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Daily Newsletter, Sunday, 07/11/2004

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The Option Investor Newsletter                   Sunday 07-11-2004
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: Dead Level
Index Trader Wrap: FALL OVER?
Editor's Plays: $20 Bet
Market Sentiment: Earnings Season Begins
Ask the Analyst: Earnings uncertainty, straddles and strangles
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 7-09         WE 7-02         WE 6-25         WE 6-18
DOW    10213.22 - 69.61   10282 - 89.01   10371 - 44.57 +  6.31
Nasdaq  1946.33 - 60.33 2006.66 - 18.81 2025.47 + 38.74 - 13.14
S&P-100  542.63 -  4.54  547.17 -  2.58  549.75 -  5.06 -  0.09
S&P-500 1112.81 - 12.57 1125.38 -  9.05 1134.43 -  0.57 -  1.47
W5000  10842.68 -154.87   10997 - 76.05   11073 + 39.48 - 11.83
SOX      451.14 -  6.17  457.31 - 21.60  478.91 + 25.83 - 23.20
RUT      563.73 - 18.99  582.72 -  4.98  587.70 + 17.16 +  1.42
TRAN    3087.97 - 58.20 3146.17 - 18.01 3164.18 + 95.61 + 43.96
******************************************************************

Dead Level
by Jim Brown

After a little more than six months of the year has expired
the S&P-500 is trading exactly where it closed 2003 at 1112.
Six months of hope, excitement, surprise and disappointment
and we have gone nowhere. Of course that is not exactly
correct with the highs and lows well away from 1112 but we
continue to return to this level. We have spent more time
above this level with the high for the year at 1163 and
+51 points above Friday's close. We have twice ventured
lower by up to -36 points to 1076. This is a perfect picture
of a range bound market and the reason so many traders are
frustrated and volume is dwindling. Everybody is waiting
for the market to pick a direction and nobody is trading
to give it a direction.

Dow Chart - Daily


Nasdaq Chart - Daily


SPX - Daily


SPX - Weekly



The other indexes are not quite as level as the S&P. The
Dow closed at 10213 about -240 points below its 2003 close
at 10453. The Nasdaq closed today at 1946 and -57 points
below the 2003 close at 2003. The broadest measure of the
market the Wilshire-5000 is actually showing a +43 point
gain from the 2003 close at 10799. I actually believe
that the ability of the markets to hold at these levels
is positive considering the long rally off the 2003 lows.
While it may be positive to consolidate at these high
levels, consolidation is never exciting.

Volume on Friday failed to reach 3B shares across all
markets despite strong earnings comments from GE, the
largest company and the proxy for our economy. Internals
were better and all the indexes finished in the green
but excitement was still missing.

The biggest company in the Dow announced earnings before
the bell on Friday and beat the street by a penny. The
beat was not as important as the comments by GE's Jeff
Immelt that "this was the best economy we have seen in
years." Those are strong words from Jeff and they backed
it up by narrowing their guidance for the year to $1.55
to $1.60. They again said that 2005 should put GE back
on track for double digit revenue growth. Of course they
have said this for the last couple of years to no avail.
Nine of eleven divisions posted gains last quarter but
GE still posted overall earnings that were not exciting.
The 38 cents included a favorable tax ruling and it
was the same 38 cents they earned in Q2-2003. Revenue
grew +11% (+$1.05B) illustrating the challenge to grow
earnings despite a billion in additional revenue. The
expectations for GE were already muted so reaction to
the news was positive but calm. GE stock gained only
+0.47 cents and Dow component MMM another diverse
manufacturer actually lost ground.

Still the Immelt comments rescued the markets from the
depths of despair and brought them back from the cliff.
The Dow gained +41 to close at 10213 and back over its
200dma at 10175. The Nasdaq gained +11 to close at
1945 and traded flat for the day.

The only economics came from the Wholesale Trade report
and the news was mixed again. May sales rose only +0.5%
compared to +0.9% in April. Inventories however shot up
+1.2% and well over the +0.2% in April. Durable Goods
sales rose only +0.1% with DG inventories jumping +1.5%.
One analyst said this divergence in durable goods was
the worst in over four years. Inventories rarely shoot
up this quickly compared to sales due to much better
computerized inventory management and just in time
ordering. A jump of this magnitude suggests sales came
to a screeching halt in May. This also suggests the June
swoon we have seen in consumer numbers may have been
stronger then we first expected.

I got a kick listening to the talking heads this week
as they constantly tried to figure out what happened
in June to keep not only consumers but also corporations
from making big purchases. Hello, George McFly? I wanted
to bang on the TV screen and remind them of the Iraq
turnover which many were saying would be a bloodbath
both in Iraq and with corresponding terrorist attacks
here and abroad. I wanted to shout Fed meeting and
rate hike to every one that claimed traders could not
understand why corporations deferred purchases of
software and hardware in June. With the Fed talking
of aggressive hikes if needed I am sure more than
one CFO decided to wait for the picture to clear.

Consumers were hit with the highest gas prices in
history in the U.S. and analysts can't understand why
SUV sales died? Makes you wonder what they pay those
experts. Speaking of gasoline, oil prices surged over
$40 again on Friday on fears that Yukos would halt
production to gain some leverage with the Russian
government in the fight currently underway. Yukos
exports 1.8 million barrels per day and that would be
a serious crunch in the supply line. I would not worry
about a work stoppage because that oil flow is worth
$720 million per day and that will go a long way toward
paying their $3 billion tax bill. Still oil closed at
$40 and the short squeeze is on again. It will not be
long now before companies start warning on earnings
due to higher energy prices. $40 oil is a drastically
increased expense for almost any manufacturer.
Transports gave up some gains early but strengthened
late in the day as oil ticked back under $40 by a
nickel.

For once the earnings news was not all negative. Computer
Associates affirmed estimates as did SAP. Considering the
carnage in the software sector this was a breath of fresh
air for the embattled techs. Spoiling that breath was
Unisys which warned that server sales had slowed in the
last month earnings would drop to 2-3 cents per share
below analysts estimates. The stock was killed far in
excess of their warning with a -$2 drop to $11. The
problem was the appearance that hardware sales might
have stalled in June just as software sales did.
Everyone works on the end of quarter stuff the channel
sales principle where quotas are made or broken in the
last week of the quarter. If Unisys hardware sales were
deferred then what about IBM, Dell, Hewlett Packard
and the rest of the herd?

The Computer Associates earnings affirmation was not
without its problems. CA said revenue would be light
due to weakness in its services business and an
unfavorable product mix. Affirming earnings in spite
of the lower revenue saved them from the same fate as
Unisys.

With nearly 300 companies reporting earnings next week
we have to hope that the majority of them repeat the
GE claims and talk excitedly about the future. The
problem will occur if they all pull a Yahoo instead.
Yahoo did not warn but only failed to impress. The
expectations were simply way too high and investors
hoping for a blowout ran for the exits when it did not
appear. Inline earnings are never met with excitement.
Inline means fairly valued and no upside to the majority
of investors. It means find another horse to ride for
the next earnings race.

Earnings start off with a whimper on Monday with only
16 companies headlined by NVLS and EFII. Tuesday picks
up the pace with about 50 reports led by INTC, JNPR and
JNJ. Wednesday has AMD, AAPL, ASML, BAC, GENZ, HDI, MTG,
QLGC, SNDK, and a flood of smaller companies. Thursday
is the big day headed by IBM, PMCS, NOK, C, RMBS, CY
and about 100 others.

Before the week is out we should know how the quarter
will turn out. The estimates have dropped to +19.4% for
the S&P, down from +26% a couple weeks ago and up from
+14.6% back in April. We have had a significant ramp
from those April estimates and that ramp is rapidly
evaporating but still strong. We should have a decent
clue by next Friday what the real number will be. +19%
would be great and should please the markets but as we
all know the guidance is the key. I strongly doubt the
software sector was alone in its sales slump. It simply
does not make sense that software would slump without
a corresponding dip in hardware. So far Unisys is the
only company of note that has mentioned soft server
sales. It will all come to a head next week and our
fate will be known.

Next week is also expiration week. As if we did not
have enough to worry about we will be dealing with
volatility related to an expiration week right in the
middle of a critical earnings cycle. We really had very
little volatility over the last week as it appears
traders are holding their cards close until the last
minute while hoping for an earnings move. That suggests
we could see an increase in volatility as the earnings
begin to flow. With Intel announcing on Tuesday this
should make Wednesday option dump day as the market
reacts to the Intel news. Right or wrong on direction
those options will be losing value with every tick and
volume should be huge.

Martha lost her last appeal on Friday and she is
scheduled to be sentenced on Friday and the betting
line is 10-16 months in prison. MSO dropped to its
lowest level since May-21st on the news and closed at
$8.63.

Our economic cycle also ramps up next week with several
Fed manufacturing surveys and the return of the much
watched PPI/CPI inflation gauges. Where the last
week of June was on hold for coming events the next
week in July should be anything but slow. There is a
lot of pent up trading on both sides of the market and
it could break lose with a vengeance next week. The
warm up acts are over and the curtain is about to rise
on the main performance. How it ends is still unknown
but at least the end is near and the waiting is almost
over.

It is amazing to see how the markets always gravitate
to a critical inflection point just before an event
that could produce a strong move. The Dow has settled
at 10200 for the last four days and refuses to move
lower, or higher for that matter. The one lower close
on Thursday was immediately retraced on Friday with
the GE news. The 200dma rose to 10178 and is providing
support while we wait for earnings. This is actually
bullish as positive news now has a strong launch point
and we are not that far away from the recent highs just
below 10500. We have had a week of consolidation of
gains in front of the earnings cycle. The Dow is
patiently waiting for the answer right in the middle
of 10000-10500 range that has held more or less for
three months.

The Nasdaq tried to hold at 1960 range support but the
warnings on Thursday knocked another 20 points off that
level. We have been stuck in traffic just above 1940
for two days now. The SOX has actually recovered the
450 support level only two days ahead of Intel earnings.
The Russell held on to 560 and 200dma support and
managed to close slightly higher in front of weekend
event risk. This was a positive sign for me.

Russell Chart - Daily



All of these factors suggest there are buyers lurking
at what they perceive to be a favorable risk level at
the bottom of our range. The lack of any material
selling over the last couple days despite the negative
sentiment is bullish. This was a perfect opportunity
for support to fail and investors to dump stock in
fear and it did not happen. Volume on Tue/Wed/Thr
was strong for a summer week and internals were very
negative and the market did not crack. This does not
mean we will not move lower if the earnings are a
disappointment but it means there is still hope.
Keep the faith for one more week and the picture
should be much clearer. Intel is the lightning rod
for the market on Tuesday. Try not to stand too close.

Enter Very Passively, Exit Very Aggressively!

Jim Brown


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

FALL OVER?
By Leigh Stevens
lstevens@OptionInvestor.com

THE BOTTOM LINE –
Not the season, but the decline - in terms of the S&P, the
current correction may be at or near an end, based on: the S&P
500 (SPX) being back to its previously broken up trendline, now
'defining' possible support, 2) completion of a 50% retracement
of SPX's early-May to mid-June advance, and 3) as suggested by a
big jump in put volume last week to a level of bearish sentiment
often marking a low. Moreover, the S&P (500) is nearing its 200-
day moving average again (at 1100), the same situation seen at
the early-May bottom. The Dow (INDU) appeared to find support at
its 200-day average at its intraday lows already Thurs and Fri.

While the tech-heavy Nasdaq Composite (COMP) is back into its
downtrend channel and fell to below it's 200-day moving average
(at 1980), COMP has completed a Fibonacci 62% retracement of its
early-May to mid-June run up - this amount could also mark a
maximum extent of its decline. While another retreat to the 1900
area can't be ruled out (from Fri's close at 1946), the Composite
is back down to a long-term weekly support (up) trendline. A wild
card is tech stocks here and whether the Nasdaq market will
stabilize shortly and cease acting as a drag on the NYSE indices.

FRIDAY'S TRADING ACTIVITY –

THE NUMBERS –
The S&P 500 Index (SPX) closed 3.7 points higher (+0.3%) to
1,112.81 but fell 1.1% on the week. The Dow 30 average (INDU)
closed up 41.6 points (+0.4%) at 10,213. The Dow closed 0.7%
higher on for the holiday shortened week.

The Nasdaq Composite (COMP) ran up 11 points (+0.6%) to close at
1,946.3. The Russell 2000 index (RUT), a benchmark index for
smaller stocks, was up a half percent on the day.

REPORTS & EARNINGS NEWS –
Market bellwether and Dow stock General Electric (GE) reported Q2
earnings that beat estimates by a penny. GE said quarterly
revenue totaled $37 billion, up 11% from last year and above
analyst forecasts of $35.5 billion as sales increased 14% to
$20.6 billion.

GE's net earnings were $3.9 billion, or 38 cents a share, versus
earnings of $3.8 billion, or 38 cents a share, in the same period
a year earlier. As OIN reported on Friday, comments from GE CEO
Jeff Immalt regarding the economy and future prospects GE were
very upbeat. Immalt indicated that: "This economy is the best
we've seen in years and I'm 'confident' our company can grow our
earnings 10% to 15% in 2005".  GE's stock closed up 1.5% on the
day, at $32.17

Wholesale inventories jumped a stronger than expected 1.2% in
May, which was above the forecasts for a 0.6% increase. Sales for
May rose 0.5% putting the monthly inventory to sales ratio at
1.13, marking the first month since June 2003 where inventory
growth exceeded sales growth. April's figures showed a 0.1%
decline.

After a string of earnings warnings out of the software sector,
some stirrings occurred for hardware company Storage Technology
(STK), which had a substantial run up after warning the day
before of a decline in orders for the recent quarter - putting
expected revenues below a prior forecast.

What the market seemed to pick up on and which was similar in
outlook to the expectations of GE's top exec, were comments from
Storage Tech CEO Pat Martin who indicated that he "remains upbeat
on the second-half of the year as a product upgrade cycle
begins".  STK finished at $28.30, +3.05 or up 12%.

