expensive stocks
is simple: the premiums for call options simply won't support our
approach, which involves short-term (monthly) positions offering
a 4-6% return with at least 10-15% downside protection in the cost
basis of the stock.  The reason for this situation, of course, is
that option premiums in general are at historical lows and until
the speculative option buyer returns to the market in earnest,
that fact won't change.  Some readers have suggested that we pick
the best (technically) stocks out of a range such as the $25-$50
group and simply list them with front-month ATM calls for bullish
investors.  Unfortunately, ideas like that are just not attractive
to us because if we don't have complete confidence in the success
(which means a profitable outcome) of what we have to offer, it
won't be published, and that is the overriding measure of any play
listed in our sections of the newsletter.

As far as the strategy of selling covered-calls on higher-priced
stocks, you could substitute the sale of "naked" puts.  I am sure
you know that the risk is exactly the same, but with a slightly
higher reward as the margin requirement is generally less for
writing the put option as opposed to actually owning the stock.
Plus, as a put writer, you incur only one commission and when the
stock price rallies (as you expected), or falls (due to unexpected
news or events), it is far easier to close a naked put play than
to close a covered-call position.  Now that doesn't mean you should
sell puts on every stock you want to use for covered-calls (there
are other considerations), just that there are many characteristics
of the strategy that favor the put writer.  If you can't sell puts
in your IRA, you might consider changing brokerages as there are a
few who permit that type of trading in retirement accounts.  At the
same, there is something to be said for "buy-n-hold" investing with
covered-calls as a downside hedge and I'll put something together
on that subject in the coming weeks.

Mark
OIN


Attn: mark@OptionInvestor.com
Subject: Rolling down with covered-calls

Mark,

If you were to roll-down, is it common for it to not do you any
good?  Basically you'd be better off closing the play.  When you
say you should do it before expiration do you mean the day before
the third Friday?  That way, the call you buy is very low?  I've
been paper trading the plays which are great but a few are below
the cost-basis and when I run the roll-down numbers, they never
seem to be worth it.  I was thinking maybe with the VXO/VIX so
low, that's why the premiums are so low.  Just a thought...

Thanks for all the top notch info.  I look forward to your column
every week.

KY


Hello KY,

Covered-calls do hedge against downside movement, however they
are not a remedy for protracted bearish activity nor for any
catastrophic downside moves due to ill-timed news or events.
If an investor's outlook becomes bearish on an issue, exiting
the position is usually the only way to prevent further loss.
Whether an investor exits a position or opts for an adjustment
strategy will depend on their long-term outlook for the stock
and their risk-reward tolerance.

One must weigh the "cost" of remaining in a position, often
times locking-in a (albeit smaller) loss, verses exiting the
position; preserving capital for those positions with a higher
probability of success.  This is a very difficult decision.

Generally, if you are defensive and trying to lower your cost
basis in your covered-call position, you would roll down and/or
forward.  If this is done before expiration, you would need to
buy back your current "sold" calls, which should be relatively
cheap.  An investor who remains bullish in the long-term will
do this to protect for short-term weakness, but ultimately, he
expects the stock to recover.  Usually, you will have to move
forward several months or use LEAPs in order to obtain a credit
in the new position.  Of course, in the case of a catastrophic
drop in price, the best that can be accomplished is to lock-in
a loss (until expiration), which could still be less than the
current loss, "if" the stock doesn't drop further.

Hope this helps,

Mark W.
OIN



SUMMARY OF PREVIOUS CANDIDATES
*****

The following summary is a reasonable account of the positions
previously offered in this section.  However, no representation
is being made as to the actual performance of a position and in
fact, there are frequently large differences between the summary
results and those of our subscribers, due to the variety of ways
in which each play can be opened, closed, and/or adjusted.  In
addition, the summary might not be completely representative of
the manner in which the average trader would react to changing
conditions in a position and to the options market in general.
The editor of this section does not take actual positions in any
published plays and the summary comments are simply a service to
help new traders understand when positions might be opened and
closed.  In most cases, actions taken based on the commentary
would be far too late to be effective, thus it is not intended
as a substitute for personal trade management nor does it in
any way replace your duty to diligently monitor and manage the
positions in your portfolio.

Note:  Margin not used in calculations.

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

AKAM    10.30   11.37  NOV 10.00  0.75    0.45*  10.2%
IDTI    17.60   17.57  NOV 17.50  0.65    0.55*   7.0%
MONE     5.14    5.83  NOV  5.00  0.40    0.26*   6.0%
TMM      3.44    3.20  NOV  2.50  1.10    0.16*   5.9%
PLUG     5.91    5.03  NOV  5.00  1.15    0.24*   5.5%
TLAB     7.53    8.08  NOV  7.50  0.30    0.27*   5.4%
ALGN    15.60   16.14  NOV 15.00  1.60    1.01*   5.2%
PUMA     5.54    5.31  NOV  5.00  0.85    0.31*   4.8%
GSS      5.49    7.02  NOV  5.00  0.70    0.21*   4.8%
CMNT     9.22    9.70  NOV  7.50  2.10    0.38*   4.6%
OXGN    10.51    9.79  NOV 10.00  1.10    0.38    4.4%
VECO    25.67   28.65  NOV 25.00  1.85    1.18*   4.3%
EMBT    12.90   14.50  NOV 12.50  0.75    0.35*   4.2%
CDN     15.39   16.40  NOV 15.00  0.80    0.41*   4.1%
CRYP    10.84   12.00  NOV 10.00  1.20    0.36*   4.1%
SSTI    11.21   12.55  NOV 10.00  1.65    0.44*   4.0%
TLAB     7.83    8.08  NOV  7.50  0.70    0.37*   3.8%
BRCD     6.33    5.91  NOV  6.00  0.65    0.23    2.9%
QSFT    14.90   14.14  NOV 15.00  0.55   -0.21    0.0%
AFFX    25.63   24.11  NOV 25.00  1.30   -0.22    0.0%
SGMO     5.10    4.29  NOV  5.00  0.55   -0.26    0.0%
BVSN     5.31    4.37  NOV  5.00  0.65   -0.29    0.0%
ACN     25.05   24.16  NOV 25.00  0.55   -0.34    0.0%
FFIV    25.49   23.44  NOV 25.00  1.25   -0.80    0.0%
ITMN    20.03   18.28  NOV 20.00  0.85   -0.90    0.0%

ARIA     7.70    7.52  DEC  7.50  0.80    0.60*   7.6%
GSS      5.90    7.02  DEC  5.00  1.25    0.35*   6.5%
MMR     16.30   17.00  DEC 15.00  2.00    0.70*   4.3%
CLHB     6.12    7.00  DEC  5.00  1.35    0.23*   4.2%
TIVO     9.02    8.19  DEC  7.50  1.85    0.33*   4.0%
AVII     4.99    4.63  DEC  5.00  0.40    0.04    0.8%
BRCD     7.63    5.91  DEC  7.00  1.00   -0.72    0.0%

*   Stock price is above the sold striking price.

