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Daily Newsletter, Tuesday, 08/17/2004

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The Option Investor Newsletter                 Tuesday 08-17-2004
Copyright 2004, All rights reserved.                       1 of 3
Redistribution in any form strictly prohibited.


In Section One:

Wrap: See Note
Futures Markets: See Note
Index Trader Wrap: Olive Oyl
Market Sentiment: Good News But Stocks Slip From Their Highs


Posted online for subscribers at http://www.OptionInvestor.com
************************************************************
MARKET WRAP  (view in courier font for table alignment)
************************************************************
     08-17-2004            High     Low     Volume Advance/Decline
DJIA     9972.83 + 18.28 10023.94  9952.11 1.54 bln   1619/1179
NASDAQ   1795.25 + 12.41  1804.59  1791.95 1.36 bln   1745/1254
S&P 100   528.40 +  1.10   530.54   527.16   Totals   3364/2433
S&P 500  1081.71 +  2.37  1086.96  1079.34
RUS 2000  530.00 +  1.94   533.28   528.06
DJ TRANS 3044.60 -  6.54  3070.67  6036.55
VIX        17.02 -  0.55    17.28    16.16
VXO        17.28 -  0.28    17.66    16.98
VXN        25.55 -  1.17    26.63    25.37
Total Volume 3,228M
Total UpVol  2,251M
Total DnVol    917M
52wk Highs      88
52wk Lows      160
TRIN          0.86
PUT/CALL      0.95
************************************************************

Due to technological difficulties there will be no Market Wrap
tonight.  Look for the next edition of the Market Wrap in
Wednesday’s email.  We apologize for any inconvenience this may
cause you.  For those of you wishing to read a quick overview of
Tuesday’s market action, please read Jeff Bailey’s Index Trader
Wrap.


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

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


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

Olive Oyl

Just how, I'm not sure, but the major indices managed to post
gains as stronger-than-expected July housing starts and building
permits, some very tame July consumer prices, and a dash of
industrial production, mixed in with some back-to-back bullish
outlooks from building product retailers Lowes Companies
(NYSE:LOW) $49.69 +1.11% and Home Depot (NYSE:HD) $35.10 +3.29%,
helped to offset another bullish session for oil.

Just after the open, when September Oil futures (cl04u) $46.77
+1.56% looked poised to break below their WEEKLY Pivot of $45.48,
oil bulls stepped in and started buying the black gold early at
$45.60.

It was an "Olive Oyl" session for sure.  While green was the
predominant color throughout the session, not unlike the cartoon
character Olivee Oyl, the gains were "thin" as bulls and bears
fought like Popeye and Bluto throughout.

U.S. Market Watch - 08/17/04 Close



Sentiment seems notably improved, but I would have to say the
retailers depicted a sentimental fade as oil began its march
higher from the morning trade.

I had an upside alert set on Dow component Home Depot (NYSE:HD)
$35.45 from a couple of week's ago, and it was triggered to the
upside this morning.  While HD gapped higher to open at $35.78,
HD's eventual close and session trade faded with oil's rise.

In the afternoon session, I lined up a bullish trade for discount
broker Amertitrade (NASDAQ:AMTD) $10.95 +2.52% for a break back
above $11.04, as the Broker Dealer Index (XBD.X) 121.46 +1.72%,
which trades above its WEEKLY R2 of 119.69 was threatening to pop
the lid off the proverbial spinach can as it hovered at its DAILY
R2 of 121.95.  Certainly AMTD would give a late session "pop"
back to its opening highs of $11.21 into the close for a nifty
bullish day trade.  Nope.... not the case as oil sludged higher
to its close.

July's CPI data put a strong bid in bonds.  Treasuries finished
higher on price with the benchmark 10-year yield ($TNX.X) falling
5.2 basis points to 4.206%.  Meanwhile our "junk bond" Pacholder
High Yield (AMEX:PHF) $9.30 +0.64% worked its way higher with
bidders firm above $9.00.  Tonight, I think of the Pacholder High
Yield as Mr. Whimpy.  Kind of quiet.  Will gladly pay you
tomorrow for a hamburger today.

Market Snapshot / Internals - 08/17/04



I don't currently track oil prices in our intra-day Market
Snapshot / Internals, but today's methodical move higher in the
CRB Index truly depicts today's trade in oil.

Tonight I want to spend a little time with the TRIN, as it could
be a key indicator for tomorrow's trade.  Those that read this
weekend's "Ask the Analyst" column will perhaps understand how
tomorrow's trade could play out.  The TRIN opened at

Up until the final hours of trade, the NASDAQ's 10-day NH/NL
ratio was green, but as the number of new lows built versus the
number the new highs, you get the feel that bears that may have
been locking in some gains on stocks that have been hitting new
lows, started having second thoughts as oil prices pressed
higher.

Who can blame a bear?  Trade the pattern until it no longer holds
true.  I think computers did.

Pivot Analysis Matrix -



The S&P Banks (BIX.X) 353.15 +0.54% closed above their WEEKLY R2,
and of those equity-based indices we follow in the Matrix, its
not a surprise that the BIX.X would be able to show this ability,
let alone be first to trade their MONTHLY R1.  That's been recent
pattern at least.

Declines among energy stocks in today's session, as well as
higher oil prices that can weight on market sentiment kept things
in check for S&P 500 Index (SPX.X) 1,081.71 +0.21% as it kissed
its WEEKLY R2.  How long has it been since we've seen the SPX at
a WEEKLY R2?  My records show it was the week of 06/07-06/11 when
the SPX.X traded its WEEKLY R2 of 1,137.52.  (Make note of August
MONTHLY R1 at 1,135.42 just in case oil reverses course.)

Some individual stocks listed on the NASDAQ that I've been
following and trading on my own and in the Market Monitor have
been showing some trade UP to their August "Max Pains."  I can
not be certain that this is truly in play, but may partially
explain some of today's more bullish trade in the afternoon for
the NDX/QQQ compared to the INDU, SPX and OEX.

Traders have asked that I add the TRIN to our DAILY and WEEKLY
Pivot Matrix.  I'm doing so tonight, and here's one thing we'll
want to monitor tomorrow.

