The Option Investor Newsletter Sunday 06-13-2004 Copyright 2004, All rights reserved. 1 of 5 Redistribution in any form strictly prohibited. Entire newsletter best viewed in COURIER 10 font for alignment In Section One: Wrap: Let Those Bulls Loose! Futures Market: See Note Index Trader Wrap: IT'S A LEG Editor's Plays: Back in Favor Again Market Sentiment: Unmotivated Ask the Analyst: Accenture, outsourcing, and politics Coming Events: Earnings, Splits, Economic Events Posted online for subscribers at http://www.OptionInvestor.com ****************************************************************** MARKET WRAP (view in courier font for table alignment) ****************************************************************** WE 6-11 WE 6-04 WE 5-28 WE 5-21 DOW 10410.10 +167.18 10242.8 + 54.37 10188.5 +221.71 - 46.13 Nasdaq 1999.87 + 21.25 1978.62 - 8.12 1986.74 + 74.65 + 7.84 S&P-100 554.90 + 7.82 547.08 + 1.95 545.13 + 10.80 - 1.14 S&P-500 1136.47 + 13.97 1122.50 + 1.86 1120.64 + 27.08 - 2.10 W5000 11045.95 +109.64 10936.3 + 9.95 10926.4 +301.26 - 9.61 SOX 476.28 + 5.37 470.91 - 17.95 488.86 + 30.68 + 7.19 RUT 569.12 + 1.37 567.75 - .53 568.28 + 22.47 + 2.05 TRAN 3024.71 + 32.43 2992.28 + 44.27 2948.01 + 82.26 + 12.86 ****************************************************************** Let Those Bulls Loose! by Jim Brown That was the most remembered comment from President Reagan when he last visited the NYSE. Multiple interviews with floor traders this week brought tears to their eyes as those words were remembered. To spark emotion from hardened traders more than ten years after the fact is a stark testimony to the strong feelings Americans had for him. Holiday volume produced a surprise on Thursday with the markets finishing positive for the day. I say a surprise because the extreme event risk over the next three days could have easily turned into selling as investors moved to safety. Is this a sign that investors have completely discounted the potential for future terrorist attacks? More likely it is a sign that greed is still alive and well. Dow Chart - Daily Nasdaq Chart - Daily SPX Chart - Daily Thursday started off with a jolt as Jobless Claims rose to 352,000 for the week and a seven week high. The prior weeks claims were revised up to 340,000. This pushed the four week moving average to 346,000 and dangerously close to the 350K mark where economists start getting worried. The markets shook off the news very quickly on comments that holiday adjustments probably skewed the number and it will revert to lower levels next week. More importantly continuing claims fell under 2.9 million and the lowest level since the recovery began. This was a -106K drop for the week. This suggests there are still jobs being created and filled. The pace of job creation is expected to slow over the summer months to something just over 125K and pickup again in the fall. With the Fed meeting only two weeks away the Import and Export Prices were viewed with inflation in mind. Import prices jumped +1.6% mostly due to higher oil prices. The core rate excluding energy still rose +0.4% and more than expected. Export prices rose +0.3% with agricultural prices slowing their upward sprint. With inflation seen in almost every recent economic report there is no doubt the Fed will hike at the end of this month. How high is still up for discussion. There was little stock news this week to produce major moves. Once the decision was made on Monday to close the exchanges the volume died for the rest of the week. Each time a Reagan special coverage alert hit TV screens the volume came to a halt until the event came to a close. Thursday barely traded three billion shares despite the Russell shuffle announcement coming on Friday and quarterly option expiration ahead. While Friday is the official day of mourning the entire week had a somber mood. For the week the Dow gained +167 points but most of those gains came on Monday and Tuesday. Wednesday and Thursday were spent treading water at the 10400 level and exactly where it managed to close for the week. As I said Tuesday the 10400-10550 level is very strong resistance and nothing has changed. The Dow did manage to blast through the 10325 resistance level I discussed last Sunday with a monster gap on Monday morning. I had speculated that a futures gap up on Monday could likely accomplish that feat where the prior week of chipping away at resistance had failed. With the Dow closing at 10400 ahead of weekend event risk it appears we could be looking at another repeat performance on Monday with no negative events. The Nasdaq was not able to follow through on its resistance test like the Dow. The Nasdaq stalled at 2020 and then fell back below 2000 by Thursday's close. The major battleground for the Nasdaq was the SOX and the Russell. The Sox failed at the 100 dma three days last week at 487. There was a significant bout of selling on Wednesday and the Sox returned to languish at 475. Without the Sox the Nasdaq cannot advance. Surprisingly the Semiconductor Industry Association upgraded their estimates for chip sales for 2004 to record levels and it had no impact. The semi sector appears to be priced to perfection when multiple upgrades in one week cannot move it higher. SOX Chart - Daily Also impacting the Nasdaq and the Sox is the Russell rebalancing coming at the end of June. This annual event produces strong volatility in the small caps and the index dropped -10 points on Wednesday in advance of the release. The changes to the Russell indexes are normally announced this Friday with two weeks until they take place at the end of June. Because the change in the indexes is announced two weeks in advance there is plenty of opportunity for volatility as traders jockey for position. The Russell 2000 is a very widely followed index and much more so than the Russell 1000. Russell calculates the top 3000 largest market cap stocks and then splits them into the top 1000 as big caps and next two thousand as mid/small caps. Because of the methodology there are always a large number of stocks which have grown their market cap moving out of the lower 2000 and into the upper 1000. Obviously those moving higher were already larger companies which were already heavily weighted in the 2000 index. When they move out of the index funds must sell them. Since the move is announced two weeks in advance there is plenty of time for aggressive funds to sell in advance of the actual change in order to get out before the general fund groups all dump on the same day. I have probably already confused everyone but the bottom line is a volatile Russell for the two weeks after the announcement. With the announcement coming on a market holiday this week we saw selling in the Russell leaders on Wednesday in advance of the Friday announcement. This produced a -10 point drop on Wednesday and a flat index on Thursday. Monday could see additional volatility as funds react to the holiday announcement. I went through this complicated explanation to show why I think the Nasdaq may have trouble making headway next week. The Russell typically drops over this period with the drop from the pre announcement levels to the post announce low averaging about 26 points over the last four years. If the -10 point drop on Wednesday was part of this then we could see a muted impact but still an impact. Russell-2000 Chart - Daily We still have the problem with the indexes at the bottom of a very strong resistance range and the VXO at critical reaction levels as I explained on Tuesday night. We had the rally to these resistance levels on Tuesday and the VXO hit a 52-week low. We followed that event with a sell cycle but one that was weak and lacked any follow through. The indexes simply rested from their run and consolidated at the bottom of the resistance range. Thursday's small rebound positioned them for takeoff next week and sent the VXO back below 14 once again. The stage is set for the state funeral on Friday and for the markets to make a critical resistance test on Monday. We know how the Reagan services will end with the cameras staring at a California sunset on Friday. We do not know how the resistance test will end on Monday. There are no major economic reports on Monday and the markets will be able to soar to their hearts content if they are able. Tuesday is a different story. We have several critical reports and Greenspan will testify before the Senate Banking Committee on his confirmation process. You can bet there will be some pointed questions. I still feel the markets want to move higher but will have trouble with the next hurdle. The week could boil down to Monday's market action. A resistance failure on Monday could trap us in a range for the rest of the week as the economic reports begin to flow again and the earnings warning cycle heats up. I see strong Dow resistance from 10400-10550, Nasdaq 2020-2060, SPX 1140-1150. Those are big ranges and strong resistance. However, support levels continue to rise and selling pressure has moderated significantly. We are definitely coming to a crossroads in the market and Monday should be the next signpost. A wrong turn could doom us to weeks of congestion as we approach June 30th. The right turn could lead to a freeway above those levels and a real breakout into a summer rally. Either way it will be an interesting drive. Enter Very Passively, Exit Very Aggressively! Jim Brown ************** FUTURES MARKET ************** Futures wrap is not emailed due to the excessive number of charts. It may be read on the website at this address. http://www.OptionInvestor.com/indexes/futureswrap.asp ******************** INDEX TRADER SUMMARY ******************** IT'S A LEG By Leigh Stevens lstevens@OptionInvestor.com THE BOTTOM LINE – My trading mentor used to say of a strong move, "it's a 'leg'". (A market "leg" being more powerful than just a price "move".) It looks like I should revise my upside objective for the S&P portion of the market in terms of the S&P 500 (SPX) as, in the just-ended trading week, SPX reached my 1140 target. SPX looks poised to at least hit its early-April highs again at 1149-1150. Strong up moves tend to occur when both a decent earnings trend is present and there is significant disbelief in the sustaining power of an advance – this "sentiment" was borne out by quite bullish call-put numbers in my equities-only COBE options volume indicator on Thursday, as put volume was greater than call volume for the second end of the week trading day in the past two weeks. As also anticipated, the Nasdaq was struggling to churn through significant resistance around 2000 in the Composite (COMP). A daily, and weekly, close above 2000 is needed to suggest that COMP can eventually advance to 2052-2059 resistance around its late-April rally peak as the Index was trending down. With the Semiconductor stocks struggling it may be hard for the Composite to get above 2020. THURSDAY'S TRADING ACTIVITY – The NUMBERS - The S&P 500 Index (SPX) gained 5.14 points (0.5%) to close at 1,136.47 – putting it up 1.2% on the week The Dow Jones Industrial Average (INDU) rose 41.6 points to 10,410. 21 of its 30 stocks were up on the day. INDU ended with a 1.6% weekly gain. The Nasdaq Composite Index (COMP) was up only 9 points to 1,999.87, so stayed under the key 2000 level. COMP was up slightly over 1 percent for the week. THE REPORTS - Data showing import prices rose by the biggest amount in over a year and a mixed jobless claims report did not provide any noticeable influence on Thursday. Many market professionals got out of town for a 3-day weekend. The U.S. Labor Department said import prices rose 1.6% in May, the biggest increase in 16 months, due to higher oil prices The Labor Department also said first-time claims for state unemployment insurance rose 12,000 in the latest week to a 7-week high of 352,000, versus expectations for a fall to 336,000. The 4-week average rose 4,750 to a 6-week high of 346,000. THE TALK – The low volume on both exchanges is seen as a problem in terms of kicking this market into a stronger up trend – but this is not likely to change ahead in the summer slow season. A relatively light 1.2 billion shares traded on the New York Stock Exchange and only 1.3 billion shares on the Nasdaq. The announcement that Target (TGT) sold its Marshall Field's unit to May Department Stores for $3.2 billion provided an early spark to retail stocks these didn't last long – TGT ended up 0.3% but was up nearly 4% to a 52-week high earlier in Thursday's trading. The Semiconductor stocks was able to rally early, but the boost from positive news – the Semiconductor Industry Association (SIA) said late Thursday that it expected global 2004 sales to rise 29% to a record $214 million due to strong chip demand for computers, cell phones and other electronic gear – did not have a sustaining impact. OTHER MARKETS – July crude futures ran up 91 cents to $38.45, after the International Energy Agency raised its forecast on oil demand. The backdrop to this is that by midweek, the nearby futures price had dropped to a 6-week low of $36.45 intraday. Bonds seesawed into positive territory after the U.S. Treasury's 10-year note auction was relatively well received. The yield on the 10-year T-note was off by .023% to yield 4.79%. Against the euro, the dollar dropped .6% to $1.21, after surging 1.7% on Wednesday. The yen rose sharply against the dollar, by nearly a full percent, to 109.31, after Japanese machinery orders for April were much stronger than expected. MY INDEX OUTLOOKS – S&P 500 Index (SPX) – Daily chart: The key determinants of seeing the progression of the reversal and subsequent rebound were the rebound from the 200-day moving average, the decisive upside penetration of the 21-day (avg.), then the 50-day and finally the down trendline (dashed blue line). Now what? We have to look to the prior highs – red arrow – and the upper trading envelope line as areas where the rally will likely at least slow down or flatten out. The 1150 area, if reached, is not a place to necessarily buy Index puts – but is sure a reasonable profit objective for calls bought at lower levels. I see key support as being at 1120. A decline to and ability to hold in this area would suggest a shallow correction only and a still strong bull trend - a close below 1120 puts us on alert for a correction to 1110; or, deeper, back to the 1100 area. I opt for the shallow correction only view given this very bullish – in my opinion – situation of heavy put activity after a strong advance. A bullish reading on my Call to Put volume indicator is a low ratio of daily call to put volume. S&P 500 Index (SPX) – Hourly chart: The S&P 500 Index was in a trading range prior to this past week – the breakout above the upper end of this range was fairly predictable as these things go – there was a next move up equal to the prior range as highlighted on the hourly SPX chart below - Key near support is at 1125-1127, with more major technical support implied by the intersection of the up trendline at 1110 as noted by the green up arrow there. If there is a close under 1125, a downside objective to 1110 becomes a good possibility. S&P 100 Index (OEX) – Hourly chart: The S&P 100 (OEX) broke out above its well-defined uptrend channel as seen on the hourly chart below. The move to above this channel now suggests an objective up to the area of prior highs around 560. Key near support is noted at the first green arrow, which is a level equal to the last down swing low in the 552-553 area. More major support I calculate to be at the lower end of the prior uptrend channel at around 544-545. Stay tuned on the next move but I think its still higher before OEX comes back down much! I said last week to favor put purchases at 550-551 (exit on an hourly/close above 552) and there was a quick exit if this trade was taken. The technical divergence that had been occurring with higher (price) highs and a declining RSI did not foretell a downside reversal – hourly price/RSI divergences are less reliable (for trend reversals) than if seen on daily charts. Dow Industrials (INDU) Hourly: The Dow 30 (INDU) broke out above its key technical resistance at its down trendline on its daily chart by the move above 10,360. I found more to highlight this week on the hourly chart however - There is well-defined uptrend price channel that is seen, with a intersection at the upper end showing at 10,500 – I would take this area as a next possible objective and next likely resistance. The