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Daily Newsletter, Sunday, 11/30/2003

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The Option Investor Newsletter                   Sunday 11-30-2003
Copyright 2003, All rights reserved.                        1 of 5
Redistribution in any form strictly prohibited.


In Section One:

Wrap: Buyers Gave Thanks
Futures Market: Tryptophan Trade
Index Trader Wrap: No Turkey for Bears
Editor's Plays: Switch Sides
Market Sentiment: In the Turkey Trance
Ask the Analyst: Which is better? The 200-day or 150-day moving average?
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 11-28        WE 11-23        WE 11-14        WE 11-07
DOW     9782.46 +153.93 9628.53 -140.15 9768.68 - 41.11 +  8.67
Nasdaq  1960.26 + 66.38 1893.88 - 36.38 1930.26 - 40.48 + 38.53
S&P-100  520.74 +  8.97  511.77 -  7.24  519.01 -  1.69 +  0.72
S&P-500 1058.20 + 22.92 1035.28 - 15.07 1050.35 -  2.86 +  2.50
W5000  10352.22 +253.34 10098.8 -145.78 10244.6 - 45.10 + 65.24
RUT      546.51 + 20.58  525.93 -  7.03  532.96 - 10.00 + 14.74
TRAN    2921.23 + 75.91 2845.32 - 82.32 2927.64 - 51.65 + 66.18
VIX       16.30 -  2.68   18.98 +  2.04   16.94 +  0.01 +  0.83
VXO       16.71 -  3.18   19.89 +  2.26   17.63 +  0.07 +  0.41
VXN       25.61 -  3.47   29.08 +  2.92   26.16 +  0.96 +  0.31
TRIN       1.04            1.04            1.35            1.21
Put/Call   0.69            0.80            0.69            0.78
******************************************************************

Buyers Gave Thanks
by Jim Brown

The buyers rallied out of the gate on Monday after being
depressed by new mutual fund disclosures and terror warnings
the prior week. They managed to push the indexes right back
to prior resistance and hold them there right into Friday's
close. In short, buyers gave thanks for the dip and bought
their Thanksgiving desert on sale.

Dow Daily Chart


Nasdaq Daily Chart


S&P Daily Chart



There were no economic reports on Friday but Wednesday was
a banner day that needs a little review. The mostly bullish
report calendar was highlighted by a massive jump in the PMI
to 64.1 from 55.0. This is an eight year high and represents
the seventh consecutive month of gains. The component gains
were led by a jump in new orders to 73.3 from 59.2 and that
would indicate the recovery in the Chicago area is picking
up speed. Order backlog rose to 59.6 from 47.3. This report
was very bullish but it was met with a yawn. The bad news
was the jump in the prices paid component from 61.5 to 67.3.
This shows that inflation is beginning to gain traction and
the Fed is probably beginning to get nervous.

The Jobless Claims fell again and faster than expected to
only 351,000 and -9,000 below estimates. Claims were revised
up for the prior week by +7,000 to 362,000. Still this is
continued good news for consumers and for the markets. If
jobless numbers continue to decline next week they could
break the psychological 350,000 level and the level where
it is commonly assumed a real turnaround in employment has
occurred. This continued drop is bullish for the long term
market. The drop in claims over the last four weeks should
impact the non farm payroll report next Friday and estimates
are for a gain of +150,000 jobs.

However, the October Monthly Mass Layoffs soared to 158,240
and nearly double the 82,647 reported in September. This is
in stark contrast to the Jobless Claims and the expectations
for the employment report next week. It is however a late
report for the October period where the other reports are
more current. Manufacturing and the West Coast reported the
most layoffs.

The final Michigan Sentiment for November was inline with
estimates at 93.7 and unlike the Consumer Confidence failed
to soar to higher than expected levels. The expectations
component showed the biggest gains from 83.0 to 88.1. The
headline number finally exceeded the highs reached last
May with the post war rebound to 92.1. The Michigan Sentiment
is less dependent on business conditions than the Consumer
Confidence and the smaller bounce could be due to consumers
maintaining a wait and see attitude.

The strongest report was the Durable Goods jump of +3.3%
compared to estimates of only +0.8%. This was the strongest
gain since Sept-2002 and coupled with the +2.1% jump in
September shows a rapidly accelerating recovery. On a year
over year basis the gain was +8.2% and the sharpest growth
in over three years. Unfilled orders continues to jump
indicating that orders are coming in faster than they can
be filled. This is good for the employment factor as
manufacturers will begin to add workers to keep up with
the orders.

The Beige Book described a broadening expansion over the
last six weeks and suggested a positive outlook for retail
sales for the holiday. Areas improving included retail sales,
tourism and domestic travel. They did say that business
travel remained weak. Outlooks for commercial real estate
actually improved in several regions. This was one the most
positive Beige Book reports since 2001.

After all the positive reports last week we have a lighter
calendar next week but it still contains some blockbuster
names. Monday we will get the ISM data for November and it
is only expected to be flat with the 57.0 reported in Oct.
Based on the positive gains over the last month this could
produce an upside surprise. On Wednesday we have the ISM
Services Index and Productivity. The ISM Services is also
expected to be flat or down at 64.0 but the Productivity
is expected to jump to +8.3% with whisper numbers in the
+9.0% range. Friday rounds out the reporting week with the
Non Farm Payrolls and Factory Orders. Factory Orders are
expected to rise by +0.8% and the economy is expected to
have added +150,000 jobs.

Obviously there is plenty of room for disappointment in
those numbers with the ISM the only potential for a real
upside surprise. This sets up next week to be confusing
for most traders.

The month end for November went out with a whimper with
both the Dow and Nasdaq gaining less than 10 points each
on Friday. Wednesday was not much better with the Dow
only gaining +15 an the Nasdaq +10. Shucks Tuesday was
flat also with the Dow +16 and the Nasdaq -4. The only
really bullish day in a normally bullish week was Monday
which stormed out of the gate as I expected. That left the
indexes trending positive but unable to make any real gains
for the rest of the week.

Where was the month end portfolio window dressing? Where
were those monster bullish days we have seen in Thanksgiving
week in the past? Economics were good, terrorists were on
holiday and there was not any really negative stock news.
The indexes failed several times at resistance but managed
to close very close on Friday. Dow 9800, Nasdaq 1960, S&P
1060 have proved to be difficult. Actually the S&P at 1060
has been the failure point for the entire month. The Dow
at 9800, Nasdaq 1960 while current resistance and are
actually lower highs for those indexes. Dow 9900 and Nasdaq
1980 were the prior resistance highs. Could this be a leading
indicator for next week with the bearish divergence by the
Dow?

Dow Weekly Chart



While the overall market sentiment is still strongly bullish
there are numerous cracks trying to appear around the edges.
In the chart above you can see the long term down trend
resistance from the market highs in Jan 2000. Except for
the May-16th 2001 temporary spike above the line the trend
is very clear. The Dow ran full speed into the 9900 down
trend several times in November and failed each time. The
current down trend resistance has declined to 9850. There
are many analysts who feel this resistance will hold and we
are going to begin another down leg soon.

The thought process is that the market is fully valued at
this level until the Q4 earnings are known. Everyone is
hoping for top line revenue growth based on the economics
but not wanting to bet on it. Lately each time we near the
9800 level the buyers simply evaporate. Like I said last
week they are willing to buy the dip but not the top. Until
they are willing to push the bears out of their comfort
zone we will remain trapped at this level.

Nasdaq Weekly Chart



The Nasdaq is not without its own level of resistance but
more horizontal than down trending. The Nasdaq has strong
resistance from 1960 to 2050 and that is not going to be
broken quickly. Even a break over 2050 only leads to more
strong resistance at 2250.

With Monday typically bullish from fund inflow purchases
I am a long way from predicting any sell off. I am simply
suggesting that moving up from here may be difficult. The
markets have huge overhead supply from 10,000 and above
from traders hoping to get out of positions they have held
since we traded in the 10,000 range for about seven months
in early 2002. This level represents very strong congestion.

In order to get through this congestion we need a catalyst.
There are no events in the near future that should fill this
bill. With the Dow up +33% from the March lows and the Nasdaq
+56% the indexes are starting to look tired. Not weak, just
tired. Like a marathon runner turning the corner at 22 miles
and finding the last four miles are all up hill the markets
are suffering from chest pains and leg cramps but determined
to finish the race. Finish, but not sprint out into the lead.

As we move into the last four weeks of the year, 22 trading
days, the goal is still Dow 10,000. This is the yardstick
where the market recovery will become official. It is the
psychological finish line and it is tantalizing us just a
few points ahead. Actually the nearness of the goal could
be preventing a material sell off. The optimism is so strong
that everyone expects it to be reached. Why sell now when
we are so close? Good point but like the investors who have
been holding since we last broke under Dow 10,000 their
patience may be wearing thin.

I said we need a catalyst and short of Osama and Saddam
being found sharing a hideout in Tikrit the good news is
already priced into the market. +8% recovery in the GDP?
Priced in. Jobless Claims under 350,000? Priced in. Non
Farm Payrolls +150,000? Priced in. PMI 64.1? Priced in.
Consumer Confidence soaring to 91.7? Priced in. Over the
last eight months the market has discounted those events
and now that they have come to pass there is little to
look forward to. At least nothing visible in our immediate
future. The 4Q earnings will be critical. If there is top
line growth then we could ratchet up expectations for 2004
to the next level. If not then investors will probably
subtract some expectation premium from markets.

The only real expectation in our future is for the beginning
of the next rate hike cycle. The next Fed meeting is only a
week away on Dec-9th and there will be quite a bit of rate
hike apprehension going into that announcement. Fed funds
futures are suggesting a March rate hike and the Fed needs
to give the markets further assurance that there will be
no hikes for a "considerable period" or the reaction could
be negative. We are entering the period where talk is cheap
and the Fed will likely try to talk its way out of trouble
to delay the rate hikes until the last minute. I expect the
Fed heads to hit the campaign trail next week with carefully
crafted statements meant to calm the bond and equity markets.

To put all the prior comments in perspective I am not looking
for a dramatic week ahead. The first trigger will be the ISM
on Monday then the INTC mid quarter update on Thursday. If
INTC raises guidance then we might make that 10,000 goal. If
they talk down estimates then I expect to remain range bound.
The Jobs number on Friday had better be positive or the
vacuum left by the imploding markets is liable to suck your
keyboard into your monitor. Forget the reports from last
week the ISM and JOBS are the only reports than matter now.

What I am looking for is a potential retest of 9800-9850 on
Monday from mutual fund cash hitting the markets. That is
of course assuming the cash outflows from funds under
pressure does not offset the inflows. With the dollar still
falling we cannot expect help from overseas investors. We
are on our own. If the ISM is less than exciting I would
expect a return to 9700 and the middle of our current range
to wait for the Jobs number on Friday. If the Jobs report
is uninspiring then I would expect one more dip before
a potential Santa Claus rally. Institutions would like to
clear the decks for one more push to Dow 10K in late December
so they can dress up their statements with D10K comments.
With the VXO at 16.50 there should not be a lot of upside
left so I am still expecting a sales event with a touch of
Dow 10,000. Everybody put Dow 10K on your holiday gift list
and lets get 2004 kicked off with a bang.

Enter Very Passively, Exit Very Aggressively!

Jim Brown


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

Tryptophan Trade
Jonathan Levinson

It was an abbreviated trading session following a holiday before
the weekend, and only those of us truly dedicated to the markets
bothered to show up.  The tape felt aimless and slow.  Equities
and commodities gained, treasuries and the dollar fell.  For the
week, equity futures printed bullish engulfing candles,
treasuries and the dollar bearish candlestick formations, and
gold moved sideways at the highs.

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 printed new bear market lows on Friday, not
challenging the 90.00 level but edging ever closer.  As with the
other symbols we follow, little if anything of significance
occurred on Friday. However, the formation appears to be either a
bearish descending triangle or a bull wedge.  A move above 90.55
would confirm the latter and invalidate the former, but 90.70 is
all that it projects to the upside.


Daily chart of December gold


December gold moved sideways on Friday, and so far I've been
unable to get reliable quotes from any of the different quote
sources I use, either for December, Jan, Feb or April contracts.
The spot price advanced 1.60 to close at 398.10.  The outlook
from Wednesday is unchanged:  technically, gold is either
consolidating or being distributed at relative highs, and a move
higher above 400 would be a trending move on the daily
oscillators-  very bullish but less likely.  390-410 is a
significant resistance zone, and a brief spike above 400 did not
last on a closing basis.  However, the fundamentals for gold have
never been more compelling, and this is a difficult level to
trade.  Longs from lower levels can wait for a decisive break of
400 or below 388.


Daily chart of the ten year note yield


I knew I should have shorted some ten year note futures earlier
this week, but it was just too scary with the uncertainty in
equities.  The TNX gapped up and rain 7.8 bps higher to close at
4.32%.  The Fed's 500M repo drain was insufficient to account for
the selloff in ten year treasuries, and the move finally gave us
our confirming buy signal on the daily oscillators for the ten
year yield.  Next resistance looms at 4.4%, with confluence at
4.5%.  If the daily cycle upphase plays out, these levels should
be exceeded, but we'll reevaluate as it progesses.


Daily NQ candles

Friday was a nothing day for equities, but the advance in the
face of selling of bonds and the dollar was very strange.  For
the day, the NQ added 3, the ES 2.25 and the YM 31.  It was
mostly a sideways move hugging the rising daily trendline, but a
sudden spike at the end of the futures session left all 3
contracts just below their session highs, with the YM going out
at its high of 9799.

The NQ is on very weak buy signals on the daily oscillators, and
needs a directional move one way or the other to break the
deadlock.  An even slightly negative day from here would likely
reverse the signals, while a positive day will confirm them.
1428-30 remains key resistance here, with secondary resistance at
1435.  A move below 1415 should give bears some breathing room
and confirm a short term negative bias.


30 minute 20 day chart of the NQ


The 30 minute chart of the NQ provides few additional clues, with
the NQ rising along the bottom of the broken bear wedge
trendline.  Obviously, this rise may confirm a looser wedge
formation, but in either event it appears to be a bearish price
advance- bearish insofar as it's a formation that tends to break
to the south.  The cycle oscillators are trending uncertainly on
this timeframe, which could indicate either a consolidation below
the highs or distribution along the top.  We won't know until
either 1435 or 1400 break.  Nearterm direction is truly a tossup,
with the 30 minute cycle oscillators near the top of their cycle
and the daily near the bottom.  Both point uncertainly higher,
but again, volume was light and it's unwise to read too much into
Friday's abbreviated session.



Daily ES candles


We have the same picture on ES.  I'm looking for a break of 1061
or 1047 to break the deadlock.  However, resistance is heavy all
the way to 1065, above which there's the potential for a short
covering rally.  The cycle picture is the same as on NQ after
this week:  mixed and uncertain, with the daily cycle trying to
put together the next leg of the rally, while the 30 minute shows
signs of exhaustion.


20 day 30 minute chart of the ES


The bear wedge projects to 1030.  Skittish bears can look to
cover if 1061 gets exceeded on Sunday night/ Monday morning.
Even if it's a throwover fakeout above 1061, there should be
ample time to short a failure of 1065 or to reenter at or just
below 1060 for the ride back down.  Again, the cycles are lined
up to justify a move in either direction from here, and nearterm
price projections are just guesswork in this environment.


50-tick ES


There was not enough volume to generate more than a 50 tick-per-
bar chart, and Friday's narrow range trading created more
questions than it answered.


Daily YM candles



Nothing to add on YM.


20 day 30 minute chart of the YM



Friday's session was not instructive and only muddied the water.
The combination of stocks rising against a falling dollar and
treasuries does not look sustainable to me, and the low volume and
continued low volatility makes the gains appear even more suspect.
When confused, I try to stay out of trouble, and this is one such
time.  Monday should get the ball rolling again.  I don't expect
yields or equities to rally far from here, but the cycle
oscillators do not support me.  Better to watch the intraday
support and resistance levels and let the market decide for us.
See you in the Futures Monitor.


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

No Turkey for Bears
Jonathan Levinson

Equities had a positive week, pulling back from the brink of what
was shaping up to be the beginning of the end for bulls last week.
The Nasdaq added 66.40 points, with a gain of 6.95 on Friday to
close at 1960.26.  The Dow added 2.89 to complete a 153 point weekly
gain, closing at 9782.46, and the SPX dropped .25, finishing the
week higher by 22.92 at 1058.20.

