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Daily Newsletter, Tuesday, 08/03/2004

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The Option Investor Newsletter                 Tuesday 08-03-2004
Copyright 2004, All rights reserved.                       1 of 3
Redistribution in any form strictly prohibited.

In Section One:

Wrap: Fed Drains, Oil Rises, Stocks Sink
Futures Markets: See Note
Index Trader Wrap: The first battle of Bull Run
Market Sentiment: Confidence Weakening


Posted online for subscribers at http://www.OptionInvestor.com
************************************************************
MARKET WRAP  (view in courier font for table alignment)
************************************************************
     08-03-2004            High     Low     Volume Advance/Decline
DJIA    10120.24 – 58.92 10178.28 10102.84 1.60 bln   1140/1649
NASDAQ   1859.42 – 32.67  1887.57  1859.17 1.48 bln    977/2053
S&P 100   537.92 -  2.49   540.87   537.53   Totals   2117/3702
S&P 500  1099.69 -  6.93  1106.62  1099.20
RUS 2000  543.63 -  8.30   551.93   543.47
DJ TRANS 3120.54 – 13.61  3147.50  3118.85
VIX        16.03 +  0.66    16.05    15.28
VXO        15.21 +  0.59    15.44    14.80
VXN        25.08 +  0.95    25.16    24.31
Total Volume 3,366M
Total UpVol    782M
Total DnVol  2,518M
52wk Highs     127
52wk Lows      182
TRIN          1.59
PUT/CALL      0.73
************************************************************

Fed Drains, Oil Rises, Stocks Sink
Jonathan Levinson

The Fed's open market desk allowed 6.5B in maturing repos to
expire unrefunded today, draining that amount from its primary
dealers' accounts.  Oil was higher, continuing its explosive
rally, and the net effect of these two bearish factors was
widespread weakness for equities.  The Nasdaq indices led
strongly to the downside as the volatility indices rose across
the board.

The excess of weakness in the Nasdaq is a problem for the bearish
oil interpretation, as the Nasdaq's 1.73% decline dwarfed the
declines in the Dow (0.6%) and particularly the Dow Transports
(1.0%).  One would think that an oil-based equity decline would
have impacted the TRANs more than the tech-laden Nasdaq.

The weakness was sufficient to hinder the daily cycle upphase
we've been tracking for the past two weeks, with the brunt of the
damage borne by the Nasdaq.


Weekly Dow Chart


Last week reversed the break of the rising weekly trendline and
this week appears to be testing it from beneath, so far
unsuccessfully. The 9900 support level held, but resistance at
10200-10250 remains the key upside level for bulls hoping that
this year's descending pattern is indeed a weekly bull flag.  The
weekly cycle picture has been and remains an ambiguous mess, with
a rising 10-week stochastic competing with a descending Macd.
With the cycle picture this uncertain, my approach is to watch
the range levels while awaiting a resolution to the cycle mess-
in this case, a break below 9900 should see a test of 9800 on the
way to the lower descending flag support line, while a break
above 10250 should see a retest of 10450-10500.  With 10200-10250
being the resistance line of a possible bull flag, a strong, high
volume break of that level would suggest a retest of the year
highs for starters.  The characteristics of the breakout, if it
occurs, will tell us more.


Daily Dow Chart


The Dow closed just above its session low, still holding
yesterday's and Friday's low and preserving the daily uptrend.
The daily cycle oscillators weakened within their upphase but
didn't sustain the same level of damage as seen in the Nasdaq's
daily chart below.  The session high (printed at the open) is at
the descending resistance line, currently 10178, and that line on
a 30 minute chart (not shown) is the neckline of what bulls have
been eyeing as a sloping reverse head and shoulders formation
projecting to an implied target roughly 250 Dow points above it.
Downside support below the session low of 10102 is at 10080,
below which is the former descending resistance line at 10025.


Weekly Nasdaq Chart


The Nasdaq remains the weakest link in last week's bounce
attempt, and this week has so far perpetuated that theme.  The
cycle picture remains more obviously bearish than with the Dow,
but the bull flag is still intact and a small bullish divergence
is evident on the Macd histogram.  Resistance has declined to the
1920 area while lower descending support on the flag lines up
with Fibonacci support at 1760.  1840 has been support so far on
the decline, and that would be the first level at which to scope
for a bounce should we decline from here.


Daily Nasdaq Chart


The Nasdaq's 32.7 point decline left the index resting on the former
descending resistance line, at the equivalent of the Dow's 10025 level
noted above.  The 10-day stochastic left off on a bearish kiss, and the
Macd lost its recently confirmed upphase.  A rollover from here would
turn the entire daily cycle bounce into a bearish whipsaw, and given
the low price and oscillator levels, such would suggest that the bounce
has been a bear flag or some similar distribution pattern projecting to
lower lows below last week's support.  With all intraday cycles
oversold and looking for a bounce, a drop tomorrow would have very
bearish implications and set up the Nasdaq for a retest of l830
support.


Weekly TNX Chart


Bonds have been rising this week as equities declined, is the
type of action I'd expect from defensive market action
attributable to bad "external" news, such as the terrorist news
from Sunday night.  That said, the weekly cycle for bonds is not
ambiguous as it is for equities, with yields in a weekly
downphase.  The ten year note yield (TNX) closed lower by 3 bps
at 4.422%.   Resistance above is at 4.48%, followed by 4.5%,
4.65%, 4.75% and 4.8%, while support is at 4.4%, 4.34% and 4.02%.
A break of that lower support could be a bear wedge breakdown
that would project an implied target back at the 2003 lows for
the TNX (2003 highs for 10-year treasury bonds).

In economic news, the International Council of Shopping Centers
and UBS announced that same-store retail sales rose 0.2% in the
last week. Chains' same-store sales were up 3.1% year-over-year,
with tax breaks and back-to-school sales credited for the
increase.

The Commerce Department announced at 8:30AM that U.S. consumer
spending declined by 0.7% in June, a downside surprise against
expectations of a 0.1% decline and reportedly the largest since
September 2001.  However, personal incomes met expectations with
a 0.2% increase in June, and the personal savings rate rose to 2%
from 1.2%, the largest increase since August 2003.
Notwithstanding the increase in savings, today's readings marked
the slowest income growth in 14 months.

The personal consumption expenditure price index, an index that
the Fed emphasizes over the CPI, rose 0.1% in June, while the
core PCE index excluding food and energy rose 0.2%. The core PCE
index is up 1.5% since last year, and real disposable incomes
were unchanged.

At 10AM, the Challenger & Gray July jobs report was released,
showing an increase in job cuts of 8.1% over June's reading. The
12-month average of job reductions fell from 89,886 in June to
88,590 in July, which was judged to be a weak improvement. Year-
to-date layoffs are down 24% from the first 7 months in 2003, but
Challenger also announced that corporations intend to hire only
26,880 employees, 30% lower than the 38,377 employees in
June.

Around the same time as these reports, from 8:30-10AM, news
stories from the BBC and Reuters discussing Tom Ridge's Sunday
terrorist warning as being old news and possibly politically
motivated began circulating.  Ridge responded to the allegations
later, defending the data upon which the warnings had been based
as "the most significant detailed pieces of information about any
particular regions that we have come across in a long, long time,
perhaps ever and that is why we decided to share it publicly."
Of greatest significance for the financial markets in my view,
the responses to the initial warning on Sunday night / Monday and
to today's story that the warning might not be timely were muted-
the markets neither sold off sharply yesterday nor rallied today.
This is a welcome reprieve from the endless OBL/Saddam rumors and
whipsaws we remember from last year, in which vague stories were
credited with instant directional moves in the markets.

