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Daily Newsletter, Tuesday, 05/18/2004

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The Option Investor Newsletter                 Tuesday 05-18-2004
Copyright 2004, All rights reserved.                       1 of 3
Redistribution in any form strictly prohibited.


In Section One:

Wrap: The Day the Market Stood Still
Futures Markets: See Note
Index Trader Wrap:
Market Sentiment: Pay at the pump


Posted online for subscribers at http://www.OptionInvestor.com
************************************************************
MARKET WRAP  (view in courier font for table alignment)
************************************************************
      05-18-2004           High     Low     Volume   Adv/Dcl
DJIA     9968.51 + 61.60  9987.04  9906.64 1.68 bln 2304/ 893
NASDAQ   1897.82 + 21.20  1903.39  1890.95 1.48 bln 2000/1113
S&P 100   533.82 +  3.42   535.25   530.40   Totals 4304/2006
S&P 500  1091.53 +  7.43  1094.14  1084.10
W5000   10598.26 + 80.40 10615.01 10518.57
SOX       453.36 +  8.40   455.97   444.94
RUS 2000  542.56 +  7.22   542.56   535.34
DJ TRANS 2842.36 + 30.00  2844.18  2811.35
VIX        19.33 -  0.63    19.70    19.14
VXO (VIX-O)19.82 -  1.21    20.54    19.23
VXN        27.75 -  1.44    29.29    27.58
Total Volume 3,421M
Total UpVol  2,628M
Total DnVol    742M
Total Adv  4793
Total Dcl  2321
52wk Highs   52
52wk Lows   190
TRIN       0.83
NAZTRIN    0.51
PUT/CALL   0.99
************************************************************

The Day the Market Stood Still
by Jim Brown

Almost like a scene out of an old science fiction movie the
markets gapped open on Asian relief and then just stopped.
They traded almost completely flat after 10:30 on very light
volume. Intraday charts showed a near flat line despite the
advancers controlling the day. It was not a surge in buyers
but a complete lack of aggressive sellers.

Dow Chart - Daily


Nasdaq Chart - Daily


Nasdaq Chart - 5 min



The lack of excitement worried everyone and there was a total
lack of conviction. However, there were several attempts to
press a sell off and they all failed quickly. Resistance held
and so did support. Considering the weak economics this morning
just holding in place was an accomplishment.

Chain Store Sales came in at -0.8% and the second consecutive
weekly loss. Consumers are getting killed at the pump with
gas prices hitting an all time high today. This is taking
cash out of consumers pockets and summer weather kept them
out of stores. Tax refunds have begun to dwindle and consumers
are running out of surplus cash.

New Residential Construction fell to 1.969M units from 2.011M
in March. This shows that builders are not as optimistic about
the future with rising rates. The drop was not significant and
we did have a very strong March so this is not really a factor
to fear. If it dropped another 50-100K traders would start to
worry more that the sector was weakening. Several comments
and events recently have begun to question if the Fed would
actually hike in June so the picture is still cloudy. We
still have a couple strong months ahead for home sales.

The majority of the market relief today was due to a recovery
in the Asian markets. India led the rebound with a +8% gain
after Sonia Gandhi turned down the Prime Minister position.
The Indian markets fell -17% intraday on Monday and recovered
to close only down -11% but it was still the biggest loss on
record. Other Asian markets fell on the news on Monday with
the Nikkei down -3%, Taiwan -5.1% and Korea -5%. All those
markets recovered on Tuesday and the U.S. markets rebounded
at the open on relief. We also saw the GDP in Japan come
in at +5.6% when only +3.5% had been expected. That was the
last major economic release for the week and the Nikkei
jumped +2% but only recovered two-thirds of Monday's losses.

No sooner had the markets opened up than Fed President Al
Broaddus delivered a hawkish speech expressing concern that
core inflation had quickly bottomed and was on a subsequent
upswing. He said there was a growing concern at the Fed about
inflation. He said that after a long period of worrying about
lack of inflation he would now have to dust off his inflation
hawk feathers in case he had to attack it again soon. As if he
feared he had said to much he repeated the current Fed refrain
of "labor market slack and excess capacity will restrain the
inflation pressures in the period immediately ahead." He also
repeated the "measured pace" phrase but said there is no
question the risk is greater now than just three months ago.
He dismissed 1994 parallels saying the Fed only wanted to
"stabilize" inflation at the current levels today and not
"reduce" it as they did in 1994. Since it took almost 20
years for the last inflation cycle to be broken the Fed does
not want to go there again and Broaddus made it clear the Fed
would not allow it to happen again. This was the most hawkish
of the recent Fed speakers and brought the June rate hike back
into focus.

That hike had been discounted somewhat over the last couple
days with oil hitting 22 year highs and depressing the current
economic environment. Coupled with global market instability
there were some beginning to think the Fed could still take
a pass in June. I think the inventory adjustment to the GDP
will push it high enough that the Fed will feel required to
act.

Helping push the U.S. markets higher at the open were strong
earnings from CSC and Agilent. This helped push the Nasdaq
back to 1900 but the index could not hold it. The Dow tried
to regain 10000 but that was also an elusive target. The
Dow rebounded from 9900 support that held firm yesterday
and climbed to 9970 by 10:30 and it held that level the
rest of the day. By failing to recover 10K after trading
very close all day it cast significant doubt on the quality
of the rally.

The Nasdaq rebounded +20 points at the open and then traded
in a six point range the rest of the day. This is yet another
lower high and another failure to return to critical levels.
Both indexes gave the appearance of a simple dead cat bounce
where sellers paused in hopes buyers would rush into the dip
and push indexes back to resistance so sellers could pile on
once again.

I mentioned on Sunday there was a chance the market could
see an option expiration rally off critical support at NDX
1400 and Nasdaq 1900 on Monday assuming there were no weekend
events. Obviously the Asian market implosion was a key event
over the weekend that nullified that rebound potential. The
failure for the NDX/Compx to return to those levels today is
a clue to the weakness still ahead. The lack of volume was
another clue. We are two days into expiration week and it
appears everyone is content to let the week end at this
level.

Hedge funds or just funds in general have been pushing the
market around worse than the ball in a Ping Pong match. On
Monday volume in the QQQ was over 150 million shares. Today
it was only 96 million. Average volume is 103 million. A 50%
increase in volume on one day should give you a clue how
heavily the funds are hedged. Program trading hit 52.3% on
the NYSE last week, the highest level ever. Average daily
volume in program trades was 847 million shares. Only 11%
of the program trading was due to arbitrage. That is the
buying/selling of a basket of stocks and futures to capture
differences in the fair value.
(http://www.nyse.com/press/1084441844123.html)
The retail trader is being tossed around like a ship in a
storm as the big guys fight for points. The lack of ANY
volatility after 10:30 today indicates the hedge funds and
institutions took the day off. Whether they are comfortable
holding the indexes just under key resistance or they were
hoping for a bounce to sell we will not know until tomorrow.

One statistic on cash flow that hit the airwaves today was
the outflow of cash by foreign investors. In March there was
an inflow of +$2.4 billion but April saw outflows of -$13.5
billion. This was the highest outflow since records began
in 1978. Deficits and rate hikes were given as the reasons
for the withdrawals as foreign accounts repatriate money.

A positive for today's market was a drop in oil of more
than a $1. July crude fell -1.08 to $40.40 after setting
an all time high yesterday. There is no reason other than
profit taking and the recovery of the Asian markets. The
Bush administration said it would NOT use the strategic
oil reserves to reduce prices. That oil is supposed to be
for national emergencies and for a defense stockpile. Prices
are not an emergency. Considering the rate of escalation in
price and the heated words over oil in the press I don't
think it is a bad idea to store it up. Planes, ships, tanks,
trucks and humvees don't run without oil. I also don't think
it would hurt to start applying the screws to OPEC nations.
Cutting off trade favors to several might take the smile
off their face. It only costs an average of $8 to produce
a barrel of oil so profits are huge.

One market factor I mentioned last week was eliminated when
Bush formally reappointed Greenspan to his position today
for another four year term. He now has to be approved by
Congress but that is not expected to be a problem. Greenspan
cannot serve the entire term. His term at the Fed is up on
Feb-1st 2006 and he will have to abdicate by then. By law
he cannot continue at the Fed past that date. That gives
us a little over a year and an election before potential
successors will start posturing in the press.

