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Daily Newsletter, Sunday, 05/09/2004

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The Option Investor Newsletter                   Sunday 05-09-2004
Copyright 2004, All rights reserved.                        1 of 5
Redistribution in any form strictly prohibited.

In Section One:

Wrap: Stronger Than Expected
Futures Market: See Note
Index Trader Wrap: Follow the Money
Editor's Plays: IBM Got The Blues?
Market Sentiment: Washout
Ask the Analyst: ETF Symbol Guide
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 5-07         WE 4-30         WE 4-23         WE 4-16
DOW    10117.34 -108.23 10225.6 -247.27 10472.9 + 20.87 +  9.94
Nasdaq  1917.96 -  2.19 1920.15 -129.62 2049.77 + 54.03 - 57.12
S&P-100  537.35 -  3.53  540.88 - 15.92  556.80 +  1.86 -  1.18
S&P-500 1098.69 -  8.61 1107.30 - 33.30 1140.60 +  6.03 -  4.76
W5000  10686.04 -107.62 10793.7 -356.76 11150.4 + 72.34 - 87.98
SOX      457.01 + 13.52  443.48 - 44.50  487.98 +  7.84 - 31.64
RUT      548.56 - 11.24  559.80 - 30.91  590.71 +  7.34 - 14.51
TRAN    2846.18 - 40.26 2886.44 -115.27 3001.71 + 62.24 + 12.59
******************************************************************

Stronger Than Expected
by Jim Brown

April was a strong month for jobs according to the employment
report released on Friday. The much stronger than expected
numbers led to some serious volatility as traders alternately
bought and sold the markets on supposed Fed fears. There is
no doubt now that rates are going up soon. The only question
is when?

Dow Chart - Daily 100/200


Nasdaq Chart - Daily 100/200


SPX Chart - Daly



The big news on Friday was the Jobs Report. The U.S. economy
created +288,000 jobs in April which was well over the +185K
expected. Not only did jobs grow in April but there were upward
revisions in both February and March. February was revised from
46K to 83K and March was revised up from 308K to 337K. This was
a total of +66K in upward revisions and when added to the April
gains of 288K we get a monster jump of +354,000 over the prior
numbers. This was the 8th consecutive month of job gains that
total 1.113 million jobs.

A gain of +300,000 or more was the point many analysts thought
would trigger a Fed rate hike either at the June meeting or
before. +288K is very close and when you add the revisions it
looks to most analysts like a rate hike soon is in the cards.
JPM went on record as saying the Fed would hike +25 in June
and +25 in August. Merrill duplicated those remarks with only
slightly less conviction about the June hike.

The Fed funds futures are now calling for a 92% chance of a
+25 point hike at the June meeting and successive hikes of
+25 points at each of the Aug, Sept and Nov meetings. The Fed
target is showing as 2.0% by the end of November. There is
already a 76% chance of another +25 point hike in December.

There is also a chance that the Fed could hike before the
June meeting. In 1994 the first rate hike after a three year
layoff was on a Friday after a blowout Jobs report. With the
weekend event risk I believe the Fed would wait for Monday
if they had plans on doing it now. If it does not happen on
Monday then June-30th should be the date.

Since the Fed did not hike rates at the recent meeting the
majority of analysts feel the Fed is behind the curve and will
have to accelerate their pace to catch up just like in 1994. I
went back and looked at the 1994 rate hikes and it was a very
strong, very fast series that investors are afraid they will
repeat. This is a table of the 1994 hikes.

- Date - Day - Hike
02/04/94 Fri +0.25 surprise hike
03/22/94 Tue +0.25 FOMC meeting
04/18/94 Mon +0.25 surprise hike
05/17/94 Tue +0.50 FOMC meeting
08/16/94 Tue +0.50 FOMC meeting
11/15/94 Tue +0.75 FOMC meeting
02/01/95 Wed +0.50 FOMC meeting
Total +3.00% in 12 months to 6.00%

You can see why traders are concerned. Even if this came to
pass this does not mean the market is not going higher. We
are starting from a much lower level at 1.0% instead of 3.0%
and the state of the economy has changed significantly in the
last ten years. 1994 was pre Internet and global consumption
was significantly less high tech. Here is a chart Jeff put
together showing the S&P growth after the 1994 rate hikes.
Note that 1994 was flat during the hikes but growth really
took off when the hikes stopped even though interest rates
were significantly higher.

Jeff's SPX Chart - Monthly 1993-2004



There are considerations for the gigantic ramp job and leading
the list was the rush to change out computer hardware and
software systems prior to Y2K. Add in the Internet revolution
and the stock market bubble and you have the extreme highs in
2000. Most of that activity did not start until 1997 leaving
the gains in 1995/1996 on their own and on top of a strong
Fed funds rate. Economic growth does and will trump rate hikes
but that growth has to have a chance to get a strong foothold
before the Fed accidentally stunts its growth.

I believe the Fed has learned its lesson after the various
rate hike debacles under the Greenspan leadership and will
continue at a measured pace this time around. Greenspan would
love to leave as a legacy a booming economy and a booming
market. Both would do wonders to resolve the coming deficit
crisis when the baby boomers begin to retire in 2008-2012.
Massive corporate profits and large gains in the market
create strong cash flow from taxes and strong consumption
by retail consumers. I am expounding here because I believe
that the market has already priced in the potential rate hikes
and there is nothing ahead from the Fed to hold the market back.
This is an excuse for selling that is being applied by analysts
to compensate for their bullish views not coming true. Get over
it!

I built my case on Thursday that the market malaise is not
rate related. I agree it is a factor but it is not the only
factor. Since Wednesday I think the market is factoring in the
potential for a Kerry victory as the Bush administration goes
down in flames. Revelations from multiple sources show the Iraq
prisoner scandal has been known since last year. Numerous relief
organizations had filed complaints and charges over the last six
months. We are hearing now that there are video tapes of even
worse atrocities being committed and may even include prisoner
deaths. I will be the first to admit I don't have the facts and
all I get is the news from the various major sources. We all
know how sensational news makes better copy. I think investors
are seeing the same thing and running for cover. Gail Dudak,
a noted analyst from one of the big firms, said a couple weeks
ago that appearance of a Kerry victory could knock -1000 points
off the Dow and do it in a hurry. We know from experience that
markets prosper under both democrats and republicans so it is
not a party problem. The major problem is the vow to reverse
the tax cuts and remove some of the business friendly initiatives
that are helping this rebound. Kerry is more eco friendly than
Bush and has a strong reluctance to approve defense spending
to name a couple. Again, it is not a party thing but an
administration change that the markets are dreading. The
more the Iraq scandal takes over the headlines the more
likely Kerry will win.

Another factor continues to be the jump in oil prices. Oil
finally traded at $40 on Friday and closed at $39.90 with no
indications that there is any relief in sight. This price
gain was in spite of a serious ramp in the dollar to highs
for the month. Gold also got whacked from a morning high at
$391 to close at $379.30.

While I talked down the rate hike impact above I am talking
about the impact from a Fed hike. The market has already
priced in way more in the way of rate increases than the Fed
could do in good conscience over the next twelve months.
Yields on the ten-year treasury soared on Friday to 4.769%
and a TWO YEAR HIGH. Considering we were at the 3.65% level
in March this is a +30% jump in little more than a month.
This is going to have an impact on the markets because real
borrowing costs have already gone up. Any Fed hike will be
anticlimactic.

Ten-year Yield Chart - Weekly



Big problems in the Dow on Friday included GM after saying
that inventory levels had risen about +30% over their desired
levels. Auto sales are slowing at a time consumers should be
buying with their tax refunds. GM fell to a six month low.
HD also fell to a six month low on fear higher mortgage rates
would slow home repair projects. AA and DD both crashed on
falling metals prices. Citigroup and JPM fell to four month
lows on fears higher rates would shrink their margins. It
was not a good day for the Dow.

The Dow lost -124 points and closed only three points off its
low of 10114. Support at 10250, 10200 and 10150 failed with
barely a hint of slowing. Because we rallied off the prior
Friday's lows the Dow only ended down -108 for the week but
it was a critical 100 points. Current support is 10100 with
disaster support at 10000 which is also the 200dma. The month
long downtrend closed at its lowest point and internals were
very negative.

For all markets the A/D line was 5:1 in favor of decliners
and volume was 4:1 in favor of declining volume. Volume was
only slightly higher than Wed/Thr but did manage to break
4.0B. The new 52-week highs hit a new 12-month low at only
61 and new 52-week lows also set a new 12-month high at 897.
We have gone from double-digit new lows just three weeks ago
to nearly 1000 on Friday. There is no joy in Mudville tonight.

The Nasdaq was slightly less negative and tried to single
handedly keep the markets from falling off the cliff. It was
a valiant effort but it did close at the low of the day at
1919 and support from last week. There is no other way to
look at it today. The Nasdaq has broken the 200dma at 1939
by a bunch and is on the verge of testing real disaster
support at 1900. A break under 1900 would be to a new six
month low and very negative for tech bulls. Remember our
discussion last Sunday about the difference between the 200
sma/ema? The 200sma is 1939 as I mentioned above and it has
broken again. The 200ema is 1915 and just below where the
Nasdaq came to rest at the close. A rebound here would be a
successful second test. A failure here could be ugly.

Helping push us lower is a complete lack of support from
overseas markets. Art Cashin said on Friday the emerging
markets are turning into submerging markets and he is right.
The Nikkei has been down for five straight days and losing
nearly -700 points. The rising dollar, rising oil and threats
of slowing in China are knocking the profits out of the
overseas markets. This global sentiment is not helping our
direction.

Other challenges remain the slowing consumer for whatever
reason and the peaking in earnings for the year. Add all
these things together and the market has a lot of weight on
its shoulders heading into the summer doldrums. Fund flows
were negative last week for the second time since March and
fund managers cannot be thrilled about that. Tax day is on
the way and money is flowing out to make those payments.
This additional drag is worsened by the flood of new IPOs
with the heaviest schedule since 2000. $39B in new issues
has been sucked out of the existing market over the last
90 days.

Trading next week could be frantic. With the markets right
at or just above critical support this would typically be
the right place for a relief rally. The selling over the
last several days was very strong internally and we should
see some relief of that pressure on Monday. Last Friday I
suggested going long at the open on Monday because the NDX
was resting just above 1400 support. Well the plan worked
and we did rally at the open and the NDX rose to 1436
before failing. This Friday the NDX has fallen to just over
1400 once again. I am not nearly as optimistic this time
around.

While I would like to think that closing the at NDX 1400,
Nasdaq 1920, Dow 10100 and SPX 1100, all critical support
levels, would produce a Monday rebound I can't make that
recommendation today. I will be making the call in real
time on the Futures Monitor Sunday night but there is too
much risk to make it today. The major risk is that we are
beginning that -1000 point election dive Gail Dudak
predicted. We also have the risk the Fed will hike rates
at the open on Monday. It is a slim chance but it does exist.
Actually I wish they would as it would clear the table for
the next three months and take that implied threat out of
the forecast. I think the markets would rally if they did.

Russell Chart - Daily



Once past Monday morning we should see the real direction
appear. Unfortunately based on the Russell as the leading
market indicator the direction is still down. We may get
a trading rebound when the Russell hits the 200dma at 544
but I am not counting on it. The Russell has broken to a
new four month low and that is not a good sign for mutual
fund health. The semiconductor sector actually closed up
on Friday and was instrumental in holding the Nasdaq up for
most of the day. Despite the rebound in the SOX it is still
in a down trend as well. There is a lot of potential here
with all the major indexes at support but there is just
enough cracking of that support to weight that potential
to the downside. Even if we do get a trading rally on Monday
it may be very brief. There are simply no material events
on the horizon to act as catalysts for a sustained move
higher. For the next 90-120 days we are in a period of
economic, political and geopolitical uncertainty that may
not lend itself to broad gains in the market. We are no
longer in a range bound market where selling tops and buying
dips will work. The game plan for the future has changed to
simply sell the rallies. I suggested last week to remain in
short mode under 10275/1940 and that advice still stands.

Enter Very Passively, Exit Very Aggressively!

Jim Brown


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

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


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

Follow the Money
By Leigh Stevens
lstevens@OptionInvestor.com

THE BOTTOM LINE –
The apparently contradictory market preoccupations are: 1.) A
rebounding economy WITH (finally) new job creation - bullish -
versus 2.) The anticipated Fed interest rate hike because of #1 -
bearish.

This particular conflicting viewpoint has gone on in every
economic recovery in the last 50 years and is not contradictory
exactly - rather, this is the market shifting gears so to speak.
Eventually the Market always follows the economy and earnings -
the money - earnings trump everything, eventually.

The Indices all had the minor early week rebound that I was
looking for - and, these rallies then reversed and all the
indices fell to new lows for the current decline. My sense of how
things might unfold was that the recent or first rally would not
"work" and that a final bottom would come later on.

I can also continue to say the same thing about the S&P and Dow
indices - they are not yet registering a fully "oversold"
condition. The Nasdaq is getting somewhat oversold however - but
not yet on longer-term weekly charts. The Composite might fall
under its prior lows in the 1900 area even, if the Russell 2000
Index provides a "bellwether" indication - more on this follows
in my comments on the Composite.


FRIDAY'S TRADING ACTIVITY –

The BIG story was that 288,000 new jobs were created - and
unemployment fell to 5.6% as estimated by the Labor Department as
released Friday.  Both numbers were above expectation.  Moreover,
March's non farm payroll gains got revised higher from 308,000 to
337,000.

The S&P 500 (SPX) was off 1.4% on the day and closed under 1100,
at 1,098.69.  The Dow 30(INDU)lost 124 points (1.2%) on its close
at 10,117. The Nasdaq Composite (COMP) fell some 20 points (1%)
to close at 1,918.

Given the outlook now for a rate hike, interest sensitive sectors
like financials and the home builders took a beating. Also
factoring into negative sentiment was crude oil's run above $40
per barrel.  Ouch!! - those fill up runs with my high performance
German car are getting painful to the pocketbook. Time to look at
something more fuel efficient as everyone is buying SUV's still -
I always did like to buck the trend.

Technology stocks showed some strength with bellwethers Cisco,
Dell, and Intel, up on the day, bucking the trend.  The SOX Index
(Philadelphia Semiconductor index) was up 1 percent. I can't say
that the chart looks at all bullish however.

OTHER MARKETS -
I mentioned already that Crude oil broke through $40 per barrel
on Friday, but did not also note that this was a 13-year high.
Yipes! I would say that this is also an underlying worry related
to the economic recovery.

Treasury yields closed Friday at their highest level since last
July as the bond market closed off for the seventh straight week
after the employment report. The 10-year note closed down a point
and 1/4 at 94 1/32 to yield 4.77% versus 4.6% on Thursday.

The dollar rose against the euro, to close at $1.1978 and back
below 1.20 - the greenback was up 1.4% against the Yen, at 111.30
yen on the New York Forex market close.

Gold continues to look weak technically and was off 2.6% - at
$378.40 an ounce on the New York Merc.  Gold continues to retreat
from the 400 area which seems to be a benchmark resistance level
- but so was $40 a barrel in Crude Oil!

MY INDEX OUTLOOKS –

S&P 500 Index (SPX) – Daily chart:

It looks like the S&P 500 could re-test the prior low in the 1087
area, or even get down to about 1080. I would be a buyer of the
SPX calls if 1080 was seen, looking for a rebound to maybe 1120
where I see resistance currently. Needless to say, its getting
close to getting out of puts.




Well, traders are getting so bearish, that it's bullish!  Makes
perfect sense in the Alice In Wonderland world in the street of
dreams. That is to say that when my Call to Put ratio gets down
to the area of the green line once or twice, a rebound is usually
not far off - typically, coming within 1-5 trading sessions.

S&P 100 Index (OEX) – Daily chart:

I said last time that "its also quite possible that the prior
lows around 532-534 get re-tested...." To add to this, I would
note that this is also the area of its 200-day moving average as
you can see on the left hand daily chart of the S&P 100 (OEX).

532 is the prior low - 531 is where my lower trading envelope
line comes - if OEX gets here don't expect it to go much lower,
without some kind of rally. If OEX gets to 531-532, then
rebounds, its sets up a potential double bottom, a pretty bullish
pattern if it holds as a low. Of course if prices fall under a
prior low and don't rebound to back above this low within 1-2
sessions, it's showing a very weak market.

I peg resistance now at 550.



Dow Industrials (INDU) Daily:

I can't get too bearish on the Dow with it at the lower end of
its hourly downtrend channel, as can be seen with DJX right hand
chart.  The very key 200-day moving average intersects in the
Industrials at 10,000.  A weekly close under this level, would
set up potential lower targets to 9800.

