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Daily Newsletter, Tuesday, 04/13/2004

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The Option Investor Newsletter                 Tuesday 04-13-2004
Copyright 2004, All rights reserved.                       1 of 3
Redistribution in any form strictly prohibited.


In Section One:

Wrap: Too Much Good News
Futures Markets: See Note
Index Trader Wrap: See Note
Market Sentiment: Investors Turn Pessimistic


Posted online for subscribers at http://www.OptionInvestor.com
************************************************************
MARKET WRAP  (view in courier font for table alignment)
************************************************************
      04-13-2004           High     Low     Volume   Adv/Dcl
DJIA    10381.28 -134.30 10552.61 10361.99 1.79 bln  397/2913
NASDAQ   2030.08 - 35.40  2073.42  2026.20 1.95 bln  718/2478
S&P 100   552.24 -  7.25   561.05   551.33   Totals 1115/5391
S&P 500  1129.44 - 15.76  1147.81  1127.70
W5000   11046.02 -166.80 11237.32 11029.52
SOX       506.25 -  9.00   517.62   505.01
RUS 2000  585.83 - 13.82   601.04   584.34
DJ TRANS 2890.71 - 43.10  2948.19  2884.40
VIX        17.26 +  1.98    17.98    15.29
VXO (VIX-O)17.50 +  2.06    18.06    15.47
VXN        22.23 +  1.86    22.52    20.26
Total Volume 4,097M
Total UpVol    739M
Total DnVol  3,320M
Total Adv  1323
Total Dcl  6085
52wk Highs  308
52wk Lows   121
TRIN       1.22
NAZTRIN    0.88
PUT/CALL   0.92
************************************************************

Too Much Good News
by Jim Brown

Analysts would have you think the reason for today's drop
was too much good news. Higher than expected Retail Sales
and higher than expected Business Inventories were said
to have increased fears of higher interest rates and that
caused the sell off. Think about it for a moment. With
rates at multi-decade lows why would two minor reports
suddenly turn the markets upside down? Not hardly.

Dow Chart - Daily


Nasdaq Chart - Daily


Russell 2000 Chart - Daily


S&P Chart - Daily



The weekly Chain Store Sales rose by +0.8% but the real heat
came from the March monthly numbers with a +1.8% gain. This
was more than double the expectations of +0.5% to +0.7% and
suggest consumers are racing to the store with their tax
refund checks. After the stronger than expected number the
markets gapped open to strong resistance at 10550/2075/1150
and instantly failed. You will not make me believe that the
good news from 8:30-9:30 turned instantly to bad news at
9:40. The component with the largest gain was Building Supply
stores which soared +10.6%. The year over year gain was a
record +20.8%. You would think this component would be seen
as positive for the housing impact. Food service and
Electronics both rose over +10%. Again, this was very good
news for the economy.

The reason for the sell off was given by the talking heads
as the news was too good and would lead to rapidly higher
interest rates. While I agree the news was good it is only
one piece of the puzzle. We have been looking for some sign
the consumer was not hibernating and this was it but nobody
expects the Fed to come out tomorrow and raise rates. There
was also the viewpoint that such good sales would project
weaker numbers over the next couple months as the tax refund
bubble burst. This is entirely possible but wouldn't that be
a reason for the Fed to be patient? Gotcha.

Other economic news was the Business Inventories, which rose
+0.7% and slightly over the +0.5% estimates. Good news BUT
the sales component rose slightly as well and the inventory
to sales ratio remained at its record low of 1.33. Good news
but far from great. The Richmond Fed also rose to 30 from 19
and employment gained for the second month. Shipments rose
+11 points to 30 and the highest level since July-1999 and
new orders rose to 28 from 20. Good news but it is only one
Fed district.

Taking all of the above into context produces the following
quandary. Only the Retail Sales number was known at 9:30.
The markets had already given back their opening gains and
were well into negative territory before the Business Inv
and Richmond Fed Survey were known. You can't blame them
for the drop. The trend was already in place and strongly
negative.

Was it earnings that started the slide? Not hardly! Dow
component JNJ reported a +20% surge in profits and they
beat estimates by +3 cents. Merrill Lynch reported record
earnings of $1.22 per share and almost twice the same qtr
last year at 67 cents. Revenues were up +27% from Q1-2003
and +25% from 4Q-2003. No bad news there.

Something was clearly afoot that triggered the very strong
sell programs at the open. Personally I think it was several
factors at work. First is option expiration. We have had no
material volatility for this expiration period. Volume on
Monday was the lightest day of the year and not a normal
expiration Monday. Traders came back from the holiday
weekend with selling on their mind and analysts were quick
to try and place blame. Another reason for the selling was
tax related. Traders with substantial profits from the 2003
rally needed to raise cash to pay the taxman on Thursday.
It was a very good year for traders and the outlook for
stocks over the next six months is not exciting. Time to
take profits, raise cash and pay the piper. Last week
mutual funds only saw positive cash flows of $2B and
this was a quarter end period and the end of the 2003
contribution period. That was not a good sign. The selling
today suggested funds were seeing substantial outflows
this week. The Russell 2000 literally fell off a cliff
and traded -17 points off its opening high and lost nearly
twice as much on a percentage basis than the Dow. This is
a clear sign of fund withdrawals.

Other challenges facing traders were the Intel earnings
report tonight and the Bush press conference. Traders
heard that a group of hostages had been found dead in Iraq
and 40 more were in captivity. April has been a horrible
month with 78 coalition soldiers killed so far. Bad news
was breaking out all over but I still feel expiration and
cash flow were the key. Intel, Bush and the war were just
added weight.

After the bell Intel disappointed but only barely. Since
it had been widely expected to announce soft earnings there
was no real after hours impact. Revenue was light and Q2
guidance was light. They said processors, chipsets and
motherboard sales were lower than expected but flash
memory sales were slightly higher. Unfortunately flash
memory has been a profit problem for Intel. Futures fell
about -3 points in after hours. No big deal and Intel only
fell about -40 cents. Andy Bryant said on a TV interview
that they were seeing consolidation of the gains for the
last three quarters and were not seeing new economic growth.
He said mature markets segments would continue to expand
IF IT spending grew and IF the economic recovery continued
but not at the rate seen in the prior three quarters. Intel
had very respectable earnings at +$1.73B. Unfortunately I
think quite a few traders were hoping for an upside surprise.
Investors have been used to constantly rising estimates and
two quarters of lowered guidance is a disappointment to some
traders regardless of how well they really did.

The Bush press conference tonight is his first since the
war started in Iraq and he is expected to restate his case
for being there and announce that 20,000-40,000 troops will
not be allowed to return home as scheduled. It is a "press"
conference and not a speech so anything will be fair game
and he is bound to get some hardball questions on everything
and some traders may have wanted to see what pops up before
buying the dip. The pictures on TV of burned Americans
hanging from bridges has brought the war back home and the
70+ soldiers killed this month is the worst since the war
began and the month is only half over.

Stock news is booming and it would be very hard to pin
any market weakness reasons on the current earnings cycle.
Unfortunately we all know the markets discount six months
in advance. First Call is now projecting as much as +21%
earnings growth for Q1. This is the third consecutive
month over 20%. Very strong performance but it is already
priced into the market. First Call is also projecting
earnings growth for Q2 at +15%, Q3 +16% and Q4 +14%. These
levels are strong but far below the last three quarters
and far below the current 20% rate.

The problem is the calendar. The first quarter last year
was a pre-war quarter and earnings were very depressed.
Here we are a year later and we are measuring our "booming"
results of +21% growth over a quarter that was a pothole
in history. Once the war was "over" business started booming
and we ramped up into the monster 3Q on the strength of
monster tax rebates. Comparisons are going to get a lot
tougher as we compete with that 8.5% GDP rate from Q3-2003
with a +4.0% GDP rate in 2004. The weak Intel guidance
tonight suggests IT spending going into Q2 is decent but
not booming. Ashok Kumar said this week the PC/IT growth
for the rest of the year would be hard pressed to pass +4%
and much less than the +10% some have suggested.

Technically we were due for a test of strength despite the
other external factors. For seven straight days the Dow
tried to rally and hold over 10500 with no success. This
sets up the potential for profit taking as traders tire
of trying to push it higher. The Dow pulled back to near
support at 10350 with stronger support at 10300. This is
not the end of the world but you may be able to see it
from here. This drop gives us a potential completed lower
high and a drop under 10300 would confirm it. We are in
a critical area. We need to rally quickly from here and
break out to the 10600 level or the selling volume will
quickly escalate. Once the bulls decide there is not going
to be an April earnings run they will head for the corral
to rest up for fall.

The Nasdaq also tried for seven days to break 2075 and
could not make it happen. The -35 drop today was serious
but not yet severe. The April 2nd gap from 2010 has not
even been filled. The 50dma is 2017 and well below our
2030 close. The Nasdaq is in better shape than the Dow
but the same criteria applies. A drop back below 1980
would put the bulls out to pasture.