There was some coverage of the new contract highs for front-month
crude oil futures today, with the 44 level broken several times
throughout the day and a session high of 44.225 amid OPEC supply
concerns.  While these are historic price highs, on an inflation-
adjusted basis they are not.  Nevertheless, the rise in oil
prices has been dramatic in the past year.  More expensive oil,
with its inelastic demand, means less available money in the
hands of consumers, corporations and government.


Weekly chart of Crude oil



At midday, GM reported a decline of 3.4% in July sales, while
Ford reported a drop of 6.8%.  BMW lost 4.4%, Mazda -12.2%.
Daimler-Chrysler reported a gain of 2%, Toyota a gain of 13.7%,
Nissan +31% for its best month ever, Suzuki +27%, Honda +0.1%,
Acura +8.1% and Porsche a gain of 6%.

TYC bucked the downward market trend after reporting Q3 earnings
of 43 cents per share, up from 27 cents in Q3 2003.  Excluding
one-time items, the company earned 45 cents per share, beating
estimates of 42 cents.  Revenue rose 11% to $10.5B, beating
estimates of $10.3B.  The company raised its 2004 forecast to
$1.61-$1.63 per share, above estimates of $1.59 per share.  For
the day, the stock closed higher by .58% at 31.42.

Chipmaker VSH got hit after announcing earnings of 22 cents per
share, missing by two pennies but announcing that it does not
expect to see improvements in earnings or revenues until Q4.  The
22 cents it earned this quarter represent an improvement of 20%
in revenues to $646.7M.  The stock closed lower by 15.52% at
13.45.

Tomorrow's session is rich with implications.  The indices spent
the entire day declining to close at their lows.  While the
action can be characterized as a merely corrective intraday
pullback for the Dow and SPX, the action damaged the daily cycle
upphase on the Nasdaq, and the 1.73% drop is sufficiently large
to qualify as impulsive.  In particular, the gains of the past 3
sessions were reversed on the Nasdaq, leaving only last week's
double bottom support between current levels and new lows for the
year.

With that said, it's worth noting that the daily cycle upphase,
even on the Nasdaq, is not yet over and should, all other things
being equal, continue for at least another week.  It's possible
that the Fed's substantial repo drain, announced at 10AM amidst
the furor over the possibility that the Sunday terror alert might
be a dud, could have been a miscalculation by the Fed's open
market desk in an attempt to mitigate a possibly large relief
rally.  That's pure speculation on my part, but if the Fed makes
a large repo announcement tomorrow, it will appear more likely.
In any event, the Nasdaq is at a level where it needs to bounce
to avoid kicking off a new daily cycle downphase from a much
lower price and oscillator high.   A bounce will preserve the
bullish daily cycle outlook, and we'll watch for confirmation in
the form of today's high being exceeded.  No bounce, and the
bulls will have fumbled the ball very close to their endzone.


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

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


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*****************
INDEX TRADER WRAP
*****************

The first battle of Bull Run

The major indices ended lower, where today's declines mark the
end to a "bull run" of five straight sessions of gains, where a
0.7% decline in June personal spending kept buyers on the
sidelines.

In June of 1861, despite their acceptance of slavery, Delaware,
Kentucky, Maryland and Missouri did not join the Confederacy.
Although divided in their loyalties, a combination of political
maneuvering and Union military pressure kept these four states
from seceding.

Then, in July of 1861, public outcry pushed General-in-Chief
Winfield Scott to advance on the South, before adequately
training his untried troops.  General Scott ordered General Irvin
McDowell to advance on Confederate troops stationed in Manassas
Junction, Virginia.

On July 21, McDowell attacked and was initially successful (for
5-days?), but the introduction of Confederate reinforcements
resulted in a Southern victory and a chaotic retreat toward
Washington by federal troops.

Today's bullish retreat would certainly not be considered chaotic
with the Dow Industrials (INDU) 10,120 -0.57% falling 59 points,
but tech bulls seemed to be more eager to "retreat" with no shoes
or socks (read SOX.X) on their hooves with the Semiconductor
Index (SOX.X) 402.96 -3.76% looking eager to be the first equity-
based index in our WEEKLY Pivot Matrix to get a trade at WEEKLY
S1 (397.31).

U.S. Market Watch - 08/03/04 Close



My "sentiment" indices had the Securities Broker/Dealer Index
(XBD.X) 118.03 -1.34% and S&P Retail Index (RLX.X) 378.90 -1.66%
rather tightlipped to sound a further bullish "charge!" on their
trumpets, while 5-day percentage loser and the Disk Drive Index
(DDX.X) 93.65 -3.29%, Health Provider Index (RXH.X) 343.85 -1.77%
and Airline Index (XAL.X) 44.17 -2.32% left the battlefield
looking tattered and torn.

Aside from the Cyclical Index (CYC.X) 683.04 -1.10%, recent 5-day
percentage gainers showed some relative strength, or held onto
fractional gains by the close.

Treasuries finished at their highs of the session, where ahead of
next Tuesday's FOMC meeting, traders begin to contemplate whether
or not the Fed will raise its target for fed funds to 1.50% from
1.25%, where higher oil/gasoline prices, which some say creates
an "artificial tax" on consumers, has the Fed holding steady at
1.25%.

Market Snapshot / Internals - 08/03/04 Close



I may have jinxed today's attempt for bulls to stand their ground
when reviewing the chart of the NYSE Composite ($NYA.X) at 01:00
PM EDT (see intra-day update) and while the stronger NYSE
Composite (read General Irvin McDowell) found fractional gains,
the weaker NASDAQ Composite (COMPX) and troops with 4 or 5-
letters stitched to their lapels, were running from the battle
field.

Eighty-nine generals showed up at the NYSE today (read new 52-
week highs), while 42 troops (read new 52-week lows) were sent to
the infirmary.

While the NASDAQ's 10-day NH/NL ratio reversed up to 22% on its
point and figure chart, it looks to have been carryover from the
prior three sessions, where today's 38 new highs are nearly half
of yesterday's 65, while today's casualties and 100 new lows grow
for a third-straight session.  In essence, the "generals" at the
NASDAQ are in desperate need of supporting troops, or their
numbers will most likely dwindle from here.

"The Generals" - 33-most heavily weighted OEX components



Software giant Microsoft (NASDAQ:MSFT) $28.07 -1.57% and energy
giant Exxon/Mobil (NYSE:XOM) $46.89 +1.39% traded places at the
#2 and #3 most heavily weighted OEX component slots.  In the
context of "generals" equating to market caps size, even a
general needs a supporting staff if they're to win the battle.

In today's 01:00 intra-day update, I noted some near-term
resistance in the NYSE Composite ($NYA.X) at the 6,436 level, and
at up until the final 5-minutes of trade, the small-caps of the
Russell-2000 Index ($RUT.X) 543.63 -1.5% were struggling to hold
a near-term level of retracement support.

Russell-2000 Index ($RUT.X) - Daily Intervals



Just looking at the Russell-2000 Index ($RUT.X) 543.63 -1.5%
gives us a weaker major index of small cap stocks to compare to
the STRONGER NYSE Composite ($NYA.X), where similar conventional
use of retracement (gives us levels as reference points) as well
as similarly drawn trends (as used on the NYSE Comp.).

My observation is that the RUT.X is WEAKER than the NYSE
Composite, not only at old downward trend (solid red), but the
RUT.X was not able to challenge its 38.2% retracement (March
highs and May low retracement) as we witness in the NYSE
Composite.

Weakness tends to lead weakness.

Please note that the NASDAQ-100 Index (NDX.X) 1,379.14 -1.93% and
its Tracking Stock (AMEX:QQQ) $34.23 -2.08% did show greater
weakness than the Russell-2000 Index ($RUT.X) last week, when the
NDX.X briefly pierced below its May low of 1,372.46.  Also note
the Semiconductor Index (SOX.X) 402.96 -3.76% traded below its
May low (432.97) on July 14th.