Most noteworthy during the abbreviated trading week was the plunge
in volatility, with the VXO doing a Steve-McQueen u-turn at 20.84 to
finish at 16.94 on Friday, with a low of 15.81 on Wednesday, closing
below 16 on that day.  This represented the lowest VXO (the old VIX)
print in as many as years as I can chart, and represents a higher
degree of complacency than has been seen at any of the significant
market tops since 1998.  Given that all of the indices are
significantly below March 2000 levels, but optimism and complacency
are well beyond levels measured at that time, one can expect that we
are either near or at a significant market top now.  However, the
markets did not decline on Friday despite an opening dip, and as
with any mania, we should be prepared for the possibility that this
one could persist longer or farther than we currently expect.

The synchronous sell signals we saw last week resulted in some
impressive bouts of selling, but no significant technical damage was
done, with all of the indices finishing in the green for the week.
The Amex Goldbugs Index (HUI) rose by better than 5% for the week,
reaching an alltime high and closing at 248.43.


Weekly COMPX candles



The weekly view of the Nasdaq shows this week’s recovery within the
broader bearish ascending wedge off the March lows.  The true test
for the bulls will be the 2000 level, which has so far held back the
advance and now coincides with trendline resistance from the failure
two weeks ago.  The bearish oscillator divergence is still intact,
and the Nasdaq is still trading on a weekly sell signal.  However,
these oscillators have been trending for weeks, and while it is
clear that selling pressure is building, the primary price trend
since March remains higher.


Weekly INDU candles



I’ve left the minor bear wedge support line undrawn on the weekly
INDU chart, but the setup is the same.  I expect that the real
battle will take place between 9820-9850, with a last hurrah at 9900
before the sprint to 10,000.  The market’s advance this week looks
good as a first step, but it took place on light volume in a short
period of time, and drilled the volatility measures down to lows not
seen in many years.  I would be amazed to see the VXO down at 14 or
the Dow at 10,000, but this year has been one of constant amazement.
Suffice it to say that the bulls have their work cut out for them
for the next 200 points of upside.


Daily OEX candles


The OEX dropped .47 to close at 520.74 on Friday.  This week’s trade
saw the OEX clawing its way back up along the broken trendline, but
each attempt was quickly rebuffed.  Nevertheless, the daily cycle
oscillators left off on very weak and early buy signals.  Once
again, there’s reason to be dubious of buy signals generated on a
closing VXO print below 16, but the price is the price.  Any upside
above 521 implies a test of resistance up to 525, and I don’t expect
that level to fall easily, if at all.  Nevertheless, the daily cycle
oscillators are on early buy signals, and any price advance from
here will give them confirmation.  Longer term traders looking to
establish long positions might want to wait for the test of the 52
week high before committing fully.  I personally have great
difficulty buying, even to cover shorts, with the VXO as low as its
been for most of the week.


20 day 30 minute chart of the OEX


The 30 minute OEX candles show this week’s rise in a bearish
ascending wedge.  A break of the lower trendline confirmed with a
break of 520 implies a potential target of 510.  The 30 minute cycle
oscillators are on sell signals from overbought territory, and lower
oscillator high compared with the higher price high forms a bearish
divergence. On this basis, I expect to see selling on Monday
morning, but the uncertainty on the daily cycle oscillators above
confuse the issue.  A move below 520 would go a long way toward
emboldening the bears.


Daily QQQ candles


The Qubes gained 1 cent to close at 35.35, right below the start of
resistance up to the 52 week high.  A failure below 35 would look a
lot like a head and shoulders top with an admittedly short head,
neckline at 33.50.  As on the OEX, the daily cycle oscillators could
go either way from here, but remain closer to the bottom of their
channel than to the top. A rollover from here brings the head and
shoulders scenario into play and would start the 10 day stochastic
trending in oversold.  A bounce will have trouble up to 36, above
which a short covering rally could kick off.


20 day 30 minute chart of the QQQ


I’ve added the descending upper trendline to illustrate the more
bullish side of the analysis, as unlikely as I take it to be.  If
the bulls can clear 35.60, the possibility of a reverse head and
shoulders breakout exists, to be tested first at 36 and then 36.20.
However, the 30 minute cycle oscillators are topping out, and rising
resistance has held all week in a possible bear wedge.  A break of
the lower trendline from here would turn down the 300 minute
stochastic and complete a bearish oscillator divergence equivalent
to that on the 30 minute OEX.

Putting it all together, we have the weekly cycles on a bearish
divergence and tenuous sell signal, the daily trying to start an
upphase, and the 30 minute commencing a downphase on the OEX and
about to do so on the QQQ.  The daily chart is the wildcard here,
and traders should be patient until confident that the uncertainty
has been resolved, either to the upside or the down.


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

Switch Sides

We picked the right horse and the right direction last week
but they did not open the windows for betting until the race
had already started.

The DJX $97 call at $1.20 x $1.35 when recommended last Sunday
gapped open to $1.40 when they opened for trading. There was
one print at 1.55 on the initial tick and then they traded
at 1.40 for seven minutes. The high for the week was $1.90
but even if you bought the high tick at the open it would
have been hard to lose money with the average price in the
$1.60-$1.65 range.

We were busted due to the strong S&P futures on Sunday night.
The market was ready to go and sprinted out of the gate.
That was not the best for us. Obviously we would have liked
to see a down tick at the open and then a rise into the
highs.

Time to switch sides.

Just like I thought we would see a bullish week last week
while sitting at the lows near 9600, I am thinking we will
see a bearish trend over the next two weeks with our Friday
close very near strong resistance at 9800. I am thinking
9850 should be the failure point and possibly 9900. Take
a look at the down trend resistance chart below and you
can see the upside possibilities face a serious challenge.

Dow Weekly Chart



The game plan for this week is to try and accumulate some
DJX puts on any bounce and look for a retracement to the
bottom of the current range at 9600.

We are going to do this by entering a base position at the
open on Monday and then add to it at 9800, 9850 and 9900 if
possible. If we gap open over 9800 then only enter one of
the first two levels below. Our target price to exit is 9600.

Buy 5 DJX-97 Puts DJV-XS at the open if we open down.
Buy 5 DJX-97 puts DJV-XS with a DJX print at 98.00
Buy 5 DJX-97 puts DJV-XS with a DJX print at 98.50
Buy 5 DJX-97 puts DJV-XS with a DJX print at 99.00

Sell all with a DJX print at 96.00

The stop loss on these should be 99.50 but aggressive
traders may want to use 100.50 instead. I am expecting
a sell off at Dow 10K and that is only 2 DJX points
away from our present position.

DJX Daily Chart




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

Play Recaps

No open plays


Powerball

The tech rebound brought us within $80 of a 100% gain since
inception. If we could just get ADCT, TLAB, JDSU and BRCD
to do something besides act like penny stocks we would be in
really good shape. If we get a Santa Claus rally we should
be well over 100% by Dec-31st and the technical closing of
the portfolio.

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

Powerball Chart



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

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

Good Luck

Jim Brown


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

In the Turkey Trance
- J. Brown

The stock market was in a slow drift higher on Friday but the
DJIA and the NASDAQ composite still managed some huge gains
adding +2.89 and +6.95 points, respectively.  Traditionally the
day before and after Thanksgiving is bullish and this year didn't
disappoint, although I probably would have expected a bigger
post-turkey day rally.

The news on Friday was focused on two things.  The start of the
holiday shopping season with "Black Friday" and the President's
surprise visit to Baghdad.  Wall Street calls the day after
Thanksgiving "Black Friday" not for any morbid reason but because
it was often seen as a barometer for how the Christmas shopping
season would pan out.  Plenty of retailers do a huge chunk (20%
to 50%) of their annual sales during the holidays.  If shopping
is strong on the Friday after Thanksgiving it indicated that the
retailers would end the month "in the black" or with a profit
instead of a loss.  Of course we've been hearing for weeks now
how analysts believe this could be the best shopping season since
1999.  Expectations are high and it could lead us to a Santa
Claus rally.

The other big story of the day was President Bush's super-secret
trip to Iraq.  Bush showed up just in time to speak to, serve
dinner to and eat with some 600 army soldiers for Thanksgiving.
The press is giving it a lot of positive coverage and it appears
to have lifted more spirits than just those on the front line.

Investor sentiment feels rather positive.  Many expect investors
to come back on Monday in a buying mood.  Yet the real question
is how this attitude mixes with the hordes of money managers
whose only focus is to preserve their current gains until
December 31st.  This lack of risk-taking could leave us in a
range-bound market.  We have a handful of economic reports this
coming week although nothing too earth shattering.  The real
focus will probably be the FOMC meeting on Dec. 9th.


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

Market Averages

DJIA ($INDU)

52-week High:  9903
52-week Low :  7197
Current     :  9782

Moving Averages:
(Simple)

 10-dma: 9717
 50-dma: 9670
200-dma: 8978



S&P 500 ($SPX)

52-week High: 1063
52-week Low :  768
Current     : 1058

Moving Averages:
(Simple)

 10-dma: 1046
 50-dma: 1038
200-dma:  965



Nasdaq-100 ($NDX)

52-week High: 1453
52-week Low :  795
Current     : 1424

Moving Averages:
(Simple)

 10-dma: 1395
 50-dma: 1394
200-dma: 1228


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

After a shortened week of mild gains there appeared to be some
put buying, possibly to protect profits, as the VIX and VXO
both edged slightly higher.  Together all three volatility
indices remain at extreme lows and suggest very high levels
of caution for bullish investors.

CBOE Market Volatility Index (VIX) = 16.32 +0.09
CBOE Mkt Volatility old VIX  (VXO) = 16.71 +0.80
Nasdaq Volatility Index (VXN)      = 25.63 +0.00 unchanged


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

          Put/Call Ratio  Call Volume   Put Volume

Total          0.69        270,108       186,728
Equity Only    0.55        218,810       121,315
OEX            1.25         19,658        24,570
QQQ            1.11          7,850         8,707


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

Bullish Percent Data

           Current   Change   Status
NYSE          73.2    + 1     Bull Confirmed
NASDAQ-100    73.0    + 1     Bear Correction
Dow Indust.   80.0    + 0     Bull Correction
S&P 500       79.6    + 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: 0.84
10-dma: 1.16
21-dma: 1.10
55-dma: 1.15


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    1526      1706
Decliners    1106      1179

New Highs     312       174
New Lows       12        11

Up Volume    337M      512M
Down Vol.    225M      164M

Total Vol.   576M      684M
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
***************

Which is better? The 200-day or 150-day moving average?

I've been reading various books on trading and investing and have
noticed some authors prefer using the 200-day moving average for
a longer-term moving average, while other authors prefer the 150-
day moving average to depict a longer-term price average.  There
also seems to be a varying preference as to the use of either
simple moving average and exponential.  You seem to like the 200-
day simple moving average, could you explain why?

The first book I read on technical analysis was Stan Weinstein's
"Secrets for Profiting in Bull and Bear Markets" where Mr.
Weinstein preferred the 150-day moving average as a longer-term
moving average.

What Mr. Weinstein displayed in his book certainly made sense and
I could see how certain stocks that broke above or below the 150-
day moving average, did seem to take on a longer-term directional
bias after the break of this moving average.

I started using the 150-day moving average and began back testing
it against stocks that I had either traded or invested in, and
saw some mixed results as to the impact of the 150-day as a
longer-term decision making tool.

Please make note that I differentiate between trader and
investor.  Some VERY GOOD TRADES can be found when a security
breaks above or below a longer-term moving average, or when a
security comes back to test a longer-term moving average that was
broken just days or weeks prior.

To make a rather long story short, one day I was sitting at my
desk and was drawing trends on a chart.  Back then,
trading/technical analysis software was relatively non-existent
compared to today, and to get a chart of a stock, you pulled the
stock up on your terminal and had the choice of 2 or 3 moving
averages if you were lucky.  Once you had the chart up on your
screen, you pressed the "print screen" button, walked down the
hall to the printer, picked up your chart, came back to your desk
and started doctoring up the chart with support and resistance
trends with a pencil and a ruler.

Anyway... I was sitting at my desk and drawing some trends on
some charts that I had printed out after the close, when a fellow
several years older than I wandered by, introduced himself as
"Bob" and asked me what I was doing.

As it turned out, Bob was the only broker in the office that
relied heavily on technical analysis when buying and selling
stocks for his clients and thought it was pretty cool that a
young (30-years old) broker like myself shared interest in
technical analysis.

Over time, I'd venture into Bob's office, ask his advice or
gather his thoughts on certain stocks I was looking at and he
began questioning why I was using a 150-day moving average.

As it turned out, there were a couple of stocks in my stack of
charts that he was also following, which he showed me, but he
used a 200-day moving average, which seemed to "fit" better as to
how the stock traded.

Like the trader asking today's question, I too was now confused
on which moving average was best to use for a longer-term moving
average of price movement.

To this day, I can't pound my fist on the desk and definitively
say which moving average between the two is best, or has the
greatest technical significance.

Over the years though, I has been my observation that the 200-day
moving average seems to hold a greater degree of technical
significance that the 150-day moving average.

I can't give quantitative evidence of this, but it has been my
observation that the 200-day would have kept me out of a bad
trade or in a good trade with better result than the 150-day.

One test a trader or investor can perform is to simply place both
moving averages on a security they are looking to trade or invest
in, and look at the security on a historical basis, while making
the observation of not only how the security has trade on breaks
above or below the two moving averages, but how the security has
tracked the 150-day or 200-day moving average.

What you may find is that the security seems to track both moving
averages at certain times, where it becomes more difficult to
truly ascertain which moving average is having greater technical
impact on the stock.

When you find this type of confusion, one thing I'll do is turn
on the volume indicator, where volume spikes often reveal
heightened INTEREST in the stock, where the interest comes at one
of the longer-term moving averages.  Often times, the break above
or below a longer-term moving average, which the MARKET deems
most important, will have the break (up or down) taking place
with an increase in volume, and gives the trader or investor an
additional observation of which moving average has been deemed
"most important" by the MARKET.

Another observation I've found over time, which may be biased to
the 200-day SMA, is that I've found some of my better short-term
trades and longer-term investments have come from correlations
found in point and figure charts in combination with the 200-day
SMA.  The reason I say this may be biased is that I've been using
the 200-day SMA for a greater length of time than I have the 150-
day SMA, but when I've observed/traded a stock that breaks above
or below a 200-day SMA and at the same time breaks above or below
a respective bearish resistance trend or bullish support trend
(both longer-term trends on a point and figure chart), it really
seems to have had some meaningful impact on future price action.
Add a BIG volume spike, and it really gets my attention!

When I see a stock breaking above or below its 200-day SMA, the
first thing I do is check the PnF chart to see just where the
bearish resistance trend or bullish support trend is at.
Similarly, when I see a stock breaking above or below its bearish
resistance trend or bullish support trend, a quick glance of the
bar chart and 200-day SMA is noted.

While a debate over which longer-term moving average carries
greatest technical significance will most likely never be
settled, there are also strong proponents of both the simple
moving average and the exponential moving average.

I prefer the simple moving average mainly because I'm more of a
meat and potato trader where I can understand what the simple
moving averages measure.  A 150-day simple moving average
measures the average price last 150-days, or 200-day's as the
case would be for the 200-day SMA, and equal weight is given to
all time periods.

While I'll eat fancy French cuisine from time-to-time, the
exponential moving average weights recent data more heavily than
"older data."  Again, it is arguable which method of charting a
moving average is more accurate, but the meat and potato trader
in me feels that trader/investor that bought a stock at $20.00
100-days ago, is just as important as the trader/investor that
bought the stock 5-days ago for $21 or $19 and should probably be
weighted equal and not be deemed any less important today.

My biggest dislike for using an exponential moving average is my
belief that a longer-term trend has greater significance than a
shorter-term trend, and the thought of putting greater weight on
near-term average price of a security, goes against my core
belief that the measurement of longer-term price action is as
meaningful, if not more meaningful, than shorter-term price
action.

Well, after all that, I know that I haven't really answered the
trader/investor's question to the level all of us would have
liked.

I don't think there is a definitive answer to these questions,
but each trader, with time, will develop his or her own
preference as to time intervals used, and whether those time
intervals are measured using a simple moving average or
exponential.

