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Daily Newsletter, Sunday, 06/20/2004

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The Option Investor Newsletter                   Sunday 06-20-2004
Copyright 2004, All rights reserved.                        1 of 5
Redistribution in any form strictly prohibited.

Entire newsletter best viewed in COURIER 10 font for alignment

In Section One:

Wrap: Ten Days and Counting
Futures Market: See Note
Index Trader Wrap: BELLWETHER BLUES
Editor's Plays: Not Nice to Fool Investors
Market Sentiment: Another Week of Waiting
Ask the Analyst: Position Size is up to you
Coming Events: Earnings, Splits, Economic Events


Posted online for subscribers at http://www.OptionInvestor.com
******************************************************************
MARKET WRAP  (view in courier font for table alignment)
******************************************************************
        WE 6-18         WE 6-11         WE 6-04         WE 5-28
DOW    10416.41 +  6.31 10410.1 +167.18 10242.8 + 54.37 +221.71
Nasdaq  1986.73 - 13.14 1999.87 + 21.25 1978.62 -  8.12 + 74.65
S&P-100  554.81 -  0.09  554.90 +  7.82  547.08 +  1.95 + 10.80
S&P-500 1135.00 -  1.47 1136.47 + 13.97 1122.50 +  1.86 + 27.08
W5000  11034.12 - 11.83 11045.9 +109.64 10936.3 +  9.95 +301.26
SOX      453.08 - 23.20  476.28 +  5.37  470.91 - 17.95 + 30.68
RUT      570.54 +  1.42  569.12 +  1.37  567.75 -   .53 + 22.47
TRAN    3068.67 + 43.96 3024.71 + 32.43 2992.28 + 44.27 + 82.26
******************************************************************

Ten Days and Counting
by Jim Brown

The markets traded to a draw once again as the indexes passed
time waiting for coming events. We are ten days away from the
Fed meeting and coming rate hike. We are ten days from the
Iraq transfer of power and we are only twelve days away from
high event risk of the July-4th weekend. Add to this the
Russell shuffle and end of the quarter. All of these events
contain high levels of uncertainty to some extent and we all
know that is not something traders welcome.

Dow Chart - Daily


Nasdaq Chart - Daily



The indexes ended flat and at strong resistance once again
despite some strong economic reports and some dovish testimony
from Greenspan. We saw the Philly Fed rise to 28.9 from 23.9
and Jobless Claims return to the 330K levels we saw in spring.
The Beige Book saw strong economic signs in nearly every area
of the country that included a pickup in hiring. Industrial
Production soared as did Consumer Sentiment. Good news was
breaking out all over but it was not without some soft spots.
The International Trade number was a new record deficit. The
current account deficit also rose to a -$145 billion level
and the largest deficit related to GDP on record. The NY
manufacturing survey was flat and the Kansas survey fell.
However, the Fed claims inflation is still low despite the
PPI and CPI which both soared.

Do you see something in that prior paragraph that should
concern traders? Of course it is uncertainty rearing its
ugly head in the economic arena as well as on the global
scene. The uncertainty in the recovery has analysts on the
fence about the coming Fed rate hike. Where most were saying
the Fed was behind the curve for the last couple months and
suggesting the first hike could be 50 points the chatter
this week has been more muted. Instead of 75 points through
the August meeting analysts are now predicting only 25
points at each of the next five meetings and no 50 point
jump at any point. The Fed rhetoric last week about taking
aggressive action if needed has mellowed back to "measured
pace" once again. The uncertainty factor still prevails.
The recovery is now being called "tenuous" and while the
Fed is still expected to hike on the 30th there is talk
that there may not be another in August if the economy
does not improve.

We are in the summer doldrums for corporate earnings and
we will begin to get the predictions for the summer quarter
in about three weeks when the Q2 earnings begin announcing.
So far there have been few earnings warnings but we are
just now getting into the real warning period. Considering
the upward guidance announcements have been muted as well
we are seeing an uncertainty cloud begin to form over the
future guidance. You see how that "U" word is beginning to
dominate our future. Remember how the "visibility" word
dominated guidance a couple years ago? Welcome to the new
buzz word for traders.

The problem is not just the next three weeks. Once past
the July-4th weekend and earnings we will then be faced
with the political conventions, Olympic event risk and
then the election itself. The economic differences between
Bush and Kerry could keep investors on the sidelines as
long as the election outcome is in doubt. In a tie race
every major election mistake by either candidate could
swing the expected outcome and by default the "initial"
impact of a win by the other side. In reality the market
does equally well with either party in power but it does
not react well to the first couple weeks after the
election with a party change.

Ideally the market would react well to positive Q3 guidance,
calming comments from the Fed and a clear leader in the
presidential race. We are several weeks before we can
count on at least two of those factors. Since the market
is a very efficient discounter of future events we are
effectively dormant because investors do not know which
way to discount. There are just too many unknowns ahead.

The Dow has come to a screeching halt at 10430 resistance
for the last two weeks and has tested it multiple times.
The close on Friday at 10416 represents a close near the
highs for the last two weeks and near the highest levels
since April 28th. The declines for the entire month of May
have been erased and we are back knocking on the resistance
door. Considering the uncertainty this is amazing. This
resistance range runs for about +150 points over the
current 10430 level and increases in intensity up to
10575. Just getting over 10430 will not solve the problem
but should at least give us a new range to trade. It does
appear to me the Dow is building a bullish triangle at
that 10430 level and were it not for the uncertainty I
would expect a breakout almost immediately.

Dow Chart - 120 min



The Nasdaq is a little tougher to call. It has been trading
in the 1980-2000 range since May 27th with only a couple
forays outside those limits. The Nasdaq is being limited
by the Russell shuffle due in 10 days and the implosion
in the SOX. The SOX made a double top at resistance at
490 since June 1st and with the Book-to-Bill dropping on
Thursday the SOX has declined to near 450. With chips
falling the Nasdaq will not be able to sustain a rally.
This should turn around next week IF it is going to turn.
The SOX has strong support at 440 and this is where it
could find buyers. Also helping the Nasdaq will be the
Russell rebalance but not until month end. Once the new
stocks are added there is normally a couple days of
volatility and then the Russell is free to trade on
fundamentals again rather than rebalance arbitrage.

Nasdaq Chart - 120 min


SOX Chart - Daily



For me all those events I discussed sets up the potential
for a rally the first week of July. Regardless of the Fed
action it will be behind us and the holiday weekend over.
The Russell rebalance will be history and earnings will
begin flowing. I am encouraged that we have not seen more
warnings and think the pickup in employment is a real sign
that the economy is growing, slowly but growing. The slow
growth should continue to keep inflation in check and the
drop in oil prices should at least keep the July inflation
numbers inline. Summers in front of an election are
surprisingly enough bullish as the candidates promise
a chicken in every pot and jobs for everybody. Reality
tends to be ignored.

With all the current negativity coming to a head very
soon there is the possibility for an uncertainty relief
rally on July 6th. I do not expect a 50 point hike and
more than a 25 point hike is already priced in. Fund
flows were actually positive +1.3B last week and June is
the end of a quarter. This means there will be a larger
influx of retirement funds the first ten days of July.
I think there will be a pre earnings bounce and then a
pause to see if the outlook will hold.

That leaves us with a slack week ahead before the fireworks
begin to happen. While I would like to think we could rise
in front of those events I am not convinced. I think we
could see a continued uptick but we could just as easily
see a final exit to the sidelines by those more cautious
to wait out the events. This is truly a week where the
bulls and bears could battle but the war may be waged in
such low volume as to be insignificant. With rising
support and strong resistance a direction will eventually
be found but it may not be next week. If anything our
range may simply widen depending on the strength of
either side but I doubt we will see a strong move in
either direction. The coming week is not a week for big
bets. It is more likely a week that traders take an early
vacation while they wait for the fireworks. The following
week could see strong volatility in both directions as
the news events unfold. Depending on those events we
could see a rise into the holiday weekend propelled by
high risk traders trying to position themselves for any
post holiday bounce. This forecast and $5 will only buy
you a cup of strong coffee at Starbucks. It may not be
exactly the way it plays out but that is the way I see
it today. I will continue to update it as the calendar
ticks away but remember for the next ten days, uncertainty
rules.

Enter Very Passively, Exit Very Aggressively!

Jim Brown


**************
FUTURES MARKET
**************

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


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

BELLWETHER BLUES
By Leigh Stevens
lstevens@OptionInvestor.com

THE BOTTOM LINE –
A least for the Nasdaq, the "bellwether" Semiconductor (SOX)
Index is keeping a lid on tech and there has been little to no
follow through to the upside.  This contrasts with the S&P and
Dow indices, which look like they could achieve some modest
further upside gains.

FRIDAY'S TRADING ACTIVITY –

THE NUMBERS -
The S&P 500 (SPX) was up 3 points to 1,135, but down 1.47 points,
(0.1%) on the week. The Dow 30 Average (INDU) advanced 38.9
points to 10,416, and was up a scant 6 points on the week.

The Nasdaq Composite Index (COMP)was up 3 points to 1,986.7,
still under the 2,000 level that I've been highlighting as an
important and pivotal area of resistance. For the week, COMP was
off 13 points - 0.6%.

THE REPORTS –
Before the opening the market got to digest our latest red ink in
the U.S. Trade deficit showing that the U.S. current account was
a minus $144.9 billion in the first quarter as we bought that
much more than we sold. The consensus was for an account deficit
of around $140 billion from an upwardly revised $127.5 billion in
the prior quarter.

The current account deficit is as noted on OIN in the morning is
the broadest measure of the nation's financial balance with the
rest of the world and includes goods, services and capital. It
shows how much more Americans consumed and invested than they
earned and saved.  Kind of like everything else it seems these
days, as we (Americans as a whole) spend like there is no
tomorrow.

The Market doesn't seem much focused on our whooping trade
deficit as it has no discernable impact on the U.S. economy right
now – not like JOBS for example.

The semiconductor book-to-bill ratio for May was released and
showed a decline to 1.11, putting it below consensus estimates of
1.13.  Goldman had estimated May's book-to-bill at 1.14 and noted
that May's data was first time in 10 months that front end orders
have not increased and the 2nd month in 10 when back end orders
have declined from one month to the next.

If you want to know why the Nasdaq (Composite and Nas 100) is
stalled and unable to establish a clear cut uptrend, you need
look no farther than the Semiconductor Index (SOX).  While
broader measures of tech and small cap stocks like the Russell
2000 Index (RUT) seem be rebounding, the SOX is not. Their two
charts, relative to their 50 & 200-day moving averages -




For the SOX index, the two key moving averages are acting as a
kind of resistance or as deflection points, whereas the opposite
is apparent in the RUT.

[For more about moving averages acting as support/resistance see
my past Trader's Corner article at -
http://www.OptionInvestor.com/traderscorner/tc_052004_1.asp]

THE TALK –
Dow and Nasdaq biggie Microsoft (MSFT) led the day's most actives
as Triple Witch expiration came to a close.  As noted by OIN's
Jeff Bailey on Friday during one of his midday updates, the stock
broke out of a bullish "wedge" pattern (pie shaped & pointing
up).  See chart below –




The MSFT bulls seem to be warming up to Microsoft (MSFT) – as
Jeff noted it is a (very) cash-rich technology name.  As you can
see from the chart, MSFT is now approaching its prior highs, and
possible resistance, at 28.8, then 30. The On Balance Volume
(OBV) Indicator actually gave an early tip off the at the stock
could be under "accumulation" (steady net buying) when this
indicator turned up when the stock was more or less going
sideways in May (see this indicator and time period circled on
the bottom part of the chart above).

[This reminds me to write something both on wedge patterns and
the OBV Indicator in a future Trader's Corner article this coming
Tues.]

Microsoft is typically a bellwether stock, tending to lead the
way for both the Dow/S&P and for Nasdaq.  However, only the S&P
and Dow are maintaining price levels above the down trendlines
highlighted on their charts below – not so, the Nasdaq, which is
still stalled in a downtrend. S&P bellwether GE also had a
technical breakout a while ago – both bellwethers suggesting that
a further advance is possible in the NYSE-related stock indices.

[More on stocks/indices (e.g., SOX) that act as bellwethers at -
http://www.OptionInvestor.com/traderscorner/tc_051304_1.asp]

Some of Friday's boost to MSFT might be at the expense of Red Hat
(RHAT) as the stock was down substantially (-10%) on the day –
RHAT's Linux software of course has been seen as a potential
threat to the Microsoft operating system with IBM and other
companies, as well as techies in general, being big proponents of
Linux.

OTHER MARKETS –
July crude futures closed up 29 cents at $38.75 on the New York
Mercantile Exchange (NY Merc). Continued violence in the Middle
East and an oil workers strike in Norway outweighed some bearish
U.S. supply data and the news that Iraqi exports would resume
late next week.

The U.S. dollar fell after the Commerce Department said the U.S.
current account deficit widened substantially in Q4.

The greenback was down 0.7% vs. the euro – the euro going out at
just over $1.21.  The dollar was down 0.7% against the Yen,
closing in New York trade at 108.7.

Bond prices on the week were off slightly (yields up) as the bond
market continues to trade on the certain anticipation of a
Federal Reserve interest-rate hike for the first time in 4 years.
The benchmark 10-year T-note was 6/32 higher on the day, at 100
10/32 to yield 4.71%.

MY INDEX OUTLOOKS –

S&P 500 Index (SPX) – Daily chart:

The chart pattern is bullish, especially if the S&P 500 (SPX)
Index holds at or above 1120.  The call to put readings continue
to show some very bullish one-day readings, which was the case
again at the beginning of this past trading week.  A move up to
highlighted resistance at 1147-1150 is a looming possibility.




There may be more of a sideways move next – Friday's apparent
breakout type move could have more to do with the triple witching
stocks, options and index futures expiration. Stay tuned on that!

Above 1150, my maximum upside SPX objective, at least for the
near-term/next 1-2 weeks, is to 1160.

S&P 100 Index (OEX) – Daily chart:

OEX could be heading up to test the prior highs at 560-564.  The
trend looks higher as long as the S&P 100 (OEX) Index holds 550,
especially on a closing basis. Below this near support and as
noted on the OEX chart below, next lower support is at 546, then
540-541 in my estimation.




The Index is of course somewhat overbought, according to the 14-
day stochastic model. This is not to say that OEX won't churn
higher – but it does suggest that the trend may flatten out in a
sideways type movement.

If OEX gets to the 560-564 area, the combination of the prior
highs, the closeness to my upper trading envelope line and the
overbought situation does at least suggest taking profits on
Index calls held from lower levels – nice profits are nice to
take!

Dow Industrials (INDU) Daily:

The trend is up as long as the Dow 30 (INDU) can hold above
10,3000 on a closing basis.  Next lower support is 10,200, then
more major support – implied by the 200-day moving average –
around 10,125. Resistance, and possible selling pressure, has to
be assumed to be the prior highs at 10,540, extending to 10,575.




By the end of this past week, the Dow was acting as though it
wanted to break out of this little trading range and flag type
pattern it was in.  The ability to hold above 10,400 should be a
tip off as to whether INDU will continue to chug higher.  Notice
how, what was resistance "became" support, as recent lows acted
as support at the previously broken down trendline – see the
green arrow at the dashed down trendline.

Nasdaq 100 (NDX) Index  – Daily:

I expect support at 1450-1455, but this looks in danger of being
penetrated, so is an area to watch closely as momentum is waning
and the stochastic model has turned down.  1425 is next support.




Resistance is apparent at 1490-1500.  An hourly, then daily close
above 1500, with the subsequent ability for NDX to hold above
that level, to suggest that 1525 is a next possible objective.

Nasdaq 100 tracking Stock (QQQ) Hourly:

The Q's are in a tight range and have formed a "rectangle" type
pattern which is another way of saying that its in a trading
range – here, between 37-37.25 on the upside and 36 on the
downside.  To gauge the bigger potential will be to watch for a
breakout in either direction.  If on the downside, next lower
support looks like 35.50.  Conversely, an upside target and next
resistance, assuming an upside breakout, is 38.



I suggested last week using the 5 and 21-day hourly stochastic
pairing (i.e., when both are at the bottom look for a buy, when
both at high extremes look for a tradable top) as a way to trade
the stock, especially on a very short-term basis.  This rather
than necessarily focusing on a specific price level – the recent
high around 37 showed an overbought reading on both the very
short term and the slightly longer term 2-3 day measure.

[My past week's Trader's Corner article for you technophiles, as
in technical analysis, was on Bollinger Bands -
http://www.OptionInvestor.com/traderscorner/tc_061704_2.asp ]

Good Trading Success!


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**************
Editor's Plays
**************

Not Nice to Fool Investors

In the suit that won't go away CECO took another hit on
Friday to the tune of -$10.79. This company has been hit
on previous charges twice in the past and the problem
simply will not go away.

The amended class action complaint states that Career
Education, according to more than a dozen former employees,
engaged in a pervasive practice and pattern which consisted
of falsifying student records in order to obtain financial
aid monies and portray Career Education schools as having
increasing and revenue to garner the favor of the investing
public, and manipulating Career Educations' schools
financial statements in order to inflate revenue, lower
bad debt reserves and to avoid cessation of funding from
financial aid sources."

While the first couple of complaints may have been chalked
up to bad blood from prior employees this is beginning to
look more like it will stick.

The stock took a major hit on Friday and I would not
recommend entering a put position on Monday. Especially
not the Monday after expiration Friday when options are
their most expensive.

I would look for a denial bounce from CECO on Mon/Tue
and then a second roll over. The stock continues to find
buyers and was pressing $70 when the news broke on Thr.
I would love to see a rebound back over $60 before the
long goodbye begins.

The concept here will be to enter two October $50 puts.
One on a bounce to $58 and another on a bounce to $60.
We do not want to enter the position before Wednesday
at the earliest. Options are simply too expensive given
the expiration cycle and the -$14 two day drop. If our
numbers are hit WAIT for a break back below those levels
before entering the position. We want the bounce to
deflate the put premiums but we want the bounce to fail
before we spend any money.

I think investors overlooked the first event but the
reappearance may start some to thinking that profits
should be taken and put into a safer investment. I am
targeting $40-$45.