After the bell today several tech companies reported great
earnings. Leading the list was Hewlett Packard, which did
announce inline at 34 cents and a profit of $1.3 billion
on an operating basis. Sales in Europe surged +17% on things
like digital cameras, music players and laptops. Carly
Fiorina said the quarter was strong but admitted corporations
were still reluctant to spend millions on computer upgrades.
She said pricing was extremely competitive and sales depended
on price. HPQ raised its guidance but it was clear that Dell
was breathing down their neck in hot pursuit and IBM is
chipping away at the HPQ base.

AMAT beat the street by three cents and said orders were up
+32% in the first quarter to $2.21 billion. AMAT raised its
guidance for the current quarter and said its plants were
running at 100% with plenty of opportunity for upside. NTAP
also announced earnings inline with estimates and they
predicted revenues would grow +4-6% in the current quarter.
ADSK also beat the street by +6 cents and boosted estimates
for the full year. PLAB beat the street by +3 cents and
will give guidance on a conference call on Wednesday.

Earnings are good, the economy is growing and Asia is still
booming as evidenced by Japan's GDP today. However the U.S.
markets are still weak. Even the finding of a couple chemical
weapons in Iraq could not send them higher. You know why and
I do not need to spell it out again. There are still some
rocky times ahead and while we may be nearing some strong
support there is still strong overhead supply. There is
stock for sale and until that supply goes away we will
continue to be weak. June 30th is the key day for more than
one reason. The key for me is when will traders decide that
enough is enough and start nibbling at beaten up issues in
hopes of a summer rally after that date. The velocity of
the decline is slowing but we may not be done yet.

For the rest of the week there are no economic reports that
should shake up the markets. We have three days left in
expiration week and based on today's volume it could be very
boring. I have been suggesting everyone sell rallies until
the trend changes but I am recommending a neutral approach
today. Until we get past expiration it could be terminally
boring interspersed with periods of extreme volatility.
Neither environment is conducive to profitable trading.
Next week we should return to normal and a trend should
emerge again.

Enter Passively, Exit Aggressively.

Jim Brown
Editor


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

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



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

Check the Site Later Tonight For Jeff's Index Trader Article
http://members.OptionInvestor.com/itrader/marketwrap/iw_051804_1.asp


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

Pay at the pump
By Jeff Bailey

U.S. stocks recouped the bulk of Monday's losses on Tuesday as
investor sentiment is swayed not only by what is taking place at
home in the U.S., but overseas as well, where great focus has
been given to energy prices as the global economy picks up
momentum.

U.S. Government statistics released this week showed the national
average for a gallon of retail gasoline reached $2.00 for the
first time in history, leaping 7.6 cents over the past week to a
record high of $2.017 a gallon.  While the government forecasted
that the average price for retail gasoline will peak at $2.03 a
gallon in June, industry analysts expect prices to rise further
because of a seasonal increase in demand that usually kicks in
after the Memorial Day weekend.

The continued rise in gasoline prices may have eaten away at
consumer spending habits, where chain store sales edged down 0.8%
in the week ended May 15, versus a 0.3% rise in the previous
week.  Broadline retailers have expressed some concern that
higher gasoline prices may eat into sales should consumers begin
cutting back on discretionary purchases as they fill their tanks
with higher priced gasoline.

Helping alleviate some fears that the consumer's pocketbook has
been totally depleted after the recent 3-month rise in Treasury
yields, which have raised the rate of borrowing costs for
consumers and had negative impact mortgage refinancing,
was the quarterly earnings report from Home Depot (NYSE:HD)
$34.62 +3.43%, where the building products retailer handily beat
Wall Street's earnings forecast.

Early Monday morning, geopolitical events in Iraq saw stocks
drop early in the session, but by Tuesday's close, stocks are
back near Friday's closing prices.

Monday morning's news that the head of Iraq's governing council
had been killed in a car bomb attack had June, Light Sweet Crude
Oil futures (cl04m) spiking to a contract high of $41.85 and
achieving its point and figure chart bullish vertical count of
$41.75, but since that morning high trade, June crude has slipped
back below $40.50, helping alleviate some near-term fears
regarding higher energy prices impact on inflation and the global
economic recovery.

Crude prices dropped in Tuesday's trade despite the Bush
administration rebuffing pressure from Democrats to open the
spigots on the nations emergency oil stockpile to help lower
record gasoline prices.  Saudi Arabia has proposed that OPEC
boost output by 1.5 million barrels per day when the cartel meets
June 3.

Also giving boost to investor sentiment in Tuesday's trade was
Japan's Nikkei 225 gaining 1.96% after the Japanese government
said its economy grew at a 1.4% rate in the first quarter.  The
news helped calm fears that higher oil prices and rising U.S.
interest rates would jeopardize Japan's export-led recovery.

Market internals in today's U.S. trade showed some sign of
renewed bullish leadership trying to build from some deeply
oversold conditions found last week.

The NYSE reported 17 stocks hitting new 52-week highs compared to
59 stocks hitting new lows, which has the 5-day NH/NL average
ratio improving to 12.5% and moving above the still declining 10-
day ratio of 10.8%.

NASDAQ showed similar improvement with 31 new highs and 74 new
lows, but not from as deeply oversold levels where the 5-day
NH/NL average ratio improved for the fourth-straight session to
24.3%, but still remains below its declining 10-day NH/NL average
ratio of 26.6%.


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

Market Averages

DJIA ($INDU)

52-week High: 10753
52-week Low :  8416
Current     :  9968

Moving Averages:
(Simple)

 10-dma: 10062
 50-dma: 10278
200-dma: 10029



S&P 500 ($SPX)

52-week High: 1163
52-week Low :  912
Current     : 1091

Moving Averages:
(Simple)

 10-dma: 1098
 50-dma: 1118
200-dma: 1080



Nasdaq-100 ($NDX)

52-week High: 1559
52-week Low : 1103
Current     : 1397

Moving Averages:
(Simple)

 10-dma: 1407
 50-dma: 1436
200-dma: 1418



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

CBOE Market Volatility Index (VIX) = 19.33 -0.63
CBOE Mkt Volatility old VIX  (VXO) = 19.82 -1.21
Nasdaq Volatility Index (VXN)      = 27.75 -1.44


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

          Put/Call Ratio  Call Volume   Put Volume

Total          0.99        716,116       710,531
Equity Only    0.75        561,884       423,685
OEX            1.88         35,393        66,475
QQQ            1.30        147,692       191,668


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

Bullish Percent Data

           Current   Change   Status
NYSE          61.5    - 1     Bear Confirmed
NASDAQ-100    31.0    - 3     Bear Confirmed
Dow Indust.   66.7    + 0     Bear Confirmed
S&P 500       57.8    - 1     Bear Confirmed
S&P 100       61.0    + 0     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: 0.85
10-dma: 0.96
21-dma: 1.06
55-dma: 1.05


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


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

Market Internals

            -NYSE-   -NASDAQ-
Advancers    2084      1951
Decliners     774      1107

New Highs      29        35
New Lows       50        40

Up Volume   1288M     1074M
Down Vol.    374M      311M

Total Vol.  1694M     1395M
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 increased their open interest be equivalent
amounts both long and short, while small traders went
net shorter.


Commercials   Long      Short      Net     % Of OI
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%)
05/11/04      401,365   421,672   (20,307)   (2.5%)

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
04/20/04      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%
05/11/04      135,534    76,987    58,547    27.5%

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 were much more active in the e-mini S&P
contracts, reducing their shorts slightly and
dramatically increasing longs, flipping to net long
for the first time in at least 4 weeks.  Small
traders took the other side of the trade, reducing
longs and increasing their net short position.


Commercials   Long      Short      Net     % Of OI
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%)
05/11/04      378,696   362,887     15,809     2.1%

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
04/20/04      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%
05/11/04      101,199     94,408     6,791     3.5%

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


NASDAQ-100

Commercials added slightly to their net short position,
while small traders reduced both shorts and longs but
favoring the long side, reducing their overall net short
position.


Commercials   Long      Short      Net     % of OI
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%
05/11/04       57,680     37,410    20,270   21.3%

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
04/20/04        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%)
05/11/04        9,716    21,072   (11,356)  (36.9%)

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

Commercials increased their net long position, while
small traders took the other side of the trade,
increasing longs and reducing shorts.


