The Option Investor Newsletter Tuesday 05-11-2004 Copyright 2004, All rights reserved. 1 of 3 Redistribution in any form strictly prohibited. In Section One: Wrap: Nervous Bargain Hunters Futures Markets: See Note Index Trader Wrap: Balances, prices and budgets Market Sentiment: Quick Fix Posted online for subscribers at http://www.OptionInvestor.com ************************************************************ MARKET WRAP (view in courier font for table alignment) ************************************************************ 05-11-2004 High Low Volume Adv/Dcl DJIA 10019.47 + 29.50 10038.35 9974.05 1.87 bln 2648/ 683 NASDAQ 1931.35 + 35.30 1931.48 1909.50 1.72 bln 2234/ 960 S&P 100 536.00 + 3.32 536.17 532.68 Totals 4882/3643 S&P 500 1095.45 + 8.33 1095.69 1087.12 W5000 10648.22 + 99.30 10650.29 10549.07 SOX 470.15 + 11.30 470.25 458.90 RUS 2000 548.67 + 10.81 548.69 537.86 DJ TRANS 2836.17 + 26.20 2843.33 2810.81 VIX 18.57 - 1.20 19.28 17.94 VXO (VIX-O)18.49 - 1.25 19.14 18.13 VXN 27.75 - 0.16 27.90 26.84 Total Volume 3,944M Total UpVol 3,260M Total DnVol 634M Total Adv 5421 Total Dcl 1982 52wk Highs 32 52wk Lows 452 TRIN 1.07 NAZTRIN 0.48 PUT/CALL 1.11 ************************************************************ Nervous Bargain Hunters by Jim Brown Buyers returned at the open on Tuesday but they were unable to force any material gains in the Dow. Tech stocks and the small caps saw the strongest buying but it was very cautious. Resistance levels from Friday held on the big caps but the SOX soared +2% led mostly by Intel. Dow Chart - Daily Nasdaq Chart - Daily After several seriously negative days in the markets traders rested from their selling and waited to see if anybody was going to buy the dip. Some bargain hunters did stick their toe in the water but the sharks were still circling and none ventured a dive into the waves. Resistance held and buyers were content to close the day in the green and chalked it up as a win. Economics were mixed with Retail Sales and Manufacturing slowing but employment indicators rising. Retail Sales fell to a gain of only +0.3% for the week as higher gasoline prices continued to pressure consumers. This number included the Mothers Day week and indicates the lack of a real buying surge for the holiday. The Job Opening and Labor Turnover Survey for March jumped +10.9% compared to only +4.3% in February. This is a stale report since the April employment report already told us there was a jump in hiring. It did confirm from a separate source that +441,000 workers were hired in March. This is a different survey base than the Employment Report but both reached the same conclusion. This bodes well for the coming months. A slight bump in the economic road appeared in the Richmond Fed Manufacturing Survey, which fell to 13 from 30 in April. This is a significant drop and a four-month low. It also represents the first drop since November in manufacturing activity. New Orders fell to 17 from 28 and Shipments to 13 from 30. Order backlog also fell as well as the six-month outlook. Anything over zero is considered an expansion of manufacturing activity but a drop of this magnitude is not a good sign. Inflation rose slightly with prices paid rising faster than prices received. This report suggests profits will be squeezed and hiring will be weak in the area. This could be somewhat market positive because it suggests the Fed was right in delaying a rate hike because economic growth is still stumbling along. Also leaning on the markets was the price of oil rising over $40 per barrel. OPEC was said to be considering a new target price for oil above the current $22-$28 level. This was not good news for the market as consumers watched gas prices rise well over $2 in some areas. In news after the bell Cisco announced earnings that beat the street by a penny and announced guidance that was not met with excitement. The company said revenues could rise only +3% to +5% for the quarter. They also said earnings were helped more than they expected from an extra week in the first quarter. (strike one) They also benefited from buying back $3 billion in stock over the quarter which reduced their outstanding shares by 131 million and increased the earnings per share. This is an IBM trick from years past. (strike two) Cisco also said inventory levels rose +20% from the prior quarter and in excess of their targets while their book to bill remained "about one" according to Chambers. (strike three) The stock dropped in after hours on the "moderate" outlook from Chambers. He reinforced the idea that they would see growth equal to GDP growth in the markets they served. Investors were not excited with this limited view after seeing many other techs reporting +15% to 25% growth prospects despite being cautious. Cisco's problem is one of scale. Once you become so large it is tough to continue to grow at the rate of the small cap competitors. This is just one more reason why Option Investor never recommends holding options over earnings announcements. It was actually a decent report but the market did not like it. Bonds actually gained some ground despite $24 billion in supply coming to market today in 3yr notes from the quarterly refunding. Wednesday and Thursday will see another $30 billion in 5yr and 10yr notes. The bid to cover ratio for the 3yr notes was 2.08, slightly below the 2.27 from February but well above last years 1.80 average. The 3yr notes are seen to be the preferred issue this week and they went at 3.199%. Some of the money raised from stock sales over the last couple days could have ended up in the bond market where safe returns over the next couple years are assured. Traders were happy to see the decent bid numbers because short interest is at an all time high in anticipation of the Fed beginning a rate hike program that some think will end up like 1994. The markets rallied at the open but the Dow never got very far away from the flat line. Only a buy program at the close kept the Dow above 10000 for the day. Resistance remains 10025 from Monday afternoon. With the 200dma at 10005 we are fighting a real technical battle for control. There was no real urge to buy stocks today but the bargain hunters were able to keep the Dow from disaster. The Nasdaq was the strongest index of the big four with a gain of +35 (+1.86%) but the Nasdaq gain was on the strength in the SOX and the Russell. The SOX gained +11 (+2.45%) led by Intel to near the 470 level. The SOX has moved up for seven days since hitting a low at 435 the first trading day in May. The Russell gained +11 (+2%) to bump back into range of the 550 level. The Russell washed out on Monday to 534 intraday and managed to post an impressive rebound back over its 200dma at 544 today. It was definitely a 200dma day with the major indexes either crossing or closing very close to that technical level. The Nasdaq closed at the high of the day just below 1931 but there is very strong resistance between 1930-1965. The one-day rebound, however strong, should not be seen as the beginning of a trend. SOX Chart - Daily Russell Chart - Daily The futures took a serious hit after the Cisco earnings but there is a lot of darkness before morning. Anything is still possible. They recovered most of their losses when the Nikkei reversed a week long trend with a +150 point gain early in the session. The challenge is finding a catalyst to produce any further rally. Despite the rebounds today we are still very oversold according to some and still over valued according to others. We have seen money flowing out of funds and there are serious geopolitical events unfolding. There is no reason to aggressively buy stocks. That does not mean the bargain hunters will not supply a steady bid for the stocks they want. As long as there is no reason to sell it is entirely possible we could remain in a range over Dow 10K while these events unfold. It is just not likely. Internally