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Daily Newsletter, Tuesday, 06/15/2004

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The Option Investor Newsletter                 Tuesday 06-15-2004
Copyright 2004, All rights reserved.                       1 of 3
Redistribution in any form strictly prohibited.

In Section One:

Wrap: Inflation or Deflation?
Futures Markets: See Note
Index Trader Wrap: Are Treasury bond trader's clueless?
Market Sentiment: CPI Cools Concerns


Posted online for subscribers at http://www.OptionInvestor.com
************************************************************
MARKET WRAP  (view in courier font for table alignment)
************************************************************
     06-15-2004            High     Low     Volume Advance/Decline
DJIA    10380.43 + 45.70 10428.05 10336.51 1.61 bln   2225/ 626
NASDAQ   1995.60 + 25.61  2006.58  1982.41 1.49 bln   2085/ 971
S&P 100   552.79 +  2.73   555.67   550.06   Totals   4310/1597
S&P 500  1132.01 +  6.72  1137.36  1125.29
RUS 2000  567.92 + 10.25   569.69   557.67
DJ TRANS 3039.84 + 45.87  3051.89  2997.09
VIX        15.05 -  1.02    15.35    14.72
VXO        15.00 -  1.15    15.64    14.61
VXN        20.88 -  1.36    21.85    20.46
Total Volume 3,116M
Total UpVol  2,443M
Total DnVol    625M
52wk Highs     111
52wk Lows       80
TRIN          0.61
PUT/CALL      0.78
************************************************************

Inflation or Deflation?
Jonathan Levinson

The markets were dominated with news and discussion surrounding
the thorny inflation vs. deflation issue, with the CPI report
released in the morning ahead of Greenspan's testimony before the
Senate Banking Committee.  Bonds staged a dramatic upside
reversal, with milder but still solid gains in equities and
metals.

The Dow closed higher by 45.7 points at 10380.43, the S&P 500
added 6.71 to close at 1,132 and the Nasdaq gained 25.6 points to
close at 1995.6.  Volume was modest, and volatility dropped
strongly following yesterday's sharp gains, correcting part of
those gains.  The VXO  fell 7.12% to close at 15, the QQV 7.09%
to close at 19.27.  The abortive morning rally and the failed
afternoon plunge accompanied by big moves in the volatility
indices reminded us that it is, after all, op-ex or "scam" week,
a time for headfakes and false breaks.  Today did not disappoint.


Daily Dow Chart



The Dow's gains lent support to the descending trendline at
10340, which once again supported the price with the day low
printed at 10336.  The move paints a complicated picture, as
today's failed high at 10428 broke Monday's and Friday's high,
but the gains blew off in a doji spike.  Despite the higher high
(and higher low), the overall descending trend from the June high
continues, but it was sufficient to confuse the daily cycle
oscillators, with the 10-day stochastic hesitating in its
downphase.   Macd confirmation of the stochastic sell signal from
last week remains elusive, making this a dangerous and tricky
level overall, below rising resistance but above descending
support.  A break below the descending trendline, currently at
10335-40, would be a good short entry with a stop just above the
trendline, while a break of today's high on a closing basis would
most likely abort the stochastic downphase and set up a test of
rising resistance at 10490.  Next support below 10335 is at
10290, being confluence and Fibonacci support, followed by 10240.


Daily Nasdaq Chart



The Nasdaq daily is a much simpler chart here, with a failed
"return-to-the-scene-of-the-crime" rally rejected at the
descending resistance line.  Last week's upside close has so-far
proven to be a classic throwover trap, and until a close above
the trendline at 2005, the daily cycle downphase should continue
to strengthen.  A closing break of support at 1980-82 (session
low at 1982 today) should provide the bearish Macd cross we've
been awaiting to confirm the daily cycle rollover from last week,
while another bounce from that level sets up another challenge of
the broken resistance line.  A break of 2005 on a closing basis
would obviously be bullish, but I'd want to see a break of 2025
resistance before doubting the daily cycle downphase currently in
progress.


It was a news-heavy day.  At 8:30AM, the Labor Department
reported that the Consumer Price Index, the most widely used
gauge of U.S. inflation, rose 0.6% in May, the largest one-month
gain since January 2001 and exceeding expectations for a 0.4%
gain.  The media emphasized that the core CPI, which is the CPI
net of food and energy costs, rose just 0.2%, in line with
expectations.   The fact that everyone has to pay the so-called
"volatile" food and energy costs doesn't seem to be a fact with
which many analysts concern themselves.  Furthermore, looking at
the yearly trend, we see that the 12-month y-o-y change in the
CPI (including food and energy) is now 3.1%.  At 1.0%, the real
Fed funds rate is -2.1% using the 12-month y-o-y change in CPI as
the inflation measure.  It's even more egregiously negative if we
use the 5-month annualized rate which is in the vicinity of 5.1%.
At 8:30AM with the release of the data, one could not help but
wonder, if the alleged economic recovery is as robust as the Fed,
the Treasury Department and our politicians claims, why is the
Fed funds rate being maintained so far below the curve?

Also at 8:30, the New York Empire State Manufacturing Index was
released, meeting expectations at 30.2.  The New York Federal
Reserve Bank said that the data showed strong economic activity,
unchanged from its May reading.  The press reported that other
than during the March decline, the Empire State index has been
above 30 since October. New orders fell to 26.5 from 36.6 in May,
shipments fell to 33.4 from 42.3, and the employment index fell
to 12.9 from 21.3.

The Commerce Department reported that business inventories in the
rose a 0.5% in April, exceeding expectations for a 0.4% rise for
an 8th consecutive gain.  Business sales fell 0.1% after record
gains in the prior month.  The inventory-to-sales ratio remained
at a record low of 1.30 months in April, which indicates
strengthening demand exceeding the ability or willingness of
businesses to grow their inventories, a generally bullish sign.
A low inventory-to-sales ratio predicts a more direct increase in
production in the event of increasing demand for products.

The Producers Price Index was delayed again indefinitely with the
BLS again citing computer problems.  The missing report was
originally scheduled for release on June 11th.

The US Dollar Index dipped on the 8:30 data, sparking a rally in
equities, treasuries and precious metals.  At 9:45, the
University of Michigan announced that consumer sentiment rose to
95.2 in June, a 2 month high, up from the 90.2 May reading and
exceeding expectations for 90.5.  The admittedly subjective index
reading is down 8% from its January high.  Despite this strong
data, bonds remained firm near their highs of the day in breakout
territory on the daily charts, just in time for Greenspan to
begin his testimony before the Senate at 10AM.

Around the same time, it was reported by oil minister Thamer
Ghadban that "A pipeline south of Basra was targeted by saboteurs
with explosives," in what he felt was an act of sabotage.  Oil
rose on the news of yet another attack on oil production and
delivery assets.  Iraqi oil exports were reportedly brought to a
standstill by the blast.  The gains were short lived, with crude
futures settling back into negative territory to finish the day
down 1.29% at 37.39.

Greenspan said relatively little in his Senate testimony.  He
told the committee that he would be honored to serve a 5th term
as Fed chairman.  Most notably, he did not confirm if or when the
Fed would be raising rates, and emphasized uncertainty and the
difficulty in determining monetary policy overall.  He said that
the Fed would focus on probabilities in the face of the wide
range of events that the future might hold, and noted that the
economy has been very resilient in the face of what would
formerly have been destabilizing shocks. In the Q&A session,
Greenspan stated that the Fed views inflation to be benign
currently, and not a problem.  He nevertheless admitted that high
energy costs could present a threat to productivity.  Moving from
that topic, he reiterated his warnings from last year, saying
that he found the numbers concerning the imminent retirement of
the baby boomers around 2008 to be "very disturbing", urging that
deficits be reduced or eliminated, primarily by reducing
government spending.  In response to a question from Senator
Sarbanes, he added that he would be very surprised to the boom in
home sales and prices continue.

Equities had been in the process of rolling over, but spiked
higher on the "inflation is benign" comments from the Fed chief.
Gold spike to new session highs and similarly held those levels
during the Q&A session.

Chairman Greenspan is scheduled to testify before the House
Budget Committee tomorrow at 10AM.

In last night's Futures Wrap, I cautioned against being too
confident that Greenspan would be quick to do what the market so
obviously expected.  With a rate hike appearing almost
unavoidable, I noted that the bond market, which determines the
rates that concern the whole world (other than the Fed's 23
primary dealer banks), had already fallen very substantially from
its March highs, raising yields (read: interest rates) sharply
from their March lows.  Central bankers prefer to jawbone the
markets than to actively buy or sell them, and Mr. Greenspan
today did not disappoint.  The markets over the past 3 months
have done most of the heavy lifting, and his testimony and Q&A
responses were only a step above bare chit chat.

Also in the morning, President Bush and the Afghan president
Hamid Karzai addressed the press from the Rose Garden.  They
delivered an upbeat assessment of economic developments in
Afghanistan, and announced a bilateral trade agreement between
the US and that country, including a dedication of $5M to
promoting the advancement of women in the Afghan's public and
private sectors, including training and small business grants.
In the Q&A session that followed, the President answered
questions about the US economy, stating that he's pleased about
the strong economy and optimistic for its future.  No one asked
him why he thought the Fed is pegging its rates so far below even
the official CPI number.