Commercials   Long      Short      Net     % of OI
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%
05/11/04       22,614    21,507    1,107       2.5%

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
04/20/04        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%)
05/11/04        7,009     7,640   (  631)   ( 4.3%)

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 05-18-2004
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, LXK
New Calls Plays: ERTS
Put Play Updates: AMZN, APOL, CAKE, CTX, GM, MBG, MSTR, WHR
New Put Plays: None


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


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option* and futures traders. The combination of the proven Man
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********************
PLAY UPDATES - CALLS
********************

Auto. Data Proc. - ADP - close: 44.57 change: -0.03 stop: 43.25

Continuing with its pullback from last week's highs, ADP dropped
back to the $44.50 level yesterday and finally found some support
at the midline of the rising channel that has been encompassing
the stock's price action these past several months.  That support
lines up perfectly with horizontal support from February and
March and if the bulls are going to buy this dip, then this is
the spot where they'll have to do it.  Daily oscillators are
nearly to oversold and this decline has come on rather light
volume, supporting the notion that this is just a normal pullback
in the overall bullish trend.  Aggressive traders still looking
for a position can use a rebound off this $44.50 level as their
entry into the play.  We should see the 50-dma ($43.77) providing
added support as it nears the current price level, helping to
protect our $43.25 stop.  If looking to enter on strength, we'd
suggest waiting for a rally back through the 10-dma ($45.63) and
mild resistance at $46 before playing.

Picked on May 9th at         $46.03
Change since picked:          -1.46
Earnings Date               4/22/04 (confirmed)
Average Daily Volume =     2.06 mln
Chart =


---

Johnson & Johnson - JNJ - close: 54.63 change: -0.07 stop: 52.75

We're still waiting to see if JNJ is going to put in that bullish
continuation that we've been expecting ever since the stock
pushed through the $55 resistance level over a week ago.  Since
tapping the $56 level, the stock has been pulling back on
diminishing volume and it was encouraging yesterday to see the
stock once again find support above the $54 level and post a
solid gain on the session.  That gain came amidst broad market
weakness, maintaining the theme that JNJ still appears to be a
defensive stock, garnering investor's dollars when nervousness
about riskier areas of the market increases.  Daily Stochastics
are just starting to turn upwards from slightly above the
oversold area and this looks like a good spot for initiating new
positions, especially with the 30-dma ($53.83) rising to
reinforce support at $54.  If looking to enter on renewed
strength, waiting for a move back over $55 looks like the
appropriate course of action.  Maintain stops at $52.75 for now,
which is now fractionally below the 100-dma ($52.77).

Picked on May 9th at         $55.30
Change since picked:          -0.67
Earnings Date               4/13/04 (confirmed)
Average Daily Volume =     7.23 mln
Chart =


---

Lexmark Intl. - LXK - close: 91.75 change: +1.48 stop: 89.75


There's no two ways about it, Monday's drop to just above the $90
level looked ominous indeed, especially with the close below the
50-dma ($91.17).  But true to form, the bulls stepped into the
breech, buying the dip this morning and sending the stock back
over that average at the close.  It's hard to characterize
today's rebound as overly bullish, as it didn't have the support
of strong volume.  But the daily price pattern does look
reminiscent of the past 3 tests of the 50-dma, which consisted of
a bullish reversal higher only one day after closing below that
average.  So far, that pattern remains intact and it is nice to
know that each of those prior test resulted in new highs a couple
weeks after the test.  We're looking for a repeat performance, so
obviously we view this dip and nascent rebound as a viable entry
point.  Of course, more cautious traders may want to wait for a
close back over the 30-dma ($93.04) before playing.  Maintain
stops at $89.75.

Picked on May 13th at        $94.03
Change since picked:          -2.28
Earnings Date               4/19/04 (confirmed)
Average Daily Volume =     1.07 mln
Chart =



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

Electronic Arts - ERTS - close: 49.60 change: -0.60 stop: 47.00

Company Description:
ERTS creates, markets and distributes interactive entertainment
software for a variety of hardware platforms, including Sony's
PlayStation 2, the PC, Nintendo GameCube and the recently
launched Xbox.  The company's EA.com business segment is engaged
in the creation, marketing and distribution of entertainment
software which can be played or sold online, as well as the
ongoing management of subscriptions of online games and Website
advertising.

Why we like it:
After soaring to new highs in late March and early April, shares
of ERTS have been slowly settling their way back to earth in a
very orderly manner.  There hasn't been much of a bullish tone to
the daily trading pattern now for over a month, so one might
wonder why we're considering it as a bullish play.  That's a fair
question and to be fair, this is definitely a more aggressive
play, as we're going to be attempting to pick the bottom of the
current round of profit-taking, looking to play a rally back to
test the April highs.  There really hasn't been a lot of follow-
through to any of the bearish moves of late, and even a
disappointment on April video game sales this morning didn't
usher in a wave of selling.  Instead, the stock just continued
its orderly decline towards strong support near $48-49.  As we
can see, there's significant historical support in this area, and
it is reinforced by the 100-dma ($48.89) and the 200-dma
($47.62).

Looking at the PnF chart, we can see that ERTS is in a precarious
position here, as a trade at $48 will generate a new PnF sell
signal.  But we're looking for a rebound from just above $48 to
provide a solid bullish entry point.  Traders not willing to
attempt catching the falling knife (even this close to an
expected floor) will want to wait for a breakout over the near-
term descending trendline at $51.50 (also the site of the 30-dma)
before playing.  We'll target an initial move to the $55-56 area,
for a test of the April highs and re-evaluate at that time
whether it appears prudent to hold for a breakout to new highs.
Due to the aggressive nature of the play, we're working with a
tight initial stop at $47.  While a trade at $48 would be a new
PnF Sell signal, we want to give the stock a bit more room to
move than that on the thought that we could see a bear-trap and
then a strong reversal to the upside.

Suggested Options:
Shorter Term: The June $47 Call will offer short-term traders the
best return on an immediate move, as it is currently in the
money.

Longer Term: Aggressive longer-term traders can use the June $52
Call, while the more conservative approach will be to use the
June $50 Call.  Traders looking for more insulation against time
decay may want to consider the September strike.  Our preferred
option is the June $50 strike, as it is currently near the money
and should provide sufficient time for the play to move in our
favor.

BUY CALL JUN- 47*EZQ-FW OI=1970 last traded @ $3.70
BUY CALL JUN- 50 EZQ-FJ OI=6596 last traded @ $2.15
BUY CALL JUN- 52 EZQ-FX OI=2125 last traded @ $1.15
BUY CALL SEP- 50 EZQ-IJ OI=2108 last traded @ $4.10

Annotated Chart of ERTS:



Picked on May 18th at        $49.60
Change since picked:          +0.00
Earnings Date               4/29/04 (confirmed)
Average Daily Volume =     3.87 mln
Chart =



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Amazon.com - AMZN - close: 41.99 chg: -0.09 stop: 44.75

For weeks, many have speculated that Google's planned IPO would
take some of the shine off other Internet favorites such as AMZN,
but it may actually be another IPO that accomplishes that task.
Blue Nile (NILE), a company selling diamonds over the Internet,
boasts a proven low-cost operating model profitable since 2002
with positive cash flow from operations for three years.
Operating expenses measure just a little more than 14 percent of
sales.  According to one article, AMZN's operating expenses
measure about 19 percent of sales.

Blue Nile, to be launched this week, will offer buyers the
ability to order customized rings that will compete with AMZN's
newly announced "Create a Diamond Ring" feature on its "Jewelry
Store" site.  Perhaps some AMZN investors took note.  While the
CBOE Internet Index, the $INX, bounced Tuesday into an inside-day
formation, AMZN did not bounce.  Zale Corp (ZLC) and Tiffany and
Company (TIF), other competitors in NILE's category, also bounced
Tuesday.

This week saw AMZN drop out of the most recent bear flag, but it
has so far refused to fall below the 5/10 low of $40.57.  Bearish
traders want to see it drop below that level and then below the
3/24 low of $39.15 on its way to its trendline of lower lows,
currently near $35.40.  We continue to suggest that short-term
players take profits near $40.00, or perhaps just ahead of that
3/24 low if $40.00 is breached.  Conservative longer-term plays
could take partial profits at those levels, too.  This weekend,
we suggested new rollover entries, with AMZN complying by a
rollover beneath the new-entry levels.  Now that support
approaches, however, we would not suggest new entries.  We'll
reevaluate if AMZN pushes below that round-number support at
$40.00.

