The Option Investor Newsletter Sunday 08-08-2004 Copyright 2004, All rights reserved. 1 of 5 Redistribution in any form strictly prohibited. Entire newsletter best viewed in COURIER 10 font for alignment In Section One: Wrap: Want to See Something Really Scary? Futures Wrap: See Note Index Trader Wrap: Double whammy: oil and jobs Editor's Plays: Busted! Market Sentiment: New Lows Ask the Analyst: Was That A Stop Sign Coming Events: Earnings, Splits, Economic Events Posted online for subscribers at http://www.OptionInvestor.com ****************************************************************** MARKET WRAP (view in courier font for table alignment) ****************************************************************** WE 8-06 WE 7-30 WE 7-23 WE 7-16 DOW 9815.33 -324.38 10139.7 +177.49 9962.22 -177.56 - 73.44 Nasdaq 1776.89 -110.47 1887.4 + 38.27 1849.09 - 34.06 - 63.18 S&P-100 521.83 - 15.84 537.67 + 7.29 530.38 - 5.52 - 6.73 S&P-500 1063.97 - 37.75 1101.72 + 15.52 1086.20 - 15.20 - 11.41 W5000 10307.84 -393.81 10701.7 +147.83 10553.8 -178.04 -110.82 SOX 386.88 - 29.55 416.43 + 10.85 405.58 - 4.88 - 40.68 RUT 519.65 - 31.64 551.29 + 12.07 539.22 - 16.26 - 8.25 TRAN 2966.08 -145.61 3111.69 + 68.25 3043.44 - 44.89 + 0.36 ****************************************************************** Want to See Something Really Scary? by Jim Brown That title may be a famous line from the Twilight Zone movie but you only need to take a look at the index changes for the week in the table above for a real nightmare on Wall Street. The Nasdaq lost nearly -5% for the week and all the indexes are at their lows for the year. While most analysts would be blaming the Jobs disaster there was far more impacting the markets and the road ahead could be even worse. Dow Chart – Weekly Nasdaq Chart – Weekly SPX Chart – Weekly Let's get the worst out of the way first. The July Jobs report was not just below estimates but a disaster. At only +32,000 jobs about the only thing worse would have been a job loss instead of a job gain. With consensus estimates at +220,000 and whisper numbers as high as +300K the minor +32,000 gain was a disaster. If you factor in the downward revisions to May and June we actually lost jobs with this report. The May number was revised down from +235K to +208K for a loss of -27K. The June report was revised down from +112K to +78K for a reduction of -44K. Let's see, using the new math a drop in previously reported gains of -71K and a gain in July of only +32K leaves us with a net change of -39K when analysts were expecting +220K. OOPS! Twelve Month Jobs Table There was a lot of talk about the falling unemployment rate to 5.5% from 5.6% but the key there was a drop in the overall workforce more than an increase in employment. The services sector was the weakest link in the report with financial services, retail trade, leisure and hospitality, information and social services all showing losses. Another factor was a loss due to seasonal adjustments. Many of the government reports have fudge factors for various months to smooth out normal volatility. In July the seasonal adjustments knocked real job growth (raw data) down from +222,000 to only +32,000. In reality many more jobs were created but the raw data is not used as a yardstick due to years of historical seasonal adjustment precedent. Live by the adjustment, die by the adjustment. This was slowest rate of jobs growth in eight months. The Housing Survey showed jobs increased by +629,000 jobs and was a serious divergence from the Payroll Survey quoted above. Unfortunately 577,000 of those jobs were only part time and weighted toward those with lower education. Highly educated workers have been having a harder time finding employment all year. If you were Alan Greenspan today you were probably reaching for the Maalox. With the Fed scheduled to raise rates on Tuesday the Jobs report was a bitter pill to swallow. When the Fed embarked on its current "measured pace" of rate hikes the economy was thought to be charging down the road to recovery and the rate hikes were needed to curb potential inflation and return the benchmark rate to a normal level. With the recent economic reports mixed and with many trending down the Fed may want to take its foot off the brake but can't due to the current policy. The Fed would have a hard time not raising rates on Tuesday because it would bring up questions of "what do they know we don't" and fears that the economy is worse than it appears. That means the Fed will have to "rescue" the market from itself with a positive statement after the meeting. Former Fed Governor Wayne Angel disagreed with the consensus the Fed was locked into a hike cycle and suggested Greenspan could surprise investors next week. The chances of a rate hike next week have declined from 100% according to the futures to about 80%. The chance for a September hike declined to about 12% at the open but returned to 30% by the close. Still far from a lock. The analysts are still expecting the Fed to stick to its measured pace of hikes but the target for December is now only 1.75% instead of 2.0%. Currently the rate is 1.25%. Bonds soared on the negative Jobs news with yield on the ten year falling to 4.21% and a four month low. Home builders will be overjoyed as low rate mortgages become yet another sales tool for the rest of the summer. Ten-Year Yield Chart The Jobs number was only slightly more important than the new high in oil at $44.65 but news from Russia put pressure on late in the day. The Yukos story continues to flip flop back and forth and today was a win for Yukos. The company won a court battle and lived to fight another day. Oil closed at $43.94 but the uptrend is still alive. The uptrend in oil is the only uptrend still alive. The Dow closed at 9815 and a level not seen since Nov 2003. This was the low for the year and a significant breakdown. The -324 (-3%) loss for the week was minor compared to the hit in the Nasdaq. The Nasdaq closed at 1776 and lost -110 points, -5.8% for the week. Considering we actually traded up on Mon/Tue it shows how negative the last two days have been. The Nasdaq is -10% YTD and the SOX is down -30% YTD. The bears have come out to growl and the bulls are running scared. The Dow broke under 9800, a level most would not have believed possible only a few weeks ago. By breaking the May lows the index has now setup a retest of 9500 and a -38% retracement of the rally from the Mar-2003 low. This would have been an unheard of retracement back June but times have changed. I preached about the coming summer event risk for the last three months until I felt everyone was tired of hearing it. Well boys and girls it is here to liven up our August. The Jobs report is smoke. Yes, it was bad relative to the prior six months results but it was still positive. The economy is still growing as evidenced by the various economic reports just slower than hoped. This is a normal summer slump aggravated by the terror event risk. Companies are doing exactly what they did before the war. They are holding off on purchases and hiring until the risk of a major attack passes. Add in the election uncertainty and you get a market with no buyers. Those investors who were considering remaining long and toughing it out are then shaken out of their convictions by things like the Jobs numbers. Those convictions were definitely shaken today. Not only did the Dow drop to new lows and the Nasdaq break the 1800 support line but the SPX completely lost the 1070-1080 numbers I wrote about Thursday night. SPX 1080 was the 200 week moving average and 1068-1070 was a double Fib retracement level. All of this support should have held better than it did. The 1070 level did hold until 2:PM but finally caved in at the close. Volume increased and internals crumbled once that level failed. SOX Chart – Weekly Russell Chart – Weekly This sets up a serious situation for Monday. We can hope for an opening rebound back above the 1070 level to calm those itchy trigger fingers but without a major change in sentiment it could be only a temporary reprieve. We can hope for a rebound into the FOMC meeting on the chance they will not hike rates again but the odds of that happening are still slim. Even if the Fed did not hike it will not provide a lasting bounce. It just removes one minor reason for concern and adds another level of economic uncertainty. The challenge in our future is not the Olympics. With a million people coming to town it should not be hard to sneak in a dozen or so. However bad and unfortunate an attack would be, unless they found a nuke or were successful in some kind of biological spread, this is not going to be an earthshaking risk for the U.S. However, people are seeing it as a strong negative and electing to move to the sidelines. I do not think the risk is worth the selling but it is not my money. The real risk is the week following the Olympics when the Republicans come to New York. If NYC goes to the same security lengths as Boston did then the convention should be safe. Again, it is not the event itself but the perception of the risk. Al Qaeda is not going to attack where we expect them to attack and that is the real problem. I have little doubt they will try to disrupt the election because they proved they could do it in Spain. That means sometime in the next 90 days we will wake up to a surprise and this is what the market fears not the loss of jobs. Traders seem to need an excuse to push themselves off dead center and there are plenty of excuses appearing on a daily basis. What these events have done is push stocks back down to where real value has begun to appear and those funds sitting on cash have got to be drooling about the opportunities ahead. The PE on the S&P has declined to only 16 times expected 2005 earnings after an earnings cycle that exceeded all expectations. Yes, I know there was much more inline guidance and a few more earnings misses but overall earnings were well over +20%. Experienced investors understand that historically August is not kind to investors. Over the last 15 years August has been the worst month of the year for the Dow and S&P and the second worst month for the Nasdaq. It appears that despite the event risk, soaring oil and weak economics we are right in line with the historical trend. The key is not why the markets are dropping but what are you going to do about it and more importantly when? Based on the commentary above I would say our buying opportunity is not over. I see no reason to rush into stocks regardless of how low priced they seem. The normal summer weakness tends to climax with a sharp drop in September and October. Considering the NYC convention ends on Thursday Sept-2nd and Labor Day is Monday Sept-6th I would want to have all my ducks lined up by Sept-7th. The seven weeks between Labor Day and the election should be considered bargain days in the market. I would begin taking small positions with an eye on the market direction. We know that historically the markets tend to react strongly once the election is over and with literally hundreds of billions waiting in cash on the sidelines the last two months of 2004 could be very strong. Of course that assumes there is no earthshaking terror event on U.S. soil before the election concludes. That leaves us in window-shopping mode for the next three weeks. We will see more selling and some short term rallies but I would be surprised to see any rebound stick. When the markets go directional as they did this week they tend to do everything to excess. This means there are probably lower lows ahead and I would not discount the potential for the Dow to test 9500. Nasdaq 1703 is a 50% retracement of the March-2003 low to the Jan-2004 high. I would think that is a safe bet given the current sentiment. 1600 is actually stronger support as a confluence of the Oct/Mar Fib levels but it would take a real washout to see that level again. However the timing would correspond to the next major target on the SPX of the 50% retracement level at 965. The 965 level has been targeted by hard core bears for months and I am beginning to see that as a possibility. Slim but still a possibility. Since the market exists to confound the most traders and all analysts those numbers are far from set in stone. As I sit here and look at the SPX chart I find it hard to believe 965 is a target but my bias is clouding my vision. Meanwhile the increase in volatility is providing great trading opportunities. The back to back triple digit moves on the Dow and the -5% Nasdaq drop for the week gave everyone something to trade. I don't know if I could stand that much volatility for the next three weeks but I will definitely try. More than likely we will find a range before next Friday to wait out the Olympics on minimal volume. Once we hit that range I would spend more time researching stocks/LEAPs you want to add to your long term portfolio than worrying about the day to day changes in the market. If you are not a trader the next three weeks should be ignored. If you are a trader then cinch up that seatbelt and join the party. Enter Very Passively, Exit Very Aggressively! Jim Brown ************ FUTURES WRAP ************ Futures wrap is not emailed due to the excessive number of charts. It may be read on the website at this address. http://www.OptionInvestor.com/indexes/futureswrap.asp ******************** INDEX TRADER SUMMARY ******************** Double whammy: oil and jobs By Leigh Stevens lstevens@OptionInvestor.com THE BOTTOM LINE – Record oil prices and too few new jobs was a big double whammy for stocks this past week, causing the indices to sink to new lows in a decline that's now about 5 weeks old. The last time I wrote two weeks ago I saw some rally potential and the S&P 500 (SPX) did rebound from the 1080 area to 1105 or so and the Nasdaq Composite (COMP) from around 1830 up to 1895 over the week that following. This was short-lived and this past week saw this ground given back fast and then some. To keep things a bit in perspective: from weekly low to high, SPX has now retraced 25% of the late-2002 to early-'04 advance, with the Nasdaq Composite giving back around 36%. This retracement has been fast of course, relative to the long advance, but per the old commodity expression, they always "slide faster than they glide". The market in rally phases builds in an overly optimistic earnings expectation and then adjusts – unlike buying, selling tends to be closer to a one-time decision. But, says the option trader, should I cover my index puts soon and look to maybe buy some calls? Probably so – maybe after 1-2 more days of this decline or choppiness, such as into Tuesday. My indicator of bearish sentiment got to an extreme by Friday. Traders finally got a healthy dose of fear and went into puts heavily enough to suggest that the market could be near a tradable low. This was the only thing that didn't quite fit for me before – traders were "too" bullish to suggest that that the 1080 SPX low was going to be it for a while. FRIDAY'S TRADING ACTIVITY – THE NUMBERS – The S&P 500 (SPX) fell 16.7 points (-1.5%) to close at 1,063.97 and its lowest close since last December and off 3.5% for the week. The Dow (INDU) 30 closed at 9,815.33, off 147.7 points (also –1.5%). The Dow fell over 300 points over Thursday and Friday, reaching a low point not seen since late-November. The Nasdaq Composite (COMP) fell 44.74 (-2.5%) to 1,776.9. You have to go back to a year ago August to equal this close. For the week, COMP was down almost 6% in a tech wreck. REPORTS & ECONOMIC NEWS – The big shock Friday was of course the Labor Department's report that the U.S. economy only added 32,000 non-farm payroll jobs in July, compared with about 230-235,000 expected. To add insult to injury, payroll growth in May and June was revised lower by a cumulative 61,000, as well. The unemployment rate fell to 5.5 percent from 5.6 percent. Of course, the Administration could tout this drop but the market is influenced by job creation as it discounts or assesses the coming months ahead. As has been the case this year, this was THE report for the month as job creation is what can fuel continued consumer spending – certainly business spending remains relatively lackluster. Bonds rallied strongly after the report, which showed the worst monthly job growth this year. The benchmark 10-year note jumped 1 and 16/32, to 104 and 7/32 to yield 4.22%, down