The House Financial Services Committee approved a bill tabled by
Richard Baker, R-LA. that would require companies to expense only
those stock options granted to their five highest-paid
executives.  This watered-down bill would also require the SEC
and Labor Department to conduct a joint study to study the
economic impact of stock option expensing despite the fact that
the Financial Accounting Standards Board has already recommended
that companies should deduct the value of all stock options from
their income statements.  This is also a point on which Warren
Buffett has been particularly outspoken in the past, arguing that
stock options should be required to be expensed by the companies
that grant them.

In corporate news, MSFT was higher on analyst Rick Sherlund's
speculation that MSFT may announce a share buy-back program to
reduce part of its massive cash position.  The Goldman Sachs
analyst said that "We believe an aggressive share repurchase
would be materially additive to earnings and could be a positive
catalyst to the stock," but admitted that the Company had yet to
make any announcement.  Speculators didn't wait, however, bidding
MSFT up to a 1.56% gain, stock closing at 27.32.

After the close, ORCL announced Q4 earnings of $990M or 19 cents
per share, up from $858 million or 16 cents y-o-y and beating
expectations by a penny.  Sales rose 9% percent to $3.1B,
exceeding expectations of $3.071M, up from $2.8B y-o-y.

For tomorrow, we await the 8:30 release of May housing starts
(est. 1.95M) and building permits (est. 1.97M), followed by May
industrial production (est. .8%) and capacity utilization (est.
77.4%), followed by the 2PM release of the Fed's Beige Book.
And, to repeat, Chairman Greenspan's testimony before Congress is
scheduled to begin at 10AM.

For tomorrow, I'm expecting more downside attempts based on the
ongoing daily cycle downphases.  Because it's op-ex week,
complete with failed moves and spiky volatility, I'm trying to
stay flexible and not get too surprised by whatever sudden move
happens next.  The trendlines on the daily charts provide a good
working range that can either be faded for reversals or followed
on breakouts, but I'd urge you to be disciplined with your stops
out of respect for the op-ex factor.  Greenspan's testimony
should also be good for some swings, if it doesn't result in a
teeth-grinding stall such as we had at various points this
morning.


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

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



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


Are Treasury bond trader's clueless?

I've always held the belief that Treasury bond traders are the
smartest traders around, but of late, and after today's trade,
I'm beginning to wonder if that's the case.

While the major equity indices all posted handsome gains in
today's trade, Treasuries simply unraveled and posted what I'd
consider to be more significant gains, as "group think" and an
ever so slight abatement of core producer prices had bond traders
gobbling up these fixed income instruments like there was no
tomorrow.

Certainly today's inflation data at the consumer level, which
showed overall consumer prices a stronger-than-expected 0.6%, now
has consumer prices having risen 3.1% year-over-year, boosted
largely by a 15% rise in energy and 4% in food prices.  However,
bond and Treasury bulls seemed shocked, and bought Treasuries
along with other fixed income instruments as the core rate, which
excludes the often times more volatile energy and food
components, which reached a new 40-year low of 1.1% from November
to January, but turned higher to 1.7% in May, appeared modest
when measured against recent government figures that showed the
economy growing at a 4.4% annual rate at the end of the first
quarter.

U.S. Market Watch - 06/15/04 Close



I'm not berating bond traders, but how is such a move in
Treasuries possible today?  19.3 basis points in the 5-year?
18.4 basis points in the 10-year?  15.6 in the longest-dated 30-
year?

Some of our "inflation" gauges in Oil, currently depicted by the
August Light, Sweet Crude Oil futures (cl04q) $37.63, which shows
a 7.67% decline over the past 4-weeks (since April 14), August
Gold futures (gc04q) $389.20, up 1.61%, but still below $400, and
the CRB Index (cr00y) 266.62 now back below that 270 level we had
made a benchmark from several weeks ago, may all have been
suggesting that other market participants weren't overly worried
about consumer prices.

I've shown the 20-day percentage change in the U.S. Market Watch.
While it would be incorrect verbiage to say the 10-year yield has
fallen 2.13% the past 20-day's, the point I would be trying to
make today is the forceful lower yield in today's trade, relative
to the past 20-days.  Meanwhile, oil is more notably lower, but
gold and CRB Index (cr00y) relatively unchanged.

Treasury bond traders seemed shocked today.

In yesterday afternoon's Market Monitor, just prior to the close,
I ran through some of our inflation checks.  I also made note
that our "junk bond" security that I find useful to monitor had
the Pacholder High Yield Fund (PHF) $8.72 +1.75% having been
trading sideways the past 9 sessions, despite the 10-year yield
having risen from a yield of 4.655% to yesterday's close of
4.870%.

Aside from any "option-related" action I was following in various
option chains on the major indices today, I had noted at 02:31 PM
EDT that the Broker Dealer Index (XBD.X) 123.11 -1.17% had fallen
to unchanged levels and had been seeing a "prolonged" intra-day
decline after matching its morning highs just prior to 01:00 PM
EDT.

A quick check of some brokers showed Lehman Brothers (NYSE:LEH)
$73.02 -4.03% leading weakness when down 2.32%.  I thought to
myself "this is a bit surprising considering today's strong trade
in Treasuries, where LEH is one of the biggest bond houses."
Before the bell, LEH reported upside earnings, gapped up to trade
a session high of $76.80, then faded to hold $75 intra-day, but
when $75 was broken, fell to its close and weighed heavily on the
XBD.X today.

Market Snapshot / Internals - 06/15/04 Close



The major indices faded a bit from their mid-session highs, but
after having said earlier in today's session that today's trade
was shaping up to be very similar to what we saw Thursday of last
week, A/D lines at both the NYSE and NASDAQ finished stronger, as
did the NH/NL indications at the NYSE and NASDAQ.

It's PRICE that seems to be mattering most, as is often the case,
where I still feel that much of what we're seeing right now, is a
constant gyration where this week's Triple Witch is having
greater impact on trade, and most likely will into Friday's
close.  It may also have BIG impact on next week's trade, which I
hope to provide some insight toward, later on in the wrap.

Pivot Analysis Matrix -



While rather simplistic, I feel quite a bit of tension into
tonight's close.  Not necessarily from bulls and bears, but just
what the heck options market makers are going to "try" to do, or
better yet.... "have to do."  For the most part, today's highs
(tomorrow's DAILY R1s) and today's lows (tomorrow's DAILY S1s)
would be some levels to me monitoring very closely, where using
the Dow Industrials (INDU) 10,381.43 +0.44%, which close up 46
points does find correlative resistance at DAILY R1 and MONTHLY
R1 (which it has traded this month), but a break much above there
(10-point above) could trigger some unraveling for bullish gains
to DAILY R2 and correlative WEEKLY R1, which NONE of the equity-
based indices have been able to trade this week.

Earlier this afternoon, AFTER I had profiled a bullish day trade
in the Semiconductor HOLDRs (AMEX:SMH) $37.50 +1.35% from the
$37.60 level (stopped out at break-even on price), I saw that the
Semiconductor Index (SOX.X) 471.30 +1.25% had traded a session
high of 475.02 and it dawned on me that 475 was the "Max Pain"
level for June in the SOX.X.  I have no regrets for profiling
this bullish trade.  If the SOX.X had broken 475, perhaps
tomorrow's DAILY R1, then SOX.X at its WEEKLY Pivot (478.98)
would have carried SMH bulls to my bullish target.

Fact at tonight's close is that the SOX.X didn't make the break,
and we'll look at some intra-day charts of how I think we have to
tie things together heading into tomorrow, and even into Friday's
close.

As noted previously, when Lehman Brothers (LEH) broke the $75
level and had the XBD.X turning fractionally red, that also
marked today's high in the S&P Banks Index (BIX.X) 347.52 +0.9%
as it was challenging its WEEKLY Pivot.

I'd begin to build some near-term resistance observations with
SOX.X 475 and BIX.X 349.

10-year Treasury YIELD ($TNX.X) Chart - Daily Intervals



For impact more than anything, if the above chart were that of a
stock, we'd say "that's impressive!"  Not only the rise in YIELD
since the March relative lows of 3.7%, but today's single-day
decline, where in the context of the narrow WEEKLY Pivot levels,
today's turn was similar to an equity index trading above its
WEEKLY R1, then falling to WEEKLY S2.

S&P 500 (SPX.X) Option Chain - Sorted by most active



I wanted to quickly look at the SPX most active, and it may not
be what you and I would have thought would be amongst the most
active.  With PINK arrows, I note some volume levels as being
notable relative to open interest.  The September 1,135 call/put
would most likely be some continued rollout from June.  However,
what it the HECK is that Aug 1,200 call (SZPHT) doing, where
average trade size is institutional at 2,049 per trade?  Could be
a premium seller, but if interpreting both sides of the trade
(bullish/bearish) somebody sees something roughly 4-points either
side of 1,200 next month, and that notably higher that where
we're at right now.

In Monday's Index Wrap, I had highlighted both the June 1,125
call/put and June 1,135 call/put.  Note today that the 1,125
calls get little attention, but the 1,125 puts get greater
attention.  Open interest has built in BOTH as of Tuesday's
trade.

Now... look at their average trade size, but also consider OPEN
interest.  In my opinion, the trade size is "retail" (you and I).
One opinion I have on this is that it is "easy" to sell 50
contracts naked on the SPX 1,125 put, rake in a cool $11,350
today.