Picked on May 02 at $ 43.60
Change since picked: - 1.61
Earnings Date      04/22/04 (confirmed)
Average Daily Volume:   8.4 million
Chart =


---

Apollo Group - APOL - close: 89.66 change: +0.74 stop: 95.00

We've been waiting for a full week for APOL to deliver some
follow-through to its plunge through the $91.50 support level and
it hasn't happened yet.  The stock has spent the time wedging up
on top of the 50-dma ($88.88) with the 10-dma ($90.61) continuing
to cap any intraday rally attempts.  With daily Stochastics
starting to roll over again without even reaching overbought
territory, this looks like a classic rollover in process.  If
this one is going to play out as we suspect, then getting a
rollover entry in the $92-93 area appears unlikely.  Instead, we
should be focusing our efforts on catching a rejection from the
10-dma, as it is clearly providing upside resistance.  The
breakdown entry possibility is still very much in play as well,
and using a break under $87.50 looks like the way to play.
Maintain stops at $95.

Picked on May 11th at         $90.32
Change since picked:           -0.66
Earnings Date                6/11/04 (unconfirmed)
Average Daily Volume =      1.72 mln
Chart =


---

Cheesecake Factory - CAKE - cls: 40.25 chng: +0.63 stp: 42.75

The lack of a significant bounce in CAKE over the past few
sessions certainly adds credence to the notion that last week's
breakdown under the 200-dma ($41.51) was significant.  The stock
tried an initial rebound late last week and then a move lower
yesterday, but basically it is just consolidating that breakdown.
Oscillators are looking like they want to turn up here, so we
could be looking at a real rebound attempt.  With a PnF downside
target of $31, that rebound would be welcome, as it would set us
up for a nice rollover entry in the $41-42 area.  A quick look at
the PnF chart tells us why we're seeing the stock hold at these
levels, as the bullish support line rests at $39.  While
aggressive traders can short a breakdown below that level, our
preference is still to exercise patience and wait for the fat
pitch on a rollover from resistance.  Maintain stops at $42.75,
which is solidly above the top of last week's gap, as well as the
20-dma ($42.33).

Picked on May 13th at         $40.09
Change since picked:           +0.16
Earnings Date                4/20/04 (confirmed)
Average Daily Volume =         579 K
Chart =


---

Centex Corp - CTX - close: 44.93 change: -0.07 stop: 49.35

While CTS did challenge $46.00 again on Monday, as it had on
Friday, it hasn't yet followed the new parameters we set out this
weekend for a triggered entry.  Those included a move up to
$47.00 and then a downturn through $46.00 again.  Therefore,
we're not yet considering this play officially triggered even
though it did pull back slightly this week.

We're still eyeing the $DJUSHB, the Dow Jones US Home
Construction Index, noting that it's still rising within its
possible bear flag, perhaps up to form a right shoulder on the
potential H&S formation.  We mentioned that as a possibility when
the play was first listed, and that possibility was behind our
focus on a bounce-and-rollover entry.  If the DJUSHB bounced,
perhaps as a result of a consolidation in yields, we thought CTX
might be carried higher with some of the other homebuilders.

As is almost always true whenever a stock enters a consolidation
pattern, oscillators give few clues, with the MACD, RSI, and
stochastics all having flattened.  We notice that many of those
homebuilders, such as TOL and HOV, have patterns similar to
CTX's.  All look as if they've been rising into a bear flag
formation, but all now teeter on the edge of a rollover.

If such a rollover begins now, we may miss our official entry.  A
look at ten-year yields, the TNX, shows a doji printed for
Tuesday's trade, with that doji displaying indecision that won't
be resolved until later in the week.  A continued pullback in
yields may well produce that CTX bounce up to $47.00, but a
continued rise in yields may turn CTX down before we get our
entry.

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 =


---

General Motors - GM - close: 44.11 change: +0.71 stop: 47.25

Is it finally time for a rebound?  After the recent breakdown,
shares of GM have been consolidating in a very tight sideways
range.  On one hand, we can view this as holding up while
oscillators move south, in preparation for a bullish move.
However, with the highs and lows moving lower over the past week,
it looks more like a classic 'b' distribution pattern.  In either
case, today's rebound came on slightly stronger volume and does
look encouraging for those of us looking for an entry on a
rollover from resistance.  That resistance begins near the $45
level, strengthens near the 200-dma ($45.54) and becomes strong
near the $46 level, with both the 30-dma ($46.60) and 50-dma
($46.38) bearing down.  So our preferred strategy of entering new
bearish positions on a rollover from the $45-46 area still looks
like the best course of action.  Breakdown entries might work,
but as we can see from the way yesterday's apparent breakdown
below $43 was reversed, there's greater risk in pursuing that
strategy.  Maintain stops at $47.25.

Picked on May 9th at          $44.60
Change since picked:           -0.49
Earnings Date                4/20/04 (confirmed)
Average Daily Volume =      5.21 mln
Chart =


---

Mandalay Resort Group - MBG - cls: 53.04 chng: +1.54 stop: 53.21

After almost hitting our original trigger Friday, MBG headed up
Monday and Tuesday, posting stronger-than-average volume during
Tuesday's rise.  Monday, CSFB raised the company's rating from a
neutral rating to an outperform one.  The firm also raised the
company's price target to $62 from its former $60 target.  That
strong-volume rise was perhaps prompted by the upgrade.  The
bounce brought MBG above the 10- and 100-dma's, closing it above
both.  However, the rise stopped short at the resistance zone
from $53.00-53.60.

To recap our new entry, we're now looking for a move below round-
number resistance at $50.00, with the new entry officially
triggered at $49.95.  RSI hints that MBG may rise first before
rounding down and hitting our trigger, if it does, as RSI has
hooked upward.  The MACD histogram grows less negative, but MACD
lines have not produced a bullish cross and both lines remain
below signal.

We see conflicting signals.  We never want to see rising volume
on a bounce if we're considering a bearish play, so that
expanding volume warns us to be particularly careful that
triggers are hit before considering an entry.  However, other
considerations do not show the bounce to be a strong one as yet,
and our trigger may yet be hit.

Picked on May xx at $ xx.xx (See Trigger)
Change since picked: - x.xx
Earnings Date      06/03/04 (confirmed)
Average Daily Volume:   1.7 million
Chart =


---

MicroStrategy Inc. - MSTR - cls: 45.37 chng: +0.48 stp: 47.00

The consolidation pattern in MSTR that we spoke of over the
weekend has shown no signs of resolving itself this week, as the
stock continues to trade in that gradually rising bear-flag
pattern.  Energy is being stored up in this consolidation pattern
ahead of the next strong directional move and when MSTR decides
to move, it could get exciting in a hurry.  Obviously we're still
leaning towards a downside continuation move and daily
Stochastics support that position, as the oscillator has risen
almost to overbought, while price has merely drifted sideways, a
classic sign of weakness.  The first sign that the stock is
breaking down from this pattern will come from a drop through the
$44.50 level (just under the lower boundary of the wedge), with
confirmation coming from a close below $44, violating Monday's
low.  Aggressive traders could consider new entries on such a
move, but with the understanding that we're likely to see support
again in the $42-43 area on the way to our $40 target.  On the
chance that the current consolidation breaks to the upside, we've
got a fairly tight stop at $47, which is above the highs of the
pattern.

Picked on May 6th at          $47.02
Change since picked:           -1.65
Earnings Date                4/27/04 (confirmed)
Average Daily Volume =         417 K
Chart =


---

Whirlpool Corp - WHR - close: 64.65 chg: +1.08 stop: 65.76

Tuesday, WHR announced a plan to spend $180 million in 2004 on
its Benton Harbor U.S. facilities and Mexican plants, with the
money being used for a new generation of washers and dryers.
When making that announcement, the company also announced other
initiatives at other plants.  Perhaps at least in part to that
announcement, WHR moved higher Tuesday.

As we mentioned this weekend, however, WHR continues to find
resistance at $65.00.  While we're encouraged by that resistance
holding, we also notice that WHR finds support at about $63.40.

We continue to suggest that play participants exercise caution as
the bulls and bears battle to see whether support or resistance
will prove stronger.  Intraday charts do depict a more detailed
look at the action.  The 60-minute chart shows that on Monday WHR
broke through the supporting trendline that had been in place
since 5/10.  After trading sideways through a number of 60-minute
bars, WHR rose again to retest that trendline early Tuesday
morning, then immediately fell away again.  WHR labored uphill
again through the rest of the day, never quite reaching the
early-morning high of the day.

