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Daily Newsletter, Tuesday, 07/20/2004

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The Option Investor Newsletter                 Tuesday 07-20-2004
Copyright 2004, All rights reserved.                       1 of 3
Redistribution in any form strictly prohibited.


In Section One:

Wrap: Cash Talks in After Hours
Futures Markets: See Note
Market Sentiment: Bargain Shopping
Watch List: Healthcare to Audio Equipment


Posted online for subscribers at http://www.OptionInvestor.com
************************************************************
MARKET WRAP  (view in courier font for table alignment)
************************************************************
      07-20-2004           High     Low     Volume   Adv/Dcl
DJIA    10149.07 + 55.00 10155.63 10072.68 1.75 bln 1893/1324
NASDAQ   1917.07 + 33.20  1917.07  1885.80 1.63 bln 2103/ 995
S&P 100   539.65 +  3.36   539.81   535.10   Totals 3996/2319
S&P 500  1108.67 +  7.77  1108.88  1099.10
SOX       423.47 + 10.20   423.48   413.13
RUS 2000  564.19 +  9.46   564.25   554.73
DJ TRANS 3154.75 + 49.60  3155.33  3104.84
VIX        14.17 -  1.00    15.57    13.98
VXO (VIX-O)14.58 -  0.37    15.85    14.45
VXN        20.91 -  1.30    22.30    20.66
Total Volume 3,670M
Total UpVol  2,782M
Total DnVol    818M
Total Adv  4450
Total Dcl  2702
52wk Highs  145
52wk Lows   202
TRIN       0.72
NAZTRIN    0.39
PUT/CALL   0.65
************************************************************

Cash Talks in After Hours
by Jim Brown

The weakness from the last several days finally wore off
just prior to the Greenspan testimony and the major indexes
recovered some of their losses. That was not the big story
of the day. After the close the richest company in the U.S.
decided to return $75 billion to shareholders over the next
four years.

Dow Chart



Nasdaq Chart



The markets started off in negative territory after New
Home Construction dropped to only 1.80 million units and
well below consensus of 1.98 million and the May rate of
1.97 million. This is a massive drop considering how
strong the sector has been recently. This was also the
biggest drop since Feb-2003. Single-family starts were
the hardest hit and new permits are also down. With the
June decline closing out Q2 we now have two consecutive
quarters of declines in housing. The long awaited
collapse of the housing bubble may be closer than we
previously thought.

The drop in June was led by single family but the multi
family units were also down with a decline of -3.7%. The
rental sector has been seeing a rise in vacancy rates
that depressed new construction but that should end
soon. The baby boomers will be selling their family
homes and moving into cheaper rentals and condos in
an effort to get by on social security. This should
boost the multi family market over the next five years.

The housing sector was understandably weak today but
not as bad as you would have expected. The downtrend
has been predicted for months and this was just real
confirmation of that trend. BZH fell below support at
$90 but quickly recovered. CTX hit a new nine-month
low at $41 and its downward trend accelerated but the
drop was still minimal. Dominion Homes had telegraphed
this weakness last week when it said they were seeing
a significant rise in order cancellations. They are
predominantly located in the Midwest and this appears
to be where the general economic slowdown in May/June
originated.

The general housing slowdown came from the sudden
increase in rates back in April when the ten-year yield
jumped from its 3.65% March low to the 4.9% high in May.
We saw a rush to buy houses in April as buyers tried to
lock in prices and rates but it appears many of those
sales were cancelled in May/June. Since May the rates
have been falling and we saw a new three month low of
4.51% on Monday. This should help builders unload
current inventory but the dropping housing starts
suggests they are not in a hurry to build into the
increasing economic uncertainty.

Further consumer weakness was seen in the Chain Store
Sales at +0.2% for the last week. Since May-29th the
total weekly increase in sales has amounted to only
-0.1%. With sales flat and due in most part to the
rising oil prices they are not likely to get better
any time soon. Oil rocketed to $41.95 today before
pulling back on profit taking and there is nothing
to keep it from going higher. This was very near the
$42.30 high set on the last bounce in May. OPEC is
pumping well over the levels seen in May and the
price is still rising.

Even 99 Cents Only stores (NDN) found conditions tough
in the last quarter. They missed earnings by a penny
on an overall revenue increase of +14% but same store
sales were down -2.5% and costs were higher. Growing
competition helped to shrink margins.

Schwab (SCH) jumped in early trading after missing
estimates by a penny on weak volume. The CEO resigned
and Charles Schwab was picked to come back in to run
the company and revive sagging revenues. The company
said price cuts needed to stay competitive had produced
a -30% drop in net income on 20% fewer revenue producing
trades. The CFO said job cuts would likely continue
despite more than -10,000 jobs already eliminated
since the 2000 market bubble. Schwab said "mixed
securities market returns, continuing geopolitical
uncertainties and concerns about rising interest rates
all weighed on client engagement during much of the
quarter. Client daily average revenue trades declined
by 20% from the first quarter." Welcome to summer
trading in 2004.

Russell Chart



The big news for the morning was the impending testimony
by Greenspan to the Senate Banking Committee. Stocks
recovered off their early morning lows as speculators
took positions hoping for some good news and shorts
covered just in case that good news appeared. The SOX
rose +2.47% to 423 and well off its 408 lows from
Monday. This helped pull the Russell back from the
brink at 551 on Monday to close at 563 today and
back over the 560 resistance level. The Nasdaq was
the beneficiary of all this good news and after
trading at 1870 on Monday it recovered to close at
1914, back over 1900 and just above 1910 resistance.
The Dow recovered to 10150 and with the news after
the bell it should be substantially higher tomorrow.
This was all in motion before the Greenspan testimony
and stocks got a further substantial boost after the
close.

The Greenspan ramp on the hope of a cooling interest
rate calendar was served a small disappointment with
the prepared comments where he continued to suggest
the Fed was prepared to act aggressively if the need
arose. There was plenty of boiler plate about the
measured pace wording just to assure investors they
were not going to race ahead but the message was
clear, more rate hikes ahead.

Overall Greenspan's testimony was positive with the
headline sentence proclaiming economic developments
in the U.S. "have been" quite favorable in 2004 and
there is support for the view the expansion will be
self-sustaining. He said inflation was not a problem
and the recent jump in the numbers was a transitory
move due to the spike in energy prices. (I assume he
meant transitory if oil does not break $32 this week)

Greenspan also said the jump in hiring in the last
six months was encouraging although the rate has
eased. According to Manpower, who beat earnings by
+4 cents, (+2 cents was due to currency translation),
the outlook was not as great and they guided lower
for Q3 on lower than expected revenues. Kelly Services
also warned that the future job expectations may be
weaker. Greenspan warned that lower demand and higher
unit labor costs could pressure profits for the rest
of 2004.

