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Daily Newsletter, Tuesday, 05/11/2004

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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



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


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

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


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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

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


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*******************
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 =



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DISCLAIMER
**********

Please read our disclaimer at:
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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

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


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