Dow did fulfill the triangle objective at 10,370. Recapping: a series of lower highs and higher lows from 5/12 to 5/24 formed a triangle – going back to the first low anchoring an up trendline and drawing one side of a hypothetical triangle gives a distance "A". Adding this distance to the breakout point (above the down trendline) is line "B". The top of B (10,370) becomes a minimum objective for the next advance. Going back to the uptrend channel – support is implied at 10350 just under the lower channel line (green up arrow) and resistance, as mentioned at the top of the channel (10,500) – but we also have to keep an eye on whether prices clear last week's high at 10,430. A recent Trader's Corner article of mine covered "triangles" and price objectives implied by triangle breakouts - see http://www.OptionInvestor.com/traderscorner/tc_060304_1.asp Nasdaq Composite (COMP) Index – Daily: Prices here are still more or less confined within its downtrend pattern, although there were three highs (and two consecutive closes) above the down trendline. However, I like to see prices stay above a trendline like this – otherwise any upside "breakout" is a bit suspect. Therefore my test for the Nasdaq Composite (COMP) is that it get above and stay above 2000-2005. If there is a strong move above this area, next resistance is at 2050; then at 2070-2075. The Nasdaq is far from taking a lead role in this recent market strength. I estimate that key near support is now at 1960-1965. As per my comments of a week ago – the Composite needs to maintain closes above 2000 and then hold this area on subsequent pullbacks to get the chart picture bullish. Then the focus is watching whether COMP can rally to, and ultimately above, its prior highs in the 2050 and 2075 areas. Nasdaq 100 (NDX) Index – Hourly: I noted back when that the rounding bottom that could be seen or imagined by the pattern of hourly lows was the bullish tip off that a strong rally could lie ahead. Rounding bottoms and tops are not seen that often but are reliable in suggesting trend reversals. Again, comes the question, now what? As long as the hourly up trendline is not penetrated by more than a brief opening or closing period, chances are good that the Nasdaq 100 (NDX) will re-test its prior highs around 1495 and just under 1500 as noted at the dashed (red)level line. I think that NDX can get up to the 1500 area, then my crystal ball gets cloudy. There is likely selling interest (resistance) at 1520 next. Nasdaq 100 tracking Stock Daily chart (AMEX:QQQ: Last week I suggested having shorting interest in QQQ if the stock got up to the 36.50 area but of course the stock got above this after a sideways period of consolidation and a brief dip to 36. The tip off on the last rally was the move above the prior line of tops around 36.50 then the pullback to 36.50 – what had been resistance "became" support, showing that the market wanted to go higher. I think that the Q's could advance again and make yet another new high, around 37.50 or higher – even to equal the late-January top that formed in the 38.50 area. More important sometimes as a way to trade the stock – rather than focusing on a price level, making use of the 5 and 21-day hourly stochastic pairing – when both are at the bottom look for a buy, when both at high extremes look for a tradable top. First support implied by the current hourly up trendline is around 36.50. 36.00 is the key support implied by the last swing low. The chart picture turns mildly bearish if the Q's can't stay above 36. I was figuring QQQ to be in a broad range between 38 and 34 this month. Maybe less likelihood of 34, and the probably range becomes 35.50 – 38.50. Good Trading Success! ************************Advertisement********************************** Option traders, check what PreferredTrade offers: - true direct access to each option exchange - stop and stop loss online option orders - contingent option orders based on the price of the option or stock - online spread order entry for net debit or credit - fast option executions - rates as low as $1.50 per contract ($14.95 min) PreferredTrade, Inc. Call 888-889-9178 or Click http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN Member NYSE, Other Principal Exchanges, NFA, MSRB and SIPC *********************************************************************** ************** Editor's Plays ************** Back in Favor Again I have profiled Providian Bank several times over the last couple years with the most memorable back in 2002 at $3.00 with a long term hold of the stock. Since March of 2003 it has been making steady progress back from the ranks of the unloved and hit $14.85 last week. Providian has been under attack on the legal front for the last couple years as well as having their huge portfolio of credit card debt called into question when the jobs market was crashing. On Monday they announced a settlement of their last class action suit for $65 million with the proceeds to be paid by insurance. (key word there = insurance) This frees them up to concentrate on business once again. With the jobs market recovering and credit defaults dropping the PVN portfolio is doing great. Last week PVN sold $650 million in securitized debt backed by their portfolio. In the last three months Jefferies, Legg Mason and Fulcrum have all upgraded PVN to a buy. Everything appears to be looking up for Providian. The stock gapped up on the news of the suit settlement and then saw profit taking from its month long gains the rest of the week. A delayed sell the news event. The resolution had been expected for some time. I think PVN has the potential to go to $20 by year-end with all the storm clouds fading. With PVN at $13.95 today and the Jan-$15 calls at $1.05 I think they are a bargain. They traded at $1.55 earlier in the week before the profit taking set in. This is a long term hold on a straight call option. Buy Jan-$15 Call ZLA-AC $1.05 Target PVN $20.00 (The Jan-2006 $15 calls are only $1.95 and I could see PVN back at $30 before then.) PVN Chart - Weekly ********************** DITC Put Update $21.21 DITC gapped up Monday over $21 and never looked back. Chalk this one up as a loser and move on. The option was 75 cents when profiled and closed at 25 cents on Thursday. http://members.OptionInvestor.com/editorplays/edply_053004_1.asp ********************** TYC Call Update $31.70 New 52-week highs are beginning to be commonplace with TYC moving over $32 during the week. Our $1 option traded over $2.40. This is the last update on Tyco. http://members.OptionInvestor.com/editorplays/edply_052304_1.asp *********************** News Corp Update $36.04 NWS was all over the map this week with a spike to $37.08 and a gap up or down every day for the week. With DirecTV selling positions in TIVO and its stake in Hughes Software there was plenty of news. DirecTV is controlled by NWS. Current position: Long (6) Jan-2006 $40 Calls WLN-AH @ $3.83 http://members.OptionInvestor.com/editorplays/edply_041104_1.asp http://members.OptionInvestor.com/editorplays/edply_041804_1.asp **************** MARKET SENTIMENT **************** Unmotivated - J. Brown The markets have been very flat the last three days because there is little reason for investors to move. The major indices are at or near significant resistance but there was no impetus to buy stocks with the long weekend ahead of them. What surprised us was there was not much selling pressure ahead of the weekend given the opportunity for what many are calling "event risk". Any time there is a long weekend and one with national events like the funeral tomorrow investors generally turn cautious and minimize or hedge positions. Investors are focused on more than just the weekend. Next week we have a number of fed governors offering comments so they can prep the markets ahead of the two-day FOMC meeting at the end of June. We might get the PPI report out next week too if the government can finish their calculations. The PPI will cast more light on the state of inflation and this could determine whether or not we get a 25 basis point hike or more. Most analysts are only expecting a 25-point hike in June so this shouldn't change if the PPI comes in near the estimate for a +0.05% jump in prices. Unfortunately, traders are unmotivated to make any moves until after the FOMC meeting and the interest rate decision is know. What should be a concern for traders are the volatility indices. The VXO or the old VIX is back under the 14 level again. Jim discussed the VXO and how it generally signals market tops in his wrap on Tuesday. Currently with the VXO this low it's signaling that investors have almost no fear. When everyone's leaning the same direction it usually time for a change. Interpreting the volatility indices is more art than science and the signals can be a few days off but we need to be careful when consider new bullish positions. The VIX and VXO can always trade lower, which is something we've learned over the past year or two. ----------------------------------------------------------------- Market Averages DJIA ($INDU) 52-week High: 10753 52-week Low : 8871 Current : 10410 Moving Averages: (Simple) 10-dma: 10290 50-dma: 10266 200-dma: 10101 S&P 500 ($SPX) 52-week High: 1163 52-week Low : 962 Current : 1136 Moving Averages: (Simple) 10-dma: 1127 50-dma: 1120 200-dma: 1090 Nasdaq-100 ($NDX) 52-week High: 1559 52-week Low : 1180 Current : 1481 Moving Averages: (Simple) 10-dma: 1470 50-dma: 1448 200-dma: 1433 ----------------------------------------------------------------- CBOE Market Volatility Index (VIX) = 15.04 -0.35 CBOE Mkt Volatility old VIX (VXO) = 13.91 -0.85 Nasdaq Volatility Index (VXN) = 21.23 -1.12 ----------------------------------------------------------------- Put/Call Ratio Call Volume Put Volume Total 1.15 486,746 559,901 Equity Only 1.01 364,599 367,379 OEX 1.16 27,569 31,867 QQQ 3.97 22,707 90,205 ----------------------------------------------------------------- Bullish Percent Data Current Change Status NYSE 65.8 - 1 Bear Confirmed NASDAQ-100 40.0 + 0 BULL ALERT Dow Indust. 70.0 + 0 Bear Confirmed S&P 500 63.6 + 0 Bear Confirmed S&P 100 63.0 + 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: 0.77 10-dma: 0.94 21-dma: 1.01 55-dma: 1.00 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 1607 1533 Decliners 1201 1472 New Highs 45 33 New Lows 24 31 Up Volume 844M 724M Down Vol. 568M 578M Total Vol. 1458M 1327M M = millions ----------------------------------------------------------------- Commitments Of Traders Report: 06/01/04 ! Please Come Back and Check the Market Sentiment on Tuesday June 15th for New COT Figures & Commentary 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 Action in the large S&P 500 futures contracts has been slow. Commercial traders remain net short but the bearish interest has been declining for two weeks now. Small traders' positions are virtually unchanged. Commercials Long Short Net % Of OI 05/11/04 401,365 421,672 (20,307) (2.5%) 05/18/04 394,352 423,258 (28,906) (3.5%) 05/25/04 400,713 420,764 (20,051) (2.4%) 06/01/04 406,665 421,681 (15,016) (1.8%) 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 05/11/04 135,534 76,987 58,547 27.5% 05/18/04 139,647 74,597 65,050 30.4% 05/25/04 136,086 79,060 57,026 26.5% 06/01/04 137,100 79,583 57,517 26.5% 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 Wow! Commercial traders are completely undecided with a dead heat between longs and shorts. Meanwhile small traders have turned bullish. Commercials Long Short Net % Of OI 05/11/04 378,696 362,887 15,809 2.1% 05/18/04 390,484 357,157 33,327 4.5% 05/25/04 353,722 336,406 17,316 2.5% 06/01/04 325,865 325,274 591 0.0% 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 05/11/04 101,199 94,408 6,791 3.5% 05/18/04 62,216 87,269 25,053 16.8% 05/25/04 91,515 100,759 ( 9,244) ( 4.8%) 06/01/04 111,484 90,625 20,859 10.3% Most bearish reading of the year: (77,385) - 09/02/03 Most bullish reading of the year: 449,310 - 06/10/03 NASDAQ-100 Commercial traders have hit new bullish extremes we've not seen in many months. Right on track small traders have hit bearish extremes. Commercials Long Short Net % of OI 05/04/04 56,931 35,209 21,722 23.6% 05/18/04 58,376 37,528 20,848 21.8% 05/25/04 59,891 37,630 22,261 22.8% 06/01/04 59,944 34,784 25,160 26.6% Most bearish reading of the year: (21,858) - 08/26/03 Most bullish reading of the year: 25,160 - 06/01/04 Small Traders Long Short Net % of OI 05/11/04 9,716 21,072 (11,356) (36.9%) 05/18/04 9,843 18,935 ( 9,092) (31.6%) 05/25/04 10,184 20,653 (10,469) (33.9%) 06/01/04 9,755 30,025 (20,270) (51.0%) Most bearish reading of the year: (20,270) - 06/01/04 Most bullish reading of the year: 19,088 - 01/21/02 DOW JONES INDUSTRIAL Not much action going on here with the commercial traders. They remain slightly bearish on the Dow. Small traders are growing more bullish. Commercials Long Short Net % of OI 05/11/04 22,614 21,507 1,107 2.5% 05/18/04 22,257 22,444 ( 187) (0.4%) 05/25/04 23,578 24,632 (1,045) (2.2%) 06/01/04 23,397 24,393 ( 996) (2.0%) 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 05/11/04 7,009 7,640 ( 631) ( 4.3%) 05/18/04 9,098 6,591 2,507 16.0% 05/25/04 9,623 6,614 3,009 18.5% 06/01/04 9,000 6,021 2,979 19.8% Most bearish reading of the year: (12,106) - 3/09/04 Most bullish reading of the year: 8,523 - 8/26/03 ----------------------------------------------------------------- ************************Advertisement********************************* Option Traders: Pay Attention Use the online options trading system built by option traders for options traders. Featuring direct access to each option exchange, stop and stop loss option orders, contingent option orders, online spreads, fast executions, and rates as low as $1.50 per contract ($14.95 min.). PreferredTrade, Inc. Call 888-889-9178 or Click http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN Member NYSE, Other Principal Exchanges, NFA, MSRB and SIPC ******************************************************************** *************** ASK THE ANALYST *************** Accenture, outsourcing, and politics My name is Mxxxxxx Bxxxxxx I have been a subscriber for more than 2 years. I would like to know your opinion on ACN (Accenture). I don't recall having ever received an e-mail from M.B, but with my Ask the Analyst e-mail all but dried up as the seasonally slow summer period is not in full swing combined with a long-time subscriber asking for an opinion, let's look at Accenture Ltd. (NYSE:ACN) $25.15 +1.28% and see what we can come up with. Investors that have been wonder about "outsourcing" American jobs overseas might want to read some of this article. I think it may help bring some insight into the whole outsourcing dynamic that has been getting a lot of press in recent months. Accenture Ltd. may not be a name many of us are familiar with. Oh, I've heard of them, but I didn't know that Accenture was formerly known as Andersen Consulting. That's a name I remember and associate with management consulting. Sure enough, this Bermuda-based global management and technology consulting firm has over 110 offices in 48 countries, and for a fee, advises its clients on how best to utilize existing or new technologies to formulate winning solutions under demanding time constraints. Heck.... sometimes I feel like I could use a helping hand during the day, and I see that financial services is just one of the 18 industry groups Accenture provides consulting for. Accenture is not a company I'm familiar with, but a cursory view of their recent 10-Q quarterly report has the company looking healthy, where business is certainly growing. Some items noted in their quarterly report also look to have the company potentially benefiting on higher interest rates. For the three months ended February 29, 2004 Accenture's revenues grew 17% year-over-year (in U.S. dollars) before reimbursements to $3.302 billion from $2.826 billion. Why do company's incorporate in Bermuda? One answer is to try and mitigate tax liability. Here's a http://biz.yahoo.com/e/040408/acn10-q.html to the Accenture's most recent 10-Q if you're interested in reading all the fundamental stuff, but something I'm learning is there's a benefit to be found from rising interest rates! For instance, while these are forecasts from Accenture, which I would think the forecasts are based on some historical data, the company touched on pension expenses. In the United States and certain other countries, Accenture maintains and administers