Greenspan said the Fed was prepared to act aggressively
to maintain prices but warned that weak production and
the weak demand was going to depress prices companies
could receive on their goods. This would shrink future
profit margins until demand returned. He suggested GDP
was running at a 3.5% to 4% rate. Unfortunately the
strong drop in housing today could impact that GDP by
up to a point by Q4. The building community consumes
vast amounts of raw materials, furniture, fixtures
and appliances. A continued slowdown like we saw
today could have a serious ripple down impact.

He repeated the obituary on deflation and explained
the risk was mostly due to the stock market crash and
the reduction of capital available to spend on consumer
goods. I think that is a pretty good assumption.

Greenspan continued to repeat the mantra that the Fed
had maintained abnormally low rates for an extended
period of time and that accommodation had benefited
the economy significantly. No complaints there. However,
he also maintained that the Fed needed to remove that
accommodation at a measured pace to bring Fed policy
back in line with reality. Nothing he said suggested
they were going to pass on the expected rate hike on
August 10th but he also said nothing to indicate it
could be the +50% analysts previously expected. It
seems a sure thing now that another 25 points will
be added in August and the markets simply need to
accept it. With bonds already pricing in three more
hikes there should not be any material impact from
an August hike.

He did make a point that there were potential outside
risks (as in another terrorist attack) and the Fed
would quickly react to assess and manage these events
if they occurred. Interesting that he added that
statement as we near the conventions and Olympics.

The market gains into the testimony were shredded as
the various comments came out but in the end we moved
higher again just before the close. With a flurry of
tech earnings after the bell investors did not appear
in a hurry to exit. Considering the after hours events
it was a good choice.

MOT rose after reporting gains in market share from
rivals in the cell phone market and upgrading guidance
for next quarter. SUNW also moved higher after posting
a profit and revenue actually rose for the first time
in 13 quarters. SANM jumped after beating the street
and said demand for its high end products was increasing.
Etrade beat the street by a mile at +31 cents compared
with estimates of +13 cents with results helped by the
sale of its ATM business. MCHP beat the street and
raised its dividend. PXLW beat by a penny as did STX,
STK and WEBX.

Not all the news was good. TXN reported inline and
guided slightly lower for next quarter. RFMD beat the
street and warned for the current quarter. Still all
in all the tech news was good and techs should have
had a good day on Wednesday.

It was this last piece of news that gave us the biggest
bounce. Microsoft jumped in front of its Thursday
earnings announcement with the cash spending plan we
have been expecting. Considering the amount of cash
they have to spend it was the mother of all cash
disbursement programs. Microsoft announced they were
going to issue a one time $3.00 dividend and raise
their quarterly dividend to eight cents per quarter.
They also announced a $30 billion stock buyback
program. The total benefit package amounts to $75
billion over the next four years.

This gave MSFT a real shot in after hours trading with
the last trade at $29.81 for about a +1.60 jump from
the close. With futures moving higher overnight on the
positive tech/chip earnings and the Microsoft news the
odds are very good this Microsoft announcement will
produce a strong bounce at the open. For those in the
Editors Play on Microsoft be sure to tune into the
Market Monitor in the morning for exit directions.

While this may appear a strong move by Microsoft and
you would think the stock will rocket higher we may
be surprised. The news has been expected for over a
month and the stock has already moved from its support
at $26 to trade at the mid $28 range on expectations.
Because the buyback is going to be spread over four
years it may receive a lukewarm welcome from MSFT
investors. The $3 one-time dividend would be slightly
less than the amount the stock has risen from the
$26 support in May to the overnight close at $29.81.
We could easily see investors take profits now on
the expectation that the dividend is already priced
in. Had the buyback been over the next six months
then we could have seen some real movement but over
four years may produce a yawn from the more impatient
types. Funds holding MSFT will receive a windfall and
probably will not change positions. I seriously doubt
they will run out and buy more at the inflated price
regardless of the hype. It will be interesting to
see how Mr. Softee trades tomorrow.

For Wednesday we have Greenspan testimony again at
10:00 and he will get to change anything he felt he
said wrong today. Since there was nothing of material
impact to the market I doubt he will change anything
in his prepared remarks. The markets will still hold
their breath during the Q&A to see if anything new
appears.

The three days beginning today are the three heaviest
days for earnings in this cycle. I believe everyone
knows now that the Q2 was good for business despite
the end of quarter slump. Most companies are guiding
inline but we are seeing an increase in those guiding
flat to lower. No surprise there. We only have three
trading days left before the democratic convention
begins and the odds are good we will see some selling
once tomorrows bounce runs its course. We should see
some serious knee jerk short covering at the open and
it remains to be seen if it will have legs. I would
definitely not be a buyer this week. I believe
discretion is called for this week and I would not
be a buyer for other than a day trade until after the
convention is over. I suspect there are quite a few
others who believe the same way. This does not mean
they won't nibble at some longs just in case nothing
happens. I would like to believe that the security is
so tight that nothing could possibly happen but I am
not willing to risk my capital on that premise. There
will always be another trade.

Enter Passively, Exit Aggressively.

Jim Brown
Editor


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

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


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

Bargain Shopping
 - J. Brown

The NASDAQ turned in a pretty good session but the Dow's 55-point
gain really doesn't reflect the oomph behind today's bounce.
Investors were out doing some bargain shopping.  All the major
tech sectors were strongly higher in the 2%-3% range.  Yet
considering how oversold these groups were I'm surprised it
wasn't higher.  Can you blame the bounce on Greenspan's positive
comments about the economy?  Maybe but the rebound actually
started before he began speaking in the afternoon.  Alan's
outlook for growth certainly doesn't hurt stocks here.

Overall the market internals were pretty bullish.  Advancing
stocks outpaced decliners 17 to 10 on the NYSE and 2 to 1 on the
NASDAQ.  Up volume was more than double down volume on the NYSE
and more than four times down volume on the NASDAQ.  Those are
some strong numbers.

Investors should still be cautious here but we could easily see
the rebound continue at least short term. Many of the tech-
related sector indices have been sinking for two or three weeks
straight so a multi-day bounce is in order.  Just be sure to
follow up your stops if you decide to open bullish plays.  There
are plenty of bears just looking at the bounce as a new entry
point to get short.

Tomorrow will be another huge day for corporate earnings but
Greenspan will steal the stage Wednesday morning with day two of
his bi-annual appearance before Congressional and Senate
committees.


