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Daily Newsletter, Tuesday, 05/25/2004

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The Option Investor Newsletter                 Tuesday 05-25-2004
Copyright 2004, All rights reserved.                       1 of 3
Redistribution in any form strictly prohibited.


In Section One:

Wrap: Russell Leads the Way
Futures Markets: See Note
Index Trader Wrap: A trimming of the hedge?
Market Sentiment: Oil Slides, Stocks Geyser


Posted online for subscribers at http://www.OptionInvestor.com
************************************************************
MARKET WRAP  (view in courier font for table alignment)
************************************************************
     05-25-2004            High     Low     Volume Advance/Decline
DJIA    10117.62 +159.19 10121.67  9915.86 1.84 bln   2410/ 478
NASDAQ   1964.65 + 41.67  1966.68  1913.73 1.73 bln   2216/ 850
S&P 100   542.39 +  8.35   542.72   531.57   Totals   4626/1328
S&P 500  1113.05 + 17.64  1113.80  1090.74
RUS 2000  565.39 + 13.67   565.43   550.16
DJ TRANS 2931.95 + 66.59  2934.22  2856.11
VIX        15.96 -  2.12    18.42    15.73
VXO        15.91 -  2.40    19.21    15.63
VXN        22.04 -  2.29    24.82    21.62
Total Volume 4,012M
Total UpVol  3,476M
Total DnVol    454M
52wk Highs     117
52wk Lows      125
TRIN          0.40
PUT/CALL      0.90
************************************************************

Russell Leads the Way
Linda Piazza

While market participants focused on the Iraq situation, crude
oil prices, the Consumer Sentiment and Existing Home Sales, the
Russell 2000 was making a sneak assault on the top boundary of
its nearly month-long rectangular congestion zone.  That sneak
assault led the way for other indices to challenge recent
consolidation patterns, too.  By the end of the day, the move had
led to gains of 2.48 percent on the Russell 2000, 1.16 percent on
the SPX, 2.17 percent on the Nasdaq, and 1.60 percent on the Dow,
with those gains produced on moderate volume.  Other volume
patterns proved impressive, however, with the ratio of advancing
to declining issues 28:6 on the NYSE and 23:9 on the Nasdaq.  Up
volume amounted to more than eight times down volume on the NYSE
and seven times down volume on the Nasdaq.

With crude oil futures closing at a record high on Monday, the
stage had been set for a decline in overseas markets.  Following
network television's decision not to televise Bush's speech live,
articles discussing overseas market performance made little
mention of Bush's five-point plan for achieving a stable,
peaceful Iraq as a factor in trading decisions.  Instead, those
articles focused on the likely impact of increasing oil prices.

The Nikkei followed through on the promised declines, falling
138.71 points or 1.25 percent to close below the psychologically
important 11,000 at 10,962.93.  With concerns that oil prices
would restrict economic growth and Germany's much-watched IFO
Index easing in May, European markets gapped lower, too, but then
treaded water near their opening levels.  Stagnating consumer
demand continues to impact expectations in Germany, with higher
oil prices being mentioned along with escalating health-care
costs as negative factors. Some took heart from the increase in
the expectations component of that index, however.

Our futures reacted by falling throughout the night, beginning a
labored climb about 6:30 am EST, perhaps about the time that it
was clear that European markets would steady rather than tumble
precipitously.  The dollar weakened and fixed income markets
throughout the globe stabilized.  Yields for the benchmark Ten-
Year Treasury Note opened lower, followed by early weakness in
equity markets.

Most indices fell toward their morning lows just ahead of and as
May's Consumer Confidence and April's Existing Home Sales numbers
were released at 10:00 am EST.  Expectations for May's Consumer
Confidence had ranged from 93-94 with a prior number at 92.9.
The expectations component of the consumer confidence number, 60
percent of the total index, rose from 94.8 to 95.2, with the
present-situation component falling from 90.4 to 90.3.

The 93.2 Consumer Confidence number was variously hailed as
meeting expectations and being lower than expectations, depending
on the news source.  Survey results listed rising gasoline
prices, a mixed employment outlook, and the growing Iraq scandal
as pressures on confidence levels.  UBS issued a report last
Friday that speculated that the rising oil costs could trim $35
billion from after-tax income this year if those higher costs
continue.  Goldman Sachs believes consumer confidence and
presidential approval ratings to be strongly linked, and Bush's
approval rating has dipped as the Iraq situation intensifies.

All agreed on whether the existing home sales number met or beat
expectations, with that number surprising to the upside.  The
6.64 million sales figure was the second highest on record
according to the National Association of Realtors.  Consensus
expectations had been for a decrease to 6.41 million from March's
6.48 million sales, although I'd read forecasts that ranged from
6.40-6.48 million.  Some theorize that potential homebuyers
rushed to get into homes as interest rates rose, fearing higher
interest rates to come, making that bump higher a temporary one.
Perhaps predictably, the homebuilders saw some of the strongest
gains, with the $DJUSHB, the Dow Jones US Home Construction
Index, gaining 4.90 percent in Tuesday's trading.

The SPX, Dow and Nasdaq reacted variously to those numbers and a
concurrent dip in crude oil futures by steadying a few minutes or
dipping to a slightly lower low.  The Russell 2000, however, just
steepened the climb that it had begun at Tuesday's open when it
broke above the consolidation zone in which it had been confined
since May 7.

Annotated 60-Minute Chart of the Russell 2000:



After closing above its 200-dma on Monday, the Russell charged
above that consolidation zone and important 60-minute averages at
the open, pausing only to absorb the impact of the economic
numbers before steepening that climb.

Annotated Daily Chart of the Russell 2000:



As can be observed on the Russell 2000's daily chart, recent
gains produced a bullish cross in the MACD, but from below
signal, and broke the stochastics above the signal line.
Shorter-term 5(3)3 stochastics (not shown), however, have already
cycled far toward levels indicating short-term overbought
conditions, with that stochastics level being approached as the
Russell 2000 approaches horizontal resistance, the upside target
of its 60-minute rectangular consolidation band, the 50-dma, and
one version of a descending trendline off recent highs.  While
today's impressive gains can not be minimized, especially as they
created a new P&F double-top breakout signal with an upside
target of 630, neither should that impressive resistance be
minimized.

This move can not be called bullish with certainty until it
retraces more than 50 percent of the recent decline.  If the
Russell 2000 can break above the 572 level, it should next test
the 100-dma and then the 595-600 range if it can climb above the
100-dma.

If the Russell 2000 led the way, did the other indices follow?
Most major indices produced breakouts, with the SPX being one of
those indices.

Annotated Daily Chart of the SPX:



The SPX has been particularly important to watch as its tests of
the 200-sma have prompted recent bounce attempts.  While some
other indices, most notably the OEX, appeared more bearish
because of continual closes below their 200-dma's, the SPX's
closes above that important moving average coupled with the
bullish divergence on its daily chart signaled a warning to those
thinking bearishly. Today's action saw the MACD produce a bullish
cross, but from below signal.

Annotated Daily Chart of the Nasdaq:



If the Russell 2000's close above its 200-sma Monday predicted
that it was breaking out of its recent congestion zone, the
Nasdaq's close above its 200-ema Monday may have been doing the
same.  Especially with tech-related indices, I like to watch the
-ema as well as the -sma, and this viewpoint shows the OEX
scrambling above that moving average Monday, finding support at
it on Tuesday's morning dip, and then climbing strongly from that
average.  As with many other indices, MACD produced a bullish
cross but from below signal.  The 21(3)3 stochastics have moved
up through the signal line.  The shorter-term 5(3)3's (not shown)
have already cycled far toward levels indicating overbought
conditions as the Nasdaq heads up to test its 50-dma, the
psychologically important 2000, and then perhaps its 100-dma and
the descending trendline off the year's high, depending on
whether it can surmount each succeeding level or gets turned
back.  It's possible to draw several versions of a triangle on
the Nasdaq's chart, and the possible formation I've drawn on this
one proves less neutral than a symmetrical triangle.  The chart
reveals that the Nasdaq is perhaps just rising within that
formation that consists of a flat bottom and a series of lower
highs.  That presumes the formation of another lower high, but it
was also possible to draw a triangle with an ascending lower
trendline, the neutral version of a triangle.  The coordination
of the MACD bottoms with the price bottoms within the flat-
bottomed structure hint that it may be the correct one.