IF TRIN above 1.11, prepare for declines.  Oil most likely sets
the tone.  A TRIN break below 0.85, then bears beware as Popeye
might open not only a can of spinach, but a can of home cooked
southern whoop @ss.  Remember, its Option Expiration week, and
August "Max Pain" levels are .... S&P 500 (SPX.X) 1,100, OEX "Max
Pain" 525 and why TRIN above 1.11 could be important, QQQ "Max
Pain" $34.00 (usually have to give or take $0.50 either side) and
DIA "Max Pain" is $101.00 (usually give $0.50 either side).

The TRIN - 10-minute intervals



TRIN may be a very useful tool tomorrow.  Today, I said I felt
"great pressure building," and I think the TRIN trade today adds
a picture of "pressure" as TRIN slowly moved higher, while stocks
seemed hard pressed to extend morning gains, but still finished
in positive territory, as TRIN stayed below the 1.0 level all
session.  Note, TRIN has been below 1.0 the last two sessions.

Tomorrow, we start anew, and I would think we have a pretty good
feeling that based on what Oil does overnight, and where it is at
tomorrow morning, could dictate where TRIN opens.  That is, is
there some BUY side pressure on LOWER oil, which would have TRIN
opening BELOW 1.0?  If so, then bullish, and IF below the TRIN
Daily Pivot of 0.85 as I have calculated (using high of 1.10 and
low of 0.60 and close of 0.86) bullish pressure could quickly
build to TRIN 0.61, where I would have to think, this has SPX.X
immediately challenging today's highs and WEEKLY R2.  Get the
feel?  All heck could break loose should TRIN try and press 0.35.

That's the BULLISH scenario.

Now... with oil closing at its highs of the session, and so near
contract highs, lets face it.  Overhead supply is LIMITED and
that's where a TRIN open above 1.0 is bearish, and givebacks of
this weeks gains could really begin above TRIN 1.11.

Do you feel like you're sitting in a car, with its gears in
"neutral" right now.  Neutral being 1.00 at the open, and if
bulls are going higher, then its a shift into first gear at TRIN
below 1.0, second gear DAILY Pivot 0.85, third gear 0.61 and
overdrive at 0.35.  It's REVERSE on TRIN above 1.0, another
reverse gear at 1.11, and "overdrive reverse" to 1.35.

I have a feeling that QCharts' DAILY TRIN pivot levels will be
derived from high of 1.24, low of 0.59 and close of 0.86.  That's
OK, but I wanted to try and tie in this weekend's Ask the Analyst
column where we now have TRIN moving back up toward 1.0 by
today's close (see how low it was by Monday's close?) in a
session where I really felt that Popeye and Bluto were fighting
it out, with "Oyl" in the balance.

Jeff Bailey


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

Good News But Stocks Slip From Their Highs
 - J. Brown

A lot of market pundits were a bit surprised at Monday's rally.
I include myself in that group since crude oil rose to another
new high on Monday.  I suspect the rally was more of a sigh of
relief that the Olympics got off to a successful and uneventful
(a.k.a. there were no terror events) start.  Monday's oversold
bounce was pretty impressive and a lot of stocks that had broken
through support last week were suddenly climbing back through
support.  That kind of whipsaw action can be painful and
frustrating for traders (yet another category I include myself
in).

The momentum continued today with the positive inflation data and
strong earnings from Home Depot (HD).  Stocks also got an early
boost as oil began to fade but this didn't last very long.  News
that the courts rejected an appeal for Russian oil giant Yukos on
its $3.4 billion bill sent oil climbing again to close at $46.80
a barrel.

Watching CNBC today one of their guests, Ernie Ankrim with Russel
Investment Group, offered a great way to describe investor
sentiment in the markets.  He called it a vowel market as in
AEIOU.  "A" stands for anxiety, which of course is fueled by the
terrorism fears with targets like the Olympics and the upcoming
Republican national convention.  "E" stands for the November
Presidential elections.  Right now not knowing who is likely to
win the election makes investors hesitant to place any bets.  "I"
stands for interest rates.  Is the Fed going raise rates again in
September?  Can the economy handle another rate hike?  Will they
keep to their "measured pace"?  "O" stands for oil.  Rising crude
oil prices have been a major influence on stocks and the economy.
"U" represents general uncertainty about the economy and
corporate earnings.

Market internals were mostly bullish.  Advancing stocks
outnumbered decliners 16 to 11 on the NYSE and 17 to 12 on the
NASDAQ.  Up volume outweighed down volume by almost 2-to-1 on the
NYSE and more than 3-to-1 on the NASDAQ.

After the bell Applied Materials (AMAT), the largest
semiconductor equipment company on the planet, announced earnings
and beat estimates by 1 cent with sales that doubled over last
year.  Unfortunately, they followed up with bad news and warned
that the next quarter would be under analysts' expectations.

The AMAT news combined with the rising oil prices could be a real
struggle for techs stocks tomorrow, especially since the momentum
was already beginning to fade this afternoon.


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

Market Averages

DJIA ($INDU)

52-week High: 10753
52-week Low :  9230
Current     :  9972

Moving Averages:
(Simple)

 10-dma:  9933
 50-dma: 10115
200-dma: 10240



S&P 500 ($SPX)

52-week High: 1163
52-week Low :  983
Current     : 1081

Moving Averages:
(Simple)

 10-dma: 1075
 50-dma: 1099
200-dma: 1109



Nasdaq-100 ($NDX)

52-week High: 1559
52-week Low : 1256
Current     : 1335

Moving Averages:
(Simple)

 10-dma: 1331
 50-dma: 1396
200-dma: 1443



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

CBOE Market Volatility Index (VIX) = 17.02 –0.55
CBOE Mkt Volatility old VIX  (VXO) = 17.28 –0.28
Nasdaq Volatility Index (VXN)      = 25.55 –1.17


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

          Put/Call Ratio  Call Volume   Put Volume

Total          0.95        711,771       678,781
Equity Only    0.69        537,330       371,034
OEX            1.42         38,689        54,952
QQQ            1.17         61,828        72,514


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

Bullish Percent Data

           Current   Change   Status
NYSE          53.0    + 0     Bear Confirmed
NASDAQ-100    26.0    + 1     Bear Confirmed
Dow Indust.   46.7    + 0     Bear Confirmed
S&P 500       47.4    + 1     Bear Confirmed
S&P 100       45.0    + 0     Bear Confirmed


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

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


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

 5-dma: 1.27
10-dma: 1.44
21-dma: 1.28
55-dma: 1.26


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    1619      1745
Decliners    1179      1254

New Highs      54        30
New Lows       25        68

Up Volume    946M     1038M
Down Vol.    556M      297M

Total Vol.  1534M     1360M
M = millions


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

Commitments Of Traders Report: 08/10/04

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

There has been almost no change in the commercial traders'
positions for the large S&P 500 futures contracts.  They remain
marginally bearish.  Meanwhile small traders have upped their
bets in both longs and shorts but remain net bullish.