What happens on a break below SPX DAILY S1?  That's why I'm
keeping a rather close eye on the VIX.X right now.  Remember, a
naked put seller takes on the OBLIGATION to buy the SPX at 1,125.

I'm not saying the "retail" trader is wrong, we know they can be
after watching short interest and commercial shorts build as the
SPY and QQQ marched higher all last year.  Just understand on a
near-term basis what can happen if they all head for the door if
they've over leveraged and the "quick buck" suddenly evaporates.

I can't say for sure, but the recent session's gaps up and down,
(see the daily percentage gain/losses in the near-term June
options) have been pleasurable for some, but equally painful for
others.

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



For a moment, lets place option expiration aside and at least
realize that today's close reverses about 1/2 of yesterday's
declines (all of them at one point) where the rebound came on a
retest of our broken downward trend (resistance broken becoming
support).  Now back to option action.  Last night I was looking
for a naked put trade in the SPX, but on a decline to 1,115.
Today's high volume in the June 1,125 puts wasn't a bad trade,
where RISK to WEEKLY S2 being assessed, was a high probability
trade with expiration nearing.  It's the LIGHT volume in the
1,125 calls, and the lower average trade size in the 1,125 puts
that suggests the bulk of put sellers was "retail" oriented.

Semiconductor Index (SOX.X) - 10-minute intervals



One part of trading is taking a chance to seek profit in
anticipation for gain, where upside looks to be present.  I think
the above intra-day chart of the SOX.X gives some good technical
support-resistance trade.  I "had" to take a chance from the
bullish side (some buy programs, declining VIX.X and VXN.X) to
give the SMH a shot from the long side.  Only reason I raised the
stop to breakeven was the realization of what looked to be taking
place (VIX.X and VXN.X started to rise again after SOX.X edged
off 475).  It's a tough trade into expiration, and I'm using
tight stops as Triple Witch expiration can become VERY volatile,
it is difficult to try and monitor option unraveling, which can
really move and index, and a stock.

OK... now let's take a look at an intra-day chart of the S&P
Banks Index (BIX.X) 347.52 +0.90%.  Good one here as this index
does NOT trade with options!!!  Maybe a more "natural" trade.

S&P Banks Index (BIX.X) - 10-minute Intervals



If I had not been more focused on the SMH and QQQ today, I might
have noticed that the BIX.X and SPX.X had both gotten to their
WEEKLY Pivots at about the same time.  Maybe the BIX.X, which
doesn't trade options might not have "confirmed" the SPX.X 1-
point move above its WEEKLY Pivot.  SPX afternoon and session low
of 1,128.84 was 0.01 above its WEEKLY Pivot.  For the most part,
BIX.X and SPX.X traded "identical" today.  BIX.X without options
can become a good "natural" trade perhaps offsetting any option
influence found in the SPX.

Now, I do make note that the money centery KBW Bank Index (BKX.X)
96.85 +0.62% does trade with options, and there are common
components between the BIX.X and BKX.X, where any attempt by the
BKX.X to gravitate back HIGHER toward its June "Max Pain" of
99.00 could have bullish influence on the BIX.X.

NASDAQ-100 Tracker (QQQ) - 10-minute intervals



I'm marking SOX.X 475 against the QQQ's WEEKLY 38.2% retracement
as a correlation.  However, I might make note that without the
impressive gain from index heavyweight MSFT in today's trade,
with the SOX.X pinned below 475, then QQQ might not have made it
to $36.99.  On the above chart, I forgot to market the
MONTHLY/WEEKLY pivot retracement overlap down at $36.32, but it
is there, and I'd eyeball the SOX.X equivalent of 465, which is
really Monday's close.

Jeff Bailey


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

CPI Cools Concerns
- J. Brown

Monday's market wide decline was fueled by rising fears of a 50
basis point rate hike at the end of June.  Hawkish comments from
Federal Reserve officials late last week made it clear that if
inflation rose too quickly so to would their monetary policy.
All eyes were on the May CPI report this morning.  The overall
rise in consumer prices jumped 0.6%, the strongest move in three
years.  Fortunately, everyone knew the Fed was watching the core
rate of inflation that excludes more volatile food and energy
prices.  May's core rate rose just 0.2%, which was inline with
expectations.  This report eased tensions that the Fed might be
forced to raise rates too quickly and Wall Street felt more
confident that the FOMC would indeed use their "measured"
approach with just a 25-point hike on the June 30th.

The May CPI number sparked a rally in both stocks and bonds today
but trading began to slow midday as investors turned to hear
Greenspan testify before his Senate confirmation hearings.  As we
moved into the afternoon stocks began to falter and by the close
we were well off the highs of the session.

Overall it was a bullish session with market internals strongly
positive.  Advancing stocks overshadowed decliners 11 to 3 on the
NYSE and by more than 2 to 1 on the NASDAQ.  Up volume was four
times down volume on the NYSE and the NASDAQ.

What is a potential concern are the volatility indices.  Once
again the VIX/VXO/VXN are moving toward their recent lows.
Usually when they reach such extremes the stock market tends to
sell-off.  These volatility indices aren't there yet but they are
nearing dangerous levels and traders should keep this in mind as
they consider any bullish positions.

Tomorrow is another big day for economic data and Fed head
speeches.  Wednesday brings the housing starts number, building
permits, industrial production, capacity utilization and the
Fed's Beige Book report.  Wall Street will also keep one ear
turned toward Fed governor Guynn and Fed governor Broaddus as
they speak on the economy.



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

Market Averages

DJIA ($INDU)

52-week High: 10753
52-week Low :  8871
Current     : 10380

Moving Averages:
(Simple)

 10-dma: 10322
 50-dma: 10266
200-dma: 10122



S&P 500 ($SPX)

52-week High: 1163
52-week Low :  962
Current     : 1132

Moving Averages:
(Simple)

 10-dma: 1129
 50-dma: 1120
200-dma: 1092



Nasdaq-100 ($NDX)

52-week High: 1559
52-week Low : 1180
Current     : 1479

Moving Averages:
(Simple)

 10-dma: 1470
 50-dma: 1449
200-dma: 1434



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

CBOE Market Volatility Index (VIX) = 15.05 -1.02
CBOE Mkt Volatility old VIX  (VXO) = 15.06 -1.09
Nasdaq Volatility Index (VXN)      = 20.88 -1.36


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

          Put/Call Ratio  Call Volume   Put Volume

Total          0.78        737,671       578,207
Equity Only    0.63        534,309       337,034
OEX            1.29         41,021        52,912
QQQ            1.05         49,427        51,777


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

Bullish Percent Data

           Current   Change   Status
NYSE          65.3    - 1     Bear Confirmed
NASDAQ-100    39.0    - 1     BULL ALERT
Dow Indust.   70.0    + 0     Bear Confirmed
S&P 500       63.4    + 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: 0.96
10-dma: 0.96
21-dma: 1.00
55-dma: 1.01


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    2225      2085
Decliners     626       971

New Highs      70        41
New Lows       39        41

Up Volume   1260M     1178M
Down Vol.    325M      300M

Total Vol.  1612M     1498M
M = millions


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

Commitments Of Traders Report: 06/08/04

Weekly COT report discloses positions held by small specs
and commercial traders of index futures contracts at the
Chicago Mercantile Exchange and Chicago Board of Trade. COT data
can be found at www.cftc.gov.

Small specs are the general trading public with commercials being
financial institutions. Commercials are historically on the
correct side of future trend changes while small specs tend
to be wrong.

S&P 500

Commercial trades are turning more bearish with an increase
in short positions while pulling a little bit of money out
of their longs.  Small traders have increased their positions
in both longs and shorts but continue to remain net bullish.


Commercials   Long      Short      Net     % Of OI
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%)
06/08/04      397,294   452,904   (55,610)   (6.5%)

Most bearish reading of the year: (111,956) -  3/06/02
Most bullish reading of the year:   23,977  - 12/09/03

Small Traders Long      Short      Net     % of OI
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%
06/08/04      158,373    92,794    65,579    26.1%

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

Hmm... could the commercial traders be trying to tell us something?
Both their large S&P futures positions and their S&P e-minis
positions have turned net short or bearish.  As would be
expected the small traders is walking the other way and has
significantly beefed up their longs.


Commercials   Long      Short      Net     % Of OI
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%
06/08/04      367,191   409,246    (42,055)   (5.4%)

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
05/18/04       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%
06/08/04      140,191     84,649    55,542    24.7%

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 remain net long on the NASDAQ 100.
Small traders remain strongly net short.


Commercials   Long      Short      Net     % of OI
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%
06/08/04       64,747     41,178    23,569   22.3%

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
05/18/04        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%)
06/08/04        9,716    29,594   (19,878)  (50.6%)

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

There has been very little action from the commercial traders
in the Dow Jones futures but they remain net short.  Small
traders remain net long but their resolve may be weakening
a bit.


Commercials   Long      Short      Net     % of OI
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%)
06/08/04       24,636    25,821   (1,185)     (2.3%)

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
05/18/04        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%
06/08/04        8,325     6,431    1,894     12.8%

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


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The Option Investor Newsletter                  Tuesday 06-15-2004
Copyright 2004, All rights reserved.                        2 of 3
Redistribution in any form strictly prohibited.

