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Daily Newsletter, Sunday, 08/22/2004

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The Option Investor Newsletter                   Sunday 08-22-2004
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: Oversupply and Undersupply Stories
Futures Wrap: See Note
Index Trader Wrap: HOW MUCH MORE BOUNCE?
Editor's Plays: See Note
Market Sentiment: End of Summer
Ask the Analyst: First the TRIN, then the VIX with Pivot Analysis
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 8-20          WE 8-13         WE 8-06         WE 7-30
DOW     10110.14 +284.79  9825.35 + 10.02 9815.33 -324.38 +177.49
Nasdaq   1831.02 + 73.80  1757.22 - 19.67 1776.89 -110.47 + 38.27
S&P-100   536.04 + 15.32   520.72 -  1.11  521.83 - 15.84 +  7.29
S&P-500  1098.35 + 33.55  1064.80 +  0.83 1063.97 - 37.75 + 15.52
W5000   10648.75 +344.09 10304.66 -  3.18 10307.84-393.81 +147.83
SOX       386.00 + 19.35   366.65 - 20.23  386.88 - 29.55 + 10.85
RUT       547.92 + 30.53   517.39 -  2.26  519.65 - 31.64 + 12.07
TRAN     3090.87 +123.95  2966.92 +  0.84 2966.08 -145.61 + 68.25
******************************************************************

Oversupply and Undersupply Stories
Linda Piazza

Jim Brown attends a conference this week, and will return next
week.  Writers and subscribers alike look forward to his return.

Oversupply and undersupply stories dominated reports early Friday
morning, with those reports pressuring markets.  Futures eased
during the overnight session.  Cash markets dipped at the open,
too.  They soon found support and waffled around for a number of
hours, looking for next direction before heading higher through
the afternoon until a steep dip off the highs in the last few
minutes.  Internals had been strong all day, with advancers ahead
of decliners on both exchanges throughout the day.  TRIN had
trended down from bearish to neutral in the early period and then
quickly into bullish territory, signaling the up-thrust to come
in the equities before it actually arrived.

Those oversupply and undersupply stories did not start the day on
a bullish theme, however.  They included oversupply issues
related to LCD's.  Isupply Corporation, a California-based
business, reported that global supply of LCD's needed for
computer and television screens surpassed demand in the first
half of the year, and that the excess was likely to widen.  In
European trading, companies such as Royal Philips Electronics had
already headed down before the U.S. open.  As James Brown
reported later in the day on OIN's Market Monitor, CNBC later
reported that the oversupply was likely to bring prices lower on
flat-panel televisions.

Concerns about rising inventories in semiconductor and tech
stocks have pressured semi-related stocks lower through the
summer months until August's bounce.  Figures released by the
Semiconductor Equipment and Materials International after the
close Thursday did not ease those concerns. According to a
Bloomberg article, the semi-book-to-bill report showed the
smallest month-to-month increase in global orders since August,
2003.  Although the book-to-bill ratio remained above the
benchmark 1.00, the July ratio fell to 1.05 from June's revised
1.07. Credit Suisse First Boston reportedly termed the number
worse than expected, with CSFB expecting 1.08 from a revised 1.07
for June.  As Jim Brown has often reminded us, that book-to-bill
ratio reflects a three-month average.  That means that the July
number must have been lower than 1.05 to achieve that lower
three-month-average.  For those who would like to view the
complete report, it can be accessed www.semi.org.

During the morning, the SOX's behavior remained lackluster,
dragging down other indices that appeared to want to bounce from
support, then doing some waffling of its own.  That waffling took
the form of a neutral triangle before the SOX finally pushed
above that triangle and joined other indices that were breaking
out at the same time.

Annotated 15-Minute Chart of the SOX:



Gap Inc. (GPS) might have experienced a bit of an oversupply
problem, too.  Poor attendance at summer clearance sales impacted
the retailer, causing it to be lumped together with JWN and NOVL,
other companies with earnings reports deemed disappointing.  The
RLX, the S&P Retail Index, managed a gain Friday, but that gain
straddled the 200-dma, showing the RLX spending a fourth day
testing that average.

Annotated Daily Chart of the RLX:



The RLX looks ready to roll down into a right shoulder or punch
up through the converging 50- and 200-dma's.

Another oversupply story concerned GM.  According to a WSJ story,
GM may trim production as much as five percent due to dealers
cutting back their orders as they experience rising inventories.
GM opened $0.54 below Thursday's close, but managed to make up
all but $0.21 or 0.51 percent of those losses.

Rising fuel costs number among the reasons for those rising
inventories that car manufacturers and others experience.  Crude
costs and the reasons behind those costs composed the undersupply
story for the day.  In the overnight session, crude futures for
September delivery traded a new record high, variously reported
as $49.20 and $49.27, on supply concerns.  The clash between
radical cleric Muqtada al-Sadr's militia and U.S. and Iraqi
troops escalated overnight, with one headline Friday morning
mentioning 77 killed and 70 wounded in the fighting since
Thursday morning.  The cleric's militia had threatened to attack
Iraq's pipeline and other elements of the oil infrastructure.

By midmorning, reports began surfacing that Iraqi police had
gained control of the Iman Ali Mosque, the shrine where the
cleric had taken refuge.  Witnesses had reported seeing Iraqi
police transporting arms out of the mosque.  Markets began
hesitant climbs off their lows of the day.