While the immediate pullback at resistance proved encouraging to
our position, the continual testing of resistance warns that WHR
may break through one of these times. If it does, next resistance
appears to be at about $65.50.  If WHR breaks through that, too,
our stop loss will soon take us out of the play.

Play participants want to see WHR fall through the $63.40 next
support instead, with such a fall also producing a new entry into
this bearish play.

Picked on May 05 at $ 64.69
Change since picked: - 0.04
Earnings Date      04/21/04 (confirmed)
Average Daily Volume:   555 thousand
Chart =



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

None


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The Option Investor Newsletter                  Tuesday 05-18-2004
Copyright 2004, All rights reserved.                        3 of 3
Redistribution in any form strictly prohibited.


In Section Three:

Watch List: Fed Prez Mentions Inflation, Not News to Consumers
Spreads & Straddles: A Much-Needed Bounce!
Premium Selling Plays: Naked Puts & Calls


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

Fed Prez Mentions Inflation, Not News to Consumers
_________________________________________________________________

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.
_________________________________________________________________

KMart - KMRT - close: 48.79 change: +0.17

What to Watch:  After reporting a profitable quarter on 5/17,
KMRT gapped higher then climbed out of a possible bull flag.  It
climbed on volume five times its 820,000 average daily volume.
Tuesday, KMRT posted another gain on strong volume. That day's
gain produced a small-bodied candle at the top of a climb,
however, so we think it may be time for KMRT to absorb some of
those strong gains, perhaps either by consolidating sideways or
by pulling back and retesting support, perhaps near $46.80-47.00.
Those interested in playing the long side on this stock might
wait for such a pullback and then a push back up past Tuesday's
high.  Monday's trade created a triple-top breakout signal on the
P&F chart with a $69.00 upside target, but those interested in
this bullish play should follow KMRT higher with their stops, as
some articles still mention the negative sentiment toward KMRT on
the part of investors.

Chart=


---

Nike Inc - NKE - close: 66.50 change: +0.45

What to Watch:  When we study NKE's chart, we see a possible "b"
distribution pattern developing, with that type of pattern often
occurring about halfway through a decline.  That possible "b"
distribution pattern appears on both the daily and weekly charts.
On the daily chart, the bulb of the "b" forms just over and under
the 200-dma, giving that pattern even more relevance.  In
addition, on the weekly chart, NKE already appears to be below a
support/resistance level near $68.00.

We believe a breakdown out of the "b" distribution pattern,
signaled by a fall through $65.85, below last week's low, might
send NKE down to test $57.00, but we see some danger spots along
the way and would suggest setting a closer profit target.
Shortest-term traders might opt for a quick exit near $64.00-
64.60, the site of historical horizontal S/R.  A new P&F sell
signal will be created with a trade at $63.00, so support might
also be expected at that level, and some traders might opt to set
a profit target just above that.  We believe that $61.50-62.00
might be achievable, however.

Chart=


----

Waters Corp  - WAT - close: 44.62 change:  +0.50

What to Watch:  With a new high reached on Tuesday, the
completion of a saucer pattern completed with a move above
$41.00, and a P&F upside target of $79.00, this potential bullish
play has much to offer.  We would use intraday dips toward $44.00
as entries.  We think entries at the current level are fine, and
also believe that a profit target near $49.00 should be possible.
We would suggest following WAT's movements closely with stops as
it approaches $48.50-50.00.

Chart=


----

Intl Rectifier  - IRF - close: 38.99 change:  +0.67

What to Watch:  IRF's chart looks ugly.  IRF has slipped beneath
its 200-dma, but clings to support just above $38.50.  We could
see two possible entries on this play.  One would be on a low-
volume rise and then a rollover beneath the 200-dma.  The other
would be on a fall through the support at $37.00-37.25 level.  Be
sure to watch volume patterns if the bounce-and-rollover entry
should present itself.  That might be the first entry offered
since bullish price/oscillator divergence shows up on the daily
chart.  Target $34.60-35.00, just above the 200-week moving
average.  We could see this working its way down toward $30-
32.00, but think the potential for a bounce at the 200-week
moving average might be strong, too.

Chart=



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

A Much-Needed Bounce!
By Ray Cummins

Stocks rebounded from 2004 lows Tuesday as investors shopped for
bargains on news of favorable corporate profits and a retreat in
crude prices.

The Dow Jones industrial average closed up 61 points at 9,968 on
strength in Home Depot (NYSE:HD) after the company reported solid
earnings.  The technology-laden NASDAQ Composite Index added 21
points to finish at 1,897 ahead of quarterly income reports from
Hewlett-Packard (NYSE:HPQ) and Applied Materials (NASDAQ:AMAT).
The S&P 500 Index ended up 7 points at 1,091 with oil services
stocks among the few losing groups.  Trading was light with only
1.35 billion shares changing hands on the New York Stock Exchange,
while 1.4 billion shares were crossed on the NASDAQ.  Advancing
issues outnumbered decliners by a 5 to 2 ratio on the NYSE and by
a 7 to 4 margin on the technology exchange.  Bond prices drifted
lower with the 10-year treasury note down 9/32, while its yield
climbed to 4.73%.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
SUMMARY OF CURRENT POSITIONS - AS OF 05/16/04
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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     56.00  61.09   MAY   47  50   0.25   49.75   0.25   Open
EBAY    75.94  78.95   MAY   65  70   0.65   69.35   0.65   Open
HDI     55.63  54.95   MAY   47  50   0.25   49.75   0.25   Open
PDCO    74.97  74.59   MAY   65  70   0.65   69.35   0.65   Open
CME    116.11 118.65   MAY  100 105   0.60  104.40   0.60   Open
MATK    65.12  70.37   MAY   55  60   0.60   59.40   0.60   Open
MTG     74.42  70.69   MAY   60  65   0.50   64.50   0.50   Open
AVP     84.00  84.39   MAY   75  80   0.45   79.55   0.45   Open
MUR     68.50  66.04   MAY   60  65   0.50   64.50   0.50   Open?
ERES    32.29  31.99   MAY   27  30   0.25   29.75   0.25   Open
ZBRA    74.62  75.97   MAY   65  70   0.40   69.60   0.40   Open
ERTS    51.88  51.04   JUN   45  47   0.35   47.15   0.35   Open
IMDC    61.17  57.78   JUN   50  55   0.50   54.50   0.50   Open
GPRO    38.30  37.48   JUN   30  35   0.70   34.30   0.70   Open
MATK    68.01  70.37   JUN   55  60   0.65   59.35   0.65   Open

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

Bullish positions in BJ Services (NYSE:BJS), Nabors Industries
(NYSE:NBR), Navistar (NYSE:NAV), Henry Schein (NASDAQ:HSIC) and
(Silicon Labs NASDAQ:SLAB) have previously been closed to limit
potential losses.  Murphy Oil (NYSE:MUR) remains on the "watch"
list.


CALL-CREDIT SPREADS

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

SOHU    25.46  16.95   MAY   35  30   0.60   30.60   0.60   Open
SFNT    31.65  22.40   MAY   40  35   0.70   35.70   0.70   Open
GENZ    46.40  42.56   MAY   55  50   0.60   50.60   0.60   Open
PRX     55.25  40.26   MAY   65  60   0.65   60.65   0.65   Open
MERQ    45.59  44.60   MAY   55  50   0.60   50.60   0.60   Open
NEM     42.86  36.95   MAY   50  47   0.25   47.75   0.25   Open
RYL     77.41  74.92   MAY   90  85   0.60   85.60   0.60   Open
AMZN    45.20  43.05   MAY   55  50   0.65   50.65   0.65   Open
BOBJ    27.85  19.70   MAY   35  30   0.75   30.75   0.75   Open
NTES    51.43  37.34   MAY   65  60   0.50   60.50   0.50   Open
VECO    27.43  23.81   MAY   35  30   0.55   30.55   0.55   Open
BSX     40.25  39.57   MAY   45  42   0.25   42.75   0.25   Open
RIMM    97.54  92.61   MAY  115 110   0.50  110.50   0.50   Open
MRVL    38.92  39.72   MAY   45  42   0.30   42.80   0.30   Open
OVTI    22.38  21.77   MAY   30  25   0.55   25.55   0.55   Open
AMZN    43.95  43.05   MAY   50  47   0.25   47.75   0.25   Open
CHIR    45.58  43.87   MAY   50  47   0.25   47.75   0.25   Open
BCSI    38.55  36.09   MAY   50  45   0.40   45.40   0.40   Open
CFC     56.30  59.99   MAY   65  60   0.45   60.45   0.45   Open?
CTX     44.80  45.66   JUN   55  50   0.50   50.50   0.50   Open
IVGN    67.61  65.38   JUN   80  75   0.55   75.55   0.55   Open

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

Countrywide Financial (NYSE:CFC) is now on the "watch" list.