Comments:

The major averages lost some ground this week and are testing a
key support area near their 50-day MAs.  Was the selling enough
of a correction or will more pain be needed?  Next week should
offer some clues.  As for the covered-call portfolio, several
positions were closed in the interest of money management though
investors with a bullish outlook may have opted to be assigned
the stock (to sell calls for next month).  Two positions with
a December expiration lost some ground on Friday after reporting
earnings.  Brocade (NASDAQ:BRCD) dropped rather drastically
after a disappointing earnings announcement and will be shown
closed.  TiVo (NASDAQ:TIVO) is also acting rather worrisome
after reporting earnings and could also be a candidate for early
exit.

Positions Previously Closed:  Credence Systems (NASDAQ:CMOS),
Xoma (NASDAQ:XOMA), Seachange (NASDAQ:SEAC), Viasat (NASDAQ:VSAT),
Emisphere (NASDAQ:EMIS), Rudolph Technologies (NASDAQ:RTEC),
Alkermes (NASDAQ:ALKS) and Ibis Technology (NASDAQ:IBIS) -- which
recovered (Murphy's Law?).


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

PAAS   12.57  DEC 12.50  USP LV  0.70  353   11.87  28   5.8%
MOBE   11.19  DEC 10.00  MUL LB  1.60  219    9.59  28   4.6%
ISSI   16.33  DEC 15.00  IUH LC  1.90  158   14.43  28   4.3%
INSP   24.39  DEC 22.50  IOU LX  2.70  14    21.69  28   4.1%
ESPR   22.21  DEC 20.00  SPU LD  2.90  1118  19.31  28   3.9%
CANI   14.05  DEC 12.50  CDU LV  1.95  66    12.10  28   3.6%
TLAB    8.08  DEC  7.50  TEQ LU  0.80  4405   7.28  28   3.3%


Company Descriptions

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

*****
PAAS - Pan American  $12.57  *** Diversify: Precious Metals! ***

Pan American Silver (NASDAQ:PAAS) is principally engaged in the
exploration for, and the acquisition, development and operation
of, silver properties.  PAAS owns and operates the producing
Quiruvilca silver mine in Peru, a 99.85% interest in the Huaron
silver mine in Peru and the producing La Colorada property.  The
company mines and sells silver-rich pyrite stockpiles at a
small-scale operation in central Peru.  Pan American also either
holds an interest in or may earn an interest in non-producing
silver resource and silver exploration properties in Peru,
Argentina, the United States, Russia and Mexico, including the
Alamo Dorado deposit in Mexico.  Pan American continues to move
higher in a strong Stage II climb and investors who want to
diversify their portfolio should consider this position.

DEC-12.50 USP LV LB=0.70 OI=353 CB=11.87 DE=28 TY=5.8%


*****
MOBE - Mobility  $11.19  *** Keeps Going Higher ***

Mobility Electronics (NASDAQ:MOBE) provides mobile computing
solutions for the notebook computer, PDA, pocket PC, tablet PC,
smartphone and other mobile computing device users.   Mobility's
power products include a combination AC and DC power adapter that
can be used to simultaneously charge a notebook computer and a
cellular telephone or PDA in a vehicle, an airplane, a home or
an office; a series of DC to DC or auto/air power adapters, and
batteries for notebook computers.  Their expansion products
include a variety of PCI expansion devices designed to increase
the storage capacity and computing capability of notebook or
desktop computers.  Mobility's accessory products include port
replicators based on its Split Bridge technology, monitor stands
and a variety of other accessories for the mobile computing device
user.  Mobility Electronics continues to climb above its 30-day
MA and traders can speculate on the near-term performance of the
issue with this conservative position.

DEC-10.00 MUL LB LB=1.60 OI=219 CB=9.59 DE=28 TY=4.6%


*****
ISSI - Integrated Silicon  $16.33  *** Breaking Resistance? ***

Integrated Silicon Solution (NASDAQ:ISSI) designs, develops and
markets memory products for networking, Internet infrastructure,
telecommunications, wireless products, handheld devices, computer
peripherals and automotive electronics.  Its products incorporate
circuit design and advanced process technology.  The company's
high-speed and low-power SRAMs, low- to medium-density DRAMs and
its family of electrically erasable programmable ROMs enable
designers to meet demanding connectivity, portability and
bandwidth requirements.  In addition, ISSI has multi-chip
packages combining Flash and SRAM (MCP), Bluetooth wireless
chipsets and parallel search processors or content addressable
memories (CAM) in development.  ISSI is moving through a two-year
old resistance level which suggests further upside potential in
the near-term.  Traders who believe the rally will continue can
profit from that outcome with this position.

DEC-15.00 IUH LC LB=1.90 OI=158 CB=14.43 DE=28 TY=4.3%


*****
INSP - InfoSpace  $24.39  *** Entry Point? ***

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 after posting better-than-expected results for the third
quarter and issuing a solid fourth-quarter outlook.  The recent
consolidation could be offering investors who agree with the
bullish assessment a chance to own InfoSpace near a cost basis
of $22.

DEC-22.50 IOU LX LB=2.70 OI=14 CB=21.69 DE=28 TY=4.1%


*****
ESPR - Esperion  $22.21  *** Pure 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.

DEC-20.00 SPU LD LB=2.90 OI=1118 CB=19.31 DE=28 TY=3.9%


*****
CANI - Carreker  $14.05  *** On The Move! ***

Carreker (NASDAQ:CANI) provides payments-related software and
consulting solutions to financial institutions and financial
service providers.  These solutions help the their customers
improve operational efficiency in how payments are processed,
enhance revenue and profitability from payments-oriented
products and services, reduce losses associated with fraudulent
payment transactions, and evolve toward next-generation payment
practices and technologies.  The company is organized into three
main operating divisions: Global Payments Technologies, Revenue
Enhancement and Global Payments Consulting.  Carreker continues
to climb higher on heavy volume and has now moved above last
year's high, which suggests a bullish future.  Investors can use
this position to target-shoot a conservative entry point in the
bullish issue.

DEC-12.50 CDU LV LB=1.95 OI=66 CB=12.10 DE=28 TY=3.6%


*****
TLAB - Tellabs  $8.08  *** Stage I Speculation ***

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.