Some speculated that the cleric had fled the mosque, and Iraq's
Interior Ministry spokesman appealed to the cleric to turn
himself in, saying that the police were in control of the shrine.
Those reports were soon disputed, however.  A senior aide of the
cleric claimed that the shrine was still in control of the Mehdi
army.  News correspondents associated with the U.S. Marines
reported that the Marines were unable to verify the reports that
Iraqi police had taken control, with witnesses reporting fighting
continuing near the shrine where Mehdi militia have been holed up
in the mosque complex, the adjoining cemetery, and the alleyways
leading to the mosque.  The Iraqi national security adviser
reported an inability to establish communications with the
governor and chief of police of Najaf and verify those earlier
reports.  Later in the afternoon, U.S. time, witnesses began
reporting the Mehdi militia in charge of the shrine and its
approaches, with Iraqi police not seen.  One must wonder whether
the initial reports of a takeover of the shrine and a disarming
of the cleric's militia were not intended to convince Sadr to
turn himself over and call off his militia.

As this report was prepared Friday evening, Iraqi police in Najaf
had reportedly just confirmed that they did not control the site.
Sadr's aide said that talks were underway to transfer control of
the site to another cleric.

As the day wore on, however, markets seemed to care less and less
about what was happening in Najaf.  Perhaps some reasoned that
the conflict was drawing to close, whether that close came on
Friday or another day.  Crude futures dropped throughout the
afternoon, with crude futures for September delivery dropping
from that overnight high all the way to $47.60.  Equity markets
began bouncing as crude futures dropped.

As the conflict dragged through the week, at least some of the
quick inflation in crude futures might have been attributed to
the fast-approaching expiration of crude futures for September
delivery, however, with that expiration occurring Friday.  Shorts
who had expected a resolution any day as the cleric agreed to
ceasefires and then rescinded his agreement almost as quickly
must have been feeling the squeeze as expiration Friday
approached.

Rising crude costs have benefited the OSX, of course, and Lehman
Brothers upgraded the group to a positive rating from its
previous neutral rating.  The firm also upgraded companies CAM,
CLB, TDW, OII, RIG, GSF, NE, and SII. Almost all of those stocks
gapped higher Friday, but although none closed the gap, most
could not hold onto all their gains and printed bearish shooting
stars Friday.

The intraday chart for the SOX shown above indicated that the SOX
also could not hold onto its gains.  Wednesday's Wrap had
suggested that indices might print small-bodied candles at
resistance, perhaps through Friday, and the SOX followed that
scenario.

Annotated Daily Chart for the SOX:



The theory presented Wednesday had been that many indices had
seen strong gains Wednesday, and might need a day or two to
consolidate their gains.  Many indices also displayed the
possibility of forming inverse H&S, with either descending
necklines if the indices turned down from then-current levels or
from horizontal ones if they rose up to next resistance.  The
expectation had been for many indices to print candles like the
ones shown on the SOX daily chart for Thursday and Friday.  That
did happen for the RLX and some other indices as well as the SOX.
However, other indices confounded that theory by showing larger-
range days than expected Thursday and Friday while still
maintaining the possibility of turning down into another
shoulder.

Annotated Daily Chart of the SPX:



The bearish 50/200 cross and the continued trade within the
descending regression channel still suggest that selling rallies
remains the preferred strategy, but the possibility that the SPX
could trade all the way up to the top of that descending
regression channel or even break out of the channel cannot be
ignored.  The weekly chart presents a more bullish view of the
SPX's actions.

Annotated Weekly Chart of the SPX:



Because of the possibility that the SPX's weekly morning-star
pattern could be signaling a reversal up through its descending
regression channel, those who prefer to play the bullish side
could wait for a test of the 200-dma, with a move above it
confirmed by a move above the 100-dma.  Plans should be made to
protect profits in the 1130-1135 zone, however, in case the SPX
turns down again instead of breaking out through resistance line.
In actuality, with the exception of the breakout above 1080, it
has been difficult to find a safe place from which to suggest a
bullish play because of multiple resistance zones ahead as the
SPX moves up through that congestion zone.

The Nasdaq printed its own potential reversal signal on the
weekly chart, although not in as classic form as did the SPX.
The daily chart shows that the Nasdaq stopped short Friday at a
descending trendline that has been in place for more than a
month, also the site of the diving 30-dma.

Annotated Daily Chart of the Nasdaq:



The descending red trendline depicted above could serve as the
neckline for an inverse H&S, but the Nasdaq oscillators indicate
that the Nasdaq could push higher.  Those who prefer to play the
bullish side could watch for a push above that trendline,
confirmed by a move above the 30-dma, but should have profit-
protecting plans in place as the Nasdaq approaches 1890-1900, the
likely site of the descending 50 and 200-ema's by the time that
level could be approached.  If the Nasdaq is to form an inverse
H&S from a horizontal neckline, that would be the appropriate
spot for a rollover into another shoulder.

Like the other indices, however, bearish MA crossovers suggest
that selling rallies could still be the preferred strategy, with
the knowledge that crossovers tend to come late in a movement.
Bullish MA crossovers, confirming strength, could come just as
late in the movement.

Out of all the indices, the Russell 2000 may be the closest to
reaching an appropriate rollover level from a horizontal neckline
or a push through the neckline, rejecting the potential formation
and preparing for a climb up toward the 200-dma.