I've included a neutral triangle (ascending bottom support) and a
bearish one (flat bottom) on the Dow's chart, although here an
interpretation of the formation as a bearish right triangle seems
a stretch.

Annotated Daily Chart of the Dow:



The Dow's chart (using the DJX as a proxy) has produced bullish
price/MACD divergence, too.  As with the other indices, the MACD
bullish cross was produced from below signal, and prices head
straight up into moving-average, horizontal and trendline
resistance.  Dow 10,200-10,300 registers as important known
historical resistance as well as the location of the 30- and 50-
dma's and the former supporting trendline from the Dow's neutral
triangle.

Weekly charts show these indices trying to steady at first
important weekly support, while weekly 21(3)3 stochastics attempt
bullish crosses, completed only on the COMPX and without a move
up through the signal line on that index.  On all, RSI hooks up
within a roughly descending formation.  Weekly MACD has not
turned up on any of the above indices.

What does it all mean?  Earlier in the week, I had speculated
that indices might make a run higher this week into the June 3
official OPEC meeting in a kind of buy-the-rumor move.
Yesterday's climb by crude oil futures spoiled that effect, with
Jane Fox of the OIN Market Monitor perhaps pinpointing one reason
behind that climb.  It was perhaps produced at least in part by a
safety shutdown at a Royal Dutch/Shell Oil platform in the Gulf
of Mexico, with that shutdown cutting the oil supply by 150,000
barrels a day.

With some statements about an optimum price being $30/barrel
producing Tuesday's pullback in crude prices, we then saw the
expected run higher, a run into resistance.  That continued
inverse relationship between oil prices and equity behavior gives
me pause about predicting whether the indices will be able to
push above their next approaching resistance levels.  Crude oil
prices have been consolidating above the benchmark $40.00, with
these moves higher and lower occurring within a consolidation
zone roughly between $40.00 and $42.00.  Moves within a
consolidation zone prove difficult to predict.  Daily oscillators
for crude oil head lower . . . or did, until stochastics turned
higher again on Tuesday, refusing to fall below the signal line.

The other factor giving me pause relates to economic releases
Wednesday, with one of those releases being the Crude
Oil/Gasoline/Distillate Inventories at 10:30.  In this climate,
that number might be watched more closely than in the past, with
further declines producing a move higher in the crude futures.
We're beginning to see earnings reports and business and consumer
confidence numbers being impacted by crude oil costs, such as
Germany's IFO Index and our Consumer Confidence Index.  Headlines
for articles discussing airline stocks mention fuel surcharges,
but the airliners aren't the only entities affected by those high
crude prices.  Articles today about eurozone movers and shakers
included notations that chemical firms such as BASF and Bayer had
been notable decliners in early trading today, attributing those
declines to crude oil costs.

The best I can say is that I think indices will attempt continued
bounces into resistance as long as crude prices consolidate or
show an inclination to decline into the June 3 OPEX meeting.
However, if Wednesday's inventory numbers concern market watchers
or some global geopolitical event heightens worries and send
crude oil higher again, markets appear vulnerable to a downturn
below resistance.  Whether indices can break above upper
descending trendlines remains in question at this time and may
depend in part on OPEC's decision.  If we do get a buy-the-rumor
continued run higher, then even a beneficial decision by OPEC
might result in a sell-the-rumor effect, especially as some doubt
how much production can be increased.

When we're considering what's likely to happen, however, we
shouldn't ignore the collapse in volatility today.  The collapse
was huge, almost mirroring the March 10 one-day gain in
volatility.  The collapse turned the VIX back into the 15.75-
16.75 range that has been a recent axis of gyrations for the VIX
and elicited intrigue about who knows what.  Is China going to
announce a decrease in demand that will uncouple the inverse
relationship of oil and equities?  Will Russia reveal that it
will complete its pipelines sooner than expected and be able to
supply the world's needs?  Who knows something and what is it
that's known?

It's not the actual number that proved so startling, since that's
within that recent axis, but the precipitous drop.  As far as I
can ascertain, Tuesday produced the biggest one-day drop in the
VXO since the reformulation of the VIX. A continued drop in the
VIX produces an enigma for market watchers who remember the old
"when VIX is low, it's time to go" axiom, coupled with the usual
advice about selling stocks in May.  We've watched the VIX go
lower and lower, reaching new multi-year low after new multi-year
low with only to-be-expected pullbacks resulting, so how low is
low?

Other economic reports due Wednesday include the 8:30 release of
April's Durable Goods Orders, with expectations anything from a
flat number to a 0.8 percent decrease.  March's number stood at 5
percent and March's Durable Goods Orders minus transportation at
5.4 percent.  This release by the Census Bureau often proves
market-moving even though it can be volatile.  Non-defense
capital goods can be a much-watched component of this number
since it gives insight into business investment component of the
GDP. Market watchers will want to see gains, if any result, be
broad based rather than isolated in a particular sector.  Other
economic releases include April's New Homes Sales at 10:00 EST
and the already mentioned Crude Oil/Gasoline/Distillate
Inventories at 10:30.  Homebuilder Toll Brothers (TOL) also
reports before the bell.  Like other indices, the $DJUSHB's gain
today sent it up into resistance, and market watchers want to see
TOL announce results that reassure the dip buyers that the made
the right decision.

Keep an eye on the Russell 2000 and crude oil prices tomorrow as
guides to likely action, and be careful around the time of these
economic releases.


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

A trimming of the hedge?

Bulls ran rampant in today's trade and either today's economic
data, which was largely inline with economists' forecast was much
better than equity traders thought it would be, or President Bush
said something in last night's speech that had a hedge being
lifted in today's trade.

When the morning trade began I mumbled to myself... "here we go
again, another tight range of trade," but by the close, the major
indices all finished with 1% gains or more, with all closing back
above their longer-term 200-day simple moving averages.

While I can't be certain, some things Jane Fox first mentioned in
this morning's Market Monitor 10:39:03 "the most encouraging
thing I see is the VIX, it has fallen below 18 and is not at
17.30"  regarding the declining Market Volatility Index (VIX.X)
15.96 -11.72% which simply imploded would strongly suggest to
this trader that some type of downside hedge, which may have been
initiated just about a month ago triggered today's bullish gains.

While July Light, Sweet Crude Oil Futures (cl04n) $41.14 -1.39%
retreated from recent contract highs, I don't think a 58-cent
decline in oil could have sparked today's broad gains for
equities.

Market Volatility Index (VIX.X) - Daily Intervals



A daily interval bar chart of the VIX.X shows just what type of
volatility collapse was seen, where action like this on a rather
"light news day" is suspicious.

Market Volatility Index (VIX.X) - 5-minute intervals



The major indices were sideways to lower early this morning and
really didn't make much of a move until after this morning's
10:00 AM release of May Consumer Confidence (93.2 vs. consensus
94.0) and April Existing Home Sales (6.64 mill. vs. 6.45 mill
consensus).  Alternating buy and sell program premium alerts were
found ahead of, and just after the economic data as the SPX
seemed pinned at its MONTHLY S1 (1,092.92) and WEEKLY Pivot
(1,092.96) as it was trading 1,093.00.  Jane's notes came just as
the VIX.X fell under 18.00 (10:10-10:15 buy program premium
marked the end of the alternating buy and sell programs we had
been seeing) and the further unwinding or collapse of the VIX.X
would suggest to me that there was some type of meaningful option
action driving today's action.

S&P 500 (SPX.X) Option Chain - 05/25/04 Most Active



At tonight's close, I wanted to quickly update ourselves on some
comments made in the 01:00 PM intraday update.  Note the amount
of option volume in some of the June 2004 contracts (arrows),
where if I (Jeff Bailey) think a hedge was taken off in today's
trade at SPX 1,093 and a correlative WEEKLY/MONTHLY level, its
really the June 1,150 calls (SPTFJ) that grabs my attention.
I'll discuss the 1,150 calls in a minute when we look at the SPX
chart.  Let's also take note that the June 1,125 calls (SPTFE),
which I've marked with a BLUE arrow, would have this 1,125 strike
(sound familiar?  keeps showing up month after month in "max
pain" calculations) a familiar level for Index Trader Wrap
readers.