One word of advice as it relates to moving averages is to try and
keep them to a minimum.  I've told the story before of a trader
that had 5, 10, 20, 50, 100, 150 and 200-day moving averages on
his chart, and he could never really make any type of firm trade
decision, because at any one point in time, one of the moving
averages provided some type of support or resistance on the
chart, and the number of moving averages created so much
confusion that there was really no way a decision could be made.

Jeff Bailey


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

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

Symbol  Co               Date           Comment      EPS Est

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

DCI    Donaldson             Mon, Dec 1  After the Bell      0.56
MCDTA  McDATA Corporation    Mon, Dec 1  After the Bell      0.00


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

ADCT   ADC                   Tue, Dec 2  After the Bell      0.00
BNS    Bank of Nova Scotia   Tue, Dec 2  During the Market    N/A
CHS    Chico's FAS           Tue, Dec 2  After the Bell      0.27
CPRT   Copart                Tue, Dec 2  After the Bell      0.16
JWa    John Wiley & Sons     Tue, Dec 2  Before the Bell     0.40
MBT    Mobile Telesystems    Tue, Dec 2  Before the Bell      N/A
NAV    Navistar Intl         Tue, Dec 2  Before the Bell     0.71
TSA    Sports Authority      Tue, Dec 2  After the Bell      0.14
V      Vivendi Universal     Tue, Dec 2  During the Market    N/A


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

CMVT   Comverse Technology   Wed, Dec 3  After the Bell     -0.02
MBG    Mandalay Resort Group Wed, Dec 3  After the Bell      0.62
NMGa   Neiman Marcus Group   Wed, Dec 3  After the Bell      1.16
PLL    Pall Corp.            Wed, Dec 3  After the Bell      0.18
SNPS   Synopsys              Wed, Dec 3  After the Bell      0.41
UU     United Utilities      Wed, Dec 3  Before the Bell      N/A


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

BTH    Blyth Inc.            Thu, Dec 4  Before the Bell     0.72
DLM    Del Monte Foods       Thu, Dec 4  -----N/A-----       0.18
DG     Dollar General Corp.  Thu, Dec 4  -----N/A-----       0.20
NSM    National SemiconductorThu, Dec 4  -----N/A-----       0.32
PFP    Premier Farnell Plc   Thu, Dec 4  Before the Bell      N/A


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

ABS    Albertson's           Fri, Dec 5  Before the Bell     0.36

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

Symbol  Co Name              Ratio    Payable     Executable

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
ATA     Apogee Technology, Inc    2:1      Dec  11th   Dec  12th
CKFB    CKF Bancorp, Inc          2:1      Dec  11th   Dec  12th
TRID    Trident Microsystems Inc  3:2      Dec  12th   Dec  15th


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

We're officially in the holiday season now and traders will be
looking for a Santa Claus rally by Christmas.  This week's
economic reports are spread out on Monday, Wednesday and Friday.
Vehicle sales, ISM index, construction spending, productivity,
unemployment and more all come out this week.


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

----------------
Monday, 12/1/03
----------------
Auto Sales (NA)         Nov  Forecast:    5.5M  Previous:     5.1M
Truck Sales (NA)        Nov  Forecast:    7.5M  Previous:     7.4M
ISM Index (DM)          Nov  Forecast:    57.0  Previous:     57.0
Construction Spndng (DM)Oct  Forecast:    0.5%  Previous:     1.3%


-----------------
Tuesday, 12/2/03
-----------------
None


-------------------
Wednesday, 12/3/03
-------------------
Productivity-Rev. (BB)      Q3  Forecast:    8.3%  Previous:     8.1%
ISM Services (DM)          Nov  Forecast:    64.0  Previous:     64.7


------------------
Thursday, 12/4/03
------------------
Initial Claims (BB)      11/29  Forecast:     N/A  Previous:     351K


----------------
Friday, 12/5/03
----------------
Nonfarm Payrolls (BB)      Nov  Forecast:    150K  Previous:     126K
Unemployment Rate (BB)     Nov  Forecast:    6.0%  Previous:     6.0%
Hourly Earnings (BB)       Nov  Forecast:    0.3%  Previous:     0.1%
Average Workweek (BB)      Nov  Forecast:    33.9  Previous:     33.8
Factory Orders (DM)        Oct  Forecast:    0.6%  Previous:     0.5%
Consumer Credit (DM)       Oct  Forecast:   $5.0B  Previous:   $15.1B


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

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Contact Support
The Option Investor Newsletter                   Sunday 11-30-2003
Sunday                                                      2 of 5


In Section Two:

Watch List: Leftovers? No way!
Call Play of the Day: AMZN
Dropped Calls: None
Dropped Puts: MXIM


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

Leftovers? No way!

Broadcom - BRCM - close: 36.39 change: +0.51

WHAT TO WATCH: It may be a little hard to see but BRCM is
climbing higher in a rising channel.  The recent bounce off its
30-dma was the bottom of its channel.  Bulls might want to
consider new positions on a move over $36.50.  Our first target
would be $40.00.

Chart=


---

Merrill Lynch - MER - close: 56.75 change: +0.21

WHAT TO WATCH: MER is bouncing from a test of support at the $55
mark but has not yet reclaimed its simple 50-dma.  The whole
broker-dealer group seems to be in a similar pattern, at least
the XBD broker-dealer index is.  A move over the 50-dma and MER
should retest resistance at $60.00.  Its MACD is about to
crossover into a bullish signal.

Chart=


---

Boston Scientific - BSX - close: 35.89 change: +0.65

WHAT TO WATCH: The stock hasn't been moving much but the company
has been getting a lot more press recently about its Taxus drug-
coated stents.  Patient bulls could open long plays while BSX
remains above the $35.00 level.  Its P&F chart shows an ascending
triple-top breakout buy signal.

Chart=


---

Lexmark Intl - LXK - close: 77.40 change: +0.77

WHAT TO WATCH: Bullish traders will want to keep an eye on LXK.
Shares have rebounded back to long-time resistance at the $78.00
level.  A breakout over $78 could be a trigger to go long. The
stock wouldn't have much more resistance until the $90 region.

Chart=


---

Amgen Inc - AMGN - close: 57.62 change: -0.52

WHAT TO WATCH: We're keeping AMGN on the watch list.  The stock
has now broken support at $58.00 and fallen out of what could
have been a bear flag consolidation.  Shares appeared to produce
a failed rally at the $58.25 level on Friday and MACD is rolling
over again.  Aggressive traders could initiate shorts now.

Chart=



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


PCAR $80.26 -0.11 - We're not giving up yet.  PCAR is still
trying to breakout over resistance near $81.00.

ASD $99.70 +0.45 - ASD is also trying to breakout over the $100
level.  On Wednesday the worst profit taking it could muster was
a dip to the $99 region.

CFC $105.60 +2.77 - Shares of CFC were strongly higher on Friday.
Watch for a breakout over the $107 region.  Its MACD is about to
turn positive again.


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

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

Amazon.com - AMZN - close: 53.97 chg: +1.01 stop: 48.99

See details in play list




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

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


CALLS
^^^^^

None


PUTS
^^^^

Maxim Int. Prod. - MXIM - close: 52.17 change: +0.87 stop: 52.30

It is time to throw in the towel on our MXIM play.  The benefit
of hindsight allows us to see that the brief dip below $50 was a
bear trap.  The clincher was Friday's price action, which had the
stock surging to within 4 cents of our $52.30 stop and closing
very near the high of the day.  With the Semiconductor index
(SOX.X) back above the $525 level, and MXIM solidly above the top
of its channel again, it would appear very unlikely that our stop
will survive through Monday's session.  Rather than take that
risk, we're pulling the plug this weekend.  MXIM never worked
very far in our favor and it is best to admit the error and move
on.

Picked on November 18th at   $49.89
Change since picked:          +2.25
Earnings Date                1/27/04 (unconfirmed)
Average Daily Volume =      6.43 mln
Chart =



***********
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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The Option Investor Newsletter                   Sunday 11-30-2003
Sunday                                                      3 of 5


In Section Three:

Current Calls: BBY, DGX, DHR, HOV, PGR, UTX
New Calls: AMZN, ZMH, SNDK
Current Put Plays: KSS
New Puts: None


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

Best Buy Co - BBY - close: 62.00 chg: +0.90 stop: 57.95 *new*

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)

Why We Like It:
If you've been listening to the financial media the last few days
they've all been chanting the same line..."Best Buy" is one of
the best plays for this holiday season.  Considering some of the
lines of customers waiting to get into the technology laden
stores this morning on "Black Friday" it shouldn't be a surprise.

Consumers are looking for anything technology related and Best
Buy has the edge over rival Circuit City.  The stock recently
broke out of a consolidation between $57 and $60 with volume
being somewhat decent the first part of this week.  Two weeks ago
UBS reiterated their "buy" rating on BBY and upped their price
target to $70.

The stock is up five days in a row now and could be overdue for a
little profit taking.  Those not willing to buy it here might
want to wait for a dip back towards the $61.00-60.00 levels.
We're going to raise our stop loss a $1.00 to $57.95.  Short-term
traders who jumped in when we initiated the play can be ready to
exit should BBY soar to our initial target of $65.00.

Suggested Option:
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= 7091 at $7.60 SL=4.85
BUY CALL DEC 60*BBY-LL OI=16515 at $3.70 SL=1.75
BUY CALL DEC 65 BBY-LM OI= 3501 at $1.30 SL=0.65
BUY CALL JAN 55 BBY-AK OI= 3769 at $8.30 SL=5.25
BUY CALL JAN 60 BBY-AL OI= 5945 at $4.60 SL=2.30
BUY CALL JAN 65 BBY-AM OI= 2046 at $2.15 SL=1.05

Annotated Chart:



Picked on November 25 at $60.36
Change since picked:     + 1.64
Earnings Date          12/17/03 (unconfirmed)
Average Daily Volume:      3.6  million
Chart =


---

Quest Diagnostics - DGX - cls: 72.97 chng: +0.31 stop: 70.25*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:
Our DGX play certainly isn't setting any speed records but it
certainly is a consistent performer.  After breaking above the
top of the consolidation flag near $72, the stock has just been
inching higher towards our $75-76 target.  Recall that this level
corresponds to the measuring objective from the breakout of that
flag pattern, as well as the site of historical resistance on the
weekly chart.  Now that the stock has broken and held above the
top of its flag, we should be able to safely raise our stop to
just below the bottom of that consolidation pattern at $70.25.  A
pullback near the $71.50 level should provide for fresh entries
into the play, but only on a rebound from the 10-dma ($71.57).
We're reaching the point where it may not make sense to consider
momentum entries above the $73 level, but aggressive traders may
be want to consider it if they're setting their sights on the
upper target at $79, which is the bullish price target from the
PnF chart.

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 January 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.  Our
preferred option is the December 70 strike.

BUY CALL DEC-70*DGX-LN OI=1005 at $3.90 SL=2.50
BUY CALL DEC-75 DGX-LO OI= 569 at $1.15 SL=0.50
BUY CALL JAN-70 DGX-AN OI=2047 at $4.70 SL=2.75
BUY CALL JAN-75 DGX-AO OI= 455 at $1.95 SL=1.00

Annotated Chart of DGX:



Picked on November 13th at   $69.46
Change since picked:          +3.51
Earnings Date               1/20/04 (unconfirmed)
Average Daily Volume =        876 K
Chart =


---

Danaher Corp - DHR - close: 83.20 chg: +0.55 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:
So far so good.  The general bullish mood on Wall Street has
allowed DHR to slowly climb higher after bouncing from the $80
level.  Short-term oscillators have been bullish for a few days
now and its MACD is getting closer to a new buy signal. We
haven't seen any new headlines for DHR nor have there been any
new broker ratings.

Investors are still attracted to the "old" economy cyclical
stocks like DHR and the recent parade of positive economic
reports adds a lot of confidence that the economy is on a
sustained rebound.  Shares of DHR have cleared all of their
moving averages and the only resistance is its old highs from
early November.  We're optimistic that DHR can clear these levels
and trade toward the $87.50-90.00 region by year's end.  The
company last split its stock 2-for-1 in June of 1998 near $72 so
the possibility of another split announcement certainly exists.
No change in our stop loss at $79.50.

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= 815 at $4.10 SL=2.00
BUY CALL DEC 85 DHR-LQ OI=1020 at $0.95 SL= --
BUY CALL JAN 80 DHR-AP OI= 627 at $4.90 SL=2.40
BUY CALL JAN 85 DHR-AQ OI=1316 at $1.90 SL=0.95

Annotated Chart:



Picked on November 23 at $81.95
Change since picked:     + 1.25
Earnings Date          10/16/03 (confirmed)
Average Daily Volume:       829  thousand
Chart =


---

Hovnanian Enterprises - HOV - cls: 92.25 chg: +1.59 stop: 87.75*new*

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:
What can we say that hasn't already been said?  The housing
sector remains red hot.  These stocks refuse to go down.  Shorts
are getting killed as investors have an insatiable appetite for
this sector.  Historically low mortgage rates have inspired
strong earnings numbers from the group and mortgage applications
have surged again gaining two weeks in a row.  The Fed is still
preaching their "low interest rate" message and some homebuilders
are predicting strong growth through 2005.

HOV is a stock split candidate and they might announce one around
their earnings report in December.  HOV last splits its stock 2-
for-1 back in 1987.  We know it's tough to chase these stocks
that have climbed so much already but there is a growing number
of analysts that believe the entire group is in the process of a
strong surge in P/E appreciation.  Now that HOV has broken the
$90 level of resistance bulls will be aiming for the
psychological round-number mark at $100.  We like how HOV is
climbing inside its rising channel (see chart) and we're raising
our stop loss to $87.75.  More conservative traders who would
rather protect a larger gain can slip their stop closer to $90.

Traders should keep in mind that there are only six trading days
before HOV is expected to announce its earnings.  We'll probably
close the play before earnings.  That is not a lot of time left
to trade HOV and new positions should be considered carefully.


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.  Our previous favorite was the DEC
85 strike but HOV is up so much now that the DEC 90 probably
looks better.

BUY CALL DEC 80 HOV-LP OI= 506 at $12.80 SL=8.00
BUY CALL*DEC 85 HOV-LQ OI=1276 at $ 8.40 SL=5.50
BUY CALL*DEC 90 HOV-LR OI=1238 at $ 4.70 SL=2.35
BUY CALL DEC 95 HOV-LS OI=1007 at $ 2.40 SL=1.20
BUY CALL FEB 85 HOV-BQ OI= 291 at $11.50 SL=7.50
BUY CALL FEB 90 HOV-BR OI= 439 at $ 8.40 SL=5.50
BUY CALL FEB 95 HOV-BS OI= 200 at $ 6.00 SL=3.75

Annotated Chart:



Picked on November 21 at $85.51
Change since picked:     + 6.74
Earnings Date          12/09/03 (confirmed)
Average Daily Volume:      827  thousand
Chart =


---

Progressive - PGR - close: 78.10 chg: -0.51 stop: 75.99

 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:
The daily chart and its bullish catapult breakout on PGR's point-
and-figure chart continue to look tempting but we're growing a
little impatient.  The stock continues to build on a trend of
higher lows, which is good.  Yet buyers have not yet retested the
$80 level.

We initially added PGR on a breakout above its old highs from
June.  Soon thereafter the stock rocketed higher on extremely
positive October results.  It's probably going to be a couple of
more weeks before we see November results and it may not pay to
wait that long.  We are suggesting caution on anyone considering
new plays.  PGR is certainly out performing its peers in the
insurance group and Warren Buffet has positive things to say
about the insurance sector but then we're not holding PGR stock
for 5 years either.  Traders might want to look for a move over
$79.00 as confirmation that there is still some buying momentum.
If PGR closes under $77.00 we'll probably close the play.

Suggested Options:
We're not suggesting any new plays at this time until PGR can
display a little more upward momentum.

