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Daily Newsletter, Sunday, 01/25/2004

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The Option Investor Newsletter                   Sunday 01-25-2004
Copyright 2004, All rights reserved.                        1 of 5
Redistribution in any form strictly prohibited.

Entire newsletter best viewed in COURIER 10 font for alignment

In Section One:

Wrap: Two Out of Three
Futures Market: Al Green's Pocket Rocket
Index Trader Wrap: Down Week, Barely
Editor's Plays: Sky High Profits
Market Sentiment: The Race Continues
Ask the Analyst: Rebalancing act
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 01-23        WE 01-16        WE 01-09        WE 01-02
DOW    10568.29 - 32.22 10600.5 +141.62 10458.9 + 49.04 + 85.18
Nasdaq  2123.87 - 16.59 2140.46 + 53.54 2086.92 + 80.24 + 33.54
S&P-100  565.41 +  0.69  564.72 +  8.17  556.55 +  6.56 +  7.21
S&P-500 1141.55 +  1.72 1139.83 + 17.97 1121.86 + 13.38 + 12.21
W5000  11156.78 + 40.74 11116.0 +187.04 10929.0 +151.14 +115.48
RUT      596.14 +  5.73  590.41 + 15.21  575.20 + 14.35 +  5.75
TRAN    3072.94 + 36.66 3036.28 + 47.34 2988.94 - 19.22 +  8.49
VIX       14.84 -  0.16   15.00 -  1.75   16.75 -  1.47 +  0.83
VXO       14.87 -  0.40   15.27 -  0.67   15.94 -  2.00 +  1.36
VXN       21.27 +  1.03   20.24 -  2.77   23.01 -  1.50 +  0.56
TRIN       1.15            0.47            1.63            1.01
Put/Call   0.77            0.51            0.65            0.76
******************************************************************

Two Out of Three
by Jim Brown

Two of the top three indexes broke their long running winning
streaks. Two of the three busiest weeks in the earnings cycle
are now over. While these milestones are noted in passing they
have no real impact on our market direction next week. If
anything it takes the pressure off the Dow to keep the streak
going and gives dip buyers an entry point.

Dow Chart - 120 min


Nasdaq Chart - 60 min



The only economic report on Friday, the ECRI Weekly Leading
Index, saw the projected six month growth rate rise to +9.6%
after two weeks of declines. Almost all of the index
components rose but the +12% gain in mortgage applications
had the biggest impact. The strength of the internals suggest
that the last two months of sluggishness in the index may be
coming to an end. A problem for next week was the huge spike
in the ten year note yields on Friday to 4.06% from Friday's
low of 3.91%. That may not seem like much but the morning
low was a four-month low. The bounce was due to some option
expiration worries and news that the G7, meeting Monday,
could warn the ECB to reel in the soaring Euro. The prospect
of intervention in the currency sent bonds into a spin and
helped take stocks with them.

In stock news the merger mania is alive and well. Regions
Financial (NYSE:RF) and Union Planters (NYSE:UPC) agreed
to merge in a nearly $6 billion transaction and create one
of the largest banks in the Southeast. It was said this was
an offensive strategy to better compete with STI, BBT and
WFC in the region. It could also be a defensive strategy
to make them less desirable of a target for a big bank to
acquire. There was no premium on the deal for UPC which
was the acquired entity. UPC was started in 1869 during
Civil War reconstruction. They must have seen the bank
Yankees from New York coming over the hill to surrender
to RF without any recruitment fee. Analysts liked the
deal as both stocks rose strongly on the day.

The Dow positive string was broken after eight weeks and
the Nasdaq string was stopped at six. The S&P is still
alive and celebrated its ninth straight week of gains.
The gains are being fueled by massive amounts of cash
flowing into mutual funds. The S&P is greatly supported
by contributions to index funds which do not try to time
the market but just invest the cash when it arrives.
TrimTabs said $11.5 billion flowed into funds in the
first eleven days of January. This was the second highest
rate on record with $16 billion in early February 2000
the existing record. AMG Data said $5.6 billion flowed
into funds for the week ended Wednesday. This flood of
cash always trails market performance. We had a great
earnings run that pushed the Dow back over 10,000 and the
flashing alert light went on in homes across the country.
That triggered the continued flood of cash and until that
cash shrinks to a trickle the rally will continue. There
is no shortage of cash on the sidelines. Some analysts
now estimate that there is as much as 10% cash reserves
now in many funds. They are waiting to see what will
happen when the winning streak ends before putting all
of the inflows to work. With seven trillion dollars in
equity funds that is a lot of money regardless of how
little you think they are hoarding.

Friday's market action did not play out as expected. The
tech stocks traded down overseas but our futures rallied
before the open and gave us a gap open instead of the
gap dawn they were indicating late Thursday night. No
problem, we will always take a gap up rather than a gap
down. Unfortunately it did not last long and after taking
one more shot at 10650 the Dow rolled over and led the
broader markets down all day. The Nasdaq tried valiantly
to reach for the sky on the better than expected semi
earnings but could only make it to 2138 before following
the Dow into the depths. The Nasdaq managed to close in
positive territory thanks to a strong rebound off 2110
in the last 20 minutes.

The S&P broke 1150 and it's nearly two year high once
again and struggled to hold near that level but the diving
Dow finally sunk it. This is a very tough level for the
S&P with 1152 a 50% rebound from the October-2002 lows.
1161 is a 50% retracement from the Jan-2000 to Oct-02
drop and 1173 is the 2002 resistance highs. Very tough
territory for the S&P.

The strongest index was still the Russell-2000 which
closed up +4.41 at 595 thanks to a really strong end of
day bounce. The low was 589.92 but the key was the close.
It was only .77 below the high for the day. Very strong
performance and proof that the retail investor is alive,
well and buying the dips with a vengeance despite the
very extended indexes. 600 is still very strong resistance
and 606 was the all time closing high. Both could be tough
levels to break.

Russell-2000 Chart - 120 min



Microsoft recovered from the bad-mouthing drop Thursday
night to spike to a two month high and ended the day up
+.47 cents. Volume was 127 million shares. Intel, which
should have benefited from Microsoft's prediction of
double digit PC growth for the first six months closed
only fractionally positive but off its lows. KLAC had
great results but got knocked for -2.21 loss. This
helped accelerate the $SOX drop which began Wednesday
morning. The SOX closed at 526 and well off the high
for the week at 558. That is nearly a -6% drop in three
days for a sector that has been giving positive guidance
and had a book-to-bill number last Monday of 1.20, the
highest level since July-2002. This is proof that profit
taking sometimes occurs despite good news.

Next week is going to be tricky. Monday is a very light
day economically but we have the FOMC meeting on Tue/Wed
and a strong economic calendar the rest of the week. We
have already seen 1/3 of the Dow stocks report and we
get another 1/3 next week. Another 143 S&P companies
also report earnings. This is a very busy week but the
two key points are the Fed announcement on Wed and the
GDP on Friday. As I said on Thursday the Fed may take
the opportunity of low bond rates and a high stock market
to adjust their bias statement and traders could be very
cautious into that announcement. The threat of an ECB
rate cut could actually be a wild card that could cause
a 1/4 point rate hike to show cooperation. While almost
nobody expects that the news report on Friday put the
possibility in traders minds. The bond market imploded
on the potential sending yields soaring. Everyone expects
this meeting to be a non event but the rumors are flying.
Greenspan will speak in London on Monday and there is
always risk when he speaks to an international crowd.
With Howard Dean suggesting he be fired there is always
the risk Greenspan uses his oratory skills to reinforce
his current clout.

The other fear is the GDP. I say fear because the GDP
expectations are getting out of line. With the ECRI
Index showing a growth spurt to +9.6% Friday it just
provided more fuel for the GDP whisper number. This
could be a big disappointment. On Thursday I suggested
a hot number would prompt Fed action and disappoint the
markets. The current official estimate is +4.5% and the
whisper number +6.5%. The best case would probably be
something in the +5.1% range that would be neutral to
everyone.

The roadmap is clear but the road may be rocky for the
next five days. The market conditions are still strong
with advancers BEATING decliners 3916 to 3414 despite
the Dow and S&P turning in negative performances. Volume
was almost perfectly split between up (2.23B) and down
(2.31B) and it was still strong although about -10%
from the prior levels this week. This suggests that
the Dow drop is just a normal pullback on profit taking.

If the markets remain bullish the Dow now has breathing
room of nearly -100 points from the weeks highs. This
will allow some room to consolidate and give dip buyers
an entry opportunity if desired. Resistance remains
10650 and support at 10500 then 10400. This is a no risk
range for the Dow in front of a rocky week. Plenty of
room to wander without having to take out any critical
levels. The Nasdaq is in the same shape with resistance
at 2150 and support at 2085. That 65-point range will
take some of the stress out of trading techs.

The key levels are still 1150-1160 on the S&P and 600
on the Russell. Those indexes are still close enough
to test those resistance levels and if broken the other
indexes would be quick to catch up. My market view for
next week would be flat to down Mon/Tue with Wednesday's
close dependent on the Fed meeting. Beginning Thursday
I am expecting a cautious uptick in anticipation of
a positive Jobs report the following Friday. I say
cautious because of the GDP time bomb. It could be
very bullish, very bearish or a dud. Once that report
is over we will review the outlook for the following
week. This could be the busiest earnings week for this
cycle and there will be no shortage of stock news. The
better earnings tend to be reported earlier in the cycle
so there is a potential for a few more disappointments.
I do not think it will matter. Investors already have
their minds made up and they are not going to learn
anything new. We are in a momentum market and according
to the internals there is no slowdown in sight. That
could change abruptly the first time a big dip fails
to rebound. Keep those parachutes handy.

Enter Very Passively, Exit Very Aggressively!

Jim Brown


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

Al Green's Pocket Rocket
Jonathan Levinson

The Fed drained 19.5B on Thursday and 5.75B on Friday via its
open market operations as the Fed's 23 dealers returned its
maturing intervention money ahead of the weekend, and the markets
actually saw some selling.  Treasuries advanced right up to
double top resistance and then fell sharply, the US Dollar Index
bounced, equities, the CRB and gold corrected.

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.


Daily chart of the US Dollar Index


The US Dollar Index finished the week in negative territory,
approaching but never testing the year low at 84.80.  Friday saw
a huge bullish engulfing move that added nearly 14 bps from
trough to intraday peak.  The daily cycle upphase nearly aborted
but did not, and bulls are pressing for a retest of the
descending trendline, now at 87.30.  The CRB lost 1.38 to close
at 268.26, led by weakness in cocoa, live cattle and wheat
futures.


Daily chart of February gold


February gold put in a lower high on Friday but held support
23.6% below the year high.  406 was support all week following
the sharp drop off the highs, and the bounces failed repeatedly
in the 413 area.  Rising trendline support is just below 406,
with confluence support next at 399-400.  The daily cycles
drifted lower, but with price building a base, the cycle is
beginning to look tired.  It appears almost too easy that
goldbugs will be let off the hook, but until 399 breaks, that
appears to be what is setting up here.  For the day, February
gold futures decline 2.60 to close at 407.50, HUI dropped 1.65%
to 222.72, and XAU -1.47% to close at 97.79.


Daily chart of the ten year note yield


Ten year bonds took a whack on Friday after an early morning rise
took the yield down to test the 3.9% support line.  The TNX
bounced so fast that those who blinked could have missed it, and
finished higher by 9.7 bps at 4.066%.  The daily cycle downphase
is very extended here, and the impulsive feel to the yield's
bounce leads me to conclude that the next upphase is imminent and
likely kicked off Friday.  This meaningful selloff in US bonds
coincided with the Fed's draining 19.5B on Thursday and 5.75B on
Friday in expiring repos.  Whether that liquidity drain was the
prime mover or not, the reversal lined up perfectly with cycles
and confluence we had been watching all week, and sets up a firm
base for the yield at 3.9%.


Daily NQ candles


The NQ managed to fall apart this week while barely raising
eyebrows.  The tallest dojis were to the upside, as four days'
worth of bulls trapped themselves in daily candle blowoffs.
Friday's tame decline off its highs finished with just a
fractional loss, but two separate rising trendlines were violated
on a closing basis as of Friday, and a new daily cycle downphase
at last kicked off.  1538 was the latest rising support line to
fail, and while a return-to-the-scene rally to that level would
relieve the oversold condition on the 30 minute cycle (below),
any failure of that bounce would be a textbook short entry.  For
the day, NQ dropped 2.5 points to close at 1532.


30 minute 20 day chart of the NQ


The NQ's low was printed at 1521, just above Fibonacci, price
confluence and rising trendline support at 1518.  The move drove
the 30 minute cycle oscillators to deep in oversold territory,
and while a further washout to 1518 could easily follow this
week's losses, I expect to see a weak bounce from that level.
With the daily cycle downphase now in progress, however, the "buy
all dips" mantra is no longer applicable.  Bears want to see a
lower high put in at the top of the impending 30 minute cycle
upphase, and if that occurs, then the next target will be a break
of 1518.  Next support is 1504, followed by 1492.  Resistance is
1548-50.


Daily ES candles


The ES declined for the week as well, the first in what feels
like forever, and while Friday was a small, almost insignificant
point drop, it managed to catch bulls in 3 consecutive daily doji
tops that finished in negative territory.  What that observation
means is that chasing upside breakouts in the ES has been a
losing trade 3 days in a row (4 on the NQ).  By the same token,
however, sellers who piled onto the daily rising support line
break got hosed, and it remains a tricky market.  The NQ has
broken the equivalent of 1130 ES on a closing basis, and if ES
doesn't bounce on Monday, then that level's the next bearish
target.  The daily cycle downphase is still not underway, with
the oscillators not so much declining as melting like toffee on a
hot summer day. Any further selling will break the first rising
trendline and kick off a daily cycle downphase.  For the day, ES
dropped 4.25 to finish at 1139.75.


20 day 30 minute chart of the ES


The ES came to rest on the 23.6% retrace off the rally highs,
bouncing from 1135.25.  The 30 minute cycle downphase was pausing
in oversold territory at the cash close, and again, the easiest
directional call from here is a 30 minute cycle bounce.  1142
support is now resistance, and a failure there would constitute
the right shoulder of a head and shoulders top, neckline 1135 and
projecting to the 1120 area, close enough to my 1115 confluence
zone for gubmit work.   1146-50 is the next resistance zone, and
a strong 30 minute cycle upphase could easily test it.  That's
the bull-bear battleground for next week.


150-tick ES


The short cycle spent most of Friday trending in oversold
territory, with an upphase kicking off in the last half hour, as
the entire universe has doubtless come to expect.  The flattening
of the 35 period Keltners, which I use to approximate the 30
minute cycle channel, lined up with the pause at the bottom of
the 300 minute stochastic in the previous chart.  If price
remains firm on Monday morning, I expect the upphase to
strengthen and set up that test of 1142.


Daily YM candles


The YM dropped 67 points to finish at 10549, the biggest
percentage loser of the session for -.63%.  That said, its daily
cycle downphase has achieved virtually no price traction to the
downside, and the rising lower support line hasn't been breached
even on a spike.


20 day 30 minute chart of the YM


The 30 minute cycle downphase was upticking on the end of session
ramp on Friday, and 10500 support held at the low.  10560,
followed by 10590 are overhead resistance.

This week saw large moves in the US Dollar Index in both
directions, but with Friday's impressive bounce retracing only
part of the damage.  We saw bonds trading inversely to the dollar
for a change, and gold traded alongside the dollar until Friday,
when it sunk again against a rising dollar.  Equities too traded
"uncoupled" from the dollar, and until some clear trends assert
themselves, I respectfully suggest that traders view their
signals with a grain of salt.  Gold *should* trade inversely to
the dollar, while equities and treasuries have taken both sides
of that relationship recently.  The 2003 rally was liquidity
based, and probably central bank support of the dollar saw bonds,
equities and gold rally against the falling dollar.  As the
dollar attempts to bounce, we've seen equities continue to
advance (last week), and fall this week.  Until we see a clear
trend, it is far better to either ignore the intermarket
relationships altogether or keep an eye on them, searching for
clues and developments.  I believe that the massive draining from
the Fed, the return of Al Green's pocket rocket of 25.25B,
contributed to the declines in gold, equities and treasuries,
lining up with the rise in the dollar, but it's early to tell,
and hopefully next week will enlighten us.

See you Monday morning.


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

Down Week, Barely
Jonathan Levinson

A week that saw new highs and heavy volume finished with the
Nasdaq barely in the green and the SPX barely in the red and the
Dow leading to the downside.  The heavy volume and overall heavy
feel to the market suggested distribution taking place at the
top, but it could also be base-building consolidation ahead of
the next wave up.

For the day, the Dow lost 55 points, closing at 10586.29, the SPX
lost 2.39 points to close at 1141.55, and the Nasdaq gained 4.86
points, finishing at 2123.87.  For the week, the Dow lost .3%,
the SPX gained .2% and the COMPX dropped .8%, bringing the 52
week gains to 27% for the Dow, 30% for the SPX and 56.2% for the
Naz.

Volatility remained low all week, with the OEX volatility index,
the "old" VIX now called the VXO, finishing at 14.87, with a
bottom having printed at 14.40 on Wednesday.  The Nasdaq
volatility index, the VXN, printed a record low at 20.1 a week
ago but cam close on Thursday's open at 20.4.  The NDX volatility
index, the QQV, actually broke beneath 19 for a few minutes on
Tuesday afternoon, still reflecting the ongoing bear market in
fear and option premium that has easily exceeded levels that
marked the top in Spring 2000.  Bears who aim to survive this
rally have learned to take these readings in stride and follow
the only indicator that prints on monthly statements, the price.


Weekly COMPX candles


Prophetcharts is expressing the COMPX's .8% drop to 2123 with a
green weekly candle, but the closing print is nevertheless
correct.  Note that the index has closed for the second
consecutive week above the upper rising Bollinger band, which
indicates a seriously overbought, upwardly trending market.  The
8% correction is minor given the close above the upper band and
the trending weekly oscillators.  Rising wedge resistance on the
weekly chart is now 2170, and support is now 2100, followed by
2025.  The weekly cycle oscillators are pointed north on buy
signals from deep in overbought, the 10-week stochastic
nevertheless at a lower oscillator high.  Any decline from here
will set up a bearish divergence, but we've been watching that
setup since July 2003, as it continues to tell us only that the
decline, when it comes, risks been serious as the market trends
ever higher.


Weeky INDU candles


The Dow dropped .3%, closing at 10586, the first weekly decline
in 2 months.  The weekly cycle oscillators are still well within
their bullish uptrend, as is the price within its rising channel.
10500 was spike support, and 10300 is next support, followed more
substantial support between 9900 and 10000. The weekly charts
remain uniformly bullish, with this week's notable weakness
constituting at best a weak correction.


Daily OEX candles


Turning to our primary trading vehicles, we see some cracks in
the bullish armor, and given how overbought the indices had
become, one might expect more selling to follow.  That may or may
not turn out to be the case, but for the moment the price trend
on the daily OEX is firm.  A daily cycle downphase began last
week despite new 52 week highs printing this week.  565 held
today, with more significant support below at 560, then 556 and
550.  Until 525 breaks, any decline from here should be treated
with caution by bears, as that level, once such firm resistance,
is now strong support.  To the upside, 570-2 is resistance, but a
move back to that level could reverse the current daily cycle
downphase and likely set off the next short squeeze.


20 day 30 minute chart of the OEX


The 30 minute cycle downphase provided a whipsaw on Thursday that
was maximally dispiriting to bulls, but it reached deep oversold
territory on Friday before the closing bounce.  Unless Monday
sells off quick and hard, I'd expect the next meaningful move on
this cycle to be to the upside.  As can be seen over the past 3
weeks, this cycle does not trend in oversold at all, and barely
in overbought.   A selloff on Monday would indicate trouble in
paradise for the first time in many weeks, and will imply that
the daily cycle downphase is going to get some price traction
after all.


Daily QQQ candles


I've generated a daily chart for the past 52 weeks, to display
the strong uptrend at the expense of some candle clarity.  The
QQQ is in a daily cycle downphase here, and if 37.40 breaks, next
real support comes at 36.  The shape of the daily cycle rollover
looks good for a move to that level, but this rally has been
built on whipsaws and early downphase aborts.  Below 36, next
stop is 33.50, with minor support at 34.20.


20 day 30 minute chart of the QQQ


The 30 minute cycle for QQQ was trending in oversold before the
end of session bounce that closed QQQ at a minor loss of 12 cents
at 38.03.  37.60 is strong support, and I'd treat a break of that
level as a head and shoulders neckline break, projecting 1.2
points lower to 36.40.  Given how oversold the 30 minute cycle
oscillators have become and the bullish kisses on which they left
off, I'll be viewing any upside Monday morning as indicating a
new 30 minute cycle upphase.  If that upphase fails right away or
from a lower high (below 38.80), then the daily cycle downphase
will be confirmed, portending a test of 37.60 support.


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

Sky High Profits

Careful this is risky. Now that I have the disclaimer out
of the way let's explore a few facts. Everybody has seen
the rocket ride to the stratosphere for XMSR. I am talking
about the stock price not the satellites. The stock was
selling for $1.70 in Nov-2002 and $30 two weeks ago. I
personally feel XMSR will be the survivor of the radio
war but recent events suggest we could see a retracement
of the stock before the next up leg.