One thing that has me thinking we saw a hedge removed today, was
if I were to simply split the difference from the 1,025 and 1,150
strike, I'd come up with 1,087.50.  This too is a bit suspicious
to me (Jeff Bailey) when we've been noting how the SPX has been
wanting to show very modest gains/losses on a closing basis the
past several sessions.  Almost as if it was being "pegged" to a
level, and today, as if a hedge is fully unwound, or really
starting to be unwound, we get a pretty sizeable move in
VOLATILITY and the SPX, or major indices themselves.

Market Snapshot / Internals - 05/25/04 Close



I've made a coupe of notes as it relates to the NH/NL breadth
indications, where today's trade would have the NASDAQ
Composite's NH/NL 10-day average ratio reversing up to "bull
alert" status, where this would be the first sign of meaningful
bullish leadership returning.  But also look at the intra-day
point moves for the major indices from the 12:00 to 01:00 PM and
then to the close point changes after having observed the intra-
day VIX.X chart.

S&P 500 Index (SPX.X) Chart - Daily Intervals



I've marked the 1,150 level to get a visual price perspective on
just who in their right mind would have been an active buyer of
June 1,150 out the money calls today.  Was the consumer
confidence or existing home data that much of a bullish catalyst?
I don't think so, and in April, June 1,150 calls were selling for
between $30 and $20 and I think call buyer was a covered call
seller locking in gains.

The one SHORT-TERM trade setup an SPX option trader might look
for from the CALL side tomorrow is a pullback into the 1,106.50
or better yet 1,099 area, have VIX.X stay BELOW 16.78, then trade
the 1,100 June strikes long, but don't hold if failure back below
1,093, where a further bounce target to trend and 1,130.

NASDAQ-100 Tracker (QQQ) - Daily Intervals



Not unlike the SPX, the QQQ made a strong move above an
overlapping MONTHLY Pivot ($35.66) and WEEKLY R1 ($35.64)
resistance, and this should serve some support on any near-term
retest.  Volume of 90.7 million wasn't overly heavy, which may be
partially explained by a volume at price study on the QQQ.

NASDAQ-100 Tracker (QQQ) - Volume at price



In my opinion, there was a lot of selling that "should have taken
place" today among some QQQ stocks that didn't.  After giving a
very bearish triple-bottom sell signal at $79 on May 10, and a
fitting bearish vertical count of $70, which would have tied in
very nicely with a QQQ at about $33.00, shares of eBay (EBAY)
$85.33 negated the triple bottom pattern objective of Professor
Davis, and its bearish vertical count of $70 when it traded a
negating $84 buy signal and then goes on to trade a new all-time
high.  A volume at price study has the QQQ now entering an area
that would be considered "void" of much near-term resistance
where $36.65-$37.00 looks near-term achievable.

A trader in the QQQ might well associate any re-test of the
MONTHLY Pivot as a good support entry for a continued bounce
higher.  Later tonight I'll check the NASDAQ-100 Bullish %
($BPNDX) where I know EBAY was at least one stock to generate a
reversing upward point and figure buy signal, but if the QQQ was
to have found it pullback bottom then $34.00 may well have been
it on a longer-term basis, where the only upward trend on the
QQQ, and a longer-term one at that from the October 2002 lows
certainly would grab some attention at this point.

Jeff Bailey


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

Oil Slides, Stocks Geyser
- J. Brown

It is interesting how the market seems to focus on one main
concern.  A few weeks ago it was interest rates.  Before that it
was jobs.  Right now it's oil.  Monday saw oil shoot to an all-
time high at $41.72 a barrel despite news that Saudi Arabia would
up production to soothe demand and rising prices.  Today oil
slips 58 cents and the markets rejoice with a very broad-based
rally that left no one behind.  Every major sector index closed
in the green with very heavy buying in tech stocks and previously
interest rate sensitive items like homebuilders.

Boosting investors confidence today was a better than expected
existing home sales numbers, which is a strong sign for the
economy since home sales tend to boost demand for household
products.  Also on the economic front today was consumer
confidence, which edged up 0.2 percent to 93.2.  The markets
could also be reacting to President Bush's speech last night that
clearly outlined America's plan to exit the conflict in Iraq.
The fact that we now have a plan and a timetable should have
eased fears that we'll be trapped there forever.

Of course the President did say we have tough days ahead of us as
insurgents and terrorists step up their activities ahead of the
June 30th handover.  Here at home we have mounting concerns with
elevated terrorist "chatter" about a potential attack during the
Olympics in Greece, the Democratic and Republican conventions
this summer and the U.S. elections in November.  For the time
being "geo-political risk" will remain an underlying worry but
today investors managed to forget them.

Market internals were very bullish with advancing stocks
outnumbering decliners almost 6-to-1 on the NYSE and 11-to-4 on
the NASDAQ.  Up volume was more than eight times down volume on
the NYSE and more than seven times down volume on the NASDAQ.
Volatility indices took major tumbles back toward their April
lows.  We've been expecting a potential rally this week (see this
weekend's market wrap) and we've finally got one.  The Dow's
breakout over 10,100 and its 200-dma is very encouraging as is
the NASDAQ's close over its own 200-dma.

Tomorrow brings us the April durable goods order and the new home
sales numbers.


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

Market Averages

DJIA ($INDU)

52-week High: 10753
52-week Low :  8540
Current     : 10117

Moving Averages:
(Simple)

 10-dma:  9986
 50-dma: 10252
200-dma: 10050



S&P 500 ($SPX)

52-week High: 1163
52-week Low :  927
Current     : 1113

Moving Averages:
(Simple)

 10-dma: 1094
 50-dma: 1116
200-dma: 1083



Nasdaq-100 ($NDX)

52-week High: 1559
52-week Low : 1123
Current     : 1447

Moving Averages:
(Simple)

 10-dma: 1407
 50-dma: 1435
200-dma: 1422



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

CBOE Market Volatility Index (VIX) = 15.96 -2.12
CBOE Mkt Volatility old VIX  (VXO) = 15.91 -2.40
Nasdaq Volatility Index (VXN)      = 22.04 -2.29


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

          Put/Call Ratio  Call Volume   Put Volume

Total          0.90        829,079       748,788
Equity Only    0.69        648,742       448,555
OEX            1.00         25,434        25,328
QQQ            0.50         56,017        28,098


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

Bullish Percent Data

           Current   Change   Status
NYSE          62.4    + 1     Bear Confirmed
NASDAQ-100    33.0    + 3     Bear Confirmed
Dow Indust.   66.7    + 0     Bear Confirmed
S&P 500       58.4    + 0     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: 0.91
10-dma: 1.14
21-dma: 1.06
55-dma: 1.08


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    2410      2216
Decliners     478       850

New Highs      67        78
New Lows       27        37

Up Volume   1597M     1511M
Down Vol.    192M      209M

Total Vol.  1841M     1734M
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

Commercial traders remain net short and seem to be increasing
their bearish sentiment.  Small traders are net bullish and in
mirror-like fashion are growing more bullish compared to the
big traders.


Commercials   Long      Short      Net     % Of OI
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%)
05/18/04      394,352   423,258   (28,906)   (3.5%)

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
04/27/04      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%
05/18/04      139,647    74,597    65,050    30.4%

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


E-MINI S&P 500

The four-week trend for the commercial traders has been a bullish
one as they increase their long positions.  Meanwhile the small
traders have been busy shuffling money around and reducing their
long and short positions.


Commercials   Long      Short      Net     % Of OI
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%
05/18/04      390,484   357,157     33,327     4.5%

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
04/27/04      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%
05/18/04       62,216     87,269    25,053    16.8%

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


NASDAQ-100

There continues to be very little movement in the commercial
traders' positions.  Small traders have reduced their short
positions somewhat.