defined benefit pension plans. The annual cost of these plans can be significantly affected by changes in assumptions and differences between expected and actual experience. Pension expense was $57 million and $34 million for the first six months of fiscal 2004 and 2003, respectively. What interested me when perusing Accenture's 10-Q was the company's assumption that a one-percentage-point INCREASE in the discount rate would decrease the company's annual pension expense by $31 million, while a one-percentage point DECREASE in the discount rate would increase the company's annual pension expense by $5 million. For those that may not know just what the Discount Rate is, it is the interest rate charged by the Federal Reserve to member banks for loans. The Federal Open Market Committee is responsible for adjustments to the Discount Rate, which is often raised or lowered in conjunction with the more widely used Federal Funds Rate. Accenture then went on to say that SFAS 87 requires recognition of a minimum pension liability if the fair value of pension assets is less than the accumulated benefit obligation. During fiscal 2003, we (Accenture) recorded a charge to equity of $108 million representing an adjustment to increase our pension liability by $180 million, net of a tax benefit of $72 million. This charge was included in accumulated other comprehensive loss in the shareholders' equity section of our balance sheet. Additional charges to equity may be required in the future depending on future contributions to our pension plans, returns on pension plan assets and interest rates. Don't you find Accenture's assumptions interesting? Doesn't the trend of outsourcing make some sense over the past couple of years? Doesn't it all tie in with the "mass outsourcing" issue and "loss of quality jobs" during the past recession? It makes sense doesn't it? A pension plan is a liability at first, as a company needs to make sure it is fully funded if it is to eventually help supplement an employee's retirement. As the Fed has been cutting rates, then according to Accenture, and probably every other company that provides a pension for employee's, was most likely seeing their pension costs rise as the Fed and other foreign government bankers were cutting rates. Wasn't it 9-months ago or so that GM was on the verge of financial ruin as its pension liability was thought to be insurmountable? Then the stock market rocketed higher and suddenly that HUGE pension plan GM has, was viewed as an asset! Now I see why some economists are saying the U.S. could be on the cusp of huge jobs growth in the months ahead. If we believe, or at least think about Accenture's assumptions that pension liabilities would FALL as the discount rate RISES, then there might actually be an additional incentive for a company to HIRE workers on a full-time basis. Perhaps the Fed raising the fed funds rate from 1% and moving up the discount rate from 2% has at least one potential positive implication to shareholder's equity and a corporation's balance sheet. Let's get back to Accenture (ACN)..... One area I see accelerated growth at the top line has been the company's "government" segment, where in U.S. dollar terms, its government consulting business revenue jumped an impressive 29% year-over-year for the recent quarter ended February 29, 2004, where government contracts now account for just 13% of the company's total revenue, but up from 11% in the year-ago quarter. On a year-over-year basis, this 29% growth was the largest of all business units, where communications/high tech was second, showing 18% growth year-over-year. This jump in government revenues serves as a nice transition to some news this week (Wednesday, June 9, 2004) and a $10 billion security contract that Accenture won for the U.S. Government's Department of Homeland Security. The news on Thursday is that the House Appropriations Committee voted 35-17 to modify the Department of Homeland Security's $32 billion budget to prevent Accenture from implementing a program that would track foreign visitors. Good gravy! Politics, politics, politics. At issue is that some politicians now feel it is wrong for the Department of Homeland Security to have awarded the contract to Accenture, when this Bermuda-based corporation doesn't pay U.S. taxes. I want to scream! Better yet... strangle some politicians as I read different reports that say Accenture will pay taxes on the awarded $10 billion contract. Funny..... actually it isn't funny, but the other day somebody was criticizing the Bush administration, I think there was a "D" in front of his title, for moving too slowly on homeland security issues. Now it looks like a portion of homeland security is going to be tied up as politicians argue if we should be awarding contracts to non-US-taxpaying corporations. Don't get me wrong. I see the dilemma of whether a U.S. taxpayer's dollar should be going to a foreign-incorporated company that isn't paying U.S. taxes, but if something needs to be done that could protect U.S. citizens, then let's get on with it. The Department of Homeland Security defended its awarding of the contract to Accenture saying the company does have operations in Reston, VA, and employees 24,000 U.S. citizens that do pay U.S. taxes. An Accenture (ACN) spokesman Jim McAvoy also said the contract was awarded to the U.S. subsidiary of Accenture, or Accenture LLP, which is based in Illinois and will pay U.S. taxes on the Homeland Security contract. Accenture LLP's government division is based in Reston, VA. Accenture (ACN) beat out Computer Sciences (NYSE:CSC) and Lockheed Martin (NYSE:LMT) for the bidding, where the $10 billion contract was awarded to Accenture to help administer the U.S. Visitor and Immigrant Status Indicator Technology, which will track foreign visitors using digital photographs, fingerprints and other biometric information. So there is a little fundamental background on ACN, and while I don't see past fundamentals as being a "hyper growth" story at this point, I am impressed with some of the growth rates the company is seeing in its government contracting business. The growth rates in the company's government business unit, which has been the smallest revenue contributor on whole, now appears to be a focus of the company, and that focus would certainly appear to be showing some impressive top line results, excluding the recent Homeland Security contract award. Accenture shows it has earned $1.08 per share, which has the company's stock trading at a P/E multiple of 23.2. For fiscal 2004, the average estimate among 22 analysts covering the stock is for the company to earn $1.15, which would have ACN trading at a forward P/E multiple of 21.8-times 2004 EPS. For 2005, analysts currently forecast ACN earnings per share to grow 12.17% to $1.29. This would have the stock currently trading at a P/E multiple of 19.49-times 2005 EPS. Should ACN achieve analysts EPS growth rate of 12.17% for 2005, that would exceed current growth estimates for S&P 500 companies, where on average, analysts see the S&P 500 group of companies growing earnings by 11%. Accenture Ltd. (ACN) - Daily Intervals Technicals for Accenture (ACN) show demand in control on the point and figure chart, since May of 2003 when the stock traded a triple top buy signal at $16.50. First sign of weakness on the point and figure chart would be a trade at $21.00. Current bullish vertical count associated with ANC's point and figure chart is $29. From current levels of trade ($25.15), risk/reward to sell signal ($22) and bullish vertical count ($29) would be unfavorable at roughly $3/$4. While stocks can always exceed bullish vertical counts, and may never achieve them, this would be a starting point to assess an entry point. Relative strength of Accenture versus the S&P 500 (SPX.X) is bullish, with the stock outperforming this major market average. The bar chart of ACN shows the stock trading above its longer- term 200-day SMA, its intermediate-term 50-day SMA and its shorter-term 21-day SMA. These observations would all be viewed as technically bullish. ACN is currently battling with a downward trend, which isn't all that different from observations made with other major market averages. As depicted by the regression channel on the above bar chart, as well as a point and figure chart, ACN's overriding trend is higher. My views on ACN would be to hold the stock if you already owned it, and would rate the stock "buy" on a pullback to $23.50. ACN has shown a history of being a methodically paced stock and in my opinion would be an excellent candidate for buying the underlying shares, and writing covered calls against those shares should the stock move to the upper-end of the rising regression channel. At the lower portion of the bar chart, I have projected three different dates where ACN would achieve its current bullish vertical count of $29, should the stock remain in its upward trending bullish regression channel. Jeff Bailey ************* COMING EVENTS ************* ----------------- Earnings Calendar ----------------- Symbol Co Date Comment EPS Est ------------------------- MONDAY ------------------------------- AHO Koninklijke Ahold NV Mon, Jun 14 -----N/A----- N/A ZQK Quiksilver Mon, Jun 14 After the Bell 0.46 URS URS Corp. Mon, Jun 14 After the Bell 0.50 ------------------------- TUESDAY ------------------------------ CC Circuit City Stores Tue, Jun 15 Before the Bell -0.07 FDS FactSet Research Sys Tue, Jun 15 Before the Bell 0.43 LEH LEHMAN BROS HLDGS INC Tue, Jun 15 Before the Bell 1.90 LEN Lennar Corporation Tue, Jun 15 After the Bell 1.16 ORCL Oracle Tue, Jun 15 After the Bell 0.18 PIR Pier 1 Imports, Inc. Tue, Jun 15 Before the Bell 0.13 ------------------------ WEDNESDAY ----------------------------- BSC Bear Stearns Wed, Jun 16 Before the Bell 2.23 BBY Best Buy Co., Inc. Wed, Jun 16 Before the Bell 0.33 JBL Jabil Wed, Jun 16 After the Bell 0.26 JWa John Wiley & Sons Wed, Jun 16 Before the Bell 0.13 KBH KB Home Wed, Jun 16 After the Bell 2.09 MBT Mobile Telesystems Wed, Jun 16 07:00 am ET N/A ------------------------- THUSDAY ----------------------------- ADBE Adobe Systems Thu, Jun 17 After the Bell 0.42 KMX CarMax, Inc Thu, Jun 17 -----N/A----- 0.31 CLC CLARCOR Inc. Thu, Jun 17 -----N/A----- 0.56 SJM J. M. Smucker Company Thu, Jun 17 Before the Bell 0.52 RHAT Red Hat, Inc. Thu, Jun 17 -----N/A----- 0.04 SLR Solectron Thu, Jun 17 After the Bell 0.00 TIBX TIBCO Software Thu, Jun 17 After the Bell 0.05 ------------------------- FRIDAY ------------------------------- None ---------------------------------------------- Upcoming Stock Splits In The Next Two Weeks... ---------------------------------------------- Symbol Co Name Ratio Payable Executable FELE Franklin Electric Co 2:1 Jun 15th Jun 16th NARA Nara Bancorp, Inc 2:1 Jun 15th Jun 16th IRM Iron Mountain Inc 3:2 Jun 15th Jun 16th HSY Hershey Foods Corp 2:1 Jun 15th Jun 16th APPB Applebees Internatl Inc 3:2 Jun 15th Jun 16th RIMM Research In Motion Ltd 2:1 Jun 17th Jun 18th PG Procter & Gamble 2:1 Jun 18th Jun 21st CACH Cache Inc 3:2 Jun 18th Jun 21st WGR Western Gas Resources, Inc2:1 Jun 18th Jun 21st EWBC East West Bancorp Inc 2:1 Jun 20th Jun 21st NOC Northrop Grumman Corp 2:1 Jun 21st Jun 22nd WCN Waste Connections Inc 3:2 Jun 24th Jun 25th -------------------------- Economic Reports This Week -------------------------- Wall Street is quickly approaching the quarter's end and that means earnings season is around the corner. It also means we need to watch out for earnings warnings. There are a lot of fed governors speaking this week even so investors will be focused on the June 30th FOMC interest rate decision and the Iraq handover. ============================================================== -For- ---------------- Monday, 06/14/04 ---------------- Trade Balance (BB) Apr Forecast: -$45.0B Previous: -$46.0B Retail Sales (BB) May Forecast: 1.0% Previous: -0.5% Retail Sales ex-auto (BB) May Forecast: 0.4% Previous: -0.1% ----------------- Tuesday, 06/15/04 ----------------- Business Inventories (BB) Apr Forecast: 0.5% Previous: 0.7% CPI (BB) May Forecast: 0.4% Previous: 0.2% Core CPI (BB) May Forecast: 0.2% Previous: 0.3% NY Empire State Index (BB) Jun Forecast: 28.5 Previous: 30.2 Mich Sentiment-Prel. (DM) Jun Forecast: 91.0 Previous: 90.2 Fed governor Minehan speaks at fiscal policy conference Fed Chairman Greenspan before his Senate nomination hearing. ------------------- Wednesday, 06/16/04 ------------------- Housing Starts (BB) May Forecast: 1950K Previous: 1969K Building Permits (BB) May Forecast: 1965K Previous: 2006K Industrial Production (DM) May Forecast: 0.6% Previous: 0.8% Capacity Utilization (DM) May Forecast: 77.3% Previous: 76.9% Fed's Beige Book (DM) Fed governor Guynn speaks on economy Fed governor Broaddus speaks on economy ------------------ Thursday, 06/17/04 ------------------ Initial Claims (BB) 06/12 Forecast: N/A Previous: 352K Leading Indicators (DM) May Forecast: 0.4% Previous: 0.1% Philadelphia Fed (BB) Jun Forecast: 25.0 Previous: 23.8 SEMI Book-to-Bill Report Fed governor Moskow speaks on economic outlook ---------------- Friday, 06/18/04 ---------------- Current Account (BB) Q1 Forecast:-$139.6B Previous: -$127.5B ! PPI NOTE: The Bureau of Labor Statistics has delayed the May PPI report until no sooner than next Wednesday but it could be delayed even longer. They will announce its release one day in advance. PPI (NA) DELAYED May Forecast: 0.6% Previous: 0.7% Core PPI (NA) DELAYED May Forecast: 0.2% Previous: 0.2% Definitions: DM= During the Market BB= Before the Bell AB= After the Bell NA= Not Available ************************Advertisement************************* Full Service Brokers Man Financial announces the formation of the OneStopOption Brokerage Group, addressing the demand for personalized, experienced service for both securities* and futures trading within the same firm. Licensed Option Principals Andrew Aronson and Alan Knuckman specialize in live assistance of stock*, option* and futures traders. The combination of the proven Man Financial global presence and the convenience of one group for all trading needs provide customers with the tools needed for success. 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You may also fax the information to: 303-797-1333 ********** DISCLAIMER ********** Please read our disclaimer at: http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html ************************************************************** ADVERTISING INFORMATION For more information on advertising in OptionInvestor Newsletter, or any Premier Investor Network newsletter please contact: Contact Support