Commercials   Long      Short      Net     % Of OI
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%)
08/10/04      397,576   419,734   (22,158)   (2.7%)

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

Small Traders Long      Short      Net     % of OI
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%
08/10/04      135,689    93,897    41,792    18.2%

Most bearish reading of the year:  (1,657)- 5/27/03
Most bullish reading of the year: 114,510 - 3/26/02


E-MINI S&P 500

Commercial traders have upped their stakes in both their
long and short positions but the net results was a small decrease
in bearishness.  Small traders pared back their longs and added
to their shorts to decrease their bullish stance some but they
remain net bullish (albeit the least bullish in a month).


Commercials   Long      Short      Net     % Of OI
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%)
08/10/04      369,547   441,055   ( 71,508)  ( 8.8%)

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
07/22/04      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%
08/10/04      179,940     89,239    90,701    33.7%


Most bearish reading of the year: (77,385)  - 09/02/03
Most bullish reading of the year: 449,310   - 06/10/03


NASDAQ-100

There was very little movement from the commercial traders.
They did add positions on both sides but the result was a
small move closer to neutral.  Small traders are really
undecided and a very close to a dead heat.


Commercials   Long      Short      Net     % of OI
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%
08/10/04       43,968     38,351     5,617    6.8%


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
07/22/04        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%)
08/10/04       10,081    10,858    (  777)  ( 3.7%)


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

DOW JONES INDUSTRIAL

Commercial traders reduced their short positions but a few
thousand which increased their bullish stature.  Small traders
naturally moved the opposite direction and increased their
shorts to boost their bearish outlook.


Commercials   Long      Short      Net     % of OI
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%
08/10/04       30,634    22,994    7,640      14.2%

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
07/22/04        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%)
08/10/04        6,450     8,488   (2,038)   (13.6%)

Most bearish reading of the year: (12,106) -  3/09/04
Most bullish reading of the year:   8,523  -  8/26/03

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


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The Option Investor Newsletter                  Tuesday 08-17-2004
Copyright 2004, All rights reserved.                        2 of 3
Redistribution in any form strictly prohibited.


In Section Two:

Dropped Calls: None
Dropped Puts: LM, RIMM, WHR
Call Play Updates: AET, POT, TXT
New Calls Plays: See Note
Put Play Updates: HIG, SPW
New Put Plays: See Note


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

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


CALLS:
*****

None


PUTS:
*****

Legg Mason - LM - close: 79.56 chg: +1.15 stop: 80.01

This may be a case of having our stop loss set too tight.  The
XBD broker-dealer index has rallied sharply in the last two days.
The index has broken through the top of its descending channel
and today's move higher confirms the breakout and pushes the XBD
above some technical resistance.  Most of the stocks in the group
have followed and LM was not left behind.  Today's rally was
important because it lifted LM above its descending trendline of
resistance (look at the chart from Sunday).  However, it's also
significant that LM did not trade over its July 21st high of
$80.30 and it did not close over the $80.00 mark today.  We are
stopped out at $80.01 but we're going to keep an eye on LM to see
if there's any confirmation over the $80 level.

Picked on August 12 at $76.35
Change since picked:   + 3.21
Earnings Date        07/19/04 (confirmed)
Average Daily Volume =    508 thousand
Chart =


--

Research In Motion - RIMM - close: 57.31 chg: +1.04 stop: 57.01

Monday's relief(?) rally was tough on the bears but today's rally
in tech stocks was rough too.  There were a lot of stocks
breaking out over what should have been resistance levels.  RIMM
was one such stock although there is actually news behind the
move.  Yesterday RIMM announced that Sprint customers will get
the option to choose the popular BlackBerry wireless email
service later this year.  Sprint is the fourth largest wireless
and long-distance company in the U.S. and was the only major
provider who didn't yet offer RIMM's BlackBerry service.  We've
been stopped out at $57.01 but bears can keep an eye on RIMM.
The stock has more overhead resistance at the $60.00 level.

Picked on August 6th at $54.50
Change since picked:    + 2.81
Earnings Date         06/29/04 (confirmed)
Average Daily Volume =     6.7 million
Chart =


---

Whirlpool - WHR - close: 61.75 change: +0.58 stop: 61.51

Ouch!  The whipsaw action in WHR has been relatively volatile for
the stock.  WHR rallied sharply above the $60 level and its
simple 10-dma with the broader market rally on Monday.  Shares
continued to rise and gapped higher on Tuesday after management
announced a 43-cent cash dividend.  The three-day rebound has
turned WHR's short-term technicals bullish and its MACD into
another "buy" signal.  We've been stopped out at $61.95 because
of WHR's gap higher this morning.

Picked on August 6th at $58.71
Change since picked:    + 3.04
Earnings Date         07/21/04 (confirmed)
Average Daily Volume =     849 thousand
Chart =




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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

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


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

Aetna - AET - close: 92.86 change: +1.04 stop: 87.50

AET continues to out perform its peers in the insurance sector
and this has been a good week so far.  The stock is well on its
way toward testing its April highs near $95.00 although we
believe AET can actually reach $100.  Readers can choose to
consider bullish momentum plays here at current levels of look
for a potential dip back to $90 and buy a bounce.  No change in
our stop loss yet.