DEC-7.50 TEQ LU LB=0.80 OI=4405 CB=7.28 DE=28 TY=3.3%


*****


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

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

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

SSTI   12.55  DEC 12.50  SJV LV  1.05  1760  11.50  28   9.4%
UAIR    7.81  DEC  7.50  UWS LU  0.90  56     6.91  28   9.3%
NEOL   17.57  DEC 17.50  UOE LW  1.40  580   16.17  28   8.9%
SWIR   20.29  DEC 20.00  IYQ LD  1.80  169   18.49  28   8.9%
SPRT   12.76  DEC 12.50  RQJ LV  1.15  388   11.61  28   8.3%
LTXX   15.50  DEC 15.00  UXT LC  1.30  83    14.20  28   6.1%
ELN     5.10  DEC  5.00  ELN LA  0.35  5832   4.75  28   5.7%
QLTI   15.94  DEC 15.00  QTL LC  1.60  421   14.34  28   5.0%
AKAM   11.37  DEC 10.00  UMU LB  1.80  1576   9.57  28   4.9%
ASYT   16.25  DEC 15.00  QQY LC  1.80  482   14.45  28   4.1%
VIRL   10.25  DEC 10.00  UVB LB  0.60  120    9.65  28   3.9%
MERX   18.90  DEC 17.50  KXQ LW  2.00  224   16.90  28   3.9%
NTPA   14.10  DEC 12.50  NQD LV  2.00  438   12.10  28   3.6%



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

Options 101: Selling "Naked" Puts
By Ray Cummins

This week's narrative includes some common questions from new
readers of this section.

One of the most frequent questions among our new readers is how
they should approach this section and the different selections.
Should they attempt to participate in all of the picks or focus
on one or two positions with a larger number of contracts.  As
you might expect, the first requirement before initiating any
new play is comprehensive due diligence and self-study.  There
are a number of key factors to consider with the most important
being the overall condition of the market, and the sector or
industry in which the target issue resides.  Traders should also
clearly understand the risk/reward ratio of this particular
strategy and use the technique only when it conforms to their
portfolio outlook and personal trading style.  As far as opening
the positions, our prices are based on Friday's closing quotes,
so they may not be the same on Monday morning, or later in the
week.  Each individual trader must decide which candidates meet
their criteria for acceptable profit potential and downside risk,
and enter those positions at the appropriate cost basis.  Most of
our readers use a "limit" order to guarantee a fill only when the
position is available at a certain price.  After the position is
open, money management becomes the key factor to success.  Since
this is a limited profit strategy, no one can afford to have many
losers and that's why it is so important to monitor the plays on
a daily basis and exit those issues that experience a significant
change in character.

Another common inquiry is about the "Supplemental Picks" and why
they are not included in the regular group of listed candidates.
With regard to these additional plays, the disclaimer offers a
general explanation: "The following group of issues is a list of
additional candidates to supplement your search for profitable
trading positions."  For one reason or another, they simply did
not make our final play list, which is usually limited to 7 - 10
candidates.  However, the process of choosing the "published"
plays is highly subjective and quite often there are additional
issues that warrant individual consideration.  That is why we now
include some of the stocks that just missed our final cut (for
various reasons), so that our readers can decide if they meet
their personal criteria for favorable naked-put plays.  Remember,
our primary task is to provide a list of potentially profitable
positions, greatly reducing the initial research for candidates
in this strategy.  At the same time, we expect our subscribers to
decide which plays meet their risk/reward profile and hopefully,
with thorough examination and analysis far beyond that which we
can provide in the few hours between Friday's market close and
the publishing deadline, they will select only those positions
that are winners.

One final question (or group of questions) relates to portfolio
management, which includes early exits and position adjustments.
A "short" put position generally requires the underlying issue to
remain above a specific price in order to generate profits.  You
must be confident of this outcome before initiating any play on
our candidate list.  In addition, any time you participate in an
option trade, you should know at what (stock) price the position
will be at "break-even."  You should also determine the price the
underlying issue would have to reach to generate unacceptable
losses.  Ideally, you will enter a position and then simply wait
for expiration.  Unfortunately, it doesn't always work that way.
To be successful on a consistent basis, option positions must be
closed or adjusted if predetermined exit points are reached.  You
must be prepared to make these adjustments when they are needed,
not after the position has moved beyond a reasonable loss level.
This type of money management requires advanced planning and the
discipline to execute the necessary exit strategies in adverse
conditions, regardless of your emotions or instincts.

With this form of trading, there is a large downside potential and
and in many cases, failure to adjust a position in a timely manner
can lead to catastrophic portfolio losses.  We publish the classic
"warning" paragraph in the weekend play narrative for that reason
alone.  The last two sentences are paramount to success: "It is
also important that you consider using trading STOPS on any naked
option positions to help limit losses when the stock price drops.
Many professional traders suggest closing the position when the
stock price falls below the sold strike or using a 'buy-to-close'
STOP at a price that is no more than twice the original premium
from the sold option."  It is not uncommon for traders who have
enjoyed a long string of winning positions to get "wiped out" by
one bad play because they failed to limit their losses when the
market moved against them.  The problem is, the decision usually
has to be made under duress, at the worst possible moment.  The
only way to avoid this fate is to develop a plan with a target
exit (or adjustment) point, and stick to it.  This requirement is
difficult for new traders to adhere to but the simple fact is,
professionals use proven money management techniques to maximize
profits and limit losses and that's why they come out ahead in
the long run.

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   25.04  NOV 20.00  0.50    0.50*   2.8%   9.6%
ESPR    23.02   22.21  NOV 20.00  0.60    0.60*   3.4%   9.6%
ONXX    25.93   25.04  NOV 20.00  0.60    0.60*   2.7%   9.0%
XMSR    19.10   22.10  NOV 17.50  0.85    0.85*   3.7%   8.9%
CYD     27.57   25.75  NOV 22.50  0.50    0.50*   2.5%   8.4%
ESPR    23.87   22.21  NOV 20.00  0.35    0.35*   2.6%   8.4%
FCEL    14.35   12.98  NOV 12.50  0.50    0.50*   3.0%   8.2%
XMSR    20.25   22.10  NOV 17.50  0.30    0.30*   2.5%   7.7%
PHTN    40.90   37.99  NOV 37.50  0.45    0.45*   2.6%   7.3%
PXLW    12.10   12.95  NOV 10.00  0.30    0.30*   2.2%   7.1%
INSP    26.05   24.39  NOV 22.50  0.35    0.35*   2.3%   7.0%
FFIV    25.01   23.44  NOV 22.50  0.35    0.35*   2.3%   6.5%
MTZ     12.81   12.25  NOV 10.00  0.25    0.25*   1.9%   6.4%
NWAC    12.18   11.78  NOV 10.00  0.25    0.25*   1.9%   6.2%
SCUR    14.09   13.64  NOV 12.50  0.30    0.30*   2.1%   6.0%
ALGN    15.21   16.14  NOV 12.50  0.25    0.25*   1.8%   6.0%
FCS     20.04   23.07  NOV 17.50  0.40    0.40*   2.0%   5.9%
SCRI    25.49   26.30  NOV 22.50  0.40    0.40*   2.0%   5.7%
AVCT    36.00   36.75  NOV 32.50  0.75    0.75*   2.1%   5.6%
FCS     22.60   23.07  NOV 20.00  0.25    0.25*   1.8%   5.4%
CNX     21.88   20.89  NOV 20.00  0.55    0.55*   2.0%   5.4%
IDXC    24.30   23.64  NOV 20.00  0.35    0.35*   1.5%   5.3%
SCHN    36.92   44.67  NOV 30.00  0.40    0.40*   1.5%   5.3%
CY      20.44   21.80  NOV 17.50  0.40    0.40*   1.7%   5.1%
MCD     26.01   24.97  NOV 25.00  0.25    0.22    1.9%   5.0%
AFCI    26.70   21.90  NOV 22.50  0.60    0.00    0.0%   0.0%
PMCS    22.12   18.84  NOV 20.00  0.40   -0.76    0.0%   0.0%
ECLG    25.25   20.57  NOV 22.50  0.25   -1.68    0.0%   0.0%