The Option Investor Newsletter Sunday 06-13-2004 Sunday 2 of 5 In Section Two: Watch List: Internets to Defense to Drugs and more! Dropped Calls: None Dropped Puts: None ************************Advertisement************************* Live Securities Brokerage Service with Licensed Option Principals OCO Stop & Profit Orders OneStopOption All types of Spreads and Buy Writes 888-281-9569 Auto-Trade Market Monitor Signals Personal Service and Education **Services available for Foreign Traders including Canada** http://www.OneStopOption.com ************************************************************** ********** Watch List ********** Internets to Defense to Drugs 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. ___________________________________________________________________ Magna Intl - MGA - close: 82.90 change: +0.36 WHAT TO WATCH: We mentioned MGA in the MarketMonitor on Thursday. The stock has been moving in a very wide trading range for the past several weeks. Currently shares are near the top of the trading range with resistance at $84.00. Bulls are probably watching for a breakout above this level. Bears are shorting it with a tight stop and an eye on the bottom of the range near $74. How you choose to play it depends on your view point but the stock does look overbought with the three-week rally and exhausted technicals. Chart= --- Ask Jeeves - ASKJ - close: 36.23 change: -2.22 WHAT TO WATCH: We looked at a number of Internet stocks today and many of the larger cap Internet stocks look very short-term overbought and due for a pull back (a.k.a. round of profit taking). ASKJ appears to have beat them to the punch and has already sunk sharply in the last few sessions. The breakdown under $40.00 and its 50-dma is bad enough but Thursday's 5.7% decline came on its strong volume since March 4th. Traders might want to watch for a move under $36.00 and target a drop to $30- 31. Its P&F chart is very close to producing a new triple-bottom breakdown sell signal. Chart= --- General Dynamics - GD - close: 98.80 change: +0.50 WHAT TO WATCH: We've been keeping an eye on GD in the MarketMonitor. The DFI defense index has been out performing the market with a string of new highs. Likewise GD has broken out to new relative highs. Traders could get aggressive here above $98 but it might be prudent to wait for a move above the $100 level. Such a breakout could lead to a run toward its highs near $110. Its P&F chart happens to have a recent double-top breakout buy signal with a $113 price target. Chart= --- Career Education - CECO - close: 69.98 change: +0.88 WHAT TO WATCH: We came very close to adding CECO to the play list this weekend. The breakout above $68.00 and the new MACD buy signal looks good. Short-term technicals (RSI and stochastics) are improving. Its P&F chart has produced a very strong triple- top breakout buy signal and $93.00 price target. Using a trigger above its recent highs near $70.70 to go long might be a good idea. Chart= --- Forest Labs - FRX - close: 61.87 change: -0.67 WHAT TO WATCH: The action in FRX looks bearish. Granted the breakdown under its 200-dma and the $60.00 mark two weeks ago was a huge bear trap but now that rally has run out of gas. FRX failed at the $65.00 level and its descending 40-dma. Now its struggling to hold support at its 200-dma again and its MACD is about to turn negative. The P&F chart points to a $52 price target. More aggressive traders could give it a go here with a stop above its 40-dma and target $55.00. Chart= ----------------------------------- RADAR SCREEN - more stocks to watch ----------------------------------- CME $127.00 +4.92 - This has been very volatile lately but the rebound from support above $115 has seen a lot of volume. CME looks a lot stronger now above $125. AUO $17.78 -1.57 - Ouch! The 8.1% drop on Thursday was on the strongest volume to date for AUO. Look for a move under $17.50 and target $15.00. OSIP $67.25 -1.19 - There it is! The breakdown under $67.50 has occurred. Volume has been pretty strong during the recent sell off. The only problem now is OSIP looks very short-term oversold and due for a bounce. A roll over under $70-71 might work. ETN $60.66 +0.69 - Keep an eye on ETN for a breakout over $62.00. CVD & BCO - We mentioned both in the Monitor on Thursday as potential covered call candidates due to their steady up trend. SSP $108.13 -0.03 - Bulls can look for a breakout over $109. Bears can speculate on aggressive positions now with a stop over $109 and a target near $101. ************************Advertisement************************* No time to follow the Market Monitor? Tired of missing good Trades because you stepped away from your computer? OneStopOption Group can follow the Market Monitor for you. You choose the number of contracts, we take care of the rest!! Trade Stock Options, Stocks and ALL Futures with the same Group. Call us 888 281-9569 to see if you qualify to have us rebate your subscription cost. http://www.OneStopOption.com ************************************************************** ************************** PICKS WE DROPPED THIS WEEK ************************** Remember that historically, when we drop a pick it will go up 10 to 15% the very next week. It is part of Murphy's Law. Just because we drop a stock as a pick does not mean we are advocating a "sell" on any position you have. We are simply dropping our recommendation as a new play. Existing plays can and do continue on and are usually profitable. CALLS ^^^^^ None PUTS ^^^^ None *********** DEFINITIONS *********** ! Please note changes to the Option Chains for new call and put plays. We are no longer listing a "SL" or Suggested Stop Loss on individual options. Most brokers offer the ability to list a stop loss for your option on the underlying stock. All of OptionInvestor.com's directional call or put plays list a suggested stop loss for the stock itself and if the stock trades at or below that stop on an intraday basis we will close any hypothetical play at that time. OI = Open Interest - the number of open contracts outstanding. Last Trade @ = Indicates where the option traded last. ITM = In the money ATM = At the money OTM = Out of the money ADV = Average Daily Volume The options with a "*" by the strike price are our choices from the group. If the stock moves as expected we feel they have the best chance to substantially increase or double in price with the best risk/reward ratio compared to the other options for the same stock. You must determine if they fit your risk profile for time and price. RISKS of SELLING PUTS: The risk of selling naked puts is always the possibility of a catastrophic event that drops the stock below the strike price and could result in the stock being PUT to you. Always protect yourself with a "buy to cover" limit order to take you out before this can happen. ************************Advertisement************************* Stock Option and Futures Brokerage OneStopOption teams the best trading technology with varying levels of professional assistance at very competitive prices. Commission costs are comparable to discount brokerage and tailored to individual customer needs. 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The Option Investor Newsletter Sunday 06-13-2004 Sunday 3 of 5 In Section Three: Current Calls: AIG, BA, BCR, DGX, ERTS, HSY, JNJ, MERQ, QCOM, ZMH New Calls: GDW Current Put Plays: KSS New Puts: CCMP, SYMC ! Please note changes to the Option Chains for new call and put plays. We are no longer listing a "SL" or Suggested Stop Loss on individual options. Most brokers offer the ability to list a stop loss for your option on the underlying stock. All of OptionInvestor.com's directional call or put plays list a suggested stop loss for the stock itself and if the stock trades at or below that stop on an intraday basis we will close any hypothetical play at that time. ************************Advertisement************************* OneStopOption.com Trade: Securities, Stock Options, Futures Contracts Service: Experienced Brokers Personal Assistance Convenience of One Brokerage Online and Live Broker Trading Experience... The Difference OneStopOption.com 888-281-9569 *************************************************************** ****************** CURRENT CALL PLAYS ****************** American Int'l Grp. - AIG - cls: 73.26 chng: -0.12 stp: 71.50 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: Monday's broad market rally pushed shares of AIG to its high of the week, just pennies below the $75 level and the remainder of the week saw price gradually deteriorating until hitting an intraday low of $72.89 on Thursday afternoon, just above the 50- dma ($72.77). On one hand, we can view this pullback as a viable entry point, giving us the ability to enter on a bounce from strong support at the 50-dma. On the other hand, this could be the beginning of a large H&S topping formation, which has been building since February. It is difficult to see which way it will play out, but with the PnF chart still looking bullish, odds favor a bullish resolution, at least in the near term. Look for new entries in the $72 area, but only if a rebound has already gotten underway. The price action of the past couple weeks reinforces our view that momentum entries are ill-advised for AIG. But the dips, and keep a tight stop at $71.50, just under the 30-dma ($71.73). Suggested Options: Shorter Term: The July $70 Call will offer short-term traders the best return on an immediate move, as it is currently in the money and won't suffer time decay like the June strike over the next week. Longer Term: Aggressive longer-term traders can use the July $75 Call, while the more conservative approach will be to use the August $75 Call. Our preferred option is the July $75 strike, as it is currently just out of the money and should provide sufficient time for the play to move in our favor. ! Alert - June options expire next week! BUY CALL JUN- 70 AIG-FN OI= 9561 last traded @ $3.50 BUY CALL JUL- 70 AIG-GN OI= 691 last traded @ $4.10 BUY CALL JUL- 75*AIG-GO OI= 7240 last traded @ $1.05 BUY CALL AUG- 75 AIG-HO OI=18054 last traded @ $2.00 Annotated Chart of AIG: Picked on May 25th at $72.00 Change since picked: +1.26 Earnings Date 4/22/04 (confirmed) Average Daily Volume = 5.35 mln --- The Boeing Company - BA - cls: 48.75 chng: +0.09 stop: 47.25*new* Company Description: One of the world's major aerospace firms, BA operates in three principal segments: commercial airplanes, military aircraft and missiles, and space and communications. Commercial airplanes operations involves the development, production and marketing of commercial jet aircraft, principally to the commercial airline industry. The Military Aircraft and Missiles division is involved in the research, development, production, modification and support of military aircraft, including transport and attack aircraft. The Space and Communications segment is involved in the research, development, production, modification and support of space systems, rocket engines and battle management systems. Why we like it: What's not to like about our BA play? After breaking out to new multi-year highs on the back of the broad market strength on Monday, the stock just kept charging higher, ending the week very near its highs. With the close at $48.75, our $50 profit target is within sight and from here on out, it is going to be tough to justify new entries. Only aggressive traders should even consider it, and then only on a pullback near the $48 level, which should now be mild support. For everyone else, our BA play is now about maximizing our gain, while at the same time not giving back too much on a bout of profit taking. We're tightening our stop this weekend to $47.25, which is just below the top of last Monday's gap and also below where the 10-dma (currently $47.19) will be on Monday. Remember that $50 is strong resistance on the weekly chart, so look for the exit door as that price draws near. 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 July $50 Call, while the more conservative approach will be to use the July $47 Call. Our preferred option is the July $47 strike, as it is currently in the money and should provide sufficient time for the play to move further in our favor. ! Alert - June options expire next week! BUY CALL JUN- 47 BA -FW OI=2582 last traded @ $1.45 BUY CALL JUL- 47*BA -GW OI=5157 last traded @ $2.30 BUY CALL JUL- 50 BA -GJ OI=1185 last traded @ $0.90 Annotated Chart of BA: Picked on May 27th at $46.20 Change since picked: +2.55 Earnings Date 4/28/04 (confirmed) Average Daily Volume = 2.99 mln --- Bard C R - BCR - close: 57.20 chg: +0.60 stop: 54.95 Company Description: C. R. Bard, Inc. (www.crbard.com), headquartered in Murray Hill, N.J., is a leading multinational developer, manufacturer, and marketer of innovative, life-enhancing medical technologies in the fields of vascular, urology, oncology, and surgical specialty products. (source: company press release) Why We Like It: The Dow Industrials have chopped relatively sideways the last three days and BCR has followed along. Actually, BCR has churned sideways in a $2.00 range ($56-58) for the last six sessions. Technicals are mixed with this sideways action but we don't see a reason to close this play just yet. Originally we added BCR for its relative strength and the anticipation of a stock split ramp up. We did get a small rally higher and we have not yet seen any post-split depression and don't expect any now with the split 10 days ago. We had previously suggested traders consider dips toward $56.00 as potential entry points and the market bought the dip on Tuesday. Now we're suggesting investors consider a breakout over $58.00. Suggested Options: We still like the July 55s but the July 60s look okay on a breakout above $58.00. ! Alert - June options EXPIRE on Friday! BUY CALL JUL 55.00 BCR-GK OI= 371 Last traded @ $3.20 BUY CALL JUL 57.50 BCR-GY OI= 134 Last traded @ $1.60 BUY CALL JUL 60.00 BCR-GL OI= 37 Last traded @ $0.65 Annotated Chart: Picked on May 20 at $ 55.00 (post split) Change since picked: + 2.20 Earnings Date 04/20/04 (confirmed) Average Daily Volume: 386 thousand Chart = --- Quest Diagnostic - DGX - cls: 87.70 chg: +0.23 stop: 83.95 Company Description: Quest Diagnostics Incorporated is the nation's leading provider of diagnostic testing, information and services, providing insights that enable healthcare professionals to make decisions that improve health. The company offers the broadest access to diagnostic testing services through its national network of laboratories and patient service centers, and provides interpretive consultation through its extensive medical and scientific staff. Quest Diagnostics is the leading provider of esoteric testing, including gene-based medical testing, and provides advanced information technology solutions to improve patient care. (source: company press release) Why We Like It: We like DGX because so far the stock has been reading its cue cards perfectly. There was three or four days of follow through on the breakout above resistance near $87.00. Now there's been three days of consolidation of its big move off the lows from May. Shares have slowed their descent as it approached old resistance at $87.00 since it should now be new support. Plus we're encouraged to see very light volume on the consolidation after strong volume on the rallies. DGX's technicals have obviously flattened or dipped on the pull back but the stock should be ready for the next leg higher. We are suggesting that traders look for the bounce before initiating any new positions. A move up through $88.00 or $88.25 might work as entry points. On Thursday DGX announced a deal with ESRX. Here's an excerpt from the company press release: DGX the nation's leading provider of diagnostic laboratory testing, information and services, today announced that it has entered into an agreement with Express Scripts, one of the largest pharmacy benefit management companies in North America, to provide physicians with online access to Express Scripts' pharmacy benefit management services. The electronic prescribing, or ePrescribing services, will be available through Quest Diagnostics' eMaxx. electronic health record, developed by MedPlus, the healthcare information technology subsidiary of Quest Diagnostics. Terms of the agreement were not disclosed. Suggested Options: We're suggesting the July 85s and 90s but if you're eyeing the $100 mark as your target the August 90 calls might work well. ! Alert - June options EXPIRE on Friday! BUY CALL JUL 85 DGX-GQ OI= 104 Last traded @ $4.30 BUY CALL JUL 90 DGX-GR OI= 238 Last traded @ $1.50 BUY CALL AUG 90 DGX-HR OI= 799 Last traded @ $2.70 Annotated chart: Picked on June 01 at $ 87.70 Change since picked: + 0.00 Earnings Date 04/22/04 (confirmed) Average Daily Volume: 603 thousand Chart = --- Electronic Arts - ERTS - close: 52.25 change: -0.40 stop: 50.00 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: Have you got game? ERTS certainly appeared to have it early last week, with the bullish action from Monday continuing on Tuesday, giving us that PnF Buy signal with the print at $53. While it is a bit disappointing to see the rally start to roll over at the end of the week, it isn't particularly surprising. ERTS occasionally puts in a strong rally like that seen in late March, but most of the time the price action is composed of stair-step action, as price takes two steps forward and then one step back. ERTS is now headed back for a test of support and we're expecting the 50-dma ($51.50), which was such stubborn resistance on the way up to now act as solid support for the next leg up the chart. Target new entries on a rebound from above $51. More aggressive traders can now consider breakout entries above last week's highs, but keep in mind that there will be solid resistance appearing at the March highs in the $55-56 area. Maintain stops at $50. Suggested Options: Shorter Term: The July $50 Call will offer short-term traders the best return on an immediate move, as it is currently in the money. Note that June contracts expire next week. Longer Term: Aggressive longer-term traders can use the July $55 Call, while the more conservative approach will be to use the September $55 Call. Our preferred option is the July $50 strike, as it is currently in the money and should provide