On Friday XMSR said they had priced 20 million shares of
stock at $26.50. No problem the stock only lost -$1.00
from the day's highs to close at $25.88. Support for the
stock is 25.50. This is well off the $30 high from Jan-7th.
This suggests to me that the bloom is off the rose. Also,
13 million of those shares are coming from insiders and
not the company. Also, insiders have generously offered
to sell three million more shares just in case there is
too much demand. That is no small pocket change. That is
$424 million that insiders have decided to accept in lieu
of future gains, if any, if all 16 million shares are
tendered. Can't blame them I would be selling those hot
potatoes too! It just makes me wonder if reality is about
to strike.

According to Business Week it may be a long time before
XMSR actually makes a profit. A very long time. XM has
1.4 million subscribers and expects to post a -$250
million loss for this year on revenue of $259 million.
This cash burn is a very long way from just breaking
even much less making a profit. Business Week suggested
the initial saturation point for North American subscribers
was 3.5 million listeners willing to pay $9.95 a month.
That is possible given their current growth rates. The
growth rate is expected to slow as the early adopters
begin to dissipate and it could take several more years
to hit that level.

Eventually the numbers work out to where a profit is
possible. Here is the catch. In order to finance their
startup and growth both XMSR and SIRI have issued tens
of millions of shares of stock, warrants, convertibles,
options etc. SIRI has enough options outstanding to
increase the amount of stock by 1/3. XMSR has been much
more liberal in attempting to streak out into the lead
and total shares outstanding could more than double over
the next couple years if all the options are executed.
That does not even assume the issuance of new stock like
the company announced on Friday.

This means that lenders wanting to be repaid for their
investment will be eager sellers and should the stock
price begin to fall XM may have to issue more options
to attract more lenders and keep the cash drawer full.
When earnings do begin to appear the dilution impact of
all these additional shares could be extreme. Just going
profitable has been the kiss of death for many dot.coms
as their mysterious promises turn into minimum returns.

Currently the closest mature competitor to XMSR would
be Echostar. (DISH) The highest price to sales ratio
they have ever seen was 14 and cable TV is much more
saleable to normal consumers than satellite radio. We
can't use PE ratios since XMSR and SIRI have no earnings.
XM currently trades for a price-to-sales ratio of 60 and
SIRI is obscene at 392.

While I think XMSR will survive and eventually prosper
it may be a very long time before it happens. What
started me down this research path was the new stock
offering and the 16 million shares offered by insiders.
If they are that eager to dump and run it might start
others to thinking the same thing.

They currently have 149 million shares outstanding and
a $4 billion market cap. A whopping 33% of the float is
currently shorted. (41 million shares) This is a huge
number and the number one reason for the meteoric price
rise. Every bounce brings another round of short covering
and another round of shorts. A vicious circle we have seen
time and time again. It eventually ends badly with the
sudden decline of the stock once the momentum players
decide the ride is finished. Remember ACF back in 2001?

Here is the deal. This is a short term play and because
of the high short interest I am going to take out insurance
in the form of a cheap call. I would not be surprised to
see the $25.50 level fail as the new offering news sinks
in to the public consciousness.

Buy March $30 call QSY-CF currently $0.95
Buy April $25 put QSY-PE currently $2.45

If we get a short covering blowout to the upside the
call should cover the loss on the put. If we get any
decent move to the downside the put price should cover
the loss on the call.

The target price to exit for a profit is $22.50.
The stop loss is $30.00

If either number is hit close all positions.

You could just sell the put on a touch of $30 and take
your chances on the call but that is up to you. Likewise
if we start to see a steady decline in the stock and
the market I might try to squeeze out $20 on the downside.
That would be a very slight possibility. The official
exit is $22.50/$30.00.

I am using the April put to retain the most time premium
on any move. You could use the Feb-$30 call for 40 cents
but that only gives us four weeks for the play. That
may be more than enough but the March call would still
have more value if we did hit the targets in the next
four weeks.

XMSR Chart






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

Play Recaps

DJX Puts

When things go bad they really go bad. The Dow finally spiked
to 10650 this week and actually spent part of three days at
that level. The bullishness is so rampant that even on Friday
when the Dow dropped to 10523, -137 points off its Thursday
high, the advancers still beat the decliners and there were
over 800 new 52-week highs. I am giving up all but the weakest
of hopes that the Dow will retreat any meaningful distance
before expiration. Anything is possible and the dip on Friday
could be a crack in the foundation but I have my doubts.

The 50 dma has climbed to 10146 and every test of this support
since March has broken it slightly for a couple days before
launching out again. This suggests 10100 is still possible
but 10200 is more likely IF we were to get a real bout of
profit taking.

Currently 10500 and 10400 are decent support levels followed
by light support at 10300.

The play was predicated on a repeat of the January drop that
we have had for the last six years. There has been no drop.
The closest thing we got was a dip to 10367 on the 13th
which was -221 points from the high three days earlier. If
that was it I missed it. The average drop has been -550
points and that was less than half of the average.

I am writing this play up as a loss and suggest you cover
on any dip to 10400. I am holding on until the bitter end.
The current 30-cent value of the Feb-100 puts will not buy
much and they are worth the 30 cents to me as a lottery
play. My Feb-102 puts are 50 cents today and could still
be in play. My personal exit target is 10300 today unless
the sentiment changes quickly. Should we see a real dip in
progress I will play it by ear. I am not holding my breath
but with the Fed, GDP, ISM and Jobs ahead there is plenty
of risk for the bulls and little in the way of a catalyst
to the upside. Earnings are good just like they expected
but that is old news. The biggest factor that could push
us up higher is simply the momentum factor. Bulls are in
control and in full stampede. Until they come to a cliff
there is nothing to stop them.

Initial play description December 21st
http://members.OptionInvestor.com/editorplays/edply_122103_1.asp


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


Priceline.com (PCLN) Put play $20.58

Did you get the number of that truck? I searched everywhere
for the reason for the spike on Jan-21st but could not find
any news. For some unexplained reason at 12:05 on Wednesday
PCLN jumped from $19 to $21.50. That spike stopped us out at
$20 and ended the misery. Must have been something Spock did
to the warp drive.

http://members.OptionInvestor.com/editorplays/edply_121403_1.asp



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

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

Good Luck

Jim Brown


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

The Race Continues
- J. Brown

The major indices have been racing higher for several weeks
straight and they finally had to pause and catch their breath.
This last week ended an eight-week stretch for the Dow Jones
Industrials and the S&P 500 and it closed a six-week rally for
the NASDAQ.  Fortunately for investors the consolidation was
pretty mild.  Almost too mild.  The averages are looking so
extended that it's getting tougher to chase them and it's been
too dangerous to attempt many bearish plays.  No one wants to
pick a top but no one appears willing to buy the top either.  At
least that appears to be a growing feeling among some traders.
It could be wrong and this market could take off again despite
their increasingly overbought and somewhat bearish technical
oscillators.

I think the market internals for the last couple of days might be
the real clue.  The advance-decline line has been weakening and
the up-down volume ratios have also been fading from their
bullish levels.  For weeks you've heard that the markets are due
for a pull back.  Odds are when it finally comes it will be brief
but sharp. This expectation could put the brakes on any new rally
attempts.  Why buy stocks now when you might get a chance to buy
them 5% or 10% cheaper?

Let's look at some of the sector indices.  Bulls should be happy
to see the Dow Transports (TRAN) almost hitting 3-year highs.
The group recently broke out above resistance at 3050 despite
crude oil prices hitting $35 a barrel.  Traditional Dow theory
suggests you can't have an extended rally/bull-market without the
transports along for the ride.  So far so good.

The GHA hardware index has pulled back to its support in the 257-
258 range.  We might see a bounce here in spite of its bearish
technicals.

The OSX oil services index was the big winner on Friday with a
3.98% gain.  This was sparked by a strong earnings report from
Schlumberger (SLB), who turned in 50 cents a share, 7 cents
better than expected.  SLB was up 7.5% and brokers were upgrading
the issue on growing expectations for increased oil exploration
and production.

Some of the strongest sectors in the market have been the UTY
utility index and the XNG natural gas index.  They have both
traded sideways the past couple of sessions but they are
maintaining their gains and new yearly highs.  It could be
investors chasing those stocks with a higher-dividend yield.

I also noticed some minor strength in the RLX retail sector.
Category killer Wal-Mart (WMT) broke through resistance at $54
and its simple 50-dma on Friday, giving the group a lift.

The XAU gold & silver index continues to look weak.  Friday was
another close under the 100 level as gold futures dropped another
$2 to close at $408.

Another group to watch next week may be the Insurance sector.
The IUX index has been climbing in a very narrow channel for 9
weeks straight.  It just pulled back toward its simple 10-dma and
a breakdown here could spark a sharp round of profit taking.

Next week investors will have to withstand another flood of
earnings on top of several economic reports, not to mention the
two-day FOMC meeting.

Monday will bring the December existing home sales figures, which
are expected to be slightly higher.  Tuesday is the Conference
Board's consumer confidence report, which is also expected to
rise from December.  Tuesday night will offer the New Hampshire
Democratic primary and if the new front-runner Kerry wins it
could cause a stir on Wednesday.  Actually, it probably won't
matter who wins because the markets don't like uncertainty.
Expect some volatility on Wednesday no matter what the primary
results are.  Plus, we'll have the interest rate decision by the
Fed on Wednesday but no one really expects any changes.  The rest
of the week will bring even more economic reports but earnings
will continue to hog the spotlight.

Trade carefully!


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

Market Averages

DJIA ($INDU)

52-week High: 10660
52-week Low :  7416
Current     : 10568

Moving Averages:
(Simple)

 10-dma: 10540
 50-dma: 10146
200-dma:  9411



S&P 500 ($SPX)

52-week High: 1150
52-week Low :  788
Current     : 1141

Moving Averages:
(Simple)

 10-dma: 1134
 50-dma: 1087
200-dma: 1012



Nasdaq-100 ($NDX)

52-week High: 1559
52-week Low :  795
Current     : 1531

Moving Averages:
(Simple)

 10-dma: 1534
 50-dma: 1447
200-dma: 1307



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

The volatility indices continue to offer us little help.  They
remain near their lows despite the mild weakness in the major
averages.

CBOE Market Volatility Index (VIX) = 14.84 +0.13
CBOE Mkt Volatility old VIX  (VXO) = 14.87 -0.14
Nasdaq Volatility Index (VXN)      = 21.27 -0.47

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

          Put/Call Ratio  Call Volume   Put Volume

Total          0.77        861,409       665,677
Equity Only    0.60        764,989       456,491
OEX            1.67         13,497        22,561
QQQ            2.85         32,996        98,161


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

Bullish Percent Data

           Current   Change   Status
NYSE          78.4    + 0     Bull Confirmed
NASDAQ-100    79.0    - 1     Bull Confirmed
Dow Indust.   93.3    + 0     Bull Confirmed
S&P 500       88.8    + 0     Bull Confirmed
S&P 100       88.0    + 1     Bull Confirmed


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

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


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

 5-dma: 1.00
10-dma: 1.06
21-dma: 0.97
55-dma: 1.05


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    1529      1766
Decliners    1329      1316

New Highs     398       274
New Lows        7         5

Up Volume    960M      1116
Down Vol.    924M      1072

Total Vol.  1946M     2231M
M = millions


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

Commitments Of Traders Report: 01/23/04

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

Wow!  We've seen a mild reversal in the commercial traders'
positions.  They've moved from mildly net short to mildly net
long.  That's an encouraging sign for more strength in the
markets.  Small traders have grown a bit more cynical with
a slight increase in short positions but they remain net
long.


Commercials   Long      Short      Net     % Of OI
12/22/03      400,066   405,240    (5,174)   (0.6%)
01/06/04      403,721   408,729    (5,008)   (0.6%)
01/13/04      405,558   411,361    (5,803)   (0.7%)
01/23/04      422,135   407,626    14,509     1.7%

Most bearish reading of the year: (111,956) -  3/06/02
Most bullish reading of the year:   23,977  - 12/09/03

Small Traders Long      Short      Net     % of OI
12/22/03      147,537    81,596    65,941    28.8%
01/06/04      142,844    83,518    59,326    26.2
01/13/04      149,057    90,571    58,486    24.4%
01/23/04      141,107   100,090    41,017    17.0%

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

Commercials are starting to up their bets on the e-minis with
almost 40K new longs and 44K new shorts.  Small traders in
turn reduced their bets but remain net long.


Commercials   Long      Short      Net     % Of OI
12/22/03      128,801   213,021    (84,220)  (24.6%)
01/06/04      175,489   240,865    (65,376)  (15.7%)
01/13/04      196,858   263,845    (66,987)  (14.5%)
01/23/04      233,867   307,122    (73,255)  (13.5%)

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
12/22/03     125,248     43,482    81,766    48.5%
01/06/04     139,433     51,909    87,524    45.7%
01/13/04     191,241     62,711   128,530    50.6%
01/23/04     187,270     57,196   130,074    53.2%

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


NASDAQ-100

There is very little change in commercial traders' positions
here and the same holds true for the small traders.


Commercials   Long      Short      Net     % of OI
12/22/03       40,277     36,452     3,825    5.0%
01/06/04       42,892     37,801     5,091    6.3%
01/13/04       41,829     38,547     3,282    4.1%
01/23/04       42,823     39,442     3,381    4.1%

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
12/22/03       22,656    14,544     8,112    21.8%
01/06/04        8,035    17,911   ( 9,876)  (38.1%)
01/13/04        9,705    12,539   ( 2,834)  (12.7%)
01/23/04        9,180    11,371   ( 2,191)  (10.7%)

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

Commercials are also hesitant to make any big changes to their
net bullish stance on the Dow.  Meanwhile small traders grow
a little more bearish.


Commercials   Long      Short      Net     % of OI
12/22/03       14,088     9,998    4,090      17.0%
01/06/04       15,697     9,497    6,200      24.6%
01/13/04       16,501     8,724    7,777      30.8%
01/23/04       16,403     9,252    7,151      27.9%

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
12/22/03        6,915     8,983  ( 2,068)   (13.0%)
01/06/04        5,713     8,105  ( 2,392)   (17.3%)
01/13/04        6,496     9,970  ( 3,474)   (21.1%)
01/23/04        6,068    10,183  ( 4,115)   (25.3%)

Most bearish reading of the year: (10,136) - 12/16/03
Most bullish reading of the year:   8,523  -  8/26/03

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


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

Rebalancing act

I read with great interest your ask the analyst column from Dec.
28, 2003 regarding the rebalancing of a portfolio.  I don't watch
the markets on a daily basis and hold a mix of mutual funds, a
few individual stocks and like to buy longer-term call options
with some of my risk capital.

I was rather shocked when I sat down and reviewed my various
accounts this past weekend (getting ready for taxes) when I saw
just how much things had changed!  For the better I might add.

Unfortunately, I think, I didn't rebalance right at the beginning
of the year, and a precious metals fund I own has given back some
gains.  Still, the way my other equity funds have done, it looks
like I was still able to offset some of recent decline in my
precious metals fund.

Will you be updating that article, or your benchmark portfolio?
I'd like to see how things have done.

I was also wondering...

It has been just about 1-month, or 1/3 of a quarter since that
December 28th Ask the Analyst column titled "Rebalancing Makes
Sense," and while the question was asked more than a week ago, I
wanted to wait at least one month to allow some time to pass
before reviewing what has taken place.

Let's quickly look at what the rebalanced portfolio looked like
on the December 26, 2003 close, and quickly review what an
investor, or even an institutional money manager may have been
doing just before the end of the year.

Beetle's Balanced Benchmark - 12/26/03 Close (Rebalanced)



As a quick review, what we were looking to do is simply bring our
various asset classes back into balance.  The #shares column with
red boxes around those asset classes reflected the partial
selling of those assets (which prior to the rebalance were then
over weighted on a Value basis) and the capital raised from
that selling, was then redistributed to the #Shares column and
asset classes with the green box.  At the far right of the
portfolio, you can see that the Values of each asset class were
just about equal, and rebalancing was complete.

Please note.  This is NOT a recommended asset allocation.  The
equal distribution of capital is used to simplify the tracking of
how each asset class is performing over time, and any impact seen
on the TOTAL VALUE of a portfolio versus one that isn't
rebalanced.

It is also important to try and understand "RISK MANAGEMENT" with
what was done when rebalancing.  What did an investor do when
they sold some of their equity positions (DIA, SPY, QQQ, $HUI.X)
which had risen 19.35% from 12/31/02 to 12/26/03, and also sold
some of their corporate bond holdings (LQD) and junk bond
holdings (PHF), and with those funds bought U.S. dollars (dx00y)
which might represent cash you hold in an emergency fund, but may
gain/lose purchasing power for foreign goods and services,
shorter-dated Treasuries (SHY), intermediate-term Treasuries
(IEF) and longer-dated Treasuries (TLT), where these Treasury
bonds are backed by the full faith a credit of the U.S.
Government?

While Treasury bonds will fluctuation in price and can have the
investor gaining/losing money after purchase, this asset class is
backed by the full faith and credit of the U.S. Government.
Corporate bond are backed by the underlying company (if the U.S.
Government goes bankrupt, chances are corporate bonds won't be
much safer, and if corporate bonds were to default, then the
company's stock would be worth little as the company would be in
bankruptcy).

Here is a comparison of the rebalanced portfolio above, and the
same portfolio shown in the December 28, 2003 Ask the Analyst
column if we had not rebalanced at all.

Comparison of Rebalancing (upper) vs. not Rebalancing (lower)



I has been 4-weeks since the article on rebalancing.  In PINK,
I've highlighted the "Total" of the rebalanced portfolio, and the
"Total" for the same portfolio if no rebalancing had taken place.
The percentage difference would show the rebalanced portfolio
having under performed the unbalanced portfolio by $11.39, or
094% (does not account for dividends or interest received and
commissions paid).

The BLUE boxes at the "Subtotal" of each asset class ($$ and
Bonds) and (Equities) would still have the "riskier" asset class
of equities as a whole outperforming $$ and bonds.

The RED boxes show those particular asset classes that have under
performed in the past 4 weeks (dollar and gold stocks), while the
GREEN boxes show those asset classes that have outperformed (junk
bonds and large cap tech-growth).

Note:  While the U.S. Dollar Index (dx00y) has declined -1.12%
since 12/26/03, the hypothetical $1,192.91 would still be a cash
balance in the account, but the 1.12% decline may be
representative of the loss of purchasing power for foreign made
goods and services, impact of inflation, etc..

As we can see, there can always be the trade off of risk
management, which incorporates the discipline of rebalancing a
portfolio from time to time, which may have the trader/investor
selling some of their winners and buying a loser.  It may also
have the investor/trader buying a winner and selling a loser.

The trader/investor that asked today's question also went on to
ask about how his longer-term call options, where risk capital
was used to buy various stocks might be classified in the scope
asset allocation.

I have some general ideas on that part of the question.

I always try to think in very generic terms, and try to think of
a stock as it might related to it representation of a major
index, or even an industry, but only in the concept of top of
mind awareness.  Or word association if you will.

When I say Intel (NASDAQ:INTC) what do you think of?

I think... large cap technology.

While Intel is a component of the Dow Industrials (DIA in the
portfolio), the S&P 500 (SPY in the portfolio) and the NASDAQ-100
(QQQ in the portfolio), I'd think of a longer-term call option as
a portion of a QQQ asset class.

When I say Merck (NYSE:MRK), which is also a Dow component and
S&P 500 Component, I tend to think MRK as more of an SPX asset
class, where the company is more focused on drug manufacturing.

Johnson & Johnson (NYSE:JNJ), which has its fingers in everything
from consumer products to drugs to healthcare equipment, I might
also think SPX asset class.  However, if I owned a call option in
MRK, then I might make the exception and say JNJ is now a Dow
representative, and count it toward my Dow asset class.

So... there's a quick update on rebalancing in what I would
consider to be a "real life" example, which we can continue to
test over time.

What are your investment friends saying these days about
valuations of stocks?

Have you heard from any of your overly pessimistic friends this
month that told you at this past year's holiday party to dump all
your technology stocks and buy gold stocks?

Has your next-door neighbor been letting his dog frequent your
front yard of late after you told him to dump everything he owned
and stuff it in his mattress?  Or has your neighbor brought you
homemade bread only because you told him to re-balance his
portfolio and he feels like he raised a little cash in his
account, and can't wait to rebalance next quarter and snap up
some bargains in the precious metals sector?