RDWR    23.46   22.35  DEC 20.00  0.65    0.65*   2.9%   8.6%
APPX    32.29   32.62  DEC 25.00  0.55    0.55*   2.0%   6.8%
SWIR    18.75   20.29  DEC 15.00  0.30    0.30*   1.8%   6.4%
FFIV    25.07   23.44  DEC 22.50  0.55    0.55*   2.2%   6.0%
ECLG    24.14   20.57  DEC 20.00  0.40    0.40*   1.8%   5.9%
PDII    25.97   24.75  DEC 22.50  0.45    0.45*   1.8%   5.3%

* Stock price is above the sold striking price.

Comments:

Friday's bullish bias did little to offset the recent downward
trend in equities, which left the major indices nearly 2% lower
for the week.  As mentioned last Sunday, the bearish activity,
even among the best performing groups, suggests a consolidation
through the month of November.  Based on that outlook, traders
are cautioned to initiate bullish plays only when the technical
indications are outstanding and monitor current portfolio plays
on a daily basis.  Among the December positions, eCollege.com
(NASDAQ:ECLG) and F5 Networks (NASDAQ:FFIV) are candidates for
early exit to limit potential losses.  The profitable position
in Palm (NASDAQ:PALM) has been removed from the summary due to
the complex share value adjustments in the wake of the company's
merger with Handspring (NASDAQ:HAND), which produced PalmOne
(NASDAQ:PLMO), and also the spin-off of PalmSource (NASDAQ:PSRC).

Previously Closed Positions: CV Therapeutics (NASDAQ:CVTX), China
Yuchai (NYSE:CYD); $25 and $30 strikes, eResearch Technologies
(NASDAQ:ERES), Brightpoint (NASDAQ:CELL), Rudolph Technologies
(NASDAQ:RTEC) and Advanced Fibre (NASDAQ:AFCI).


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

SANM   11.11  DEC 10.00  SQN XB 0.25 401   9.75  28   2.8%   7.6%
APPX   32.62  DEC 25.00  AQO XE 0.45 1045 24.55  28   2.0%   7.0%
AEIS   26.30  DEC 22.50  OEQ XX 0.45 14   22.05  28   2.2%   6.8%
ALTR   23.93  DEC 22.50  LTQ XS 0.50 5018 22.00  28   2.5%   6.3%
XMSR   22.10  DEC 17.50  QSY XW 0.25 2496 17.25  28   1.6%   5.8%
MGAM   42.90  DEC 35.00  QMG XG 0.45 359  34.55  28   1.4%   5.0%
NPSP   29.26  DEC 25.00  QKK XE 0.35 462  24.65  28   1.5%   4.9%


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).

*****
SANM - Sanmina-SCI  $11.11  *** Favorable Outlook! ***

Sanmina-SCI Corporation (NASDAQ:SANM) is an independent global
provider of customized, integrated electronics manufacturing
services.  The company provides these comprehensive services
primarily to original equipment manufacturers in the defense
and aerospace, communications, computing, multimedia, medical
and automotive, and industrial controls industries.  The firm's
end-to-end services, in combination with its global expertise
in supply chain management, enable it to manage its customers'
products throughout their life cycles.  These services include
product design and engineering, including initial development,
detailed design and pre-production services; manufacturing of
complete systems, components and subassemblies; final system
assembly and test; direct order fulfillment, and after-market
product service and support.  Needham & Co. and Wells Fargo
Securities recently upgraded Sanmina-SCI based on early signs
of a seasonal up-tick and a lower-than-expected decline in the
March quarter.  Investors who like the outlook for the company
can establish a cost basis below $10 in the issue with this
position.

DEC-10.00 SQN XB LB=0.25 OI=401 CB=9.75 DE=28 TY=2.8% MY=7.6%


*****
APPX - American Pharma Partners  $32.62  *** Premium Selling! ***

American Pharmaceutical Partners (NASDAQ:APPX) is a specialty
drug company that develops, manufactures and markets injectable
pharmaceutical products, focusing on the oncology, anti-infective
and critical care markets.  The company is one of the largest
producers of injectables, with more than 130 generic products in
more than 350 dosages and formulations.  American Pharmaceutical
recently received FDA approval to launch their drug Piperacillin
for injection, the generic equivalent of Wyeth's Pipracil.  The
product is an antibiotic for the treatment of serious infections
caused by designated susceptible microorganisms.  APPX has also
been in the news recently with a number of lawsuits concerning
the drug Abraxane.  More specifically, the complaints alleges that
APPX officials made materially false and misleading statements
about the product and its potential.  Regardless of the ongoing
litigation, APPX appears to be poised for further upside movement
and speculative traders can profit from that outcome with this
position.

DEC-25.00 AQO XE LB=0.45 OI=1045 CB=24.55 DE=28 TY=2.0% MY=7.0%


*****
AEIS - Advanced Energy  $26.30  *** Consolidation Pattern ***

Advanced Energy Industries (NYSE:AEIS) designs, manufactures and
supports a group of primary components and subsystems for vacuum
process systems.  The firm's core products are very complex power
conversion and control systems.  Its products also control the
flow of gases into the process chambers and provide them with
thermal control and sensing within the chamber.  The company's
customers use its products in plasma-based thin film processing
equipment that is essential to the manufacture of semiconductors;
compact discs, DVDs and other digital storage media; flat panel
computer and television screens; coatings for architectural glass
and optics, and power converters for advanced technology computer
workstations and servers.  AEIS makes equipment that supports a
number of popular consumer products and the demand for high-tech
gadgets is growing at a rapid pace.  At the same time, the firm
has concerns about revenues (flat) in the coming quarter and the
technicals suggest a continued consolidation near the current
price.  Any close below the recent trading-range top at $23-$24
should be a reasonable signal for early exit or adjustment.