In Section Two:

Dropped Calls: AIG, BA, JNJ
Dropped Puts: None
Call Play Updates: BCR, DGX, GDW, HSY, QCOM, ZMH, ERTS, MERQ
New Calls Plays: ETN
Put Play Updates: CCMP, KSS, SYMC
New Put Plays: MO


****************
PICKS WE DROPPED
****************

When we drop a pick it doesn't mean we are recommending a sell
on that play. Many dropped picks go on to be very profitable.
We drop a pick because something happened to change its
profile. News, price, direction, etc. We drop it because we
don't want anyone else starting a new play at that time.
We have hundreds of new readers with each issue who are
unfamiliar with the previous history for that pick and we
want them to look at any current pick as a valid play.


CALLS:
*****

American Int'l Grp. - AIG - cls: 72.15 chng: -0.61 stp: 71.50

Two weeks after we began coverage on AIG, the stock has made a
round trip, right back where we started.  After the breakout over
the 50-dma, we tracked the stock up to the $75 level, at which
point we were expecting a bit of a retracement and then another
leg up.  Our plan took a wrong turn yesterday when the stock
closed right on the 50-dma and today's high-volume violation of
that average looks ominous.  Based on the price action so far
this week, it looks like the H&S pattern we noted over the
weekend may be setting up for confirmation later this month.
Even though our stop hasn't yet been violated, with the increased
volume on today's drop and the stock right back to our starting
point, this looks like a good place to make our exit.

Picked on May 25th at        $72.00
Change since picked:          +0.15
Earnings Date               4/22/04 (confirmed)
Average Daily Volume =     5.35 mln



The Boeing Company - BA - cls: 49.25 chng: +0.42 stop: 47.25

Following its breakout over $46 a couple weeks ago, BA has done
everything we've asked of it, including rising to within spitting
distance of our $50 target this morning.  The opening gap,
courtesy of a Navy contract win, sent the stock soaring to $49.90
before retracing back to fill that gap by the end of the day.  No
matter, we're happy with the performance and in keeping with our
prior comments are going to suggest exiting the play near current
levels.  Another push up towards the $50 would be a gift at this
point and should be used to exit any remaining open positions.

Picked on May 27th at        $46.20
Change since picked:          +3.05
Earnings Date               4/28/04 (confirmed)
Average Daily Volume =     2.99 mln



Johnson & Johnson - JNJ - cls: 56.21 chng: -0.80 stop: 55.25

After pushing up to the $57 level last week, JNJ looked like it
might finally get enough buying interest to continue its journey
up to the $58 resistance level this week before entering the next
phase of consolidation.  Alas, it wasn't to be, as the stock sold
off sharply today, ending just above the $56 level.  JNJ may yet
continue up to the $58 and then possibly $60 levels, but it will
do so without us.  We knew when we began coverage that the stock
would be a slow-mover, but this progress is just a bit too slow,
even for a longer-term option play.  Use any pop back towards the
$57 level to exit open positions.  We're dumping the play tonight
to make room for stronger candidates.

Picked on May 9th at         $55.30
Change since picked:          +0.91
Earnings Date               4/13/04 (confirmed)
Average Daily Volume =     7.34 mln




PUTS:
*****

None


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

Bard C R - BCR - close: 57.30 chg: -0.02 stop: 55.95*new*

Unfortunately, we have very little to report on for BCR.  Shares
continue to trade sideways between $56.00 and $58.00.  Technicals
have turned sideways.  If we don't see a breakout over the $58.00
level soon we may plan to drop BCR on Thursday.  We are going to
raise our stop loss to $55.95.  It wouldn't hurt to close
profitable positions now.

Picked on May 20 at $ 55.00 (post split)
Change since picked: + 2.30
Earnings Date      04/20/04 (confirmed)
Average Daily Volume:   386 thousand
Chart =


---

Quest Diagnostic - DGX - cls: 87.45 chg: +0.51 stop: 84.95*new*

It's time to see some action in DGX.  Shares of this stock have
been consolidating for the last six sessions.  Volume has been
light on the pull back and that's what we want to see but now
it's time for the bounce.  We're still willing to consider new
long positions on a move through $88.00 or $88.25.  In the mean
time we're going to raise our stop loss to $84.95.  Look for
potential headlines tomorrow when DGX presents at the Thomas
Weisel Growth conference in California.

Picked on June 01 at $ 87.70
Change since picked:  - 0.25
Earnings Date       04/22/04 (confirmed)
Average Daily Volume:    603 thousand
Chart =


---

Golden West Fncl - GDW - close: 108.27 chg: +1.92 stop: 107.00

In spite of the volatile and bearish session on Monday GDW's P&F
chart remains bullish and points to a $129 price target.  Shares
of GDW dropped strongly yesterday without any apparent catalyst
other than the market-wide sell-off.  GDW did find support above
$105 and its simple 50-dma and the stock produced a decent bounce
today.  Chart readers will note that GDW appears stuck in a bull
flag consolidation pattern.  Our TRIGGER to go long is $110.01
but more aggressive traders could try and catch the breakout from
this flag pattern with a trigger above $108.50.

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 =


---


Hershey Foods - HSY - close: 92.03 chg: +0.28 stop: 89.50*new*

Here we go!  HSY is set to split 2-for-1 and should open
Wednesday morning near $46.00 per share.  That means our new stop
loss at $89.50 will become $44.75.   Any options owned should
half in value while double in quantity and potentially change
their symbols so check with your broker about the new symbols, if
any, when it comes time to sell.  We're still bullish on HSY but
sometimes stocks can experience some post-split depression if
they've enjoyed a strong pre-split ramp up.  We'd probably
hesitate to open new positions unless HSY gave us a nice bounce
from the $45.50 region.

Picked on June 08 at $ 92.22
Change since picked:  - 0.19
Earnings Date       04/22/04 (confirmed)
Average Daily Volume:    441 thousand
Chart =


---


QUALCOMM - QCOM - close: 69.40 chg: +0.68 stop: 67.00*new*

QCOM continues to coil more tightly under resistance at $70.00
and we expect an upside breakout soon.  Traders have been buying
mild technical support at its simple 10-dma, which means any dip
tomorrow "should" be bought at $68.50.  We are suggesting that
investors wait for the breakout over $70.00 before considering
any new long positions.  We're going to raise our stop loss to
$67.00.

Picked on May 24 at $ 66.01
Change since picked: + 3.39
Earnings Date      04/22/04 (confirmed)
Average Daily Volume:   9.6 million
Chart =


---


Zimmer Holdings - ZMH - close: 87.64 chg: +0.54 stop: 84.25

Any day now.  Yes we're expecting ZMH to breakout above
resistance at $88.00 any day now.  The stock continues to trade
sideways in a narrow range (86.65-88.00).  Now that ZMH has
churned sideways for the last week and a half its technicals are
flattening out and they don't offer as many clues.  Yet we're
still bullish and suggest traders wait for the breakout over
$88.00 before evaluating new bullish positions.  We didn't see
any news come out of ZMH's presentation at the Thomas Weisel
Growth Forum today.

Picked on May 27 at $ 85.20
Change since picked: + 2.44
Earnings Date      04/26/04 (confirmed)
Average Daily Volume:   1.2 million
Chart =


--

Electronic Arts - ERTS - close: 51.89 change: +0.68 stop: 50.00

Last week's rally in ERTS was certainly encouraging, especially
with the issuance of the new PnF Buy signal as the stock traded
over the $53 level.  But the fade into the end of the week and
then the sharp drop through the 50-dma ($51.42) yesterday did not
inspire confidence. Fortunately, ERTS rebounded without tapping
our $50 stop and spent most of today's session back on the right
side of the 50-dma.  While this could turn out to be a solid
entry point, we want to exercise caution due to the fact that the
daily oscillators have just issued fresh Sell signals.  We'll
stick with our action plan of buying dips near the $51 level,
with the reminder to keep those stops tight at $50.  While some
may want to buy strength over last week's highs, we're hesitant
to endorse such a strategy with the knowledge that there should
be solid resistance near our $55-56 target for the play.  That
just doesn't leave enough upside potential to work with.

Picked on May 18th at        $49.60
Change since picked:          +2.29
Earnings Date               4/29/04 (confirmed)
Average Daily Volume =     3.85 mln



--

Mercury Interact. - MERQ - cls: 48.52 chng: +0.02 stp: 46.50*new*

Everything looked so encouraging for our MERQ play last Monday
after the ramp right through the $48.50 resistance level.  Since
then, the stock has settled into a small, shallow descending
channel of consolidation.  While at first blush it may not seem
conducive to our bullish goals for the play, another perspective
is that this could be a short-term bull flag, meaning that the
likely resolution will be an upside breakout.  Aggressive traders
can look to buy this dip, with strong support likely to be found
in the $48 area, which is both the site of last week's breakout,
as well as the 10-dma ($48.21).  Reinforcing that support is the
20-dma ($47.05), which should cross up through the 200-dma
($47.14) tomorrow.  Traders looking to enter on strength will
want to wait for a move over $49.75 before playing.  Raise stops
to $46.50, just under the June 3rd intraday low.

