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Daily Newsletter, Wednesday, 11/26/2003

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The Option Investor Newsletter                Wednesday 11-26-2003
Copyright 2003, All rights reserved.                        1 of 2
Redistribution in any form strictly prohibited.


In Section One:

Wrap: Markets Digest Economic News
Futures Wrap: Turkey Day
Index Trader Wrap: Totally computerized
Traders Corner: Bless The Turkeys Who Make Our Profits Possible
Traders Corner: Pick Your Battles


Posted online for subscribers at http://www.OptionInvestor.com
*******************************************************************
MARKET WRAP  (view in courier font for table alignment)
*******************************************************************
     11-26-2003            High     Low     Volume Advance/Decline
DJIA     9779.57 + 15.63  9794.68  9706.01 1.35 bln   1846/ 942
NASDAQ   1953.31 + 10.27  1960.31  1930.63 1.48 bln   1767/1307
S&P 100   521.21 +  1.67   521.77   516.68   Totals   4437/1546
S&P 500  1058.45 +  4.56  1058.45  1048.28
RUS 2000  545.31 +  2.13   547.32   539.70
DJ TRANS 2917.27 -  4.05  2941.86  2904.12
VIX        16.23 -  0.48    17.26    16.02
VXO        15.91 -  0.38    17.08    15.81
VXN        25.63 -  0.36    26.82    25.54
Total Volume 3,167M
Total UpVol  2,259M
Total DnVol    840M
52wk Highs     717
52wk Lows       22
TRIN          0.75
PUT/CALL      0.72
*******************************************************************

Markets Digest Economic News
by James Brown

Heading into the Thanksgiving holiday Wednesday's session began
with investors selling the positive economic news before traders
bought the dip midday and drove stocks into the green by the
close.  The early morning weakness was probably a matter of
digesting the news of which there was plenty to go around.  The
buffet of reports was mostly positive and reaffirmed that the
world's largest economy is indeed on the rebound.  Since many
believe the autumn market's gains were in anticipation of the
news the actual announcements left little incentive to push
stocks higher.  As Art Cashin likes to say, the numbers were
already baked in.

World markets were mixed with Asian exchanges trading higher.
The Japanese NIKKEI jumped 184 points to 10,144, reclaiming the
10K mark.  European stocks were generally lower but losses were
mild.  The U.S. dollar ended the day weaker against the yen and
the euro.  This in turn helped push gold up to $402 an ounce
intraday but gold futures closed the session at $398, up $5.60.
The DJIA stretched its winning streak to three day in a row by
adding more than 15 points to close at 9779.  The NASDAQ
Composite added 10 points closing at 1953.  The S&P 500 index
marked its fourth gain in a row edging up less than five points
to 1058.

The market's strength today was relatively broad based.
Homebuilders, retail, airlines, drugs and transports were the
weakest, all closing in the red but losses were mild.  The best
performers were gold stocks (XAU +2.9%) followed by software,
networking, broker-dealers and oil service stocks.  Market
internals were positive for such a low volume day.  Advancing
stocks climbed past decliners 18 to 9 on the NYSE and 17 to 13 on
the NASDAQ.  Up volume was two to three times down volume on both
exchanges.

Chart of the DJIA



Chart of the NASDAQ




One of the most influential economic reports out today was the
Chicago Purchasing Managers Index (PMI).  The November figures
hit a 9-year high at 64.1 percent.  Estimates had been for a
slight improvement to 56.3 percent from October's 55.0 percent.
Numbers over 50 represent improvement in business conditions.
One of the most compelling ingredients in the PMI was the new
orders component, which jumped to 73.3 in November from 59.2 in
October.  The factory sector in this country has been lagging for
years and we're finally seeing some month over month
improvements.  Unfortunately, we're not seeing factories up their
hiring practices just yet as the employment component slipped
from 53.1 to 48.5 percent.

Investors were also treated to some strong consumer sentiment
numbers per the University of Michigan report.  The consumer
sentiment index hit 93.7 in November up from 89.6 in October.
This was the highest level since May 2002.  Those surveyed felt
optimistic as the current conditions component edged up to 102.5
in November up from 99 in October.  The expectations component
also made gains with November hitting 88.1 compared to 83.0 in
October.

The Durable Goods report was very bullish as well.  The consumer
has been carrying our economy but we're finally beginning to see
signs that business will open their wallets soon.  The Commerce
Department said orders for durable goods, those made to last more
than three years, rose 3.3 percent in October.  This is great
news but it gets sweeter when you also figure that September's
numbers were revised higher to a 2.1 percent gain.  October was
the fastest pace in more than a year with the past six months
soaring almost 10 percent.  Wall Street focused on the core
capital goods orders, which many view as a business spending
forecast.  The core capital goods orders rose 1.7 percent on top
of September's 5.8 percent.  It's about time corporations started
spending some money because consumer spending was flat in
October.  Personal spending numbers were down 0.6 percent in
September and remained unchanged in October despite a 0.4 percent
increase in personal income.  If you're a glass is half full type
of person then the personal spending figures might show consumers
taking a breather after a strong summer and now they're rested
and ready for this holiday shopping season.

Speaking of holiday spending the Federal Reserve released their
Beige Book report and the authors seemed rather optimistic for
this year's holiday retail sales.  The Beige Book said the
economy has continued to expand in October and early November (no
surprise there) and that manufacturing was improving.  While the
authors were disappointed that factory hiring had not picked up
they did feel that labor conditions were generally stable or
improving nationwide.  We see the same improving labor conditions
in this morning's initial jobless claims.  The Labor Department
said jobless claims dropped another 11,000 to 351,000.  This was
the lowest level in jobless claims sine George W. Bush took
office.

The improving labor conditions will also be a boon for the
already hot housing market.  The October new home sales report
was out this morning and sales slipped 3.5 percent to an annual
rate of 1.105 million homes.  Analysts were not concerned as
October's sales still ranked as the fifth highest on record.
Plus the Mortgage Bankers Association said mortgage applications
grew for the second week in a row.

Hardly a day goes by that we don't hear some new development in
the ongoing mutual fund scandal.  Today's news was a surprise as
Bank One (ONE) reported late in the trading day that it expects
the SEC to take enforcement action against the bank's mutual fund
advisor.  ONE is the country's sixth largest bank and hopes to
reach a settlement with the SEC without litigation.

All U.S. markets will be closed tomorrow for the Thanksgiving
holiday.  Friday will be a shortened trading day with both the
bond market and the stock markets closing early.  The commodities
market will reopen on Monday.  It could be a rather quiet session
with no economic reports and probably very little volume as most
major market players will be absent.  Fortunately, the markets
have a very strong historical trend of gaining on the Friday
after Thanksgiving.  I would not be surprised to see the VXO (old
VIX) volatility index hit yet another new low as the afternoon
bounce from today continues over into Friday.

Personally, I want to say thank you to all of our readers.  I
encourage all of you to take time on Thursday to truly appreciate
our freedoms we have in this country.  If you are blessed enough
to have family close by then give them a hug and let them know
what you're thankful for.  If not, then there is always the
phone.  I'm sure they'd be happy to hear from you.  My heart also
goes out to all of our brave men and women serving overseas no
matter where you are.  For those of you who have come home
wounded, you have my utmost respect.

Happy Thanksgiving!


************
FUTURES WRAP
************

Turkey Day
Jonathan Levinson

It was a listless but exciting session, with volume dropping
throughout the day.  Equities, commodities and precious metals
gains, while the US Dollar Index and treasuries dropped.