German software giant SAP (sym: SAP) reported that it expected Q2
revenue to grow 9% from a year ago, topping estimates and bucking
the recent software warnings trend (e.g., Computer Associates,
Sibel Systems, Veritis and BMC). The U.S. traded shares of SAP
rallied $2.08 (5%) to $40.04 at the New York close.

THE TALK –
GE's numbers were welcome but the mood was one of caution based
on uncertainty/anxiety about how Q2 earnings would come in.
Evidence for this concern is based on a large number of recent
warnings on earnings, especially in the tech sectors.

There is concern also related to the recent rebound in oil prices
back to $40 and the potential drag of high energy prices on the
economy. As one market analyst pointed out, stocks have been
moving inversely to oil prices – as oil backed off from a record
$40 a barrel, the market went up, but when oil rebounded, stocks
corrected.  As I note above, we've seen a fast 50% retracement of
the early-May to mid-June rally in the S&P 500.

OTHER MARKETS –
Bonds ended a bit higher, as 10-year yields dropped back to 4.46%
from 4.47% the day before – this left the benchmark 10-year T-
Note virtually unchanged for the week.

The dollar was barely changed against the other major currencies.

Oil futures closed below the key $40 a barrel level but the front
month crude contract was up more than 4% on the week. The most
active August crude futures closed down 37 cents to $39.96.

MY INDEX OUTLOOKS –

S&P 500 Index (SPX) – Daily chart:

I mention in the beginning bullish technical aspects, which are
apparent on the chart and with the indicators of: the S&P 500
(SPX) being back to its previously broken up trendline, now
'defining' possible support – see green arrow around 1109-1110;
2) completion of a 50% retracement of SPX's early-May to mid-June
advance, and 3) as suggested by a big jump in put volume last
week to a level of bearish sentiment often marking a low.

While I don't usually don't try to anticipate technical patterns
that might form before they actually do, it is interesting to
note that at the recent lows or, better, if there was a lower low
in the 1100-1090 range, followed by a rebound, a possible head &
shoulder's bottom would be in place.  All things considered, I
would not overstay in index puts due the probability that SPX is
at or near a bottom.  I pay special attention to the bullish
Call/Put readings of last week.




SPX is also nearing its 200-day moving average again (at 1100),
the same situation seen at the early-May bottom when it rebounded
from this area then. [Note: the Dow (INDU) appeared to find
support at its 200-day average at its intraday lows already Thurs
and Fri.]

S&P 100 Index (OEX) – Daily chart:

I was looking at the possibility that that there was an emerging
uptrend line on the OEX chart below. At least two points are
needed to start to draw a trendline – starting with a close-only
line chart there is the possibility of such a line of support
intersecting around 540 currently.  Since it's tentative,
something further can be learned to keep the trendline in place
and change the chart view to a chart view that includes intraday
lows and highs (i.e., bar or candlestick chart type) which will
be seen in a daily chart after this one immediately below -




S&P 100 Index (OEX) – Daily chart:

Interestingly, switching to a bar chart 'view', the trendline
becomes an accurate "internal" trendline – one connecting the
most number of intraday lows or highs.  I also call this a "best
fit" trendline.  This analysis suggests the possibility – stay
tuned on the result! – that 540 is as low as she goes.  A move to
the 530-532 is a next possible objective if the aforementioned
recent lows do not hold. I would be a buyer of OEX calls on such
a further decline while holding some purchased in the 540 area.

Resistance or selling pressure is anticipated in the 550 area – a
close over 550 (or better, two consecutive closes) would suggest
a reversal back to the upside. A sideways move between 540 and
550 would not be surprising in the next few sessions.




Sometimes trendlines drawn on the RSI indicator chart, like the
one above, are also suggestive of where prices will hold.  will
hold.

Nasdaq Composite (COMP) Index  – Daily:

The Nasdaq Composite (COMP) has more of a tendency than the S&P
and the Dow to fall under its 200-day average which was the case
last week as can be seen on the next chart.  As noted in my
opening commentary, COMP has retraced 62% of its prior upswing.
This might be as low as it goes, although a further decline to
retest the 1900 area can't be ruled out either – I don't have
lower objectives than this currently.




A move back to the 1900 area, followed by a rebound would also
set up a possible head and shoulder's bottom. COMP is nearing an
oversold area in terms of its 14-day RSI – there is good tendency
in recently months for bottoms to occur when there is a
reading(s)in this area, as can be seen in the chart above.

Nasdaq 100 (NDX) Index  – Hourly:

I highlighted before the bearish price/RSI (length: 21)
divergence, that proved to be an excellent tip off to the recent
top; i.e., the series of higher highs, "unconfirmed" by a similar
high in the RSI, suggested a high potential buy of Nasdaq 100
(NDX) index puts.

Now, the reverse – a bullish divergence – situation is suggested
as prices moved lower, while the RSI has been trending higher.
Near support looks to be 1430, with the next area of lower
support anticipated in the 1410-1408 area.  Resistance is at
1450, then 1460. I gauge more major resistance to be the "gap"
area at 1471-1473.




Nasdaq 100 tracking Stock (QQQ) Daily:

I would be a buyer of the stock in the 35-35.50 area.  35.50
might hold as support or prices may drift lower, along the
previously broken up trendline, which is now looking to be a
decline "line" of support.  The lower envelope line comes in just
under 35.  My lowest technical objective is to around 34.50
currently. Resistance is at 36.5-36.7 currently.




I haven't shown the volume chart as analysis of this indicator
isn't telling of anything especially – volume diminished somewhat
on Friday as trading tapered off ahead of the weekend.

TRADER'S CORNER ARTICLE NOTE:
I wrote some more on Dow Theory last week – part 2 – and not the
usual things about averages "confirming" each other and the like,
but about the typical phases of trends, in bull markets and bear
markets. If interested, see –
http://www.OptionInvestor.com/traderscorner/tc_070604_2.asp

Good Trading Success!


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

$20 Bet

This will be short and sweet. Everyone knows that Intel
reports earnings on Tuesday night. Expectations are low
after they were not exactly bubbling over with enthusiasm
at their mid quarter update.

The stock has been punished lately after multiple
downgrades by a variety of brokers. Currently at $26.50
it is almost midway between the $27.50 call and the
$25 put. The call is asking 25 cents and the put 20 cents.
That makes one contract a $20-$25 bet on the direction.

I do not think Intel will move enough to make it worth
buying both and we don't have enough time to sit on
them and wait for a multi day move. This is a coin
toss, a lottery play. Guess right and double your
money. Guess wrong and lose it all.

My gut feel is that they will hit their number but lower
guidance for the current quarter. If PC sales slowed in
June as did software sales then chips could be backing
up in the channel. This is just a calculated guess based
on their mid quarter report and the many software warnings.

The smart move is to remain flat until after a market
direction is decided and then pick a real option from
the current newsletter play list.

I would suggest the $20 put. With support at $26 and any
negative guidance we could easily break that and plunge
lower. Remember YHOO after inline performance. This
market is very nervous. If somebody else warns on Monday
or the market breaks that 10200/1940 floor then Intel
will already be stretched to the limit on any decline.

Conversely a surprise out of Intel and it could easily
jump back to the top of its recent range at $28.50-$29.
The stock is very depressed and they could be selling
chips overseas by the boatload. The call is slightly
closer to the money and could easily spike higher on
good news.

It is your coin. Flip it and choose a side.

Warning: This is not a fundamental play or even a play
that has a 50:50 chance of success. This is a lottery
play and should only be entered with money you can
afford to lose. It for gamblers only and provided for
entertainment value.

Making any option bet regardless of how fundamental
during expiration/earning week is extremely dangerous.
We have no market direction and a coin toss would
predict it as reliably as a room full of analysts.
I looked far and wide for a real trade and found none
I could recommend in good conscience. EBAY call play?
I like it after the recent YHOO drop but earnings in
a week and we are tied to whatever direction the market
decides after Intel on Tuesday. IWN put play? I like
it on a break of 560 on the Russell but that is strong
support. Support that once broken could produce a
serious drop but still strong support. Too risky ahead
of Intel. MSO put? If I took the chance I guarantee she
would get probation instead of jail time.

Spend the $20-$25 bucks and take a chance. It will be
much cheaper and less risk than any other play between
now and Wednesday morning.

INTC July $25 Put INQ-SE $0.20

For those that like the other side.

INTC July $27 Call INQ-GY $0.25


Intel Chart





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

DJX Put Update  $102.13

We got the drop I was expecting but the 10200 level has
proven to be very tough. The option rose as high as $1.00
on Tuesday and then a stubborn Dow and time decay started
eroding the price. With Intel earnings on Tuesday we
knew it was going to be very close. The option expires
on Thursday at the close but the play is over.

Friday's closing price was 60 cents. The game plan was
to close the play on Friday regardless of price. It was
70 cents until noon and that was the price when it was
profiled. If you followed the plan you are out now and
looking for something else to trade. It was a good idea
but the market did not follow through despite the many
warnings.

http://members.OptionInvestor.com/editorplays/edply_070404_1.asp

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

Microsoft Running In Place  $27.86
Combination play

Still waiting for the news on the cash disbursement.

http://members.OptionInvestor.com/editorplays/edply_062704_1.asp

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

News Corp Update $35.00

Not getting any movement on NWS after the last discussion
about moving to the U.S. This is a very long term play and
we are waiting for some positive momentum to sell covered
calls against our position.

Current position: Long (6) Jan-2006 $40 Calls WLN-AH @ $3.83

http://members.OptionInvestor.com/editorplays/edply_041104_1.asp

http://members.OptionInvestor.com/editorplays/edply_041804_1.asp


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

PVN Call Update $13.98

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


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

Earnings Season Begins
- J. Brown

The markets bounced on Friday when Dow-component General Electric
(GE), the world's largest company by market cap, beat earnings
estimates by a penny.  Comments from Jeff Immelt, GE's Chairman
and CEO, briefly lifted investor sentiment when he said the
economy is the best he's seen in years.  Overall the markets were
due for a bounce with the vast majority of sector-specific
indices all significantly oversold.  The rebound happened to
produce some bullish market internals with advancing stocks
outnumbering decliners 17 to 10 on the NYSE and 17 to 12 on the
NASDAQ.  Up volume outweighed down volume but overall volume
remained light.

The problem is that Friday's bounce did not do much to erase the
losses or repair the technical damage done in the last week or so
and investor confidence remains shot with the daily parade of
earnings warnings.  Next week's long awaited Q2 earnings season
will hit full swing but odds are we could see more "sell the
news" reaction as companies fail to issue positive guidance for
the third quarter.

The combination of oil back to $40 a barrel, the upcoming
terrorist targets.. I mean Democratic and Republican conventions,
and fears of a major event at the August Olympics could easily
keep a lid on stocks.  Although the biggest wet blanket on the
markets is probably the upcoming, anybody's-guess presidential
election.

There is hope that stocks could turn around late in the week with
the large number of economic reports due out to hit Wall Street.
That's assuming they can offer some positive numbers and not
depress us further with concerns that the U.S. economy is
slowing.  Speaking of slowing I heard that the Chinese GDP
numbers might be released this coming week and it could be the
first report since the Chinese government actively tried to slow
down GDP growth before their economy overheated.  That could be a
wild card for cyclical stocks.



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

Market Averages

DJIA ($INDU)

52-week High: 10753
52-week Low :  8996
Current     : 10213

Moving Averages:
(Simple)

 10-dma: 10288
 50-dma: 10229
200-dma: 10181



S&P 500 ($SPX)

52-week High: 1163
52-week Low :  960
Current     : 1112

Moving Averages:
(Simple)

 10-dma: 1125
 50-dma: 1117
200-dma: 1101



Nasdaq-100 ($NDX)

52-week High: 1559
52-week Low : 1204
Current     : 1440

Moving Averages:
(Simple)

 10-dma: 1475
 50-dma: 1448
200-dma: 1444



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

CBOE Market Volatility Index (VIX) = 15.75 -0.42
CBOE Mkt Volatility old VIX  (VXO) = 15.42 -0.63
Nasdaq Volatility Index (VXN)      = 22.35 -0.33

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

          Put/Call Ratio  Call Volume   Put Volume

Total          0.75        614,062       457,710
Equity Only    0.67        468,279       315,317
OEX            1.01         27,847        28,147
QQQ            1.56         45,390        47,685


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

Bullish Percent Data

           Current   Change   Status
NYSE          66.0    + 0     Bear Confirmed
NASDAQ-100    48.0    - 1     BULL ALERT
Dow Indust.   70.0    + 0     Bear Confirmed
S&P 500       62.8    + 0     Bear CORRECTION
S&P 100       65.0    + 0     Bear CORRECTION



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: 1.82
10-dma: 1.54
21-dma: 1.27
55-dma: 1.12


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    1728      1718
Decliners    1026      1247

New Highs      84        37
New Lows       43        94

Up Volume    846M      958M
Down Vol.    516M      371M

Total Vol.  1406M     1367M
M = millions


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

Commitments Of Traders Report: 07/06/04

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 continue to sit tight without much change
in their bearish sentiment.  Retail traders aren't changing
their bullish tune much either but they have grown a bit more
optimistic

Commercials   Long      Short      Net     % Of OI
06/15/04      428,905   444,197   (15,292)   (1.8%)
06/22/04      407,842   415,462   ( 7,620)   (0.9%)
06/29/04      405,273   413,351   ( 8,078)   (0.9%)
07/06/04      402,952   416,526   (13,574)   (1.7%)

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
06/15/04      169,595   115,336    54,259    19.0%
06/22/04      124,985    89,934    35,051    16.3%
06/29/04      129,978    94,535    35,443    15.7%
07/06/04      132,423    90,748    41,675    18.7%

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

Now we are seeing some money shuffling in the e-minis.
Commercial traders have reduced their shorts and raised their
long positions but remain overwhelmingly bearish.  Small traders
have pared back their bullish sentiment.