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%
05/18/04       58,376     37,528    20,848   21.8%

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
04/27/04        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%)
05/18/04        9,843    18,935   ( 9,092)  (31.6%)

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

The dead heat between longs and shorts for the commercial
traders has grown even thinner.  Small traders have moved
from net bearish to net bullish on the Industrials.


Commercials   Long      Short      Net     % of OI
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%
05/18/04       22,257    22,444   (  187)     (0.4%)

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
04/27/04        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%)
05/18/04        9,098     6,591    2,507     16.0%

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

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


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The Option Investor Newsletter                  Tuesday 05-25-2004
Copyright 2004, All rights reserved.                        2 of 3
Redistribution in any form strictly prohibited.


In Section Two:

Dropped Calls: None
Dropped Puts: APOL, CTX, GDT, WHR
Call Play Updates: ADP, ERTS, JNJ, LXK, BCR, QCOM
New Calls Plays: AIG, IMCL
Put Play Updates: AMZN, CAKE, GM, FRX
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:
*****

Apollo Group - APOL - close: 91.87 change: +2.62 stop: 92.00

After a pretty convincing breakdown under the 50-dma last week,
APOL moved right back up to its $90 price magnet on expiration
Friday.  Direction was still unclear yesterday, as the stock
posted a narrow-range doji.  But the neutrality was resolved in a
big way today with APOL opening strongly and rallying straight up
the chart, hitting our $92 stop in the final hour.  In hindsight,
we can clearly see that last week's breakdown was nothing more
than a bear trap.  All open positions should have been closed out
when our stop was hit this afternoon, especially with daily
oscillators now giving strong bullish reversals.

Picked on May 11th at         $90.32
Change since picked:           +1.55
Earnings Date                6/11/04 (unconfirmed)
Average Daily Volume =      1.80 mln
Chart =


---

Centex Corp - CTX - close: 48.34 change: +2.16 stop: 47.50

The rebound in the homebuilders has become a full-fledged rally
and the DJUSHB home construction index jumped 4.9% on Tuesday.
Investors seem to be rotating money back into the group after
weeks of selling.  We're going to close CTX un-triggered since
the stock never completed our entry requirements for a drop back
through the $46 level.  It may be time for traders to scan the
group for bullish candidates.

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 =


---

Guidant - GDT - close: 60.49 chg: +1.64 stop: 60.26

Shucks!  GDT was looking pretty good yesterday with the move
toward resistance at $60.00 and the slow fade into Monday's
close.  Then Medtronic announced earnings this morning but more
importantly they released data on their Phase I Endeavor drug-
coated stent program.  The news wasn't good and right now
Endeavor does not appear to be any competition to BSX or GDT.
That sent shares of GDT soaring to $62.25 before profit taking
set in.  Of course that was more than enough to stop us out at
$60.26.  This is a good example of why we use stop losses.  No
one could have known that MDT was going to report its Phase I
data with earnings or that the data would be disappointing.  It
could have easily been a positive report that sent GDT lower.

Picked on May 20 at $ 57.11
Change since picked: + 3.38
Earnings Date      04/22/04 (confirmed)
Average Daily Volume:   3.1 million
Chart =


---

Whirlpool Corp - WHR - close: 68.21 chg: +2.84 stop: 65.76

WHR reiterated their 2004 earnings forecasts as the stocked
soared more than 4.3% with heavy volume.  The move was fueled by
the stronger than expected existing home sales, which boosted
expectations for stronger household items.  Not hurting WHR was a
decent consumer confidence number.  Oh and did we mention the
159-point gain in the Dow?  We're obviously stopped out at $65.76
and WHR looks ready to challenge resistance near its 200-dma just
under the $70 mark.

Picked on May 05 at $ 64.69
Change since picked: + 3.52
Earnings Date      04/21/04 (confirmed)
Average Daily Volume:   555 thousand
Chart =



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

Auto. Data Proc. - ADP - cls: 45.27 chng: +1.00 stop: 43.75*new*

It seems like we've been waiting forever for shares of ADP to
show some sign of life.  The 2-week pullback finally came to an
end today, with the stock gapping up at the open in response to
the positive sentiment in the rest of the market.  The positive
action didn't end there, as ADP steadily worked higher into the
close, ending at its high of the day on strong volume.  The stock
gapped open to the midline of the rising channel and the day's
intraday gains put the stock well into the upper half of the
channel.  With daily oscillators now pointed solidly upwards, it
looks like the next leg of the rally is underway.  Traders that
stepped into positions during the weakness of the past week
appear to have gotten a great entry point and now our attention
turns to the upside to see if ADP can continue its trend of
higher highs.  Should this rebound falter at this point, we'd be
hesitant to buy another dip towards the $44 level.  New entries
can be considered on a break above today's $45.35 high.  Raise
stops to $43.75, just under the recent low, as well as the 50-dma
($43.99).

Picked on May 9th at         $46.03
Change since picked:          -0.76
Earnings Date               4/22/04 (confirmed)
Average Daily Volume =     2.16 mln
Chart =


---

Electronic Arts - ERTS - close: 50.13 change: +1.65 stop: 47.00

Finally, our patience was rewarded today, as ERTS put in a real
rebound from that $48 support level.  After trading fractionally
below that level and created a new PnF Sell signal last week, the
stock has been trying to stabilize near strong support at $48.
From today's price action, it certainly looks favorable for the
bulls.  Underscoring the strength of today's rebound, it came
after some early weakness that saw both the rising trendline and
the 200-dma ($47.80) being challenged.  Tuesday's session was a
clear key reversal day, with the stock dropping to new lows early
in the session and then battling back to close well above the
highs of the past few days.  There's still an important challenge
for the bulls to overcome though, and that is dual resistance at
$51, the site of both the 50-dma ($51.10) and the short-term
falling trendline.  Traders looking to enter on strength will
want to wait for a move above that resistance before playing.
Maintain stops at $49.75.

Picked on May 18th at        $49.60
Change since picked:          +0.53
Earnings Date               4/29/04 (confirmed)
Average Daily Volume =     3.85 mln
Chart =


---

Johnson & Johnson - JNJ - cls: 55.36 chng: +1.05 stop: 53.50

If the bulls are going to put in a showing, it's always nice to
see them do it in the manner they did on Tuesday.  JNJ opened the
day looking a bit weak and poised to challenge $54 support again,
but the buyers showed up in force, driving the stock sharply
higher for most of the day.  After hitting its high of $55.70,
JNJ backed off a bit into the close, but holding above the $55
level.  What was nice about the day's candle was the way it
engulfed not just yesterday's candle, but the last SIX!  Daily
Stochastics and MACD are now turning up in bullish fashion and
after the recent consolidation, JNJ ought to be able to make a
serious run at the early May highs near $56.50 and then take aim
at solid resistance near $58.  Since we began coverage of JNJ,
we've cautioned against attempting to initiate momentum entries
due to the stock's slow-moving nature, and that is still our
advice.  There's been ample opportunity to buy this recent dip
near $54 and now we'll see how much gas is in the tank.  Maintain
stops at $53.50 until we get a breakout to new recent highs.

Picked on May 9th at         $55.30
Change since picked:          -0.36
Earnings Date               4/13/04 (confirmed)
Average Daily Volume =     7.23 mln
Chart =


---

Lexmark Intl. - LXK - close: 95.06 change: +2.01 stop: 89.75

After one last thrust down to test the 50-dma ($92.12) for any
stragglers still waiting to buy the dip, LXK took off with
enthusiasm, blasting through the near-term resistance near $94.40
and closing at a new 3-week high.  The battle isn't over, but
with daily oscillators showing clear bullish indications and
price breaking over near-term resistance, it certainly appears
the stock is on its way to a test of the April highs near $97.
Of course, that isn't our final objective, as we're still looking
for the stock to make a run at the century mark.  Our ideal entry
scenario was for a dip and rebound from the $92 area and while
things have been rather choppy over the past several sessions,
initial indications are that the wait is going to be worth it.
Aggressive traders can now look for momentum entries above
today's high, keeping in mind that resistance is likely to be
found in the $96.50-97.00 area.  Maintain stops at $89.75.