Pivot Analysis Matrix -



In the context of "generals" and "troops," I'd consider the
"troops" to be depicted by the NDX/QQQ and SOX.X at this point.
Certainly some troops can become generals in the military, but
when we look at the pivot matrix and correlations into tomorrow's
trade, correlative support levels for NDX/QQQ and SOX.X are
largely found at WEEKLY S1, while the INDU, SPX, OEX and BIX.X
are at WEEKLY Pivots.

Jeff Bailey


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

Confidence Weakening
- J. Brown

It's amazing how things can change so quickly.  Last week traders
were excited over the possibility of a bounce.  Now that bounce
is fading over record high crude oil prices and disappointing
economic data.

The record close for crude oil is probably the page one story.
Crude closed at $44.15 for the first time ever after OPEC said
the cartel was virtually helpless to influence the rise in oil
because almost all its members are pumping at capacity.  Saudia
Arabia is probably the only member of OPEC who has any excess
capacity left and that's down to 800,000 to 1 million barrels a
day.

Then there's the terror-impact on oil prices.  Some speculate
that there is a $15 "risk" premium built into the price of oil
already.  The recent terror warning this Sunday has only
heightened investors' fears about interruptions in the global oil
supply.

This morning's personal spending data was also disappointing and
impacted the retail sector.  Spending dropped 0.7 percent, which
was significantly more than expected.  Economists were looking
for a drop of just 0.1 percent.  I'll give you one guess on what
could be impacting consumer-spending habits.  Yes, oil prices and
how it impacts consumers' wallets at the pump.  Now we cannot lay
all the blame on high gasoline prices but it's a big influence.

A spike in planned corporate layoffs also fueled concerns that
this Friday's non-farm payrolls report for July may come in
weaker than expected.  If jobs don't pick up it's going to be
another bat for the Democrats to beat President Bush with as we
near the polls.

The rest of the week will be influenced by economic data.
Wednesday brings the factory orders for June, the ISM Services
index for July and crude oil and gasoline inventory data.  Thursday
brings the weekly initial jobless claims and the natural gas
inventories.




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

Market Averages

DJIA ($INDU)

52-week High: 10753
52-week Low :  8997
Current     : 10120

Moving Averages:
(Simple)

 10-dma: 10076
 50-dma: 10205
200-dma: 10228



S&P 500 ($SPX)

52-week High: 1163
52-week Low :  960
Current     : 1099

Moving Averages:
(Simple)

 10-dma: 1095
 50-dma: 1112
200-dma: 1107



Nasdaq-100 ($NDX)

52-week High: 1559
52-week Low : 1204
Current     : 1379

Moving Averages:
(Simple)

 10-dma: 1389
 50-dma: 1429
200-dma: 1446



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

CBOE Market Volatility Index (VIX) = 16.03 +0.66
CBOE Mkt Volatility old VIX  (VXO) = 15.21 +0.59
Nasdaq Volatility Index (VXN)      = 25.08 +0.95


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

          Put/Call Ratio  Call Volume   Put Volume

Total          0.73        544,250       344,652
Equity Only    0.54        396,065       215,231
OEX            1.15         16,835        19,299
QQQ            0.77         20,665        15,915


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

Bullish Percent Data

           Current   Change   Status
NYSE          59.8    + 0     Bear Confirmed
NASDAQ-100    34.0    + 1     Bear Confirmed
Dow Indust.   53.3    + 0     Bear Confirmed
S&P 500       53.6    + 0     Bear Confirmed
S&P 100       54.0    - 1     Bear Confirmed


Bullish percent measures the number of stocks in an index
currently trading on a buy signal on their point and figure
chart.  Readings above 70 are considered overbought, and readings
below 30 are considered oversold.

Bull Confirmed  - Aggressively long
Bull Alert      - Cautiously long
Bull Correction - Pause or pullback in upward trend
Bear Alert      - Take defensive action if long
Bear Confirmed  - High risk if long, good conditions for shorting
Bear Correction - Pause or rebound in downtrend


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

 5-dma: 1.14
10-dma: 1.19
21-dma: 1.33
55-dma: 1.18


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    1140       977
Decliners    1649      2053

New Highs      62        40
New Lows       44        81

Up Volume    516M      211M
Down Vol.   1074M     1226M

Total Vol.  1602M     1479M
M = millions


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

Commitments Of Traders Report: 07/27/04

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

Commercials are turning a bit more bearish with a decrease in
long positions and a small increase in shorts.  Small traders
are naturally turning a bit more bullish with a decrease in
shorts.


Commercials   Long      Short      Net     % Of OI
07/06/04      402,952   416,526   (13,574)   (1.7%)
07/13/04      407,166   416,869   ( 9,703)   (1.2%)
07/22/04      404,828   419,017   (14,189)   (1.7%)
07/27/04      397,354   422,914   (25,560)   (3.1%)

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
07/06/04      132,423    90,748    41,675    18.7%
07/13/04      133,935    95,787    38,148    16.6%
07/22/04      138,123    94,990    43,133    15.5%
07/27/04      135,136    90,433    44,703    19.8%

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 decreased their bearishness by
upping their long contacts by about 20K.  Small traders
are hedging their bets a bit by reducing their bullish
positions.


Commercials   Long      Short      Net     % Of OI
07/06/04      287,442   423,583   (136,141)  (19.1%)
07/13/04      265,142   427,017   (161,875)  (23.4%)
07/22/04      309,972   428,240   (118,268)  (16.0%)
07/27/04      337,615   429,477   ( 91,862)  (12.0%)

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

Small Traders Long      Short      Net     % of OI
07/06/04      219,321     58,567   160,754    57.8%
07/13/04      225,410     57,699   167,711    59.2%
07/22/04      212,078     62,416   149,662    54.5%
07/27/04      186,211     68,930   117,281    46.0%

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 are still hovering around the same level
of cautious bullishness for the last three weeks.  Small
traders have moved from bearish to less bearish to neutral
in the last three weeks (thus a bullish progression in
sentiment).


Commercials   Long      Short      Net     % of OI
07/06/04       42,245     37,343     4,902    6.2%
07/13/04       44,211     37,007     7,204    8.9%
07/22/04       45,069     37,975     7,094    8.5%
07/27/04       43,042     35,935     7,107    9.0%

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
07/06/04        9,345    16,527    (7,182)  (27.8%)
07/13/04        7,847    15,243    (7,396)  (32.0%)
07/22/04        9,398    11,776    (2,378)  (11.2%)
07/27/04       14,543    14,518        25     0.0%

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

The bullish sentiment from the commercial traders dipped
a tad this past week with an increase in their short positions.
Meanwhile small traders have significantly adjusted their
positions to be less bearish.


Commercials   Long      Short      Net     % of OI
07/06/04       27,214    20,775    6,439      13.4%
07/13/04       27,773    20,573    7,200      14.9%
07/22/04       27,957    20,389    7,568      15.7%
07/27/04       27,577    21,427    6,150      12.5%

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
07/06/04        5,969     8,227   (2,258)   (15.9%)
07/13/04        5,292     9,068   (3,776)   (26.3%)
07/22/04        4,857     7,297   (2,440)   (20.1%)
07/27/04        5,310     6,099   (  789)   ( 6.9%)

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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The Option Investor Newsletter                  Tuesday 08-03-2004
Copyright 2004, All rights reserved.                        2 of 3
Redistribution in any form strictly prohibited.

In Section Two:

Dropped Calls: None
Dropped Puts: CEPH
Call Play Updates: ADSK, CCMP, ETN, FDX, HUG, IMO, IR, SYMC, TXT
New Calls Plays: None
Put Play Updates: MGA
New Put Plays: AMZN, EBAY, CAT


****************
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:
*****

Cephalon - CEPH - close: 49.78 change: -0.57 stop: 52.01

Time's up.  According to our plan we hypothetically closed this
play at Tuesday's closing bell to avoid any earnings surprises.
CEPH reported earnings after the bell that were in-line with
expectations of 39 cents a share.  Revenues for the quarter did
rise more than 40% and came in above analysts' estimates.  The
stock has been trading in a very volatile $6.00 range in after
hours markets but as of the time of this update the stock was
down more than $1.00.