Commercials   Long      Short      Net     % Of OI
06/15/04      440,867   522,546    (81,679)   (8.5%)
06/22/04      229,290   446,974   (217,684)  (32.2%)
06/29/04      258,443   447,505   (189,062)  (26.7%)
07/06/04      287,442   423,583   (136,141)  (19.1%)

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

Small Traders Long      Short      Net     % of OI
06/15/04      216,759    147,247    69,512    19.1%
06/22/04      243,444     58,389   185,055    61.3%
06/29/04      236,492     47,780   188,712    66.3%
07/06/04      219,321     58,567   160,754    27.9%

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 somewhat bullish on the NASDAQ 100
but only by a small margin.  Small traders are much more
bearish on technology.

Commercials   Long      Short      Net     % of OI
06/15/04       78,542     54,341    24,201   18.2%
06/22/04       40,397     37,413     2,984    3.8%
06/29/04       41,078     37,194     3,884    4.9%
07/06/04       42,245     37,343     4,902    6.2%

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
06/15/04       15,794    35,880   (20,086)  (38.9%)
06/22/04        9,311     9,950      (639)  ( 3.3%)
06/29/04        7,437    11,904    (4,467)  (23.1%)
07/06/04        9,345    16,527    (7,182)  (27.8%)

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

Commercial traders continue to snooze with little change
in their Dow Jones Industrials positions.  Small traders
have reduced their bearish attitude some but remain
negative.

Commercials   Long      Short      Net     % of OI
06/15/04       30,438    24,766    5,672      10.3%
06/22/04       26,808    19,752    7,056      15.2%
06/29/04       27,278    20,512    6,766      14.1%
07/06/04       27,214    20,775    6,439      13.4%

Most bearish reading of the year: (8,322) -  1/16/01
Most bullish reading of the year: 15,135  - 10/16/01

Small Traders  Long      Short     Net     % of OI
06/15/04       13,942    20,953   (7,011)   (20.1%)
06/22/04        5,626     7,798   (2,172)   (16.2%)
06/29/04        4,930     7,682   (2,752)   (21.8%)
07/06/04        5,969     8,227   (2,258)   (15.9%)

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

Earnings uncertainty, straddles and strangles
What do you think of a Yahoo! July 35 call and 30 put?

On Wednesday afternoon, a trader was looking at a Yahoo! Inc.
(NASDAQ:YHOO) $30.11 strangle (an options strategy where both a
call and put are purchases on the same underlying security with
the same dates of expiration and strike prices equally out the of
the money).  This strategy is a "neutral" strategy, but the
trader is looking for a SIGNIFICANT move, up or down, in order to
profit.

Once I discussed the strategy, priced it out, and did some
technical work with Yahoo's chart using the retracement tool,
other traders had questions regarding not only the pricing and
interpretation, but what I thought of other option strategies
regarding different stocks ahead of quarterly earnings.

What a perfect opportunity to try and use the retracement tool,
teach some of us how to price out various option strategies, put
the information on a chart, look at it, then try and make an
educated decision.

Especially ahead of quarterly earnings season!  While I would
love to be able to try and analyze every stock ahead of their
earnings report, if I can give you a tool, teach you how to use
it, then you might not be reliant on myself or another analyst to
discuss the stock YOU'RE interested in ahead of earnings.

Once again, we're going to look at BOTH sides of the trade.  One
side is the BUYER of the call/put strangle, but we're also going
to look at it from the OPTION MARKET MAKER's perspective, where
this perspective can come in handy when we're not only trying to
make a decision if we should BUY the position, but when we should
SELL, or CLOSE the position.

Here's what we were looking at in the OptionInvestor.com Market
Monitor Wednesday afternoon with about an hour and 45-minutes
left until the close.

Facts:

YHOO was trading $32.64, almost smack in the middle of $30 and
$35.

The July $35 Calls (YHQGG) were offered at $0.60
The July $30 Puts (YHQSF) were offered at $0.60.
If I bought 1 contract each, the cost would be $120.00 + Comm.
To make money on the strangle, the PURCHASER of the strangle
needs YHOO's stock price to either move UP to $36.20 at a minimum
($35 + $1.20 spent on strangle) or FALL to $28.80 at a minimum
($30 - $1.20 spent on strangle).

From the OPTION's MARKET MAKER perspective (they are usually
selling the calls and options to market participants as they
provide liquidity to buyers and sellers), he/she can make money
on the trade IF YHOO's stock stays INSIDE of $36.20 to $28.80.

Yahoo! Inc. (YHOO) - July 7, 02:47:44 PM EDT



Once a trader prices out what it would cost per contract to buy a
put and call that make up the strangle, they will often times
define a range of profitability.  As noted in "Facts" we knew it
was going to cost $0.60 for the call and $0.60 for the put.  Add
the two together and we come up with $1.20.

To define the RANGE of profitability, you add this $1.20 to the
call strike ($35) for your upper range, and subtract the $1.20
from the put strike ($30) for your lower RANGE of profitability.

Once a trader does this, it gives them perspective on what the
stock NEEDS TO DO before expiration.  Remember!  If YHOO's stock
were to JUMP HIGHER on the market's reaction to
earnings/guidance, the put options go "poof" or fall in price and
most likely become worthless and the trader would lose their
$60.00 on the put option, so to have the strangle come out
profitable ($120.00 was the cost) the trader would need YHOO's
price to JUMP HIGHER than $36.20 ($36.20 - $35 = $1.20 * 100 =
$120.00).

Conversely, if YHOO's stock were to FALL on the market's reaction
to earnings/guidance, the call options go "poof" for fall in
price and most likely become worthless and the trader would lose
their $60.00 on the call option, so to have the strangle come out
profitable ($120.00 was the cost) the trader would need YHOO's
price to FALL below $28.80 ($28.80 - $30 = $1.20 * 100 =
$120.00).

OK.... so what happens?  YHOO reports earnings that were inline
with analysts estimates, but forward guidance wasn't as robust as
market participants had hoped for, and the stock fell in after-
hours trading (after Wednesday's regular session).

Now it gets fun!

While I wasn't overly fond of the YHOO strangle, as it seemed a
little expensive for what I thought the stock could do in a
reaction to earnings, let's pretend we did buy the strangle.

Let's also pretend we ONLY BOUGHT THE PUT option, and played a
direction play lower with an out-the-money put.

Here's the fun part.  Also pretend that YOU are the market maker
and YOU are trying to stay as PROFITABLE as possible.  When
you're thinking like a market maker, you're trying to figure out
how you can put the screws to other traders in the market as YOU
want to make as much money as possible, while controlling you
risk.  Remember, the market maker most likely sold the $35 calls
and $30 puts to strangle traders, and the market maker is
OBLIGATED to sell/deliver YHOO stock at $35 or buy YHOO stock at
$30.  Of course, the MARKET MAKER received $60 per contact, or
$0.60 per share when he SOLD the $35 call (that's his/her premium
for the RISK they're taking) and the MARKET MAKER received $60
per contract, or $0.60 per share when he SOLD the $30 put.

In Wednesday's evening's Market Monitor (you'll find it in
Thursday's Market Monitor archive at OptionInvestor.com if you're
looking for it) I made some notes as to how YHOO traded in after-
hours trade.  It looked like somebody was bound and determined to
keep YHOO's price as close to $28.80 (where the strangle
purchaser needed the stock to fall below to be profitable).

Yahoo! Inc. (YHOO) - 5-minute intervals (extended hours)



At 04:00 PM EDT when the market's regular session ended, YHOO was
within 10-cents of the mid-point of the $30-$35 strangle.  When
earnings and guidance were released, the stock fell sharply in
extended hours to as low as $27.79.  But then it "gravitated"
right back up near $28.80 when the extended session closed.

Hmmmm.... see how the stock actually went above $28.80 and just
above $29, then came back to $28.80.  To me, this seems like
"fine tuning" or somebody is trying to peg the stock at $28.80,
as if to KEEP all the money from a $30-$35 strangle.

Who in their right mind would try and keep the stock at $28.80 in
after-hours?  Ahead of the next day's opening bell?  Somebody
with a profit motive is my thinking.  The MARKET MAKER perhaps?

Alright.... so a trader that BOUGHT the $30-$35 strangle becomes
a little suspicious, has an action plan for the next day, as the
holder of the $30-$35 strangle understands that this strangle
expires on Friday July 16, and based on after-hours trade, the
call portion of the trade looks like it is going to be worthless
come expiration, so its the PUT option part of the trade that
needs the greatest amount of attention.

IF YHOO opens at $28.80 the next morning, what is the MINIMUM the
$30 put option would be worth?  $30 - $28.80 = $1.20.

Now.... let's quickly discuss "why" YHOO might have been able to
recover from $28.00 to $28.80 in the extended hours.

Options traders don't get a chance to trade their options after
04:00 PM EDT, and if they do, the spread of the bid/ask usually
don't allow for very good fills.

What can happen is that traders that do hold puts, when they
DON'T see an after-hours trade as LOW as they thought the stock
might should have fallen, will immediately come in and BUY the
UNDERLYING stock.

Think of it this way.  If YOU own 10 YHOO July $30 puts, and the
stock is trading $28.00 in extended hours, you have the RIGHT to
sell 1,000 shares of YHOO at $30.  Since you can't sell your 10
put contracts for $2.00, you might BUY 1,000 shares of YHOO at
$28.00 and immediately lock in the $2.00 per contract difference
($30 - $28 = $2.00).

In the context of the $1.20 strangle, you are also capturing the
$2.00 per share difference, and going to bed with the knowledge
that you made $0.80 per contract on the trade.

If the stock opens lower at $27.00, you might have missed out on
further profit, but you would most likely EXERCISE your right to
SELL the stock you bought in extended hours at $30, so you don't
care if the stock opens lower at $27.00.

Conversely, if details are released later that have the stock
moving higher in the next day's session, or analysts still seem
enthused and feel the stock is a bargain after a 13.8% decline
and the stock gets upgraded, then while the put option value
would be worth less at $30 than it would have been the next
morning if the stock opened at $28.80, the stock you bought in
extended hours at $28.00 has now appreciated.

What does this sound like?  It sounds like HEDGING!

What are options MARKET MAKERS known for?  MANAGING RISK, and
knowing how to hedge.

Now.... Let's pretend that YOU or I bought the $30-$35 strangle.
Where's our profit at?  Where's our RISK at?  Our risk, or
attention should be on the $30 put.  We know the $35 calls have
gone "poof."  What do I do in the morning?  I've only got 7
trading days until expiration, and I'm going to lose 2 days worth
of premium over the weekend.

My/YOUR primary goal is to make money.  My/YOUR secondary goal is
to lose as little money as possible, if the bet we made doesn't
look like it is going to pan out.

Let's look at how YHOO has traded since Thursday's open.

Yahoo! Inc. (YHOO) - 5-minute intervals (regular session only)



At its best, the strangle would have been slightly profitable as
the July $30 puts did see a trade at $1.35, but the put price
dropped pretty quick in just the first 15-minutes of trade as
buyers bid the stock above $30.00.

If traders are going to trade strangles and straddles, where
PROFIT depends on the STOCK showing VOLATILITY, then that's the
MAIN TEST for the trade.

By establishing some PROFIT points, or RANGE that the stock MUST
MOVE, a trader then has most of the information they need for
CLOSING the trade.

In the above chart I ask the question, "Why did a strangle buyer
actually purchase the strangle?"  The reason is that the trader
thought the stock would show VOLATILITY or price action AWAY from
the price they established the strangle.  YHOO certainly showed
volatility AWAY from $32.50.

However, YHOO did NOT achieve or pass the test  of VOLATILITY for
PROFIT outside the range we had calculated BEFORE buying the
strangle.

Since this trade was established so close to July expiration,
there was little time to sit and contemplate what the strangle
trader should do on Thursday morning.  One good rule of thumb is
if we are going to play some strangles or straddles ahead of an
earnings release, if the STOCK DOES NOT do what we think it
should do, in relation to what we PAID for the strangle or
straddle, then we should probably take our lumps and close the
trade immediately.

What if YHOO had gapped lower and opened at $27 the next day?
What would you do?  At a MINIMUM, where would your profit stop
have been placed?

Strangle and straddle option strategies are excellent option
strategies as a way to be "neutral" into an earnings report, an
important FDA drug review, and FOMC meeting, a major economic
report.  Any event that might be expected to bring VOLATILITY
into a security.

Hopefully this column gives traders an idea at how to look at
your trade, set some parameters, and then have an established
action plan set in place AFTER the trade is established, and
TRADE MANAGEMENT becomes more crucial.