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 plethora of economic data released this morning was not
particularly bad, but you wouldn't know by looking at the chart
of the US Dollar Index.  A precipitous slide took it down to sub-
90.50, and the index spent the remainder of the session chopping
along uncertainly in what will either prove to be a descending
triangle or a pennant.  Neither formation is bullish, but support
at 90.00 should be strong.  Gold, silver and the CRB all rallied,
with the HUI printing a new alltime high.  The CRB added 2.75 to
close at 248.42, led by strength in cotton, copper, sugar, crude
and heating oil futures.


Daily chart of December gold


December gold bucked the daily cycle downphase that kicked off
this week, adding 6 to close at 398.40.  The intraday high was
402.50, the first break of the 400 level in several years.  HUI
broken 240 with authority, never looking back, and XAU broke to
new highs as well above 108.  HUI closed up 9.36 at 242.58, XAU
+3.06 at 107.68.  If gold can hold these levels without pulling
back, the daily sell signal should reverse and begin trending in
overbought.  This remains a risky level for new long positions,
but if it holds, it will be a very bullish development.  Note
that gold, silver and the miners all rose as equities declined,
also a very bullish indicator.


Daily chart of the ten year note yield


Bonds sold off today in a shortened session ending at 2PM EST,
despite weakness in equities and strength in commodities and
metals.  The ten year note yield rose 5.6 basis points to close
at 4.242%, the daily candle almost engulfing yesterday's sell
candle.  Without wracking our brains to correlate the news with
the price action in treasuries today, we see that the down phase
on the daily cycle oscillators moved closer to a reversal today,
and again it appears that the low in the TNX was seen last
Friday.  Another down day for bonds should give us our buy signal
on the yield, and signal a test of the 4.4% level overhead.


Daily NQ candles


It was a bullish day for the indices, with fractional gains for
NQ, ES and YM, but at a huge cost.  The VXO finished at 15.91,
which is the lowest closing price I have seen in my years of
trading.  The highs were printed in the opening minutes and not
revisited for the duration of the session.  Despite the sharp
doji bottom, then NQ could not regain the failed rising wedge
trendline on the daily chart, and despite the higher high, the
buy signal on the 10 day stochastic retreated, closing on a
bearish kiss.  This wavering at current levels makes any trades
of longer duration than scalps risky, because there's no way of
knowing what the bias on this key time frame is going to be.
However, with the VXO unsustainably low and the bulls unable to
rattle the bears even on a high news / low volume day, it can be
convincingly argued that the next move could see the daily cycle
oscillators trending in oversold territory.


30 minute 20 day chart of the NQ


The 30 minute NQ broke down out of the bear wedge, but bounced
cleanly of the 1400 low, making all the way to 1422 at the close.
The bounce was less than inspiring, but it was sufficient to turn
the 30 minute cycle oscillators back up on buy signals.  An
upphase from here with even minimal price traction should be
sufficient to get the 10 day stochastic back into an upphase.
Resistance is at 1428, followed by 1435.  However, with the VXO
this low, the bullish picture just doesn't feel right.  The
cycles do no paint a bearish picture, but the bulls are not going
to be able to just drift the NQ to new 52 week highs.


Daily ES candles


The daily ES played touch-and-go with the secondary wedge
trendline, managing to close either right on or right above it,
depending on precisely where it's drawn.  The upphase on the
daily cycle oscillators for ES is not quite as iffy as that on
the NQ, but it's certainly not confirmed yet either.  Once again,
the extremely low volatility readings serve as a huge grain of
salt on any bullish interpretation.  But the daily candle is a
large bullish hammer, and the bears aren't out of the woods by
any means.  The ES is clearly more oversold than overbought on a
daily basis, and bulls are trying very hard to mount a charge.


20 day 30 minute chart of the ES


On the 30 minute chart, we see the same truncated downphase on
the 30 minute cycle oscillators, and the bear wedge breakout
didn't last for long.  The move off the lows hugged the lower
rising trendline for its duration, heading toward price and
trendline confluence between 1058-60.  This entire range to 1065
is fraught with resistance for bulls, and I expect the 30 minute
cycle oscillators to top out in that range as well.  Bulls will
have to convert the bulk of longer-term traders (as measured by
the daily chart and cycles) to launch the next leg of the 2003
rally above 1065, and I don't expect that to be accomplished with
volatility this low or the 30 minute cycle this close to topped
out.


150-tick ES


The 2-day 150-tick ES shows the short cycle oscillators looking
for a fresh downphase, and reaffirms resistance at 1058-60.


Daily YM candles


Same picture on the YM.


20 day 30 minute chart of the YM



Wednesday was mostly a throw-away day and did not serve to answer
any of our questions on the nearterm outlook for equities.
Gold's move and the weakness in the dollar were not bullish for
equities.  A bullish situation might have seen the dollar fall
and bonds, equities and gold rise.  Today, treasuries fell,
hinting at foreign selling of US assets, and while equities rose,
they failed to break any significant upside resistance and in
the process drilled volatility down to extreme lows not seen in
years.

While it looks and feels bearish, the cycles have the potential
for a new assault on the highs.  Given the proliferation of
shorts betting on those highs holding, the potential for a rally
financed on the backs of panicked bears cannot be ruled out.
Friday promises to be a low-volume session, and with the
potential for meaningless price swings and the current ambiguity
in the cycles, it will be a day in which I will be reluctant to
enter. See you in the Futures Monitor!


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

Totally computerized

Traders and investors may have been inundated with a plateful of
economic data today, but I think little can be read into today's
trade, as I honestly believe today's session was largely
controlled by computers.

The reason I think this, is that today's trade was almost a
mirror image of what we discussed just prior to reviewing the
pivot matrix where we thought a bull might look for a short-term
bullish trade back near the WEEKLY R1s and a strong close back
near the WEEKLY R2s.

Today's trade did see the NASDAQ-100 Index (NDX.X) 1,420 +0.61%
and its Tracking Stock (AMEX:QQQ) $34.34 +0.45% as well as the
Dow Industrials (INDU) 9,779.57 +0.16% and Dow Diamonds
(AMEX:DIA) $97.90 +0.22% see trade just below their WEEKLY R1's
today, and while these were the major indices in our pivot
matrix that did see a trade at their WEEKLY R1s, the broader S&P
500 Index (SPX.X) 1,058.45 +0.43% closed at its session high,
which was good enough for its first trade this week at its WEEKLY
R2, while its tracker, S&P Depository Receipt (AMEX:SPY) $106.37
+0.35% traded its WEEKLY R2 for a second consecutive session.

While some of this may be shrugged off as coincidental and have
the aroma of pure turkey, maybe today's late morning sell program
at 10:45 AM EST, and tomorrow's DAILY Pivots make the case
that a large sell program at 10:45 AM EST was designed to hedge
some portfolio's ahead of the Thanksgiving weekend, where the
sell program came almost smack-dab between the WEEKLY R1 and R2,
so senior traders could get an early start on a long weekend, but
still allow the junior traders to not mess anything up, and have
a bullish tone take hold into the latter half of today's session.

I'll admit that I was very skeptical when a fellow trader first
told me that markets tend to trade more bullish into a weekend,
where a trader looks for bullishness to appear at the lunchtime
hour, ahead of a vacation-lengthened weekend.

The thought is that the toughest decision a trader/investor has
to make, is when to SELL a stock.  While it is also difficult to
pull the trigger and buy a stock, the real work begins when the
position is initiated, where the hardest decision to eventually
hit the sell button comes later.