DEBIT STRADDLES

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

ZMH     80.84  81.85   MAY    80    80     4.90    6.15    Open?
AH      35.78  34.40   MAY    35    35     3.10    2.90   Closed
QLTI    29.60  24.85   MAY    30    30     3.00    5.25    Open?
HOTT    22.26  20.19   MAY    22    22     1.80    2.25    Open
LF      19.67  20.11   JUN    20    20     3.50    5.25    Open?
BSTE    30.63  38.00   JUL    30    30     6.00   11.50    Open?
MKSI    23.10  19.53   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 viable
short-term gains.  The Stratasys (NASDAQ:SSYS) position has been
closed to preserve capital.  The Corinthian Colleges (NASDAQ:COCO)
straddle was not available at the target entry price, due to the
"gap-up" on the day after the straddle was listed as a 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.

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

CSC - Computer Sciences  $42.17  *** A Big Day! ***

Computer Sciences (NYSE:CSC) offers a wide array of services to
its clients in the global commercial and government markets and
specializes in the application of complex information technology
to achieve its customers' strategic objectives.  The company's
service offerings include IT and business process outsourcing
and IT and professional services.  CSC also provides management
of key functions for clients, such as claims processing, credit
checking, logistics and customer call centers.

CSC - Computer Sciences  $42.17

PLAY (less conservative - bullish/credit spread):

BUY  PUT  JUN-35.00  CSC-RG  OI=1663  ASK=$0.20
SELL PUT  JUN-40.00  CSC-RH  OI=3167  BID=$0.85
INITIAL NET-CREDIT TARGET=$0.65-$0.70
POTENTIAL PROFIT(max)=15% B/E=$39.35


__________________________________________________________________

GILD - Gilead Sciences  $62.54  *** New Rally Underway! ***

Gilead Sciences (NASDAQ:GILD) is an independent biopharmaceutical
company that discovers, develops and commercializes therapeutics
to advance the care of patients suffering from life-threatening
diseases.  The company has five major products marketed in the
United States and in other countries worldwide.  These are Viread,
a drug for treating HIV infection; AmBisome, a drug for treating
and preventing life-threatening fungal infections; Tamiflu, a drug
for treating and preventing influenza; Vistide, a drug for treating
cytomegalovirus (or CMV) retinitis in AIDS patients, and DaunoXome,
a drug for treating AIDS-related Kaposi's sarcoma.

GILD - Gilead Sciences  $62.54

PLAY (aggressive - bullish/credit spread):

BUY  PUT  JUN-55.00  GDQ-RK  OI=2199  ASK=$0.65
SELL PUT  JUN-60.00  GDQ-RL  OI=523   BID=$1.70
INITIAL NET-CREDIT TARGET=$1.05-$1.20
POTENTIAL PROFIT(max)=26% B/E=$58.95


__________________________________________________________________

RIMM - Research In Motion  $99.98  *** Next Leg Up? ***

Research In Motion Limited (NASDAQ:RIMM) is a designer, builder,
and marketer of wireless solutions for the mobile communications
market.  Through development and integration of hardware, software
and services, the firm provides solutions for seamless access to
time-sensitive information and communications, including e-mail,
telephone, messaging and Internet- and intranet-based applications.
The company's technology also enables a broad array of third-party
developers and manufacturers around the world to enhance their own
products and services with wireless connectivity.  RIM's portfolio
of products includes a family of wireless handhelds, the BlackBerry
wireless e-mail solution, embedded radio modems and a suite of
software development tools.

RIMM - Research In Motion  $99.98

PLAY (conservative - bullish/credit spread):

BUY  PUT  JUN-80.00  RUL-RP  OI=3073  ASK=$0.75
SELL PUT  JUN-85.00  RUP-RQ  OI=2199  BID=$1.15
INITIAL NET-CREDIT TARGET=$0.45-$0.60
POTENTIAL PROFIT(max)=9% B/E=$84.55



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

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.

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

CERN - Cerner  $41.33  *** In A Trading Range? ***

Cerner (NASDAQ:CERN) designs, develops, markets, installs, hosts
and supports software information technology and content solutions
for healthcare organizations and consumers.  The firm's solutions
give end users secure access to clinical, administrative and other
financial data in real-time.  Consumers retrieve appropriate care
information and educational resources via the Internet.  The firm
implements these solutions as stand-alone, combined or enterprise
wide systems.  Cerner solutions can be managed by the company's
clients or via an application outsourcing/hosting model.  Cerner
provides hosted solutions from its data center in Lee's Summit,
Missouri.

CERN - Cerner  $41.33

PLAY (conservative - bearish/credit spread):

BUY  CALL  JUN-50.00  CQN-FJ  OI=1685  ASK=$0.25
SELL CALL  JUN-45.00  CQN-FI  OI=1738  BID=$0.80
INITIAL NET-CREDIT TARGET=$0.60-$0.65
POTENTIAL PROFIT(max)=14% B/E=$45.60


__________________________________________________________________

SEPR - Sepracor  $45.06  *** Pure Premium-Selling! ***

Sepracor (NASDAQ:SEPR) is a research-based pharmaceutical company
dedicated to treating and preventing human disease through the
discovery, development and commercialization of pharmaceutical
compounds, including product candidates directed toward serving
unmet medical needs.  The firm's proprietary compounds are either
single-isomer or active metabolite forms of existing drugs, which
Sepracor refers to as improved chemical entities, or new chemical
entity compounds, which are unrelated to current products.

SEPR - Sepracor  $45.06

PLAY (conservative - bearish/credit spread):

BUY  CALL  JUN-55.00  ERU-FK  OI=1192  ASK=$0.35
SELL CALL  JUN-50.00  ERU-FJ  OI=3950  BID=$0.90
INITIAL NET-CREDIT TARGET=$0.60-$0.65
POTENTIAL PROFIT(max)=14% B/E=$50.60



~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
STRADDLES AND STRANGLES
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Based on analysis of the historical option pricing and technical
background, these positions meet the fundamental criteria for
favorable volatility-based plays.
__________________________________________________________________

No straddles or strangles today...