Picked on July 15 at $ 49.87
Change since picked:  - 0.09
Earnings Date       08/03/04 (confirmed)
Average Daily Volume:    969 thousand
Chart =



PUTS:
*****

None


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

Autodesk - ADSK - close: 39.96 change: +0.47 stop: 36.99

The good news here is that traders bought the dip toward $39.00
on Monday and ADSK rallied back above the $40 level Tuesday
morning.  The bad news is that ADSK couldn't hold its gains as
the broader market turned lower.  ADSK, a software maker, did out
perform the NASDAQ's 1.7 percent loss and the GSO software
index's 1.86 percent loss.  We're still bullish on the stock but
readers may want to wait for ADSK to trade back above $40.40
before consider new positions.

Picked on July 30 at $ 40.05
Change since picked:  - 0.09
Earnings Date       08/19/04 (unconfirmed)
Average Daily Volume:    2.1 million
Chart =


---

Cabot Micro - CCMP - close: 33.18 change: -1.88 stop: 31.75

Ouch!  The 3.76 percent decline in the Semiconductor Index (SOX)
really undercut confidence in the chip sector.  Investors decided
to do some profit taking in CCMP and the stock slipped more than
five percent.  The $33 level is pivotal as both the simple 10-dma
and the 100-dma, both possible technical support, converge
together.  The drop back under the $34 level does look somewhat
ominous as CCMP's short-term technicals (RSI and Stochastics)
turn negative from overbought levels.  We would be extra careful
about new positions and wait for the bounce.

Picked on August 1st at $35.46
Change since picked:    - 2.28
Earnings Date         07/22/04 (confirmed)
Average Daily Volume =     935 thousand
Chart =


--


Eaton Corp - ETN - close: 65.00 change: -0.41 stop: 61.99

It's been a decent couple of days for ETN.  Shares broke out
above the $65.00 level of potential resistance on Monday.  ETN
saw some follow through on the move Tuesday morning before
slipping backwards as the market turned sour.   We're actually
encouraged that ETN closed at $65.00 and not under it on Tuesday
even though we suspect it will slip lower tomorrow.  Readers can
look for another bounce above the $64 level as a potential entry
point for bullish positions.

Picked on July 29 at $ 64.98
Change since picked:  + 0.02
Earnings Date       07/15/04 (confirmed)
Average Daily Volume:    925 thousand
Chart =



---

Fedex Corp - FDX - close: 81.81 change: -0.64 stop: 79.00

The Dow Jones Transportation index has actually done okay with
decent bounce the last several days in spite of the new record
highs in crude oil.  Likewise shares of FDX have rebounded from
the $80 region to breakout over month-old resistance at $82.00.
At least that was yesterday.  Tuesday saw FDX reverse Monday's
gains and slip back under the $82 level.  We're not making a
prediction but FDX could once again fade back to the $80 region
before bouncing.  More aggressive traders might want to use the
dip as an entry point.

Picked on July 20 at $ 82.81
Change since picked:  - 1.00
Earnings Date       06/23/04 (confirmed)
Average Daily Volume:    1.1 million
Chart =



---

Hughes Supply - HUG - close: 60.00 change: -1.72 stop: 57.75*new*

Ouch!  HUG's 2.78 percent drop today erased the previous four
days of gains.  There isn't any specific catalyst for the drop
other than market weakness and the disappointing consumer
spending numbers.  The fact that HUG closed at $60.00 and not
under it is a good sign but tomorrow could be a challenge.  We're
going to raise our stop loss to $57.75.  We would not suggest new
entries until HUG traded back above $60.50 or $61.00 depending on
your risk profile.

Picked on July 15 at $ 60.51
Change since picked:  - 0.51
Earnings Date       08/24/04 (unconfirmed)
Average Daily Volume:    288 thousand
Chart =


--

Imperial Oil - IMO - close: 49.91 change: +0.69 stop: 46.75

Oil and energy stocks were one of the few pockets of strength
today as the broader market tumbled.  Fueling the move was crude
prices, which closed at new all-time highs above $44 a barrel.
Shares of IMO continues to build on their recent breakout.  While
we suggested a possible alternative on a dip to $48 the momentum
entry over $50.00 may be our only play.  Of course you don't have
to take the momentum entry and exercise patience for a possible
dip.

Picked on August 1st at $49.49
Change since picked:    + 0.42
Earnings Date         07/22/04 (confirmed)
Average Daily Volume =      55 thousand
Chart =




---

Ingersoll-Rand - IR - close: 68.17 chg: +0.01 stop: 66.99

We are still in limbo with IR.  The stock needs to breakout over
resistance at $70.00 and hit our trigger at $70.01 before we're
officially "long" the stock.  The only challenge we see to buying
this dip is the weakness in the Industrials.  If the Dow sinks
lower then IR may be inclined to test its simple 200-dma, which
lately hasn't held up very well as support.

Picked on July 29 at $ xx.xx <-- see TRIGGER
Change since picked:  + 0.00
Earnings Date       07/22/04 (confirmed)
Average Daily Volume:    1.3 million
Chart =


---

Symantec - SYMC - close: 45.43 change: -1.01 stop: 42.45

The drop in the NASDAQ and the 1.86 percent drop in the GSO
software index both weighed heavily on SYMC as traders sought to
sell their recent winners.  SYMC slipped more than two percent.
While the stock did hold above minor support at the $45 level and
its simple 100-dma candlestick traders might note the bearish
engulfing candlestick pattern created today.  We would be
cautious here as short-term technicals like the RSI and
stochastics are hinting at a bearish turnaround.  We would expect
a dip back to the $44.00 region.  More aggressive traders can
look to buy a bounce there.

Picked on July 27 at $ 44.91
Change since picked:  + 0.52
Earnings Date       07/21/04 (confirmed)
Average Daily Volume:    5.4 million
Chart =


---

Textron - TXT - close: 62.51 change: +0.21 stop: 58.49 *new*

TXT continues to look strong and has not allowed the terror
warning, record crude prices or market weakness to derail its
rally.  However, should TXT produce a dip readers can look for a
bounce in the $60.50-61.00 range as an entry point for new
positions.  There is no change in our strategy but we are raising
our stop loss to $58.49.

Picked on July 26th at $60.72
Change since picked:   + 1.79
Earnings Date        07/22/04 (confirmed)
Average Daily Volume =    622 thousand
Chart =



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


None


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


Magna Intl - MGA - close: 80.40 change: -0.18 stop: 82.01

MGA continues to oscillate around the $80.00 region as investors
wait for the company's earnings report due out Thursday morning.
It is interesting that MGA's rally attempt today failed at the
$81.00 level, the fourth such failed rally at $81.00 in the last
couple of weeks.  We are not suggesting new plays and want to
remind readers that we'll exit on Wednesday afternoon's close to
avoid any earnings surprises.
	
Picked on July 15 at $ 81.53
Change since picked:  - 1.13
Earnings Date       08/05/04 (confirmed)
Average Daily Volume:    182 thousand
Chart =



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

Amazon.com - AMZN - close: 37.61 change: -0.69 stop: 40.01

Company Description:
Amazon.com, a Fortune 500 company based in Seattle, opened on the
World Wide Web in July 1995 and today offers Earth's Biggest
Selection. Amazon.com seeks to be Earth's most customer-centric
company, where customers can find and discover anything they
might want to buy online, and endeavors to offer its customers
the lowest possible prices. Amazon.com and other sellers offer
millions of unique new, refurbished and used items in categories
such as health and personal care, jewelry and watches, gourmet
food, sports and outdoors, apparel and accessories, books, music,
DVDs, electronics and office, kids and baby, and home and garden.
(source: company press release)

Why We Like It:
Normally we don't like to play puts on a stock that's this
oversold and AMZN is definitely oversold down more than 17 points
from its June highs.  Yet the stock has not shown any signs of an
oversold bounce even when the Industrials and NASDAQ were
bouncing last week.  The current trend of lower highs and lower
lows looks ready to breakdown under minor support at $37.50.
Now that the major indices look ready to roll over again the P/E
compression could hit richly valued stocks like AMZN harder than
most.  Traders can choose to go short/buy puts on a drop through
today's low at $37.23 or look for a bounce/failed rally under the
$40.00 level and its simple 10-dma.