Annotated Daily Chart of the Russell 2000:



Like the positioning of the oscillators on other indices, their
positioning on the Russell 2000's daily chart presents the
possibility of more upside.  A rollover at the potential
horizontal neckline for an inverse H&S may not occur, and the
Russell 2000 may instead shoot up to test its more closely
watched 200-sma and then perhaps the top of its regression
channel.  A bullish trade in the Russell remains problematic,
however, as there has just been a bearish 100/200-sma cross, it
does still remain within a descending regression channel, and so
many potential pitfalls in the form of various MA's exist in the
path of any bullish play.  Some oscillators signal incipient
bearish divergence as they've already reached higher highs when
compared to the early August period while price has not. The
Russell 2000 can erase that potential divergence, however, by the
simple method of climbing higher than that early August high.

The Dow, too, may be aiming for a horizontal neckline to a
potential inverse H&S, if it intends to form one.

Annotated Daily Chart for the Dow (using DJX as proxy):



The Dow also produced a nice-looking morning-star reversal signal
on its weekly chart.  It had also been showing bullish divergence
on this daily chart.  Note that the last approach to the bottom
of the regression channel stopped before touching that channel,
when the previous approach had not only touched it, but breached
it.  However, a bullish trade in the Dow appears as problematic
as one in the Russell 2000, with a group of important moving
averages converging overhead.  While the Dow can plow through
those averages, it appears more likely that it would need
consolidation or a pullback from that resistance before doing so.
Look for a test of 10,130-10,170 and a rollover from that zone as
an opportunity for a bearish play.  A break above the 200-sma
would be one indication for a bullish play, but profit-protecting
plans should be in place as the top of the descending regression
channel is approached.

If indices begin rollovers sometime next week instead of punching
up through next resistance levels, special note should be taken
of the shoulder levels in the possible inverse H&S formations.
If in bearish plays, profit-protecting plans should be place
ahead of tests of those potential shoulder levels.  OIN readers
are not the only ones capable of noting potential formations, and
those intending to buy could step in ahead of the actual shoulder
level.  Anywhere ahead, actually.  With weekly charts showing
bullish reversal signals and daily charts presenting the
possibility that even a pullback could be part of a bullish
inverse H&S formation, some might be willing to buy well ahead of
such a test of the shoulder level.  Those profit-protecting plans
could include plans that allow for participation in further
downside if the shoulder levels are violated.

Taking over for the SOX lately as an indicator index, the TRAN
may provide our first clue as to whether other indices are likely
to roll over or break out to the upside.

Annotated Daily Chart of the TRAN:



Unlike some other indices, the TRAN has the support of both the
200-sma and -ema below it.

The indices are printing beautiful potential reversal signals on
their weekly charts.  Some have broken above the midlines of
their regression channels.  Daily chart oscillators still
indicate there's plenty of upside to go.  What could precipitate
a rollover now?

Crude could, of course.  If the theory about an expiration-
related run-up in crude coupled with an actual price increase is
wrong, crude could continue higher next week.  An incident in the
final days of the Olympics or a blown-up pipeline in Iraq could
precipitate a rollover, although it's difficult to even give
words to that first possibility.  The terrible historical trading
pattern for the last week in August, mentioned by James Brown in
OIN's Market Monitor on Monday, could reassert itself this year,
resulting in a rollover.

Fear of the GDP could also do it.  That GDP will be released
Friday.

No important economic releases are scheduled for Monday, and the
calendar for the entire week will be lighter than last week's
heavy calendar, although not without its share of weighty
releases.  Tuesday sees July's Existing Home Sales at 10:00 EST.
Expectations are for a decrease to 6.78 million, down from the
prior month's 6.95 million.

Wednesday's numbers include July's Durable Orders at 3:30, with
expectations for that number at a 0.8 percent rise after June's
0.9 percent climb.  Wednesday's releases also include July's New
Homes Sales, with expectations for 1,280 thousand sales, down
from June's 1,326 thousand sales.  Also, Wednesday has become
important because of the 10:30-11:00 releases of the Department
of Energy and API figures for crude, distillate, and gasoline
inventories.  Thursday, natural gas inventories, watched less
closely lately, will be released, but more might be watching for
the earlier, 8:30 release of Initial Claims and the 10:00 release
of July's Help-Wanted Index.  Economists expect the Help-Wanted
Index to show an increase to 39 from June's 38.

Friday draws more attention, however, with the 8:30 release of
the second-quarter preliminary Chain Deflator and GDP, and the
10:30 release of August's Revised Michigan Sentiment.  Earlier
this week, a French minister quantified the effect he expected
rising crude to have on the French GDP, saying that if crude
reached $50/barrel and stayed at that level, he expected the GDP
gain to decrease by one percent.  During much of the second
quarter, crude futures were retracing gains and hadn't approached
$40.00, so that preliminary GDP might not yet show the effect of
increasing crude costs.  Crude futures for September delivery
increased from the March 31 close at $33.65 to the June 30 close
at $37.14.

However, Japan's shocking Q2 GDP number certainly could make
markets jittery, concerned that the U.S. could be in for a
similar downside surprise.  That's especially true since June's
trade balance, released last week, showed that the gap had
widened to a record $55.8 billion, with prices paid for crude oil
and other industrial supplies showing up as one of the factors in
that increasing deficit.  Perhaps those crude costs earlier this
summer, although minimal by comparison to today's costs, were
still high enough to impact the GDP figure, too, some might
wonder.

That widening trade balance last week also revealed that exports
had decreased.  Upon the release of that number, some began
speculating that growth estimates for the U.S. economy might
require revision.  The too-low estimate for June's trade gap had
probably been folded into the calculations for economic growth,
some commented.

Forecasts for the preliminary GDP are for 2.8 percent, a small
decrease from the previous 3.0 percent.  Estimates for the
preliminary Chain Deflator are for a flat 3.2 percent, and no
change in expected in the revised Michigan Sentiment number,
either, according to one source.