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

SEE DISCLAIMER - SECTION 1

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


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

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

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
SUMMARY OF CURRENT POSITIONS - AS OF 05/16/04
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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   19.91    0.35   4.19%   2.04%
MICC     MAY    17    17.15   21.45    0.35   4.31%   2.04%
MNST     MAY    22    21.95   25.34    0.55   4.39%   2.51%
HNT      MAY    22    22.00   22.76    0.50   4.76%   2.27%
IPXL     MAY    20    19.50   21.57    0.50   5.43%   2.56%
SSNC     MAY    22    21.60   23.31    0.90   7.85%   4.17%
IPXL     MAY    20    19.65   21.57    0.35   4.38%   1.78%
JBLU     MAY    22    22.15   25.92    0.35   3.65%   1.58%
LSCP     MAY    22    21.95   30.32    0.55   5.43%   2.51%
ASKJ     MAY    30    29.50   37.23    0.50   4.47%   1.69%
BRCM     MAY    37    36.70   37.66    0.80   4.83%   2.18%
FWHT     MAY    20    19.35   19.91    0.56   6.28%   3.36%
HOLX     MAY    20    19.50   19.38   (0.12)  0.00%   2.56%
HSII     MAY    22    22.25   26.53    0.25   2.61%   1.12%
LF       MAY    20    19.55   20.11    0.45   5.16%   2.30%
TSAI     MAY    20    19.80   20.24    0.20   2.99%   1.01%
TSO      MAY    20    19.50   22.07    0.50   5.60%   2.56%
APPX     MAY    35    34.40   34.88    0.48   4.65%   1.74%
BLDP     MAY    10     9.75    9.09   (0.66)  0.00%   2.56%
ELN      MAY    17    17.30   22.25    0.20   4.01%   1.16%
ERES     MAY    25    24.50   31.99    0.50   6.05%   2.04%
HOLX     MAY    20    19.65   19.38   (0.27)  0.00%   1.78%
LSCP     MAY    22    22.10   30.32    0.40   5.49%   1.81%
PDII     MAY    22    21.75   27.77    0.75   8.99%   3.45%
TELK     MAY    22    22.20   23.14    0.30   4.32%   1.35%
TNOX     MAY    15    14.50   16.60    0.50   8.35%   3.45%
APPX     MAY    35    34.65   34.88    0.23   2.47%   1.01%
EYE      MAY    17    17.20   22.81    0.30   5.00%   1.74%
JCOM     MAY    22    22.30   22.96    0.20   2.82%   0.90%
MGAM     MAY    22    21.90   22.49    0.59   7.05%   2.74%
NIHD     MAY    33    32.88   33.24    0.37   3.20%   1.52%
PXLW     MAY    17    16.95   16.45   (0.50)  0.00%   3.24%
SNIC     MAY    17    17.15   18.79    0.35   5.76%   2.04%
DNDN     MAY    12    12.25   11.15   (1.10)  0.00%   2.04%
FWHT     MAY    20    19.60   19.91    0.31   5.50%   2.04%
NIHD     MAY    35    34.50   33.24   (1.26)  0.00%   1.45%
OSTK     MAY    30    29.25   32.84    0.75   9.75%   2.56%
SNIC     MAY    17    17.20   18.79    0.30   6.05%   1.74%
UTHR     MAY    20    19.65   23.74    0.35   6.71%   1.78%
ATRS     MAY    25    24.55   23.85   (0.70)  0.00%   1.83%
DRTE     MAY    17    17.20   16.36   (0.84)  0.00%   1.74%
FWHT     MAY    20    19.65   19.91    0.26   5.03%   1.78%
INSP     MAY    30    29.50   31.50    0.50   7.20%   1.69%
ISPH     MAY    15    14.50   16.57    0.50  11.39%   3.45%
PTEN     MAY    35    34.65   31.23    0.40   4.13%   1.01%
UTHR     MAY    22    22.10   23.74    0.40   6.82%   1.81%
ARTC     MAY    22    22.20   21.10   (1.10)  0.00%   1.35%
CPKI     MAY    20    19.70   19.44   (0.26)  0.00%   1.52%
HEW      MAY    30    29.50   29.99    0.49   6.56%   1.69%
ISPH     MAY    15    14.55   16.57    0.45  12.90%   3.09%
MGM      MAY    20    19.65   20.45    0.35   7.24%   1.78%
SONO     MAY    20    19.60   21.10    0.40   8.71%   2.04%
USPI     MAY    35    34.35   36.17    0.65   7.48%   1.89%
DRIV     MAY    25    24.75   28.41    0.25   5.17%   1.01%
GPRO     MAY    35    34.70   37.48    0.30   4.34%   0.86%
JILL     MAY    20    19.60   21.25    0.40   9.70%   2.04%
MVSN     MAY    20    19.65   23.11    0.35   9.34%   1.78%
PDII     MAY    25    24.55   27.77    0.45   8.88%   1.83%
SYMC     MAY    45    44.65   48.00    0.35   3.95%   0.78%
VXGN     MAY    15    14.50   16.36    0.50  16.34%   3.45%
ADP      MAY    45    44.65   45.48    0.35   5.00%   0.78%
ERES     MAY    30    29.70   31.99    0.30   7.04%   1.01%
FARO     MAY    20    19.75   23.41    0.25   9.82%   1.27%
MXIM     MAY    45    44.70   47.18    0.30   4.57%   0.67%
NCF      MAY    30    29.50   31.50    0.50  11.10%   1.69%
NSM      MAY    20    19.70   20.41    0.30   9.79%   1.52%
BCGI     JUN    10     9.65   10.88    0.35   7.73%   3.63%
LPNT     JUN    35    34.30   36.59    0.70   4.03%   2.04%
ASCA     JUN    30    29.35   33.05    0.65   5.02%   2.21%
DRIV     JUN    25    24.25   28.41    0.75   7.04%   3.09%
FARO     JUN    20    19.45   23.41    0.55   7.32%   2.83%
GIVN     JUN    30    29.25   35.61    0.75   7.01%   2.56%
MVSN     JUN    20    19.65   23.11    0.35   4.54%   1.78%
PDII     JUN    22    22.00   27.77    0.50   6.67%   2.27%
SMTC     JUN    20    19.50   21.98    0.50   6.25%   2.56%
SSTI     JUN    12    12.15   12.37    0.22   4.40%   2.88%

Positions in ADEX, ALKS, CAMD, CLZR, ESIO, GNTA, GVHR, IMM,
INSP ($35 strike), MICC, MRVL, NET, NFLX, ORBZ, PLMO, TINY,
TOMO, USG and XMSR were previously closed to limit potential
losses.  New additions to the "early-exit" list are: ARTC,
ATRS, BLDP, CPKI, DRTE, DNDN, HOLX, NIHD, SSTI and PXLW,
among others.  In light of the recent bearish activity, most
of the remaining portfolio issues are 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   15.88    0.75   7.73%    2.91%
QLGC     MAY    37    37.95   27.05    0.45   4.22%    1.19%
AVCT     MAY    37    38.15   32.35    0.65   4.61%    1.70%
INTU     MAY    47    48.00   42.49    0.50   2.80%    1.04%
PPCO     MAY    20    20.30   12.71    0.30   6.92%    1.48%
SINA     MAY    45    45.55   28.45    0.55   6.61%    1.21%
NANO     MAY    20    20.40   11.93    0.40  10.66%    1.96%
PHTN     MAY    35    35.60   29.82    0.60   7.03%    1.69%
SFA      MAY    35    35.55   32.43    0.55   6.17%    1.55%
SOHU     MAY    25    25.75   16.95    0.75  11.61%    2.91%
SWIR     MAY    35    35.60   23.92    0.60   9.26%    1.69%
HOV      MAY    42    42.90   33.10    0.40   4.07%    0.93%
NFI      MAY    45    45.40   33.88    0.40   7.16%    0.88%
PHTN     MAY    35    35.30   29.82    0.30   6.07%    0.85%
RMBS     MAY    25    25.30   19.01    0.30   7.84%    1.19%
FLSH     MAY    20    20.25   16.30    0.25   8.55%    1.23%
BRCM     MAY    42    42.80   37.66    0.30   4.46%    0.70%
APPX     MAY    50    50.55   34.88    0.55  11.50%    1.09%
KG       MAY    20    20.25   13.88    0.25  12.67%    1.23%
SHRP     MAY    30    30.45   27.55    0.45   8.28%    1.48%
ATRX     MAY    30    30.35   27.86    0.35   9.16%    1.15%
KOSP     MAY    40    40.65   34.05    0.65  12.52%    1.60%
PBY      MAY    27    27.85   24.20    0.35  10.04%    1.26%
IACI     JUN    32    33.15   29.25    0.65   5.22%    1.96%
OVTI     JUN    30    30.80   21.77    0.80  11.79%    2.60%

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

ARTI     JUN   22.50   22.00   24.51    0.50   6.11%   2.27%
AVID     JUN   45.00   44.30   50.57    0.70   4.62%   1.58%
BLUD     JUN   25.00   24.70   27.86    0.30   3.54%   1.21%
DIGE     JUN   35.00   34.25   39.01    0.75   6.16%   2.19%
DRIV     JUN   25.00   24.60   29.75    0.40   5.37%   1.63%
NUE      JUN   55.00   54.25   60.95    0.75   3.96%   1.38%
PHRM     JUN   20.00   19.70   27.22    0.30   5.30%   1.52%
SPLS     JUN   25.00   24.60   26.39    0.40   4.24%   1.63%
YHOO     JUN   25.00   24.60   27.77    0.40   4.64%   1.63%

__________________________________________________________________

ARTI - Artisan Components  $24.51  *** Testing 2001 Highs! ***

Artisan (NASDAQ:ARTI) is a developer of unique high-performance,
high-density and low-power embedded memory, standard cell and
input/output intellectual property components for the design and
manufacture of complex integrated circuits or semiconductors.
The company's products are used for the design of integrated
circuits used in complex, high-volume applications, such as
portable computing devices, cellular phones, consumer multimedia
products, automotive electronics, computers, workstations and
servers.  Artisan focuses on licensing its products and providing
related services to semiconductor manufacturers and integrated
circuit design companies.