today was an exact opposite of Monday. Volume was moderate and about a billion shares less than yesterday but advancing beat declining volume by 5:1. New 52-week lows at 452 were less than of half yesterday's level at 1181. Monday was the most negative internals since Oct-2002 and the new 52-week highs were the lowest since July-2002 at only 32. That was the same number we had today. While internals were better they were far from good. Today could be seen as a holiday for sellers more than a return of the buyers. The key point for me is simply support held. Make no mistake this is strong support at these levels. It should have held on the first test and it did. Whether we rebound from here or not the odds are good that this support will be tested again. Considering the strength of the multiple 200dma averages and the various interactions of the various indexes it could be tested several times before it either holds or breaks for the final time. One thing for sure a break of these levels could produce a significant downward move while any rebound could face quite a challenge for a considerable period of time, maybe until after the election. The current drop could be the election premium being priced into the market as I have discussed before. Pollster John Zogby predicted today that Kerry would win the election. According to his website Kerry is ahead 47% to 44% in a two man race. According to Zogby there are very few voters still undecided and those usually break in favor of the challenger. Kerry is ahead on economic issues 54% to 35% and 57% to 36% on Iraq. Bush is still way ahead on terrorism at 64% to 30% but the Iraq problem is increasingly negative for Bush. According to Zogby, the election is now Kerry's to lose. This administration change uncertainty is very damaging to the stock market as each candidate is reaching the point where they will say and do anything to win votes. Nothing is sacred and administration policies 12 months from now are anybody's guess. For many institutions this is the time for caution in their investments. For many with big profits still on the table from the 2003 bull market it may be time to exit stocks and find safety in bonds at the current levels. Earning a safe 3%-4% for the next 12-18 months may be starting to look appealing. For traders the biggest economic reports left this week are the PPI and CPI on Thursday and Friday. This may provide a better clue to the current inflation rate. Lately there have been many analyses of the CPI making the rounds which show how the government "adjusts" the numbers to produce "real" inflation. This suggests we will not find any inflation this week and I doubt the reports will really influence the market. There may be a lot of volatility as they are announced but like the election numbers most traders already have their minds made up. They are just waiting for a signal to make their next move. SPX Chart - Weekly I think the next move for us is still to sell the rallies. Overhead resistance is very strong on the Dow at 10200 to 10300 and I do not foresee a breakout. Resistance on the Nasdaq is still 1930-1965 and despite the strength in the SOX I would be surprised to see higher Nasdaq numbers. SPX 1078 (200dma) is the strongest major support of all the indexes since most technical trading programs key in one way or another off the SPX. A break under 1078 could quickly test the 38% retracement level of the March 2000 high to the Oct-2002 low at 1067. The 50% retracement level at 1160 held for two months and prevented an upside breakout. I am not as confident about 1067 being support but it should at least be a speed bump if tested. Until the trend changes be very careful about buying the dip. Enter Passively, Exit Aggressively. Jim Brown Editor *************** FUTURES MARKETS *************** Futures wrap is not emailed due to the excessive number of charts. It may be read on the website at this address. http://www.OptionInvestor.com/indexes/futureswrap.asp ************************Advertisement************************* No time to follow the Market Monitor? Tired of missing good Trades because you stepped away from your computer? OneStopOption Group can follow the Market Monitor for you. You choose the number of contracts, we take care of the rest!! Trade Stock Options, Stocks and ALL Futures with the same Group. Call us 888 281-9569 to see if you qualify to have us rebate your subscription cost. http://www.OneStopOption.com ************************************************************** ******************** INDEX TRADER SUMMARY ******************** Balances, prices and budgets With no economic data released in today's session and earnings season winding down, today's trade was more of a chance for traders to square things up before tomorrow economic reports, which will give some insight into the US' March trade balance, as well as import (ex-oil) and export (ex-agriculture) prices. Later in the afternoon, at 02:00 PM EDT, the Treasury will release figures for its April budget, which is expected to show a $15.5 billion surplus, that's right, surplus, for the first month this year. All data might play into a recent bearish scenario we discussed in the May 6th Index Trader Wrap. The U.S. trade data will be monitored to see what, if any impact the stronger dollar has had on things, while the import/export prices data can give some insight as to any inflation. The Treasury budget figures will become increasingly important, where the recent strength in nonfarm payrolls should have some positive impact on tax receipts, to try and offset the swelling deficit, partially caused by the war effort in Iraq, not to mention President Bush's tax cuts, which the Bush administration felt might help fuel the U.S. economic recovery. Market Snapshot / Internals - 05/11/04 Close Considering today's major index gains, there sure wasn't much bullish leadership at the new high category at either the NYSE or NASDAQ compared to yesterday. However, the number of new lows abated, and if anything, would suggest bears were locking in some gains. Pivot Analysis Matrix The QQQ closed right on its WEEKLY Pivot, where during today's session found its session high of $35.38 just as the Semiconductor Index (SOX.X), which has been showing some strength in its WEEKLY Pivot Matrix found willing sellers at its WEEKLY R1. Now, before technology bulls, or broader market bulls get overly excited about what has taken place today, let's understand where the major indices now trade in the MONTHLY Pivots. For the first time this month, the SOX.X get a trade at its MONTHLY Pivot. That's not bad, but in the scope of what we've been seeing of late, we've seen the banks as depicted by the BIX.X show strength in the matrix for about two weeks, then quickly turn tail and run to the downside. Of late, the trade has been to rotate capital briefly to a group of stocks (semiconductor, technology, banks, oil service, transports, small cap, etc.) then distribute to a new relative low, while then rotating to another sector for a couple of weeks, before it gets distributed to a new relative low. We can see from the MONTHLY Pivot Matrix that the INDU has traded its MONTHLY S2, the SPX/OEX its MONTHLY S1, while the NDX/QQQ have now completed trade this month at their MONTHLY Pivots. Tomorrow, I think we'd better keep a very close eye on the Dow Industrials, and SPX/OEX lows from yesterday. I think tomorrow's March trade deficit numbers are going to be a focal point early, and could set the tone for tomorrow's session. S&P 100 Index Chart - Daily Intervals The S&P 100 (OEX.X) is comprised of large caps, and here's a pretty good starting point for a good sampling of multi- nationals, where a large portion of revenue/earnings come from overseas customers. On an intra-day basis, a nasty little buy program was set up just as the OEX and SPX dipped to session lows and below their MONTHLY