Picked on August 15th at $90.72
Change since picked:     + 2.14
Earnings Date          07/29/04 (confirmed)
Average Daily Volume =      1.4 million
Chart =


--

Potash - POT - close: 101.55 change: -0.95 stop: 97.50

POT is back above the pivotal $100 level and managed to hit new
all-time highs with Monday's rally.  The bullish trend is still
intact but now we wait to see how traders will react to the 2-
for-1 split.  POT will begin trading at post-split levels on
Wednesday.  This will change our entry price from $102.17 to
$51.08.  It will change our stop loss at $97.50 to $48.75.  Plus,
it will change the strike prices on the options while double the
number of options outstanding but halving their value.  The
$100/$50 level should hold up as support so traders looking for a
new entry can wait for a bounce from the $50 level.

Picked on August 10th at $102.17
Change since picked:      - 0.62
Earnings Date           07/29/04 (confirmed)
Average Daily Volume =       180 thousand
Chart =


--

Textron - TXT - close: 62.93 change: -0.17 stop: 59.99

TXT managed to hit another new four-year high this morning when
it climbed to $63.91 but then shares began to suffer some profit
taking.  We are somewhat encouraged by the late day bounce from
the $62.40 region.  Remember that we're targeting a move to the
$65-66 region.  More conservative traders may want to move up
their stop loss.  The $61 level looks like a good spot. We're
going to give TXT more room and leave ours under the $60 mark for
now.

Picked on July 26th at $60.72
Change since picked:   + 2.21
Earnings Date        07/22/04 (confirmed)
Average Daily Volume =    622 thousand
Chart =



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

Editor’s Note:
We are not adding any new plays tonight.  We're
going to wait and see if the Industrials can breakout
over the 10,000 mark or whether today proves to be
a failed rally and thus another bearish entry point.
Please see our watch list for additional play ideas.


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

Hartford - HIG - close: 59.65 change: +0.16 stop: 62.01

The impact of hurricane Charley on the insurers has yet to play
out. Some of the headlines you may see suggest Charley's damages
near the $20 billion range, making it the second most damaging
storm in our history.  However, insurers will not be forking out
$20 billion.  The payout will be several billion less because the
industry generally doesn't cover flood damage in Florida.  Some
analysts have attributed the two-day rise in insurance stocks to
the idea that the industry will be able to raise prices next year
due to the storm.  We feel it's significant that HIG couldn't
maintain its gains and closed back under the $59.00 level today
producing a failed rally pattern.  This may prove to be a new
bearish entry point but we would suggest waiting for some
confirmation before initiating new positions.

Picked on August 12 at $59.17
Change since picked:   + 0.48
Earnings Date        07/21/04 (confirmed)
Average Daily Volume =    1.4 million
Chart =


---

SPX Corp - SPW - close: 37.37 change: +0.26 stop: 38.26

We remain un-triggered in SPW.  The stock has bounced higher like
much of the market in the past two sessions but SPW remains under
some minor technical resistance and could easily reverse course.
We're waiting for the stock to breakdown under the $36.00 level
and hit our TRIGGER at $37.75.  More aggressive traders may want
to consider jumping the gun and using a trigger under $36.50.

Picked on August xxth at $xx.xx <-- see TRIGGER
Change since picked:     - 0.00
Earnings Date          08/02/04 (confirmed)
Average Daily Volume =      814 thousand
Chart =



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

Editor’s Note:
We are not adding any new plays tonight.  We're
going to wait and see if the Industrials can breakout
over the 10,000 mark or whether today proves to be
a failed rally and thus another bearish entry point.
Please see our watch list for additional play ideas.


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The Option Investor Newsletter                  Tuesday 08-17-2004
Copyright 2004, All rights reserved.                        3 of 3
Redistribution in any form strictly prohibited.


In Section Three:

Watch List: Oil Refiners to Retailers
Spreads & Straddles: Looking For A Bottom...
Premium Selling Plays: Naked Puts & Calls


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

Oil Refiners to Retailers

___________________________________________________________________

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.
___________________________________________________________________


Valero Energy - VLO - close: 64.36 change: -3.61

WHAT TO WATCH: We strongly considered adding VLO to the play list
as a put candidate today.  The failed rally near $68.00 at its
simple 10-dma is a strong bearish reversal.  The breakdown under
its simple 100-dma and the $65.00 level and its new relative low
all check off as bearish qualities.  Even the rising price of
crude to new highs isn't stopping the profit taking in VLO.  We
would target a drop toward the exponential 200-dma near $60.00.
One of our challenges was were do we put the stop loss to make it
worthwhile?

Chart=


---

Engineered Support - EASI - close: 43.53 change: -2.73

WHAT TO WATCH: Defense contractor EASI has failed at its simple
10-dma and broken down through significant support at the $45-44
levels.  The move was fueled by almost double the average volume.
We don't see any specific news for the move and that makes us
cautious.  Earnings are expected on August 31st.  The next stop
is likely to be the $40.00 level but its bearish P&F chart points
to a $30 target.

Chart=


---

Magna Intl - MGA - close: 77.90 change: +0.76

WHAT TO WATCH: A few weeks ago we were playing MGA as a put play
with a target near $75.00.  We ended up closing the play because
we didn't want to hold over earnings.  The stock cratered after
earnings and $75.30 in the next day or so.  Now shares are
bouncing and interested traders can play the range and target a
rebound back toward $84-85.  Its short-term technicals are
bullish and its MACD is nearing a new "buy" signal.

Chart=


---

Kmart Holdings - KMRT - close: 75.17 change: -0.88

WHAT TO WATCH: Ouch!  KMRT has been extremely volatile in the
last few days.  Yesterday the stock soared about 15% after
reporting blow out earnings numbers.  Today the stock gapped
higher again and hit $81.01 before selling off painting a very
bearish candlestick.  Technicals are still bullish but KMRT has a
$16 range in just the last two sessions.  We're willing to watch
and see which way it will go.

Chart=



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

SUN $59.17 -1.73 - SUN is another oil refiner, like VLO, which is
suffering under a new bearish trend.  We're watching for a drop
under $58.00 and its simple 200-dma.

PD $80.77 +1.32 - The rally over the $80.00 level looks very
bullish and traders might want to consider plays now.  However,
be aware that PD still has some resistance near $82.00 at its
July highs.