substantially from a yield of 4.4% on Thursday. OTHER MARKETS – The big OTHER market this past week was crude oil, which fell off a bit on Friday but after setting a record price. September crude futures closed off 46 cents to $43.92 a barrel, after climbing to as high as $44.65, a new record. Most of this climb in Oil prices is attributed to unrest in the middle east and Russian supply disruptions real or imagined. Most of it is a "risk premium" and not related to current supply and demand conditions. U.S. crude inventories are at a "comfortable" level, near the 300,000-barrel level. The Strategic Petroleum Reserves have been increased for emergency use. The Russian dilemma over Yukos oil company is reported to be closer to a short-term resolution. Some oil traders in the know suggest that prices could drop back under $40 in the coming month, but may also hit $45 a barrel first, even $50 as a wild card possibility. Even with a fall in oil prices ahead, gasoline prices would typically continue to rise over the next 30 days or so due to the lag in refining – not good for the summer driving season. In currency trading, the dollar was off 1.2% against the yen, at 110.36 yen and lost 2% against the euro, with its close at $1.228 in New York. MY INDEX OUTLOOKS – S&P 500 Index (SPX) – Daily chart: Based on the area reached on the downside on Friday of this week, relative to my lower trading envelope (3% under the 21-day moving average) and the accompanying "gap", the S&P 500 (SPX) should not have much further downside potential left. Perhaps a bit lower such either on Monday or a mild rebound and then another slide to the lows or a bit lower such as 1060-1058, but further downside from here is not huge in my estimation. The slight price "gap" that occurred as Friday's high was below Thursday's low is important from a technical standpoint. I would anticipate a rally back to that gap area around 1080 in the not too distant future which would then be met with renewed selling – a close above this area, if it held as support on subsequent pullbacks, would be a key way to measure further rally potential beyond just an oversold rebound. An indicator I rely on very much and that has finally given a solidly bullish reading is my call to put ratio for daily CBOE equities options, as it fell to under "1" on Friday since put volume was greater than calls. As you can see from the chart above, such low readings often, not always, occur in clusters at significant bottoms – enough so to pull the 5-day average down closer to the line. However, any 1-day reading like the one on Friday is enough to suggest that the market is at or near a low within 1-5 trading days assuming my other main indicators line up bullishly also – more on my "tree of indicators" further on. S&P 100 Index (OEX) – Daily chart: Near-term, I don't have objectives much beyond 520 – allowing some slippage, perhaps to 518. I don't think the S&P is headed to the 500 area again, certainly not near-term. The 530 area is key resistance and I would expect a rally back to this area this (coming) week. However, more selling should be expected on a rebound to this area. The OEX is about as oversold as it tends to get without at least going sideways to "throw off" some of the oversold condition. The new low was "confirmed" by a similar new low in the RSI, so there is not bullish divergence that set up. This market is adjusting to a new set of economic and earnings assumptions. S&P 100 Index (OEX) – Hourly chart: As you can see by how I have outlined it, the OEX is near the low end of its hourly downtrend channel – this at least suggests that the decline will likely slow. The steep declines tend to occur for the top of these channels when the index is in a downtrend; i.e., anytime we have a pattern of lower rally peaks and lower lows. Of course the S&P 100 is oversold short-term so the potential for a rebound is there. Those who come in and buy OEX puts on Monday morning are snoozing – too late to get into a winning situation most likely. S&P Main Indicators: The red arrows are areas where my "tree of (main) indicators" for the S&P segment of the market were lined up to suggest a top. The green arrows show the reverse. The Up Volume indicator is mostly only useful to show a bottom, so no red arrows there. The indicators are all getting into bullish readings and the S&P 500 index could find some support at the low end of its downtrend channel. The rally potential on a first rally might not be much however – I think more bearishness will build up first. The volume indicator is one that I have not shown as much in my column but will start to include it when it could be suggesting that it is reaching the area where the market typically bottoms. Looking at the last time that these indicators seemed to suggest a bottom was early – at least the rally that followed was limited, not major. Nasdaq 100 (NDX) Index – Daily: As with the S&P indices, the Nasdaq 100 is about as oversold as it gets and the extension of this decline to the lower envelope line (4.5% under its 21-day moving average) typically, more or less, marks the low end of its range. Some further lows around 1315-1310 will offer some call buying potential, for at least a rally back up the 1350-1355 area at some point. I will be watching for a rally attempt, say by Tuesday, then another decline back toward the lows already established – if put volumes stay high at that point, this may be a buy point. So much for my crystal ball – stay tuned for what the market tells us next. Nasdaq 100 (NDX) Index – Hourly: NDX has reached the lower end of its hourly downtrend channel – what does this mean? Not much, except, that it does suggest that the best part of the decline is over. The "easy" money so to speak, for those positioned in puts from the 1380 area especially, has been made. A next good entry for puts may come with a rebound back into toward the top of the downside gap area around 1350. The hourly chart of the Nas 100 has the same appearance as QQQ's hourly chart, so I don't include both. The Q's are also at the low end of its hourly channel. Nasdaq 100 tracking Stock (QQQ) Daily: The $34 area was support – once broken and so decisively, it is a key near technical resistance as suggested by the green (support) and red (resistance) arrows on the chart below. The downside gap area is typically a place that prices come back to. Next lower support suggested by going back on the daily chart in QQQ looks to be 32-32.25. Resistance as noted is 34. Unless there is a daily close above 34, and the subsequent ability to hold above this area, I would anticipate prices trading in a 32-34 range. There is nothing much volume shows us here – the jump in volume on the market break on Friday is consistent with a bearish turn of events. If it has been low volume, it might have suggested that the decline would be brief. On the other hand, many long holders of the stock sold once the 34 technical support was decisively penetrated. Not a good day to be a bull. I would do some buying in the 32 area if reached – a rebound back to the 34 area at that point is a good bet. Good Trading Success! ************************Advertisement********************************** Option traders, check what PreferredTrade offers: - true direct access to each option exchange - stop and stop loss online option orders - contingent option orders based on the price of the option or stock - online spread order entry for net debit or credit - fast option executions - rates as low as $1.50 per contract ($14.95 min) PreferredTrade, Inc. Call 888-889-9178 or Click http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN Member NYSE, Other Principal Exchanges, NFA, MSRB and SIPC *********************************************************************** ************** Editor's Plays ************** Editors Note: I will be on vacation from Aug-12-21 and there will be no Editors Plays until the Aug-29th newsletter. I am not including a new play today since there would be no follow up. Short any rally! Busted! Last week I profiled a put play on the Russell Ishares but when I reached back into memory for the symbol I profiled IWN instead of IWM. The IWN was the Russell 2000 Value Index and IWM is just the Russell 2000 Index. The concept of the play was valid for either symbol but I apologize for the error. The play called for buying three contracts of the Sept $160 Put IWN-UL. One at Monday's open and one each on a touch of IWN $165 and $166. I was expecting a post convention rebound early in the week but the Sunday terror announcement killed that possibility. If you followed the rules you should have filled on the one contract at Monday's open at $3.10/$3.20. You would never have filled on the others as the high on Monday was $164.80 and 20 cents shy of the next target. The play went as planned with the exception of the symbol and lack of a meaningful rally (grin) and the Russell crashed back to earth by Friday's close. The IWN closed at 157.25 and the Sept-160 put was $6.00 by $6.10. Not bad for a busted play. The target on the play was $155 and we are very close. I would set a stop at $5.00 and let it run in hopes the August weakness continues. IWN Chart ****************** QQQ Update $32.74 The target to exit the call was $35.50 and the Monday high for the week was $35.02 with the call at 70 cents. We did not hit the exit target but since the strategy for the week was to bail out of the position I hope everyone took advantage of the near miss to exit. http://members.OptionInvestor.com/editorplays/edply_072504_1.asp *********************** Microsoft Update $27.14 Microsoft cooperated with us and traded down to $27.06 and well below out $27.50 target exit. The $27.50 put traded as high as 70 cents with our cost was only a quarter. In this case the parachute functioned perfectly. *********************** News Corp Update $32.29 NOTE: After today I am moving this play to the LEAPS section for future coverage. Ouch! The -$7.75 hit to BskyB on the 4th knocked NWS for a loss back to $32.90 after trading as high as $34.65 for the week. NWS has a big stake in BskyB and received a sharp haircut for its trouble. With the market negative there is still no premium in the $35 calls to justify selling calls against our leaps. We have plenty of time before the move to the U.S. occurs. Current position: Long (6) Jan-2006 $40 Calls WLN-AH @ $3.83 http://members.OptionInvestor.com/editorplays/edply_041104_1.asp http://members.OptionInvestor.com/editorplays/edply_041804_1.asp ********************** PVN Call Update $13.20 http://members.OptionInvestor.com/editorplays/edply_061304_1.asp **************** MARKET SENTIMENT **************** New Lows - J. Brown Bearish, fearful, concerned, confused, and weary are just some of the choices one could use to describe investor sentiment. Now that the major indices and a good number of sector-specific indices are hitting new lows for the year it's hard to find anything to be bullish about. Even oil stocks, which have been a pillar of strength in this market, have seen some sharp selling in spite of crude oil all-time highs. This column has mentioned the impact of crude oil on the markets, the economy and the consumer before and nothing has changed. The high price of crude remains a significant threat to our economic recovery. There does seem to be a split in the analyst community. Some believe crude will fall back towards $35 a barrel by the U.S. November elections compared to the other side who believe crude will hit $50.00. Of course we could see both. It would not surprise me to see crude soar to $50 on some sort of news and or terrorist event to then only fall back in a massive bout of profit taking (maybe I'm just being optimistic on the sell-off). If this dance between the Kremlin and Russian oil producer Yukos would end we'd probably see oil ease a bit. Believe it or not the jobs picture managed to overshadow crude oil's grip on the markets this past Friday but not in a good way. I won't go into details since this weekend's market wrap covers the job report more in depth but needless to say the 200,000 miss is a big one. If you consider the revisions to the previous reports we actually lost jobs in July. This not only raises huge doubts on the strength of the economy but it throws the upcoming presidential election into more turmoil, if that was possible. Market internals are certainly painting a bearish picture. They've been pretty negative for the last two sessions. Friday saw declining stocks outnumber advancers by more than 2-to-1 on the NYSE and almost 4-to-1 on the NASDAQ. Down volume was about 5-to-1 over up volume on the NYSE and more than 8-to-1 on the NASDAQ. Volatility indices, which were traditional gauges of investor sentiment, are rising fast. They are all near bullish reversal levels but they have not yet hit their highs seen in May. Unfortunately, interpreting the VIX/VXO/VXN is more art that science. I can't say that if the VIX/VXO hit 21-22 the markets will immediately rebound. These volatility indices could always go higher but no one really expects them to rise to the levels they saw in 2001-2002. What I can say that the higher these indices rise the higher the odds are that we're near a short-term bottom. This makes it somewhat dangerous to consider new bearish positions even through everything appears to be breaking down. Next week will be driven by concerns over economic data, mainly the FOMC meeting and expected rate hike on Tuesday and the host of reports out Thursday and Friday. As we approach the end of the week and the beginning of the Olympics we could see investors move to the sidelines over fears of a terrorist event in Athens sending stocks lower worldwide. This could easily muffle any sort of oversold bounce if one does decide to show up. Trade carefully and watch your stops. ----------------------------------------------------------------- Market Averages DJIA ($INDU) 52-week High: 10753 52-week Low : 8997 Current : 9815 Moving Averages: (Simple) 10-dma: 10045 50-dma: 10193 200-dma: 10226 S&P 500 ($SPX) 52-week High: 1163 52-week Low : 960 Current : 1063 Moving Averages: (Simple) 10-dma: 1092 50-dma: 1108 200-dma: 1108 Nasdaq-100 ($NDX) 52-week High: 1559 52-week Low : 1204 Current : 1315 Moving Averages: (Simple) 10-dma: 1377 50-dma: 1420 200-dma: 1446 ----------------------------------------------------------------- CBOE Market Volatility Index (VIX) = 19.34 +1.02 CBOE Mkt Volatility old VIX (VXO) = 20.23 +2.11 Nasdaq Volatility Index (VXN) = 27.45 +1.26 ----------------------------------------------------------------- Put/Call Ratio Call Volume Put Volume Total 1.38 753,807 1,042,286 Equity Only 1.28 535,745 683,184 OEX 0.78 54,529 42,303 QQQ 3.88 72,091 279,918 ----------------------------------------------------------------- Bullish Percent Data Current Change Status NYSE 55.1 - 2 Bear Confirmed NASDAQ-100 28.0 - 5 Bear Confirmed Dow Indust. 