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

Market Averages

DJIA ($INDU)

52-week High: 10753
52-week Low :  8996
Current     : 10149

Moving Averages:
(Simple)

 10-dma: 10183
 50-dma: 10217
200-dma: 10205



S&P 500 ($SPX)

52-week High: 1163
52-week Low :  960
Current     : 1108

Moving Averages:
(Simple)

 10-dma: 1109
 50-dma: 1116
200-dma: 1104



Nasdaq-100 ($NDX)

52-week High: 1559
52-week Low : 1204
Current     : 1421

Moving Averages:
(Simple)

 10-dma: 1422
 50-dma: 1447
200-dma: 1447



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

CBOE Market Volatility Index (VIX) = 14.17 -1.00
CBOE Mkt Volatility old VIX  (VXO) = 14.58 -0.37
Nasdaq Volatility Index (VXN)      = 20.91 -1.30


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

          Put/Call Ratio  Call Volume   Put Volume

Total          0.66        811,128       531,659
Equity Only    0.57        673,255       386,264
OEX            1.09         16,542        17,981
QQQ            0.65         29,844        19,476


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

Bullish Percent Data

           Current   Change   Status
NYSE          64.2    - 1     Bear Confirmed
NASDAQ-100    42.0    - 1     Bear Confirmed
Dow Indust.   63.3    - 3     Bear Confirmed
S&P 500       58.8    - 1     Bear Confirmed
S&P 100       61.0    - 2     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: 1.41
10-dma: 1.34
21-dma: 1.27
55-dma: 1.19


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    1742      2054
Decliners    1058       969

New Highs      97        32
New Lows       31        53

Up Volume   1185M     1371M
Down Vol.    532M      246M

Total Vol.  1750M     1634M
M = millions


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

Commitments Of Traders Report: 07/13/04

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

Not much movement going on in the Commercial traders' positions
for the large S&P futures contracts.  They remain net bearish
but by a small margin.  Small traders remain net bullish but
have upped their shorts a bit.


Commercials   Long      Short      Net     % Of OI
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%)
07/16/04      407,166   416,869   ( 9,703)   (1.2%)

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
06/22/04      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%
07/16/04      133,935    95,787    38,148    16.6%

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

Commercial traders have reduced their long positions in the
e-minis raising their net bearish positions several percentage
points.  Small traders are still very bullish.


Commercials   Long      Short      Net     % Of OI
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%)
07/16/04      265,142   427,017   (161,875)  (23.4%)

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

Small Traders Long      Short      Net     % of OI
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    57.8%
07/16/04      225,410     57,699   167,711    59.2%

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 upped their long positions a bit boosting
their bullish stature on the NDX.  Small traders reduced both
their longs and shorts but the drop in long positions actually
left them move bearish.


Commercials   Long      Short      Net     % of OI
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%
07/16/04       44,211     37,007     7,204    8.9%

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
06/22/04        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%)
07/16/04        7,847    15,243    (7,396)  (32.0%)

Most bearish reading of the year: (20,270) - 06/01/04
Most bullish reading of the year:  19,088  - 01/21/02

DOW JONES INDUSTRIAL

Commercial traders are not making any big moves with their
INDU futures positions and they remain net bullish.  Meanwhile
small traders have turned a bit more bearish, the most we've
seen in weeks.


Commercials   Long      Short      Net     % of OI
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%
07/16/04       27,773    20,573    7,200      14.9%

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
06/22/04        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%)
07/16/04        5,292     9,068   (3,776)   (26.3%)

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

Healthcare to Audio Equipment

___________________________________________________________________

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.
___________________________________________________________________


United Health - UNH - close: 65.94 change: +0.61

WHAT TO WATCH: We came very close to adding UNH to the call list
today.  Shares charged higher after its earnings report last
week.  There was an attempted at some profit taking yesterday but
traders bought the dip.  A breakout over $66.00 could be a new
entry point for momentum plays.  A push past $67 would be a new
P&F chart buy signal.  Keep an eye on the HMO.X index, it is
trading in a similar pattern to UNH.

Chart=


---

Harman Intl - HAR - close: 88.05 change: +1.85

WHAT TO WATCH: We also came close to adding HAR to the OI call
list tonight.  We like how the consolidation rebounded off the
simple 40-dma and almost hit its 38.2% Fibonacci retracement
level.  Today's move did break above its simple 10-dma and broke
the short-term two-week trendline of lower highs (suggesting a
possible bull flag pattern).  Its short-term technicals are
already bullish and its MACD is about to produce a new buy signal
in the next day or two.  We'd consider longs here but more
conservative traders might wait for a move through $90.  Its P&F
chart is very bullish with a $135 price target.

Chart=


---

OSI Pharmaceuticals - OSIP - close: 59.39 change: -0.45

WHAT TO WATCH: OSIP is in the process of "filling the gap" from
April.  While there's no guarantee it will fill the gap
completely there isn't much support holding it up.  After
struggling under the $70 level for most of June the recent
breakdown under $65-64 looks pretty good.  Currently OSIP is
trying to hold support at the simple 100-dma.  We would watch
OSIP for a bounce back toward the $64 level and then consider
shorts on a failed rally under the 10-dma or consider momentum
entries on a drop below $57.50.

Chart=


---

Autodesk Inc - ADSK - close: 39.06 change: +1.00

WHAT TO WATCH: Technical traders will immediately note how ADSK
has pulled back to long-term support at its rising 50-dma.  This
moving average has held up pretty well since last fall save for a
brief dip in May.  Its short-term technicals are already hinting
at a bottom and we're seeing the beginning of a reversal in the
MACD.  Watch this for a breakout over the $40.00 level and target
a move to $45.

Chart=



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The Option Investor Newsletter                  Tuesday 07-20-2004
Copyright 2004, All rights reserved.                        2 of 3
Redistribution in any form strictly prohibited.


In Section Two:

Dropped Calls: ATK, PD
Dropped Puts: IRF
Call Play Updates: AET, HUG, SUN, ZBRA
New Calls Plays: APOL, FDX
Put Play Updates: CEPH, DISH, GS, MGA, PGR
New Put Plays: None


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

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


CALLS:
*****

Alliant Tech - ATK - close: 63.28 chg: -2.20 stop: 62.99

Investors appeared to overreact this morning when analyst firm
Jeffries downgraded ATK from "buy" to "hold" on valuation
concerns.  The stock gapped lower to open at $64.00 and quickly
traded to $61.60 near its simple 50-dma before bouncing.  Volume
was very heavy on the session.  We were stopped out at $62.99.

Picked on July 11 at $ 65.03
Change since picked:  - 1.75
Earnings Date       08/05/04 (confirmed)
Average Daily Volume:    335 thousand
Chart =


---

Phelps Dodge - PD - close: 76.83 chg: -2.39 stop: 77.49

A sell-off in mining stocks and copper prices was the one-two
punch that sent PD back through the $80 level and through
technical support at its 10 and 21-dma's.  We were stopped out at
$77.49 pretty early in the session.  PD may see more profit
taking now that its MACD indicator has produced a new sell signal
and its P&F chart has produced a new sell signal with a $72
target.