The Point & Figure chart is very bearish with a new spread
triple-bottom breakdown sell signal and a $21 price target.  We
feel that a target in the $32.50-30.00 region is more reasonable.
We are going to start the play now with a stop loss at $40.01.

Suggested Options:
Short-term traders have a choice between August and September
puts.  We prefer the September 35s and 40s.

BUY PUT AUG 35.00 ZQN-TG OI= 5173 Current Ask $0.75
BUY PUT AUG 37.50 ZQN-TU OI=10521 Current Ask $1.60
BUY PUT AUG 40.00 ZQN-TH OI=13533 Current Ask $3.20
BUY PUT SEP 35.00 ZQN-UG OI= 4955 Current Ask $1.55
BUY PUT SEP 37.50 ZQN-UU OI= 4482 Current Ask $2.60
BUY PUT SEP 40.00 ZQN-UH OI= 3314 Current Ask $4.00

Annotated chart:



Picked on August 3rd at $37.61
Change since picked:    - 0.00
Earnings Date         07/22/04 (confirmed)
Average Daily Volume =     8.3 million



---


eBay Inc - EBAY - close: 77.08 change: -2.07 stop: 80.35

Company Description:
eBay is The World's Online Marketplace.. Founded in 1995, eBay
created a powerful platform for the sale of goods and services by
a passionate community of individuals and businesses. On any
given day, there are millions of items across thousands of
categories for sale on eBay. eBay enables trade on a local,
national and international basis with customized sites in markets
around the world. Through an array of services, such as its
payment solution provider PayPal, eBay is enabling global e-
commerce for an ever growing online community.
(source: company press release)

Why We Like It:
Why are we playing puts on EBAY?  After all the Internet auction
giant continues to grow revenues like gang-busters and is
arguably the best Internet stock to survive the dotcom bubble
bursting.  Our number one reason is probably the hard to quantify
issue of investor confidence.  Confidence in EBAY is wavering.
Yes, business is great but the company actually guided under
analyst estimates for the current quarter when they announced
earnings on July 21st.  The number two is its momentum, the
bearish kind of momentum.  The stock dipped to $71.45 after its
earnings report but traders bought the dip and/or shorts covered
so much that EBAY actually closed positive on the session after
its report.  Then as EBAY began to fade the market turned around
and stocks turned in an oversold bounce after a dismal
performance in July.  EBAY participated in the bounce but it
couldn't breakout over technical resistance at its simple 100-dma
or psychological resistance at the $80.00 mark.

Tuesday's early morning attempt to breakout over $80.00 again
failed and the stock actually broke down under its simple 10-dma
by the close.  Yes, shares are still oversold but lo and behold
the bounce back to $80.00 just happened to be a 38.2% Fibonacci
retracement of the June to July drop.  With short-term technicals
like RSI and stochastics turning lower again we suspect EBAY will
retest the $71.50 range and/or its simple 200-dma (currently at
$70.90).  We're going to start the play with a stop loss over the
recent high.

! Alert: It's been dangerous to short/buy puts on EBAY for years
and this is no exception.  We feel this is slightly more
aggressive considering that EBAY's P&F chart is still in a
bullish buy signal.

Suggested Options:
Short-term traders can choose from the August or September puts.
We like the September 80s and 75s.

BUY PUT AUG 75 XBA-TO OI= 25681 Current Ask $1.50
BUY PUT AUG 80 XBA-TP OI= 15675 Current Ask $4.20
BUY PUT SEP 75 XBA-UO OI=  3135 Current Ask $3.00
BUY PUT SEP 80 XBA-UP OI=  1162 Current Ask $5.60

Annotated chart:



Picked on August 3rd at $77.08
Change since picked:    - 0.00
Earnings Date         07/21/04 (confirmed)
Average Daily Volume =     9.1 million


---


Caterpillar - CAT - close: 71.68 change: -1.42 stop: 74.25

Company Description:
For more than 75 years, Caterpillar has been building the world's
infrastructure and, in partnership with our independent dealers,
is driving positive and sustainable change on every continent.
Caterpillar is a technology leader and the world's largest maker
of construction and mining equipment, diesel and natural gas
engines and industrial gas turbines.
(source: company press release)

Why We Like It:
We like CAT as a put candidate for a multiple reasons.  Number
one it's a Dow-component and with the Dow looking ready to test
the 10,000 level again CAT is likely to trade lower with it (if
not overshoot it to the downside).  Secondly we like CAT as a put
because investor reaction to its earnings report has not been
positive.  Yes, the company raised its 2004 earnings outlook but
traders weren't happy with the earnings miss and the stock gapped
down on the news.  Now shares of CAT have been stuck in a trading
range the last several sessions and it looks ready to breakdown
from this trading range to new relative lows.

Furthermore its P&F chart has broken rising support and has also
produced a spread triple-bottom breakdown sell signal with a $64
target.  We want to use a TRIGGER at $70.75 to open the play.
That means CAT has to break support at the $71.00 level and we'll
be able to catch the breakdown.  We thought there might be some
round-number support at the $70.00 level but that doesn't seem to
be the case when you look at how shares reacted to this level
last summer.  We'll target a drop to $65.00.  Our initial stop
loss will be $74.25, just over the recent high.

Suggested Options:
We like the August puts because there is more liquidity and open
interest.  Yet we like the September puts more because we get
more time.

BUY PUT AUG 75 CAT-TO OI=6018 current ask $3.80
BUY PUT AUG 70 CAT-TN OI=8009 current ask $1.00
BUY PUT SEP 75 CAT-UO OI= 447 current ask $4.70
BUY PUT SEP 70 CAT-UN OI=1657 current ask $2.05

Annotated chart:



Picked on August xxx at $xx.xx <-- see TRIGGER
Change since picked:    - 0.00
Earnings Date         07/22/04 (confirmed)
Average Daily Volume =     2.4 million




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**********

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Contact Support



The Option Investor Newsletter                  Tuesday 08-03-2004
Copyright 2004, All rights reserved.                        3 of 3
Redistribution in any form strictly prohibited.

In Section Three:

Watch List: AZO, QCOM, ATH, OXY
Spreads & Straddles: Bears Rout Bulls As Oil Soars To Record Highs!
Premium Selling Plays: Naked Puts & Calls


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

AutoZone - AZO - close: 75.26 change: -2.29

WHAT TO WATCH: This seriously looks like a bearish entry point in
AZO.  The stock had managed to trade above its simple 21-dma and
was challenging resistance at the $78.00 mark on Monday.
Tuesday's 2.95% drop was a sharp reversal and its short-term
technicals immediately turned south with it.  Readers might want
to use a trigger under the recent low at $74.84 and target a drop
to $67.50.  The bearish P&F chart points to a $59 target.



---

QUALCOMM - QCOM - close: 70.97 change: -1.09

WHAT TO WATCH: We're putting QCOM on the watch list as a bullish
candidate.  The stock has been holding up pretty well.
Aggressive traders might want to consider a bounce from $70.00 as
an entry point.  The rest of us are probably better off waiting
for QCOM to break the month-long trend of lower highs and push
through overhead resistance in the $73.50 region.  The P&F chart
is bullish and points to a $90.00 target.