DEC-22.50 OEQ XX LB=0.45 OI=14 CB=22.05 DE=28 TY=2.2% MY=6.8%


*****
ALTR - Altera  $23.93  *** 18-Month High! ***

Altera (NASDAQ:ALTR) designs, builds and sells high-performance,
high-density programmable logic devices; pre-defined design
building blocks, known as intellectual property cores, and
associated development tools.  The company's logic devices,
which consist of field-programmable gate arrays and complex
programmable logic devices are semiconductor ICs that are
manufactured as standard chips that customers program to
perform desired logic functions within their electronic
systems.  Altera's customers can license these IP cores for
implementation of standard functions in their PLD designs.
Customers develop, compile, verify and program their PLD
designs using the Company's proprietary development software,
which operates on personal computers and basic engineering
workstations.  Altera closed at an 18-month high on Friday
and much of the activity is due to a Lehman Brothers upgrade.
The brokerage raised its rating on the programmable logic
device maker, telling clients it sees the communications
and enterprise hardware markets "up-ticking."  Traders who
agree with that optimistic outlook can use this position to
establish a conservative entry point in the issue.

DEC-22.50 LTQ XS LB=0.50 OI=5018 CB=22.00 DE=28 TY=2.5% MY=6.3%


*****
XMSR - XM Satellite Radio  $22.10  *** Uptrend Intact! ***

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.  Despite the recent market slump,
XMSR is in a long-term uptrend and traders who think the bullish
activity will continue in the coming weeks can profit from that
outcome with this position.

DEC-17.50 QSY XW LB=0.25 OI=2496 CB=17.25 DE=28 TY=1.6% MY=5.8%


*****
MGAM - Multimedia Games  $42.90  *** Earnings Speculation! ***

Multimedia Games (NASDAQ:MGAM) is the leading supplier of
interactive electronic games and player stations to the rapidly
growing Native American gaming market.  The company's games are
delivered through a telecommunications network that links its
player stations with one another both within and among gaming
facilities.  Multimedia Games designs and develops networks,
software and content that provide its customers with a range of
gaming systems.  The company's development and marketing efforts
focus on Class II gaming systems and Class III video lottery
systems for use by Native American tribes throughout the United
States.  The quarterly earnings report for MGAM is expected to
be issued on Monday, Nov 24, 2003, at 10:00 A.M. EST.  Traders
who like "premium-selling" plays can speculate on the outcome
of the report by trading this position near the opening bell.

DEC-35.00 QMG XG LB=0.45 OI=359 CB=34.55 DE=28 TY=1.4% MY=5.0%


*****
NPSP - NPS Pharmaceuticals  $29.26  ** New Drug Speculation! ***

NPS Pharmaceuticals (NASDAQ:NPSP) is engaged in the discovery,
development and commercialization of pharmaceutical products.
Its product pipeline consists of product candidates in various
stages of clinical development and preclinical development.  Two
of these product candidates, PREOS and cinacalcet HCl, are in
Phase III clinical trials.  A third product candidate, ALX-0600,
has completed a pilot Phase II clinical trial and plans are now
underway to commence additional clinical trials.  PREOS is NPS'
brand name for a recombinant, full-length parathyroid hormone
it is developing for the treatment of osteoporosis.  ALX-0600
is the company's analog of glucagon-like peptide 2 that it is
developing for the treatment of gastrointestinal disorders.
Cinacalcet HCl, its orally active, small-molecule compound for
the treatment of hyperparathyroidism, is being developed by the
company's licensees, Amgen and Kirin Brewery Company.  NPSP is
another company developing novel drugs and investors who perform
the necessary due-diligence may find this position attractive
for a speculative portfolio.

DEC-25.00 QKK XE LB=0.35 OI=462 CB=24.65 DE=28 TY=1.5% MY=4.9%


*****


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

ADAT   12.54  DEC 10.00  HAU XB 0.30 95    9.70  28   3.4%  11.6%
DGIN   23.33  DEC 22.50  UGU XX 0.90 10   21.60  28   4.5%  10.4%
SMTC   24.38  DEC 22.50  QTU XR 0.65 309  21.85  28   3.2%   8.3%
WMS    25.82  DEC 25.00  WMS XE 0.70 0    24.30  28   3.1%   7.4%
SJR    15.28  DEC 15.00  SJR XC 0.40 60   14.60  28   3.0%   7.0%
RMBS   24.99  DEC 20.00  BNQ XD 0.30 1192 19.70  28   1.7%   6.1%
ISPH   17.85  DEC 15.00  JPU XC 0.25 78   14.75  28   1.8%   6.0%
APCC   21.07  DEC 20.00  PWQ XD 0.40 144  19.60  28   2.2%   5.6%
ADSK   22.53  DEC 20.00  ADQ XD 0.25 112  19.75  28   1.4%   4.0%


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


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

Market Consolidation Continues Amid Global Concerns
By Ray Cummins

Even with Friday's gains, the major equity averages finished the
week lower due to terrorist attacks in Turkey, rising tension in
Iraq, and the falling U.S. dollar.

The blue-chip Dow Jones industrial average added 9 points to end
at 9,628 with much of the selling pressure attributed to losses in
Merck (NYSE:MRK) which abandoned its second experimental medicine
this month.  The tech-laden NASDAQ Composite Index rose 11 points
to finish at 1,893 on strength in software, internet, wireless and
semiconductor shares.  The broader S&P 500-stock index closed up 1
point at 1,035 on buying pressure in airline, retail, homebuilding,
banking and hospital stocks.  Advancing issues outpaced decliners
nearly 3 to 2 on the New York Stock Exchange where 1.26 billion
shares were traded.  On the NASDAQ, winners edged past losers by a
slim margin with 1.6 billion shares exchanged.  In the bond market,
the benchmark 10-year note finished unchanged at a yield of 4.15%.
For the week, both the Dow and the S&P 500 dropped 1.4%, while the
NASDAQ fell 1.9%.

*****************
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   61.44   NOV   50  55   0.55  54.45   0.55  Closed
MXIM    44.82   50.36   NOV   35  40   0.50  39.50   0.50  Closed
PHS     54.50   57.86   NOV   45  47   0.30  47.20   0.30  Closed
PIXR    71.56   68.50   NOV   60  65   0.70  64.30   0.70  Closed
COH     31.43   36.24   NOV   27  30   0.35  29.65   0.35  Closed
CYMI    44.99   43.64   NOV   35  40   0.65  39.35   0.65  Closed
SAP     36.00   37.59   NOV   30  32   0.30  32.20   0.30  Closed
ICOS    45.42   43.66   NOV   35  40   0.50  39.50   0.50  Closed
SMH     38.55   41.72   NOV   32  35   0.20  34.80   0.20  Closed
BBY     58.31   58.24   NOV   50  55   0.40  54.60   0.40  Closed
CTX     97.50  103.38   NOV   85  90   0.40  89.60   0.40  Closed
VSEA    48.40   43.14   NOV   40  45   0.45  44.55  (1.41) Closed
LNCR    41.05   33.00   DEC   35  37   0.30  37.20  (1.60) Closed
PLMD    31.35   25.77   DEC   27  30   0.30  29.70  (1.45) Closed
MGAM    41.45   42.90   DEC   30  35   0.45  34.55   0.45   Open
ANPI    48.77   47.00   DEC   35  40   0.45  39.55   0.45   Open
PFE     34.08   33.18   DEC   30  32   0.25  32.25   0.25   Open
PHS     58.10   57.86   DEC   48  50   0.30  49.70   0.30   Open
SII     39.07   37.07   DEC   35  37   0.45  37.05   0.02   Open?