Picked on July 07 at $ 78.75
Change since picked:  - 1.92
Earnings Date       07/27/04 (confirmed)
Average Daily Volume:    2.6 million
Chart =



PUTS:
*****

Int'l Rectifier - IRF - close: 35.71 chg: +1.38 stop: 35.61

A strong rebound in the semiconductor index (SOX) helped push IRF
back above the $35.00 level and trigger our stop at $35.61.  The
move above $35 looks pretty bullish for IRF and its MACD is
hinting at a new buy signal soon.  Watch out for earnings on July
29th.

Picked on July 6th at $37.00
Change since picked:  - 1.29
Earnings Date       07/29/04 (confirmed)
Average Daily Volume =  1.07 mln
Chart =



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

Aetna - AET - close: 87.70 change: +0.52 stop: 82.99

AET is holding up pretty well and paced the Dow's 0.54 percent
gain today.  AET has been consolidating in a $2 range between
$86-88.  We need to see the breakout over $88 soon as we near the
company's earnings report a week from Thursday.  Thankfully the
IUX Insurance index produced a strong intraday rebound off a test
of its simple 200-dma.  Maybe AET can help lead the rebound
tomorrow.  No change in our strategy.

Picked on July 14th at $86.55
Change since picked:   + 1.15
Earnings Date        07/29/04 (confirmed)
Average Daily Volume =   1.44 mln
Chart =


--

Hughes Supply - HUG - close: 61.53 change: +0.84 stop: 57.00

Tuesday was another strong day for HUG.  The stock sort of melted
higher as the broader indices rebounded.  Today's close marks a
new all-time high for the stock.  We remain bullish and readers
can still consider new entries here.  Keep in mind that we're
targeting a move to the $65-66 range.  We're not going to adjust
our stop just yet but more conservative traders might consider
moving theirs toward the $58 region.

Picked on July 15 at $ 60.51
Change since picked:  + 1.02
Earnings Date       08/24/04 (unconfirmed)
Average Daily Volume:    288 thousand
Chart =


--

Sunoco - SUN - close: 68.74 change: -0.26 stop: 67.95*new*

Time is almost up.  SUN hit the bottom of our target range last
Friday and this week the stock has been consolidating gains
between $68-70.  While the breakout still looks great we have to
prepare to exit.  SUN is due to report earnings on Thursday
morning before the opening bell.  Estimates are for SUN to report
$2.30 per share.  We are going to exit tomorrow afternoon at the
close to avoid any unnecessary surprises.  Plus, we're going to
seriously tighten our stop loss to protect a decent chunk of
SUN's rally.  We're raising the stop from $66.49 to $67.95, just
under what should be minor support at $68.

Picked on July 08 at $ 66.67
Change since picked:  + 2.07
Earnings Date       07/22/04 (confirmed)
Average Daily Volume:    973 thousand
Chart =


---

Zebra Tech - ZBRA - close: 84.05 chg: +1.89 stop: 79.85

Not a bad day for ZBRA with a 2.3 percent gain.  ZBRA rallied on
early strength today to trade above the $84 level and its simple
10 and 21-dma's.  Unfortunately, the stock continues to have some
resistance there in the $84 range.  You'll notice ZBRA traded
sideways most of the session on Tuesday.  We are still bullish
and we're encouraged by the bullish reversals in short-term
technicals like the RSI and stochastics indicators.  Its MACD is
also improving with a bullish divergence in the histogram.  We've
got about one week to go before ZBRA reports earnings.

Picked on July 15 at $ 82.90
Change since picked:  + 1.15
Earnings Date       07/28/04 (confirmed)
Average Daily Volume:    401 thousand
Chart =



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

Apollo Group - APOL - close 92.49 change: +0.89 stop: 89.99

Company Description:
Apollo Group Inc. has been providing higher education programs to
working adults for over 25 years. Apollo Group Inc. operates
through its subsidiaries The University of Phoenix Inc.,
Institute for Professional Development, The College for Financial
Planning Institutes Corp., and Western International University
Inc. The consolidated enrollment in its educational programs
makes it the largest private institution of higher education in
the United States. It offers educational programs and services at
78 campuses and 133 learning centers in 38 states, Puerto Rico
and Vancouver, British Columbia. (source: company press release)

Why We Like It:
APOL has made an appearance or two on the OI watch list in the
past couple of weeks and we've decided to upgrade the stock to a
play.  Shares were hammered hard in late June not for its
earnings report but due to the scandal at rival CECO.  APOL has
since rebounded back above the $90 level and broken above
technical resistance at its moving averages.  APOL is one of the
relative winners in the education niche and we're likely to see
investors looking for exposure to the group to place there money
here.  APOL beat estimates by five cents last time they reported
and guided higher for the full year.  A few weeks ago Bank of
America reiterated their "buy" rating on APOL and raised its
price target to $105.  Speaking of price targets APOL's P&F chart
points to a $99.00 target.

We feel like the recent pull back and bounce from the $90.00
level is an entry point.  There is some resistance in the $96-98
range but we're going to target the $99-100 level.  We'll place
our stop under support at $90.00.

FYI: If you're not excited about APOL check out its subsidiary
University of Phoenix (UOPX).  Shares of UOPX look ready to
breakout over the $94.00 level.

Suggested Options:
We like both the August and September calls.  The $90 strikes
should work great.

BUY CALL AUG 90 OAQ-HR OI=4723 Current Ask $4.80
BUY CALL AUG 95 OAQ-HS OI=3780 Current Ask $2.00
BUY CALL SEP 90 OAQ-IR OI=   1 Current Ask $6.10
BUY CALL SEP 95 OAQ-IS OI=  25 Current Ask $3.30

Annotated Chart:




Picked on July 20 at $ 92.49
Change since picked:  + 0.00
Earnings Date       06/24/04 (confirmed)
Average Daily Volume:    2.1 million
Chart =


---

Fedex Corp - FDX - close: 82.81 change: +1.99 stop: 79.00

Company Description:
FedEx Corp. provides customers and businesses worldwide with the
broadest portfolio of transportation, e-commerce and business
services. With annual revenues of $25 billion, the company offers
integrated business applications through operating companies
competing collectively and managed collaboratively, under the
respected FedEx and Kinko's brands. Consistently ranked among the
world's most admired and trusted employers, FedEx inspires its
more than 240,000 employees and contractors to remain
"absolutely, positively" focused on safety, the highest ethical
and professional standards and the needs of their customers and
communities.(source: company press release)

Why We Like It:
We are going to try again with a momentum play.  We like the
transport sector because the Dow Jones Transportation index is
rebounding strongly from a 38.2% Fibonacci retracement of its May
-June rally.  Short-term technicals for the TRAN looks good and
its MACD is close to producing a new sell signal.  We like FDX
even more because its retracement was a lot more shallow,
indicating fewer willing sellers, and the rebound has already
broken out to a new all-time high over resistance at $82.00.