At the institutional level, it is often the senior trader that
gets first dibs on leaving early, and it is most often the senior
trader that makes a sell decision, while the junior trader is
usually left at his/her terminal to simply make markets or take
care of the buy side customers.

As such, a long weekend where the senior trader wants to get out
of the office early, often executes some sell orders before the
lunchtime hour, and just before heading out the door to lunch
(and not returning until after his/her extended weekend) leaves
the junior trader with nothing more to do than fulfill the needs
of the buy side.  If things get too bullish, then often times,
the computers are set up to do any selling while the senior
trader spends a little more quality time with family and friends.

Here's a quick look at the pivot matrix for Friday (remember,
markets are closed tomorrow) and I'll try and think like a
computer to ascertain what a trader might look for on Friday, for
those of us determined to not have a 4 or 4.5-day weekend!

Pivot Analysis Matrix -



In PINK I made quick note of today's HIGH and LOW trades in the
SPX/SPY and NDX/QQQ, which respectively traded the WEEKLY R2 and
WEEKLY S1.  Why is this?  I can only think that these are the two
major indices, for which buy/sell programs are set on and more
likely influenced by institutional computer trading.

Unfortunately, my Qcharts don't have a premium symbol for the NDX
buy/sell levels, but according to HL Camp & Company, only one
data vendor in the world has an accurate premium alert for the
NDX.  Still, we will see later on what took place at 10:45 in the
QQQ.

In the DAILY pivot matrix for FRIDAY, I make note of the DAILY
Pivots.  I'll show you in a moment where these two levels were
almost EXACTLY where today's 10:45 EST sell program had influence
on today's trade.  What was significant about 10:45 AM?  Good
question as the last bit of economic data released in the morning
was 10:00 AM.  Nope... I don't think this sell program was in
relation to the economic data, but simply a hedge put on before
the Thanksgiving weekend, just in case of a terrorist event.

This hedge, then gives downside protection to.... the MONTHLY
Pivot/DAILY S2 correlative support in the more volatile NDX and
WEEKLY R1/DAILY S2 in the less volatile SPX.

In the pivot matrix, you may note how the Dow Industrials (INDU)
is perhaps lagging in the WEEKLY Matrix relative to the other
indices.  Do you see how the INDU closed 9,779.57, while its
WEEKLY R2 is 9,840 and correlative resistance is found at DAILY
R2?  On Friday, should the other major indices break above their
NOW CLOSE WEEKLY R2, I think that INDU 9,845 may well be a level
where we find upside resistance.

Barring any terrorist activity on Thursday, I still view the
WEEKLY R1 as support.

Remember that after Friday's close, we will have new MONTHLY
levels and new WEEKLY levels.  I also want to stress as I did
last night, that I'm not turning the Index Trader Wrap into a
day-trade wrap, but ahead of the Thanksgiving holiday, which is
most likely a 4.5 day weekend, I'm just not in the mindset that
current trade is anything more than short-term computer-related
trading, as most of the "big money" went on vacation at around
12:00 PM EST today.

Let's look at the NASDAQ-100 Tracking stock (AMEX:QQQ) $35.34
+0.45% on 10-minute intervals, where as it would relate to last
night's Index Trader Wrap, I set up a bullish day trade in OI
Market Monitor for the QQQ as it was pulling back toward its
WEEKLY R1 of $38.89.  The trade was initially set up as "long at
$34.90, stop $34.70, target $35.35."  I'm using 10-minute
intervals only to be able to draw in Monday and Tuesday's trade.
The little retracement levels you see are from the 5-minute
retracement technique (blue is upper, red is lower) and the pink
was a stacked lower just in case the QQQ "overdid it" to the
downside should it trade WEEKLY R1.

For you trend traders, I too was using trend in the QQQ for my
trade setup, but also pulling in the pivot matrix observations.

NASDAQ-100 Index Tracking Stock (AMEX:QQQ) - 10-minute intervals



The main point I'm trying to get across right now is that I
really don't think yesterday or today's trade, let alone Friday's
is any type of REAL response form the market as it relates to the
economy.

There were 2 sell program premium alerts given at 10:06 and
10:16, and I do think these were a negative response to the
October Help Wanted Index (37 vs. forecast 38) and October new
home sales (1.015M vs. forecast of 1.138M), but had less impact
as it was probably offset by the November Chicago PMI (64.1 vs.
56.5 forecast) and buyers were stemming a more notable decline
from those programs.

I can only think "hedge" when trying to explain the 10:45 AM EST
sell program at 10:45 AM EST, which had the QQQ trading at about
$35.22.

Now lets look at the S&P 500 Index (SPX.X), but on the 5-minute
bar scale.  Here however, I'm going to not only quickly show the
SPX action on the 10:45 AM EST sell program, but try and tie in
the SPX DAILY R2 with the correlative INDU WEEKLY R2 and DAILY R2
of 9,845.  My mindset here is that the SPX is trying to lead in
the WEEKLY Matrix, but to get higher, its needs further strength
from the NDX/QQQ and the INDU.  We can perhaps see the challenge
of a short-term downward trend in play on the QQQ in the above
chart, we can see the WEEKLY R2 resistance on the SPX.  For a
bullish follow through session on Friday, a LOT depends on the
INDU.

S&P 500 Index (SPX.X) Chart - 5-minute intervals



One could say that not all "buy/sell program premium alerts are
created equal" or generate a notable market move.  But the 10:45
sell program found a more notable decline that the two prior sell
programs.  My suspicion that the sell program was a hedge is
further noted as I'm so suspicious as to just how Friday's DAILY
Pivot seems to mark where the 10:45 AM EST sell program was
generated.  One piece of analysis here is that EARLY support on
Friday is 1,055.06, and we can see how WEEKLY R2 plays as
resistance.

We've seen the indices get bullish above a WEEKLY R2, but my
thinking based on the pivot matrix and lagging of the INDU in its
WEEKLY pivot matrix, is derived from the correlative INDU
resistance at Friday's DAILY R2 and current WEEKLY R2.

If the SPX is going to have a shot at its DAILY R2 on Friday,
then I think the DAILY Pivot in the SPX needs to hold support,
and the INDU needs to get its tail in gear.

Dow Industrials (INDU) Chart - 5-minute intervals



A break above the 9,796 level and Tuesday's high should have the
INDU making a gravitational move toward its correlative WEEKLY R2
and DAILY R2 and that would just about do it for what tends to be
a bullish week.  I would have to think the INDU needs to hold its
DAILY Pivot early to have a shot at WEEKLY R2.

Jeff Bailey


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

Bless The Turkeys Who Make Our Profits Possible
By Mike Parnos, Investing With Attitude

With the holiday season upon us, there will be millions of people
feasting on turkey.  Some will follow their meals with TUMS, while
others will get to go to the bank for their well-earned dessert.

Obviously, turkeys come in all shapes, sizes – and species.  At
the Couch Potato Trading Institute (CPTI), we feast on turkeys all
year long.  I'm speaking of the directional traders and
speculators who place their bets frequently and foolishly.   The
gravy is all ours.  It's only fattening for our brokerage
accounts.

I feel a little like the pot calling the kettle black since we
recently, in a regretful moment of temporary insanity, contributed
over $2,000 to the directional piss-away-pot.  A very expensive
lesson, indeed.  I learned from it.  Hopefully, you did too.

Giving Thanks
Let's all give thanks to OptionInvestor – that brought us
together.  Jim Brown, and the OI family of writers, techs, etc.,
work diligently to provide you with a vast base of knowledge and
information.