Jeff Bailey


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

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

Symbol  Co               Date           Comment      EPS Est

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

ARA    ARACRUZ CELULOSE S  Mon, Jul 12    -----N/A-----      0.70
BRO    Brown & Brown       Mon, Jul 12    After the Bell     0.45
CTAS   Cintas Corp         Mon, Jul 12    After the Bell     0.41
EFII   Elec for Imaging    Mon, Jul 12    -----N/A-----      0.24
HELE   Helen of Troy Ltd   Mon, Jul 12    Before the Bell    0.45
MTB    M&T Bank Corp       Mon, Jul 12    Before the Bell    1.45
MDC    M.D.C Holdings      Mon, Jul 12    After the Bell     1.93
NVLS   Novellus Sys, Inc.  Mon, Jul 12    -----N/A-----      0.26
STI    SunTrust            Mon, Jul 12    Before the Bell    1.26

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

ADTN   ADTRAN, Inc.        Tue, Jul 13    Before the Bell    0.26
AMB    AMB Property Corp   Tue, Jul 13    After the Bell     0.53
ASO    AmSouth BanCorp     Tue, Jul 13    -----N/A-----      0.46
BBT    BB&T Corp           Tue, Jul 13    Before the Bell    0.68
CBH    Commerce Bancorp    Tue, Jul 13    Before the Bell    0.78
CBSH   Commerce Bancshares Tue, Jul 13    Before the Bell    0.75
GCI    Gannett             Tue, Jul 13    Before the Bell    1.30
INTC   Intel Corp          Tue, Jul 13    After the Bell     0.27
JEF    Jefferies Grp       Tue, Jul 13    Before the Bell    0.46
JNJ    Johnson & Johnson   Tue, Jul 13    -----N/A-----      0.79
JNPR   Juniper Networks    Tue, Jul 13    After the Bell     0.04
MI     Marshall & Ilsley   Tue, Jul 13    Before the Bell    0.66
MEG    Media General       Tue, Jul 13    Before the Bell    0.84
PKX    POSCO               Tue, Jul 13    -----N/A-----       N/A
RJF    Raymond James       Tue, Jul 13    -----N/A-----      0.48
PHG    Royal Philips Elec  Tue, Jul 13    -----N/A-----       N/A
STT    State Street Corp   Tue, Jul 13    Before the Bell    0.68
TSCO   Tractor Supply Co   Tue, Jul 13    Before the Bell    0.75
YUM    Yum! Brands, Inc.   Tue, Jul 13    After the Bell     0.52

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

AMD    Adv Micro Devices   Wed, Jul 14    After the Bell     0.09
AAPL   Apple Computer, Inc.Wed, Jul 14    -----N/A-----      0.15
ASML   ASML Holdings NV    Wed, Jul 14    -----N/A-----      0.15
BAC    Bank of America CorpWed, Jul 14    -----N/A-----      1.74
CEC    CEC Entertainment   Wed, Jul 14    After the Bell     0.39
CYN    City Natl Corp      Wed, Jul 14    After the Bell     1.02
CNET   CNET Networks       Wed, Jul 14    After the Bell    -0.01
CCK    CROWN HOLDINGS INC  Wed, Jul 14    After the Bell     0.28
DRL    Doral Finl          Wed, Jul 14    -----N/A-----      0.91
GENZ   Genzyme Corp        Wed, Jul 14    -----N/A-----      0.41
HDI    Harley-Davidson     Wed, Jul 14    Before the Bell    0.75
IFIN   Invest Finl Serv    Wed, Jul 14    After the Bell     0.48
MOGN   MGI Pharma          Wed, Jul 14    Before the Bell    0.05
MTG    MGIC Investment CorpWed, Jul 14    Before the Bell    1.27
PPDI   Pharm Product Dvlp  Wed, Jul 14    After the Bell     0.39
PP     Prentiss Properties Wed, Jul 14    -----N/A-----      0.76
QLGC   QLogic              Wed, Jul 14    After the Bell     0.36
RI     Ruby Tuesday        Wed, Jul 14    After the Bell     0.46
SNDK   SanDisk Corp.       Wed, Jul 14    After the Bell     0.30
STN    Station Casinos     Wed, Jul 14    Before the Bell    0.49
TFX    Teleflex Incorp     Wed, Jul 14    After the Bell     0.88
NYT    New York Times Co   Wed, Jul 14    Before the Bell    0.50
WWW    Wolverine Wrld Wde  Wed, Jul 14    Before the Bell    0.27

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

ATR    AptarGrp            Thu, Jul 15    After the Bell     0.62
BRE    BRE PROPERTIES INC  Thu, Jul 15    After the Bell     0.57
CSL    Carlisle Co         Thu, Jul 15    Before the Bell    1.08
C      CitiGrp Inc.        Thu, Jul 15    Before the Bell    0.97
CBCF   Citizens Banking    Thu, Jul 15    -----N/A-----      0.42
CMA    Comerica Incorp     Thu, Jul 15    Before the Bell    0.93
CBSS   Compass Bancshares  Thu, Jul 15    -----N/A-----      0.70
CY     Cypress Semicon     Thu, Jul 15    Before the Bell    0.23
DJ     Dow Jones & Co Inc. Thu, Jul 15    Before the Bell    0.38
ETN    Eaton               Thu, Jul 15    Before the Bell    1.01
EQT    Equitable Res, Inc. Thu, Jul 15    Before the Bell    0.61
FCS    Fairchild Semicon   Thu, Jul 15    Before the Bell    0.23
FITB   Fifth Third Bancorp Thu, Jul 15    Before the Bell    0.79
GPC    Genuine Parts       Thu, Jul 15    Before the Bell    0.57
GGG    Graco               Thu, Jul 15    After the Bell     0.40
HIB    Hibernia Corp.      Thu, Jul 15    -----N/A-----      0.45
IVC    Invacare            Thu, Jul 15    Before the Bell    0.56
LSTR   Landstar System     Thu, Jul 15    Before the Bell    0.52
MAR    Marriott InterNatl  Thu, Jul 15    Before the Bell    0.61
NCF    Natl Comm Finl Corp Thu, Jul 15    After the Bell     0.45
NFLX   NetFlix.com         Thu, Jul 15    After the Bell     0.13
NOK    Nokia               Thu, Jul 15    -----N/A-----      0.18
PBCT   People's Bank       Thu, Jul 15    -----N/A-----      0.25
PEP    PepsiCo             Thu, Jul 15    -----N/A-----      0.60
PMCS   PMC-Sierra, Inc.    Thu, Jul 15    After the Bell     0.07
PII    Polaris Ind Inc.    Thu, Jul 15    Before the Bell    0.52
PPG    PPG Ind             Thu, Jul 15    Before the Bell    1.08
RMBS   Rambus Inc.         Thu, Jul 15    After the Bell     0.06
RS     Reliance Steel      Thu, Jul 15    Before the Bell    1.54
RDC    Rowan Co, Inc.      Thu, Jul 15    Before the Bell   -0.03
SEIC   SEI Investments     Thu, Jul 15    Before the Bell    0.36
SLM    SLM Corp            Thu, Jul 15    Before the Bell    0.52
LUV    Southwest Airlines  Thu, Jul 15    Before the Bell    0.16
SYK    Stryker             Thu, Jul 15    After the Bell     0.34
TCB    TCF Finl Corp       Thu, Jul 15    Before the Bell    0.88
SSP    The E.W. Scripps Co Thu, Jul 15    Before the Bell    0.98
MNI    The McClatchy Co    Thu, Jul 15    Before the Bell    0.88
TRB    Tribune             Thu, Jul 15    Before the Bell    0.61
UNH    UnitedHealth Grp IncThu, Jul 15    Before the Bell    0.92
VLY    Valley Natl Bancorp Thu, Jul 15    -----N/A-----      0.38
WB     Wachovia Corp       Thu, Jul 15    Before the Bell    0.96
WBS    Webster Finl Corp.  Thu, Jul 15    Before the Bell    0.91


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

CX     CEMEX S.A.          Fri, Jul 16    -----N/A-----      0.83
DPH    Delphi              Fri, Jul 16    Before the Bell    0.28
ELUX   Electrolux AB       Fri, Jul 16    -----N/A-----      1.35
HAS    Hasbro, Inc.        Fri, Jul 16    Before the Bell    0.08
HBAN   Huntington Bancshrs Fri, Jul 16    Before the Bell    0.42
KEY    KeyCorp             Fri, Jul 16    Before the Bell    0.57
NCC    Natl City           Fri, Jul 16    Before the Bell    0.69
NAP    Natl Processing, IncFri, Jul 16    Before the Bell    0.25
UCBH   UCBH Holdings, Inc. Fri, Jul 16    -----N/A-----      0.40
GWW    W.W. Grainger       Fri, Jul 16    -----N/A-----      0.69
WL     Wilmington Trust    Fri, Jul 16    Before the Bell    0.54


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

Symbol  Co Name              Ratio    Payable     Executable

URBN    Urban Outfitters Inc      2:1      Jul   9th   Jul  12th
SLXP    Salix Pharms              3:2      Jul  12th   Jul  13th
MGPI    MGP Ingredients           2:1      Jul  15th   Jul  16th
CCFH    CCF Holding Co            3:2      Jul  15th   Jul  16th
BLUD    Immucor, Inc              3:2      Jul  16th   Jul  19th
KNGT    Knight Transportation Inc 3:2      Jul  20th   Jul  21st
CWTR    Coldwater Creek Inc       3:2      Jul  23rd   Jul  26th


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

The Q2 Earnings Season is finally here and hits full steam this
week.  On top of earnings we get a wave of economic data this
week.  Tuesday brings the Retail sales numbers.  Thursday and
Friday are packed with a number of reports but headlining the
week will be the PPI, CPI, NY Empire state index and Philly Fed
report.


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

----------------
Monday, 07/12/04
----------------
Trade Balance (BB)         May  Forecast: -$48.0B  Previous:  -$48.3B
Treasury Budget (DM)       Jun  Forecast:  $14.4B  Previous:   $21.2B


-----------------
Tuesday, 07/13/04
-----------------
Export Prices ex-ag. (BB)  Jun  Forecast:     N/A  Previous:     0.2%
Import Trices ex-oil (BB)  Jun  Forecast:     N/A  Previous:     0.4%
Retail Sales (BB)          Jun  Forecast:   -0.5%  Previous:     1.2%
Retail Sales ex-auto (BB)  Jun  Forecast:    0.3%  Previous:     0.7%


-------------------
Wednesday, 07/14/04
-------------------
None


------------------
Thursday, 07/15/04
------------------
Initial Claims (BB)      07/09  Forecast:    333K  Previous:     310K
Business Inventories (BB)  May  Forecast:    0.5%  Previous:     0.5%
PPI (BB)                   Jun  Forecast:    0.2%  Previous:     0.8%
Core PPI (BB)              Jun  Forecast:    0.2%  Previous:     0.3%
NY Empire State Index (BB) Jul  Forecast:    28.0  Previous:     30.2
Industrial Production (BB) Jun  Forecast:    0.1%  Previous:     1.1%
Capacity Utilization (BB)  Jun  Forecast:   77.7%  Previous:    77.8%
Philadelphia Fed (DM)      Jul  Forecast:    25.3  Previous:     28.9


----------------
Friday, 07/16/04
----------------
CPI (BB)                   Jun  Forecast:    0.3%  Previous:     0.6%
Core CPI (BB)              Jun  Forecast:    0.2%  Previous:     0.2%
Mich Sentiment-Prel. (DM)  Jul  Forecast:    97.0  Previous:     95.6


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 07-11-2004
Sunday                                                      2 of 5

In Section Two:

Watch List: Biotech, Software, Brokers and more!
Dropped Calls: None
Dropped Puts: None


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

Biotech, Software, Brokers and more!

___________________________________________________________________

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


Eon Labs - ELAB - close: 36.47 change: -2.32

WHAT TO WATCH: Technical players will want to give ELAB another 
look.  Shares have been bouncing from their simple 100-dma for 
months.  Friday's steep decline sent ELAB straight to support at 
the $35.00 level and its simple 100-dma.  There was a sharp 
intraday bounce suggesting traders were buying the dip.  However, 
the high-volume decline is a concern.  We might be cautious bulls 
on a rebound back above the $38.00 level with a target of $44-45.
Look for earnings on July 22nd.
 
Chart=


---

Symantec Corp - SYMC - close: 41.09 change: +0.00 

WHAT TO WATCH: Software stocks have been crushed in the last 
several days with several earnings warnings shocking the sector.  
SYMC has managed to weather the storm pretty well but the stock 
is still slipping toward support at the $40.00 mark and its 
simple 200-dma.  The MACD is about to produce another sell 
signal.  We'd consider bearish plays under $40.00 or the recent 
low at $39.40.  Watch for earnings on July 21st. 
 
Chart=


---

Legg Mason - LM - close: 86.50 change: +0.02

WHAT TO WATCH: The broker-dealer sector has been an big under 
performer lately.  LM has followed the sector lower with several 
declines in the past week or two.  Now LM is testing support at 
the $86 level and its simple 200-dma.  The P&F chart, while 
currently bullish, also looks ready to turn bearish.  The MACD is 
already in a sell signal and we would target the $80 level but 
watch out for earnings on July 19th.
 
Chart=


---

Hughes Supply - HUG - close: 58.99 change: +0.58

WHAT TO WATCH: Bulls will want to keep an eye on HUG.  The stock 
recently raised its earnings forecasts and now shares are 
consolidating higher toward resistance at $60.00.  Currently the 
P&F chart is bullish and points to a $66 target.  A breakout over 
the $60.00 mark might be a decent entry point.  Earnings are 
expected on August 24th.
 
Chart=




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

JBLU $25.61 -0.34 - JBLU has recently failed at its 200-dma and 
now shares are testing support at the $25.00 level.  

GDT $53.35 +0.15 - GDT has been rolling over from an oversold 
bounce in early June.  Currently the stock's daily chart has a 
H&S pattern that points to a $47 target.

IMCL $79.62 +0.60 - The recent pull back in IMCL has stalled 
above its simple 40-dma and the stock looks poised to rebound 
back above the $80 level. 


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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
^^^^^

None


PUTS
^^^^

None


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


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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DISCLAIMER
**********

Please read our disclaimer at:
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Contact Support
The Option Investor Newsletter                   Sunday 07-11-2004
Sunday                                                      3 of 5

In Section Three:

Current Calls: PD, QCOM, SUN
New Calls: ATK, ITT, WFMI
Current Put Plays: APPX, DISH, IRF, SLAB
New Puts: None


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

Phelps Dodge - PD - close: 79.00 chg: +1.90 stop: 75.49

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're off to a good start with PD.  The stock is seeing some 
follow through on its technical bull-flag breakout from 
Wednesday.  The metals and mining stocks have been winners this 
week and both gold and copper prices are moving higher.  Its P&F 
chart still looks strong.  Fundamentally investors are bullish on 
PD due to the improving U.S. and global economies, specifically 
China, which has been a huge buyer of copper.  

The bull flag pattern points to an $82.50-85.00 target and that 
happens to coincide with the $82.00 P&F bullish target.  We 
believe that PD can actually trade to the $84-85 region with 
overhead resistance at the $85.00 mark.  Although PD's immediate 
challenge is resistance at the round-number, psychological $80.00 
mark.  