LEH $71.99 +0.54 - We still feel LEH may be a bullish candidate
with the breakout over $72.00 but the stock gave it all back
today.  Look for a bounce from $71.00.

PHM $59.05 +0.18 - Like LEH, PHM looks like a bullish candidate
with the rally above $60.00 but the inability to hold its gains
is not good news.  Look for a bounce from $58.00.

PIXR $72.42 +0.22 - PIXR looks more impressive with the follow
through on Monday's breakout over resistance at $71.00 but we're
still not willing to go long just yet.


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

Looking For A Bottom...
By Ray Cummins

U.S. equities closed higher Tuesday in a second straight session
of gains as upbeat inflation and housing data overcame investor
concerns about record oil prices.

The Dow Jones Industrial Average ended up 17 points at 9,971, as
Home Depot (NYSE:HD) led the gainers on strength in the housing
market, which boosted profits at the home improvement retailer.
The NASDAQ Composite closed up 12 points at 1,797, with internet
and semiconductor shares among the best performers.  The S&P 500
added 2 points to finish at 1,081 as oil stocks retreated while
banks, brokerages and airlines moved higher.  Advancers outpaced
decliners roughly 3 to 2 on both the New York Stock Exchange and
the NASDAQ.  Trading volume was 1.2 billion on the Big Board and
1.4 billion on the technology exchange.  In the bond market, U.S.
treasury prices were higher with the 10-year note ending up 12/32,
while its yield fell to 4.22%.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
SUMMARY OF CURRENT POSITIONS - AS OF 08/15/04
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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  66.15  AUG  55.0  60.0  0.55   59.45   0.55   Open
POT    98.08  99.92  AUG  85.0  90.0  0.60   89.40   0.60   Open
FAST   54.74  59.33  AUG  45.0  50.0  0.60   49.40   0.60   Open
PD     79.00  76.68  AUG  65.0  70.0  0.60   69.40   0.60   Open
FSH    58.66  57.00  AUG  50.0  55.0  0.65   54.35   0.65   Open?
WBSN   38.19  38.38  AUG  30.0  35.0  0.45   34.55   0.45   Open
RTP   105.00 100.45  AUG  95.0 100.0  0.55   99.45   0.55   Open?
FRE    65.04  66.15  SEP  55.0  60.0  0.40   59.60   0.40   Open
FPL    67.73  67.67  SEP  60.0  65.0  0.45   64.55   0.45   Open
MCO    67.33  66.50  SEP  60.0  65.0  0.65   64.35   0.65   Open
BSTE   44.14  42.95  SEP  35.0  40.0  0.55   39.45   0.55   Open
ISCA   53.40  51.77  SEP  45.0  50.0  0.55   49.45   0.55   Open

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

Issues on the "watch" list include: Fisher Scientific (NYSE:FSH)
and Rio Tinto (NYSE:RTP).  Spreads on Apple Computer (NASDAQ:AAPL),
Anyss (NASDAQ:ANSS), and Gilead Sciences (NASDAQ:GILD), which are
currently profitable, as well as Anthem (NYSE:ATH), BJ Services
(NYSE:BJS), 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  35.44  AUG  42.5  40.0  0.30   40.30  0.30   Open
XLNX   31.53  27.08  AUG  37.5  35.0  0.25   35.25  0.25   Open
MERQ   46.17  34.01  AUG  55.0  50.0  0.65   50.65  0.65   Open
SMH    34.58  28.95  AUG  42.5  40.0  0.30   40.30  0.30   Open
TLB    33.04  26.26  AUG  40.0  35.0  0.60   35.60  0.60   Open
VAR    77.24  32.12  AUG  90.0  85.0  0.50   85.50  0.50   Open
KLAC   43.33  35.78  AUG  50.0  47.5  0.25   47.75  0.25   Open
NVLS   29.23  23.85  AUG  35.0  32.5  0.20   32.70  0.20   Open
BZH    90.65  93.03  AUG 105.0 100.0  0.45  100.45  0.45   Open
LLY    64.67  61.57  AUG  75.0  70.0  0.65   70.65  0.65   Open
ACS    51.80  49.43  AUG  60.0  55.0  0.45   55.45  0.45   Open
DIGE   33.08  23.50  AUG  40.0  35.0  0.55   35.55  0.55   Open
SRCL   48.00  46.32  AUG  55.0  50.0  0.30   50.30  0.30   Open
PDCO   73.40  75.39  SEP  85.0  80.0  0.55   80.55  0.55   Open
CDWC   59.25  57.20  SEP  65.0  60.0  0.45   60.45  0.45   Open
KMRT   64.60  64.90  SEP  80.0  75.0  0.60   75.60  0.60   Open
VIP    85.00  84.56  SEP 100.0  95.0  0.45   95.45  0.45   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  66.10   AUG   70.00  70.00   5.00    5.00    Open
TBL     60.26  53.45   AUG   60.00  60.00   4.75    6.75    Open?

The Timberland (NYSE:TBL) straddle recently traded near a credit
of $6.75 for the bearish portion of the straddle, thus providing
a favorable "early-exit" opportunity in the position.

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

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

PD - Phelps Dodge  $80.77  *** A Reader's Request! ***

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

PD - Phelps Dodge  $80.77

PLAY (very conservative - bullish/credit spread):

BUY  PUT  SEP-65.00  PD-UM  OI=1273  ASK=$0.40
SELL PUT  SEP-70.00  PD-UN  OI=1213  BID=$0.75
INITIAL NET-CREDIT TARGET=$0.40-$0.50
POTENTIAL PROFIT(max)=8% B/E=$69.60


__________________________________________________________________

RYL - The Ryland Group  $86.01  *** Sector Rally! ***

The Ryland Group (NYSE:RYL) is a homebuilder and mortgage-finance
company.  The company has built more than 200,000 homes during its
35-year history.  Ryland homes are available in more than 275 new
communities in many markets across the United States.  In addition,
the Ryland Mortgage company has provided mortgage financing and
related services for thousands of homebuyers.  The company's major
operations span all the significant aspects of the home-buying
process, from design, construction and sale to mortgage financing,
title insurance, settlement, escrow and homeowners insurance.