53.3 + 0 Bear Confirmed S&P 500 49.0 - 3 Bear Confirmed S&P 100 50.0 - 4 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: 1.91 10-dma: 1.44 21-dma: 1.37 55-dma: 1.22 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 933 640 Decliners 1902 2387 New Highs 22 14 New Lows 107 240 Up Volume 277M 175M Down Vol. 1493M 1490M Total Vol. 1782M 1672M 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 Commercial traders haven't made any big bets but the data we're looking at doesn't reflect the big sell-off in the last two days. Small traders remain bullish as of this report. Commercials Long Short Net % Of OI 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%) 08/03/04 401,619 419,429 (17,810) (2.2%) 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 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% 08/03/04 128,510 88,833 39,677 18.3% 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 Not much movement in the e-minis from commercial traders. Small traders have turned a bit more bullish, but again this is before the big sell-off. Commercials Long Short Net % Of OI 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%) 08/03/04 340,053 428,736 ( 88,683) (11.5%) Most bearish reading of the year: (354,835) - 06/17/03 Most bullish reading of the year: 133,299 - 09/02/03 Small Traders Long Short Net % of OI 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% 08/03/04 195,105 68,717 126,388 47.9% Most bearish reading of the year: (77,385) - 09/02/03 Most bullish reading of the year: 449,310 - 06/10/03 NASDAQ-100 Commercial traders have reversed their previous gain by paring their longs and adding to their shorts. Meanwhile small traders have turned bearish again. Commercials Long Short Net % of OI 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% 08/03/04 42,771 36,863 5,908 7.4% 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 07/13/04 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% 08/03/04 8,995 13,901 (4,906) (21.4%) 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 Commercials seem to be taking some money off the table as their bullish stances seems to waver a bit here. Small traders pared back their longs and their shorts but remained net bearish. Commercials Long Short Net % of OI 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% 08/03/04 30,118 25,029 5,089 9.2% 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 07/13/04 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%) 08/03/04 4,325 5,212 ( 887) ( 9.3%) Most bearish reading of the year: (12,106) - 3/09/04 Most bullish reading of the year: 8,523 - 8/26/03 ----------------------------------------------------------------- ************************Advertisement********************************* Option Traders: Pay Attention Use the online options trading system built by option traders for options traders. Featuring direct access to each option exchange, stop and stop loss option orders, contingent option orders, online spreads, fast executions, and rates as low as $1.50 per contract ($14.95 min.). PreferredTrade, Inc. Call 888-889-9178 or Click http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN Member NYSE, Other Principal Exchanges, NFA, MSRB and SIPC ******************************************************************** *************** ASK THE ANALYST *************** Jeff, I have been playing with options for several years now (with OI's help) and enjoy the action, but I am a rookie. Over the past couple of days, compared to today's close, I've lost about 35% of the value of my positions from being stopped out at the low trade of the day. After the lessons from a few years ago, I know that stops are important, but I never seem to hit them correctly. Unfortunatly, I have a job and can't watch the markets during the trading hours. Do you have some tips for those of us that can't trade on interday happenings? Thanks in advance, Randy Jeff's reply: Yes.... I have a tip or two. Read some of these "Ask the Analyst" columns. Your paying for a subscription, you might as well get your money's worth. "Your account is your business" 11/07/2002 "Position size is up to you" 06/20/2004 Randy: The REASON OI play writer's profile a STOP in an OPTION is because too many OPTION traders OVERLEVERAGE in options. A trader that buys 10 calls, or 10 puts in a $100 stock is saying "I'd buy/short 1,000 shares of a $100 stock in my account, and still not exceed the 10% rule for my account." Too many traders trading a $10,000 account OVERLEVERAGE when they buy 10 call/puts on a $100 stock, then they MUST use a stop on the option, sometimes getting stopped out right at the wrong time, never getting a chance to let the trade work. "Risk/Reward, Point and Figure, and minimizing risk with options" 05/04/2003. Hope these help, but THINK about them, then REVIEW what YOU are doing in YOUR account, then GO BACK AND REVIEW your LOSING TRADES, not just from point of being stopped for a loss, but the days, weeks that followed. For those of you that DO USE STOPS IN YOUR OPTIONS, I STRONGLY SUGGEST you review THOSE TRADES YOU WERE STOPPED OUT OF! Where are they now if the OPTION has NOT expired? Hey.... could you quickly send me the stocks/options you've played lately? I would like to use them as examples (good or bad) in the Ask the Analyst column. YOU will remain anonymous in the article. (End of Jeff's reply) Jeff, Thanks for the tips--I'll keep reading! I am a little embarrassed, but here are some of the errors I made this week. (Jeff's thinking... hey, at least this guy is serious, he's actually reviewing his trades.... excellent!) 1. I had a couple of what I call runners and could not decide what to do with them. All I knew was that I wanted to protect the gains. (Jeff remembers the saying... I've never met a poor man that takes a profit). -Bought Oct 60 NUE calls at 6.10 set stop at 17.50 executed at 17.20. -Bought Oct 35 TXI calls at 3.00 set stop at 8.00 executed at 7.40. 2. Got scared-- Bought August 27.5 DISH puts at .60 stop set at .70 executed at 65 3. Tried a couple of short term plays and held over earnings based on last year's market (maybe stupid buys, and after today, glad I got stopped) Bought August 22.5 calls TXN at 2 stop and execution at .50 Bought August 15 MOT calls at 2.30 stop and execution at 1.30 4. I liked this stock and it climbed nicely today. Bought August 12.50 calls DHB at 3.20 stop at 1.50 executed at 1.30. 5. Maybe the worst decision-Bought August 35 IRF puts at 2.20 stop and execution at 1.70. 6. Committed the Cardinal Sin-Held over earnings MMM August 90 calls-now worthless. Jeff's reply: Randy: Good gravy! Don't be at all embarrassed. You, I, and others will make mistakes. If you ever talk to anyone that says they never lost on a trade, they're a liar. OK.... between now and then, I would REVIEW this. 1) IF NOT stopped out, how would each trade look today? Between now and EXPIRATION? Remember, you paid some premium for time, did you get your money's worth? 2) I see a lot of August expirations. What is an option trader's BIGGEST risk when trading near-month expiration, especially when he/she loads up on SEVERAL near-month expirations (put or call)? Answer: When buying a BUNCH of near-month expiration, the tendency is "to be right quick, otherwise if I'm not, the more rapid time loss, as well as any Market Volatility (VIX.X) could have great impact on the option's price. If trading near-month expiration and using stops, high likelihood of getting stopped. Remember that its tough enough to predict price movement, let alone predict what options volatility is going to do to options. One time I (Jeff Bailey) had an EXCELLENT call trade on IBM right at a bottom. However, as the broader market surged higher, as did IBM, option's volatility PLUNGED from a high VIX.X. IBM's STOCK gained big time, but the PREMIUM that was also built into the calls, worked against me as it premiums plummeted. Had I bought more TIME, greater gain would have been achieved. 3) See your (Randy's) #2 "I got scared?" Think about this as it relates to the number of option contracts you bought (you didn't disclose), but I'm guessing you OVER LEVERAGED. I'm thinking you bought those Aug. $27.50 puts (10 of them, maybe more?) when the STOCK was below $28. Now, if you bought 10 puts (1,000 shares equivalent) would you (Randy) have shorted 1,000 shares of DISH at $28, stop $28.60, target $26.00? If your answer is "No, I can't take that kind of heat, let alone afford to short 1,000 shares of a $28 stock, but I would have shorted 200 shares, and my account size affords me the ability to short 200 shares (2 put options equivalent), then I would have been willing to risk $0.60 to a stop in the UNDERLYING STOCK. Now Randy.... do you see where you can "consign the loss," or assess risk ahead of time, NOT use a stop and possibly get swung out, stopped out, of an option trade? 4) See your #3? Stupid buys? Why is that? I'd make a note that they are BOTH semiconductor stocks. OK, might not repeat that one in the near future, maybe that was "stupid." After today (now your looking in the rear view mirror, thinking STOPS on options are a good idea). Good gravy! Does it make sense to pay $2.00 for an option, then take a 75% loss the next day or two? Hey...if you're using a stop on the option, then that's life. Before you or I say "and after today, glad I got stopped," check these trades in a week or two to solidify this belief. 5) Check against "in the money" and "out the money." Sometimes we buy out the money because they are cheaper, less capital at risk. That's fine, UNLESS you use the "lower price" of out the money to then believe "hey, I can buy more, and OVER LEVERAGE more." Ugh! Sounds like GREED doesn't it? Hey! Those OSIP out the money August $50 puts (GHU-TJ) I've profiled in the Market Monitor (3 contracts), I'm just above break even after they bid $2.00 the other morning. I missed it at the open, and I've been watching them trade $1.90, $1.80, $1.70, $1.60, $1.50, $1.40, $1.30, $1.20 to today's close. GREED is not good! (grin) (Note: I ended up closing this OSIP put option position for 3 puts bought at $1.00 when we sold 2 of them at $1.65, and the other one at $2.20 later in the day. I will guarantee you if I had bought 10 contracts, they would have been sold either at a loss, or relatively break even.) 6) See you're #1? Stop!!!!!! Stop!!!!!!!, Stop!!!!!!!! NEVER, and I mean NEVER question the RAISING of a PROFIT STOP on an OPTION to PROTECT GAINS. Here you CORRECTLY let the MARKET decide when you take PROFIT! This is NOT GREEDY. Helps pay for those "stupid" trades we take every now and then. (grin) Traders would beat me down silly if I said.... "that's stupid to set a profit stop to take a 200% gain, and we got juked out on the profit stop." Goodness.... do you know how many traders would love that problem of idiocy? (I can't stop laughing if we as traders get frustrated with taking a profit) Hey... how many did you buy? If you're (Randy) still frustrated with the thought "I got juke out of further gains," maybe next time you could set a profit stop on 1/2 of you calls. Leg out of the position. Then if you get profit stopped out, check back in a week or two. If calls have fallen further in price, then you're still "happy" you sold 1/2 of them at higher price. If you did get "juked out" and calls are higher a week later, then you're "happy" you've still got some! Either way, you've taken care of you're emotions, and you're happy. Too often, traders think it is "all in and all out at once." When a military general attacks his opponent, does he send all of his troops into battle at once? In Iraq, are we withdrawing ALL of our troops at once? Trading certainly is not the same thing, but traders can implement similar strategy by "legging in" or "legging out" of a position. The term "legging" in trader talk means gradual. When looking to buy "out the money" calls or puts, an EXCELLENT strategy is to "leg into" a position, especially if buying a couple of months out in expiration. For instance, stock you're looking to PUT is trading $24.50, but you think stock is determined to trade $20 between now and whatever expiration you are contemplating, and you decide to buy the out the money $22.50 puts. There's nothing wrong with the strategy of saying.... "I believe stock is headed to $20, why not buy 1/2 of the position now, wait a week, see if stock is CONFIRMING my analysis/belief." IF stock is trading $23.50 a week later, then analysis builds some conviction, trader legs into the other 1/2 position. Anyway.... you (Randy) took the time to gather some of your trade data, and I wanted to respond in this e-mail. Oh! Always set a target too! Here's an article from an "Ask the Analyst" column from a trader that was trying to figure out how to manage a profitable put option he held on Federated Dept. Stores. Ask the Analyst "Setting profit stops when target is near" 02/23/2003. By setting TARGETS and utilizing point and figure chart analysis, it can be VERY helpful in trade management. (End of Jeff's reply) Jeff, I really appreciate the time you have spent with me. I probably need to read your emails and links a few more times, but I'd thought I'd share my initial takeaways. In general, my strategy has been to set stops at 50% losses and tighter stops after 100% gains; however, I usually let my emotions about future market direction interfere with my plan. In other words, I need to rethink my "business plan" and stick to it! Maybe I need to start thinking in dollars instead of percentages. For example, the 4 dish puts I bought at $0.60, were such a small fraction of my account that a stop loss did not make any sense. I have a small account, so my positions are almost always only 2-4 options. I try to keep the number of contracts even with "legging out" as a strategy in mind, but I have rarely done so. I made some "easy money" in 2003, but have been treading water in 2004 (but my online broker is happy with me). Although I have not learned to fully understand P&F charts, I understood the value of your FD example completely and can think of many examples of -- had I used that technique I would have enhanced my account (and peace of mind). I bought one OSIP July 65 put on 6/21 at $3.00 and was stopped out on 6/22 at $1.50, but I have been watching the stock since. Do you mind sharing what your play has been with it? I am not happy treading water, so will be working hard over the next couple of months to increase my knowledge. Thanks, and I'll stop bugging you soon, Randy Jeff's reply: I had profiled a bearish trade for OSI Pharmaceuticals (NASDAQ:OSIP) on July 19, 2004, where based on technical analysis using BOTH a bar chart and the point and figure chart from www.stockcharts.com (which you can view for FREE at their website), decided that out-the-money August $50 puts (GHU-TJ) would be a good option play based on what the MARKET and the biotech SECTOR was doing. OSI Pharmaceuticals (OSIP) - Daily Intervals On July 19, 2004, I thought a put play in OSIP might be a good trade. I had been observing stocks "gravitating" toward their 200-day SMAs, which I'm sure other market participants had been observing. Some fitted retracement work gave hint that the stock might trade to at least the lower part of a "zone of support" from $52.83-$56.64. At the time (July 19) the point and figure chart of OSIP had its bullish support trend at $50, which I consider to be a longer-term support trend and good target. Now, on July 22, I was running late with the 09:00 intra-day update upload and e-mail, and all be darned if OSIP didn't gap lower at the open. I had placed a QCharts alert at $54 so that I'd be alert that this option trade would be close to a 100% gainer after just three-days had passed since profile, and that might be an enjoyable trade for subscribers. Well, I missed it. Now.... have YOU (the reader of this article) ever found yourself "wishing" you had close out a trade? Remember my talk with Randy about watching those puts go from $1.90 bid, to $1.80, $1.70, ... $1.20? I often find that when I "wish" I had done something, when given a second chance (which the market will often provide) it's a good time to take it. On July 26, and after having watched these options go from a 100% gain to $0.90 bid, OSIP gave us a second chance. But like Randy, I suddenly became "certain" of my analysis. So certain (grin) that I decided it best to "leg out" of the position and sell 2 of those puts at $1.65. Remember, I "wished" I had sold them a couple of days ago at $1.90, $1.80, $1.70, $1.60, $1.50..... Later in the day, as OSIP looked like it was falling apart, I thought. Hmmm.... $2.20 bid on a $50 puts. Do you (Jeff Bailey) really think this thing can trade $47.80 ($50-$2.20 = $47.80) and break below that bullish support trend on your point and figure chart? What do you think of the above bar chart of OSIP as it relates to my YELLOW zones? Is OSIP currently trading in a "zone of support," or is my original analysis and lower YELLOW zone going to be the "zone of support?" Now put yourself in the position of previously "wishing" you had taken a profit, then saw it evaporate, then find the profit reappear. Good gravy man! Take your profits! One trader asked me why I closed the position out entirely when the stock looked so weak. I didn't really have a quick reply, other than to say we had a nice profit, it evaporated, then we had the opportunity to take the profit again. Another question was, why 3 put options? Doesn't that violate you OptionInvestor.com Market Monitor portfolio trading size of $10,000 in the underlying security? Yes it does. But if I had profiled 1, or 2 put options ($10,000 / $58 stock = 172 shares) was it worth $100, or $200 plus commissions to try for a quick 100% gain? Maybe, maybe not. Another question was, why not just short it, use a tight stop instead of paying $1.00 per contract premium? This one is SO EASY. Remember my (Jeff Bailey's) rule of NOT SHORTING BIOTECH STOCKS? See that little gap higher to the left of the chart from about $38.65 to $77.00? A "tight stop" would have done NO GOOD that day. Let me share a FEAR I had this week with you. Those of you that took my bearish day trade short in biotech Protein Design Labs (NASDAQ:PDLI) from $16.80 to the MANDATORY close out before the close to $16.47, during the late afternoon, my heart sunk deep in my stomach when all of a sudden my time and sales suddenly froze, and the stock stopped trading! "Oh $*#&$!!!" I thought, it has been halted! They've discovered the cure for what ails us! Whew! Lucky for us shorts, it was my trading software data feed that went down. The stock was still trading as I scrambled to fire up my Ameritrade Level II quotes. I don't know what the odds are of being short a biotech when it moves 100%, 200%, 300% against you, but I believe more in NOT shorting the underlying stock of a biotech and holding it overnight, than I do in the belief that I will win the lottery. I would MUCH rather LIMIT my RISK to a KNOWN amount with a PUT OPTION, sleep at night, than think about the number of casualties I've witnessed when a biotech stock is thought to have discovered the cure for cancer, or some previously untreated ailment. Jeff Bailey ************* COMING EVENTS ************* ----------------- Earnings Calendar ----------------- Symbol Co Date Comment EPS Est ------------------------- MONDAY ------------------------------- ACF AmeriCredit Corp. Mon, Aug 09 After the Bell 0.34 ADRX Andrx Corporation Mon, Aug 09 -----N/A----- 0.33 ANPI Angiotech Pharm Mon, Aug 09 After the Bell -0.10 BAB British Airways Mon, Aug 09 Before the Bell N/A CVC Cablevision Systems Mon, Aug 09 Before the Bell -0.40 DQE Duquesne Light HldngMon, Aug 09 Before the Bell 0.26 FLA FL East Coast Ind Mon, Aug 09 Before the Bell 0.15 JHX James Hardie Ind Mon, Aug 09 After the Bell N/A GAS Nicor Inc. Mon, Aug 09 Before the Bell 0.19 ONXX Onyx PharmaceuticalsMon, Aug 09 After the Bell -0.31 PSUN Pac Sunwear of Cali Mon, Aug 09 After the Bell 0.23 KPN Royal Kpn N.V. Mon, Aug 09 Before the Bell N/A SGY Stone Energy Mon, Aug 09 After the Bell 1.45 TOUS Tech Olympic USA Mon, Aug 09 After the Bell 0.49 PGR The Progressive CorpMon, Aug 09 -----N/A----- N/A UCOMA UnitedGlobalCom Mon, Aug 09 -----N/A----- -0.03 WSC Wesco Financial Mon, Aug 09 -----N/A----- N/A ------------------------- TUESDAY ------------------------------ ANF Abercrombie & Fitch Tue, Aug 10 After the Bell 0.41 ATO Atmos Energy Corp Tue, Aug 10 After the Bell 0.02 CHD Church & Dwight Co. Tue, Aug 10 Before the Bell 0.44 CSCO Cisco Systems Tue, Aug 10 After the Bell 0.20 CCH Coca-Cola Helnc BttlTue, Aug 10 Before the Bell 0.62 CSC Comp Sciences Corp Tue, Aug 10 After the Bell 0.57 DISH EchoStar Comm Corp. Tue, Aug 10 Before the Bell 0.23 FOSL Fossil, Inc. Tue, Aug 10 Before the Bell 0.17 FS Four Seasons Hotels Tue, Aug 10 Before the Bell 0.35 HSP Hospira Tue, Aug 10 Before the Bell 0.33 OSIP OSI Pharmaceuticals Tue, Aug 10 After the Bell -1.18 PRGO Perrigo Tue, Aug 10 Before the Bell 0.13 TEO Telecom Argentina Tue, Aug 10 After the Bell -0.36 MAY May Depart Stores CoTue, Aug 10 Before the Bell 0.35 DIS Walt Disney Tue, Aug 10 After the Bell 0.27 ------------------------ WEDNESDAY ----------------------------- AAP Advance Auto Parts Wed, Aug 11 After the Bell 0.69 ABV AmBev - Comp BebidasWed, Aug 11 -----N/A----- 0.28 ANN AnnTaylor Stores Wed, Aug 11 After the Bell 0.40 RMK Aramark Corporation Wed, Aug 11 Before the Bell 0.34 AVT Avnet Wed, Aug 11 After the Bell 0.39 BSG BISYS GROUP INC Wed, Aug 11 -----N/A----- 0.17 EAT Brinker Internatl Wed, Aug 11 Before the Bell 0.71 BUH Buhrmann NV Wed, Aug 11 Before the Bell N/A CGT CAE Wed, Aug 11 Before the Bell N/A RIO Comp Vale Rio Doce Wed, Aug 11 After the Bell 0.97 FD Fed Depart Stores Wed, Aug 11 Before the Bell 0.61 FOX Fox Entertain Group Wed, Aug 11 After the Bell 0.29 MIM MI DEVS INC Wed, Aug 11 Before the Bell 0.48 NVO Novo-Nordisk Wed, Aug 11 Before the Bell N/A LQU Quilmes Industrial Wed, Aug 11 After the Bell 0.22 NWS The News Corp Ltd Wed, Aug 11 After the Bell N/A ------------------------- THUSDAY ----------------------------- AEG AEGON N.V. Thu, Aug 12 -----N/A----- N/A A Agilent TechnologiesThu, Aug 12 After the Bell 0.28 AEOS Am Eagle Outfitters Thu, Aug 12 Before the Bell 0.36 ADI Analog Devices Inc. Thu, Aug 12 After the Bell 0.45 BEAS BEA Systems Thu, Aug 12 -----N/A----- 0.07 CSB Ciba Spec Chems HldgThu, Aug 12 Before the Bell 0.55 DELL Dell, Inc. Thu, Aug 12 After the Bell 0.31 DT Deutsche Telekom Thu, Aug 12 Before the Bell N/A DEX Dex Media, Inc. Thu, Aug 12 Before the Bell N/A EON E.ON AG Thu, Aug 12 Before the Bell N/A FMD Frst Marblehead CorpThu, Aug 12 Before the Bell 0.68 KSS Kohl's Thu, Aug 12 After the Bell 0.43 0494.HK Li & Fung Limited Thu, Aug 12 -----N/A----- N/A MTA Matav Thu, Aug 12 -----N/A----- N/A PBY Pep Boys Thu, Aug 12 Before the Bell 0.37 SPI ScottishPower Thu, Aug 12 -----N/A----- N/A TGT Target Corporation Thu, Aug 12 Before the Bell 0.47 TIF Tiffany & Co. Thu, Aug 12 Before the Bell 0.29 UBB Unibanco Thu, Aug 12 -----N/A----- 0.70 URBN Urban Outfitters Thu, Aug 12 Before the Bell 0.20 WMT Wal-Mart Stores Inc.Thu, Aug 12 Before the Bell 0.60 WTW Weight Watchers IntlThu, Aug 12 After the Bell 0.49 ------------------------- FRIDAY ------------------------------- ERJ Embraer-Empresa BrasFri, Aug 13 -----N/A----- 0.45 SCM Swisscom AG Fri, Aug 13 Before the Bell N/A ---------------------------------------------- Upcoming Stock Splits In The Next Two Weeks... ---------------------------------------------- Symbol Co Name Ratio Payable Executable CAPX Capital Crossing Bank 2:1 Aug 9th Aug 10th QCOM Qualcomm Inc 2:1 Aug 13th Aug 16th RNT Aaron Rents, Inc 3:2 Aug 16th Aug 17th WIRE Encore Wire Corporation 3:2 Aug 16th Aug 17th BOCH Bank of Commerce Holdings3:1 Aug 16th Aug 17th IMGC Intermagnetics Gen Corp 3:2 Aug 17th Aug 18th POT Potash Corp Saskatchewan 2:1 Aug 17th Aug 18th JOSB JoS A. Bank Clothiers Inc 5:4 Aug 18th Aug 19th HTLD Heartland Express 3:2 Aug 20th Aug 23rd TOX MEDTOX Scientific, Inc 3:2 Aug 20th Aug 23rd -------------------------- Economic Reports This Week -------------------------- The Q2 earnings season is starting to slow down this week. Wall Street's focus will be on the Tuesday FOMC meeting and the expected 1/4 point hike. Thursday and Friday are very busy with lots of economic data being released. Friday's PPI report is probably the big one to watch. ============================================================== -For- ---------------- Monday, 08/09/04 ---------------- Wholesale Inventories (DM) Jun Forecast: 0.6% Previous: 1.2% ----------------- Tuesday, 08/10/04 ----------------- Productivity-Prel (BB) Q2 Forecast: 2.0% Previous: 3.8% FOMC Meeting on monetary policy (DM) ------------------- Wednesday, 08/11/04 ------------------- Treasury Budget (DM) Jul Forecast: -$60.0B Previous: -$54.2B ------------------ Thursday, 08/12/04 ------------------ Initial Claims (BB) 08/07 Forecast: 340K Previous: 336K Business Inventories (BB) Jun Forecast: 0.5% Previous: 0.4% Export Prices ex-ag. (BB) Jul Forecast: N/A Previous: -0.1% Import Prices ex-oil (BB) Jul Forecast: N/A Previous: 0.0% Retail Sales (BB) Jul Forecast: 1.1% Previous: -1.1% Retail Sales ex-auto (BB) Jul Forecast: 0.4% Previous: -0.2% FOMC minutes released. ---------------- Friday, 08/13/04 ---------------- Trade Balance (BB) Jun Forecast: -$46.5B Previous: -$46.0B PPI (BB) Jul Forecast: 0.3% Previous: -0.3% Core PPI (BB) Jul Forecast: 0.1% Previous: 0.2% Mich Sentiment-Prel. (DM) Aug Forecast: 98.0 Previous: 96.7 Definitions: DM= During the Market BB= Before the Bell AB= After the Bell NA= Not Available ************************Advertisement************************* Full Service Brokers Man Financial announces the formation of the OneStopOption Brokerage Group, addressing the demand for personalized, experienced service for both securities* and futures trading within the same firm. 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The Option Investor Newsletter Sunday 08-08-2004 Sunday 2 of 5 In Section Two: Watch List: Two Bullish, Two Bearish Dropped Calls: ADSK, ETN, FDX, HUG Dropped Puts: None ************************Advertisement************************* Live Securities Brokerage Service with Licensed Option Principals OCO Stop & Profit Orders OneStopOption All types of Spreads and Buy Writes 888-281-9569 Auto-Trade Market Monitor Signals Personal Service and Education **Services available for Foreign Traders including Canada** http://www.OneStopOption.com ************************************************************** ********** Watch List ********** Two Bullish, Two Bearish ___________________________________________________________________ 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. ___________________________________________________________________ Chicago Mercantile Exchange - CME - close: 129.88 chg: +8.63 WHAT TO WATCH: We mentioned CME in the MarketMonitor on Friday. Shares exploded higher for no apparent reason after dipping under support at the $120 level and its simple 100-dma. Volume was very big at more than twice the norm. The stock broke through three-week old resistance at the $127.50 level and closed right under its 40 and 50-dma's and the $130 mark. We strongly considered adding CME to the play list as a call but chose to pass since we couldn't determine the cause of the rally. More aggressive readers may want to consider bullish positions on a breakout above $130.00. Chart= --- LandAmerica Financial - LFG - close: 40.25 change: +1.29 WHAT TO WATCH: Any time a stock can buck the prevailing trend in the face of a market-wide sell-off it will pique our curiosity. LFG broke out from its recent trading range and pushed through round-number resistance at $40.00 and technical resistance at its simple 100-dma. Volume was well above normal on the rally yet we can't find a catalyst for the move. Readers might want to consider bullish positions if LFG shows any follow through on Monday. Chart= --- Omnicom - OMC - close: 67.69 change: -1.48 WHAT TO WATCH: We considered adding OMC to the put list this weekend. The oversold bounce has completely turned around and OMC has broken through support at the $68.00 level. Short-term technicals are very bearish and its MACD is nearing a new "sell" signal. The bearish P&F chart points to a $53 target. Readers may want to consider bearish positions on any new weakness with a $60 target. Chart= --- Maxim Integrated - MXIM - close: 44.23 change: -2.35 WHAT TO WATCH: The SOX semiconductor index continues to fall and is currently testing the trendline of lower lows (a.k.a. the bottom of its descending channel). Should the SOX continue to breakdown then we'd expect MXIM to break support at the $44.00 level. Should this occur traders could use it as a trigger to target a drop toward the $40.00 level. MXIM's bearish P&F chart has produced a new triple-bottom breakdown sell signal that currently points to a $38 target. Chart= ----------------------------------- RADAR SCREEN - more stocks to watch ----------------------------------- IMCL $51.45 -3.93 - IMCL's oversold bounce has turned into a full-fledged retreat and shares have broken the simple 200-dma. Aggressive traders might watch for a drop under the $50.00 mark. DE $57.60 -2.25 - Ouch! The follow through on DE's breakdown under the $60 level is sharp. Volume on Friday's decline was more than twice the norm. ************************Advertisement************************* No time to follow the Market Monitor? Tired of missing good Trades because you stepped away from your computer? OneStopOption Group can follow the Market Monitor for you. You choose the number of contracts, we take care of the rest!! Trade Stock Options, Stocks and ALL Futures with the same Group. Call us 888 281-9569 to see if you qualify to have us rebate your subscription cost. http://www.OneStopOption.com ************************************************************** ************************** PICKS WE DROPPED THIS WEEK ************************** Remember that historically, when we drop a pick it will go up 10 to 15% the very next week. It is part of Murphy's Law. Just because we drop a stock as a pick does not mean we are advocating a "sell" on any position you have. We are simply dropping our recommendation as a new play. Existing plays can and do continue on and are usually profitable. CALLS ^^^^^ Autodesk - ADSK - close: 36.28 change: -2.27 stop: 36.99 Ouch! We knew that Thursday's breakdown was bad news (and said so). The market wide sell-off on Friday and the carnage in the tech sector hit ADSK for a 5.8 percent drop. Technicals are very bearish and while ADSK managed to stop above its simple 100-dma it may not hold as support. We were stopped out at $$36.99. We would keep ADSK on your watch list as some analyst expect a rebound in the software sector soon. Picked on July 30 at $ 40.05 Change since picked: - 3.77 Earnings Date 08/19/04 (confirmed) Average Daily Volume: 2.1 million Chart = -- Eaton Corp - ETN - close: 61.00 change: -2.95 stop: 61.99 Friday's market weakness hit ETN pretty hard as well. Shares fell more than 4.6 percent and broke down through its simple 50- dma to hit new one-month lows. Volume on the decline was double the norm. While we expect ETN to have some support at the $60.00 level it doesn't look very good. We have been stopped out at $61.99. Picked on July 29 at $ 64.98 Change since picked: - 3.98 Earnings Date 07/15/04 (confirmed) Average Daily Volume: 925 thousand Chart = --- Fedex Corp - FDX - close: 78.14 change: -1.11 stop: 79.00 As we expected FDX broke down under support at the $79 level and its simple 50-dma. The move was lead by a sharp 2.9 percent drop in the Dow Transports. Technicals are bearish for FDX and shares could head lower to retest the $75-76 region as support. FDX did gap down on Friday to open at $78.30, which is under our stop loss at $79.00. Picked on July 20 at $ 82.81 Change since picked: - 4.67 Earnings Date 06/23/04 (confirmed) Average Daily Volume: 1.1 million Chart = --- Hughes Supply - HUG - close: 56.81 change: -2.04 stop: 57.75 HUG is another casualty to the market's big drop in the last couple of days. Shares have broken down through support at $58.00 and its simple 40 and 50-dma. Look for a potential bounce from the simple 100-dma just north of $55.00. We've been stopped out at $57.75. Picked on July 15 at $ 60.51 Change since picked: - 3.70 Earnings Date 08/24/04 (unconfirmed) Average Daily Volume: 288 thousand Chart = PUTS ^^^^ None *********** DEFINITIONS *********** OI = Open Interest - the number of open contracts outstanding. Last Trade @ = Indicates where the option traded last. ITM = In the money ATM = At the money OTM = Out of the money ADV = Average Daily Volume The options with a "*" by the strike price are our choices from the group. If the stock moves as expected we feel they have the best chance to substantially increase or double in price with the best risk/reward ratio compared to the other options for the same stock. You must determine if they fit your risk profile for time and price. RISKS of SELLING PUTS: The risk of selling naked puts is always the possibility of a catastrophic event that drops the stock below the strike price and could result in the stock being PUT to you. Always protect yourself with a "buy to cover" limit order to take you out before this can happen. ************************Advertisement************************* Stock Option and Futures Brokerage OneStopOption teams the best trading technology with varying levels of professional assistance at very competitive prices. Commission costs are comparable to discount brokerage and tailored to individual customer needs. The power of one brokerage group with experience and expertise in the Securities* and Futures Markets offers unprecedented convenience for traders. Access To All Futures Markets Toll Free 888-281-9569 Stock Option Principals www.OneStopOption.com ************************************************************** ********** DISCLAIMER ********** Please read our disclaimer at: http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html ************************************************************** ADVERTISING INFORMATION For more information on advertising in OptionInvestor Newsletter, or any Premier Investor Network newsletter please contact: Contact Support