Jeff  Bailey


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

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

Symbol  Co               Date           Comment      EPS Est

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

ADPT   Adaptec, Inc.         Mon, Jan 26  After the Bell      0.04
AIN    Albany Intl           Mon, Jan 26  -----N/A-----       0.58
ALTR   Altera Corp           Mon, Jan 26  After the Bell      0.11
AXP    Amn Express Co        Mon, Jan 26  -----N/A-----       0.59
ASD    Amn Standard          Mon, Jan 26  Before the Bell     1.10
ABC    AmeriSourceBergen     Mon, Jan 26  Before the Bell     0.94
ASH    Ashland               Mon, Jan 26  Before the Bell     0.43
STD    Bnc Sntndr Cntl Hspn  Mon, Jan 26  Before the Bell      N/A
BOH    Bank of Hawaii Corp   Mon, Jan 26  Before the Bell     0.65
CSE    CAPSOURCE INC         Mon, Jan 26  After the Bell      0.22
CNF    CNF Inc.              Mon, Jan 26  After the Bell      0.49
CGNX   Cognex                Mon, Jan 26  After the Bell      0.13
CLP    Colonial Prop Trust   Mon, Jan 26  -----N/A-----       0.98
CUZ    Cousins Prop Incorp   Mon, Jan 26  After the Bell      0.57
CVD    Covance               Mon, Jan 26  After the Bell      0.32
DL     Dial                  Mon, Jan 26  Before the Bell     0.35
DOV    Dover Corp            Mon, Jan 26  After the Bell      0.39
FIC    Fair Isaac Corp       Mon, Jan 26  After the Bell      0.56
FCNCA  First Ctzns BncShrs   Mon, Jan 26  After the Bell       N/A
GGP    General Growth Prop   Mon, Jan 26  -----N/A-----       0.73
HLT    Hilton Hotels Corp    Mon, Jan 26  Before the Bell     0.11
IDXX   Idexx Laboratories    Mon, Jan 26  Before the Bell     0.40
KMB    Kimberly Clark        Mon, Jan 26  Before the Bell     0.88
LLL    L-3 Comm Hldgs        Mon, Jan 26  Before the Bell     0.92
LEA    Lear Corp.            Mon, Jan 26  Before the Bell     1.86
LXK    Lexmark Intl, Inc.    Mon, Jan 26  Before the Bell     0.92
MCD    McDonalds Corp        Mon, Jan 26  After the Bell      0.35
MIL    Millipore Corp.       Mon, Jan 26  After the Bell      0.48
NVLS   Novellus Systems, Inc Mon, Jan 26  After the Bell      0.06
PPC    Pilgrim's Pride       Mon, Jan 26  Before the Bell     0.19
SAFC   Safeco Corp.          Mon, Jan 26  Before the Bell     0.88
SGP    Schering-Plough       Mon, Jan 26  Before the Bell     0.04
SLAB   Silicon Laboratories  Mon, Jan 26  After the Bell      0.32
SYY    SYSCO Corp            Mon, Jan 26  Before the Bell     0.32
TXN    Texas Instruments     Mon, Jan 26  After the Bell      0.19
TSN    Tyson Foods           Mon, Jan 26  Before the Bell     0.26
VLI    Valero L.P.           Mon, Jan 26  Before the Bell     0.78


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

AFCI   Advanced Fibre Comm   Tue, Jan 27  After the Bell      0.09
ADVP   AdvancePCS            Tue, Jan 27  After the Bell      0.55
ATE    Advantest Corp        Tue, Jan 27  -----N/A-----        N/A
AMZN   Amazon.com, Inc.      Tue, Jan 27  After the Bell      0.29
ARB    Arbitron Inc.         Tue, Jan 27  Before the Bell     0.27
ASN    Archstone-Smith Trust Tue, Jan 27  Before the Bell     0.42
ARMHY  ARM Hldgs Plc.        Tue, Jan 27  Before the Bell     0.02
AJG    Arthur J. Gallagher   Tue, Jan 27  After the Bell      0.53
AV     Avaya                 Tue, Jan 27  After the Bell      0.05
AVY    Avery Dennison Corp   Tue, Jan 27  During the Market   0.59
AVX    AVX Corp              Tue, Jan 27  Before the Bell    -0.04
BN     Banta Corp            Tue, Jan 27  After the Bell      0.66
BZH    Beazer Homes USA Inc. Tue, Jan 27  Before the Bell     3.17
BMC    BMC Software          Tue, Jan 27  Before the Bell     0.17
BXP    Boston Prop           Tue, Jan 27  After the Bell      1.00
BRCM   Broadcom              Tue, Jan 27  After the Bell      0.16
BNI    Brlngtn No Snt Fe Crp Tue, Jan 27  Before the Bell     0.57
CCJ    Cameco                Tue, Jan 27  -----N/A-----        N/A
CP     Can Pacific Railway   Tue, Jan 27  Before the Bell     0.59
CAT    Caterpillar Inc.      Tue, Jan 27  Before the Bell     0.94
CTC    Co de Telede Chile S.ATue, Jan 27  After the Bell      0.05
CFC    Countrywide Finl Corp Tue, Jan 27  Before the Bell     2.71
CSX    CSX                   Tue, Jan 27  Before the Bell     0.60
CMI    Cummins Inc.          Tue, Jan 27  Before the Bell     0.97
CYMI   Cymer, Inc.           Tue, Jan 27  After the Bell      0.00
XRAY   DENTSPLY Intl Inc.    Tue, Jan 27  After the Bell      0.59
DJ     Dow Jones & Co Inc.   Tue, Jan 27  Before the Bell     0.41
DST    DST Systems           Tue, Jan 27  After the Bell      0.46
DD     DuPont                Tue, Jan 27  Before the Bell     0.25
ELNK   EarthLink             Tue, Jan 27  Before the Bell     0.09
ERTS   Electronic Arts       Tue, Jan 27  After the Bell      1.20
EFII   Elec for Imaging      Tue, Jan 27  After the Bell      0.25
EOC    Empresa Nacl Elect SA Tue, Jan 27  -----N/A-----       0.09
ELX    Emulex                Tue, Jan 27  After the Bell      0.22
ENB    Enbridge Inc.         Tue, Jan 27  After the Bell       N/A
EN     Enel S.p.A.           Tue, Jan 27  -----N/A-----        N/A
ESA    Extended Stay Am, Inc Tue, Jan 27  After the Bell      0.01
FISV   Fiserv                Tue, Jan 27  After the Bell      0.42
FLEX   Flextronics           Tue, Jan 27  After the Bell      0.14
GNTX   Gentex                Tue, Jan 27  Before the Bell     0.35
HMY    Harmony Gold Mining   Tue, Jan 27  Before the Bell     0.00
HRS    Harris                Tue, Jan 27  After the Bell      0.49
HCP    Health Care Property  Tue, Jan 27  Before the Bell     0.92
IMN    Imation Corp.         Tue, Jan 27  Before the Bell     0.50
IMO    Imperial Oil Limited  Tue, Jan 27  -----N/A-----        N/A
IR     Ingersoll-Rand Co Ltd Tue, Jan 27  Before the Bell     1.05
KFT    Kraft Foods           Tue, Jan 27  After the Bell      0.50
KYPH   Kyphon, Inc.          Tue, Jan 27  After the Bell      0.07
LMT    Lockheed Martin       Tue, Jan 27  Before the Bell     0.76
MRO    Marathon Oil Corp     Tue, Jan 27  Before the Bell     0.68
WFR    MEMC Elect Materials  Tue, Jan 27  -----N/A-----       0.13
MNT    Mentor                Tue, Jan 27  After the Bell      0.27
MENT   Mentor Graphics       Tue, Jan 27  -----N/A-----       0.31
MRK    Merck & Co., Inc.     Tue, Jan 27  Before the Bell     0.62
MDP    Meredith Corp         Tue, Jan 27  Before the Bell     0.37
MLNM   Millennium Pharm      Tue, Jan 27  After the Bell     -0.31
NCR    NCR Corp              Tue, Jan 27  Before the Bell     0.80
NNDS   NDS Grp PLC           Tue, Jan 27  Before the Bell     N/A
OI     Owens Illinois        Tue, Jan 27  After the Bell      0.17
PTNR   Partner Comm          Tue, Jan 27  Before the Bell      N/A
PBG    Pepsi Bottling Grp    Tue, Jan 27  Before the Bell     0.28
PMI    PMI Grp               Tue, Jan 27  Before the Bell     0.81
PPP    Pogo Producing        Tue, Jan 27  Before the Bell     0.89
PEG    PSEG                  Tue, Jan 27  Before the Bell     0.68
DGX    Quest Diagnostics     Tue, Jan 27  Before the Bell     0.99
RJR    R.J. Reynolds Tobacco Tue, Jan 27  Before the Bell     1.06
RTN    Raytheon              Tue, Jan 27  Before the Bell     0.52
RHI    Robert Half Intl      Tue, Jan 27  After the Bell      0.03
ROK    Rockwell Automation   Tue, Jan 27  Before the Bell     0.27
COL    Rockwell Collins, Inc Tue, Jan 27  Before the Bell     0.32
SBC    SBC Communications    Tue, Jan 27  Before the Bell     0.34
SSD    Simpson Manufacturing Tue, Jan 27  After the Bell      0.52
SLG    SL Green Realty       Tue, Jan 27  After the Bell      0.88
SSCC   Smurfit-Stone Cntnr   Tue, Jan 27  Before the Bell    -0.08
TSFG   South Finl Grp Inc    Tue, Jan 27  Before the Bell     0.45
SUSQ   Susquehanna Bncshrs   Tue, Jan 27  -----N/A-----       0.37
SWFT   Swift Transportation  Tue, Jan 27  After the Bell      0.31
SY     Sybase                Tue, Jan 27  Before the Bell     0.31
SYD    Sybron Dntl Spcl      Tue, Jan 27  Before the Bell     0.28
TECH   Techne                Tue, Jan 27  Before the Bell     0.29
MHP    The McGraw-Hill Co    Tue, Jan 27  Before the Bell     0.75
NYT    The New York Times Co Tue, Jan 27  Before the Bell     0.70
SMG    The Scotts Co         Tue, Jan 27  Before the Bell    -1.45
TRP    TransCanada Corp      Tue, Jan 27  -----N/A-----        N/A
UDI    United Defense Ind    Tue, Jan 27  Before the Bell     0.50
VLO    Valero Energy Corp.   Tue, Jan 27  Before the Bell     0.97
EYE    VISX Inc.             Tue, Jan 27  After the Bell      0.14
XRX    Xerox Corp            Tue, Jan 27  Before the Bell     0.15
ZION   Zions Banc            Tue, Jan 27  After the Bell      1.07


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

ABY    Abitibi-Consolidated  Wed, Jan 28  Before the Bell      N/A
ATVI   Activision            Wed, Jan 28  After the Bell      0.66
AMG    Affiliated Mngrs Grp  Wed, Jan 28  -----N/A-----       1.29
AFFX   Affymetrix            Wed, Jan 28  After the Bell      0.23
ATG    AGL Resources         Wed, Jan 28  -----N/A-----       0.44
ARG    Airgas                Wed, Jan 28  After the Bell      0.26
AGN    Allergan              Wed, Jan 28  -----N/A-----       0.67
ADS    Alliance Data Sys CorpWed, Jan 28  -----N/A-----       0.24
MO     Altria Grp, Inc.      Wed, Jan 28  During the Market   1.06
AWC    ALUMINA LTD           Wed, Jan 28  -----N/A-----       0.29
ABK    Ambac Finl Grp        Wed, Jan 28  Before the Bell     1.39
AHC    Amerada Hess          Wed, Jan 28  Before the Bell     0.98
AME    AMETEK Inc.           Wed, Jan 28  Before the Bell     0.71
AMKR   Amkor Technology, Inc Wed, Jan 28  After the Bell      0.10
ABI    Applied Biosystems    Wed, Jan 28  Before the Bell     0.23
ACI    ARCH COAL INC         Wed, Jan 28  Before the Bell     0.10
ARM    ArvinMeritor, Inc.    Wed, Jan 28  Before the Bell     0.30
ASKJ   Ask Jeeves            Wed, Jan 28  After the Bell      0.11
ACLS   Axcelis Technologies  Wed, Jan 28  After the Bell      0.02
BCR    C.R. Bard, Inc.       Wed, Jan 28  After the Bell      1.01
CDN    Cadence Design SystemsWed, Jan 28  After the Bell      0.23
CNI    Canadian Natl Railway Wed, Jan 28  -----N/A-----       1.10
CRA    Celera Genomics       Wed, Jan 28  Before the Bell    -0.30
CEY    Certegy               Wed, Jan 28  Before the Bell     0.49
CHIR   Chiron                Wed, Jan 28  After the Bell      0.29
CNXT   Conexant Systems Inc. Wed, Jan 28  After the Bell      0.04
COP    ConocoPhillips        Wed, Jan 28  Before the Bell     1.43
CNX    CONSOL Energy         Wed, Jan 28  Before the Bell    -0.17
CAM    Cooper Cameron        Wed, Jan 28  Before the Bell     0.52
COCO   Corinthian Colleges   Wed, Jan 28  -----N/A-----       0.45
CFR    Cullen/Frost Bankers  Wed, Jan 28  Before the Bell     0.61
CYTC   Cytyc Corp            Wed, Jan 28  After the Bell      0.17
DBD    Diebold               Wed, Jan 28  Before the Bell     0.80
DTC    Domtar Inc.           Wed, Jan 28  -----N/A-----        N/A
DCLK   DoubleClick           Wed, Jan 28  After the Bell      0.02
DRE    Duke Realty Corp      Wed, Jan 28  After the Bell      0.65
EGN    Energen               Wed, Jan 28  After the Bell      0.61
ENI    Enersis SA ADS        Wed, Jan 28  -----N/A-----       0.06
ESV    ENSCO Intl            Wed, Jan 28  Before the Bell     0.17
EXC    Exelon Corp           Wed, Jan 28  -----N/A-----       1.08
FHR    Farmnt Hot Resrt Inc. Wed, Jan 28  -----N/A-----      -0.08
FNF    Fidelity Natl Finl    Wed, Jan 28  Before the Bell     1.28
FMD    First Marblehead      Wed, Jan 28  Before the Bell     0.56
FDRY   Foundry Networks      Wed, Jan 28  -----N/A-----       0.16
FBN    Furniture Brands      Wed, Jan 28  After the Bell      0.40
GGB    Gerdau S.A.           Wed, Jan 28  -----N/A-----       0.96
GSF    GlobalSantaFe Corp.   Wed, Jan 28  Before the Bell     0.07
HAR    Harman Intl Ind       Wed, Jan 28  -----N/A-----       0.55
HIG    Hartford Finl Serv    Wed, Jan 28  After the Bell      1.46
HSY    Hershey Foods Corp    Wed, Jan 28  Before the Bell     1.14
INGR   Intergraph            Wed, Jan 28  After the Bell      0.08
IFF    Intl Flav Fragrances  Wed, Jan 28  Before the Bell     0.46
ISIL   Intersil Corp         Wed, Jan 28  After the Bell      0.18
JDSU   JDS Uniphase Corp     Wed, Jan 28  After the Bell     -0.02
KMT    Kennametal Inc.       Wed, Jan 28  Before the Bell     0.31
KMG    Kerr-McGee            Wed, Jan 28  Before the Bell     0.83
LSTR   Landstar System       Wed, Jan 28  Before the Bell     0.47
LEG    Leggett & Platt       Wed, Jan 28  After the Bell      0.23
LSI    LSI Logic             Wed, Jan 28  After the Bell      0.04
MKC    McCormick & Co, Inc.  Wed, Jan 28  Before the Bell     0.61
MEG    Media General         Wed, Jan 28  Before the Bell     0.96
MRBK   Mercantile Bankshares Wed, Jan 28  Before the Bell     0.68
MEOH   Methanex              Wed, Jan 28  -----N/A-----       0.22
MGG    MGM MIRAGE            Wed, Jan 28  Before the Bell     0.29
NJR    New Jersey Resources  Wed, Jan 28  Before the Bell     0.87
NYB    New York Comm Banc    Wed, Jan 28  Before the Bell     0.57
NSC    Norfolk Southern Corp Wed, Jan 28  Before the Bell     0.37
NCX    NOVA Chemicals        Wed, Jan 28  Before the Bell    -0.28
NFI    Novastar Finl         Wed, Jan 28  After the Bell       N/A
OGE    OGE Energy            Wed, Jan 28  Before the Bell    -0.08
PKI    PerkinElmer           Wed, Jan 28  After the Bell      0.22
PLCM   Polycom Incorp        Wed, Jan 28  -----N/A-----       0.15
PX     Praxair Inc           Wed, Jan 28  Before the Bell     0.47
PG     Procter & Gamble Co   Wed, Jan 28  Before the Bell     1.28
PHM    Pulte Homes Inc.      Wed, Jan 28  After the Bell      1.88
QSFT   Quest Software Inc.   Wed, Jan 28  After the Bell      0.09
RYN    Rayonier Inc.         Wed, Jan 28  After the Bell      0.07
RDA    READERS DIGEST ASSN   Wed, Jan 28  Before the Bell     0.80
RBK    Reebok                Wed, Jan 28  Before the Bell     0.41
REG    REGENCY CTRS CORP     Wed, Jan 28  After the Bell      0.90
SEE    Sealed Air            Wed, Jan 28  -----N/A-----       0.72
SIRI   Sirius Satellite RadioWed, Jan 28  -----N/A-----      -0.11
SON    Sonoco Products       Wed, Jan 28  Before the Bell     0.31
SNE    Sony Corp             Wed, Jan 28  Before the Bell      N/A
STTS   ST Assembly Test Serv Wed, Jan 28  After the Bell     -0.01
STJ    St. Jude Medical, Inc Wed, Jan 28  Before the Bell     0.47
STM    STMicroelectronics    Wed, Jan 28  After the Bell      0.16
TWX    Time Warner Inc.      Wed, Jan 28  Before the Bell     0.15
TRB    Tribune               Wed, Jan 28  Before the Bell     0.64
TUP    Tupperware            Wed, Jan 28  Before the Bell     0.49
UGI    UGI                   Wed, Jan 28  Before the Bell     0.84
VAR    Varian Medical Sys    Wed, Jan 28  After the Bell      0.37
VARI   Varian, Inc.          Wed, Jan 28  -----N/A-----       0.40
VVC    Vectren Corp          Wed, Jan 28  After the Bell      0.58
VRTS   VERITAS Software Corp Wed, Jan 28  After the Bell      0.24
WLP    WellPoint Hlth Ntwrk  Wed, Jan 28  After the Bell      1.71
WGL    WGL Hldgs             Wed, Jan 28  After the Bell      0.80
WWY    Wm. Wrigley Jr. Co.   Wed, Jan 28  -----N/A-----       0.53
XEL    Xcel Energy           Wed, Jan 28  Before the Bell     0.27