Annotated Chart:



Picked on November 07 at $76.25
Change since picked:     + 1.85
Earnings Date          10/22/03 (confirmed)
Average Daily Volume:      654  thousand
Chart =


---

United Tech. - UTX - cls: 85.70 chng: -0.62 stop: 83.00*new*

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:
Volume is a weapon of the bulls and with that tool locked away
during Friday's short session, our UTX play really had no hope of
continuing its bullish trend.  After a failed attempt to move
over the $86.50 level, UTX headed steadily lower into the closing
bell, giving back most of Wednesday's gains in the process.  It
looks like the stock is setting up for a test of support in the
$84.70-85.40 area early next week, as that area is the site of
combined moving average support at the 10-dma ($84.70), 20-dma
($85.36) and 30-dma ($84.88).  Any rebound from above $84.50
looks like a solid entry point, while a break below that level
will introduce the possibility of a dip and retest of major
support at the 50-dma ($83.24).  Any break of the 50-dma will be
a very disconcerting development, so we're raising our stop to
$83, just under that key moving average.  Aggressive traders
targeting a rally up to the $90 level can consider breakout
entries over $87, but need to do so with the understanding that
the early November highs near $88 are likely to present solid
resistance.

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

Longer Term: Aggressive traders looking to capitalize on an
extended rally will want to look to the 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.  Our
preferred option is the December 85 strike.

BUY CALL DEC-85*UTX-LQ OI=2894 at $2.20 SL=1.00
BUY CALL DEC-90 UTX-LR OI=1079 at $0.35 SL=0.00
BUY CALL JAN-85 UTX-AQ OI=1505 at $3.30 SL=1.75
BUY CALL JAN-90 UTX-AR OI=4483 at $0.95 SL=0.50

Annotated Chart of UTX:



Picked on November 23rd at   $83.90
Change since picked:          +1.80
Earnings Date               1/15/04 (unconfirmed)
Average Daily Volume =     1.84 mln
Chart =



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

Amazon.com - AMZN - close: 53.97 chg: +1.01 stop: 48.99

Company Description:
Amazon.com, a Fortune 500 company based in Seattle, opened its
virtual doors on the World Wide Web in July 1995 and today offers
Earth's Biggest Selection. Amazon.com seeks to be Earth's most
customer-centric company, where customers can find and discover
anything they might want to buy online, and endeavors to offer
its customers the lowest possible prices. Amazon.com and sellers
list millions of unique new and used items in categories such as
jewelry and watches, gourmet food, apparel and accessories,
sporting goods, electronics, computers, kitchenware and
housewares, books, music, DVDs, videos, cameras and photo items,
toys, baby items and baby registry, software, computer and video
games, cell phones and service, tools and hardware, travel
services, magazine subscriptions and outdoor living items.
(source: company press release)

Why We Like It:
We're going to keep this play simple.  It doesn't matter whether
you think AMZN is a highly overvalued pig or the brave prospector
to a new online world, no one can deny the growth or the gold in
online shopping.  Analysts are hailing this the best shopping
season in four years for brick-and-mortar retailers but online
shopping is expected to surge as well.  No one is better
positioned to capture a good chunk of those sales than AMZN, with
or without its traditional "delight-o-meter" on its homepage.  A
story that has the sound of bearish desperation to it has
recently risen over Amazon.com not posting its traditional
holiday "delight-o-meter" on its home page, which measured how
many gifts that consumers had purchased from AMZN.  In the past
some traders had used this meter as a proxy for how well the
company's holiday sales were doing.  The bears would tell you
that AMZN isn't so sure about its upcoming performance and
decided not to advertise it with the meter.  Bulls will say that
AMZN has found a better use for such highly valued retail "space"
on its front page.

Technically speaking we noticed that AMZN has bounced from the
38.2% retracement level of its April low to October high run.
Furthermore, the recent bullish breakout over its simple 50-dma
has also broken the trend of lower highs.  Third, the stock has
reversed an ugly looking sell signal on its P&F chart into a "low
pole reversal".  Now shares might pull back after four days up in
a row and a bounce above the $50 level still looks buyable but
odds are the rally looks ready to continue on Monday.  There is
some overhead resistance at $58 but our initial target is $60.
We'll start the play with a stop loss at 48.99.

We always tend to consider any option play in AMZN as aggressive
due to its violent swings.  Granted the stock isn't as volatile
as it used to be it can still move fast.  Wisely consider what
your tolerance for risk is before you play.

Suggested Options:
We have plenty of December and January options to choose from but
our favorite is the January 50's.

BUY CALL DEC 47.50 ZQN-LW OI= 4777 at $7.00 SL=4.85
BUY CALL DEC 50.00 ZQN-LJ OI=14219 at $4.70 SL=2.50
BUY CALL DEC 55.00 ZQN-LK OI=11465 at $1.75 SL=0.90
BUY CALL JAN*50.00 ZQN-AJ OI=12039 at $5.80 SL=3.35
BUY CALL JAN 55.00 ZQN-AK OI=12237 at $2.95 SL=1.50
BUY CALL JAN 60.00 ZQN-AL OI=10221 at $1.30 SL= --

Annotated Chart:


Picked on November 30 at $53.97
Change since picked:     + 0.00
Earnings Date          10/21/03 (confirmed)
Average Daily Volume:     10.7  million
Chart =


---

Zimmer Holdings - ZMH - close: 65.92 chg: +0.43 stop: 62.89

Company Description:
Founded in 1927 and headquartered in Warsaw, Indiana, Zimmer is
the worldwide #1 pure-play leader in the design, development,
manufacture and marketing of reconstructive orthopaedic, spinal
and dental implants, trauma products and related orthopaedic
surgical products. The new Zimmer has operations in more than 24
countries around the world and sells products in more than 80
countries. In October, 2003, the company finalized its
acquisition of Centerpulse AG, a Switzerland-based orthopaedics
company and the leader in the European market. For the year 2002,
the pro forma worldwide combined revenues of Zimmer and
Centerpulse were approximately $2.2 billion. On a combined basis,
Zimmer and Centerpulse are supported by the efforts of nearly
7,000 employees. (Source: company press release)

Why We Like It:
It must be inflation.  Instead of the $6 million dollar man, we
have the $108 million man. Okay, we're joking but considering
ZMH's product line of reconstructive implants they probably hear
jokes like that all the time.  Last month ZMH just finished its
$3.2 billion acquisition of Swiss rival Centerpulse AG.  Now ZMH
just recently announced a $108 million acquisition of New Jersey
based Implex Corp.  The stock shot higher and broke resistance at
$65.00.  It's somewhat uncommon for the acquirer to trade higher
on merger news but ZMH did. Usually that means the market
strongly approves of the merger.

Shares of ZMH have continued to inch higher after Monday's big
gain and the bounce from $64 on Wednesday looks buyable.  With
the stock trading at all-time highs we'd like to say it is a
split candidate but ZMH does not have a split history (it has
never split its stock yet).  After a strong bull run from July
the best profit taking sellers could do to ZMH was a couple of
weeks of sideways trading.  That sounds like there is a shortage
of willing sellers.  Short-term oscillators are bullish and its
MACD is about to issue a new buy signal.

Before continuing traders need to consider ZMH's longer-term
overbought status.  Looking at the weekly chart could give you
vertigo.  It is essential that you trade with a stop loss should
the market and ZMH suddenly turn sour.  We're going to initiate
the play with a stop loss at $62.89.    Our first target is $70.

Suggested Option:
Short-term traders can look over the December calls but we prefer
the January strikes.  Longer-term traders have March and June
strikes to consider.  The DEC 65s look good because they have
more open interest but we're going to favor the JAN 65s.

BUY CALL DEC 60 ZMH-LL OI=1378 at $6.30 SL=3.85
BUY CALL DEC 65 ZMH-LM OI=1870 at $2.05 SL=1.00
BUY CALL JAN 60 ZMH-AL OI=   0 at $6.70 SL=4.20
BUY CALL JAN 65 ZMH-AM OI=  20 at $2.95 SL=1.50
BUY CALL JAN 70 ZMH-AN OI=  21 at $0.85 SL= --

Annotated Chart:



Picked on November 30 at $65.92
Change since picked:     + 0.00
Earnings Date          10/22/03 (confirmed)
Average Daily Volume:      1.8  million
Chart =


---

Sandisk Corp. - SNDK - close: 80.82 change: +1.02 stop: 75.50

Company Description:
What's in a name?  SNDK provides computer storage sans disk.  The
company is a leading provider of flash memory storage devices –
integrated circuits that retain data when power is off.  The
company is involved in all aspects of flash memory process
development, chip design, controller development, and system-
level integration.  SNDK has customized its products to address
the needs of many emerging applications in the consumer
electronics and industrial/communications markets, including
digital cameras, smart phones, personal digital assistants (PDA),
and MP3 portable music players.

Why we like it:
There aren't many Technology stocks that can boast the kind of
gains that SNDK can brag about this year.  Bottoming near $16.50
in mid-April, the stock has had a nearly-uninterrupted bullish
run that recently took the stock above $85.  That's more than a
400% gain in 7 months and normally we wouldn't be bold enough to
try entering such an extended trend.  But if this is just another
dip in the trend, then this is just about the best entry we're
likely to see.  Driving the stock's strong performance has been
the company's strong growth and continued dominance in the flash
memory market.  These ubiquitous flash memory cards seem to be
found in more and more consumer electronics devices and with the
holiday season now underway, it makes sense that business should
continue to be strong heading into the end of the year.

Throughout its meteoric rise, SNDK has found consistent support
at the bottom of its rising channel.  The latest bout of profit
taking however, pushed price below the bottom of its channel and
it looked like the trend just might be in trouble.  But last
week, the stock rebounded and managed to close back inside the
channel on Friday.  Ending just below the 20-dma ($80.86) on
Friday, SNDK looks like it wants to make another run at the early
November highs and quite possibly the top of the channel, now at
$90.  Since Friday's volume was so light, we're going to use a
trigger of $81.55 (just over Tuesday's intraday high) to avoid
the possibility of a rollover below resistance.  Use the initial
breakout to initiate momentum-based positions, or a subsequent
dip and rebound from the lower channel line (currently $80) to
enter on a pullback.  Given the aggressive nature of this play,
we're starting coverage with a fairly wide stop at $75.50, just
under the recent low.  More conservative traders may want to use
a stop at $77.40, just under Wednesday's low.  Our initial target
will be for a return to the $86 level at the early November
highs, but we're really looking for a return to the top of the
channel near $90.

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

Longer Term: Aggressive traders looking to capitalize on an
extended rally will want to look to the January 85 Call.  This
option is currently out of the money, but should provide
sufficient time for the stock to move higher without time decay
becoming a dominant factor over the short run.  More conservative
long-term traders will want to use the January 80 Call.  Our
preferred option is the December 80 strike.

BUY CALL DEC-80*SWQ-LP OI=4303 at $4.10 SL=2.50
BUY CALL DEC-85 SWQ-LQ OI=3778 at $1.85 SL=0.90
BUY CALL JAN-80 SWQ-AP OI=2541 at $6.70 SL=4.75
BUY CALL JAN-85 SWQ-AQ OI=2242 at $4.30 SL=2.75
BUY CALL JAN-90 SWQ-AR OI=1851 at $2.70 SL=1.25

Annotated Chart of SNDK:



Picked on November 30th at   $80.82
Change since picked:          +0.00
Earnings Date               1/14/04 (unconfirmed)
Average Daily Volume =     3.63 mln
Chart =



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

Kohl's Corporation - KSS - close: 48.32 change: +0.22 stop: 52.00

Company Description:
Kohl's Corporation operates family-oriented, specialty department
stores, primarily in the Midwest.  The company's stores sell
moderately priced apparel, shoes, accessories and home products
targeted to middle-income customers shopping for their families
and homes.  Kohl's stores have fewer departments than full-line
department stores, but offer customers assortments of merchandise
displayed in complete selections of styles, colors and sizes.  Of
the 420 stores the company operates, 116 are takeover locations,
which have facilitated the entry into several new markets,
including Chicago, Illinois; Detroit, Michigan; Ohio; Boston,
Massachusetts; Philadelphia, Pennsylvania; St. Louis, Missouri,
and the New York region.

Why we like it:
Friday kicked off the holiday shopping season, but there wasn't
anything for the bulls to cheer about in KSS' price action.  The
stock did continue to look weak, but being confined to a narrow
78 cent range certainly didn't provide much room to maneuver.
Wednesday's dip below $48 certainly looked encouraging though and
the fact that the stock ended near its low on Friday bodes well
for the bearish potential.  As noted when we initiated coverage,
KSS has been trading extremely poorly relative to the rest of the
Retail sector (RLX.X) and with the break of the ascending
trendline off the October-2002 lows, it should continue to do so.
At the same time, we're a bit leery of chasing the stock lower
with potential support at $48.25 and then down at $46.25.
Entering on failed bounces below resistance holds greater appeal,
so next week we want to target a failed bounce below the $50
level. In addition to historical support-turned-resistance, the
10-dma ($49.45) is clearly exerting downward pressure, and will
be reinforced by the falling 20-dma ($51.04).  Maintain stops at
$52 for now, just above the 30-dma ($51.82).

Suggested Options:
Aggressive short-term traders can use the December 45 Put, while
those with a more conservative approach will want to use the
December 50 put.  Our preferred option is the December 50 strike,
which gives a nice balance due to being slightly in the money and
having ample time until expiration.

BUY PUT DEC-50*KSS-XJ OI=5145 at $2.75 SL=1.40
BUY PUT DEC-45 KSS-XI OI=5230 at $0.65 SL=0.30
BUY PUT JAN-45 KSS-MI OI=8134 at $1.35 SL=0.75

Annotated Chart of KSS:



Picked on November 18th at   $48.75
Change since picked:          -0.43
Earnings Date                2/12/04 (unconfirmed)
Average Daily Volume =      3.97 mln
Chart =



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

None


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The Option Investor Newsletter                   Sunday 11-30-2003
Sunday                                                      4 of 5


In Section Four:

Leaps: One More Month
Traders Corner: Paying A Steep Price For Not Paying Attention


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*****
LEAPS
*****

One More Month
By Mark Phillips
mphillips@OptionInvestor.com

With the Thanksgiving holiday behind us, there's only one more
month to endure until we can close the book on 2003, which I don't
mind telling you has been the most frustrating year of my trading
career.  Never before have I seen so many failed technical
patterns, irrational price movement and so much untradable price
action.  In hindsight of course it is clear where I zigged and
should have zagged.  But in the past, I could easily have made
twice as many mistakes and still had a hugely profitable year.  My
ire with 2003 is two-fold -- first in its inscrutability on a
short-term basis, but secondly because I started out the year with
a clear picture of what I expected over the course of the year.
While that big picture view was largely correct, it was in the
nuances of reading the short-term fluctuations that I missed the
boat.

I "knew" that the NASDAQ would outperform to the upside, yet
failed to snag a viable long-term entry in this column.  We had
our bullish QQQ Watch List play cued up back in the middle of
March, but I failed to capture a solid entry and then watched over
the past several months as it steadily rose, albeit in an ugly
manner, to gain more than $10 from our desired entry point.
Probably my most frustrating miss of the year was neglecting to
capture the long-term entry in NEM near the $24 level.  I also
"knew" that it would be a bullish year for gold stocks due to the
continued dollar weakness, yet failed to grab that highly
profitable entry point.  As I type, NEM has advanced more than $20
from that missed entry.  There were other misses that bother me,
but those two are probably the most irritating.  What is the
lesson to be learned?  In every case, I find that the entry point
I defined was just a bit too aggressive.  The solution is to not
be quite so stingy/greedy in defining the entry points when we
have a high degree of conviction about the direction of a given
stock.

Why the confessional to start off this week's column?  Partially
because with a lack of meaningful market action since last
Monday's closing bell, I've been in a reflective mood.  But the
real catalyst is the reality that we really only have 3 more
trading weeks between now and the time the New Years Eve ball
drops.  The Friday before the Christmas holiday will effectively
mark the end of trading for 2003 as far as I'm concerned.  Part of
my own trading plan requires me to set aside some time at the end
of each year, reflect on what went right and what went wrong and
hopefully learn from the process, improving my results in the year
ahead.  I'm getting an early start on that activity this year and
while there have been marked successes to go along with the
failures cited above, I find it is from the biggest failures that
I learn the biggest lessons.  Hopefully my reflection here will
help you to examine your own trading results from the past year,
and learn and improve in 2004.