S1, but above their WEEKLY S1. Should the OEX slip much below its WEEKLY S1, be alert to the possibility of a decline back toward WEEKLY S2 and MONTHLY S2. As I look at the OEX chart, in past relative bottoms, the OEX seems to like to consolidate for at least two sessions following a "spike" drop before getting bounce that can last 5 sessions or so. Today's would be a day one of any consolidation. Dow Industrials (INDU) Chart - Daily Intervals Dow breadth was positive at 19 to 11, but as I look at the INDU's chart, I'm a bit surprised it managed to gain a modest 29 points, where resistance came at our WEEKLY 80.9% retracement, and served more like a formidable level of resistance that the WEEKLY S1. Early tomorrow morning, before the opening bell, the Commerce Department will report March's U.S. trade deficit, where economists expect the trade deficit to rise to $43.0 billion, up from February's $42.1 billion. In February, exports totaled $92.4 billion, while imports continued to rise at $134.4 billion. One would think that with the recent strength in the Dollar against most major foreign currencies (euro and yen are the main two) that most market participants would expect a widening trade deficit. HOW MUCH of a deficit is probably the key. Now, that's the NEGATIVE, or downside. If the Deficit were to narrow and SURPRISE the market, then the Dow could bid strong on thought that these multi-nationals continue to see strong trade demand, despite the strengthening dollar. Still, its the rather weak trade in today's session that suggests there may be some concern with regard to the strong dollar, where combined with some jitters over Fed tightening, could pressure earnings for many of the Dow components, which are supposed to reflect key economic sectors for the U.S. economy. NASDAQ-100 Tracker (QQQ) - Daily Intervals My mindset at tonight's close is that I'm more eager to protect some swing trade bullish gains from a trade I profiled in the underlying QQQ yesterday at $34.75, based solely on the SOX.X strength in the pivot, as I sure would have liked to see the SOX.X give a QQQ bull a little more strength above its WEEKLY S1 to the close. Cisco's earnings were upbeat, but there was some negative mention of gross margins dropping off, where in tech-land, when gross margins slip, even just a little, it suggests pricing pressures brought on by the competition. Cisco (CSCO) $22.25 +2.91% was all over the map in after-hours where the headline numbers found a decline to $21.60, then a rebound back to has high as $22.32, steady at $22.11, before then falling to a last tick in after-hours at $21.75, where not too unlike the QQQ, CSCO rests right near its WEEKLY Pivot of $21.58. I also profiled a short-term swing trade long in CISCO May $22.50 calls for $0.50 per contract earlier today when CSCO was trading $21.90, with thought we might get a trade near $23.00 tomorrow and CSCO's WEEKLY R2 of $22.85. Early tomorrow morning, I'll be looking to see what kind of action, if any we see near CSCO's WEEKLY R1 of $22.31, which really marked its session high of $22.32. Jeff Bailey ************************Advertisement************************* Live Securities Brokerage Service with Licensed Option Principals OCO Stop & Profit Orders OneStopOption All types of Spreads and Buy Writes 888-281-9569 Auto-Trade Market Monitor Signals Personal Service and Education **Services available for Foreign Traders including Canada** http://www.OneStopOption.com ************************************************************** **************** MARKET SENTIMENT **************** Quick Fix Jonathan Levinson Sentiment and breadth were awful at Monday's close, but the oversold bounce in the indices today helped to repair the damage to the markets' internals. OEX volatility, the VXO, was lower by 6.33% or 1.25 to close at 18.49. Similarly, the VIX fell 6.07%, though the VXN and QQV were only fractionally lower. Note that the QQQ and Nasdaq were considerably stronger than the Dow and S&P, and yet volatility fell much further for the Dow/S&P options than for those that were Nasdaq/QQQ related. This divergence is worth watching, as it suggests that the options markets were far more fearful than the price advance suggests. I believe that fear of CSCO's earnings report released after the closing bell contributed to that effect. New highs minus new lows rose strongly for both the NYSE and the Nasdaq, while the put to call ratio remained very high at 1.28. The NYSE, Nasdaq and Amex advancers minus decliners also rose sharply within their daily downtrends, again correcting part of yesterday's damage. Economic news due tomorrow inclues the Balance of trade, estimated at -$43B, Export prices excluding agriculture and import prices excluding oil for April and the April Treasury Budget, estimated at $15.5B. ----------------------------------------------------------------- Market Averages DJIA ($INDU) 52-week High: 10753 52-week Low : 8416 Current : 10016 Moving Averages: (Simple) 10-dma: 10215 50-dma: 10337 200-dma: 10009 S&P 500 ($SPX) 52-week High: 1163 52-week Low : 912 Current : 1095 Moving Averages: (Simple) 10-dma: 1109 50-dma: 1124 200-dma: 1077 Nasdaq-100 ($NDX) 52-week High: 1559 52-week Low : 1103 Current : 1421 Moving Averages: (Simple) 10-dma: 1419 50-dma: 1442 200-dma: 1414 ----------------------------------------------------------------- CBOE Market Volatility Index (VIX) = 18.57 -1.20 CBOE Mkt Volatility old VIX (VXO) = 18.55 -1.19 Nasdaq Volatility Index (VXN) = 27.75 -0.16 ----------------------------------------------------------------- Put/Call Ratio Call Volume Put Volume Total 1.11 799,195 885,934 Equity Only 0.92 603,030 556,511 OEX 0.54 55,501 29,810 QQQ 5.90 44,221 260,900 ----------------------------------------------------------------- Bullish Percent Data Current Change Status NYSE 64.0 - 5 Bear Confirmed NASDAQ-100 33.0 - 7 Bear Confirmed Dow Indust. 70.0 - 7 Bear Confirmed S&P 500 59.8 - 6 Bear Confirmed S&P 100 64.0 - 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: 0.90 10-dma: 1.09 21-dma: 0.96 55-dma: 1.13 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 2282 2209 Decliners 614 889 New Highs 19 38 New Lows 263 60 Up Volume 1422M 1406M Down Vol. 384M 199M Total Vol. 1836M 1614M 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 ----------------------------------------------------------------- ************************Advertisement************************* Full Service Brokers Man Financial announces the formation of the OneStopOption Brokerage Group, addressing the demand for personalized, experienced service for both securities* and futures trading within the same firm. 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The Option Investor Newsletter Tuesday 05-11-2004 Copyright 2004, All rights reserved. 