Picked on May 13th at        $94.03
Change since picked:          +1.03
Earnings Date               4/19/04 (confirmed)
Average Daily Volume =     1.13 mln
Chart =


---

Bard C R - BCR - close: 109.58 chg: -0.42 stop: 106.99 *new*

Uh-oh!  If you're a bullish trader in BCR warning bells should be
going off in your head.  The Dow added almost 160 points in a
very widespread rally today but BCR failed to join in.  The stock
lost 42 cents when it should have been breaking out over the $110
level and challenging resistance at $112.  Volume was pretty
strong on the session as well and that smells like distribution.
We still like the short-term uptrend and BCR has consolidated
tightly under the $110 mark and that suggests it is ready or at
least trying to move higher. Keep in mind that BCR will split 2-
for-1 a week from today.  Traders looking for new positions might
want to wait for a close over $110 again. We're going to raise
our stop loss from $106.00 to $106.99.

Picked on May 20 at $110.00
Change since picked: - 0.42
Earnings Date      04/20/04 (confirmed)
Average Daily Volume:   386 thousand
Chart =


---

QUALCOMM - QCOM - close: 66.90 chg: +1.35 stop: 64.00 *new*

That didn't take long did it?  QCOM traded through our TRIGGER at
$66.01 on Monday but failed to hold the $66 level by the close.
Fortunately, Tuesday was much more positive and QCOM paced the
rally in the NASDAQ with a 2.05% gain of its own.  Volume was
above average and the stock looks ready to challenge resistance
near $70, especially now with all of its technical in "buy" mode.
If you missed the entry point yesterday QCOM still looks good to
us here.  We're going to raise our stop loss from $63.50 to
$64.00.

Picked on May 24 at $ 66.01
Change since picked: + 0.89
Earnings Date      04/22/04 (confirmed)
Average Daily Volume:   9.6 million
Chart =



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

American Int'l Group.- AIG - close: 72.00 change: +2.20 stop:
68.70

Company Description:
Engaged in a broad range of insurance and insurance-related
activities through its subsidiaries, AIG's primary focus is on
its general and life insurance businesses.  Additionally, the
company is growing its presence in financial services and asset
management.  Other operations include auto insurance, mortgage
guaranty, annuities, and aircraft leasing.  With operations in
130 countries, AIG generates more than half of its revenues
outside the United States.

Why we like it:
Will the real trend please stand up?  In actuality, it looks like
the dominant trend in shares of AIG is starting to reassert
itself.  After trading briefly above the $77 level in early
April, the stock succumbed to the broad market weakness and
gradually drifted lower until reaching bottom just below the $69
level in early May.  While that near-term trend looked bad, one
thing that was interesting is that the stock was unable to trade
the $68 level, which was what would have been necessary for the
PnF chart to issue a Sell signal.  AIG spent more than 2 weeks
drifting along with the $69 level acting as support, but with
negligible signs of a bonified rebound.  That all ended today
with the stock dipping slightly at the open and then rallying
strongly right up to the closing bell.  As if to leave us with an
ideal setup, the stock closed right on $72 resistance, leaving us
with the perfect scenario for bullish entries on further strength
tomorrow.

Of course, there's always the possibility that this rally could
fail, but with solid bullish alignments on the daily oscillators,
AIG certainly looks like it wants to move higher.  To minimize
the chance of getting caught in a bull trap, we're going to set
our entry trigger at $72.40, which is just above the 50-dma
($70.27).  That way, AIG will have to rally through today's high
and the 50-dma before we'll be lured into a position, and a
breakout above the 50-dma should have some room to run, at least
to the $75 resistance level.  Taking a quick peek at the PnF
chart shows that the stock is still nominally bullish with an
upside target of $94.  We don't want to be too greedy though, so
we'll initially just target a return to the $77 highs from last
month.  Should AIG pick up a head of steam, we may even stretch
our target up to the $80 level.  Initial stops should be set at
$69.70, just under the recent lows.

Suggested Options:
Shorter Term: The June $70 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 July $75
Call, while the more conservative approach will be to use the
July $70 Call.  Our preferred option is the July $70 strike, as
it is currently in the money and should provide sufficient time
for the play to move in our favor.

BUY CALL JUN- 70*AIG-FN OI=14828 last traded @ $2.85
BUY CALL JUN- 75 AIG-FO OI=18138 last traded @ $0.50
BUY CALL JUL- 70 AIG-GN OI=  105 last traded @ $3.70
BUY CALL JUL- 75 AIG-GO OI=  608 last traded @ $1.10

Annotated Chart of AIG:



Picked on May 25th at        $72.00
Change since picked:          +0.00
Earnings Date               4/22/04 (confirmed)
Average Daily Volume =     5.28 mln


---

Imclone Systems - IMCL - close: 73.13 chg: +1.43 stop: 70.00

Company Description:
ImClone Systems Incorporated is committed to advancing oncology
care by developing and commercializing a portfolio of targeted
biologic treatments designed to address the medical needs of
patients with a variety of cancers. The Company's three programs
include growth factor blockers, angiogenesis inhibitors and
cancer vaccines. ImClone Systems' strategy is to become a fully
integrated biopharmaceutical company, taking its development
programs from the research stage to the market. ImClone Systems'
headquarters and research operations are located in New York
City, with additional administration and manufacturing facilities
in Branchburg, New Jersey. (source: company press release)

Why We Like It:
After a sell-the-news reaction to its stunning Q1 report in April
shares of IMCL are on the rise again.  The stock has found new
support at its 21-dma and its short-term and long-term technicals
also support additional upside.  We like the recent rebound from
the $69 level in IMCL and the bullish reversal in the BTK biotech
index could pave the way for IMCL to test its April highs.

More aggressive traders could go long at current levels but we're
going to wait for a move over $74.00.  Our TRIGGER will be
$74.05.  If triggered we'll use a stop loss at $70.00.  More
conservative traders may want to consider using a trigger over
short-term resistance at $75.00.  Our initial target is the
$80.00 mark.  Currently IMCL's P&F target is $96.

Suggested Options:
June or July calls appear to be the best bets for short-term
traders.  Our favorites are the June 70s or 75s or the July 75s.

BUY CALL JUN 70 QCI-FN OI= 5407 Last traded @ $7.10
BUY CALL JUN 75 QCI-FO OI= 5829 Last traded @ $4.70
BUY CALL JUL 75 QCI-GO OI=  111 Last traded @ $6.60

Annotated Chart:



Picked on May xx at $ xx.xx <- see TRIGGER
Change since picked: + 0.00
Earnings Date      04/27/04 (confirmed)
Average Daily Volume:   2.9 million
Chart =



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*******************
PLAY UPDATES - PUTS
*******************

Amazon.com - AMZN - close: 43.65 chg: +2.02 stop: 44.05

Ouch!  Bears are being overwhelmed by the bulls in Internet
stocks today.  The INX Internet index soared 3.34% with leaders
like EBAY and YHOO nearing or hitting new highs.  Even the
laggard, AMZN, found some buying support in Tuesday's very broad-
based rally and the stock is within striking distance of our stop
loss.  Investors are ignoring news out yesterday that Toys-R-Us
is suing AMZN over its exclusivity rights to certain toys and
baby products.  If you haven't already abandoned ship there's no
need to wait for the command.  We're holding on to this one only
because it may still yet failed at the $44 resistance level but
odds are good we may be stopped out tomorrow.

Picked on May 02 at $ 43.60
Change since picked: + 0.05
Earnings Date      04/22/04 (confirmed)
Average Daily Volume:   8.4 million
Chart =


---

Cheesecake Factory - CAKE - cls: 38.77 chng: +0.29 stp: 40.75

It was a strongly bullish day in the broad market on Tuesday, but
you sure wouldn't know it to look at the price action in CAKE.
Sure, the stock rebounded from its lows and ended near the high
of the day, but that's about all the bulls can crow about, as the
stock didn't get anywhere near challenging first resistance at
$39.50.  That said, the daily oscillators are turning upward and
it may indeed be time for a bit of an oversold rebound.
Conservative traders unwilling to risk the current small gains
may want to exit on a move above Tuesday's high and look for re-
entry on a rollover in the $39.50-40.00 area.  Judging by the
anemic rebound of the past few days, CAKE and the other non-
Atkins friendly stocks still look weak and rally attempts should
continue to be sold.  Maintain stops at $40.75, which is solidly
above both the 10-dma and last Wednesday's intraday high.