Yes, it is a little odd that transports are rising along with the
rising price of oil but the move suggests investors don't believe
oil is going to remain high.  Thus as oil prices subside fuel
costs for the transports will drop.  We're going to suggest longs
at current levels above $82 for FDX and we'll start the play with
a stop loss at $79.00. Our target is $88-90.

Suggested Options:
We like the August and September calls.  The $80 strike looks
good.

BUY CALL AUG 80 FDX-HP OI=1312 Current Ask $3.70
BUY CALL AUG 85 FDX-HQ OI=3846 Current Ask $0.85
BUY CALL SEP 80 FDX-IP OI=  10 Current Ask $4.50
BUY CALL SEP 85 FDX-IQ OI= 158 Current Ask $1.70

Annotated Chart:



Picked on July 20 at $ 82.81
Change since picked:  + 0.00
Earnings Date       06/23/04 (confirmed)
Average Daily Volume:    1.1 million
Chart =



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

Cephalon - CEPH - close: 50.22 change: +0.64 stop: 52.01

CEPH managed to see a continuation of Monday's intraday bounce on
Tuesday boosted by strength in the BTK biotech index and an
overall rebound in the tech sector.  Fortunately for the bears
CEPH's failed at the simple 10-dma and shares were dropping back
toward the $50 level before the markets closed.  We see the move
as a potential new entry point for bearish positions.  However,
given the market's rebound today it may be prudent to wait and
look for another drop through the $50.00 mark or $49.70 level
before initiating new plays.

Picked on July 15 at $ 49.87
Change since picked:  + 0.35
Earnings Date       08/03/04 (confirmed)
Average Daily Volume:    969 thousand
Chart =


---

EchoStar Comm. - DISH - close: 27.27 chg: -0.50 stop: 29.55*new*

Maybe it was news that DISH plans to broadcast the first season
of American Pro Cricket, otherwise we still can't find the
catalyst for DISH's new weakness this week.  Not that we're
complaining mind you.  The stock is picking up speed and volume
was double the average on Tuesday's loss.  We are going to lower
our stop loss to $29.55, just above the simple 21-dma.  Remember
that we're targeting a move to the $25 level.

Picked on July 09th at $28.99
Change since picked:   - 0.26
Earnings Date        08/11/04 (unconfirmed)
Average Daily Volume =    2.5 mln
Chart =


--

Goldman Sachs - GS - close: 89.70 change: +2.20 stop: 92.01

Argh!  GS is doing it again! Last month the stock produced a new
bearish breakdown and sell signal and immediately reversed.  GS
went on to produce a new bullish breakout buy signal in late June
only to have it reverse.  Now traders are being whipsawed again.
GS rallied 2.5% on the session as Ameritrade (AMTD) soared on
news of a stronger than expected earnings report and Schwab (SCH)
rose on news they were replacing their current CEO with its
previous CEO and founder. Positive comments from Greenspan didn't
hurt the sector either.  We are immediately turning defensive
here and are NOT suggesting new bearish positions.  The three-day
candlestick pattern looks reminiscent of a bullish morning doji
star pattern.  Maybe if GS can falter under the $90 level or
trade back under the $88 level would we consider new bearish
plays.

Picked on July 15 at $ 87.25
Change since picked:  + 2.45
Earnings Date       06/22/04 (confirmed)
Average Daily Volume:    4.0 million
Chart =


--

Magna Intl - MGA - close: 80.61 change: -0.92 stop: 84.51

Good news race fans, MGA has reversed yesterday's rebound from
the $80 level and negating the bullish engulfing candlestick.  We
mentioned over the weekend we expected an oversold bounce near
$80 and we got it.  Now we just need to see MGA break through the
$80 level and its simple 200-dma.  Fortunately, the stock has
been ignoring the latter for the past few months.  No change in
our stop just yet.  In the news MGA confirmed it would report
earnings on August 5th.

Picked on July 15 at $ 81.53
Change since picked:  - 0.92
Earnings Date       08/05/04 (confirmed)
Average Daily Volume:    182 thousand
Chart =


--

Progressive - PGR - close: 77.22 chg: -0.98 stop: 80.75*new*

The bears are winning but they're fighting for every inch in PGR.
The recent pattern has been a gap down or early weakness at the
open only to see PGR shoot higher again and then slowly bleed
lower throughout the afternoon.  Volume on today's decline was
twice the average, which is a good sign for the bears.  We're
going to lower our stop to $80.75, just above the simple 10-dma.

Picked on July 15 at $ 79.00
Change since picked:  - 1.78
Earnings Date       07/14/04 (confirmed)
Average Daily Volume:    655 thousand
Chart =



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

None


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The Option Investor Newsletter                  Tuesday 07-20-2004
Copyright 2004, All rights reserved.                        3 of 3
Redistribution in any form strictly prohibited.


In Section Three:

Spreads & Straddles: Greenspan Speaks -- Shares Soar!
Premium Selling Plays: Naked Puts & Calls


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

Greenspan Speaks -- Shares Soar!
By Ray Cummins

Stocks rallied Tuesday in the wake of positive comments during
a congressional testimony made by Federal Reserve chairman Alan
Greenspan.

The Dow Jones Industrial Average closed up 55 points at 10,149,
with the majority of the blue-chip barometer's 30 stocks moving
higher during the session.  The NASDAQ Composite rose 33 points
to 1,917, as semiconductor, networking and internet shares put
in solid performances.  The S&P 500 edged up 7 points to 1,108,
despite a slump in gold and energy-related issues.  Advancers
outpaced decliners 3 to 1 on both the New York Stock Exchange
and the NASDAQ.  Trading volume on the Big Board was nearly 1.4
billion while 1.6 billion shares were crossed on the technology
exchange.  Bond prices fell with the 10-year Treasury note down
21/32, while its yield climbed to 4.43%.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
SUMMARY OF CURRENT POSITIONS - AS OF 07/18/04
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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


PUT-CREDIT SPREADS

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

FRE    63.57  67.24  AUG  55.0  60.0  0.55   59.45   0.55   Open
GILD   67.42  62.44  AUG  55.0  60.0  0.60   59.40   0.60   Open
POT    98.08  96.05  AUG  85.0  90.0  0.60   89.40   0.60   Open
UOPX   89.09  90.66  AUG  75.0  80.0  0.60   79.40   0.60   Open
FAST   54.74  60.82  AUG  45.0  50.0  0.60   49.40   0.60   Open
PD     79.00  80.50  AUG  65.0  70.0  0.60   69.40   0.60   Open
ATH    91.31  93.40  AUG  80.0  85.0  0.45   84.55   0.45   Open
WLP   112.90 114.85  AUG 100.0 105.0  0.50  104.50   0.50   Open

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

Special Tuesday Note: Positions in Gilead Sciences (NASDAQ:GILD)
and Phelps Dodge (NYSE:PD) are now on the "watch" list.