The market internals were very bad with decliners beating
advancers 4:1 and down volume nearly 5:1 over advancing.
New 52-week lows hit 121 and the highest single day level
since August 4th. There was definitely a change in sentiment
that was not due entirely to rate fears.

The interest fear that was blamed for today's selling is
not unfounded but it is greatly exaggerated. The Fed Funds
futures are still not targeting a rate cut until September
and then only a quarter point. Heck the ten-year yields
have almost doubled that in the last two weeks. The fear
of rate hikes has done far more damage than any real hike
will ever do. Talk is cheap and the Fed heads have been
doing a lot of it lately.

For the rest of the week earnings will continue to flow
with 70 S&P companies announcing this week. The next big
tech to report is IBM on Thursday and there are a flood
of chip stocks reporting tomorrow. Some of the notable
reporters for Wednesday include AMD, BAC, AAPL, DHI, DAL,
ETN, EXTR, LRCX, MTG, RMBS, SNDK, SGR, TXN and PGR. The
problem as I see it is not earnings but cash flow and
future expectations. If the lowered guidance from Intel
is a symptom of future earnings releases then traders
still in the market will lose interest. The cash flow
numbers for the week will be critical and there is no
second chance. Fund flows after April 15th typically
slow to a dribble as summer approaches. Tomorrow we also
have the Consumer Price Index and traders will be look
for signs of inflation that would accelerate any rate
hike schedule.

For the short term we are slightly oversold and could
rebound at the open but it is still an expiration week
and still income tax week. This suggests we could see
some more weakness. We also have the increasing war in
Iraq and it is finally beginning to drag on the market.
The Bush speech tonight could reassure Americans or it
could raise the anxiety level. It will be a critical
point as the fight escalates. I would be very cautious
about entering new positions until this week is out. The
conflicting currents are very strong and there are plenty
of icebergs around. Thursday is the 92nd anniversary of
the Titanic sinking and I would hope it is not an omen
for the markets.

Enter Passively, Exit Aggressively.

Jim Brown
Editor


***************
FUTURES MARKETS
***************

Futures wrap is not emailed due to the excessive number of charts.
It may be read on the website at this address.
http://www.OptionInvestor.com/indexes/futureswrap.asp



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

Check the Site Later Tonight For Jeff's Index Trader Article
http://members.OptionInvestor.com/itrader/marketwrap/iw_041304_1.asp


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

Investors Turn Pessimistic
- J. Brown

After Monday's relief rally from the uneventful long holiday
weekend and the strong earnings report from NVLS the markets
seemed set to continue the rally into Tuesday.  Better than
expected earnings numbers from Johnson & Johnson (JNJ) and
Merrill Lynch (MER) helped set the tone and solidify expectations
for a strong earnings season.  Yet everything changed when the
March retail sales numbers blew past estimates with a +1.8%
increase.  Suddenly the focus was on higher interest rates and
the fed being forced to move sooner rather than later.  Whether
it was an excuse to take profits or not the sell-off was market
wide.  Declining stocks trounced advancers 25 to 4 on the NYSE
and 25 to 7 on the NASDAQ.  Down volume swallowed up volume 8-to-
1 and 14-to-5 on the NYSE and NASDAQ, respectively.

The market decline sent the Dow Industrials and the S&P 500 below
technical support at their 50-dma.  The NASDAQ looks poised to
join them below its own 50-dma soon.  Selling was very heavy in
the gold stocks on strength in the U.S. dollar.  The XAU dropped
more than 6% and closed below its simple 200-dma.  A number of
sector indices broke down under their own technical support
levels.  It was not a good day for stocks or bonds, the latter
saw yields shoot higher as investors pulled money out of the bond
market.

After the close Intel's earnings report didn't help matters.  The
largest chip maker on the planet missed earnings expectations and
revenues were lighter than expected.  This is liable to sink the
SOX back under its 50-dma and support at the 500 level, which
almost guarantees a down day for the NASDAQ.  There was some good
news after the close with McDonald's (MCD) raising their earnings
forecast but the Intel news is likely to overshadow it.

Historically April is the best month of the year for the Dow but
this is not a good start.  The MACD technical indicator on all
the major stock indices are hinting at a bearish sell signal in
the next few days.  I'd be careful about initiating new bullish
positions.


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

Market Averages

DJIA ($INDU)

52-week High: 10753
52-week Low :  8179
Current     : 10381

Moving Averages:
(Simple)

 10-dma: 10453
 50-dma: 10453
200-dma:  9890



S&P 500 ($SPX)

52-week High: 1163
52-week Low :  865
Current     : 1129

Moving Averages:
(Simple)

 10-dma: 1138
 50-dma: 1134
200-dma: 1064



Nasdaq-100 ($NDX)

52-week High: 1559
52-week Low : 1020
Current     : 1472

Moving Averages:
(Simple)

 10-dma: 1476
 50-dma: 1459
200-dma: 1396



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

Volatility indices soared higher with double-digit percentage
gains in the VIX and VXO as the markets dropped in a broad-based
decline.

CBOE Market Volatility Index (VIX) = 17.26 +1.98
CBOE Mkt Volatility old VIX  (VXO) = 17.50 +2.06
Nasdaq Volatility Index (VXN)      = 22.23 +1.86

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

          Put/Call Ratio  Call Volume   Put Volume

Total          0.92        856,548       785,025
Equity Only    0.77        659,012       510,532
OEX            0.73         67,691        49,196
QQQ            1.78         80,044       142,423


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

Bullish Percent Data

           Current   Change   Status
NYSE          77.1    + 1     Bull Correction
NASDAQ-100    54.0    + 1     Bear Correction
Dow Indust.   90.0    + 0     Bear Correction
S&P 500       76.6    - 1     Bear Confirmed
S&P 100       79.0    - 1     Bull Correction


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

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


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

 5-dma: 1.40
10-dma: 1.08
21-dma: 1.22
55-dma: 1.19


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     380       674
Decliners    2500      2479

New Highs      50       104
New Lows       63        17

Up Volume    183M      528M
Down Vol.   1640M     1379M

Total Vol.  1832M     1921M
M = millions


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

Commitments Of Traders Report: 04/06/04

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

There isn't much change to report in the Commercial traders'
positions.  They remain net short of the large S&P futures
contracts.  Small traders are virtually unchanged as well.


Commercials   Long      Short      Net     % Of OI
03/16/04      454,635   449,505     5,130     0.6%
03/23/04      401,456   418,732   (17,273)   (2.1%)
03/30/04      407,987   420,624   (12,673)   (1.5%)
04/06/04      409,429   419,471   (10,042)   (1.2%)

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
03/16/04      159,054   115,023    44,031    25.3%
03/23/04      130,648    89,943    40,705    18.5%
03/30/04      130,112    81,937    48,175    22.7%
04/06/04      130,262    80,174    50,088    23.8%

Most bearish reading of the year:  (1,657)- 5/27/03
Most bullish reading of the year: 114,510 - 3/26/02


E-MINI S&P 500

The S&P e-minis are seeing a bit more action with commercials
increasing their short by 20K.  In contrast the small trader
has upped their longs, which is par for the course.


Commercials   Long      Short      Net     % Of OI
03/16/04      472,809   574,241   (101,432)  ( 9.7%)
03/23/04      268,647   294,930    (26,283)  ( 4.7%)
03/30/04      265,492   305,797    (40,305)  ( 7.1%)
04/06/04      270,904   328,862    (57,958)  ( 9.7%)

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
03/16/04     192,136     96,691    95,445    33.0%
03/23/04     131,879     59,210    72,669    38.0%
03/30/04     123,494     59,550    63,944    35.0%
04/06/04     148,737     46,235   102,502    52.6%

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


NASDAQ-100

Hmm.... commercial traders have erased the one-week surge in
short contracts flipping them back to net long for the NASDAQ.
Meanwhile small traders are reducing longs and upping their
shorts.


Commercials   Long      Short      Net     % of OI
03/16/04       68,285     54,899    13,386   10.9%
03/23/04       52,014     34,017    17,997   20.9%
03/30/04       52,749     67,967   (15,218) (12.6%)
04/06/04       54,862     34,762    20,100   22.4%

Most bearish reading of the year: (21,858)  - 08/26/03
Most bullish reading of the year:  13,386   - 03/16/04

Small Traders  Long     Short      Net     % of OI
03/16/04       27,859    18,333     9,526    20.6%
03/23/04        9,884    12,887    (3,003)  (13.2%)
03/30/04        8,928    16,551    (7,623)  (30.0%)
04/06/04        7,971    20,721   (12,750)  (44.4%)

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

Very little change in commercial traders' positions for the
Dow futures.  Small traders have turned a bit more negative.