In the Dow Index (DJX), resistance is at 102.5, then around 103.5
and finally, at the top end of the current downtrend channel in
the 104 area.  The Dow 30 Index (INDU) had a very weak technical
close at the end of this past week and the Dow had been holding
up the best.  The market is spooked - per usual - by the Fed.  It
was always an analogy that the Fed gets the party going and then
takes away the punchbowl!




Nasdaq Composite (COMP) and Russell 2000 Indexes – Daily:

The 1900 area is key support in the Nasdaq Composite (COMP) and
this index is oversold on the daily charts.  Traders should be,
will be, on the outlook for signs of support in this area, if
reached.  Especially so, with the bellwether Semiconductor Index
(SOX) having a bit of a rebound on Friday.

Resistance is at 1980, then 2000 - I would look at buying Nasdaq
related Index puts in this area.




Suggesting that 1900 or the prior lows might not hold in the
Composite is the action in the bellwether Russell Index (RUT),
which took out its prior lows and suggests that another down leg
may be underway in Nasdaq.

My recent Trader's Corner article on Bellwether indexes and
stocks can be found at:
http://www.OptionInvestor.com/traderscorner/tc_050404_1.asp

Nasdaq 100 (NDX) Index  – Daily:

1400 has been my target on the Nasdaq 100 (NDX), thinking that
NDX might get a rebound back up to 1450 at key resistance.

Now however, I'm beginning to wonder if 1400 will hold - 1368 is
the prior low and this may be the next target given the tendency
for the indices to re-test prior key lows (or highs).  If NDX
does get into this area, and holds, its sets up a potential
double bottom and would offer a compelling indication to get into
calls at that point - that (the pattern) and the fast approaching
oversold reading on oscillator type indicators like the RSI - see
chart below.




Nasdaq 100 tracking Stock (AMEX:QQQ)– Hourly:

Buying QQQ under 35 is what I suggested.  Still do, but how much
under?  The 34.50 area, at the lower end of the hourly downtrend
channel looks a possible target and potential support early in
the coming week. If the Q's take out that prior low at 34.80, the
stock would likely dip a bit further. Then there is the prior low
at 34 and the question of whether this low will get re-tested. 34
is a definite technical target or lower target possibility.

I have some degree of confidence in looking to buy the stock in
the 34.5-34 area, if reached - using a sell stop at 33.7 to exit.
In that case my objective is back up to 35.50-35.70.  The ability
to hold above 35.70 would be bullish and suggest that prices
could regain 36.





Good Trading Success!


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

IBM Got The Blues?

I am afraid our sell the rallies program of late is about
to turn into simply sell anything. I am not naove enough
to think it is that simple but there are some dangers ahead.

There were so many targets this weekend I had trouble
picking the one I liked best. Lots of cheap stocks have
already gotten cheaper so I focused on those big caps at
risk.

IBM ended up getting the brunt of the joke today with a
two month decline to support at $88. I know IBM's earnings
were good last quarter but there is trouble brewing. A
very large part of their earnings came from favorable
currency translation from the weak dollar. With the dollar
soaring those currency translation profits are going to
evaporate.

Earnings warning season is just ahead and late May early
June could be a minefield of multinational companies
confessing earnings shortfalls due to the stronger dollar.
It does not make any difference if IBM warns or not. They
will be painted by the same brush once the scenario starts
to play out.

Should they break support at $88 the next real support
level is $80. They are already under the 200dma at 90 and
have a solid downtrend in place. We also have a rough
Head & Shoulders in place.

I am looking at the June-$85 Put IBM-RQ at $1.15 and
targeting $2.25 for an exit.

This is a simple play with a cheap option and no stop.
Use your own risk profile to exit if the play goes against
us. If we do open with a rebound on Monday then wait to
enter until the market begins to roll over again. No rush.

IBM Chart - Daily





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

QQQ/DJX Calls Update

The QQQ target was $36.00 and we hit $35.75 on Tuesday.
That is close enough to call it a winner. The $35 call
hit $1.20 and I had estimated $1.25 at $36.

The DJX target was hit at 10325 and closed the play.
The $103 call at $.95 hit $1.55.


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

EBAY Update

This makes two Fridays in a row that EBAY has closed under
$80 after rallying during the week. This week we have a
lower high and more substantial Nasdaq weakness. The target
remains $76.

http://members.OptionInvestor.com/editorplays/edply_042504_1.asp



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

Taser Update

TASR continues to die and we are just waiting for the options
to expire for a full profit around $20. As I mentioned last
week the play is so deep in the money there is no time premium
and can be closed now for a full profit less any spread. I am
calling this one closed.

http://members.OptionInvestor.com/editorplays/edply_041804_1.asp

http://members.OptionInvestor.com/editorplays/edply_042504_1.asp


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


News Corp Update $36.62

Still waiting for a chance to fill the last one third of
the position. Waiting until entire position is filled to
sell calls against our current leaps. It would help to
have a market bounce to actually produce some call premium
to sell. I am very encouraged by the staying power of NWS.
It was actually positive again on Friday after posting
higher than expected earnings.

You should be long (4) 2006 Leap Calls at an average price
of $4.10 and waiting for the final (2) to be filled.

Still unfilled:

Buy (2) Jan-2006 $40 Calls WLN-AH with a touch of
200dma (currently $35.25)

http://members.OptionInvestor.com/editorplays/edply_041104_1.asp

http://members.OptionInvestor.com/editorplays/edply_041804_1.asp


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

Washout
Jonathan Levinson

Sentiment and breadth were wildly negative on Friday as bullish
employment data buoyed the US Dollar and sparked another selloff
in bonds.  Despite the upward march in yields for two months, the
implications of higher interest rates were big news in the markets
on Friday.

Volatility increased along with the put to call ratio, and up
volume spiked against down volume almost 9:1 on the NYSE, though
less than 2:1 on the Nasdaq.  Total NYSE volume actually exceeded
Nasdaq volume, and it's apparent that the real damage was in the
NYSE while tech shares were spared.

Next week is loaded with economic reports, most notably the
Producers Price Index on Thursday and Consumers Price Index, along
with Industrial Production and Capacity Utilization on Friday.
Inflation and interest rates will again be the theme, and given
the oversold conditions of both stocks and bonds, the stage is set
for either a strong bounce or more serious technical damage.

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

Market Averages

DJIA ($INDU)

52-week High: 10753
52-week Low :  8416
Current     : 10117

Moving Averages:
(Simple)

 10-dma: 10306
 50-dma: 10362
200-dma: 10001



S&P 500 ($SPX)

52-week High: 1163
52-week Low :  912
Current     : 1098

Moving Averages:
(Simple)

 10-dma: 1118
 50-dma: 1127
200-dma: 1076



Nasdaq-100 ($NDX)

52-week High: 1559
52-week Low : 1103
Current     : 1406

Moving Averages:
(Simple)

 10-dma: 1443
 50-dma: 1445
200-dma: 1413



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

CBOE Market Volatility Index (VIX) = 18.13 +1.08
CBOE Mkt Volatility old VIX  (VXO) = 19.07 +1.42
Nasdaq Volatility Index (VXN)      = 25.50 +0.32

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

          Put/Call Ratio  Call Volume   Put Volume

Total          1.01        684,716       693,425
Equity Only    0.81        529,005       418,012
OEX            0.89         33,845        30,276
QQQ            1.03         46,943        48,212


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

Bullish Percent Data

           Current   Change   Status
NYSE          69.7    - 2     Bear Confirmed
NASDAQ-100    40.0    + 0     Bear Confirmed
Dow Indust.   76.6    - 3     Bear Confirmed
S&P 500       65.6    - 2     Bear Confirmed
S&P 100       67.0    - 3     Bear 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: 0.83
10-dma: 1.29
21-dma: 1.12
55-dma: 1.15


Extreme readings above 1.5 are bullish, and readings below .85
are bearish.  These signals don't occur often and tend be early,
but when they do, they can signal significant market turning
points.


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

Market Internals

            -NYSE-   -NASDAQ-
Advancers     239       801
Decliners    2691      2284

New Highs      28        37
New Lows      419        81

Up Volume    219M      566M
Down Vol.   1706M     1028M

Total Vol.  1944M     1606M
M = millions


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

Commitments Of Traders Report: 05/04/04

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

Commercials reduced their longs and increased shorts
slightly, while small traders added to longs and covered
shorts.

Commercials   Long      Short      Net     % Of OI
04/12/04      412,827   419,910   ( 7,083)   (0.9%)
04/20/04      409,729   421,456   (11,727)   (1.4%)
04/27/04      406,927   416,244   ( 9,317)   (1.1%)
05/04/04      397,964   417,175   (19,211)   (2.4%)

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
04/12/04      135,840    89,090    46,750    20.8%
04/20/04      136,699    92,982    43,717    19.0%
04/27/04      133,775    90,535    43,240    19.3%
05/04/04      137,112    80,201    56,911    21.6%

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 added to longs and maintained their shorts,
while small traders significantly reduced their long
positions and added to shorts.


Commercials   Long      Short      Net     % Of OI
04/12/04      261,889   341,163    (79,274)  (13.1%)
04/20/04      275,985   355,555    (79,570)  (10.1%)
04/27/04      291,365   370,549    (79,184)  (12.0%)
05/04/04      316,840   370,781    (53,941)  ( 7.8%)

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
04/12/04      172,473     52,274   120,199    53.5%
04/20/04      186,799     69,137   117,662    46.0%
04/27/04      175,788     69,613   106,175    43.3%
05/04/04      119,308     74,407    44,901    23.2%

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


NASDAQ-100

Commercial traders increased their long positions and short
positions, but the net addition to longs was sufficient to
set a new high bullish reading of the year for the second week
in a row.  Small Traders added slightly to longs and more
heavily to shorts, setting a new most bearish reading of the
year -


Commercials   Long      Short      Net     % of OI
04/12/04       54,144     34,432    19,712   22.3%
04/20/04       54,852     35,964    18,888   20.8%
04/27/04       54,196     33,948    20,248   23.0%
05/04/04       56,931     35,209    21,722   23.6%

Most bearish reading of the year: (21,858)  - 08/26/03
Most bullish reading of the year:  21,722   - 05/04/04

Small Traders  Long     Short      Net     % of OI
04/12/04        8,297    20,746   (12,449)  (42.9%)
04/20/04        8,538    19,431   (10,893)  (39.0%)
04/27/04        9,008    20,347   (11,339)  (38.6%)
05/04/04       10,247    24,764   (14,517)  (41.5%)

Most bearish reading of the year: (14,517) - 05/04/04
Most bullish reading of the year:  19,088  - 01/21/02

DOW JONES INDUSTRIAL


Commercial traders added slightly to longs and maintained their
short positions, while small traders added slightly to longs and
covered shorts.


Commercials   Long      Short      Net     % of OI
04/12/04       23,501    22,748      753       1.6%
04/20/04       24,156    22,009    2,147       4.7%
04/27/04       23,676    22,009    1,667       3.6%
05/04/04       24,296    22,181    2,115       4.6%

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
04/12/04        6,136     7,450   (1,314)    (9.7%)
04/20/04        5,997     9,631   (3,634)   (23.3%)
04/27/04        5,998     8,868   (2,870)   (19.3%)
05/04/04        6,262     8,155   (1,893)   ( 9.2%)

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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ETF Symbol Guide

Each week I get a lot of questions for ETF ticker symbols, or
questions as to where a trader/investor can find a security that
represents a particular sector or index.

I usually end up at prior Ask the Analyst columns from 10/12/03
"Asian Markets," or an 08/03/2003 article titled "China
Depository Receipts for Hot and Sour Trading" or the 06/15/03
column titled "Sector/Index Trading with HOLDRs and iShares, all
which have web links to various information recourses.

I've got more ticker symbols in my head than I do brain cells
anymore, so I thought I'd put together a QCharts list of ticker
symbols for a full list of various ETFs as a quick reference
guide.

It's a loooooong one, so I've had to divide the list into two
parts, and have sorted the list by the security name.

ETF (Exchange Traded Funds) - Sorted by Name (Part I)



Whether you looking for security that represents Consumer
Discretionary (AMEX:XLY) $30.46 sector, or want to trade Mid Cap
Value (AMEX:IWS) $92.19 with options or the underlying security
itself, there's plenty of ETFs that give the trader/investor
exposure (long/short or call/put).

ETF (Exchange Traded Funds) - Sorted by Name (Part II)



I couldn't for the life of me remember what some of the Small Cap
ETF symbols were during today's session, but I've highlighted
some of the various "small cap" ETF's that may offer
traders/investors a more affordable security or option than the
Russell 2000 Index ($RUT.X).  The Streettrks Small Cap do not
trade with option.

If you're looking for brief descriptions of the various ETF's and
what each ETF has been designed to represent, I like to use
Yahoo! finance http://finance.yahoo.com

Jeff Bailey


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

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

Symbol  Co               Date           Comment      EPS Est

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

AYE    Allegheny Energy, Inc.Mon, May 10  Before the Bell     0.08
ANPI   Angiotech Pharm       Mon, May 10  After the Bell     -0.03
BAY    Bayer                 Mon, May 10  Before the Bell      N/A
CVC    Cablevision Sys Corp. Mon, May 10  Before the Bell    -0.37
CHTR   Charter Comm          Mon, May 10  After the Bell     -0.32
FOSL   Fossil, Inc.          Mon, May 10  Before the Bell     0.20
KGC    Kinross Gold          Mon, May 10  After the Bell      0.04
L      Liberty Media Grp     Mon, May 10  -----N/A-----       0.03
NHY    Norsk Hydro           Mon, May 10  -----N/A-----        N/A
PSUN   Pac Sunwear of Ca, IncMon, May 10  After the Bell      0.16
PRA    ProAssurance Corp     Mon, May 10  Before the Bell     0.48
KPN    Royal Kpn N.V.        Mon, May 10  -----N/A-----        N/A
SPP    Sappi Limited         Mon, May 10  Before the Bell     0.06
SRV    Service Corp Intl     Mon, May 10  Before the Bell     0.15
SBL    Symbol Tech Inc.      Mon, May 10  After the Bell      0.08
TEO    Telecom Argentina     Mon, May 10  After the Bell       N/A
UCOMA  UnitedGlobalCom, Inc. Mon, May 10  -----N/A-----      -0.14
WR     Westar Energy, Inc.   Mon, May 10  Before the Bell     0.39


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

ANF    Abercrombie & Fitch CoTue, May 11  After the Bell      0.30
AGO    Assured Guaranty      Tue, May 11  Before the Bell      N/A
ATO    Atmos Energy Corp     Tue, May 11  After the Bell      1.11
BRG    BG Grp                Tue, May 11  Before the Bell     0.47
CHD    Church & Dwight Co.   Tue, May 11  -----N/A-----       0.56
CSCO   Cisco Systems         Tue, May 11  After the Bell      0.18
TEU    CP Ships              Tue, May 11  Before the Bell     0.08
E      ENI SpA               Tue, May 11  During the Market   2.46
FIA    Fiat S.p.A.           Tue, May 11  -----N/A-----        N/A
MIM    MI DEVS INC           Tue, May 11  -----N/A-----        N/A
MYL    Mylan Laboratories    Tue, May 11  Before the Bell     0.27
OSIP   OSI Pharmaceuticals.  Tue, May 11  After the Bell     -1.03
IMI    SanPaolo IMI SpA      Tue, May 11  -----N/A-----        N/A
SCMR   Sycamore Networks     Tue, May 11  After the Bell     -0.04
MAY    The May Dept Stores CoTue, May 11  -----N/A-----       0.28
WTW    Weight Watchers Intl  Tue, May 11  After the Bell      0.47


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

ACXM   Acxiom                Wed, May 12  After the Bell     0.17
AEG    AEGON N.V.            Wed, May 12  Before the Bell     N/A
ABV    AmBev - Co            Wed, May 12  Before the Bell    0.40
ANN    AnnTaylor Stores      Wed, May 12  After the Bell     0.56
RMK    Aramark Corp          Wed, May 12  Before the Bell    0.23
AIZ    Assurant, Inc.        Wed, May 12  Before the Bell    0.57
CIB    Bancolombia SA        Wed, May 12  After the Bell      N/A
BNG    Benetton Grp          Wed, May 12  -----N/A-----       N/A
BSY    British Sky BrdCst GrpWed, May 12  Before the Bell     N/A
CPWR   Compuware Corp        Wed, May 12  After the Bell     0.09
EN     Enel S.p.A.           Wed, May 12  -----N/A-----       N/A
FD     Federated Dept Stores Wed, May 12  -----N/A-----      0.48
GALN   Galen Holdings PLC    Wed, May 12  Before the Bell    0.73
LQU    Quilmes Industrial    Wed, May 12  After the Bell     0.40
REP    Repsol YPF            Wed, May 12  Before the Bell    0.49
SCM    Swisscom AG           Wed, May 12  Before the Bell    N/A
UTI    Unvrsl Tech Institute Wed, May 12  After the Bell     0.24
DIS    Walt Disney           Wed, May 12  -----N/A-----      0.21