CALL-CREDIT SPREADS

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

LLTC   36.74  35.87  AUG  42.5  40.0  0.30   40.30  0.30   Open
XLNX   31.53  29.76  AUG  37.5  35.0  0.25   35.25  0.25   Open
MERQ   46.17  42.26  AUG  55.0  50.0  0.65   50.65  0.65   Open
SMH    34.58  32.00  AUG  42.5  40.0  0.30   40.30  0.30   Open
TLB    33.04  30.49  AUG  40.0  35.0  0.60   35.60  0.60   Open
VAR    77.24  66.30  AUG  90.0  85.0  0.50   85.50  0.50   Open
KLAC   43.33  39.36  AUG  50.0  47.5  0.25   47.75  0.25   Open
NVLS   29.23  27.29  AUG  35.0  32.5  0.20   32.70  0.20   Open

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


DEBIT STRADDLES

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

DVN     69.40  70.40   AUG   70.00  70.00   5.00    4.80    Open


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

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

AAPL - Apple Computer  $32.20  *** An Apple A Day... ***

Apple Computer (NASDAQ:AAPL) designs, manufactures and markets
personal computers (PCs) and related software, peripherals and
personal computing and communicating solutions.  Its products
include the Macintosh line of desktop and notebook computers,
the Mac OS X operating system, the iPod digital music player and
a portfolio of software and peripheral products for education,
creative, consumer and business customers.  The company sells
its products through its online stores, direct sales force,
third-party wholesalers and resellers and its retail stores.

AAPL - Apple Computer  $32.20

PLAY (conservative - bullish/credit spread):

BUY  PUT  AUG-27.50  AAQ-TA  OI=2482  ASK=$0.20
SELL PUT  AUG-30.00  AAQ-TF  OI=7242  BID=$0.45
INITIAL NET-CREDIT TARGET=$0.30-$0.35
POTENTIAL PROFIT(max)=14% B/E=$29.70


__________________________________________________________________

FSH - Fisher Scientific  $58.66  *** Next Leg Up? ***

Fisher Scientific (NYSE:FSH) provides products and services to
the worldwide scientific research and United States clinical
laboratory markets.  Its customers include pharmaceutical and
biotechnology companies, colleges and universities, medical
research institutions, hospitals and reference labs and quality
control, process control and research and development labs.  Its
three reportable segments are: scientific products and services,
healthcare products and services and laboratory workstations.

FSH - Fisher Scientific  $58.66

PLAY (conservative - bullish/credit spread):

BUY  PUT  AUG-50.00  FSH-TJ  OI=30    ASK=$0.25
SELL PUT  AUG-55.00  FSH-TK  OI=2184  BID=$0.85
INITIAL NET-CREDIT TARGET=$0.65-$0.70
POTENTIAL PROFIT(max)=15% B/E=$54.35



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

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.

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

BZH - Beazer Homes  $90.65  *** Sector Slump! ***

Beazer Homes USA (NYSE:BZH) designs, builds and sells single family
homes in the following locations within the United States: Florida,
Georgia, North Carolina, South Carolina, Tennessee, Arizona, Nevada,
California, Colorado, Texas, Maryland, New Jersey/Pennsylvania and
Virginia.  Beezer designs its homes to appeal mainly to entry-level
and first time "move-up" homebuyers.  The company's objective is to
provide its customers with homes that incorporate quality and value
while seeking to maximize its return on invested capital.

BZH - Beazer Homes  $90.65

PLAY (conservative - bearish/credit spread):

BUY  CALL  AUG-105.00  BZH-HA  OI=1825  ASK=$0.40
SELL CALL  AUG-100.00  BZH-HT  OI=2900  BID=$0.80
INITIAL NET-CREDIT TARGET=$0.45-$0.50
POTENTIAL PROFIT(max)=9% B/E=$100.45


__________________________________________________________________

LLY - Eli Lilly and Company  $64.67  *** Sell-Off Underway! ***

Eli Lilly and Company (NYSE:LLY) discovers, develops, makes and
sells pharmaceutical products.  The company's largest category
of products is the neurosciences group, however it also makes
endocrinology products, oncology products, animal health products,
cardiovascular products, anti-infectives and other pharmaceutical
products.  Most of Lily's pharmaceutical products are distributed
through wholesalers that serve pharmacies, physicians and other
healthcare professionals, and hospitals.

LLY - Eli Lilly and Company  $64.67

PLAY (conservative - bearish/credit spread):

BUY  CALL  AUG-75.00  LLY-HO  OI=7231   ASK=$0.25
SELL CALL  AUG-70.00  LLY-HN  OI=16136  BID=$0.85
INITIAL NET-CREDIT TARGET=$0.65-$0.70
POTENTIAL PROFIT(max)=15% B/E=$70.65



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

No straddles or strangles today...

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

SEE DISCLAIMER - SECTION 1

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


*****************************************
PREMIUM-SELLING PLAYS: NAKED PUTS & CALLS
*****************************************

All of these issues have robust option premiums and favorable
technical indications.  However, current news and events as
well as market sentiment, will have an effect on these stocks
so review each position thoroughly and make your own decision
about its outcome.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
SUMMARY OF CURRENT POSITIONS - AS OF 07/18/04
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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


MONTHLY YIELD FOR UNCOVERED OPTIONS: MAXIMUM & SIMPLE

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

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

NAKED PUTS

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

NFI      AUG    30.00   29.20   42.41    0.80   5.99%   2.74%
NVTL     AUG    20.00   19.50   21.33    0.50   5.77%   2.56%
CBST     AUG    10.00    9.65   10.58    0.35   6.43%   3.63%
CACS     AUG    12.50   12.00   13.02    0.50   7.03%   4.17%
ARXX     AUG    12.50   12.10   11.79   (0.31)  0.00%   0.00%
TASR     AUG    30.00   29.15   40.24    0.85   5.67%   2.92%
PETD     AUG    25.00   24.35   28.01    0.65   4.86%   2.67%
NFI      AUG    30.00   29.40   42.41    0.60   4.68%   2.04%
NVTL     AUG    20.00   19.50   21.33    0.50   6.11%   2.56%
TASR     AUG    30.00   29.30   40.24    0.70   4.93%   2.39%
EYET     AUG    35.00   34.45   40.10    0.55   3.92%   1.60%
SCHN     AUG    30.00   29.00   33.04    1.00   6.53%   3.45%
MGAM     AUG    25.00   24.25   26.04    0.75   5.51%   3.09%
FRO      AUG    30.00   29.30   37.37    0.70   4.97%   2.39%
GIVN     AUG    30.00   29.45   37.15    0.55   4.21%   1.87%
ATI      AUG    15.00   14.50   17.75    0.50   7.89%   3.45%
BEIQ     AUG    25.00   24.00   25.60    1.00   7.61%   4.17%
ESIO     AUG    25.00   24.20   24.33    0.13   1.05%   3.31%
AMHC     AUG    25.00   24.25   26.43    0.75   5.98%   3.09%
VTS      AUG    22.50   21.85   23.76    0.65   5.72%   2.97%
OSTK     AUG    30.00   29.40   35.05    0.60   5.60%   2.04%
KWK      AUG    30.00   29.50   33.98    0.50   4.09%   1.69%
ATI      AUG    15.00   14.75   17.75    0.25   4.68%   1.69%
EYET     AUG    30.00   29.55   40.10    0.45   3.85%   1.52%
ERES     AUG    22.50   22.15   28.09    0.35   4.50%   1.58%
CTSH     AUG    22.50   22.05   24.92    0.45   4.61%   2.04%
TECH     AUG    40.00   38.75   40.77    1.25   6.27%   3.23%
GPRO     AUG    40.00   39.10   42.63    0.90   5.00%   2.30%
ELN      AUG    20.00   19.70   24.91    0.30   4.31%   1.52%