CECO Chart - Daily




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

PVN Call Update $14.98

Providian provided us a perfect entry point last week on
the dip to $13.95 and it rebounded to hit a new 52-week
high this week. This play is off to a rousing start and
I look for good things ahead. (kiss of death)


http://members.OptionInvestor.com/editorplays/edply_061304_1.asp


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

Another Week of Waiting
- J. Brown

The markets have been effectively range bound over the last three
to four weeks due to investor uncertainty over oil prices,
interest rates, and Iraq.  Unfortunately, none of that has
changed.  Granted fears over oil prices have settled somewhat
despite the reality of the recent shutoff in Iraq due to
terrorist bombings.  Interest rate concerns aren't really a true
"fear" any more now that the recent economic data shows inflation
remains under control and the Fed is once again spouting their
"measured" mantra.  The only real concern left is Iraq.

This past week has been a tough one when it comes to geo-
political concerns.  A handful of Iraq's new governing officials
have been assassinated.  Dozens of Iraqi citizens have been
killed in car bombs while they waited in line for jobs with the
new government.  Two successful attacks on the southern pipelines
have cut off Iraq's oil exports for the next seven to ten days to
the tune of $60 million per day in lost revenues.  There are
rumors of Iran building up its armed forces near the Iraq border
all while tensions mount of Iran's nuclear aims and capabilities.
Let's not forget the recent beheading of an American by
terrorists in Saudi Arabia, a country many claim is on the verge
of civil war.  Yes, geo-political worries truly are an influence
on investor sentiment even more so if its affect keeps investors
from trading at all.

Volume has been incredibly low this past week because there is no
impetus to buy (or sell) stocks.  We're still ten days from the
June 30th decision on interest rates and the Iraq handover of
power.  We're also ten days away from the end of the quarter and
the end of the first half of the year.  Will we see much window
dressing ahead of these huge events?  Or will it be window
undressing?  Jim mentioned the upcoming July 4th weekend.  What
are the odds of the U.S. government raising the terror alert on
such a patriotic holiday?  It would certainly appear to be a big
opportunity for terrorists said to already be in the U.S. but
then so is the Democratic and Republican conventions later in the
summer.

Take a look at the COT data at the bottom of this report.  You'll
notice a few interesting changes.  Check the history of the
commercial traders for the S&P e-minis.  You'll see that
commercial traders have slowly been upping their short positions
so that they've turned from mildly bullish to significantly more
bearish in the past month.  That's not a good sign.  This data
says that commercial traders believe the S&P 500 will be trading
lower in our future.  Oddly enough we've seen the opposite happen
in the Dow Jones futures.  Commercial traders, or so called
"smart money", has moved from net bearish to net bullish on the
Dow Industrials.  It wouldn't surprise me to see a divergence in
the markets between blue chips and techs.

Looking ahead to next week I'd keep my eyes on these sectors:
oil, oil services, natural gas, defense, cyclicals, healthcare
and gold.  All of them have out performed this past week and
might be able to keep the momentum going.


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

Market Averages

DJIA ($INDU)

52-week High: 10753
52-week Low :  8871
Current     : 10416

Moving Averages:
(Simple)

 10-dma: 10373
 50-dma: 10257
200-dma: 10126



S&P 500 ($SPX)

52-week High: 1163
52-week Low :  962
Current     : 1135

Moving Averages:
(Simple)

 10-dma: 1133
 50-dma: 1119
200-dma: 1093



Nasdaq-100 ($NDX)

52-week High: 1559
52-week Low : 1180
Current     : 1464

Moving Averages:
(Simple)

 10-dma: 1473
 50-dma: 1447
200-dma: 1436



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

CBOE Market Volatility Index (VIX) = 14.99 -0.16
CBOE Mkt Volatility old VIX  (VXO) = 14.75 -0.29
Nasdaq Volatility Index (VXN)      = 20.02 -1.31


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

          Put/Call Ratio  Call Volume   Put Volume

Total          0.80      1,095,854       878,324
Equity Only    0.60        907,770       543,536
OEX            1.05         45,969        48,124
QQQ            0.29        201,008        57,587


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

Bullish Percent Data

           Current   Change   Status
NYSE          65.5    + 0     Bear Confirmed
NASDAQ-100    41.0    - 1     BULL ALERT
Dow Indust.   70.0    + 0     Bear Confirmed
S&P 500       63.0    + 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: 1.02
10-dma: 0.90
21-dma: 0.93
55-dma: 1.03


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    1561      1408
Decliners    1217      1601

New Highs     167        78
New Lows       46        79

Up Volume   1084M      903M
Down Vol.    667M      687M

Total Vol.  1777M     1690M
M = millions


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

Commitments Of Traders Report: 06/15/04

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

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

S&P 500

Commercial traders remain net bearish but they have added to
their long positions.  Small traders have also added to their
long positions but it's the jump in their shorts that is most
noteworthy.


Commercials   Long      Short      Net     % Of OI
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%)
06/15/04      428,905   444,197   (15,292)   (1.8%)

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

Small Traders Long      Short      Net     % of OI
05/25/04      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%
06/15/04      169,595   115,336    54,259    19.0%

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... what are commercial traders trying to tell us.  Their
short positions have grown steadily over the past four weeks.
Likewise the small traders' long positions have grown each
week for the last four weeks.


Commercials   Long      Short      Net     % Of OI
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%)
06/15/04      440,867   522,546    (81,679)   (8.5%)

Most bearish reading of the year: (354,835)  - 06/17/03
Most bullish reading of the year:  133,299   - 09/02/03

Small Traders Long      Short      Net     % of OI
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%
06/15/04      216,759    147,247    69,512    19.1%

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 bullish on the NASDAQ but their
confidence is waning.  Likewise small traders are staying
true to their nature and doing the opposite with a decrease
in shorts.


Commercials   Long      Short      Net     % of OI
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%
06/15/04       78,542     54,341    24,201   18.2%

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
05/25/04       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%)
06/15/04       15,794    35,880   (20,086)  (38.9%)

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

Hmm.. we have some interesting moves here.  Commercial traders have
gone from net bearish to net bullish while small traders have
moved from net bullish to net bearish on the Dow Jones.
You know who normally wins these conflicts - it's the
commercials.


Commercials   Long      Short      Net     % of OI
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%)
06/15/04       30,438    24,766    5,672      10.3%

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
05/25/04        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%
06/15/04       13,942    20,953   (7,011)   (20.1%)

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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***************
ASK THE ANALYST
***************

Position Size is up to you

When reviewing your "open position profiles" it appears you and I
invest the same on your "stock Profiles", $10K/position. I am
curious, if you don't mind sharing, how you decide your
investment in the option positions.  I see no pattern in your
updates.

Due to a prolonged power outage, I'm re-printing an e-mail
question I received earlier this week, and what ended up being a
rather lengthy e-mail response.

Great question, and this is how I was taught to think about
options.

I'm using $10,000.00 as a base number.  Some investors that may
be managing their own money may feel comfortable with 10
positions at $1,000.00 per STOCK position.  Some investors may
feel comfortable with 10 positions at $50,000.00 per STOCK
position.

OK... now think of this.

What does 1 option contract represent?  100 shares right?  Right!

OK... now... REGARDLESS of what security we are looking to trade
BULLISH or BEARISH this is where OPTIONS mitigate RISK and how I
was taught to treat an option.

How many shares of a $100 stock could you buy with $10,000 (if
this is what you would invest in the UNDERLYING STOCK?) 100
shares right?  Right!  OK.... how many contracts do I buy to
represent 100 shares?  1 contract right?  RIGHT!

How many shares of a $20 stock could you buy with $10,000?  500
shares right?  How many contracts?  Five.

OK....

For YOU Frank, it sounds like a "full position" is $10,000.00 per
UNDERLYING STOCK trade.

But what about Sue Subscriber and her $50,000.00 per UNDERLYING
STOCK investment, or John Subscriber and his $1,000.00 per
UNDERLYING STOCK trade?

Now do you see the pattern?

Jeff Bailey's Market Monitor OPEN Profiles - 06/18/04 Close



Take the Stillwater Mining (SWC) October 15 Call profiles.  2
separate profiles, for 1/2 each (2 * 1/2 = 1 full position).

(Note:  Pink arrows are the actual profiles.  Only the IPIX was
profiled with the underlying stock as this security does not
trade with options.)

OK... on 05/27/04, stock looks like it is going to break out (but
I'm a bit uncertain as to what the dollar may be doing) so I
profile 1/2 position just in case SWC rockets higher to challenge
recent 52-week highs.

If $10,000.00 in UNDERLYING is full position, then a 1/2 position
is $5,000.00.

So... SWC UNDERLYING stock is trading $15.60.  I quickly take
$5,000.00 and divide by $15.60 and get... 320.51 shares.  Boom!
That's 3 contracts.

Next.... What's my risk to a point and figure sell signal?

SWC would give a sell signal if it were to trade $12.00.

What's my RISK in the UNDERLYING STOCK to that sell signal?  From
$15.60, I calculate $3.60 per share RISK.  Hey.... I'm mitigating
my risk with the OPTION at $2.90 per share/contract.  Not only
that, but EVEN IF SWC trades $12.00, where I would probably have
to STOP OUT on the STOCK, I've ALREADY assessed that RISK with
the option, but now I've got until OCTOBER to let the stock work
toward where I think its is going.

Look at the PnF chart of SWC at this link
http://stockcharts.com/webcgi/Pnf.asp?S=SWC .  Now... a STOCK
trader that was LONG/BULLISH SWC may have gotten stopped out back
in February (after the red 2) when the stock did give a sell
signal at $11.00.  OK, so be it.

However.... let's say YOU as an OPTIONS trader that had bought
the June $12.5 calls when SWC was trading $14.00, and paid $3.00
per contract, would YOU have stopped out of the OPTION when SWC
traded $11.00?  I'm not sure what the options would have done,
but if they were down 50% at the time, would it have made sense
to stop out with a loss, after ALREADY having assessed $3.00 per
share risk before I/you put the trade on?

(Note:  Friday was option expiration for June contracts.  If
still holding June $12.50 calls, we have the RIGHT, but not the
OBLIGATION to buy the stock at $12.50 per share, or we can close
out that June $12.50 call option for $2.70.)

With a bullish vertical count of $32.00 associated with the PnF
chart, if a trader did NOT over leverage in June $12.50 calls, I
would exercise the call option, and take possession of the
underlying stock.  I could perhaps write covered call on part of
the position if 700 shares ($10,000 / $14 = 714 share
equivalent).  Here, do you see how if I over leveraged back in
February at $14 and bought 20 option contracts, I may have had to
either stop out of the option (bit off more than I could chew)
and perhaps my account discipline says I can't buy 2,000 shares
at $12.50?

Some option traders do use stops, but I think it is mistake!

Why do I think its is a mistake to trade stops on options?

BECAUSE... if you DON'T over leverage in OPTIONS, and if you use
the discipline of establishing a consistent TRADE SIZE based on
what you would invest in the UNDERLYING STOCK, then in essence,
when you pull the trigger to buy an option (put or call) then
you've basically consigned the loss, or RISK and once you've done
that, then all that is left to worry about when to take PROFITS
if they're had.

I'm no different than most when it comes to losses.  I hate them.
But it makes me SICK to my STOMACH when I see options traders put
on a trade, take a 50% loss in their option by stopping out 2
day's later, and then 2 weeks later, find the stock/option now
PROFITABLE as the trade works in the DIRECTION of their analysis.

Now... Look at the EBAY Put.  Here I did got outside of the
$10,000.00 divide by $78.48 per share, thus 127 shares, and did
"round up" from 1 contract to 2 contracts.  Here perhaps I look
at a $3.10 per contract and say.... "$310.00?  Get two of them."
Hindsight being 20/20, at this point 1 put contract looks like it
would have been too many.  TIME will tell with one month left
until expiration.

Now... Look at the DIA Puts.  Certainly $10,000 of a $99.36
security would have a full position being 1 contract.
So... for $0.65, or and additional $65.00 I round to full
position (have I really gone overboard with this one?  An extra
$65.00?).  If I see both the DIA falling to $101 anytime soon,
and get the option trade "break-even" (between the two) then I'm
closing out both with July expiration now just a month away.
However, the ONLY way I have a shot at break-even is to have
RISKED an additional $65.00.  Might not be worth it, but it might
be.

Now... IPIX Corp. (IPIX) .... this is a stock that has been
showing up as being very volatile, but has been garnering both
BULLISH and BEARISH trader's interest in recent months.  If I
were managing/investing/trading a $100,000.00 base account, would
I (Jeff Bailey) put $10,000 of my own money in this stock at
$14.30 with a stop at $10.50, representing a potential 26.5%
loss?  I (Jeff Bailey) would not.  However, we've traded IPIX
more than a couple of times on a day trade basis, and it has been
rather clear that this stock will fluctuate $1 or $2 (sometimes
more) in a day.

OK Frank... this e-mail was long.  Now, here's a more detailed
thought process you might also want to review.

The FIRST article I wrote for the Ask the Analyst column on
11/17/2002 (look under Education, then Ask the Analyst) describes
in greater detail something I think EVERY trader or INVESTOR
should do BEFORE they open an investment/trading account.

The articles title is "Your account is your business," and may
give investors/trader some insight as to establishing a business
plan for their account investment/trading strategy.

Let me know what you think....

Jeff Bailey


*************
COMING EVENTS
*************

-----------------
Earnings Calendar
-----------------

Symbol  Co               Date           Comment      EPS Est

------------------------- MONDAY -------------------------------

WAG    Walgreen              Mon, Jun 21  -----N/A-----       0.32


------------------------- TUESDAY ------------------------------

COMS   3Com Corp             Tue, Jun 22  After the Bell     -0.10
DRI    Darden Restaurants    Tue, Jun 22  After the Bell      0.44
GS     Goldman Sachs         Tue, Jun 22  Before the Bell     1.95
GTK    GTECH Holdings Corp.  Tue, Jun 22  Before the Bell     0.73
SCS    Steelcase Inc.        Tue, Jun 22  Before the Bell    -0.07


------------------------ WEDNESDAY -----------------------------

ARRO   Arrow International   Wed, Jun 23  -----N/A-----       0.36
BBBY   Bed Bath & Beyond Inc.Wed, Jun 23  After the Bell      0.25
COGN   Cognos                Wed, Jun 23  After the Bell      0.20
FDX    FedEx                 Wed, Jun 23  Before the Bell     1.33
MLHR   Herman Miller         Wed, Jun 23  After the Bell      0.17
KMG    Kerr-McGee            Wed, Jun 23  -----N/A-----       1.09
LNR    LNR Property          Wed, Jun 23  -----N/A-----       0.88
MU     Micron Technology     Wed, Jun 23  -----N/A-----       0.07
WOR    Worthington IndustriesWed, Jun 23  Before the Bell     0.76


------------------------- THUSDAY -----------------------------

ATYT   ATI Technologies      Thu, Jun 24  -----N/A-----       0.17
DLM    Del Monte Foods       Thu, Jun 24  Before the Bell     0.33
FDO    Family Dollar         Thu, Jun 24  Before the Bell     0.43
NKE    Nike                  Thu, Jun 24  After the Bell      1.09
RAD    Rite Aid Corporation  Thu, Jun 24  -----N/A-----       0.05
TEK    Tektronix Inc.        Thu, Jun 24  -----N/A-----       0.29


------------------------- FRIDAY -------------------------------

PAYX   Paychex               Fri, Jun 25  Before the Bell     0.21


----------------------------------------------
Upcoming Stock Splits In The Next Two Weeks...
----------------------------------------------

Symbol  Co Name              Ratio    Payable     Executable

PG      Procter & Gamble          2:1      Jun  18th   Jun  21st
CACH    Cache Inc                 3:2      Jun  18th   Jun  21st
WGR     Western Gas Resources, Inc2:1      Jun  18th   Jun  21st
EWBC    East West Bancorp Inc     2:1      Jun  20th   Jun  21st
NOC     Northrop Grumman Corp     2:1      Jun  21st   Jun  22nd
WCN     Waste Connections Inc     3:2      Jun  24th   Jun  25th
FBMT    First National Bancshares 3:2      Jun  30th   Jul   1st
KWK     Quicksilver Resources, Inc2:1      Jun  30th   Jul   1st
AXYS    Axsys Technologies, Inc   3:2      Jun  30th   Jul   1st
TEVA    Teva Pharm Industries Ltd 2:1      Jun  30th   Jul   1st
PTEN    Patterson-UTI Energy Inc  2:1      Jun  30th   Jul   1st
CNT     CenterPoint Prop Trust    2:1      Jun  30th   Jul   1st
LPMA    Lipman Elect Engineering  2:1      Jul   1st   Jul   2nd


--------------------------
Economic Reports This Week
--------------------------

Wall Street continues to focus on the upcoming June 30th decision
on interest rates and the handover in Iraq.  Meanwhile this week's
economic data is all due to be released on Thursday and Friday.
Don't forget that earnings are just around the corner.

==============================================================
                       -For-

----------------
Monday, 06/21/04
----------------
None


-----------------
Tuesday, 06/22/04
-----------------
None


-------------------
Wednesday, 06/23/04
-------------------
None


------------------
Thursday, 06/24/04
------------------
Initial Claims (BB)      06/19  Forecast:    340K  Previous:     336K
Durable Orders (BB)        May  Forecast:    1.6%  Previous:    -3.2%
Help-Wanted Index (DM)     May  Forecast:      40  Previous:       38
New Home Sales (DM)        May  Forecast:   1120K  Previous:    1093K


----------------
Friday, 06/25/04
----------------
GDP-Final (BB)              Q1  Forecast:    4.5%  Previous:     4.4%
Chain Deflator-Final (BB)   Q1  Forecast:    2.6%  Previous:     2.6%
Mich Sentiment-Rev. (DM)   Jun  Forecast:    95.0  Previous:     95.2
Existing Home Sales (DM)   May  Forecast:   6.50M  Previous:    6.64M


Definitions:
DM=  During the Market
BB=  Before the Bell
AB=  After the Bell
NA=  Not Available


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The Option Investor Newsletter                   Sunday 06-20-2004
Sunday                                                      2 of 5

In Section Two:

Watch List: Diapers, Tractors and Chinese Internets
Dropped Calls: BCR, ERTS, HSY
Dropped Puts: None


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**********
Watch List
**********

Diapers, Tractors and Chinese Internets

___________________________________________________________________

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


Kimberly Clark - KMB - close: 66.35 change: +0.38

WHAT TO WATCH: KMB is a huge producer of personal care and
consumer products from diapers to paper towels to wet wipes.  The
non-durable consumables manufacturer has seen its stock rise
strongly over the last year and now shares are butting up against
major resistance at $67.00.  A breakout over $67 could lead KMB
to challenge its highs near $72.00 back in 2001.  Currently its
P&F chart points to a $100 price target.