Picked on June 6th at        $47.56
Change since picked:          +1.50
Earnings Date               4/22/04 (confirmed)
Average Daily Volume =     2.38 mln




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

Eaton Corp - ETN - close: 61.41 chg: +0.85 stop: 59.95

Company Description:
Eaton Corporation is a diversified industrial manufacturer with
2003 sales of $8.1 billion. Eaton is a global leader in fluid
power systems and services for industrial, mobile and aircraft
equipment; electrical systems and components for power quality,
distribution and control; automotive engine air management
systems and powertrain controls for fuel economy; and intelligent
drivetrain systems for fuel economy and safety in trucks. Eaton
has more than 54,000 employees and sells products to customers in
more than 100 countries. (source: company press release)

Why We Like It:
We like ETN for a couple of reasons.  The stock has been very
strong the last 3 1/2 weeks and shares are on the verge of a
major breakout.  ETN peaked near $62.00 back in January 2004 and
has been consolidating under resistance at $62.00 ever since.  If
the stock can break out it would produce a new triple-top
breakout buy signal on its P&F chart.  Plus, if you look closely
at its daily chart ETN appears to be building a reverse head-and-
shoulders pattern.  The H&S pattern suggests we can target the
$71.00 level on a break of the neckline.

We're going to use a TRIGGER at $62.05 to open the play for us.
Until ETN trades at or above this level we'll sit out.  If we are
triggered then we'll target a move to $67.00-70.00.  Our initial
stop loss will be $59.95.

Suggested Options:
We're going to suggest the July options but the Octobers are
available.  Our favorite would be the July 60s.

BUY CALL JUL 60.00 ETN-GL OI= 293 Last traded @ $2.90
BUY CALL JUL 62.50 ETN-GZ OI= 902 Last traded @ $1.55
BUY CALL JUL 65.00 ETN-GM OI= 182 Last traded @ $0.75

Annotated Chart:



Picked on June xx at $ xx.xx <-- See TRIGGER
Change since picked:  + 0.00
Earnings Date       04/14/04 (confirmed)
Average Daily Volume:    1.0 million



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

Cabot Micro. - CCMP - close: 28.20 chg: +0.15 stop: 30.45*new*

Our recently added put play is hitting all the right notes so
far.  Monday's weakness was led by a strong drop in the SOX
semiconductor index.  CCMP, while not technically a chip builder,
is influenced by moves in the chip group.  Shares of CCMP lost
4.78% on Monday and confirmed the breakdown under the $30 mark.
We remain bearish.  Traders can use a failed rally under $30.00
or moves under $28.00 as potential entry points.  CCMP does have
some support at $26.80 but we expect it to fail now that the MACD
has produced a new sell signal.  We are going to lower our stop
loss again this time from $30.65 to $30.45.

Picked on June 13 at $ 29.46
Change since picked:  - 1.26
Earnings Date       04/22/04 (confirmed)
Average Daily Volume:    3.7 million
Chart =


---

Kohl's Corp - KSS - close: 46.56 change: -0.24 stop: 49.01

Our put play in KSS is right on target.  Monday's decline broke
through minor support at $47.25-47.00.  The stock tried to
rebound this morning but hit selling pressure at $47.26.  The
slide stopped right at its 21 and 100-dma's but we don't expect
them to hold as support with the MACD in a new sell signal.  If
you're looking for entry points consider a roll over under $47.25
or a move through $46.50.  Remember that we're targeting the $41-
42 range.

Picked on June 06 at $ 47.45
Change since picked:  - 0.89
Earnings Date       05/13/04 (confirmed)
Average Daily Volume:    3.7 million
Chart =


---

Symantec Corp. - SYMC - cls: 42.42 chng: -0.58 stop: 45.50*new*

After several failed breakdown attempts, SYMC finally got the job
done this week, smashing through the recent lows on Monday and
continuing the carnage the morning, with the early lows coming
very close to our $39-40 target.  Nimble traders got a brief shot
at locking in some gains this morning as the stock began to
rebound from just over the $40 level.  The question now is
whether this was the bottom for the move or whether the bears
have more in store.  Despite the strength of the rebound, we feel
the stock will make another stab down into the $39-40 area,
meeting our target for the play.  We're not so much interested in
new entries at this point, as watching for attractive exit
points.  Should that target zone be reached later this week,
don't hesitate to pull the trigger and book that gain.  We're
lowering our stop tonight to $45.50, which will be just over the
20-dma ($45.53) by tomorrow.

Picked on May 13th at         $44.16
Change since picked:           -1.81
Earnings Date                4/28/04 (confirmed)
Average Daily Volume =      4.92 mln




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

Altria Group - MO - close: 47.55 change: -0.07 stop: 49.50

Company Description:
Altria Group, Inc., formerly Philip Morris Companies Inc., is a
holding company and the parent company of Philip Companies Inc.
The company's wholly owned subsidiaries, Philip Morris USA,
Philip Morris International and its majority-owned (84.2%)
subsidiary, Kraft Foods Inc. are engaged in the manufacture and
sale of various consumer products, including cigarettes, foods
and beverages.  The company changed its name from Philip Morris
Companies to Altria Group in January 2003.

Why we like it:
As regular as clockwork, it seems every time that shares of MO
get up near the $60 level, legal challenges arise to knock the
stock back down the charts.  This time around the catalyst seems
to have been the issue of whether the government can force the
disgorgement of past profits in penalizing the Tobacco stocks.
Regardless of the outcome of this issue, the technical picture is
clear.  After rising over the $58 level, MO dropped back into the
low $50s in March, rebounded to a lower high near $57 and then
plummeted in early May, finding support first near $48 and then
most recently near $45.  That most recent rebound stalled out
near the $49 level and over the past few days the stock has been
in the process of rolling over again.  The PnF chart shows just
how bad the technical situation is, as the drop from early May
created a large Sell signal that currently has the stock working
on a downside target of $22.

The major breakdown already occurred, and the rollover is already
in progress, negating the need for an entry trigger.  Traders
looking to enter on further weakness can target entries on a
break below $47.25, while those looking for a more favorable
entry can look for a failed rebound in the vicinity of the 10-dma
($48.31) and 20-dma ($48.37), which would also come very close to
filling Monday's gap.  The $45 level is an obvious level of
support, having produced the rebound from the late May selloff.
But we're looking for the stock to set a lower low on this leg,
with the strong historical support in the $42-43 area being a
reasonable target to shoot for.  Stops should initially be set at
$49.50, just over the top of the most recent rally attempt.

Suggested Options:
Aggressive traders will want to use the July 47 Put while those
with a more conservative approach will want to use the July 50
strike.  Our preferred option is the July 50 strike, as it is
currently in the money and should provide ample time for the play
to move in our favor.

BUY PUT JUL-50*MO -SJ OI= 598 last traded @ $3.10
BUY PUT JUL-47 MO -SW OI=3755 last traded @ $1.35

Annotated Chart of MO:



Picked on June 15th at         $47.55
Change since picked:           +0.00
Earnings Date                7/20/04 (unconfirmed)
Average Daily Volume =      6.97 mln




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The Option Investor Newsletter                  Tuesday 06-15-2004
Copyright 2004, All rights reserved.                        3 of 3
Redistribution in any form strictly prohibited.

In Section Three:

Watch List: EBAY, WFMI, TEVA, GS
Spreads & Straddles: Stocks Rebound On Hopes Of "Measured" Rate
                     Increase
Premium Selling Plays: Naked Puts & Calls


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

eBay Inc - EBAY - close: 87.44 change: +1.83

WHAT TO WATCH: We strongly considered adding EBAY to the play
list tonight.  This looks like an entry point with the strong
bounce from its 21-dma.  Yet one could argue EBAY has not yet
broken out of what looks like a bull flag consolidation pattern.
More aggressive traders might want to use a move through the
$88.00 level as a trigger point to consider longs.

Chart=


---

Whole Foods Market Inc - WFMI - close: 87.78 change: +1.81

WHAT TO WATCH: WFMI also looks like a good candidate for the call
list tonight.  The stock has been strong and resistant to profit
taking.  It held support at $85 on Monday when the rest of the
market was sinking.  Today's move is a nice breakout to new
highs.  The $90 level might be some resistance but we'd consider
new plays with a tight stop.  Its P&F target is $98.00.

Chart=


---

Teva Pharmaceuticals - TEVA - close: 67.10 change: +1.08

WHAT TO WATCH: Yesterday TEVA announced a 2-for-1 stock split.
The split is payable on June 30th and shares should begin trading
post-split on July 1st.  We think a trigger over $67.50 might be
a good entry point to try and capitalize on any pre-split ramp
up.  A move over $68.00 would produce a new triple-top breakout
buy signal on its P&F chart, which currently points to a $77
price target.

Chart=


---

Goldman Sachs - GS - close: 90.21 change: -1.32

WHAT TO WATCH: A week or two ago we tried to play GS as a bearish
play but the stock never hit our trigger under support at $90.00
to initiate the strategy.  Investor reaction to Lehman Brother's
earnings report today has sent GS back toward support at $90
again.  Short-term traders might want to try again.  Use a
trigger under $90.00 and target a drop to $85.00.  However, be
careful and be aware of GS' earnings report due on next Tuesday.
We would not hold over the announcement.

Chart=




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

CI $68.95 +0.70 - Cigna looks like a potential bullish candidate
if it can breakout over resistance in the 70.00-70.50 range.