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

SE     7-Eleven              Thu, Jan 29  Before the Bell     0.05
ALB    Albemarle Corp        Thu, Jan 29  -----N/A-----       0.38
ALGN   Align Technology      Thu, Jan 29  Before the Bell     0.04
AC     Alliance Cap Mgmt HldgThu, Jan 29  After the Bell      0.61
AFC    Allmerica Finl        Thu, Jan 29  After the Bell      0.28
ATH    Anthem, Inc.          Thu, Jan 29  Before the Bell     1.38
APA    Apache Corp           Thu, Jan 29  Before the Bell     0.84
ASCL   Ascential Software    Thu, Jan 29  After the Bell      0.08
AZN    AstraZeneca PLC       Thu, Jan 29  Before the Bell     0.40
AVID   Avid Technology, Inc. Thu, Jan 29  After the Bell      0.46
AVT    Avnet                 Thu, Jan 29  After the Bell      0.18
BLL    Ball Corp             Thu, Jan 29  Before the Bell     0.71
BOL    Bausch & Lomb         Thu, Jan 29  Before the Bell     0.79
BAX    BAXTER INTL INC       Thu, Jan 29  Before the Bell     0.61
BDX    Becton, Dickinson     Thu, Jan 29  Before the Bell     0.47
BDK    Black & Decker Corp   Thu, Jan 29  Before the Bell     1.27
BOW    Bowater Incorp        Thu, Jan 29  Before the Bell    -0.76
BMY    Bristol-Myers Squibb  Thu, Jan 29  -----N/A-----       0.39
BC     Brunswick Corp        Thu, Jan 29  Before the Bell     0.39
CZR    Caesars Entertainment Thu, Jan 29  -----N/A-----       0.05
CAJ    Canon                 Thu, Jan 29  Before the Bell      N/A
CLS    Celestica             Thu, Jan 29  After the Bell     -0.04
CELG   Celgene Corp.         Thu, Jan 29  Before the Bell     0.06
CHRT   Chartered Semi Manu   Thu, Jan 29  After the Bell     -0.16
CNET   CNET Networks         Thu, Jan 29  After the Bell      0.02
CCE    Coca-Cola Enterprises Thu, Jan 29  Before the Bell     0.13
COLM   Columbia Sportswear   Thu, Jan 29  -----N/A-----       0.77
CFB    Commercial Federal    Thu, Jan 29  Before the Bell     0.50
CPO    Corn Products Intl    Thu, Jan 29  Before the Bell     0.54
COT    Cott Corp             Thu, Jan 29  Before the Bell     0.21
DHR    Danaher               Thu, Jan 29  Before the Bell     0.95
DLX    Deluxe Corp           Thu, Jan 29  Before the Bell     0.82
DO     Diamnd Offshre Drllng Thu, Jan 29  Before the Bell    -0.03
DUK    Duke Energy Corp      Thu, Jan 29  Before the Bell     0.13
DQE    Duquesne Light Hldgs  Thu, Jan 29  After the Bell      0.18
DYN    Dynegy Inc.           Thu, Jan 29  Before the Bell    -0.15
EMN    Eastman Chemical Co   Thu, Jan 29  After the Bell      0.02
LLY    Eli Lilly             Thu, Jan 29  Before the Bell     0.67
XOM    ExxonMobil Corp       Thu, Jan 29  -----N/A-----       0.58
FTI    Fmc Technologies, Inc Thu, Jan 29  After the Bell      0.36
GTW    Gateway, Inc.         Thu, Jan 29  After the Bell     -0.15
GILD   Gilead Sciences       Thu, Jan 29  After the Bell      0.42
GSPN   GlobespanVirata, Inc. Thu, Jan 29  -----N/A-----       0.06
GFI    Gold Fields Limited   Thu, Jan 29  -----N/A-----       0.08
GLK    Great Lakes Chemical  Thu, Jan 29  -----N/A-----       0.05
GDT    Guidant               Thu, Jan 29  Before the Bell     0.58
HAL    Halliburton Co        Thu, Jan 29  Before the Bell     0.32
HSC    Harsco Corp           Thu, Jan 29  Before the Bell     0.57
HHS    Harte-Hanks           Thu, Jan 29  Before the Bell     0.28
HR     Healthcare Realty TrstThu, Jan 29  After the Bell      0.69
HON    Honeywell             Thu, Jan 29  Before the Bell     0.47
HON    Honeywell             Thu, Jan 29  Before the Bell     0.47
IKN    Ikon Office Solutions Thu, Jan 29  Before the Bell     0.19
ITW    Illinois Tool Works   Thu, Jan 29  Before the Bell     0.91
IGL    IMC Global            Thu, Jan 29  Before the Bell    -0.17
NDE    IndyMac Banc, Inc.    Thu, Jan 29  Before the Bell     0.76
IRF    Intl Rectifier        Thu, Jan 29  After the Bell      0.34
JBLU   JetBlue Airways       Thu, Jan 29  Before the Bell     0.17
K      Kellogg Co.           Thu, Jan 29  Before the Bell     0.46
KRON   Kronos Incorp         Thu, Jan 29  After the Bell      0.23
LANC   Lancaster Colony Corp Thu, Jan 29  Before the Bell     0.75
LEXR   Lexar Media           Thu, Jan 29  After the Bell      0.16
LYO    Lyondell Petrochem Co Thu, Jan 29  Before the Bell    -0.42
MMP    Mglln Mdstrm Part L.P.Thu, Jan 29  Before the Bell     0.72
MAN    Manpower              Thu, Jan 29  Before the Bell     0.53
MKL    MARKEL CORP           Thu, Jan 29  -----N/A-----       4.14
MEE    Massey Energy Co      Thu, Jan 29  After the Bell     -0.19
MYG    Maytag                Thu, Jan 29  Before the Bell     0.52
MWV    MeadWestvaco          Thu, Jan 29  Before the Bell     0.05
MEDI   MedImmune             Thu, Jan 29  Before the Bell     0.33
MCRL   Micrel Semi           Thu, Jan 29  After the Bell      0.03
MYL    Mylan Laboratories    Thu, Jan 29  Before the Bell     0.28
NFG    Natl Fuel Gas Co      Thu, Jan 29  After the Bell      0.51
NIPNY  NEC (ADR)             Thu, Jan 29  -----N/A-----        N/A
NWL    Newell Rubbermaid     Thu, Jan 29  Before the Bell     0.38
NMR    Nomura Hldgs, Inc.    Thu, Jan 29  -----N/A-----        N/A
NT     Nortel Networks       Thu, Jan 29  -----N/A-----       0.02
NBP    Northern Border Part  Thu, Jan 29  After the Bell      0.63
NUE    Nucor                 Thu, Jan 29  Before the Bell     0.15
ORI    Old Republic Intl     Thu, Jan 29  -----N/A-----       0.63
OLN    Olin                  Thu, Jan 29  After the Bell     -0.04
PCBC   Pacific Cap Banc      Thu, Jan 29  Before the Bell     0.38
PTEN   Patterson-UTI Energy  Thu, Jan 29  -----N/A-----       0.24
BTU    Peabody Energy Corp.  Thu, Jan 29  Before the Bell     0.36
PSFT   PeopleSoft            Thu, Jan 29  After the Bell      0.20
PCZ    Petro-Canada          Thu, Jan 29  -----N/A-----       1.06
PD     Phelps Dodge          Thu, Jan 29  Before the Bell     0.70
PNW    Pinnacle West Cap CorpThu, Jan 29  -----N/A-----       0.53
PII    Polaris Ind Inc.      Thu, Jan 29  Before the Bell     1.66
PWER   Power-One             Thu, Jan 29  During the Market  -0.06
PCO    Premcor Inc.          Thu, Jan 29  Before the Bell     0.21
RNWK   RealNetworks          Thu, Jan 29  After the Bell     -0.03
RGA    Rensrnc Grp of Am, IncThu, Jan 29  After the Bell      0.84
RCL    Ryl Crbbn Cruises Ltd Thu, Jan 29  -----N/A-----      -0.07
RSAS   RSA Security          Thu, Jan 29  After the Bell      0.10
S      Sears, Roebuck and Co Thu, Jan 29  -----N/A-----       2.02
SEIC   SEI Investments       Thu, Jan 29  Before the Bell     0.33
SO     Southern Co           Thu, Jan 29  Before the Bell     0.17
SFG    StanCorp Finl Grp Inc Thu, Jan 29  Before the Bell     1.28
STN    Station Casinos       Thu, Jan 29  Before the Bell     0.40
SYK    Stryker               Thu, Jan 29  After the Bell      0.66
SLF    Sun Life Finl Inc.    Thu, Jan 29  -----N/A-----       0.51
SU     Suncor Energy         Thu, Jan 29  Before the Bell     0.44
TDK    TDK                   Thu, Jan 29  -----N/A-----        N/A
TKLC   Tekelec               Thu, Jan 29  After the Bell      0.10
TNE    Tele No Leste PartS.A Thu, Jan 29  Before the Bell     0.16
TXT    Textron Inc.          Thu, Jan 29  Before the Bell     0.87
BA     The Boeing Co         Thu, Jan 29  Before the Bell     0.46
DOW    The Dow Chemical Co   Thu, Jan 29  Before the Bell     0.29
EL     The Estie Lauder Co   Thu, Jan 29  Before the Bell     0.48
G      The Gillette Co       Thu, Jan 29  Before the Bell     0.35
MNI    The McClatchy Co      Thu, Jan 29  Before the Bell     0.92
SPC    The St. Paul Co Inc.  Thu, Jan 29  Before the Bell     1.03
SWK    The Stanley Works     Thu, Jan 29  Before the Bell     0.70
WPO    The Washington Post CoThu, Jan 29  -----N/A-----       7.55
TAC    TRANSALTA CORP        Thu, Jan 29  Before the Bell      N/A
TSM    TSMC                  Thu, Jan 29  -----N/A-----       0.11
TLRK   Tularik Inc.          Thu, Jan 29  Before the Bell    -0.45
UMBF   UMB Finl              Thu, Jan 29  -----N/A-----       0.64
UPS    UNITED PARCEL SERVICE Thu, Jan 29  Before the Bell     0.69
USTR   United Stationers Inc Thu, Jan 29  After the Bell      0.63
UPM    UPM-Kymmene Grp       Thu, Jan 29  Before the Bell     0.17
USFC   USFreightways Corp.   Thu, Jan 29  After the Bell      0.49
VSEA   Vrn Semi Eqpmnt Assoc Thu, Jan 29  After the Bell      0.10
VRSN   VeriSign, Inc.        Thu, Jan 29  After the Bell      0.13
VZ     Verizon               Thu, Jan 29  Before the Bell     0.56
VVI    Viad Corp             Thu, Jan 29  -----N/A-----       0.22
WPL    W.P. Stewart & Co     Thu, Jan 29  Before the Bell     0.28
WDR    Waddell & Reed Finl,  Thu, Jan 29  Before the Bell     0.32
WAT    Waters Corp           Thu, Jan 29  Before the Bell     0.47
WPS    WPS Resources         Thu, Jan 29  After the Bell      0.70
YELL   Yellow Roadway Corp   Thu, Jan 29  After the Bell      0.78


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

ALE    Allete                Fri, Jan 30  Before the Bell     0.37
LNT    Alliant Energy        Fri, Jan 30  Before the Bell     0.53
APC    Anadarko Petroleum    Fri, Jan 30  Before the Bell     1.17
AU     Anglogold Limited     Fri, Jan 30  Before the Bell     0.32
ADM    Archer Daniels MidlandFri, Jan 30  Before the Bell     0.26
BEC    Beckman Coulter       Fri, Jan 30  Before the Bell     0.90
CVX    ChevronTexaco         Fri, Jan 30  Before the Bell     1.58
CEG    Cnstlltn Energy Grp   Fri, Jan 30  Before the Bell     0.60
EQT    Equitable Resources   Fri, Jan 30  Before the Bell     0.78
FUJIY  Fuji Photo Film       Fri, Jan 30  -----N/A-----        N/A
GMT    GATX Corp             Fri, Jan 30  Before the Bell     0.31
HEW    Hewitt Assoc          Fri, Jan 30  Before the Bell     0.30
KYO    Kyocera Corp          Fri, Jan 30  -----N/A-----        N/A
MXICY  Macronix Intl         Fri, Jan 30  -----N/A-----        N/A
HCR    Manor Care Inc        Fri, Jan 30  Before the Bell     0.42
NBR    Nabors Ind            Fri, Jan 30  Before the Bell     0.42
NHP    Nationwide Hlth Prop  Fri, Jan 30  Before the Bell     0.41
NI     NiSource              Fri, Jan 30  Before the Bell     0.56
OCENY  Oci N.V.              Fri, Jan 30  -----N/A-----        N/A
PIO    Pioneer Corp          Fri, Jan 30  -----N/A-----        N/A
SII    Smith Intl, Inc.      Fri, Jan 30  Before the Bell     0.39
TROW   T. Rowe Price         Fri, Jan 30  -----N/A-----       0.52
X      United States Steel   Fri, Jan 30  -----N/A-----      -0.31
WFT    Weatherford Intl      Fri, Jan 30  Before the Bell     0.35
WEN    Wendy's Intl          Fri, Jan 30  -----N/A-----       0.54
WIN    Winn-Dixie Stores     Fri, Jan 30  Before the Bell     0.09


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

Symbol  Co Name              Ratio    Payable     Executable

MRX     Medicis Pharmaceutical    3:2      Jan  23rd   Jan  26th
THO     Thor Ind Inc              2:1      Jan  26th   Jan  27th
CHDX    Chindex Intl Inc          2:1      Jan  26th   Jan  27th
MSA     Mine Safety Appliances Co 3:1      Jan  28th   Jan  29th
YAJC    YAK Communications, Inc   2:1      Jan  29th   Jan  30th
HOFT    Hooker Furniture Corp, Inc2:1      Jan  30th   Feb   2nd
RMCF    Rocky Mountain Chocolate  N/A      Feb   1st   Feb   2nd
PROV    Provident Financial Hldgs 3:2      Feb   2nd   Feb   3rd
PCAR    Paccar Inc                3:2      Feb   5th   Feb   6th
JST     Jinpan Intl Limited       2:1      Feb   6th   Feb   9th


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

This coming week is all about earnings as the downpour becomes
a monsoon of announcements.  Wall Street will also have to digest
a two-day FOMC meeting and a handful of economic reports.


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

----------------
Monday, 01/26/04
----------------
Existing Home Sales (DM)   Dec  Forecast:   6.10M  Previous:    6.06M


-----------------
Tuesday, 01/27/04
-----------------
Consumer Confidence (DM)   Jan  Forecast:    95.1  Previous:     91.3


-------------------
Wednesday, 01/28/04
-------------------
Durable Orders (BB)        Dec  Forecast:    2.0%  Previous:    -2.5%
New Home Sales (DM)        Dec  Forecast:   1100K  Previous:    1082K
FOMC Meeting (DM)


------------------
Thursday, 01/29/04
------------------
Initial Claims (BB)      01/23  Forecast:     N/A  Previous:     341K
Employment Cost Index (BB)  Q4  Forecast:    0.9%  Previous:     1.0%
Help Wanted Index (DM)     Dec  Forecast:      40  Previous:       39


----------------
Friday, 01/30/04
----------------
GDP-Adv. (BB)               Q4  Forecast:    4.7%  Previous:     8.2%
Chain Deflator-Adv. (BB)    Q4  Forecast:    1.3%  Previous:     1.6%
Mich Sentiment-Rev. (DM)   Jan  Forecast:   102.5  Previous:    103.2
Chicago PMI (DM)           Jan  Forecast:    61.7  Previous:     59.2


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


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**********

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The Option Investor Newsletter                   Sunday 01-25-2004
Sunday                                                      2 of 5


In Section Two:

Watch List: Watch Those Rallies
Dropped Calls: DGX
Dropped Puts: None


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

Watch Those Rallies
___________________________________________________________________

How to use this watch list:
  Readers can use the candidates below as a springboard for their
  own research.  Many are in the process of breaking support or
  resistance or in the process of starting new trends or
  extending old ones.  With your own due diligence these could be
  strong potential plays.
___________________________________________________________________


Intl Business Machines - IBM - close: 97.90 change: +0.39

WHAT TO WATCH:  IBM has been a big performer after its very
positive earnings announcement two weeks ago.  The challenge now
is that shares are looking pretty overbought from its lows near
$89 on January 13th.  We would look for the $100 level to offer
short-term resistance.  It's the perfect place for traders to do
some profit taking and then we can gauge a potential new entry
point on a pull back to the $95-97 range.

Chart=


---

Factset Research - FDS - close: 38.18 change: +1.45

WHAT TO WATCH:  FDS appears to be rallying on news that the
company purchased 2 million shares from its co-founder.
Unfortunately for shareholder this strength was met with selling
as FDS approached its 40-dma.  The chart suggest this is the
upper trendline of lower highs and Friday's failed rally looks
like an entry point for shorts to target a move to support at
$35.

Chart=


---

Deluxe Corp - DLX - close: 42.47 change: +1.25

WHAT TO WATCH:  We couldn't find any news to explain the 3% jump
on Friday but the stock looks ready to try and breakout above its
simple 200-dma again.  Both its daily and weekly chart suggest
that DLX has found a new bottom and the trend of higher lows from
November might finally produce a move we can trade.  There is
some resistance at $44 but bulls can look for some pre-earnings
momentum next week.  DLX is due to report on Jan. 29th.

Chart=


---

Infosys Technologies - INFY - close: 93.85 change: +3.02

WHAT TO WATCH:  The bounce on Friday might be an entry point for
short-term traders to scalp a run towards $100 again.  INFY had
hit the $101 level in early January and then slowly faded back
towards its simple 50-dma, where traders bought the dips in
November and December.  This technical support held again this
week and the stock popped 3.3% on Friday.

Chart=



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


BWA $97.70 -0.01 - Shares of BWA have been in a non-stop rally
since January 2nd.  Traders appear dead-set on hitting the $100
mark.  We would expect some profit taking once shares reach this
psychological round number.

NEM $42.25 -0.55 - The price movement in NEM continues to suggest
more weakness is in store.  The oversold bounce rolled over at
resistance near $45.

HAR $77.40 -1.21 - HAR appears to be struggling with resistance
at $80.  Bullish traders might look for support in the 75 range
or near its 40-dma near 73.00.  Watch for earnings on Jan. 28th.


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**************************
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
^^^^^

Quest Diagnostic - DGX - close: 77.90 chg: -0.52 stop: 76.60

We're going to take our own advice and exit DGX above the $77.50
level.  Shares have been exceptionally strong, especially this
week as the major averages churned sideways to down.  We're
encouraged by its mild dip on Friday but with earnings approaching
on Tuesday morning we don't feel like tempting fate.  More
aggressive traders might want to keep the play open  through
Monday but we would not hold over the Tuesday, pre-market earnings
report.  Post-earnings we might look for a dip and bounce above
the $75 level.

Picked on December 30 at $72.95
Change since picked:     + 4.95
Earnings Date          01/27/03 (confirmed)
Average Daily Volume:      836  thousand
Chart =



PUTS
^^^^

None


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

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

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

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 01-25-2004
Sunday                                                      3 of 5


In Section Three:

Current Calls: AMZN, APOL, ESRX, GENZ, HSIC, MBI, MWD, MXIM, STJ
New Calls: CSC
Current Put Plays: ADBE, QLGC
New Puts: None


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

Amazon.com - AMZN - close: 57.11 chg: -0.07 stop: 55.00*new*

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
apparel and accessories, sporting goods, gourmet food,
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:
This is it.  We've got two more trading days left for AMZN to
make a move before its Tuesday earnings report due out after the
closing bell.  Right now the plan is to exit at the close on
Tuesday.  If the market is done with its extremely mild
consolidation then AMZN might just yet offer a pre-earnings ramp
up, much like YHOO did two weeks ago.  However, because we are
almost out of time we would not suggest new bullish positions.
Plus, we would not recommend holding over the earnings report
despite expectations for strong numbers due to the surge in
online sales this holiday season.  As a matter of fact we're
going to raise our stop loss to breakeven at $55.00 (almost
breakeven).

Suggested Options:
Due to the short amount of time left in this play we are not
suggesting any new bullish positions.

Annotated chart:



Picked on January 14 at $55.01
Change since picked:    + 2.10
Earnings Date         01/27/04 (confirmed)
Average Daily Volume:       10 million
Chart =


---

Apollo Group - APOL - close: 72.56 change: -0.22 stop: 71.00

Company Description:
The Apollo Group provides higher education to working adults.
The company operates through its subsidiaries, The University of
Phoenix, Inc., Institute for Professional Development, The
College for Financial Planning Institutes Corporation and Western
International University, Inc.  APOL offers its programs and
services at 58 campuses and 102 learning centers in 36 states,
Puerto Rico, and Vancouver, British Columbia.

Why we like it:
After a very nice breakout over $72.50 and rally up to the $75
level, shares of APOL have pulled back in a perfect "return to
the scene of the crime".  Lacking the buying interest to propel
the stock higher last week, APOL was due for a bit of retracement
and it looks like we're going to find out just how strong support
now is at the former resistance in the $72.00-72.50 area.  With
the past two days closing under the 10-dma ($73.18), we now have
to acknowledge the possibility of a dip to the 20-dma ($71.40)
before being rewarded with the rebound we expect.  In light of
the volume last week that remained below the ADV, this pullback
has the look of simple profit taking, meaning that we can expect
to see that rebound from support.  The cleanest entries will come
from above $72, while more aggressive traders could target shoot
entries down to the 20-dma.  Below there, we'd stand aside
though, as we'll be getting awfully close to our $71 stop.

Suggested Options:
Shorter Term: The February $75 Call will offer short-term traders
the best return on an immediate move, as it is just slightly out
of the money.  Short term traders with a less aggressive stance
will want to use the ITM February $70 call.

Longer Term: Aggressive longer-term traders can use the March $75
Call, while the more conservative approach will be to use the May
$75 strike.  Our preferred option is the March $75 strike, which
is just slightly out of the money and should provide sufficient
time for the play to move in our favor.

BUY CALL FEB-70 OAQ-BN OI=4538 at $4.00 SL=2.50
BUY CALL FEB-75 OAQ-BO OI=1291 at $1.20 SL=0.60
BUY CALL MAR-75*OAQ-CO OI=   9 at $2.30 SL=1.25
BUY CALL MAY-75 OAQ-EO OI=1564 at $4.00 SL=2.50

Annotated Chart of APOL:



Picked on January 13th at    $72.63
Change since picked:          -0.07
Earnings Date               3/18/04 (unconfirmed)
Average Daily Volume =     1.86 mln
Chart =


---

Express Scripts - ESRX - close: 68.05 change: -0.77 stop: 64.00

Company Description:
Express Scripts provides health care management and
administration services on behalf of clients that include health
maintenance organizations, health insurers, third-party
administrators, employers and union-sponsored benefit plans.  The
company's fully integrated pharmacy benefit management services
include network claims processing, mail pharmacy services,
benefit design consultation, drug utilization review, formulary
management, disease management, medical information management
services and informed decision counseling services through its
Express Health Line division.

Why we like it:
Proving that our initial assessment was correct, ESRX seems to
have exhausted its supply of eager buyers at this level and is
finally beginning that pullback to support.  Recall that we
eschewed momentum entries on the play from the beginning,
preferring to wait for a pullback near the $66 support level.
After a couple of attempts at pushing through the $69 level last
week, Friday's bearish engulfing candle points to a pullback and
with daily oscillators about to tip over in bearish alignment,
that development seems all the more likely.  The 20-dma ($66.18)
has now risen into our targeted entry zone at $66.00-66.50 and
that level should now prove to be strong support.  ESRX should
continue its pattern of higher lows and higher highs after coming
back to confirm that support and our target for the next upward
swing in the $72 area still seems reasonable.  With earnings near
the end of February, there's plenty of time for that next rally
leg to materialize.  Maintain stops at $64, which is now solidly
below the 50-dma ($64.27).

Suggested Options:
Shorter Term: The February $70 Call will offer short-term traders
the best return on an immediate move, as it is just slightly out
of the money.  Short term traders with a less aggressive stance
will want to use the ITM February $65 call.

Longer Term: Aggressive longer-term traders can use the March $70
Call, while the more conservative approach will be to use the May
$70 strike.  Our preferred option is the March $70 strike, which
is just slightly out of the money and should provide sufficient
time for the play to move in our favor.

BUY CALL FEB-65 XTQ-BM OI=2153 at $4.50 SL=2.75
BUY CALL FEB-70 XTQ-BN OI=1754 at $1.60 SL=0.75
BUY CALL MAR-70*XTQ-CN OI=  71 at $2.45 SL=1.25
BUY CALL MAY-70 XTQ-EN OI= 277 at $4.00 SL=2.50

Annotated Chart of ESRX:



Picked on January 13th at    $68.32
Change since picked:          -0.27
Earnings Date               2/24/04 (confirmed)
Average Daily Volume =     1.23 mln
Chart =


---

Genzyme Corp. - GENZ - close: 55.00 change: -0.18 stop: 51.00

Company Description:
Genzyme General, a division of Genzyme Corporation, is focused on
developing innovative products and services to solve major unmet
medical needs.  GENZ has nearly 600 products and services on the
market and a strong pipeline of therapeutic products for the
treatment of rare genetic diseases.  The Diagnostics business
unit develops, markets and distributes in vitro diagnostic
products and genetic testing services. With a solid, profitable
revenue base, this research is intended to maintain the company’s
high rate of earnings growth.