Monday begins a week that's been bearish for six out of the last
seven years, with drops in the major indices averaging more than
3.5 percent.  We begin that week with weekly charts showing
beautifully completed morning-star reversal signals.  Switching
back and forth from weekly, daily, and intraday charts show
differing pictures for the indices, so that one could form wildly
differing market outlooks.  Weekly says up.  Daily bar charts say
up, but maybe with pullback first.  Daily nested Keltner charts
suggest that the two S&P's, at least, are nearly jammed up
against next strong resistance.  Facing Friday's possible GDP
downside surprise and uncertainty over what will happen with
crude costs, trade carefully during this traditionally bearish
week, prepared for a rollover into shoulders for potential
inverse H&S formations or for moves up through to the tops of the
descending regression channels on daily charts.  Be prepared to
jump out of the way if your bias is proved wrong and indices head
the other direction.


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

HOW MUCH MORE BOUNCE?
By Leigh Stevens
lstevens@OptionInvestor.com

THE BOTTOM LINE -
The market had a substantial "oversold" rebound this past week,
after declines that totaled 25% and 38% respectively for the '01-
'04 advance in the S&P 500 and the Nasdaq Composite. It was
easier to see that the indices were at or near a tradable bottom
than to now anticipate just how high this rally can carry. Time
to windex that crystal ball! Somewhat higher is what I see, per
my individual index comments below.

Since Oil prices are pretty key to what stocks can manage, I
include an analysis and look at some key charts for this sector
below.  I think oil has reached a peak for now and this should
help out stocks.

I don't buy the $60 a barrel scenario based on what I see on the
charts. $50 was the level I thought oil could get to.  But, there
is a tendency for pit traders (who are not the best
prognosticators) to pick a higher number as further upside
potential once an important level is reached. Since the talking
heads on market cable know next to nothing themselves, hey why
not! The traders must have an idea.

FRIDAY'S TRADING ACTIVITY -

THE NUMBERS -
The S & P 500 index (SPX) ran up 7 points (+0.7%) to 1,098.35 and
was up a respectable 3.2% on the week. The Dow (INDU) closed 69
points higher at 10,110 and gained 2.9% for the week.

The Nasdaq Composite (COMP) rallied 18 points (+1%) to 1,838 and
gained 4.6% on a week over week basis. The Russell 2000 index
(RUT) rallied nearly 2%, to 547.9.  These market sectors were of
course down the most from their highs of earlier this year.

REPORTS & ECONOMIC NEWS -
On Friday, the market rallied in what seemed to both short-
covering and some new bargain hunting type buying based on
cautious optimism about an end to the immediate threat to Iraqi
oil supplies.  Higher oil prices, were they to continue would
really be a damper to the economic recovery underway in the U.S.,
which may be somewhat fragile anyway based on a slowdown in new
job creation.

The Iraqi news was of a potential resolution to the standoff in
Najaf. Investors found relief in the stories that militiamen
loyal to rebel cleric Muqtada al-Sadr had removed their weapons
from the revered Imam Ali Shrine in Najaf.

Volatility was in evidence on Friday also because of triple-
witching activity relating to options, index options and index
futures contracts all expiring.

U.S. Treasury Secretary John Snow said oil supplies have not been
disrupted enough to justify releasing petroleum from the U.S.
Strategic Petroleum Reserve. "I don't think we're there yet," he
said in an interview on CNBC.

Snow said the Bush administration intends to keep adding oil to
the reserve. With oil at such levels, investors remained as I
said quite concerned about the effect of high energy prices on
economic growth.

The Philly Federal Reserve Bank reported Friday that economists
have lowered their growth forecasts for the U.S. economy for the
rest of this year and the next. For 2004, the survey now sees
growth at 4.3%, down from 4.6 percent in the last survey. Growth
should average 3.8 percent annualized in the last half of the
year, down from 4.1 percent earlier. Growth in 2005 was lowered
to 3.7 percent from 3.9 percent.

OIL -
Crude oil for September delivery climbed toward 50, getting as
high as $49.40 a barrel on the New York Mercantile Exchange. The
contract then dropped back to close at $47.86, down 84 cents for
the session. After reaching intraday records every day this week,
the contract still closed almost 3% above the prior week's close
of $46.58.

The October contract,became the lead-month contract on Friday and
finished at $46.72, down 92 cents for the day.

Militants loyal to Muqtada al-Sadr in Iraq were reported to have
removed weapons from the Imam Ali mosque in Najaf, but remained
in control of the site, according to the newswires.

Guess where prices got to on the charts - exactly to the top end
of the price channel per the Sept and Oct contract charts below.




The touch to the top of the channel was accompanied by a very
overbought extreme on the 14-day RSI.

The problem with believing that oil was going to go much higher
was suggested by the next chart - that of the OIL stock Index,
OIX, which made a minor top and then started trending lower,
slipping under its 50-day moving average after a bearish
price/RSI divergence.  If oil prices were going to be sustained
at higher levels the Oil Stock Index would have been going up
along with it.




OTHER MARKETS -
Bonds ended lower on the rally in stocks following the news out
of Iraq. That news dampened bond-market gains tied to record
crude prices, which may force the Fed to slow the pace of its
expected interest-rate hikes. The benchmark 10-year note closed
down 3/32 at 100 6/32 to yield 4.23%, versus 4.22% on Thursday.

The euro fell 0.5% against the dollar, to $1.2304, while the
British pound fell 0.7% to $1.8178. Against the yen, the dollar
saw early gains slip away and ended down 0.2% at 109.22.