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

Lincare (NASDAQ:LNCR) was the big surprise this week as the stock
plunged on speculation the company's earnings would be negatively
affected by pending legislation, which would allow Medicare to
base rates on those used in the Federal Employees Health Benefits
Program.  Conservative traders should have exited the position on
Tuesday (when the issue moved below the sold put strike at $37.50)
and the portfolio summary reflects the closing debit on that day.
Polymedica (NASDAQ:PLMD) was also a disappointment, dipping below
the sold put strike on Wednesday amid selling pressure in medicare
suppliers.  The summary reflects the position loss as of our exit
trade Thursday morning.  Varian Semiconductor (NASDAQ:VSEA) became
an early exit candidate on Thursday, and Sina Corp. (NASDAQ:SINA)
has previously been closed to limit losses.


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

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

CA      23.50   22.55   NOV   30  27   0.35  27.85   0.35  Closed
MTG     53.79   50.47   NOV   65  60   0.55  60.55   0.55  Closed
BJS     32.50   31.22   NOV   37  35   0.30  35.30   0.30  Closed
CEPH    45.77   46.34   NOV   55  50   0.55  50.55   0.55  Closed
HDI     47.26   45.14   NOV   55  50   0.50  50.50   0.50  Closed
SEPR    26.98   23.05   NOV   35  32   0.25  32.75   0.25  Closed
AMZN    54.51   48.58   NOV   65  60   0.50  60.50   0.50  Closed
OEX    511.25  511.77   NOV  540 535   0.45 535.45   0.45  Closed
EBAY    55.93   51.85   NOV   65  60   0.50  60.50   0.50  Closed
FNM     71.69   69.34   NOV   80  75   0.50  75.50   0.50  Closed
KSS     56.07   48.88   NOV   65  60   0.40  60.40   0.40  Closed
AIG     58.28   56.59   DEC   65  60   0.90  60.90   0.90   Open
BJS     32.18   31.22   DEC   37  35   0.30  35.30   0.30   Open
SNPS    30.85   29.08   DEC   37  35   0.25  35.25   0.25   Open
CCMP    54.16   50.87   DEC   65  60   0.50  60.50   0.50   Open
KKD     41.85   40.60   DEC   50  45   0.60  45.60   0.60   Open
SNPS    30.28   29.08   DEC   37  35   0.20  35.20   0.20   Open

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

Neurocrine Biosciences (NASDAQ:NBIX), which is now profitable,
was candidate for early exit last week and conservative traders
should have closed the bearish position.  Mercury Interactive
(NASDAQ:MERQ), which has previously been closed to limit losses,
also finished the expiration period profitable.


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

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

LLTC    40.77  41.17   NOV   35  37   2.20   37.20  0.30  Closed
QCOM    47.49  43.92   NOV   42  45   2.25   44.75 (0.33) Closed
VLO     44.00  43.00   DEC   37  40   2.20   39.70  0.30   Open
ADRX    21.66  20.65   DEC   17  20   2.15   19.65  0.35   Open

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

CV Therapeutics (NASDAQ:CVTX) has previously been closed to limit
losses.


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

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

NPSP    25.45  29.26  NOV   35  30   4.40   30.40  0.60  Closed
IACI    37.34  31.70  NOV   42  40   2.25   40.25  0.25  Closed
CTMI    16.08  15.00  DEC   20  17   2.25   17.75  0.25   Open

Cablevision (NYSE:CVC), which has previously been closed, ended
the expiration period profitable.  The speculative play in Loews
(NYSE:LTR) was closed early to limit potential losses.


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

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

XING     9.13   8.15   DEC     12      7     0.10    0.30  Closed
LRCX    24.38  29.49   DEC     30     20     0.15    2.20  Closed
PHTN    32.40  37.99   JAN     40     25     0.00    3.40  Closed
IDCC    19.00  19.98   JAN     25     15     0.20    0.20   Open

Lam Research (NASDAQ:LRCX), Photon Dynamics (NASDAQ:PHTN), and
Juniper Networks (NASDAQ:JNPR), which has previously been closed,
have provided outstanding 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  37.00   DEC-37C   NOV-37C  (0.20)   0.50   Closed
SCRI    20.52  26.30   FEB-22C   DEC-25C   1.40    2.10    Open?
GPRO    26.77  32.17   FEB-30C   NOV-30C   1.95    2.55   Closed
ACS     46.86  49.54   DEC-45P   NOV-45P   0.80    0.85   Closed

Gen-Probe (NASDAQ:GPRO) was closed for a favorable profit earlier
this week as the stock moved through a recent resistance level at
$30.  Affiliated Computer Services (NYSE:ACS) was not as fruitful,
offering only a minimal gain before the issue gapped higher Friday
on news of a $1 billion contract from the U.S. Dept. of Education.
The diagonal spread in Sicor (NASDAQ:SCRI) is on the "watch" list
as the issue needs to remain above $25 to achieve maximum profit.
The Microsoft (NASDAQ:MSFT) spread, which offered many profitable
opportunities, has previously been closed.


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

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

ADVP    49.05  53.77   NOV    50    50     3.40    6.20   Closed
RMBS    24.79  25.00   NOV    25    25     2.50    2.35   Closed
VIP     65.11  61.65   NOV    65    65     2.45    6.00   Closed

Vimpel Communications (NYSE:VIP) closed out a great month for
volatility traders with a one-week profit of over 100%.  There
were other big winners in the straddle section in November such
as AdvancePCS (NASDAQ:ADVP), 4Kids Entertainment (NYSE:KDE) and
Priceline.com (NASDAQ:PCLN), which far exceeded all expectations,
providing over a 100% gain in the wake of the company's mediocre
earnings report.  Zimmer Holdings (NYSE:ZMH) was a very profitable
straddle and the position in Toyota Motors (NYSE:TM) achieved a
small short-term gain.  The straddle in Engineered Support Systems
(NASDAQ:EASI), which has previously been closed, offered a number
of lucrative opportunities.  Triad Hospitals (NYSE:TRI), which has
never achieved a gain on a simultaneous order basis, has previously
been closed to preserve capital.


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

No Open Positions


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

E-MAIL REPLIES

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

Attn: Contact Support
Subject:  Risk management with spreads

Hi again:

You helped me a week or two ago with some credit spread questions
(very helpful answers, thanks).  I was hoping to bother you again...

I've done some more reading and paper trading of put-credit
spreads.  So far, things have done well (but everyone can look
good when the market cooperates!).