Why we like it:
Shooting higher than we anticipated on its rally last week, GENZ
finally found resistance at the $57 level at the bottom edge of
strong resistance.  Ending again on Friday right at $55, GENZ
looks like it is finally set to begin the pullback to support in
the $52-53 area that we were looking for when we initiated
coverage last week.  After the initial surge through $52
resistance, GENZ found support near $52.50-53.00 before
continuing up to its $57 high.  Now we're looking for a pullback
into that support area to provide entry ahead of a continued
rally up near the $60-61 area.  The fact that the stock couldn't
push through the $57-58 resistance on the first attempt points to
the likelihood of that pullback before the bulls make another
strong upward move.  Maintain stops at $51.  Look for GENZ to
find support near its 10-dma ($52.23) concurrently with the BTK
index finding support at its own 10-dma (currently $508.65) and
that will be the point where it makes sense to enter new
positions.

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

Longer Term: Aggressive longer-term traders can use the March $60
Call, while the more conservative approach will be to use the
March $55 strike.  Our preferred option is the March $55 strike,
which is currently at the money and should provide sufficient
time for the play to move in our favor.

BUY CALL FEB-55 GZQ-BK OI=1446 at $2.20 SL=1.00
BUY CALL FEB-60 GZQ-BL OI= 450 at $0.55 SL=0.25
BUY CALL MAR-55*GZQ-CK OI= 227 at $3.00 SL=1.50
BUY CALL MAR-60 GZQ-CL OI= 250 at $1.10 SL=0.50

Annotated Chart of GENZ:



Picked on January 20th at    $53.00
Change since picked:          +2.00
Earnings Date               2/19/04 (unconfirmed)
Average Daily Volume =     2.78 mln
Chart =


---

Henry Schein - HSIC - close: 70.65 chg: +0.00 stop: 67.00

Company Description:
Henry Schein, Inc. is the largest distributor of healthcare
products and services to office-based practitioners in the
combined North American and European markets. Recognized for its
excellent customer service and low prices, the Company's four
business groups--Dental, Medical, International and Technology--
serve more than 400,000 customers worldwide, including dental
practices and laboratories, physician practices and veterinary
clinics, as well as government and other institutions. The
Company's sales reached a record $3.1 billion for the twelve
months ended September 27, 2003. With a presence in 14 countries,
Henry Schein's International Group posted sales of over $500
million for the same period.  The Company operates through a
centralized and automated distribution network, which provides
customers in more than 125 countries with a comprehensive
selection of over 90,000 national and Henry Schein private-brand
products. (source: company press release)

Why We Like It: (This is original play from Thursday)
HSIC turned out to be a big performer for investors in 2003.
Shares rallied from their February '03 lows near $35 to end the
year near $66.  Now it looks like the stock is ready for its next
leg higher.  HSIC did have some recent news when the company
announced a $328 million acquisition for a handful of European
dental product distributors.  Fortunately, from the bullish
reaction in the stock price, Wall Street appears to agree with
HSIC's management that there is little risk in the acquisition
that will be immediately accretive to earnings.  However, we will
note that Bank of America did recently downgrade the stock from
"buy" to "hold" based on valuation claiming it was near their $70
price target.

Coincidentally HSIC's current point-and-figure price target is
$70 and that target has been met.  Technically this raises the
risk level for the play.  The vertical price objectives
forecasted by P&F analysis are not always met and can be exceeded
but P&F fans should be extra cautious here.  Chart readers will
also notice that HSIC appears to be breaking out of a mult-week
consolidation.  We do like the bullish breakout over the $70
level on a day where the major averages were lower.  HSIC's MACD
is in a bullish buy signal while its other oscillators are also
pointing higher.  Our first target is the $75 mark but we believe
HSIC can actually trade beyond this level.  We'll start the play
with a stop loss at $67.00, just under its simple 50-dma at
67.36.

On a side note...HSIC does not appear to have any sort of stock
split history but shares are at an all-time high.

Weekend Play Update:
HSIC held up okay, closing unchanged on Friday as the major
indices generally traded sideways to down.  Traders appeared to
buy the dip towards $70 so we'll look for some follow through on
this week's breakout next week.

Suggested Options:
Traders have plenty of options to choose from.  HSIC has
February, March, April and July strikes.  We're prone to use the
February and March calls.  Our favorite would be the March 70s
but there is little open interest.  The April 70s will have to
work.

BUY CALL FEB 65 HQE-BM OI= 35 at $6.60 SL=4.00
BUY CALL FEB 70 HQE-BN OI=652 at $2.30 SL=1.15
BUY CALL MAR 65 HQE-CM OI=  0 at $6.80 SL=4.40
BUY CALL MAR 70 HQE-CN OI= 12 at $3.20 SL=1.65
BUY CALL MAR 75 HQE-CO OI= 11 at $1.05 SL= --
BUY CALL APR 70*HQE-DN OI=540 at $3.90 SL=2.00
BUY CALL APR 75 HQE-DO OI=146 at $1.50 SL=0.75

Annotated Chart:



Picked on January 22 at $70.65
Change since picked:    + 0.00
Earnings Date         03/04/04 (unconfirmed)
Average Daily Volume:      334 thousand
Chart =


---

MBIA Inc. - MBI - close: 62.58 chg: -0.49 stop: 59.99

Company Description:
MBIA Inc., through its subsidiaries, is a leading financial
guarantor and provider of specialized financial services. MBIA's
innovative and cost-effective products and services meet the
credit enhancement, financial and investment needs of its public
and private sector clients, domestically and internationally.
MBIA Inc.'s principal operating subsidiary, MBIA Insurance
Corporation, has a financial strength rating of Triple-A from
Moody's Investors Service, Standard & Poor's Ratings Services,
Fitch Ratings, and Rating and Investment Information, Inc.
(source: company press release)

Why We Like It:
Traders who have been waiting to jump in MBI on a dip back toward
the 60-61 region might have their patience rewarded soon.  The
stock is slipping backward after valiantly trying to breakout
over the $63.50 level during a week the major indices traded
sideways to down.  We initially added MBI to the OI call list
because the strong breakout over three-month resistance at $60
and a very strong, rising sector sounded like a winning
combination.  Now that sector, via the IUX insurance index, is
pulling back toward its simple 10-dma.  This could be where
investors step up to by the dip.  If not, then we might suggest
caution on any new bullish positions in MBI.

Technical oscillators on MBI look tired and are starting to roll
over. Fortunately, volume has been slipping a bit during the last
few sessions.  What we don't want to see are big declines in big
volume.  We suggest that traders step back to wait and see where
MBI bounces.  If it bounces above $60 then great, otherwise we'll
be stopped out soon.

Suggested Options:
We have a short time frame for this play with earnings on Feb.
3rd so our preference is for the February strikes. Our favorite
is the Feb. 60.

BUY CALL FEB 60*MBI-BL OI= 910 at $3.60 SL=1.80
BUY CALL FEB 65 MBI-BM OI=1066 at $0.90 SL= --
BUY CALL MAY 65 MBI-EM OI= 734 at $2.70 SL=1.40

Annotated Chart:



Picked on January 20 at $62.93
Change since picked:    - 0.35
Earnings Date         02/03/04 (confirmed)
Average Daily Volume:      572 thousand
Chart =


---

Morgan Stanley - MWD - close: 59.29 chg: -0.57 stop: 56.75

Company Description:
Morgan Stanley is a global financial services firm and a market
leader in securities, investment management and credit services.
With more than 600 offices in 28 countries, Morgan Stanley
connects people, ideas and capital to help clients achieve their
financial aspirations. (source: company press release)

Why We Like It:
It has been an interesting week even if MWD and the major
averages have done nothing but slip sideways.  Actually, it has
been the first week in several that the XBD broker-dealer index
actually slowed its rapid advance.  Maybe this is the pause that
refreshes before the rally continues.

We initially added MWD to the list after the JPMorgan (JPM) and
Bank One (ONE) merger news reignited the financials and the
broker-dealers.  Banking stocks rose on speculation that the
merger would start a new wave of consolidation and brokers like
MWD rose because that means a wave of M&A activity to cash in on.
At the same time news that China has plans to IPO several
companies this year was also boosting shares of MWD since the
firm is a lead contender to due the lucrative underwriting.

As we suggested early this week MWD has pulled back to the $59.00
level and bounced there late in Friday's session.  The question
for us is will this support hold.  More patient traders might
want to wait and see if MWD pulls back toward its simple 50-dma
(currently near 56.90).  We'd actually prefer to see MWD rebound
from its current position as an indication of strength.  That may
depend where the XBD index leads next week.

On a side note there have been some headlines for MWD.  Most of
them are regarding a defamation suit that MWD lost to LVMH.
LVMH, a maker of the Louis Vuitton brands and other luxury goods,
claimed that MWD's negative and critical comments about their
company were influenced by MWD's banking relationship with rival
luxury goods maker Gucci.  The fine really shouldn't affect Wall
Street's view on MWD who turned in a net profit of more than $1
billion last quarter.


Suggested Options:
We like the February and April 55 and 60 calls but our favorite
is the February 55's.

BUY CALL FEB 55*MWD-BK OI=  991 at $4.80 SL=2.75
BUY CALL FEB 60 MWD-BL OI= 8630 at $1.25 SL=0.65
BUY CALL FEB 65 MWD-BM OI= 2648 at $0.15 SL= --
BUY CALL APR 60 MWD-DL OI=20411 at $2.50 SL=1.25
BUY CALL APR 65 MWD-DM OI= 9534 at $0.75 SL= --

Annotated Chart:



Picked on January 15 at $59.81
Change since picked:    - 0.52
Earnings Date         03/18/04 (unconfirmed)
Average Daily Volume:      3.8 million
Chart =


---

Maxim Integrated - MXIM - cls: 53.71 chg: +0.09 stop: 52.49*new*

Company Description:
Maxim Integrated Products is a leading international supplier of
quality analog and mixed-signal products for applications that
require real world signal processing. (source: company press
release)

Why We Like It:
Hold that line!  The semiconductor sector was overdue for some
profit taking and we're starting to see it after several chip
companies announced their December quarter numbers.  MXIM has not
been immune to the pull back either but it is holding support at
$52.60.  Shares have bounced there three days in a row and the
longer this level holds the stronger it should become.

We initially added MXIM to the call list on a strong bullish
breakout from what appeared to be a bull flag pattern as well as
a break above the $50 mark.  Chip stocks were soaring on the
expectation that global sales would soar 20-25% in 2004.  Some of
the recent earnings reports have let a little steam out of those
lofty expectations but Wall Street analysts are still
enthusiastic for the group.  Last week S&P announced that its
researchers published a 52-page report stating their reasons why
they believe semiconductor stocks could see a 20-25% appreciation
in price despite their already price valuations (see Thursday's
update for more details on what S&P said).

We're willing to hold on to MXIM as long as it holds the $52.60
level.  Thus we're raising our stop loss to $52.49. However, less
aggressive traders may want to wait for MXIM to trade up and
through the $54 or $55 levels again before considering new
bullish positions. If we are stopped out you can bet we'll keep
our eyes on the group for the next entry point (in either
direction).

Suggested Options:
Our preference is the February or May strikes.  Our favorite is
the February 50's, especially on a dip.

BUY CALL FEB 50*XIQ-BJ OI=2453 at $4.70 SL=2.45
BUY CALL FEB 55 XIQ-BK OI=3218 at $1.60 SL=0.85
BUY CALL MAY 55 XIQ-EK OI=1337 at $3.80 SL=2.00

Annotated Chart:



Picked on January 06 at $51.89
Change since picked:    + 1.82
Earnings Date         02/05/04 (confirmed)
Average Daily Volume:      5.4 million
Chart =


---

Saint Jude Medical - STJ - cls: 64.80 chg: -1.58 stop: 62.75

Company Description:
St. Jude Medical, Inc. (www.sjm.com) is dedicated to the design,
manufacture and distribution of innovative medical devices of the
highest quality, offering physicians, patients and payers
unmatched clinical performance and demonstrated economic value.
(source: company press release)

Why We Like It:
Uh-oh!  Friday's action was not good news for the bulls in STJ.
We only have two more trading days before STJ's earnings report.
That means we have to close the play on Tuesday afternoon
assuming we aren't stopped out first.  The good news is that
Friday's profit taking, while breaking under the $65 level (not
good), did not break the simple 10-dma.  Plus, STJ should still
have very formidable support at the $64 area but that's not very
encouraging given our short time frame.

We initially added STJ to the call list because the stock was
hinting at a bullish breakout from a cup-and-handle formation as
well as a very attractive fundamental story for a new ICD product
to be launched in May.  Investors may still have an opportunity
to play both but we suggest waiting until after the company's
Wednesday morning report to consider any new positions.

Suggested Options:
We are not suggesting any new bullish positions ahead of STJ's
earnings report.

Annotated chart:



Picked on January 12 at $64.01
Change since picked:    + 0.79
Earnings Date         01/28/04 (confirmed)
Average Daily Volume:      1.4 million
Chart =



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

Computer Sciences Corp - CSC - cls: 46.54 chng: +0.93 stop: 43.50

Company Description:
As a world leader in the information technology (IT) services
industry, CSC helps its clients use IT more efficiently to
improve their operations and profitability.  The company offers a
broad array of professional services to clients in the commercial
and government markets.  Its service offerings include
outsourcing, systems integration, IT and management consulting,
and other professional services, including e-business solutions.

Why we like it:
Ever since being turned back near the $45 level in early
September, CSC has been building up for a solid breakout move.
The steady advance over the past four months has seen the stock
tapping out higher highs and higher lows.  We can draw a pretty
clean bullish ascending triangle connecting those lows with a
horizontal top at $45.  Earlier this month, there was a brief
push through the top of that triangle, but price fell back to
drift along just under that level until late last week.
Thursday's session saw a break back over $45 and on Friday CSC
pushed through $46 to close at its best level since the summer of
2002.  The past two days have seen robust buying volume and it is
encouraging to see how price rebounded last week off of the 20-
dma ($44.79), another sign of strength.  The move through $45
generated a fresh PnF Buy signal and Friday's trade at $46 just
solidified that move, removing the potential for a bear trap.

With about 2 1/2 weeks until the company releases its earnings,
CSC looks poised to continue its upward journey, with $50
resistance a very viable target.  But the way the bulls have been
sending stocks to test their 2002 highs, we think CSC has a shot
at revisiting its own 2002 highs near $53.  Obviously a pullback
and rebound from the $45 area would make for the ideal entry as
former resistance is confirmed as new support.  But entering on
strength can work as well.  If choosing that strategy, look for a
move through $46.85 to trigger entry.  Since late December, CSC
has been finding support just above $43.50, and with the 30-dma
now above that mark at $43.85, we can feel safe placing our stop
at $43.50.  On a more severe dip, aggressive traders can consider
entries as low as $44, but make sure to wait for the rebound to
commence before playing.

Suggested Options:
Shorter Term: The February $45 Call will offer short-term traders
the best return on an immediate move, as it is in the money.

Longer Term: Aggressive longer-term traders can use the March $50
Call, while the more conservative approach will be to use the
March $45 strike.  Our preferred option is the March $45 strike,
which is currently at the money and should provide sufficient
time for the play to move in our favor.

BUY CALL FEB-45 CSC-BI OI= 846 at $2.65 SL=1.25
BUY CALL FEB-50 CSC-BJ OI= 788 at $0.60 SL=0.30
BUY CALL MAR-45*CSC-CI OI=1408 at $3.40 SL=1.75
BUY CALL MAR-50 CSC-CJ OI=1625 at $1.05 SL=0.50

Annotated Chart of CSC:



Picked on January 25th at    $46.54
Change since picked:          +0.00
Earnings Date               2/11/04 (confirmed)
Average Daily Volume =     1.21 mln
Chart =



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Adobe Systems - ADBE - close: 38.04 change: +0.84 stop: 40.00

Company Description:
A long-time leader in desktop publishing software, ADBE provides
graphic design, publishing, and imaging software for Web and
print production.  Offering a line of application software
products for creating, distributing, and managing information of
all types, the company generates nearly 75% of sales through
publishing software products such as Photoshop, Illustrator, and
PageMaker.  Its Acrobat Reader, which uses portable document
format (PDF) is popping up all over the Internet, as businesses
shift from print to digital communications.  In addition, ADBE
licenses its industry standard technologies to major hardware
manufacturers, software developers, and service providers, as
well as offering integrated software solutions to businesses of
all sizes.

Why we like it:
Back and forth, the tug of war continues, with buyers stepping in
to prop up shares of ADBE every time it dips below the 200-dma
(now at $37.55) and sellers leaning on the stock whenever
resistance near the 20-dma ($38.63) is tested.  The range is
continuing to narrow with a break from the ever-tightening range
likely to occur very soon.  The PnF chart is still on a Sell
signal and price ended on Friday right at the $38 bullish support
line.  Taking the bearish vertical count of $32 off the PnF
chart, our lower target of $32 is still in play.  But first, ADBE
will need to produce a convincing break below the $36 support
level, something that it has so far been unable to achieve.
Aggressive entries can still be taken on failed rebounds below
the 20-dma, while the more conservative approach will be to wait
for the break under $36 before playing.  Maintain stops at $40, a
level that should not be reachable with the 50-dma now solidly
below there at $39.60.

Suggested Options:
Aggressive short-term traders can use the February 35 Put, while
those with a more conservative approach will want to use the
February 40 put.  Traders looking for greater insulation against
time decay will want to consider the March 35 Put.  The February
$40 strike is our preferred option.

BUY PUT FEB-40*AEQ-NH OI=1461 at $2.75 SL=1.40
BUY PUT FEB-35 AEQ-NG OI=1807 at $0.55 SL=0.25
BUY PUT MAR-35 AEQ-OG OI= 139 at $1.15 SL=0.60

Annotated Chart of ADBE:



Picked on January 11th at     $37.12
Change since picked:           +0.92
Earnings Date                3/11/04 (unconfirmed)
Average Daily Volume =      3.41 mln
Chart =


---

QLogic Corp. - QLGC - close: 45.45 change: +0.20 stop: 48.50

Company Description:
QLogic Corporation designs and develops storage networking
infrastructure components sold to original equipment
manufacturers (OEMs), resellers and system integrators.  The
company's products include the SANblade host bus adapters (HBAs),
SANbox Fibre Channel Switches and SANsurfer Management Suite HBA
and Switch management software.  QLGC's Fibre Channel HBAs
support small computer systems interface (SCSI) protocol,
Internet protocol (IP), virtual interface (VI) and fiber
connection (FICON) protocol.  In addition, the company designs
and supplies controller chips used in hard drives and tape
drives, as well as enclosure management and baseboard management
chip solutions that monitor the health of the physical
environment within a server or storage enclosure.

Why we like it:
The first day out of the gate was rather a non-event for our QLGC
play, as price held above $45 support, but was unable to stage
much of a recovery either, trading in a less than $1 range for
the entire day.  Strong resistance should be found now near $47
as broken support transforms to resistance and that is a good
spot for aggressive traders to look for new entries.  Those
looking to enter on weakness will still do well to wait for the
break under $45 before playing.  With the Semiconductor index
(SOX.X) still looking rather weak, the path of least resistance
for QLGC still appears to be down.  Once under $45, look for next
support near $41-42, the site of the August lows.  A drop to that
level will make a good exit point for conservative traders, while
those with a more aggressive approach can target a drop to the
$39-40 area.  Maintain stops at $48.50, just over the recent
rebound high.

Suggested Options:
Aggressive short-term traders can use the February 42 Put, while
those with a more conservative approach will want to use the
February 45 put.  We've also listed March strikes for those
traders desiring greater insulation from time decay.  Our
preferred option is the March 45 strike, as it is currently at
the money and provides more time until expiration.

BUY PUT FEB-45 QLC-NI OI=5932 at $1.75 SL=0.80
BUY PUT FEB-42 QLC-NV OI=1953 at $0.85 SL=0.40
BUY PUT MAR-45*QLC-OI OI= 254 at $2.50 SL=1.25
BUY PUT MAR-42 QLC-OV OI= 623 at $1.50 SL=0.75

Annotated Chart of QLGC:



Picked on January 22nd at    $45.25
Change since picked:          +0.20
Earnings Date               4/14/04 (unconfirmed)
Average Daily Volume =     3.88 mln
Chart =



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

None


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The Option Investor Newsletter                   Sunday 01-25-2004
Sunday                                                      4 of 5


In Section Four:

Leaps: Still On Course
Traders Corner: It's Inevitable -- A Large QQQ Movement


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LEAPS
*****

Still On Course
By Mark Phillips
mphillips@OptionInvestor.com

Despite a bit of weakness in Technology shares last week, the
market is still on its relentless course towards its 2002 highs,
with the NASDAQ having already achieved that goal.  At the same
time, the VIX continues to drill to ever lower levels and one
might ask out of curiosity whether we'll ever see a VIX reading
over 20 again.  I remember having the opposite conversation some
months back, wondering if the VIX would ever drop as low as 20
again.  The answer to both questions is an unequivocal "yes".
It's in determining the timing of such a development that the true
difficulty lies.