Suggested Options: 
We like the August $75 and $80 calls and that gives us time to 
ride them into PD's earnings report in late July.

!Alert - July options EXPIRE this Friday!

BUY CALL AUG 75 PD-HO OI= 484 Current Ask $6.40
BUY CALL AUG 80 PD-HP OI=1570 Current Ask $3.50

Annotated Chart: 

 


Picked on July 07 at $ 78.75 
Change since picked:  + 0.25
Earnings Date       07/27/04 (confirmed)
Average Daily Volume:    2.6 million    
Chart =


---

QUALCOMM - QCOM - close: 70.56 change: -0.09 stop: 69.75*new*

Company Description:
QUALCOMM Incorporated (www.qualcomm.com) is a leader in 
developing and delivering innovative digital wireless 
communications products and services based on the Company's CDMA 
digital technology. Headquartered in San Diego, Calif., QUALCOMM 
is included in the S&P 500 Index and is a 2003 FORTUNE 500® 
company. (source: company press release)

Why We Like It:
We are growing even more concerned about our bullish play in 
QCOM.  The markets managed a bounce on Friday but QCOM didn't 
participate.  Instead the stock produced another candle in its 
bearish wedge-like pattern above support at $70.00.  This is 
disappointing.  In the last three weeks two brokers have 
reiterated their "out perform" ratings, two more brokers have 
raised or reiterated their "buy" ratings and raised the price 
target on QCOM to $90 and above.  Merrill and Piper Jaffray have 
essentially said QCOM is the best play in the wireless sector.  
Technically the stock's breakout over the $70 mark looked great 
and produced a quadruple-top breakout buy signal on its P&F 
chart.  

Unfortunately, QCOM can't seem to keep its momentum up.  The MACD 
indicator is about to produce a new sell signal, which is 
certainly a warning sign.  We're willing to keep it as long as 
support at the $70.00 mark holds up but we'd probably hesitate to 
initiate new positions until QCOM trades back above the $72.00 
mark.  We're going to raise our stop loss from $69.00 to $69.75.  
Keep in mind that we only have a week and a half before QCOM's 
earnings report and we do not plan to hold over the event.

Suggested Options:
We're going to suggest the August calls even though we plan to 
close the play before QCOM's July 21st earnings report.  Our
favorites are the August 70s.

!Alert - July options EXPIRE this Friday!

BUY CALL AUG 70 AAO-HN OI= 4362 Current Ask $3.60
BUY CALL AUG 75 AAO-HO OI=11041 Current Ask $1.45

Annotated Chart: 

 


Picked on June 29 at $ 71.55 
Change since picked:  - 0.99
Earnings Date       07/21/04 (confirmed)
Average Daily Volume:    8.8 million    
Chart =


---

Sunoco - SUN - close: 66.69 change: +0.02 stop: 62.99

Company Description:
Sunoco, Inc., headquartered in Philadelphia, PA, is a leading 
manufacturer and marketer of petroleum and petrochemical 
products. With 890,000 barrels per day of refining capacity, 
approximately 4,900 retail sites selling gasoline and convenience 
items, over 4,500 miles of crude oil and refined product owned 
and operated pipelines and 37 product terminals, Sunoco is one of 
the largest independent refiner-marketers in the United States. 
Sunoco is a significant manufacturer of petrochemicals with 
annual sales of approximately five billion pounds, largely 
chemical intermediates used to make fibers, plastics, film and 
resins. Utilizing a unique, patented technology, Sunoco also 
manufactures two million tons annually of high-quality 
metallurgical-grade coke for use in the steel industry.
(source: company press release)

Why We Like It: (Original Write up from Thursday)
Today was an exception.  For the most part energy stocks have 
been a pocket of strength for the bulls.  The rise in crude back 
above the $40.00 barrel has kept oil and energy equities 
resistance to profit taking.  We're attracted to SUN for multiple 
reasons.  First it is one of the few oil refiners in the U.S. and 
demand is so high for refined products that the entire industry 
is working near capacity to pump out as much as they can.  
Second, we like SUN because it also produced tons of coke for the 
steel industry.  The steel sector has been another group of 
strength as the U.S. and Chinese economies heat up pushing steel 
prices to new highs.  With demand for steel this high companies 
ramp up production and that means more demand for SUN's coke.  
Third we like SUN for its technical breakout over resistance at 
the $65.00 level.  The stock broke out on strong volume.  Today's 
dip looks like an entry point for new bullish positions. 
Actually, we'd consider any dip above $65.00 as an entry point.  
Right now we're going to target a move to the $70-72 range.  Our 
initial stop loss will be at $62.99.  

WEEKEND UPDATE:
Hmm... that's not exactly what we expected to see on Friday.  
Energy stocks were generally positive in spite of crude futures 
slipping back under the $40.00 mark.  Meanwhile SUN traded in a 
very tight 50-cent range for the majority of Friday's session.  
The way SUN has coiled into a point we can expect a move soon.  
The only problem is that it could go either way. Should SUN break 
downwards wait and look for a bounce from the $64.00 or $65.00 
levels.  Otherwise, a push through $67.00-67.50 may be our next 
entry point.  

Suggested Options:
We're going to suggest the August 65s and August 70s as our 
favorite options to play.

!Alert - July options EXPIRE this Friday!

BUY CALL AUG 65 SUN-HM OI= 4535 Current Ask $3.50
BUY CALL AUG 70 SUN-HN OI= 1685 Current Ask $1.10

Annotated Chart: 

 

Picked on July 08 at $ 66.67
Change since picked:  + 0.02
Earnings Date       07/22/04 (confirmed)
Average Daily Volume:    973 thousand   
Chart =



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

Alliant Tech - ATK - close: 65.03 chg: +0.87 stop: 61.99

Company Description:
ATK is an advanced weapon and space systems company with sales of 
approximately $2.4 billion and strong positions in propulsion, 
composite structures, munitions, precision capabilities, and 
civil and sporting ammunition. The company is the world's leading 
supplier of solid propulsion systems and the nation's largest 
manufacturer of ammunition. ATK employs approximately 13,200 
people. (source: company press release)

Why We Like It: 
The defense sector has been a huge pillar of strength in the 
markets soaring from the May lows to hit a string of new highs 
through most of June.  ATK has followed the defense indices 
higher from its May lows but has spent the last 3 1/2 weeks 
consolidating sideways between $62.00 and $64.00.  Now shares are 
breaking out through resistance at the $64 level and its MACD has 
produced a new buy signal.  In reality this shouldn't be a 
surprise.  This past week Secretary of Homeland Defense, Tom 
Ridge, has reminded Americans that we're still at risk.  This 
summer holds high value targets with the Democratic and 
Republican conventions and the Olympics in Greece.  It's only 
natural for money to flow into defense contractors who will 
benefit from an uptick in spending.  We also like the technical 
breakout over ATK's long-term trendline of resistance (see 
chart).  We're going to target a move to $70.00 although heaviest 
resistance appears to be in the 72.50-75.00 range. 

Suggested Options:
We are going to suggest the August 60s and 65 calls. 

BUY CALL AUG 60 ATK-HL OI= 410 Current Ask $5.90
BUY CALL AUG 65 ATK-HM OI= 425 Current Ask $2.20

Annotated Chart: 

 

Picked on July 11 at $ 65.03
Change since picked:  + 0.00
Earnings Date       08/05/04 (unconfirmed)
Average Daily Volume:    335 thousand   
Chart =


---

ITT Industries - ITT - close: 82.86 chg: +1.75 stop: 80.95

Company Description:
ITT Industries, Inc. is a $6 billion global multi-industry 
company based in White Plains, NY. ITT supplies advanced 
technology products and services in key markets including: fluid 
and water management including water treatment; defense 
communication, opto-electronics, information technology and 
services; electronic interconnects and switches; and other 
specialty products. (source: company press release)

Why We Like It: 
We like ITT for its technical picture.  Longer-term ITT has been 
a real momentum winner with investors choosing to jump in as it 
pulls back to its 40 & 50-dma's or the 100-dma.  This time 
they're buying the dip to its 40 & 50-dma's.  Coincidentally the 
pull back happens to be a 50% retracement of its May through June 
rally.  We see a bullish divergence in its MACD suggesting a new 
buy signal soon while its short-term technicals like the RSI and 
stochastics are already turning.  

We're going to go long here above $82.50 and target a move to 
$88.00.  There is obvious resistance at the $86.00 mark and 
short-term traders may want to exit at $86.00 for a quick profit.  
We'll start the play with a stop loss at $80.95.  Traders should
take note of ITT's earnings report due out on Friday, July 23rd.
We do not plan to hold over the event giving this a very short
time frame.

Suggested Options:
We're going to suggest the August 80s and 85s.

BUY CALL AUG 80 ITT-HP OI=  1 Current Ask $4.10
BUY CALL AUG 85 ITT-HQ OI=118 Current Ask $1.35

Annotated Chart: 

 

Picked on July 11 at $ 82.86
Change since picked:  + 0.00
Earnings Date       07/23/04 (confirmed)
Average Daily Volume:    532 thousand   
Chart =


---

Whole Foods - WFMI - close: 92.31 change: -1.75 stop: 90.50

Company Description:
Founded in 1980 in Austin, Texas, Whole Foods Market® 
(www.wholefoodsmarket.com ) is the largest natural and organic 
foods supermarket retailer. The Company had $3.5 billion in sales 
for the last twelve months ending April 11, 2004 and currently 
has 159 stores in the United States, Canada, and the United 
Kingdom. (source: company press release)

Why We Like It: 
We have had our eye on WFMI for weeks as it continued to climb 
after the breakout above resistance at $80.00.  Yet it never gave 
a decent pull back so we could evaluate new bullish positions.  
This looks like our chance.  This is a pure and simple momentum 
play.  WFMI has been a steamroller driving over shorts that 
totaled about 8% of the float last time data was available.  
After peaking near the $96 level a week ago WFMI dipped to $90.53 
on Friday morning after UBS downgraded the stock from "neutral" 
to "reduce" on valuation concerns.  Yet surprise, surprise WFMI 
rebounded strongly in the last hour of the day on rising volume 
(look at the intraday chart and you'll see strong volume on the 
early morning weakness and strong volume on the afternoon 
bounce.)  Friday's candlestick looks like a "hammer", which is 
typically a one-day reversal signal.  We admit this is somewhat 
aggressive and not for everyone, especially with the new MACD 
sell signal, but we're going to try and reduce our risk with a 
stop loss under Friday's low ($90.50).  True gamblers can place 
their stop under round-number support at $90.00.  Our target is 
the $99-100 range by its July 28th earnings report.

FYI: Odds are good that WFMI will announce a split with earnings.  
It last split 2-for-1 near the $55 level on June 5th, 2001.

Suggested Options:
Our favorite would be the August 90s but the 95s look good too.

BUY CALL AUG 90 FMQ-HR OI=4738 Current Ask $5.00
BUY CALL AUG 95 FMQ-HS OI= 475 Current Ask $2.55

Annotated Chart: 

 

Picked on July 11 at $ 92.31
Change since picked:  + 0.00
Earnings Date       07/28/04 (confirmed)
Average Daily Volume:    801 thousand   
Chart =




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

American Pharma. - APPX - close: 25.79 chg: -0.57 stop: 27.01*new*

Company Description: 
American Pharmaceutical Partners, Inc. is a specialty drug 
company that develops, manufactures and markets injectable 
pharmaceutical products, focusing on the oncology, anti-infective 
and critical care markets. APP has acquired the exclusive North 
American rights to manufacture and market ABRAXANE(TM), a 
proprietary nanoparticle injectable oncology product that has 
completed Phase III clinical trials for metastatic breast cancer. 
The company believes that it has established the only commercial 
scale protein-engineered nanoparticle manufacturing capability in 
the United States.  (source: company press release)

Why We Like It: 
Biotech stocks have suffered another tough week.  The BTK has 
fallen back through its simple 200-dma while producing a new MACD 
sell signal. Likewise shares of APPX have hit new seven-month 
lows and broken through support at the $30.00 mark.  We're 
encouraged to see APPX consolidate its big drop from Tuesday by 
churning sideways and Friday's late day drop through the $26.00 
level looks great.  We initiated this play with a $25.00 target.  
This close to our exit point we would not suggest new positions.
We are lowering our stop loss to $27.01.

Suggested Options:
We are not suggesting new positions.  Readers can be planning
their exits.  So far the August 32.50 puts have risen from $4.40 
to $7.10.  The August 30s have climbed from $2.75 to $4.90 and 
the August 27.50s soared from $1.50 to $3.00.

!Alert - July options EXPIRE this Friday!

Annotated Chart: 

 

Picked on July 04 at $ 29.07
Change since picked:  - 2.81
Earnings Date       07/22/04 (confirmed)
Average Daily Volume:    910 thousand   
Chart =


---

EchoStar Comm. - DISH - close: 29.29 chg: +0.04 stop: 31.01

Company Description:
EchoStar Communications Corporation serves 10 million satellite 
TV customers through its DISH Network(TM) and is a leading U.S. 
provider of advanced digital television services. DISH Network's 
services include hundreds of video and audio channels, 
Interactive TV, HDTV, sports and international programming, 
together with professional installation and 24-hour customer 
service. DISH Network is the leader in the sale of digital video 
recorders (DVRs). (source: company press release)

Why We Like It: 
Heads up!  CIBC initiated coverage on DISH with an "under 
perform" rating Friday morning. Shares of DISH began to fall from 
the open.  The intraday drop to $28.64 traded through our TRIGGER 
to initiate bearish plays at $28.99.  Unfortunately, DISH managed 
to rebound back above the $29.00 level rather quickly and churned 
sideways between $29.00-29.30 for the rest of the session.  CIBC 
believes that DISH is likely to struggle with its attempts to 
gain subscribers over its cable-TV rivals.  Meanwhile we still 
feel that story behind the SEC's inquiry into DISH's subscriber 
count has not yet blossomed.  