Have you noticed that I haven't said anything about last week's
market action?  It's intentional, as I view it as essentially a
throwaway.  Monday's rally was expected and should have left no
one surprised.  Beyond that closing bell, essentially nothing
happened.  Oh there were certain story stocks that had substantial
movement, but in terms of the broad market action, no progress was
made.  So where are we?  The DOW is trolling along just below 9800
and I sense the bulls are still itching to take a serious run at
the 10,000 level before the year is out.  Likewise, the SPX is
just below 1060 and I will be quite surprised if we don't see a
serious run at major resistance in the 1065-1070 area, the key
level being 1068, which is the 38% retracement of the entire bear
market decline.  We shouldn't leave the NASDAQ out of this
discussion either, as it is lurking just below that key 2000
level, which should be seriously challenged before the year is
out.

We've talked at great length about the factors that have kept this
market rising as a whole and all the factors that should prevent
it from doing so.  The bottom line is that the sea of Fed-created
liquidity has served its purpose of pushing the market back into a
sustained bullish trend, prompting many to state the bear is dead.
I'm not in that camp, but at the same time I can recognize there
are industries and areas of the economy that do appear to be
growing.  Not nearly enough to justify the rich valuations we're
once again seeing unless that 8.2% GDP number (which I believe to
be complete fiction) is sustainable and repeatable.  I'm not
holding my breath on that one.

My interpretation is that the strong GDP growth and other strong
economic numbers have already been priced into the market.
Remember, the market looks forward 6-9 months.  It has now gotten
that first big growth spurt and investors are now asking
themselves if it is a one-trick pony or if we have sustainable
growth on the horizon.  I don't think sustainable growth is really
the issue.  Whether the economy continues to grow, valuations in
so many stocks far exceed what is reasonable to expect even in a
strongly growing economy.  Let's look at a few examples.

INTC is currently trading near its 2002 highs, with a PE ratio of
49.  That's the sort of PE associated with a high growth stock.
With annual revenues of roughly $26 billion, is it reasonable to
expect the kind of growth that should be expected from a stock
garnering such a rich valuation?  How about AMZN?  Technically,
there is no PE ratio, as the company is still not truly cash-flow
positive.  But that doesn't stop it from continuing to rise to
nose-bleed valuation levels.  CSCO is back to a PE ratio of 40,
and MSFT, which is growing revenues at an anemic rate is boasting
a PE ratio of 28.  Compare these with REAL growth stocks like SNDK
(P/E = 62), which has been growing revenues at 80-100% year-over-
year for the past 5 quarters and something is truly amiss.

There are too many richly valued stocks that have no hope of
growing fast enough to grow into those valuations and the strong
growth stocks are already fully valued (I'm being generous) with
the best that can be seen ahead already factored into the share
price.  Most stocks and indeed the broad market is significantly
overvalued at current prices, and that assumes the economy is
recovering and will continue to do so.  Should the current rate of
apparent growth slow or stall, I suspect it won't take long for
that reality to be felt in the form of falling stock prices.

So therein lies the rub as we continue into the end of the year.
The market has already fully discounted a steady (and perhaps
strong) recovery, which is reflected in equity prices here.  At
the same time, it is my belief that with the still anemic job
growth, huge government deficits and record levels of business and
consumer indebtedness, not to mention global competition and a
looming trade war, that market participants are being far too
optimistic in their willingness to be long equities.  At the same
time, the price action in the markets (both individual equities,
sectors and the broad indices) if refusing to show even a hint of
weakness beyond the occasional bout of normal profit taking.

This reality is precisely why a week ago I predicted we'd have a
bullish week leading up to the Thanksgiving holiday.  The market
(and most stocks) do not want to go down and the volatility
indices make it quite clear that there is very little fear of the
downside.  The VIX (SPX Volatility) and VXO (OEX Volatility)
indices are both trolling along very near multiyear lows and not
to be left behind, the VXN (NASDAQ 100 Volatility) isn't very far
above its own all-time lows near 24.00.  In a way it is a bit like
the "chicken and egg" puzzle in terms of what comes first.
Intraday ranges in the broad indices have been compressed for so
long that the volatility indices must contract -- that's precisely
what they're telling us is that there is very little volatility in
the market.  But at the same time, we know that readings as low as
what we have been seeing lately have a tendency to presage an
increase in volatility and falling prices.  The exception as I
noted in a recent article is the 1992-94 time period when the
intraday, intraweek and intramonth ranges compressed so far on a
percentage basis as to make what we've seen in recent months look
volatile.

An argument could be made that the 1992-1994 timeframe is a model
for what we can expect in the future.  I find that highly
doubtful, in large part because the underlying economic conditions
are so different.  Gold is charging to multi-year highs and the
dollar is hitting multiyear lows.  Friday saw it hit all-time lows
against the Euro and this trend doesn't appear likely to reverse
any time soon.

So what do we have to look forward to?  My expectation is that
we'll see more of the same heading into the end of the year.  The
bullish sentiment will keep the markets dancing near their highs
and most likely have them pushing a bit higher, while the
volatility indices should provide a mirror image, drifting along
near their multi-year lows and possibly moving a bit lower.  I
think it will be very difficult to infer much in the next few
weeks as to what to expect from 2004.

I have my opinion (as does every other trader out there) and my
expectation remains the same -- we should be very near a major top
for the broad market and then we should see volatility and
intraday ranges expand after the New Year, with prices trending
downwards.  We have the same set of tools to use to determine when
the trend has truly changed.  Watch the ascending channels for a
clear breakdown.  Watch for weekly (and more importantly monthly)
oscillators to turn bearish.  Watch for clear Sell signals on the
Bullish Percent charts, both on the SharpChart and on the PnF
views and watch for the VIX/VXO/VXN to break from their persistent
descending trends.  It isn't necessary to have all of these
ingredients before we can have a high degree of confidence in a
trend change, but the more we can line up in our favor, the
better.  Until then, keep in mind that every bearish play we
consider here is an attempt to pick a top in an over-extended,
over-valued market that could continue to drift higher, fueled by
the dual factors of hype and hope.

Turning away from the action of the broad indices, there are in
fact stocks that continue to look quite bullish and appear to have
further upside in store.  The challenge we face here is to find
those that look strong and have LEAPS available for our use.  The
vast majority of stocks do not have LEAPS due to a failure to meet
one of the several conditions necessary for the CBOE to list them.
My current project is culling the updated list of LEAP-able stocks
and seeing where that list matches up with the list of stocks that
seem to have significant upside potential, even from current
levels.  We'll continue to look at bearish plays as well, but must
remember that until we see those concrete signs of a trend change,
they must be considered as more aggressive.

I think I've rambled on long enough, and now we should turn our
focus to the topic of individual plays, both those currently under
consideration and those that are just under the surface.

Portfolio:

WMT - If you need a visual example of the effect of plunging
volatility, look no further than our WMT play.  The stock is
significantly below where we initiated coverage, yet both the '05
and '06 LEAPS are currently showing a loss.  That isn't a major
concern so long as the play continues to work in our favor, but it
is a near-term frustration.  I liked the way the stock rolled over
again near $56, just below the bottom of the 11/13 gap.  But as
you can see, that pesky 200-dma continues to provide support.  The
results of spending through the holiday season will likely prove
key to the success of our play.  We took our position at the right
time technically and we're managing it effectively with our stop
just above the top of that gap.  Now we just have to wait and see
whether the weekly Stochastics turn up in bullish fashion (they're
in full bearish plunge right now) or if price breaks down into our
target range in the $48-50 area.

SBUX - As noted last week, I decided to wait for more conviction
in terms of price action before initiating the Portfolio play on
SBUX.  Monday's rally to close over $31 was good enough for me, so
we finally have a bullish entry in the Portfolio again.

Watch List:

QQQ - If you doubted the conviction of the bulls, then last week's
price action should have been very instructive.  Following the
prior week's break of both the ascending channel and the 50-dma,
the QQQ shot higher on Monday, easily clearing the 50-dma and just
kissing the bottom of the broken channel.  The remainder of the
week saw QQQ riding along the underside of that channel line and
the all-important question is whether we'll finally see a rollover
from the underside of the channel or a break back inside the
channel.  In reality, it could go either way, but I'm expecting
another push higher early next week and then a rollover.  Weekly
Stochastics have rolled down out of overbought, but are
threatening to turn bullish again, while daily Stochastics are
once again nearing overbought.  We've reached the point where I
think it is warranted to do what is necessary to take an entry and
then let the chips fall where they may.  A break and close below
$35 will satisfy the current entry trigger.  As an alternate, I
will also list $36.50 as a target-shooting entry.  If the NASDAQ
takes a serious run at 2000, then we ought to see the QQQ near
$36.50 and I would consider that a viable (although aggressive)
entry point.  We'll take whichever one sets up first, using a
tight initial stop at $37.

SMH - What can I say?  The SMH is back to its old tricks,
rebounding well within the steeper channel we've been discussing
these past several weeks.  Higher highs and higher lows remain the
pattern and there's no hint of a bearish play here just yet.  SMH
is right into major resistance in the $44-46 area, but that
doesn't mean it's heading lower anytime soon.  Watch and wait
remains the (in)action plan, as SMH remains on HOLD.

NEM - Sheesh!  What does a guy have to do to get an entry into
this runaway bullish trend?  NEM absolutely exploded to the upside
the past couple days and there's no way we want to even consider
chasing it higher.  Either it comes back to give us an entry near
the 50-dma (or lower) or we don't play.  I'm still not willing to
raise our entry target, as I'm looking at the potential for a bout
of profit taking in the gold market heading into the end of the
year.  Of course, all bets could be off if gold futures manage a
decisive breakout over $400, a major resistance level that has
been flirted with for more than 2 weeks.  Maintain the entry
target at $40 and hope for a reasonable pullback.

DJX - Just like the picture we've discussed in the past on the
SPX, the DOW has some major bearish Stochastics divergence setting
up on the monthly chart and barring a continued rally up to the
10,700 level before the monthly Stochastics turn down, we ought to
have a sizable bearish move once this divergence confirms with the
monthly Stochastics turning down.  Another metric I've got my eye
on is the 100-dma, which is now at 9484, inching up on that 9504
50% retracement of the entire bear market decline.  I suspect we
won't truly have bearish confirmation until price breaks below the
100-dma (which hasn't happened since late April) and even better
will be when the 50-dma crosses down through the 100-dma.
Needless to say, we're nowhere close to either of those events
coming to pass, which keeps this play in the aggressive top-
fishing category.  While I still think DOW 10K is in the cards
before the year is out, I still want to stick with the lower
target at $98.50-99.00 on the DJX.  Remember, we don't want to
enter just on achieving that price zone, but on a break back under
it AFTER reaching it.  That means if price just breaks out over
$100, we won't be sitting on a losing position.

QCOM - Last week was certainly not one to inspire confidence in my
bullish outlook for QCOM, as the stock got hit lower the past two
days, erasing most of the gains from earlier in the week.  With
the stock having broken below its rising channel, we're definitely
operating in the more aggressive category here, a point that is
made all the more clear with the decisive break of the 50-dma as
well.  But as we've covered above, broken channels and 50-dmas
don't seem to be carrying the weight we would normally expect.  As
with the DJX, I've got my eye on that 100-dma, now at $42.  A
pullback and rebound from the $42-43 area certainly looks like a
viable entry point into this bullish trend and the first sign of
trouble will come with a trade at $40, which would generate a Sell
signal on the PnF chart.  Technology is still bullish and QCOM is
too until that Sell signal is printed, so we'll stick with the
plan and look to buy the dip if the market will give it to us.
With risk to our $39.50 stop and a bullish price target (from the
PnF chart), we definitely have to classify the risk/reward on this
play as favorable.

Radar Screen:

GENZ - Now that's what I was looking for.  That strong rebound on
Monday had GENZ looking a bit more bullish, and Friday's push back
to close just under the 50-dma has the stock looking like it
really will head up to challenge the bottom of that broken
channel, now at roughly $50.  Between that and strong historical
resistance at $52, I'm looking at potentially adding this one to
the Watch List next weekend.  Of course, a break back inside the
channel will have me feeling much more cautious.  Let's see where
things are at a week from now.

MEL - Price action in MEL still looks weak, but I can't shake the
feeling that it is setting up for a strong rebound from the 200-
dma.  It is simply too difficult to balance risk and reward in our
favor near current levels, so the most prudent course of action is
simply to wait.  A failed rally near the $31 level looks far more
palatable and we'll just have to wait and see if it sets up as we
head into the end of the year.  For now, we wait and watch.

EK - EK certainly traded weak last week, but not enough so that I
have any desire to rush a play here.  The stock has had an amazing
ability to rebound to resistance over the past few years, so we'll
wait for a fill of that gap and then we'll look for an entry near
$27.  It may not happen in the next few weeks and that's just
fine.  If there's one thing that should be clear from the current
market, it is that entries on bearish plays must be just right.

Closing Thoughts:

Let's keep it very simple this weekend.  The market still wants to
go up, there is very little fear of the downside among investors,
and there is nary a catalyst for downside action aside for the
occasional bout of profit taking.  Expect to start hearing the
phrase "Santa Clause Rally" with greater frequency and it could
become a self-fulfilling prophecy.  Take the bullish plays that
make sense and the bearish ones that fit your risk profile.  But
before doing so, make sure you understand that the current market
environment is one that could potentially move big with the right
catalyst.  Down seems like the more likely direction for a large
move, but we can't rule out the possibility of new market highs
between now and the end of the year.  If you're going to initiate
new long-term bearish plays, make sure to do so on the failed
rallies, not on breakdowns.  And initiating new bullish plays
should be done on bounces from support, not on breakouts.

Have a great week!

Mark


LEAPS Portfolio

Current Open Plays

SYMBOL OPENED     LEAPS    SYMBOL  ENTRY   CURRENT  CHANGE  STOP

Calls:
SBUX   11/24/03  '05 $ 30  ZOS-AF  $ 4.30  $ 5.30  +23.26%  $26.50
                 '06 $ 30  WSP-AF  $ 6.40  $ 7.10  +10.94%  $26.50


Puts:
WMT    10/03/03  '05 $ 55  ZWT-MK  $ 5.10  $ 4.80  - 5.88%  $58.50
                 '06 $ 55  WWT-MK  $ 7.20  $ 6.30  -12.50%  $58.50


LEAPS Watchlist

Current Possibles

SYMBOL  SINCE    TARGET PRICE  TARGETED LEAP  SYMBOL

CALLS:
NEM    10/05/03   $40          JAN-2005 $ 40  ZIE-AH
                            CC JAN-2005 $ 35  ZIE-AG
                               JAN-2006 $ 40  WIE-AH
                            CC JAN-2006 $ 35  WIE-AG
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
AIG    11/30/03  $60-61        JAN-2005 $ 60  ZAF-ML
                               JAN-2006 $ 60  WAP-ML


New Portfolio Plays

SBUX - Starbuck Corp. $31.10  **Call Play**

It has been so long since a bullish play made it into the
Portfolio, I almost forgot what to do!  SBUX teased us the week
before last, vacillating about the $30 level, but we got the
confirmation we needed this past Monday, as the stock got its
bounce going with a close over $31.  In hindsight, that rebound
from the 50-dma sure looks nice and we can even draw a more
aggressive channel beginning in late May, the lower boundary of
which provided support on the latest pullback.  The bottom line is
SBUX continues to look bullish and despite its rich valuation,
looks to be headed higher from here.  Successive dips near the $30
level can still be used for entry, although an even better entry
might be had on a dip near $29, as we would then have support from
the midline of the longer term channel and the 100-dma coming into
play.  So long as the PnF chart remains on a Buy signal (current
bullish price target = $37) and SBUX remains within the confines
of the broad ascending channel, it should be good to continue
moving higher.  We're using a wide stop initially at $26.50.
That's just below both the 200-dma and the lower channel line and
should prevent us from being stopped out in any near-term
weakness, while the overall bullish trend remains intact.