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

ATVI   Activision            Thu, May 6  After the Bell       0.01
ALKS   Alkermes, Inc.        Thu, May 13  -----N/A-----      -0.15
AEOS   Am Eagle Outfitters   Thu, May 13  Before the Bell     0.28
ADI    Analog Devices Inc.   Thu, May 13  After the Bell      0.35
IRE    Bank of Ireland       Thu, May 13  Before the Bell      N/A
BEAS   BEA Systems           Thu, May 13  After the Bell      0.08
BOX    BOC Grp PLC           Thu, May 13  Before the Bell      N/A
DELL   Dell, Inc.            Thu, May 13  -----N/A-----       0.28
DT     Deutsche Telekom      Thu, May 13  Before the Bell      N/A
EON    E.ON AG               Thu, May 13  Before the Bell     2.60
ELN    Elan Corp, PLC        Thu, May 13  Before the Bell    -0.27
JHX    James Hardie Inds N.V.Thu, May 13  -----N/A-----        N/A
KSS    Kohl's                Thu, May 13  After the Bell      0.33
PNRA   Panera Bread          Thu, May 13  -----N/A-----       0.31
PBY    Pep Boys              Thu, May 13  Before the Bell     0.24
RYG    Royal Grp Tech Lmtd   Thu, May 13  Before the Bell      N/A
TGT    Target Corp           Thu, May 13  Before the Bell     0.47
TIF    Tiffany & Co.         Thu, May 13  Before the Bell     0.27
UBB    Unibanco              Thu, May 13  -----N/A-----       0.71
URBN   Urban Outfitters      Thu, May 13  During the Market   0.34
WMT    Wal-Mart Stores Inc.  Thu, May 13  -----N/A-----       0.49


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

ERJ    Embraer               Fri, May 14  After the Bell      0.22
KUB    Kubota Limited        Fri, May 14  -----N/A-----        N/A
NTT    Nippon Tlgrph Tlphn   Fri, May 14  -----N/A-----        N/A


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

Symbol  Co Name              Ratio    Payable     Executable

FARM    Farmer Bros. Co          10:1      May  10th   May  11th
YHOO    Yahoo! Inc                2:1      May  11th   May  12th
DNA     Genentech Inc             2:1      May  12th   May  13th
IKNX    IKONICS Corp              3:2      May  13th   May  14th
NSM     Natl Semiconductor Corp   2:1      May  13th   May  14th
SYK     Stryker Corp              2:1      May  14th   May  17th
TOUS    Tech Olympic USA, Inc     3:2      May  14th   May  17th
BCR     C.R.Bard                  2:1      May  14th   May  17th
PBCT    Peoples Bank              3:2      May  15th   May  17th
BWA     BorgWarner Inc            2:1      May  17th   May  18th
TK      Teekay Shipping Corp      2:1      May  17th   May  18th
DHR     Danaher Corp              2:1      May  20th   May  21st
ODFL    Old Dom Freight Line, Inc 3:2      May  20th   May  21st
CCNE    CNB Financial Corp        5:2      May  21st   May  24th
FBTC    First BancTrust Corp      2:1      May  21st   May  24th
ASBC    Associated Banc-Corp      3:2      May  21st   May  24th
SONC    Sonic Corp                3:2      May  21st   May  24th


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

Earnings announcements continue to dwindle, with a number of big
retailers and computer-hardware giant DELL due to report this
week.  Traders should focus on the flood of economic reports set
for next week.  The trade balance and treasury budget are due to
report on Wednesday, while retail sales/ex-auto is due on
Thursday.  Capacity utilization figures, business inventories, and
the Michigan sentiment-prel. round out the weeks economic
calendar.


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

----------------
Monday, 05/10/04
----------------
None


-----------------
Tuesday, 05/11/04
-----------------
None


-------------------
Wednesday, 05/12/04
-------------------
Trade Balance (BB)         Mar  Forecast: -$42.6B  Previous:  -$42.1B
Export Prices ex-ag. (BB)  Apr  Forecast:     N/A  Previous:     0.6%
Import Prices ex-oil (BB)  Apr  Forecast:     N/A  Previous:     0.2%
Treasury Budget (DM)       Apr  Forecast: -$46.8B  Previous:  -$51.1B


------------------
Thursday, 05/13/04
------------------
Initial Claims (BB)      05/08  Forecast:     N/A  Previous:     315K
PPI (BB)                   Apr  Forecast:    0.3%  Previous:     0.5%
Core PPI (BB)              Apr  Forecast:    0.2%  Previous:     0.2%
Retail Sales (BB)          Apr  Forecast:    0.1%  Previous:     1.8%
Retail Sales ex-auto (BB)  Apr  Forecast:   -0.2%  Previous:     1.7%


----------------
Friday, 05/14/04
----------------
Business Inventories (BB)  Mar  Forecast:    0.4%  Previous:     0.7%
CPI (BB)                   Apr  Forecast:    0.3%  Previous:     0.5%
Core CPI (BB)              Apr  Forecast:    0.2%  Previous:     0.4%
Industrial Production (BB) Apr  Forecast:    0.5%  Previous:    -0.2%
Capacity Utilization (BB)  Apr  Forecast:   76.7%  Previous:    76.5%
Mich Sentiment-Prel. (BB)  May  Forecast:    96.5  Previous:     94.2


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


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The Option Investor Newsletter                   Sunday 05-09-2004
Sunday                                                      2 of 5


In Section Two:

Watch List: Big Declines in Small Caps
Dropped Calls: AU, BBY, DGX, GDW
Dropped Puts: SLAB


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

Big Declines in Small Caps

_________________________________________________________________

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.
_________________________________________________________________

Western Gas Res - WGR - close: 55.55 change: +0.55

WHAT TO WATCH: A P&F upside target of $62.00 advises us to look
for a bullish play in this stock.  In addition, the daily chart
depicts WGR stair-stepping nicely up the chart.  It's
consolidating nicely now, broadening out to form a firm base
before it breaks out and climbs again.  However, we've seen
several of these consolidating stocks break unexpectedly to the
downside lately, so those adding WGR to their personal watch
lists need exits in mind before entering the play.

Fortunately, the consolidation pattern provides us easy entry and
exit levels.  Use a trigger over $57.00 and set a stop at $53.50.
Those willing to take a bit more risk might set that stop a few
cents under the 30-dma, now at $53.23.  Follow the stock higher
with stops.  If triggered, some participants might elect to exit
just ahead of a test of round-number resistance near $60.00.
Average daily volume is only 282,000, so be sure you understand
the kind of volatility that attends such a low-ADV stock before
considering the play. Earnings were May 6.

Chart=



---

Autodesk, Inc. - ADSK - close: 35.79 change: +1.73

WHAT TO WATCH: ADSK, a company that provides computer-aided
design (CAD) to architects, reports earnings May 18, so this play
doesn't warrant a listing on our play listing.  Those who like
aggressive and risky plays might take a look at this stock,
however, appearing to be breaking out of its recent consolidation
pattern.  Friday's trade left a long upper shadow, normally a
troublesome sign in a potential bullish play, but the fact that
it held up as well as it did during Friday's market weakness
might be encouraging.

ADSK had threatened to form a H&S formation, but then shot up
above the head level in a rejection of that formation.  Under
such conditions, bulls often are relieved to see their bearish
fears erased, resulting in that kind of strong drive.  Entries
could be found on intraday pullbacks to and bounces from $35.00,
but Friday's long upper shadow warns those considering such an
entry to check intraday volume levels before entering.  Pullbacks
should draw lower volume than the bounces. Be aware that the
stock looks extended on the weekly chart, so that any earnings
disappointment is likely to see the stock punished harshly.  Be
sure to exit before earnings.

Chart=


---

Johnson Controls Inc. - JCI - close: 52.62 change: -2.17

WHAT TO WATCH:  This auto parts manufacturer reported earnings
April 15 and zigzagged its way back to the top of its descending
regression channel afterwards.  After touching the top of that
channel, it's been in free-fall, breaking through the bottom
channel support and the 200-dma on Friday.  Friday's drop proved
too steep to consider breakdown entries now.  Instead, watch for
bounce-and-rollover entries below that 200-dma.  Set a profit
target just above the P&F downside target of $51.00.  Be aware of
some historical support on the weekly chart near $52.20, planning
exit strategies in advance if JCI should bounce from that level.

Chart=


---

S P X Corp - SPW - close: 42.96 change: -0.48

WHAT TO WATCH:  After reporting earnings in April, this
manufacturer of products used in the transformer and power
conversion industries headed lower.  SPW sports a big partially
formed H&S on its weekly chart, and that's what we're watching.
Recent historical support has been in the $41.50 level, and some
might trigger a play on a move below that recent historical
support, but others might wait until a neckline test.  While it's
sometimes difficult to pinpoint the exact neckline level when a
pattern forms over such a long period of time, as the slightest
miscalculation in the angle of the line can throw off the
neckline level considerably by the time the right-shoulder
breaks, the slightly descending neckline of that formation
currently appears to be at about $40.80-41.00.  What's been
happening with many of these formations lately is that candles
cling to the neckline for a day or two and then suddenly gap
lower, so start making preparations for entry when you see the
neckline being tested.

A trade at $42.00 creates a new P&F sell signal.  Support is
layered in close intervals as SPW heads down, perhaps increasing
the risk in this play, but if that H&S is confirmed, its downside
target would send it back to test the 2003 low.  We wouldn't
advise waiting for that target to be hit, but instead would
advise aiming for a downside target in the mid-thirties.

Chart=



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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
^^^^^

Anglogold - AU - close: 30.78 change: 1.27  stop: 31.84

Weakness in gold and the gold miners hit AU on Friday, sending it
below our stop by 10:15 in the morning.  It continued lower all
day, demonstrating the need to adhere to those stops.  Those who
did suffered a smaller loss as compared to those who stuck out
the day to the bitter end, waiting for a bounce that didn't come.

AU seemed more determined to roll down toward the $27 downside
target of the confirmed H&S on its daily chart than to rise in a
countertrend bounce.  There's still a chance that it could form
an equal or slightly higher low, bouncing again, but we won't be
in the play to watch.  Gold doesn't always glitter.

Picked on April 30 at $ 32.25
Change since picked:   - 1.47
Earnings Date        04/29/04 (confirmed)
Average Daily Volume:     1.0 million
Chart =


---

Best Buy Co - BBY - close: 52.10 change: -1.30 stop: 51.99

The rate-hike fears that hurt homebuilders harmed the retailers
that sell furnishings or electronics to equip those new or
refinanced homes.  HD, LOW, and S all dove.  So did BBY.  We had
hoped that the stock was consolidating near the neckline of its
reverse H&S. Instead it turned lower, perhaps to form a second
right shoulder or reject the formation entirely.  It ended Friday
sitting squarely on the 200-dma and only cents above our stop.

That offers slight hope that BBY will find support and rise, but
that hope is too dim for our liking.  RSI and stochastics hint at
more downside to go, with BBY already demonstrating that it's
capable of falling along with those oscillators.  We're closing
the play.

Intraday charts, however, show BBY oversold on a short-term
basis, so it's possible that players could use intraday bounces
up to $53-53.20 and $53.60-53.90 to exit the play.  Don't allow
the hope of such an intraday bounce to keep you in the play if
BBY heads down instead, however.

Picked on April 23 at $ 55.05
Change since picked:   - 2.95
Earnings Date        03/31/04 (confirmed)
Average Daily Volume:     3.6 million
Chart =


---

Quest Diagnostics - DGX - close: 84.15 change: -1.85 stop: 83.75

It seems every time our DGX play builds up a head of steam and
looks ready to blast higher, somebody opens the pressure relief
valve and lets all that pressure out in an unproductive manner.
Midweek, the stock had risen to new recent highs and looked ready
to break out with conviction.  That bullish setup vaporized on
Friday, with the stock plunging right from the opening bell and
just barely holding above the $84 level.  While it is certainly
possible that we'll get another strong bounce from support, that
doesn't look like the most likely outcome, especially with the
daily oscillators turning south.  Rather than take the risk,
we're going to drop the play this weekend and suggest exiting on
Monday.

Picked on April 25th at      $86.15
Change since picked:          -2.00
Earnings Date               4/22/04 (confirmed)
Average Daily Volume =        581 K
Chart =


---

Golden West Fin. - GDW - close: 101.22 change: -3.14 stop: 101.75

After a solid week of failing to push through the $106 level, our
GDW play tipped over on Thursday, causing us to comment on the
potential that the stock was building a bear flag pattern.  Sure
enough, that pattern was confirmed in a big way on Friday as the
stock plunged through the supporting trendline near $103 and
continued down below $101, triggering our $101.75 stop in the
process.  This play never really worked to our advantage, just
barely moving up far enough to satisfy our entry trigger before
rolling over.  Clearly, any open positions should have been
closed on Friday's disheartening plunge, as a test of the 200-dma
seems imminent.

Picked on April 29th at     $104.99
Change since picked:          -3.77
Earnings Date               4/20/04 (confirmed)
Average Daily Volume =        665 K
Chart =



PUTS
^^^^

Silicon Labs. - SLAB - close: 48.81 change: +0.08 stop: 50.40

There's no two ways about it, our SLAB play ended on a very
frustrating note.  After the stock fell below the $46 level last
week, we cautiously edged our stop down to just above the $50
level, leaving plenty of room for an oversold bounce -- or so we
thought.  The rebound that began in earnest on Tuesday made one
more thrust higher on Friday, just enough to trigger our stop
before tipping over and ending the day near unchanged.  But by
then the damage was done, leaving us with no choice but to drop
the play this weekend.  We should note that the stock appears to
be finding intraday support near what had been prior resistance
earlier in the week, so it may be for the best that we're being
forced to drop the play this weekend.  Open plays should have
been exited on that early thrust above the $50 level, but for
those traders that may have ignored that stop, a drop early next
week near the $48 level should be used as a more favorable exit
point.

Picked on April 29th at       $50.03
Change since picked:           -1.22
Earnings Date                4/26/04 (confirmed)
Average Daily Volume =      1.29 mln
Chart =



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

! Please note changes to the Option Chains for new call and put
  plays.  We are no longer listing a "SL" or Suggested Stop Loss
  on individual options.  Most brokers offer the ability to list
  a stop loss for your option on the underlying stock.

  All of OptionInvestor.com's directional call or put plays list
  a suggested stop loss for the stock itself and if the stock
  trades at or below that stop on an intraday basis we will
  close any hypothetical play at that time.

OI  = Open Interest - the number of open contracts outstanding.
Last Trade @ = Indicates where the option traded last.
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 05-09-2004
Sunday                                                      3 of 5

In Section Three:

Current Calls: OMC
New Calls: ADP, JNJ
Current Put Plays: AMZN, BZH, LTR, WHR, MSTR
New Puts: GM


! Please note changes to the Option Chains for new call and put
  plays.  We are no longer listing a "SL" or Suggested Stop Loss
  on individual options.  Most brokers offer the ability to list
  a stop loss for your option on the underlying stock.

  All of OptionInvestor.com's directional call or put plays list
  a suggested stop loss for the stock itself and if the stock
  trades at or below that stop on an intraday basis we will
  close any hypothetical play at that time.


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

Omnicom Group - OMC - close: 80.90 change: -0.84 stop: 79.25

Company Description:
Omnicom Group is a marketing and corporate communications
company.  The company has grown its strategic holdings to over
1500 subsidiary agencies operating in more than 100 countries.
OMC's wholly and partially owned businesses provide
communications services to clients on a global, pan-regional and
national basis.  The company's agencies provide an extensive
range of marketing and corporate communications services,
including advertising, brand consultancy, crisis communications,
custom publishing, database management, digital and interactive
marketing, business-to-business advertising, employee
communications and environmental design.  OMC also provides field
marketing, healthcare communications, marketing research,
promotional marketing and sports and event marketing.