SLB $59.92 +1.22 - We mentioned SLB in the MarketMonitor today.
The breakout over its 40 and 50-dma's looks great but we'd
consider a trigger over $60.00 as an entry point with a target of
$64.50-65.00.

AET $84.79 +1.10 - We recently played AET as a call and it may be
time to do it again.  Keep an eye on it for the next move higher.

INFY $86.03 +3.28 - INFY broke out over resistance at $85.00
today but still has resistance at $90. Nimble traders might be
able to scalp the next move higher.


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

Stocks Rebound On Hopes Of "Measured" Rate Increase
By Ray Cummins

U.S. equities rallied Tuesday as investors were comforted by
Fed Chair Alan Greenspan's assurance of a slow and methodical
response to inflation.

Analysts also speculated that today's CPI data removes the need
for Fed policymakers to raise interest rates by 50 basis points
when they meet later this month and stocks responded positively
to that outlook.  The Dow Jones Industrial Average close up 45
points at 10,380 with big moves coming from Honeywell (NYSE:HON),
Caterpillar (NYSE:CAT), Alcoa (NYSE:AA), Merck (NYSE:MRK), United
Technologies (NYSE:UTX), and General Motors (NYSE:GM).  Microsoft
(NASDAQ:MSFT) and Intel (NASDAQ:INTC) led the technology index
higher with the NASDAQ finishing 25 points higher at 1,995.  The
S&P 500 added 6 points to close at 1,132, with gold and energy
shares among the best performers.  Winners outnumbered losers by
a 4 to 1 margin on the New York Stock Exchange and by 2 to 1 on
the technology exchange.  Big Board volume was over 1.35 billion
shares while about 1.5 billion shares traded on the NASDAQ.  Bond
prices remained higher, while yields fell back from recent highs,
despite a strong reading for the University of Michigan consumer
sentiment gauge.  The benchmark 10-year Treasury note rose 48/32
with its yield falling to 4.68%.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
SUMMARY OF CURRENT POSITIONS - AS OF 06/15/04
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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  51.78   JUN   45  47   0.35   47.15   0.35   Open
IMDC    61.17  56.69   JUN   50  55   0.50   54.50   0.50   Open?
GPRO    38.30  42.03   JUN   30  35   0.70   34.30   0.70   Open
ASD     35.96  38.47   JUN   32  33   0.16   33.17   0.16   Open
IMCL    71.36  79.16   JUN   50  55   0.50   54.50   0.50   Open
CSC     42.17  42.33   JUN   35  40   0.65   39.35   0.65   Open
GILD    62.54  63.87   JUN   55  60   1.00   59.00   1.00   Open
RIMM    49.99  57.06   JUN   40  42   0.22   42.28   0.22   Open
QCOM    65.40  69.40   JUN   55  60   0.45   59.55   0.45   Open
ZBRA    80.08  79.18   JUN   70  75   0.65   74.35   0.65   Open
BRCM    42.54  42.84   JUN   37  40   0.30   39.70   0.30   Open
EBAY    85.33  87.45   JUN   75  80   0.50   79.50   0.50   Open
AMZN    48.50  50.11   JUN   42  45   0.30   44.70   0.30   Open
EYET    44.32  42.13   JUN   35  40   0.50   39.50   0.50   Open
RIMM    59.97  57.06   JUN   47  50   0.20   49.80   0.20   Open
AMZN    50.95  50.11   JUL   43  45   0.30   44.70   0.30   Open
YHOO    31.87  32.10   JUL   25  27   0.30   27.20   0.30   Open
CFC     69.15  68.06   JUL   60  63   0.35   63.03   0.35   Open
QCOM    69.86  69.40   JUL   60  65   0.45   64.55   0.45   Open
SWIR    33.83  34.28   JUL   25  30   0.90   29.10   0.90   Open

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

The position in Martek Biosciences (NASDAQ:MATK) has been closed
to limit potential losses.  Inamed (NASDAQ:IMDC) and Eyetech
Pharmaceuticals (NASDAQ:EYET) remain on the "watch" list.


CALL-CREDIT SPREADS

Stock   Pick   Last   Month  LC  SC  Credit   CB     G/L   Status

CTX     44.80  46.06   JUN   55  50   0.50   50.50   0.50   Open
IVGN    67.61  64.17   JUN   80  75   0.55   75.55   0.55   Open
VIP     91.45  90.62   JUN  110 105   0.50  105.50   0.50   Open
CERN    41.33  43.95   JUN   50  45   0.55   45.55   0.55   Open
SEPR    45.06  49.05   JUN   55  50   0.60   50.60   0.60   Open?
BSC     80.02  79.43   JUN   90  85   0.50   85.50   0.50   Open
FRX     59.20  61.76   JUN   70  65   0.55   65.55   0.55   Open
MDT     47.66  49.46   JUN   55  50   0.60   50.60   0.60   Open?
AZO     83.38  88.76   JUN   95  90   0.20   90.20   0.20   Open?
RYL     79.60  76.25   JUN   90  85   0.60   85.60   0.60   Open
VIP     92.25  90.62   JUN  105 100   0.60  100.60   0.60   Open
APPX    34.03  31.21   JUL   45  40   0.50   40.50   0.50   Open
OIH     65.40  68.40   JUL   75  70   0.65   70.65   0.65   Open
GENZ    41.93  42.88   JUL   47  45   0.30   45.30   0.30   Open
INSP    34.71  33.13   JUL   45  40   0.65   40.65   0.65   Open
WMS     28.75  27.01   JUL   35  30   0.65   30.65   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), although profitable, has
been closed to limit potential losses.  Sepracor (NASDAQ:SEPR) is
an "early-exit" candidate.  Autozone (NYSE:AZO) and Medtronic
(NYSE:MDT) are on the "watch" list.  The oil service segment has
been a bullish sector recently and the OIH is nearing resistance
at $68.50.  A move above this area would signal our exit in the
bearish position.


DEBIT STRADDLES

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

KKD     19.63  21.18   JUN    20    20     3.00    2.80   Closed
RIO     49.38  45.35   JUN    50    50     2.65    4.20    Open?
GRMN    32.60  33.44   JUL    35    30     2.15    2.35    Open
SNDK    22.90  20.68   JUL    22    22     3.40    3.60    Open
GDT     56.02  56.60   JUL    55    55     4.80    4.50    Open

Companhia Vale Do Rio Doce (NYSE:RIO) reached our profit target
in only one week and Sandisk (NASDAQ:SNDK) has achieved a small
profit.  The Krispy Kreme (NYSE:KKD) straddle has been closed to
preserve capital.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
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.

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

CTSH - Cognizant Technology  $48.50  *** A Big Day! ***

Cognizant Technology Solutions (NASDAQ:CTSH) delivers full life
cycle solutions to complex software development and maintenance
problems that companies face as they transition to e-business.
These information technology (IT) services are delivered through
the use of a seamless on-site and offshore consulting project
team.  The company's solutions include application development
and integration, application management and re-engineering
services.

CTSH - Cognizant Technology  $48.50

PLAY (conservative - bullish/credit spread):

BUY  PUT  JUL-40.00  UPU-SH  OI=1233  ASK=$0.35
SELL PUT  JUL-45.00  UPU-SI  OI=3203  BID=$0.85
INITIAL NET-CREDIT TARGET=$0.55-$0.60
POTENTIAL PROFIT(max)=12% B/E=$44.45


__________________________________________________________________

NUE - Nucor  $69.54  *** Steel Stocks Soar! ***

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

NUE - Nucor  $69.54

PLAY (less conservative - bullish/credit spread):

BUY  PUT  JUL-60.00  NUE-SL  OI=1505  ASK=$0.40
SELL PUT  JUL-65.00  NUE-SM  OI=511   BID=$1.15
INITIAL NET-CREDIT TARGET=$0.75-$0.85
POTENTIAL PROFIT(max)=17% B/E=$64.25


__________________________________________________________________

SII - Smith International  $53.26  *** Strong Sector! ***

Smith International (NYSE:SII) is a worldwide supplier of premium
products and services to the oil & gas exploration and production
industry, the petrochemical industry and other industrial markets.
The firm provides a comprehensive line of technologically advanced
products and engineering services, including various drilling and
completion fluid systems, solids control, waste management services,
production chemicals, three-cone and diamond drill bits, turbines,
fishing services, drilling tools, under-reamers, casing exit and
multilateral systems, packers and liner hangers.  The firm also
offers supply chain management solutions through an large North
American branch network providing pipe, valves, fittings, mill,
safety and other maintenance products.

SII - Smith International  $53.26

PLAY (conservative - bullish/credit spread):

BUY  PUT  JUL-47.50  SII-ST  OI=955   ASK=$0.35
SELL PUT  JUL-50.00  SII-SJ  OI=1026  BID=$0.65
INITIAL NET-CREDIT TARGET=$0.30-$0.40
POTENTIAL PROFIT(max)=14% B/E=$49.70



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

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.