The Option Investor Newsletter Sunday 08-08-2004 Sunday 3 of 5 In Section Three: Current Calls: CCMP, IMO, SYMC, TXT New Calls: None Current Put Plays: AMZN, AZO, CAT, CI, EBAY, RIMM New Puts: DGX, WHR ************************Advertisement************************* OneStopOption.com Trade: Securities, Stock Options, Futures Contracts Service: Experienced Brokers Personal Assistance Convenience of One Brokerage Online and Live Broker Trading Experience... The Difference OneStopOption.com 888-281-9569 *************************************************************** ****************** CURRENT CALL PLAYS ****************** Cabot Micro - CCMP - close: 32.67 change: -1.61 stop: 31.75 Company Description: Cabot Microelectronics Corporation, headquartered in Aurora, Illinois, is the leading supplier of CMP slurries for polishing various materials used in semiconductor manufacturing processes. The company's products play a critical role in the production of the most advanced semiconductor devices, enabling the manufacture of smaller, faster and more complex devices by its customers. (source: company press release) Why We Like It: It's do or die time for CCMP and the SOX semiconductor index. The SOX has slipped with the NASDAQ to new lows. However, there is some small hope for a rebound in the SOX with the index resting right at the trendline of support of lower lows dating back several months. Yet if the SOX doesn't bounce soon then it could game over for CCMP. We're actually impressed that CCMP is holding up so well. The stock has been churning in its trading range between $32 and $26 the last couple of weeks. The test now is whether or not support at $32 will hold. Unfortunately, technicals are turning bearish and CCMP closed under its simple 100-dma, which is normally bad news. Aggressive traders can consider a bounce from $32 as an entry point. The rest of us can probably wait for a move over $35-36 again. Suggested Option: Right now, with the SOX hitting new lows and CCMP nearing support at $32 we are not recommending new positions. Annotated Chart: Picked on August 1st at $35.46 Change since picked: - 2.79 Earnings Date 07/22/04 (confirmed) Average Daily Volume = 935 thousand Chart = -- Imperial Oil - IMO - close: 47.70 change: -0.69 stop: 46.75 Company Description: Imperial Oil is Canada's largest integrated oil company and its largest refiner and marketer of petroleum products with over 2,100 Esso-branded retail sites across the country. (source: company press release) Why We Like It: The sell-off has been so strong this past week that even oil stocks have been hit with profit taking. The fact that crude oil is closing near all-time highs is not enough to save the oil patch from investor fear. IMO managed to breakout above the $50.00 level on an intraday basis earlier in the week but couldn't hold it. Then the selling began. We expected a little profit taking and outlined a potential bounce from $48 as an entry point. Now IMO has broken down under $48.00, its 10-dma, and 21-dma. Technicals have turned bearish and shares are headed toward the $47 level. If IMO doesn't bounce from $47.00 and its simple 40-dma we're in trouble. We would not suggest new positions until IMO traded back above $48.50-49.00. Suggested Option: Given the current market environment we are not suggesting new bullish positions in IMO at this time. See comments above. Annotated Chart: Picked on August 1st at $49.49 Change since picked: - 1.79 Earnings Date 07/22/04 (confirmed) Average Daily Volume = 55 thousand Chart = --- Symantec - SYMC - close: 45.51 change: +0.10 stop: 42.45 Company Description: Symantec is the global leader in information security providing a broad range of software, appliances and services designed to help individuals, small and mid-sized businesses, and large enterprises secure and manage their IT infrastructure. Symantec's Norton brand of products is the worldwide leader in consumer security and problem-solving solutions. Headquartered in Cupertino, Calif., Symantec has operations in more than 35 countries. (source: company press release) Why We Like It: Relative strength. That's what bulls should be happy about when they look at SYMC. On a day that the NASDAQ lost 2.45 percent and the GSO software index fell 2.4 percent shares of SYMC actually closed in the green with a decent bounce off its intraday lows. We find this very encouraging and suggests that when the market does bounce SYMC could be a leader to the upside. It's worth noting that SoundView came out on Thursday and said the software sector was extremely oversold and due for a significant rebound. Also noteworthy was Piper Jaffray's upgrade for SYMC from "market perform" to "out perform". The analyst also raised their price target on SYMC from $50 to $55. There has been some concerns in the software security industry recently about how third-party products will interface with Microsoft's big update coming out (service pack 2), which is supposed to seriously upgrade the security on Windows XP. Fortunately, SYMC announced Friday afternoon that their products are compatible with service pack 2. We're still willing to buy a bounce at $44.00 but should it fail to appear traders can use a breakout above $46 as an entry. Such a move would appear to be a bull flag breakout. Our target remains the $49.50-50.00 region although the bullish P&F chart points to a long-term $60 target. Suggested Options: We like the August and September calls, specifically the $40 and $45 strikes. We'd suggest the September strikes. BUY CALL AUG 40 SYQ-HH OI= 6156 Current Ask $5.70 BUY CALL AUG 45 SYQ-HI OI=10962 Current Ask $1.50 BUY CALL SEP 40 SYQ-IH OI= 698 Current Ask $6.20 BUY CALL SEP 45 SYQ-II OI= 922 Current Ask $2.60 Annotated chart: Picked on July 27 at $ 44.91 Change since picked: + 0.60 Earnings Date 07/21/04 (confirmed) Average Daily Volume: 5.4 million Chart = --- Textron - TXT - close: 61.32 change: -0.71 stop: 59.49 Company Description: Textron Inc. is a $10 billion multi-industry company with more than 43,000 employees in nearly 40 countries. The company leverages its global network of aircraft, industrial and finance businesses to provide customers with innovative solutions and services. Textron is known around the world for its powerful brands such as Bell Helicopter, Cessna Aircraft, Kautex, Lycoming, E-Z-GO and Greenlee, among others. (source: company press release) Why We Like It: In spite of the last two days of declines shares of TXT are still out performing the market. Nothing goes up in a straight line and that's especially true when the markets are sinking. Now the bearish twist we're seeing in the technicals is discouraging but not completely unexpected. Readers can look for a bounce from the $60.00-60.50 region as a new entry point for bullish positions. However, any new positions are probably best considered only if the market is rebounding as well. The $60 level, which was resistance for so long, should hold as support. If it doesn't then we want out. Suggested Options: We like the August and September calls. Our favorites are the $55s and $60s with the Septembers looking like the better deal. BUY CALL AUG 55 TXT-HK OI= 0 Current Ask $6.60 BUY CALL AUG 60 TXT-HL OI= 174 Current Ask $2.00 BUY CALL SEP 55 TXT-IK OI= 588 Current Ask $6.80 BUY CALL SEP 60 TXT-IL OI= 456 Current Ask $2.85 BUY CALL SEP 65 TXT-IM OI=1114 Current Ask $0.55 Annotated Chart: Picked on July 26th at $60.72 Change since picked: + 0.60 Earnings Date 07/22/04 (confirmed) Average Daily Volume = 622 thousand Chart = ************** NEW CALL PLAYS ************** None ************************Advertisement********************************* Option Traders: Pay Attention Use the online options trading system built by option traders for options traders. Featuring direct access to each option exchange, stop and stop loss option orders, contingent option orders, online spreads, fast executions, and rates as low as $1.50 per contract ($14.95 min.). PreferredTrade, Inc. Call 888-889-9178 or Click http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN Member NYSE, Other Principal Exchanges, NFA, MSRB and SIPC ******************************************************************** ***************** CURRENT PUT PLAYS ***************** Amazon.com - AMZN - close: 35.49 change: -0.12 stop: 39.08 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: It was hard to believe. For the first half of Friday's session shares of AMZN were trading higher as the market crashed lower. Was it an oversold bounce? Were shorts covering/bulls buying the dip when it dipped to round-number support at $35.00? We couldn't find any news to relate to the bounce. Fortunately, before 1:00 PM rolled around AMZN had peaked and began to sink back toward the $35 level. We remain bearish on the stock and believe that if the major indices are now hitting new relative lows for the year then AMZN is likely to lead them. Shares are at round-number support at $35.00 so it is possible that AMZN might try another oversold bounce but we would expect the simple 10-dma, currently at $37.75 to act as resistance. We're currently targeting a drop to the $32.50-30.00 range. That makes new entries somewhat challenging. Readers can choose to short/buy puts on another failed bounce under the 10-dma or look for a drop under Friday's low at $34.85. It is interesting to note that the P&F chart now points to a $15.00 target. FYI: some readers may want to exit all or half their position with the rise in put values. The August 35s have virtually doubled to $1.40. The August 37.50s have risen from $1.60 to $2.95 and the August 40s have climbed from $3.20 to $4.90. The September puts have made impressive gains as well. Suggested Options: Short-term traders have a choice between August and September puts. We prefer the September 35s and 40s. BUY PUT AUG 32.50 ZQN-TZ OI= 2666 Current Ask $0.60 BUY PUT AUG 35.00 ZQN-TG OI=12169 Current Ask $1.40 BUY PUT AUG 37.50 ZQN-TU OI=10474 Current Ask $2.95 BUY PUT AUG 40.00 ZQN-TH OI=13202 Current Ask $4.90 BUY PUT SEP 32.50 ZQN-UZ OI= 3811 Current Ask $1.55 BUY PUT SEP 35.00 ZQN-UG OI= 8558 Current Ask $2.55 BUY PUT SEP 37.50 ZQN-UU OI= 5641 Current Ask $3.90 BUY PUT SEP 40.00 ZQN-UH OI= 3032 Current Ask $5.70 Annotated chart: Picked on August 3rd at $37.61 Change since picked: - 2.12 Earnings Date 07/22/04 (confirmed) Average Daily Volume = 8.3 million Chart = --- AutoZone - AZO - close: 73.81 change: +1.46 stop: 76.51 Company Description: As of May 8, 2004, AutoZone sells auto and light truck parts, chemicals and accessories through 3,337 AutoZone stores in 48 states plus the District of Columbia in the U.S. and 60 AutoZone stores in Mexico. Each store carries an extensive product line for cars, sport utility vehicles, vans and light trucks, including new and remanufactured automotive hard parts, maintenance items and accessories. Many domestic stores also have a commercial sales program that provides commercial credit and prompt delivery of parts and other products to local, regional and national repair garages, dealers and service stations. AutoZone also sells ALLDATA brand diagnostic and repair software. (source: company press release) Why We Like It: Are we looking at a mirage? Is the intraday rebound from new lows in shares of AZO to be believed? The stock hit new lows at $70.35 on Friday, which incidentally could qualify as a hit for our initial target region "near" $70.00, before rebounding sharply and almost touching old support - now new resistance at $75.00. What prompted such a move? It would seem that rumors of Eddie Lampert and his ESL Investments could be planning to buy more stock in AZO. Lampert has been making headlines recently because he's behind the turnaround in Kmart and everyone's keenly aware of how shares of KMRT have rocketed higher. We can't say if this Lampert news is the culprit for AZO's surprise rally or if it will last. What we can see is how the $75 level held up as resistance. This may prove to be another entry point to initiate bearish positions. We'd probably suggest readers wait for AZO to drop back under the $73.50-73.25 levels before initiating new plays. Suggested Options: Short-term traders can play the August puts if they like but we're partial to the September strikes. BUY PUT SEP 80 AZO-UP OI= 952 current ask $7.10 BUY PUT SEP 75 AZO-UO OI=1558 current ask $3.70 BUY PUT SEP 70 AZO-UN OI= 976 current ask $1.60 Annotated chart: Picked on August 4th at $74.60 Change since picked: - 0.79 Earnings Date 05/26/04 (confirmed) Average Daily Volume = 1.0 million Chart = --- Caterpillar - CAT - close: 70.25 change: +0.63 stop: 73.25 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: Technically shares of CAT still look very weak and with the Dow Industrials breaking down to new lows for the year the future could be challenging for this Dow-component. Oddly enough shares of CAT managed to buck the trend in the broader indices and close higher. Not only did CAT close in the green it closed above the $70.00 mark, which is seen as round-number support/resistance. Volume was the strongest it has been in the last two weeks. Could there be some rumors circulating about the latest union negotiations? We mentioned earlier that CAT does have a major event risk ahead of us. On Thursday it issued its last and "best" offer to the UAW labor union just as workers were beginning to walk out. The labor talks have been going on for months and both sides say they want to avoid the pain of a strike. If CAT and the UAW can come to an agreement we would expect shares to rally. That's why you need to keep your stops in place. More importantly if this is too much risk for you then don't play. Obviously if CAT doesn't reach an agreement with its union workers then we expect shares to fall. Traders willing to play with the risks can look for another failed rally under $72.00 and its simple 10-dma as an entry point or a drop through $70.00 again. 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=6024 current ask $5.10 BUY PUT AUG 70 CAT-TN OI=7939 current ask $1.60 BUY PUT SEP 75 CAT-UO OI= 964 current ask $5.90 BUY PUT SEP 70 CAT-UN OI=1837 current ask $2.85 BUY PUT SEP 65 CAT-UM OI= 517 current ask $1.20 *very speculative Annotated chart: Picked on August 5th at $70.75 Change since picked: - 0.50 Earnings Date 07/22/04 (confirmed) Average Daily Volume = 2.4 million Chart = -- Cigna Corp - CI - close: 59.20 change: -0.93 stop: 62.51 Company Description: CIGNA Corporation headquartered in Philadelphia, and its subsidiaries constitute one of the largest publicly owned providers of health care, disability, life and accident insurance benefits in the United States and selected markets around the world. (source: company press release) Why We Like It: (Original play from Thursday) If you read the earnings report you probably feel that CI belongs on the call list not the put list. The company blew away estimates and raised its outlook for 2004. So why did shares paint a massive bearish engulfing candlestick yesterday after the results came out? Good question. It would appear that CI is dealing with a continuing decline in its membership and predicted that it would continue. Today shares saw an early morning (oversold?) bounce but it faded with the market's decline. Now we want to list CI as a potential bearish breakdown candidate. The P&F chart already shows CI in a double-bottom breakdown sell signal with a $50.00 target. We think that traders might be able to get a quick drop to the $55.00 level if CI breaks support again at the $60.00 level and its simple 200-dma. However, the jobs number is coming out tomorrow and if it's good then stocks should rebound. If the jobs number is bad...well.. look out below. We will use a TRIGGER under the recent July low. Our entry point will be a drop under $59.70 with a quick exit point at $55.00. Weekend Update: The market sell-off on Friday was enough to push CI through support at the $60.00 level. CI hit our TRIGGER to open bearish positions at $59.70 with its gap down at the open ($59.59). The $60 level should now be overhead resistance. CI still looks ripe for new positions. Suggested Options: This should be a quick play if it happens but we'll feel more comfortable with the September puts. BUY PUT SEP 60 CI-UL OI=1248 current ask $3.10 BUY PUT SEP 55 CI-UK OI= 640 current ask $1.15 Annotated Chart: Picked on August 6th at $59.59 Change since