2 of 3 Redistribution in any form strictly prohibited. In Section Two: Dropped Calls: None Dropped Puts: None Call Play Updates: ADP, JNJ New Calls Plays: None Put Play Updates: AMZN, LTR, WHR, GM, MSTR New Put Plays: APOL, CTX **************** PICKS WE DROPPED **************** When we drop a pick it doesn't mean we are recommending a sell on that play. Many dropped picks go on to be very profitable. We drop a pick because something happened to change its profile. News, price, direction, etc. We drop it because we don't want anyone else starting a new play at that time. We have hundreds of new readers with each issue who are unfamiliar with the previous history for that pick and we want them to look at any current pick as a valid play. CALLS: ***** None PUTS: ***** None ************************Advertisement************************* Full Service Brokers Man Financial announces the formation of the OneStopOption Brokerage Group, addressing the demand for personalized, experienced service for both securities* and futures trading within the same firm. Licensed Option Principals Andrew Aronson and Alan Knuckman specialize in live assistance of stock*, option* and futures traders. The combination of the proven Man Financial global presence and the convenience of one group for all trading needs provide customers with the tools needed for success. Live Broker and Online Trading Available 888-281-9569 http://www.OneStopOption.com ************************************************************** ******************** PLAY UPDATES - CALLS ******************** Auto. Data Proc. - ADP - close: 46.84 change: +0.00 stop: 43.25 Continuing with the bullish picture offered on Friday, shares of ADP didn't disappoint. The stock opened near the $46 level and then shot over the $47 level yesterday and then gave another strong performance today, dipping to confirm support at $46 and then pushing up to close right at its high of the day. Traders that missed the breakout entry on Monday got another clean opportunity as the stock rebounded from just above the $46 level midday today. There's nothing to suggest the bullish run is over either, as buying volume continues to be strong. The best entries still appear to be on dips near the $45-46 area, although aggressive traders can chase the stock higher on a breakout over the $47.50 level. For now we'll maintain our stop at $43.25, which is below the bottom of the recent consolidation, as well as the 50-dma ($43.59). Picked on May 9th at $46.03 Change since picked: +0.81 Earnings Date 4/22/04 (confirmed) Average Daily Volume = 2.00 mln --- Johnson & Johnson - JNJ - close: 55.14 change: -0.31 stop: 52.75 Given the continued weakness throughout most of the market, shares of JNJ certainly looked good on Monday, pushing up to test Friday's highs before pulling back a bit. The stock spent most of today's session gradually drifting lower in what looks like the beginning of a bull flag consolidation pattern. The best approach for new entries still looks like targeting a dip near $54.50, or perhaps even $54. Make sure to wait for the rebound before buying though, as there's no sense trying to catch a falling knife if the "flight to safety" crowd decides to move back into higher risk equities. The more conservative approach for entries would be to wait for a break from the developing bull flag pattern, which would currently occur on a push back over the $55.50 level. As mentioned over the weekend, we're rather cautious on actual breakout entries due to the stock's slow- moving nature. Maintain stops at $52.75. Picked on May 9th at $55.30 Change since picked: -0.16 Earnings Date 4/13/04 (confirmed) Average Daily Volume = 7.20 mln ************** NEW CALL PLAYS ************** None ************************Advertisement************************* Live Securities Brokerage Service with Licensed Option Principals OCO Stop & Profit Orders OneStopOption All types of Spreads and Buy Writes 888-281-9569 Auto-Trade Market Monitor Signals Personal Service and Education **Services available for Foreign Traders including Canada** http://www.OneStopOption.com ************************************************************** ******************* PLAY UPDATES - PUTS ******************* Amazon.com - AMZN - close: 42.70 chg: +1.44 stop: 44.75 Tuesday, AMZN produced a white candle that completed the third candle of a potential reversal signal known as a morning-star formation. That three-candle series consists of a red candle, a doji that gaps below the red candle, and then a white candle that gaps higher, leaving the star or doji below the other two candles. That morning star formed as AMZN hit the midline of the big descending regression channel on its daily and weekly charts. RSI hooked up and stochastics did, too, but stochastics did so from below signal. MACD did not change its bearish cast, and even the MACD histogram remained negative. We expected a countertrend or oversold bounce along the way, and are at least glad that this one didn't produce an upturn in the MACD or an expansion of volume. Volume was lighter than normal in today's rise. Our lowered stop is at $44.75, placed just above the 10- and 50- dma's, and also at a short-term trendline that marked support for the last consolidation zone. We encourage play participants to set alternate stop losses to exit when their options lose an account-appropriate proportion of their value or upon other considerations if our stop losses do not fit with account parameters. Those seeking new entries should watch for a rollover beneath the 50-dma at $44.20, but make sure first that volume continues to contract. This remains especially important since AMZN appeared to find support near the midline of its descending regression channel, setting up the possibility that it could be trying to move toward the top again before falling to the bottom of that channel. Picked on May 02 at $ 43.60 Change since picked: - 0.90 Earnings Date 04/22/04 (confirmed) Average Daily Volume: 8.4 million Chart = --- Loews Corp - LTR - close: 56.96 change: +0.06 stop: 60.01 In Tuesday's trading, many tobacco-related stocks struggled, impacted both by MO's lowered forecast and U.S. District Judge Gladys Kessler's decision on the Department of Justice's case against seven tobacco companies, with $289 billion in industry profits at stake. While MO and RJR each fell over two percent, however, LTR managed a small gain. That's not what we want to see. In Monday's trading, it pierced the 100-dma, but then bounced back above it. Tuesday it tried to build on that bounce. Unfortunately for LTR's investors and fortunately for us, LTR made no more progress to the upside than it had previously to the downside. A river of moving averages now cascades toward it, with the 10-dma at $57.59 the closest to LTR's current position. The 50-dma has now descended to $59.72, well below our current stop. It's our belief that if LTR cannot make forward progress, it may begin the next leg down. However, we're aware that options plays require more than movement in the right direction: they require that movement within the right time frame. We encourage traders to look at their own account-management styles and consider taking themselves out of the play when their options prices have suffered an account-appropriate percentage loss. For some accounts, that would be 1/3-1/2 the option price, while others invest small enough proportions of their account that they're willing to stake the entire cost of the option. We would not encourage new entries in this play at this time. Picked on May 03 at $ 57.74 Change since picked: - 0.78 Earnings Date 04/29/04 (confirmed) Average Daily Volume: 419 thousand Chart = --- Whirlpool Corp - WHR - close: 63.76 chg: +1.62 stop: 65.76 When we last discussed WHR on these pages, we mentioned the possibility that WHR was dropping into nearby support on its weekly chart. We suggested that conservative traders should consider measures to protect profits if WHR should bounce from the then-current support level or anywhere near $60.00, with those plans perhaps including a breakeven exit. Monday, WHR dropped first, but then bounced strongly from $61.00. That bounce continued Tuesday, producing a rather convincing morning- star reversal signal. When scanning charts Tuesday, we noticed a number of these across many industries, so we continue to urge conservative traders to establish stops according to their own account needs. That might include setting personal stops at breakeven levels. Some might choose a stop just above the neckline level of WHR's large H&S or the 10-dma, with both those possible resistance levels also near horizontal resistance at about $64.60-65.30. We were cheered to see WHR close below all those mentioned resistance levels. However, although volume did not expand when compared to recent volume levels in the downturn, they were strong when compared to 30-day average daily volume. That's not such a cheering event. What about new entries? We think rollovers beneath $65 might provide