Why we like it:
While it wasn't what we wanted to see, we'll count ourselves
lucky that OMC tipped over and dropped in the latter half of the
trading week without hitting our $84 entry trigger.  It's no
surprise that the stock felt some significant selling pressure
over the past couple days, as the overall market has been acting
poorly as fears of rising interest rates increase.  OMC actually
didn't fare too badly, especially during Friday's rout of the
bulls, with the stock only falling back to support at the
converged 10-dma ($80.78) and 20-dma ($80.74).  Should investors
return in a better mood on Monday, we could see another assault
on resistance near $83.50, setting the stage for an actual move
through $84 to satisfy our entry trigger.  Should the stock
continue to weaken from here, we'll abide by our $79.25 stop and
drop the play.  For now, we remain comfortably on the sidelines
and will remain there until (hopefully) the stock breaks out over
the $84 level, satisfying our entry trigger.

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

Longer Term: Aggressive longer-term traders can use the June $85
Call, while the more conservative approach will be to use the
June $80 Call.  Our preferred option is the June $80 strike, as
it is currently in the money and should provide sufficient time
for the play to move in our favor.

! Alert - May options expire in 2 weeks!

BUY CALL MAY-80 OMC-EP OI=1063 last traded @ $2.10
BUY CALL JUN-80*OMC-FP OI= 162 last traded @ $3.00
BUY CALL JUN-85 OMC-FQ OI= 230 last traded @ $0.95

Annotated Chart of OMC:



Picked on May 4th at         $82.78
Change since picked:          -1.88
Earnings Date               4/27/04 (confirmed)
Average Daily Volume =     1.21 mln



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

Auto. Data Proc. - ADP - close: 46.03 change: +0.78 stop: 43.25

Company Description:
Through its many subsidiaries, ADP is a provider of computerized
transaction processing, data communication and information
services.  The company's operations are divided into Employer
Services, Brokerage Services, Dealer Services and Claims
Services.  Among the activities managed by the Employer Services
division are payroll, human resources, benefits administration,
tax filing and reporting and retirement plan services.

Why we like it:
What's so special about ADP and its business model?  Unlike the
rest of the market, this stock has just continued its relentless
upward march, holding easily within its 13-month rising channel
and threatening to break out with enthusiasm.  Technically the
stock has already broken out, with Friday's close inching above
the highs from last month, which had already exceeded the highs
of late 2002.  That assessment can be made without including the
intraday spike near the $46.50 area, which was unsustainable on
Friday with the rest of the market in the tank.  Turning to the
PnF chart, we can see the strength of the stock's bullish move,
as the push through $45 created another Buy signal, giving added
credence to the idea that the stock will eventually make its way
to the $61 price target implied by the PnF chart.

With ADP right at the cusp of a major breakout, this is also the
perfect time to contemplate new entries.  Aggressive traders can
jump onto a breakout move over $46.50, while those with a more
cautious approach will want to look for a slight pullback near
the $44.50-45.00 support zone before playing.  Once the stock
gets moving above near-term resistance, we can look for the rally
to continue up towards next resistance at $50.  While that may be
all we can squeeze out of the play, we'll keep an open mind for
now, with the thought of a continued rally up towards stronger
resistance at $52.  Obviously in order to achieve either of these
upside targets in the near term, we're going to need to see ADP
break out over the top of its long-term rising channel.  Initial
stops will be set at $43.25, just under the lows of the past
month, as well as the 50-dma ($43.41).

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

Longer Term: Aggressive longer-term traders can use the June $47
Call, while the more conservative approach will be to use the
June $45 Call.  Our preferred option is the June $45 strike, as
it is currently in the money and should provide sufficient time
for the play to move in our favor.

! Alert - May options expire in 2 weeks!

BUY CALL MAY-45 ADP-EI OI=3444 last traded @ $1.45
BUY CALL JUN-45*ADP-FI OI=1073 last traded @ $2.05
BUY CALL JUN-47 ADP-FW OI= 163 last traded @ $0.75

Annotated Chart of ADP:



Picked on May 9th at         $46.03
Change since picked:          +0.00
Earnings Date               4/22/04 (confirmed)
Average Daily Volume =     1.91 mln


---

Johnson & Johnson - JNJ - close: 55.30 change: +0.46 stop: 52.75

Company Description:
Johnson & Johnson is engaged in the manufacture and sale of
products related to human health and well-being.  Through over
200 operating companies, it conducts business worldwide.  The
company's business is divided into three segments: Consumer,
Pharmaceutical and Medical Devices and Diagnostics.  The Consumer
segment manufactures and markets a range of products used in the
baby and child care, skin care, oral and wound care and women's
healthcare fields, as well as nutritional and over-the-counter
pharmaceutical products.  The Pharmaceutical segment's principal
worldwide franchises are in the antifungal, anti-infective,
cardiovascular, contraceptive, dermatology, gastrointestinal,
hematology, immunology, neurology, oncology, pain management,
psychotropic and urology fields.  The Medical Devices and
Diagnostics segment includes a range of products used by or under
the direction of physicians, nurses, therapists, hospitals,
diagnostic laboratories and clinics.

Why we like it:
Throughout much of the past year, shares of JNJ have been mired
in a gradual downtrend, with the stock dropping from the $58.50
area all the way down to very strong support near $49.  After
spending much of last fall building a new base near that support
level, the stock pushed up to the vicinity of $55, pulled back to
test $49 support one more time and then launched higher following
the last test of support in late March.  What the bulls
accomplished in that first failed rally was enough of an upward
movement to get the 50-dma ($52.34) over the 200-dma ($51.37), a
classic bullish alignment.  Then the stock was poised for a
bullish move, and that move really got started the day after the
company's most recent earnings report (April 14th), with a strong
rally through both the 100-dma ($52.42) and the 50-dma, taking
the stock up to just below the February highs near $55.  All it
took was a slight pullback to the 10-dma ($54.45) and the buyers
re-emerged and really got serious over the past couple days,
succeeding in breaking out over $55 on strong volume on Friday.

This move wouldn't be that impressive if it weren't for the
significant weakness seen throughout the rest of the market last
week.  JNJ seems to be the beneficiary of investors that are
looking for strong defensive stocks to protect and potentially
even grow their capital.  Regardless of the root cause, the
charts say Buy, with last week's trade at $55 issuing another PnF
Buy signal to go along with the bullish price target at $65.
That seems a long ways away for a stock that tends to move as
slowly as JNJ, so we'll set a more modest objective at the $60
level, the site of strong resistance in late 2002.  We can expect
to find initial resistance in the $57-58 area.  Optimum entries
will be found on a pullback near $54, and due to the slow and
methodical way in which JNJ trades, we're not real enthusiastic
about chasing the stock higher.  We'll do better by waiting for
the pullback.  Initial stops at $52.75 should be well out of the
way of mischievous bears unless this nascent breakout fails.
That stop is set below the bottom of the post-earnings gap, as
well as the 10-dma ($54.45), 20-dma ($53.82) and 30-dma ($52.84).

Suggested Options:
Shorter Term: The May $80 Call will offer short-term traders the
best return on an immediate move, as it is currently in the
money.  However, due to the stock's slow moving nature and
expiration only 2 weeks away, we'd suggest moving out to the June
or July strikes.

Longer Term: Longer-term traders can use the June $55 Call, while
the more conservative approach will be to use the July $55 Call.
Our preferred option is the July strike, as it is currently at
the money and gives the stock plenty of time to move upwards
without a significant loss of time value.

! Alert - May options expire in 2 weeks!

BUY CALL MAY-55 JNJ-EK OI=16014 last traded @ $0.85
BUY CALL JUN-55*JNJ-FK OI= 9263 last traded @ $1.35
BUY CALL JUL-55 JNJ-GK OI=43816 last traded @ $1.80

Annotated Chart of JNJ:



Picked on May 9th at         $55.30
Change since picked:          +0.00
Earnings Date               4/13/04 (confirmed)
Average Daily Volume =     7.07 mln



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

Amazon.com - AMZN - close: 41.90 chg: -1.24 stop: 45.25*new*

Company Description:
Amazon.com, a Fortune 500 company based in Seattle, opened 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 other sellers offer
millions of unique new and used items in categories such as
health and personal care, jewelry and watches, gourmet food,
sports and outdoors, apparel and accessories, books, music, DVDs,
electronics and office, kids and baby, and home and garden.
(Source: Company Press Release)

Why We Like It:
Many theorized that investors would ditch their Internet
favorites to reserve funds for Google's planned IPO. They did
that Friday, with the $INX Internet Index dropping 1.07 percent.
That proved comparable to the Nasdaq's 1.02 percent drop, so
perhaps it was general market weakness that sent the Internet-
related stocks lower.  Whatever hit them, we'll take the result.

After rising to test its 50-dma one last time, AMZN fell to
midline support on its descending regression channel on strong
volume.  With stochastics already trending in levels showing
oversold conditions, as sometimes happens when a trend gets
underway, and with MACD lines headed below signal, it's possible
AMZN could see the bottom of its descending regression channel.
The bottom now crosses at about $35.40, but descends, of course.
That lower trendline marks our official target, but some play
participants might consider sticking with that $35.40 exit level.
That level represents a 50 percent retracement of the rally off
the September 2001 low.

What about new entries?  With AMZN hitting midline support on
Friday, it's possible that next week will bring a bounce up to
$44.25-45.00 and a rollover from there.  Watch carefully to be
sure that such bounces occur on low volume before watching for
rollover entries at that level.

Suggested Options:
Because AMZN dropped all the way to support Friday and may now
bounce into a lower high, June options might be advisable.  Our
preference is for the June 40's or 42.50's.

! Alert - May options expire in two weeks !

BUY PUT JUN 40.00 ZQN-RH OI=1491 Last traded @ $1.42
BUY PUT JUN 42.50 ZQN-RV OI=4358 Last traded @ $2.50
BUY PUT JUN 45.00 ZQN-RI OI=2810 Last traded @ $4.10

Annotated Chart:



Picked on May 02 at $ 43.60
Change since picked: - 1.70
Earnings Date      04/22/04 (confirmed)
Average Daily Volume:   8.4 million
Chart =


---

Beazer Homes - BZH - close: 92.47 chg: - 4.33 stop: 98.91*new*

Company Description:
Beazer Homes USA, Inc., headquartered in Atlanta is one of the
country's ten largest single-family homebuilders with operations
in Arizona, California, Colorado, Delaware, Florida, Georgia,
Indiana, Kentucky, Maryland, Mississippi, Nevada, New Jersey,
North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee,
Texas and Virginia.  Beazer Homes also provides mortgage
origination and title services to its homebuyers.  (Source:
Company Press Release.)


Why We Like It:
The strong non-farms payroll number and upward revisions to the
previous two months' numbers increased the chances that interest
rates will be hiked in June, if not sooner.  Although mortgage
lenders have been discounting that possibility for weeks now,
raising mortgage rates ahead of a hike in the Fed's overnight
lending rate, the news hit homebuilders hard.  The $DJUSHB, the
Dow Jones US Homebuilders Index, gapped straight down Friday to
its 200-dma, where it held for the rest of the day, printing a
small-bodied candle that was nearly a doji.

BZH opened beneath its 200-dma, rose to test it, and then dropped
again, doing so on stronger-than-normal volume.  The stock
dropped straight into the zone that included several weekly opens
or closes at the beginning of the year.  Although daily
oscillators do not yet show a likelihood of a bounce, we think
the steep drop and the beginning of a weekly support zone could
slow the descent or even produce a bounce.  We encourage
conservative traders to set a breakeven exit on this play, not
letting their profits evaporate.  We're lowering our official
stop to $98.91, just above Thursday's high and the 21-dma.  More
conservative traders might set a breakeven exit or an exit at
$97.41, just above the 200-dma and the violated trendline on the
chart below.

We would not suggest new breakdown entries since BZH draws so
near our profit target of $90.30.  If BZH should bounce up to and
rollover from below $95.70-96.90, and particularly if it bounces
toward that higher number and then rolls back down through the
200-dma, traders might take a rollover entry.  As we always
suggest, make sure that any bounce occurs on low rather than high
volume and pass up apparent rollover entries if volume had
expanded on the bounce.

Suggested Options:
Those seeking a new entry on a bounce and rollover should
consider June options.  Because of its higher open interest (OI),
we would suggest the June 95 option.

! Alert - May options expire in two weeks !

BUY PUT JUN - 95 BZH-RS OI=1,256 last traded @ $6.60
BUY Put JUN - 90 BZH-RT OI=  125 last traded @ $4.00

Annotated Daily Chart for BZH:



Picked on May 07 at $ 95.49
Change since picked: - 3.02
Earnings Date      04/22/04 (confirmed)
Average Daily Volume:   501 hundred thousand
Chart =


---

Loews Corp - LTR - close: 56.58 chg: -0.78 stop: 60.01

Company Description:
Loews Corp is a New York, NY based holding company that owns a
number of major subsidiaries.  LTR owns 100% of Lorillard, a
cigarette company (a.k.a. the Carolina Group); Loews Hotels, and
Texas Gas Transmission.  LTR is a majority owner in Bulova Corp
(97% owner), CNA Financial (90% owner) and Diamond Offshore
Drilling (54% owner). (Source: Company Press Release)

Why We Like It:
After triggering this play, LTR clung stubbornly to the $57.00
support, but that support finally broke Friday.  U.S. District
Judge Gladys Kessler helped push LTR over the $57.00 ledge when
she refused to throw out $289 billion in penalties levied against
tobacco companies in a suit the government originally filed in
1999.

Now that LTR has dropped below $57.00, conservative players might
consider exits nearer $55-56.00 than $54.00 because of moderate
weekly support near that level. We also note support from a
descending regression channel near that level.  We're setting our
official target at $54.00, just above the 38.2 percent
retracement of the rally off the November low.

What about new entries?  We've been concerned at LTR's hesitation
to move below the $57.00 level, so are somewhat reluctant to
suggest bounce-and-rollover entries, but such entries could be
found on a bounce to and rollover from the midline of that
regression channel.  Breakdown entries would come too close to
our $54.00 target to consider such entries.

Suggested Options:
Because this has been a slow-moving play, buying front-month May
options does not appear to be a good choice.  We suggest either
the June 55 or 60 options.

! Alert - May options expire in two weeks !

BUY PUT JUN 55 LTR-RK OI= 99 Last traded @ $1.15
BUY PUT JUN 60 LTR-RL OI=111 Last traded @ $3.20

Annotated Chart for LTR:



Picked on May 03 at $ 57.74
Change since picked: - 1.16
Earnings Date      04/29/04 (confirmed)
Average Daily Volume:   419 thousand
Chart =


---

Whirlpool Corp - WHR - close: 62.09 chg: -1.68 stop: 67.15*new*

Company Description:
Whirlpool is one of world's leading manufacturers and marketers
of major home appliances, with annual sales of more than $12
billion, 68,000 employees, and nearly 50 manufacturing and
technology research centers. The company markets Whirlpool,
KitchenAid, Brastemp, Bauknecht, Consul and other major brand
names to consumers in more than 170 countries. (Source:  Company
Press Release.)

Why We Like It:
By Thursday when initial claims were reported, market pundits
already had an idea that Friday's non-farm payroll number might
be strong.  It was, and traders began pricing in the likelihood
of a rate hike in June, if not sooner.  With mortgage rates
already heading higher and likely to rise even more, retailers
and manufacturers of household goods headed lower.  Maytag (MYT)
dropped 1.09 percent, Electrolux shed 0.91 percent, and Whirlpool
(WHR) dropped a bigger 1.68 percent.

WHR headed into last nearby support on its weekly chart before
our $58.01 profit target, but we do expect some degree of round-
number support near $60.00.  Conservative traders should consider
measures to protect profits if WHR should bounce from the current
support level or near $60.00, with those plans perhaps including
a breakeven exit.

What about new entries?  Consider bounces up toward $65.00 and
then a rollover back through that $64.69 original entry level as
new entries. Do not enter if volume expands on the bounce.  We
have lowered our stop to $67.15, just above the 21-dma.

Suggested Options:
With May expiration in less than two weeks, we suggest June
options, in particular the June 65's.

! Alert - May options expire in two weeks !