picked: - 0.39 Earnings Date 08/04/04 (confirmed) Average Daily Volume = 985 thousand Chart = --- eBay Inc - EBAY - close: 73.76 change: -0.03 stop: 77.50*new* 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: EBAY and AMZN were both running higher on Friday at least for the first half of the session. We were surprised to see EBAY bouncing as the rest of the tech sector sank. It would appear the move could have been technical in nature. EBAY's morning low tagged the exponential 200-dma, not its simple 200-dma. Fortunately, the rally faded and the stock turned negative again just before the close. Point-and-figure traders will note that EBAY's recent weakness has finally reversed the recent bounce-buy signal into a new sell signal with a $65 target. Now more importantly is what do we do now? EBAY is testing its exponential 200-dma and is within a couple of points of our target near $71.50. We would suggest readers tighten their stops and plan to exit. EBAY could dip to $71.50 intraday only to bounce again and we need to be ready to close the play, which we will do if EBAY trades within 25 cents of our target. We're going to tighten our stop loss to $77.50 but this may be too wide for some readers. FYI: If EBAY breaks down under $70.00 we may consider new put positions. Suggested Options: EBAY is only a couple of points away from our target at $71.50. We are not suggesting new put positions and readers need to be ready to exit. The August 75s have already risen from $1.50 to $2.85. The August 80s have climbed from $4.20 to $6.70. The September 75s are up to $4.60 from $3.00. Annotated chart: Picked on August 3rd at $77.08 Change since picked: - 3.32 Earnings Date 07/21/04 (confirmed) Average Daily Volume = 9.1 million Chart = --- Research In Motion - RIMM - close: 53.89 chg: -2.44 stop: 58.51 Company Description: Research In Motion is a leading designer, manufacturer and marketer of innovative wireless solutions for the worldwide mobile communications market. Through the development of integrated hardware, software and services that support multiple wireless network standards, RIM provides platforms and solutions for seamless access to time-sensitive information including email, phone, SMS messaging, Internet and intranet-based applications. RIM technology also enables a broad array of third party developers and manufacturers to enhance their products and services with wireless connectivity to data. RIM's portfolio of award-winning products, services and embedded technologies are used by thousands of organizations around the world and include the BlackBerry. wireless platform, the RIM Wireless Handheld(TM) product line, software development tools, radio-modems and software/hardware licensing agreements. Founded in 1984 and based in Waterloo, Ontario, RIM operates offices in North America, Europe and Asia Pacific. (source: company press release) Why We Like It: (Original play from Thursday) This is purely a technical play on RIMM's bearish posture. The earnings news faded as soon as we moved into the month of July. The oversold bounce from the last week of July has faded. Now RIMM has fallen under the $60.00 level again and is nearing significant support at the $55.00 level and its simple 100-dma. It is also important to note that RIMM's point-and-figure chart is showing a descending triple-bottom breakdown with a $49 price target. We are going to use a TRIGGER to enter this play because tomorrow's jobs report could change everything. We only want to buy puts if RIMM breaks down under the simple 100-dma. This technical level held up pretty well back in May. We'll use a TRIGGER at $54.50 as our entry point. Short-term traders can target a quick drop to $50. We suspect that RIMM could trade down to its simple 200-dma near $45. Weekend Update: Heads up! The market weakness on Friday sent RIMM to another 4.3 percent loss. Shares broke down under support at $55.00 and its simple 100-dma. Volume on Friday's decline was almost double the average. We are TRIGGERED at $54.50 with a stop loss at $58.51. Short-term traders can target a move to $50. We're looking for a drop toward $45 (or at least $47.50). Suggested Options: We like the September strikes. We think the 57.50s, 55s, 52.50s and even the 50s can work well for this play. BUY PUT SEP 57.50 RUP-UY OI=5585 current ask $6.40 BUY PUT SEP 55.00 RUP-UK OI=5919 current ask $4.90 BUY PUT SEP 52.50 RUP-UX OI=2790 current ask $3.70 BUY PUT SEP 50.00 RUP-UJ OI=6583 current ask $2.70 Annotated Chart: Picked on August 6th at $54.50 Change since picked: - 0.00 Earnings Date 06/29/04 (confirmed) Average Daily Volume = 6.7 million Chart = ************* NEW PUT PLAYS ************* Quest Diagnostic - DGX - close: 79.41 chg -2.04 stop: 82.51 Company Description: Quest Diagnostics Incorporated is the nation's leading provider of diagnostic testing, information and services, providing insights that enable healthcare professionals to make decisions that improve health. The company offers the broadest access to diagnostic testing services through its national network of laboratories and patient service centers, and provides interpretive consultation through its extensive medical and scientific staff. Quest Diagnostics is the leading provider of esoteric testing, including gene-based medical testing, and provides advanced information technology solutions to improve patient care. (source: company press release) Why We Like It: When everything is breaking down and hitting new lows for the year it's tough to find something that isn't oversold. That's why we're drawn to DGX. Shares are showing weakness but there's still plenty of room for more profit taking. The stock peaked in early June and drifted lower to test support at the $80 level in late July just as the market produced its short-lived bounce. The bounce faded in DGX too and now the stock has cracked support at the $80.00 mark and its simple 200-dma. The bullish perspective here is that DGX has out performed the markets by falling more slowly. That may be true but the selling pressure is likely to pick up the pace if the major indices keep sliding and if DGX completes the breakdown under support. That's right, DGX still has some support left. The stock has not yet closed under its exponential 200-dma (currently 79.24) nor has it closed under its February low at $79.25. We're willing to short a breakdown but we want to see some confirmation. We'll use a TRIGGER at $78.99 to open the play. If we're triggered we'll target a drop toward $72.00 but short-term traders can target a quick move toward support at $75.00. The P&F chart is currently bearish with a $74 target but shows support near $71- 72. More aggressive traders could target an entry on a failed rally back toward $81.50 but be careful! Suggested Options: We would suggest the September 80s or 75s. BUY PUT SEP 80 DGX-UP OI= 131 current ask $3.00 BUY PUT SEP 75 DGX-UO OI= 26 current ask $1.20 Annotated Chart: Picked on August xth at $xx.xx <-- see TRIGGER Change since picked: - 0.00 Earnings Date 07/22/04 (confirmed) Average Daily Volume = 602 thousand Chart = --- Whirlpool - WHR - close: 58.71 change: -1.00 stop: 61.51 Company Description: Whirlpool Corporation is the world's leading manufacturer and marketer of major home appliances, with annual sales of over $12 billion, 68,000 employees, and nearly 50 manufacturing and technology research centers around the globe. The company markets Whirlpool, KitchenAid, Brastemp, Bauknecht, Consul and other major brand names to consumers in more than 170 countries (source: company press release) Why We Like It: Normally when a company's CFO resigns the market's reaction is pretty negative. Yet when WHR announced that its CFO was suddenly leaving on August 3rd shares slipped lower but not by very much. It took the market's widespread drop on Thursday to finally produce a reaction in WHR. Shares broke down under support at the $61.00 and the $60.00 level on big volume. Friday saw some follow through on the drop with the intraday rebound rolling over by the closing bell. This technical breakdown could have been spooked by the disappointing personal spending numbers or general worries that the economy isn't as strong as we thought it might be. It is worth noting that WHR's P&F chart has produced a new double- bottom breakdown sell signal with a $53 target. We suspect that the stock could actually fall farther but we're going to list an early target at $55.00 partly due to the trendline on its weekly chart (see below). Readers can choose to pick entries here or look for a bounce and roll over under $60 or $61. We'll start the play with a stop loss at 61.51. Our immediate risk is probably positive comments from the Fed after its meeting on Tuesday. Yet it could produce the sort of bounce we want to short WHR at resistance. Suggested Options: We're going to suggest the September 60 and 55 puts. BUY PUT SEP 60 WHR-UL OI=1717 current ask $3.50 BUY PUT SEP 55 WHR-UK OI= 306 current ask $1.35 Annotated Chart: Picked on August 6th at $58.71 Change since picked: - 0.00 Earnings Date 07/21/04 (confirmed) Average Daily Volume = 849 thousand Chart = ************************Advertisement********************************** Option traders, check what PreferredTrade offers: - true direct access to each option exchange - stop and stop loss online option orders - contingent option orders based on the price of the option or stock - online spread order entry for net debit or credit - fast option executions - rates as low as $1.50 per contract ($14.95 min) PreferredTrade, Inc. Call 888-889-9178 or Click http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN Member NYSE, Other Principal Exchanges, NFA, MSRB and SIPC *********************************************************************** ********** DISCLAIMER ********** Please read our disclaimer at: http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html ************************************************************** ADVERTISING INFORMATION For more information on advertising in OptionInvestor Newsletter, or any Premier Investor Network newsletter please contact: Contact Support
The Option Investor Newsletter Sunday 08-08-2004 Sunday 4 of 5 In Section Four: Leaps: Mass Confusion Reigns ************************Advertisement************************* Full Service Brokers Man Financial announces the formation of the OneStopOption Brokerage Group, addressing the demand for personalized, experienced service for both securities* and futures trading within the same firm. Licensed Option Principals Andrew Aronson and Alan Knuckman specialize in live assistance of stock*, option* and futures traders. The combination of the proven Man Financial global presence and the convenience of one group for all trading needs provide customers with the tools needed for success. Live Broker and Online Trading Available 888-281-9569 http://www.OneStopOption.com ************************************************************** ***** LEAPS ***** Mass Confusion Reigns Last week was an exercise in futility. I started it off with wrong symbols in the Russell put play and the week started off with a high profile terror alert on Sunday. The expected rebound fizzled after the alert and we barely stayed in the green on Mon/Tue. The SMH puts are working like a charm with the SOX under 400 once again. We were triggered on Monday when the SMH hit $32.50 and our target is $28.00. The Russell puts were another story. I profiled the Russell Ishares but when I reached into my memory bank for the symbol I came up with IWN instead of IWM. The IWN is the Russell 2000 Value Ishares and the IWM is the Russell 2000 Index. I updated the website Sunday night when the error was found and sent out an update in the Monday night email as well. The play worked regardless of what symbol you used with the IWN symbol (IWN-UL) up from $3.10 to $6.20. The IWM symbol (IWT-WB) jumped from $4.10 to $6.60. In fact you can see the wrong symbol actually performed better because of the higher index value. The corrected Russell IWM play had a target of $105 and that target was hit on Friday. Since it got off to such a bad start I left it in the portfolio for this weekend. I still expect the Russell to move lower but it will be up to you to plan your own exit. I will remove it from the list next week. ******************** With the market imploding and creating new values for us on all fronts we really can't complain that several of our current plays are also dropping. In a down market all stocks are treated equal. The next three weeks should continue to offer us buying opportunities and I fully plan on taking advantage of the opportunities. Some of the targets on the watch list may seem extreme but after the last week in the markets I would not assume anything was too low. Over the last 15 years August has been the worst month for the markets for the Dow and SPX and the second worst month for the Nasdaq. SYMC - Symantec - $45.51 In a world where multiple new viruses are a daily event nobody can afford to be without virus software. Personally I think Symantec's Norton is the best available. I have tried McAffe and Norton side by side and by far the Symantec product is the best for my money. We run Norton on all of our personal PCs and our server farm. I had profiled SYMC in the past as a takeover candidate by Microsoft but it no longer appears they are interested. Microsoft was giving away the Symantec product with various operating system packages earlier this year. Microsoft will eventually be a strong competitor to Symantec but I doubt it will be soon. They have too many other irons in the fire. SYMC is one of those stocks like EBAY that seldom loses ground. For this reason we may have a hard time getting filled on an entry point. The stock is currently at $45 with the 200dma at $40.69. I would always like to get an entry on strong stocks at the 200dma but I am not holding my breath on SYMC. I am going to target $41 and hope a continued Nasdaq implosion hits our target. 2006 $45 LEAP Call YAG-AI current $9.20, target $6.00 2006 $50 LEAP Call YAG-AJ current $7.10, target $5.00 SYMC Chart ******************* Blue Chippers In researching various companies for the watch list I was struck but the potential opportunity to add a few blue chip companies cheap over the coming weeks. Several of the strong performers are dropping fast as funds raise cash. Making an individual case for each of these names is not really a necessity as you know them all. Using the analogy of a falling tide lowers all boats we have a chance over the next several weeks to land several battleships. MMM - 3M Company - $79.87 3M is a prime example. They are well off their $90 high at $79 and stand a very good chance of dropping to $75. The 200dma at 81.25 was just broken on worries that rising oil prices could hurt earnings. I agree there is a danger but I think MMM will manage it and move on. Every major company will be hit by the high oil not just MMM. Buy on weakness sell on strength. Target entry $75, add to position at $70. 2006 $80 LEAP Call VMU-AP current $8.80 target $7.00 2006 $85 LEAP Call VMU-AQ current $6.50 target $5.00 MMM Chart ******************* C - Citigroup - $43.19 Citigroup is approaching 52-week support at $42.50 and while that is a logical entry point I am hoping to get in lower. Citigroup is a cash cow and they are raking in profits. They have either paid or allocated reserves to pay literally billions in settlements for various problems over the last five years. Still they continue to earn literally billions per quarter. The last quarter was the lowest in years at +$1.1B after the settlement reserves. Their average earnings over the last two years have been a whopping $5 billion per quarter. Citigroup was down on Friday on speculation of a takeover of Barclays for $82 billion. It was denied by all parties. Still it got us closer to a potential entry point. I also like Citigroup because their leaps are cheap. I see support at 42.50 but I would really like to enter lower. Next real support is 38.50 but I have serious doubts it will drop that far. Because I want to take advantage of the current drop I am posting two entries. Enter 1/2 position at $42.50 and another 1/2 at $40.00. 