new entries, but urge that close attention should be paid to those volume levels before a new entry is considered. Volume should contract on any further bounces. Picked on May 05 at $ 64.69 Change since picked: - 1.93 Earnings Date 04/21/04 (confirmed) Average Daily Volume: 555 thousand Chart = --- General Motors - GM - close: 44.61 change: +0.58 stop: 47.25 Performing just as we wanted to see, GM broke below $44 yesterday, pressured by the broad market weakness. Despite today's rebound, we got what we wanted -- a fresh PnF Sell signal, with a bearish price objective of $37. As noted over the weekend, we also have historical support near $38 and the bullish support line resting at $39. But with the PnF Sell signal, we can now get more aggressive with our entries. Clearly the conservative approach appears to have been the best entry strategy, given the stock's rebound back over its breakdown level today and today's rollover near $45 looked appealing. There's the distinct possibility that we could see a bit more of a rebound and a rollover closer to the $46 level would be ideal. Recall that we're going to split the difference in terms of our downside target, looking for an exit on a drop to the $38 level. Note that our stop has been lowered to $47.25, which is above the 10-, 20-, 30- and 50-dmas. Picked on May 9th at $44.60 Change since picked: +0.01 Earnings Date 4/20/04 (confirmed) Average Daily Volume = 5.21 mln --- MicroStrategy Inc. - MSTR - cls: 45.99 chng: +2.13 stp: 48.05 We had anticipated that MSTR would probably find enough buying interest for a rebound attempt off of the $42 support level and that's certainly what has played out. Last week the stock appeared to be in free fall, smashing under the $46.50 trigger level. That slide continued all the way to $42.44 yesterday before the end of day rebound appeared. The bulls kept it up this morning, sending the stock all the way back to $46 by the close and this rebound is now a bit on the disconcerting side. The past three candles on the daily chart have produced a morning star reversal pattern and we may have seen a bottom put in yesterday. For that reason, we're suggesting that conservative traders tighten stops to breakeven on the play. We're going to hold out for a rollover below strong resistance at $48 though and keep the play alive. That rollover can be used for new aggressive entries, but stops need to be adhered to as MSTR has now become a higher risk play due to the morning star pattern. Traders looking to enter on renewed weakness should probably wait for a break back under $44 before taking the plunge. Picked on May 6th at $47.02 Change since picked: -1.03 Earnings Date 4/27/04 (confirmed) Average Daily Volume = 403 K ************* NEW PUT PLAYS ************* Apollo Group - APOL - close: 90.32 change: +1.87 stop: 96.50 Company Description: The Apollo Group provides higher education to working adults. The company operates through its subsidiaries, The University of Phoenix, Inc., Institute for Professional Development, The College for Financial Planning Institutes Corporation and Western International University, Inc. APOL offers its programs and services at 58 campuses and 102 learning centers in 36 states, Puerto Rico, and Vancouver, British Columbia. Why we like it: After hitting new all time highs above $96 late last month, shares of APOL were due for a bit of consolidation and we saw that play out in the $90-94 area for nearly 2 weeks before yesterday's high-volume breakdown below the bottom of the range from the past month. APOL (and the rest of the Education stocks) have been amazingly strong for the past several months, so we should have expected a strong rebound after yesterday's support break. That rebound came right where we should have expected it this morning, at the 50-dma ($87.83). That average has been consistent support for APOL these past few months and the bulls took advantage of that fact this morning, lifting it to a 2.1% gain on the day. So why are we looking at APOL as a bearish play? The answer comes from the PnF chart, which issued its first Sell signal of the year. Along with the Sell signal comes a bearish price target of $81 and that certainly gives us enough room to work with. We had initially planned on using a trigger at $87.50, just under today's low, but we want the ability to take advantage of what we expect will be a rollover near the $92-93 resistance level. Conservative traders should use that trigger for entries, only playing after the stock violates today's low. But more aggressive traders can look for a rollover near the $92-93 area, which now ought to be solid resistance. There's the potential for some mild support to be found near $85 and then APOL ought to quickly seek out the $81 level (our downside target), which also happens to be the site of the 100-dma ($80.62). Because of the aggressive nature of this play, we're going to start with a fairly wide stop at $96.50, just over the recent highs. Traders taking the breakdown entry should use a tighter stop at $94.50, just over the top of the range of the past 2 weeks. Suggested Options: Aggressive short-term traders may want to use the May 90 Put, but with the May options expiring next week, the June strikes may be the better choice. Those with a more conservative approach will want to use the June 90 put. Our preferred option is the June 90 strike, as it is currently at the money and should provide ample time for the play to move in our favor. ! Alert - May options expire in less than 2 weeks! BUY PUT MAY-90 OAQ-QR OI= 3871 last traded @ $2.10 BUY PUT JUN-90*OAQ-RR OI= 1168 last traded @ $4.10 BUY PUT JUN-85 OAQ-RQ OI= 408 last traded @ $2.45 Annotated Chart of APOL: Picked on May 11th at $90.32 Change since picked: +0.00 Earnings Date 6/11/04 (unconfirmed) Average Daily Volume = 1.67 mln --- Centex Corp - CTX - close: $44.80 change: +0.31 stop: 49.35 Company Description: Dallas-based Centex, through its subsidiaries, ranks among the nation's largest home builders, mortgage originators and commercial contractors. Centex was recently ranked No. 12 on Business Week's annual list of the "Top 50 Best Performing Companies" in the U.S. and consistently ranks among the most admired companies in its industry, according to FORTUNE magazine. (Source: Company Press Release.) Why We Like It: Tuesday, Raymond James downgraded the homebuilder stocks, including CTX in the bunch. Raymond James cited the impact of rising interest rates and worsening stock market conditions. Despite that downgrade, CTX climbed 0.70 percent on average volume. However, it underperformed some other homebuilders. The DJUSH, the Dow Jones US Homebuilders, gained 1.08 percent. So why are we listing this as a put play? Through most of April, CTX consolidated just above the 200-dma. Friday's non-farm payroll sent many interest-sensitive stocks lower, and CTX and other homebuilders joined the crowd. By Tuesday morning's low, it had dropped 5.07 points off the Thursday close. It was time for a bounce, and CTX did bounce, but we believe this bounce to be a countertrend or oversold bounce. Volume Tuesday measured nearly a third less than on Friday's and Monday's drops. MACD remained bearish, as did stochastics. Only RSI hooked upward. That RSI hook presented the possibility of bullish divergence building on the daily chart, however, as RSI levels are currently at a higher low while prices are at a lower low. Subscribers want to see that erased eventually with a lower RSI low before price makes a higher high. Because of the presence of this tentative bullish divergence, potential play participants should be particularly watchful of volume patterns when considering a bounce-and-rollover entry. Volume should contract on bounces, not expand. The P&F chart supports the bearish case, however, with a downside target of $36.00. We're looking for a bounce-and-rollover entry below the 200-dma, and