sufficient time for the play to move in our favor. ! Alert - June options expire next week! BUY CALL JUN- 50 EZQ-FJ OI=8812 last traded @ $2.70 BUY CALL JUL- 50*EZQ-GJ OI= 587 last traded @ $3.60 BUY CALL JUL- 55 EZQ-GK OI=3178 last traded @ $1.00 BUY CALL SEP- 55 EZQ-IK OI=1864 last traded @ $2.45 Annotated Chart of ERTS: Picked on May 18th at $49.60 Change since picked: +2.65 Earnings Date 4/29/04 (confirmed) Average Daily Volume = 3.85 mln --- Hershey Foods - HSY - close: 91.50 chg: -0.37 stop: 89.25 Company Description: Hershey Foods Corporation is the leading North American manufacturer of quality chocolate and non-chocolate confectionery and chocolate-related grocery products. Some of the company's most popular products include Hershey's, Reese's, Hershey's Kisses, York, Almond Joy, Mounds, Jolly Rancher, Twizzlers, Swoops, Hershey's cocoa, and Hershey's syrup. The company also is a market leader in the gum and mint category, with such well- known brands as Ice Breakers, Breath Savers, Koolerz, and Bubble Yum. (source: company press release) Why We Like It: (Tuesday's Original Play) Try as we might we cannot find any particular catalyst for today's bullish breakout in shares of Hershey. Not that we mind. We've had our eye on HSY for just such a move. The stock has made it to our watch list/radar screen section in the last several days. Technically the stock looks pretty strong. Its MACD just produced a new buy signal. Today's rally broke through six weeks of resistance at the $90.00 mark on almost double the normal volume. Now that HSY has broken above $90 the psychological round-number $100 level is going to act like a magnet and pull it higher. That's what we're counting on since HSY's P&F target is only $93. Fortunately, it's not uncommon to see stocks trade past their P&F targets. We're willing to open positions at current levels with a stop loss at $89.25 (near its 10-dma) but patient traders might want to look for a dip back toward $90-91 as an entry point. However, take note of the fact that HSY closed near its high for the session and that bodes well for tomorrow. Trading note! Part of the excitement in HSY could be its upcoming 2-for-1 split scheduled for June 16th. That's only a week away. WEEKEND UPDATE: We just recently added HSY to the call list on Tuesday and suspected that its super strong close on Tuesday would lead to a strong open on Wednesday. Sure enough that's what we got but with the market heading south on Wednesday traders decided to do a little profit taking. HSY continued to slip lower on Thursday but the decline was very orderly as if buyers were merely waiting for it to pull back before piling in again. That's exactly what we suggest investors do. Look for a dip to $90.50-91.00 and buy the bounce. Suggested Options: We like the July 90 calls but the 95s should work too. Remember that after HSY's 2:1 split on June 16th the strike price will split as will the option value but you'll have twice as many contracts. ! Alert - June options EXPIRE on Friday! BUY CALL JUL 90 HSY-GR OI= 355 Last traded @ $3.10 BUY CALL JUL 95 HSY-GS OI= 209 Last traded @ $0.75 Annotated Chart: Picked on June 08 at $ 92.22 Change since picked: - 0.72 Earnings Date 04/22/04 (confirmed) Average Daily Volume: 441 thousand Chart = --- Johnson & Johnson - JNJ - cls: 57.07 chng: +0.31 stop: 55.25*new* Company Description: Johnson & Johnson is engaged in the manufacture and sale of products related to human health and well-being. Through over 200 operating companies, it conducts business worldwide. The company's business is divided into three segments: Consumer, Pharmaceutical and Medical Devices and Diagnostics. The Consumer segment manufactures and markets a range of products used in the baby and child care, skin care, oral and wound care and women's healthcare fields, as well as nutritional and over-the-counter pharmaceutical products. The Pharmaceutical segment's principal worldwide franchises are in the antifungal, anti-infective, cardiovascular, contraceptive, dermatology, gastrointestinal, hematology, immunology, neurology, oncology, pain management, psychotropic and urology fields. The Medical Devices and Diagnostics segment includes a range of products used by or under the direction of physicians, nurses, therapists, hospitals, diagnostic laboratories and clinics. Why we like it: Slow and steady, JNJ is performing exactly as we had hoped it would. Helped along by the broad market rally last week, the stock moved through the $56.50 level and then used it as support for its move above $57. Resistance is looming not too far above near $58 and conservative traders should be thinking about locking in some gains before the next bout of profit taking gets underway. We're officially targeting a move to $60, but it would be foolish to expect a move straight to that goal without another pullback to consolidate over new support first. That new support should be seen just under the $56 level and a pullback and rebound from that area can be used for new entries. But remember to wait for the rebound before playing. Of course before that happens, make sure to protect those gains that have accrued over the past couple weeks, as a run of profit taking would seem likely in the week ahead. Raise stops to $55.25, which is just under both the 20-dma ($55.58) and 30-dma ($55.32). Suggested Options: With June options expiring next week, the July $55 strike makes the best choice for new positions. ! Alert - June options expire next week! BUY CALL JUN-55 JNJ-FK OI=20539 last traded @ $2.20 BUY CALL JUL-55*JNJ-GK OI=45018 last traded @ $2.60 Annotated Chart of JNJ: Picked on May 9th at $55.30 Change since picked: +1.77 Earnings Date 4/13/04 (confirmed) Average Daily Volume = 7.34 mln --- Mercury Interactive - MERQ - cls: 49.06 change: +0.49 stop: 46.25 Company Description: As a provider of integrated performance management solutions that enable businesses to test and monitor their Internet applications, MERQ is looking for growing e-commerce demand to continue to fuel its business. The company's products perform such tasks as analyzing and eliminating Web site performance bottlenecks and automating quality assurance testing. MERQ's client base spans a wide range of industries including Internet companies such as Amazon.com and America Online, infrastructure companies Ariba and Oracle, as well as Apple Computer, Cisco Systems and Ford Motor Company. Why we like it: Traders looking for some excitement last week certainly got it from MERQ on Monday, as the stock vaulted higher with the rest of the market, almost reaching the $50 level and posting a very clear breakout over $48. After a couple days of mild profit taking, the bulls were back in charge on Thursday, pushing the stock back over $49, albeit on light volume. Following Monday's breakout, we suggested a pullback near the $48 level looked good for new entries, but alas, we never got that much of a drop. With the 10-dma ($48.07) edging over that level, it looks doubly good as a potential entry point. Aggressive traders can enter on a breakout over $50, but with next resistance at $52, such an entry would have to be undertaken with aspirations of a rally all the way up for a retest of the January highs near $54. We're not saying it's unachievable, just that it is a more aggressive target. Maintain stops at $46.25, just below the 6/03 intraday low, as well as the 20-dma ($46.73). 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 July $50 Call, while the more conservative approach will be to use the July $47 Call. Our preferred option is the July $47 strike, as it is currently at the money and should provide sufficient time for the play to move in our favor. ! Alert - June options expire next week! BUY CALL JUN- 47 RQB-FR OI=1917 last traded @ $1.90 BUY CALL JUL- 47*RQB-GR OI=2137 last traded @ $3.20 BUY CALL JUL- 50 RQB-GJ OI=1500 last traded @ $1.80 Annotated Chart of MERQ: Picked on June 6th at $47.56 Change since picked: +1.50 Earnings Date 4/22/04 (confirmed) Average Daily Volume = 2.38 mln --- QUALCOMM - QCOM - close: 69.86 chg: +1.40 stop: 66.01 Company Description: QUALCOMM Incorporated (www.qualcomm.com) is a leader in developing and delivering innovative digital wireless communications products and services based on the Company's CDMA digital technology. Headquartered in San Diego, Calif., QUALCOMM is included in the S&P 500 Index and is a 2003 FORTUNE 500. company. (source: company press release) Why We Like It: Our strategy on QCOM hasn't changed it all since Tuesday. The relative strength in the stock looks great. Shares were charging toward resistance at $70.00 at the close in front of a long weekend. That's sounds bullish to us. The $70 level was our initial profit target for short-term traders. They can still consider taking some profit out of the play now. We're looking for the breakout and a target price of $74.00. If QCOM can breakout over $70.00 it would be a new triple-top breakout buy signal on its P&F chart and that should scare some of the shorts into covering. In the last couple of days we've had two analysts reiterate their positive outlooks. Harris Nesbitt reiterated their "out perform" while a S&P analyst reiterated their buy and target price of $80. The S&P analyst also issued positive comments on QCOM's recent news that it was considering S. Korea as an overseas chip foundry. Two of its biggest handset customers, Samsung Electronics and LG Electronics, are in S. Korea and they both accounted for 26% of QCOM's sales in 2003 (source: S&P). The BusinessWeek Online article also mentioned that 75% of S. Korea's 48 million people use mobile phones and they "tend to change handsets every one and a half years". We're going to leave our stop loss at 66.01. If you prefer to buy the dip look for a dip to $68.50. Right now we'd prefer new entries on a breakout above $70.00. Suggested Options: Short-term traders should be looking at the June or July strikes. Our favorites are the July 65s and 70s. ! Alert - June options EXPIRE on Friday! BUY CALL JLY 65 AAO-GM OI=21207 Last traded @ $5.70 BUY CALL JLY 70 AAO-GN OI=21164 Last traded @ $2.25 Annotated Chart: Picked on May 24 at $ 66.01 Change since picked: + 3.85 Earnings Date 04/22/04 (confirmed) Average Daily Volume: 9.6 million Chart = --- Zimmer Holdings - ZMH - close: 87.14 chg: +0.49 stop: 84.25 Company Description: Founded in 1927 and headquartered in Warsaw, Indiana, Zimmer is the worldwide #1 pure-play orthopaedic leader in the design, development, manufacture and marketing of reconstructive and spinal implants, trauma and related orthopaedic surgical products. In October, 2003, the company finalized its acquisition of Centerpulse AG, a Switzerland-based orthopaedics company and the leader in the European reconstructive market. The new Zimmer has operations in more than 24 countries around the world and sells products in more than 80 countries. As a result of the acquisition of Centerpulse, reported 2003 sales were $1.9 billion. Full-year 2003 pro forma worldwide sales of Zimmer and Centerpulse were approximately $2.6 billion. The new Zimmer is supported by the efforts of more than 6,500 employees. (source: company press release) Why We Like It: It's been a couple of weeks now since we added ZMH to the play list and we're still bullish. The fundamental picture for this medical device maker looks great and the technical breakout over resistance at $85 two weeks ago was too tempting to pass up. We've seen a strong run to the $88 level but this level is proving to be resistance. We are suggesting that traders consider buying a bounce from $86.00 or a breakout over $88.00. We're encouraged by the Point-and-Figure chart and its triple-top breakout buy signal with the $105 price target. Remember that our first target is $90.00 but we believe ZMH can trade even higher. We do find it interesting that ZMH's rival, Stryker Corp (SYK), has been out performing ZMH the last few days. It's about time ZMH does a little catching up. In the news ZMH said it would be presenting at the Thomas Weisel Partners Growth Forum 6.0 Conference in California next Tuesday. Suggested Options: We are suggesting that traders consider the July calls. Our favorites would be the July 85s on a dip. ! Alert - June options EXPIRE on Friday! BUY CALL JUL 85 ZMH-GQ OI= 219 Last traded @ $4.00 BUY CALL JUL 90 ZMH-GR OI= 674 Last traded @ $1.50 Annotated Chart: Picked on May 27 at $ 85.20 Change since picked: + 1.96 Earnings Date 04/26/04 (confirmed) Average Daily Volume: 1.2 million Chart = ************** NEW CALL PLAYS ************** Golden West Fncl - GDW - close: 108.27 chg: +1.92 stop: 107.00 Company Description: Headquartered in Oakland, California, Golden West is one of the nation's largest financial institutions with assets over $85 billion as of April 30, 2004. The Company has one of the most extensive thrift branch systems in the country, with 273 savings branches in ten states and lending operations in 38 states. (source: company press release) Why We Like It: Some of our readers might wonder why we're adding a banking stock in the face of rising interest rates. Traditionally financials tend to under perform the market in a rising interest rate environment. We have three points to consider. Number one, interest rates are abnormally low right now and a few "measured" rate hikes aren't likely to damage business that much in the financials. No 2, a few analysts believe that GDW might do better than some of its financial brethren due to its strong adjustable rate mortgage business. Third, there is an undercurrent of buying pressure in GDW because it and several of the mid-cap banking stocks are considered takeover candidates for further consolidation in the banking industry. The technical picture doesn't look too bad either. GDW's point- and-figure chart appears to have moved from a "bear trap", where it gives a sell signal and then reverses higher, into a new double-top breakout buy signal with a price target of $129. The technical indicators on its daily chart are a bit mixed but the stock appears to be in a bull flag pattern. Aggressive traders can try and buy a bounce from the bottom of the flag near $106 or a breakout through the very top edge of the pattern near $109.00. We're going to play it a little bit conservatively and look for a move through $110. Our TRIGGER to go long will be $110.01. If we are triggered our stop loss will be $107.00. Our target is the recent March high near $116-117. Suggested Options: We're going to suggest the July or August calls. Our favorite would be the July 110s. BUY CALL JUL 105 GDW-HA OI= 55 Last traded @ $6.20 BUY CALL JUL 110 GDW-HB OI=1708 Last traded @ $3.30 BUY CALL JUL 115 GDW-HC OI= 422 Last traded @ $1.45 Annotated chart: Picked on June xx at $xxx.xx <-- See TRIGGER Change since picked: + 0.00 Earnings Date 04/20/04 (confirmed) Average Daily Volume: 694 thousand Chart = ************************Advertisement********************************* Option Traders: Pay Attention Use the online options trading system built by option traders for options traders. Featuring direct access to each option exchange, stop and stop loss option orders, contingent option orders, online spreads, fast executions, and rates as low as $1.50 per contract ($14.95 min.). PreferredTrade, Inc. Call 888-889-9178 or Click http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN Member NYSE, Other Principal Exchanges, NFA, MSRB and SIPC ******************************************************************** ***************** CURRENT PUT PLAYS ***************** Kohl's Corp - KSS - close: 47.54 change: -0.48 stop: 50.01 Company Descriptions: Based in Menomonee Falls, Wis., Kohl's is a family-focused, value oriented specialty department store offering moderately priced national brand apparel, shoes, accessories and home products. The company operates 589 stores in 38 states. (source: company press release) Why We Like It: Our KSS put play isn't off to the greatest start but we may be in a better position now than when we listed it on Sunday. Shares of Kohl's managed to buck bad news but it couldn't push through its declining simple 200-dma. The bad news was an announcement that its general merchandise manager for its footwear and households business had resigned to become the president and COO of Linens 'n Things (LIN). We're encouraged to see KSS back under its descending trendline of resistance, especially since it never truly broke it with any conviction. Plus, its MACD indicator is