Chart=


---

Deer Co - DE - close: 69.17 change: +0.65

WHAT TO WATCH: Construction and heavy machinery producer Deere's
stock is up four weeks in a row.  The trend of higher lows has
now produced a small breakout over $69.00 and its simple 50-dma
on better than average volume.  We've been watching listing DE
for a move above $69.00 or $70.00.  More conservative traders
might feel better evaluating bullish positions on a move through
$70.  We would target the $74.50-75.00 region.

Chart=


---

Harman Intl Industries - HAR - close: 89.10 change: +0.43

WHAT TO WATCH: Up, up and away!  HAR is up four out of the last
five weeks with this last week hitting new all-time highs.
Shares have been challenging new resistance at $90.00 for the
last four sessions.  The pattern is suggesting a new upside
breakout soon but the stock is short-term overbought.  We'd look
for a dip to its simple 10-dma in the $85.00-85.50 region and
then consider a bounce.  Its bullish P&F chart points to a long-
term target of $126.00.

Chart=


---

Varian Medical Systems - VAR - close: 80.08 change: +0.88

WHAT TO WATCH: We seriously considered VAR as a potential put
candidate this weekend.  The recent breakdown under $82.00 and
then the $80.00 level on rising volume looks very bearish.  Its
MACD is in a new sell signal and its P&F chart just produced a
new triple-bottom breakdown sell signal.  We hesitated to add VAR
because of the bounce back above $80.00 and its P&F support right
at $78.00.  More aggressive traders can watch it for a failed
rally under $82.00 and use a tight stop.  Keep an eye on the
simple 200-dma near $75, which could also be support.

Chart=


---

Sina Corp - SINA - close: 36.05 change: -2.49

WHAT TO WATCH: We almost added SINA to the put list this weekend.
All the Chinese Internet stocks look weak and we really like
SINA's 6.4% breakdown on Friday.  The stock fell through support
at $37.50 and its 21, 100 and 200-dma's.  The move produced a new
MACD sell signal.  A couple of our concerns was potential support
at $35.00 and its 40 and 50-dma's just below $35.  Plus its P&F
chart is still in a bullish pattern, although that appears to be
reversing.

Chart=



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

GD $99.68 +0.40 - We're still watching GD for a breakout over
$100.  Defense stocks are on the rise and a move through $100
might be a decent entry point for a run toward its highs near
$111.

AGN $91.42 -0.14 - Keep an eye on AGN for a move through $92.50.
It could be a trigger for a run toward the $100 mark.

ITW $92.77 +0.32 - We're also watching ITW for a run toward the
century mark.  A breakout over $94 or $95 might work as an entry
point.

MBI $57.09 +0.34 - MBI appears to have built a solid six-week old
base near $55.  Now the stock is inching higher and just broke
out above resistance at $57.00.

BBOX $44.30 -0.44 - We'd use a trigger under $44.00 to try and
capture what looks like BBOX's next move down toward $40.50.

DJ $45.49 -0.62 - Dow Jones Co looks ready to breakdown below
support at $45.  Such a move could lead to a test of the $40
level (if you're patient).


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**************************
PICKS WE DROPPED THIS WEEK
**************************

Remember that historically, when we drop a pick it will go up
10 to 15% the very next week. It is part of Murphy's Law.
Just because we drop a stock as a pick does not mean we are
advocating a "sell" on any position you have. We are simply
dropping our recommendation as a new play. Existing plays
can and do continue on and are usually profitable.


CALLS
^^^^^

Bard C R - BCR - close: 57.46 chg: -0.17 stop: 55.95

After a month of trying we're going to kick BCR off the play
list.  However, that doesn't mean you need to close the play.
The stock is still hanging in there near its highs.
Unfortunately, it can't seem to get enough momentum to breakout
over $58.00.  BCR tried to breakout on Friday and made it to
$58.20 before selling off in the last hour.  Now Murphy's law is
alive and well and odds are if we close the play now BCR will
rocket higher next week.  If you keep the play open watch your
stops!

Picked on May 20 at $ 55.00 (post split)
Change since picked: + 2.46
Earnings Date      04/20/04 (confirmed)
Average Daily Volume:   386 thousand
Chart =


---

Electronic Arts - ERTS - close: 51.69 change: +0.04 stop: 50.00

After a month on the play list, we've just gotten tired of
waiting for ERTS to extend its initial move off of support.  We
got the new Buy signal on the PnF chart over a week ago, yet the
stock continues to languish just over its 50-dma.  While it is
still possible that we'll see a bullish move towards the $55-56
area, with time value wasting away it seems better to harvest the
small gain here and focus our efforts elsewhere.  For traders
that are willing to stick with the play in hopes of more bullish
action next week, we'd suggest keeping a tight reign on open
positions with a stop at $51, just under last week's lows and the
20-dma.

Picked on May 18th at        $49.60
Change since picked:          +2.09
Earnings Date               4/29/04 (confirmed)
Average Daily Volume =     3.65 mln
Chart =


---

Hershey Foods - HSY - close: 45.19 chg: -0.26 stop: 44.75

HSY has not yet broken support at $45.00 but we're going to err
on the side of caution today.  The recent close under its simple
10-dma and Friday's close under the $45.20 level, which should
have been minor support has undermined our confidence.  Its MACD
has rolled back into a sell signal and HSY looks ready to retest
its simple 40-dma near $44.70.  Should HSY decide to bounce we
can always choose to pick it back up again, maybe with a move
through $46.50.  We're closing the play with a small loss.

Picked on June 08 at $ 46.11 (post split)
Change since picked:  - 1.08
Earnings Date       04/22/04 (confirmed)
Average Daily Volume:    441 thousand
Chart =



PUTS
^^^^

None


***********
DEFINITIONS
***********

! Please note changes to the Option Chains for new call and put
  plays.  We are no longer listing a "SL" or Suggested Stop Loss
  on individual options.  Most brokers offer the ability to list
  a stop loss for your option on the underlying stock.

  All of OptionInvestor.com's directional call or put plays list
  a suggested stop loss for the stock itself and if the stock
  trades at or below that stop on an intraday basis we will
  close any hypothetical play at that time.

OI  = Open Interest - the number of open contracts outstanding.
Last Trade @ = Indicates where the option traded last.
ITM = In the money
ATM = At the money
OTM = Out of the money
ADV = Average Daily Volume

The options with a "*" by the strike price are our choices from the
group. If the stock moves as expected we feel they have the best
chance to substantially increase or double in price with the best
risk/reward ratio compared to the other options for the same stock.
You must determine if they fit your risk profile for time and price.

RISKS of SELLING PUTS:
The risk of selling naked puts is always the possibility
of a catastrophic event that drops the stock below the
strike price and could result in the stock being PUT to you.
Always protect yourself with a "buy to cover" limit order
to take you out before this can happen.


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The Option Investor Newsletter                   Sunday 06-20-2004
Sunday                                                      3 of 5


In Section Three:

Current Calls: AHC, ETN, GDW, MERQ, ZMH
New Calls: DHR, EASI, PD
Current Put Plays: CCMP, KSS, MO
New Puts: OMC, OSIP, SLAB


! Please note changes to the Option Chains for new call and put
  plays.  We are no longer listing a "SL" or Suggested Stop Loss
  on individual options.  Most brokers offer the ability to list
  a stop loss for your option on the underlying stock.

  All of OptionInvestor.com's directional call or put plays list
  a suggested stop loss for the stock itself and if the stock
  trades at or below that stop on an intraday basis we will
  close any hypothetical play at that time.


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******************
CURRENT CALL PLAYS
******************

Amerada Hess Corp. - AHC - close: 74.27 change: +0.12 stop: 69.00

Company Description:
Amerada Hess Corporation explores for, produces, purchases,
transports and sells crude oil and natural gas.  These
exploration and production activities take place in the United
States, United Kingdom, Norway, Denmark, Equatorial Guinea,
Gabon, Indonesia, Thailand, Azerbaijan, Algeria, Malaysia,
Colombia and other countries.  The company also manufactures,
purchases, transports, trades and markets refined petroleum and
other energy products.  It owns 50% of a refinery joint venture
in the United States Virgin Islands, as well as another refining
facility, terminals and retail gasoline stations located on the
east coast of the United States.

Why we like it:
As expected, our new AHC play didn't do much on expiration
Friday, but did managed to inch a bit closer to our $75 trigger.
Once over that level, the bulls ought to come out of the woodwork
and quickly drive the stock towards first resistance at $78.
Aggressive traders can enter on the initial breakout, while those
with a more conservative style can hope for a pullback to test
support near $74 before the rally begins in earnest.  Until AHC
breaks out, we'll maintain a liberal stop at $69.

Suggested Options:
Shorter Term: The July $75 Call will offer short-term traders the
best return on an immediate move, as it is currently at the
money.

Longer Term: Aggressive longer-term traders can use the August
$80 Call, while the more conservative approach will be to use the
August $75 Call.  Our preferred option is the August $75 strike,
as it is currently at the money and should provide sufficient
time for the play to move in our favor.

BUY CALL JUL- 70 AHC-GN OI=  70 last traded @ $5.20
BUY CALL JUL- 75 AHC-GO OI=1772 last traded @ $1.95
BUY CALL AUG- 75*AHC-HO OI=2439 last traded @ $3.20
BUY CALL AUG- 80 AHC-HP OI= 916 last traded @ $1.40

Annotated Chart of AHC:



Picked on June 17th at       $74.15
Change since picked:          +0.12
Earnings Date               4/28/04 (confirmed)
Average Daily Volume =     1.08 mln
Chart =


---

Eaton Corp - ETN - close: 61.75 chg: +0.80 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 have good news to report on ETN.  The rebound from Thursday
afternoon continued into Friday morning and shares pierced
resistance at $62.00 to hit our trigger point at $62.05.  Volume
on the rally was average but that's not bad considering the
abysmally low volume the market has seen lately.  The move over
$62.00 did produce the new triple-top breakout buy signal on
ETN's point-and-figure chart with a $77 price target.

The bad news is that ETN failed to close over this pivotal $62.00
level.  ETN pulled back the rest of the session into what looks
like a very short-term bull flag, which could be good news.
Remember that the reverse head-and-shoulders pattern should
project a $71 price target.  We're only targeting a move to the
$67-70 range.  We're not going to change our stop loss at $59.95
but we will suggest that more aggressive traders consider buying
a bounce above $60.00.  More conservative types ought to consider
looking at new positions on a move through $62 again.

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 @ $2.95
BUY CALL JUL 62.50 ETN-GZ OI= 906 Last traded @ $1.40
BUY CALL JUL 65.00 ETN-GM OI= 273 Last traded @ $0.50

Annotated Chart:



Picked on June 18 at $ 62.05
Change since picked:  - 0.20
Earnings Date       04/14/04 (confirmed)
Average Daily Volume:    1.0 million
Chart =



---

Golden West Fncl - GDW - close: 108.07 chg: +0.11 stop: 107.00

Company Description:
Headquartered in Oakland, California, Golden West is one of the
nation's largest financial institutions with assets over $85
billion as of April 30, 2004. The Company has one of the most
extensive thrift branch systems in the country, with 273 savings
branches in ten states and lending operations in 38 states.
(source: company press release)

Why We Like It:
It has been a somewhat volatile week for GDW.  The stock sank on
Monday but has since seen a very slow drift higher the following
four sessions.  Unfortunately, volume has been very low for the
stock so it's hard to read much into the recent action.  Not all
financials are expected to do poorly in a rising interest rate
environment and GDW is one of the stronger candidates analysts
believe will out perform its peers.  We like the P&F chart with
its bullish buy signal and $129 price target.  Our target is a
bit lower, in the $116-117 range, but first we need to open the
play.  Currently we are un-triggered.  GDW needs to hit $110.01
or higher to trigger the play for us.  More aggressive traders
can try and jump the gun by entering on a breakout from its sharp
bull flag pattern.  As mentioned on Thursday the $108.50 or
$109.00 level might make decent entries for the more aggressive.


Suggested Options:
We're going to suggest the July or August calls.  Our favorite
would be the July 110s.

BUY CALL JUL 105 GDW-HA OI= 412 Last traded @ $3.30
BUY CALL JUL 110 GDW-HB OI= 411 Last traded @ $0.20

Annotated chart:



Picked on June xx at $xxx.xx <-- See TRIGGER
Change since picked:  + 0.00
Earnings Date       07/20/04 (confirmed)
Average Daily Volume:    694 thousand
Chart =


---

Mercury Interactive - MERQ - cls: 47.82 change: -0.26 stop: 46.50

Company Description:
As a provider of integrated performance management solutions that
enable businesses to test and monitor their Internet
applications, MERQ is looking for growing e-commerce demand to
continue to fuel its business.  The company's products perform
such tasks as analyzing and eliminating Web site performance
bottlenecks and automating quality assurance testing.  MERQ's
client base spans a wide range of industries including Internet
companies such as Amazon.com and America Online, infrastructure
companies Ariba and Oracle, as well as Apple Computer, Cisco
Systems and Ford Motor Company.

Why we like it:
Expiration week didn't help out our MERQ play, with the stock
steadily drifting lower through out the week.  Closing just below
$48 support on Friday, the stock should be primed for a rebound
early next week, with the test of the 20-dma ($47.64) perhaps
providing the catalyst for that bounce.  As is typical of summer
expiration weeks, MERQ saw light volume throughout the week,
which adds credence to the notion that this is just normal
consolidation before the rally resumes.  Should the 20-dma fail
to provide support, the last ditch support will be found at $47,
which was solid resistance in April and provided support earlier
this month.  Maintain stops at $46.50, which is just under the
early June intraday low, as well as the 30-dma, now at $46.55.

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

Longer Term: Aggressive longer-term traders can use the October
$50 Call, while the more conservative approach will be to use the
October $47 Call.  Our preferred option is the July $47 strike,
as it is currently at the money and should provide sufficient
time for the play to move in our favor.

BUY CALL JUL- 47*RQB-GR OI=2089 last traded @ $2.05
BUY CALL JUL- 50 RQB-GJ OI=1530 last traded @ $1.00
BUY CALL OCT- 47 RQB-JR OI= 165 last traded @ $4.20
BUY CALL OCT- 50 RQB-JJ OI= 376 last traded @ $3.10

Annotated Chart of MERQ:



Picked on June 6th at        $47.56
Change since picked:          +0.26
Earnings Date               4/22/04 (confirmed)
Average Daily Volume =     2.15 mln
Chart =


---

Zimmer Holdings - ZMH - close: 86.27 chg: +0.27 stop: 84.95

Company Description:
Founded in 1927 and headquartered in Warsaw, Indiana, Zimmer is
the worldwide #1 pure-play orthopaedic leader in the design,
development, manufacture and marketing of reconstructive and
spinal implants, trauma and related orthopaedic surgical
products. In October, 2003, the company finalized its acquisition
of Centerpulse AG, a Switzerland-based orthopaedics company and
the leader in the European reconstructive market. The new Zimmer
has operations in more than 24 countries around the world and
sells products in more than 80 countries. As a result of the
acquisition of Centerpulse, reported 2003 sales were $1.9
billion. Full-year 2003 pro forma worldwide sales of Zimmer and
Centerpulse were approximately $2.6 billion. The new Zimmer is
supported by the efforts of more than 6,500 employees.
(source: company press release)

Why We Like It:
We debated back and forth on whether or not to keep ZMH on the
play list.  Fundamentally business is good.  The stock is near
all-time highs and its P&F chart is on a new triple-top breakout
buy signal with a $105 price target.  Yet after two weeks of
consolidating in a tight $2.00 range under resistance at $88.00
the stock slipped under $86 on Thursday.  Its short-term
technicals look weak.  We decided that this is when we're going
to let support and resistance do the work for us.  ZMH has not
yet broken support at $85.00.  Until it does we're going to keep
the play active.  However, we're not suggesting new bullish
positions until ZMH can breakout above resistance at $88.00.
Maybe ZMH's management can issue some stock moving comments at
the growth conference next Tuesday.

Suggested Options:
We are NOT suggesting any new plays until ZMH can trade above the
$88.00 mark.


Annotated Chart:



Picked on May 27 at $ 85.20
Change since picked: + 1.07
Earnings Date      04/26/04 (confirmed)
Average Daily Volume:   1.2 million
Chart =



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

Danaher Corp. - DHR - close 48.74 change: +0.51 stop: 47.00

Company Description:
Danaher Corporation operates in two business areas:
Process/Environmental Controls and Tools and Components. The
company's Tools and Components segment produces and distributes
general purpose mechanics' hand tools and automotive specialty
tools.  Among the household names they are responsible for are
Sears' Craftsman line, Allen wrenches, and NAPA hand tools.  The
Process Controls division, led by Veeder-Root, makes leak
detection systems for underground storage tanks, as well as
sensors, switches, measurement devices, and communications and
power protection products.

Why we like it:
Continuing its year-long bullish trend, shares of DHR recently
broke out over several months of resistance at $48, and then
spent much of last week confirming that support appears to be
firm near the $47.50 level.  After rising from the $35 level to
nearly $48, the stock has been in a broad consolidation pattern
between $44-48 since mid-January and the recent breakout over the
top of that range suggests a resumption of the year-long rally.
The PnF chart presents a bit of a mixed picture, with a fresh
Triple Top Buy signal, while at the same time the $49 bullish
price target has already been reached.  That said, from the
perspective of the candle chart, this breakout looks like a
bullish resolution to the 6-month continuation flag pattern, and
that suggests this is a case where the PnF price target will be
exceeded.

With the breakout already having occurred, there's no need to use
an entry trigger for the play.  Aggressive traders can enter on a
break over the $49 level, which would be a move to new all-time
highs.  On the other hand, conservative players can look for
entry on another mild dip into the $47.50-48.00 area.  Initially,
we'll look for a breakout over $50 to extend towards our $55
target.  Last week's lows near $47.50 should hold any test of
support, and there's the 20-dma ($47.19) rising to reinforce that
support.  We'll initially set our stop at $46.75, which is just
under the 50-dma ($46.76).