I know I've learned a lot from all of my readers and I'm pretty
sure you've all learned a few things from me.   I'm gratified to
have provided guidance and helped put some "hypothetical" dollars
in your pockets and the "hypothetical" turkey on your Thanksgiving
table.   I'm also glad to have provided a side dish smiles along
the way and maybe garnished it with a little perspective.

Personally, I'm thankful for all of your emails, your kind words,
your questions, your desire to learn and your unending interest in
this very stimulating world of option trading.   I look forward to
writing this same column next year – the only difference is that
my OI readers will need two doggie bags -- one to take home extra
turkey from dinner and another to carry home CPTI profits from the
markets.
____________________________________________________________

December Trade Entry Progress (Or Lack Of . . .)
On Monday, the market quickly moved up from the open.  After
waiting for amateur hour to pass, the market remained higher.
Therefore, we made an adjustment or two and a few decisions.  We
moved our SPX Iron Condor parameters up a bit as well as picked
the second BBH alternative trade – the $125/$130 Baby Condor
instead of the $125 Siamese Condor.

A chunk of the premium on the projected DJX Iron Condor trade
disappeared over the weekend.  With no premium available, there
was no point attempting to enter the trade – even if we had
adjusted it higher.

Watch the Sunday column for a potential (and, of course,
hypothetical) replacement trade for the DJX trade that didn't
happen.
____________________________________________________________

DECEMBER CPTI PORTFOLIO POSITIONS
SPX Iron Condor – 1058.45
We sold 7 contracts of December 1085 SPX calls and bought 17
contracts of December 1100 calls for net credit of about $1.75
($1,225).  Then, sold 7 contracts of December 1005 SPX puts and
bought 7 contracts of December 990 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 -- Baby Iron Condor - $127.39
BBH looks to be in a trading range.  To take advantage of this
range we sold 10 contracts of the Dec. BBH $130 calls and bought
10 of the Dec. $140 calls for a credit of about $2.00.  Then, we
sold 10 contracts of the Dec. BBH $125 puts and bought the $115
puts for a credit of about $1.85.  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.   Maximum potential profit of $3,850.

OEX Credit Spread Boogie – 521.21
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).
_____________________________________________________________

ONGOING POSITIONS
QQQ ITM Strangle – Ongoing Long Term -- $35.27
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 $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 @ $35.27
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.
______________________________________________________________

Pass The Cranberry Sauce
When are cannibals done with Thanksgiving dinner?  When everyone's
eaten.
______________________________________________________________

Don't Forget To . . .
Don't forget to renew your OI subscription.  Perhaps you have a
friend or family member who thinks he/she knows what they're doing
in the market.  Quick! Before they lose any more money, give them
a subscription to OptionInvestor.  It's a wonderful Christmas
gift.  It's the gift of knowledge – and that's a gift that lasts
(unless they have Alzheimer's, of course).
_____________________________________________________________

New To The CPTI?
Are you a new Couch Potato Trading Institute student?  Do you have
questions about our educational plays or our strategies?  To find
past CPTI (Mike Parnos) articles, look under "Education" on the OI
home page and click on "Traders Corner."  They're waiting for you
24/7.
___________________________________________________________

Happy Trading!
Remember the CPTI credo: May our remote batteries and self-
discipline last forever, but mierde happens. Be prepared! In
trading, as in life, it’s not the cards we’re dealt. It’s how we
play them. Your questions and comments are always welcome.

Mike Parnos
CPTI Master Strategist and HCP
_____________________________________________________________

Couch Potato Trading Institute Disclaimer

All results reported in this section are hypothetical. While the
numbers represented here may have been achieved or beaten by our
readers we make no representation that any individual investor
achieved these exact results. The tracking for the plays listed in
this section uses closing prices for the day the newsletter is
published and it is not meant to imply that any reader actually
received those prices or participated in these recommendations.
The portfolio represented here is hypothetical and for investment
education purposes only. It is only an illustration of what type
of gains a knowledgeable investor might receive utilizing these
strategies.


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

Pick Your Battles
by Mark Phillips
mphillips@OptionInvestor.com

Alright, I know I promised to finish up our "Adapting To Change"
discussion this week, but a couple of factors pushed that topic
down one notch this afternoon.  The primary issue was that the
erratic market over the past week has failed to give me the recent
examples I want to use for the conclusion to that topic.  but the
thing that pushed me over the edge was a heated discussion with
one of my close trading associates this morning.  At the end of
that discussion -- alright, it was more like an argument -- I came
to the realization that some people just haven't quite got the
balance right.  This isn't meant to denigrate anyone -- least of
all, my good friend I was arguing with -- but it is my opinion
that you have to be just a little bit nuts to even consider
trading on Friday.

Think about it.  It will be one of the lightest volume days of the
year and most traders are going to be unwilling to take any big
positions ahead of the weekend, especially with the looming
concerns about a possible terror attack here in the U.S.  I
suppose if your idea of fun is to just watch the squiggly lines
paint across the screen then you could consider spending the
abbreviated day in front of the computer, but most of us have more
interesting and enjoyable tasks in mind.  I'll personally be
recovering from my tryptophan-induced coma and looking forward to
enjoying more bird over the weekend.

It all comes down to picking the right battles to fight.  We
should all have the very clear understanding that for short-term
trading, those of us trading by computer are at a distinct
disadvantage to the pros on the floors of the various exchanges.
The way we win (and grow our accounts) is by trading only when we
can somehow skew the odds in our favor.  We may do that through
the use of a combination of technical indicators or price patterns
that we've noted can give us a statistical edge in a given trade
scenario.  Another way we may do that is by avoiding the more
hazardous trading time windows.  Here are some of the time windows
that I diligently avoid.  I will carry a trade through these
periods of time, but if the time window arrives and I'm not yet in
the trade, then I know through experience and a copious amount of
back-testing that I should stay out of the market until that
period passes.

1. After-hours and pre-market trading.  The cash session provides
much better liquidity and tighter spreads.  I cannot carve out an
advantage in these two periods of time, so I avoid it altogether.

2. The lunchtime lull.  While there are times that a tradable
setup will materialize during the 11:30am-1:00pm ET time period,
more often than not, it is fraught with peril and choppy trading.

3. The final 15 minutes before any economic report is usually a
dangerous place to initiate a short-term trade.  Market
participants have a tendency to square up or hedge positions ahead
of an important news release, meaning that most of the time, the
final minutes leading up to that report do not provide a strong
directional move.  So taking a position just ahead of the report
is akin to a coin flip on the REACTION of the market to an unknown
catalyst.  That is two levels of guesswork and frequently the
charts will not give us even the faintest clue as to what to
expect after the report is released.

4. Finally, in the big picture, I tend to avoid half-day sessions,
or ones in which bonds do not trade.  Certainly there are examples
where equities will move strongly and predictably in the absence
of bond market action.  But more often than not, the result of
having that part of the Financial market closed is that equities
will trade in a choppy and/or unpredictable manner.