Commercials   Long      Short      Net     % of OI
03/16/04       32,317    17,514   14,803      29.7%
03/23/04       23,048    22,119      929       2.1%
03/30/04       23,642    22,180    1,462       3.2%
04/06/04       23,101    22,108      993       2.2%

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
03/16/04       10,002    20,970  (10,968)   (35.4%)
03/23/04        8,344     6,734    1,610     10.7%
03/30/04        7,020     6,711      309      2.3%
04/06/04        7,316     8,085     (769)    (5.0%)

Most bearish reading of the year: (12,106) -  3/09/04
Most bullish reading of the year:   8,523  -  8/26/03

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


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The Option Investor Newsletter                  Tuesday 04-13-2004
Copyright 2004, All rights reserved.                        2 of 3
Redistribution in any form strictly prohibited.


In Section Two:

Dropped Calls: NEM, SLAB
Dropped Puts: None
Call Play Updates: CAT, EBAY, ESRX, NSM, PDCO, TK, ZBRA
New Calls Plays: None
Put Play Updates: CFC, LEH, UTSI
New Put Plays: PD, QLGC


****************
PICKS WE DROPPED
****************

When we drop a pick it doesn't mean we are recommending a sell
on that play. Many dropped picks go on to be very profitable.
We drop a pick because something happened to change its
profile. News, price, direction, etc. We drop it because we
don't want anyone else starting a new play at that time.
We have hundreds of new readers with each issue who are
unfamiliar with the previous history for that pick and we
want them to look at any current pick as a valid play.


CALLS:
*****

Newmont Mining - NEM - close: 42.86 change: -2.40 stop: 43.50

Carnage is the best one-word description of what happened in the
Precious Metals sector today following the strong Retail Sales
report.  The XAU index got slammed for more than a 6% loss, in
response to the $12 slide in the price of gold.  In that context
NEM's 5.3% loss doesn't really look that bad.  But clearly the
breakout that drew us to the play a couple weeks ago has been
invalidated and today's obliteration of the 50-dma ($43.94) at
the open does not bode well.  Our $43.50 stop was hit shortly
after the open and the stock just continued downhill from there.
We'll have to chalk this one up to a radical change in market
sentiment derailing what had been looking like a solid bullish
play.  If nothing else, today's action is a stark reminder of why
we use stops.

Picked on March 28th at      $46.15
Change since picked:          -3.29
Earnings Date                2/04/04 (confirmed)
Average Daily Volume =     6.14 mln
Chart =


---

Silicon Labs. - SLAB - close: 56.84 change: -1.99 stop: 55.00

We were looking for SLAB to break out over $60 to trigger our
bullish play and fortunately that didn't happen before today's
carnage across the broad market.  SLAB rolled over this morning
just below the February highs and never looked back, slipping
more than 3% lower by the closing bell.  While the stock did hold
above the 10-dma and hasn't yet threatened its $55 stop, it seems
silly to keep it on the bullish play list.  Earnings are now less
than 2 weeks away and the stock would have to undo today's
technical damage and break out to new highs just to trigger the
play, not to mention the work it would have to do in order to
become a winning play.  In light of the INTC earnings tonight,
that seems even less likely.  We're removing SLAB from
consideration tonight and perhaps we can re-evaluate after
conditions improve.

Picked on April 11th at      $58.50
Change since picked:          -1.66
Earnings Date                4/26/04 (unconfirmed)
Average Daily Volume =     1.43 mln
Chart =



PUTS:
*****

None


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********************
PLAY UPDATES - CALLS
********************

Caterpillar - CAT - close: 82.02 change: -1.73 stop: 79.99

Uh-oh!  Buckle those seat belts.  The 134-point drop in the Dow
Industrials didn't help our long play in Dow component CAT.  The
stock lost more than 2% on Tuesday but managed to bounce from
last Wednesday's low and technical support at its simple 10-dma
today.  Short-term technicals are overbought and look weak.
Meanwhile we've got six trading days left before CAT announces
earnings.  That doesn't put us in the best position to consider
new plays.  Yesterday we raised our stop loss to $79.99 and we'll
keep it there for now.  Our target remains unchanged at $85.00.

Picked on April 02 at $ 80.25
Change since picked:   + 1.77
Earnings Date        04/22/04 (confirmed)
Average Daily Volume:     2.5 million
Chart =


---

eBay Inc - EBAY - close: 74.68 change: -1.52 stop: 71.95 *new*

The INX Internet index was one of Tuesday's worst performers
dropping 2.68%.  It felt some of the strongest selling because it
has been one of the strongest sectors with a huge rebound from
its late March lows.  EBAY has followed suit with an impressive
rebound as well so it was no surprise to see the stock slip
backward on profit taking during a market-wide sell-off.  Bullish
traders can look for a bounce from the $74 level (today's low) or
a dip from the 10-dma near $73 as potential entry point but
remember that EBAY is due to announce earnings on April 21st.  We
don't plan to hold over the event so that only gives us a few
trading days left.  We are going to raise our stop loss to
$71.95.

Picked on April 01 at $ 72.25
Change since picked:   + 2.43
Earnings Date        04/21/04 (confirmed)
Average Daily Volume:     7.0 million
Chart =


---

Express Scripts - ESRX - close: 76.66 change: -0.92 stop: 74.00

Playing out to our script late last week, ESRX rebounded from the
10-dma ($76.14) before continuing higher to once again test the
$78 level yesterday and then again this morning.  But the broad
market selling pressure was a bit too much for the bulls and the
stock headed south for the remainder of the session.  Still above
the 10-dma, ESRX held up much better than the rest of the market,
suffering only a 1.2% loss on the day.  But we do have a
disconcerting pattern of a lower high compared to last week's
price action and it is entirely possible that this time the 10-
dma will fail as support, requiring a test of the4 20-dma
($75.00) and 30-dma ($74.73) before the next real rebound can get
underway.  There's still 2 weeks until earnings are set to be
released, so there's definitely time for a fresh breakout and run
at the $80 level and beyond.  All we need is a cooperative market
environment, which was sorely lacking today.  Look for entry
opportunities on a rebound from the $75 area, but don't try to
catch a falling knife. If ESRX falls through the 30-dma, then it
will probably slice right through our $74 stop and head down for
a test of the 50-dma.  At this juncture, the best setup for new
entries would appear to be a breakout to new highs above $78.60.

Picked on April 4th at       $75.36
Change since picked:          +1.30
Earnings Date                4/28/04 (unconfirmed)
Average Daily Volume =     1.03 mln
Chart =


---

National Semi. - NSM - cls: 47.44 chng: -1.10 stop: 46.25*new*

Tuesday was not a day to be long stocks of any stripe, with every
sector ending in the red.  On the whole, the Semiconductor index
(SOX.X) didn't fare too badly, holding above the key $495-500
support area, but it certainly wasn't a bullish day.  In light of
the disappointing earnings report from INTC tonight, tomorrow may
not be very encouraging either.  Despite its recent relative
strength, NSM succumbed to the selling pressure, losing 2.25%.
While that doesn't look good, it was nice to see that volume was
relatively light, and price still held above the 10-dma ($46.75).
Tuesday's intraday low managed to just fill the gap left behind
last Thursday and we could be looking at a repeat of the gap fill
and bullish continuation seen last week.  If that's how things
play out, we're still recommending an exit from the play on a
test of the $50 resistance level.  Just in case this is the
beginning of a reversal though, we're tightening our stop to
$46.25.  That ensures at least a modest gain on the play, while
still keeping the stop under the 10-dma and the top of the 4/02
gap.  A successful rebound from the 10-dma can be used for
aggressive entries into the play, but should only be considered
if the SOX goes along for the ride from above $500.

Picked on March 30th at      $44.43
Change since picked:          +3.01
Earnings Date                6/10/04 (unconfirmed)
Average Daily Volume =     4.19 mln
Chart =


---

Patterson Dental Co - PDCO - cls: 74.97 chg: -1.24 stop: 71.75

There isn't much to report on PDCO.  Yesterday looked pretty
encouraging because the market (relief) rally helped PDCO
breakout over the $76 level.  Today's market weakness has pushed
PDCO back into the $74 to $76 trading range.  Conservative
investors concerned about a reversal might want to use a tight
stop under $74 or maybe the 10-dma at $73.15.  We're going to
give the stock a bit more room and use our updated stop from
Monday at $71.75.

Picked on April 04 at $ 72.14
Change since picked:   + 2.83
Earnings Date        02/19/04 (confirmed)
Average Daily Volume:     493 thousand
Chart =


---

Teekay Shipping - TK - close: 66.05 change: -2.04 stop: 65.95

There isn't much change in shares of TK either.  The stock
continues to consolidate between its rising 50-dma and overhead
resistance at $70.00.  Currently, OptionInvestor.com is un-
triggered while we wait for TK to trade at or above $70.05.
However, we have suggested that more aggressive traders could
take a riskier entry on a bounce from support above $65 (or the
50-dma).  Today's action tested that level again today suggesting
this is a potential entry point.  However, TK's lack of
participation in Monday's rally does go up as a yellow flag of
caution.  TK's P&F chart is also noteworthy.  It's still in
strong buy signal but the recent dip has produced another row of
O's.  A trade under $65.00 and TK will be in a P&F sell signal.
We will probably close this play unopened if TK closes under its
50-dma and/or the $65 mark.