One concern I have with credit spreads as opposed to covered calls
(another favorite of mine) is the risk factor.  With credit spreads
the spread (less the credit)is 100% at risk...if the underlying
tanks, the entire investment is at risk.  As opposed to CCs, which
you still own the stock and can try to repair damage.

My question is...what techniques, if any, can be used to limit the
risk with credit spreads of a massive breakdown in stock price?  So
far, the obvious solutions to me are selling OTM spreads on well
picked stocks and selling spreads with limited time left (maybe a
week or two)  as opposed to a full month.  But, there's still the
risk of total loss if there happens to be a major meltdown of the
stock, or possibly the market in general (with all the world news
lately, the possibility of a major terrorist strike must at least
be considered).

My broker (OptionsXpress) doesn't have stop limits for spreads...do
others that you're aware of (although even that wouldn't work in a
real meltdown)?  I was wondering about buying additional puts at a
lower strike, but I'm not sure that would help much.  Wasn't sure
if I was missing any other ideas to limit the risk, just in case
something real bad happens.

I'm realistic enough to know there's going to be risk, but I'm
always looking for ways to limit it, relative to the gain possible.

Thanks again for your thoughts!

ST

Editor's note: Andrew Aronson, option principle and Vice President
of Onestopoption.com, a division of Man Financial, has generously
offered to share his views on this subject.


Hello ST,

The first thing that I help my clients develop is risk management.
Risk is the only thing we can attempt to control when trading the
markets.  With the credit spreads, we can determine the worst
possible scenario, no matter what happens.  As you said, this is
simply the difference between the sold and purchased strike price
minus any credit received.  In other words, we can quantify the
risk before we put the trade on.  When my clients want to do a
certain number of positions, I will inform them of the worst case
scenario.  If they are uncomfortable with the potential risk, we
will do fewer positions until they are comfortable.  The strategy
of selling "covered" calls offers the ability to hold the stock
and sell other options against the stock, however there is no
right answer as to which is better.  I would point out that in
the covered call strategy, you will have to post at least 50% of
the value of the stock in order to hold the position.  I would
then suggest you compare the margin required for the credit spread
versus the covered call.  Most likely, the better return on margin
will be found with credit spreads.

Your main question was how to control the risk in credit spreads.
I would argue that the risk control would be done before the trade
is placed.  I fail to see the logic in trying to leg out or cover
a credit spread before expiration (unless you are covering the
short for a small amount).  The main goal is to take the emotion
out of the trading decisions.  When using the covered calls, you
may want to consider purchasing longer term puts to hedge the
downside risk.  It may take a few months to pay for the puts, but
this will remove the risk and hopefully the emotion.  As I said
before, there is no one strategy that is better than the other.
They both offer their own pros and cons.  Try to limit the covered
call plays to stock that you would not mind owning over the long
term.  If it is a short term play, consider the puts to hedge so
the play does not become a long-term play by accident.  Feel free
to contact me if you have additional questions.

Andrew Aronson
Aaronson@OptionInvestor.com
(888) 281-9569

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

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* Dedicated option brokerage with "live" option principals/brokers
* Order routing to "best-priced" exchange and timely executions
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* Foreign accounts including Canada -- Futures trading available
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*************
NEW POSITIONS
*************

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

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

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

*****
IVGN - Invitrogen  $64.85  *** Next Leg Up? ***

Invitrogen (NASDAQ:IVGN) develops, manufactures and markets more
than 10,000 products for the life sciences markets.  Invitrogen's
products are principally research tools in reagent and kit form,
biochemicals, sera, media, and other products and services, which
the company sells to corporate, academic and government entities.
The company focuses its core business on two principal segments,
Molecular Biology Products and Cell Culture Products.  Earnings
are due in early December.

IVGN - Invitrogen  $64.85

PLAY (less conservative - bullish/credit spread):

BUY  PUT  DEC-55.00  IUV-XK  OI=326  ASK=$0.50
SELL PUT  DEC-60.00  IUV-XL  OI=877  BID=$1.00
INITIAL NET-CREDIT TARGET=$0.55-$0.60
POTENTIAL PROFIT(max)=12% B/E=$59.45


*****
NTLI - NTL Incorporated  $58.96  *** Cable Sector Giant! ***

NTL Incorporated (NASDAQ:NTLI) is a broadband communications and
broadband services company in the United Kingdom and the Republic
of Ireland.  The firm's principal lines of business are consumer
services, including residential telephony, cable television,
Internet access and interactive services and wholesale Internet
access solutions for United Kingdom Internet service providers;
business services, including data, voice and Internet services;
broadcast transmission and tower services, including digital and
analog television and radio broadcasting, tower and site leasing,
wireless network management, satellite distribution services and
radio communications services to the public safety sector; network
services, including the management of the firm's United Kingdom
national network infrastructure; and carrier services and mobile,
including national and international carrier telecommunications
services.

NTLI - NTL Incorporated  $58.96

PLAY (conservative - bullish/credit spread):

BUY  PUT  DEC-45.00  NTL-XI  OI=3174  ASK=$0.90
SELL PUT  DEC-50.00  NTL-XJ  OI=1565  BID=$1.30
INITIAL NET-CREDIT TARGET=$0.50-$0.65
POTENTIAL PROFIT(max)=11% B/E=$49.50


*****
NVLS - Novellus Systems  $42.54  *** An Old Favorite! ***

Novellus Systems (NASDAQ:NVLS) manufactures, sells and services
semiconductor processing equipment.  The company's products are
comprised primarily of advanced systems used to deposit thin
conductive and insulating films on semiconductor devices, as well
as equipment for preparing the device surface prior to these
deposition processes.  Novellus is a supplier of high productivity
deposition and surface preparation systems used in the fabrication
of integrated circuits.  Chemical Vapor Deposition systems employ
a chemical plasma to deposit all of the dielectric (insulating)
layers and certain of the metal (conductive) layers on the surface
of a semiconductor wafer.  Physical Vapor Deposition systems are
used to deposit conductive metal layers by sputtering metallic
atoms from the surface of a target source via high DC power.
Electrofill systems are used for depositing copper conductive
layers in a dual damascene design architecture using an aqueous
solution.

NVLS - Novellus Systems  $42.54

PLAY (conservative - bullish/credit spread):

BUY  PUT  DEC-35.00  NLQ-XG  OI=5344  ASK=$0.30
SELL PUT  DEC-37.50  NLQ-XU  OI=3819  BID=$0.55
INITIAL NET-CREDIT TARGET=$0.25-$0.30
POTENTIAL PROFIT(max)=11% B/E=$37.25


*****
ITMN - Intermune  $18.28  *** Oritavancin NDA Delay! ***

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.