Suggested Options:
Shorter Term: The July $45 Call will offer short-term traders the
best return on an immediate move, as it is currently in the
money.

Longer Term: Aggressive longer-term traders can use the September
$50 Call, while the more conservative approach will be to use the
September $47 Call.  Our preferred option is the September $47
strike, as it is currently at the money and should provide
sufficient time for the play to move in our favor.


BUY CALL JUL- 45 DHR-GI OI= 350 last traded @ $4.10
BUY CALL JUL- 50 DHR-GJ OI=1058 last traded @ $0.75
BUY CALL SEP- 47*DHR-IW OI=1572 last traded @ $3.10
BUY CALL SEP- 50 DHR-IJ OI=1452 last traded @ $1.75

Annotated Chart of DHR:



Picked on June 20th at       $48.74
Change since picked:          +0.00
Earnings Date               4/22/04 (confirmed)
Average Daily Volume =     1.59 mln
Chart =


---

Engineered Support Sys - EASI - cls: 56.22 chg: +3.17 stop: 53.50

Company Description:
Engineered Support Systems, Inc. is a diversified supplier of
high-tech, integrated military electronics, support equipment and
logistics services for all branches of America's armed forces and
certain foreign militaries. The Company also serves a variety of
commercial and industrial customers
(source: company press release)

Why We Like It:
Nope, that flash across the sky on Friday was not a UFO but
shares of EASI soaring almost 6% higher on three times its normal
volume.  Yet the move is an unexplained phenomenon since we can't
find any catalyst to account for the rally or the volume.  The $3
move burst through major resistance at $55 and EASI looks ready
to challenge its highs near $62.

We do know that the stock's last surge higher back on May 25th
was due to its earnings report.  EASI beat estimates with
stronger than expected revenues.  According to their press
release it was due to "recent acquisitions and exceptional
organic growth."  Plus, the company guided higher for the year.
EASI now expects full year earnings of $2.65-2.70, which is 15
cents higher than their previous forecasts.  Revenues are
expected to hit $840 million versus $787 million.

Now after four weeks of consolidating sideways EASI is on the
move.  Its P&F chart is bullish and points to a $79 price target.
We're only going to target a move to $60-62.  Our initial stop
loss will be $53.50.

Suggested Options:
We like both the July and August strikes.  Right now our
favorites would be the July 55s.

BUY CALL JUL 55 UFE-GK OI= 256 Last traded @ $3.30
BUY CALL JUL 60 UFE-GL OI= 120 Last traded @ $0.95
BUY CALL AUG 55 UFE-HK OI= 356 Last traded @ $4.00

Annotated Chart:



Picked on June 20 at $ 56.22
Change since picked:  + 0.00
Earnings Date       05/25/04 (confirmed)
Average Daily Volume:    297 thousand
Chart =


---

Phelps Dodge - PD - close: 71.68 chg: +3.08 stop: 68.00

Company Description:
Phelps Dodge Corp. is the world's second-largest producer of
copper, a world leader in the production of molybdenum, the
largest producer of molybdenum-based chemicals and continuous-
cast copper rod, and among the leading producers of magnet wire
and carbon black. The company and its two divisions, Phelps Dodge
Mining Co. and Phelps Dodge Industries, employ more than 13,500
people in 27 countries. (source: company press release)

Why We Like It:
We've been following PD in the MarketMonitor and on the watch
list for weeks now.  After a quick double-bottom at $60.00 in May
shares of PD have been edging higher.  Its trend of higher lows
has finally blossomed into a bullish breakout above resistance at
its 50-dma, 200-dma and the $70.00 mark.  Volume was stronger
than normal on the breakout and that's encouraging considering
the incredibly low volume numbers we've seen all week in the
markets.

Contributing to the move higher for PD has been the weeklong
drift higher for copper futures and the recent declines in the
U.S. dollar.  Hopefully, now that PD has pushed through
resistance we can see some momentum carry it toward the $80
level.  Its P&F chart currently shows a new triple-top breakout
buy pattern and a push through its P&F resistance.  However, PD
may see more resistance at its simple 100-dma.  Be prepared.
We're going to start the play with a stop loss at $68.00.

Suggested Options:
Short-term traders can choose from the July or October calls.
Our favorites are the July 70s and 75s.

BUY CALL JUL 70 PD-GN OI= 3268 Last traded @ $3.80
BUY CALL JUL 75 PD-GO OI= 3190 Last traded @ $1.50

Annotated Chart:



Picked on June 20 at $ 71.68
Change since picked:  + 0.00
Earnings Date       04/28/04 (confirmed)
Average Daily Volume:    2.6 million
Chart =



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*****************
CURRENT PUT PLAYS
*****************

Cabot Micro. - CCMP - close: 28.00 chg: +0.18 stop: 30.00

Company Description:
Cabot Microelectronics, headquartered in Aurora, Illinois, is the
leading supplier of CMP slurries for polishing various materials
used in semiconductor manufacturing processes. The company's
products play a critical role in the production of the most
advanced semiconductor devices, enabling the manufacture of
smaller, faster and more complex devices by its customers.
(source: company press release)

Why We Like It:
Not a bad week for CCMP.  Shares continued to drop Monday through
Wednesday and CCMP came within 2 cents of our $26-25 profit
target.  Volume was pretty strong on Wednesday's drop to $26.02
but CCMP did manage a bounce off its lows.  That bounce has
continued the last couple of days but we're not concerned since
CCMP was due for an oversold rebound.  CCMP's MACD is in a new
sell signal but its short-term technicals like its stochastics
(5,3,3) are stepping higher from oversold.  We are still bearish
on the stock but suspect we could see a bit more bounce early
next week.

Look for a failed rally under $29.50 and or its simple 40-dma,
currently near $29.75.  This would be the preferred entry point
for new positions.  We're going to leave our stop loss at $30.00
for now.  Be aware that CCMP is due to speak at a growth
conference on Tuesday.

Suggested Options:
Our favorite puts for short-term traders are the July 30s.

BUY PUT JUL 30 UKR-SF OI= 1577 Last traded @ $2.85
BUY PUT JUL 25 UKR-se OI= 2570 Last traded @ $0.55

Annotated chart:



Picked on June 13 at $ 29.46
Change since picked:  - 1.46
Earnings Date       04/22/04 (confirmed)
Average Daily Volume:    3.7 million
Chart =


---

Kohl's Corp - KSS - close: 45.45 change: -0.08 stop: 48.05

Company Descriptions:
Based in Menomonee Falls, Wis., Kohl's is a family-focused, value
oriented specialty department store offering moderately priced
national brand apparel, shoes, accessories and home products. The
company operates 589 stores in 38 states.
(source: company press release)

Why We Like It:
Wow!  We wish they were all this easy to play.  A couple of weeks
ago KSS had rallied right to resistance and began to falter.  We
jumped on with suggested put plays since KSS had a descending
trendline of resistance and its simple 200-dma looming overhead.
We got a brief scare when KSS broke through its trendline but it
failed under its 200-dma.  Since then the stock has been down
seven days in a row.  The July 50 puts are up 50% and the July 45
puts are up 75% since we suggested them.  Of course you know what
happens now.  After seven declines in a row KSS is overdue for a
bounce.  That doesn't means it has to bounce but odds are we
might see one soon.  Traders looking for new positions might want
to wait for another rebound and then open positions as it begins
to fail.  Our target is the $41-42 region.  We know our stop loss
feels a bit wide at $48.05 but we want to give KSS room to move
without jeopardizing our play.

Suggested Options:
It could take a few weeks to achieve our target so we're suggesting
the July puts.  Our favorites are the July 50s.

BUY PUT JUL 50 KSS-SJ OI= 4555 Last traded @ $4.80
BUY PUT JLU 45 KSS-SI OI= 6792 Last traded @ $1.15

Annotated Chart:



Picked on June 06 at $ 47.45
Change since picked:  - 2.00
Earnings Date       05/13/04 (confirmed)
Average Daily Volume:    3.7 million
Chart =


---

Altria Group - MO - close: 47.58 change: -0.11 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 majufacture 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 noted Thursday night, MO spent most of last week consolidating
in a very narrow range after its drop back from just over $49.
In typical expiration-Friday fashion, the stock tested both ends
of that consolidation range and then closed near the middle of
the range, giving us very little to go on in terms of forecasting
next week's price action.  The PnF chart is still bearish,
there's solid resistance overhead at $48, further bolstered by
the 10-dma ($48.20) and the 20-dma ($48.09) and all signs point
to further downside.  But on the other hand, it is interesting
that the decline paused last week right on the $47.50 level,
which is very close to the bottom of the gap from last November.
That gap support may prove problematical in the near-term, so our
preference for new entries is to focus on rollovers from
resistance near $48.  Maintain stops at $49.50, just over the top
of the most recent failed bounce 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=  815 last traded @ $2.80
BUY PUT JUL-47 MO -SW OI=18454 last traded @ $1.05

Annotated Chart of MO:



Picked on June 15th at        $47.55
Change since picked:           +0.03
Earnings Date                7/20/04 (unconfirmed)
Average Daily Volume =      6.67 mln
Chart =



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

Omnicom Group - OMC - close: 77.14 change: -0.70 stop: 80.50

Company Description:
Omnicom Group is a marketing and corporate communications
company.  The company has grown its strategic holdings to over
1500 subsidiary agencies operating in more than 100 countries.
OMC's wholly and partially owned businesses provide
communications services to clients on a global, pan-regional and
national basis.  The company's agencies provide an extensive
range of marketing and corporate communications services,
including advertising, brand consultancy, crisis communications,
custom publishing, database management, digital and interactive
marketing, business-to-business advertising, employee
communications and environmental design.  OMC also provides field
marketing, healthcare communications, marketing research,
promotional marketing and sports and event marketing.

Why we like it:
Ever since last August, shares of OMC have been in the process of
building a large H&S topping formation, and as we know, the
bigger these patterns are, the more significant they are in terms
of price action.  The neckline of that formation currently rests
just below $77 and last week's drop to within pennies of that
line has the stock very close to confirming that long-term
pattern.  Looking at the more recent price action, we can see a
smaller H&S top that has been forming since the beginning of
April, and that pattern confirmed last week with the break of the
neckline at $77.50.  Calculating a downside target from that
pattern gives us a near-term objective of $72.  Completing the
bearish picture is the PnF chart, which finally gave a Sell
signal on Friday's touch of the $77 level and the tentative
downside target from that view is $71.  Should we see a solid
break of the longer-term H&S neckline (which seems likely, given
the PnF chart and the short-term H&S pattern), we'll have a
longer-term target of $65 to work with.

Looking simply at support levels that might come into play, we
can see the likelihood for a near-term bounce from the $75 level,
but real strong support doesn't come in until the $71-72 area,
confirming the $71 target from the PnF chart and the $72 target
from the short-term H&S pattern.  With that kind of confluence,
we'll set the $71-72 area as our initial target for the play.
Depending on your perspective, we could say that the breakdown
has already occurred (based on the short-term H&S pattern and PnF
chart) or that it is just ahead, with a break of $76.50 being
needed.  We'll be a bit more aggressive and say the breakdown has
already happened and will therefore not use an entry trigger.  A
break of $76.50 can be used for momentum entries, while a bounce
back near the $78.00-78.50 area should provide for a nice
rollover entry.  With all of the shorter-term moving averages
clustered near the $80 level, we'll set our initial stop at
$80.50, just above the 50-dma ($80.18), which just crossed down
through the 200-dma ($80.29).

Suggested Options:
Aggressive traders will want to use the July 75 Put while those
with a more conservative approach will want to use the July 80
strike.  Our preferred option is the July 80 strike, as it is
currently in the money.

BUY PUT JUL-80*OMC-SP OI=3704 last traded @ $3.70
BUY PUT JUL-75 OMC-SO OI=1063 last traded @ $1.15

Annotated Chart of OMC:



Picked on June 20th at        $77.14
Change since picked:           +0.00
Earnings Date                4/27/04 (confirmed)
Average Daily Volume =      1.12 mln
Chart =


---

OSI Pharma - OSIP - close: 65.63 chg: -2.00 stop: 70.01

Company Description:
OSI Pharmaceuticals is a leading biotechnology company focused on
the discovery, development, and commercialization of high-
quality, next-generation oncology products that both extend life
and improve the quality of life for cancer patients worldwide.
OSI has a balanced pipeline of oncology drug candidates that
includes both novel mechanism-based, gene-targeted therapies
focused in the areas of signal transduction and apoptosis and
next-generation cytotoxic chemotherapy agents. OSI's most
advanced drug candidate, Tarceva(TM), a small-molecule inhibitor
of the HER1 gene, has successfully completed Phase III clinical
trials for lung cancer and is subject to an ongoing rolling
submission of an NDA. OSI has a commercial presence in the U.S.
oncology market where it exclusively markets Novantrone.
(mitoxantrone concentrate for injection) for approved oncology
indications and Gelclair. for the relief of pain associated with
oral mucositis. OSI has also established Prosidion Ltd., an
independently operated diabetes and obesity subsidiary based in
the United Kingdom. (source: company press release)

Why We Like It:
It's hard to miss the big gap up in shares of OSIP last April.
The stock soared from $38 to $98 and settled at $91 after
releasing positive Phase III trial data on its lung cancer
treatment Tarceva.  After some initial profit taking OSIP found
support near $67.50-70.00 and began climbing.  After all the
upcoming ASCO conference, where full details of the Phase III
data would be unveiled, was only a few weeks away.  Traders
ignored a negative earnings report where OSIP missed estimates by
24 cents and came in under revenue expectations because they were
focused on the ASCO conference.  Well June showed up and true to
form investors decided to "sell the news".  After a month long
rally in May suddenly biotech stocks were out of favor and OSIP
fell sharply.

The stock tried to consolidate between $65 and $70 last week but
Friday saw the stock drop 2.95% and close under its simple 50-
dma.  We're going to suggest new (aggressive) put positions now
and target a move to $55 maybe $50 depending on how fast OSIP
falls.  We know our stop loss at $70 is wide but the stock has
been volatile and that's the nearest overhead resistance.  Some
traders might feel better using a trigger under $65.00 to enter
new plays.  FYI: point-and-figure chart fans will note the new
sell signal and $46 price target.

There are always significant risks trading biotech stocks.  Just
looking back to April is an excellent example of what can happen
if you're on the wrong side of the press release.  Tarceva is
expected to be approved by the FDA some time in late 2004 or
early 2005.  Obviously many investors are already banking on an
approval letter however; any new positive announcements could
seriously impact our bearish play.  Enter with caution.

Suggested Options:
We're going to suggest the July and October puts but our
favorites would be the July 65 or 60s.

BUY PUT JUL 60 GHU-SL OI= 3470 Last traded @ $1.35
BUY PUT JUL 65 GHU-SM OI= 3021 Last traded @ $3.10
BUY PUT JUL 70 GHU-SN OI= 3014 Last traded @ $6.20

Annotated Chart:



Picked on June 20 at $ 65.63
Change since picked:  - 0.00
Earnings Date       05/11/04 (confirmed)
Average Daily Volume:    4.4 million
Chart =


---

Silicon Labs. - SLAB - close: 44.99 change: -0.64 stop: 48.00

Company Description:
Silicon Laboratories designs, manufactures and markets
proprietary high-performance mixed-signal integrated circuits
(ICs) for the wireless, wireline and optical communications
industries.  The company initially focused its efforts on
developing ICs for the personal computer modem market and is now
applying its mixed-signal and communications expertise to the
development of ICs for other high growth communications devices,
such as wireless telephones and optical network applications.


Why we like it:
With more weakness in the Semiconductor sector (SOX.X) last week,
it seems clear the time in this space is turning decidedly in
favor of the bears.  Even good news and upgrades from Wall Street
haven't been able give the bulls enough ammunition to make any
headway.  After we completed our last foray into playing the
downside in shares of SLAB, the stock rose to test its 50-dma and
it actually looked for a couple days like it might succeed.  But
since then, price fell back under the 50-dma, then the 200-dma
and over the past few days, we've seen selling intensify, driving
the stock right to the site of support created by the May low at
$44.90.  A break below that level will likely see the bears
getting more aggressive, particularly in light of the picture
offered by the PnF chart.  This recent downdraft has produced a
new Sell signal and the tentative downside target is currently
$38.

The candle chart clearly shows that a break below the May lows
will have the stock on a trajectory to test the December lows
near $40 and that looks like a reasonable initial target to shoot
for.  We'll use a trigger at $44.75 for the play, with aggressive
entries looking good on the initial break of support, while the
more conservative approach will be to wait for a failed rebound
in the $46-47 area before entry.  There is now solid resistance
near $47.50, which is backed up by the 10-dma (now at $47.43).
Another very bearish factor about to be added to the mix is that
the 50-dma ($50.59) is poised just over the 200-dma ($50.33) and
that ominous cross should take place by Tuesday at the latest.
We'll initially place our stop at $48.50, just over last week's
intraday highs.

Suggested Options:
Aggressive traders will want to use the July 40 Put while those
with a more conservative approach will want to use the July 45
strike.  Our preferred option is the July 45 strike, as it is
currently at the money.

BUY PUT JUL-45*QFJ-SI OI=5618 last traded @ $2.60
BUY PUT JUL-40 QFJ-SH OI= 652 last traded @ $0.85

Annotated Chart of SLAB:



Picked on June 20th at        $44.99
Change since picked:           +0.00
Earnings Date                4/26/04 (confirmed)
Average Daily Volume =      1.13 mln
Chart =



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The Option Investor Newsletter                   Sunday 06-20-2004
Sunday                                                      4 of 5

In Section Four:

Leaps: Under The Surface
Option Spreads: Whoever Said “Money Can’t Buy Happiness” Must Not
    Have Any!
Traders Corner: A New Look at Macro Support and Resistance


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*****
LEAPS
*****

Under The Surface
By Mark Phillips
mphillips@OptionInvestor.com

The ridiculous rangebound chop in the broad market continued again
last week.  It really makes one wonder whether natural price
action in the major indices will ever return.  I'm not the only
one wondering such a thing and I received a couple interesting and
disturbing notes from some colleagues with connections into the
pits where some of the index futures contracts are traded.  If the
reference to "990N" means anything to you, then you know precisely
what I'm talking about.