Picked on April xx at $ xx.xx <-- see trigger
Change since picked:   + 0.00
Earnings Date        02/25/04 (confirmed)
Average Daily Volume:     374 thousand
Chart =


---

Zebra Technologies - ZBRA - cls: 74.25 chg: -0.23 stop: 69.99

There isn't much bulls can complain about with ZBRA.  The stock
continued its bullish outbreak on Monday supported by the rising
market.  However, it was relatively stable today, only falling 23
cents and holding the 74 mark.  While we're impressed with its
relative strength patient traders might get an opportunity to buy
a dip back towards $73.00-73.50 if the markets continue to slip.
Yesterday we raised the stop loss to $69.99.

Picked on April 11 at $ 73.26
Change since picked:   + 0.99
Earnings Date        04/28/04 (unconfirmed)
Average Daily Volume:     332 thousand
Chart =



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

None


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PLAY UPDATES - PUTS
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Countrywide Financial - CFC - close: 57.29 chg: +0.24 stop: 59.50

CFC began trading on a post-split (3-for-2) basis today.  We
don't know if the early morning strength was due to a reaction to
the split or just an oversold bounce.  Whatever the case the
rally faded and CFC looks poised to challenge support at its 100-
dma (55.75) again tomorrow.  Traders should also note that the
3:2 split has altered our exit target from the $82.00 region to
$54.65, which is just above the early December (03) resistance.
Our new stop loss is $59.50.  A reader asked us yesterday if CFC
was still worthy of new positions.  That is a tough call for us
to make since more aggressive, short-term traders can probably
still capture the nearly 5% move we're still expecting.  However,
CFC is near support at its 100-dma so the answer would depend on
your own risk profile and aggressiveness.

Picked on April 06 at $ 59.00 (split adjusted)
Change since picked:   - 1.71
Earnings Date        04/21/04 (confirmed)
Average Daily Volume:     2.5 million
Chart =


---

Lehman Brothers - LEH - cls: 77.22 chng: -3.60 stop: 81.00*new*

After patiently waiting for a week, LEH finally delivered the
breakdown we were sure was coming.  Initiating the play ahead of
time with a trigger at $80 turned out to be the right way to go
as well, because if we had waited for the break before initiating
coverage, we would have missed out on today's wild ride.  Traders
that took their entry on the break of $80 this morning saw shares
of LEH lead the Brokerage sector (XBD.X) lower on very strong
volume.  By the end of the day, LEH had traded more than twice
its ADV and the XBD index had delivered a convincing rollover
from its 50-dma up near $707.  Now we'll see if there's more
follow-through in store.  Our target for the play is the 200-dma
($74.25), which seems reasonable with the PnF bearish price
target of $73 and strong historical support coming in at $73-74.
The $80 level should now pose strong overhead resistance,
especially with the 100-dma at $80.56).  Due to the strength of
today's move, we aren't suggesting new positions at this time.  A
breakdown entry is too close to our eventual target and we need
to see if there's a strong or weak rebound in store before
attempting to enter on a failure of that rebound.  Lower stops to
$81.

Picked on April 6th at        $81.77
Change since picked:           -4.55
Earnings Date                3/16/04 (confirmed)
Average Daily Volume =      2.14 mln
Chart =


---

UTStarcom, Inc. - UTSI - cls: 29.51 chng: -0.39 stop: 30.75*new*

In light of the strong selloff across the entire market on
Tuesday, shares of UTSI held up much better than we would have
liked.  Rather than dropping sharply, the stock just continued
its very mild rollover, but once again remained above key support
in the $28.70-29.00 area.  The stock remains below its descending
trendline resistance ($30.50) and all technical signs point to
another break to new recent lows.  But the lack of a more
significant drop today is troubling.  We're hesitant to suggest
new entries on this anemic rollover and would prefer to wait for
a real breakdown under the recent low ($28.73) before opening new
positions.  Reflecting our increased caution on the play, we're
lowering our stop to $30.75 tonight, which is just over last
week's intraday highs.  If UTSI rallies above that level, it will
have the stock above its trendline and send a clear message that
the downtrend has run its course for the time being.

Picked on March 30th at       $29.38
Change since picked:           +0.13
Earnings Date                4/27/04 (unconfirmed)
Average Daily Volume =      3.22 mln
Chart =



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

Phelps Dodge - PD - close: 75.15 chg: -3.43 stop: 79.01

Company Description:
Phelps Dodge Corp. is the world's second-largest producer of
copper, a world leader in the production of molybdenum, the
largest producer of molybdenum-based chemicals and continuous-
cast copper rod, and among the leading producers of magnet wire
and carbon black. The company and its two divisions, Phelps Dodge
Mining Co. and Phelps Dodge Industries, employ more than 13,000
people in 27 countries. (source: company press release)

Why We Like It:
Readers know that we've been following the ups and downs of PD on
the watch list for weeks now.  Copper prices have soared to
multi-year highs due to rising demand from the expanding U.S.,
Chinese and global economies.  While copper has come down a bit
from its highest levels it's still overbought.  However, we're
not expecting a major bearish reversal in copper even though some
brokers have described the rise in copper as parabolic and
unsustainable.  We still believe that demand will remain strong
due to the strength in the aforementioned economies.  Yet that
doesn't mean that nimble traders can't try and capture some of
the intermediate moves.  The strength and recent breakout in the
U.S. dollar helped push metals lower today.  Looking more closely
at a chart of the dollar it would appear that the greenback could
rally for a few more days before hitting significant resistance.
Add to that the weakness in copper and a technical breakdown
under the 100-dma in shares of PD and we see a short-term
opportunity to buy puts on PD as it moves toward support near
$70.00.  Volume was well above average suggesting some conviction
in today's drop and PD's p&f chart points to a $65 price target.

Looking at our annotated chart below you'll see the descending
trendline of support.  This is still a concern so more
conservative traders might want to wait for PD to trade below the
$75 mark again or Tuesday's low at $74.49.  We're going to start
the play with a stop loss at $79.01, which we admit is a bit wide
but we still need to give PD some room to move.  Our first target
is the $70 level.  Please note that PD is expected to report
earnings on April 28th and we don't plan to hold over the
announcement.

Suggested Options:
With such a short time frame given PD's earnings report our
favorite puts are the May strikes.  Even though they're at-the-
money strikes the May 75's will probably work well.

BUY PUT MAY 80 PD-QP OI= 447 at $6.90 SL=4.50
BUY PUT MAY 75 PD-QO OI=1941 at $3.80 SL=1.90
BUY PUT MAY 70 PD-QN OI=1168 at $1.75 SL=0.90

Annotated Chart:



Picked on April 13 at $ 75.15
Change since picked:   - 0.00
Earnings Date        04/28/04 (confirmed)
Average Daily Volume:     2.3 million
Chart =



---

QLogic Corp. - QLGC - close: 31.00 change: -0.75 stop: 33.00

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:
Already in a protracted downtrend near the end of last March,
shares of QLGC got hammered when the company reduced its Q4
guidance.  The stock gapped sharply lower on 3/31 and didn't find
any buying interest until reaching the $31 level, more than $11
below where it was trading just a few days earlier.  Over the
past couple weeks, the stock has been attempting to build a base
at critical support in the $31-32 area, but the price action this
week suggests that attempt is going to fail.  In actuality,
today's drop to close at $31 is the beginning of the next leg of
the breakdown, as it just barely eclipses the low from April 2nd
($31.01).  The PnF chart reflects the very bearish condition of
the stock, with a major Sell signal occurring at the end of March
as price crashed through the $40 bearish price target.  Volume is
once again on the rise and if QLGC continues south tomorrow on
the heels of the disappointing INTC earnings report from tonight,
it looks like it could be a long ways down to meaningful support.

The next support seen comes in near the 2002 lows at $20 and more
weakness in the Semiconductor sector (SOX.X) could really get the
ball rolling.  Since the stock has already violated its prior
low, we're not going to use a trigger for the play.  A break
below today's closing low can be used for momentum entries, while
more conservative players can look to enter on a failed bounce
below what should now be strong resistance near $32.00-32.25.
We'll initially place our stop at $33, which is just above the
highs from last week, reinforced by the 10-dma ($33.13), which
will itself be below $33 by tomorrow.  There could be some mild
support found in the $25-26 area, but we'll be able to better
gauge that potential as price approaches that level.  For now,
we'll target a drop to major support near $20.  If entering on
continued weakness tomorrow, use the SOX as confirmation of
sector weakness in the wake of INTC's earnings report.  One final
note is that this will be a fairly short play with QLGC set to
report its own earnings on April 28th.

Suggested Options:
Aggressive short-term traders can use the April 32 Put, but with
April options so close to expiration, the May strikes make more
sense.  The more conservative approach will be to use the May 32
put.  Aggressive traders looking for more insulation against time
decay will want to utilize the May 30 strike.  Our preferred
option is the May 32 strike, as it is in the money and should
provide ample time for the play to move in our favor.