RYL - The Ryland Group  $86.01

PLAY (less conservative - bullish/credit spread):

BUY  PUT  SEP-75.00  RYL-UO  OI=844  ASK=$0.85
SELL PUT  SEP-80.00  RYL-UP  OI=232  BID=$1.50
INITIAL NET-CREDIT TARGET=$0.70-$0.75
POTENTIAL PROFIT(max)=16% B/E=$79.30



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

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.

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

EASI - Engineered Support Systems  $43.53  *** New 2004 Low! ***

Engineered Support Systems (NASDAQ:EASI) along with its various
subsidiaries, designs and manufactures military support equipment
and electronics for the United States armed forces.  The company
also engineers and manufactures air handling and heat transfer
equipment, material handling equipment and custom molded plastic
products for commercial and industrial users.  Engineered Support
Systems' six wholly owned subsidiaries are Systems & Electronics,
Engineered Air Systems, Keco Industries, Engineered Coil Company,
Engineered Electric Company and Engineered Specialty Plastics.

EASI - Engineered Support Systems  $43.53

PLAY (very conservative - bearish/credit spread):

BUY  CALL  SEP-55.00  UFE-IK  OI=112  ASK=$0.35
SELL CALL  SEP-50.00  UFE-IJ  OI=321  BID=$0.70
INITIAL NET-CREDIT TARGET=$0.40-$0.50
POTENTIAL PROFIT(max)=8% B/E=$50.40


__________________________________________________________________

VLO - Valero Energy  $64.36  *** Sector Slump! ***

Valero Energy (NYSE:VOL) is an independent refining and marketing
company that owns and operates 15 refineries having a combined
throughput capacity of over 2 million barrels per day.  Valero
produces premium, environmentally clean products, including:
reformulated gasoline, gasoline meeting the specifications of
the California Air Resources Board (CARB), CARB diesel fuel,
low-sulfur diesel fuel and oxygenates (liquid hydrocarbon
compounds containing oxygen).  Valero also produces conventional
gasoline, distillates, jet fuel, asphalt and petrochemicals, and
is a marketer of refined products.

VLO - Valero Energy  $64.36

PLAY (less conservative - bearish/credit spread):

BUY  CALL  SEP-75.00  VLO-IO  OI=4135  ASK=$0.30
SELL CALL  SEP-70.00  VLO-IN  OI=4244  BID=$0.85
INITIAL NET-CREDIT TARGET=$0.60-$0.65
POTENTIAL PROFIT(max)=14% B/E=$70.60



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

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

No straddles or strangles today...

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

SEE DISCLAIMER - SECTION 1

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


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

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

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
SUMMARY OF CURRENT POSITIONS - AS OF 08/15/04
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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   37.84    0.80   5.99%    2.74%
PETD     AUG    25.00   24.35   28.15    0.65   4.86%    2.67%
NFI      AUG    30.00   29.40   37.84    0.60   4.68%    2.04%
SCHN     AUG    30.00   29.00   27.04   (1.96)  0.00%    0.00%
FRO      AUG    30.00   29.30   36.71    0.70   4.97%    2.39%
GIVN     AUG    30.00   29.45   31.45    0.55   4.21%    1.87%
ATI      AUG    15.00   14.50   16.93    0.50   7.89%    3.45%
BEIQ     AUG    25.00   24.00   25.85    1.00   7.61%    4.17%
AMHC     AUG    25.00   24.25   26.39    0.75   5.98%    3.09%
VTS      AUG    22.50   21.85   22.34    0.49   4.31%    2.97%
ATI      AUG    15.00   14.75   16.93    0.25   4.68%    1.69%
EYET     AUG    30.00   29.55   33.30    0.45   3.85%    1.52%
CTSH     AUG    22.50   22.05   24.85    0.45   4.61%    2.04%
STLD     AUG    30.00   29.60   30.03    0.40   3.50%    1.35%
SRDX     AUG    20.00   19.50   23.80    0.50   7.27%    2.56%
NFI      AUG    35.00   33.85   37.84    1.15   9.90%    3.40%
ISG      AUG    30.00   29.05   29.50    0.45   3.60%    3.27%
DHB      AUG    12.50   12.15   12.16    0.01   0.24%    2.88%
MSO      AUG    10.00    9.65   11.35    0.35   9.88%    3.63%
EENC     AUG    12.50   12.25   13.75    0.25   4.83%    2.04%
IDCC     AUG    17.50   17.05   14.82   (2.23)  0.00%    0.00%
NFI      AUG    35.00   34.25   37.84    0.75   7.63%    2.19%
CERN     AUG    35.00   34.35   43.55    0.65   6.54%    1.89%
VLCCF    AUG    25.00   24.35   26.06    0.65   8.65%    2.67%
KRON     AUG    40.00   39.40   40.23    0.60   6.74%    1.52%
UTHR     AUG    22.50   22.20   28.54    0.30   6.05%    1.35%
CYTC     AUG    22.50   22.10   22.55    0.40   7.64%    1.81%
TOY      AUG    15.00   14.75   14.97    0.22   6.55%    1.69%
IDCC     AUG    17.50   17.20   14.82   (2.38)  0.00%    0.00%
KYPH     AUG    25.00   24.50   23.90   (0.60)  0.00%    0.00%
TOY      AUG    15.00   14.75   14.97    0.22   7.30%    1.69%
KIND     AUG    22.50   22.10   25.23    0.40   8.57%    1.81%
ODSY     AUG    17.50   17.25   17.64    0.25   6.78%    1.45%
NFI      AUG    30.00   29.55   37.84    0.45   9.02%    1.52%
KYPH     AUG    25.00   24.35   23.90   (0.45)  0.00%    0.00%
AH       AUG    35.00   34.60   32.79   (1.81)  0.00%    0.00%
ING      AUG    22.50   22.25   23.25    0.25   7.30%    1.12%
IVX      SEP    20.00   19.55   23.60    0.45   5.52%    2.30%
MCIP     SEP    15.00   14.30   16.60    0.70   8.50%    4.90%
PAAS     SEP    12.50   12.05   13.57    0.45   6.87%    3.73%
UTHR     SEP    25.00   24.70   28.54    0.30   3.01%    1.21%
AMED     SEP    25.00   24.25   28.10    0.75   6.54%    3.09%
PHM      SEP    50.00   49.25   56.57    0.75   3.32%    1.52%
KOSP     SEP    30.00   29.25   35.22    0.75   5.48%    2.56%
GLBCE    SEP    12.50   11.90   15.28    0.60  11.90%    5.04%
ECLP     SEP    12.50   12.10   13.71    0.40   6.90%    3.31%
OMM      SEP    12.50   12.10   12.58    0.40   6.51%    3.31%
CNCT     SEP    25.00   24.10   27.13    0.90   7.11%    3.73%
TOY      SEP    15.00   14.45   14.97    0.52   7.10%    3.81%
ACF      SEP    20.00   19.25   19.57    0.32   3.06%    3.90%
KYPH     SEP    25.00   24.60   23.90   (0.70)  0.00%    0.00%
PLMO     SEP    30.00   29.45   38.00    0.55   5.05%    1.87%
ION      SEP    25.00   24.50   25.05    0.50   4.17%    2.04%
ESLT     SEP    20.00   19.20   20.68    0.80   7.95%    4.17%