---

Anthem - ATH - close: 81.36 change: -0.94

WHAT TO WATCH: Health insurance company Anthem saw its stock drop
sharply as questions arose about its proposed merger with WLP.
The drop continued after ATH reported earnings.  Now the oversold
bounce is fading under its simple 200-dma.  Readers might want to
consider bearish positions if ATH breaks down under the $80.00
level or its July low of $79.30.  The P&F chart looks very
bearish with a breakdown under support ant a $66 target.



---

Occidental Petroleum - OXY - close: 49.97 change: +0.57

WHAT TO WATCH: There are plenty of stocks in the oil/energy
sector at or near new highs but many of them look too overbought
to play safely.  Fortunately, OXY is not one of them.  The stock
has a more gradual climb and is nearing resistance in the $50.00-
50.50 range.  Bulls could use a breakout over $50.50 as an entry
point.  The P&F chart is extremely bullish with a $90 target.
We'd be more realistic with a short-term target of $55.



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


GDW $108.68 +0.52 - GDW's rally is starting to pick up a little
bit of steam.  We're still waiting for the breakout over $110.

WFMI $78.68 -2.11 - Here we go!  WFMI has broken down through
round-number support at the $80.00 level after yesterday's failed
rally at the simple 100-dma.  The next stop is likely the 200-dma
near $75.


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

Bears Rout Bulls As Oil Soars To Record Highs!
By Ray Cummins

Stocks retreated Tuesday as crude futures rose above $44 and
investors assimilated a sizable decline in consumer spending.

The Dow Jones Industrial Average closed down 58 points at
10,120, with Alcoa (NYSE:AA), Home Depot (NYSE:HD), Intel
(NASDAQ:INTC) and Microsoft (NASDAQ:MSFT) leading the blue
chip decliners. The NASDAQ Composite Index fell 32 points to
1,859 amid a drop in semiconductor shares after A.G. Edwards
downgraded several chip-makers.  The S&P 500 slid 7 points
to 1,099 with retailers among the worst performers after the
Commerce Department said consumer spending declined 0.7% in
June, the biggest drop since September 2001.  In the broader
market, decliners outpaced advancers by a 6 to 5 margin on
the New York Stock Exchange and 2 to 1 on the NASDAQ.  About
1.3 billion shares traded on the Big Board, while more than
1.5 billion shares were crossed on the technology exchange.
Treasury prices enjoyed a small lift from the economic data
with the benchmark 10-year note adding 7/32 to yield 4.42%.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
SUMMARY OF CURRENT POSITIONS - AS OF 08/01/04
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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   Mon  L/P   S/P  Credit   CB     G/L   Status

FRE    63.57  64.31  AUG  55.0  60.0  0.55   59.45   0.55   Open
POT    98.08  96.69  AUG  85.0  90.0  0.60   89.40   0.60   Open
UOPX   89.09  86.17  AUG  75.0  80.0  0.60   79.40   0.60   Open
FAST   54.74  62.38  AUG  45.0  50.0  0.60   49.40   0.60   Open
PD     79.00  77.94  AUG  65.0  70.0  0.60   69.40   0.60   Open
AAPL   32.30  32.34  AUG  27.5  30.0  0.30   29.70   0.30   Open
FSH    58.66  58.20  AUG  50.0  55.0  0.65   54.35   0.65   Open

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

Special Tuesday Note: Shares of University of Phoenix Online
(NASDAQ:UOPX) fell sharply on Monday after industry competitor
Corinthian Colleges (NASDAQ:COCO) warned of a shortfall in its
financial results.  UOPX is now slightly below our sold (put)
strike at $80 and conservative traders should consider closing
the position to preserve capital.  Positions in Gilead Sciences
(NASDAQ:GILD), which is currently profitable, Anthem (NYSE:ATH)
and Wellpoint Health (NYSE:WLP) have previously been closed to
limit losses.


CALL-CREDIT SPREADS

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

LLTC   36.74  39.10  AUG  42.5  40.0  0.30   40.30  0.30   Open
XLNX   31.53  29.43  AUG  37.5  35.0  0.25   35.25  0.25   Open
MERQ   46.17  36.56  AUG  55.0  50.0  0.65   50.65  0.65   Open
SMH    34.58  32.90  AUG  42.5  40.0  0.30   40.30  0.30   Open
TLB    33.04  30.80  AUG  40.0  35.0  0.60   35.60  0.60   Open
VAR    77.24  69.01  AUG  90.0  85.0  0.50   85.50  0.50   Open
KLAC   43.33  41.23  AUG  50.0  47.5  0.25   47.75  0.25   Open
NVLS   29.23  27.01  AUG  35.0  32.5  0.20   32.70  0.20   Open
BZH    90.65  93.40  AUG 105.0 100.0  0.45  100.45  0.45   Open
LLY    64.67  63.72  AUG  75.0  70.0  0.65   70.65  0.65   Open

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

Linear Technologies (NASDAQ:LLTC) will be a candidate for early
exit on any move above $40.


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
TBL     60.26  58.04   AUG   60.00  60.00   4.75    5.00    Open

Timberland (NYSE:TBL) enjoyed a brief surge in volatility on 7/22,
plunging to a low near $56.25 during the session.  The move may
have offered a break-even exit using only the bearish portion
of the straddle, however I was not available to monitor trading
in the TBL options so the play will remain open in the summary.

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

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

BJS - BJ Services  $49.60  *** A New Multi-Year High! ***

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

BJS - BJ Services  $49.60

PLAY (less conservative - bullish/credit spread):

BUY  PUT  AUG-45.00  BJS-TI  OI=311   ASK=$0.25
SELL PUT  AUG-47.50  BJS-TW  OI=1525  BID=$0.55
INITIAL NET-CREDIT TARGET=$0.35-$0.40
POTENTIAL PROFIT(max)=16% B/E=$47.15


__________________________________________________________________

RTP - Rio Tinto  $105.00  *** Natural Resources In Demand! ***

Rio Tinto plc (NYSE:RTP), and Rio Tinto Limited, operate as a
single business organization engaged in discovering, mining and
processing the Earth's mineral resources.  Its major products
include aluminum, copper, diamonds, energy products (coal and
uranium), gold, industrial minerals (borax, titanium dioxide,
salt and talc) and iron ore.  Its activities are represented
in Australia and North America, with significant businesses in
South America, Asia, Europe and southern Africa.

RTP - Rio Tinto  $105.00

PLAY (less conservative - bullish/credit spread):

BUY  PUT  AUG-95.00   RTP-TS  OI=71  ASK=$0.30
SELL PUT  AUG-100.00  RTP-TP  OI=22  BID=$0.75
INITIAL NET-CREDIT TARGET=$0.50-$0.60
POTENTIAL PROFIT(max)=11% B/E=$99.50



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

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.

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

DIGE - Digene  $33.08  *** Downtrend Intact! ***

Digene (NASDAQ:DIGE) develops, manufactures and sells proprietary
gene-based testing systems for screening, monitoring and diagnosis
of human diseases.  Its primary focus is in women's cancers and
infectious diseases.  The firm has applied its proprietary Hybrid
Capture technology to develop a unique diagnostic test for human
papillomavirus, which is the primary cause of cervical cancer and
is found in greater than 99% of all cervical cancer cases.  In
addition to its HPV Test, the company's product portfolio includes
gene-based tests for detecting chlamydia, gonorrhea, hepatitis B
virus and cytomegalovirus.