BUY LEAP JAN-2005 $30 ZOS-AF $4.30
BUY LEAP JAN-2006 $30 WSP-AF $6.40




New Watchlist Plays

AIG - American International Group $57.95  **Put Play**

It may not be obvious from the daily price chart, but it looks
like AIG is about ready to head substantially lower.  In contrast
to the rest of the market, the Insurance stock has been posting
lower highs and lower lows since peaking near $65 in late July.
It's hard to use the 50-dma as a gauge of price action, as AIG has
been dancing on both sides of that average since June.  The 200-
dma appears a bit more meaningful though and last week's rebound
from there shows that the bears are not yet feeling bold.  But we
can connect a trendline between the last three price peaks (July,
October and November) and see that resistance seems to be firming
up there in the $60-61 area, the lower bound of which is
delineated by the 100-dma.  Weekly Stochastics are nearing
oversold already, but looking at the monthly chart, we can see
that resistance is coming in consistently at the 20-month moving
average and the Stochastics are just starting to tip bearish.  Not
only that, but when they do finally cross and tip over, we'll have
a nice instance of bearish divergence working in our favor.  The
PnF chart has already turned bearish with a Sell signal at $57 and
a bearish price target of $50.  Note also that price found support
(as we would expect) at the bullish support line at $56, so a
near-term rebound is expected.  As noted in the closing comments
above, we don't want to chase these bearish plays lower.  We need
to initiate positions on failed rebounds near support.  That will
have us targeting entries in the $60-61 area, looking for a
decline to the $50 area.  Initial stops will be set at $64, as AIG
would have to trade that level to generate a new Buy signal and
negate the current Sell signal.

BUY LEAP JAN-2005 $60 ZAF-ML
BUY LEAP JAN-2006 $60 WAP-ML


Drops

None


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

Paying A Steep Price For Not Paying Attention
By Mike Parnos, Investing With Attitude

Looking for an absolute?  – "Education is what you get from
reading about the mistakes of others.  Experience is what you get
from not reading it."

Parents (at least the good ones) spend years imparting advice to
their children based on their experiences.  In life, most parents
have "been there, done that."  However, more often than not, kids
will ignore their parents and make their own mistakes.

Survival Of The Fittest – And Most Sensible
We're adults now – chronologically, if not emotionally.  We've
been blessed with the ability to think – to use common sense.
It's what separates us from the animals.  Occasionally, in life,
we can get away without using it.  Many people do.  However, in
the world of trading, we don't have that luxury.   It's survival
of the fittest.  The casualties?  They'll be trading hot apple
pies at the Golden Arches to supplement their Social Security.

At the CPTI we're training to become survivors -- one strategy at
a time -- one trade at a time.  Our trades aren't always pretty,
but they make sense and, on the whole, they tend to generate a
nice stream of income.  Michael Caine, the actor, was once asked
why he made a particularly bad movie.  He responded by saying,
"The movie may have been bad, but the house that it bought was
wonderful."   A practical man indeed!  That's our goal.  A
practical, knowledgeable trader translates into a successful
trader.
_________________________________________________________________

Hi Mike!
I'm a newcomer to the CPTI and am playing my first SPX Iron Condor
this month. Unfortunately, I went ahead and entered the short
1075/long1085 call positions per your 11/23 instructions as well
as the 990/975 put positions.  I didn't get the message that, with
the Monday morning ramp up in prices, you changed the positions to
1085/1100 calls and 1005/990 puts.  How were we notified?  Market
Monitor? E-mail?  Whatever it was, I missed it. Anyway, now that
the SPX is approaching the 1075 level, I want to be prepared to
act if necessary.   What would be your bailout point if you were
short the 1075's?  And, if you close the 1075's, would you
continue to hold the long 1085's, particularly if you expected the
SPX to rise in a continuing pre-holiday rally?  I assume you would
close the long puts.  What about the short puts?  HELP!!
Thanks...JK

Hi JK,
Sorry you got into the trade so soon.  First, there are a few
things we should go over.
1.  You didn't read the November 23rd column carefully.  You
missed the "Friendly Reminders" section in which I warn about
trading on those Monday after expiration where the market gaps.
Here's what it says:

Those Friendly Reminders
December 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 premium
erosion.  In some instances, when the bid/ask spread is wide, I
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."

2.  You also didn't catch the section that suggests new readers of
my column take advantage of the comprehensive OI archives to get
answers and explanations.  Here's what it says:

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."

If you're going to trade options (or anything else for that
matter), you have to be a lot more thorough than you've
demonstrated to this point.

OK, now that I'm done chastising you (don't worry, you're not
alone), there are a few different ways to deal with a potential
violation of a short strike price.
a)  You can roll up and/or out.  You can close out the bear call
spread and roll it up and out -- trading an increased number of
contracts on the rollout to replenish what it cost to close out
the original bear call spread.
b)  You can wait and see what happens.  As you know (hopefully),
the market fluctuates.  There's still a reasonable chance that the
market will come back down and finish comfortably below the short
call strike.
c)  When a trend becomes somewhat clear, you can close out the
bear call spread and establish a bull put spread below the strike
and trade a sufficient number of contracts so the credit taken in
will replenish what it cost to close out the original bear call
spread.
d)  You can buy back the short call of the bear call spread and,
if you anticipate a continued upward move, ride the remaining long
call up.
e)  I wouldn't necessarily close out the put spread – unless you
need to close the spread to free up maintenance dollars for
another purpose, or unless you can do it inexpensively -- a nickel
or dime.  If the SPX is threatening the upper bear call spread,
the put spread will likely expire worthless.  Why spend the money
and commissions if you don't have to?

There are not always cut and dried solutions.  Sometimes you just
have to suck it up, take your medicine, and chalk it up to being
an expensive lesson.  We had an OEX trade last month on which we
lost over $2,000.  Shit happens.  All we can do it hope to learn
from it and not make similar mistakes in the future.

I don't know that even the 1085s are safe.  Time will tell.  But
we're both OK for a while.  About notification -- regular readers
of my column know that we try and establish the SPX Iron Condors
about 40-50 points above and below where the SPX is currently
trading.  We try to take in a total of about $2.00 in premium when
we initiate the trade.  The big move up required an adjustment in
potential parameters.  We also try to limit the exposure to about
$10,000 per side.  We might trade 10 contracts of a 10-point
spread, 7 contracts of a 15-point spread and 5 contracts of a 20-
point spread.  My column normally appears on Thursday evenings and
Sundays.  Occasionally, I'll publish an update column during the
week, but I mostly stick to the regular schedule.  If you have any
doubts, don't hesitate to email me.  I' receive a lot of emails,
but my readers know I respond quite quickly.

The above are just basic guidelines.  Nothing is etched in stone.
Remember, the trades I post are "hypothetical" and for educational
purposes.   Let me reiterate what I said before:  "And make sure
you know the intricacies of a strategy before you trade."

I hope this helped.  Good luck, keep in touch and do your
homework.
_____________________________________________________________

CPTI REPLACEMENT POSITION
NDX Iron Condor – 1424.30
Here's a new index we haven't traded before.  The NDX mirrors the
NASDAQ 100 stocks, just like the QQQs.  We'll try to establish a
huge range, giving the market room to roam, and take in some
premium for the good guys.  The NDX can move in chunks, but we'll
see if it can control itself for the next three weeks.

We'll sell the December NDX 1325 puts and buy the December NDX
1300 puts, taking in about $1.70.  Then, let's sell the December
NDX 1525 calls and buy the December 1550 calls for a credit of
about $1.00.  Total credit: $2.70.  Maximum profit range: 1325 to
1525.

Be careful!  These are 25-point spreads, so you should adjust your
number of contracts to suit your risk tolerance.  For the CPTI
portfolio, we're going to use 6 contracts.  That amounts to a
$15,000 maintenance requirement for each side of the Iron Condor.
Our potential profit is $1,620 – not bad for three weeks.
______________________________________________________________

DECEMBER CPTI PORTFOLIO POSITIONS
SPX Iron Condor – 1058.21
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 - $127.62
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 – 520.74
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 -- $35.38
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 @ $35.38
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.
______________________________________________________________

It May Be Fattening, But . . .
What did the cannibal give his wife for Valentine's Day?  A box of
farmer's fannies.
_____________________________________________________________

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 11-30-2003
Sunday                                                      5 of 5


In Section Five:

Covered Calls: What is a Covered Call?
Naked Puts: Using Portfolio Collateral For Uncovered Options
Spreads/Straddles/Combos: Bracing For The Next Leg Up?

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

Trading Basics: What is a Covered Call?
By Mark Wnetrzak

One of our new readers asked for an explanation of this popular
strategy.

Many investors view options as speculative, high-risk investments.
However, there are several option strategies that are conservative
and one such strategy is covered-call writing.  Investors write
covered-calls for several reasons: to realize additional income
(cash flow) on the underlying stock by earning premium income; to
provide a measure of downside protection against small declines in
the price of the stock; and to yield a consistent monthly return
even if the share price of the underlying stock remains unchanged.
Covered call writing is usually considered to be a more conservative
strategy than just stock ownership, because the investor's downside
risk is reduced by the amount of the premium received for selling
the call.  Generally, the covered-call strategy requires a neutral
to slightly bullish outlook as one must be willing to limit the
upside potential of stock ownership in exchange for some downside
protection.  Any investor, using sound money management, can profit
from the strategy.

The covered call writer either buys stock and simultaneously sells
calls against the shares purchased (a "buy-write" order), or sells
calls against common stock that is already owned.  Generally, 100
shares of the underlying stock "cover" one call-option contract at
the stated exercise (striking) price.  For example, if you owned 500
shares of XYZ stock, you could sell up to 5 contracts of a XYZ call
option.  If the share price of XYZ stock was $11.00: you might sell
(write) an in-the-money (ITM) XYZ call option at the $10.00 or $7.50
striking price; or you could sell an out-of-the-money (OTM) XYZ call
option at the $12.50 or $15.00, or higher striking price.  You can
also choose a near-term option series such as the current month, or
longer-term series such as a few months out to a year or more (LEAPS),
depending on your outlook.  Once an option series (strike price and
expiration period) has been selected, the seller of the call option
is "paid" for the obligation to provide the underlying stock at the
striking price of the sold option, if assigned.  An investor should
be prepared to deliver the common stock shares, if assigned, at any
time during the life of the option (early assignments are rare but do
happen).  To avoid losing the stock, an investor may cancel or remove
the obligation closing the short position (buying-back the sold call).

The primary disadvantage of the covered-write strategy is the limited
profit potential.  Remember, a covered-call writer is willing to give
up share value increases above the sold-option strike price in return
for the money received from the sale of the call.  Thus, an extremely
bullish move in the underlying stock can be quite disheartening to a
covered-call writer.  At the same time, there is risk of loss in all
forms of trading and although covered-calls "hedge" against downside
movement in the stock, they are not a panacea for protracted bearish
activity in the market.  The main benefit of writing "covered" calls
is that different approaches to the strategy can meet the needs of a
wide range of investors and in addition, it is one of the few option
trading techniques available in retirement accounts (IRAs/KEOGHs).

If you are considering covered-calls for your portfolio, you simply
need to ask yourself, "Do I want to get paid for trying to sell my
stock at a predetermined price, which sacrifices upside potential in
return for downside protection?"  If the answer is "yes," then this
strategy may be appropriate for you.

Trade Wisely!


SUMMARY OF PREVIOUS CANDIDATES
*****

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

Note:  Margin not used in calculations.

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

ARIA     7.70    8.29  DEC  7.50  0.80    0.60*   7.6%
GSS      5.90    7.54  DEC  5.00  1.25    0.35*   6.5%
AVII     4.99    4.90  DEC  5.00  0.40    0.31    5.9%
PAAS    12.57   13.22  DEC 12.50  0.70    0.63*   5.8%
MOBE    11.19   11.21  DEC 10.00  1.60    0.41*   4.6%
ISSI    16.33   18.70  DEC 15.00  1.90    0.57*   4.3%
MMR     16.30   17.96  DEC 15.00  2.00    0.70*   4.3%
CLHB     6.12    9.16  DEC  5.00  1.35    0.23*   4.2%
INSP    24.39   26.25  DEC 22.50  2.70    0.81*   4.1%
TIVO     9.02    8.32  DEC  7.50  1.85    0.33*   4.0%
ESPR    22.21   22.84  DEC 20.00  2.90    0.69*   3.9%
CANI    14.05   14.98  DEC 12.50  1.95    0.40*   3.6%
TLAB     8.08    8.01  DEC  7.50  0.80    0.22*   3.3%

*   Stock price is above the sold striking price.

Comments:

The Holiday shortened week was bullish indeed as investors helped
the major averages rebound quite nicely.  Will the Russell 2000,
which just made a new 52-week high, continue to lead the way?
Or is it a sign of speculation fluff?  Ah, there are never any
easy answers in the game called the stock market.  As for the
covered-call portfolio, the rebound was a nice respite from last
week's bearishness, though it could be cause some "call-selling"
regret.  The early-exit watch list includes: TiVo (NASDAQ:TIVO),
Avi Biopharama (NASDAQ:AVII) and Mobility (NASDAQ:MOBE).

Positions Previously Closed: Brocade (NASDAQ:BRCD).


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

NTPA   15.30  DEC 15.00  NQD LC  1.30  601   14.00  21  10.3%
PDLI   13.86  DEC 12.50  PQI LV  2.05  1944  11.81  21   8.5%
XXIA   12.70  DEC 12.50  UJC LV  0.70  30    12.00  21   6.0%
KMRT   30.44  DEC 30.00  KTQ LF  1.50  8249  28.94  21   5.3%
SLNK   20.61  DEC 20.00  SXU LD  1.25  460   19.36  21   4.8%
IBIS   16.25  DEC 15.00  UIB LC  1.65  447   14.60  21   4.0%


Company Descriptions

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

*****
NTPA - Netopia  $15.30  *** Climbing Higher! ***

Netopia (NASDAQ:NTPA) develops, markets and supports broadband
equipment, software and services that enable its carrier and
broadband service provider customers to simplify and enhance
the delivery of broadband services to their residential and
enterprise-class customers.  The company's product and service
offerings enable carriers and broadband service providers to
improve their profitability with feature rich routers and
gateways and software that manages to the edge of the network
to reduce costs, and provide value-added services to enhance
revenue generation.  These bundled service offerings often
include DSL or broadband cable equipment bundled with back-up,
bonding, virtual private networking (VPN), firewall protection,
parental controls, Web content filtering, integrated voice and
data and e-site and e-store hosting.  Netopia continues to
rally, making another new multi-year high on heavy volume, and
it appears destined to climb higher.  This short-term position
offers traders a method to profit from the current trend at the
risk of owning NTPA near a basis of $14.00.

DEC-15.00 NQD LC LB=1.30 OI=601 CB=14.00 DE=21 TY=10.3%


*****
PDLI - Protein Design Labs  $13.86  *** Lateral Trend ***

Protein Design Labs (NASDAQ:PDLI) is engaged in the discovery
and development of humanized monoclonal antibodies for the
treatment of various diseases.  The company's is focusing on
oncology and inflammatory and autoimmune diseases.  They have
several humanized antibodies in clinical development for
inflammatory bowel disease, psoriasis and asthma.  The company
is fully integrated from research through clinical development.
PDLI conducts multiple activities in support of the clinical
development program, including pre-clinical studies, process
development and antibody manufacturing.  They have significant
research activities aimed at the discovery of new antibodies
that may be useful for the treatment of certain cancers and
autoimmune and inflammatory diseases.  Protein Design has been
in a lateral consolidation pattern for several months.  Traders
who believe the current trend will continue can profit from
that outcome with this position.

DEC-12.50 PQI LV LB=2.05 OI=1944 CB=11.81 DE=21 TY=8.5%


*****
XXIA - Ixia  $12.70  *** Rally Mode! ***

Ixia (NASDAQ:XXIA) provides multi-port traffic generation and
performance analysis systems for high-speed data communications
markets.  Their product line is made up of analysis systems that
simulate large-scale networks, and of stand-alone software
products to allow its customers to verify conformance of their
products to industry standards.  The company's systems consist
of interchangeable interface cards, multi-slot chassis, a power
supply and a backplane.  The interface cards generate, receive
and analyze data traffic.  The software for these systems includes
management software and application-specific test suites.  Ixia
recently rebounded off its 30-day MA and appears to be headed
for a test of the mid-November high.  Reasonable short-term
speculation with a cost basis near technical support.