Right now, there is virtually no selling pressure in the market
and this is reflected in the almost ludicrous levels of
volatility, which are really telling us that there is almost no
fear of the downside.  Eventually that dynamic will change, the
VIX will head significantly higher and the markets will begin to
challenge and break significant levels of support.  But that time
is not yet here as investors continue to focus on positive
earnings reports and the continued flow of economic data that both
indicate that the economy is improving.  Never mind that the
market has already priced in far more improvement that actually
exists and that valuations are once again approaching nosebleed
levels.

In the near-term, it is still "full bull" ahead and that isn't
likely to change in the next week.  There are significant support
levels on all the major indices that must be broken before we can
even start to measure the weakness necessary to have winning
bearish plays.  The overwhelming bullishness of the current market
environment is perhaps best encapsulated in the response to EK's
earnings report on Thursday.  Sure the company beat estimates
handily on both the revenue and EPS fronts, but when looking at
the overall message presented by the company, I was astounded at
the magnitude of the price rise.  The company will be instituting
massive layoffs in their restructuring efforts of the next 3
years, de-emphasizing their film business and finally placing
their focus on the digital side of the business where it should
have been for the past 5 years!  The positive action in the stock
is a direct reflection of investors' optimism that the company
will be able to pull off the ambitious restructuring plan, while
at the same time pulling off strong growth, the likes of which
haven't been seen at this company for many moons.  Time will tell,
but I place myself firmly in the skeptic camp.

As noted below, our bearish play on EK is a drop this weekend, but
what I want to discuss here is the way in which we could have
mitigated the damage felt on the play by taking advantage of the
simple strategy I introduced last weekend and expanded on in this
past week's Options 101 article "The Light Finally Goes On".  If
you missed it, then head on over using the link below and catch up
with the rest of us.

http://members.OptionInvestor.com/options101/opt_012204_1.asp

As an example, I want to look at our short-lived EK play and
demonstrate how the results would have been different if we had
used a protective call.  For our example, let's just focus on the
case where we would have bought the 2005 $25 LEAP Put (ZEK-ME) for
$2.60.  At the close of trading this past Thursday, the price of
that LEAP was only $1.20, resulting in a loss of 53.85%.  Ouch!!

But if at the same time that we had purchased the LEAP, we also
purchased a slightly OTM $30 April Call (EK-DF) for $0.60, the
results would have been far less painful.  While the LEAP lost
$1.40 during the course of the play, the protective Call rose to
close on Thursday at $2.20.  Doing some quick math, the LEAP
declined from $2.60 to $1.20 for a loss of $1.40.  But the
Insurance Call rose from $0.60 to $2.20 for a gain of $1.60.
That's right, we were dead wrong on the direction for EK, but
implementing it with the insurance policy would have resulted in a
net gain of $0.20.

The downside to implementing this strategy is that our cost basis
is a bit higher, and that means the stock has to move a bit
further in our direction to get us into profitable territory, but
I think it is worth the additional cost, especially in this
market.  Remember, insurance costs money, but it is designed to
protect against a catastrophic loss.  It certainly did its job in
this case.

I'm still struggling with finding a way to put all the pertinent
information into the column in place of the current Portfolio
playlist, but hopefully I'll have all the kinks worked out by next
week and we can then we can move forward from there and have a
profitable 2004.  In the meantime, let's quickly peruse the
current plays and see what meaningful action transpired in the
week just past.

Portfolio:

SBUX - Who is drinking all that coffee?  SBUX just keeps soaring
higher and last week crested the $36 level for the first time
ever.  If you recall, our initial target was for a rise to the $37
level, with expectations for a continued rally towards $40 by the
end of the year.  Clearly, we're making significant progress far
ahead of schedule.  It only makes sense at this point to get more
aggressive with our stop, and I'm raising the official stop to
$32.50, just below the 50-dma ($32.54).  Any sharp pullback from
current levels should find initial support near $34.50 and strong
support near $33.  SBUX hasn't closed under the 50-dma since last
June, so clearly if it were to do so, we'd want to be out of the
play.  Conservative traders should consider harvesting gains on a
near-term push above $37, as the stock is becoming quite extended,
having now pushed through the top of its aggressive rising
channel.  Barring a break below our stop, we'll endeavor to remain
on board right up to that $40 target.  One interesting development
last week was the fact that the '06 LEAP actually lost ground.
This has the familiar scent of our WMT play, with option pricing
starting to act a bit peculiar.  This could just be a one-time
glitch, but I'll be watching carefully to see if the normal
pricing relationship is restored.  The reason it catches my
attention is that the '05 LEAP made another upward move in price
and I would have expected the '06 LEAP to have followed suit,
since they are both at the same strike price.

DJX - The DJX continues to flirt with major resistance and on
Thursday came within spitting distance of its 2002 highs.  We have
still not seen any meaningful signs of weakness as even Friday's
dip failed to even challenge the 20-dma (now at $104.99) before
the afternoon rebound.  Weekly Stochastics are buried deep on
overbought and the daily is hinting at a rollover from overbought
as well.  But still the bulls are completely in control.  This is
the place to initiate a bearish position trade on the index, and
all we can do from here is wait to see if support at $104 will
give way first or if a breakout over the 2002 highs is in store.
If currently in the play, make sure to keep that stop in place at
$107, as a breakout could generate significant follow-through,
whether it makes sense or not.  Now that the 50-dma has pushed
over $101, we must concede that it will be difficult for the DJX
to break much below $101 unless something significant changes in
terms of market sentiment.  At a minimum, we would need to see the
VIX make some upward progress above the 20 level.

SMH - It seems like we've been here before, doesn't it?  The
Semiconductors appear to be losing their relative strength and the
SMH cracked below the $43 level on Friday, almost touching the 50-
dma ($42.41) before the afternoon rebound.  That's just the first
level of support that must be dealt with though as the more
important test will come at the 100-dma ($40.45).  Remember the
SMH hasn't touched the 100-dma since last April, so we're likely
to see a rebound if that average is touched.  The key will be the
strength of that rebound.  Ideally, we'll see a weak rebound and
then rollover to take out $39 support and get things moving
towards the 200-dma, now just above $35.  Maintain stops at $46,
just above the recent highs.

NEM - Gold stocks delivered a feeble rebound last week and then
rolled over in what looks like solid bearish action.  With the
rebound in the dollar, we're probably looking at a drop to test
major support levels before the uptrend can continue.  For the XAU
index, that strong support is found in the $94-95 area, for gold
it is found first at $400 and then at $390 (right on the ascending
trendline from the April lows) and for NEM the strong support is
found first at $40 and then at $38, which just happens to be the
site of the 200-dma ($37.78).  For traders that didn't take the
plunge on the first drop to $42, I still favor long-term entries
in the $38-40 area if we can get it, using a stop at $37.

EK - Investors cheered EK's earnings report on Thursday, sending
the stock soaring above the $31 level and triggering our stop.
Details can be found below in the Drop section, but I think what
is important to take note of here is the way in which we could
have significantly mitigated the damage by following the strategy
of buying a short-term insurance call at the same time as the LEAP
Put was purchased.  Hopefully the details of that strategy as laid
out above help to show the value of such a strategy.

Watch List:

QCOM - In light of the strong gains in recent months, I've
actually been astounded at how well QCOM has held up over the past
couple weeks, giving only a mild pullback to the top of the
1/08/04 gap and finding support at the 20-dma.  I still expect to
see further weakness in the weeks ahead, with a strong likelihood
of a test of the rising 50-dma ($51.41).  That's still quite a
drop from current levels and with weekly Stochastics just starting
to curl over from deep within overbought, I'm not in a hurry to
move the play back onto the active Watch List.  Let's leave it on
hold for at least one more week.

HD - Am I the only one that is intrigued by the way HD has shown a
complete lack of strength over the past month?  Despite the
strength in the overall market and a rebound in the Housing
sector, shares of HD have hardly budged, as strong resistance is
being found near $36.  I still think we've got the right approach
though, waiting for a test of resistance at $37-38 before entering
the play, with strong resistance at the top of the multi-year
descending channel coming in just above there at $38.50.  With the
persistence of the long-term downtrend, I would strongly encourage
traders to use a protective call on this play when purchasing the
LEAP put.  My choice for a protective call would be the May $40
call (HD-EH), currently priced at $0.45.  That should effectively
protect against a dramatic breakout from the channel if HD should
pull a stunt similar to what EK delivered last week.

SNDK - Now that is precisely why we didn't want to chase SNDK
higher over the past several weeks!  Despite a solid earnings
performance for the past quarter, the company raised concerns
about additional competition and pricing pressures in 2004 and
2005.  Investors couldn't hit the sell button fast enough and the
stock promptly fell back to strong support in the $59-60 area on
Thursday, where it remained heading into the weekend.  We're still
looking for a pullback to the $54-55 area, supported by the 200-
dma (now at $55.02) to provide our entry into the stock.  Despite
concerns about pricing and margins, I expect to see SNDK trading
up near its 2003 highs before the year is out, as the company is
still the de facto leader in the Flash Memory market.  Sure there
is extra supply that will be coming to market, but the big
question is whether that will do anything more than just help to
satisfy the still growing demand from consumers for all those
little electronic gadgets we just "have to have".  Due to the
current uncertainty in the marketplace, I think it would be a
prudent move to purchase a protective put when initiating the
bullish position.  My choice would be the April $50 Put (SWQ-PJ),
currently priced at $2.25.

Radar Screen:

MLNM - Spending most of last week in consolidation mode has given
us a bit of breathing room for targeting an entry on MLNM.  I'm
still looking for a pullback to the rising trendline near $16 as
the best shot at a winning play.  We'll gain some further insights
this week as the company is set to deliver its earnings report on
Tuesday.  Perhaps after that event, price action will deliver us a
viable entry point in the weeks ahead.

CHK - The weakness in the price of Natural Gas over the past week
certainly hasn't had a deleterious effect on shares of CHK, as the
stock once again rebounded into the upper half of its rising
channel on Friday.  Barring a break from the channel in the week
ahead, I'll be adding the stock to the Watch List next weekend,
with an entry target of $13, which is currently just above the 50-
dma and the bottom of the channel.

WMB - Last week's strength in the Utility sector finally gave WMB
the breakout over the $11 level, but there wasn't really any
follow through and it looks like the bulls need to gather more
strength before sustaining a breakout.  That process will likely
involve a mild pullback to stronger support near $10 and that's
where we'll want to think about adding new positions.  WMB is a
slow mover and there's no reason to get overly excited and think
we need to chase the stock higher.

Closing Thoughts:
I've had to keep this column concise this weekend due to the bug
that has now developed into Bronchitis, but I wanted to provide
some necessary updates this weekend.  The big picture hasn't
changed, with the overall market quite extended, but still
refusing to give up much ground.  Bearish plays make the most
sense up here, but a solid pullback to lower levels of support
will likely set up some interesting bullish plays as well.  I look
forward to getting back to full strength next week and
repopulating those playlists!

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  $ 7.50  +74.42%  $ 32.50
                '06 $ 30  WSP-AF  $ 6.40  $ 8.20  +28.13%  $ 32.50
NEM   01/18/04  '05 $ 40  ZIE-AH  $ 8.20  $ 7.80  - 4.88%  $ 37.00
                '06 $ 40  WIE-AH  $10.20  $10.30  + 0.98%  $ 37.00


Puts:
SMH   12/30/03  '05 $ 40  ZTO-MH  $ 4.90  $ 4.10  -16.33%  $ 46.00
                '06 $ 40  YRH-MH  $ 6.60  $ 6.00  -10.00%  $ 46.00
DJX   01/05/03  '04 $100  DJV-XV  $ 4.50  $ 4.00  -11.11%  $107.00
                '05 $100  YDK-XV  $ 6.80  $ 6.20  - 8.82%  $107.00


LEAPS Watchlist

Current Possibles

SYMBOL  SINCE    TARGET PRICE  TARGETED LEAP  SYMBOL

CALLS:
QCOM   11/16/03   HOLD         JAN-2005 $ 50  ZLU-AJ
                            CC JAN-2005 $ 45  ZLU-AI
                               JAN-2006 $ 50  WLU-AJ
                            CC JAN-2006 $ 45  WLU-AI
SNDK   12/21/03   $54-55       JAN-2005 $ 45  XWS-AK
                            CC JAN-2005 $ 40  XWS-AJ
                               JAN-2006 $ 45  YSD-AK
                            CC JAN-2006 $ 40  YSD-AJ



PUTS:
HD     12/21/03  $37-38        JAN-2005 $ 35  ZHD-MG
                               JAN-2006 $ 35  WHD-MG


New Portfolio Plays

None


New Watchlist Plays

None


Drops

EK - $30.95 Proving that the response to earnings is all about
perception, EK skyrocketed above our $31 stop following its
earnings report on Thursday.  The strong price action is
interesting in that investors apparently liked the fact that the
company has finally admitted that it can't compete in the
traditional film business and as a part of the dramatic
restructuring will finally place the appropriate focus on the
digital side of the business.  Despite a lack of details on the
restructuring plan, investors bought the story of hope for the
future.  Several analysts voiced their skepticism over the firm's
ability to grow its digital business by 26% in an industry that is
already seeing falling prices and margins.  A further sign of the
admission of its prior missteps, EK will be slashing 12,000-15,000
workers (20% of its workforce) over the next 3 years.  I
personally wouldn't even consider buying the stock here, but
investors were in an optimistic mood and bought the story of hope.
Despite the fact that the stock did close a nickel below our stop,
with the intraday move above $31, the PnF chart issued a new Buy
signal and we must drop the play this weekend.


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It's Inevitable -- A Large QQQ Movement
By Mike Parnos, Investing With Attitude

Are we on the cusp of witnessing proof that the “Greater Fool”
theory is a reality?  The NASDAQ has been over extended.  Fools
have rushed in all the way up expecting that GREATER fools will
buy their shares at a higher price.  The economy is improving a
little, but investor IQ points haven't budged at all – unless they
became CPTI students.

Time will tell.  Right or wrong, up or down, foolish or genius,
it’s likely that the QQQs are going to move.  Optimists will go
toe-to-toe with pessimists.   We just want to be in a position to
take advantage of the resulting move.

Many CPTI traders have been using the QQQ Baby Strangle very
successfully over the past year.  It's time to take a few minutes
to review the basics of the strategy.  It’s also an opportunity to
introduce the Baby Strangle to the many new CPTI students who have
joined us in the recent months.
______________________________________________________________

The QQQ Baby Strangle
We’re going to use the QQQs, one of my favorite trading vehicles,
because of the $1.00 strike price increments and high liquidity.
Those factors offer greater flexibility in putting on new and
smaller spreads that, in turn, result in larger profits (or
smaller losses).

The QQQs have, along with the rest of the market, been working
their way up for a long time. Some believe it follow Jack up the
beanstalk all the way to the sky. Those same people are still
holding Nortel at $4 and have memorized the "Mary Poppins"
soundtrack.

Some analysts believe the QQQs will return to $30. In either case,
it's not unreasonable to anticipate a substantial move. We're
basing this strategy on the fact that there has seldom been a two
month period when the QQQs have not moved at least three points in
one direction or the other. Our risk will be about $250-300 per
month for a year - or a total of about $3,000 (based on a 10
contract position). Don't worry. It's likely we'll make it back 10
times over.

The Position
Step 1 - It's January 25th and the QQQs are trading at $38.01
1. Buy March $37 calls @ $2.05
2. Buy March $39 puts @ $1.85
Total invested: $3.90
There is $2.00 of intrinsic value in this position. The actual
risk is only $1.90.

We're waiting for the QQQs to move about three points. It normally
takes less than a month. Let's say that Julie Andrews' hills are
still alive (they probably have some mileage left) with the sound
of music and, in three weeks, the QQQs hit $41. The $37 calls will
be worth approximately $4.15 ($4.00 intrinsic value + .15 time
value). Time to possibly liquidate the calls and put the $4.15 in
your pocket - for the moment.   Since the cost of the position was
only $3.90, we’ve already made $.25.

Now, with the QQQs at $41, where do we stand?
We have the March $39 put at a cost of ZERO.
If the QQQs reverse and tank back to $35 in the days left to March
expiration, you just made $4.25.  Remember, the cost of the $39
put is ZERO.  You will have made $4.00 when you liquidate the $39
put plus the $.25 you made on the $37 call. Nice return.

There are occasions where it may not take the full eight weeks
(two option cycles) for both the movements to happen.   Maybe it
takes only five weeks.
Let's do it again. It's early March and the QQQs are now trading
at $35.
Buy May 34 calls @ $2.15
Buy May 36 puts @ $2.20
Total invested: $4.35
Again, we have the $2.00 of intrinsic value in the position. As
you can see, the numbers will be basically the same – perhaps
slightly higher because we're buying a few weeks of time (10
instead of 8).  Increases or decreases in volatility may result in
minor fluctuations in the time premium. If it varies by a nickel
or a dime, it's no big deal.

The risk is $2.35 and we're awaiting the next move. In another
three weeks, the QQQs go from $35 to $38. The $34 puts are worth
$4.30 ($4.00 intrinsic value + $.30 in time value). We sell the
calls. This time we profited by $.05.

Now, where do we stand?

a) There are still five weeks left before May expiration.
b) We are still long the May $36 puts.

Every time a move is made, and a long position liquidated, another
similar position is established around the QQQs. You can continue
this indefinitely. Eventually, the QQQs will go down quicker than
a political groupie. Or, it will run up faster than your wife's
credit card bill. That's when all your patience will pay off and
you'll ring up serious profits - so you can pay that credit card
bill.

See the pattern? What we're trying to accomplish is to have long
puts (or calls) at little or no cost with time left before
expiration. Whenever we liquidate a long position on one side, we
are left with a long position in the opposite direction with
virtually no cost.

When The Original Move Continues . . .
There are times, as it has recently, that the QQQs do not stop
with just a three-point move in one direction.  Then, it makes no
sense to close out the long call (or put) simply because the QQQs
have generated enough money to cover the cost of the original
spread.  If it looks like there is still strength in the move,
hang on and ride the wild surf – but with sensible stops.

We’re not picky.  It doesn’t matter which way we profit.  If the
move does continue up another few points – it’s all profit.  Once
we cover the original cost of the position, we’re home free.

What is the maximum risk?
The original $1.90 ($3.90 less the $2.00 intrinsic value).   If
the QQQs begin to appear range-bound and haven’t moved in 3-4
weeks, you have the choice of abandoning the position and perhaps
losing only half of the $1.90 risk.

This seems like complicated stuff, but requires only minimal
monitoring - maybe once a day.

Re-read the strategy again and look at the possibilities. You know
that what goes up must come down – sooner or later.  If you don't
believe me, ask Isaac Newton, Lenny Fibonacci, and all buy and
hold investors. They'll tell you.  It would just be nice to be in
a position with a long put or call (at little or no cost) when
that reversal begins.
____________________________________________________________

FEBRUARY CPTI POSITIONS

Position #1 -- OEX – Credit Spread Boogie – 565.41
With the market trending, let's not fight the tape.  We're going
to establish a bull put spread, take in some premium, and ride the
wave into shore.
We sold 3 OEX February 565 puts, and bought 3 OEX February 540
puts for a total credit of $6.80 (x 3 contracts = $2,040).
This strategy requires $25 x 3 contracts = $7,500.  We're only
trading three contracts because, if the market reverses
significantly, it might become necessary to close the bull put
spread and establish a bear call spread that may be wider and
would require more contracts.  We need to preserve our money for a
potential maintenance requirement.

Position #2 – MNX (mini NDX index) – Iron Condor – 153.12
This index seems substantially safer than the highly volatile NDX.
We're going to put on an Iron Condor with limited exposure.
Because the market is trending, we skewed the strike prices
slightly so that we have a little more cushion on the upside.
We sold 10 MNX February 165 calls and bought 10 MNX February 170
calls for a net credit of $.40 x 10 contracts = $400.  Then we
sold 20 MNX February 150 puts and bought 20 MNX February 147.50
puts for a net credit of $.50 x 20 contracts = $1,000.  Our total
credit is $1,400.  Our maximum profit range is 150 to 165.  Our
exposure is only $3,600 ($5,000 less $1,400).  Maximum profit:
$1,400.

Position #3 – XAU (Gold/Silver Index) – Iron Condor -- $97.79
The XAU has been temperamental of late.  This is a low risk and
relatively safe play with a wide range.  Maybe we can make a
couple of bucks.
We sold 10 XAU February 90 puts and bought 10 XAU February 85 puts
for a net credit of about $.70 (x 10 contracts = $700).  Then we
sold 10 XAU February 110 calls and bought 10 XAU February 115
calls for a net credit of about $.45 (x 10 contracts = $450).  Our
maximum profit range is $90 to $110 – a 20-point range.  Our
exposure is $3,850 ($5,000 less $1,150).  Maximum profit: $1,150.

Position #4 – OSX (Oil Service Sector Index) - $102.82
We're being cautious again here.  We're reducing our potential
income by expanding our safety range.
We sold 10 OSX February 105 calls and bought 10 OSX February 110
calls for a net credit of about $.45.  Then we sold 10 OSX
February 90 puts and bought 10 OSX February 85 puts for a net
credit of about $.75.  Our total net credit is about $1.20 (x 10 =
$1,200).  Our maximum profit range is 90 to 105 – a 15-point
range.  Our exposure is $3,800 ($5,000 less $1,200).  Maximum
profit: $1,200.
_____________________________________________________________

ONGOING POSITION
QQQ ITM Strangle – Ongoing Long Term -- $38.01
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:
October: Oct. $33 puts and Oct. $34 calls – credit of $1,900.
November: Nov. $34 puts and calls – credit of $1,150.
December: Dec. $34 puts and calls – credit of $1,500.
January: Jan. $34 puts and calls – credit of $850.
February: Feb. $34 calls and $36 puts – credit of $750.
Total credit: $6,150.