very close to producing a new sell signal. Short- term technicals like the RSI and stochastics are already bearish. Readers might remember that we listed this as somewhat aggressive. KSS is right at resistance and in this respect it isn't aggressive but we're stepping in front of four weeks of upward momentum. Fortunately, it seems to have stalled. Traders might feel more comfortable waiting for KSS to breakdown under the $47.00 level before initiating positions. Our target is the $41-42 range and we'll leave our stop at $50.01 for now. Suggested Options: It could take a few weeks to achieve our target so we're suggesting the July puts. Our favorites are the July 50s. ! Alert - June options EXPIRE on Friday! BUY PUT JUL 50 KSS-SJ OI= 3080 Last traded @ $3.20 BUY PUT JLU 45 KSS-SI OI= 6448 Last traded @ $0.65 Annotated Chart: Picked on June 06 at $ 47.45 Change since picked: + 0.09 Earnings Date 05/13/04 (confirmed) Average Daily Volume: 3.7 million Chart = ************* NEW PUT PLAYS ************* Cabot Micro. - CCMP - close: 29.46 chg: -0.77 stop: 31.35 Company Description: Cabot Microelectronics, headquartered in Aurora, Illinois, is the leading supplier of CMP slurries for polishing various materials used in semiconductor manufacturing processes. The company's products play a critical role in the production of the most advanced semiconductor devices, enabling the manufacture of smaller, faster and more complex devices by its customers. (source: company press release) Why We Like It: Wow! Investors have been rotating out of CCMP for a long time. Shares topped out in August/September of 2003 near $67.50 and traders have been selling the rallies ever since. There was a brief ramp up in January for its earnings report but the stock promptly dropped back into its trend of new lows. CCMP's most recent earnings report on April 22nd was a disappointment. The company missed estimates by 7 cents with revenues down almost 4% from the same period a year earlier. CCMP has spent the last six weeks consolidating mostly sideways after its steep April sell-off. Now the stock looks ready for the next leg down. We do have a couple of caveats. First the stock has exceeded its P&F downside target of $33.00 but that doesn't mean it can't (obviously) go lower. Second, CCMP has significantly high short interest. The most recent data shows that short interest measured 23% of the float. Should anything unexpectedly spark a rally there could be a lot of shorts trying to cover at once to protect their gains. Fortunately, the technical picture looks pretty discouraging if you're a bull. CCMP has been struggling with technical resistance at its 40-dma for the last few days and lost. Thursday's drop puts it back under the round-number $30.00 mark and its MACD indicator is about to produce a new sell signal again. We're going to target a move toward the $26.00-25.00 region with an initial stop loss at $31.35. Suggested Options: Our favorite puts for short-term traders are the July 30s or the 35s if you can afford them. BUY PUT JUL 30 UKR-SF OI= 1680 Last traded @ $2.20 BUY PUT JUL 35 UKR-SG OI= 1830 Last traded @ $5.90 (low premium) Annotated chart: Picked on June 13 at $ 29.46 Change since picked: - 0.00 Earnings Date 04/22/04 (confirmed) Average Daily Volume: 3.7 million Chart = --- Symantec Corp. - SYMC - close: 44.16 change: +0.31 stop: 47.50 Company Description: Symantec Corporation provides content and network security software and appliance solutions to enterprises, individuals and service providers. The Company provides client, gateway and server security solutions for virus protection, firewall and virtual private network (VPN), security management, intrusion detection, Internet content and e-mail filtering, remote management technologies and security services to enterprises and service providers worldwide. Symantec has offices in 36 countries worldwide. The Company views its business in five operating segments: enterprise security, enterprise administration, consumer products, services and other activities. Why we like it: Standing out from the rest of the market right up until the end of April, SYMC just refused to give up any ground, holding stubbornly above its 50-dma, even as the overall Technology sector sold off with gusto. But that incredible relative strength began to crack in early May, as the stock started posting lower highs and then roughly a month ago, price fell below the 50-dma, currently $47.04. But due to the strength of the stock in recent months, we wanted to see a failed rally below that important average to convince us that there was enough weakness to see a real downward move. Last week gave us the confirmation we were looking for, with price stalling just under the 50-dma early in the week and then dropping hard on Wednesday. Not only did that selloff crack the 100-dma ($44.26), but it also created a fractional breakdown under the $44 support level. April's drop to the $45 level created the PnF Sell signal, that currently projects a drop to $39, and with the Relative Strength chart (compared to the NASDAQ Composite) breaking to new multi- month lows on Thursday, it looks like we have a potential winner on our hands. Due to the way the stock has been trading lately, momentum entries do not seem to be the best choice. Note how each break to new lows over the past couple months has produced a rebound back to resistance, producing the next lower high. That means a breakdown entry would have to be made with the understanding that risk is to the site of the most recent high, in this case roughly $47. So the preferred entry strategy is for an entry on the next failed rally, ideally in the vicinity of $46. Any rollover from below the 50-dma looks favorable as a bearish entry point. While there's some support near $42, we're going to target the $39-40 area for this play. We'd expect to see the lower edge of that range reached about the same time as the 200-dma (currently $38.41) rises to near $39. We'll initially place our stop at $47.50, which is sufficiently above both the most recent swing high and the 50-dma that if it were breached, would be a strong sign that something is wrong. Suggested Options: Aggressive traders will want to use the July 40 Put while those with a more conservative approach will want to use the July 45 strike. Our preferred option is the July 45 strike, as it is just in the money and should provide ample time for the play to move in our favor. BUY PUT JUL-45*SYQ-SI OI=4341 last traded @ $2.60 BUY PUT JUL-40 SYQ-SH OI=5472 last traded @ $0.80 Annotated Chart of SYMC: Picked on May 13th at $44.16 Change since picked: +0.00 Earnings Date 4/28/04 (confirmed) Average Daily Volume = 4.92 mln Chart = ************************Advertisement********************************** Option traders, check what PreferredTrade offers: - true direct access to each option exchange - stop and stop loss online option orders - contingent option orders based on the price of the option or stock - online spread order entry for net debit or credit - fast option executions - rates as low as $1.50 per contract ($14.95 min) PreferredTrade, Inc. Call 888-889-9178 or Click http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN Member NYSE, Other Principal Exchanges, NFA, MSRB and SIPC *********************************************************************** ********** DISCLAIMER ********** Please read our disclaimer at: http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html ************************************************************** ADVERTISING INFORMATION For more information on advertising in OptionInvestor Newsletter, or any Premier Investor Network newsletter please contact: Contact Support
The Option Investor Newsletter Sunday 06-13-2004 Sunday 4 of 5 In Section Four: Leaps: See Note Option Spreads: Quickies – Let's Try To Give The Market A Little Haircut ************************Advertisement************************* Full Service Brokers Man Financial announces the formation of the OneStopOption Brokerage Group, addressing the demand for personalized, experienced service for both securities* and futures trading within the same firm. Licensed Option Principals Andrew Aronson and Alan Knuckman specialize in live assistance of stock*, option* and futures traders. The combination of the proven Man Financial global presence and the convenience of one group for all trading needs provide customers with the tools needed for success. Live Broker and Online Trading Available 888-281-9569 http://www.OneStopOption.com ************************************************************** ***** LEAPS ***** Look for Mark Phillips Leap Section Next Sunday! ************************Advertisement************************* Live Securities Brokerage Service with Licensed Option Principals OCO Stop & Profit Orders OneStopOption All types of Spreads and Buy Writes 888-281-9569 Auto-Trade Market Monitor Signals Personal Service and Education **Services available for Foreign Traders including Canada** http://www.OneStopOption.com ************************************************************** ************************ Option Spread Strategies ************************ Quickies – Let's Try To Give The Market A Little Haircut By Mike Parnos, Investing With Attitude We got lucky last month with our Quickie plays – real lucky. Let's see if we can do it again. I only found two decent candidates this time around, but if they work, we'll be rollin' in the green stuff. As I do every month, let me remind you that these quickies are quite risky. They do seem to work out more often than not. However, when they don't, it can cost you dearly. Keep your risk tolerance in mind before you establish any of these "hypothetical" quickies. If you wanna dance, you're gonna have to pay the band – eventually. June Quickie #1 – RUT Siamese Condor - $569.12 While I believe the QQQs might spike up, I think the market as a whole will trade in a pretty tight range next week (but, again, what do I know?). Let's take advantage of it by establishing one of our Siamese Condors. We'll: Sell 10 of the June RUT 570 calls @ $5.70 = $5,700 Sell 10 of the June RUT 570 puts @ $6.30 = $6,300 Total credit of $12,000 Now, we're going to have to, protect ourselves, or at least make it seem like we're going to protect these short options. So, we'll: Buy 10 June RUT 530 calls @ $.30 = $300 Buy 10 June RUT 600 puts @ $.30 = $300 Our net credit is $11.40 ($11,400). Our ABSOLUTE bailout points are 581.40 on the topside and $558.60 on the bottom. We'll make money if RUT closes anywhere in between. The closer RUT closes to 570, the more money we'll make. That's a pretty sizable range of 22.80 points. The technical maintenance is a hefty $30,000 – but it's only for a week and it's not really at risk if we know our exit points – and WE DO! You should adjust the number of contracts based on your risk tolerance. June Quickie Position #2 – SPX Iron Condor – 1136.47 Sell 10 June SPX 1120 puts Buy 10 June SPX 1110 puts Credit: $.80 ($800) Sell 10 June SPX 1150 calls Buy 10 June SPX 1160 calls Credit: $1.00 ($1,000) Total net credit of: $1.80 ($1,800). Maximum profit range: 1120 to 1150. Safety range 1118.20 to 1151.80. Maintenance: $10,000. _____________________________________________________________ Those Friendly Reminders The premiums quoted on the above educational trades are based on Thursday's closing bid/ask prices. On Monday, the premiums will be different due to market movement and/or the additional three days of time erosion. In a few instances, when the bid/ask spread is wide, we figure you may be able to shave off a nickel here and there. Be careful. If a stock gaps up or down, it may change the entire dynamic of the trade. Don't skydive without a parachute. Just because you have a pulse and evidence of brain activity doesn't mean you a trader. And make sure you thoroughly know the intricacies of a strategy before you trade. The money you save may be your own. ______________________________________________________________ Did You Hear About . . . Did you hear about the dyslexic, atheist insomniac? He stayed up all night wondering if there really was a Dog. ______________________________________________________________ JUNE POSITIONS June Position #1 - SPX Iron Condor – 1136.47 We sold 5 SPX June 1150 calls and bought 5 SPX June 1170 calls for a credit of $1.20 (x 5 contracts = $600). Then we sold 7 SPX June 1025 puts and bought 7 SPX June 1010 puts for a credit: $1.00 (x 7 contracts = $700). Our total net credit is $1,300. Maintenance: $10,500. Maximum profit range of 1025 to 1150. Potential profit is $1,300. June Position #2 - BBH Iron Condor - $138.93 We sold 10 BBH $155 calls and bought 10 BBH $165 calls for a credit of $.70 (x 10 contracts = $700). Then we sold 10 BBH $135 puts and bought 10 BBH $125 puts for a credit: $.90 (x 10 contracts = $900). Our total net credit is $1,550. Maintenance: $10,000. Maximum profit range of $135 to $155. Potential profit: $1,550. June Position #3 - RUT - Iron Condor – 569.12 We sold 10 RUT 590 calls and bought 10 RUT 600 calls for a credit of $.80 (x 10 contracts = $800). Then, we sold 10 RUT 490 puts and bought 10 RUT 480 puts for a credit: $1.00 (x 10 contracts = $1,000). Our total net credit is $1,800. Maintenance $10,000. Maximum profit range of 490 to 590. Potential profit: $1,800. June Position #4 - MNX - Iron Condor - $148.13 Sold 10 MNX 147.50 calls and bought 10 MNX 152.50 calls for a credit: $.70 (x 10 contracts = $700). Then sold 10 MNX $132.50 puts and bought 10 MNX $127.50 puts for a credit: $.60 (x 10 contracts = $600). Our total net credit of $1,300. Maintenance: $5,000. Maximum profit range of $132.50 to $147.50. Profit potential: $1,300. ________________________________________________________________ ONGOING POSITIONS QQQ ITM Strangle – Ongoing Long Term -- $36.84 We bought 10 contracts of the 2005 QQQ $39 puts and 10 contracts of the 2005 QQQ $29 calls for a total debit of $14,300. We make money by selling near term puts and calls every month. Here's what we've done so far: Oct. $33 puts and Oct. $34 calls – credit of $1,900. Nov. $34 puts and calls – credit of $1,150. Dec. $34 puts and calls – credit of $1,500. Jan. $34 puts and calls – credit of $850. Feb. $34 calls and $36 puts – credit of $750. Mar. $34 calls and $37 puts – credit of $1,150. Apr. $34 calls and $37 puts – credit of $750. May $34 calls and $37 puts – credit of $800. We rolled out the May $34 calls to the June $34 calls for a credit of $.60 and then the May $37 puts to the June $37 puts for credit of $.15. The total net credit was $.75 ($750). Our new total credit: $9,600. Note: We haven't included the proceeds from this long term QQQ ITM Strangle in our profit calculations. It's a bonus! And it's a great cash flow generating strategy. ZERO-PLUS Strategy. OEX – 554.90 In my Feb. 8th column, I outlined a strategy based on an initial investment of $100,000. $74,000 was spent on zero coupon bonds maturing in seven years at a value of $100,000. The principal $100,000 investment is guaranteed. We're trading the remaining $26,000 to generate a "risk free" return on the original investment. Our current position: We own 3 OEX December 2006 540 calls @ $81 (x 300 = $24,300). Our cash position as of May expiration is $4,390 plus unused $1,700 = $6,090. June Zero Plus Positions. A June OEX bull put spread 515/505, taking in a credit of $1.15 x 5 contracts = $575. We also sold the June 560 call taking in a credit of $1.20 x 5 contracts = $600. If all goes well, we'll be able to add an additional $1,175 to our cash position at June expiration. OSX Calendar Spread Plus - $99.51 Originally bought 10 OSX June $115 calls and sold 10 OSX April $115 calls at a cost of $2.15 ($2,150). We also put on an April $100/$90 bull put spread and took in an extra $.70 ($700) to reduce the cost basis to $1.45 ($1,450). We rolled out our April $115 call and took in $1.20 - further reducing our cost basis to $.20. Then, aggressive traders (which we are in this strategy) put on the May $100/$90 bull put spread and took in $.95. So, we were a "plus" $.75 ($750). The May $115 call expired worthless. For June, on Thursday, we sold the June $105 call for $.70 against the June $115 call we still own. We closed our May bull put spread for a loss of $3.25 and rolled it out to the June $95/$85 bull put spread for a credit of $2.25. We had to trade 15 contracts of the bull put spread to cover what we spent to close the May $100/$90 bull put spread. We now have a positive $1.45 ($1450) -- $750 from before and another $700 from selling the $105 June call. We bought ourselves another month for the OSX to behave. We're scrambling and I'll be glad to be out of this damn trade with my butt still attached. That'll teach me to try something directional. Never fear, we shall persevere. New To The CPTI? Are you a new Couch Potato Trading Institute student? Do you have questions about our educational plays or our strategies? To find past CPTI (Mike Parnos) articles, first look under "Education" on the OI home page and click on "Traders Corner." For more recent columns, you can look under "Strategies" and click on "Combinations." They're waiting for you 24/7. ____________________________________________________________ Happy Trading! Remember the CPTI credo: May our remote batteries and self- discipline last forever, but mierde happens. Be prepared! In trading, as in life, it's not the cards we're dealt. It's how we play them. Your questions and comments are always welcome. Mike ParnosCPTI Master Strategist and HCP Couch Potato Trading Institute Disclaimer All results reported in this section are hypothetical. While the numbers represented here may have been achieved or beaten by our readers, we make no representation that any individual investor achieved these exact results. The tracking for the plays listed in this section uses closing prices for the day the newsletter is published and it is not meant to imply that any reader actually received those prices or participated in these recommendations. The portfolio represented here is hypothetical and for investment education purposes only. It is only an illustration of what type of gains a knowledgeable investor might receive utilizing these strategies. ************************Advertisement************************* No time to follow the Market Monitor? Tired of missing good Trades because you stepped away from your computer? OneStopOption Group can follow the Market Monitor for you. You choose the number of contracts, we take care of the rest!! Trade Stock Options, Stocks and ALL Futures with the same Group. Call us 888 281-9569 to see if you qualify to have us rebate your subscription cost. http://www.OneStopOption.com ************************************************************** ********** DISCLAIMER ********** Please read our disclaimer at: http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html ************************************************************** ADVERTISING INFORMATION For more information on advertising in OptionInvestor Newsletter, or any Premier Investor Network newsletter please contact: Contact Support
The Option Investor Newsletter Sunday 06-13-2004 Sunday 5 of 5 In Section Five: Spreads and Straddles: Shares Recover But Inflation And Employment Concerns Remain... Premium-Selling Plays: Naked Puts and Calls ************************Advertisement************************* Stock Option and Futures Brokerage OneStopOption teams the best trading technology with varying levels of professional assistance at very competitive prices. Commission costs are comparable to discount brokerage and tailored to individual customer needs. The power of one brokerage group with experience and expertise in the Securities* and Futures Markets offers unprecedented convenience for traders. Access To All Futures Markets Toll Free 888-281-9569 Stock Option Principals www.OneStopOption.com ************************************************************** ******************* SPREADS & STRADDLES ******************* Shares Recover But Inflation And Employment Concerns Remain... By Ray Cummins The major equity averages closed higher Thursday despite rising import prices and an unexpected jump in jobless claims. A multi-billion dollar retail deal and a positive outlook from the semiconductor industry helped the market rally ahead of the extended week-end for investors. U.S. stock exchanges will be closed Friday, as Americans observe a national day of mourning for President Ronald Reagan. The Dow Jones Industrials added 41 points to finish at 10,410, with leadership coming from 3M (NYSE:MMM), ExxonMobile (NYSE:XOM) and General Motors (NYSE:GM). The technology-laden NASDAQ Composite ended 9 points higher at 1,999, as gains in telecom stocks overcame selling pressure in internet issues. The S&P 500 was up 5 points at 1,136 with gold and oil-related shares among the best performers. In the broad market, advancing stocks edged past decliners by a small margin on the NYSE, but ended roughly even on the technology exchange. Trading was very light, with 1.2 billion shares changing hands on the New York Stock Exchange, while 1.3 billion shares crossed on the NASDAQ. Bonds were slightly weaker after the U.S. Labor Department said import prices rose 1.6% in May, but the yield on the benchmark 10-year Treasury note finished the session nearly unchanged at 4.79%. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ SUMMARY OF CURRENT POSITIONS - AS OF 06/09/04 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ The following summary is a reasonable account of the positions previously offered in this section. However, no representation is being made as to the actual performance of a position and in fact, there are frequently large differences between the summary results and those of our subscribers, due to the variety of ways in which each play can be opened, closed, and/or adjusted. In addition, the summary might not be completely representative of the manner in which the average trader would react to changing conditions in a position and to the options market in general. The editor of this section does not take actual positions in any published plays and the summary comments are simply a service to help new traders understand when positions might be opened and closed. In most cases, actions taken based on the commentary would be far too late to be effective, thus it is not intended as a substitute for personal trade management nor does it in any way replace your duty to diligently monitor and manage the positions in your portfolio. PUT-CREDIT SPREADS Stock Pick Last Month L/P S/P Credit CB G/L Status ERTS 51.88 52.65 JUN 45 47 0.35 47.15 0.35 Open IMDC 61.17 58.35 JUN 50 55 0.50 54.50 0.50 Open? GPRO 38.30 43.78 JUN 30 35 0.70 34.30 0.70 Open MATK 68.01 59.86 JUN 55 60 0.65 59.35 0.51 Closed ASD 35.96 38.45 JUN 32 33 0.16 33.17 0.16 Open IMCL 71.36 80.63 JUN 50 55 0.50 54.50 0.50 Open CSC 42.17 43.12 JUN 35 40 0.65 39.35 0.65 Open GILD 62.54 62.97 JUN 55 60 1.00 59.00 1.00 Open RIMM 49.99 55.86 JUN 40 42 0.22 42.28 0.22 Open QCOM 65.40 68.46 JUN 55 60 0.45 59.55 0.45 Open ZBRA 80.08 80.17 JUN 70 75 0.65 74.35 0.65 Open BRCM 42.54 42.70 JUN 37 40 0.30 39.70 0.30 Open EBAY 85.33 86.31 JUN 75 80 0.50 79.50 0.50 Open AMZN 48.50 50.24 JUN 42 45 0.30 44.70 0.30 Open EYET 44.32 41.35 JUN 35 40 0.50 39.50 0.50 Open? RIMM 59.97 55.86 JUN 47 50 0.20 49.80 0.20 Open AMZN 50.95 50.24 JUL 42 45 0.30 44.70 0.30 Open YHOO 31.87 32.32 JUL 25 27 0.30 27.20 0.30 Open L/P = Long Put S/P = Short Put CB = Cost Basis G/L = Gain/Loss The position in Martek Biosciences (NASDAQ:MATK) should have been closed by conservative traders. Inamed (NASDAQ:IMDC) and Eyetech Pharmaceuticals (NASDAQ:EYET) are on the "watch" list. CALL-CREDIT SPREADS Stock Pick Last Month LC SC Credit CB G/L Status CTX 44.80 46.64 JUN 55 50 0.50 50.50 0.50 Open IVGN 67.61 65.30 JUN 80 75 0.55 75.55 0.55 Open VIP 91.45 92.55 JUN 110 105 0.50 105.50 0.50 Open CERN 41.33 42.69 JUN 50 45 0.55 45.55 0.55 Open SEPR 45.06 47.00 JUN 55 50 0.60 50.60 0.60 Open BSC 80.02 81.92 JUN 90 85 0.50 85.50 0.50 Open FRX 59.20 62.54 JUN 70 65 0.55 65.55 0.55 Open MDT 47.66 49.72 JUN 55 50 0.60 50.60 0.60 Open AZO 83.38 89.20 JUN 95 90 0.40 90.40 0.40 Open? RYL 79.60 77.82 JUN 90 85 0.60 85.60 0.60 Open VIP 92.25 92.55 JUN 105 100 0.60 100.60 0.60 Open APPX 34.03 32.16 JUL 45 40 0.50 40.50 0.50 Open OIH 65.40 66.09 JUL 75 70 0.65 70.65 0.65 Open L/C = Long Call S/C = Short Call CB = Cost Basis G/L = Gain/Loss The position in NTL Inc. (NASDAQ:NTLI) has been closed to limit potential losses. Autozone (NYSE:AZO) is on the "watch" list. DEBIT STRADDLES Stock Pick Last Exp. Long Long Initial Max Play Symbol Price Price Month Call Put Debit Value Status KKD 19.63 21.42 JUN 20 20 3.00 2.80 Open? RIO 49.38 48.84 JUN 50 50 2.65 2.50 Open GRMN 32.60 34.35 JUL 35 30 2.15 2.35 Open SNDK 22.90 21.70 JUL 22 22 3.40 3.20 Open There was no additional volatility after Krispy Kreme (NYSE:KKD) announced quarterly earnings, thus conservative traders should consider an early exit in the position. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ CFC - Countrywide Financial $69.15 *** Rally Mode! *** Countrywide Financial (NYSE:CFC), formerly Countrywide Credit Industries, is a holding company that originates, purchases, sells and services mortgage loans through its major subsidiary, Countrywide Home Loans. The company's mortgages are principally prime credit first-lien mortgage loans secured by single one- to four-family residences (prime credit first mortgages). The firm also offers home equity loans and sub-prime credit loans. CFC, through its other wholly owned subsidiaries, offers products and services that are largely complementary to its mortgage banking business, including lender-placed mortgage insurance, insurance brokerage, mortgage-backed securities brokerage and underwriting, brokerage of bulk servicing transactions, loan processing and servicing in foreign countries, and retail banking. The company conducts its business through four segments: Insurance Segment, Capital Markets Segment, Global Segment and Banking Segment. CFC - Countrywide Financial $69.15 PLAY (conservative - bullish/credit spread): BUY PUT JUL-60.00 CFC-SL OI=3731 ASK=$0.75 SELL PUT JUL-63.37 CFU-SW OI=610 BID=$1.05 INITIAL NET-CREDIT TARGET=$0.35-$0.40 POTENTIAL PROFIT(max)=11% B/E=$63.02 __________________________________________________________________ QCOM - Qualcomm $69.86 *** New Multi-Year High! *** Qualcomm (NASDAQ:QCOM) is a developer and supplier of code division multiple access (CDMA)-based integrated circuits and system software for wireless voice and data communications and global positioning system (GPS) products. Qualcomm offers complete system solutions, including software and integrated circuits for wireless handsets and infrastructure equipment. This complete system solution approach provides customers with advanced wireless technology and enhanced component integration and interoperability, as well as reduced time to market. QCOM - Qualcomm $69.86 PLAY (conservative - bullish/credit spread): BUY PUT JUL-60.00 AAO-SL OI=10194 ASK=$0.25 SELL PUT JUL-65.00 AAO-SM OI=15782 BID=$0.65 INITIAL NET-CREDIT TARGET=$0.45-$0.55 POTENTIAL PROFIT(max)=9% B/E=$64.55 __________________________________________________________________ SWIR - Sierra Wireless $33.83 *** On The Rebound! *** 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 $33.83 PLAY (aggressive - bullish/credit spread): BUY PUT JUL-25.00 IYQ-SE OI=1148 ASK=$0.40 SELL PUT JUL-30.00 IYQ-SF OI=469 BID=$1.30 INITIAL NET-CREDIT TARGET=$0.90-$1.00 POTENTIAL PROFIT(max)=22% B/E=$29.10 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ INSP - InfoSpace $34.71 *** Downtrend Underway? *** InfoSpace (NASDAQ:INSP) develops and delivers a wireless and Internet platform of software and application services to a range of customers that span each of its wireline, merchant and wireless business units. Many of the company's products and application services are offered to its customers, which, in turn, offer these products and application services to their customers as their own solutions. InfoSpace provides its services across multiple platforms, including personal computers and non-PC devices. INSP - InfoSpace $34.71 PLAY (less conservative - bearish/credit spread): BUY CALL JUL-45.00 IOU-GI OI=426 ASK=$0.40 SELL CALL JUL-40.00 IOU-GH OI=1136 BID=$1.00 INITIAL NET-CREDIT TARGET=$0.65-$0.75 POTENTIAL PROFIT(max)=15% B/E=$40.65 __________________________________________________________________ GENZ - Genzyme $41.93 *** Next Leg Down? *** Genzyme Corporation (NASDAQ:GENZ) is a global biotechnology firm that develops and markets therapeutic products and services for serious diseases. The company's product portfolio is focused on rare genetic disorders, renal disease and osteoarthritis and includes an array of diagnostic products and services. Genzyme researches into novel approaches to cancer, heart disease and other areas of unmet medical need. The company serves patients in over 80 countries worldwide. GENZ - Genzyme $41.93 PLAY (conservative - bearish/credit spread): BUY CALL JUL-47.50 GZQ-GS OI=3052 ASK=$0.30 SELL CALL JUL-45.00 GZQ-GI OI=4064 BID=$0.55 INITIAL NET-CREDIT TARGET=$0.30-$0.35 POTENTIAL PROFIT(max)=14% B/E=$45.30 __________________________________________________________________ WMS - WMS Industries $28.75 *** Consolidation In Progress! *** WMS Industries (NYSE:WMS) is engaged in the design, manufacture and sale and lease of gaming machines and video lottery terminals. Its machines feature advanced graphics, digital sound and engaging game themes. The company's gaming machines are installed in all of the major regulated gaming jurisdictions in the United States, as well as in 50 foreign gaming jurisdictions. WMS generates revenue in two principal ways: through sales of gaming machines, conversion kits, parts, used equipment and original manufactured equipment to casinos and other licensed gaming machine operators and leasing of participation games and royalties it receives from third parties under license agreements to use its games. WMS - WMS Industries $28.75 PLAY (less conservative - bearish/credit spread): BUY CALL JUL-35.00 WMS-GG OI=117 ASK=$0.25 SELL CALL JUL-30.00 WMS-GF OI=435 BID=$0.85 INITIAL NET-CREDIT TARGET=$0.65-$0.70 POTENTIAL PROFIT(max)=15% B/E=$30.65 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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. __________________________________________________________________ GDT - Guidant $56.02 *** Stent Design Woes? *** Guidant Corporation (NASDAQ:GDT) provides therapeutic medical solutions of distinctive value for customers, patients and healthcare systems worldwide. The company develops, makes and markets implantable defibrillator systems, implantable pacemaker systems, coronary stent systems, angioplasty systems and cardiac surgery systems. Guidant's lifesaving medical technologies are designed to extend the lives and improve the quality of life of millions of patients suffering from life-threatening cardiac and vascular disease. Its products treat the heart, managing its rhythms, clearing its arteries and permitting less-invasive surgeries. GDT - Guidant $56.02 PLAY (very speculative - neutral/debit straddle): BUY CALL JUL-55.00 GDT-GK OI=13764 ASK=$2.95 BUY PUT JUL-55.00 GDT-TK OI=4837 ASK=$1.90 INITIAL NET-DEBIT TARGET=$4.65-$4.75 INITIAL TARGET PROFIT=$2.25-$3.10 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ SEE DISCLAIMER - SECTION 1 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ************************Advertisement************************* OneStopOption.com Trade: Securities, Stock Options, Futures Contracts Service: Experienced Brokers Personal Assistance Convenience of One Brokerage Online and Live Broker Trading Experience... The Difference OneStopOption.com 888-281-9569 *************************************************************** ***************************************** 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 06/09/04 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ The following summary is a reasonable account of the positions previously offered in this section. However, no representation is being made as to the actual performance of a position and in fact, there are frequently large differences between the summary results and those of our subscribers, due to the variety of ways in which each play can be opened, closed, and/or adjusted. In addition, the summary might not be completely representative of the manner in which the average trader would react to changing conditions in a position and to the options market in general. The editor of this section does not take actual positions in any published plays and the summary comments are simply a service to help new traders understand when positions might be opened and closed. In most cases, actions taken based on the commentary would be far too late to be effective, thus it is not intended as a substitute for personal trade management nor does it in any way replace your duty to diligently monitor and manage the positions in your portfolio. 