DEC-12.50 UJC LV LB=0.70 OI=30 CB=12.00 DE=21 TY=6.0%


*****
KMRT - Kmart  $30.44  *** Retail Sector Play ***

Kmart Corporation (NASDAQ:KMRT) is a discount retailer and a
general merchandise retailer.  The company operates 1,829 Kmart
discount stores with locations in all 50 states, Puerto Rico,
the U.S. Virgin Islands and Guam; and through its e-commerce
shopping site, www.kmart.com.  On January 22, 2002, Kmart and
37 of its U.S. subsidiaries filed under Chapter 11 of the federal
bankruptcy laws, and, subsequently, obtained an exit financing
facility.  On January 28, 2003, the court approved the closure
of 326 stores located in 40 states, which number was later
reduced to 316 stores, or approximately 17%, of their 1,829
stores.  In May 2003, Kmart emerged from Chapter 11 protection.
The retail sector is expecting a favorable Christmas season
and investors who want to speculate on Kmart's return to favor
can use this position to establish a favorable cost basis in the
issue.

DEC-30.00 KTQ LF LB=1.50 OI=8249 CB=28.94 DE=21 TY=5.3%


*****
SLNK - SpectraLink  $20.61  *** On The Rebound ***

SpectraLink (NASDAQ:SLNK) designs, creates and sells workplace
wireless telephone systems that complement existing telephone
systems by providing mobile communications in a building or
campus environment.  SpectraLink's product portfolio consists of
two product categories differentiated by the wireless technology
implemented: the Link Wireless Telephone System (Link WTS) and
NetLink Wireless Telephones.  Link WTS uses a proprietary radio
infrastructure and targets organizations that only require a
wireless voice solution for their on-premises mobile workforce.
The NetLink products operate over IEEE 802.11-compliant wireless
LANs and target organizations that want both a wireless-voice
and -data solution on a single network.  The rebound back above
the 50-day MA on increasingly heavy volume bodes well for SLNK
in the near-term.  Maybe investors really do appreciate the
company issuing its first dividend.  We simply favor the recent
technical strength and investors can use this play to speculate
on the company's future share value.

DEC-20.00 SXU LD LB=1.25 OI=460 CB=19.36 DE=21 TY=4.8%


*****
IBIS - Ibis Technology  $16.25  *** Semiconductor Sector ***

Ibis Technology (NASDAQ:IBIS) develops, manufactures and markets
SIMOX-SOI implantation equipment and wafers for the worldwide
semiconductor industry.  SIMOX, or Separation by IMplantation of
Oxygen, is a form of silicon-on-insulator (SOI) technology that
creates an insulating barrier below the top surface of a silicon
wafer.  SIMOX-SOI products are well suited for many commercial
applications, including servers and workstations, portable and
desktop computers, wireless communications and battery-powered
devices such as laptop computers, personal digital assistants
(PDAs) and mobile telephones, integrated optical components and
harsh-environment electronics.  Sales of 300-millimeter wafers
accounted for approximately 44% of the company's total wafer
product sales in 2002.  Shares of Ibis Technology have rallied
strongly since May and are now testing an "old" resistance area.
Investors with a bullish outlook who believe the rally will
continue can use this position to establish a favorable cost
basis in the issue.

DEC-15.00 UIB LC LB=1.65 OI=447 CB=14.60 DE=21 TY=4.0%


*****


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

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

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

GSS     7.54  DEC  7.50  GSS LU  0.55  844    6.99  21  10.6%
MMR    17.96  DEC 17.50  MMR LW  1.30  1114  16.66  21   7.3%
CVTX   18.05  DEC 15.00  UXC LC  3.60  2502  14.45  21   5.5%
SSTI   13.57  DEC 12.50  SJV LV  1.50  2150  12.07  21   5.2%
TQNT    8.14  DEC  7.50  TQN LU  0.85  1171   7.29  21   4.2%
FHRX   11.37  DEC 10.00  FUF LB  1.65  51     9.72  21   4.2%



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

Options 101: Using Portfolio Collateral For Uncovered Options
By Ray Cummins

One of our readers submitted some excellent questions concerning
margin requirements for "naked" puts and other option-selling
strategies.


Subject: Naked Calls & Puts - Margin Requirements

I would like to enquire about margin requirements on the various
trade platforms and if you have any advice on (i) how (i.e. which
strategy) and where (i.e. trading platform) would be the best way
& best place to minimize these margin cost requirements please.

Optionsxpress for example, has the following margin requirements
(10~25% of market price + premium earned), which for some of the
optionwriters recommendations of naked call/put writes for $40
and $60 stock means that each of the transactions recommended is
incurring very high margin costs requirements.

Would I be right in presuming that 'covered call writes' and
'credit spreads' are one of the best ways of minimizing margin
and costs requirements?

What other method(s) would you recommend in line with the CBOE
requirements, but that does not impose too high a cost for the
average trader, especially for credit spreads or naked put/call
transactions?

Your very kind + learned advice is much appreciated.

Kind thanks,

S.K.K.


Hello SKK,

The first thing option traders must understand is the difference
between the initial margin requirement and the maintenance
requirement.


Initial Margin

The initial margin is the amount of collateral you must have in
your account to initiate a 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, or in the case of cash-settled
options, to pay the cash settlement amount, if assigned through
an exercise.  The minimum margin requirements are imposed by the
Board of Governors of the Federal Reserve, the options markets,
and other self-regulatory organizations and the most widely used
margin requirements are based on the regulations at the Chicago
Board Options Exchange:

Writers of uncovered puts or calls must deposit and maintain 100%
of the option proceeds* plus 20% of the aggregate contract value
(current equity price x $100) minus the amount by which the option
is out-of-the-money, if any, subject to a minimum for calls of
option proceeds* plus 10% of the aggregate contract value and a
minimum for puts of option proceeds* plus 10% of the aggregate
exercise price amount. (*For calculating maintenance margin, use
the option's market value instead of the option's proceeds.)

(http://www.cboe.com/LearnCenter/pdf/MarginManual2000.pdf)


Maintenance Margin

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.

In most cases, initial margin and maintenance margin are based
on the CBOE's guidelines.  However, different margin amounts
may be needed at specific exchanges such as the NYSE, which
requires 100% of the option's market value, plus 20% of the
underlying security's value less any out-of-the-money amount,
down to a minimum of the option's market value plus 10% of the
underlying security's value.  In addition, most brokerages
supplement the CBOE's formula with slightly higher requirements
based on the average capital holdings and experience level of
their clientele.

For example, to sell puts at E-trade, the requirement is the
greater of: 40% of the underlying security's market value plus
the option premium received, minus any out-of-the-money amount
or, 20% of the underlying issue's market value plus the option
premium received.

At Wall Street Access, the requirement for selling uncovered
options is 100% of the option's market value, plus 25% of the
underlying security's value less any out-of-the-money amount,
down to the option's market value plus 15% of the underlying
security's value.

At Preferred Trade, the margin maintenance requirement is equal
to the option premium received plus the greater of 20% of the
underlying stock's price less any out-of-the money amount or,
10% of the underlying stock's price.

Obviously, there are many variations of margin requirements for
uncovered options and this will certainly be part of the criteria
you use in determining which brokerage best meets your trading
needs.  But, as you mentioned, you can reduce margin costs with
different option trading strategies and of the two you noted, a
(vertical) credit spread is probably the most popular technique
for a "directional" position.  We'll talk more about using a
credit-spread instead of a "naked" put in next week's narrative.

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

RDWR    23.46   26.84  DEC 20.00  0.65    0.65*   2.9%   8.6%
SANM    11.11   12.19  DEC 10.00  0.25    0.25*   2.8%   7.6%
APPX    32.62   36.04  DEC 25.00  0.45    0.45*   2.0%   7.0%
APPX    32.29   36.04  DEC 25.00  0.55    0.55*   2.0%   6.8%
AEIS    26.30   26.47  DEC 22.50  0.45    0.45*   2.2%   6.8%
SWIR    18.75   18.16  DEC 15.00  0.30    0.30*   1.8%   6.4%
ALTR    23.93   25.36  DEC 22.50  0.50    0.50*   2.5%   6.3%
FFIV    25.07   25.82  DEC 22.50  0.55    0.55*   2.2%   6.0%
ECLG    24.14   22.10  DEC 20.00  0.40    0.40*   1.8%   5.9%
XMSR    22.10   24.88  DEC 17.50  0.25    0.25*   1.6%   5.8%
PDII    25.97   28.90  DEC 22.50  0.45    0.45*   1.8%   5.3%
MGAM    42.90   40.93  DEC 35.00  0.45    0.45*   1.4%   5.0%
NPSP    29.26   30.14  DEC 25.00  0.35    0.35*   1.5%   4.9%

*  Stock price is above the sold striking price.

Comments:

The month of November came to an end on an upbeat note as stocks
held their gains for the week after Friday's lackluster session.
There were few investors participating in the market on the day
after Thanksgiving but the positive breadth figures bode well
for the coming month.  Despite the potential for a "Santa Claus"
rally, we recommend unremitting diligence with current portfolio
positions and we will continue to monitor the primary candidate
on the "watch" list: eCollege.com (NASDAQ:ECLG).  The issue has
yet to close below the sold (put) strike at $20, so the bullish
trend may eventually resume.

Previously Closed Positions: None


WARNING: THE RISK IN SELLING NAKED OPTIONS IS SUBSTANTIAL!
*****

The sale of uncovered puts entails considerable financial risk,
far more than the initial margin or collateral required to open
a position.  The maximum financial obligation for the sale of a
naked put is the strike price (of the underlying stock) that is
sold.  Although this obligation is reduced by the premium from
the sale of the option, a writer of puts should have the cash or
collateral equivalent of the sold strike price in reserve at all
times.  In addition, there is one very important rule when using
this strategy: Don't sell puts on stocks that you don't want to
own!  Why?  Because stocks occasionally experience catastrophic
declines, exponentially increasing the margin maintenance and
possibly causing a devastating shortfall in your portfolio.  It
is also important that you consider using trading stops on naked
option positions to help limit losses when a stock's price falls.
Many professional traders suggest closing the position when the
underlying share value moves below the sold strike, or using a
"buy-to-close" stop order at a price that is no more than twice
the original premium received from the sold option.


MARGIN REQUIREMENTS

The Initial Margin is the amount of collateral you must have in
your account to initiate the position.  In specific terms, margin
refers to cash or securities required of an option writer by his
brokerage firm as collateral for the writer's obligation to buy
or sell the underlying interest if assigned through an exercise.
The Maintenance Margin is the amount of cash (or securities)
required to offset the changing collateral requirements of the
written options in your portfolio.  As the price of the option
and the underlying stock changes, so does the maintenance margin.
With (short) put options, the margin requirements can increase
when the underlying stock price declines and also when it rises
significantly.  The reason is the manner in which the collateral
amount is determined (with the formula listed above) and traders
should always consider not only the initial margin requirement,
but also the maximum margin needed for the life of the position.
Option writers occasionally have to meet calls for additional
margin during adverse market movements and even when there is
enough equity in the account to avoid a margin call, the need
for increased collateral will make that equity unavailable for
other purposes.  Please consider these facts carefully before
you initiate any "naked" option positions.

For more information on margin requirements, please refer to:

http://www.cboe.com/LearnCenter/pdf/MarginManual2000.pdf


MONTHLY YIELD: MAXIMUM & SIMPLE

The Maximum Monthly Yield (listed in the summary and with each
new candidate) is the greatest possible profit available in the
position.  This amount, expressed as a percentage, is based on
the initial margin requirement as determined by the Board of
Governors of the Federal Reserve, the U.S. options markets and
other self-regulatory organizations.  Although increased margin
requirements may be imposed either generally or in individual
cases by various brokerage firms, our calculations use the widely
accepted margin formulas from the Chicago Board Options Exchange.
The Simple Monthly Yield is based on the cost of the underlying
issue (in the event of assignment), including the premium from
the sold option, thus it reflects the maximum potential loss in
the position.


NEW CANDIDATES
*********

Sequenced by Maximum Yield (monthly basis - margin)
*****
Stock  Last    Option    Option Last Open Cost  Days Simple  Max
Symbol Price   Series    Symbol Bid  Int. Basis Exp. Yield  Yield

RMBS   30.00  DEC 25.00  BNQ XE 0.55 2709 24.45  21   3.3%  10.6%
RDWR   26.84  DEC 25.00  AUD XE 0.60 111  24.40  21   3.6%   9.2%
ADEX   25.14  DEC 22.50  QDE XX 0.45 49   22.05  21   3.0%   8.3%
FLEX   16.00  DEC 15.00  QFL XC 0.30 2182 14.70  21   3.0%   7.6%
NTE    36.99  DEC 22.50  HEH XX 0.35 355  22.15  21   2.3%   6.5%
APPX   36.04  DEC 30.00  AQO XF 0.35 1776 29.65  21   1.7%   5.8%


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).

*****
RMBS - Rambus  $30.00  *** Unocal Settlement! ***

Rambus (NASDAQ:RMBS) designs, develops and markets "chip-to-chip"
interface solutions that enhance the performance and effectiveness
of its client's chip and system products.  These solutions include
multiple chip-to-chip interface products, which can be grouped into
two categories: memory interfaces and logic interfaces.  Rambus'
memory interface products provide an interface between memory chips
and logic chips.  In addition, the firm's logic interface products
provide an interface between two logic chips.  Rambus has two major
memory interface products: Rambus dynamic random access memory and
Yellowstone.  Additionally, it offers a logic interface product for
high-speed serial chip-to-chip communications between logic chips
in a range of computing, networking and communications applications.
Shares of Rambus rallied Friday in the wake of a new legal ruling
involving Unocal (NYSE:UCL), which analysts say could foreshadow a
positive outcome for Rambus in its suit with the government.  The
ongoing saga of the company's royalty issues may be resolved in a
favorable manner after this ruling, and traders can profit from
that outcome with this position.

DEC-25.00 BNQ XE LB=0.55 OI=2709 CB=24.45 DE=21 TY=3.3% MY=10.6%


*****
RDWR - Radware  $26.84  *** Multi-Year High! ***

Radware (NASDAQ:RDWR) is dedicated to providing Intelligent
Application Switching, guaranteeing the best operation and
servicing of IP applications and enterprise traffic across the
Internet.  Radware aligns application needs with the network
infrastructure to seamlessly allocate resources, optimize
application operations and extend security, ensuring the
integrity of critical business processes.  Radware's unique
solutions address the needs of corporate enterprises, service
providers, and e-commerce business through one or more of their
award winning products including: Web Server Director (WSD),
Cache Server Director (CSD), Content Inspection Director (CID),
FireProof, LinkProof, Peer Director, CertainT 100.  The firm's
comprehensive suite of products service end-to-end application
operations, providing robust and scalable network traffic
assurance.  This week, RDWR climbed to a multi-year high with
much of the activity due to its recent bullish earnings report.
The company reported record revenues of $14 million for the
third quarter of 2003, an increase of over 25% from the third
quarter of 2002, and an increase of 6% over the previous period.
Investors who like the fundamental outlook for Radware should
consider this position.

DEC-25.00 AUD XE LB=0.60 OI=111 CB=24.40 DE=21 TY=3.6% MY=9.2%


*****
ADEX - ADE Corporation  $25.14  *** Earnings Speculation! ***

ADE Corporation (NASDAQ:ADEX) is engaged in the design, building,
marketing and service of production metrology and inspection
systems for the semiconductor wafer, semiconductor device,
magnetic data storage and optics manufacturing industries.  The
company's products have evolved from single instruments used in
offline engineering analysis to full, 100% inline, automated
metrology solutions throughout the wafer, semiconductor device
and hard disk drive manufacturing processes.  Its systems analyze
and report product quality at critical manufacturing process steps,
sort wafers and disks and provide manufacturers with certification
data upon which they rely to manage processes and accept incoming
material.  Semiconductor wafer, device and magnetic data storage
manufacturers use the firm's systems to improve yield and capital
productivity.  ADE is due to report earnings next week (12/3) and
investors are bidding up the price in anticipation of a favorable
outcome.  Traders can speculate conservatively on the announcement
with this position.