We're encouraged to see the new relative low and it did manage to 
produce a new double-bottom breakdown on its P&F chart.  Traders 
can look for a failed rally under $30.00 as a new entry point or 
look for a new low under $28.64 to open positions.

Suggested Options: 
July options expire soon so we're going to use the August puts.
Our favorite is the August 30s.

!Alert - July options EXPIRE this Friday!

BUY PUT AUG 32.50 UAB-TZ OI= 217 Current Ask $3.70
BUY PUT AUG 30.00 UAB-TF OI= 267 Current Ask $1.85
BUY PUT AUG 27.50 UAB-TY OI= 703 Current Ask $0.75

Annotated Chart: 

 


Picked on July 09th at $28.99
Change since picked:   + 0.30
Earnings Date        08/11/04 (unconfirmed)
Average Daily Volume =    2.5 mln
Chart =


---

Int'l Rectifier - IRF - close: 35.34 chg: +0.05 stop: 38.25     

Company Description:
International Rectifier Corporation is a designer, manufacturer
and marketer of power management products and a worldwide
supplier of a type of power semiconductor, MOSFET (a metal oxide
semiconductor field effect transistor).  Power semiconductors
process electricity into a form more usable by electrical
products.  The company's products are divided among three broad
product categories: analog integrated circuits (ICs) and advanced
circuit devices, power systems and power components.  IRF's
products are used in a range of end markets, including consumer
electronics, information technology, automotive, aerospace and
defense, communications and industrial.

Why we like it:
We remain encouraged by the action in IRF.  The SOX semiconductor 
index has produced a decent oversold bounce in the last three 
sessions.  During that same time IRF has continued to slip to new 
relative lows toward support at $35.00.  If you missed the 
Thursday update Harris Nesbitt downgraded the chip sector to 
"negative" and downgraded IRF to a "neutral".  We're also happy 
to see IRF trade under its trendline of support dating back to 
December.  Yet the next test for the bears is the round-number 
support at $35.00.  Readers can look for an oversold bounce and 
failed rally in the $36-37 range or look for a drop through the 
$35.00 mark to initiate new plays.  The P&F chart looks very 
bearish with its $25.00 target but we will continue to target the 
$31-30 range.  No change in our stop at $38.25.

Suggested Options:
We're going to suggest the August 40s and August 35s.  If you
tend to be more of a gambling type the August 30s could work.

!Alert - July options EXPIRE this Friday!

BUY PUT AUG 40 IRF-TH OI=2449 Current Ask $5.40
BUY PUT AUG 35 IRF-TG OI= 870 Current Ask $1.95
BUY PUT AUG 30 IRF-TF OI=  69 Current Ask $0.55

Annotated Chart of IRF:

 

Picked on July 6th at $37.00
Change since picked:  - 1.66
Earnings Date       07/29/04 (unconfirmed)
Average Daily Volume =  1.07 mln
Chart =


---

Silicon Labs. - SLAB - close: 42.13 chg: +0.68 stop: 45.01     

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:
This is actually a pivotal spot for shares of SLAB.  We're 
encouraged by the new relative lows and the under performance 
compared to the SOX.  The semiconductor index has managed a 
decent oversold bounce in the last three sessions.  Not so for 
SLAB.  Yet this is a dangerous spot to consider new plays.  SLAB 
is close to our target near the $40.00 level but it also happens 
to be near the trendline of support formed by its lower lows.  
Readers might want to consider new bearish positions on a failed 
rally/roll over under the $45 mark.  Otherwise we would not 
suggest new positions, unless maybe SLAB broke through the $40 
level, but then we'd have hit our target.  

Suggested Options:
We are not suggesting new positions in SLAB at this time.

!Alert - July options EXPIRE this Friday!

Annotated Chart of SLAB:

 

Picked on June 20th at $44.99
Change since picked:   - 2.86
Earnings Date        07/26/04 (confirmed)
Average Daily Volume =   1.14 mln
Chart =



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

None


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The Option Investor Newsletter                   Sunday 07-11-2004
Sunday                                                      4 of 5

In Section Four:

Option Spreads: It’s Quickie Time Again & Maybe Profit Time, Too


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Option Spread Strategies
************************

It’s Quickie Time Again & Maybe Profit Time, Too
By Mike Parnos, Investing With Attitude

It’s time for some quickies.  A word of caution.  These premiums
were based on Friday’s closing prices.  Three days have gone by
and the premiums will not likely be the same.  More than likely,
they will be less.  So, enter these hypothetical trades only if
you believe there is enough premium left to make them worthwhile.

August Expiration Quickies
These quickies can be hazardous to your wealth.  In past months
we’ve had many more winners than losers.  The losers can be
expensive, though.  These are hypothetical and educational plays,
but readers have been known to roll the “quickie” dice.   Should
you be so inclined, only use hypothetical money you can afford to
lose.  Would you like to know how I select our monthly quickies?
Let me know.
____________________________________________________________

The Hindsight Of A Directional Trader
“Don't gamble! Take all your savings and buy some good stock and
hold it till it goes up, then sell it. If it don't go up, don't
buy it.”  --Will Rogers
____________________________________________________________

AUGUST QUICKIE POSITIONS

Quickie Position #1 – RUT Baby Iron Condor – 563.73
Sell 10 contracts of the 560 puts
Buy 10 contracts of the 530 puts
Credit of about: $3.60

Sell 10 contracts of the 570 calls
Buy 10 contracts of the 590 calls
Credit of about: $3.15

Total credit of about $6.75.  Maximum profit range: 560 to 570.
Safety range: 553.25 to 576.75.  Maintenance: $30,000.  Potential
profit: $6,750.

Quickie Position #2 – OEX Short Strangle – 542.63
The short strangle strategy is a risky one.  Many traders may not
have the trading approval level to do it, but, for those who do,
here’s a hypo(thetical) quickie trade for you.
Sell 10 OEX July 540 puts
Sell 10 OEX July 545 calls

Total credit of about: $4.50.   Maximum profit range of 540 to
545.  Safety range of 530.50 to 549.50.  Potential profit: $4,500.
Bailout points depend on your personal money management
parameters.  If you’re willing to risk $2,000 on a trade, you
should close the trade when it costs $6,500.

Quickie Positions #3 & #4 – QQQ & DJX Straight Option Purchase
You know I don’t recommend directional trading.  It’s a gamble,
pure and simple.  However, both the QQQs and the DJXs seem to be
near the 200-day moving average and ready for a bounce.  My
personal 200-day moving average is once a day, but that’s probably
TMI and is not entirely relevant.  So, for the hell of it, if you
want to take a flyer . . .
Buy 20 QQQ $36 calls @$.25 - .30 or
Buy 20 DJX $103 calls @ $.25 - .30

If you enter such trades, unless you’re around to babysit the
position, you might want to put in sell orders at $.50 or $.60 (or
whatever figure makes you happy).  Just don’t get greedy.  This is
a crapshoot as it is.  If the bounce actually happens, it’s best
if it happens on Monday or Tuesday.  If it does happen, it may
last only a matter of minutes or hours.  If it doesn’t happen, you
might consider closing the positions to salvage what is left.

The delta on the July DJX 103 calls is about .31.  That means the
DOW would have to move about 100 (or more) points for you to
double your money.    The delta on the July QQQ 36 calls is about
42.  It’s a little better than the DOW, but is still going to
require a healthy move.
___________________________________________________________

JULY POSITIONS
Position #1 – SPX Iron Condor – 1112.81
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 sold 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 – 563.73
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 – 1112.81 – See Adjustment
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 Adjustment:  As the market went down, so did the S&P.  It
was time to dance, and dance we did.  I closed out the 3 contracts
of the July 1125/1100 bull put spread for $12.60 and rolled out to
5 contracts of the August 1125/1150 bear call spread for $8.70.
That put an additional $570 potential profit into our pocket –
making a total of  $2,370 ($1,800 + $570).  Our new maintenance is
$12,500.

Position #4 – SOX (Semi-Conductor Index) – Iron Condor – 451.14
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.


ONGOING POSITIONS
QQQ ITM Strangle – Ongoing Long Term -- $35.75
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.
June $34 calls and $37 puts -- total net credit of $750.  We
rolled out to the July $34 calls ($.20 credit) and $37 puts ($.60
credit) and took in a net credit of $.80 ($800).  Our new total
credit is now $10,400.

Thursdays morning, I rolled out the July $37 puts to the August
$37 puts and took in $.40.

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 – 542.63
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 was
$4,390 plus unused $1,700 = $6,090.  From the June option cycle,
we are able to officially add $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.
______________________________________________________

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
Options Therapist and CPTI Master Strategist

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.


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The Option Investor Newsletter                   Sunday 07-11-2004
Sunday                                                      5 of 5


In Section Five:

Spreads and Straddles: A Market With Great Expectations...
Premium-Selling Plays: Naked Puts and Calls


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

A Market With Great Expectations...
By Ray Cummins

Stocks drifted higher Friday after a favorable profit report from
General Electric (NYSE:GE) renewed investor optimism about the
upcoming quarterly earnings season.

The Dow Jones industrial average ended up 41 points at 10,213 on
strength in blue-chip manufacturers such as United Technologies
(NYSE:UTX), Caterpillar (NYSE:CAT) and 3M Company (NYSE:MMM).  The
technology-laden NASDAQ Composite Index added 11 points to finish
at 1,946 as semiconductor equipment and software shares rebounded.
Standard & Poor's 500 Index closed 3 points higher at 1,112, with
automotive, railroad, apparel, homebuilding, and aerospace issues
among the best performers.  Winners outpaced losers 3-to-2 on the
major exchanges.  Trading activity was moderate, with nearly 1.2
billion shares traded on the New York Stock Exchange and about 1.4
billion shares changing hands on the NASDAQ.  In the fixed-income
market, the 10-year note ended up 2/32, with its yield falling to
4.46%.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
SUMMARY OF CURRENT POSITIONS - AS OF 07/09/04
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

The following summary is a reasonable account of the positions
previously offered in this section.  However, no representation
is being made as to the actual performance of a position and in
fact, there are frequently large differences between the summary
results and those of our subscribers, due to the variety of ways
in which each play can be opened, closed, and/or adjusted.  In
addition, the summary might not be completely representative of
the manner in which the average trader would react to changing
conditions in a position and to the options market in general.
The editor of this section does not take actual positions in any
published plays and the summary comments are simply a service to
help new traders understand when positions might be opened and
closed.  In most cases, actions taken based on the commentary
would be far too late to be effective, thus it is not intended
as a substitute for personal trade management nor does it in
any way replace your duty to diligently monitor and manage the
positions in your portfolio.


PUT-CREDIT SPREADS

Stock   Pick   Last   Month L/P  S/P Credit   CB     G/L   Status

AMZN    50.95  48.32   JUL   42  45   0.30   44.70   0.30   Open
YHOO    31.87  30.11   JUL   25  27   0.30   27.20   0.30   Open
CFC     69.15  69.90   JUL   60  63   0.35   63.03   0.35   Open
QCOM    69.86  70.56   JUL   60  65   0.45   64.55   0.45   Open
SWIR    33.83  35.85   JUL   25  30   0.90   29.10   0.90   Open
CTSH    24.25  24.81   JUL   20  22   0.27   22.23   0.27   Open
NUE     69.54  73.48   JUL   60  65   0.75   64.25   0.75   Open
SII     53.26  55.94   JUL   47  50   0.30   49.70   0.30   Open
RJR     65.90  65.92   JUL   55  60   0.35   59.65   0.35   Open
URBN    60.80  58.01   JUL   50  55   0.40   54.60   0.40   Open
AMZN    53.71  48.32   JUL   47  50   0.30   49.70  (1.38) Closed
PLT     42.39  40.01   JUL   35  40   0.50   39.50   0.50   Open?
FRE     63.57  64.06   AUG   55  60   0.55   59.45   0.55   Open
GILD    67.42  65.33   AUG   55  60   0.60   59.40   0.60   Open
POT     98.08  96.21   AUG   85  90   0.60   89.40   0.60   Open
UOPX    89.09  90.72   AUG   75  80   0.60   79.40   0.60   Open

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

The position in Ishares Russell 2000 Index (IWM) was not available
at the recommended price.  Photon Dynamics (NASDAQ:PHTN) and Maxim
Integrated Products (NASDAQ:MXIM) suffered the fate of most chip
stocks and the bullish plays on those issues have previously been
closed to limit potential losses.  Amazon.com (NASDAQ:AMZN); at $50,
has also become an "early-exit" victim in the wake of the mediocre
profit outlook from Yahoo! (NASDAQ:YHOO) and Plantronics (NYSE:PLT)
is definitely on the "watch" list.

  
CALL-CREDIT SPREADS

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

APPX    34.03  25.79   JUL   45  40   0.50   40.50   0.50   Open
INSP    34.71  32.46   JUL   45  40   0.65   40.65   0.65   Open
WMS     28.75  30.18   JUL   35  30   0.65   30.65   0.47   Open?
GS      90.21  90.05   JUL  100  95   0.70   95.70   0.70   Open
SYMC    42.42  41.09   JUL   50  45   0.65   45.65   0.65   Open
FRX     56.32  51.65   JUL   65  60   0.60   60.60   0.60   Open
CTX     47.34  43.77   JUL   52  50   0.30   50.30   0.30   Open
SINA    35.60  26.82   JUL   45  40   0.45   40.45   0.45   Open
CECO    44.45  44.89   JUL   55  50   0.55   50.55   0.55   Open
RYL     75.80  72.60   JUL   85  80   0.60   80.60   0.60   Open
LLTC    36.74  37.04   AUG   42  40   0.30   40.30   0.30   Open
XLNX    31.53  31.36   AUG   37  35   0.25   35.25   0.25   Open
MERQ    46.17  45.08   AUG   55  50   0.65   50.65   0.65   Open
SMH     34.58  35.37   AUG   42  40   0.30   40.30   0.30   Open

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

WMS Industries (NYSE:WMS) remains a candidate for early exit and
positions in Genzyme (NASDAQ:GENZ), which is currently profitable,
and the Oil Service Holdrs (AMEX:OIH), have previously been closed
to limit potential losses.