Gold futures ended at their highest levels in 4 months as record
oil prices weighed on the broader market - this an the MidEast
uncertainty raised investment demand for gold.

MY INDEX OUTLOOKS -

S&P 500 Index (SPX) - Daily chart:

The rally of this past week was substantial, better than I
Anticipated with oil prices climbing like they were. Helping out
this rally was the fact that traders didn't get immediately
overly bullish, at least as suggested by my call/put model ran.

SPX resistance is at 1110, especially on a closing basis - an
important level at both the prior upswing high and at the key
200-day moving average. Next resistance I figure at around 1120.
Key support is at 1080. If this rally is going to mark much of a
turnaround 1080-1085 should hold as support.




I mentioned last week a tendency for a good rebound after 2-3
touches to the lower envelope line, at least back to the 21-day
average.  That this average was exceeded suggested good upside
momentum that should carry still further in the coming week. I
figure SPX can make it to at least the 1110 area, maybe up toward
1120, which also looks to be a good place to take profits on
calls.

S&P 100 Index (OEX) - Hourly chart:

I thought that the last decline to under 520 looked like an area
to exit puts and do some call buying, looking for a move to at
least 530 - too conservative of an estimate. OEX broke out
above resistance implied by the top end of the hourly downtrend
channel.

Next key resistance is in the 540 area per the level line and red
(down) arrow on the chart.  Above 540, I expect resistance at 550
at the previously broken up trendline - a prior support "becomes"
possible new resistance. And, prior resistance (or a line of
resistance), once penetrated, will tend to become new support on
pullbacks: so key support now looks like 530.




Given the near-term overbought situation, I look for sideways to
lower price action at some point, say by Tuesday. If there was
pause/pullback and a less overbought condition if would then
seem more likely for a further advance. This is just a tendency
but you can see the frequency of pullbacks from overbought
extremes when using the stochastic set at "length" 21 as on the
chart above.

Dow 30 (INDU) - Daily chart:

The rally in the Dow (INDU) occurred from the low end of a well-
defined price channel as in the chart below. Support is apparent
in the 9800 area.  Likely resistance comes in around 10200 at the
prior (up) swing high, extending to around 10250 at the 200-day
moving average. The top of the channel suggest even more
significant resistance and possible selling pressure coming in
the 10400 area.




As I said last week, the close above 10200 suggests possible
ultimate potential to the top end of the downtrend channel on the
daily chart, which is around 10400 - I would both exit calls in
this area, if reached and look to buy some DJX puts.

PRICE/KEY INDICATORS SUMMARY - S&P:

The S&P (both SPX and OEX) as well as the Industrials (INDU)
reached an oversold area and as pointed out in my last weekly
commentary, the RSI oscillator had a bullish divergence - as seen
in the higher low made by the RSI indicator contrary to price
action (and noted on the RSI chart). [When the price pattern
turns bullish or bearish and the indicators confirm, I note the
occurrences with either up or down arrows under that part of the
chart.]




NYSE Up Volume got back to its recent "baseline" and then turned
up, suggesting a bottom, as did my "Sentiment" indicator.  Note
that the Call/Put reading is the one most likely to precede a
rally. But all - price action and my key indicators - taken
together suggested a high probability for the rally that followed
this past week.

Nasdaq Composite (COMP) - Price/Key Indicators - Daily:

1840, at a prior closing low (support becomes resistance) is a
key area in my mind that the Composite needs to clear next.
Above that, 1892 (Columbus sailed the ocean blue!) is the prior
high close and an even more key level.  I have some doubt whether
COMP can get above this area in the coming week - mostly I judge
this by looking at key tech stocks. Not a lot of em are yet in
gear on the upside.

Besides price considerations, always number 1 on my list, the
same bullish price/RSI divergence seen in the S&P set up in the
Nasdaq Composite - this from an area that looked like it could be
the low end of a downtrend channel on a close-only ("line" chart)
basis - see below:



The decline to a common "baseline" and then the turn up from
there by the 10-day average of Nasdaq daily Advancing (Up) Volume
was a bullish confirming indicator this past week. I had more on
this aspect, this indicator, in my Trader's Corner article the
other week. See -
http://www.OptionInvestor.com/traderscorner/tc_081504_2.asp

This indicator and the other main ones I use got bullish in March
and May. The up volume indicator is of use for indications of
bottoming action only.

I'll note as before re the chart above, that I use the same Call
to Put ratio for the Nasdaq as for the S&P and Dow Indices. When
option traders do a lot of call buying relative to puts in
equities options in general, or the reverse, the possible
"overdone" aspect tends to hold true for both markets.

Nasdaq 100 (NDX) Index  - Daily:

Bullish price action first occurred when the rally decisively
penetrated the (downside) gap area. I thought that lows around
1315-1310 offered call buying potential and the upside exceeded
my initial expectations for a rally back up to 1350-1355. Now
what?  Key resistance in the Nas 100 (NDX) is noted at the prior
rally highs around 1410.  I estimate near technical support to
now be in the 1357-1360 area.




A close under 1357 would be a bearish note. The upper envelope
line around 1430 currently is a next area where this index would
be extended or overbought.  1357 is the level of the 21-day
moving average currently - this average tends to alternate as a
key support or resistance, as can be seen from prior price
action.

Nasdaq 100 tracking Stock (QQQ) Daily:

Well, the Q's didn't make it back to 32, but did get to the
support zone I highlighted in the chart.  34 looks to be pretty a
pretty significant resistance overhang - there as a lot of buying
in this area, at what was the low end of the March - July price
range prior to the sharp early-August break.  This then tends to
be "breakeven" for many and is their first change to get out
whole so to speak.