Picked on May 13th at         $40.09
Change since picked:           -1.32
Earnings Date                4/20/04 (confirmed)
Average Daily Volume =         629 K
Chart =


---

General Motors - GM - close: 44.74 change: +0.97 stop: 45.25

Well, this doesn't look good at all! After being mired in a
persistent downward trend since late April, shares of GM finally
found a bit of buying support yesterday and then the stock
screamed higher along with the rest of the broad market today.
The stock managed to tap the $45 level in the middle of the day
before running out of steam and that leaves the stock at a
critical juncture in terms of our play.  A rollover here could
set up new entry points, although that should only be considered
by VERY aggressive players with the daily oscillators angled
upward in bullish fashion.  It appears likely that GM will push
up to test the 20-dma ($45.30) tomorrow and such a move will end
up challenging our $45.25 stop.  Conservative traders may just
want to pull the plug on any move over the $45 level.  We'll
stick with the play for now in hopes of another rollover, but
everyone should understand that is not the most likely course
from here.

Picked on May 9th at          $44.60
Change since picked:           -0.14
Earnings Date                4/20/04 (confirmed)
Average Daily Volume =      5.17 mln
Chart =


---

Forest Labs - FRX - close: 60.10 chg: +1.60 stop: 63.00

If you haven't heard it yet the rally on Tuesday was very
widespread.  Every sector closed in the green and that includes
the drug sector.  FRX was oversold and due for a bounce and the
triple-digit gain in the Dow as enough to inspire a 2.7% rebound
in FRX.  Are we worried here?  No, not yet.  FRX can bounce back
to resistance at $62.00 before we really start to get concerned.
A rollover under $62.00 could be a new entry point but some
traders may want to wait for the drop back under $60 to confirm
the "failed rally".  No change in our stop loss.

Picked on May 23 at $ 59.20
Change since picked: + 0.90
Earnings Date      04/20/04 (confirmed)
Average Daily Volume:   1.9 million
Chart =



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

None


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**********
DISCLAIMER
**********

Please read our disclaimer at:
http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html


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For more information on advertising in OptionInvestor Newsletter,
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Contact Support


The Option Investor Newsletter                  Tuesday 05-25-2004
Copyright 2004, All rights reserved.                        3 of 3
Redistribution in any form strictly prohibited.


In Section Three:

Watch List: Internets, Financials and more!
Spreads & Straddles: Crude Retreat Spurs Rally!
Premium Selling Plays: Naked Puts & Calls


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

Internets, Financials and more!

___________________________________________________________________

How to use this watch list:
  Readers can use the candidates below as a springboard for their
  own research.  Many are in the process of breaking support or
  resistance or in the process of starting new trends or
  extending old ones.  With your own due diligence these could be
  strong potential plays.
___________________________________________________________________


eBay Inc - EBAY - close: 85.33 change: +3.22

WHAT TO WATCH: Tuesday's strong rally inspired courage in the
tech-buying crowd and the INX Internet index soared 3.34%.  EBAY,
arguably the darling of Internet-stock investors, outpaced the
advance with a 3.9% gain of its own.  The two-day rally for EBAY
has been fueled by strong volume and today's close marks another
new all-time high.  We would keep a watch on EBAY for a dip back
toward the $82.50-83.50 range and consider buying a bounce.

Chart=


---

Vimpel Communications - VIP - close: 99.65 change: +0.98

WHAT TO WATCH: A few of the telecom stocks appear to be on the
rebound and Russian wireless provider VIP has turned in a strong
two-week rally.  The good news is the rally doesn't appear to be
over yet.  The stock recently broke out over resistance at its
50-dma and is now challenging the psychological round-number
level at $100.  Its P&F chart is back into a new buy signal and
points to a $114 price target.  We would consider a trigger over
$100 and an initial target at its old highs near $110.

Chart=


---

I T T Industries - ITT - close: 79.73 change: +1.04

WHAT TO WATCH: Once again ITT is bouncing from technical support
at its 100-dma.  We also like the technical picture with a new
MACD buy signal and its short-term RSI and stochastics already
pointing higher.  Bulls could use a trigger over resistance at
$80.00 and target a move to $85.00 assuming the rising channel
still holds up.

Chart=


---

T C F Financial Corp - TCB - close: 54.55 change: +0.55

WHAT TO WATCH: This regional bank stock has broken out above
major resistance at the $54 level on stronger than average
volume.  Normally we might pass over TCB because shares move a
bit slowly for option traders.  This time it might be worth
another look.  Its weekly chart appears to be painting a cup and
handle formation but bulls may want to use a trigger over $55
before opening any positions.

Chart=



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


AVP $87.81 +2.76 - We're still watching AVP now that it has
broken out over resistance at $86.00.  A pull back toward the
$86.00-86.50 range could be an entry point.

GBBK $28.37 +0.68 - GBBK has been channeling sideways between
$26.50 and $30.00 for the last five months.  Scalpers can still
grab part of the next move toward $30.

HOT $42.00 +0.90 - Trading near its all-time highs shares of
Starwood Hotels is breaking out from a bull-flag pattern.
Consider targeting a move toward the $46 region.

UTSI $28.84 +1.44 - Communications stock UTSI has broken out of
its descending channel and above technical resistance at its 40 &
50-dma's.

ZMH $83.75 +2.10 - We're still watching ZMH for a breakout over
resistance at $84.50.  Target $90.00.


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

Crude Retreat Spurs Rally!
By Ray Cummins

U.S stocks soared Tuesday amid a decline in energy prices that
gave buyers a reason to return to the market after a two-week
absence.

The Dow Jones Industrial Average closed up 159 points at 10,117
as blue-chip stocks enjoyed solid gains.  The NASDAQ Composite
Index rose 41 points to 1,964 with only telecom shares limiting
the technology advance.  The S&P 500 Index added 17 points to
end at 1,113 as homebuilding shares rallied along with airline,
retail, oil refining, natural gas, and gold issues.  Advancers
outnumbered decliners 4 to 1 on the New York Stock Exchange and
2 to 1 on the NASDAQ.  Big Board volume was 1.55 billion shares,
and nearly 1.8 billion shares traded on the technology exchange.
Treasury prices edged higher with the benchmark 10-year note up
1/32 at 100 5/32, yielding 4.73%.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
SUMMARY OF CURRENT POSITIONS - AS OF 05/23/04
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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

ERTS    51.88  48.72   JUN   45  47   0.35   47.15   0.35   Open
IMDC    61.17  58.51   JUN   50  55   0.50   54.50   0.50   Open
GPRO    38.30  37.13   JUN   30  35   0.70   34.30   0.70   Open
MATK    68.01  61.60   JUN   55  60   0.65   59.35   0.65   Open
ASD    107.89 107.83   JUN   95 100   0.50   99.50   0.50   Open
IMCL    71.36  70.24   JUN   50  55   0.50   54.50   0.50   Open
CSC     42.17  41.89   JUN   35  40   0.65   39.35   0.65   Open
GILD    62.54  63.33   JUN   55  60   1.00   59.00   1.00   Open
RIMM    99.98 109.02   JUN   80  85   0.45   84.55   0.45   Open

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


CALL-CREDIT SPREADS

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

CTX     44.80  44.95   JUN   55  50   0.50   50.50   0.50   Open
IVGN    67.61  66.16   JUN   80  75   0.55   75.55   0.55   Open
NTLI    55.28  56.47   JUN   65  60   0.80   60.80   0.80   Open?
VIP     91.45  95.18   JUN  110 105   0.50  105.50   0.50   Open?
CERN    41.33  39.89   JUN   50  45   0.55   45.55   0.55   Open
SEPR    45.06  43.31   JUN   55  50   0.60   50.60   0.60   Open

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

Vimpelcom (NYSE:VIP) and NTL Inc. (NASDAQ:NTLI) are on the "watch"
list after Tuesday's rally.