BUY PUT JUN-60 WHR-RL OI=   27 Last traded @1.65
BUY PUT JUN-65 WHR-RM OI=4,363 Last traded @4.30

Annotated Daily Chart for WHR:



Picked on May 05 at $ 64.69
Change since picked: - 2.60
Earnings Date      04/21/04 (confirmed)
Average Daily Volume:   555 thousand
Chart =


---

MicroStrategy Inc. - MSTR - cls: 44.81 chng: -2.21 stp:
50.05*new*

Company Description:
MicroStrategy Inc. is a worldwide provider of business
intelligence software that enables companies to analyze the raw
data stored across their enterprise to reveal the trends and
insights needed to develop solutions to manage their business
effectively.  The company's software delivers this critical
information to workgroups, the enterprise and extranet
communities via e-mail, Web, fax, wireless and voice
communication channels.  MSTR offers an integrated business
intelligence platform, known as MicroStrategy 7i, which is
designed to enable businesses to turn information into strategic
insight and make more effective business decisions.

Why we like it:
There's nothing like a play starting off with a bang to put a
smile on our faces.  MSTR did just that on Friday, smashing
through our $46.50 entry trigger on Friday.  The bulls did
attempt a weak rebound early in the day, but the stock just
rolled over near $48 after the opening bounce and then plunged
lower throughout the afternoon.  Hitting our entry trigger at
$46.50 only caused the decline to pick up speed and by the
closing bell, MSTR had shed a large 4.4%, barely hanging onto
support near the $45 level.  The action here will be critical for
our play, as the stock could easily put in a rebound from this
potential support.  If it does, then we'll be looking for new
entry points on a subsequent rollover from the $47-48 area.  If
however, the weakness we saw on Friday continues next week, then
a break below Friday's low ($44.30) can be used for momentum
entries.  Below current levels, look for potential support again
at $42 enroute to our $40 target.  Lower stops to $50.05 this
weekend, just above the top of last week's failed rebound
attempt.

Suggested Options:
Aggressive short-term traders will want to use the May 45 Put.
Those with a more conservative approach will want to use the June
45 put.  Our preferred option is the June 45 strike, as it is
just now at the money and should provide ample time for the play
to move in our favor.

! Alert - May options expire in 2 weeks!

BUY PUT MAY-45 EOU-QI OI=1105 last traded @ $2.15
BUY PUT JUN-45*EOU-RI OI= 212 last traded @ $3.60
BUY PUT JUN-40 EOU-RH OI=  49 last traded @ $1.65

Annotated Chart of MSTR:



Picked on May 6th at          $47.02
Change since picked:           -2.21
Earnings Date                4/27/04 (confirmed)
Average Daily Volume =         392 K
Chart =



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

General Motors - GM - close: 44.60 change: -1.67 stop: 48.00

Company Description:
General Motors Corporation provides automotive-related products
and services by primarily designing, manufacturing and marketing
vehicles, as well as providing communications services and
financial services.  The company operates in two segments,
Automotive, Communications Services and Other Operations, and
Financing and Insurance Operations.  It's automotive business
segment consists of General Motors Automotive, which encompasses
four regions: GM Norma America, GM Europe, GM Latin
America/Africa/Mid-East and GM Asia Pacific.  The communication
services include digital entertainment, information and
communications services and satellite-based private business
networks.  The company's other operations include the design,
manufacturing and marketing of locomotives and heavy-duty
transmissions.  GM's Financing and Insurance Operations primarily
relate to General Motors Acceptance Corporation (GMAC).

Why we like it:
That great sucking sound you hear last week was the realization
that in a rising interest rate environment, GM will lose much of
its appeal with investors.  The reason why is simple.  GM doesn't
make much money from building cars anymore.  The company has
largely become a Finance company that happens to build and sell
cars and trucks on the side.  If interest rates are going to be
rising, it will take a big bite out of the company's profits,
just like all the other big Financial company's.  Proof of that
cause and effect can be seen in the stock's price action over the
past two days.  Strong data on the employment front had investors
thinking the Fed will move sooner rather than later to raise
rates and the stock sold off on heavy volume, slicing through the
200-dma ($45.29) on Friday and closing at its worst level since
early December.  Looking at the PnF chart, we can see that GM
will need to trade the $44 level before we'll have a fresh Sell
signal to work with.  For that reason, it makes sense to set a
trigger at $44 on this play.

Aggressive traders can enter on the initial break of that level,
while those with a more conservative approach will want to look
for a failed bounce in the $45-46 area (near the 200-dma) as
their signal to enter the play.  Once below $44, the stock won't
find much in the way of support until reaching $42 and
realistically not until the $39-40 level.  Taking another look at
the PnF chart, we can see that the trade at $44 that generates
the Sell signal will bring with it a tentative price target of
$37.  That coincides nicely with strong historical support near
$38 and the bullish support line at $38.  We'll split the
difference and target a drop to the $38 level for our play.
Initial stops will be rather wide to give the stock room to
bounce around before breaking under our trigger.  Set stops at
$48, which is above the 10-dma ($47.70) -- along with the rest of
the short-term moving averages -- and shouldn't be threatened
unless there is a major change in the stock's bearish trend.  If
entering on the initial breakdown, make sure to confirm the
strength of the move by verifying that selling volume is still
running strong.

Suggested Options:
Aggressive short-term traders will want to use the May 45 Put.
Those with a more conservative approach will want to use the June
45 put.  Our preferred option is the June 45 strike, as it is
just out of the money and should provide ample time for the play
to move in our favor.

! Alert - May options expire in 2 weeks!

BUY PUT MAY-45 GM-QI OI= 8310 last traded @ $1.50
BUY PUT JUN-45*GM-RI OI=17161 last traded @ $2.35
BUY PUT JUN-42 GM-RV OI= 8540 last traded @ $1.25

Annotated Chart of GM:



Picked on May 9th at          $44.60
Change since picked:           +0.00
Earnings Date                4/20/04 (confirmed)
Average Daily Volume =      5.10 mln
Chart =



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The Option Investor Newsletter                   Sunday 05-09-2004
Sunday                                                      4 of 5

In Section Four:

Leaps: Sell In May and Go Away
Option Spreads: A New Meaning Of "IPO"
Futures Corner: Selling Overshoots


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*****
LEAPS
*****

Sell In May and Go Away
By Mark Phillips
mphillips@OptionInvestor.com

That's the old market axiom and an argument could be made that
this is the effect that took control of the broad market last
week.  After a half-hearted attempt at a rebound early in the
week, the market got spooked and sold off hard into the end of the
week.  Is this the "Sell in May" crowd at work or something else.
If you've been with me for awhile, you know that I never choose
the obvious answer.  I think people finally acknowledged that
inflation, interest rates and the economy actually do matter.

But at the same time, as I've alluded to in recent commentary, I
think last week's selloff was an over-reaction.  Let's review.
The FOMC meeting didn't change anything except remove a few more
of the roadblocks that have been keeping the Fed in check in terms
of ending their accommodative stance.  While the message being
sent is one of balanced risks, the various Fed Heads have gone out
of their way to reassure the markets that they're in no hurry to
embark on the tightening cycle.  Up until now, the missing
ingredient necessary to finish the rate hike cake was robust job
growth.

Well, we did get another strong report on both Thursday and Friday
and investors jumped to the conclusion that the Fed could act as
early as Monday to raise rates and reign in the out-of-control
economic growth.  Say what??  It wasn't that long ago that
officials were opining that we weren't growing fast enough.  So
why when we just start to see some growth would the Fed slam on
the brakes?  The simple answer is that they won't.  I'll go out on
a limb here and say that the first hike in the upcoming tightening
cycle will NOT be an inter-meeting cut.  The Fed is trying to walk
a very fine line between "Not too hot" and "Not too cold" as they
try to revive the Goldilocks economy.  The last thing that will
give them that delicate control is ham-handed, surprise rate cuts.
It isn't going to happen.

I've talked about this before, but I think it needs to be
reiterated.  Interest rates are going to be rising soon and the
market is adjusting to that reality, but let's focus on what's
actually important.  To effectively make my point, I'll borrow a
line from both Jim Brown and Mike Parnos, "SIZE MATTERS!"  Now if
that statement offends you, I'm sorry.  But let me gently suggest
that you pull your own mind out of the gutter.  There is nothing
wrong with that statement and I could see it being used on Sesame
Street in the right context.  Sometimes we get so wrapped around
the axle seeing hidden meanings in everything that we lose sight
of the fact that there is no hidden meaning.  So let me be doubly
clear -- SIZE DOES MATTER!

In this context we're talking about interest rates, and the size
of the moves in the discount rate will be absolutely critical to
the effect on the market.  The market right now is totally over-
reacting, as though the Fed is going to raise rates by 100 basis
points on Monday.  I'll go out on another limb (although it's a
pretty sturdy one, in my opinion) and say that the extent of
interest rate increases over the next 6-9 months will be limited
to 25-50 basis points.  The market is a forward looking mechanism,
and it looks roughly 6 months into the future.  So if the recent
market weakness is really based on expected moves in interest
rates, I think it is an over-reaction.

My opinion is much different from most of the analysts I've read
in recent weeks.  I don't think interest rate policy matters until
we see a rate hike in excess of 200 basis points.  That would get
us close to a neutral interest rate policy, not a restrictive one.
Barring a huge surge in both inflation and employment, along with
capacity utilization moving over 80% and staying there, I don't
think we'll see that much of a rise in interest rates even in the
next 24 months.  Quite simply, investors are acting as though that
200 basis point hike is going to arrive Monday before the open.
If I'm correct, then that means the current moves in the market
are not really related to the reality of rising interest rates,
but the fear of those rates beginning to rise.  It's the Bogeyman,
run for your lives!  GRIN

Seriously, if we're seeing market weakness now, it is because it
is finally time for some serious consolidation of the stellar
rally of the past year.  The excesses need to be worked off and
this is the time for it to happen.  April earnings are over,
guidance from much of Corporate America is suggesting slower
economic growth over the next couple quarters as the economic
stimulus peters out.  Sure there are some troubling signs in the
technicals of most of the major averages, but they are the sorts
of signs that point to drops on profit taking or brief selloffs.
Where we will start to get really concerned about the bear market
(which has just been hibernating for the past 18 months in my
opinion) is re-awakening is when we start to see the 50-dmas of
the major indices crossing down through the 200-dmas.

Probably the closest market to this critical juncture is the
NASDAQ-100, but even there, we have 50 points of separation still
between those averages.  To reiterate, we're seeing some serious
selling in many issues that have run WAY too far over the past
year and they now need to come back to build new bases for the
next leg up.  By now I know you're wondering "Who are you and what
did you do with the real Mark Phillips?" right?  Don't worry, he's
still here, but I'm trying to adopt a more balanced viewpoint.
Yes, the bear market that ravaged investors from 2000 to 2002 is
alive and well and still sleeping off that huge feast.

But this bull market is a fanciful creation of Wall Street and it
won't last.  The valuations don't support it, the levels of debt
don't support it and most importantly smart investors like Warren
Buffett and Sir John Templeton see NO VALUE.  Nobody else has ever
built the kind of wealth that Mr. Buffett has by investing.  That
alone leads me to pay attention to what he has to say -- the
central theme of his comments lately is that there is no long-term
value.  When there is value to be found in our stock market, then
the secular bear market will be over.  Don't hold your breath
because it isn't going to happen this year and I seriously doubt
it will be next year.

So where does that leave us?  It's a stock-picker's market and
that means that we have to pay especially careful attention to the
technicals.  Remember over the past couple weeks we've looked at
the big trading ranges in the broad market.  So far those ranges
have not been broken.  In order to deliver some resolution, we
still need to see the DOW break 10,000, the SPX break under 1080
and the COMPX take out the 1900 support level.  All three of those
levels could be smashed first thing on Monday morning, but until
they are, we remain in a trading range market.  That means we need
to tread carefully.  So far we seem to be doing all right and our
primary focus as we move into the summer doldrums will be to not
screw it up.

So with that in mind, let's turn our attention to our current
plays and see what kind of additional excitement we can dredge up.

Portfolio:

HD - What's this? Do my eyes deceive me or did HD actually make a
directional move last week?  GRIN  Well, I was right in stating
that the FOMC meeting wasn't likely to be the catalyst we're
waiting for, but the strong Employment numbers seemed to do the
trick on Thursday and Friday, with investors apparently convinced
that rates can now rise at any time.  HD cratered on Thursday,
smashing its 200-dma near $35 and the picture only got that much
worse (better for us) on Friday, as the stock fell right to the
next potential support at $33 on very heavy volume.  It certainly
looks like the downdraft that we've been (im)patiently waiting for
over the past few months has finally gotten underway.  What we'll
really need to see now is a break under the $31 level, which will
finally give us our PnF Sell signal and it will carry with it an
initial downside target of $24.  Should this decline reverse
itself, we'll know for certain with a trade at $38, which would
issue a new PnF Buy signal, so we're lowering our stop to $38 this
weekend.

CHK - It's hard to get terribly concerned about the pullback in
shares of CHK last week, as it is likely due to the broad market
weakness.  The stock continues to behave well, testing the $14.00-
14.50 resistance area, while continuing to find support near
$13.50, former resistance a few short weeks ago.  The key that
keeps us comfortably bullish is that the price of Natural Gas
continues to push higher, now solidly over the $6.00 level again.
We'll continue to ride out the current volatility, while we want
for the next bullish move that ought to push the stock up towards
the next level of resistance near $16.

LUV - Considering the absolute pounding being dished out to the
Transport stocks last week, our LUV play really didn't do too
badly.  Of course, I'd feel a lot better if it had managed to work
its way up near the $16 level before this latest round of profit
taking hit, but with the price of crude oil knocking on the door
of $40 and likely to go higher, it's natural to assume a bit of
additional pressure on the Airline stocks.  After rolling over
from just above $15, LUV is back at the $14 level, our initial
entry point.  We'll now need to see the stock stabilize near here
and then move up, preferably through its April highs, to give us
some confidence that the bulls will win out.  My largest source of
concern is the fact that weekly Stochastics moved almost to
overbought territory and are now tipping over on this weakness.
That could portend another move down and I certainly wouldn't
argue with conservative traders that want to exit here and then
look for a better entry point at a lower level.  We'll stick with
the play until the bulls regain control, or price falls through
our stop, just under the March lows.

EBAY - Conservative traders have certainly had ample opportunity
to find a favorable exit from our EBAY play over the past couple
weeks, as the as the stock has repeatedly moved into the $83-84
area, only to fall back towards support due to the incessant broad
market weakness.  If we squint, we can see the potential for a
tiny little H&S top formation building right now and I find it
interesting that the neckline of that formation (from the hourly
chart) crosses right at $79.  Recall that a trade at $79 will
generate a new PnF Sell signal and is also the site of our stop.
we now have the 20-dma above that level, helping to protect that
level of support.  So far the bulls have done a good job of
defending that support and we'll see what happens next week.
Whatever you do, make sure to keep those stops in place, just in
case the bulls lose their resolve.

Watch List:

TYC - Sticking with our discipline, we still have not had a viable
entry point on our TYC play.  Yes, we got a move back through the
$28 level and the stock ended back near that level on Friday.  The
first move up early last week was a gap move following it earnings
report, which we ignore for entry possibilities.  And then on
Friday, TYC approached $28 once again -- this time ending near its
low of the day with negligible signs of a rebound.  What I'd
really like to see at this point is a dip back near $27.50 and
then a rebound to close just over the $28 level.  But we'll just
have to see what the market has in store.

AIG - It really seems amazing, but last week, shares of AIG just
continued to deteriorate, never managing a rebound back over the
$72 level, which we need to see for the stock to give us a viable
entry signal.  Note that the stock may find support near the
$69.50 level on this decline, as that is the site of the rising
trendline connecting the lows from late January and late March.
The PnF chart is still bullish so long as AIG doesn't trade the
$68 level, but I don't really care for the way the stock broke
under the 100-dma, with the 50-dma now apparently rolling over.
We don't want to catch a falling knife, and that means we wait for
the bonified rebound over $72 to give us our desired entry signal.
Should the stock just continue down from here, we'll drop it on a
trade at $68.

Radar Screen:

EK - Despite what looked like an honest attempt at an upward move,
shares of EK stalled out at the junction of the 50-dma and the
100-dma as the shorter-term average moved down through the longer
one, and for the past few weeks, the stock has found consistent
resistance at that 50-dma.  After lifting out of oversold
territory, the weekly Stochastics appear to be tipping over again.
Price action is obviously weak, and the 50-dma is just inching
down under the 200-dma, another clear bearish sign.  All the
while, EK continues to be unable to move through its multi-year
descending trendline.  So why isn't it making a move to the Watch
List yet?  Quite honestly, I can't see the bang for the buck
unless we can get an entry at a higher level.  Note that we also
are still waiting for a bearish signal from the PnF chart, which
is still technically on a Buy signal with an upside target of $52.
I like the odds for new entries near the $29-30 area (even though
that is above the descending trendline), but I can't shake the
feeling that entries at current levels will be susceptible to too
much upside risk for the downside potential I see down to the $20
area.