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

GS - Goldman Sachs  $90.21  *** Brokerage Shares Slump! ***

The Goldman Sachs Group (NYSE:GS) is a global investment banking
and securities firm that provides a range of services worldwide
to a substantial and diversified client base.  The firm operates
offices in over 20 countries with activities are divided into two
primary segments: Global Capital Markets, and Asset Management
and Securities Services.  The Global Capital Markets segment,
which represented 64% of the firm's 2001 net revenues, consists
of Investment Banking, and Trading and Principal Investments.
Goldman's Asset Management segment offers investment strategies
and advice across all major asset classes: global equity; fixed
income, including money market instruments; currency, as well as
alternative investment products.  The firm's Securities Services
activities include brokerage, financing services and securities
lending.

GS - Goldman Sachs  $90.21

PLAY (less conservative - bearish/credit spread):

BUY  CALL  JUL-100.00  GS-GT  OI=14196  ASK=$0.25
SELL CALL  JUL-95.00   GS-GS  OI=8730   BID=$0.95
INITIAL NET-CREDIT TARGET=$0.70-$0.75
POTENTIAL PROFIT(max)=16% B/E=$95.70


__________________________________________________________________

SYMC - Symantec  $42.42  *** New Competition: Microsoft!  ***

Symantec (NASDAQ:SYMC) provides content and network security
software and appliance solutions to enterprises, individuals and
service providers.  The firm provides client, gateway and server
security solutions for virus protection, firewall and virtual
private network, security management, intrusion detection, e-mail
filtering and Internet content, remote management technologies
and security services to enterprises and service providers
worldwide.  The company views its business in five operating
major segments: enterprise security, enterprise administration,
consumer products, services and other activities.

SYMC - Symantec  $42.42

PLAY (less conservative - bearish/credit spread):

BUY  CALL  JUL-50.00  SYQ-GJ  OI=4319  ASK=$0.20
SELL CALL  JUL-45.00  SYQ-GI  OI=2628  BID=$0.80
INITIAL NET-CREDIT TARGET=$0.65-$0.70
POTENTIAL PROFIT(max)=15% B/E=$45.65



~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
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.
__________________________________________________________________


No straddles or strangles today...



*****************************************
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 06/15/04
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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

LPNT     JUN    35    34.30   37.86    0.70   4.03%   2.04%
ASCA     JUN    30    29.35   32.89    0.65   5.02%   2.21%
DRIV     JUN    25    24.25   31.91    0.75   7.04%   3.09%
FARO     JUN    20    19.45   24.72    0.55   7.32%   2.83%
GIVN     JUN    30    29.25   32.50    0.75   7.01%   2.56%
MVSN     JUN    20    19.65   23.69    0.35   4.54%   1.78%
PDII     JUN    22    22.00   31.53    0.50   6.67%   2.27%
SMTC     JUN    20    19.50   23.52    0.50   6.25%   2.56%
CELG     JUN    45    44.40   54.70    0.60   4.75%   1.35%
ELN      JUN    17    17.05   21.42    0.45   8.73%   2.64%
FARO     JUN    20    19.45   24.72    0.55   8.04%   2.83%
FRO      JUN    25    24.50   38.45    0.50   6.48%   2.04%
IMMU     JUN     5     4.75    4.94    0.19  10.27%   5.26%
LNCR     JUN    32    32.05   33.86    0.45   3.60%   1.40%
MCK      JUN    32    32.00   35.13    0.50   3.76%   1.56%
NFLX     JUN    25    24.45   29.73    0.55   7.36%   2.25%
PHRM     JUN    20    19.65   41.33    0.35   5.67%   1.78%
RTN      JUN    32    32.00   34.51    0.50   3.62%   1.56%
VXGN     JUN    12    12.10   14.98    0.40  10.35%   3.31%
ARTI     JUN    22    22.00   25.53    0.50   6.11%   2.27%
AVID     JUN    45    44.30   51.37    0.70   4.62%   1.58%
BLUD     JUN    25    24.70   30.50    0.30   3.54%   1.21%
DRIV     JUN    25    24.60   31.91    0.40   5.37%   1.63%
ERES     JUN    17    18.11   23.33    0.22   3.85%   1.21%
NUE      JUN    55    54.25   69.54    0.75   3.96%   1.38%
PHRM     JUN    20    19.70   41.33    0.30   5.30%   1.52%
SPLS     JUN    25    24.60   29.10    0.40   4.24%   1.63%
YHOO     JUN    25    24.60   32.10    0.40   4.64%   1.63%
ARO      JUN    22    23.03   29.37    0.35   4.75%   1.52%
CRDN     JUN    25    24.65   35.11    0.35   5.57%   1.42%
ERES     JUN    17    18.63   23.33    0.30   6.61%   1.61%
FARO     JUN    22    21.85   24.72    0.65   9.88%   2.97%
ISPH     JUN    15    14.55   16.90    0.45  10.57%   3.09%
IDEV     JUN     5     4.70    6.98    0.30  17.36%   6.38%
PDII     JUN    22    22.20   31.53    0.30   5.83%   1.35%
SSYS     JUN    22    21.85   26.88    0.65   9.43%   2.97%
SLXP     JUN    25    24.70   27.72    0.30   4.85%   1.21%
ASKJ     JUN    35    34.40   36.42    0.60   6.85%   1.74%
ERES     JUN    20    19.80   23.33    0.20   4.60%   1.01%
FWHT     JUN    20    19.65   20.48    0.35   6.25%   1.78%
GPRO     JUN    35    34.45   42.03    0.55   5.54%   1.60%
MEE      JUN    22    22.15   25.23    0.35   5.66%   1.58%
SMTC     JUN    20    19.70   23.52    0.30   6.79%   1.52%
SWIR     JUN    22    22.20   34.28    0.30   6.05%   1.35%
YHOO     JUN    27    27.15   32.10    0.35   4.58%   1.29%
ASKJ     JUN    35    34.55   36.42    0.45   6.43%   1.30%
CRDN     JUN    30    29.45   35.11    0.55   8.32%   1.87%
ERES     JUN    23    23.03   23.33    0.30   5.71%   1.52%
NKTR     JUN    17    17.25   18.16    0.25   8.24%   1.45%
NSM      JUN    20    19.70   21.06    0.30   6.58%   1.52%
SMTC     JUN    23    22.20   23.52    0.30   6.21%   1.35%
YHOO     JUN    27    27.25   32.10    0.25   4.28%   0.92%
CVTX     JUL    15    14.60   15.88    0.40   5.63%   2.74%
DITC     JUL    17    16.80   21.98    0.70   8.40%   4.17%
JILL     JUN    20    19.70   23.00    0.30  10.05%   1.52%
NKTR     JUN    17    17.20   18.16    0.30  13.99%   1.74%
OSIP     JUN    65    64.50   66.72    0.50   6.89%   0.78%
SINA     JUN    35    34.50   38.36    0.50  10.37%   1.45%
SMTC     JUN    22    22.25   23.52    0.25   7.77%   1.12%
SYNA     JUL    17    16.85   19.24    0.65   7.48%   3.86%
TELK     JUN    20    19.75   21.25    0.25  10.33%   1.27%
USG      JUN    15    14.70   16.31    0.30  13.27%   2.04%
UTHR     JUN    22    22.15   22.70    0.35  10.38%   1.58%
PTIE     JUL     7     7.15    8.77    0.35   9.89%   4.90%
BCC      JUL    35    34.25   36.34    0.75   5.12%   2.19%
JILL     JUL    20    19.45   23.00    0.55   6.72%   2.83%
LSS      JUL    20    19.50   22.27    0.50   6.07%   2.56%
OI       JUL    15    14.65   15.89    0.35   5.64%   2.39%
NVTL     JUL    15    14.65   22.36    0.35   7.34%   2.39%
PDII     JUL    25    24.70   31.53    0.30   3.91%   1.21%
RSAS     JUL    17    17.05   20.39    0.45   6.22%   2.64%
STLD     JUL    25    24.45   26.90    0.55   5.33%   2.25%
UPL      JUL    30    29.55   33.90    0.45   4.14%   1.52%
USG      JUL    15    14.15   16.31    0.85  13.32%   6.01%

Au Optronics (NYSE:AUO), Boston Communications (NASDAQ:BCGI),
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.  In light of the recent volatile activity,
there are a large number (far too many to list) of issues
on the "watch" list.  Use good judgment and remember that
limiting losses is the "secret to success" in this strategy.


NAKED CALLS

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

IACI     JUN    32    33.15   30.11    0.65   5.22%   1.96%
OVTI     JUN    30    30.80   15.98    0.80  11.79%   2.60%
SLAB     JUN    55    55.50   47.47    0.50   4.93%   0.90%
PHTN     JUN    35    35.35   31.93    0.35   4.69%   0.99%
ENDP     JUN    25    25.70   21.42    0.70  11.16%   2.72%
IPXL     JUN    22    23.05   20.15    0.55   8.75%   2.39%
MMR      JUN    15    15.25   15.66   (0.41)  0.00%   1.64%
APPX     JUN    40    40.40   31.21    0.40   6.84%   0.99%
OVTI     JUN    27    27.25   15.98    0.25   6.69%   0.92%
WSM      JUN    32    33.00   30.87    0.50   5.64%   1.52%
ABAX     JUN    20    20.25   18.94    0.25   5.81%   1.23%
CHIC     JUN    20    20.35   19.50    0.35   8.70%   1.72%
USNA     JUN    30    30.40   29.50    0.40   6.29%   1.32%
ABGX     JUN    17    17.85   11.92    0.35  13.94%   1.96%
CREE     JUN    25    25.25   20.44    0.25   5.36%   0.99%
SSNC     JUN    25    25.50   18.51    0.50  10.41%   1.96%
DIGE     JUN    40    40.30   36.22    0.30   6.89%   0.74%
MDCO     JUN    30    30.70   27.26    0.70  15.46%   2.28%
ASKJ     JUL    45    45.55   36.42    0.55   6.50%   1.21%
AMLN     JUL    25    25.35   21.99    0.35   5.29%   1.38%
ICOS     JUL    30    30.45   27.04    0.45   5.26%   1.48%
OIIM     JUL    17    17.80   16.25    0.30   5.50%   1.69%

Charlotte Russe Holdings (NASDAQ:CHIC) and Usana (NASDAQ:USNA)
are on top of the "watch" list.  McMoran Exploration (NYSE:MMR)
has been closed to limit potential losses.