DEBIT STRADDLES

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

LF      19.67  19.99   JUN    20    20     3.50    5.25   Closed
BSTE    30.63  38.26   JUL    30    30     6.00   11.50   Closed
MKSI    23.10  20.58   JUL    22    22     4.70    5.50   Closed

Biosite (NASDAQ:BSTE) was the "Straddle of the Month," however
Hot Topic (NASDAQ:HOTT), Zimmer (NYSE:ZMH), LeapFrog (NYSE:LF),
MKS Instruments (NASDAQ:MKSI), QLT Incorporated (NASDAQ:QLTI),
and Stratasys (NASDAQ:SSYS) also offered potential gains in May.
Corinthian Colleges (NASDAQ:COCO), although very volatile, was
not a viable position 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.

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

BRCM - Broadcom  $42.54  *** Next Leg Up? ***

Broadcom (NASDAQ:BRCM) is a leading provider of highly integrated
silicon solutions that enable broadband communications and the
networking of voice, video and data services.  Using proprietary
technologies and advanced design methodologies, Broadcom designs,
develops and supplies complete system-on-a-chip solutions and
related hardware and software applications for all broadband
communications markets.  Their diverse product portfolio includes
solutions for digital cable and satellite set-top boxes; cable
and DSL modems and residential gateways; high-speed transmission
and switching for local, metropolitan, wide area and storage
networking; home and wireless networking; cellular and terrestrial
wireless communications; Voice over Internet Protocol (VoIP)
gateway and telephony systems; broadband network processors; and
SystemI/O(TM) server solutions.

BRCM - Broadcom  $42.54

PLAY (less conservative - bullish/credit spread):

BUY  PUT  JUN-37.50  RCQ-RT  OI=5920  ASK=$0.30
SELL PUT  JUN-40.00  RCQ-RH  OI=5172  BID=$0.60
INITIAL NET-CREDIT TARGET=$0.30-$0.40
POTENTIAL PROFIT(max)=14% B/E=$39.70


__________________________________________________________________

EBAY - eBay  $85.33  *** Another All-Time High! ***

eBay (NASDAQ:EBAY) is a web-based community in which buyers and
sellers are brought together to browse, buy and sell items such
as collectibles, automobiles, high-end or premium art items,
jewelry, consumer electronics and a host of practical and other
miscellaneous items.  The eBay trading platform is an automated,
topically arranged service that supports an auction format in
which sellers list items for sale and buyers bid on items of
interest, and a fixed-price format in which sellers and buyers
trade items at a fixed price established by sellers.  Through
its wholly owned and partially owned subsidiaries and affiliates,
the Company operated online trading platforms directed towards
the United States, Australia, Austria, Belgium, Canada, France,
Germany, Ireland, Italy, Japan, the Netherlands, New Zealand,
Singapore, South Korea, Spain, Sweden, Switzerland and also the
United Kingdom.

EBAY - eBay  $85.33

PLAY (less conservative - bullish/credit spread):

BUY  PUT  JUN-75.00  XBA-RO  OI=21924  ASK=$0.25
SELL PUT  JUN-80.00  XBA-RP  OI=13952  BID=$0.70
INITIAL NET-CREDIT TARGET=$0.50-$0.60
POTENTIAL PROFIT(max)=12% B/E=$79.50



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

BEARISH PLAYS - CREDIT SPREADS

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

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

AZO - Autozone  $83.38  *** Failed Rally? ***

AutoZone (NYSE:AZO) is a specialty retailer of automotive parts
and accessories primarily to do-it-yourself customers.  It also
sells parts and accessories online at autozone.com.  Each auto
parts store carries an extensive product line for cars, vans and
light trucks, including new and remanufactured automotive parts,
maintenance items and various accessories.  AutoZone also has a
commercial sales program in the United States, AZ Commercial,
which provides commercial credit and prompt delivery of parts and
other products to local, regional and national repair garages,
dealers and service stations.  In addition, the company sells
automotive diagnostic and repair software through ALLDATA and
through alldatadiy.com.

AZO - Autozone  $83.38

PLAY (conservative - bearish/credit spread):

BUY  CALL  JUN-95.00  AZO-FS  OI=799   ASK=$0.20
SELL CALL  JUN-90.00  AZO-FR  OI=3447  BID=$0.65
INITIAL NET-CREDIT TARGET=$0.50-$0.55
POTENTIAL PROFIT(max)=11% B/E=$90.50



~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
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 05/23/04
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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

BCGI     JUN    10    9.65    10.35    0.35   7.73%   3.63%
LPNT     JUN    35    34.30   36.16    0.70   4.03%   2.04%
ASCA     JUN    30    29.35   32.87    0.65   5.02%   2.21%
DRIV     JUN    25    24.25   32.38    0.75   7.04%   3.09%
FARO     JUN    20    19.45   25.75    0.55   7.32%   2.83%
GIVN     JUN    30    29.25   32.66    0.75   7.01%   2.56%
MVSN     JUN    20    19.65   22.71    0.35   4.54%   1.78%
PDII     JUN    22    22.00   27.97    0.50   6.67%   2.27%
SMTC     JUN    20    19.50   23.04    0.50   6.25%   2.56%
CELG     JUN    45    44.40   54.42    0.60   4.75%   1.35%
ELN      JUN    17    17.05   21.30    0.45   8.73%   2.64%
FARO     JUN    20    19.45   25.75    0.55   8.04%   2.83%
FRO      JUN    25    24.50   32.16    0.50   6.48%   2.04%
IMMU     JUN     5     4.75    5.42    0.25  13.52%   5.26%
LNCR     JUN    32    32.05   34.41    0.45   3.60%   1.40%
MCK      JUN    32    32.00   33.61    0.50   3.76%   1.56%
NFLX     JUN    25    24.45   31.26    0.55   7.36%   2.25%
PHRM     JUN    20    19.65   38.56    0.35   5.67%   1.78%
RTN      JUN    32    32.00   32.51    0.50   3.62%   1.56%
VXGN     JUN    12    12.10   15.64    0.40  10.35%   3.31%
ARTI     JUN    22    22.00   24.39    0.50   6.11%   2.27%
AVID     JUN    45    44.30   50.30    0.70   4.62%   1.58%
BLUD     JUN    25    24.70   28.45    0.30   3.54%   1.21%
DIGE     JUN    35    34.25   39.59    0.75   6.16%   2.19%
DRIV     JUN    25    24.60   32.38    0.40   5.37%   1.63%
NUE      JUN    55    54.25   62.35    0.75   3.96%   1.38%
PHRM     JUN    20    19.70   38.56    0.30   5.30%   1.52%
SPLS     JUN    25    24.60   26.72    0.40   4.24%   1.63%
YHOO     JUN    25    24.60   28.55    0.40   4.64%   1.63%

Issues on the "watch" list are: Given Imaging (NASDAQ:GIVN)
and Raytheon (NYSE:RTN).


NAKED CALLS

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

IACI     JUN    32    33.15   30.06    0.65   5.22%   1.96%
OVTI     JUN    30    30.80   20.59    0.80  11.79%   2.60%
SLAB     JUN    55    55.50   47.25    0.50   4.93%   0.90%
PHTN     JUN    35    35.35   28.48    0.35   4.69%   0.99%
ENDP     JUN    25    25.70   20.90    0.70  11.16%   2.72%
IPXL     JUN    22    23.05   19.64    0.55   8.75%   2.39%
MMR      JUN    15    15.25   13.53    0.25   7.20%   1.64%


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

ASKJ     JUN   35.00   34.40   40.84    0.60   6.85%   1.74%
AUO      JUN   20.00   19.55   23.35    0.45   8.86%   2.30%
ERES     JUN   30.00   29.70   36.71    0.30   4.60%   1.01%
FWHT     JUN   20.00   19.65   22.09    0.35   6.25%   1.78%
GPRO     JUN   35.00   34.45   38.27    0.55   5.54%   1.60%
MEE      JUN   22.50   22.15   25.02    0.35   5.66%   1.58%
SMTC     JUN   20.00   19.70   24.50    0.30   6.79%   1.52%
SWIR     JUN   22.50   22.20   27.52    0.30   6.05%   1.35%
YHOO     JUN   27.50   27.15   30.28    0.35   4.58%   1.29%

__________________________________________________________________

ASKJ - Ask Jeeves  $40.84  *** The Uptrend Resumes! ***

Ask Jeeves (NASDAQ:ASKJ) is a provider of Internet-wide search,
providing consumers with authoritative and fast ways to find
relevant information to their everyday searches.  Ask Jeeves
deploys its search technologies on Ask Jeeves (Ask.com and
Ask.co.uk), Teoma.com, and Ask Jeeves for Kids (AJKids.com).
In addition, to its internet sites, Ask Jeeves syndicates its
monetized search technology and advertising units to a network
of affiliate partners.  The company is based in Emeryville,
California, with offices in New York, Boston, New Jersey, Los
Angeles, London and Dublin.