Tuesday Note: There are a few new candidates for "early exit"
including: Taser (NASDAQ:TASR), Aeroflex (NASDAQ:ARXX), BEI
Technologies (NASDAQ:BEIQ), Electro Scientific (NASDAQ:ESIO),
and Veritas (NYSE:VTS).  Eyetech (NASDAQ:EYET), Overstock.com
(NASDAQ:OSTK) and Carrier Access (NASDAQ:CACS) are now on the
"watch" list.


NAKED CALLS

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

SLAB     AUG    50.00   51.00   40.90    1.00   5.30%   1.96%
SINA     AUG    40.00   40.85   24.67    0.85   7.85%   2.08%
ATRS     AUG    30.00   30.85   22.44    0.85   6.52%   2.76%
MRVL     AUG    27.50   27.85   23.03    0.35   3.98%   1.26%
MACR     AUG    25.00   25.40   21.28    0.40   4.55%   1.57%
ISIL     AUG    20.00   20.45   17.34    0.45   5.72%   2.20%
FLML     AUG    25.00   25.50   19.90    0.50   8.15%   1.96%
OTEX     AUG    30.00   30.65   25.38    0.65   6.12%   2.12%
TELK     AUG    25.00   25.45   20.68    0.45   5.60%   1.77%
ASKJ     AUG    40.00   40.50   30.29    0.50   5.97%   1.23%
DRIV     AUG    30.00   30.85   25.32    0.85   7.92%   2.76%
SINA     AUG    35.00   35.45   24.67    0.45   6.42%   1.27%

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

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

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

VLCCF  30.46  AUG 25.00  QHF TE 0.65  321 24.35  31   2.6%   8.6%
NFI    43.50  AUG 35.00  NFI TG 0.75  998 34.25  31   2.1%   7.6%
ERES   28.57  AUG 25.00  UDB TE 0.60  876 24.40  31   2.4%   7.0%
BLUD   21.93  AUG 20.00  QMQ TD 0.50    0 19.50  31   2.5%   6.7%
IDCC   18.97  AUG 17.50  DAQ TW 0.45  699 17.05  31   2.6%   6.7%
CERN   43.17  AUG 35.00  CQN TG 0.65   85 34.35  31   1.9%   6.5%
JNPR   24.30  AUG 22.50  JUX TX 0.55 9960 21.95  31   2.5%   6.4%
JCOM   27.08  AUG 25.00  JQF TE 0.55 2281 24.45  31   2.2%   5.8%
LCAV   29.14  AUG 25.00  JVQ TE 0.25    3 24.75  31   1.0%   3.2%

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 with margin), TS-Target
Shoot.
_________________________________________________________________

VLCCF - Knightsbridge Tankers  $30.46  *** Strong Sector! ***

Knightsbridge Tankers (NASDAQ:VLCCF) is an international tanker
company and its business activity is the international seaborne
transportation of crude oil.  The company's fleet consists of
five double-hull large crude oil carriers and its was formed for
the purpose of the acquisition, disposition, ownership, leasing
and chartering of, through wholly owned subsidiaries, five large
carriers chartered by the Shell International Petroleum Company.

VLCCF - Knightsbridge Tankers  $30.46

AUG 25.00 QHF TE LB=0.65 OI=321 CB=24.35 DE=31 TY=2.6% MY=8.6%


_________________________________________________________________

NFI - Novastar  $43.50  *** Recovery In Progress! ***

NovaStar Financial (NYSE:NFI) is a specialty finance firm that
originates, invests in and services residential nonconforming
loans.  NFI operates through three separate but inter-related
units: mortgage lending and loan servicing, mortgage portfolio
management and branch operations.  The company offers a range
of mortgage loan products to borrowers (nonconforming borrowers)
that do not satisfy the credit, collateral, documentation or
other underwriting standards prescribed by conventional mortgage
lenders and loan buyers, including government-sponsored entities
such as Federal National Mortgage Association (Fannie Mae) or
Federal Home Loan Mortgage Corporation (Freddie Mac).

NFI - NovaStar Financial  $43.50

AUG 35.00 NFI TG LB=0.75 OI=998 CB=34.25 DE=31 TY=2.1% MY=7.6%


_________________________________________________________________

ERES - eResearch Technology  $28.57  *** The Uptrend Resumes! ***

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

ERES - eResearch Technology  $28.57

AUG 25.00 UDB TE LB=0.60 OI=876 CB=24.40 DE=31 TY=2.4% MY=7.0%


_________________________________________________________________

BLUD - Immucor  $21.93  *** Who Can Live Without BLUD? ***

Immucor (NASDAQ:BLUD) develops, manufactures and sells a complete
line of reagents and automated systems used primarily by hospitals,
clinical laboratories and blood banks in a number of tests performed
to detect and identify certain properties of the cell and serum
components of human blood prior to blood transfusion.  Immucor also
markets a complete family of automated instrumentation for all of
their market segments.

BLUD - Immucor  $21.93

AUG 20.00 QMQ TD LB=0.50 OI=0 CB=19.50 DE=31 TY=2.5% MY=6.7%


_________________________________________________________________

IDCC - InterDigital Comm.  $18.97  *** Bottom-Fishing! ***

InterDigital Communications (NASDAQ:IDCC) designs, develops and
places into operation a variety of advanced wireless technologies,
systems and products.  IDCC, through its major involvement in
the standards bodies and incubation efforts, monitors emerging
technologies being developed to deliver voice and data in a
wireless environment.  Since 1999, it has been focusing on its
product development on the air interface technology, referred as
wideband code division multiple access (WCDMA), is comprised of
two duplexing methods, frequency division duplex (FDD) and time
division duplexing (TDD).