! Alert - April options expire on Friday!

BUY PUT APR-32 QLC-PZ OI=6638 at $1.70 SL=0.75
BUY PUT MAY-32*QLC-QZ OI=2208 at $2.60 SL=1.25
BUY PUT MAY-30 QLC-QF OI=3864 at $1.25 SL=0.60

Annotated Chart of QLGC:



Picked on April 13th at       $31.00
Change since picked:           +0.00
Earnings Date                4/28/04 (confirmed)
Average Daily Volume =      4.72 mln
Chart =



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The Option Investor Newsletter                  Tuesday 04-13-2004
Copyright 2004, All rights reserved.                        3 of 3
Redistribution in any form strictly prohibited.


In Section Three:

Watch List: Homes, Metals, Food and more!
Spreads & Straddles: Economic Recovery Threatens Interest Rates
Premium Selling Plays: Naked Puts & Calls


**********
WATCH LIST
**********

Homes, Metals, Food and more!

___________________________________________________________________

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.
___________________________________________________________________


Ryland Group Inc - RYL - close: 77.41 change: -1.86

WHAT TO WATCH: Homebuilders have been getting hammered as
investors sell interest-rate sensitive stocks on fears of the
looming rate hike.  Shares of RYL have really taken it on the
chin this month with a breakdown through technical support at its
50-dma, the $80.00 mark and now its 200-dma.  If you believe the
sell-off will continue this last technical breakdown could be a
bearish entry point for a move toward the $70 region.  However,
keep two things in mind.  RYL is very short-term oversold and it
has already exceeded its P&F bearish profit target at $78.
Earnings should be on April 21st.

Chart=


---

Freeport Mcmoran - FCX - close: 35.66 change: -1.97

WHAT TO WATCH: We mentioned FCX as a potential bearish candidate
in the MarketMonitor today.  Metals and mining stocks were
hammered on the jump in the U.S. dollar.  The XAU gold & silver
index lost more than 6% and FCX dropped 5.2%.  The decline in FCX
was a technical breakdown below its simple 200-dma on nearly
twice its average volume.  However, the stock has strong support
at the $35 mark dating back to January and February this year.
Bears could use a trigger under $35.00 to open positions but keep
in mind that FCX is due to report earnings on April 20th (and we
don't like to hold over an earnings report).

Chart=


---

American Standard Cos - ASD - close: 112.50 change: -2.35

WHAT TO WATCH: The bullish trend remains unbroken in ASD but the
stock has fallen out of its recent trading range over the last
few days.  ASD has some support near $110 underpinned by its
simple 50-dma.  A breakdown here could be a trigger for bearish
positions, especially since the 50-dma (& 40-dma) has held up as
support for the last eight months.  Such a move could occur if
ASD issues any negative comments at its earnings report tomorrow
morning before the opening bell.  Right now estimates are for
$1.13 a share.  Traders should also note that ASD has a 3-for-1
stock split pending shareholder approval at the May 4th annual
meeting.

Chart=


---

Cal-Maine Foods Inc - CALM - close: 30.12 change: -3.08

WHAT TO WATCH: Uh-oh!  CALM may have topped out over the last
three months and we could see it start to hit investors' sell-
stops if it breaks down under psychological support at the $30.00
mark.  There is a little bit more support near $28.35-28.50 but
other than that it could be a quick drop toward its 200-dma near
the $20 level.  Coincidentally its P&F chart also points to a
$20.00 price target.

Chart=




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

TRMM $22.20 -1.79 - The amazing rally in shares of TRMM may have
finally run out of steam.  The stock has painted a very bearish
engulfing candlestick pattern with a big gap open top this
morning.  Don't be surprised to see this stock deflate rapidly.

BOL $64.69 -1.06 - BOL has been a great example of relative
strength in this market but shares began to show some weakness
today with the close over $65.00.  Granted, it's not real
weakness just profit taking but technicals are maxed out and we
could see BOL sink back toward support at its 50-dma.  Earnings
should be April 21st.

IGT $45.03 -0.31 - IGT is another stock that has displayed nice
relative strength but it too looks tired and in need of some
consolidation (a.k.a. profit taking).  We'd consider new bullish
positions on a bounce from its 50-dma.  Earnings are April 22nd.


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*******************
SPREADS & STRADDLES
*******************

Economic Recovery Threatens Interest Rates
By Ray Cummins

U.S. equities slumped Tuesday as worries about higher borrowing
costs forced the major stock averages into a brisk retreat.

The Dow Jones industrial average fell 134 points to 10,381, with
J.P. Morgan (NYSE:JPM), Disney (NYSE:DIS), and Alcoa (NYSE:AA)
among the worst blue-chip performers.  The NASDAQ Composite slid
35 points to 2,030 as selling pressure emerged in virtually all
technology groups.  The Standard & Poor's 500 Index dropped 15
points to 1,129 with gold, banking and utilities shares enduring
the biggest losses.  Trading volume was moderate, with over 1.4
billion shares changing hands on the New York Stock Exchange and
1.9 billion shares changing hands on the NASDAQ.  Advancers were
ahead of decliners by more than 3-to-1 on both exchanges.  Bond
prices slumped, pushing the yield on the benchmark 10-year note
up to 4.35%, the highest rate since early January.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
SUMMARY OF CURRENT POSITIONS - AS OF 04/11/04
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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.


PUT-CREDIT SPREADS

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

APOL    77.82  90.45   APR  65  70   0.60  69.40   0.60   Open
BZH    111.90 101.82   APR  95 100   0.70  99.30   0.70  Closed
KBH     78.71  75.82   APR  65  70   0.55  69.45   0.55   Open
COF     73.50  75.86   APR  60  65   0.50  64.50   0.50   Open
SYMC    44.64  47.50   APR  37  40   0.35  39.65   0.35   Open
DNA    106.82 108.45   APR  90  95   0.60  94.40   0.60   Open
FDX     71.59  75.06   APR  65  70   0.85  69.15   0.85   Open
LLL     56.67  62.10   APR  50  55   0.50  54.50   0.50   Open
TASR    61.80  98.04   APR  45  50   0.60  49.40   0.60   Open
DE      68.23  72.82   APR  60  65   0.40  64.60   0.40   Open
FFIV    31.87  33.85   APR  25  30   0.55  29.45   0.55   Open
MRVL    42.67  47.10   APR  37  40   0.20  39.80   0.20   Open
KBH     80.80  75.82   APR  70  75   0.40  74.60   0.40  Closed
NCEN    48.56  48.55   APR  40  45   0.45  44.55   0.45   Open
RIMM   104.14 107.98   APR  85  90   0.50  89.50   0.50   Open
YHOO    50.15  48.35   APR  45  47   0.35  47.15   0.35   Open
HSIC    75.81  76.85   MAY  65  70   0.45  69.55   0.45   Open
NAV     49.90  49.33   MAY  40  45   0.60  44.40   0.60   Open

L/P = Long Put  S/P = Short Put  CB = Cost Basis  G/L = Gain/Loss

Positions in Countrywide Financial (NYSE:CFC) and Hughes Supply
(NYSE:HUG), which is positive, have previously been closed to
limit potential losses.  Positions in Beazer (NYSE:BZH) and KB
Home (NYSE:KBH); at the $75 strike, are candidates for early exit.


CALL-CREDIT SPREADS

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

DISH    35.50  32.96   APR  42  40   0.30  40.30   0.30   Open
NVLS    31.15  33.40   APR  37  35   0.35  35.35   0.35   Open
VSEA    40.85  43.71   APR  50  45   0.60  45.60   0.60   Open?
SFA     31.96  33.74   APR  40  35   0.55  35.55   0.55   Open?
BBBY    39.04  39.11   APR  45  42   0.25  42.75   0.25   Open
MSTR    52.64  53.47   APR  65  60   0.60  60.60   0.60   Open
NTLI    53.12  56.91   APR  65  60   0.60  60.60   0.60   Open?
SINA    35.96  38.65   APR  45  40   0.70  40.70   0.70   Open?
AFCO    27.85  28.39   APR  35  30   0.55  30.55   0.55   Open?
CAM     43.90  44.88   APR  50  45   0.50  45.50   0.50  Closed
CCMP    42.13  42.24   APR  50  45   0.45  45.45   0.45   Open
XLNX    37.76  39.51   APR  42  40   0.25  40.25   0.25  Closed
PHM     52.87  51.56   APR  60  55   0.40  55.40   0.40   Open
SOHU    25.46  25.17   MAY  35  30   0.60  30.60   0.60   Open
SFNT    31.65  32.07   MAY  40  35   0.70  35.70   0.70   Open

L/C = Long Call  S/C = Short Call  CB = Cost Basis  G/L = Gain/Loss

Bearish spreads on Adobe (NASDAQ:ADBE) and Cognos (NASDAQ:COGN),
which is positive, have previously been closed to limit potential
losses.  Xilinx (NASDAQ:XLNX) and Cooper-Cameron (NYSE:CAM) are
"early-exit" candidates.  NTL Inc. (NASDAQ:NTLI), Applied Films
(NASDAQ:AFCO), Varian Semi (NASDAQ:VSEA), Sina (NASDAQ:SINA) and
Scientific Atlanta (NYSE:SFA) are on the "watch" list.