Some new stocks are now on the "early exit" list including: AH,
KYPH, IDCC and SCHN.  They join ACF, BEIQ, CYTC, DHB, ION, ISG,
KRON, OMM, ODSY, STLD, TOY, VLCCF and VTS on a list of issues
to "watch" closely.  A long list of plays; ARXX, BLUD, BR, CRK,
CACS, CBST, CRDN, ELN, ERES, ESIO, EYET, FARO, GPRO, KWK, JCOM,
JNPR, LCAV, MGAM, NVTL, OSTK, 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   30.39    1.00   5.30%   1.96%
SINA     AUG    40.00   40.85   19.78    0.85   7.85%   2.08%
ATRS     AUG    30.00   30.85   23.50    0.85   6.52%   2.76%
MRVL     AUG    27.50   27.85   19.77    0.35   3.98%   1.26%
MACR     AUG    25.00   25.40   18.65    0.40   4.55%   1.57%
ISIL     AUG    20.00   20.45   15.70    0.45   5.72%   2.20%
FLML     AUG    25.00   25.50   14.97    0.50   8.15%   1.96%
OTEX     AUG    30.00   30.65   21.63    0.65   6.12%   2.12%
TELK     AUG    25.00   25.45   15.93    0.45   5.60%   1.77%
ASKJ     AUG    40.00   40.50   23.98    0.50   5.97%   1.23%
DRIV     AUG    30.00   30.85   22.97    0.85   7.92%   2.76%
SINA     AUG    35.00   35.45   19.78    0.45   6.42%   1.27%
BSX      AUG    40.00   40.50   32.37    0.50   3.58%   1.23%
ICUI     AUG    30.00   30.80   27.58    0.80   8.64%   2.60%
WMGI     AUG    35.00   35.65   24.68    0.65   5.46%   1.82%
LSCP     AUG    30.00   30.70   16.33    0.70  11.15%   2.28%
ERICY    AUG    30.00   30.65   24.11    0.65   8.01%   2.12%
NTES     AUG    40.00   40.45   30.01    0.45   6.31%   1.11%
SPW      AUG    45.00   45.40   36.50    0.40   5.03%   0.88%
MXIM     AUG    50.00   50.45   43.31    0.45   5.06%   0.89%
YHOO     AUG    32.50   32.70   27.49    0.20   4.20%   0.61%
MRVL     AUG    25.00   25.30   19.77    0.30   8.23%   1.19%
CRDN     SEP    40.00   40.50   31.80    0.50   5.29%   1.23%
SWIR     SEP    35.00   35.60   23.80    0.60   7.40%   1.69%
AVID     SEP    50.00   50.50   41.52    0.50   3.56%   0.99%
USPI     SEP    37.50   38.05   33.34    0.55   3.90%   1.45%
BDY      SEP    25.00   25.75   22.41    0.75   7.42%   2.91%
DRIV     SEP    30.00   30.30   22.97    0.30   4.51%   0.99%
SINA     SEP    30.00   30.35   19.78    0.35   5.84%   1.15%

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

POSS   28.63  SEP 25.00  UPQ-UE 0.80   63 24.20  32   3.1%  8.8%
ARO    31.95  SEP 30.00  ARO-UF 0.95  330 29.05  32   3.1%  7.7%
WBSN   39.70  SEP 35.00  DQH-UG 0.95  263 34.05  32   2.7%  7.4%
ECLP   14.10  SEP 12.50  IQV-UV 0.30 2339 12.20  32   2.3%  6.6%
TOL    43.95  SEP 40.00  TOL-UH 0.95 2927 39.05  32   2.3%  6.2%
JOSB   32.95  SEP 30.00  QZS-UF 0.60  135 29.40  32   1.9%  5.3%
MW     27.32  SEP 25.00  MW-UE  0.40   55 24.60  32   1.5%  4.2%

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.

__________________________________________________________________

POSS - Possis Medical  $28.63  *** A Big Day! ***

Possis Medical (NASDAQ:POSS) is a developer, manufacturer and
marketer of medical devices.  Its main product is the AngioJet
Rheolytic Thrombectomy System, a non-surgical, less invasive
catheter system designed to rapidly remove blood clots with
minimal vascular trauma.  The company has received U.S. FDA
clearances to commence United States marketing of the AngioJet
System, for removal of blood clots in leg arteries, native
coronary arteries and coronary bypass grafts and access grafts
used by patients on kidney dialysis.

POSS - Possis Medical  $28.63

SEP 25.00 UPQ-UE LB=0.80 OI=63 CB=24.20 DE=32 TY=3.1% MY=8.8%


__________________________________________________________________

ARO - Aeropostale  $31.95  *** Bullish Retailer! ***

Aeropostale (NYSE:ARO), together with its subsidiary, Aeropostale
West, is a mall-based specialty retailer of casual apparel and
accessories that target both young women and young men aged 11
to 20 years.  The firm provides its customers with a selection
of active-oriented, fashion basic merchandise.  Aeropostale
maintains control over its proprietary brand by designing and
sourcing all of its merchandise.  The company's products can be
purchased only at its stores or organized sales events at college
campuses.  The company plans to open approximately 95 new stores
in fiscal 2004.