Note:  We haven't included any of the proceeds from this long term
QQQ ITM Strangle in our profit calculations.  It's a bonus!  And
it's a great cash flow generating strategy.
___________________________________________________________

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 01-25-2004
Sunday                                                      5 of 5


In Section Five:

Covered Calls: Covered-Call Fundamentals
Naked Puts: Strategy Selection
Spreads/Straddles/Combos: Correction Looming On The Horizon?


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

Trading Basics: Covered-Call Fundamentals
By Mark Wnetrzak

One of the most common questions we receive from new subscribers
concerns our approach to this strategy: short-term, in-the-money
covered calls.

The covered-call writer is always striving to find positions that
offer a balance between minimally acceptable returns and downside
protection.  Most experienced traders say a conservative covered
call portfolio should contain a variety of positions that provide
yields of 1%-2% per month (with the stock price unchanged) and a
downside margin of at least 10%.  Using these criteria, a covered
call writer is usually going to be limited to selling at-the-money
(ATM) or in-the-money (ITM) calls.  In addition, the risk-reward
outlook (limited profit-unlimited loss) with this type of strategy
advocates using a relatively short-term time frame for each play,
because an investor is not so interested in stock ownership, but
rather in achieving a consistent monthly yield.  With that concept
in mind, a conservative investor would consider longer-term options
only when rolling forward and/or down in an attempt to rescue a
"losing" position.

Of course, more aggressive traders may prefer "out-of-the-money"
covered-writes in situations where the technical outlook or the
available cost basis warrants additional risk.  According to Larry
McMillan, noted option guru and author of "Options: As a Strategic
Investment," there is some mathematical basis to believe, in the
long run, that moderately OTM covered-writes will perform better
than ITM writes.  But, even though both ITM and OTM covered-call
positions outperform outright stock ownership in a flat or down
market, the OTM writer has far greater risk than the ITM writer.
Obviously, the allure of an OTM covered call is that in a rising
market, the investor doesn't limit his upside potential as much as
with ITM options, but his yield still depends on favorable stock
movement.  Also, the OTM covered-call position will, by virtue of
its dependence on stock movement, be more volatile on a regular
basis.  In all cases, the covered-write strategy is viable only
when there is a neutral to slightly bullish outlook on the stock
(as well as the market in general) as this condition increases the
probability of a successful outcome.

When comparing different time frames and strikes in a covered-write
position, it is important to calculate the yield based on the stock
remaining unchanged.  Using this method, there is no assumption on
stock movement and a more accurate month-to-month annualized return
can be calculated (and compared).  Investors who want higher yields
may decide to sell a combination of both ITM and OTM covered-calls.
However, this approach will generate higher transaction costs and
occasionally, some interesting (and often complex) adjustments if
the stock doesn't perform as expected.  In the end, determining the
most appropriate option (strike) to sell in a covered-call play is
simply a matter of identifying your personal risk-reward tolerance.
Keep in mind though, no matter which method is eventually employed,
success usually depends more on maintaining a disciplined approach
and using proven money-management techniques to limit losses when
they occur.

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

ZIXI    10.93   14.67  FEB 10.00  1.80    0.87*   6.9%
SIRI     3.15    3.14  FEB  2.50  0.80    0.15*   5.7%
ADPT    10.50   10.48  FEB 10.00  1.10    0.60*   5.7%
ALVR    13.09   14.12  FEB 12.50  1.45    0.86*   5.4%
CREE    20.49   25.67  FEB 20.00  1.65    1.16*   4.5%
LTXX    19.12   18.20  FEB 17.50  2.45    0.83*   4.5%
CHINA   11.05   11.48  FEB 10.00  1.60    0.55*   4.2%
PSEM    12.77   13.05  FEB 12.50  0.80    0.53*   4.0%
NANX    12.39   12.37  FEB 10.00  2.90    0.51*   3.9%
CLTK     8.54    8.49  FEB  7.50  1.35    0.31*   3.9%
ATSN    10.90   11.19  FEB 10.00  1.30    0.40*   3.7%
SEAC    18.40   18.20  FEB 17.50  1.75    0.85*   3.7%
PAAS    16.10   14.82  FEB 15.00  1.95    0.67    3.4%
CIEN     7.97    7.35  FEB  7.50  0.85    0.23    2.9%

* Stock price is above the sold strike price.

Editor's Comments:

The Market Pauses On Earnings...

The DJ-30 and NASDAQ were flat while the S&P-500 and Russell-2000
ended positive this week as investors digested a slew of earnings.
The bullish fever continues and it appears that any pullback is
bought quickly.  How long can it last?  Well, next week should
offer some more clues and another barrage of earnings.

Positions Previously Closed: None

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

NEW COVERED-CALL 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

VXGN   10.92  FEB 10.00  UWG BB  1.40  4834   9.52  28   5.5%
ZIXI   14.67  FEB 12.50  HQU BV  2.70  3091  11.97  28   4.8%
CTLM    7.30  FEB  5.00  UUM BA  2.50  50     4.80  28   4.5%
NEOL   19.10  FEB 17.50  UOE BW  2.30  852   16.80  28   4.5%
GSF    27.77  FEB 27.50  GSF BY  1.35  7607  26.42  28   4.4%
SCMR    5.63  FEB  5.00  SMZ BA  0.80  1585   4.83  28   3.8%
WEBM   10.93  FEB 10.00  UUW BB  1.25  468    9.68  28   3.6%


Legend (for play description below)

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

__________________________________________________________________

VXGN - VaxGen  $10.92  *** Bio-Terror Play  ***

VaxGen (NASDAQ:VXGN) is a biopharmaceutical company engaged in
the development, manufacture and commercialization of biologic
products for the prevention and treatment of human infectious
disease.  The company is developing preventive vaccines against
anthrax, smallpox and HIV/AIDS and is the largest shareholder
in Celltrion Inc., a joint venture to build biopharmaceutical
manufacturing operations.  Celltrion was formed by VaxGen and
certain South Korean investors to provide manufacturing of
complex proteins made through mammalian-cell fermentation.
This type of manufacturing is used to make many of the drug
products developed by the biotechnology industry, including
monoclonal antibodies and therapeutic proteins.  Products under
development by VaxGen include an anthrax vaccine, a smallpox
vaccine and the AIDSVAX AIDS vaccine.  VaxGen has once again
moved back above its 150-day MA and this position offers
investors a reasonable cost basis from which to speculate on
the company's future share value.

FEB-10.00 UWG BB LB=1.40 OI=4834 CB=9.52 DE=28 TY=5.5%


__________________________________________________________________

ZIXI - ZixCorp  $14.67  *** Stepping Higher! ***

Zix Corporation (NASDAQ:ZIXI) is a global provider of e-messaging
management and protection services.  Its services offer a range
of managed onsite and hosted e-messaging solutions to securely
exchange Internet communications with any e-mail user and protect
organizations from viruses, spam and electronic attack, while
delivering the ability to enforce corporate policies.  Their
advisory services and comprehensive e-messaging solutions enable
organizations of any size to streamline operations, mitigate the
risks associated with obsolescence, negligence and a series of
e-mail-borne threats, as well as leverage the cost and time
efficiencies of e-messaging.  ZixCorp solutions are managed
policy-driven services for analyzing and encrypting Internet
communications and for addressing anti-virus, anti-spam, content
filtering, reporting and archiving needs.  They also provide
related advisory, consulting, installation, customization and
training services.  ZixCorp signed some new contracts over the
past few weeks and pleased investors have sent its shares to a
new 52-week high.  The stock continues to jump higher on heavy
volume which suggests further upside potential.  Investors who
agree with a bullish outlook can use this play to target-shoot
an entry point in the issue.

FEB-12.50 HQU BV LB=2.70 OI=3091 CB=11.97 DE=28 TY=4.8%


__________________________________________________________________

CTLM - Centillium  $7.30  *** On The Rebound! ***

Centillium Communications (NASDAQ:CTLM) is a provider of highly
integrated silicon solutions that enable broadband communications
for homes and business enterprises.  CTLM designs, develops and
supplies communications semiconductor solutions for applications
in the DSL and voice over packet (VoP) markets.  The company's
DSL and VoP products include the CopperFlite CO (Central Office),
CopperFlite CPE (Customer Premises Equipment), Optimizer, Palladia
and Entropia families of products.  The company's DSL products are
based on a type of DSL technology known as asymmetrical DSL (ADSL).
ADSL technology provides substantially faster transmission of data
from the network to the end user than from the user to the network.
The company's VoP products, Entropia CO and Entropia CPE, are
positioned to support current and evolving VoP applications.  The
chart of Centillium continues to show improvement and the recent
move back above the 150-day MA on heavy volume bodes well for the
near term.  This position offers reasonable speculation on a
recovering stock.

FEB-5.00 UUM BA LB=2.50 OI=50 CB=4.80 DE=28 TY=4.5%


__________________________________________________________________

NEOL - NeoPharm  $19.10  *** Drug Speculation ***

NeoPharm (NASDAQ:NEOL) is a biopharmaceutical company engaged
in the research, development and commercialization of drugs for
the treatment of various cancers.  The firm has built its drug
portfolio based on its novel proprietary technology platforms,
the proprietary NeoLipid liposomal drug delivery system and a
tumor-targeting toxin platform.  NeoPharm has several promising
compounds in various stages of development.  The company's lead
compound is IL13-PE38, a tumor-targeting toxin being developed
as a treatment for glioblastoma multiforme, a deadly form of
brain cancer.  NEOL shares have traded in a relatively stable
uptrend since early 2003 and the technical support near the cost
basis offers a viable risk/reward outlook in this speculative
position.

FEB-17.50 UOE BW LB=2.30 OI=852 CB=16.80 DE=28 TY=4.5%


__________________________________________________________________

GSF - GlobalSantaFe  $27.77  *** Drillers Are Hot! ***

GlobalSantaFe (NYSE:GSF) is an international oil and gas-drilling
contractor, owning or operating a fleet of over 100 marine and
land drilling rigs.  It has three lines of business, comprised of
contract drilling, drilling management services and oil and gas.
Its contract drilling business provides crewed, mobile offshore
and land drilling rigs to oil and gas operators on a daily rate
basis.  The drilling management services business designs, develops
and executes specific offshore drilling programs.  GlobalSantaFe's
oil and gas business participates in exploration and production
activities, principally in order to facilitate the acquisition of
turnkey contracts for its drilling management services operations.
Its fleet includes 13 floating rigs, 44 cantilevered jack-up rigs,
31 land rigs and one platform rig.  The Oil and Gas Drillers sector
is catching fire as investors speculate on rising energy prices
and increased demand.  GSF has just broken out of a Stage I base
on heavy volume and investors who are interested in a long-term
portfolio position in the oil sector may consider this play.

FEB-27.50 GSF BY LB=1.35 OI=7607 CB=26.42 DE=28 TY=4.4%


__________________________________________________________________

SCMR - Sycamore  $5.63  *** Government Contract! ***

Sycamore Networks (NASDAQ:SCMR) develops and markets intelligent
optical networking products that enable telecommunications service
providers to cost-effectively transform the capacity created by
their fiber-optic networks into usable bandwidth to deliver a
broad range of telecommunications services.  Its intelligent
optical networking product portfolio includes fully integrated
edge and core optical switching products, network management
products and network design and planning tools.  Sycamore also
offers engineering, furnishing, installation and testing services,
as well as customer support from multiple locations worldwide.
Shares of Sycamore Networks have rallied strongly recently on
news that the company may have won a portion of a government
contract worth as much as $900 million over two years.  This
position offers investors a method to target-shoot an entry
point closer to technical support.

FEB-5.00 SMZ BA LB=0.80 OI=1585 CB=4.83 DE=28 TY=3.8%


__________________________________________________________________

WEBM - WebMethods  $10.93  *** Bottom Fishing ***

WebMethods (NASDAQ:WEBM) is a provider of software and services
for comprehensive end-to-end integration solutions.  WebMethods'
integration platform is a comprehensive solution for linking
business processes, enterprise and legacy application software
products, databases, human workflows and Web services within
and across business enterprises and government organizations.
In addition, the company offers a variety of software support
and maintenance options designed to meet its customers' varied
needs.  WebMethods has been forging a Stage I base for over a
year with a strong support area near $9.  Investors who believe
the company's share value will rebound in the future can use
this position to profit from that outcome.

FEB-10.00 UUW BB LB=1.25 OI=468 CB=9.68 DE=28 TY=3.6%




~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Supplemental Covered Calls
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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

GT     10.26  FEB 10.00   GT BB  0.95  2292   9.31  28   8.1%
OSTK   18.58  FEB 17.50  QKT BW  2.10  1101  16.48  28   6.7%
IPXL   17.54  FEB 17.50  UPR BW  1.00  1768  16.54  28   6.3%
DYN     5.06  FEB  5.00  DYN BA  0.30  6646   4.76  28   5.5%
NGEN   11.46  FEB 10.00  QEM BB  1.90  950    9.56  28   5.0%
CLZR   23.50  FEB 22.50  UKZ BX  1.85  340   21.65  28   4.3%
DITC   22.57  FEB 20.00  QZD BD  3.30  459   19.27  28   4.1%
TNOX   19.04  FEB 17.50  TMQ BW  2.05  44    16.99  28   3.3%
SWIR   22.90  FEB 20.00  IYQ BD  3.40  94    19.50  28   2.8%



**********
NAKED-PUTS
**********


Options 101: Strategy Selection
By Ray Cummins

One of our readers asked about the differences in the selection
process for naked puts and covered calls.


Attn: Naked Puts Editor
Subject: Covered Calls vs. Naked Puts

Hi Ray,

I have been following both your comments regarding naked puts and
Mark's letters on ITM covered calls.  Many of the factors which go
towards screening for securities suitable for covered call writing
and for selling naked puts clearly are identical or very closely
related.  However once the basic research is done, is it simply
personal preference which tips the scale towards one strategy over
the other?  Or, am I completely off base here?  Your comments on
the factors you feel should be considered in choosing one strategy
over the other would be greatly appreciated.

All the best and many thanks to all of you at OI for the patience
you have with those of us who are learning the trade.

DO


Hello DO,

Thanks for the generous comments and indeed, the "factors which go
towards screening for securities suitable for covered-call writing
and for selling naked puts clearly are identical or very closely
related."  The reason for the similarity is because the sale of
covered calls and the sale of naked puts offer essentially the
same capital risk, but with a slightly different reward potential.
The reason for the disparity in the return on investment is due to
the initial margin requirement (50%) for the stock purchase in a
covered-call play, whereas the naked-put collateral is generally
closer to 25% of the underlying issue's current value.  A second,
more important, consideration is that one approach requires you to
purchase the stock outright with cash (in a minimum amount of 50%
of the current price), while the other strategy involves only the
commitment of portfolio securities of a much smaller amount.  The
last consideration is commissions.  A successful naked-put play
involves only one transaction; the sale of the uncovered option.
However, a successful (ITM) covered-call position requires three
separate trades; the purchase of the stock, the sale of the option,
and the sale of the stock.  So, even though there is no significant
difference in the capital risk of the two strategies, the issue of
cash versus collateral and the minimum margin requirements, and to
a lesser degree, commission costs, suggest that writing naked puts
is (theoretically) the more favorable of the two techniques.

Since an equivalent uncovered put outperforms a covered call, why
would anyone ever use the latter approach?  The primary reason is
simple: Some investors aren't comfortable writing "naked" options
and many have yet to learn that buying and selling derivatives can
be more profitable than many strategies which involve ownership in
the underlying issue.  Brokerages also play a major role in this
scenario -- some say to bolster commission fees -- by preventing
traders from selling uncovered options until they have acquired a
certain (higher) level of experience and established a substantial
account balance.  Of course, there are other motives in strategy
selection and one of the most common examples is the category of
investors who are simply looking for conservative techniques to
improve the performance of their individual retirement accounts.
(The use of margin is not allowed in most IRA's -- so naked puts
are prohibited -- but options can be sold against an underlying
long position such as stock or in some cases, LEAPS.)

With these factors in mind, our goal is simply to provide a range
of candidates in both strategies and the only real difference in
the selection process is the cost basis that can be achieved with
the sale of the (call or put) option.  Obviously, "lower is better"
when it comes to your cost basis in the underlying and the nature
of option pricing is such that superior (theoretical) positions are
usually available with deep-out-of-the-money uncovered puts.  Most
professional traders who use this technique focus on a target gain
of no more than 3-4% per month in "premium-selling" plays because
a position established within that range will generally require a
price change (in the underlying) of nearly two standard deviations
to become unprofitable.  While that approach certainly applies to
writing "naked" puts, I would not regard it as the only qualifier
in selecting stocks for the strategy.  Indeed, there are numerous
occasions when the recent trend of the issue (or tracking stock,
holdr, ETF, etc.) dictates that you should avoid a position even
when the most robust premiums exist.  Reducing the number of (sold)
contracts is one way to limit the overall percentage risk to your
portfolio, however it will not adequately address the requirement
to avoid preventable losses in technically unfavorable candidates.
In all cases, remember that option premiums are just one of the
components you must evaluate when choosing potential plays; recent
price/volume trends (charting) in both the issue and its industry
group/sector, and the risk versus reward in the overall position
are important factors as well.

Hope that helps...and 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

ADAT    16.95   16.80  FEB 12.50  0.40    0.40*   3.0%   9.4%
SEPR    27.99   27.54  FEB 22.50  0.65    0.65*   2.7%   9.1%
XING    12.80   14.70  FEB 10.00  0.35    0.35*   2.6%   8.7%
NEOL    18.26   19.10  FEB 15.00  0.40    0.40*   2.5%   8.1%
OPWV    15.18   16.73  FEB 12.50  0.40    0.40*   2.4%   7.6%
PMCS    23.80   22.53  FEB 20.00  0.50    0.50*   2.3%   7.2%
SEPR    27.25   27.54  FEB 22.50  0.65    0.65*   2.2%   6.9%
ASKJ    23.83   23.06  FEB 20.00  0.60    0.60*   2.2%   6.9%
SPRT    16.40   14.66  FEB 12.50  0.25    0.25*   1.8%   6.3%
NKTR    17.12   17.20  FEB 15.00  0.45    0.45*   2.2%   6.3%
IDCC    24.46   24.30  FEB 20.00  0.50    0.50*   1.9%   6.2%
WFII    17.80   15.29  FEB 15.00  0.40    0.40*   2.0%   6.1%
RMBS    34.60   31.54  FEB 25.00  0.50    0.50*   1.8%   6.0%
JNPR    22.00   27.98  FEB 20.00  0.55    0.55*   2.0%   5.4%
AFFX    28.29   28.40  FEB 25.00  0.50    0.50*   1.8%   5.2%
RDWR    30.73   32.30  FEB 25.00  0.35    0.35*   1.3%   4.5%

* Stock price is above the sold strike price.

Editor's Comments:

Entry Point Or Time To Sell?

The majority of stocks drifted lower Friday as buyers weighed
the upside potential from current levels and opted to lock-in
profits after nearly two months of bullish activity.  With the
major equity averages at two-year highs and favorable earnings
factored into share values, investors should be prepared for a
necessary consolidation and maintain extreme diligence in their
portfolio management.  This week's only "early-exit" candidate
is: Wireless Facilities (NASDAQ:WFII).

Positions Previously Closed: 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 NAKED-PUT CANDIDATES

Sequenced by Maximum Yield (monthly basis)
__________________________________________________________________

Stock  Last    Option    Option Last Open Cost  Days Simple  Max
Symbol Price   Series    Symbol Bid  Int. Basis Exp. Yield  Yield

RETK   11.37  FEB 10.00  QRD NB 0.45 78    9.55  28   5.1%  13.5%
ADAT   16.80  FEB 12.50  HAU NV 0.40 608  12.10  28   3.6%  11.6%
UTHR   24.25  FEB 22.50  FUH NX 0.70 851  21.80  28   3.5%   8.8%
IMCL   43.41  FEB 35.00  QCI NG 0.75 2937 34.25  28   2.4%   8.4%
BLTI   21.14  FEB 17.50  BQF NW 0.30 649  17.20  28   1.9%   6.4%
ATRS   37.40  FEB 30.00  QJI NF 0.45 128  29.55  28   1.7%   6.1%
AFFX   28.40  FEB 25.00  FIQ NE 0.40 1147 24.60  28   1.8%   5.2%


Legend (for play descriptions below)

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).

__________________________________________________________________

RETK - Retek  $11.37  *** Earnings Are Due Tuesday! ***

Retek (NASDAQ:RETK) is a provider of software and services to
the retail industry.  The company provides technology solutions
that help retailers create, manage and fulfill consumer demand.
The company develops and sells software solutions that support
virtually all operational activities of a typical retailer.  The
company's primary software solutions consist of integrated, but
independently deployable groups of products, which are accessed
via an Internet browser and can be hosted by a customer or by an
outside application service provider.  Retek markets a number of
unique products for retailers that help them reduce costs while
improving customer service and the overall shopping experience.
The question is whether demand for Retek's retail solutions will
translate to profits when the company posts its annual report on
January 27, 2004.  Traders who expect favorable earnings should
consider this position.