ARTI - Artisan Components  $24.51

PLAY (sell naked put):

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

SELL PUT  JUN 22.5  UAR RX      85  0.50  22.00   6.1%   2.3%


__________________________________________________________________

AVID - Avid Technology  $50.57  *** Consolidation Complete? ***

Avid Technology (NASDAQ:AVID) develops, markets, and supports a
wide range of software, and hardware and software systems, for
digital media production, management and distribution.  Avid
Technology participates in two principal markets transitioning
from well-established analog content-creation processes to
digital content-creation tools.  Both of these markets, video
and film editing and effects and professional audio, are using
the worldwide web to collaborate and distribute video and audio
content.  The company's products, which are categorized into the
two principal markets in which they are sold, are used worldwide
in production and post-production facilities, film studios,
network, affiliate, independent and cable television stations,
recording studios, advertising agencies, government and also
educational institutions, corporate communication departments,
and by game developers and Internet professionals.

AVID - Avid Technology  $50.57

PLAY (sell naked put):

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

SELL PUT  JUN 45    AQI RI     951   0.70  44.30   4.6%   1.6%


__________________________________________________________________

BLUD - Immucor  $27.86  *** Who Can Live Without BLUD? ***

Immucor (NASDAQ:BLUD) develops, manufactures and sells a complete
line of reagents and automated systems used primarily by hospitals,
clinical laboratories and blood banks in a number of tests performed
to detect and identify certain properties of the cell and serum
components of human blood prior to blood transfusion.  Immucor also
markets a complete family of automated instrumentation for all of
their market segments.

BLUD - Immucor  $27.86

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    QMQ RE      66   0.30  24.70   3.5%   1.2% TS


__________________________________________________________________

DIGE - Digene  $39.01  *** Rally Underway? ***

Digene (NASDAQ:DIGE) develops, manufactures and sells proprietary
gene-based testing systems for screening, monitoring and diagnosis
of human diseases.  Its primary focus is in women's cancers and
infectious diseases.  The firm has applied its proprietary Hybrid
Capture technology to develop a unique diagnostic test for human
papillomavirus, which is the primary cause of cervical cancer and
is found in greater than 99% of all cervical cancer cases.  In
addition to its HPV Test, the company's product portfolio includes
gene-based tests for detecting chlamydia, gonorrhea, hepatitis B
virus and cytomegalovirus.

DIGE - Digene  $39.01

PLAY (sell naked put):

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

SELL PUT  JUN 35    QDG RG     322   0.75  34.25   6.2%   2.2%


__________________________________________________________________

DRIV - Digital River  $29.75  *** Testing 2004 Highs! ***

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  $29.75

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    1168   0.40  24.60   5.4%   1.6%


__________________________________________________________________

NUE - Nucor  $60.95  *** Strong Sector! ***

Nucor (NYSE:NUE) is engaged, along with its subsidiaries, in the
manufacture and sale of steel and steel products.  The company
operates two segments: steel mills and steel products.  Primary
products from the steel mills segment are hot-rolled steel and
cold-rolled steel.  Principal products from the steel products
segment are steel joists and joist girders, steel deck, cold
finished steel, steel fasteners, metal building systems and
light gauge steel framing.

NUE - Nucor  $60.95

PLAY (sell naked put):

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

SELL PUT  JUN 55    NUE RK      65   0.75  54.25   4.0%   1.4%


__________________________________________________________________

PHRM - Pharmion Corporation  $27.22  *** New Drug Speculation! ***

Pharmion Corporation (NASDAQ:PHRM) is a global pharmaceutical
company focused on acquiring, developing and commercializing
products for the treatment of hematology and oncology patients.
The company has established its own regulatory, development and
sales and marketing organizations and has a distributor network
to serve the global hematology and oncology markets.  Pharmion
has acquired rights to two products, Innohep and Refludan.  It
also has two products, Thalidomide Pharmion 50 mg) and Vidaza,
in advanced stages of development.  Pharmion intends to continue
to build a balanced portfolio of approved and pipeline products
targeting the hematology and oncology markets.

PHRM - Pharmion Corporation  $27.22

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    JUT RD       0   0.30  19.70   5.3%   1.5%


__________________________________________________________________

SPLS - Staples  $26.39  *** Favorable Earnings! ***

Staples (NASDAQ:SPLS) is an office supplies retailer that sells
its products through a superstore concept.  The company operates
three business segments: North American Retail, North American
Delivery and European Operations.  Staples' North American Retail
segment consists of United States and Canadian business units
which sell office products and services through over 1,100 retail
stores.  Its North American Delivery segment consists of United
States and Canadian business units that sell and deliver office
products and services directly to customers.  Staples' European
Operations business units sell office products and services in
over 200 stores in the United Kingdom, Germany, the Netherlands,
Portugal and Belgium, and sell and deliver office products and
services directly to customers throughout the United Kingdom,
Germany, France, Belgium, Spain, Italy and Sweden.

SPLS - Staples  $26.39

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    PLQ RE    1711   0.40  24.60   4.2%   1.6%


__________________________________________________________________

YHOO - Yahoo!  $27.77  *** Post-Split Rally! ***

Yahoo! (NASDAQ:YHOO) is a global Internet business and consumer
services company that offers a comprehensive branded network of
properties and services to more than 200 million individuals
worldwide.  The company offers an online navigational guide to the
Internet via its www.yahoo.com Website, which is a guide in terms
of traffic, advertising and household and business user reach.
Through Yahoo! Enterprise Solutions, the firm also provides many
business services designed to enhance the productivity and Web
presence of its clients.  Yahoo! has offices in the United States,
Europe, Asia, Latin America, Australia and Canada.

YHOO - Yahoo!  $27.77

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    YHQ RE   36615   0.40  24.60   4.6%   1.6%



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

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.

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

ENDP - Endo Pharmaceuticals  $21.90  *** Oxycontin Delay! ***

Endo Pharmaceuticals (NASDAQ:ENDP) is a specialty pharmaceutical
company specializing in pain management.  The company is engaged
in the research, development, sale and marketing of branded and
generic prescription pharmaceuticals used primarily to treat and
manage pain.  The company's primary area of focus is analgesics,
with a portfolio of branded products and generic drugs that cover
a broad range of indications, most of which are focused in pain
management.

ENDP - Endo Pharmaceuticals  $21.90

"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 25    IUK FE    1649   0.70  25.70  11.2%   2.7%


__________________________________________________________________

IPXL - IMPAX Laboratories  $20.23  *** Sell-Off In Progress! ***

IMPAX (NASDAQ:IPXL)) is a unique, technology-based pharmaceutical
firm focused on the development and commercialization of generic
and brand name pharmaceuticals, utilizing its controlled-release
and other in-house development and formulation expertise.  In the
generic pharmaceuticals market, IMPAX is primarily focusing its
efforts on selected controlled-release generic versions of brand
name pharmaceuticals.  The firm is also developing other generic
pharmaceuticals that present one or more competitive barriers to
entry, such as difficulty in raw materials sourcing, complex
formulation or development characteristics, or special handling
requirements.  In the brand-name pharmaceuticals market, IMPAX is
developing products for the treatment of central nervous system
disorders.

IPXL - IMPAX Laboratories  $20.23

PLAY (sell naked call):

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

SELL CALL  JUN 22.5  UPR FX     350   0.55  23.05   8.8%   2.4%


__________________________________________________________________

MMR - McMoRan Exploration  $13.05  *** Sector Slump! ***

McMoRan Exploration (NYSE:MMR) is engaged in the exploration,
development and production of oil and gas offshore in the Gulf
of Mexico and onshore in the Gulf Coast region.  The company
owns or controls interests in oil and gas leases in the Gulf
of Mexico and onshore Louisiana and Texas covering over 376K
gross acres.  This acreage includes 100,000 gross and 26,000
net acres associated with the firm's potential reversionary
interests.

MMR - McMoRan Exploration  $13.05

PLAY (sell naked call):

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

SELL CALL  JUN 15    MMR FC      88   0.25  15.25   7.2%   1.6%



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

SEE DISCLAIMER - SECTION 1

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


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