The common theme in all of these periods of time is that the
normal balance of market action can be more easily skewed by the
lack of volume.  In the pre- and post-market, volumes are
significantly lower and that means it takes less effort to push
prices around EXTERNAL to what the charts say the stock in
question should do.  Look at a typical intraday chart -- the
symbol doesn't matter -- and find the lightest volume of the day.
Right there in the lunchtime lull is where it is time and again.
The additional risk involved in trades initiated during this
period is that the entry is based on market action that is the
result of light volume, meaning that it is easier for floor
traders to push price around, nipping both buy and sell stops in
the process.  Have you noticed that stock prices will often gyrate
both directions before picking the "real" direction immediately
following an economic report?  You don't think maybe that is floor
traders sweeping for stops on trades placed just before the report
do you?  Nah, that wouldn't be fair.  As mom always said, "Nobody
ever said life was fair."  You can count on that sort of
volatility more often than not to make it very difficult to hold
stops on trades taken just before the report.

To me, the most important time periods to avoid are these holiday
sessions.  It isn't that they are any more hazardous than the
other time periods that I diligently avoid.  It is the fact that
we so completely waste the opportunity to more productively use
the time.  There will be 3.5 hours of market "action" on Friday.
Ask yourself whether the chance for a winning trade is more
important than some other activity that you might choose to fill
the time with.  Perhaps serving your wife breakfast in bed?  How
about taking the kids to the park or spending the morning visiting
with a friend or family member that you see all too infrequently.
In the larger picture of life, using the time outside the trading
arena will provide greater rewards than any financial gain from
time spent in front of the computer.

Our goal in this profession is to make money, grow our trading
accounts and provide a better life for those we love.  It requires
discipline, focus and a clearly defined plan of action.  Part of
that plan should define when we will and will not trade, based on
when we can enter the battlefield (markets) only when we can exert
some control over the way the battle unfolds.  One of the best
ways we can do that is by only trading when the odds of erratic
market action can be minimized.

While we must all decide for ourselves when to trade and when not
to, hopefully I've caused you to stop and think not only about the
risks of trading in the lower-odds time periods, but also about
the opportunity cost of sitting in front of the computer during
these times, when perhaps the time could be better invested with
those that are so important to us.  I can tell you without a doubt
that my broker window will not be opened on Friday!

Have a Happy Thanksgiving!

Mark

P.S. Next week, I promise we'll get back to the remainder of our
discussion on "Adapting to Change".


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Contact Support
The Option Investor Newsletter                Wednesday 11-26-2003
Copyright 2003, All rights reserved.                        2 of 2
Redistribution in any form strictly prohibited.


In Section Two:

Stop Loss Updates: None
Dropped Calls: None
Dropped Puts: None
Play of the Day: Call - BBY
Spreads, Combinations & Premium-Selling Plays: Stocks Drift Higher
    As Holiday Season Begins
Watch List: A Cornucopia of Candidates

Updated on the site tonight:
Market Posture: Markets Flat Line


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*****************
STOP-LOSS UPDATES
*****************

None


*************
DROPPED CALLS
*************

None


************
DROPPED PUTS
************

None


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

Best Buy Co - BBY - close: 61.10 chg: +0.75 stop: 56.95

-Company Description-
Best Buy Stores, owned and operated by Minneapolis-based Best Buy
Co., Inc., is the nation's leading specialty retailer of
technology and entertainment products and services. Best Buy was
founded in St. Paul, Minn. in 1966. Best Buy Stores reach an
estimated 300 million consumers per year through 600 retail
stores in 48 states and online at BestBuy.com.
(source: company press release)


- Most Recent Update (Thursday, Nov. 20, 2003) -
"...Silver bells...silver bells... It's Christmas time in the
city..." Okay, so maybe it's a little early to be singing
Christmas carols but the holiday shopping season is about to be
launched this Friday.  Consumer electronics are huge and BBY is
one of the biggest players on the field.  UBS recently reiterated
their buy rating and upped their price target to $70.

The company recently opened their 600th store (in Hartsdale, New
York) and they've already launched the holiday price wars with
rival Circuit City.  Earnings should be about three weeks away
and a strong run into its announcement is a good possibility.
Looking at the chart, shares of BBY have been consolidating
sideways for the last three weeks between $57 and $60.  The stock
just broke out above $60 today and should have a clear shot at
trading to $65 - our first target.  Since shares have not traded
below $56.95 all month that's where we'll stock our stop loss.

- Play of the Day Comments -
Friday is traditionally one of the biggest shopping days of the
year.  With expectations strong for this year's revenues
investors bought the dip in BBY today (59.30) and pushed it to
new highs by the close.  Volume has been decent the last three
days in a row.


- Suggested Options -
We'd be looking over the December and January calls with a
preference for the $55 and $60 strikes.  Right now our favorite
would be the DEC 60, but if you think the Santa Claus rally will
show up, then the January 60's look good too.

BUY CALL DEC 55 BBY-LK OI= 6937 at $6.80 SL=4.25
BUY CALL DEC 60*BBY-LL OI=12835 at $3.00 SL=1.50
BUY CALL DEC 65 BBY-LM OI= 2788 at $0.90 SL= --
BUY CALL JAN 55 BBY-AK OI= 3655 at $7.50 SL=5.00
BUY CALL JAN 60 BBY-AL OI= 5816 at $4.00 SL=2.20
BUY CALL JAN 65 BBY-AM OI= 1842 at $1.85 SL=0.95

Annotated Chart:




Picked on November 25 at $60.36
Change since picked:     + 0.74
Earnings Date          12/17/03 (unconfirmed)
Average Daily Volume:      3.6  million
Chart =



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*********************************************
SPREADS, COMBINATIONS & PREMIUM-SELLING PLAYS
*********************************************

Stocks Drift Higher As Holiday Season Begins
By Ray Cummins

Investors had much to be thankful for Wednesday in light of the
nearly year-long rally and upbeat economic forecasts for 2004.

The Dow Jones Industrial Average was up 15 points to 9,779 with
DuPont (NYSE:DD), Altria (NYSE:MO) and Exxon-Mobil (NYSE:XOM)
among the best performing blue-chips.  The NASDAQ Composite rose
10 points to 1,953 on strength in networking and software issues.
The S&P 500 finished 4 points higher at 1,058 as gold and oil
shares led the broader market sectors.  Trading volume was light
with about 1.1 billion shares changing hands on the NYSE, while
over 1.5 billion shares were traded on NASDAQ.  Advancers paced
decliners 2 to 1 on the Big Board and 4 to 3 on the technology
exchange.  The bond market had a shortened session and finished
with the 10-year note down 16/32, bringing its yield up to 4.25%.

Happy Thanksgiving!

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

SUMMARY OF CURRENT POSITIONS - AS OF 11/25/03

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

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.


MONTHLY YIELD FOR UNCOVERED OPTIONS: MAXIMUM & SIMPLE

The Maximum Yield (listed in the summary and with "naked" option
selling plays) 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 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 trade.


Naked Puts
**********

Stock   Strike Strike Cost  Current   Gain    Max    Simple
Symbol  Month  Price  Basis  Price   (Loss)  Yield   Yield

AMAT     DEC    22    22.05  24.02    0.45   4.81%   2.04%
EYE      DEC    20    19.65  23.90    0.35   5.21%   1.78%
ICOS     DEC    35    34.55  45.00    0.45   3.81%   1.30%
NVLS     DEC    40    39.20  43.99    0.80   4.65%   2.04%
PHTN     DEC    35    34.25  40.18    0.75   5.41%   2.19%
PMCS     DEC    17    17.10  20.22    0.40   6.88%   2.34%
ANPI     DEC    40    39.05  47.50    0.95   7.86%   2.43%
APPX     DEC    25    24.55  35.22    0.45   6.28%   1.83%
EASI     DEC    42    42.68  52.14    0.70   4.74%   1.64%
GPRO     DEC    25    24.65  32.61    0.35   4.88%   1.42%
INSP     DEC    22    21.85  25.35    0.65   8.33%   2.97%
MGAM     DEC    35    34.60  40.43    0.40   4.33%   1.16%
NEM      DEC    42    41.60  45.75    0.90   5.61%   2.16%
NVLS     DEC    37    36.95  43.99    0.55   4.49%   1.49%
PHS      DEC    50    49.40  60.80    0.60   3.91%   1.21%
UTSI     DEC    30    29.65  36.99    0.35   3.83%   1.18%

A few issues remain on the "watch" list and as always, traders
are encouraged to exit (or adjust) any suspect positions in
the interest of capital preservation.