A close above 35 and the ability of the stock to hold this area
on subsequent pullbacks is needed to suggest higher levels near-
term such as back up the 35 area, or even 36.

Support is estimated around 33.50, then at 32-32.25.

I still favor shorting the stock on rallies that get to and
falter at either the 35 or 36 areas.

Good Trading Success!


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

Look for the next edition of the Editor's Plays in next Sunday's email.


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

End of Summer
- J. Brown

It has been an interesting summer thus far.  June was strong.
July was terrible and August has just been plain volatile.  If we
use Memorial Day as the unofficial start of summer then we
haven't moved very far.  The Dow Industrials are only down 78
points from May 28th.  The NASDAQ looks a lot worse because July
was so painful.  The NASDAQ Composite is down 148 points from
Memorial Day.  Meanwhile the S&P 500, which better represents the
market as a whole, is down about 22 points for the summer.
That's really not too bad considering the carnage from July 1st
through the first week of August.

During the same time period crude oil has risen 21.6% from May
28th through Friday's close (using the recently expired September
contract).  Crude is up almost 34% from its June lows, where
stocks peaked.  Oil continues to be the main story affecting the
markets and it almost hit $50 a barrel on Friday morning as
fighting raged in Najaf and investors responded to stories late
Thursday of Iraqi oil company buildings being burnt down by
militants.  Fortunately, oil began to subside as the weekend
approached and stocks pushed higher into the close.

The question now is what are investors feeling?  The recent rally
has produced some positive bullish reversals in a number of
stocks and indices.  Is it a new bullish entry point?  Or will it
become a new lower high in the market's seven-week downtrend.
The bounce from 10,000 in the Industrials on Friday is
encouraging but the S&P 500's inability to breakout and close
over the 1100 level is equally discouraging.  If you look at the
volatility indices they have all fallen sharply from their recent
highs indicating that investors are feeling more confident
(a.k.a. bullish) on stocks.  Friday's market internals were
certainly positive.  Advancers outpaced decliners by 21 to 6 on
the NYSE and almost 22 to 8 on the NASDAQ.  Up volume outweighed
down volume on both exchanges but overall volume was pretty
light.

Odds are volume will continue to be light until after Labor day.
On Thursday I noted that most of the professionals were echoing
comments made by Jim a couple of weeks ago that there really
isn't any reason for stocks to rally before Labor Day.  Yes, we
could see an oversold bounce but any meaningful uptrend is likely
to remain absent.  We still have another week of Olympics but the
real threat is the upcoming Republican National Convention in New
York City that begins a week from Monday.  The temptation for
terrorists to strike at both the President's political party and
the financial capital of the world New York City has to be a big
one.  Whether anything happens or not the threat of an event
could easily keep a lid on stocks.  Volume in the markets is
expected to dry up and shrivel away during the week of the RNC.

Yet that's still a week away.  This coming week doesn't offer us
any reprieve either.  Stocks are starting to look bullish with
the bounce from August 16th but the Stock Trader's Almanac has
bad news for us.  As reported earlier the Almanac states that the
last five days of August have been extremely painful 6 out of the
last 7 years.  The average loss in the Dow is -4.0%, on the S&P
500 it's -3.8% and on the NASDAQ it's -3.5%.  If the markets
follow this historical trend then the end of August could witness
the Industrials near 9700, the S&P 500 near 1056 and the NASDAQ
near 1775.  Of course if you're feeling optimistic you could
round the numbers up a bit and just look for the major indices to
retest their August lows.  Then if you're feeling really
optimistic imagine the whole scenario as an opportunity for a big
double-bottom to lead us into the fall.

Unfortunately, this is all just conjecture and what-if's.  The
facts are that we still have to face the month of September,
which has historically been the WORST month of the year for all
three indices.  Now we could see stocks buck this trend if crude
oil suddenly reverses on us but that's a big if right now.
Investors need to shed their personal bias on the markets and
consider the following.  Not only are we facing some painful
historical trends but record high oil prices, rising terror
fears, concerns over a slowing economy and major uncertainty over
the upcoming Presidential election do not nurture a bullish
environment for stock prices.

Bulls say the markets usually need a wall of worry to climb.
Well they've got one and it's looking pretty steep.


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

Market Averages

DJIA ($INDU)

52-week High: 10753
52-week Low :  9230
Current     : 10110

Moving Averages:
(Simple)

10-dma:  9999
50-dma: 10144
200-dma: 10229




S&P 500 ($SPX)

52-week High: 1163
52-week Low :  983
Current     : 1098

Moving Averages:
(Simple)

10-dma: 1079
50-dma: 1099
200-dma: 1109




Nasdaq-100 ($NDX)

52-week High: 1559
52-week Low : 1256
Current     : 1366

Moving Averages:
(Simple)

10-dma: 1334
50-dma: 1392
200-dma: 1442




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

CBOE Market Volatility Index (VIX) = 16.00 -0.96
CBOE Mkt Volatility old VIX  (VXO) = 16.30 -0.97
Nasdaq Volatility Index (VXN)      = 23.06 -0.85


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

   Put/Call Ratio  Call Volume   Put Volume

Total          0.95      1,049,280     1,001,436
Equity Only    0.72        784,646       566,482
OEX            1.07         82,678        88,318
QQQ            1.20         90,233       107,960


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

Bullish Percent Data

    Current   Change   Status
NYSE          54.0    + 1     Bear Confirmed
NASDAQ-100    29.0    + 2     Bear Confirmed
Dow Indust.   46.7    + 0     Bear Confirmed
S&P 500       49.0    + 1     Bear Confirmed
S&P 100       46.0    + 1     Bear Confirmed


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

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


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

5-dma: 0.66
10-dma: 1.00
21-dma: 1.27
55-dma: 1.24


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    2147      2189
Decliners     650       824

New Highs      87        35
New Lows       13        26

Up Volume   1183M      967M
Down Vol.    866M      347M

Total Vol.  1439M     1330M
M = millions


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

Commitments Of Traders Report: 08/17/04

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 very little change in the commercial traders'
positions.  They remain slightly net short while small traders
are net long (bullish).