DEBIT STRADDLES

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

GRMN    32.60  35.84   JUL    35    30     2.15    2.35   Closed
SNDK    22.90  20.93   JUL    22    22     3.40    3.60   Closed
GDT     56.02  53.35   JUL    55    55     4.80    4.50   Closed
DNA     54.60  51.35   JUL    55    55     4.25    5.10    Open?
OVTI    15.50  13.41   JUL    15    15     2.70    4.00    Open?
MDC     64.77  60.50   JUL    65    65     4.00    5.00    Open?

Positions in Garmin (NASDAQ:GRMN), Sandisk (NASDAQ:SNDK) and
Guidant (NYSE:GDT) have been closed in the name of "capital
preservation."  Genetech (NYSE:DNA), M.D.C. Holdings (NYSE:MDC)
and Omnivision (NASDAQ:OVTI) have offered small profits.


CREDIT STRANGLES

Stock   Pick   Last   Exp.   Sold  Sold  Initial  Current   Play
Symbol  Price  Price  Month  Call  Put   Credit    Debit   Status
        
NFLX    32.31  33.43   JUL    37    27    0.55     0.50     Open

Netflix (NASDAQ:NFLX) appears comfortable in a range near $29-$35,
but it is a volatile issue and the position should be monitored
daily.


~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
NEW POSITIONS
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

This following group of plays is simply a list of candidates to
supplement your search for profitable trading positions.  As with
any new investment, you must decide if the selections meet your
criteria for potential plays.  Only you can know what strategies
are suitable for your personal skill level, risk-reward tolerance
and portfolio outlook.  In addition, we recommend that you avoid
any trading techniques in which you are not completely comfortable
with the potential capital loss, the necessary adjustments, and
the common entry-exit strategies.

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

BULLISH PLAYS - CREDIT SPREADS

These candidates are based on the underlying issue's technical
history or trend.  The probability of profit in these positions
may also be higher than other plays in the same strategy, due to
small disparities in option pricing however, each play should be
evaluated for portfolio suitability and reviewed with regard to
your strategic approach and trading style.

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

FAST - Fastenal Company  $54.74  *** In A Trading Range? ***

Fastenal Company (NASDAQ:FAST) is engaged in the wholesale
distribution of industrial and construction supplies through
over 1,300 store sites located in 50 states, Puerto Rico,
Canada, Mexico and Singapore.  In addition to the stores,
Fastenal also operates in-plant sites.  An in-plant site is
a selling unit located in or near a customer's facility that
sells product solely to that customer.  Fastenal sells over
440,000 different types of industrial and construction supplies
in 10 product categories.

FAST - Fastenal Company  $54.74

PLAY (conservative - bullish/credit spread):

BUY  PUT  AUG-45.00  FQA-TI  OI=1112  ASK=$0.30
SELL PUT  AUG-50.00  FQA-TJ  OI=1022  BID=$0.85
INITIAL NET-CREDIT TARGET=$0.60-$0.65
POTENTIAL PROFIT(max)=14% B/E=$49.40


__________________________________________________________________

PD - Phelps Dodge  $79.00  *** Basic Materials Sector ***

Phelps Dodge (NYSE:PD) is engaged in the production of copper,
carbon black, magnet wire, continuous-cast copper rod and also
molybdenum products.  The firm consists of two major divisions:
Phelps Dodge Mining, which is an international business for its
vertically integrated copper operations, and Phelps Dodge
Industries, which is the manufacturing division, comprising two
individual business segments that produce engineered products
for the global energy, telecommunications, transportation and
specialty chemicals sectors.

PD - Phelps Dodge  $79.00

PLAY (conservative - bullish/credit spread):

BUY  PUT  AUG-65.00  PD-TM  OI=770  ASK=$0.50
SELL PUT  AUG-70.00  PD-TN  OI=511  BID=$1.05
INITIAL NET-CREDIT TARGET=$0.60-$0.65
POTENTIAL PROFIT(max)=14% B/E=$79.40



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

BEARISH PLAYS - CREDIT SPREADS

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

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

TLB - The Talbots  $33.04  *** Profit Warning = Sell-Off! ***

The Talbots (NYSE:TLB) is a national specialty retailer and
cataloger of women's, children's and men's apparel, accessories
and shoes.  In addition to its core Misses business, the firm's
other main business concepts are Talbots Petites, Talbots Kids,
Talbots Accessories & Shoes, Talbots Woman, Talbots Woman Petites,
Talbots Collection and Talbots Mens.  The retailer offers a range
of sportswear, casual wear, dresses, coats, sweaters, accessories
and shoes, consisting almost exclusively of Talbots' own branded
merchandise, for all ages and styles.

TLB - The Talbots  $33.04

PLAY (conservative - bearish/credit spread):

BUY  CALL  AUG-40.00  TLB-HH  OI=81   ASK=$0.20
SELL CALL  AUG-35.00  TLB-HG  OI=183  BID=$0.75
INITIAL NET-CREDIT TARGET=$0.60-$0.65
POTENTIAL PROFIT(max)=14% B/E=$35.60


__________________________________________________________________

VAR - Varian Medical Systems  $77.24  ** The Downtrend Resumes? **

Varian Medical Systems (NYSE:VAR) is principally engaged in the
design and production of integrated systems of equipment for
treating cancer with radiation therapy, as well as x-ray tubes
for original equipment manufacturers, replacement x-ray tubes and
imaging subsystems.  In addition to developing medical equipment,
Varian also develops software products and devices designed to
enhance the productivity and quality of its equipment, devices
manufactured by other companies and the delivery of healthcare
services.

VAR - Varian Medical Systems  $77.24

PLAY (conservative - bearish/credit spread):

BUY  CALL  AUG-90.00  VAR-HR  OI=1972  ASK=$0.25
SELL CALL  AUG-85.00  VAR-HQ  OI=1010  BID=$0.70
INITIAL NET-CREDIT TARGET=$0.50-$0.55
POTENTIAL PROFIT(max)=11% B/E=$85.50



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

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

DVN - Devon Energy  $69.40  *** Oil Sector Volatility ***

Devon Energy (NYSE:DVN) is an independent energy company engaged
primarily in oil and gas exploration, development and production,
the acquisition of producing properties, the transportation of
oil, gas, and NGLs and the processing of natural gas.  Its North
American properties are concentrated within five geographic areas.
Operations in the United States are focused in the Permian Basin,
the Mid-Continent, the Rocky Mountains and onshore and offshore
Gulf Coast.  The company's Canadian operations are in the Western
Canadian Sedimentary Basin in Alberta and British Columbia.  The
company's operations outside North America are located primarily
in Azerbaijan, China, Egypt, and areas in West Africa, including
Equatorial Guinea, Gabon and Cote d'Ivoire.

DVN - Devon Energy  $69.40

PLAY (speculative - neutral/debit straddle):

BUY CALL  AUG-70.00  DVN-HN  OI=2568  ASK=$2.25
BUY PUT   AUG-70.00  DVN-TN  OI=162   ASK=$2.80
INITIAL NET-DEBIT TARGET=$4.80-$5.00
INITIAL TARGET PROFIT=$2.10-$2.90



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

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 07/09/04
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

The following summary is a reasonable account of the positions
previously offered in this section.  However, no representation
is being made as to the actual performance of a position and in
fact, there are frequently large differences between the summary
results and those of our subscribers, due to the variety of ways
in which each play can be opened, closed, and/or adjusted.  In
addition, the summary might not be completely representative of
the manner in which the average trader would react to changing
conditions in a position and to the options market in general.
The editor of this section does not take actual positions in any
published plays and the summary comments are simply a service to
help new traders understand when positions might be opened and
closed.  In most cases, actions taken based on the commentary
would be far too late to be effective, thus it is not intended
as a substitute for personal trade management nor does it in
any way replace your duty to diligently monitor and manage the
positions in your portfolio.


MONTHLY YIELD FOR UNCOVERED OPTIONS: MAXIMUM & SIMPLE

The Maximum Yield (listed in the summary and with "naked" option
selling plays) is the greatest possible profit available in the
position.  This amount, expressed as a percentage, is based on
the initial margin requirement as determined by the Board of
Governors of the Federal Reserve, the U.S. options markets and
other self-regulatory organizations.  Although increased margin
requirements may be imposed either generally or in individual
cases by various brokerage firms, our calculations use the widely
accepted margin formulas from the Chicago Board Options Exchange.
The "Simple Yield" is based on the cost of the underlying issue
(in the event of assignment), including the premium from the sold
option, thus it reflects the maximum potential loss in the trade.
  
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
 
NAKED PUTS

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

CVTX     JUL    15.00   14.60   15.47    0.40   5.63%   2.74%
DITC     JUL    17.50   16.80   21.45    0.70   8.40%   4.17%
SYNA     JUL    17.50   16.85   17.18    0.33   3.80%   3.86%
PTIE     JUL     7.50    7.15   7.79     0.35   9.89%   4.90%
BCC      JUL    35.00   34.25   34.49    0.24   1.64%   2.19%
JILL     JUL    20.00   19.45   22.46    0.55   6.72%   2.83%
LSS      JUL    20.00   19.50   27.18    0.50   6.07%   2.56%
OI       JUL    15.00   14.65   15.67    0.35   5.64%   2.39%
NVTL     JUL    15.00   14.65   23.83    0.35   7.34%   2.39%
PDII     JUL    25.00   24.70   29.57    0.30   3.91%   1.21%
RSAS     JUL    17.50   17.05   19.17    0.45   6.22%   2.64%
STLD     JUL    25.00   24.45   28.89    0.55   5.33%   2.25%
UPL      JUL    30.00   29.55   39.41    0.45   4.14%   1.52%
USG      JUL    15.00   14.15   18.01    0.85  13.32%   6.01%
ATI      JUL    12.50   12.20   17.80    0.30   7.44%   2.46%
BJS      JUL    42.50   41.70   46.57    0.80   4.75%   1.92%
LCAV     JUL    25.00   24.35   27.21    0.65   6.85%   2.67%
NCRX     JUL    27.50   26.80   30.14    0.70   7.30%   2.61%
NVTL     JUL    17.50   17.05   23.83    0.45   8.97%   2.64%
SSYS     JUL    22.50   22.20   23.13    0.30   4.41%   1.35%
SWIR     JUL    30.00   28.85   35.85    1.15  10.66%   3.99%
SYNA     JUL    17.50   16.90   17.18    0.28   4.19%   3.55%
YHOO     JUL    30.00   29.20   30.11    0.80   6.80%   2.74%
AMHC     JUL    22.50   21.80   27.03    0.70   9.36%   3.21%
CTSH     JUL    22.50   22.20   24.81    0.30   4.34%   1.35%
CYBX     JUL    30.00   29.25   29.31    0.06   0.82%   2.56%
ERES     JUL    22.50   21.85   26.48    0.65   9.03%   2.97%
HLEX     JUL    15.00   14.65   15.21    0.35   7.40%   2.39%
MINI     JUL    20.00   19.65   26.00    0.35   5.89%   1.78%
NFI      JUL    30.00   29.30   39.56    0.70   9.77%   2.39%
PTIE     JUL     7.50    7.25    7.79    0.25  11.96%   3.45%
RIMM     JUL    50.00   49.15   66.74    0.85   6.57%   1.73%
SGTL     JUL    22.50   22.25   24.53    0.25   4.25%   1.12%
BRCM     JUL    40.00   39.30   39.31    0.01   0.09%   1.78%
CSGP     JUL    40.00   39.60   43.85    0.40   3.49%   1.01%
DHB      JUL    12.50   12.20   14.51    0.30   8.97%   2.46%
DY       JUL    25.00   24.65   26.34    0.35   4.63%   1.42%
ERES     JUL    22.50   22.20   26.48    0.30   4.97%   1.35%
FWHT     JUL    20.00   19.60   19.83    0.23   3.96%   2.04%
GVHR     JUL    22.50   22.20   23.10    0.30   5.07%   1.35%
IMH      JUL    20.00   19.75   21.63    0.25   4.41%   1.27%
NVTL     JUL    17.50   16.90   23.83    0.60  15.07%   3.55%
PLMO     JUL    25.00   24.55   34.29    0.45   7.28%   1.83%
USG      JUL    15.00   14.70   18.01    0.30   7.05%   2.04%
BCC      JUL    35.00   34.55   34.49   (0.06)  0.00%   1.30%
CHIC     JUL    20.00   19.65   20.11    0.35   7.68%   1.78%
CENX     JUL    22.50   22.00   24.37    0.50   9.64%   2.27%
ENDP     JUL    22.50   22.15   21.38   (0.77)  0.00%   1.58%
IFIN     JUL    37.50   37.05   41.34    0.45   5.93%   1.21%
TASR     JUL    30.00   29.65   40.61    0.35   6.39%   1.18%
USG      JUL    15.00   14.70   18.01    0.30  10.67%   2.04%
VSAT     JUL    22.50   22.20   22.27    0.07   1.32%   1.35%
CIMA     JUL    30.00   29.60   33.72    0.40   6.65%   1.35%
ERES     JUL    25.00   24.70   26.48    0.30   6.05%   1.21%
ISRG     JUL    17.50   17.25   19.48    0.25   7.04%   1.45%
MU       JUL    15.00   14.70   14.40   (0.30)  0.00%   2.04%
NFLX     JUL    30.00   29.45   33.43    0.55   9.80%   1.87%
NSM      JUL    20.00   19.80   19.62   (0.18)  0.00%   1.01%
NKTR     JUL    17.50   17.15   18.33    0.35  10.49%   2.04%
SWIR     JUL    30.00   29.75   35.85    0.25   5.32%   0.84%
XMSR     JUL    25.00   24.65   26.19    0.35   6.82%   1.42%
NFI      AUG    30.00   29.20   39.56    0.80   5.99%   2.74%
NVTL     AUG    20.00   19.50   23.83    0.50   5.77%   2.56%
CBST     AUG    10.00   9.65    11.07    0.35   6.43%   3.63%
CACS     AUG    12.50   12.00   13.10    0.50   7.03%   4.17%
ARXX     AUG    12.50   12.10   13.31    0.40   5.71%   3.31%
TASR     AUG    30.00   29.15   40.61    0.85   5.67%   2.92%
PETD     AUG    25.00   24.35   27.29    0.65   4.86%   2.67%
CRDN     JUL    35.00   34.55   38.51    0.45   9.24%   1.30%
CRDN     JUL    35.00   34.70   38.51    0.30   7.43%   0.86%
NFI      AUG    30.00   29.40   39.56    0.60   4.68%   2.04%
NVTL     AUG    20.00   19.50   23.83    0.50   6.11%   2.56%
TASR     AUG    30.00   29.30   40.61    0.70   4.93%   2.39%
EYET     AUG    35.00   34.45   45.00    0.55   3.92%   1.60%
SCHN     AUG    30.00   29.00   31.59    1.00   6.53%   3.45%
MGAM     AUG    25.00   24.25   26.33    0.75   5.51%   3.09%
FRO      AUG    30.00   29.30   39.60    0.70   4.97%   2.39%
GIVN     AUG    30.00   29.45   33.00    0.55   4.21%   1.87%

Steel Technologies (NASDAQ:STTX) and Amedisys (NASDAQ:AMED)
have been closed to limit potential losses, and only those
traders interested in owning Micron (NYSE:MU) should still
be in that position.  A long list of issues remain on the
"watch" list after the recent selling pressure in stocks.