Naked Calls
***********

Stock  Strike Strike Cost  Current   Gain    Max     Simple
Symbol Month  Price  Basis  Price   (Loss)  Yield    Yield

IACI     DEC    37   35.90  32.62    0.40   3.22%    1.11%
WEBX     DEC    25   25.30  20.11    0.30   5.79%    1.19%
MERQ     DEC    50   50.40  46.69    0.40   3.21%    0.79%
SEPR     DEC    27   27.75  24.59    0.25   5.36%    0.90%
TTWO     DEC    40   40.40  33.16    0.40   5.84%    0.99%

Mercury Interactive (NASDAQ:MERQ) on the "watch" list for
the coming week.


Put-Credit Spreads
******************

Symbol  Pick   Last   Month L/P S/P Credit  C/B    G/L   Status

KLAC    60.08  58.11   DEC  50  55   0.75  54.25   0.75   Open
MIK     50.55  47.75   DEC  42  45   0.30  44.70   0.30   Open?
SMH     44.65  43.25   DEC  37  40   0.25  39.75   0.25   Open
BRCM    34.62  35.58   DEC  27  30   0.25  29.75   0.25   Open
BRL     81.14  81.27   DEC  70  75   0.50  74.50   0.50   Open
TOL     38.27  41.75   DEC  30  35   0.55  34.45   0.55   Open

KLA-Tencor (NASDAQ:KLAC) and Michael's (NYSE:MIK) remain on the
potential "early exit" list.


Call-Credit Spreads
*******************

Symbol  Pick   Last   Month L/C S/C Credit  C/B    G/L   Status

NE      33.79  34.19   DEC  37  35   0.40  35.40   0.40   Open?
HDI     45.17  46.70   DEC  50  47   0.25  47.75   0.25   Open?
SYMC    30.17  32.79   DEC  35  32   0.40  32.90   0.11   Open?

All of the bearish plays in the portfolio are on the "watch"
list in the wake of Monday's rebound and the expected "Santa
Claus" rally.


Synthetic Positions
*******************

No Open Positions


Debit Straddles
***************

No Open Positions


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

READERS WRITE -- E-MAIL REPLIES

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

Attn: Contact Support
subject: risk/reward

Hi Ray,

You guys have a great site!  I signed up for a 2 week freebie and
will join when the trial period is over.

I have a question regarding return/risk and need your input.  I
currently have the following Dec 2003 S&P 500 future (SP) option
Iron Condor which I entered on Nov 13th when the price was approx.
1055.  Long put 965, short put 985, short call 1120, long call
1140.  I collected a total of 2 pts x $250 or $500 less commissions
and fees of $24 x 4 legs for a net of $404.  This required approx.
$2300 in margin.

The 20 point difference in the strikes "limits" my loss to 20 pts.
less the 2 pts. premium received x $250 = $4500 of risk.  This, if
my thinking is correct, means I have a return to risk of $404 to
$4500 or 9%.  Is my strategy reasonable?  Am I insane to risk that
much for so little return?  If either strikes were penetrated what
exit plan should I incorporate?  Being a novice in Iron Condors any
advice you can provide will be eternally appreciated.

LB


Hello,

Glad to have you aboard!

All of the folks here at the OIN/PIN take pride in offering some of
the best stock/option information available on the internet, and at
a reasonable price.

As far as the spread strategy you described, the profit potential
(approx 8-9%/month) is acceptable as long as the risk is appropriate
for your portfolio.  Many professional traders use the approach you
described (opposing deep-OTM credit spreads on index-based futures)
and it is a viable technique when implemented correctly and managed
diligently.

Concerning potential adjustments for an unexpectedly large move in
the underlying, the most common technique would involve "rolling" up
or down (and possibly out), since you can't really cover with a long
or short position.  In that regard, many experienced traders would
initiate the adjustment prior to or very near the time when the
underlying moves past the sold strike price, not afterwards.

As with most strategies, timeliness is a critical aspect of success
and a timely exit or adjustment trade is even more essential with
limited-profit positions.

Since I am not a broker, I can't give you any specific advice on
option trading.  However, if you want a hands-on explanation of the
position management techniques for credit spreads, send a note to
Andrew Aronson, option principle at Man Financial.  He is one of
the contributing (professional) writers here at the OIN and his
expertise/viewpoints on option strategies are a wonderful resource
for new traders.

His E-mail address is: Aaronson@OptionInvestor.com

Good Luck!


Editors Note: Below is the "follow-up" reply from Andrew Aronson.

Hi Andrew,

Ray Cummins referred me to you in his email.  I sent Ray the email
shown below [above]...

Seems like Iron Condors, unless one tightens the range between the
strikes of the sold call and the sold put, results in a high risk
to low reward.  Is what I am doing advisable?  I used a wide range
of 135 points thinking it will not be threatened in the 4 to 5
weeks to expiration, unless there is an awful terrorist attack
causing a string of circuit-breaker "limit down" days.

Earning $404 on a margin (collateral) of $2300 results in a super
monthly return.  Even doubling the margin for price swings gives
one an enviable annualized return.

LB


Hello LB,

I think the first thing to realize is the fact that the market
would have to rally or fall over 5% in a month to result in an
unprofitable outcome.  The risk to reward ratio is going to look
awful but if you expect that a vast majority of your positions
will expire worthless (a good outcome), I feel the ratio is worth
the risk.  I am currently advising client to be very careful of
selling options (especially puts) in this very low volatility
market.  If and when volatility returns to the market, we will
see short options explode in price.

I work with my clients to help formulate and manage positions in
all markets. The commission cost is a good value, if you have
someone to advise and help you when the market really gets wild.
We charge $20 per option and are always here to help advise and
recommend strategies to keep our clients out of trouble.  If you
are interested in opening an account, please feel free to contact
me.

Thank you,

Andrew Aronson
V.P. Investments
OneStopOption
Division of Man Financial
(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.

OneStopOption Strengths:

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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 new investment, you must decide if the selections meet your
criteria for potential plays.  Only you can know what strategies
are suitable for your personal skill level, risk-reward tolerance
and portfolio outlook.  In addition, we recommend that you avoid
any trading techniques in which you are not completely comfortable
with the potential capital loss, the necessary adjustments, and
the common entry-exit strategies.  The positions with "*" will be
included in the weekly summary.  Those with "TS" (Target-Shoot)
are below our minimum monthly return, but may offer a favorable
entry price with a limit order, due to the daily volatility of
the underlying issue.

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

BULLISH PLAYS - NAKED PUTS

All of these issues have robust option premiums and relatively
favorable technical indications.  However, current news and market
sentiment will have an effect on these stocks, so review each play
thoroughly and make your own decision about its future outcome.

WARNING: THE RISK IN SELLING UNCOVERED 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.

**************
APPX - American Pharma Partners  $35.56  *** Recent High! ***

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.