QQQ - At odds with the bearish picture presented by looking at the
NDX and the COMPX, the QQQ remains on a PnF Buy signal and that
keeps me cautious.  Sure there was another painful drop back near
COMPX 1900 last week, but is this the precursor to a rebound from
strong support or are we getting set for a more substantial drop?
I lean towards the idea of a bigger drop, but I think it will come
AFTER we see another rebound from support that has been holding
for the past several months.  That means we ought to see a rebound
on the QQQ from the $34 level (or above) and I would expect to see
resistance hold firm in the $37-38 area.  So even though we're
seeing the weekly Stochastics tip over in a short-cycle reversal,
we're going to wait for the fat pitch, which will be a rollover
near higher resistance.  If we don't get it, that's just
fine...there'll be another pitch coming along very soon.

$DJUSHB - Alright, I know, we can't buy LEAP puts on the $DJUSHB
index, but I think it's time to start thinking about a long-term
bearish strategy on the sector.  Not now though, as I suspect
housing will remain strong through the summer.  The final piece of
the puzzle will come when the Fed actually does begin to raise
interest rates.  After that event, I believe we'll see one more
push on the home buying front, as people rush to buy a house
before it's "too late" and interest rates begin to rise for real.
Does it make sense?  No not really, but then people in crowds
aren't particularly sensible.  I think the strategy we should
employ is to start monitoring the LEAP-able Housing stocks for
favorable technical patterns over the next few months.  Next week,
our commentary will center on the process of how we'll pick the
one or two that look the most favorable to the short side.  That's
right, we actually have some choices this time around.  A couple
years back, our only choice was LEN as it was the only stock in
the sector that had LEAPS available.  But LEN has now been joined
in that arena by DHI, CTX, PHM and RYL.  So we've got enough ammo
to start doing some serious analysis work.  It should be clear
that this will be strictly a technical analysis exercise, as every
one of the above-referenced stocks has a single-digit P/E
ratio...that's a symptom of the strong growth we've been seeing in
the industry.  But when the music stops (rates start rising)
things could get pretty exciting.  Stay tuned.

Closing Thoughts:
Near-term, the bears are in control, but they're going to need
some fresh ammunition to break the markets down through the key
support levels identified in the commentary above.  If successful,
then the technical picture will have changed significantly in my
opinion.  But I really expect to see the range hold a bit longer.
So let's stick with what's working, and that means playing very
carefully with those long-term positions.  Taking a position for a
1-2 or even 3-week trade is quite manageable in the current
environment.  But as we've seen, the macro picture can change
significantly in a period of 3-6 months, our typical holding time
for our plays.

Wait a minute, what does this have to do with the idea of "Sell in
May and go away"?  Remember, we're not talking about active,
aggressive selling.  We're talking about judicious selling to take
advantage of the historical market cycle.  I don't tend to place a
lot of stock in these historical patterns, but it does make sense
to pay attention to them so that we aren't surprised on those
occasions when they do reassert their influence.  We'll continue
to add new plays when we can get the setups we're looking for, but
chasing entries will not be a part of our strategy.  Long or short
should work equally well in the next few months, but we should be
looking for singles and doubles, not going for the grand slam.
Play it safe and hope for another bounce from support next week!
GRIN

Have a great week!

Mark


LEAPS Portfolio

Current Open Plays



LEAPS Watchlist

Current Possibles

SYMBOL  SINCE    TARGET PRICE  TARGETED LEAP  SYMBOL

CALLS:
TYC    03/07/04   $28          JAN-2005 $ 30  ZPA-AF
                            CC JAN-2005 $ 25  ZPA-AE
                               JAN-2006 $ 30  WPA-AF
                            CC JAN-2006 $ 25  WPA-AE
                            PP JUL-2004 $ 25  TYC-SE
AIG    04/25/04   $71-72       JAN-2005 $ 75  ZAF-AO
                            CC JAN-2005 $ 70  ZAF-AN
                               JAN-2006 $ 75  WAP-AO
                            CC JAN-2006 $ 70  WAP-AN
                            PP AUG-2004 $ 65  AIG-TM



PUTS:
GM     05/09/04   $47-48       JAN-2005 $ 45  ZGM-MI
                               JAN-2006 $ 45  WGM-MI
                            PP SEP-2004 $ 50  GM -IJ



New Portfolio Plays

None

New Watchlist Plays

GM - General Motors $44.60  **Put Play**

We've been discussing playing the downside in shares of GM for a
few weeks now, and this isn't the first time we've made the
attempt, as my bearish opinion on the stock is no secret.  While
the stock market rebound over the past year has mitigated the
pension underfunding issue, there's another problem brewing.  GM
has become much more of a Finance company in recent years,
deriving the lion's share of its profits from its financing arm,
as the production and sale of vehicles becomes less and less of a
factor.  This reality is borne out by the stock's price action
last week, as it plummeted to critical support on the positive
employment news that is being widely interpreted as clearing the
way for the Fed to raise interest rates at any time.  Rising rates
will cut right to GM's bottom line and that wasn't lost on
investors who sold on heavy volume.  Last week's weakness was
enough to almost give a bearish cross on the weekly Stochastics
and if the cross occurs, it will be a bearish short-cycle
reversal.  While Friday's break below the 200-dma looks bad, to me
the real key is the $44 level, as a trade below that level will
issue a new PnF Sell signal, with a minimum downside target of
$37.

I may regret this, but I'm going to try and get cute with the
entry strategy on GM.  I don't think there is much more downside
in the play before we get a bounce, but I'm hoping we can see $44
before that bounce arrives.  So we're going to use a trigger point
on that $44 level.  Once we see a trade there, we'll want to watch
for a SUBSEQUENT rebound and failure in the $47-48 area.  That now
looks like strong resistance, with all the shorter-term moving
averages clustered in that area.  One reason for getting cute with
the entry strategy is that it allows us to be stingy with our
stop, placing it at $51, just over the recent double top
formation.  We aren't going to try to chase the stock lower.  If
it just breaks down hard (unlikely in my opinion, then we'll just
let it go.  Note that on the PnF chart, the initial target after
trading $44 will be $37, and with the bullish support line at $39,
we should expect at least one solid attempt at a rebound once the
$40 level is breached.

BUY LEAP JAN-2005 $45 ZGM-MI
BUY LEAP JAN-2006 $45 WGM-MI
BUY Call SEP-2004 $50 GM -IJ **Insurance Put**


Drops

None


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Option Spread Strategies
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A New Meaning Of "IPO"
By Mike Parnos, Investing With Attitude

I'm no economist. That's for sure.  Maybe that's why I can't
understand why the stock market has such a bug up its butt about a
potential 1/4% interest rate increase.

Well, maybe they're worried about subsequent rate hikes, too.  The
bottom line is that the good companies will still make more money
than the not-so-good companies.

Normally, I could care less about fundamentals.  We make most of
our trading decisions based on charts.  News?  Usually the news
balances itself out.  But, the current environment puts traders,
in a no-win situation.  Good economic news?  The market goes down.
CEOs lining their pockets?  The market goes down.  Gas prices
skyrocketing?  The market goes down.  This is the "mierde" that I
talk about.  Enough already.  It's time to find Bin Laden.

Be Alert
I only say this because some of our CPTI portfolio positions are
at risk of violating their lower strikes.  Be ready to possibly
make adjustments.

This week is a good time for a bounce.  The buyers are poised to
jump back in.  How do I know?  I read it in a damn fortune cookie.
Plus, I got an email from the Psychic Friends Network.  What
better confirming indicators are there?  They're just as reliable
as those used by most money managers.

Options Trading Is Up
According to the Options Clearing Corporation, the March volume of
US options traded was up by 63% over March of 2003.  That's good
news for us premium sellers.  There are more retail option traders
stepping up to the craps table.  Three years ago, about 70% of US
options trading came from retail traders.  Although the percentage
of retail investors hasn't necessarily increased, the sheer
percentage increase means there are more premium dollars out there
to be had.

There is additional good news.  This for mutual fund investors.
Apparently, there is an increased interest in options from
institution investors looking for new risk management tools.   Why
is this good?  Because they're concerned about the future.
Imagine how nice it would be if more mutual funds used options to
hedge their extensive portfolios.  The cost of this kind of
insurance might mean mutual fund values would increase a little
slower.  However, the knowledge that their positions are, at least
to some degree, hedged should provide peace of mind.  Plus, I
suspect that it would attract more investors to the funds that
partake in this hedging.

What Does "I-P-O" Really Mean?
In this instance it means "I'm Pissed Off."  Why?  Because some
more of our civil liberties may be at risk.  It's enough that the
government can tap our phones and search our homes on a whim.
They can even go to libraries and see what books we've checked
out.  A piece of paper allows them to hack into our computers and
see what web pages we visit – all in the name of suspicion.

I'm fully in favor of G-strings, but I have some reservations
about Gmail.  Email is a wonderful thing.  It allows us to
communicate almost instantly to people next door or all over the
world – in complete privacy.

So, where's the problem.  By now you must know that Google is
going public.  Google is a great search engine, to be sure.
However, they're trying to further enhance their appeal by
offering a new wrinkle to email.  It's going to be free – or,
almost free.  What's the cost?  Maybe a civil liberty or two.

Google makes their money by selling advertising.  They do very
well.  To subsidize Google's proposed "Gmail," their computers
will supposedly scan the text of your emails.  When it recognizes
a keyword, like "car," a related ad will appear on the email.
Google maintains that it will all be computerized – no human
involvement.  Maybe, maybe not.  I would rather pay for my email
rather than having a computer (or anyone) poking around in my
business.

I'm sure Google will remain immensely popular and profitable.  It
will remain my search engine of choice – until the government
starts scrutinizing my searches.  It's just not right.  I'll pass
on Gmail.  That's why the whole new meaning to I-P-O.
________________________________________________________________

MAY CPTI POSITIONS
Remember, May is a five-week option cycle.  Get comfortable.
We're going to exercise some patience and self-discipline.  That's
the best kind of exercise.  It beats the hell out of a
Stairmaster.  It's more profitable, too – usually.

May Position #1 – SPX Iron Condor – 1098.70
We sold 10 SPX May 1080 puts and bought 10 SPX May 1070 puts for a
total credit of $1.90 ($1,900).  Then we sold 7 SPX May 1175 calls
and bought 7 SPX May 1190 calls for a credit of  $1.40 ($980).
Our total net credit and potential profit is $2,880.  Our maximum
profit range is 1080 to 1175.  Maintenance: $10,500.

May Position #2 – RUT Iron Condor – 548.56
We sold 10 RUT May 620 calls and bought 10 RUT May 630 calls for a
credit of $1.20 ($1,200).  Then we sold 10 RUT May 540 puts and
bought 10 RUT May 530 puts for a credit of $1.30 ($1,300).  Our
total net credit and profit potential is $2,500.  Our maximum
profit range is 540 to 620.  Maintenance: $10,000.

May Position #3 – MNX Iron Condor - $140.62
We sold 10 MNX May $152.50 calls and bought 10 MNX May $157.50
calls for a credit of $.80 ($800).  Then we sold 10 MNX May $140
puts and bought 10 MNX May $135 puts for a credit: $.95 ($950).
Our total net credit and profit potential is $1,750.  Our maximum
profit range is $140 to $152.50.  Maintenance: $5,000.

May Position #4 – BBH Iron Condor - $146.03
We sold 10 BBH May $155 calls and bought 10 BBH May $165 calls for
a credit of $.70 ($700).  Then we sold 10 BBH May $135 puts and
bought 10 BBH May $125 puts for a credit of  $.70 ($700).  Our
total net credit and profit potential is $1.40 x 10 contracts =
$1,400.  Our maximum profit range is  $135 to $155.  Maintenance:
$10,000.
________________________________________________________________

ONGOING POSITIONS

QQQ ITM Strangle – Ongoing Long Term -- $34.97
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 make
money by selling near term puts and calls every month.  Here's
what we've done so far:
Oct. $33 puts and Oct. $34 calls – credit of $1,900. Nov. $34 puts
and calls – credit of $1,150. Dec. $34 puts and calls – credit of
$1,500.  Jan. $34 puts and calls – credit of $850.  Feb. $34 calls
and $36 puts – credit of $750. Mar. $34 calls and $37 puts –
credit of $1,150. Apr. $34 calls and $37 puts – credit of $750.
May $34 calls and $37 puts – credit of $800.  Total credit:
$8,850.

Note:  We haven't included 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.

ZERO-PLUS Strategy.  OEX – 537.35
In my Feb. 8th column, I outlined a strategy based on an initial
investment of $100,000.  $74,000 was spent on zero coupon bonds
maturing in seven years at a value of $100,000.  The principal
$100,000 investment is guaranteed.  We're trading the remaining
$26,000 to generate a "risk free" return on the original
investment.

Long Term: Bought 3 OEX Jan. 2006 540 calls @ $81 (x 300 =
$24,300)
March: Sold 3 OEX 585 calls @ $3.10 (x 300 = $930)
March: 535/525 Bull Put spread for credit of $1.10 (x 300 = $330).
Bought back 3 OEX March 585 calls for $.10 & sold 3 of March 560
calls for $1.35.  A credit of $1.25 x 300 = $375.00.  Bought back
March 560 calls for $.15, locked in profit of $120 x 3 = $360.
Cash position is $3,320 ($1,620 plus the unused $1,700).  Our cash
position as of April expiration is $2,640 plus unused $1,700 =
$4,340.

The April 570 OEX call and the OEX 515/505 bull put spread expired
worthless.

New May Zero Plus BPS Position
We sold 5 OEX May 530 puts and buy 5 contracts of May 520 puts for
credit of  $1.10 (x 5 contracts = $550).

We sold a call against our long 540 call. We sold 5 OEX May 575
calls for $1.40 (x 5 contracts = $700).  On Thursday, when the
market tanked, we bought back the May 575 call for $.15 ($75).
This locked in $1.25 profit on the 575 call.  Then, we still have
two weeks left, so we sold 5 of the May 560 calls for $1.15
($575).

If these plays work out, we can add another $1,175 + $575 ($1,750)
to our cash total – just a little bonus while we wait for the
market to go up.

OSX Calendar Spread Plus - $104.10
OSX is the Oil Index. This is a play on the common belief that oil
prices will continue to move up over the next month or two. Bought
10 OSX June $115 calls (36 delta) and sold 10 OSX April $115 calls
(23 delta) at a cost of $2.15 ($2,150). We also put on an April
$100/$90 bull put spread and took in an extra $.70 ($700) to
reduce the cost basis to $1.45 ($1,450). We rolled out our April
$115 call and took in $1.20 - further reducing our cost basis to
$.20. Then, aggressive traders (which we are in this strategy) put
on the May $100/$90 bull put spread and took in $.95. So, now we
are a "plus" $.75. In the best-case scenario, the OSX will finish
just below $110 at May expiration.
_____________________________________________________________

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, first look under "Education" on
the OI home page and click on "Traders Corner."  For more recent
columns, you can look under "Strategies" and click on
"Combinations."  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.


**************
FUTURES CORNER
**************

Selling Overshoots

This was a "Selling Overshoots" kind of week.  The confluence last
week of economic reports, FOMC language, interest rate "fears,"
and geopolitical PR disasters (pictures of Iraqi prisoner abuse)
took us on a wild ride.  Notwithstanding all the back-and-forth
tug-of-war gyrations there was surprising symmetry to the market's
gyrations.  Without further ado, let's look at the daily chart of
the ES (below the next paragraph), which many would argue
spearheads the world financial system.

Yes, we look at a lot of charts in the daily Futures Wrap which
are important to keep track of, but the main index and contract
that I follow are the SPX and ES respectively.  Many traders posit
that the SPX tends to reflect all the conflicting opinions of
multiple time frame traders equity, bond traders, and commodity
traders.  It also tends to reflect other things such as
fundamental data including as economic reports, corporate earnings
reports, and earnings forecasts.  But it also reflects geopolitics
and emotional reactions to various events from geopolitics to all
the items enumerated above.


S&P 500 Emini contract (ES04M) – Daily Chart



On the daily chart, note the waves labeled 1, 2, and 3 as they as
they swing back and forth from one extreme to the other around the
red median line.  The waves labeled A, B, and C are the more minor
recent waves that show more subdued moves, but nonetheless very
symmetrical around the median line.  The (A) wave bounced off the
127.2% Fib extension of the prior wave 1 to 2.  Wave B (and 4) was
a rally-back to the 50% Fib resistance area of wave 2 to 3.  This
was also where the down-sloping 20 day moving average was (red
line).