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 10.43 0.35 7.73% 3.63% LPNT JUN 35 34.30 37.55 0.70 4.03% 2.04% ASCA JUN 30 29.35 32.39 0.65 5.02% 2.21% DRIV JUN 25 24.25 32.88 0.75 7.04% 3.09% FARO JUN 20 19.45 26.38 0.55 7.32% 2.83% GIVN JUN 30 29.25 31.53 0.75 7.01% 2.56% MVSN JUN 20 19.65 23.66 0.35 4.54% 1.78% PDII JUN 22 22.00 29.79 0.50 6.67% 2.27% SMTC JUN 20 19.50 23.92 0.50 6.25% 2.56% CELG JUN 45 44.40 54.77 0.60 4.75% 1.35% ELN JUN 17 17.05 21.98 0.45 8.73% 2.64% FARO JUN 20 19.45 26.38 0.55 8.04% 2.83% FRO JUN 25 24.50 38.45 0.50 6.48% 2.04% IMMU JUN 5 4.75 5.44 0.25 13.52% 5.26% LNCR JUN 32 32.05 33.46 0.45 3.60% 1.40% MCK JUN 32 32.00 34.84 0.50 3.76% 1.56% NFLX JUN 25 24.45 31.30 0.55 7.36% 2.25% PHRM JUN 20 19.65 39.70 0.35 5.67% 1.78% RTN JUN 32 32.00 34.10 0.50 3.62% 1.56% VXGN JUN 12 12.10 14.89 0.40 10.35% 3.31% ARTI JUN 22 22.00 25.90 0.50 6.11% 2.27% AVID JUN 45 44.30 52.50 0.70 4.62% 1.58% BLUD JUN 25 24.70 30.45 0.30 3.54% 1.21% DRIV JUN 25 24.60 32.88 0.40 5.37% 1.63% ERES JUN 17 18.11 22.98 0.22 3.85% 1.21% NUE JUN 55 54.25 65.63 0.75 3.96% 1.38% PHRM JUN 20 19.70 39.70 0.30 5.30% 1.52% SPLS JUN 25 24.60 28.63 0.40 4.24% 1.63% YHOO JUN 25 24.60 32.32 0.40 4.64% 1.63% ARO JUN 22 23.03 28.59 0.35 4.75% 1.52% CRDN JUN 25 24.65 36.39 0.35 5.57% 1.42% ERES JUN 18 18.63 22.98 0.30 6.61% 1.61% FARO JUN 22 21.85 26.38 0.65 9.88% 2.97% ISPH JUN 15 14.55 16.97 0.45 10.57% 3.09% IDEV JUN 5 4.70 7.07 0.30 17.36% 6.38% PDII JUN 22 22.20 29.79 0.30 5.83% 1.35% SSYS JUN 22 21.85 27.01 0.65 9.43% 2.97% SLXP JUN 25 24.70 26.87 0.30 4.85% 1.21% ASKJ JUN 35 34.40 38.45 0.60 6.85% 1.74% ERES JUN 20 19.80 22.98 0.20 4.60% 1.01% FWHT JUN 20 19.65 21.55 0.35 6.25% 1.78% GPRO JUN 35 34.45 43.78 0.55 5.54% 1.60% MEE JUN 22 22.15 24.92 0.35 5.66% 1.58% SMTC JUN 20 19.70 23.92 0.30 6.79% 1.52% SWIR JUN 22 22.20 31.21 0.30 6.05% 1.35% YHOO JUN 27 27.15 32.32 0.35 4.58% 1.29% ASKJ JUN 35 34.55 38.45 0.45 6.43% 1.30% CRDN JUN 30 29.45 36.39 0.55 8.32% 1.87% ERES JUN 23 23.03 22.98 (0.04) 0.00% 0.00% NKTR JUN 17 17.25 17.32 0.07 2.31% 1.45% NSM JUN 20 19.70 21.15 0.30 6.58% 1.52% SMTC JUN 22 22.20 23.92 0.30 6.21% 1.35% YHOO JUN 27 27.25 32.32 0.25 4.28% 0.92% CVTX JUL 15 14.60 16.10 0.40 5.63% 2.74% DITC JUL 17 16.80 20.93 0.70 8.40% 4.17% JILL JUN 20 19.70 21.45 0.30 10.05% 1.52% NKTR JUN 17 17.20 17.32 0.12 5.60% 1.74% OSIP JUN 65 64.50 68.71 0.50 6.89% 0.78% SINA JUN 35 34.50 39.65 0.50 10.37% 1.45% SMTC JUN 22 22.25 23.92 0.25 7.77% 1.12% SYNA JUL 17 16.85 18.76 0.65 7.48% 3.86% TELK JUN 20 19.75 22.88 0.25 10.33% 1.27% USG JUN 15 14.70 16.01 0.30 13.27% 2.04% UTHR JUN 22 22.15 22.97 0.35 10.38% 1.58% PTIE JUL 7 7.15 8.09 0.35 9.89% 4.90% Au Optronics (NYSE:AUO), Drexler Technologies (NASDAQ:DRXR), Nvidia (NASDAQ:NVDA), Silicon Storage Tech (NASDAQ:SSTI) and Digene (NASDAQ:DIGE), which is currently profitable, have been closed to limit potential losses. Some of the obvious issues on the "watch" list are: Boston Comm. (NASDAQ:BCGI), eResearch Tech (NASDAQ:ERES); at $23.37, Nektar (NASDAQ:NKTR), Given Imaging (NASDAQ:GIVN), United Therapeutics (NASDAQ:UTHR), and Salix Pharmaceuticals (NASDAQ:SLXP), among others. NAKED CALLS Stock Strike Strike Cost Current Gain Max Simple Symbol Month Price Basis Price (Loss) Yield Yield IACI JUN 32 33.15 30.45 0.65 5.22% 1.96% OVTI JUN 30 30.80 17.63 0.80 11.79% 2.60% SLAB JUN 55 55.50 48.36 0.50 4.93% 0.90% PHTN JUN 35 35.35 31.81 0.35 4.69% 0.99% ENDP JUN 25 25.70 21.21 0.70 11.16% 2.72% IPXL JUN 22 23.05 20.35 0.55 8.75% 2.39% MMR JUN 15 15.25 14.42 0.25 7.20% 1.64% APPX JUN 40 40.40 32.16 0.40 6.84% 0.99% OVTI JUN 27 27.25 17.63 0.25 6.69% 0.92% WSM JUN 32 33.00 31.63 0.50 5.64% 1.52% ABAX JUN 20 20.25 19.47 0.25 5.81% 1.23% CHIC JUN 20 20.35 19.83 0.35 8.70% 1.72% USNA JUN 30 30.40 27.93 0.40 6.29% 1.32% ABGX JUN 17 17.85 11.79 0.35 13.94% 1.96% CREE JUN 25 25.25 20.03 0.25 5.36% 0.99% SSNC JUN 25 25.50 20.09 0.50 10.41% 1.96% DIGE JUN 40 40.30 35.30 0.30 6.89% 0.74% MDCO JUN 30 30.70 28.09 0.70 15.46% 2.28% Positions in Abaxis (NASDAQ:ABAX), Charlotte Russe Holdings (NASDAQ:CHIC), McMoran Exploration (NYSE:MMR) and Williams- Sonoma (NYSE:WSM) are on the "watch" list. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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 BCC JUL 35.00 34.25 37.08 0.75 5.12% 2.19% JILL JUL 20.00 19.45 21.68 0.55 6.72% 2.83% LSS JUL 20.00 19.50 21.51 0.50 6.07% 2.56% OI JUL 15.00 14.65 16.05 0.35 5.64% 2.39% NVTL JUL 15.00 14.65 20.24 0.35 7.34% 2.39% PDII JUL 25.00 24.70 30.39 0.30 3.91% 1.21% RSAS JUL 17.50 17.05 18.80 0.45 6.22% 2.64% STLD JUL 25.00 24.45 26.72 0.55 5.33% 2.25% UPL JUL 30.00 29.55 34.06 0.45 4.14% 1.52% USG JUL 15.00 14.15 16.61 0.85 13.32% 6.01% __________________________________________________________________ BCC - Boise Cascade $37.08 *** Strong Sector! *** Boise Cascade (NYSE:BCC) is a multinational contract and retail distributor of office supplies and paper, technology products and office furniture. Boise Cascade is also a distributor of building materials and a manufacturer and distributor of paper, packaging and wood products. The firm operates in four segments: Boise Office Solutions, Contract; Boise Office Solutions, Retail; Boise Building Solutions and Boise Paper Solutions. BCC - Boise Cascade $37.08 PLAY (sell naked put): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL PUT JUL 35 BCC SG 54 0.75 34.25 5.1% 2.2% __________________________________________________________________ JILL - J. Jill Group $21.68 *** Bullish Retailer! *** The J. Jill Group (NASDAQ:JILL) is a multi-channel specialty retailer of women's apparel, accessories and footwear. The company markets its products through catalogs, retail stores and an e-commerce website. J. Jill has two business segments, direct and retail, and each segment is separately managed and utilizes distinct distribution, sales and inventory management strategies. The direct segment markets merchandise through its catalogs and an e-commerce website. The retail segment markets merchandise through retail stores. The firm's target customers are active, affluent women ages 35 to 55, who want comfort and styling, from relaxed career clothing to sophisticated casual weekend wear, in a broad range of sizes. JILL - J. Jill Group $21.68 PLAY (sell naked put): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL PUT JUL 20 JUI SD 5 0.55 19.45 6.7% 2.8% __________________________________________________________________ LSS - Lone Star $21.51 *** Oil Service "Star" *** Lone Star Technologies (NYSE:LSS) is a domestic manufacturer and marketer of welded "oil country tubular goods," which are steel tubular products used in the completion and production of oil and natural gas wells. Lone Star is a manufacturer of line pipe, which is used in the gathering and transmission of oil and natural gas. In addition, the company is a manufacturer of specialty tubing products used in power technology, automotive, construction, agricultural and industrial applications. LSS - Lone Star $21.51 PLAY (sell naked put): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL PUT JUL 20 LSS SD 5 0.50 19.50 6.1% 2.6% __________________________________________________________________ OI - Owens-Illinois $16.05 *** Asbestos "Deal" Speculation *** Owens-Illinois (NYSE:OI) is a manufacturer of packaging products. The company manufactures glass containers in North America, South America, Australia and New Zealand and Europe, and is a worldwide manufacturer of plastics packaging. Plastics packaging products manufactured by Owens-IL include consumer products (blow molded containers, injection molded closures and dispensing systems) and prescription containers. Owens-IL has acquired 18 glass container businesses in 18 countries since 1991, including businesses in North and South America, Central and Eastern Europe and the Asia Pacific region, and seven plastics packaging businesses operating in 12 countries. OI - Owens-Illinois $16.05 PLAY (sell naked put): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL PUT JUL 15 OI SC 5 0.35 14.65 5.6% 2.4% __________________________________________________________________ NVTL - Novatel Wireless $20.24 *** "Premium-Selling" Only! *** Novatel Wireless (NASDAQ:NVTL) is a provider of wireless data access solutions, including wireless data modems and software, for use with portable personal computers (PCs) and with handheld computing devices. The company delivers comprehensive solutions that help businesses and consumers to access personal, corporate and public information through e-mail, enterprise networks and the Internet. Novatel also offers wireless data modems as well as custom software and hardware engineering services and systems integration services to its customers to facilitate use of its products. NVTL - Novatel Wireless $20.24 PLAY (sell naked put): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL PUT JUL 15 NVU SC 10 0.35 14.65 7.3% 2.4% __________________________________________________________________ PDII - PDI Incorporated $30.39 *** In A New Trading Range? *** PDI (NASDAQ:PDII) is an innovative healthcare sales and marketing provider to biopharmaceutical and medical devices companies and and the diagnostics industry. Its three business units offer service and product-based capabilities for companies seeking to maximize profitable brand sales growth. The three units include PDI Pharmaceutical Products, PDI Sales and Marketing Services, and PDI Medical Devices and Diagnostics. PDII - PDI Incorporated $30.39 PLAY (sell naked put): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL PUT JUL 25 PKU SE 18 0.30 24.70 3.9% 1.2% TS __________________________________________________________________ RSAS - RSA Security $18.80 *** Testing 2004 Highs! *** RSA Security (NASDAQ:RSAS) is a provider of electronic security (e-security) solutions that are designed to help organizations ensure the authenticity of the people, devices and transactions involved in e-business. The company's core competencies are in two-factor user authentication solutions, Web access management software, digital certificate management solutions and encryption software. Through its RSA SecurID, RSA ClearTrust, RSA Keon and RSA BSAFE product lines, the company directly addresses critical e-security requirements for e-business. RSAS - RSA Security $18.80 PLAY (sell naked put): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL PUT JUL 17.5 QSD SW 249 0.45 17.05 6.2% 2.6% __________________________________________________________________ STLD - Steel Dynamics $26.72 *** Entry Point? *** Steel Dynamics (NASDAQ:STLD) is a steel manufacturing company. The company owns and operates electric arc furnace mini-mills. Its primary steel operations include the Flat Roll Division, the Structural and Rail Division and the Bar Products Division. The company produces hot- and cold-rolled steel products, galvanized sheet products, light gauge steel products, structural steel and rails and joists and deck materials. STLD - Steel Dynamics $26.72 PLAY (sell naked put): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL PUT JUL 25 RQL SE 56 0.55 24.45 5.3% 2.2% __________________________________________________________________ UPL - Ultra Petroleum $34.06 *** Uptrend Resumes! *** Ultra Petroleum (NYSE:UPL) is an independent oil and gas company engaged in the development, production, operation, exploration and acquisition of oil and gas properties. The firm's operations are focused mainly in the Green River Basin of southwest Wyoming and Bohai Bay, offshore China. Ultra Petroleum also has working interests in Texas and Pennsylvania. UPL - Ultra Petroleum $34.06 PLAY (sell naked put): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL PUT JUL 30 UPL SF 114 0.45 29.55 4.1% 1.5% __________________________________________________________________ USG - USG Corp. $16.61 *** Volatility = Premium! *** USG Corporation (NYSE:USG) produces a range of products for use in new residential, new non-residential and repair and remodel construction, as well as products used in certain industrial processes. Its operations are organized into three operating segments: North American Gypsum, which manufactures Sheetrock brand gypsum wallboard and related products in the United States, Canada and Mexico; Worldwide Ceilings, which manufactures ceiling tile in the United States and ceiling grid in the United States, Canada, Europe and the Asia-Pacific region, and Building Products Distribution, which distributes gypsum wallboard, drywall metal, ceiling products, joint compound and other building products throughout the United States. USG - USG Corp. $16.61 "SPECULATIVE" PLAY (sell naked put): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL PUT JUL 15 USG SC 666 0.85 14.15 13.3% 6.0% ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ASKJ - Ask Jeeves $36.23 *** A Necessary Consolidation! *** 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 $36.23 PLAY (sell naked call): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL CALL JUL 45 AUK GI 949 0.55 45.55 6.5% 1.2% __________________________________________________________________ AMLN - Amylin Pharmaceuticals $21.96 *** Range-Bound? *** Amylin Pharmaceuticals (NASDAQ:AMLN) is committed to improving the lives of people with diabetes and other metabolic diseases through the discovery, development and commercialization of innovative, cost-effective medicines. Amylin has two primary drug candidates in late-stage development for the treatment of diabetes; SYMLIN (pramlintide acetate) and exenatide, formerly referred to as AC2993 (synthetic exendin-4). AMLN - Amylin Pharmaceuticals $21.96 PLAY (sell naked call): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL CALL JUL 25 AQM GE 4523 0.35 25.35 5.3% 1.4% __________________________________________________________________ ICOS - ICOS Corporation $26.74 *** New 52-Week Low! *** ICOS Corporation (NASDAQ:ICOS) develops pharmaceutical products with significant commercial potential by combining its unique capabilities in molecular, cellular and structural biology, high-throughput drug screening, medicinal chemistry and gene expression profiling. The firm applies its integrated approach to erectile dysfunction and other urologic disorders, sepsis, pulmonary arterial hypertension and cardiovascular diseases, as well as inflammatory diseases. The company has established collaborations with pharmaceutical and biotechnology companies to enhance its internal development capabilities and to offset a substantial portion of the financial risk of developing its product candidates. ICOS - ICOS Corporation $26.74 PLAY (sell naked call): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL CALL JUL 30 IIQ GF 2437 0.45 30.45 5.3% 1.5% __________________________________________________________________ OIIM - O2Micro $15.88 *** Bearish Technicals? *** O2Micro (NASDAQ:OIIM) designs, develops and markets innovative power management and security components for mobile telecom, communication, computer, information appliance, and LCD products. Its unique products include AudioDJ, SmartCardBus for secure on line e-commerce, Intelligent Lighting and Battery Management IC's. O2Micro International also maintains an extensive portfolio of intellectual property with thousands of patent claims granted, and thousands more pending. OIIM - O2Micro $15.88 PLAY (sell naked call): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL CALL JUL 17.5 XQQ GW 127 0.30 17.80 5.5% 1.7% ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ SEE DISCLAIMER - SECTION 1 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ************************Advertisement************************* OneStopOption.com Trade: Securities, Stock Options, Futures Contracts Service: Experienced Brokers Personal Assistance Convenience of One Brokerage Online and Live Broker Trading Experience... The Difference OneStopOption.com 888-281-9569 *************************************************************** ********** DISCLAIMER ********** Please read our disclaimer at: http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html ************************************************************** ADVERTISING INFORMATION For more information on advertising in OptionInvestor Newsletter, or any Premier Investor Network newsletter please contact: Contact Support
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