Commercials   Long      Short      Net     % Of OI
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%)
08/17/04      398,472   416,109   (17,637)   (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
07/27/04      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%
08/17/04      138,550    97,792    40,758    17.2%

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

In the e-mini contracts we see commercial traders upping
both their long and short positions but they remain net
bearish.  Small traders have done the same by increasing
positions overall and they have increased their bullish
sentiment.

Commercials   Long      Short      Net     % Of OI
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%)
08/17/04      404,065   457,372   ( 53,307)  ( 6.2%)

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
07/27/04      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%
08/17/04      192,939     92,361   100,578    35.3%

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 increased both their longs and
shorts in the NDX but shorts made a stronger comeback.
Commercial traders remain net bullish but the strength of
their sentiment is decreasing at least as of Aug. 17th.
Small traders have turned sharply bullish with a big switch
in positions.

Commercials   Long      Short      Net     % of OI
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%
08/17/04       44,743     41,535     3,208    3.7%

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
07/27/04       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%)
08/17/04       12,256     8,352     3,904    18.9%

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

DOW JONES INDUSTRIAL

Commercial traders are at a virtual standstill during the
latest period and remain net bullish on the Industrials.
Naturally small traders are making the opposite bet and have
turned more bearish.

Commercials   Long      Short      Net     % of OI
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%
08/17/04       30,271    22,809    7,462      14.1%

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
07/27/04        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%)
08/17/04        4,388     7,089   (2,701)   (23.5%)

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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***************
ASK THE ANALYST
***************

I thought your column from last week was the most interesting and
useful column for day traders that you have written.  I've
utilized other techniques you've taught in my trading, both day
and swing trading, but as I learn more about pivot analysis, it
has become a pillar for which my trading is centered around.

While your article discussing the TRIN and pivot analysis was a
real eye-opener and gave me a better understanding of what TRIN
really does, and how I can actually apply levels during the day
to interpret building strength or weakness, I started looking at
the Market Volatility Index, which you seem follow.

Like most traders I know, I always used to just assume weakness
was building above 1.0 and strength was building below 1.0, but
this week's trade, as well as reviewing historical trade, really
shows how, or where an intra-day reversals took place, especially
at the daily pivot.

I was flabbergasted when I used my Q-charts daily pivots and made
some observations as to how the VIX also seems to track the daily
pivots, where using a similar set of rules, or assumptions during
a trading day, the VIX and TRIN seem to be a killer combination.

Like you said though, nothing is "foolproof," and while I had
some losing trades this week, I had a pretty good feeling from
the TRIN and the VIX when it was time to cut the loss.

Reply:

Wow!  This trader sent me a much longer e-mail, question, and
some observations that I'm not fully printing, and unfortunately
for some traders, I didn't get a chance to really "test" until
Friday afternoon.  I wish I had, as it would have saved me, and a
some other traders from a loss in a bearish QQQ trade early
Friday morning.  Conversely, I see just that bullish trade in
Research in Motion (NASDAQ:RIMM) performed so well.

If you've ever tried trading off the VIX.X by itself, you'll
most likely find that using the TRIN is beneficial.  If you've
always used the TRIN by itself, then adding the VIX.X as an
observation can have great impact.

While I have noticed how the VIX.X seems to "peg" its QCharts'
daily pivot levels, what blew my mind was the trader's
observations he alerted me to, and how traders observing
the VIX and the TRIN together, get somewhat of a three-
dimensional view of things.  OK, two dimensional (VIX and TRIN),
but you really get some "depth" that the TRIN and VIX by
themselves don't necessarily show.

Quick review of the Market Volatility Index (VIX.X).  This
indicator portends to measures the volatility of the U.S. stock
market and is updated throughout the day by the Chicago Board
Option Exchange (CBOE) in real-time using the OEX bid/ask quotes.
The VIX is calculated by taking the weighted average of the
implied volatility of eight OEX calls and puts with an average
time to maturity of 30 days.  The VIX is therefore a measurement
of 30 day index options.  It is not a measure of the volatility
of any one individual stock or option, and it does not measure
the implied volatility of any other index other than the OEX.
However, many traders use it as a general indication of index
option implied volatility.

Laughing to myself.... Do you want to know how I think of the
VIX?  If it's going up, then that means there is more put buyers
and call sellers (bearish), than there are put sellers and call
buyers (bullish).  If it is going down, then there are more call
buyers and put sellers (bullish) than there are call sellers and
put buyers (bearish).

Now... close your eyes for 10-seconds, and take a deep breath,
then open them up and makes some observations that I think will
get your juices flowing.

VIX.X and TRIN comparisons - 10-minute intervals



We talked about the TRIN and DAILY Pivot analysis levels in last
weekend's column, now look at the top chart of the VIX.X with the
QCharts-derived daily pivot analysis levels.  Doesn't it look as
if the VIX.X trades "levels?"