There's a growing contingent of CME pit traders that are
increasingly ticked off by the way the futures are being driven,
reportedly by an entity known by their clearing number, which is
"990N".  The notes that I receive dance around the issue of who
990N is, but the very strongly implied reference is that it is the
very same entity that is due to make a big decision on June 30th.
Whether there's any validity to the veiled accusation, I can't
say.  But there are many things that are purported in the
marketplace and the financial arena that I feel are far less
likely.

What remains as an incontrovertible fact is that the something is
wrong with the volatility indices.  Either something fundamentally
changed with the new calculation scheme last September, or there
is very clear market manipulation and everyone knows it, keeping
the volatility at extreme lows.  Whatever the cause, the VIX/VXO
indicators remain as useless to understanding the marketplace as
they have been for the past 6 months.

While the action in the broad market is inscrutable as ever, we're
starting to see some sectors start to put in some important moves,
and more importantly, we're starting to see some interesting
action from individual stocks.

We know that the Semiconductor sector is often a leading indicator
for the overall market.  So what does it say about the future of
the rangebound broad market when the SOX gets hammered like we saw
last week.  Forget about what the root cause of the drop was.  The
key is that is completely irrelevant!  What is key is that the SOX
has been riding lower along the underside of the 200-week moving
average since early January, and last week's break back under the
50-week moving average looks bad.  But what we really need to
think about is the picture being portrayed by the major weekly
moving averages.  All of the shorter averages are in the process
of rolling over just below the 200-wma, and the 50-wma hasn't been
over the 200-wma since the "death cross" that occurred in late
2001.  Barring an as-yet invisible major catalyst, the SOX is
going down and rising interest rates are certainly not going to
help.

Moving on to the individual equity landscape, we have some broad
price patterns that are looking rather troubling for the bulls.
As boring as the price action has been, isn't it interesting that
our HD Portfolio play continues to be pressured by resistance at
the top of its multi-year descending channel?  How about EK?
While the price action is about as exciting as watching grass
grow, there's not a bullish sign to be seen.  Jumping over to our
Watch List, we have GM rebounding nicely from its recent lows, but
stalling well below the top of its own multi-year descending
channel.

It's almost as though these three are waiting on the outcome from
the Fed in terms of interest rates before giving an indication on
what the future holds.  It makes sense that HD would be in a
holding pattern, as consumers' spending habits relative to home
improvement projects will very likely be pinned to the near-term
direction for interest rates.  Likewise, GM has become little more
than a financing operation, so a significant rise in interest
rates is certainly not going to be good for corporate profits.

There are numerous other examples of the market "under the
surface" showing signs of weakness or at least indecision.  But we
don't really have time to hit them all here this weekend.  The
final point I'll make is to touch on a subject I've been writing
about a great deal lately -- The Housing Sector.  We're waiting
for the shoe to drop on Fed policy towards interest rates to get
the ball rolling, but I certainly see a lot of signs of a dam
about to break.  Check out my Trader's Corner article from last
week and you'll see what I mean.

Everyone expects the Fed to raise rates by 25 basis points on June
30th and then continue the process of tightening monetary policy
until we've seen a significant rise in short term rates off of the
current generational lows.  But I'll offer a somewhat different
view.  While I won't necessarily say the Fed will not raise rates
in a couple weeks, I think we're going to be looking at a much
more subdued series of rate hikes than many fear.  I'm taking my
cues from the action in the Ten Year Note, which hit a high yield
of 4.904% in the middle of May and has since been building what
looks an awful lot like a double top formation.

Sure, it could be just simple consolidation, but why?  From all
the economic reports that have been coming out in the past month,
you would think the bond junkies would be in Sell mode, viewing
the economic strength, employment growth and clearly rampant
inflation as major signs that the Fed is about to get very hawkish
indeed.  The fact that it hasn't happened tells me that the bond
crowd is once again listening to the Fed's rhetoric about a
gradualist approach and believing it.

With the incredible risks to the system of interest rates rising
too rapidly (the carry trade is one risk, but an attendant risk is
also the leveraged nature of FNM/FRE, along with a staggering
amount of derivatives risk in the financial system -- think JPM),
we can be sure that Greenspan will want to be exceedingly cautious
in raising rates throughout the balance of the year.

So what am I saying in all this rambling dialogue?  The Fed is
trying desperately to re-inflate the economy and to be honest,
they've done a great job, what with the latest PPI showing an
annualized rate of inflation approaching 10%!  Of course that is
being played down so as to allow the Fed to continue printing
money at an alarming rate, while nobody really pays attention, all
the while keeping interest rates as low as possible.  If the Fed
had their way, they wouldn't raise rates until sometime in 2005,
but I suspect the bond market may have forced his hand in concert
with the recently strong economic data.  In short, I expect the 25
basis point hike on the 30th, with the very real possibility that
it could be the only one until after the election.

In addition to the now well-established process of keeping
consumers literally swimming in all the cash being printed, I
think the irrational chop we're seeing in the broad indices smacks
of something very ugly -- namely market manipulation.  I'll leave
the identity of the force behind this supposed manipulation
unnamed, but if you think "The Unknown Comic" -- you know, the guy
with the bag over his head -- I think we'll have a working
understanding.  This entity has the ability to shove large amounts
of cash at the index futures and pretty much make them behave as
desired, ticking off everyone else involved in that arena.

But what can't be accomplished with the complete lack of
directionality is an influencing of individual stocks and sectors,
which are now starting to react to things other than broad market
action.  You know, like fundamentals and valuations!  So while the
broad market action continues to be completely nonsensical, we're
starting to see the real market appear in individual equities
again and that means we ought to have more choices to work with in
the months ahead.  For now, let's take a gander at our current
crop of plays and see what's happening.

Portfolio:

HD - There's no doubt that HD has really been trying our
collective patience, as it continues to hold in its dull
consolidation range after the false breakdown last month.  The top
of the channel near $36 continues to offer significant resistance
and I suspect that the outcome of the upcoming FOMC meeting will
be the key determinant for future price action.  We'll maintain
our coverage as is until after that event, keeping our stop set at
$38.

CHK - With the Natural Gas index (XNG.X) advancing to new 3-year
highs last week and the price of Natural Gas holding well above
the key $6 level, shares of CHK have enjoyed a nice little rally
over the past week.  Rebounding smartly from the bottom of the 4-
month rising channel, the stock blasted right to the top of that
channel before pulling back a bit on Friday.  Last week's rally
pushed the stock to fresh multi-year highs and it looks like a run
at the $16.00-16.50 area is about ready to start.  Note that
weekly Stochastics are just starting to turn up from well above
oversold territory, a significant bullish indication.  Based on
the way this stock trades, we can expect to see another round of
profit taking or consolidation once price reaches that next
plateau of resistance, so conservative traders may want to
consider harvesting at least partial profits when that level is
reached.  We're still maintaining our long-term objective for a
rally up towards the $20 level.  Note that we've raised our stop
to $12.60 this weekend, which is solidly below the bottom of the
rising channel and just slightly under the 200-dma.

LUV - We've had to be patient with our LUV play, but the stock
looks like it is finally acting the way it should, rising on
expectations of the normal rise in travel through the summer
months.  We're seeing a steady progression of higher lows and
higher highs now and Friday's strong surge has LUV very close to a
major breakout over $16 resistance, as well as the 200-dma.  There
will be more resistance found in the $16.60-16.70 area, but that
will likely be just another consolidation zone prior to the bulls
propelling LUV towards strong resistance near $18.  Note that
we've inched our stop up slightly this weekend, placing it at $14,
just slightly under the rising trendline that connects the March
and May lows.

TYC - Continuing its inexorable rise, TYC has spent the past
couple weeks churning about the $31-32 area and based on Friday's
early surge higher, it appears this consolidation phase may be
just about over.  The stock is squarely in the middle of its 15-
month rising channel and with the strong buying volume on Friday
combined with the very encouraging picture on the PnF chart, our
$35 target looks quite achievable.  Of course, that's just the
initial target, but we'll deal with the potential for a further
advance after that first objective has been met.  With the stock
up well over 10% from our entry point, it's time to be less
forgiving with our stop, so we've raised it to $29 this weekend.
TYC should have strong support in the $29.50-30.00 area, further
supported by the 50-dma ($29.44).

AIG - Well, what's it going to be?  AIG got off to a good start,
rallying right up to the $75 area, where it stalled out and then
fell right back to our entry point near $72.  Viewed on the daily
chart, it's clear that we have the potential risk of a H&S top
being formed right now and that certainly wouldn't be good for our
play.  Of course, it would take a break under the $68.60 neckline
of that pattern to confirm and a break of $68 to generate a PnF
Sell signal.  For the time being, we'll stay our course,
maintaining our expectation that the current consolidation will
resolve itself in favor of the bulls.  Note that it will require a
breakout over the April highs just north of $77 to remove the
potential for a H&S top formation.  In the meantime, a successful
rebound from the $72 level can be considered for fresh entries.
Maintain stops at $68.

Watch List:

GM - Over the past few weeks, we've been seeing a steady rise in
GM, and last week, the stock finally climbed through the
descending trendline from the January and April peaks.  With the
bullish slant to the weekly Stochastics oscillator, it looks like
the bulls are going to attempt a run at the top of the long-term
descending channel near $50.  How the stock behaves on that
initial test and the position of the weekly Stochastics at the
time will tell us a great deal about whether this remains a viable
bearish play candidate.  Note that on the PnF chart, a breakout
over $51 would be required for a new Buy signal.  Short of that,
we'll likely be looking to re-activate the play, with an ideal
entry point near $50.  But we've still got a few weeks to wait for
that setup to present itself, based on the position of the weekly
Stochastics right now.

Radar Screen:

EK - Two more weeks have passed since our last update and still
nothing of consequence has occurred in shares of EK.  We do have
the stock building a pretty convincing neutral wedge on the daily
chart, and the break from that pattern may give us some clues as
to whether this un-tradable rangebound action will continue or if
EK is going to see a return of normal trading action.  Stay tuned.

$DJUSHB - If you've been following my long series on the Housing
sector and looking for some viable bearish candidates, then you
know we've narrowed our list of potential victims down to two
front-runners -- CTX and LEN.  While we aren't interested in
jumping the gun here, I think it's safe to say that both stocks
will find their way onto our Watch List next weekend.  I will
offer this though -- LEN is currently my favorite of the two.
We'll get into the details behind that view with next week's
Trader's Corner article, but if you want a hint as to a big piece
of the puzzle, I can tell you that playing with different scaling
on the PnF charts of the two stocks should turn on a big neon
sign.

NEM - We certainly don't have a bullish picture just yet in the
Mining sector, but there are some encouraging developments.  We
recently had new PnF Buy signals on the XAU and HUI indices, but
they've both seen bearish reversals this month.  That tells me
that we need to explore some different scales on the PnF charts to
remove the spurious signals.  A scale setting of 3-point box size
(instead of the default of 2) on HUI and about 1.4 on XAU filters
out a lot of the extraneous noise.  What I like about the sector
right now is that we're seeing the price of Gold putting in some
good basing action below the $400 level and a breakout over $400
would be a solid PnF Buy on the $5-box chart.  With the weekly
oscillators also showing bullish signs on the Gold chart, the
overall sector appears to be in the final stages of this
consolidation.  As the bellwether for the sector, NEM is looking
solid as well, holding above the bullish support line on its own
PnF chart, which will issue a new Buy signal with a trade at $41.
We aren't quite ready to Watch List this one again, but we're
getting close.

NOK - Technically, shares of NOK are still looking quite ugly on
the PnF chart, but we're seeing signs of improvement on the weekly
candle chart, with Stochastics threatening to move up out of
oversold territory.  What we really need to see is a solid move up
to the $15 level, then a slight retracement down near the $13.50
level and then finally a breakout over the bottom of the April gap
to turn things decidedly bullish.  We'll need to exercise some
patience here, but I think we've got a solid bullish play in the
making.

Closing Thoughts:
All eyes are fixed on the events scheduled for the end of June and
then the first week of July.  But as we've discussed here today,
we're likely to start seeing the "real market" appear as
individual equities and sectors start to move on their own merits
again.  If you've got some vacation time coming, the next 2-3
weeks would be a good time to take advantage of it, as the market
is likely to have a hard time making up its mind until we get past
the 4th of July weekend.

Best Trading Wishes!

Mark


LEAPS Portfolio

Current Open Plays



LEAPS Watchlist

Current Possibles

SYMBOL  SINCE    TARGET PRICE  TARGETED LEAP  SYMBOL

CALLS:
None



PUTS:
GM     05/09/04   HOLD         JAN-2005 $ 45  ZGM-MI
                               JAN-2006 $ 45  WGM-MI
                            PC SEP-2004 $ 50  GM -IJ
OMC    06/20/04   $79-80       JAN-2006 $ 80  YGS-MP
                               JAN-2007 $ 75  OBG-MO
                            PC SEP-2004 $ 85  OMC-JQ


New Portfolio Plays

None


New Watchlist Plays

OMC - Omnicom Group Inc. $77.14  **Put Play**

It isn't often that the same play shows up on both the short-term
put play list and as a LEAP put play at the same time, but this is
one of those rare occurrences.  OMC has been building a large H&S
top since last August and the upward-sloping neckline of that
slightly irregular pattern crosses just below the $77 level.  Over
the past coupe months, the stock has also traced out a smaller H&S
pattern, with the neckline at $77.50 having been violated last
week on strong volume.  Adding its voice to the bearish cacophony,
the PnF chart has seen some significant developments over the past
week.  Price finally broke the bullish support line at $78-79 and
issued a fresh PnF Sell signal, that brings with it a tentative
bearish price objective of $71.  While short term players can make
plenty of hay between current levels and that short-term
objective, we need to see the potential for a sharper decline to
tempt us into a longer-term play.  That evidence will appear on
the break of the long-term H&S neckline, giving us a downside
target in the vicinity of $65.  Additionally, should the current
column of O's on the PnF chart continue down to the $71 level
without seeing a 3-box reversal first, we'll have a downside
target of $59 to work with.

With all the time I've spent looking at alternate scales on PnF
charts lately, I thought it might be interesting to use a 1.5-
point box size on the PnF chart and see what that view might lend
to this discussion.  Interestingly enough, the Sell signal from
March is still intact and has a bearish price target of (are you
ready for this?) $60!  We still have a couple of things that have
to line up in our favor, as that $59 target is still speculative,
rather than being based on actual price data, but it's enough for
me to want to start looking aggressively for a bearish entry point
before everything is perfectly lined up.  With all of the major
moving averages on the daily chart clustered in the $79-80 area, I
would view another failed rebound in that area to be an excellent
bearish entry point.  Having the luxury of time on our side, we
typically don't advocate breakout/breakdown entries for our LEAPS
plays, so if that breakdown does occur first, then we'll be
looking for a subsequent failed rebound to allow us into the play.
Given the size of the potential gain on this play, we'll set a
rather liberal initial stop at $84, just over the top of the
short-term H&S pattern.

BUY LEAP JAN-2006 $80 YGS-MP
BUY LEAP JAN-2007 $75 OBG-MO
BUY Call Oct-2004 $85 OMC-JQ **Insurance Put**


Drops

None


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Whoever Said “Money Can’t Buy Happiness” Must Not Have Any!
By Mike Parnos, Investing With Attitude

When you’re hot, you’re hot.  When you’re not, you’re probably a
directional trader.  Let’s be grateful that the market is
cooperating and bask in the glow (like the Detroit Pistons!!)
again this month.  It’s also been said that money can’t buy love –
unless, of course, you love money – or at least the freedom it
provides.

This month (June) we didn’t set a CPTI record.  Our previous high
monthly profit was last month’s $8,530.  Well, everything went
right this month, but we only made $7,200.   I think that CPTI
students that made some of these “hypothetical” profits are
willing to forgive.  We have every reason to celebrate.  Now you
can afford an extra item or two on your pizza and not think a
thing of it.

The June option cycle was the eighth cycle in the second year of
tracking our Couch Potato Trading Institute portfolio.  With our
$7,200 of profits, we’ve now accumulated a total of $33,210 in
seven months – on a trading account size of about $40,000.

June Trade Summary
SPX – Iron Condor – Profit:  $1,300
RUT – Iron Condor – Profit: $1,800
MNX – Iron Condor – Profit: $1,200
BBH – Iron Condor – Profit: $1,550
OSX – Calendar Spread – Profit: $1,350
TOTAL JUNE PROFITS:  $7,200
(See the summary below)

Happy Returns Of The Day (Month) Report
Once again, I calculated our hypothetical return on risk for this
month’s portfolio trades.  The total amount of maintenance in the
above four trades was $45,000.  If we subtract the $7,200 of
premium we took in, we now have a real risk of $37,800.  When we
divide $37,800 into our $7,200 profit, we get a return on risk of
19%.   Not too shabby!
___________________________________________________________

JUNE QUICKIE RESULTS –
This Will Knock Your Socks Off – Maybe Your Shorts too!
The $7,200 CPTI portfolio profits are impressive, but they are
PEANUTS compared to our Quickie results this month.

June Quickie #1 - RUT Siamese Condor - $569.12
We sold 10 June RUT 570 calls @ $5.70 = $5,700 and sold 10 June
RUT 570 puts @ $6.30 = $6,300 for a total credit of $12,000 .
Then we bought 10 June RUT 530 calls @ $.30 = $300 and 10 June RUT
600 puts @ $.30 = $300 for a total of $600.

Our net credit was $11.40 ($11,400).   The closer RUT finishes to
570, the more money we were to make.  The settlement price was
announced at 569.74.  That means we had to give back $.26 ($260).
Our profit was an amazing $11,140.  Yes, you read that right.
ELEVEN BLEEPING THOUSAND and one hundred forty dollars – in one
week.

June Quickie Position #2 - SPX Iron Condor - 1136.47
We sold 10 June SPX 1120 puts and bought 10 June SPX 1110 puts for
a credit of $.80 ($800).  Then we sold 10 June SPX 1150 calls and
bought 10 June SPX 1160 calls for a credit of $1.00 ($1,000).  Our
total net credit was $1.80 ($1,800).   The SPX settlement price
came in at 1129.60 – well within the range. Our profit was $1,800
– for one week.