preferably below $46-47.00. We note some tentative support near $42.50-43.00, so conservative players should consider taking partial or total profit as that level is approached. Our official downside target will be $41.51, but we may adjust that, too, as we see how CTX behaves. Suggested Options: Because May expiration draws so close, we would not suggest May options. We have listed both June and July 45 strikes. June does not offer the 47.50 strike, and currently July 47.50 strikes are not priced, but play participants might check those options, too, as CTX rises toward the point at which we hope to see a rollover. Make sure there is sufficient open interest before settling on a July 47.50 put. ! Alert - May options expire in two weeks ! BUY PUT JUN 45.00 CTX-RI OI=3097 Last traded @ $2.75 BUY PUT JLY 45.00 CTX-SI OI=1843 Last traded @ $3.20 BUY PUT JUN 50.00 CTX-RJ OI= 725 Last traded @ $5.90 Annotated Chart for CTX: Picked on May xx at $ xx.xx (See rollover entry.) Change since picked: - x.xx Earnings Date 04/20/04 (confirmed) Average Daily Volume: 2.0 million Chart = ************************Advertisement************************* No time to follow the Market Monitor? Tired of missing good Trades because you stepped away from your computer? OneStopOption Group can follow the Market Monitor for you. You choose the number of contracts, we take care of the rest!! Trade Stock Options, Stocks and ALL Futures with the same Group. Call us 888 281-9569 to see if you qualify to have us rebate your subscription cost. http://www.OneStopOption.com ************************************************************** ********** DISCLAIMER ********** Please read our disclaimer at: http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html ************************************************************** ADVERTISING INFORMATION For more information on advertising in OptionInvestor Newsletter, or any Premier Investor Network newsletter please contact: Contact Support
The Option Investor Newsletter Tuesday 05-11-2004 Copyright 2004, All rights reserved. 3 of 3 Redistribution in any form strictly prohibited. In Section Three: Watch List: Reversal Signals Abound, but Can They Be Trusted? Spreads & Straddles: Recovery Underway Or An Oversold Bounce? Premium Selling Plays: Naked Puts & Calls ********** WATCH LIST ********** Reversal Signals Abound, but Can They Be Trusted? ___________________________________________________________________ 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. ___________________________________________________________________ Maxim Integrated Prod - MXIM - close: 49.31 change: +0.86 What to Watch: After reporting earnings 4/27, MXIM steadied, dropped into an equal low on the weekly chart, and then began climbing. It climbed back above the 200-dma, the 50-dma, and the 30-dma, and it did it on stronger-than-average volume. Now it looks close to confirming a double-bottom formation on the weekly chart with a push above the $50.01 peak between the two troughs. However, that confirmation isn't guaranteed. Tuesday, the advance stopped at the 100-dma, but even if MXIM makes it above that resistance, round-number resistance at $50.00 and a bearish resistance line on the P&F chart loom just overhead. That bearish resistance line crosses at $51.00, the point at which MXIM will also create a new P&F buy signal that will erase the current sell signal. While aggressive traders might elect to enter a bullish play on a move above $50.05, conservative traders would do well to wait until that new P&F buy signal is created with a trade at or above $51.00. Those same conservative traders should target a move up to $53.25-53.50, the site of a former, now-violated, supporting trendline, while more aggressive traders could follow MXIM higher with their stops, targeting something in the $54-58 range. All considering this play should be aware that the now-violated trendline was probably the neckline of a H&S on the weekly chart, and so might now present significant resistance. The $41.90 downside target has not yet been met. Chart= --- Lennar Corp - LEN - close: 43.58 change: +0.35 What to Watch: Raymond James downgraded the homebuilders today, but most bounced. We believe the bounce among stocks in the sector is an oversold bounce. In LEN's case, that bounce could not bring the stock back above its 200-dma, with the bounce occurring on volume lighter than that seen during recent declines. We suspect that LEN will roll down again, either below the 200-dma or the resistance near $46.00. LEN currently has an upside P&F target of $83.00, but we suspect it won't be seeing that target soon. A trade at $42.00 will create a new P&F sell signal, and also bring LEN beneath recent support. Those interested in playing the downside on a homebuilder could trigger this play on a move below $42.00. Play participants should be aware of slight weekly support just below $41.00, as well as likely round-number support near $40.00. While either of those numbers might produce a reflexive bounce, the first significant weekly support occurs at just under $38.00, so we would suggest a first downside target just over $38.00. Anyone inclined to stay in a play beyond that point should follow LEN lower with stops, remaining aware of a P&F bullish support line at $34.00. Chart= ---- OSI Pharmaceuticals - OSIP - close: 74.00 change: +2.05 What to Watch: Feel like taking a wild ride? While we don't always like trading into a gap because of the possibility of gap support at the top, middle, or bottom of a gap, this gap looms so large that those levels provide plenty of range for a trade to work. Remain aware that this is a play for those with great risk-tolerance, made especially so by the fact that OSIP reported earnings Tuesday and has not yet had time to digest those results and settle down. The recent gap didn't create a new buy signal, however. OSIP long ago exceeded its P&F upside target of $56.00. A trade at $67.00 will create a new P&F sell signal. Use a trigger under $67.00 to initiate a bearish play. The 50 percent retracement of that big gap occurs near $54.70, so traders should probably be prepared with a plan for profitable exit as that level is approached, if not at a higher level. Chart= ----------------------------------- RADAR SCREEN - more stocks to watch ----------------------------------- STI $63.12 +1.32 - STI reported earnings Monday and gapped down. Tuesday, it traded entirely within Monday's range, creating an inside-day candle. RSI hints that STI will break to the upside out of that inside-day configuration, but we're not suggesting a bullish play. We're suggesting that you put this on your personal radar list for a possible bounce up to test $66, the high end of the gap, or even the 200-dma, looking for a rollover entry from that level. Watch for the usual signs that such a play should be avoided, such as expanding volume on the bounce. STI currently has a P&F downside target of $49.00, but since it has a P&F support line at $58.00, we would suggest planning exits ahead of that level. On a rollover at $66-68, a downside target just above the recent low might be a good first target. ************************Advertisement************************* Live Securities Brokerage Service with Licensed Option Principals OCO Stop & Profit Orders OneStopOption All types of Spreads and Buy Writes 888-281-9569 Auto-Trade Market Monitor Signals Personal Service and Education **Services available for Foreign Traders including Canada** http://www.OneStopOption.com ************************************************************** ******************* SPREADS & STRADDLES ******************* Recovery Underway Or An Oversold Bounce? By Ray Cummins Equity values rebounded Tuesday with semiconductor stocks leading the NASDAQ higher while Disney (NYSE:DIS) powered the advance in blue-chip shares. The Dow Industrial Average finished up 29 points at 10,019, with Alcoa (NYSE:AA), General Motors (NYSE:GM) and ExxonMobil (NYSE:XOM) also enjoying renewed buying support. The NASDAQ Composite closed up 35 points at 1,931 with chip-sector stalwart Intel (NASDAQ:INTC) among the upside movers. The S&P 500 index ended up 8 points at 1,095 on strength in oil service, transportation, and brokerage shares. Advancers outpaced decliners 3 to 1 on the New York Stock Exchange and by a 2 to 1 margin on the NASDAQ. Trading volume was 1.5 billion on the NYSE and 1.6 billion on the technology exchange. Treasury prices were higher but yields held near eight-month highs ahead of economic data in coming days which is expected to provide further guidance on future interest rate hikes. The 10-year bond was up 7/32 with its yield closing at 4.77%. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ SUMMARY OF CURRENT POSITIONS - AS OF 05/09/04 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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 last 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. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ GPRO - Gen-Probe $38.30 *** Bracing For A Rally? *** Gen-Probe (NASDAQ:GPRO) is a global leader in the development, manufacture and marketing of rapid, accurate and cost-effective nucleic acid testing products used for the clinical diagnosis of human diseases and for screening donated human blood. Using its patented NAT technology, Gen-Probe has received approvals or clearances for over 60 products that detect a wide variety of infectious microorganisms, including those causing sexually transmitted diseases, tuberculosis, strep throat, pneumonia and fungal infections. Gen-Probe has over 20 years of nucleic acid detection research and product development experience, and its products are used daily in clinical laboratories and blood collection centers throughout the world. GPRO - Gen-Probe $38.30 PLAY (less conservative - bullish/credit spread): BUY PUT JUN-30.00 PSU-RF OI=80 ASK=$0.30 SELL PUT JUN-35.00 PSU-RG OI=48 BID=$1.00 INITIAL NET-CREDIT TARGET=$0.70-$0.75 POTENTIAL PROFIT(max)=16% B/E=$34.30 __________________________________________________________________ MATK - Martek Biosciences $68.01 *** Uptrend Intact! *** Martek Biosciences (NASDAQ:MATK) develops and sells products made from microalgae. Microalgae are microplants. The firm is engaged in the commercial development of microalgae into a portfolio of high value products and new product candidates consisting of Nutritional Products, Advanced Detection Systems and Other Products, primarily Algal Genomics. Their nutritional products include nutritional oils for infant formula, dietary supplementation and other products. Advanced Detection Systems products include fluorescent dyes from various algae for use in scientific applications for detection of certain biological processes. MATK - Martek Biosciences $68.01 PLAY (less conservative - bullish/credit spread): BUY PUT JUN-55.00 KQT-RK OI=341 ASK=$0.45 SELL PUT JUN-60.00 KQT-RL OI=880 BID=$1.05 INITIAL NET-CREDIT TARGET=$0.65-$0.70 POTENTIAL PROFIT(max)=15% B/E=$59.35 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ BEARISH PLAYS - CREDIT SPREADS All of these positions are favorable candidates for "bear-call" credit spreads, based on the current price or trading range of the underlying issue and its recent technical history or trend. The probability of profit from these positions may be higher than other plays in the same strategy, due to disparities in option pricing. However, current news and market sentiment will have an effect on these issues, so review each play individually and make your own decision about its future outcome. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ CTX - Centex $44.80 *** Homebuilding Sector Consolidation! *** Centex Corporation (NYSE:CTX) is a multi-industry company with operates in six principal business segments. Conventional Homes operations involve the construction and sale of single-family homes, town homes and low-rise condominiums, and the purchase and development of land. Investment Real Estate operations involve the acquisition, development and sale of land, and the development of industrial, office, retail and mixed-use projects. Financial Services operations involve the financing of homes, home equity and sub-prime lending, and the marketing of insurance coverage. Construction Products involves cement production and distribution, and the production, distribution and sale of gypsum wallboard, concrete, aggregates and recycled paperboard. Contracting and Construction Services involves the construction of buildings. Centex HomeTeam Services is involved in pest and termite control, lawn and landscape care, electronic security, alarm monitoring and homewiring services. CTX - Centex $44.80 PLAY (conservative - bearish/credit spread): BUY CALL JUN-55.00 CTX-FK OI=417 ASK=$0.20 SELL CALL JUN-50.00 CTX-FJ OI=474 BID=$0.60 INITIAL NET-CREDIT TARGET=$0.45-$0.55 POTENTIAL PROFIT(max)=9% B/E=$50.45 __________________________________________________________________ IVGN - Invitrogen $67.61 *** Range-bound Pattern? *** Invitrogen (NASDAQ:IVGN) develops, manufactures and markets more than 10,000 products for the life sciences markets. Invitrogen's products are principally research tools in reagent and kit form, biochemicals, sera, media, and other products and services, which the company sells to corporate, academic and government entities. The company focuses its core business on two principal segments, Molecular Biology Products and Cell Culture Products. IVGN - Invitrogen $67.61 PLAY (conservative - bearish/credit spread): BUY CALL JUN-80.00 IUV-FP OI=720 ASK=$0.30 SELL CALL JUN-75.00 IUV-FO OI=48 BID=$0.80 INITIAL NET-CREDIT TARGET=$0.55-$0.60 POTENTIAL PROFIT(max)=12% B/E=$75.55 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ STRADDLES AND STRANGLES ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Based on analysis of the historical option pricing and technical background, these positions meet the fundamental criteria for favorable volatility-based plays. __________________________________________________________________ No straddles or strangles today... ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ SEE DISCLAIMER - SECTION 1 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ***************************************** PREMIUM-SELLING PLAYS: NAKED PUTS & CALLS ***************************************** All of these issues have robust option premiums and favorable technical indications. However, current news and events as well as market sentiment, will have an effect on these stocks so review each position thoroughly and make your own decision about its outcome. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ SUMMARY OF CURRENT POSITIONS - AS OF 05/9/04 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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 ASCA JUN 30 29.35 33.34 0.65 5.02% 2.21% DRIV JUN 25 24.25 28.31 0.75 7.04% 3.09% FARO JUN 20 19.45 23.95 0.55 7.32% 2.83% GIVN JUN 30 29.25 36.60 0.75 7.01% 2.56% MVSN JUN 20 19.65 23.36 0.35 4.54% 1.78% PDII JUN 22 22.00 28.30 0.50 6.67% 2.27% SMTC JUN 20 19.50 23.21 0.50 6.25% 2.56% SSTI JUN 12 12.15 14.57 0.35 7.00% 2.88% __________________________________________________________________ ASCA - Ameristar Casinos $33.34 *** Gaming Sector *** Ameristar Casinos (NASDAQ:ASCA) develops, owns and operates casinos and related hotel, food and beverage, entertainment and other facilities. The firm's properties in operation are Missouri, Iowa, Mississippi and Nevada. The properties offer restaurants ranging from casual to upscale from which customers can choose from entertainment options ranging from cabaret lounges, sports bars, outdoor amphitheaters and multi-purpose entertainment pavilions. ASCA - Ameristar Casinos $33.34 PLAY (sell naked put): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL PUT JUN 30 UWT RF 281 0.65 29.35 5.0% 2.2% __________________________________________________________________ DRIV - Digital River $28.31 *** New Trading Range? *** Digital River (NASDAQ:DRIV) is a provider of electronic commerce outsourcing solutions. As an application service provider, the company enables its clients to access its proprietary electronic commerce system over the Web. Their technology platform allows the company to provide a suite of electronic commerce services, including Web commerce development and hosting, transaction processing, fraud screening, digital delivery, integration to physical fulfillment and customer service. The firm also has analytical marketing and merchandising services to assist its clients in increasing page view traffic to, and sales through, their Web commerce systems. DRIV - Digital River $28.31 PLAY (sell naked put): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL PUT JUN 25 DQI RE 1132 0.75 24.25 7.0% 3.1% __________________________________________________________________ FARO - FARO Technologies $23.95 *** Recovery Mode! *** 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 $23.95 PLAY (sell naked put): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL PUT JUN 20 QEJ RD 240 0.55 19.45 7.3% 2.8% __________________________________________________________________ GIVN - Given Imaging $36.60 *** Diagnostic Devices *** Given Imaging (NASDAQ:GIVN) is an Israeli company established to develop, produce and market a platform technology for diagnostics and therapy of the gastrointestinal (GI) tract. The company was founded to commercialize a minimally invasive, disposable imaging capsule for diagnosing small intestine disorders and diseases. Given has submitted more than 20 patents worldwide for the tech- nologies employed in the Given Diagnostic Imaging System, and for new capsules to be developed using the basic technological plat- form. Future generations of the Given Diagnostic Imaging System will be developed to capture images of the rest of the upper GI tract and the large intestine. GIVN - Given Imaging $36.60 PLAY (sell naked put): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL PUT JUN 30 QPG RF 332 0.75 29.25 7.0% 2.6% __________________________________________________________________ MVSN - Macrovision $23.26 *** Rally Mode! *** Macrovision (NASDAQ:MVSN) develops and licenses rights management and copy protection technologies. The company's customers include Hollywood studios, independent video producers, enterprise and consumer software vendors, digital set-top box manufacturers and digital pay-per-view (PPV) network operators. Macrovision provides content owners with the means to market, distribute, manage and protect video, software and audio content. The company also is in the business of consumer software copy protection. Macrovision offers CD-ROM copy protection and rights management technologies to a variety of software publishers in the personal computer games, home education, information publishing and desktop applications software markets. MVSN - Macrovision $23.26 PLAY (sell naked put): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL PUT JUN 20 MVU RD 181 0.35 19.65 4.5% 1.8% TS __________________________________________________________________ PDII - PDI Incorporated $28.30 *** Volatility = Premium! *** PDI (NASDAQ:PDII) is an innovative healthcare sales and marketing provider to biopharmaceutical and medical devices companies and and the diagnostics industry. Its three business units offer service and product-based capabilities for companies seeking to maximize profitable brand sales growth. The three units include PDI Pharmaceutical Products, PDI Sales and Marketing Services, and PDI Medical Devices and Diagnostics. PDII - PDI Incorporated $28.30 PLAY (sell naked put): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL PUT JUN 22.5 PKU RX 91 0.50 22.00 6.7% 2.3% __________________________________________________________________ SMTC - Semtech $23.31 *** In A Trading Range? *** Semtech (NASDAQ:SMTC) is a supplier of analog and mixed-signal semiconductors. The company operated in two business segments, Standard Semiconductor Products and Rectifier, Assembly and Other Products. The Standard Semiconductor Products segment makes up the vast majority of overall sales and includes the power management, protection, test and measurement (formerly called high-performance), advanced communications and human input device product lines. The Rectifier, Assembly and Other Products segment includes the company's line of assembly and rectifier devices, which are the remaining products from its original founding as a supplier into the military and aerospace market. SMTC - Semtech $23.31 PLAY (sell naked put): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL PUT JUN 20 QTU RD 235 0.50 19.50 6.3% 2.6% __________________________________________________________________ SSTI - Silicon Storage $14.57 *** Entry Point? *** Silicon Storage Technology (NASDAQ:SSTI) operates as a supplier of flash memory semiconductor devices for the digital consumer, networking, wireless communications and Internet markets. The company has over 90 products based on its proprietary SuperFlash design and manufacturing process technology. These include include standard flash products, application specific memory products, embedded controllers and mass data storage products. SSTI - Silicon Storage $14.57 PLAY (sell naked put): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL PUT JUN 12.5 SJV RV 2348 0.35 12.15 7.0% 2.9% ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ IACI - InterActiveCorp $30.06 *** Stuck In A Range? *** InterActiveCorp (NASDAQ:IACI), formerly known as USA Interactive, is a multi-brand interactive commerce firm transacting business worldwide via the Internet, television and the telephone. Their portfolio of companies collectively enables direct-to-consumer transactions across many areas, including home shopping, tickets, personals, travel, teleservices and local services. IACI - InterActiveCorp $30.06 PLAY (sell naked call): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL CALL JUN 32.5 QTH FZ 1042 0.65 33.15 5.2% 2.0% __________________________________________________________________ OVTI - OmniVision $23.91 *** Premium-Selling Only! *** OmniVision Technologies (NASDAQ:OVTI) designs, develops and sells high performance, high quality and cost efficient semiconductor imaging devices for computing, telecommunications, industrial, automotive and consumer electronics applications. The company's main product, an image sensing device called a CameraChip, is used to capture an image in cameras and camera-related products in a range of imaging applications such as personal computer cameras, digital still cameras, security and surveillance cameras, personal digital assistant cameras, mobile phone cameras, and cameras for automobiles and toys that incorporate both still picture and live video applications. OVTI - OmniVision $23.91 "SPECULATIVE" PLAY (sell naked call): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL CALL JUN 30 UCM FF 10424 0.80 30.80 11.8% 2.6% ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ SEE DISCLAIMER - SECTION 1 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ************************Advertisement************************* Full Service Brokers Man Financial announces the formation of the OneStopOption Brokerage Group, addressing the demand for personalized, experienced service for both securities* and futures trading within the same firm. Licensed Option Principals Andrew Aronson and Alan Knuckman specialize in live assistance of stock*, option* and futures traders. The combination of the proven Man Financial global presence and the convenience of one group for all trading needs provide customers with the tools needed for success. 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