DEBIT STRADDLES

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

GLBC    13.86  19.71   APR    15    12     1.80    5.50   Closed
SNP     40.74  39.40   APR    40    40     5.70    5.70   Closed
CCMP    44.55  42.24   APR    45    45     5.90    5.75   Closed
AMX     35.66  38.84   MAY    35    35     3.65    5.00    Open
AIG     74.28  76.25   MAY    75    75     5.60    7.80    Open
SLB     65.13  60.76   MAY    65    65     6.75    6.50    Open
BSTE    30.63  39.89   JUL    30    30     6.00   11.50    Open?
MKSI    23.10  25.45   JUL    22    22     4.70    5.50    Open
BRKS    22.66  22.37   APR    22    22     1.60    1.50    Open
LF      19.67  20.27   JUN    20    20     3.50    3.25    Open

The recent straddle in Biosite (NASDAQ:BSTE) has nearly doubled
in value (as of April 11, 2004) and the speculative position in
Global Crossing (NASDAQ:GLBC) provided a large short-term gain
for those traders who paid a small premium to initiate the play.
Prices for the new positions in American International (NYSE:AIG)
and Schlumberger (NYSE:SLB), as well as any potential gains (max.
value) for straddles in play during my recent absence from the
market, will not be accurate.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
NEW POSITIONS
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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

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

BULLISH PLAYS - CREDIT SPREADS

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

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

HDI - Harley-Davidson  $55.63  *** Next Leg Up? ***

Harley-Davidson (NYSE:HDI) operates in the motorcycles and other
related products segment and the financial services segment.
The motorcycles and related products segment includes the group
of companies doing business as Harley-Davidson Motor Company,
subsidiaries of H-D Michigan, and Buell Motorcycle Company LLC.
The motorcycles segment designs, manufactures and sells primarily
heavyweight touring, custom and performance motorcycles, as well
as a complete line of motorcycle parts, accessories, clothing and
collectibles. The financial services segment consists of the firm's
subsidiary, Harley-Davidson Financial Services, and its various
subsidiaries.  HDFS is engaged in the business of financing and
servicing wholesale inventory receivables and consumer retail
installment sales contracts (primarily motorcycles and aircraft).

HDI - Harley-Davidson  $55.63

PLAY (conservative - bullish/credit spread):

BUY  PUT  MAY-47.50  HDI-QW  OI=2921  ASK=$0.40
SELL PUT  MAY-50.00  HDI-QJ  OI=5062  BID=$0.65
INITIAL NET-CREDIT TARGET=$0.25-$0.30
POTENTIAL PROFIT(max)=11% B/E=$47.75


__________________________________________________________________

PDCO - Patterson Dental  $74.97  *** New Trading Range? ***

Patterson Dental (NASDAQ:PDCO) is a value-added distributor
serving the North American dental supply and companion-pet
(dogs, cats and other common household pets) veterinary supply
markets.  The company has two operating segments, dental supply
and veterinary supply.  As the firm's largest segment, dental
supply provides a virtually complete range of consumable dental
products, clinical and laboratory equipment, and value-added
services to dentists, dental laboratories, institutions and
other healthcare providers throughout North America.  The firm's
veterinary supply segment distributes consumable supplies,
equipment, diagnostic products, biologicals (vaccines) and
pharmaceuticals to companion pet veterinary clinics principally
in the eastern, mid-Atlantic and southeastern regions of the
United States.

PDCO - Patterson Dental  $74.97

PLAY (less conservative - bullish/credit spread):

BUY  PUT  MAY-65.00  DOU-QM  OI=16   ASK=$0.35
SELL PUT  MAY-70.00  DOU-QN  OI=113  BID=$0.95
INITIAL NET-CREDIT TARGET=$0.65-$0.70
POTENTIAL PROFIT(max)=15% B/E=$69.35



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

BEARISH PLAYS - CREDIT SPREADS

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

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

MERQ - Mercury Interactive  $45.49  *** Stalled Rally? ***

Mercury Interactive (NASDAQ:MERQ) is a provider of integrated
performance management solutions that enable businesses to test
and monitor their Web-based applications.  Its software products
and hosted services help Global 2004 companies enhance the user
experience by improving performance, availability, reliability
and scalability in their Web-based applications.  Its many hosted
services provide its customers with a cost-effective solution that
quickly meets business needs without dedicating significant time
and internal resources.  Its integrated performance management
solutions enable customers to more quickly identify and correct
problems before users experience them.  The company also provides
outsourced load testing and Web performance monitoring services
that complement its software products.

MERQ - Mercury Interactive  $45.49

PLAY (less conservative - bearish/credit spread):

BUY  CALL  MAY-55.00  RQB-EK  OI=10   ASK=$0.20
SELL CALL  MAY-50.00  RQB-EJ  OI=672  BID=$0.75
INITIAL NET-CREDIT TARGET=$0.60-$0.70
POTENTIAL PROFIT(max)=14% B/E=$50.60


__________________________________________________________________

NEM - Newmont Mining  $42.86  *** For Gold "Bears" Only! ***

Newmont Mining (NYSE:NEM), along with its subsidiaries, is a
worldwide company engaged in the production of gold, exploration
for gold and acquisition of gold properties.  The company also
has an interest in a copper/gold mine that commenced production
in late 1999.  In addition, the company produces zinc, lead and
copper concentrates at its property in Western Australia.  The
company approved in late 2002 a restructuring to facilitate the
acquisitions of Normandy Mining Limited and Franco-Nevada Mining
Corporation Limited and to create a flexible corporate structure.

NEM - Newmont Mining  $42.86

PLAY (conservative - bearish/credit spread):

BUY  CALL  MAY-50.00  NEM-EJ  OI=5577  ASK=$0.25
SELL CALL  MAY-47.50  NEM-EW  OI=9823  BID=$0.50
INITIAL NET-CREDIT TARGET=$0.25-$0.35
POTENTIAL PROFIT(max)=11% B/E=$47.75


__________________________________________________________________

RYL - The Ryland Group  $77.41  *** Sector Slump! ***

The Ryland Group (NYSE:RYL) is a homebuilder and mortgage-finance
company.  The company has built more than 200,000 homes during its
35-year history.  Ryland homes are available in more than 275 new
communities in many markets across the United States.  In addition,
the Ryland Mortgage company has provided mortgage financing and
related services for thousands of homebuyers.  The company's major
operations span all the significant aspects of the home-buying
process, from design, construction and sale to mortgage financing,
title insurance, settlement, escrow and homeowners insurance.

RYL - The Ryland Group  $77.41

PLAY (less conservative - bearish/credit spread):

BUY  CALL  MAY-90.00  RYL-ER  OI=405  ASK=$0.60
SELL CALL  MAY-85.00  RYL-EQ  OI=558  BID=$1.15
INITIAL NET-CREDIT TARGET=$0.60-$0.70
POTENTIAL PROFIT(max)=14% B/E=$85.60



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

__________________________________________________________________

No straddles or strangles today...

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

SEE DISCLAIMER - SECTION 1

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


*****************************************
PREMIUM-SELLING PLAYS: NAKED PUTS & CALLS
*****************************************

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

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
SUMMARY OF CURRENT POSITIONS - AS OF 04/11/04
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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