NAKED CALLS

Stock   Strike  Strike  Break  Current   Gain    Max    Simple
Symbol  Month   Price   Even    Price   (Loss)  Yield   Yield

ASKJ     JUL    45.00   45.55   32.38    0.55   6.50%   1.21%
AMLN     JUL    25.00   25.35   21.78    0.35   5.29%   1.38%
ICOS     JUL    30.00   30.45   25.15    0.45   5.26%   1.48%
OIIM     JUL    17.50   17.80   14.51    0.30   5.50%   1.69%
INSP     JUL    40.00   40.50   32.46    0.50   6.88%   1.23%
RHAT     JUL    25.00   25.60   20.49    0.60   9.08%   2.34%
XMSR     JUL    27.50   27.75   26.19    0.25   4.34%   0.90%
CECO     JUL    65.00   65.90   44.89    0.90   7.19%   1.37%
ESI      JUL    45.00   45.50   37.31    0.50   5.47%   1.10%
FMT      JUL    20.00   20.40   17.19    0.40   8.75%   1.96%
NBIX     JUL    55.00   56.10   50.18    1.10   8.21%   1.96%
SLAB     JUL    50.00   50.75   42.13    0.75   6.39%   1.48%
AGIX     JUL    20.00   20.45   16.02    0.45   9.16%   2.20%
LEND     JUL    30.00   30.55   26.19    0.50   6.63%   1.64%
TSS      JUL    22.50   22.90   21.90    0.40   8.67%   1.75%
PAYX     JUL    35.00   35.40   32.00    0.40   4.97%   1.13%
FEIC     JUL    25.00   25.35   21.38    0.35   6.89%   1.38%
WM       JUL    40.00   40.30   38.18    0.30   3.79%   0.74%
IPXL     JUL    20.00   20.40   16.75    0.40  10.18%   1.96%
PSFT     JUL    20.00   20.25   17.05    0.25   6.99%   1.23%
SLAB     AUG    50.00   51.00   42.13    1.00   5.30%   1.96%
SINA     AUG    40.00   40.85   26.82    0.85   7.85%   2.08%
ATRS     AUG    30.00   30.85   23.41    0.85   6.52%   2.76%
MRVL     AUG    27.50   27.85   23.75    0.35   3.98%   1.26%
MACR     AUG    25.00   25.40   21.84    0.40   4.55%   1.57%
ISIL     AUG    20.00   20.45   18.00    0.45   5.72%   2.20%

Although currently profitable, the position in XM Satellite
Radio (NASDAQ:XMSR) 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  Last    Option    Option Last Open Cost  Days Simple Max
Symbol Price   Series    Symbol Bid  Int. Basis Exp. Yield  Yield

ATI    17.80  AUG 15.00  ATI TC 0.50   11 14.50  40   2.6%   7.9%
BEIQ   26.68  AUG 25.00  GEU TE 1.00   10 24.00  40   3.2%   7.6%
NFLX   33.43  AUG 27.50  QNQ TY 0.80 1461 26.70  40   2.3%   7.4%
ESIO   27.24  AUG 25.00  EQO TE 0.80  424 24.20  40   2.5%   6.4%
AMHC   27.03  AUG 25.00  QMH TE 0.75   68 24.25  40   2.4%   6.0%
VTS    24.19  AUG 22.50  VTS TX 0.65   25 21.85  40   2.3%   5.7%
OSTK   37.77  AUG 30.00  QKT TF 0.60  127 29.40  40   1.6%   5.6%
KWK    35.35  AUG 30.00  KWK TF 0.50   50 29.50  40   1.3%   4.1%


Company Descriptions

LB-Last Bid price, OI-Open Interest, CB-Cost Basis or break-even
point, DE-Days to Expiry, SY-Simple Yield (monthly basis - without
margin), MY-Maximum Yield (monthly basis - using margin).

__________________________________________________________________

ATI - Allegheny Technologies  $17.80  *** Strong Sector! ***

Allegheny Technologies (NYSE:ATI) is a diversified producer of
specialty materials in three major business segments: flat-rolled
products, high-performance metals and industrial products.  The
company produces, converts and distributes stainless steel, and
specialized alloys, tungsten powder, tungsten carbide materials
and carbide cutting tools.  The company produces large grey and
ductile iron castings and carbon alloy steel forgings.

ATI - Allegheny Technologies  $17.80

AUG 15.00 ATI TC LB=0.50 OI=11 CB=14.50 DE=40 TY=2.6% MY=7.9%


__________________________________________________________________

BEIQ - BEI Technologies  $26.68  *** Unique Product ***

BEI Technologies (NASDAQ:BEIQ) designs, manufactures and sells
electronic devices that provide sensory input and actuation for
the control systems of advanced machinery and automation systems.
Sensors designed by the company, most of which are concerned with
physical motion, aim to provide information that is essential to
logical, safe and efficient operation of sophisticated machinery.

BEIQ - BEI Technologies  $26.68

AUG 25.00 GEU TE LB=1.00 OI=10 CB=24.00 DE=40 TY=3.2% MY=7.6%


__________________________________________________________________

NFLX - Netflix  $33.43  *** Volatility = Premium! ***

Netflix (NASDAQ:NFLX) is an online movie rental subscription
service in the United States, providing more than 1,487,000
subscribers access to a library of more than 18,000 movies,
television and other filmed entertainment titles.  Customers
select titles at Netflix's Website, www.netflix.com, aided by
the company's recommendation service, receive them on DVD by
first-class mail and return them at their convenience using
the company's prepaid mailers.  The company also provides
information on DVD movies, including critic reviews, member
reviews, online trailers, ratings and personalized movie
recommendations.

NFLX - Netflix  $33.43

AUG 27.50 QNQ TY LB=0.80 OI=1461 CB=26.70 DE=40 TY=2.3% MY=7.4%


__________________________________________________________________

ESIO - Electro Scientific Industries  $27.24  *** Entry Point? ***

Electro Scientific Industries (NASDAQ:ESIO) provides high-tech
manufacturing equipment to the global electronics market.  In
addition, the company produces laser drilling systems for high
density interconnect circuit boards and advanced semiconductor
packaging, as well as passive component inspection systems and
original equipment manufacturer machine vision products.  Its
customers are primarily manufacturers of semiconductors, passive
electronic components and electronic interconnect devices.

ESIO - Electro Scientific Industries  $27.24

AUG 25.00 EQO TE LB=0.80 OI=424 CB=24.20 DE=40 TY=2.5% MY=6.4%


__________________________________________________________________

AMHC - American Healthways  $27.03  *** Uptrend Intact! ***

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  $27.03

AUG 25.00 QMH TE LB=0.75 OI=68 CB=24.25 DE=40 TY=2.4% MY=6.0%


__________________________________________________________________

VTS - Veritas  $24.19  *** New Multi-Year High! ***

Veritas (NYSE:VTS) provides integrated geophysical services to
the petroleum industry worldwide.  Its primary customers include
national and independent oil and gas companies that utilize
geophysical technologies to identify new areas where subsurface
conditions are favorable for the production of hydrocarbons,
determine the size and structure of previously identified oil
and gas fields and optimize development and production of
hydrocarbon reserves.

VTS - Veritas  $24.19

AUG 22.50 VTS TX LB=0.65 OI=25 CB=21.85 DE=40 TY=2.3% MY=5.7%


__________________________________________________________________

OSTK - Overstock.com  $37.77  *** Internet Retail ***

Overstock.com (NASDAQ:OSTK) is an online "closeout" retailer
offering discount, brand-name merchandise for sale primarily
over the Internet.  The company's merchandise offerings include
bed-and-bath goods, kitchenware, watches, jewelry, electronics,
sporting goods and designer accessories.  Overstock offers its
customers an opportunity to shop for bargains conveniently,
while offering an alternative inventory liquidation distribution
channel to its suppliers.  The company typically offers around
5,000 non-media products and over 100,000 media products (books,
CDs, DVDs, video cassettes and video games) in seven departments
on its Websites, www.overstock.com, www.overstockb2b.com and 
www.worldstock.com.

OSTK - Overstock.com  $37.77

AUG 30.00 QKT TF LB=0.60 OI=127 CB=29.40 DE=40 TY=1.6% MY=5.6%


__________________________________________________________________

KWK - Quicksilver Resources  $35.35  *** Energy Sector ***

Quicksilver Resources (NYSE:KWK) is an independent oil and gas
company engaged in the acquisition, development, exploration,
production and sale of natural gas, crude oil and natural gas
liquids, as well as the marketing, processing and transmission
of natural gas.  Quicksilver sells natural gas and crude oil to
a variety of customers, including utilities, oil/gas companies
or their affiliates, industrial companies, large trading and
energy marketing companies, refineries and other users of
petroleum products.

KWK - Quicksilver Resources  $35.35

AUG 30.00 KWK TF LB=0.50 OI=50 CB=29.50 DE=40 TY=1.3% MY=4.1%



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

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.

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

ELAB - Eon Labs  $36.47  *** A Big "Down" Day! ***

Eon Labs (NASDAQ:ELAB) is a generic pharmaceutical firm engaged
in developing, licensing, manufacturing, selling and distributing
a range of prescription pharmaceutical products primarily in the
United States.  The company focuses on drugs in a broad range of
solid oral dosage forms, utilizing both immediate and sustained
release delivery, in tablet, multiple layer tablet, film-coated
tablet and capsule forms.  Eon Labs obtains new generic products
primarily through internal product development and from strategic
licensing or co-development arrangements with Hexal AG, as well
as with other companies.

ELAB - Eon Labs  $36.47

PLAY (sell naked call):

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

SELL CALL  AUG 45    ESQ HI     324   0.40  45.40   4.0%   0.9%


__________________________________________________________________

FLML - Flamel Technologies  $20.83  *** Sell-Off In Progress! ***

Flamel Technologies (NASDAQ:FLML) is a biopharmaceutical company
engaged mainly in the development of two polymer-based delivery
technologies for medical applications.  The company's Micro-pump
technology is a multi-particulate technology for oral ingestion
of small molecule drugs with applications in controlled release,
tastemasking and bioavailability enhancement.  The company has
three major products based on its Micropump technology: Asacard,
a controlled-release formulation of aspirin for the treatment of
cardiovascular disease; Metformin XL, a controlled-release form
of Metformin that is in development for use for the treatment of
Type II diabetes, and Genvir, a controlled-release acyclovir for
the treatment of genital herpes.  In addition, FLML has developed
new herbicide delivery systems and has patented a biomaterial,
ColCys.

FLML - Flamel Technologies  $20.83

PLAY (sell naked call):

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

SELL CALL  AUG 25    FLU HE    1786   0.50  25.50   8.1%   2.0%


__________________________________________________________________

OTEX - Open Text  $26.73  *** Stuck In A Range? ***

Open Text (NASDAQ:OTEX) develops, markets, licenses and supports
collaboration and knowledge management software for intranets,
extranets and the Internet, enabling users to find electronically
stored information, work together in creative and collaborative
processes, perform group calendaring and scheduling and distribute
or make available to users across networks or the Internet the
resulting work product and other information.  The firm's principal
product line is Livelink, a collaboration and knowledge management
software for global enterprises.  Livelink offers several engines,
including, but not limited to, search, collaboration, workflow,
group calendaring and scheduling and document management.  

OTEX - Open Text  $26.73

PLAY (sell naked call):

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

SELL CALL  AUG 30    QFT HF     584   0.65  30.65   6.1%   2.1%


__________________________________________________________________

TELK - Telik  $21.90  *** Next Leg Down? ***

Telik (NASDAQ:TELK) is a biopharmaceutical company working to
discover, develop and commercialize small-molecule drugs to treat
serious diseases, including cancer and diabetes.  Among Telik's
most advanced product development programs is TLK286.  TLK286 is
a small-molecule tumor-activated cancer drug that the company is
evaluating initially to treat cancers which are resistant to
standard chemotherapy drugs.  Another advanced product, TLK199,
is a small-molecule bone marrow stimulant being developed for the
treatment of blood disorders associated with low white blood cell
levels.  TLK19781 is a proprietary, orally active small-molecule
insulin receptor activator for the potential treatment of Type II
diabetes and other conditions related to insulin resistance.

TELK - Telik  $21.90

PLAY (sell naked call):

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

SELL CALL  AUG 25    ZUL HE     645   0.45  25.45   5.6%   1.8%



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

SEE DISCLAIMER - SECTION 1

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


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