2006 $45 LEAP Call WRV-AI current $3.80, target $3.00 Citigroup Chart ******************** Prospective watch list additions for next week: WMT $51.33 target $47.50 2006 $55 LEAP Call WWT-AK $4.00 GE $31.50 target $30.00 2006 $35 LEAP Call WGE-AG $2.00 ******************** Portfolio Updates: HD - Home Depot - $32.90 Leap Put Late Friday afternoon Home Depot announced they were adding $1 billion to their current share buyback program and they rallied off the lows for the day but still closed barely negative. HD has been moving slower than a 100 yr old tortoise and was just about to break support at $32.50 when they made the announcement. Lucky timing I am sure. Our stop is $34.50 and should we have a positive day on Monday we could be taken out. I would drop HD today for lack of movement but it is so close to breaking that $32.50 support I want to give it at least one more week. CIEN - Ciena - $2.05 ** Dropped ** Takeover candidate It was not a pretty sight. Only a week after adding CIEN as a takeover candidate after a bullish interview on TV they came out with a warning that revenues would be flat instead of the "substantially higher" comments from just a couple weeks earlier. They said softness in the sector was rampant and the broker community lost no time in downgrading them across the board. I am not going to continue carrying CIEN after the lousy change in guidance. There are far better LEAP candidates getting cheaper every day. We entered the 2006 $5 call LEAP at 70 cents and it is worth 25x30 today. Exit and write this one off. TYC - Tyco - $30.25 LEAP Call Tyco announced a +63% jump in earnings on Tuesday and jumped to $32.10 on the news despite the lousy market. Unfortunately with the market imploding later in the week TYC could not hold its gains. I only hope we do not get stopped out (29.50) on further market weakness. Tyco beat the street by +3 cents and had nothing but good news. I like TYC and hope we can avoid the stop. RHAT - RedHat - $15.30 LEAP Call RHAT jumped to a high for the week at $17.75 on Monday on several bits of Linux news but despite a Credit Suisse affirmation and suggestion that it was still an "attractive entry point" the stock fell with the market. Our stop is $12.50 so we are in no danger but it is frustrating to see the stock crater with the market. Unfortunately a sinking tide lowers all boats. **************************** Current Portfolio: SMH - Semiconductor Holders $30.65 Entry $32.50 August 2nd Profit Target = SMH $28 Current position: Nov-$30 Put SMH-WF cost $1.40 current $2.00 Nov-$35 Put SMH-WG cost $3.80 current $5.00 Initial play description: http://members.OptionInvestor.com/leaps/Lp_080104_1.asp SMH Chart IWM - Russell 2000 Ishares Entry $110 August 2nd Profit Target $105 (hit on Friday) Current position: Nov-$106 Put IWT-WB cost $4.10 current $6.60 Initial play description: http://members.OptionInvestor.com/leaps/Lp_080104_1.asp IWM Chart RHAT Red Hat $15.30, stop $12.50 Entry $14.81 Recommended July-18th Current position: 2006 $20 LEAP Call YFX-AD cost $2.75 Current $2.85 Sept $12.50 ins put RCV-UV cost $0.55 Current 0.35 Initial play description: http://members.OptionInvestor.com/leaps/Lp_071804_1.asp Red Hat Chart TYC Tyco $30.22 Stop $29.50 Entry $28.32 2005 $30 LEAP Call TYC-AF cost $2.15 current $2.50 2006 $30 LEAP Call WPA-AF cost $4.00 current $4.50 July $25 insurance put - expired - cost $.55 Tyco Chart HD Home Depot $32.90 Stop 34.50 Entry $34.69 2005 $35 LEAP Put HD-MG cost $2.95 current $3.30 2006 $35 LEAP Put WHD-MG cost $4.50 current $4.80 May $40 Insurance put - expired - cost $.55 HD Chart Position Summary Graph LEAPS Watch List **Editors Note** In the event of a market drop due to a terrorist attack on U.S. soil all entry targets should be immediately cancelled. Watch List Update: With the market dropping sharply and creating bargains on a daily basis we are very close to our entry points on nearly all of the watch list candidates. I would be a buyer of these leaps if our targets are hit despite the market weakness. EBAY - ** ENTRY POINT CHANGE ** Change the entry point on EBAY to $71 from $70. This is the 200dma and it has risen since the initial recommendation. EBAY - EBAY $73.76 target entry $71.00 2006 $80 LEAP Call YEU-AP currently $12.00 http://members.OptionInvestor.com/leaps/Lp_072504_1.asp EBAY Chart MER - Merrill Lynch $47.53 target entry $46.00 2006 $50 LEAP Call WZM-AJ Currently $5.97 target $5.00 http://members.OptionInvestor.com/leaps/Lp_071804_1.asp MER Chart INTC - Intel $22.77 target entry $20.00 2006 $22 LEAP Call WNL-AX currently $4.20 2006 $25 LEAP Call WNL-AE currently $3.10 http://members.OptionInvestor.com/leaps/Lp_071804_1.asp INTC Chart JNPR - Juniper Networks $21.06 target entry $20.00 2006 $25 LEAP Call WBW-AE currently $4.10 http://members.OptionInvestor.com/leaps/Lp_072504_1.asp JNPR Chart ************************Advertisement************************* Live Securities Brokerage Service with Licensed Option Principals OCO Stop & Profit Orders OneStopOption All types of Spreads and Buy Writes 888-281-9569 Auto-Trade Market Monitor Signals Personal Service and Education **Services available for Foreign Traders including Canada** http://www.OneStopOption.com ************************************************************** ********** DISCLAIMER ********** Please read our disclaimer at: http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html ************************************************************** ADVERTISING INFORMATION For more information on advertising in OptionInvestor Newsletter, or any Premier Investor Network newsletter please contact: Contact Support
The Option Investor Newsletter Sunday 08-08-2004 Sunday 5 of 5 In Section Five: Spreads and Straddles: Black Gold Spoils Market Outlook! Premium-Selling Plays: Naked Puts and Calls ************************Advertisement************************* Stock Option and Futures Brokerage OneStopOption teams the best trading technology with varying levels of professional assistance at very competitive prices. Commission costs are comparable to discount brokerage and tailored to individual customer needs. The power of one brokerage group with experience and expertise in the Securities* and Futures Markets offers unprecedented convenience for traders. Access To All Futures Markets Toll Free 888-281-9569 Stock Option Principals www.OneStopOption.com ************************************************************** ******************* SPREADS & STRADDLES ******************* Black Gold Spoils Market Outlook! By Ray Cummins The major equity averages plunged this week amid the rising price of oil and renewed concerns over the strength of the U.S. economy. Crude prices hit a new record high Friday, pushing the broad S&P 500 index down 16 points to 1,063, its lowest close in 2004. The blue-chip Dow was also hammered, losing 147-points to finish at 9,815 as stocks like United Technologies (NYSE:UTX), Honeywell International (NYSE:HON) and 3M Company (NYSE:MMM) succumbed to the lackluster outlook for the economy. The NASDAQ Composite Index dropped 44 points to 1,776, capping a 5% decline for the week, its worst performance since the beginning of May. Volume on the NYSE was 1.52 billion with decliners leading advancers by a 2 to 1 margin. NASDAQ volume was 1.69 billion shares with 3 losing issues for every one that closed higher. Bonds soared during the session with the benchmark 10-year note closing up 49/32, while its yield fell to 4.21%. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ SUMMARY OF CURRENT POSITIONS - AS OF 08/06/04 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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 65.04 AUG 55.0 60.0 0.55 59.45 0.55 Open POT 98.08 98.57 AUG 85.0 90.0 0.60 89.40 0.60 Open FAST 54.74 58.53 AUG 45.0 50.0 0.60 49.40 0.60 Open PD 79.00 73.41 AUG 65.0 70.0 0.60 69.40 0.60 Open AAPL 32.30 29.78 AUG 27.5 30.0 0.30 29.70 0.08 Closed FSH 58.66 56.54 AUG 50.0 55.0 0.65 54.35 0.65 Open? ANSS 47.44 43.00 AUG 40.0 45.0 0.45 44.55 (1.55) Closed WBSN 38.19 35.20 AUG 30.0 35.0 0.45 34.55 0.45 Open? BJS 49.60 45.90 AUG 45.0 47.5 0.35 47.15 (1.25) Closed RTP 105.00 102.10 AUG 95.0 100.0 0.55 99.45 0.55 Open L/P = Long Put S/P = Short Put CB = Cost Basis G/L = Gain/Loss The broad sell-off in equities pushed a number of positions into the "early-exit" category including Apple Computer (NASDAQ:AAPL), Anyss (NASDAQ:ANSS), and BJ Services (NYSE:BJS). Issues on the "watch" list include: Fisher Scientific (NYSE:FSH) and Websense (NASDAQ:WBSN). Positions in Gilead Sciences (NASDAQ:GILD), which is currently profitable, Anthem (NYSE:ATH), University of Phoenix Online (NASDAQ:UOPX) and Wellpoint (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 37.25 AUG 42.5 40.0 0.30 40.30 0.30 Open XLNX 31.53 27.96 AUG 37.5 35.0 0.25 35.25 0.25 Open MERQ 46.17 32.95 AUG 55.0 50.0 0.65 50.65 0.65 Open SMH 34.58 30.65 AUG 42.5 40.0 0.30 40.30 0.30 Open TLB 33.04 26.81 AUG 40.0 35.0 0.60 35.60 0.60 Open VAR 77.24 31.38 AUG 90.0 85.0 0.50 85.50 0.50 Open KLAC 43.33 38.38 AUG 50.0 47.5 0.25 47.75 0.25 Open NVLS 29.23 24.90 AUG 35.0 32.5 0.20 32.70 0.20 Open BZH 90.65 93.56 AUG 105.0 100.0 0.45 100.45 0.45 Open LLY 64.67 61.00 AUG 75.0 70.0 0.65 70.65 0.65 Open ACS 51.80 49.49 AUG 60.0 55.0 0.45 55.45 0.45 Open DIGE 33.08 31.65 AUG 40.0 35.0 0.55 35.55 0.55 Open SRCL 48.00 47.25 AUG 55.0 50.0 0.30 50.30 0.30 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 65.35 AUG 70.00 70.00 5.00 5.00 Open TBL 60.26 54.35 AUG 60.00 60.00 4.75 6.10 Open Timberland (NYSE:TBL) is now comfortably profitable and Devon Energy (NYSE:DVN) has moved below of a recent trading range in the past two sessions, suggesting additional volatility in the coming week. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ FRE - Freddie Mac $65.04 *** Interest Rate Speculation *** Federal Home Loan Mortgage Corporation (NYSE:FRE) or Freddie Mac, is a stockholder-owned corporation established by Congress in 1970 to support home ownership and rental housing. Freddie Mac purchases single-family and multi-family residential mortgages and mortgage-related securities, which it finances mainly by issuing mortgage pass-through securities and debt instruments in the capital markets. The Federal Home Loan Mortgage Corporation guarantees these securities and mortgage lenders sell their loans to the company and use the proceeds to fund new mortgages, which in turn increases the money supply to homebuyers. Freddie Mac does not make loans directly to the homebuyer, but puts private investor capital to work for homebuyers in general. FRE - Freddie Mac $65.04 PLAY (very conservative - bullish/credit spread): BUY PUT SEP-55.00 FRE-UK OI=927 ASK=$0.25 SELL PUT SEP-60.00 FRE-UL OI=1400 BID=$0.60 INITIAL NET-CREDIT TARGET=$0.40-$0.50 POTENTIAL PROFIT(max)=8% B/E=$59.60 __________________________________________________________________ FPL - FPL Group $67.73 *** Broad-Market Hedge *** FPL Group (NYSE:FPL) is a public utility holding company that, through its principal subsidiary, Florida Power & Light Company, is engaged in the generation, transmission, distribution and sale of electric energy. FPL, a rate-regulated public utility, supplies electric service to approximately 4 million customers throughout most of the east and lower west coasts of Florida. The company's other subsidiaries include FPL Energy, LLC and FPL FiberNet. FPL - FPL Group $67.73 PLAY (very conservative - bullish/credit spread): BUY PUT SEP-60.00 FPL-UL OI=245 ASK=$0.15 SELL PUT SEP-65.00 FPL-UM OI=466 BID=$0.55 INITIAL NET-CREDIT TARGET=$0.45-$0.55 POTENTIAL PROFIT(max)=9% B/E=$64.55 __________________________________________________________________ MCO - Moody's Corporation $67.33 *** New Trading Range? *** Moody's Corporation (NYSE:MCO) is a provider of credit ratings, research and analysis covering debt instruments and securities in the global capital markets and a provider of quantitative credit assessment services, credit training services and credit process software to banks and other financial institutions. The company operates in two business segments, Moody's Investors Service and Moody's KMV, which is a provider of risk management products for banks and investors in credit-sensitive assets. MCO - Moody's Corporation $67.33 PLAY (conservative - bullish/credit spread): BUY PUT SEP-60.00 MCO-UL OI=55 ASK=$0.40 SELL PUT SEP-65.00 MCO-UM OI=36 BID=$1.00 INITIAL NET-CREDIT TARGET=$0.65-$0.70 POTENTIAL PROFIT(max)=15% B/E=$64.35 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ PDCO - Patterson Companies $73.40 *** Stuck In A Range? *** Patterson Companies (NASDAQ:PDCO) is a value-added distributor serving three markets, such as North American dental supply; United States companion-pet veterinary supply, including dogs, cats and other common household pets, and the rehabilitative and non-wheelchair assistive products supply market. The firm's operating units are: Patterson Dental Supply, which provides consumable products, dental equipment, practice management and clinical software, patient education systems, and office forms and stationery; Webster Veterinary Supply, which distributes a range of consumable supplies, equipment, diagnostic supplies, vaccines and pharmaceuticals, and AbilityOne Products, which include aids to daily living, orthopedic soft goods/splints, clinical products, mobility products, pediatric seating and positioning, and modalities. PDCO - Patterson Companies $73.40 PLAY (conservative - bearish/credit spread): BUY CALL SEP-85.00 DOU-IQ OI=30 ASK=$0.35 SELL CALL SEP-80.00 DOU-IP OI=43 BID=$0.85 INITIAL NET-CREDIT TARGET=$0.55-$0.60 POTENTIAL PROFIT(max)=12% B/E=$80.55 __________________________________________________________________ CDWC - CDW Corporation $59.25 *** Next Leg Down? *** CDW Corporation (NASDAQ:CDWC) is a direct seller of multi-brand computers and related technology products and services in the United States. Its offerings include multi-brand computers and related technology products, including hardware and peripherals, software, accessories and other products, for use with business computers based on a variety of operating platforms, including Microsoft, Apple, Linux, Novel, Unix and others. CDW provides a variety of value-added services and Web-based tools to its customers, including the ability to custom configure solutions, manage software licenses through its Software License Tracker tool and track tagged assets through its IT Asset Management Tracking Database. CDWC - CDW Corporation $59.25 PLAY (conservative - bearish/credit spread): BUY CALL SEP-70.00 DWQ-IN OI=188 ASK=$0.20 SELL CALL SEP-65.00 DWQ-IM OI=240 BID=$0.70 INITIAL NET-CREDIT TARGET=$0.55-$0.60 POTENTIAL PROFIT(max)=12% B/E=$65.55 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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. __________________________________________________________________ INDEX-BASED COMBINATION POSITIONS As a trader, you may be familiar with options on individual stocks where you have the right to buy (call option) or the right to sell (put option) a particular stock at some predetermined price within some predetermined time. The buyer has the rights and the seller the obligations. With index options the basic ideas are the same. Index options allow you to make investment decisions on a specific industry group or on the market as a whole. Spread strategies can be made with index options similar to those made with individual stock options and professional traders also employ index spreads in common hedge strategies. These positions will not be included in the weekly summary. _________________________________________________________________ XAU - PHLX Gold & Silver Index $86.67 ** Range-Bound Index? ** The PHLX Gold & Silver Sector (XAU) is a capitalization-weighted index composed of the common stocks of 9 companies involved in the gold and silver mining industry. XAU was set to an initial value of 100 in January 1979; the options commenced trading on December 19, 1983. For a list of individual stocks in the XAU, click here: http://www.phlx.com/products/xaucomp.htm XAU - PHLX Gold & Silver Index $86.67 PLAY (conservative - neutral/credit strangle): SELL CALL SEP-95.00 XAV-IT OI=2690 BID=$0.55 SELL PUT SEP-75.00 XAU-UO OI=1060 BID=$0.45 INITIAL NET-CREDIT TARGET=$1.10-$1.15 MAXIMUM PROFIT (MARGIN) = 6% UPSIDE B/E=$96.10 DOWNSIDE B/E=$73.90 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ SEE DISCLAIMER - SECTION 1 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ************************Advertisement************************* OneStopOption.com Trade: Securities, Stock Options, Futures Contracts Service: Experienced Brokers Personal Assistance Convenience of One Brokerage Online and Live Broker Trading Experience... The Difference OneStopOption.com 888-281-9569 *************************************************************** ***************************************** 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 40.67 0.80 5.99% 2.74% NVTL AUG 20.00 19.50 19.17 (0.33) 0.00% 0.00% PETD AUG 25.00 24.35 27.65 0.65 4.86% 2.67% CRDN JUL 35.00 34.55 32.58 (1.97) 0.00% 0.00% CRDN JUL 35.00 34.70 32.58 (2.12) 0.00% 0.00% NFI AUG 30.00 29.40 40.67 0.60 4.68% 2.04% NVTL AUG 20.00 19.50 19.17 (0.33) 0.00% 0.00% EYET AUG 35.00 34.45 33.80 (0.65) 0.00% 0.00% FRO AUG 30.00 29.30 34.48 0.70 4.97% 2.39% GIVN AUG 30.00 29.45 33.65 0.55 4.21% 1.87% ATI AUG 15.00 14.50 16.62 0.50 7.89% 3.45% BEIQ AUG 25.00 24.00 24.42 0.42 3.20% 4.17% AMHC AUG 25.00 24.25 26.02 0.75 5.98% 3.09% VTS AUG 22.50 21.85 22.33 0.48 4.23% 2.97% OSTK AUG 30.00 29.40 29.14 (0.26) 0.00% 0.00% ATI AUG 15.00 14.75 16.62 0.25 4.68% 1.69% EYET AUG 30.00 29.55 33.80 0.45 3.85% 1.52% CTSH AUG 22.50 22.05 24.75 0.45 4.61% 2.04% FARO AUG 20.00 19.65 19.48 (0.17) 0.00% 0.00% STLD AUG 30.00 29.60 29.05 (0.55) 0.00% 0.00% SRDX AUG 20.00 19.50 23.36 0.50 7.27% 2.56% NFI AUG 35.00 33.85 40.67 1.15 9.90% 3.40% ISG AUG 30.00 29.05 29.35 0.30 2.40% 3.27% LCAV AUG 25.00 24.35 22.53 (1.82) 0.00% 0.00% DHB AUG 12.50 12.15 13.50 0.35 8.54% 2.88% MSO AUG 10.00 9.65 10.64 0.35 9.88% 3.63% EENC AUG 12.50 12.25 13.56 0.25 4.83% 2.04% IDCC AUG 17.50 17.05 17.44 0.39 5.83% 2.64% NFI AUG 35.00 34.25 40.67 0.75 7.63% 2.19% LCAV AUG 25.00 24.75 22.53 (2.22) 0.00% 0.00% CERN AUG 35.00 34.35 44.94 0.65 6.54% 1.89% VLCCF AUG 25.00 24.35 25.00 0.65 8.65% 2.67% KRON AUG 40.00 39.40 40.40 0.60 6.74% 1.52% CRK AUG 20.00 19.75 18.03 (1.72) 0.00% 0.00% UTHR AUG 22.50 22.20 29.84 0.30 6.05% 1.35% CYTC AUG 22.50 22.10 23.00 0.40 7.64% 1.81% TOY AUG 15.00 14.75 16.02 0.25 7.45% 1.69% IDCC AUG 17.50 17.20 17.44 0.24 6.14% 1.74% KYPH AUG 25.00 24.50 27.71 0.50 8.62% 2.04% TOY AUG 15.00 14.75 16.02 0.25 8.30% 1.69% KIND AUG 22.50 22.10 25.17 0.40 8.57% 1.81% ODSY AUG 17.50 17.25 17.85 0.25 6.78% 1.45% NFI AUG 30.00 29.55 40.67 0.45 9.02% 1.52% KYPH AUG 25.00 24.35 27.71 0.65 12.55% 2.67% BR AUG 37.50 37.10 35.14 (1.96) 0.00% 0.00% KWK AUG 30.00 29.35 26.95 (2.40) 0.00% 0.00% AH AUG 35.00 34.60 34.60 0.00 0.00% 0.00% Ceradyne (NASDAQ:CRDN) was Friday's "big" loser, down nearly 10%, despite a lack of negative news. A small rebound early in the session helped traders escape with minimal losses, but the uptrend certainly appears to have come to an end. The most obvious stocks on the "early-exit" list are: BR, CRDN, CRK, EYET, FARO, LCAV, NVTL, OSTK, STLD and VLCCF. A long list of positions; ARXX, BLUD, CACS, CBST, ELN, ERES, ESIO, GPRO, KWK, JCOM, JNPR, MGAM, TECH, and TASR, 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 32.72 1.00 5.30% 1.96% SINA AUG 40.00 40.85 24.12 0.85 7.85% 2.08% ATRS AUG 30.00 30.85 24.12 0.85 6.52% 2.76% MRVL AUG 27.50 27.85 22.61 0.35 3.98% 1.26% MACR AUG 25.00 25.40 18.89 0.40 4.55% 1.57% ISIL AUG 20.00 20.45 17.14 0.45 5.72% 2.20% ELAB AUG 45.00 45.00 27.49 0.00 0.00% 0.00% FLML AUG 25.00 25.50 16.86 0.50 8.15% 1.96% OTEX AUG 30.00 30.65 21.79 0.65 6.12% 2.12% TELK AUG 25.00 25.45 16.05 0.45 5.60% 1.77% ASKJ AUG 40.00 40.50 24.48 0.50 5.97% 1.23% DRIV AUG 30.00 30.85 24.86 0.85 7.92% 2.76% SINA AUG 35.00 35.45 24.12 0.45 6.42% 1.27% BSX AUG 40.00 40.50 33.21 0.50 3.58% 1.23% ICUI AUG 30.00 30.80 27.52 0.80 8.64% 2.60% WMGI AUG 35.00 35.65 24.90 0.65 5.46% 1.82% LSCP AUG 30.00 30.70 15.60 0.70 11.15% 2.28% ERICY AUG 30.00 30.65 25.41 0.65 8.01% 2.12% NTES AUG 40.00 40.45 31.92 0.45 6.31% 1.11% SPW AUG 45.00 45.40 36.65 0.40 5.03% 0.88% ACDO AUG 35.00 35.00 26.44 0.00 0.00% 0.00% ULBI AUG 17.50 17.50 13.50 0.00 0.00% 0.00% MXIM AUG 50.00 50.45 44.23 0.45 5.06% 0.89% YHOO AUG 32.50 32.70 26.02 0.20 4.20% 0.61% MRVL AUG 25.00 25.30 22.61 0.30 8.23% 1.19% There was no viable position in Eon Labs (NASDAQ:ELAB), Accredo Health (NASDAQ:ACDO) or Ultralife Batteries (NASDAQ:ULBI), due to "gap-down" trading activity after those plays were 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 GLBCE 15.70 SEP 12.50 GQC-UV 0.60 3899 11.90 41 3.7% 11.9% MCIP 15.99 SEP 15.00 MQI-UC 0.70 3160 14.30 41 3.6% 8.5% ING 23.44 AUG 22.50 ING-TX 0.25 1161 22.25 12 2.8% 7.3% PAAS 13.49 SEP 12.50 USP-UV 0.45 298 12.05 41 2.8% 6.9% AMED 28.73 SEP 25.00 CQW-UE 0.75 168 24.25 41 2.3% 6.5% KOSP 34.33 SEP 30.00 KQW-UF 0.75 139 29.25 41 1.9% 5.5% IVX 24.00 SEP 20.00 IVX-UD 0.45 2913 19.55 41 1.7% 5.5% PHM 56.64 SEP 50.00 PHM-UJ 0.75 482 49.25 41 1.1% 3.3% UTHR 29.84 SEP 25.00 FUH-UE 0.30 2001 24.70 41 0.9% 3.0% 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. __________________________________________________________________ GLBCE - Global Crossing $15.70 *** Speculators Only! *** Global Crossing (NASDAQ:GLBCE) is a provider of telecom services to carriers and commercial enterprises around the world. The principal services the company offers to its customers include voice, data and conferencing services. Global Crossing offers these services using a global Internet protocol-based network that directly connects more than 300 cities in over 30 countries and delivers services to more than 500 major cities in over 50 countries around the world. The firm also provides installation and maintenance services for subsea telecommunications systems through its subsidiary, Global Marine Systems Limited. GLBCE - Global Crossing $15.70 SEP 12.50 GQC-UV LB=0.60 OI=3899 CB=11.90 DE=41 TY=3.7% MY=11.9% __________________________________________________________________ MCIP - MCI Incorporated $15.99 *** Own This One! *** MCI Incorporated (NASDAQ:MCIP), whose predecessor was WorldCom, is a global communication company, providing a wide range of communication services in over 200 countries on six continents. It operates a communications network of approximately 100,000 route miles of network connections linking metropolitan centers and various regions across North America, Europe, Asia, Latin America, the Middle East, Africa and Australia. It also owns an Internet protocol backbone and is a carrier of international voice traffic. Since April 2003, business has been conducted using the brand name MCI, under which the company operates in three primary business units: Business Markets, Mass Markets and International. SEP 15.00 MQI-UC LB=0.70 OI=3160 CB=14.30 DE=41 TY=3.6% MY=8.5% __________________________________________________________________ ING - ING Groep N.V. $23.44 *** Favorable Earnings! *** ING Groep N.V. (NYSE:ING) is a global financial institution of Dutch origin that offers banking, insurance and asset management to more than 60 million clients in more than 50 countries. The clients are individuals, businesses, corporations, institutions and governments. The firm consists of a spectrum of businesses that serve their clients under the ING brand. ING's primary segments, which are based on the management structure of the company, are ING Europe, ING Americas and ING Asia/Pacific. ING - ING Groep N.V. $23.44 AUG 22.50 ING-TX LB=0.25 OI=1161 CB=22.25 DE=12 TY=2.8% MY=7.3% __________________________________________________________________ PAAS - Pan American Silver $13.49 *** Broad-Market Hedge! *** Pan American Silver (NASDAQ:PAAS) is principally engaged in the exploration for, and the acquisition, development and operation of, silver properties primarily in Peru, Mexico, Bolivia and Argentina, with a secondary focus on the United States and the Americas. Pan American's principal products and sources of revenue are silver-rich zinc, lead and copper concentrates that it sells through a small-scale operation in central Peru. The stockpiles were accumulated over several years by Volcan, a mining company in the Cerro de Pasco mining district in central Peru. In 2003, the Quiruvilca, Huaron and La Colorada mines and stockpiles accounted for all of Pan American's production of concentrates. PAAS - Pan American Silver $13.49 SEP 12.50 USP-UV LB=0.45 OI=298 CB=12.05 DE=41 TY=2.8% MY=6.9% __________________________________________________________________ AMED - Amedisys $28.73 *** Premium-Selling Only! *** Amedisys (NASDAQ:AMED) is a multi-state provider of home health and nursing services. The company operates home care nursing offices and has corporate offices in the southern and southeastern United States. The firm's wholly owned subsidiaries are Amedisys Arkansas, Cypress Health Services and Amedisys LA Acquisitions. The services provided in home healthcare include four primary categories: home health nursing services, infusion therapy, respiratory therapy and home medical equipment. AMED - Amedisys $28.73 SEP 25.00 CQW-UE LB=0.75 OI=168 CB=24.25 DE=41 TY=2.3% MY=6.5% __________________________________________________________________ KOSP - KOS Pharmaceuticals $34.33 *** On The Rebound? *** KOS Pharmaceuticals (NASDAQ:KOSP) is a fully integrated specialty pharmaceutical firm engaged in developing and commercializing a range of proprietary prescription products for the treatment of chronic cardiovascular and respiratory diseases. The firm makes the two products that it markets, Niaspan and Advicor. Developed for mixed lipid disorders, Niaspan is a once-daily formulation of a product that has niacin as the active ingredient. Advicor is a solid-dose drug containing Niaspan and lovastatin, which is a cholesterol-lowering drug that will be used to treat mixed lipid disorders. The firm cardio-metabolic products under development consist of controlled-release, once-a-day, oral dosage products. KOSP - KOS Pharmaceuticals $34.33 SEP 30.00 KQW-UF LB=0.75 OI=139 CB=29.25 DE=41 TY=1.9% MY=5.5% __________________________________________________________________ IVX - IVAX Corporation $24.00 *** Drug Speculation! *** IVAX Corporation (NYSE:IVX) is a multinational company engaged in the research, development, manufacture and marketing of pharmaceutical products. The company manufactures and/or sells several brand name pharmaceutical products and a variety of brand equivalent and over-the-counter pharmaceutical products, primarily in the United States, Europe and Latin America. It also has subsidiaries throughout the world that specialize in the development, manufacture and marketing of respiratory drugs, primarily for asthma, delivered by metered-dose and dry-powder inhalers. IVX - IVAX Corporation $24.00 SEP 20.00 IVX-UD LB=0.45 OI=2913 CB=19.55 DE=41 TY=1.7% MY=5.5% __________________________________________________________________ PHM - Pulte Homes $56.64 *** Leading The Homebuilders! *** Pulte Homes (NYSE:PHM) is a holding company whose subsidiaries engage in the homebuilding and financial services businesses. The company's direct subsidiaries include Pulte Diversified Companies, Inc. (PDCI), Del Webb Corporation and others that are engaged in the homebuilding business. PDCI's operating subsidiaries include Pulte Home Corporation (PHC), Pulte International Corporation and other subsidiaries that are engaged in the homebuilding business. The company also has a mortgage banking company, Pulte Mortgage Corporation, which is a subsidiary of PHC. PHM - Pulte Homes $56.64 SEP 50.00 PHM-UJ LB=0.75 OI=482 CB=49.25 DE=41 TY=1.1% MY=3.3% TS __________________________________________________________________ UTHR - United Therapeutics $29.84 *** Recent Rally! *** United Therapeutics (NASDAQ:UTHR) is a biotechnology company focused on the development and commercialization of therapeutics to treat chronic and life-threatening diseases in 3 therapeutic areas: cardiovascular medicine, infectious disease and oncology. It has 5 therapeutic platforms: Prostacyclin analogs are stable synthetic forms of a molecule that has effects on blood-vessel health and function; Remodulin has been approved in the United States for the treatment of pulmonary arterial hypertension in patients with New York Heart Association Class II-IV symptoms; Immunotherapeutic monoclonal antibodies are antibodies that activate patients' immune systems to treat cancer; Glycobiology anti-viral agents are a class of small molecules that may be effective as an oral therapy for hepatitis C or other infections, and Telemedicine involves portable digital devices that enable physicians to remotely monitor patients' bodily measurements. UTHR - United Therapeutics $29.84 SEP 25.00 FUH-UE LB=0.30 OI=2001 CB=24.70 DE=41 TY=0.9% MY=3.0% 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. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ CRDN - Ceradyne $32.58 *** A Trend Reversal! *** Ceradyne (NASDAQ:CRDN) develops, manufactures and sells advanced technical ceramic products and components for defense, industrial, automotive and commercial applications. The company's primary products include lightweight ceramic armor for soldiers and military helicopters; aesthetic ceramic orthodontic brackets; durable, reduced friction, ceramic diesel engine components; ceramic-impregnated dispenser cathodes for microwave tubes, lasers and cathode ray tubes, and ceramic industrial components for erosion and corrosion resistant applications. CRDN - Ceradyne $32.58 PLAY (sell naked call): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL CALL SEP 40 AUE-IH 989 0.50 40.50 5.3% 1.2% __________________________________________________________________ SWIR - Sierra Wireless $27.06 *** Pure Premium-Selling! *** Sierra Wireless (NASDAQ:SWIR) is a leader in delivering highly differentiated wireless solutions that enable our customers to improve their productivity and lifestyle. Sierra Wireless develops and markets AirCard, the industry-leading wireless PC card line for portable computers; embedded modules for OEM wireless applications; the MP line of rugged vehicle-mounted connectivity solutions and Voq, a line of professional phones with secure, easy-to-use, products for mobile professionals. SWIR - Sierra Wireless $27.06 PLAY (sell naked call): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL CALL SEP 35 IYQ-IG 7014 0.60 35.60 7.4% 1.7% _________________________________________________________________ AVID - Avid Technology $42.80 ** Profit-Taking In Progress! ** Avid Technology (NASDAQ:AVID) develops, markets, sells and supports a wide range of software and hardware products for digital media production, management and distribution. The company has two principal business segments, Video and Film Editing and Effects, and Professional Audio. The Video and Film Editing and Effects segment produces non-linear video and film editing systems as well as 3-D and special effects software designed to provide capabilities for editing and finishing feature films, television shows, broadcast news programs, commercials, music videos and corporate and home videos. The Professional Audio segment produces digital audio systems for the professional audio market, including products developed to provide audio recording, editing, signal processing, and automated mixing. AVID - Avid Technology $42.80 PLAY (sell naked call): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL CALL SEP 50 AQI-IJ 231 0.50 50.50 3.6% 1.0% _________________________________________________________________ USPI - United Surgical Partners $33.86 ** Sell-Off Underway! ** United Surgical Partners (NASDAQ:USPI) owns and operates a number of short-stay surgical facilities including surgery centers and private surgical hospitals in the United States, Spain and the United Kingdom. The firm focuses on providing surgical facilities that meet the combined needs of patients, physicians and payors better than hospital-based and other outpatient surgical facilities. USPI acquires and develops its facilities through the formation of relationships with physicians and healthcare systems to better access and serve the communities in its markets. USPI - United Surgical Partners $33.86 PLAY (sell naked call): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL CALL SEP 37.5 QPJ-IU 100 0.55 38.05 3.9% 1.4% ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ SEE DISCLAIMER - SECTION 1 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ************************Advertisement************************* OneStopOption.com Trade: Securities, Stock Options, Futures Contracts Service: Experienced Brokers Personal Assistance Convenience of One Brokerage Online and Live Broker Trading Experience... 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