APPX - American Pharma Partners  $35.56

PLAY (sell naked put):

Action    Month &   Option    Open   Last  Cost    Max.  Simple
Req'd     Strike    Symbol    Int.   Price Basis  Yield  Yield

SELL PUT  DEC 30    AQO XF    1735   0.50  29.50   7.2%   1.7% *
SELL PUT  DEC 35    AQO XG     774   1.95  33.05  16.5%   5.9%


**************
BRCM - Broadcom  $35.88  *** Networking Sector Favorite! ***

Broadcom (NASDAQ:BRCM) is a leading provider of highly integrated
silicon solutions that enable broadband communications and the
networking of voice, video and data services.  Using proprietary
technologies and advanced design methodologies, Broadcom designs,
develops and supplies complete system-on-a-chip solutions and
related hardware and software applications for all broadband
communications markets.  Their diverse product portfolio includes
solutions for digital cable and satellite set-top boxes; cable
and DSL modems and residential gateways; high-speed transmission
and switching for local, metropolitan, wide area and storage
networking; home and wireless networking; cellular and terrestrial
wireless communications; Voice over Internet Protocol (VoIP)
gateway and telephony systems; broadband network processors; and
SystemI/O(TM) server solutions.

BRCM - Broadcom  $35.88

PLAY (sell naked put):

Action    Month &   Option    Open   Last  Cost    Max.  Simple
Req'd     Strike    Symbol    Int.   Price Basis  Yield  Yield

SELL PUT  DEC 32.5  RCQ XZ    3542   0.40  32.10   4.7%   1.2% *
SELL PUT  DEC 35    RCQ XG    2387   1.10  33.90  10.0%   3.2%


**************
EASI - Engineered Support Systems  $53.09  *** All-Time High! ***

Engineered Support Systems (NASDAQ:EASI) along with its various
subsidiaries, designs and manufactures military support equipment
and electronics for the United States armed forces.  The company
also engineers and manufactures air handling and heat transfer
equipment, material handling equipment and custom molded plastic
products for commercial and industrial users. Engineered Support
Systems' six wholly owned subsidiaries are Systems & Electronics
(SEI), Engineered Air Systems (Engineered Air), Keco Industries,
(Keco), Engineered Coil Company (d/b/a Marlo Coil), Engineered
Electric Company (d/b/a Fermont) and Engineered Specialty
Plastics.

EASI - Engineered Support Systems  $53.09

PLAY (sell naked put):

Action    Month &   Option    Open   Last  Cost    Max.  Simple
Req'd     Strike    Symbol    Int.   Price Basis  Yield  Yield

SELL PUT  DEC 45    UFE XI      94   0.35  44.65   3.4%   0.8% TS
SELL PUT  DEC 46.62 FPE XZ      21   0.55  46.08   4.7%   1.2% *
SELL PUT  DEC 50    UFE XJ     236   1.45  48.55   9.8%   3.0%


**************
GPRO - Gen-Probe  $33.75  *** Rally In Progress! ***

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

GPRO - Gen-Probe  $33.75

PLAY (sell naked put):

Action    Month &   Option    Open   Last  Cost    Max.  Simple
Req'd     Strike    Symbol    Int.   Price Basis  Yield  Yield

SELL PUT  DEC 30    PSU XF    1596   0.40  29.60   5.2%   1.4% *
SELL PUT  JAN 30    PSU MF      18   1.05  28.95   5.8%   3.6%


**************
PHTN - Photon Dynamics  $40.59  *** Consolidation Complete? ***

Photon Dynamics (NASDAQ:PHTN) is a provider of yield management
solutions to the flat panel display (FPD) industry.  The company
also offers yield management solutions for the printed circuit
board assembly and advanced semiconductor packaging industries
and the cathode ray tube display and CRT glass and auto glass
industries.  The firm's test, repair and inspection systems are
used by manufacturers to collect data, analyze product quality
and identify and repair product defects at critical steps in the
manufacturing.

PHTN - Photon Dynamics  $40.59

PLAY (sell naked put):

Action    Month &   Option    Open   Last  Cost    Max.  Simple
Req'd     Strike    Symbol    Int.   Price Basis  Yield  Yield

SELL PUT  DEC 35    PDU XG     40    0.40  34.60   4.8%   1.2% *
SELL PUT  DEC 37.5  PDU XU     88    0.80  36.70   7.6%   2.2%


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

BULLISH PLAYS - CREDIT SPREADS

These candidates are based on the underlying issue's technical
history or trend.  The probability of profit in these positions
may also be higher than other plays in the same strategy, due to
small disparities in option pricing however, each play should be
evaluated for portfolio suitability and reviewed with regard to
your strategic approach and trading style.

***************
TARO - Taro Pharmaceutical  $68.59  *** All-Time High! ***

Taro Pharmaceutical Industries (NASDAQ:TARO) is engaged in the
production, research and development and sale of pharmaceutical
products.  The company is an Israeli corporation that operates
in Israel and through various subsidiaries.  All of the company's
industrial pharmaceutical activities in Israel are performed by
the company.  The activities in North America are performed by
Taro Pharmaceuticals North America and Taro Pharmaceuticals U.S.A.
Taro Research Institute provides research and development services
to the company.  Taro International and Taro Pharmaceuticals U.K.
are engaged in the marketing activities of the firm outside North
America.

TARO - Taro Pharmaceutical  $68.59

PLAY (conservative - bullish/credit spread):

BUY  PUT  DEC-60.00  QTT-XL  OI=145  ASK=$0.35
SELL PUT  DEC-65.00  QTT-XM  OI=95   BID=$0.75
INITIAL NET-CREDIT TARGET=$0.45-$0.50
POTENTIAL PROFIT(max)=9% B/E=$64.55


**************
TECD - Tech Data  $36.13  *** Optimistic Outlook! ***

Tech Data (NASDAQ:TECD) is a distributor of information technology
products, logistics management and other value-added services
worldwide.  The company serves over 100,000 value-added resellers,
direct marketers, retailers, corporate resellers and Internet
resellers in more than 80 countries throughout the United States,
Europe, Canada, Latin America, the Caribbean and the Middle East.
It offers a variety of products from manufacturers and publishers
such as Adobe, Apple, Cisco, Computer Associates, Creative Labs,
Epson, Hewlett-Packard, IBM, Intel, Iomega, Lexmark, Microsoft,
Nortel Networks, NEC, Palm, Seagate, Sony, Symantec, 3Com, Toshiba,
Viewsonic and Western Digital.  Products are generally shipped the
same day the orders are received from regionally located logistics
centers.

TECD - Tech Data  $36.13

PLAY (less conservative - bullish/credit spread):

BUY  PUT  DEC-30.00  TDQ-XF  OI=716   ASK=$0.15
SELL PUT  DEC-35.00  TDQ-XG  OI=1226  BID=$0.80
INITIAL NET-CREDIT TARGET=$0.65-$0.75
POTENTIAL PROFIT(max)=15% B/E=$34.35


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

BEARISH PLAYS - NAKED CALLS

Based on analysis of option pricing and the underlying stock's
technical background, these positions meet our fundamental
criteria for bearish "premium-selling" strategies.  Each issue
has robust option premiums, a well-defined resistance area and
a high probability of remaining below the target strike prices.
As with any recommendations, these positions should be carefully
evaluated for portfolio suitability and reviewed with regard to
your strategic approach and personal trading style.

WARNING: THE RISK IN SELLING UNCOVERED OPTIONS IS SUBSTANTIAL!