IDCC - InterDigital Comm.  $18.97

AUG 17.50 DAQ TW LB=0.45 OI=699 CB=17.05 DE=31 TY=2.6% MY=6.7%


_________________________________________________________________

CERN - Cerner  $43.17  *** Earnings Speculation Only! ***

Cerner (NASDAQ:CERN) designs, develops, markets, installs, hosts
and supports software information technology and content solutions
for healthcare organizations and consumers.  The firm's solutions
give end users secure access to clinical, administrative and other
financial data in real-time.  Consumers retrieve appropriate care
information and educational resources via the Internet.  The firm
implements these solutions as stand-alone, combined or enterprise
wide systems.  Cerner solutions can be managed by the company's
clients or via an application outsourcing/hosting model.  Cerner
provides hosted solutions from its data center in Lee's Summit,
Missouri.  Earnings are due after the close of trading on 7/21.

CERN - Cerner  $43.27

AUG 35.00 CQN TG LB=0.65 OI=85 CB=34.35 DE=31 TY=1.9% MY=6.5%


_________________________________________________________________

JNPR - Juniper Networks  $24.30  *** Optimistic Outlook! ***

Juniper Networks (NASDAQ:JNPR) transforms the entire business of
networking by converting a commodity: bandwidth, into a dependable,
secure, and highly valuable corporate asset.  Founded in 1996 to
meet the stringent demands of service providers, Juniper Networks
is now relied upon by the world's leading network operators, such
as government agencies, research and education institutions, and
information-intensive enterprises as the foundation for stable,
uncompromising networks.

JNPR - Juniper Networks  $24.30

AUG 22.50 JUX TX LB=0.55 OI=9960 CB=21.95 DE=31 TY=2.5% MY=6.4%


_________________________________________________________________

JCOM - j2 Global Communications  $27.08  *** Entry Point? ***

j2 Global Communications (NASDAQ:JCOM) provides outsourced value
added messaging and communications services to individuals and
businesses throughout the world.  The company offers faxing and
voicemail solutions, Web initiated conference calling, document
management solutions and unified messaging services.  j2 Global
markets its services principally under the brand names eFax and
jConnect.  The company delivers its services through its global
telephony/Internet protocol network, which spans more than 600
cities in 18 countries across five continents, including four
capital cities in Latin America where j2 Global has launched its
unique service.

JCOM - j2 Global Communications  $27.08

AUG 25.00 JQF TE LB=0.55 OI=2281 CB=24.45 DE=31 TY=2.2% MY=5.8%


_________________________________________________________________

LCAV - LCA-Vision  $29.14  *** Seeing Is Believing! ***

LCA-Vision (NASDAQ:LCAV) is a developer and operator of laser
vision correction centers under the brand name LasikPlus.  The
firm's vision centers provide the staff, facilities, equipment
and support services for performing laser vision corrections
that use advanced technologies to help correct nearsightedness,
farsightedness and astigmatism.  LCA uses fixed-site excimer
lasers made by Bausch & Lomb, VISX and Alcon.  Its centers are
supported mainly by full-time, board-certified ophthalmologists
and optometrists, as well as other healthcare professionals.
Earnings are due Tuesday, July 27.

LCAV - LCA-Vision  $29.14

AUG 25.00 JVQ TE LB=0.25 OI=3 CB=24.75 DE=31 TY=1.0% MY=3.2% "TS"



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

BEARISH PLAYS - NAKED CALLS

Based on analysis of option pricing and the underlying stock's
technical background, these positions meet our fundamental
criteria for bearish "premium-selling" strategies.  Each issue
has robust option premiums, a well-defined resistance area and
a high probability of remaining below the target strike prices.
As with any recommendations, these positions should be carefully
evaluated for portfolio suitability and reviewed with regard to
your strategic approach and personal trading style.

WARNING: THE RISK IN SELLING UNCOVERED OPTIONS IS SUBSTANTIAL!

The sale of uncovered calls entails considerable financial risk,
far more than the initial margin or collateral required to open
the position.  The maximum financial obligation for the sale of a
naked option is the strike price (of the underlying stock) that
is sold.  Although this obligation is reduced by the premium from
the sale of the option, a writer of options must have the cash or
collateral equivalent of the sold strike price in reserve at all
times.  The simple fact is: stocks often experience large price
swings, exponentially increasing the margin maintenance and very
possibly causing a devastating shortfall in your portfolio.  It
is also important that you consider using trading stops on naked
option positions to help limit losses when a stock price moves in
a volatile manner.  Many professional traders suggest closing the
position when the underlying share value moves beyond the sold
strike, or using a "buy-to-close" stop order at a price that is
no more than twice the original premium received from the sold
option.

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

ERICY - LM Ericsson  $26.65  *** Stuck In A Range? ***

LM Ericsson Telephone Company (NASDAQ:ERICY) is engaged in the
development and supply of end-to-end solutions to network
operators for mobile and fixed-line communications.  The firm
offers mobile platform technology for handset manufacturers
and a wide variety of technology, equipment and services for
private-enterprise networks, as well as special applications,
such as radar, cables and mobile devices.

ERICY - LM Ericsson  $26.65

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    RQC HF    5369   0.65  30.65   8.0%   2.1%


_________________________________________________________________

LSCP - Laserscope  $25.33  *** Premium-Selling Only! ***

Laserscope (NASDAQ:LSCP) designs, manufactures, sells and services
on a worldwide basis an advanced line of medical laser systems and
related energy devices for the medical office, outpatient surgical
center and hospital markets.  The firm pioneered development and
commercialization of lasers and advanced fiber-optic devices for a
variety of applications.  The company's product portfolio consists
of more than 150 medical laser systems and related energy delivery
devices.  The firm's primary medical markets include dermatology,
aesthetic surgery and urology.  Its secondary markets include ear,
nose & throat surgery, general surgery, gynecology, photo-dynamic
therapy and other surgical specialties.

LSCP - Laserscope  $25.33

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    LXQ HF    528    0.70  30.70  11.1%   2.3%


_________________________________________________________________

NTES - NetEase.com  $32.76  *** Downtrend Intact! ***

NetEase.com (NASDAQ:NTES) is a China-based Internet technology
company that pioneered the development of applications, services
and other technologies for the Internet in China.  The NetEase Web
sites, operated by an affiliate, organize and provide access to 18
content channels through distribution arrangements with more than
one hundred international and domestic content providers.  In
addition, the NetEase Internet sites offer a variety of products
and services, including Instant Messaging (Popo), Dating, Love,
Alumni and Personal Home Page.  These products and services enable
users to communicate about interests and areas of expertise.

NTES - NetEase.com  $32.76

PLAY (sell naked call):

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

SELL CALL  AUG 40    NQG HH    1650   0.45  40.45   6.3%   1.1%



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

SEE DISCLAIMER - SECTION 1

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


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