MONTHLY YIELD FOR UNCOVERED OPTIONS: MAXIMUM & SIMPLE

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

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

NAKED PUTS

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

APPX     APR    33    32.48   46.56    0.90   5.98%   2.77%
NEOL     APR    15    14.65   20.24    0.35   5.57%   2.39%
OSTK     APR    25    24.30   32.82    0.70   7.25%   2.88%
APPX     APR    33    32.73   46.56    0.65   5.76%   1.99%
ASKJ     APR    25    24.15   38.08    0.85   9.04%   3.52%
CLZR     APR    11    11.07   15.36    0.17   4.72%   1.54%
JNPR     APR    22    21.85   27.21    0.65   7.82%   2.97%
NEOL     APR    15    14.65   20.24    0.35   6.74%   2.39%
PDII     APR    22    21.80   28.07    0.70   8.31%   3.21%
SWIR     APR    22    22.15   41.86    0.35   5.03%   1.58%
APPX     APR    33    33.03   46.56    0.35   4.71%   1.06%
BRCM     APR    35    34.55   42.19    0.45   4.64%   1.30%
ELN      APR    15    14.65   20.05    0.35   9.84%   2.39%
OSTK     APR    22    22.25   32.82    0.25   4.47%   1.12%
PCLN     APR    20    19.75   26.65    0.25   4.90%   1.27%
SYMC     APR    40    39.40   47.50    0.60   4.89%   1.52%
XMSR     APR    25    24.40   29.86    0.60   7.74%   2.46%
YHOO     APR    40    39.40   48.35    0.60   5.13%   1.52%
APPX     APR    35    34.45   46.56    0.55   6.27%   1.60%
ASKJ     APR    25    24.55   38.08    0.45   7.51%   1.83%
CMC      APR    30    29.60   31.30    0.40   4.72%   1.35%
CSGS     APR    15    14.65   17.07    0.35   7.65%   2.39%
ECLG     APR    17    17.20   21.88    0.30   6.26%   1.74%
JILL     APR    17    17.15   20.60    0.35   6.38%   2.04%
MGAM     APR    22    22.05   23.83    0.45   6.80%   2.04%
PBY      APR    25    24.50   27.77    0.50   5.97%   2.04%
SUPG     APR     8     7.15    7.66    0.35  16.86%   4.90%
AGI      APR    30    29.55   33.19    0.45   5.39%   1.52%
ASKJ     APR    25    24.60   38.08    0.40   6.62%   1.63%
ENDP     APR    20    19.75   25.97    0.25   4.98%   1.27%
NFLD     APR    12    12.15   15.80    0.35  12.17%   2.88%
PBY      APR    25    24.55   27.77    0.45   6.18%   1.83%
PLMO     APR    15    14.65   22.88    0.35   9.66%   2.39%
RSAS     APR    15    14.55   18.81    0.45  10.23%   3.09%
SHFL     APR    40    39.60   47.76    0.40   4.13%   1.01%
SYMC     APR    40    39.35   47.50    0.65   5.79%   1.65%
ASCA     APR    30    29.70   37.54    0.30   4.73%   1.01%
ASKJ     APR    30    29.40   38.08    0.60   9.72%   2.04%
ERJ      APR    30    29.40   32.21    0.60   8.22%   2.04%
IMM      APR    15    14.70   20.26    0.30  11.43%   2.04%
INSP     APR    30    29.70   39.82    0.30   5.70%   1.01%
MICC     APR    17    16.90   24.39    0.60  15.59%   3.55%
MNST     APR    22    22.20   27.66    0.30   5.95%   1.35%
TKTX     APR    15    14.50   16.22    0.50  17.25%   3.45%
APPX     APR    43    42.63   46.56    0.75   8.92%   1.76%
ASKJ     APR    30    29.70   38.08    0.30   6.44%   1.01%
COCO     APR    30    29.75   33.40    0.25   4.55%   0.84%
FWHT     MAY    17    17.15   21.84    0.35   4.27%   2.04%
MICC     MAY    17    17.15   24.39    0.35   4.39%   2.04%
MNST     MAY    22    21.95   27.66    0.55   4.48%   2.51%
PLMO     MAY    17    16.90   22.88    0.60   6.80%   3.55%
TTN      APR    17    17.25   19.60    0.25   8.43%   1.45%
TTWO     APR    35    34.55   36.04    0.45   6.40%   1.30%
BARZ     APR    35    34.35   40.83    0.65  12.11%   1.89%
HNT      MAY    22    22.00   27.25    0.50   4.76%   2.27%
IPXL     MAY    20    19.50   25.07    0.50   5.43%   2.56%
SSNC     MAY    22    21.60   28.71    0.90   7.85%   4.17%
TRID     APR    15    14.75   16.79    0.25  12.19%   1.69%
UTHR     APR    22    22.05   23.95    0.45  13.47%   2.04%
XMSR     APR    27    27.20   29.86    0.30   7.69%   1.10%
ACCL     MAY    17    17.25   21.64    0.25   4.08%   1.45%
ADEX     MAY    20    19.45   22.60    0.55   6.05%   2.83%
IMM      MAY    15    14.70   20.26    0.30   5.24%   2.04%
IPXL     MAY    20    19.65   25.07    0.35   4.93%   1.78%
JBLU     MAY    22    22.15   26.54    0.35   4.11%   1.58%
LSCP     MAY    22    21.95   28.97    0.55   6.11%   2.51%
PDII     APR    25    24.55   28.07    0.45  15.04%   1.83%
TINY     MAY    17    17.00   22.74    0.50   7.27%   2.94%
USG      MAY    15    14.25   17.71    0.75  11.45%   5.26%
XMSR     MAY    25    24.50   29.86    0.50   4.90%   2.04%

Some of the new positions may not have been available at the
listed prices, due to the recent market rallies.  Positions
in Amylin (NASDAQ:AMLN) and Nektar (NASDAQ:NKTR), although
positive, have been closed to limit potential losses.


NAKED CALLS

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

SEAC     APR    20    20.40   15.14    0.40   7.86%   1.96%
ERES     APR    35    35.30   29.63    0.30   4.73%   0.85%
FARO     APR    30    30.40   23.09    0.40   7.33%   1.32%
AFCI     APR    25    25.50   22.42    0.50   8.84%   1.96%
FLSH     APR    22    22.75   21.98    0.25   5.62%   1.10%
ADTN     APR    35    35.80   30.00    0.80   9.56%   2.23%
DISH     APR    35    35.65   32.96    0.65   6.34%   1.82%
MTLM     APR    40    40.60   39.35    0.60   9.68%   1.48% *
BRL      APR    50    50.40   48.39    0.40   4.08%   0.79%
OVTI     APR    30    30.50   28.68    0.50  10.89%   1.64%
SNDK     APR    32    32.75   32.25    0.25   6.38%   0.76% *
HOV      APR    42    42.90   39.85    0.40   7.29%   0.93%
AFCI     MAY    25    25.75   22.42    0.75   7.73%   2.91%
QLGC     MAY    37    37.95   32.21    0.45   4.22%   1.19%

M-Systems Flash Disk (NASDAQ:FLSH) and Omnivision Technologies
(NASDAQ:OVTI) are on the "watch" list.  Conservative traders
should consider closing positions in Sandisk (NASDAQ:SNDK) and
Metal Management (NASDAQ:MTLM).  Positions in Career Education
(NASDAQ:CECO), NII Holdings (NASDAQ:NIHD), and Schnitzer Steel
(NASDAQ:SCHN) have previously been closed to limit potential
losses.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
NEW POSITIONS
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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

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

WARNING: THE RISK IN SELLING UNCOVERED OPTIONS IS SUBSTANTIAL!

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

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

NEW NAKED-PUT CANDIDATES

Stock   Strike Strike Cost   Current   Max     Max    Simple
Symbol  Month  Price  Basis   Price   Profit  Yield   Yield

ESIO     MAY    22.5  22.10   25.49    0.40   6.15%   1.81%
HOLX     MAY    20    19.50   22.05    0.50   8.05%   2.56%
GVHR     MAY    25    24.65   30.59    0.35   5.85%   1.42%
HSII     MAY    22.5  22.25   25.12    0.25   3.81%   1.12%
IMM      MAY    17.5  17.25   22.80    0.25   6.08%   1.45%
LF       MAY    20    19.55   22.45    0.45   7.54%   2.30%
TOMO     MAY    12.5  12.25   14.25    0.25   6.96%   2.04%
TSAI     MAY    20    19.80   24.74    0.20   4.37%   1.01%
TSO      MAY    20    19.50   22.25    0.50   8.18%   2.56%

__________________________________________________________________

ESIO - Electro Scientific  $25.49  *** Bracing For A Rally? ***

Electro Scientific Industries (NASDAQ:ESIO) provides high-tech
manufacturing equipment to the global electronics market.  In
addition, the firm produces a series of laser drilling systems
for high-density interconnect circuit boards and advanced chip
packaging, as well as passive component inspection systems and
original equipment manufacturer machine vision products.  Its
customers are primarily manufacturers of semiconductors, passive
electronic components and electronic interconnect devices.

ESIO - Electro Scientific  $25.49

PLAY (sell naked put):

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

SELL PUT  MAY 22.5  EQO QX      45   0.40  22.10   6.2%   1.8% *
SELL PUT  MAY 25    EQO QE      19   1.25  23.75  13.3%   5.3%


__________________________________________________________________

HOLX - Hologic  $22.05  *** An "All-Time" High! ***

Hologic (NASDAQ:HOLX) is engaged in the development, manufacture
and distribution of diagnostic and medical imaging systems for
the healthcare needs of women.  Its healthcare businesses are
focused on bone densitometry, mammography and direct-to-digital
radiography.  In addition, Hologic develops, makes and supplies
other x-ray-based imaging systems, such as direct-to-digital
radiography equipment and mini C-arm imaging products.  The firm
has begun to sell, distribute and service complementary products
that were developed and manufactured by other original equipment
manufacturers.

HOLX - Hologic  $22.05

PLAY (sell naked put):

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

SELL PUT  MAY 20    QHX QD     100   0.50  19.50   8.0%   2.6% *


__________________________________________________________________

GVHR - Gevity HR  $30.59  *** A Business In Demand! ***

Gevity HR (NASDAQ:GVHR) is a provider of human capital management
solutions to clients across the United States.  The company offers
its clients, which are typically small to medium-sized businesses
with between five and 100 employees, products and services that
provide a complete solution for human resources outsourcing needs.
Its many products include assistance with employee recruiting,
performance management, training and development, benefits
administration, payroll administration, governmental compliance,
risk management, unemployment administration and health, welfare
and retirement benefits.