Total Quickie Profits -- $12,940.  When we’re hot, we’re hot.  And
WE’RE HOT!!
________________________________________________________________

I Need Your Input.  What Do You Think?
A number of people have requested that I put on a seminar to
thoroughly teach the strategies I personally use and discuss in my
weekly columns.  I’m contemplating getting up off the couch and
hosting a two-day comprehensive seminar – covering everything from
the basic to my advanced strategies.  I can imagine it being all
kinds of fun and even more informative.  If enough people are
willing and able to attend, we could do it for just a fraction of
what other seminar companies charge.  And you would have something
other companies don’t have – me.

If you like the idea, let me know.  If you don’t like it, let me
know that too.  Would you prefer late August or September?
Weekdays or weekends?  Should we include meals?  A hotel package?
Anything is possible.  Your suggestions are also welcome.

My mind is open.  It will take a lot of work, but I’m willing to
make the effort if you are.  I can guarantee you two memorable
days of fun and instruction.  Let me know what you think.  I’d
really appreciate your input.  Thanks!
________________________________________________________________

SUMMARY OF JUNE POSITIONS
June Position #1 - SPX Iron Condor – 1135.02
We sold 5 SPX June 1150 calls and bought 5 SPX June 1170 calls for
a credit of $1.20 (x 5 contracts = $600). Then we sold 7 SPX June
1025 puts and bought 7 SPX June 1010 puts for a credit: $1.00 (x 7
contracts = $700). Our total net credit was $1,300.   Profit was
the entire $1,300.

June Position #2 - BBH Iron Condor - $140.80
We sold 10 BBH $155 calls and bought 10 BBH $165 calls for a
credit of $.70 (x 10 contracts = $700). Then we sold 10 BBH $135
puts and bought 10 BBH $125 puts for a credit: $.90 (x 10
contracts = $900). Our total net credit was $1,550. Profit was the
entire $1,550.

June Position #3 - RUT - Iron Condor – 570.54
We sold 10 RUT 590 calls and bought 10 RUT 600 calls for a credit
of $.80 (x 10 contracts = $800). Then, we sold 10 RUT 490 puts and
bought 10 RUT 480 puts for a credit: $1.00 (x 10 contracts =
$1,000). Our total net credit was $1,800.  Profit was the entire
$1,800.

June Position #4 - MNX - Iron Condor - $146.47
Sold 10 MNX 147.50 calls and bought 10 MNX 152.50 calls for a
credit: $.70 (x 10 contracts = $700). Then sold 10 MNX $132.50
puts and bought 10 MNX $127.50 puts for a credit: $.60 (x 10
contracts = $600). Our total net credit of $1,300. Maintenance:
$5,000. Maximum profit range of $132.50 to $147.50. Profit was
$1,200 because we bought back the short $147.50 call at the close
on Thursday for $.10.

ONGOING POSITIONS
QQQ ITM Strangle – Ongoing Long Term -- $36.44
We bought 10 contracts of the 2005 QQQ $39 puts and 10 contracts
of the 2005 QQQ $29 calls for a total debit of $14,300.   We make
money by selling near term puts and calls every month.  Here’s
what we’ve done so far:
Oct. $33 puts and Oct. $34 calls – credit of $1,900. Nov. $34 puts
and calls – credit of $1,150. Dec. $34 puts and calls – credit of
$1,500.  Jan. $34 puts and calls – credit of $850.  Feb. $34 calls
and $36 puts – credit of $750. Mar. $34 calls and $37 puts –
credit of $1,150. Apr. $34 calls and $37 puts – credit of $750.
May $34 calls and $37 puts – credit of $800.
We rolled out the May $34 calls to the June $34 calls for a credit
of $.60 and then the May $37 puts to the June $37 puts for credit
of $.15.  The total net credit was $.75 ($750).  We rolled out to
the July $34 calls ($.20 credit) and $37 puts ($.60 credit) on
Tuesday and took in another net credit of $.80 ($800).  Our new
total credit is now $10,400.

Note:  We haven’t included the proceeds from this long term QQQ
ITM Strangle in our profit calculations.  It’s a bonus!  And it’s
a great cash flow generating strategy.

ZERO-PLUS Strategy.  OEX – 554.81
In my Feb. 8th column, I outlined a strategy based on an initial
investment of $100,000.  $74,000 was spent on zero coupon bonds
maturing in seven years at a value of $100,000.  The principal
$100,000 investment is guaranteed.  We’re trading the remaining
$26,000 to generate a “risk free” return on the original
investment.
Our current position:  We own 3 OEX December 2006 540 calls @ $81
(x 300 = $24,300).  Our cash position as of May expiration is
$4,390 plus unused $1,700 = $6,090.

Our June 515/505 bull put spread expired worthless, as did our 560
short call.  Therefore, we are able to officially add the $1,175
to our cash position – that now stands at $6,265 ($4,565 plus
unused $1,700)

New July Zero Plus Positions.
July bull put spread 535/525 for credit of $1.30 x 5 contracts =
$650.  Short 570 call for credit of $1.40 x 5 = $700.  If all goes
well, we’ll be able to add $1,350 to our cash position as we wait
for the market to move up.

OSX Calendar Spread Plus - $105.30 – A semi-fond farewell!
Originally bought 10 OSX June $115 calls and sold 10 OSX April
$115 calls at a cost of $2.15 ($2,150). We also put on an April
$100/$90 bull put spread and took in an extra $.70 ($700) to
reduce the cost basis to $1.45 ($1,450).

Results:  The $95/85 bull put spread expired worthless.  We had
bought back our short $105 June call for $.10 early in the week.
The June $115 call expired worthless.  It’s finally over.  Thank
goodness.  And it all worked out fine.  After a couple of months
of chaos, we emerged with a profit of $1.35 ($1.45 - $.10).  The
profit: $1,350.

If nothing else, we put a few more CPTI dollars of profit into our
coffers.  The biggest benefit came, however, if you followed the
trade from the beginning and saw the adjustments that were made as
the trade progressed.  The OSX didn’t move the way we had
anticipated and we had to do some tap dancing (adjusting) but it
all worked out.


JULY NEW POSITIONS
Position #1 – SPX Iron Condor – 1135.02
We sold 10 July SPX 1170 calls and bought 10 July SPX 1180 calls
for a credit of about: $1.10 ($1,100).  Then we wold 7 July SPX
1075 puts and bought 7 July SPX 1060 puts for a credit of about:
$1.20 ($840).  The total net credit of was $1,940.  Maximum profit
range of 1075 to 1170.  Breakeven points of 1072.23 to 1171.94.
Maintenance: $10,500.  Potential profit: $1,940.

Position #2 – RUT Iron Condor – 570.54
We sold 10 July RUT 600 calls and bought 10 July RUT 610 calls for
a credit of about: $1.00 ($1,000). Then we sold 10 July RUT 530
puts and bought 10 July RUT 520 puts for a credit of $1.30
($1,300).  Our total net credit was $2.30 ($2,300).  Maximum
profit range of 530 to 600.  Breakeven points of  527.70 to
602.30.  Maintenance: $10,000.  Profit potential $2,300.

Position #3 – SPX Credit Spread Boogie – 1135.02
We haven’t done this strategy is quite some time.  To review, it
consists of establishing a 25-point credit spread and taking in
$6-7 of premium (as much as possible).  If the trend continues,
you keep the premium.  If the trend reverses, you close the trade
for double the premium amount.  Then, you open a credit spread in
the opposite direction, using enough contracts to replenish what
you spent to close the initial spread.

We sold 3 SPX July 1125 puts and bought 3 SPX July 1100 puts for a
total credit of about: $6.30 ($1,800).

Our profit potential:  $1,800.  Maintenance: $7,500 (initially).
We’ll need to keep a close eye on this one.  We have to be alert –
plus, we have to have a large enough account size to accommodate
trading an increased number of contracts if adjustments become
necessary.

Position #4 – SOX (Semi-Conductor Index) – Iron Condor – 453.44
We sold 10 SOX July 490 calls and bought 10 SOX July 500 calls for
a credit of about: $1.10 ($1,100).  Then we sold 10 SOX July 420
puts and bought 10 SOX July 410 puts for a credit of about: $1.30
($1,300).   Our total net credit of: $2.40 ($2,400).  Maximum
profit range: 420 to 490.  Breakeven points: 417.60 & 492.40.
Maintenance: $10,000.  Potential profit: $2,400.


New To The CPTI?
Are you a new Couch Potato Trading Institute student? Do you have
questions about our educational plays or our strategies? To find
past CPTI (Mike Parnos) articles, first look under "Education" on
the OI home page and click on "Traders Corner." For more recent
columns, you can look under "Strategies" and click on "Spreads &
Combos." They're waiting for you 24/7.
____________________________________________________________

Happy Trading!
Remember the CPTI credo: May our remote batteries and self-
discipline last forever, but mierde happens. Be prepared! In
trading, as in life, it's not the cards we're dealt. It's how we
play them. Your questions and comments are always welcome.
Mike Parnos
CPTI Master Strategist and HCP

Couch Potato Trading Institute Disclaimer
All results reported in this section are hypothetical. While the
numbers represented here may have been achieved or beaten by our
readers, we make no representation that any individual investor
achieved these exact results. The tracking for the plays listed in
this section uses closing prices for the day the newsletter is
published and it is not meant to imply that any reader actually
received those prices or participated in these recommendations.
The portfolio represented here is hypothetical and for investment
education purposes only. It is only an illustration of what type
of gains a knowledgeable investor might receive utilizing these
strategies.


**************
TRADERS CORNER
**************

A New Look at Macro Support and Resistance
Jane Fox

I started trading about 5 years ago and over those years have
acquired a fairly nice library of trading books. Books from the
psychology of trading to the nitty gritty of the options greeks.
I have read every one of these books and some of them twice with
the exception of one, DeMark on Daytrading Options by Tom and
Tom Jr. DeMark. This was one of the hardest books I have ever
read and never
did finish it. In all fairness I attempted to read it when I
first started trading and a lot of the concepts were beyond me
but I have tried again in recent years and still found it a hard
read.

In the latest edition of Active Traders Magazine there was an
article called "Absolute Price Projections" by Tom and Roche
Demark. Since I read everything in this magazine I read the
article although I was tempted to pass over it because of the
author. I am glad I did read it.

The article is based on one of DeMark's proprietary indicators
called the TD Absolute Retracement so I went to my library
(bookshelf behind my trading desk) and pulled out the only book I
had not completed. First of all I found out the TD stands for Tom
Demark and is not there to promote DeMark's initials but to
trademark the indicator, which gives them proper control over its
distribution. Next I see there are four TD retracement indicators
called: TD Relative Retracement, TD Relative Retracement
Cancellations, TD Double Retracements and TD Absolute
Retracements. All these proprietary indicators are based on
Fibonacci Retracements but I will only be discussing the TD
Absolute Retracements here.

The TD Absolute Retracement is actually very simple for it uses
downside and upside ratios to project support or resistance. Here
at OptionInvestor we anchor our Fibonacci tool to a high or low
and then drag it to an opposing high or low. DeMark says this
leaves too much up to the discretion of the trader in that any
one trader will pick different spots to anchor the tool making it
more ad hoc than based on set rules. With the TD Absolute
Retracement method you don't have to worry about drawing a
Fibonacci retracement you just find a multi-month high or
low, a low that has not been exceeded in the previous 12 months
or a high that has not been exceeded in the previous 12 months.
Once you find a multi-month high you multiple it by 61.8%, 50% or
38.2% to arrive at downside support or once you find a multi-
month low multiple it by 138.2%, 150% or 161.8% to arrive at
upside resistance.

Let's look at some examples. The first multi-month high I would
like to examine is the infamous S&P high of 1552.87 made in March
2000.




According to DeMark you project support zones by multiplying the
S&P 12 month high at 1552.87 by the downside ratios of 38.2%, 50%
and 61.8%. Here are the numbers:

1552.87 * 61.8% = 959.67
1552.87 * 50% = 776.44
1552.87 * 38.2% = 593.20

Let's see how well these numbers fit to support zones. This first
support I see on the chart above came at in December of 2000 with
a low of 1254 and no match to TD Absolute Retracement support
levels. The next zone of support was the low on September 21,
2001 at 944.75 where SPX found a significant support area and
retraced 38.2% of the 1552 to 944 range. The TD Absolute
Retracement projected 61.8% support was at 960, only a 16-point
difference from the September 21st lows.

And then of course we have the 768.63 lows made on October 10th
2002, which marked the end of the bear cyclical, a cycle the S&P
entered in March 2000. This is kind of interesting for the TD
Absolute Retracement projected 50% support was just 6 points away
at 776.

Thank heaven we never got to the 38.2%, I'm sure we would have
had investors jumping out of windows at another 200 point drop.

Let's look at an example of a multi-month low using the October
2002 lows. First of all a check of a 12-month low finds the last
time the S&P was at this level was back in 1997 so I think this
criterion is satisfied. Here is the S&P from October 2002 lows.





October 2002 low was 768.63. If you multiply 768.63 by the TD
Absolute Retracement upside ratios 138.2%, 150% and 161.8% you
get the following numbers:

768.63 * 138.2% = 1062.24
768.63 * 150% = 1152.94
768.63 * 161.8% = 1243.64.

The TD Absolute Retracement 138.2% resistance found little
resistance at 1062 but the 150% resistance at 1152 found a lot.
SPX's March highs were 1163 only 11 points away from the 150%
resistance.

Let's now fast-forward to current highs made in March and see
where we stand.




First let's check to make sure this is a 12 month high. A quick
check shows that the last time SPX was trading at this level was
March 2003 so this criterion is satisfied.

The high made March 5th was 1163 so multiplying this number by
the TD Absolute Retracement downside ratios 61.8%, 50% and 38.2%
you get:

1163.04 * 61.8% = 718.76
1163.04 * 50% = 581.52
1163.04 * 38.2% = 444.28

S&P has not yet reached these numbers (thank heaven) but please
take note the 50% projection from March 2004 highs (581) is very
close to the 38.2% projection from the March 2000 highs (593)

Let's look at the DOW and see how well the TD Absolute
Retracement works on this market.




On January 14th 2000 the DOW made an all time high at 11750 so
multiplying this number by TD Absolute Retracement downside
ratios of 38.2%, 50% and 61.8% you get:

11750 * 61.8% = 7261
11750 * 50% = 5875
11750 * 38.2% = 4489

October 2002 lows were 7197 just 64 points away from the 61.8% TD
Absolute Retracement downside projection. The S&P hit the 50% TD
Absolute Retracement support and the DOW only the 61.8% shows how
well the DOW did in relation to the S&P in our recent bear
market.

Now let's take the DOW October 2002 lows and use the upside
projection ratios.




The October 2002 lows were 7197 and using the upside ratios here
are the numbers:

7197 * 138.2% = 9946
7197 * 150% = 10795
7197 * 161.8% = 11644

The 138.2% projected resistance didn't give much resistance but
the 150% projected resistance sure did. The February 2004 high on
the DOW was 10746 only 49 points away from the 150% upside
projection.

Now let's take the February 2004 high at 10746 and apply the
downside ratios.



Here are the numbers:

10746 * 61.8% = 6641
10746 * 50% = 5373
10746 * 38.2% = 4105

Dow at 6641 is pretty ugly isn't it?

From what I have seen in just these two markets it doesn't look
like rallies or declines get much further than the 50% or 150% TD
Absolute Retracement projections. That does not bode well for our
current environment since both the DOW and the S&P have reached
their 150% resistance levels. However, the data I have presented
here is not enough to make any investment decisions on. You
should check these projections in other markets and for sure go
back further than I did before you come to any firm conclusions.

Remember plan your trade and trade your plan

Jane Fox


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The Option Investor Newsletter                   Sunday 06-20-2004
Sunday                                                      5 of 5


In Section Five:

Covered Calls: Conservative Stock Ownership
Spreads and Straddles: Stocks Climb Amid Cautious Optimism...
Premium-Selling Plays: Naked Puts and Calls


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*************
COVERED CALLS
*************

Many investors find that writing "in-the-money" covered-calls
fits their criteria for a conservative, easy-to-manage options
strategy.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
NEW COVERED-CALL CANDIDATES
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

The following group of issues is a list of potential candidates
to supplement your search for profitable trading positions.  As
with any investment, you must decide if the selections meet your
criteria for potential plays.  Only you can know what strategies
and positions are suitable for your experience level, risk-reward
tolerance and portfolio outlook.  They will not be included in
the weekly portfolio summary.

__________________________________________________________________

COVERED-CALLS

Stock   Last   Option    Option  Last  Open  Cost  Days Target
Symbol Price   Series    Symbol  Bid   Int.  Basis Exp. Yield

ENER   11.30  JUL 10.00  EQI-GB  1.80  34     9.50  26   6.2%
NVAX    5.44  JUL  5.00  QUX-GA  0.65  151    4.79  26   5.1%
OS     13.57  JUL 12.50   OS-GV  1.55  112   12.02  26   4.7%
OMNI    5.42  JUL  5.00  QJN-GA  0.60  2      4.82  26   4.4%
AMHC   24.09  JUL 22.50  QMH-GX  2.40  105   21.69  26   4.4%
PTIE    8.84  JUL  7.50   UQ-GU  1.60  378    7.24  26   4.2%
NVTL   21.20  JUL 17.50  NVU-GW  4.30  33    16.90  26   4.2%
SGTL   26.45  JUL 25.00  UGO-GE  2.30  50    24.15  26   4.1%
CENX   23.77  JUL 22.50  CQL-GX  2.00  33    21.77  26   3.9%
TASR   25.77  JUL 22.50  QUR-GR  4.00  221   21.77  26   3.9%
NAVR   13.65  JUL 12.50  QIG-GV  1.55  350   12.10  26   3.9%
CALM   14.18  JUL 12.50  QKM-GV  2.05  64    12.13  26   3.6%


Legend (for play description below)

LB-Last Bid price,
OI-Open Interest,
CB-Cost Basis or break-even point,
DE-Days to Expiry,
TY-Target Yield (monthly basis).