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

ATI      JUL   12.50   12.20   14.74    0.30    7.44%   2.46%
BJS      JUL   42.50   41.70   44.60    0.80    4.75%   1.92%
LCAV     JUL   25.00   24.35   27.23    0.65    6.85%   2.67%
NCRX     JUL   27.50   26.80   31.32    0.70    7.30%   2.61%
NVTL     JUL   17.50   17.05   22.36    0.45    8.97%   2.64%
SSYS     JUL   22.50   22.20   26.88    0.30    4.41%   1.35%
SWIR     JUL   30.00   28.85   34.28    1.15   10.66%   3.99%
SYNA     JUL   17.50   16.90   19.24    0.60    8.98%   3.55%
YHOO     JUL   30.00   29.20   32.10    0.80    6.80%   2.74%

__________________________________________________________________

ATI - Allegheny Technologies  $14.74  *** Steel Surges! ***

Allegheny Technologies (NYSE:ATI) is a diversified producer of
specialty materials.  The company operates in three business
segments: flat-rolled products, high-performance metals and
industrial products. The flat-rolled products segment produces,
converts and distributes stainless steel, nickel-based alloys
and super-alloys and titanium and titanium-based alloys.  The
high-performance metals segment produces, converts and sells
nickel- and cobalt-based alloys and super-alloys, titanium and
titanium-based alloys, zirconium, hafnium, niobium, tantalum,
their related alloys and other specialty materials.  Industrial
products' principal business produces tungsten powder, tungsten
carbide materials and carbide cutting tools.

ATI - Allegheny Technologies  $14.74

PLAY (sell naked put):

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

SELL PUT  JUL 12.5  ATI SV     26   0.30  12.20   7.4%   2.5%


__________________________________________________________________

BJS - BJ Services  $44.60  *** Oil Service Stocks Rally! ***

BJ Services (NYSE:BJS) is a provider of pressure pumping and
other oilfield services serving the petroleum industry worldwide.
The company's pressure pumping services consist of cementing and
stimulation services, and are used in the completion of new oil
and natural gas wells and in remedial work on existing wells,
both onshore and offshore.  BJ's other oilfield services include
completion tools, completion fluids and casing and tubular
services provided to the oil and natural gas exploration and
production industry, commissioning and inspection services
provided to refineries, pipelines and offshore platforms and
production chemical services.

BJS - BJ Services  $44.60

PLAY (sell naked put):

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

SELL PUT  JUL 42.5  BJS SV    680    0.80  41.70   4.7%   1.9%


__________________________________________________________________

LCAV - LCA-Vision  $27.23  *** Consolidation Complete? ***

LCA-Vision (NASDAQ:LCAV) is a global developer and operator of
fixed-site, laser vision correction centers under the brand name
LasikPlus.  Their vision centers provide the staff, facilities,
equipment and support services for performing laser vision
corrections that employ advanced laser technologies to help
correct nearsightedness, farsightedness and astigmatism.  LCA
utilizes fixed-site excimer lasers made by Bausch & Lomb, VISX
and Alcon.  Its vision centers are supported mainly by full-time,
board-certified ophthalmologists and optometrists, as well as
other healthcare professionals.

LCAV - LCA-Vision  $27.23

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     JVQ SE     13    0.65  24.35   6.8%   2.7%


__________________________________________________________________

NCRX - NeighborCare  $31.32  *** A Healthy Stock! ***

NeighborCare (NASDAQ:NCRX), formerly Genesis Health Ventures,
is a provider of institutional pharmacy services in the United
States.  The company provides pharmacy services for beds in
long-term care facilities in the U.S. and the District of
Columbia.  Its pharmacy operations consist of 62 institutional
pharmacies, 32 community-based professional retail pharmacies
and 20 on-site pharmacies, which are located in customers'
facilities and serve only customers of that facility.  In
addition, NeighborCare operates 16 home infusion, respiratory
and medical equipment distribution centers.

NCRX - NeighborCare  $31.32

PLAY (sell naked put):

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

SELL PUT  JUL 27.5  QNY SY    5558   0.70  26.80   7.3%   2.6%


__________________________________________________________________

NVTL - Novatel Wireless  $22.36  *** Rally Mode! ***

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  $22.36

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  NVU SW      5    0.45  17.05   9.0%   2.6%


__________________________________________________________________

SSYS - Stratasys  $26.88  *** Uptrend Intact! ***

Stratasys (NASDAQ:SSYS) manufactures and sells a line of rapid
prototyping and three-dimensional printing devices that create
physical models from computerized designs.  The company's rapid
prototyping systems are based on its patented fused deposition
modeling technology or on its patented Genisys technology.  The
company is also involved in the office prototyping market (rapid
prototyping) and develops, manufactures and markets a family of
rapid prototyping devices and 3-D printers that enable engineers
and designers to create physical models, tooling and prototypes
out of plastic and other materials directly from a computer-aided
design workstation.

SSYS - Stratasys  $26.88

PLAY (sell naked put):

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

SELL PUT  JUL 22.5  QQG SX      4    0.30  22.20   4.4%   1.4%


__________________________________________________________________

SWIR - Sierra Wireless  $34.28  *** The Recovery Continues! ***

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  $34.28

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    IYQ SF    593    1.15  28.85  10.7%   4.0%


__________________________________________________________________

SYNA - Synaptics  $19.24  *** Next Leg Up? ***

Synaptics (NASDAQ:SYNA) is a worldwide developer and supplier of
custom-designed user interface solutions for notebook computers.
The company's original equipment manufacturer customers include
ten large personal computer OEMs.  Synaptics generally supplies
its OEM customers through its contract manufacturers, which take
delivery of its products and pay the company directly for the
OEMs.  Synaptics family of product solutions include TouchPad,
TouchPad Under Plastic, TouchStyk, dual pointing solutions,
ClearPad, Spiral, QuickStroke, TouchPad with embedded Chinese
character recognition, Fingerprint TouchPad, TouchRing and
TouchScreen.

SYNA - Synaptics  $19.24

PLAY (sell naked put):

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

SELL PUT  JUL 17.5  QYG SW     96    0.60  16.90   9.0%   3.6%


__________________________________________________________________

YHOO - Yahoo!  $32.10  *** Entry Point? ***

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

YHOO - Yahoo!  $32.10

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    YHQ SF    7146   0.80  29.20   6.8%   2.7%



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

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.

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

INSP - InfoSpace  $33.13  *** "Premium-Selling" Only! ***

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  $33.13

PLAY (sell naked call):

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

SELL CALL  JUL 40    IOU GH    1137   0.50  40.50   6.9%   1.2%


__________________________________________________________________

RHAT - Red Hat  $22.06  *** Post-Earnings Slump? ***

Red Hat (NASDAQ:RHAT) provides an enterprise-operating platform
based on open source technology for the IT infrastructure of the
Global 2000.  The company applies its technology to create its
enterprise operating platform, Red Hat Enterprise Linux, and
related layered infrastructure technology solutions, based on
open source technology.  Red Hat's enterprise solutions meet
the functionality requirements and performance demands of the
large enterprise and the third-party computer hardware and
software applications that are critical to enterprises.  The
company also creates additional products, including Red Hat
Linux and related tools, and open source software applications.
Red Hat's professional services offerings, principally directed
toward its large enterprise customers and strategic partners,
include technical support and maintenance, custom development,
consulting, training and education and hardware certification.

RHAT - Red Hat  $22.06

"SPECULATIVE" 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    RCV GE    2104   0.60  25.60   9.1%   2.3%


__________________________________________________________________

XMSR - XM Satellite Radio  $23.50  *** Stuck In A Range? ***

XM Satellite Radio (NASDAQ:XMSR) is America's #1 satellite radio
service with over 1 million subscribers.  Broadcasting live daily
from Washington, DC, New York City and Nashville, Tennessee at the
Country Music Hall of Fame, XM provides its loyal listeners with
over 100 digital channels of choice: 70 music channels, more than
35 of them commercial-free, from hip hop to opera, classical to
country, bluegrass to blues; and 31 channels of premiere sports,
talk, comedy, kid's and entertainment programming.  Compact and
stylish XM satellite radio receivers for the home, the car, the
computer and even a "boom-box" for on the go are available from
retailers nationwide.

XMSR - XM Satellite Radio  $23.50

PLAY (sell naked call):

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

SELL CALL  JUL 27.5  QSY GY    6217   0.25  27.75   4.3%   0.9% TS





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