The sale of uncovered calls entails considerable financial risk,
far more than the initial margin or collateral required to open
the position.  The maximum financial obligation for the sale of a
naked option 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 options must have the cash or
collateral equivalent of the sold strike price in reserve at all
times.  The simple fact is: stocks often experience large price
swings, exponentially increasing the margin maintenance and very
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 price moves in
a volatile manner.  Many professional traders suggest closing the
position when the underlying share value moves beyond 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.

***************
CVTX - CV Therapeutics  $17.41   *** Ranexa Review Speculation! ***

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

CVTX - CV Therapeutics  $17.41

PLAY (sell naked call):

Action     Month &   Option    Open   Last  Cost    Max.  Simple
Req'd      Strike    Symbol    Int.   Price Basis  Yield  Yield

SELL CALL  DEC 25    UXC LE    10534  0.40  25.40  13.6%   1.6% *
SELL CALL  DEC 22.5  UXC LX     7310  0.70  23.20  22.1%   3.0%


**************
TTWO - Take-Two Int. Software  $32.86  *** Sales Slump! ***

Take-Two Interactive Software (NASDAQ:TTWO) is an integrated
developer, marketer, distributor and publisher of interactive
entertainment software games and accessories for the personal
computer, PlayStation, PlayStation2, Nintendo Game Boy Color,
Nintendo GameCube, Nintendo Game Boy Advance and the Xbox.  The
company publishes and develops products through various wholly
owned subsidiaries including Rockstar Games, Rockstar Studios,
Gathering of Developers, TalonSoft, Joytech, PopTop, Global Star
and under the Take-Two brand name.  The company maintains sales
and marketing offices in Cincinnati, New York, Toronto, London,
Paris, Munich, Vienna, Copenhagen, Milan, Sydney and Auckland.

TTWO - Take-Two Int. Software  $32.86

PLAY (sell naked call):

Action     Month &   Option    Open   Last  Cost    Max.  Simple
Req'd      Strike    Symbol    Int.   Price Basis  Yield  Yield

SELL CALL  DEC 37.5  TUO LU     870   0.45  37.95   6.6%   1.2% *
SELL CALL  DEC 35    TUO LG    1652   1.00  36.00  11.0%   2.8%


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

BEARISH PLAYS - CREDIT SPREADS

All of these positions are favorable candidates for "bear-call"
credit spreads, based on the current price or trading range of
the underlying issue and its recent technical history or trend.
The probability of profit from these positions may be higher
than other plays in the same strategy, due to disparities in
option pricing.  However, current news and market sentiment will
have an effect on these issues, so review each play individually
and make your own decision about its future outcome.

**************
AMGN - Amgen  $58.14  *** Next Leg Down? ***

Amgen (NASDAQ:AMGN) is a biotechnology company that discovers,
develops, manufactures and markets human therapeutics based on
advances in cellular and molecular biology.  Amgen manufactures
and sells human therapeutic products including Epogen, Neupogen,
Aranesp, Neulasta and Kineret.  Amgen focuses its research and
development efforts on therapeutics delivered in the form of
proteins, monoclonal antibodies and small molecules in the areas
of nephrology, cancer, inflammation and neurology and metabolism.
The company has research facilities in the United States and has
clinical development staff in the United States, the European
Union, Canada, Australia and Japan.  Amgen has acquired Immunex,
a biopharmaceutical firm dedicated to developing immune system
science to protect human health.  Immunex has developed two
major products, Enbrel and Leukine, and has two other products,
Novantrone and Thioplex, which can be used in treating multiple
indications.

AMGN - Amgen  $58.14

PLAY (less conservative - bearish/credit spread):

BUY  CALL  DEC-65.00  YAA-LM  OI=15972  ASK=$0.15
SELL CALL  DEC-60.00  YAA-LL  OI=16323  BID=$0.80
INITIAL NET-CREDIT TARGET=$0.65-$0.75
POTENTIAL PROFIT(max)=15% B/E=$60.65


**************
SNPS - Synopsys  $29.57  *** Earnings Speculation! ***

Synopsys (NASDAQ:SNPS) is the world leader in electronic design
automation (EDA) software for integrated circuit design.  The
company delivers technology-leading IC design and verification
platforms to the electronics market, enabling the development of
complex systems-on-chips.  Synopsys also provides intellectual
property and design services to simplify the design process and
accelerate time-to-market for its customers.  The company is
headquartered in Mountain View, California and has offices in
more than 60 locations throughout North America, Europe, Japan
and Asia.  Quarterly earnings are due in early December.

SNPS - Synopsys  $29.57

PLAY (conservative - bearish/credit spread):

BUY  CALL  DEC-35.00  YPQ-LG  OI=6016  ASK=$0.20
SELL CALL  DEC-32.50  YPQ-LZ  OI=2780  BID=$0.45
INITIAL NET-CREDIT TARGET=$0.25-$0.35
POTENTIAL PROFIT(max)=11% B/E=$32.75


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

SEE DISCLAIMER - SECTION 1

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


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

A Cornucopia of Candidates

Amgen Inc - AMGN - close: 58.20 change: -0.71

WHAT TO WATCH: AMGN continues to drag on the BTK biotech index
and the stock appears to have fallen out of an ugly bear-flag
consolidation pattern.  The recent failed rally at $60 looks like
an entry point for bears but more conservative traders looking
for some conviction may want to use a trigger under the $58 mark.
There is potential support near $57.00 from last spring but it
doesn't look that formidable.

Chart=


---

PACCAR - PCAR - close: 80.37 change: +0.44

WHAT TO WATCH: PCAR seems to be a perennial entry in the watch
list but it is one stock option traders may want to keep an eye
on.  The stock has refused to break support just under $74 and
has now rebounded back toward resistance.  The move today put it
above round-number resistance at $80 and more aggressive bulls
might want to take a closer look.  The rest of us might do better
to wait for PCAR to break October resistance at $81.60.

Chart=


---

American Standard Cos - ASD - close: 99.25 change: -0.10

WHAT TO WATCH: Demonstrating some relative strength today, shares
of ASD refuse to pull back in profit taking.  The 10 cent decline
today can hardly be called profit taking and ASD spent a good
portion of today's session trading in a tight range between
$99.00 and $99.25.  Should ASD offer a pull back bulls can look
for a bounce anywhere in the $96 to $98 range.  The stock does
not have a split history but as it nears the century mark odds
are growing that management might be contemplating a stock split.

Chart=


---

Zebra Technology - ZBRA - close: 63.12 change: +1.31

WHAT TO WATCH: Charging ahead on Wednesday were shares of ZBRA,
which have hit a new all-time high and building on Monday's big
gains.  We commented in the MarketMonitor that a pull back to the
$60 level might be buyable but with ZBRA closing near its highs
of the session waiting for a dip may take some patience.

Chart=



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

NAV $42.70 +0.15 - Keep an eye on NAV.  The stock broke out over
resistance at $42 and has spent the last couple of sessions
consolidating between $42 and $43.  Aggressive traders might buy
the bounce from $42 today.  The stock has some resistance at $45.

BLI $14.83 -0.10 - Bulls might want to keep an eye on BLI for a
move above its simple 50-dma and resistance at $15.25.

SNA $29.86 -0.09 - Shares of Snap On (tools) have been
consolidating under the $30 level for months now.  A breakout
could push it to $32 on short covering.


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

Markets Flat Line

To Read The Rest of The OptionInvestor.com Market Posture Click Here
http://www.OptionInvestor.com/marketposture/mp_112603.asp


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