__________________________________________________________________

ENER - Energy Conversion Devices  $11.30  *** New Contracts! ***

Energy Conversion Devices (NYSE:ENER) is a technology, product
development and manufacturing company that specializes in the
development of proprietary materials, products and production
technology based on its atomically engineered amorphous and
disordered materials.

JUL-10.00 EQI-GB LB=1.80 OI=34 CB=9.50 DE=26 TY=6.2%


__________________________________________________________________

NVAX - Novavax  $5.44  *** Estrasorb Launch Coming ***

Novavax (NASDAQ:NVAX) is a biopharmaceutical company engaged in
the research, development and commercialization of products
focused on drug delivery and vaccine development.  The company
sells, markets and distributes women's health prescription
pharmaceuticals.

JUL-5.00 QUX-GA LB=0.65 OI=151 CB=4.79 DE=26 TY=5.1%


__________________________________________________________________

OS - Oregon Steel Mills  $13.57  *** Steel Sector Rally! ***

Oregon Steel Mills (NYSE:OS) manufactures and markets a line of
specialty and commodity steel products.  The company emphasizes
the cost-efficient production of higher-margin specialty steel
products targeted at a diverse customer base located primarily
west of the Mississippi River and in western Canada.

JUL-12.50 OS-GV LB=1.55 OI=112 CB=12.02 DE=26 TY=4.7%


__________________________________________________________________

OMNI - OMNI Energy Services $5.42  *** Oil Service Speculation ***

OMNI Energy Services (NASDAQ:OMNI) is an oilfield service company
specializing in providing a range of onshore seismic drilling,
permitting, survey and helicopter support services to geophysical
companies operating in logistically difficult and environmentally
sensitive terrain.

JUL-5.00 QJN-GA LB=0.60 OI=2 CB=4.82 DE=26 TY=4.4%


__________________________________________________________________

AMHC - American Healthways  $24.09  *** Solid Earnings! ***

American Healthways (NASDAQ:AMHC) provides specialized healthcare
enhancement and disease management services to individuals in all
50 states, the District of Columbia, Puerto Rico and Guam.

JUL-22.50 QMH-GX LB=2.40 OI=105 CB=21.69 DE=26 TY=4.4%


__________________________________________________________________

PTIE - Pain Therapeutics  $8.84  *** Positive Remoxy Results? ***

Pain Therapeutics (NASDAQ:PTIE) is a biopharmaceutical company
engaged in the development of drugs that target severe chronic
pain, such as pain associated with advanced osteoarthritis,
low-back pain or irritable bowel syndrome.

JUL-7.50 UQ-GU LB=1.60 OI=378 CB=7.24 DE=26 TY=4.2%


__________________________________________________________________

NVTL - Novatel Wireless  $21.20  *** Recovery 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.

JUL-17.50 NVU-GW LB=4.30 OI=33 CB=16.90 DE=26 TY=4.2%


__________________________________________________________________

SGTL - Sigmatel  $26.45  *** In A Trading Range? ***

Sigmatel (NASDAQ:SGTL) is a fabless semiconductor company that
designs, develops and markets proprietary, analog-intensive,
mixed-signal integrated circuits for a variety of products in
the consumer electronics and computing markets, including
portable compressed audio players, notebook and desktop PCs,
DVD players, digital televisions and set-top boxes.

JUL-25.00 UGO-GE LB=2.30 OI=50 CB=24.15 DE=26 TY=4.1%


__________________________________________________________________

CENX - Century Aluminum  $23.77  *** Riding Alcoa's Coattail! ***

Century Aluminum Company (NASDAQ:CENX) is a holding company,
whose principal subsidiaries are Century Aluminum of West
Virginia, Inc., Berkeley Aluminum, Inc. and Century Aluminum
of Kentucky, LLC.  Through its ownership interests, the company
has an annual production capacity of approximately 1.2 billion
pounds of primary aluminum.

JUL-22.50 CQL-GX LB=2.00 OI=33 CB=21.77 DE=26 TY=3.9%


__________________________________________________________________

TASR - TASER International  $25.77  *** Entry Point ***

TASER International (NASDAQ:TASR) develops and manufactures a
range of less-lethal self-defense devices.  The firm's primary
product lines include the ADVANCED TASER and the TASER X26, a
recently introduced weapon system offering a new "shaped pulse"
technology, and a smaller form factor.

JUL-22.50 QUR-GR LB=4.00 OI=221 CB=21.77 DE=26 TY=3.9%


__________________________________________________________________

NAVR - Navarre  $13.65  *** A New Multi-Year High! ***

Navarre Corporation (NASDAQ:NAVR) is a provider of distribution,
fulfillment and marketing services for a broad range of home
entertainment and multimedia products, including audio and video
titles, personal computer software, and interactive games.

JUL-12.50 QIG-GV LB=1.55 OI=350 CB=12.10 DE=26 TY=3.9%


__________________________________________________________________

CALM - Cal-Maine Foods  $14.18  *** EGG-cellent Investment? ***

Cal-Maine Foods (NASDAQ:CALM) is engaged in the production,
cleaning, grading and packaging of fresh shell eggs for sale
to shell egg retailers.  Cal-Maine also produces specialty
eggs such as Eggo land's Best and Farmhouse eggs and operates
a dairy facility.

JUL-12.50 QKM-GV LB=2.05 OI=64 CB=12.13 DE=26 TY=3.6%



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

SEE DISCLAIMER IN SECTION ONE

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


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

Stocks Climb Amid Cautious Optimism...
By Ray Cummins

U.S. equities finished the week higher as investors displayed
confidence about the economy ahead of some key reports due in
the coming week.

The Dow Jones Industrial Average ended up 38 points at 10,416,
with Alcoa (NYSE:AA), the world's biggest aluminum producer,
among the best performing blue-chips.  The NASDAQ Composite
Index added 3 points to close at 1,986 even as investors took
profits from recent gains.  The broader Standard & Poor's 500
Index added 2 points to end at 1,135, with biotech, airline,
and basic materials stocks keeping the broader market in the
green.  The simultaneous expiration of stock and stock-index
options, as well as futures contracts, boosted trading volume
but not volatility.  Over 1.5 billion shares changed hands on
the New York Stock Exchange, while about 1.69 billion shares
were crossed on the NASDAQ.  Winners outpaced losers 6 to 5 on
the Big Board, however breadth was marginally negative on the
technology exchange.  Bond prices drifted lower with the yield
on the 10-year note closing at 4.71%.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
SUMMARY OF CURRENT POSITIONS - AS OF 06/18/04
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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  51.69   JUN   45  47   0.35   47.15   0.35  Closed
IMDC    61.17  57.29   JUN   50  55   0.50   54.50   0.50  Closed
GPRO    38.30  41.72   JUN   30  35   0.70   34.30   0.70  Closed
ASD     35.96  39.38   JUN   32  33   0.16   33.17   0.16  Closed
IMCL    71.36  80.16   JUN   50  55   0.50   54.50   0.50  Closed
CSC     42.17  43.18   JUN   35  40   0.65   39.35   0.65  Closed
GILD    62.54  64.40   JUN   55  60   1.00   59.00   1.00  Closed
RIMM    49.99  59.53   JUN   40  42   0.22   42.28   0.22  Closed
QCOM    65.40  66.49   JUN   55  60   0.45   59.55   0.45  Closed
ZBRA    80.08  79.46   JUN   70  75   0.65   74.35   0.65  Closed
BRCM    42.54  42.60   JUN   37  40   0.30   39.70   0.30  Closed
EBAY    85.33  86.50   JUN   75  80   0.50   79.50   0.50  Closed
AMZN    48.50  49.60   JUN   42  45   0.30   44.70   0.30  Closed
EYET    44.32  47.95   JUN   35  40   0.50   39.50   0.50  Closed
RIMM    59.97  59.53   JUN   47  50   0.20   49.80   0.20  Closed
AMZN    50.95  49.60   JUL   42  45   0.30   44.70   0.30   Open
YHOO    31.87  32.07   JUL   25  27   0.30   27.20   0.30   Open
CFC     69.15  71.15   JUL   60  63   0.35   63.03   0.35   Open
QCOM    69.86  66.49   JUL   60  65   0.45   64.55   0.45   Open
SWIR    33.83  33.05   JUL   25  30   0.90   29.10   0.90   Open
CTSH    24.25  24.51   JUL   20  22   0.27   22.23   0.27   Open
NUE     69.54  72.47   JUL   60  65   0.75   64.25   0.75   Open
SII     53.26  54.33   JUL   47  50   0.30   49.70   0.30   Open

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

The position in Martek Biosciences (NASDAQ:MATK) has been closed
to limit potential losses.


CALL-CREDIT SPREADS

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

CTX     44.80  46.35   JUN   55  50   0.50   50.50   0.50  Closed
IVGN    67.61  67.12   JUN   80  75   0.55   75.55   0.55  Closed
VIP     91.45  96.40   JUN  110 105   0.50  105.50   0.50  Closed
CERN    41.33  44.42   JUN   50  45   0.55   45.55   0.55  Closed
SEPR    45.06  51.18   JUN   55  50   0.60   50.60  (0.58) Closed
BSC     80.02  80.95   JUN   90  85   0.50   85.50   0.50  Closed
FRX     59.20  62.99   JUN   70  65   0.55   65.55   0.55  Closed
MDT     47.66  49.12   JUN   55  50   0.60   50.60   0.60  Closed
AZO     83.38  88.76   JUN   95  90   0.20   90.20   0.20  Closed
RYL     79.60  76.31   JUN   90  85   0.60   85.60   0.60  Closed
VIP     92.25  96.40   JUN  105 100   0.60  100.60   0.60  Closed
OIH     65.40  70.79   JUL   75  70   0.65   70.65  (0.14) Closed
APPX    34.03  31.97   JUL   45  40   0.50   40.50   0.50   Open
GENZ    41.93  43.87   JUL   48  45   0.30   45.30   0.30   Open
INSP    34.71  33.23   JUL   45  40   0.65   40.65   0.65   Open
WMS     28.75  26.15   JUL   35  30   0.65   30.65   0.65   Open
GS      90.21  89.18   JUL  100  95   0.70   95.70   0.70   Open
SYMC    42.42  40.01   JUL   50  45   0.65   45.65   0.65   Open

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

Although it expired profitable, the NTL Inc. (NASDAQ:NTLI) spread
was closed earlier in the month in order to limit potential losses.
Sepracor (NASDAQ:SEPR), which is slightly negative, was also listed
as an "early-exit" candidate.  As noted last week, the continued
bullish activity in the Oil Service Holdrs (AMEX:OIH) has signaled
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  20.44   JUN    20    20     3.00    2.80   Closed
RIO     49.38  45.95   JUN    50    50     2.65    6.00   Closed
GRMN    32.60  31.93   JUL    35    30     2.15    2.35    Open?
SNDK    22.90  20.37   JUL    22    22     3.40    3.60    Open
GDT     56.02  57.01   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.  Garmin (NASDAQ:GRMN) will be a candidate for
"early-exit" in the coming weeks.

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

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

INDEX-BASED CREDIT SPREADS

As a trader, you may be familiar with options on individual stocks
where you have the right to buy (call option) or the right to sell
(put option) a particular stock at some predetermined price within
some predetermined time.  The buyer has the rights and the seller
the obligations.  With index options the basic ideas are the same.
Index options allow you to make investment decisions on a specific
industry group or on the market as a whole.  Spread strategies can
be made with index options similar to those made with individual
stock options and professional traders also employ index spreads
in common hedge strategies.  Traders who participate in OTM credit
spreads often utilize index options because they generally contain
favorable "premium" and also provide an underlying instrument less
prone to huge, gapping moves.
__________________________________________________________________

OEX - S&P 100 Index  $554.81  *** Index Spreads ***

Standard & Poor's 100 Index is a capitalization-weighted index
of 100 stocks from a broad range of industries.  The component
stocks are weighted according to the total market value of their
outstanding shares.  The impact of a component's price change is
proportional to the issue's total market value, which is the share
price times the number of shares outstanding.  Trading in S&P-100
options will ordinarily cease on the business day preceding the
expiration date.  OEX options generally may be exercised on any
business day before the expiration date.

OEX - S&P 100 Index  $554.81

PLAY (less conservative - bullish/credit spread):

BUY  PUT  JUL-535.00  OEB-SG  OI=1860  ASK=$3.00
SELL PUT  JUL-540.00  OEB-SH  OI=3880  BID=$3.70
INITIAL NET-CREDIT TARGET=$0.75-$0.80
POTENTIAL PROFIT(max)=16% B/E=$539.25


__________________________________________________________________

SPX - S&P 500 Index  $1135.02  *** Index Spreads ***

Standard & Poor's 500 Index is a capitalization-weighted index
of 500 stocks from a broad range of industries.  The component
stocks are weighted according to the total market value of their
outstanding shares.  The impact of a component's price change is
proportional to the issue's total market value, which is the share
price times the number of shares outstanding.  These are summed
for all 500 stocks and divided by a predetermined base value.  The
base value for the S&P 500 Index is adjusted to reflect changes in
capitalization resulting from mergers, acquisitions, stock rights,
substitutions, etc.  Trading in SPX options will ordinarily cease
on the business day (usually a Thursday) preceding the day on which
the exercise-settlement value is calculated.  SPX options generally
may be exercised only on the last business day before expiration.

SPX - S&P 500 Index  $1135.02

PLAY (conservative - bullish/credit spread):

BUY  PUT  JUL-1075.00  SPQ-SO  OI=24049  ASK=$3.60
SELL PUT  JUL-1090.00  SPQ-SR  OI=13378  BID=$4.60
INITIAL NET-CREDIT TARGET=$1.10-$1.20
POTENTIAL PROFIT(max)=8% B/E=$1088.90


__________________________________________________________________

BEARISH PLAYS - INDEX-BASED CREDIT SPREADS
__________________________________________________________________

OEX - S&P 100 Index  $554.81  *** Index Spreads ***

Standard & Poor's 100 Index is a capitalization-weighted index
of 100 stocks from a broad range of industries.  The component
stocks are weighted according to the total market value of their
outstanding shares.  The impact of a component's price change is
proportional to the issue's total market value, which is the share
price times the number of shares outstanding.  Trading in S&P-100
options will ordinarily cease on the business day preceding the
expiration date.  OEX options generally may be exercised on any
business day before the expiration date.

OEX - S&P 100 Index  $554.81

PLAY (conservative - bearish/credit spread):

BUY  CALL  JUL-575.00  OEB-GO  OI=2522  ASK=$1.05
SELL CALL  JUL-570.00  OEB-GN  OI=4207  BID=$1.50
INITIAL NET-CREDIT TARGET=$0.50-$0.60
POTENTIAL PROFIT(max)=11% B/E=$570.50


__________________________________________________________________

SPX - S&P 500 Index  $1135.02  *** Index Spreads ***

Standard & Poor's 500 Index is a capitalization-weighted index
of 500 stocks from a broad range of industries.  The component
stocks are weighted according to the total market value of their
outstanding shares.  The impact of a component's price change is
proportional to the issue's total market value, which is the share
price times the number of shares outstanding.  These are summed
for all 500 stocks and divided by a predetermined base value.  The
base value for the S&P 500 Index is adjusted to reflect changes in
capitalization resulting from mergers, acquisitions, stock rights,
substitutions, etc.  Trading in SPX options will ordinarily cease
on the business day (usually a Thursday) preceding the day on which
the exercise-settlement value is calculated.  SPX options generally
may be exercised only on the last business day before expiration.

SPX - S&P 500 Index  $1135.02

"DISPARITY" PLAY (very conservative - bearish/credit spread):

BUY  CALL  JUL-1190.00  SPT-GR  OI=734   ASK=$0.85
SELL CALL  JUL-1180.00  SPT-GP  OI=478   BID=$1.40
INITIAL NET-CREDIT TARGET=$0.60-$0.65
POTENTIAL PROFIT(max)=6% B/E=$1180.60



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

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

DNA - Genentech  $54.60  *** Earnings Speculation ***

Genentech (NYSE:DNA) is a biotechnology company that discovers,
develops, manufactures and commercializes biotherapeutics for
significant unmet medical needs.  The company manufactures and
commercializes 13 biotechnology products in the United States,
and also licenses several additional products to other firms.
Genentech's product development efforts cover a wide range of
medical conditions, including cancer, respiratory disorders,
cardiovascular diseases, endocrine disorders and inflammatory
and immune problems.  Genentech will announce its 2nd quarter
earnings on Wednesday, July 7, 2004, after the market close.

DNA - Genentech  $54.60

PLAY (speculative - neutral/debit straddle):

BUY CALL  JUL-55.00  DNA-GK  OI=13397  ASK=$1.80
BUY PUT   JUL-55.00  DNA-SK  OI=2834   ASK=$2.60
INITIAL NET-DEBIT TARGET=$4.20-$4.30
INITIAL TARGET PROFIT=$1.70-$2.45



__________________________________________________________________

OVTI - Omnivision  $15.50  *** Any More Surprises? ***

OmniVision Technologies (NASDAQ:OVTI) designs, develops and
markets high-performance, cost-efficient semiconductor image
sensor devices.  The company's main product, an image sensing
device called the CameraChip, is used to capture an image in
a variety of consumer and commercial mass market applications,
including digital still cameras, cellular telephones, security
and surveillance cameras and video game consoles.  The company
is expected to report its (delayed) fourth-quarter and annual
results on June 23, 2004.