ASKJ - Ask Jeeves  $40.84

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    AUK RG    2613  0.60  34.40   6.9%   1.7%


__________________________________________________________________

AUO - AU Optronics  $23.35  *** On The Rebound! ***

AU Optronics (NYSE:AUO) manufactures and assembles thin-film
transistor liquid crystal display panels.  These products are
used in computers, consumer electronics products and LCD TVs.
The company manufactures a range of TFT-LCD display panels for
computer products, which typically utilize large-size display
panels, primarily for use in notebook computers and desktop
monitors; consumer electronics products, which typically use
small to medium-sized display panels in products like digital
cameras, digital camcorders, mobile phones, car television
monitors, car navigation systems and PDAs, portable TVs and
portable DVD players, and LCD television.

AUO - AU Optronics  $23.35

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    AUO RD    2695   0.45  19.55   8.9%   2.3%


__________________________________________________________________

ERES - eResearch Technology  $36.71  *** New 2004 High! ***

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

ERES - eResearch Technology  $36.71

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    DBO RX      31   0.30  29.70   4.6%   1.0%


__________________________________________________________________

FWHT - FindWhat.com  $22.09  *** Strong Sector! ***

FindWhat.com (NASDAQ:FWHT) operates online marketplaces that
connect the consumers and businesses that are most likely to
purchase specific goods and services with the advertisers that
provide those goods and services.  Online advertisers determine
the per-click fee they will pay for their advertisements, which
FindWhat.com and its private-label partners such as Terra Lycos's
Lycos.com and HotBot distribute to millions of Internet users.
Their network includes hundreds of distribution partners, such as
CNET's Search.com, Excite, Webcrawler, NBCi, MetaCrawler, Dogpile,
Go2Net and Microsoft Internet Explorer Autosearch.

FWHT - FindWhat.com  $22.09

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    HFQ RD     350   0.35  19.65   6.3%   1.8%


__________________________________________________________________

GPRO - Gen-Probe  $38.27  *** 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.  With
its patented NAT technology, Gen-Probe has FDA approvals for
products that detect a variety of infectious microorganisms,
including those causing sexually transmitted diseases, strep
throat, tuberculosis, pneumonia and fungal infections.  The
company also produces an FDA-approved blood screening assay for
the simultaneous detection of HIV-1 and HCV, which is marketed
by Chiron.  The company has 20 years of nucleic acid detection
research and development experience, and its products are used
daily in clinical laboratories and blood collection centers
throughout the world.

GPRO - Gen-Probe  $38.27

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    PSU RG     442   0.55  34.45   5.5%   1.6%


__________________________________________________________________

MEE - Massey Energy  $25.02  *** Energy Sector Hedge! ***

Massey Energy (NYSE:MEE) produces, processes and sells bituminous,
low sulfur coal of steam and metallurgical grades through its 19
processing and shipping centers, called resource groups, many of
which receive coal from multiple coal mines.  The firm's resource
groups or mining complexes blend, process and ship coal that is
produced from one or more mines, with a single complex handling
the coal production of as many as eight distinct underground or
surface mines.  These mines are at strategic locations in close
proximity to the Massey preparation plants and rail facilities.
Coal is transported from its mining complexes to customers by
means of railroad cars or trucks.  Massey operates 30 underground
mines and 13 surface mines in West Virginia, Kentucky and Virginia.
The company's steam coal is primarily purchased by utilities and
industrial clients as fuel for power plants.

MEE - Massey Energy  $25.02

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  MEE RX      46   0.35  22.15   5.7%   1.6%


__________________________________________________________________

SMTC - Semtech  $24.50  *** Favorable Earnings? ***

Semtech (NASDAQ:SMTC) is a supplier of analog and mixed-signal
semiconductors.  The company operates 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 power management,
protection, test and measurement, 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  $24.50

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    1699   0.30  19.70   6.8%   1.5%


__________________________________________________________________

SWIR - Sierra Wireless  $27.52  *** Bottom Fishing! ***

Sierra Wireless (NASDAQ:SWIR) is a leader in delivering highly
differentiated wireless solutions that enable our customers to
improve their productivity and lifestyle.  Sierra Wireless
develops and markets AirCard, the industry-leading wireless PC
card line for portable computers; embedded modules for OEM
wireless applications; the MP line of rugged vehicle-mounted
connectivity solutions and Voq, a line of professional phones
with secure, easy-to-use, products for mobile professionals.

SWIR - Sierra Wireless  $27.52

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  IYQ RX    1927   0.30  22.20   6.0%   1.4%


__________________________________________________________________

YHOO - Yahoo!  $30.28  *** Another 2004 High! ***

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!  $30.28

PLAY (sell naked put):

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

SELL PUT  JUN 27.5  YHQ RY   26208   0.35  27.15   4.6%   1.3%



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

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.

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

ABAX - Abaxis  $18.00  *** Stuck In A Trading Range? ***

Abaxis (NASDAQ:ABAX) develops, manufactures and markets portable
blood analysis systems for use in any veterinary or human patient
care setting to provide clinicians with rapid blood constituent
measurements.  Its primary product is a system consisting of a
compact 6.9-kilogram analyzer and a series of single-use plastic
discs, reagent discs, containing all the chemicals required to
perform a panel of up to 12 tests.  The system can be operated
with minimal training and performs multiple routine tests on
whole blood, serum or plasma samples.  The system provides test
results in less than 15 minutes with the precision and accuracy
equivalent to a clinical laboratory analyzer.  Abaxis also sells
a hematology analyzer under the name Vetscan HMT, which provides
a complete blood count.

ABAX - Abaxis  $18.00

PLAY (sell naked call):

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

SELL CALL  JUN 20    QOX FD     85    0.25  20.25   5.8%   1.2%


__________________________________________________________________

CHIC - Charlotte Russe  $17.68  *** Premium-Selling Only! ***

Charlotte Russe Holdings (NASDAQ:CHIC) is a mall-based specialty
retailer of apparel and accessories targeting young women between
the ages of 15 and 35.  The firm has two distinct store concepts:
Charlotte Russe and Rampage.  Charlotte Russe stores provide a
wide range of fashionable, affordable apparel and accessories
that have been tested and accepted by the marketplace.  Rampage
stores feature emerging fashion trends.  Both Charlotte Russe and
Rampage stores are located in high-visibility, center court mall
locations in spaces that average approximately 7,100 square feet.

CHIC - Charlotte Russe  $17.68

"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 20    UYC FD     32    0.35  20.35   8.7%   1.7%


__________________________________________________________________

USNA - USANA Health Sciences  $26.90  *** An Un-Healthy Stock? ***

USANA Health Sciences (NASDAQ:USNA) develops and manufactures
nutritional, personal care and weight management products that
are distributed through a network marketing system throughout
the United States, Canada, Australia, New Zealand, the United
Kingdom, Hong Kong, Japan and Taiwan.  The firm's three primary
product lines consist of USANA Nutritionals, Sense-Beautiful
Science and LEAN Lifelong.  USANA Nutritionals include a range
of antioxidants, minerals, vitamins, and other nutritional
supplements.  The Sense-Beautiful Science product line is
comprised of products designed to support healthy skin and hair.
LEAN Lifelong products were developed to provide a comprehensive
approach to weight management, proper diet and nutrition and
healthy living.

USNA - USANA Health Sciences  $26.90

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    UNX FF    146    0.40  30.40   6.3%   1.3%



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

SEE DISCLAIMER - SECTION 1

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


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