ITMN - Intermune  $18.28

PLAY (less conservative - bearish/credit spread):

BUY  CALL  DEC-22.50  IQY-LX  OI=15   ASK=$0.20
SELL CALL  DEC-20.00  IQY-LD  OI=319  BID=$0.45
INITIAL NET-CREDIT TARGET=$0.25-$0.35
POTENTIAL PROFIT(max)=11% B/E=$20.25


*****
MRVL - Marvell Technology  $38.90  *** Profit-Taking Underway! ***

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

MRVL - Marvell Technology  $38.90

PLAY (less conservative - bearish/credit spread):

BUY  CALL  DEC-45.00  UVM-LI  OI=1645  ASK=$0.45
SELL CALL  DEC-42.50  UVM-LT  OI=6602  BID=$0.75
INITIAL NET-CREDIT TARGET=$0.30-$0.40
POTENTIAL PROFIT(max)=14% B/E=$42.80


*****
QCOM - Qualcomm  $43.97  *** Consolidation In Progress! ***

Qualcomm (NASDAQ:QCOM) is a worldwide 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 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 their advanced
wireless technology, enhanced integration and interoperability,
as well as reduced time to market.  Qualcomm provides integrated
circuits and unique system software to many wireless handset and
infrastructure manufacturers.

QCOM - Qualcomm  $43.97

PLAY (conservative - bearish/credit spread):

BUY  CALL  DEC-50.00  AAO-LJ  OI=6090  ASK=$0.20
SELL CALL  DEC-47.50  AAO-LW  OI=8645  BID=$0.45
INITIAL NET-CREDIT TARGET=$0.25-$0.35
POTENTIAL PROFIT(max)=11% B/E=$47.75


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

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

*****
AHG - Apria Healthcare Group  $26.00  *** Medicare Woes? ***

Apria Healthcare Group (NYSE:AHG) provides a broad range of home
healthcare including respiratory therapy, infusion therapy and
medical equipment to patients in 50 states through approximately
425 branches.  With over $1.25 billion in annual revenues, Apria
is the nation's leading homecare company.  In each of its three
service lines, the company provides patients with a variety of
clinical and ancillary services, as well as related products and
supplies, most of which are prescribed by a physician as part of
an in-home care plan.  These services include providing in-home
care, infusion and respiratory pharmacy management and high-tech
infusion nursing; educating patients and their caregivers about
illnesses and instructing them on self-care and the proper use
of products in the home; monitoring patients' individualized
treatment plans; reporting patient progress and status to the
physician and/or managed care organization; maintaining and
repairing equipment and processing claims.

AHG - Apria Healthcare Group  $26.00

PLAY (less conservative - bearish/debit spread):

BUY  PUT  NOV-30.00  AHG-XF  OI=25   ASK=$4.30
SELL PUT  NOV-27.50  AHG-XY  OI=655  BID=$2.05
INITIAL NET-DEBIT TARGET=$2.15-$2.20
POTENTIAL PROFIT(max)=14% B/E=$27.80


*****
ELAB - Eon Labs  $48.17  *** Bullish Outlook! ***

Eon Labs (NASDAQ:ELAB) is a generic pharmaceutical company engaged
in developing, licensing, manufacturing, selling and distributing
a range of prescription pharmaceutical products primarily in the
United States.  The company focuses on drugs in a variety of solid
oral dosage forms, utilizing both immediate and sustained release
delivery, in tablet, multiple layer tablet, film-coated tablet and
capsule forms.  The company does not depend on any single drug or
therapeutic category for a majority of its sales.

ELAB - Eon Labs  $48.17

PLAY (moderately aggressive - bullish/debit spread):

BUY  CALL  DEC-40.00  ESQ-LH  OI=60   ASK=$8.30
SELL CALL  DEC-45.00  ESQ-LI  OI=241  BID=$3.90
INITIAL NET-DEBIT TARGET=$4.20-$4.25
POTENTIAL PROFIT(max)=17% B/E=$44.25


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

*****
CEPH - Cephalon  $46.34  *** Trading Range? ***

Cephalon (NASDAQ:CEPH) is an international biopharmaceutical
company dedicated to the discovery, development and marketing
of products to treat various sleep disorders, neurological and
psychiatric disorders, cancer and pain.  In addition to its
active research and development program, the company markets
three products in the United States and a number of products
in various countries throughout Europe.  Its biggest products
in terms of sales, Provigil, Actiq and Gabitril, comprised
approximately 80% of the company's total worldwide net product
sales for 2002.  Outside the United States, the company's main
commercial activities are concentrated primarily in France, the
United Kingdom and Germany.

CEPH - Cephalon  $46.34  *** Trading Range? ***

PLAY (speculative - bullish/calendar spread):

BUY  CALL  FEB-50.00  CQE-BJ  OI=2625  ASK=$2.05
SELL CALL  DEC-50.00  CQE-LJ  OI=2192  BID=$0.70
INITIAL NET DEBIT TARGET=$1.20-$1.25
INITIAL TARGET PROFIT=$0.70-$0.95


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

*****
ATN - Action Performance  $17.93  *** Probability Play! ***

Action Performance Companies (NYSE:ATN) is a designer and seller
of licensed products related to the National Association of Stock
Car Auto Racing (NASCAR), including die-cast scaled replicas of
motorsports vehicles, apparel and memorabilia.  NASCAR is one of
the most popular motorsports sanctioning bodies in the U.S. and
sanctions the Winston Cup series of stock car races, which draws
millions of fans to events each year.  Action also designs and
sells products relating to other motorsports, including racing
sanctioned by the National Hot Rod Association (NHRA), Formula
One, the Indy Racing League (IRL) and the World of Outlaws.

ATN - Action Performance  $17.93

PLAY (speculative - neutral/debit straddle):

BUY CALL  JAN-17.50  ATN-AW  OI=53   ASK=$1.50
BUY PUT   JAN-17.50  ATN-MW  OI=638  ASK=$1.10
INITIAL NET-DEBIT TARGET=$2.40-$2.50
INITIAL TARGET PROFIT=$0.85-$1.30


*****
MACR - Macromedia  $20.22  *** Volatility Speculation! ***

Macromedia (NASDAQ:MACR) is a software company whose software
enables business users, developers and designers to create and
deliver experiences on the Internet, fixed media, wireless and
digital devices.  The firm provides three families of products
to address this market opportunity: Macromedia MX Products,
Information Convenience Products, and Mobile and Device Products.
The Macromedia MX family of products provides client software,
server and development tools for cost-effectively building
Websites and Internet applications that offer highly effective
end user experiences.  Information Convenience Products enable
non-technical business users to create and deliver information
without intricate technical training.  Mobile and Device Products
are targeted at device manufacturers, carriers and media networks.

MACR - Macromedia  $20.22

PLAY (very speculative - neutral/debit straddle):

BUY CALL  DEC-20.00  MRQ-LY  OI=1498  ASK=$1.25
BUY PUT   DEC-20.00  MRQ-XY  OI=2188  ASK=$1.00
INITIAL NET-DEBIT TARGET=$2.10-$2.20
INITIAL TARGET PROFIT=$0.70-$1.15


*****


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