OVTI - Omnivision  $15.50

PLAY (very speculative - neutral/debit straddle):

BUY CALL  JUL-15.00  UCM-GC  OI=1965  ASK=$1.65
BUY PUT   JUL-15.00  UCM-SC  OI=4888  ASK=$1.15
INITIAL NET-DEBIT TARGET=$2.60-$2.70
INITIAL TARGET PROFIT=$0.90-$1.65



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

SEE DISCLAIMER - SECTION 1

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


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*****************************************
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 06/18/04
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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   36.23    0.70   4.03%   2.04%
ASCA     JUN    30    29.35   31.95    0.65   5.02%   2.21%
DRIV     JUN    25    24.25   31.87    0.75   7.04%   3.09%
FARO     JUN    20    19.45   23.69    0.55   7.32%   2.83%
GIVN     JUN    30    29.25   34.81    0.75   7.01%   2.56%
MVSN     JUN    20    19.65   25.01    0.35   4.54%   1.78%
PDII     JUN    22    22.00   30.49    0.50   6.67%   2.27%
SMTC     JUN    20    19.50   22.47    0.50   6.25%   2.56%
CELG     JUN    45    44.40   55.70    0.60   4.75%   1.35%
ELN      JUN    17    17.05   21.83    0.45   8.73%   2.64%
FARO     JUN    20    19.45   23.69    0.55   8.04%   2.83%
FRO      JUN    25    24.50   32.62    0.50   6.48%   2.04%
IMMU     JUN     5     4.75    4.64   (0.11)  0.00%   0.00%
LNCR     JUN    32    32.05   33.19    0.45   3.60%   1.40%
MCK      JUN    32    32.00   35.16    0.50   3.76%   1.56%
NFLX     JUN    25    24.45   29.55    0.55   7.36%   2.25%
PHRM     JUN    20    19.65   47.23    0.35   5.67%   1.78%
RTN      JUN    32    32.00   35.10    0.50   3.62%   1.56%
VXGN     JUN    12    12.10   13.64    0.40  10.35%   3.31%
ARTI     JUN    22    22.00   24.10    0.50   6.11%   2.27%
AVID     JUN    45    44.30   50.36    0.70   4.62%   1.58%
BLUD     JUN    25    24.70   30.21    0.30   3.54%   1.21%
DIGE     JUN    35    34.25   35.96    0.75   6.16%   2.19%
DRIV     JUN    25    24.60   31.87    0.40   5.37%   1.63%
ERES     JUN    18    18.11   24.55    0.22   3.85%   1.21%
NUE      JUN    55    54.25   72.47    0.75   3.96%   1.38%
PHRM     JUN    20    19.70   47.23    0.30   5.30%   1.52%
SPLS     JUN    25    24.60   29.34    0.40   4.24%   1.63%
YHOO     JUN    25    24.60   32.07    0.40   4.64%   1.63%
ARO      JUN    22    23.03   29.43    0.35   4.75%   1.52%
CRDN     JUN    25    24.65   34.77    0.35   5.57%   1.42%
ERES     JUN    18    18.63   24.55    0.30   6.61%   1.61%
FARO     JUN    22    21.85   23.69    0.65   9.88%   2.97%
ISPH     JUN    15    14.55   16.80    0.45  10.57%   3.09%
IDEV     JUN     5     4.70    6.93    0.30  17.36%   6.38%
PDII     JUN    22    22.20   30.49    0.30   5.83%   1.35%
SSYS     JUN    22    21.85   27.02    0.65   9.43%   2.97%
SLXP     JUN    25    24.70   29.52    0.30   4.85%   1.21%
ASKJ     JUN    35    34.40   35.55    0.60   6.85%   1.74%
ERES     JUN    20    19.80   24.55    0.20   4.60%   1.01%
FWHT     JUN    20    19.65   20.43    0.35   6.25%   1.78%
GPRO     JUN    35    34.45   41.72    0.55   5.54%   1.60%
MEE      JUN    22    22.15   26.28    0.35   5.66%   1.58%
SMTC     JUN    20    19.70   22.47    0.30   6.79%   1.52%
SWIR     JUN    22    22.20   33.05    0.30   6.05%   1.35%
YHOO     JUN    27    27.15   32.07    0.35   4.58%   1.29%
ASKJ     JUN    35    34.55   35.55    0.45   6.43%   1.30%
CRDN     JUN    30    29.45   34.77    0.55   8.32%   1.87%
ERES     JUN    23    23.03   24.55    0.35   6.55%   1.52%
NKTR     JUN    17    17.25   18.84    0.25   8.24%   1.45%
NSM      JUN    20    19.70   20.34    0.30   6.58%   1.52%
SMTC     JUN    22    22.20   22.47    0.27   5.59%   1.35%
YHOO     JUN    27    27.25   32.07    0.25   4.28%   0.92%
CVTX     JUL    15    14.60   15.97    0.40   5.63%   2.74%
DITC     JUL    17    16.80   23.06    0.70   8.40%   4.17%
JILL     JUN    20    19.70   23.11    0.30  10.05%   1.52%
NKTR     JUN    17    17.20   18.84    0.30  13.99%   1.74%
OSIP     JUN    65    64.50   65.63    0.50   6.89%   0.78%
SINA     JUN    35    34.50   36.05    0.50  10.37%   1.45%
SMTC     JUN    22    22.25   22.47    0.22   6.84%   1.12%
SYNA     JUL    17    16.85   20.38    0.65   7.48%   3.86%
TELK     JUN    20    19.75   22.83    0.25  10.33%   1.27%
USG      JUN    15    14.70   16.28    0.30  13.27%   2.04%
UTHR     JUN    22    22.15   23.50    0.35  10.38%   1.58%
PTIE     JUL     7     7.15    8.84    0.35   9.89%   4.90%
BCC      JUL    35    34.25   37.73    0.75   5.12%   2.19%
JILL     JUL    20    19.45   23.11    0.55   6.72%   2.83%
LSS      JUL    20    19.50   25.61    0.50   6.07%   2.56%
OI       JUL    15    14.65   16.17    0.35   5.64%   2.39%
NVTL     JUL    15    14.65   21.20    0.35   7.34%   2.39%
PDII     JUL    25    24.70   30.49    0.30   3.91%   1.21%
RSAS     JUL    17    17.05   20.73    0.45   6.22%   2.64%
STLD     JUL    25    24.45   27.25    0.55   5.33%   2.25%
UPL      JUL    30    29.55   35.20    0.45   4.14%   1.52%
USG      JUL    15    14.15   16.28    0.85  13.32%   6.01%
ATI      JUL    12    12.20   15.10    0.30   7.44%   2.46%
BJS      JUL    42    41.70   45.11    0.80   4.75%   1.92%
LCAV     JUL    25    24.35   28.28    0.65   6.85%   2.67%
NCRX     JUL    27    26.80   31.88    0.70   7.30%   2.61%
NVTL     JUL    17    17.05   21.20    0.45   8.97%   2.64%
SSYS     JUL    22    22.20   27.02    0.30   4.41%   1.35%
SWIR     JUL    30    28.85   33.05    1.15  10.66%   3.99%
SYNA     JUL    17    16.90   20.38    0.60   8.98%   3.55%
YHOO     JUL    30    29.20   32.07    0.80   6.80%   2.74%

Boston Communications (NASDAQ:BCGI), Au Optronics (NYSE:AUO),
Drexler Technologies (NASDAQ:DRXR), Nvidia (NASDAQ:NVDA),
Silicon Storage Tech (NASDAQ:SSTI) and Digene (NASDAQ:DIGE),
which is currently profitable, have been closed to limit
potential losses.


NAKED CALLS

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

IACI     JUN    32    33.15   29.94    0.65   5.22%   1.96%
OVTI     JUN    30    30.80   15.50    0.80  11.79%   2.60%
SLAB     JUN    55    55.50   44.99    0.50   4.93%   0.90%
PHTN     JUN    35    35.35   30.91    0.35   4.69%   0.99%
ENDP     JUN    25    25.70   21.14    0.70  11.16%   2.72%
IPXL     JUN    22    23.05   20.47    0.55   8.75%   2.39%
MMR      JUN    15    15.25   15.26   (0.01)  0.00%   0.00%
APPX     JUN    40    40.40   31.97    0.40   6.84%   0.99%
OVTI     JUN    27    27.25   15.50    0.25   6.69%   0.92%
WSM      JUN    32    33.00   31.61    0.50   5.64%   1.52%
ABAX     JUN    20    20.25   19.67    0.25   5.81%   1.23%
CHIC     JUN    20    20.35   19.19    0.35   8.70%   1.72%
USNA     JUN    30    30.40   29.95    0.40   6.29%   1.32%
ABGX     JUN    17    17.85   11.40    0.35  13.94%   1.96%
CREE     JUN    25    25.25   19.78    0.25   5.36%   0.99%
SSNC     JUN    25    25.50   18.39    0.50  10.41%   1.96%
DIGE     JUN    40    40.30   35.96    0.30   6.89%   0.74%
MDCO     JUN    30    30.70   29.23    0.70  15.46%   2.28%
ASKJ     JUL    45    45.55   35.55    0.55   6.50%   1.21%
AMLN     JUL    25    25.35   22.09    0.35   5.29%   1.38%
ICOS     JUL    30    30.45   27.34    0.45   5.26%   1.48%
OIIM     JUL    17    17.80   15.85    0.30   5.50%   1.69%
INSP     JUL    40    40.50   33.23    0.50   6.88%   1.23%
RHAT     JUL    25    25.60   20.10    0.60   9.08%   2.34%
XMSR     JUL    27    27.75   22.83    0.25   4.34%   0.90%

McMoran Exploration (NYSE:MMR) has previously 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

AMHC     JUL   22.50   21.80   24.09    0.70    9.36%   3.21%
CTSH     JUL   22.50   22.20   24.51    0.30    4.34%   1.35%
CYBX     JUL   30.00   29.25   37.06    0.75   10.31%   2.56%
ERES     JUL   22.50   21.85   24.55    0.65    9.03%   2.97%
HLEX     JUL   15.00   14.65   16.36    0.35    7.40%   2.39%
MINI     JUL   20.00   19.65   22.34    0.35    5.89%   1.78%
NFI      JUL   30.00   29.30   37.20    0.70    9.77%   2.39%
PTIE     JUL    7.50    7.25    8.84    0.25   11.96%   3.45%
RIMM     JUL   50.00   49.15   59.53    0.85    6.57%   1.73%
SGTL     JUL   22.50   22.25   26.45    0.25    4.25%   1.12%

__________________________________________________________________

AMHC - American Healthways  $24.09  ** Solid Earnings = Rally! **

American Healthways (NASDAQ:AMHC) provides specialized healthcare
enhancement and disease management services to individuals in all
50 states, the District of Columbia, Puerto Rico and Guam.  The
firm's integrated care enhancement programs serve entire health
plan populations through its member and physician care support
interventions, advanced neural network predictive modeling and a
confidential, secure Internet-based application that provides
patients and physicians with individualized health information
and data.

AMHC - American Healthways  $24.09

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  QMH SX     10   0.70  21.80   9.4%   3.2%


__________________________________________________________________

CTSH - Cognizant Technology  $24.51  *** Post-Split Entry? ***

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  $24.51

PLAY (sell naked put):

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

SELL PUT  JUL 22.5  UPU SX      0    0.30  22.20   4.3%   1.4% TS


__________________________________________________________________

CYBX - Cyberonics  $37.06  *** "Premium-Selling" Only! ***

Cyberonics (NASDAQ:CYBX) designs, develops, manufactures and
markets medical devices that provide vagus nerve stimulation
(VNS) for the treatment of epilepsy and other debilitating
neurological, psychiatric diseases and disorders.  The firm's
primary product, the Cyberonics VNS Therapy System, is an
implantable medical device for the treatment of epilepsy,
depression, Alzheimer's disease and other debilitating chronic
disorders.

CYBX - Cyberonics  $37.06

"SPECULATIVE" PLAY (sell naked put):

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

SELL PUT  JUL 30     QAJ SF    3963   0.75  29.25  10.3%   2.6%


__________________________________________________________________

ERES - eResearch Technology  $24.55  *** Next Leg Up? ***

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

ERES - eResearch Technology  $24.55

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  UDB SX    215    0.65  21.85   9.0%   3.0%


__________________________________________________________________

HLEX - HealthExtras  $16.26  *** Own This One! ***

HealthExtras (NASDAQ:HLEX) is a provider of pharmacy benefit
management (PBM) services and supplemental benefit programs.
The company's PBM clients include managed-care organizations,
self-insured employers and third-party administrators who
contract with HealthExtras to cost-effectively administer the
prescription drug component of their overall health benefit
plans.

PLAY (sell naked put):

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

SELL PUT  JUL 15    HUE SC    100    0.35   14.65   7.4%   2.4%


__________________________________________________________________

MINI - Mobile Mini  $22.34  *** New 52-Week High! ***

Mobile Mini (NASDAQ:MINI) is a provider of portable storage
solutions through its lease fleet of almost 90,000 portable
storage and portable office units.  The firm offers portable
storage products in varying lengths and widths with a large
assortment of differentiated features, such as proprietary
security systems, multiple doors, wiring and shelving.  These
portable units provide secure, accessible temporary storage
for a unique client base including: large and small retailers,
construction companies, medical centers, schools, utilities,
distributors, the United States military, hotels, restaurants,
entertainment complexes and households.

MINI - Mobile Mini  $22.34

PLAY (sell naked put):

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

SELL PUT  JUL 20    UAC SD      0    0.35  19.65   5.9%   1.8%


__________________________________________________________________

NFI - NovaStar Financial  $37.20  *** Bottom-Fishing Only! ***

NovaStar Financial (NYSE:NFI) is a specialty finance firm that
originates, invests in and services residential nonconforming
loans.  The company offers a range of mortgage loan products to
borrowers (nonconforming borrowers) that usually do not satisfy
the credit, collateral, documentation or underwriting standards
prescribed by conventional mortgage lenders and loan buyers.

NFI - NovaStar Financial  $37.20

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    NFI SF    2301   0.70  29.30   9.8%   2.4%


__________________________________________________________________

PTIE - Pain Therapeutics  $8.84  *** No Pain -- No Gain! ***

Pain Therapeutics (NASDAQ:PTIE) is developing a new generation
of opioid painkillers with improved clinical benefits.  The
company's drugs will offer enhanced pain relief and reduced
tolerance/physical dependence or addiction potential compared
to existing opioid painkillers.  If approved by the Food and
Drug Administration, these proprietary drugs could replace
certain existing opioid painkillers commonly used to treat
moderate to severe pain.

PTIE - Pain Therapeutics  $8.84

"SPECULATIVE" PLAY (sell naked put):

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

SELL PUT  JUL 7.5   UQ SU      802   0.25   7.25  12.0%   3.4%


__________________________________________________________________

RIMM	- Research In Motion  $59.53  *** Testing 2004 Highs! ***

Research In Motion (NASDAQ:RIMM) is a designer, manufacturer and
seller of wide area wireless solutions for the worldwide mobile
communications market.  Through the development of integrated
hardware, software and services that support multiple wireless
network standards, the firm provides platforms and solutions for
seamless access to time-sensitive information including e-mail,
phone, short message service messaging, as well as Internet and
intranet-based corporate data applications.

RIMM	- Research In Motion  $59.53

PLAY (sell naked put):

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

SELL PUT  JUL 50    RUP SJ    7577   0.85  49.15   6.6%   1.7%


__________________________________________________________________

SGTL - Sigmatel  $26.45  *** In A Trading Range? ***

Sigmatel (NASDAQ:SGTL) is a fabless semiconductor company that
designs, develops and markets proprietary, analog-intensive,
mixed-signal integrated circuits for a variety of products in
the consumer electronics and computing markets, including
portable compressed audio players, notebook and desktop PCs,
DVD players, digital televisions and set-top boxes.

SGTL - Sigmatel  $26.45

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  UGO SX     10    0.25  22.25   4.3%   1.1% TS



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

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.

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

CECO - Career Education  $56.24  *** Lawsuit Woes Continue! ***

Career Education Corporation (NASDAQ:CECO) is a provider of
private, for-profit, postsecondary education, with 78 campuses
throughout the United States, Canada, France, the United Kingdom
and the United Arab Emirates.  The company also offers online
education programs through its Online Education Group, which
includes American InterContinental University Online and also
Colorado Technical University Online.

CECO - Career Education  $56.24

PLAY (sell naked call):

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

SELL CALL  JUL 65    CUY GM    2171   0.90  65.90   7.2%   1.4%


__________________________________________________________________

ESI - ITT Educational Services  $39.42  *** CECO Brethren ***

ITT Educational Services (NASDAQ:ESI) is a provider of technology
oriented post-secondary degree programs in the United States.  It
offers Associate's, Bachelor's and Master's degree programs and
non-degree diploma programs.  ITT/ESI also designs its education
programs, after consultation with employers, to help graduates
prepare for careers in various fields involving their areas of
study.

ESI - ITT Educational Services  $39.42

PLAY (sell naked call):

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

SELL CALL  JUL 45    ESI GI    2611   0.50  45.50   5.5%   1.1%


__________________________________________________________________

FMT - Fremont General  $17.82  *** A Big "Down" Day! ***

Fremont General (NYSE:FMT) is a financial services holding firm
engaged primarily in real estate lending through its industrial
bank subsidiary, Fremont Investment & Loan.  The firm lending
operations consist of the wholesale origination of non-prime or
sub-prime residential real estate loans on a nationwide basis
that are primarily sold to third-party investors on a servicing
released basis or, to a lesser extent, securitized or held in a
loan portfolio, and the origination of commercial real estate
loans on a nationwide basis that are substantially all held in
a loan portfolio.

FMT - Fremont General  $17.82

PLAY (sell naked call):

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

SELL CALL  JUL 20    FMT GD      21   0.40  20.40   8.7%   2.0%


__________________________________________________________________

NBIX - Neurocrine Biosciences  $49.70  *** Technicals Only! ***

Neurocrine Biosciences (NASDAQ:NBIX) develops and intends to
commercialize drugs for the treatment of neurologic and other
endocrine system-related diseases and disorders.  The firm's
product candidates address pharmaceutical markets that include
insomnia, anxiety, depression, malignant brain tumors, as well
as peripheral cancers, diabetes mellitus, multiple sclerosis,
irritable bowel syndrome, eating disorders, pain, prostate
cancer, obesity and certain female health disorders.

NBIX - Neurocrine Biosciences  $49.70

PLAY (sell naked call):

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

SELL CALL  JUL 55    UOT GK     959   1.10  56.10   8.2%   2.0%


__________________________________________________________________

SLAB - Silicon Laboratories  $44.99  *** Downtrend Underway! ***

Silicon Laboratories (NASDAQ:SLAB) designs and develops a wide
range of proprietary, analog-intensive, mixed-signal integrated
circuits for use in various applications.  The company groups
its products into two categories: mobile handset products and
broad-based, mixed-signal products.

SLAB - Silicon Laboratories  $44.99

PLAY (sell naked call):

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

SELL CALL  JUL 50    QFJ GJ    1313   0.75  50.75   6.4%   1.5%



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

SEE DISCLAIMER - SECTION 1

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


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