 The Bollinger band also gives "boundaries" that tend to "contain"
price.  In other words, when price goes outside of the band, it
will "want to" go back inside the band, which is a matter of
statistical probability.  Wave 3 (and A) closed outside the band
only one day before it shot up over 20 points (coinciding with the
hyper-emotionalism of Tuesday's FOMC day, labeled on the chart
above).  This was an overshoot to be sold (or shorted).

The buyer's strike Friday afternoon (wave 5, and C) was what we
are thinking could be an "overshoot" in the other direction in
that it closed (again) below the Bollinger band, and it stretched
out toward the 161.8% Fib extension area of wave 1 to 2.
Something else to consider is that this may be a "completion wave
5" (see Keene Little's write-ups on Elliott Wave methodology).
These waves (and wavelets) took place after the "too perfect" 2.5
week run-up that started in late March, ending in early April.
The reason I say "too perfect" is that it ran up too fast, and the
trend was just plain "too good to be true."  In turn, I say "too
good" because price rode up a tend line, never violating it on a
closing basis for 9 trading days, and even the intra-day price
action did not violate what turned out to be a "sacred" trend
line.  While we are talking about "containment" (and I'm not
referring to Cold War foreign policy here), the median line
channel generally contains price on the daily chart (waves A, B,
and C).  However, on smaller time frames (intraday) you will often
see the overshoots (the subject of this article) "fly off the
handle" and go outside those channels.

S&P 500 Emini contract (ES04M) – Daily Chart (zoomed in)



The chart above shows the price action for the week, but we are
sticking with the daily chart, zooming in.  On the chart above you
can see how selling into strength or trying to get in short ties
in with our theme of selling overshoots.  But the intra-day action
on Friday also fits this directive, but is not very apparent on
the daily chart (even the zoomed in daily chart above), so we
shall look at a 15 min chart, see below.  I use the word
"directive" advisedly, because it was stronger than mere advise
(see transcript below from the Futures Monitor).

ES – 15 minute chart



At the open, with an almost 6 point gap down on the ES (see the 15
minute chart above), we had a Buy Early setup, which differs from
the Buy Early Weakness in this respect: we usually do not have to
wait a few minutes for entry. Indeed, the ES moved up 2.50 in the
first 2 minutes, so we were a little late (we should call it a Buy
Immediately setup). We had a 4 minute trade about 4 minutes after
the open for 3.00 points. A massive 2 minute short squeeze pumped
things up to the high of the day by 9:44 EST, or 10 points above
the open in 14 minutes. Normally, we try to catch these type of
intraday blow-offs, but the market's risk-reward due to the major
economic report did not seem balanced, especially as fast a market
as it was in the first half hour. We made one more attempt at
10:15, but got stopped out for a 1.50 loss.

5/7/2004,  9:31:45 AM
I have a buy early bias, but neutral background setup (early
meaning before 10:00)
5/7/2004,  9:35:44 AM
Set a profit target of 1111.50
5/7/2004,  9:39:37 AM
We had a second target of 1112.50, a third of 1113.50 (for other
time frame traders)
5/7/2004,  9:42:29 AM
Went above our 3rd target, medium time frame traders should
tighten up stops
5/7/2004,  9:43:06 AM
Should be taking profits on "overshoots"
5/7/2004,  9:45:59 AM
Like I said, take profits on overshoots!

To wrap things up, we have covered the sell overshoots concept
(and reality), but you can just as effectively buy overshoots.
However, the theme of the week last week (as it turned out) was
one of selling run-ups.  Depending on your level of risk aversion
you can sell overshoots in the manner of taking profits, or if you
are more aggressive you can short the overshoots (which basically
amounts to "picking a top").  It was a very, very fast market, and
most ES and SP traders don't even attempt to trade the first hour,
so in terms of the signals in the Futures Monitor we were more
risk averse due to the plethora of economic reports this week, and
the wild trading action after the jobs report on Friday morning.
I actually had a limit sell order in (for my personal trading) set
at 1115.00, but was one tick too late.  Too bad, because it turned
out to be a massive 20 point dump, as buyers were either sitting
on their hands (due to weekend event risk), or took off early for
the weekend (judging my the very low mid-day volume).


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The Option Investor Newsletter                   Sunday 05-09-2004
Sunday                                                      5 of 5

In Section Five:

Spreads and Straddles:
Premium-Selling Plays:


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

Stocks Plunge Amid Interest Rate Fears...
By Ray Cummins

U.S. equities closed the week with a decidedly bearish bias as a
surge in crude prices and unexpected jobs growth set the stage
for rising interest rates.

The Dow Jones industrial average fell 123 points to 10,117 with
Home Depot (NYSE:HD) and General Motors (NYSE:GM) among the worst
blue-chip performers.  The tech-laden NASDAQ Composite slumped 19
points to 1,917, despite a strong showing by semiconductor shares.
Interest rate-sensitive stocks, as well as raw materials issues,
helped drag the S&P 500 Index 15 points lower to 1,098.  Trading
volume was average, with 1.65 billion shares changing hands on
the New York Stock Exchange.  On the technology exchange, 1.63
billion shares were traded.  Decliners outnumbered advancers by
a ratio of about 3 to 1 on in the broader market.  Bond prices
fell 1 5/32 after the upbeat employment report, with the yield
on the benchmark 10-year treasury note closing at 4.75% for the
first time in almost two years.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
SUMMARY OF CURRENT POSITIONS - AS OF 05/07/04
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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

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

DNA    112.00 118.95   MAY   95  100  0.50   99.50   0.50   Open
EBAY    75.94  79.82   MAY   65   70  0.65   69.35   0.65   Open
HDI     55.63  54.83   MAY   48   50  0.25   49.75   0.25   Open
PDCO    74.97  75.05   MAY   65   70  0.65   69.35   0.65   Open
CME    116.11 116.51   MAY  100  105  0.60  104.40   0.60   Open
MATK    65.12  66.97   MAY   55   60  0.60   59.40   0.60   Open
MTG     74.42  72.54   MAY   60   65  0.50   64.50   0.50   Open
AVP     84.00  84.56   MAY   75   80  0.45   79.55   0.45   Open
MUR     68.50  66.80   MAY   60   65  0.50   64.50   0.50   Open?
ERES    32.29  32.49   MAY   28   30  0.25   29.75   0.25   Open
ZBRA    74.62  74.26   MAY   65   70  0.40   69.60   0.40   Open

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

As suggested on Tuesday, bullish spreads on BJ Services (NYSE:BJS),
Nabors Industries (NYSE:NBR), Navistar (NYSE:NAV) and Henry Schein
(NASDAQ:HSIC) were closed due to further downside activity.  The
position in Silicon Labs (NASDAQ:SLAB) has previously been closed
to limit potential losses.  Murphy Oil (NYSE:MUR) is now on the
"watch" list.


CALL-CREDIT SPREADS

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

SOHU    25.46  16.65   MAY   35  30   0.60   30.60   0.60   Open
SFNT    31.65  21.97   MAY   40  35   0.70   35.70   0.70   Open
GENZ    46.40  42.60   MAY   55  50   0.60   50.60   0.60   Open
PRX     55.25  40.06   MAY   65  60   0.65   60.65   0.65   Open
MERQ    45.59  43.96   MAY   55  50   0.60   50.60   0.60   Open
NEM     42.86  35.41   MAY   50  48   0.25   47.75   0.25   Open
RYL     77.41  74.18   MAY   90  85   0.60   85.60   0.60   Open
AMZN    45.20  41.90   MAY   55  50   0.65   50.65   0.65   Open
BOBJ    27.85  20.73   MAY   35  30   0.75   30.75   0.75   Open
NTES    51.43  38.35   MAY   65  60   0.50   60.50   0.50   Open
VECO    27.43  24.00   MAY   35  30   0.55   30.55   0.55   Open
BSX     40.25  39.77   MAY   45  43   0.25   42.75   0.25   Open
RIMM    97.54  90.70   MAY  115 110   0.50  110.50   0.50   Open
MRVL    38.92  40.51   MAY   45  43   0.30   42.80   0.30   Open
OVTI    22.38  23.00   MAY   30  25   0.55   25.55   0.55   Open
AMZN    43.95  41.90   MAY   50  48   0.25   47.75   0.25   Open
CHIR    45.58  43.51   MAY   50  48   0.25   47.75   0.25   Open

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


DEBIT STRADDLES

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

SSYS    20.88  20.88   MAY    22    20     2.10    2.25   Closed
ZMH     80.84  81.85   MAY    80    80     4.90    6.15    Open?
AH      35.78  33.83   MAY    35    35     3.10    2.90    Open
QLTI    29.60  25.60   MAY    30    30     3.00    4.50    Open?
HOTT    22.26  20.17   MAY    22    22     1.80    2.25    Open
LF      19.67  20.80   JUN    20    20     3.50    5.25    Open?
BSTE    30.63  38.95   JUL    30    30     6.00   11.50    Open?
MKSI    23.10  19.75   JUL    22    22     4.70    5.50    Open

Hot Topic (NASDAQ:HOTT) provided a favorable one-week profit and
Zimmer Holdings (NYSE:ZMH), LeapFrog (NYSE:LF), MKS Instruments
(NASDAQ:MKSI) and QLT Inc. (NASDAQ:QLTI) have also offered small,
short-term gains.  The Corinthian Colleges (NASDAQ:COCO) position
was not available at the target entry price, due to the "gap-up"
on the day after the straddle was listed as a new candidate.

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

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

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.

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

ERTS - Electronic Arts  $51.88  *** Consolidation Complete? ***

Electronic Arts (NASDAQ:ERTS) develops, markets, publishes and
distributes interactive software games that are playable by
consumers on platforms such as home videogame machines, personal
computers (PCs), hand-held game machines (Game Boy Advance) and
online platforms over the Internet.  Its products for playing on
consoles and handhelds are published under license from the
manufacturers of these platforms and EA pays a fee to these
console manufacturers for the right to publish products on their
platforms.  EA operates in two major business segments: EA Core
business that creates, markets and distributes interactive
entertainment software and its EA.com business that creates,
markets and distributes interactive entertainment software that
can be played or sold online, ongoing management of subscriptions
of online games and Website advertising.

ERTS - Electronic Arts  $51.88

PLAY (conservative - bullish/credit spread):

BUY  PUT  JUN-45.00  EZQ-RI  OI=8680  ASK=$0.45
SELL PUT  JUN-47.50  EZQ-RW  OI=2679  BID=$0.75
INITIAL NET-CREDIT TARGET=$0.35-$0.40
POTENTIAL PROFIT(max)=16% B/E=$47.15


__________________________________________________________________

IMDC - Inamed  $61.17  *** Rally Mode! ***

Inamed (NASDAQ:IMDC) is a medical device firm that develops and
sells a diverse line of products that enhance the quality of
people's lives.  The company has three principal product lines:
breast aesthetics, consisting primarily of breast implants and
tissue expanders marketed for use in plastic and reconstructive
surgery; facial aesthetics, consisting primarily of collagen and
other dermal fillers sold largely to dermatologists and plastic
surgeons, and obesity intervention, consisting of products for
use in treating severe and morbid obesity.  The firm also offers
collagen products for use by medical manufacturers.

IMDC - Inamed  $61.17

PLAY (conservative - bullish/credit spread):

BUY  PUT  JUN-50.00  UZI-RJ  OI=63  ASK=$0.30
SELL PUT  JUN-55.00  UZI-RK  OI=58  BID=$0.75
INITIAL NET-CREDIT TARGET=$0.50-$0.55
POTENTIAL PROFIT(max)=11% B/E=$54.50



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

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.

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

BCSI - Blue Coat Systems  $38.55  *** Sell-Off In Progress! ***

Blue Coat Systems (NASDAQ:BCSI) designs, develops, markets and
supports secure proxy appliances that are specifically designed
or purpose-built to serve as a point of control and integration
for multiple Web security functions.  The firm calls its secure
proxy appliances ProxySGs.  It manufactures three primary types
of ProxySG appliances, the ProxySG 400 Series, the ProxySG 800
Series and the ProxySG 6000 Series.  These appliances are very
similar in terms of functionality and differ mainly in terms of
their performance characteristics and scalability.  The company
licenses two separate software products, a third-party universal
resource locator filtering software and Blue Coat Reporter, which
are used in conjunction with its ProxySG appliances.

BCSI - Blue Coat Systems  $38.55

PLAY (less conservative - bearish/credit spread):

BUY  CALL  MAY-50.00  IYU-EJ  OI=65  ASK=$0.40
SELL CALL  MAY-45.00  IYU-EI  OI=98  BID=$0.75
INITIAL NET-CREDIT TARGET=$0.40-$0.50
POTENTIAL PROFIT(max)=8% B/E=$45.40


__________________________________________________________________

CFC - Countrywide Financial  $56.30  *** Interest Rate Woes! ***

Countrywide Financial (NYSE:CFC), formerly Countrywide Credit
Industries, is a holding company that originates, purchases,
sells and services mortgage loans through its major subsidiary,
Countrywide Home Loans.  The company's mortgages are principally
prime credit first-lien mortgage loans secured by single one- to
four-family residences (prime credit first mortgages).  The firm
also offers home equity loans and sub-prime credit loans.  CFC,
through its other wholly owned subsidiaries, offers products and
services that are largely complementary to its mortgage banking
business, including lender-placed mortgage insurance, insurance
brokerage, mortgage-backed securities brokerage and underwriting,
brokerage of bulk servicing transactions, loan processing and
servicing in foreign countries, and retail banking.  The company
conducts its business through four segments: Insurance Segment,
Capital Markets Segment, Global Segment and Banking Segment.

CFC - Countrywide Financial  $56.30

PLAY (less conservative - bearish/credit spread):

BUY  CALL  MAY-65.00  CFC-EM  OI=4282  ASK=$0.20
SELL CALL  MAY-60.00  CFC-EL  OI=8775  BID=$0.60
INITIAL NET-CREDIT TARGET=$0.45-$0.50
POTENTIAL PROFIT(max)=9% B/E=$60.45



~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
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.
__________________________________________________________________

SUPPLEMENTAL DEBIT STRADDLES -- "EARNINGS REPORT SPECULATION"

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.