DIGE - Digene  $33.08

PLAY (less conservative - bearish/credit spread):

BUY  CALL  AUG-40.00  QDG-HH  OI=572  ASK=$0.25
SELL CALL  AUG-35.00  QDG-HG  OI=351  BID=$0.80
INITIAL NET-CREDIT TARGET=$0.60-$0.70
POTENTIAL PROFIT(max)=14% B/E=$35.60


__________________________________________________________________

SRCL - Stericycle  $48.00  *** Profit-Taking Underway! ***

Stericycle (NASDAQ:SRCL) is a regulated medical waste management
company, serving customers in the United States, Canada, Puerto
Rico and Mexico.  Stericycle's many services and operations are
comprised of collection, treatment, transportation, disposal and
recycling, together with related training and education programs,
consulting services and product sales.  Stericycle has a fully
integrated, nationwide medical waste management network and the
company uses this network to provide medical waste collection,
transportation and treatment and related consulting, training
and education services and products.

SRCL - Stericycle  $48.00

PLAY (conservative - bearish/credit spread):

BUY  CALL  AUG-55.00  URL-HK  OI=191   ASK=$0.15
SELL CALL  AUG-50.00  URL-HJ  OI=1323  BID=$0.50
INITIAL NET-CREDIT TARGET=$0.40-$0.45
POTENTIAL PROFIT(max)=8% B/E=$50.40



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

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

No straddles or strangles today...

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

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 08/01/04
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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   40.11    0.80   5.99%   2.74%
NVTL     AUG    20.00   19.50   22.97    0.50   5.77%   2.56%
CBST     AUG    10.00    9.65   10.38    0.35   6.43%   3.63%
TASR     AUG    30.00   29.15   31.29    0.85   5.67%   2.92%
PETD     AUG    25.00   24.35   26.61    0.65   4.86%   2.67%
CRDN     JUL    35.00   34.55   38.25    0.45   9.24%   1.30%
CRDN     JUL    35.00   34.70   38.25    0.30   7.43%   0.86%
NFI      AUG    30.00   29.40   40.11    0.60   4.68%   2.04%
NVTL     AUG    20.00   19.50   22.97    0.50   6.11%   2.56%
TASR     AUG    30.00   29.30   31.29    0.70   4.93%   2.39%
EYET     AUG    35.00   34.45   37.10    0.55   3.92%   1.60%
SCHN     AUG    30.00   29.00   30.93    1.00   6.53%   3.45%
FRO      AUG    30.00   29.30   38.35    0.70   4.97%   2.39%
GIVN     AUG    30.00   29.45   34.44    0.55   4.21%   1.87%
ATI      AUG    15.00   14.50   20.05    0.50   7.89%   3.45%
BEIQ     AUG    25.00   24.00   24.01    0.01   0.08%   4.17%
ESIO     AUG    25.00   24.20   25.75    0.80   6.43%   3.31%
AMHC     AUG    25.00   24.25   27.23    0.75   5.98%   3.09%
VTS      AUG    22.50   21.85   24.63    0.65   5.72%   2.97%
OSTK     AUG    30.00   29.40   35.07    0.60   5.60%   2.04%
KWK      AUG    30.00   29.50   31.67    0.50   4.09%   1.69%
ATI      AUG    15.00   14.75   20.05    0.25   4.68%   1.69%
EYET     AUG    30.00   29.55   37.10    0.45   3.85%   1.52%
ERES     AUG    22.50   22.15   24.91    0.35   4.50%   1.58%
CTSH     AUG    22.50   22.05   27.55    0.45   4.61%   2.04%
TECH     AUG    40.00   38.75   39.80    1.05   5.27%   3.23%
ELN      AUG    20.00   19.70   20.55    0.30   4.31%   1.52%
FARO     AUG    20.00   19.65   23.53    0.35   5.77%   1.78%
STLD     AUG    30.00   29.60   32.75    0.40   3.50%   1.35%
SRDX     AUG    20.00   19.50   23.92    0.50   7.27%   2.56%
NFI      AUG    35.00   33.85   40.11    1.15   9.90%   3.40%
ISG      AUG    30.00   29.05   32.73    0.95   7.59%   3.27%
LCAV     AUG    25.00   24.35   26.09    0.65   6.54%   2.67%
DHB      AUG    12.50   12.15   15.21    0.35   8.54%   2.88%
MSO      AUG    10.00    9.65   11.29    0.35   9.88%   3.63%
EENC     AUG    12.50   12.25   13.59    0.25   4.83%   2.04%
BLUD     AUG    20.00   19.50   20.26    0.50   6.68%   2.56%
ERES     AUG    25.00   24.40   24.91    0.51   5.92%   2.46%
IDCC     AUG    17.50   17.05   19.24    0.45   6.72%   2.64%
JNPR     AUG    22.50   21.95   22.96    0.55   6.37%   2.51%
NFI      AUG    35.00   34.25   40.11    0.75   7.63%   2.19%
JCOM     AUG    25.00   24.45   25.51    0.55   5.80%   2.25%
LCAV     AUG    25.00   24.75   26.09    0.25   3.16%   1.01%
CERN     AUG    35.00   34.35   45.00    0.65   6.54%   1.89%
VLCCF    AUG    25.00   24.35   32.39    0.65   8.65%   2.67%

Special Tuesday Note: A number of issues are on the early exit
list and the most obvious candidates are: TASR, ERES and TECH.
In addition, BLUD, JCOM, JNPR, ELN, KWK, ESIO, SCHN, CBST and
VLCCF are the primary stocks on the "watch" list.  Multimedia
Games (NASDAQ:MGAM), Gen-Probe (NASDAQ:GPRO), Carrier Access
(NASDAQ:CACS) and Aeroflex (NASDAQ:ARXX) have previously been
closed to limit potential losses.


NAKED CALLS

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

SLAB     AUG    50.00   51.00   35.29    1.00   5.30%   1.96%
SINA     AUG    40.00   40.85   28.34    0.85   7.85%   2.08%
ATRS     AUG    30.00   30.85   25.11    0.85   6.52%   2.76%
MRVL     AUG    27.50   27.85   23.22    0.35   3.98%   1.26%
MACR     AUG    25.00   25.40   20.20    0.40   4.55%   1.57%
ISIL     AUG    20.00   20.45   18.36    0.45   5.72%   2.20%
FLML     AUG    25.00   25.50   18.85    0.50   8.15%   1.96%
OTEX     AUG    30.00   30.65   25.34    0.65   6.12%   2.12%
TELK     AUG    25.00   25.45   19.76    0.45   5.60%   1.77%
ASKJ     AUG    40.00   40.50   29.08    0.50   5.97%   1.23%
DRIV     AUG    30.00   30.85   28.10    0.85   7.92%   2.76%
SINA     AUG    35.00   35.45   28.34    0.45   6.42%   1.27%
BSX      AUG    40.00   40.50   38.26    0.50   3.58%   1.23%
ICUI     AUG    30.00   30.80   27.80    0.80   8.64%   2.60%
WMGI     AUG    35.00   35.65   27.63    0.65   5.46%   1.82%
LSCP     AUG    30.00   30.70   19.07    0.70  11.15%   2.28%
ERICY    AUG    30.00   30.65   26.71    0.65   8.01%   2.12%
NTES     AUG    40.00   40.45   37.25    0.45   6.31%   1.11%

There was no viable position in Eon Labs (NASDAQ:ELAB), due to
the "gap-down" opening on the day after the play was listed.

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

KYPH   27.30  AUG 25.00  QYQ-TE 0.65  125 24.35  17   4.8%  12.5%
KWK    32.33  AUG 30.00  KWK-TF 0.65  418 29.35  17   4.0%  10.3%
NFI    42.40  AUG 30.00  NFI-UF 0.45 2534 29.55  17   2.7%   9.0%
KIND   24.25  AUG 22.50  QND-TX 0.40   29 22.10  17   3.2%   8.6%
TOY    16.43  AUG 15.00  TOY-TC 0.25 5046 14.75  17   3.0%   8.3%
ODSY   18.59  AUG 17.50  UPE-TW 0.25 1705 17.25  17   2.6%   6.8%
AH     37.19  AUG 35.00  AH-TG  0.40  708 34.60  17   2.1%   5.5%
BR     38.49  AUG 37.50  BR-TU  0.40 1041 37.10  17   1.9%   4.8%

Abbreviations:

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.