ARO - Aeropostale  $31.95

SEP 30.00 ARO-UF LB=0.95 OI=330 CB=29.05 DE=32 TY=3.1% MY=7.7%


__________________________________________________________________

WBSN - Websense  $39.70  *** The Rally Continues! ***

Websense (NASDAQ:WBSN) provides employee Internet management
products that enable organizations to analyze, report and
manage how their employees use computing resources, including
Internet access, instant messaging, peer-to-peer file sharing,
network bandwidth and desktop applications.  The company's
primary product offering is the Websense Enterprise software
application, its central policy engine and management console.
Websense Enterprise also serves as a platform for related
Websense add-on modules such as Client Application Manager,
Bandwidth Optimizer, instant message Attachment Manager and
Client Policy Manager, and supports a variety of reporting
options that allow organizations to document patterns of
employees' use of computing resources.

WBSN - Websense  $39.70

SEP 35.00 DQH-UG LB=0.95 OI=263 CB=34.05 DE=32 TY=2.7% MY=7.4%


__________________________________________________________________

ECLP - Eclipsys  $14.10  *** In A Trading Range? ***

Eclipsys Corporation (NASDAQ:ECLP) is a healthcare information
technology firm that develops and licenses proprietary software
to hospitals.  The company's software allows them to automate
the key clinical, administrative and financial functions that
they require.  Eclipsys' software is designed to improve patient
care and patient satisfaction for its customers and allow them
to reduce their operating costs.  Among other things, its unique
software enables physicians and nurses to check on a patient's
condition, order patient tests, review test results, monitor a
patient's medications and provide alerts to various changes in
a patient's condition.

ECLP - Eclipsys  $14.10

SEP 12.50 IQV-UV LB=0.30 OI=2339 CB=12.20 DE=32 TY=2.3% MY=6.6%


__________________________________________________________________

TOL - Toll Brothers  $43.95  *** Consolidation Complete? ***

Toll Brothers (NYSE:TOL) designs, builds, markets and arranges
financing for single-family detached and attached homes in
middle-income and high-income residential communities catering
to move-up, empty-nester and age-qualified homebuyers in the
United States.  The communities generally are located on land
the company has either developed or acquired fully developed
and, in some cases, improved.  The company operates its own
land development, architectural, engineering, mortgage, title,
security monitoring, landscape, cable television, broadband
Internet access, lumber distribution, house component assembly
and manufacturing operations.  Toll also owns and operates golf
courses in some of its master-planned communities.

TOL - Toll Brothers  $43.95

SEP 40.00 TOL-UH LB=0.95 OI=2927 CB=39.05 DE=32 TY=2.3% MY=6.2%


__________________________________________________________________

JOSB - Jos. A. Bank Clothiers  $32.95  *** Hot Sector! ***

Jos. A. Bank Clothiers (NASDAQ:JOSB) is a designer, retailer and
direct marketer, through stores, catalog and the Internet, of
men's tailored and casual clothing and accessories.  The company
sells substantially all of its products exclusively under the
Jos. A. Bank label through its 214 retail stores, including seven
outlet stores and 10 franchise stores, located in 35 states and
the District of Columbia in the United States, as well as through
the company's nationwide catalog and web-site, www.josbank.com.
The firm's products are targeted at the male career professional.

JOSB - Jos. A. Bank Clothiers  $32.95

SEP 30.00 QZS-UF LB=0.60 OI=135 CB=29.40 DE=32 TY=1.9% MY=5.3%


__________________________________________________________________

MW - The Men's Wearhouse  $27.32  *** Earnings Speculation! ***

The Men's Wearhouse (NYSE:MW) is a specialty retailer of men's
suits in the United States and Canada.  The company's stores
offer a large selection of designer, brand name and private
label men's business attire, including a consistent stock of
core items, such as navy blazers, tuxedos and basic suits.  As
of January 31, 2004, its United States operations included 579
retail apparel stores in 44 states and the District of Columbia,
primarily operating under the brand names of Men's Wearhouse
and K&G, with approximately 25% of its locations in Texas and
California.  The company's Canadian operations included 114
retail apparel stores in 10 provinces operating under the name
of Moores Clothing for Men.  Earnings are due on 8/18/04.

MW - The Men's Wearhouse  $27.32

SEP 25.00 MW-UE LB=0.40 OI=55 CB=24.60 DE=32 TY=1.5% MY=4.2%



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

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.

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

ICUI - ICU Medical  $26.80  *** Next Leg Down? ***

ICU Medical (NASDAQ:ICUI) is a developer and manufacturer of
proprietary, disposable medical connection systems for use in
intravenous therapy applications.  The company's devices are
designed to protect healthcare workers and their patients from
exposure to infectious diseases such as Hepatitis B and C and
Human Immunodeficiency Virus through accidental needle sticks.
ICU Medical is also a provider of custom I.V. systems and low
cost generic I.V. systems, and it incorporates its proprietary
products on many of those custom I.V. systems.  ICU Medical
also manufactures and sells the Punctur-Guard line of blood
collection needles.

ICUI - ICU Medical  $26.80

PLAY (sell naked call):

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

SELL CALL  SEP 30    QPD-IF     85    0.65  30.65   7.6%   2.1%


_________________________________________________________________

SWIR - Sierra Wireless  $22.68  *** Premium-Selling Only! ***

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  $22.68

PLAY (sell naked call):

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

SELL CALL  SEP 30    IYQ-IF    1491   0.30  30.30   5.9%   1.0%


_________________________________________________________________

UPL - Ultra Petroleum  $36.95  *** Sell-Off In Progress! ***

Ultra Petroleum (NYSE:UPL) is an independent oil and gas company
engaged in the development, production, operation, exploration
and acquisition of oil and gas properties.  The firm's operations
are focused mainly in the Green River Basin of southwest Wyoming
and Bohai Bay, offshore China.  Ultra Petroleum also has working
interests in Texas and Pennsylvania.

UPL - Ultra Petroleum  $36.95

PLAY (sell naked call):

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

SELL CALL  SEP 45    UPL-II    1799   0.40  45.40   4.9%   0.9%



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

SEE DISCLAIMER - SECTION 1

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


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