FEB-10.00 QRD NB LB=0.45 OI=78 CB=9.55 DE=28 TY=5.1% MY=13.5%


__________________________________________________________________

ADAT - Authentidate Holding  $16.80  *** Premium Selling! ***

Authentidate Holding (NASDAQ:ADAT) develops security software
technology, document imaging software products and systems
integration services and products.  The firm's products include
DocStar document imaging software products, the Authentidate
authentication and security software products and system
integration services and products through its DJS Marketing
Group subsidiary.  AHC also offers, through the Trac Medical
Solutions subsidiary, the CareCert Internet-based medical
forms processing service.  The company's subsidiary, DJS, is
also an authorized sales and support provider for software
products such as Microsoft Solutions and Lotus Notes.  DJS
sells computer hardware and provides software and integration
services to businesses to meet their data management needs.
Web security and digital document processing and certification
are necessary services for almost all Internet users and this
company has some unique solutions to those needs.  Traders who
agree with an optimistic outlook for Authentidate can speculate
on its future share value with this position.

FEB-12.50 HAU NV LB=0.40 OI=608 CB=12.10 DE=28 TY=3.6% MY=11.6%


__________________________________________________________________

UTHR - United Therapeutics  $24.25  *** Drug Speculation! ***

United Therapeutics (NASDAQ:UTHR) is a biotechnology company
focused on the development and commercialization of therapeutics
to treat chronic and life-threatening diseases in 3 therapeutic
areas: cardiovascular medicine, infectious disease and oncology.
It has 5 therapeutic platforms: Prostacyclin analogs are stable
synthetic forms of a molecule that has effects on blood-vessel
health and function; Remodulin has been approved in the United
States for the treatment of pulmonary arterial hypertension in
patients with New York Heart Association Class II-IV symptoms;
Immunotherapeutic monoclonal antibodies are antibodies that
activate patients' immune systems to treat cancer; Glycobiology
anti-viral agents are a class of small molecules that may be
effective as an oral therapy for hepatitis C and other infections,
and Telemedicine involves portable digital devices that enable
physicians to remotely monitor patients' bodily measurements.
Shares of UTHR rallied this week on speculation the company's
drug Remodulin may soon be approved for marketing in France and
other parts of Europe.  The issue appears poised for additional
upside activity in the coming months and traders can profit from
that outcome with this position.

FEB-22.50 FUH NX LB=0.70 OI=851 CB=21.80 DE=28 TY=3.5% MY=8.8%


__________________________________________________________________

IMCL - ImClone Systems  $43.41  *** Erbitux Up For Approval! ***

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.  The U.S. FDA will make a decision about Erbitux in less
than a month and analysts expect the drug to be approved, possibly
in a limited form or with restrictions.  Traders can speculate on
the results of the FDA meeting with this position.

FEB-35.00 QCI NG LB=0.75 OI=2937 CB=34.25 DE=28 TY=2.4% MY=8.4%


__________________________________________________________________

BLTI - Biolase  $21.14  *** Speculation Only! ***

BioLase Technology (NASDAQ:BLTI) is a medical technology company
that designs, develops, manufactures and markets advanced dental,
cosmetic and surgical lasers and related products.  The company's
principal products are water- and laser-based systems focused for
use in dentistry.  The company holds patents and has received
clearances from the United States Food and Drug Administration
for applications in other markets  such as dermatology.  BioLase
Technology also manufactures accessories and disposable products
for its water- and laser-based systems.  Lots of speculation on
this unique company after some recent (December) comments in IBD,
and investors say Biolase is a market leader with growing sales
year-over-year and renewed institutional interest.  The trend is
bullish in the short-term and traders can profit from additional
upside movement in the issue with this position.

FEB-17.50 BQF NW LB=0.30 OI=649 CB=17.20 DE=28 TY=1.9% MY=6.4%


__________________________________________________________________

ATRS - Altiris  $37.40  *** Entry Point? ***

Altiris (NASDAQ:ATRS) offers a range of Web-enabled solutions
that empower organizations to easily manage desktops, notebooks,
handhelds, and Windows, Linux and UNIX servers throughout the IT
lifecycle.  Altiris provides fully integrated, complete systems
management solutions for client and mobile, server, and asset
management.  The company automates, simplifies, and reduces the
cost and complexity of IT lifecycle management with a rapid
return on investment.  Shares of ATRS consolidated this week
after achieving a new "all-time" high and the dip may be just
the opportunity traders need to initiate a new (bullish) play in
the issue.  The company's quarterly earnings report is due after
the close of the market on February 2, 2004.

FEB-30.00 QJI NF LB=0.45 OI=128 CB=29.55 DE=28 TY=1.7% MY=6.1%


__________________________________________________________________

AFFX - Affymetrix  $28.40  *** New Trading Range? ***

Affymetrix (NASDAQ:AFFX) is engaged in the development, sale
and service of systems for genetic analysis in life sciences.
The firm has developed and intends to establish its GeneChip
system and related microarray technology as the platform of
choice for acquiring, analyzing and managing complex genetic
information.  The company's integrated platform consists of
disposable DNA probe arrays containing gene sequences on a
chip, certain reagents for use with the probe arrays, a
scanner and other instruments to process the probe arrays, as
well as software to analyze and manage genetic information
from the probe arrays.  Shares of AFFX have been in "rally
mode" since the company inadvertently disclosed some bullish
earnings data in a web-cast, causing an unexpected round of
"short-covering."  Now that the issue has stabilized in a new
price range, traders can establish a relatively conservative
position in the biotech segment with consider this position.

FEB-25.00 FIQ NE LB=0.40 OI=1147 CB=24.60 DE=28 TY=1.8% MY=5.2%




~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Supplemental Naked Puts
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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)
__________________________________________________________________

Stock  Last    Option    Option Last Open Cost  Days Simple  Max
Symbol Price   Series    Symbol Bid  Int. Basis Exp. Yield  Yield

NANO   20.79  FEB 17.50  QNK NW 0.55 0    16.95  28   3.5%  10.7%
ATSN   11.19  FEB 10.00  UAT NB 0.35 20    9.65  28   3.9%  10.5%
SEAC   18.20  FEB 17.50  UEG NW 0.65 78   16.85  28   4.2%   9.8%
MSO    13.39  FEB 12.50  MSO NV 0.40 171  12.10  28   3.6%   8.9%
AGYS   13.26  FEB 12.50  OQJ NV 0.40 0    12.10  28   3.6%   8.8%
FWHT   20.30  FEB 17.50  HFQ NW 0.40 173  17.10  28   2.5%   7.6%
PMCS   22.53  FEB 20.00  SQL ND 0.40 4590 19.60  28   2.2%   6.3%
ERES   34.90  FEB 30.00  UDB NF 0.50 520  29.50  28   1.8%   5.7%
MSCC   32.54  FEB 30.00  QMS NF 0.50 0    29.50  28   1.8%   4.9%

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

SEE DISCLAIMER IN SECTION ONE

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~


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

Correction Looming On The Horizon?
By Ray Cummins

Stocks ended mixed Friday as investors sold for profits in the
wake of a ninth straight week of gains for the broader market.

The Dow Jones industrial average fell 54 points to 10,568 amid
weakness in a number of industry giants including AT&T (NYSE:T),
Boeing (NYSE:BA), Dupont (NYSE:DD), Alcoa (NYSE:AA) and Disney
(NYSE:DIS).  A rally in Microsoft (NASDAQ:MSFT) shares boosted
the NASDAQ to a positive close, up 4 points to 2,123, after a
day of volatile activity.  The Standard & Poor's 500 Index slid
2 points to 1,141 as aerospace, transportation, managed care,
gold, and basic materials stocks slumped.  For the week, both
the Dow and the NASDAQ were slightly lower while the S&P edged
higher.  Volume was heavy, with over 1.5 billion shares swapped
on the New York Stock Exchange and 2.2 billion shares traded on
the NASDAQ.  Advancers narrowly outpaced decliners on both the
Big Board and the technology exchange.  In the U.S. bond market,
the benchmark 10-year treasury note plunged 30/32, driving its
yield up to 4.07%.


~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
SUMMARY OF CURRENT POSITIONS - AS OF 01/23/03
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

The following summary is a reasonable account of the positions
previously offered in this section. However, no representation
is being made as to the actual performance of a position and in
fact, there are frequently large differences between the summary
results and those of our subscribers, due to the variety of ways
in which each play can be opened, closed, and/or adjusted.  In
addition, the summary might not be completely representative of
the manner in which the average trader would react to changing
conditions in a position 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

LRCX    34.59   29.06   FEB   25  30   0.55  29.45  (0.39) Closed
OHP     46.69   47.74   FEB   40  42   0.30  42.20   0.30   Open
NBR     44.11   45.00   FEB   37  40   0.30  39.70   0.30   Open
BIIB    43.19   44.32   FEB   35  40   0.55  39.45   0.55   Open
CCMP    56.24   47.59   FEB   45  50   0.75  49.25  (1.66) Closed
GENZ    54.26   55.00   FEB   47  50   0.30  49.70   0.30   Open

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

After months of upside activity, the technology segment is finally
showing signs of weakness and semiconductor-related stocks have
been among the most active issues during the earnings reporting
season.  Two of our recent plays in this group were hammered this
week, despite apparently favorable reports.  The position in Cabot
Micro (NASDAQ:CCMP) was closed Thursday morning for a smaller than
published loss and Lam Research (NASDAQ:LRCX) became an early-exit
candidate on Friday after the stock plunged below the sold (put)
strike at $30 on heavy trading volume.


CALL CREDIT SPREADS

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

ADBE    37.12   38.04   FEB   45  40   0.55   40.55   0.55   Open
TBL     51.13   49.89   FEB   60  55   0.65   55.65   0.65   Open
ABT     43.25   42.97   FEB   48  45   0.25   45.25   0.25   Open
POWI    32.05   30.80   FEB   40  35   0.75   35.75   0.75   Open
SCHN    45.90   44.24   FEB   60  55   0.50   55.50   0.50   Open

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


CALL DEBIT SPREADS

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

BRCM    36.78  39.02   FEB   30  32   2.20   32.30  0.30   Open
CREE    25.85  25.67   FEB   20  22   2.20   22.20  0.30   Open

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


PUT DEBIT SPREADS

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

MIK     41.42  43.85   FEB   47  45   2.20   45.30  0.30   Open
QLGC    47.16  45.45   FEB   55  50   4.20   55.80  0.80   Open


SYNTHETIC (BULLISH)

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

UTHR    23.20  24.25   MAY     30     17    (0.10)   0.40   Open
CEPH    52.50  56.00   FEB     60     45     0.10    1.00   Open?
EYE     25.30  25.95   MAR     30     20     0.00    0.25   Open

All of our current synthetic positions have achieved profitability
but Cephalon (NASDAQ:CEPH) was by far the best performer, offering
up to a $0.90 gain in less than one week.


SYNTHETIC (BEARISH)

No Open Positions


CALENDAR & DIAGONAL SPREADS

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

FISV    38.28  37.71   MAR-35P   FEB-35P   0.30    0.35    Open
AMHC    27.08  27.49   MAY-30C   FEB-30C   1.25    1.20    Open


DEBIT STRADDLES

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

MATK    65.74  66.08   MAR    65    65     9.40    9.00    Open
NTE     30.44  31.49   FEB    30    30     0.00    0.00   No Play

The new straddle in Nam Tai Electronics (NYSE:NTE) was similar
to our recent position in Petrochina (NYSE:PTR) as there was
little opportunity to initiate the play (with a delta-neutral
outlook) due to the "gap-up" opening and subsequent rally on
Monday.  Some traders may have been able to open the straddle
during the first few minutes of trading, and the issue was very
volatile, closing the day almost $4 higher.  However, it does
not appear that the majority of readers could have participated
in the play as it was offered, so we will not track it in the
future.


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.

__________________________________________________________________

AVE - Aventis  $73.00  *** Buyout/Merger Coming? ***

Aventis (NYSE:AVE) is a pharmaceutical company that discovers,
develops, manufactures and commercializes prescription drugs for
such therapeutic areas as oncology, cardiology, diabetes and
respiratory/allergy, as well as human vaccines.  The company's
wide range of therapeutic innovations include treatments for
lung cancer, breast cancer, thrombosis, seasonal allergies,
diabetes and hypertension.

AVE - Aventis  $73.00

PLAY (conservative - bullish/credit spread):

BUY  PUT  FEB-60.00  AVE-NL  OI=557   ASK=$0.30
SELL PUT  FEB-65.00  AVE-NM  OI=3098  BID=$0.75
INITIAL NET-CREDIT TARGET=$0.50-$0.60
POTENTIAL PROFIT(max)=11% B/E=$64.50


__________________________________________________________________

CI - Cigna  $60.55  *** Rally In Progress! ***

Cigna Corporation (NYSE:CI) and its subsidiaries are investor-
owned employee benefits organizations in the United States.  Its
subsidiaries are major providers of employee benefits offered
through the workplace, including health care products and other
services, life, accident and disability insurance, retirement
products and services and investment management.  CIGNA's main
operating divisions include Employee Health Care, Disability and
Life Benefits, CIGNA Group Insurance, Employee Retirement, and
Investment Services, and International Life, Health and Employee
Benefits.

CI - Cigna  $60.55

PLAY (conservative - bullish/credit spread):

BUY  PUT  FEB-50.00  CI-NJ  OI=733   ASK=$0.25
SELL PUT  FEB-55.00  CI-NK  OI=8836  BID=$0.75
INITIAL NET-CREDIT TARGET=$0.55-$0.60
POTENTIAL PROFIT(max)=12% B/E=$54.45


__________________________________________________________________

DNA - Genetech  $96.40  *** Consolidation Complete? ***

Genentech (NYSE:DNA) is a biotechnology firm using human genetic
information to discover, develop, manufacture and commercialize
biotherapeutics for significant unmet medical needs.  The company
manufactures and commercializes biotechnology products directly
in the United States.  The company also licenses other products
to various partners and its development efforts, including those
of its collaborative firms, cover a range of medical conditions,
including cancer, respiratory disorders, cardiovascular diseases,
endocrine disorders and inflammatory and immune problems.

DNA - Genetech  $96.40

PLAY (less conservative - bullish/credit spread):

BUY  PUT  FEB-85.00  DNA-NQ  OI=10939  ASK=$0.50
SELL PUT  FEB-90.00  DNA-NR  OI=3519   BID=$1.25
INITIAL NET-CREDIT TARGET=$0.75-$0.80
POTENTIAL PROFIT(max)=17% B/E=$89.25


__________________________________________________________________

OVTI - OmniVision  $51.10  *** New Downtrend Underway? ***

OmniVision Technologies (NASDAQ:OVTI) designs, develops and sells
high performance, high quality and cost efficient semiconductor
imaging devices for computing, telecommunications, industrial,
automotive and consumer electronics applications.  The company's
main product, an image sensing device called a CameraChip, is used
to capture an image in cameras and camera-related products in a
range of imaging applications such as personal computer cameras,
digital still cameras, security and surveillance cameras, personal
digital assistant cameras, mobile phone cameras, and cameras for
automobiles and toys that incorporate both still picture and live
video applications.

OVTI - OmniVision  $51.10

PLAY (conservative - bearish/credit spread):

BUY  CALL  FEB-65.00  UCM-BM  OI=2836  ASK=$0.40
SELL CALL  FEB-60.00  UCM-BL  OI=2779  BID=$0.85
INITIAL NET-CREDIT TARGET=$0.50-$0.60
POTENTIAL PROFIT(max)=11% B/E=$60.50


__________________________________________________________________

VSEA - Varian Semiconductor  $45.27  *** Earnings Speculation! ***

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

VSEA - Varian Semiconductor  $45.27

PLAY (conservative - bearish/credit spread):

BUY  CALL  FEB-55.00  UES-BK  OI=438  ASK=$0.30
SELL CALL  FEB-50.00  UES-BJ  OI=526  BID=$0.80
INITIAL NET-CREDIT TARGET=$0.55-$0.60
POTENTIAL PROFIT(max)=12% B/E=$50.55



~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
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.

__________________________________________________________________

TEVA - Teva Pharmaceutical  $61.75  *** Next Leg Up? ***

Teva Pharmaceutical Industries (NASDAQ:TEVA), headquartered in
Israel, is among the top 30 pharmaceutical companies and among
the largest generic pharmaceutical companies in the world.  The
firm develops, manufactures and markets generic and innovative
human pharmaceuticals and active pharmaceutical ingredients.
The majority of Teva's sales are in North America and Europe.

TEVA - Teva Pharmaceutical  $61.75

PLAY (conservative - bullish/debit spread):

BUY  CALL  FEB-55.00  TVQ-BK  OI=633   ASK=$7.10
SELL CALL  FEB-60.00  TVQ-BL  OI=4461  BID=$2.65
INITIAL NET-DEBIT TARGET=$4.40-$4.45
POTENTIAL PROFIT(max)=12% B/E=$59.45


__________________________________________________________________

NVLS - Novellus Systems  $39.89  *** Trading Range Top? ***

Novellus Systems (NASDAQ:NVLS) manufactures, sells and services
semiconductor processing equipment.  The company's products are
comprised primarily of advanced systems used to deposit thin
conductive and insulating films on semiconductor devices, as well
as equipment for preparing the device surface prior to these
deposition processes.  Novellus is a supplier of high productivity
deposition and surface preparation systems used in the fabrication
of integrated circuits.  Chemical Vapor Deposition systems employ
a chemical plasma to deposit all of the dielectric (insulating)
layers and certain of the metal (conductive) layers on the surface
of a semiconductor wafer.  Physical Vapor Deposition systems are
used to deposit conductive metal layers by sputtering metallic
atoms from the surface of a target source via high DC power.
Electrofill systems are used for depositing copper conductive
layers in a dual damascene design architecture using an aqueous
solution.  Earnings are due Monday, January 26, 2004.

NVLS - Novellus Systems  $39.89

PLAY (conservative - bearish/debit spread):

BUY  PUT  FEB-45.00  NLQ-NI  OI=265   ASK=$5.50
SELL PUT  FEB-42.50  NLQ-NA  OI=2693  BID=$3.30
INITIAL NET-DEBIT TARGET=$2.15-$2.20
POTENTIAL PROFIT(max)=14% B/E=$42.80



~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
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.

__________________________________________________________________

DD - Dupont  $42.72  *** Pre-Earnings Slump? ***

DuPont (NYSE:DD) is a science company.  Founded in 1802, DuPont
puts science to work by solving problems and creating solutions
that make people's lives better, safer and easier.  Operating in
more than 70 countries, the firm offers a wide range of products
and services to various markets including agriculture, nutrition,
electronics, communications, safety and protection, home and
construction, transportation and apparel.  Earnings are due on
Tuesday, January 27, 2004.

DD - Dupont  $42.72

PLAY (very speculative - bearish/synthetic position):

BUY  PUT   MAR-40.00  DD-OH  OI=1215  ASK=$0.55
SELL CALL  MAR-45.00  DD-CI  OI=399   BID=$0.40
INITIAL NET-DEBIT TARGET=$0.00-$0.10
INITIAL TARGET PROFIT=$0.35-$0.65

Note: Using options, this position is similar to being short the
stock.  The minimum initial margin/collateral requirement for
the sold option is approximately $1500 per contract.  However,
do not open this position if you can not afford to purchase the
stock at the sold call strike price ($45.00).



~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
CALENDAR SPREADS
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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

__________________________________________________________________

ABGX - Abgenix  $15.60  *** Cheap Speculation! ***

Abgenix (NASDAQ:ABGX) is a biopharmaceutical company that is
focused on the discovery, development and manufacture of human
therapeutic antibodies for the treatment of a variety of disease
conditions, including cancer, inflammation, metabolic disease,
transplant-related diseases, cardiovascular disease and infectious
diseases.  Abgenix has proprietary technologies that facilitate
rapid generation of highly specific, antibody-therapeutic product
candidates that contain fully human protein sequences and that
bind to disease targets appropriate for antibody therapy.  Abgenix
developed its XenoMouse technology, a technology using genetically
modified mice to generate fully human antibodies.  It also owns a
technology that enables the rapid ID of antibodies with desired
function and characteristics, referred to as SLAM technology.

ABGX - Abgenix  $15.60

PLAY (speculative - bullish/calendar spread):

BUY  CALL  APR-17.50  AZG-DW  OI=482  ASK=$0.90
SELL CALL  FEB-17.50  AZG-BW  OI=260  BID=$0.30
INITIAL NET DEBIT TARGET=$0.55-$0.60
INITIAL TARGET PROFIT=$0.35-$0.60



~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
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.

__________________________________________________________________

BSC - Bear Stearns  $84.10  *** Probability Play ***

Founded in 1923, Bear Stearns Companies Inc. (NYSE:BSC) is the
parent company of Bear, Stearns & Co. Inc., a leading investment
banking and securities trading and brokerage firm.  With over $37
billion in total capital, Bear Stearns serves global governments,
corporations, institutions and individuals worldwide.  The firm's
business includes corporate finance and mergers and acquisitions,
institutional equities & fixed income sales, trading and research,
private client services, derivatives, foreign exchange and futures
sales and trading, asset management and custody services.  Through
Bear, Stearns Securities, it offers financing, securities lending,
clearing and technology solutions to hedge funds, broker-dealers
and investment advisors.  The company's next quarterly earnings
report is due in March, 2004.

BSC - Bear Stearns  $84.10

PLAY (speculative - neutral/debit straddle):

BUY CALL  MAR-85.00  BSC-CQ  OI=121  ASK=$2.30
BUY PUT   MAR-85.00  BSC-OQ  OI=29   ASK=$3.10
INITIAL NET-DEBIT TARGET=5.20-$5.25
INITIAL TARGET PROFIT=$2.15-$3.60


__________________________________________________________________


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