__________________________________________________________________

KYPH - Kyphon  $27.30  *** Earnings Speculation! ***

Kyphon (NASDAQ:KYPH) develops medical devices to restore spinal
anatomy using minimally invasive technology.  The firm's initial
marketing focus is on surgeons who repair spine fractures caused
by osteoporosis.  Kyphon's first commercial products, comprising
its KyphX instruments, utilize its proprietary balloon technology.
Surgeons use those tools to help repair fractures during minimally
invasive spine surgeries.  Its instruments have also been used in
open surgical procedures.  The firm sells various instruments for
use in spine fracture procedures including: Bone Access Systems,
Inflatable Bone Tamps, Inflation Syringes, Bone Filler Devices
and Bone Biopsy Devices.  Quarterly earnings are due on 8/4.

KYPH - Kyphon  $27.30

AUG 25.00 QYQ-TE LB=0.65 OI=125 CB=24.35 DE=17 TY=4.8% MY=12.5%


__________________________________________________________________

KWK - Quicksilver Resources  $32.33  *** Oil Sector Rally! ***

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  $32.33

AUG 30.00 KWK-TF LB=0.65 OI=418 CB=29.35 DE=17 TY=4.0% MY=10.3%


__________________________________________________________________

NFI - NovaStar Financial  $42.40  *** Premium-Selling Only! ***

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  $42.40

AUG 30.00 NFI-UF LB=0.45 OI=2534 CB=29.55 DE=17 TY=2.7% MY=9.0%


__________________________________________________________________

KIND - Kindred Healthcare  $24.25  *** Bottom-Fishing! ***

Kindred Healthcare (NASDAQ:KIND) is a healthcare services firm
that operates hospitals, nursing centers and institutional
pharmacies.  During 2003, the company was organized into three
operating divisions: the hospital division, the health services
division and the pharmacy division.  The hospital division
primarily operates long-term acute care hospitals while the
health services division operates nursing centers and a
rehabilitation therapy business.  The pharmacy division
provides institutional pharmacy services to nursing centers
and other healthcare providers.

KIND - Kindred Healthcare  $24.25

AUG 22.50 QND-TX LB=0.40 OI=29 CB=22.10 DE=17 TY=3.2% MY=8.6%


__________________________________________________________________

TOY - Toys R Us  $16.43  *** Entry Point? ***

Toys R Us (NYSE:TOY) is a retailer of toys, baby products and
children's apparel.  As of January 31, 2004, the firm operated
1,501 retail stores worldwide.  These consisted of 927 locations
in the United States, 685 toy stores (including four Geoffrey
stores), 198 specialty baby-juvenile stores; Babies R Us, and 44
children's clothing stores under the name Kids R Us.  Toys R Us
also sells merchandise on its Internet sites: www.toysrus.com,
www.babiesrus.com, www.imaginarium.com, www.sportsrus.com and
www.personalizedbyrus.com.

TOY - Toys R Us  $16.43

AUG 15.00 TOY-TC LB=0.25 OI=5046 CB=14.75 DE=17 TY=3.0% MY=8.3%


__________________________________________________________________

ODSY - Odyssey HealthCare  $18.59  *** On The Rebound? ***

Odyssey HealthCare (NASDAQ:ODSY) provides hospice care, with a
goal of improving the quality of life of terminally ill patients
and their families.  Hospice services focus on palliative care
for patients with life-limiting illnesses, which is directed at
managing pain and other discomforting symptoms and addressing
the psychosocial and spiritual needs of patients and their
families.  The company provides for all medical, psychosocial
care and certain other support services associated with the
patient's terminal illness.

ODSY - Odyssey HealthCare  $18.59

AUG 17.50 UPE-TW LB=0.25 OI=1705 CB=17.25 DE=17 TY=2.6% MY=6.8%


__________________________________________________________________

AH - Armor Holdings  $37.19  *** Recent Volatility = Premium! ***

Armor Holdings (NYSE:AH) is a manufacturer and provider of
security products, vehicle armoring systems and security risk
management services.  The company is organized and operated
under three business segments: Armor Holdings Products, and
Armor Mobile Security.  The company's Armor Holdings Products
Division manufactures and sells a wide range of branded law
enforcement equipment such as concealable and tactical body
armor, hard armor, duty gear, less-lethal munitions, anti-riot
products, police batons, emergency lighting products, forensic
products, firearms accessories and weapon maintenance products.
The Armor Mobile Security Division manufactures and installs
ballistic and blast protected armoring systems for military
vehicles, commercial vehicles, military aircraft and missile
components.  Quarterly earnings are due May 10, 2004.

AH - Armor Holdings  $37.19

AUG 35.00 AH-TG LB=0.40 OI=708 CB=34.60 DE=17 TY=2.1% MY=5.5%


__________________________________________________________________

BR - Burlington Resources  $38.49  *** Strong Sector! ***

Burlington Resources (NYSE:BR) is a holding company that is
engaged, through its principal subsidiaries, Burlington Resources
Oil & Gas Company LP, The Louisiana Land and Exploration Company,
Burlington Resources Canada, Canadian Hunter Exploration and their
affiliated companies, in the exploration for and the development,
production and marketing of crude oil, NGLs (natural gas liquids)
and natural gas.  The company's asset base is dominated by North
American natural gas properties and its extensive North American
lease holdings extend from the Gulf of Mexico to the Mackenzie
Delta region in the Northwest Territories of the Canadian Arctic
and Alaska's north slope.  The company also has operations in the
Northwest European Shelf, North Africa, Latin America, the Far
East and West Africa.

BR - Burlington Resources  $38.49

AUG 37.50 BR-TU LB=0.40 OI=1041 CB=37.10 DE=17 TY=1.9% MY=4.8%



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

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.

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

MRVL - Marvell Technology  $22.30  *** Earnings Speculation! ***

Marvell (NASDAQ:MRVL) designs, develops and markets integrated
circuits utilizing proprietary communications mixed-signal and
digital signal processing technology for communications-related
markets.  Marvell offers its customers a wide range of integrated
circuit solutions using proprietary communications mixed-signal
processing and digital signal processing technologies.  Marvell's
product groups include: storage products, consisting of a variety
of read channel, system-on-chip and preamplifier products; and
broadband communications products, consisting of a variety of
transceiver products, switching products, internetworking
products and wireless LAN products.  Earnings are due 8/19/04.

MRVL - Marvell Technology  $22.30

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    UVM-HE    5739   0.30  25.30   8.2%   1.2%


_________________________________________________________________

MXIM - Maxim Integrated  $46.75  *** Stuck In A Range! ***

Maxim Integrated Products (NASDAQ:MXIM) designs, develops, makes
and markets a broad range of linear and mixed-signal integrated
circuits, commonly referred to as analog circuits.  Maxim also
provides a range of high-frequency design processes and unique
capabilities that can be used in custom design.  The analog IC
market is highly fragmented and characterized by many diverse
applications, a great number of product variations and, as to
many circuit types, relatively long product life cycles.  The
company's objective is to develop and market both proprietary
and industry-standard analog integrated circuits that meet the
increasingly stringent quality standards demanded by customers.

MXIM - Maxim Integrated  $46.75

PLAY (sell naked call):

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

SELL CALL  AUG 50    XIQ-HJ    8296   0.45  50.45   5.1%   0.9%


_________________________________________________________________

YHOO - Yahoo!  $29.15  *** Internet Shares Slump! ***

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

YHOO - Yahoo!  $29.15

PLAY (sell naked call):

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

SELL CALL  AUG 32.5  YHQ-HZ    22286  0.25  32.75   5.2%   0.8%



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

SEE DISCLAIMER - SECTION 1

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


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