GVHR - Gevity HR  $30.59

PLAY (sell naked put):

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

SELL PUT  MAY 25    HWU QE      22   0.35  24.65   5.9%   1.4% *
SELL PUT  MAY 30    HWU QF       0   2.00  28.00  17.1%   7.1%


__________________________________________________________________

HSII - Heidrick & Struggles  $25.12  *** The Uptrend Resumes! ***

Heidrick & Struggles International (NASDAQ:HSII) is a provider of
executive search and leadership consulting services.  The company
helps its clients build leadership teams by facilitating the
recruitment, development and retention of personnel for their
executive management positions.  In addition to executive search,
Heidrick & Struggles provides other leadership services such as:
executive assessment, placement of interim executive management
and executive coaching through an alliance.

HSII - Heidrick & Struggles  $25.12

PLAY (sell naked put):

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

SELL PUT  MAY 22.5  AQZ QX       0   0.25  22.25   3.8%   1.1% TS
SELL PUT  MAY 25    AQZ QE       0   1.00  24.00  10.7%   4.2%


__________________________________________________________________

IMM - Immtech International  $22.80  *** Drug Speculation! ***

Immtech International (NYSE:IMM) is a pharmaceutical company
focused on the development and commercialization of oral drugs
to treat fungal, parasitic, bacterial and viral diseases.  The
company has development programs that include fungal infections,
malaria, tuberculosis, hepatitis, pneumocystis carinii pneumonia
and tropical medicine diseases, including the African sleeping
sickness (a parasitic disease also known as trypanosomiasis) and
leishmaniasis (a parasitic disease that destroys the liver).  One
of its most significant research developments was the discovery
of oral drug delivery technology for dication drugs.  This unique
proprietary technology temporarily masks the positive charges of
the dication, enabling the active compound to move easily across
digestive membranes into blood circulation.

IMM - Immtech International  $22.80

PLAY (sell naked put):

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

SELL PUT  MAY 17.5  IMM QW     220   0.25  17.25   6.1%   1.4% *
SELL PUT  MAY 20    IMM QD     130   0.85  19.15  13.9%   4.4%


__________________________________________________________________

LF - LeapFrog Enterprises  $22.45  *** Recovery Underway? ***

LeapFrog Enterprises (NYSE:LF) is a designer, developer and seller
of technology-based educational products and related proprietary
content, dedicated to making learning effective and engaging.  The
firm designs its products to help preschool through eighth grade
children learn age- and skill-appropriate subject matter, such as
phonics, reading, math, spelling, science, geography, history and
music.  The company has also extended its product line downward in
age to reach infants and toddlers and upward in age to reach high
school students.

LF - LeapFrog Enterprises  $22.45

PLAY (sell naked put):

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

SELL PUT  MAY 20    LF QD      229   0.45  19.55   7.5%   2.3% *
SELL PUT  MAY 22.5  LF QX        6   1.40  21.10  15.7%   6.6%


__________________________________________________________________

TOMO - Tom Online  $14.25  *** Entry Point? ***

Tom Online (NASDAQ:TOMO) is an Internet firm in China providing
value-added multimedia products and services.  The firm delivers
its products and services from its Internet portal to its users
through their mobile phones and through Tom's Websites.  The
firm's business activities include wireless value-added services,
online advertising and commercial enterprise solutions.

TOMO - Tom Online  $14.25

PLAY (sell naked put):

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

SELL PUT  MAY 12.5  QWX QV      12   0.25  12.25   7.0%   2.0% *


__________________________________________________________________

TSAI - Transaction Systems  $24.74  *** A Big Day! ***

Transaction Systems Architects (NASDAQ:TSAI) develops, markets,
installs and supports a line of software products and services
primarily focused on facilitating electronic payments and
electronic commerce.  In addition to its own products, TSA
distributes or acts as a sales agent for software developed
by third parties.  These products and services, which are used
principally by financial institutions, retailers and e-payment
processors, both in domestic and international markets, are
organized within three business units: ACI Worldwide, Insession
Technologies and IntraNet.  Each business unit offers its
customers a range of services, including analysis, design,
development, implementation, integration and training.

TSAI - Transaction Systems  $24.74

PLAY (sell naked put):

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

SELL PUT  MAY 20    TOU QD       0   0.20  19.80   4.4%   1.0% TS
SELL PUT  MAY 22.5  TOU QX       0   0.80  21.70  11.1%   3.7% *


__________________________________________________________________

TSO - Tesoro Petroleum  $22.25  *** Rally Mode! ***

Tesoro Petroleum (NYSE:TSO) is an independent is refiner and
marketer of petroleum products with two major operating segments,
Refining and Retail.  Through its refining segment, the company
manufactures products, mostly gasoline and gasoline blend-stocks,
jet fuel, diesel fuel and heavy fuel oils, for sale to a variety
of commercial customers principally in the mid-continental and
western United States.  Its retail segment markets motor fuels
through a network of branded gas stations, primarily trading
under the Tesoro and Mirastar brands.  The company markets its
products to wholesale, retail and commercial end users.

TSO - Tesoro Petroleum  $22.25

PLAY (sell naked put):

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

SELL PUT  MAY 20    TSO QD      93   0.50  19.50   8.2%   2.6% *
SELL PUT  MAY 22.5  TSO QX       0   1.50  21.00  16.5%   7.1%



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

BEARISH PLAYS - NAKED CALLS

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

WARNING: THE RISK IN SELLING UNCOVERED OPTIONS IS SUBSTANTIAL!

The sale of uncovered calls entails considerable financial risk,
far more than the initial margin or collateral required to open
the position.  The maximum financial obligation for the sale of a
naked option is the strike price (of the underlying stock) that
is sold.  Although this obligation is reduced by the premium from
the sale of the option, a writer of options must have the cash or
collateral equivalent of the sold strike price in reserve at all
times.  The simple fact is: stocks often experience large price
swings, exponentially increasing the margin maintenance and very
possibly causing a devastating shortfall in your portfolio.  It
is also important that you consider using trading stops on naked
option positions to help limit losses when a stock price moves in
a volatile manner.  Many professional traders suggest closing the
position when the underlying share value moves beyond the sold
strike, or using a "buy-to-close" stop order at a price that is no
more than twice the original premium received from the sold option.

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

AVCT - Avocent  $34.38  *** Sell-Off In Progress! ***

Avocent Corporation (NASDAQ:AVCT), together with its wholly owned
subsidiaries, designs, manufactures and sells analog and digital
KVM (keyboard, video and mouse) switching systems, as well as
serial connectivity devices, extension and remote access products
and also display products for the computer industry.  The firm's
switching and connectivity solutions help provide information
technology managers with access and control of multiple servers
and network data centers from any location.

AVCT - Avocent  $34.38

PLAY (sell naked call):

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

SELL CALL  MAY 37.5  QVX EU     193   0.65  38.15   6.7%   1.7% *
SELL CALL  MAY 35    QVX EG     160   1.55  36.55  12.4%   4.2%


__________________________________________________________________

INTU - Intuit  $43.77  *** Stuck In A Trading Range? ***

Intuit (NYSE:INTU) is a provider of business tax preparation and
personal finance software products and Web-based services that
simplify complex financial tasks for consumers, small businesses
and accounting professionals.  The company's principal products
and services include Quicken, QuickBooks, Quicken TurboTax,
ProSeries, Lacerte and Quicken Loans. Intuit offers products and
services in five principal business divisions, which include Small
Business, Tax, Personal Finance, Quicken Loans and Global Business.

INTU - Intuit  $43.77

PLAY (sell naked call):

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

SELL CALL  MAY 47.5  IQU EW     850   0.45  47.95   3.7%   0.9% TS
SELL CALL  MAY 45    IQU EI     400   1.15  46.15   7.7%   2.5%


__________________________________________________________________

PPCO - Penwest Pharma  $15.85  *** Premium-Selling Only! ***

Penwest Pharmaceuticals (NASDAQ:PPCO) develops pharmaceutical
products based on oral drug delivery technologies.  The basic
foundation of Penwest's technology platform is TIMERx, an
extended release delivery system that is adaptable to soluble
and insoluble drugs, and that is flexible for a variety of
controlled release profiles.  Penwest's portfolio includes four
major products utilizing its proprietary controlled release drug
delivery technology that were developed with collaborators and
have been approved in various countries.  In addition, the firm
has a number of product candidates in its development pipeline.

PPCO - Penwest Pharma  $15.85

PLAY (sell naked call):

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

SELL CALL  MAY 20    OGQ ED       0   0.30  20.30  10.1%   1.5% *
SELL CALL  MAY 17.5  OGQ EW     532   0.85  18.35  17.9%   4.6%



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

SEE DISCLAIMER - SECTION 1

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


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