DEC-22.50 QDE XX LB=0.45 OI=49 CB=22.05 DE=21 TY=3.0% MY=8.3%


*****
FLEX - Flextronics  $16.00  *** Lawsuit Settlement! ***

Flextronics International (NASDAQ:FLEX) is a provider of advanced
electronics manufacturing services to OEMs (original equipment
manufacturers), primarily in the hand-held electronics devices,
information technologies (IT) infrastructure, communications
infrastructure, computer and office automation and other consumer
devices industries.  The company provides a network of design,
engineering and manufacturing operations in 28 countries across
four continents.  The company's strategy is to provide customers
with end-to-end solutions in which it takes responsibility for
engineering, new product introduction and implementation, supply
chain management, manufacturing and logistics management, with the
goal of delivering a complete packaged product.  This week, FLEX
and Beckman Coulter agreed to settle a breach of contract lawsuit
where Beckman will receive $22 million in damages.  Apparently,
investors are happy with the news as the stock closed Friday's
session near an 18-month high.  Traders who believe the upside
activity will continue can profit from that outcome with this
position.

DEC-15.00 QFL XC LB=0.30 OI=2182 CB=14.70 DE=21 TY=3.0% MY=7.6%


*****
NTE - Nam Tai Electronics  $36.99  *** Consolidation Complete? ***

Nam Tai Electronics (NYSE:NTE) is a electronics manufacturing and
design services provider to original equipment manufacturers of
telecommunication and consumer electronic products.  Through its
electronics manufacturing services operations, the company makes
electronic components and subassemblies, including liquid crystal
display panels, transformers, LCD modules, and radio frequency
modules.  The firm also manufactures finished products, including
cordless phones, palm-sized personal computers, personal digital
assistants, electronic dictionaries, calculators and digital camera
accessories for use with cellular phones.  In addition, the company
assists its OEM customers in the design and development of their
products and furnishes full turnkey manufacturing services.  Its
services include hardware and software design, component purchasing,
assembly into finished products or electronic subassemblies and
post-assembly testing.  Shares of NTE are once again in an uptrend
and the recent consolidation appears to be at an end with traders
supporting a bullish resolution.  Investors who share an optimistic
outlook for NTE can speculate on its future performance with this
position.

DEC-22.50 HEH XX LB=0.35 OI=355 CB=22.15 DE=21 TY=2.3% MY=6.5%


*****
APPX - American Pharma Partners  $36.04  *** 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 received FDA approval to launch Piperacillin
for injection, the generic equivalent of Wyeth's Pipracil.  The
drug 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-30.00 AQO XF LB=0.35 OI=1776 CB=29.65 DE=21 TY=1.7% MY=5.8%


*****


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

DNDN    7.89  DEC  7.50  UKO XU 0.30 521   7.20  21   6.0%  14.2%
XICO   13.03  DEC 12.50  UOB XV 0.45 10   12.05  21   5.4%  12.7%
TTEK   25.50  DEC 25.00  TQI XE 0.65 26   24.35  21   3.9%   9.1%
IMCL   39.12  DEC 35.00  QCI XG 0.75 1897 34.25  21   3.2%   8.8%
CC     13.02  DEC 12.50   CC XV 0.30 3535 12.20  21   3.6%   8.7%
ZRAN   18.45  DEC 17.50  ZUO XW 0.35 1062 17.15  21   3.0%   7.5%
PHTN   40.81  DEC 37.50  PDU XU 0.65 88   36.85  21   2.6%   6.9%
IPXL   14.10  DEC 12.50  UPR XV 0.20 225  12.30  21   2.4%   6.8%
ADSK   23.17  DEC 22.50  ADQ XX 0.40 701  22.10  21   2.6%   6.4%
NFLX   49.00  DEC 42.50  QNQ XT 0.55 1343 41.95  21   1.9%   5.8%
TECD   36.84  DEC 35.00  TDQ XG 0.50 2050 34.50  21   2.1%   5.4%



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


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

Bracing For The Next Leg Up?
By Ray Cummins

Stocks ended relatively unchanged Friday amid light volume as
many traders skipped the session to extend the Thanksgiving
holiday with their families.

The Dow Jones Industrial Average ended 2 points higher at 9,782
while the NASDAQ Composite Index finished up 6 points at 1,960.
The S&P 500 closed where it started at 1,058 as gains in gold
and airline shares offset losses drug and oil service issues.
Breadth was positive with advancers outnumbering decliners by
a 3 to 2 ratio on the New York Stock Exchange, where trading
volume was slightly over 480 million shares.  NASDAQ winners
outpaced losers by a similar margin on volume of 700 million
shares.  In the bond market, treasury prices slumped with the
benchmark 10-year note down 16/32 at 99 16/32 to yield 4.31%.

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

MGAM    41.45   40.93   DEC   30  35   0.45  34.55   0.45   Open
ANPI    48.77   49.32   DEC   35  40   0.45  39.55   0.45   Open
PFE     34.08   33.57   DEC   30  32   0.25  32.25   0.25   Open
PHS     58.10   65.11   DEC   47  50   0.30  49.70   0.30   Open
SII     39.07   37.54   DEC   35  37   0.45  37.05   0.45   Open?
IVGN    64.85   68.17   DEC   55  60   0.50  59.50   0.50   Open
NTLI    58.96   65.16   DEC   45  50   0.45  49.55   0.45   Open
NVLS    42.54   43.76   DEC   35  37   0.25  37.25   0.25   Open

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

Smith International (NYSE:SII) remains on the early-exit list with
the stock treading water at the sold (put) strike price.


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

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

AIG     58.28   57.95   DEC   65  60   0.90  60.90   0.90   Open
BJS     32.18   31.89   DEC   37  35   0.30  35.30   0.30   Open
SNPS    30.85   29.96   DEC   37  35   0.25  35.25   0.25   Open
CCMP    54.16   53.25   DEC   65  60   0.50  60.50   0.50   Open
KKD     41.85   41.37   DEC   50  45   0.60  45.60   0.60   Open
SNPS    30.28   29.96   DEC   37  35   0.20  35.20   0.20   Open
ITMN    18.28   21.11   DEC   22  20   0.30  20.30  (0.81) Closed
MRVL    38.90   39.49   DEC   45  42   0.30  42.80   0.30   Open

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

Intermune (NASDAQ:ITMN) became an early-exit candidate after its
sharp rebound on no news.


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

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

VLO     44.00  43.10   DEC   37  40   2.20   39.70  0.30   Open
ADRX    21.66  21.96   DEC   17  20   2.15   19.65  0.35   Open
ELAB    48.17  53.03   DEC   40  45   4.50   44.50  0.50   Open

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


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

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

CTMI    16.08  15.40  DEC   20  17   2.25   17.75  0.25   Open
AHG     26.00  27.11  DEC   30  27   2.20   27.80  0.30   Open?

Apria Healthcare (NYSE:AHG) will be one to monitor in the coming
sessions.


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

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

IDCC    19.00  20.44   JAN     25     15     0.20    0.45   Open


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

No Open Positions


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

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

SCRI    20.52  27.59   FEB-22C   DEC-25C   1.40    2.10    Open
CEPH    46.34  46.88   FEB-50C   DEC-50C   1.30    1.40    Open


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

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

ATN     17.93  19.42   JAN    17    17     2.40    2.75    Open
MACR    20.22  20.52   DEC    20    20     2.20    2.10    Open


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

No Open Positions


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

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

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

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

*****
HOV - Hovnanian Enterprises  $92.25  *** New All-Time High! ***

Hovnanian Enterprises (NYSE:HOV) constructs and sells single-family
detached homes and attached condominium apartments and townhouses
in more than 196 new home communities in New Jersey, Pennsylvania,
New York, Virginia, Maryland, North Carolina, Texas and California.
The firm offers a wide variety of homes that are designed to appeal
to first-time buyers; first- and second-time, move-up buyers; luxury
buyers; active adult buyers, and empty nesters.  In addition, the
company provides financial services, including mortgage banking and
title services to the homebuilding operations' customers.  The firm
does not retain or service the mortgages that it originates, but
rather sells the mortgages and servicing rights to investors.

HOV - Hovnanian Enterprises  $92.25

PLAY (less conservative - bullish/credit spread):

BUY  PUT  DEC-80.00  HOV-XP  OI=1156  ASK=$0.35
SELL PUT  DEC-85.00  HOV-XQ  OI=1317  BID=$0.90
INITIAL NET-CREDIT TARGET=$0.55-$0.65
POTENTIAL PROFIT(max)=12% B/E=$84.45


*****
IMCL - ImClone  $39.29  *** The Uptrend Resumes! ***

ImClone Systems (NASDAQ:IMCL) is a biopharmaceutical company whose
mission is to advance oncology care by developing a portfolio of
targeted biologic treatments designed to address the medical needs
of patients with a variety of cancers. The company's lead product,
Erbitux, is a therapeutic antibody that inhibits stimulation of
epidermal growth factor receptor upon which certain solid tumors
depend in order to grow. In addition to the development of its
lead product candidates, the company conducts research in a number
of areas related to its core focus of growth factor blockers, as
well as cancer vaccines and angiogenesis inhibitors.  IMCL has also
developed diagnostic products and vaccines for certain infectious
diseases.

IMCL - ImClone  $39.29

PLAY (less conservative - bullish/credit spread):

BUY  PUT  DEC-30.00  QCI-XF  OI=1897  ASK=$0.20
SELL PUT  DEC-35.00  QCI-XG  OI=1897  BID=$0.70
INITIAL NET-CREDIT TARGET=$0.55-$0.60
POTENTIAL PROFIT(max)=12% B/E=$34.45


*****
MATK - Martek Biosciences  $60.74  *** New "All-Time" High! ***

Martek Biosciences (NASDAQ:MATK) develops and sells products
made from microalgae.  Microalgae are microplants.  The firm
is engaged in the commercial development of microalgae into a
portfolio of high value products and new product candidates
consisting of Nutritional Products, Advanced Detection Systems
and Other Products, primarily Algal Genomics.  Their nutritional
products include nutritional oils for infant formula, dietary
supplementation and other products.  Advanced Detection Systems
products include fluorescent dyes from various algae for use
in scientific applications for detection of certain biological
processes.

MATK - Martek Biosciences  $60.74

PLAY (conservative - bullish/credit spread):

BUY  PUT  DEC-50.00  KQT-XJ  OI=164  ASK=$0.15
SELL PUT  DEC-55.00  KQT-XK  OI=729  BID=$0.55
INITIAL NET-CREDIT TARGET=$0.45-$0.50
POTENTIAL PROFIT(max)=9% B/E=$54.55


*****
MSTR - MicroStrategy  $54.00  *** Consolidation Complete? ***

MicroStrategy (NASDAQ:MSTR) is a global leader in the increasingly
critical business intelligence software market.  Large and small
firms alike are harnessing MicroStrategy's business intelligence
software to gain vital insights from their data to help them
proactively enhance cost-efficiency, productivity and customer
relations and optimize revenue-generating strategies.  The firm's
business intelligence platform offers exceptional capabilities that
provide organizations, in virtually all facets of their operations,
with user-friendly solutions to their data query, reporting, and
advanced analytical needs, and distributes valuable insight on this
data to users via Web, wireless, and voice.

MSTR - MicroStrategy  $54.00

PLAY (moderately aggressive - bullish/credit spread):

BUY  PUT  DEC-45.00  EOU-XI  OI=344  ASK=$0.35
SELL PUT  DEC-50.00  EOU-XJ  OI=319  BID=$0.95
INITIAL NET-CREDIT TARGET=$0.65-$0.70
POTENTIAL PROFIT(max)=15% B/E=$49.35


*****
MHK - Mohawk Industries  $72.08  *** Trading Range? ***

Mohawk Industries (NYSE:MHK), including its primary operating
subsidiaries, Mohawk Carpet and Aladdin Manufacturing, is a
producer of woven and tufted broadloom carpet and rugs for
principally residential applications.  The company designs,
manufactures and markets carpet and rugs in a broad range of
colors, textures and patterns.  The company's brands include
Mohawk, Aladdin, Mohawk Home, American Weavers, Bigelow, Custom
Weave, Durkan, Galaxy, Helios, Horizon, Image, Karastan, Mohawk
Commercial, Newmark Rug, World, Harbinger and WundaWeve.  Their
products are marketed primarily through carpet retailers, home
centers, mass merchandisers, department stores, commercial end
users and dealers.  Some products are also marketed through
private labeling programs.

MHK - Mohawk Industries  $72.08

PLAY (conservative - bearish/credit spread):

BUY  CALL  DEC-80.00  MHK-LP  OI=27   ASK=$0.20
SELL CALL  DEC-75.00  MHK-LO  OI=241  BID=$0.60
INITIAL NET-CREDIT TARGET=$0.45-$0.50
POTENTIAL PROFIT(max)=9% B/E=$75.45


*****
TTWO - Take-Two Int. Software  $33.10  *** 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  $33.10

PLAY (conservative - bearish/credit spread):

BUY  CALL  DEC-40.00  TUO-LH  OI=3314  ASK=$0.25
SELL CALL  DEC-37.50  TUO-LU  OI=880   BID=$0.45
INITIAL NET-CREDIT TARGET=$0.25-$0.30
POTENTIAL PROFIT(max)=11% B/E=$37.75


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

*****
ANPI - Angiotech  $49.32  *** Next Leg Up? ***

Angiotech Pharmaceuticals (NASDAQ:ANPI) is engaged in the fusion
of medical device technologies and pharmaceutical therapies.  The
company's first product was a drug-coated stent.  A stent is a
cylindrical medical device, usually made of metal, inserted into
a body duct or tube to prevent collapse, blockage or overgrowth
of the duct or tube.  Angiotech's primary goal is to develop new
products to enhance the performance of medical devices and other
biomaterials through the use of pharmatherapeutics.  In 2002, the
company agreed to a merger with Cohesion Technologies, which will
continuing as a wholly owned subsidiary of Angiotech.

ANPI - Angiotech  $49.32

PLAY (less conservative - bullish/debit spread):

BUY  CALL  DEC-40.00  AUJ-LH  OI=4720  ASK=$9.60
SELL CALL  DEC-45.00  AUJ-LI  OI=1262  BID=$5.10
INITIAL NET-DEBIT TARGET=$4.45-$4.50
POTENTIAL PROFIT(max)=11% B/E=$44.50


*******************
SYNTHETIC POSITIONS
*******************

These stocks have momentum-based trends and favorable option
premiums.  Traders with a directional outlook on the underlying
issues may find the risk-reward outlook in these plays attractive.

*****
ELX - Emulex  $29.50  *** Break-Out Coming? ***

Emulex (NYSE:ELX) is a designer, developer and supplier of a
line of storage networking host bus adapters and application
specific computer chips that provide connectivity solutions for
storage area networks, network-attached storage and redundant
array of independent disks storage.  HBAs are the basic data
communication products that enable servers to connect to storage
networks by offloading processing tasks as information is
delivered and sent to the network.  The company's products are
based on internally developed ASIC and embedded firmware and
software technology, and offer support for a wide variety of
SAN protocols, configurations, system interfaces and operating
systems.

ELX - Emulex  $29.50

PLAY (speculative - bullish/synthetic position):

BUY  CALL  APR-35.00  UMQ-DG  OI=1215  ASK=$1.75
SELL PUT   APR-25.00  UMQ-PE  OI=167   BID=$1.60
INITIAL NET-CREDIT TARGET=$0.00-$0.10
INITIAL TARGET PROFIT=$0.90-$1.60

Note:  Using options, the position is similar to being long the
stock.  The minimum initial margin/collateral requirement for the
sold option is approximately $900 per contract.  However, do not
open this position if you can not afford to purchase the stock at
the sold put strike price ($25.00).


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

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

*****
MYL - Mylan Laboratories  $25.32  *** A Reader's Play! ***

Mylan Laboratories (NYSE:MYL) is primarily engaged in developing,
licensing, manufacturing, marketing and distributing generic and
brand pharmaceutical products.  The company conducts business
through its generic and brand pharmaceutical operating segments.
The Generic segment consists of two principal business units,
Mylan Pharmaceuticals and UDL Laboratories, both of which are
wholly owned subsidiaries.  The Brand segment consists of two
principal business units, Bertek Pharmaceuticals and Mylan Tech,
both of which are wholly owned subsidiaries.  Bertek's principal
therapeutic areas of concentration include neurology, dermatology
and cardiology.

MYL - Mylan Laboratories  $25.32

PLAY (speculative - neutral/debit straddle):

BUY CALL  JAN-25.00  MYL-AE  OI=6011  ASK=$1.40
BUY PUT   JAN-25.00  MYL-ME  OI=294   ASK=$1.00
INITIAL NET-DEBIT TARGET=$2.20-$2.30
INITIAL TARGET PROFIT=$0.85-$1.35


*****


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