Stock    Pick     Exp.  Straddle  Long    Long    Target  Target
Symbol   Price   Month   Strike   Call    Put     Debit    Gain

BRKS     16.99    MAY    17.50   BQE-EW  BQE-QW    1.50    0.35
KDE      20.02    MAY    20.00   KDE-ED  KDE-QD    1.85    0.45
PLCE     22.56    MAY    22.50   TUY-EX  TUY-QX    1.90    0.45
PNRA     40.42    MAY    40.00   UPH-EH  UPH-QH    3.25    0.75
POSS     25.20    MAY    25.00   UPQ-EE  UPQ-QE    2.05    0.50
SRNA     17.77    MAY    17.50   NHU-EW  NHU-QW    1.70    0.40
VSAT     22.50    MAY    22.50   IQS-EX  IQS-QX    1.90    0.45

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

SEE DISCLAIMER - SECTION 1

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


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*****************************************
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 05/7/04
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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

FWHT     MAY    17    17.15   19.62    0.35   4.19%   2.04%
MICC     MAY    17    17.15   23.02    0.35   4.31%   2.04%
MNST     MAY    22    21.95   25.78    0.55   4.39%   2.51%
HNT      MAY    22    22.00   23.40    0.50   4.76%   2.27%
IPXL     MAY    20    19.50   23.18    0.50   5.43%   2.56%
SSNC     MAY    22    21.60   22.84    0.90   7.85%   4.17%
TINY     MAY    15    14.70   16.01    0.30   4.60%   2.04%
IMM      MAY    15    14.70   16.81    0.30   4.66%   2.04%
IPXL     MAY    20    19.65   23.18    0.35   4.38%   1.78%
JBLU     MAY    22    22.15   26.75    0.35   3.65%   1.58%
LSCP     MAY    22    21.95   31.09    0.55   5.43%   2.51%
TINY     MAY    17    17.00   16.01   (0.99)  0.00%   2.94%
XMSR     MAY    25    24.50   23.01   (1.49)  0.00%   2.04%
ASKJ     MAY    30    29.50   36.21    0.50   4.47%   1.69%
BRCM     MAY    37    36.70   39.12    0.80   4.83%   2.18%
FWHT     MAY    20    19.35   19.62    0.27   3.03%   3.36%
IMM      MAY    17    17.05   16.81   (0.24)  0.00%   2.64%
HOLX     MAY    20    19.50   20.08    0.50   5.51%   2.56%
HSII     MAY    22    22.25   24.00    0.25   2.61%   1.12%
IMM      MAY    17    17.25   16.81   (0.44)  0.00%   1.45%
LF       MAY    20    19.55   20.80    0.45   5.16%   2.30%
TSAI     MAY    20    19.80   21.47    0.20   2.99%   1.01%
TSO      MAY    20    19.50   20.51    0.50   5.60%   2.56%
APPX     MAY    35    34.40   38.89    0.60   5.81%   1.74%
BLDP     MAY    10    9.75    9.81     0.06   1.57%   2.56%
ELN      MAY    17    17.30   21.00    0.20   4.01%   1.16%
ERES     MAY    25    24.50   32.49    0.50   6.05%   2.04%
HOLX     MAY    20    19.65   20.08    0.35   4.54%   1.78%
LSCP     MAY    22    22.10   31.09    0.40   5.49%   1.81%
PDII     MAY    22    21.75   27.53    0.75   8.99%   3.45%
TELK     MAY    22    22.20   23.36    0.30   4.32%   1.35%
TNOX     MAY    15    14.50   17.02    0.50   8.35%   3.45%
APPX     MAY    35    34.65   38.89    0.35   3.75%   1.01%
EYE      MAY    17    17.20   21.80    0.30   5.00%   1.74%
JCOM     MAY    22    22.30   22.83    0.20   2.82%   0.90%
MGAM     MAY    22    21.90   23.01    0.60   7.17%   2.74%
MICC     MAY    22    22.10   23.02    0.40   5.16%   1.81%
NIHD     MAY    33    32.88   34.88    0.50   4.38%   1.52%
PXLW     MAY    17    16.95   18.49    0.55   7.81%   3.24%
SNIC     MAY    17    17.15   18.19    0.35   5.76%   2.04%
CAMD     MAY    15    14.60   13.80   (0.80)  0.00%   2.74%
DNDN     MAY    12    12.25   13.40    0.25   6.83%   2.04%
FWHT     MAY    20    19.60   19.62    0.02   0.36%   2.04%
MICC     MAY    25    24.45   23.02   (1.43)  0.00%   2.25%
NIHD     MAY    35    34.50   34.88    0.38   3.81%   1.45%
OSTK     MAY    30    29.25   36.60    0.75   9.75%   2.56%
SNIC     MAY    17    17.20   18.19    0.30   6.05%   1.74%
TINY     MAY    17    17.20   16.01   (1.19)  0.00%   1.74%
UTHR     MAY    20    19.65   24.48    0.35   6.71%   1.78%
ALKS     MAY    15    14.70   13.84   (0.86)  0.00%   2.04%
ATRS     MAY    25    24.55   25.22    0.45   7.08%   1.83%
DRTE     MAY    17    17.20   17.18   (0.02)  0.00%   1.74%
FWHT     MAY    20    19.65   19.62   (0.03)  0.00%   1.78%
INSP     MAY    30    29.50   31.65    0.50   7.20%   1.69%
ISPH     MAY    15    14.50   16.63    0.50  11.39%   3.45%
PTEN     MAY    35    34.65   32.03    0.40   4.13%   1.01%
UTHR     MAY    22    22.10   24.48    0.40   6.82%   1.81%
ARTC     MAY    22    22.20   22.35    0.15   2.76%   1.35%
CPKI     MAY    20    19.70   20.07    0.30   6.19%   1.52%
HEW      MAY    30    29.50   29.65    0.15   2.01%   1.69%
ISPH     MAY    15    14.55   16.63    0.45  12.90%   3.09%
MGM      MAY    20    19.65   20.59    0.35   7.24%   1.78%
SONO     MAY    20    19.60   22.56    0.40   8.71%   2.04%
USPI     MAY    35    34.35   35.85    0.65   7.48%   1.89%
DRIV     MAY    25    24.75   27.12    0.25   5.17%   1.01%
GPRO     MAY    35    34.70   37.76    0.30   4.34%   0.86%
JILL     MAY    20    19.60   21.11    0.40   9.70%   2.04%
MVSN     MAY    20    19.65   22.43    0.35   9.34%   1.78%
ORBZ     MAY    25    24.75   21.73   (2.57)  0.00%   2.83% *
PDII     MAY    25    24.55   27.53    0.45   8.88%   1.83%
SYMC     MAY    45    44.65   48.25    0.35   3.95%   0.78%
VXGN     MAY    15    14.50   15.38    0.50  16.34%   3.45%

Positions in ADEX, CLZR, ESIO, GNTA, GVHR, INSP ($35 strike),
MRVL, NET, NFLX, PLMO, TOMO, and USG have previously been
closed to limit losses.  Obvious additions to the early-exit
list are ALKS, CAMD, IMM (17.50 strike), MICC, TINY, and XMSR.
Orbitz (NASDAQ:ORBZ) gapped lower before the opening bell on
the day after the earnings-related position was listed, but
even those traders who chose to open the play (for a larger
initial premium) would likely have exited early for a smaller
than published loss.  In light of the recent bearish trend,
the majority of portfolio issues remain on the "watch" list.


NAKED CALLS

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

AFCI     MAY    25    25.75   16.18    0.75   7.73%    2.91%
QLGC     MAY    37    37.95   27.13    0.45   4.22%    1.19%
AVCT     MAY    37    38.15   33.23    0.65   4.61%    1.70%
INTU     MAY    47    48.00   40.51    0.50   2.80%    1.04%
PPCO     MAY    20    20.30   13.40    0.30   6.92%    1.48%
SINA     MAY    45    45.55   26.98    0.55   6.61%    1.21%
NANO     MAY    20    20.40   12.00    0.40  10.66%    1.96%
PHTN     MAY    35    35.60   30.80    0.60   7.03%    1.69%
SFA      MAY    35    35.55   31.68    0.55   6.17%    1.55%
SOHU     MAY    25    25.75   16.65    0.75  11.61%    2.91%
SWIR     MAY    35    35.60   22.79    0.60   9.26%    1.69%
HOV      MAY    42    42.90   32.14    0.40   4.07%    0.93%
NFI      MAY    45    45.40   33.82    0.40   7.16%    0.88%
PHTN     MAY    35    35.30   30.80    0.30   6.07%    0.85%
RMBS     MAY    25    25.30   20.13    0.30   7.84%    1.19%
FLSH     MAY    20    20.25   17.07    0.25   8.55%    1.23%
BRCM     MAY    42    42.80   39.12    0.30   4.46%    0.70%
APPX     MAY    50    50.55   38.89    0.55  11.50%    1.09%
KG       MAY    20    20.25   14.52    0.25  12.67%    1.23%
SHRP     MAY    30    30.45   27.16    0.45   8.28%    1.48%


~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
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    Stock   Option   Max.   Simple
Symbol  Month  Price  Basis   Price   Price   Yield   Yield

ADP      MAY    45    44.65   46.03    0.35   5.00%   0.78%
BCGI     JUN    10     9.65   11.51    0.35   7.73%   3.63%
ERES     MAY    30    29.70   32.49    0.30   7.04%   1.01%
FARO     MAY    20    19.75   23.00    0.25   9.82%   1.27%
LPNT     JUN    35    34.30   37.51    0.70   4.03%   2.04%
MXIM     MAY    45    44.70   47.75    0.30   4.57%   0.67%
NCF      MAY    30    29.50   31.80    0.50  11.10%   1.69%
NSM      MAY    40    39.40   41.75    0.60   9.78%   1.52%

__________________________________________________________________

ADP - Automatic Data Processing  $46.03  *** Next Leg Up? ***

Automatic Data Processing (NYSE:ADP) is primarily engaged in
computerized transaction processing, data communication and
information services.  The firm offers four types of services:
Employer Services, Brokerage Services, Dealer Services and
Claims Services.  All of ADP's services are offered broadly
across North America and Europe.  Some employer services and
brokerage services are also offered in South America (mainly
Brazil), Australia and Asia.  ADP's revenues are primarily
attributable to fees for providing these services, as well as
investment income on payroll funds, tax filing funds and other
Employer Services client-related funds.  It also recognizes
revenues associated with the sale of software systems and
associated software licenses.

ADP - Automatic Data Processing  $46.03

PLAY (sell naked put):

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

SELL PUT  MAY 45    ADP QI    4025  0.35  44.65   5.0%   0.8%


__________________________________________________________________

BCGI - Boston Communications Group  $11.51  *** Own This One! ***

Boston Communications Group (NASDAQ:BCGI) provides real-time
subscriber management services to the wireless industry.  The
company's real-time subscriber management products include the
following: proprietary software applications, which include
extensive software suite to manage subscribers; hosting
environment, which is a real-time, large scale, micro-payment
transaction processing platform; Intelligent Voice Services
Network, which includes edge-of-network voice services and
Signaling System 7 call control; and Distribution Technology
Partnership Program, which is a national payment network for
cash collection.

BCGI - Boston Communications Group  $11.51

PLAY (sell naked put):

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

SELL PUT  JUN 10    QGB RB    1265   0.35   9.65   7.7%   3.6%


__________________________________________________________________

ERES - eResearch Technology  $32.49  *** 3-For-2 Split Coming! ***

eResearch Technology (NASDAQ:ERES) is a provider of technology and
services that enable the pharmaceutical, biotechnology and medical
device industries to collect, interpret and distribute cardiac
safety and clinical data more efficiently.  The company offers a
range of products and services, including Diagnostics Technology
and Services and Clinical Research Technology.  Their Diagnostics
Technology and Services include centralized diagnostic services
and clinical research operations, including clinical trial and
data management services.  Their Clinical Research Technology and
Services include the developing, marketing and support of clinical
research technology and services.

ERES - eResearch Technology  $32.49

PLAY (sell naked put):

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

SELL PUT  MAY 30    UDB QF     482   0.30  29.70   7.0%   1.0%


__________________________________________________________________

FARO - FARO Technologies  $23.00  *** A Big Day! ***

FARO Technologies (NASDAQ:FARO) designs, develops, markets and
supports portable, software-driven, 3-D measurement systems used
in a broad range of manufacturing and industrial applications.
The firm's principal products are the Faro-Arm Control Station
and Control Station Pro (articulated measuring devices), the Faro
Laser Tracker and Laser Control Station and their companion Soft
Check Tool and CAM2 software, respectively, which provide for
computer-aided design (CAD)-based inspection and factory-level
statistical process control.  Faro's products bring precision
measurement, quality inspection and specification conformance
capabilities, integrated with CAD software, to the factory floor.

FARO - FARO Technologies  $23.00

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    QEJ QD     206   0.25  19.75   9.8%   1.3%


__________________________________________________________________

LPNT - LifePoint Hospitals  $37.51  *** Safe-Haven Sector?

LifePoint Hospitals (NASDAQ:LPNT) operates 28 general, acute care
hospitals with an aggregate of 2,617 licensed beds in non-urban
communities in the United States.  The company's general, acute
care hospitals usually provide the range of medical and surgical
services commonly available in hospitals in non-urban markets.
Most of LifePoint's hospitals provide diagnostic and emergency
services, as well as outpatient and ancillary services, including
outpatient surgery, laboratory, rehabilitation, radiology,
respiratory therapy and physical therapy.

LPNT - LifePoint Hospitals  $37.51

PLAY (sell naked put):

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

SELL PUT  JUN 35    PUN RG       0   0.70  34.30   4.0%   2.0% TS


__________________________________________________________________

MXIM - Maxim Integrated  $47.75  *** Chip Sector Strength? ***

Maxim Integrated Products (NASDAQ:MXIM) designs, develops, makes
and markets a broad range of linear and mixed-signal integrated
circuits, commonly referred to as analog circuits.  The company
also provides a range of high-frequency design processes and
capabilities that can be used in custom design.  Maxim's products
include data converters, interface circuits, microprocessor
supervisors, operational amplifiers, power supplies, multiplexers,
delay lines, real-time clocks, microcontrollers, switches, battery
chargers, battery management circuits, radio frequency circuits,
fiber-optic transceivers, sensors and voltage references.  The
firm's unique products are sold to customers in various markets
including automotive, communications, consumer, industrial control,
instrumentation and data processing.

MXIM - Maxim Integrated  $47.75

PLAY (sell naked put):

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

SELL PUT  MAY 45    XIQ QI   12136   0.30  44.70   4.6%   0.7%


__________________________________________________________________

NCF - National Commerce Financial  $31.80  *** Merger Target? ***

National Commerce Financial (NYSE:NCF) is a bank holding company
that provides banking and other financial services through its
banking and non-banking subsidiaries.  The firm is the surviving
corporation from the merger of National Commerce Bancorporation
with the former CCB Financial Corporation.  NCF's primary banking
subsidiary is National Bank of Commerce.  Across North and South
Carolina, NBC operates under the name Central Carolina Bank.  NBC
offers commercial and retail banking, savings and trust services
through 266 CCB offices located in the Carolinas and 183 offices
located in Tennessee, Mississippi, Arkansas, Georgia, Virginia
and West Virginia.  In addition, the firm offers trust services
through a subsidiary located in Florida.

NCF - National Commerce Financial  $31.80

"SPECULATIVE" PLAY (sell naked put):

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

SELL PUT  MAY 30    NCF QF       0   0.50  29.50  11.1%   1.7%


__________________________________________________________________

NSM - National Semiconductor  $41.75  *** Bottom Fishing! ***

National Semiconductor (NYSE:NSM) designs, develops, manufactures
and markets an array of semiconductor products, including a line
of analog, mixed-signal and other integrated circuits.  These
products address a variety of markets and applications, including
amplifiers, personal computers (PCs), power management, local and
wide area networks (LANs and WANs), flat panel and CRT displays,
and imaging and wireless communications.  The firm seeks to sell
the information appliance business, primarily consisting of the
Geode family of products, and the cellular base-band business.

NSM - National Semiconductor  $41.75

PLAY (sell naked put):

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

SELL PUT  MAY 40    NSM QH   10600   0.60  39.40   9.8%   1.5%



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

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.

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

ATRX - Atrix Laboratories  $28.09  *** Sell-Off Underway? ***

Atrix Laboratories (NASDAQ:ATRX) is a specialty pharmaceutical
company focused on advanced drug delivery.  Its drug delivery
systems deliver controlled amounts of drugs in various time
frames to address a range of therapeutic and patient needs.
Atrigel is the company's original proprietary sustained release
biodegradable polymer drug delivery system.  The Atrigel system
is designed to provide benefits over traditional methods of drug
administration such as safety and effectiveness, ease of use and
application, site-specific or systemic delivery, biodegradability
and customized release rates.

ATRX - Atrix Laboratories  $28.09

PLAY (sell naked call):

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

SELL CALL  MAY 30    OQF EF    2955   0.35  30.35   9.2%   1.2%


__________________________________________________________________

KOSP - KOS Pharmaceuticals  $37.51  *** A Big "Down" Day! ***

KOS Pharmaceuticals (NASDAQ:KOS) is a fully integrated specialty
pharmaceutical company engaged in the development of proprietary
prescription products for the treatment of chronic cardiovascular
and respiratory diseases.  The company manufactures its marketed
products, Niaspan and Advicor, and markets such products directly
through its own specialty sales force and through a sales force
provided by a contract sales organization.  Their cardiovascular
products are based on controlled-release, once-a-day, oral dosage
formulations.  The company's respiratory products in development
consist of aerosolized inhalation formulations to be used mainly
with its proprietary inhalation devices.

KOSP - KOS Pharmaceuticals  $37.51

"SPECULATIVE" PLAY (sell naked call):

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

SELL CALL  MAY 40    KQW EH    1024   0.65  40.65  12.5%   1.6%


__________________________________________________________________

PBY - Pep Boys  $25.72  *** Consolidation In Progress! ***

Pep Boys -- Manny, Moe & Jack (NYSE:PBY) is engaged primarily in
the retail sale of automotive parts and accessories, automotive
maintenance and service and the installation of parts through a
chain of stores.  The company operated its stores in 36 states
and Puerto Rico and its primary operating unit is its Supercenter
format.  Its operates over 600 Supercenters and one Service and
Tire Center, having an aggregate of 6,527 service bays, as well
as 12 non-service/non-tire format Pep Boys Express stores.  The
Supercenters serve "do-it-yourself" (retail) and "do-it-for-me"
(service labor, installed merchandise and tires) customers.

PBY - Pep Boys  $25.72

PLAY (sell naked call):

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

SELL CALL  MAY 27.5  PBY EY    1687   0.35  27.85  10.0%   1.3%



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SEE DISCLAIMER - SECTION 1

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