A general observation.  When VIX.X is BELOW its DAILY Pivot,
there seems to be a BULLISH bias to that session.  On the (TRIN)
chart I labeled each day with OEX and QQQ gains or losses.  Look
back at the upper VIX.X chart.  See how VIX.X below daily pivot
resulted in a more BULLISH session?  Thursday was a bearish
session.  What was the VIX.X doing that day?

Good gravy!  It's somewhat notable on Thursday how both the VIX.X
and TRIN traded right up to their respective DAILY R2.

Spend a little time right now, and use your "rules" that we
outlined last weekend related to TRIN and the 1.00 level, as well
as where TRIN was trading in relation to its DAILY Pivot.  Then
look at the VIX.X.

Now, here's a question I (Jeff Bailey) had, as well as other
traders, when we were using observations ONLY from the TRIN this
week.  I and others wondered why the TRIN would seeming "stop"
itself at some area that was nowhere close to a DAILY Pivot
Analysis level, and when it did, it seemed as if an intra-day
relative high or low, excluding the first 10-minutes or so when
TRIN could settle down, would seemingly have the QQQ making a
sudden move (lower or higher) inverse to the TRIN.

Friday was a perfect example.  Look at the TRIN chart after it
fell below 1.00 and its DAILY Pivot, where its seems to stop
ABOVE its DAILY S1 of 0.61.  See where I point to "little move
lower to session low," which still doesn't quite trade to 0.61?
We saw a nice extension of Friday's mid-session gains on that
"little TRIN move lower."  Now look up a your VIX.X chart.

Here I point to "Boom!" as the VIX.X had edged below its DAILY
S1, and then the "Boom!" as volatility imploded.  Maybe, if I had
just set an alert at VIX.X DAILY S1 of 16.32, that alert could
have given me a 20-minute "heads up" for further bullishness.

In Friday's Market Monitor at 12:53:18, I issued a "TRIN alert"
at 0.70 as the TRIN made a session low.  Mind you, I was NOT
looking at, or paying too much attention to the VIX.X, other than
to have noticed it moving lower during the day.

Hold that thought for a minute.

In Thursday evenings Index Trader Wrap at OptionInvestor.com, I
stated that I was carrying a BEARISH bias into Friday's trade.  I
backed up that observation with the TRIN, where for the first
time this week, it closed above 1.00, and most likely was going
to open above Friday's TRIN daily pivot.

Well, I've never been one to deviate from a plan that I had
outlined, and as I saw the TRIN fall back to the 1.00 level, and
find "support" above DAILY Pivot, the QQQ was trading BELOW its
DAILY Pivot.  I had to go short the QQQ at $33.57, stop $33.75 (I
did nudge it up to $33.77 as TRIN was finding support at its
daily pivot).  Now look at the VIX.X.  It was BELOW its DAILY
Pivot.  Hmmmm.... I can perhaps see what I did "wrong," with
trying to short the QQQ so early in the session, but based ONLY
on TRIN, I still think it was a good trade idea.  However, next
time I'll want to see what the VIX.X is doing.  Especially on an
option expiration Friday!!!!!!

OK.  Now lets get down to what really counts.  Remember, it is
PRICE that matters most.  You cant put food on the table if your
ONLY looking at TRIN and VIX.  What are the indices or securities
doing that you're trading?

S&P 100 (OEX.X) and QQQ Comparisons - 10-minute intervals



After you get a "feel" for the VIX.X and TRIN trade within their
DAILY Pivot levels, now look at how the indices PRICE played out.
Stock traders will interpret an index, then go looking for stocks
to trade based on their interpretation of a MARKET or SECTOR.

On Friday I traded short the QQQ just after the open.  While
still "hopeful" that the QQQ would slip back below its DAILY
Pivot and have TRIN rising from its DAILY Pivot and back above
1.00, that didn't happen.  It was time to admit the mistake, and
start looking to get long.

I like to review my mistakes/losses.  I also like to review my
winners.

Intel (INTC) and Research in Motion (RIMM) Charts - 10-min int.



Two bullish trades in RIMM this week treated traders pretty good.
A swing trade bullish on Wednesday with a close out at our target
on Thursday morning.  After getting stopped on the QQQ bearish
trade Friday, RIMM was the first stock I thought of when it
became evident the QQQ was going to at least make a move to its
DAILY R1, if not its DAILY R2 with TRIN headed below its DAILY
Pivot.  It just so happened that RIMM wash challenging its DAILY
Pivot.  Since RIMM treated us well on Wednesday, it deserved
another shot.  Long at $59.40, target $61.00.  Good gravy!  I
meant to target $61.27! (grin)

When Thursday's TRIN indications were more bearish, we traded
Intel (INTC) short at $22.06 and closed out at $21.85 for a 0.95%
gain.  We did a little bit better than the percentage declines of
the QQQ the entire day.

Look how different RIMM and INTC traded in recent sessions, where
despite some bullish TRIN and VIX.X indications, where QQQ/OEX
trade bullish, INTC not as bullish.  When TRIN and VIX.X
indications more bearish, INTC has been good short.

Whew!  The trader that sent me the e-mail I used for today's
column was a rather long one, and he had some EXCELLENT
observations, as well as a lot of questions, where I've tried to
roll many of them into this article.

Now, he also asked about the WEEKLY Pivots for swing trading,
where he likes to use some additional capital he can't possibly
day trade, as there's NO WAY a trader can really keep track of 5
or 6 different day trades he/she may have open in a session.

I have to do some analysis and back testing, which may take
awhile.  I'll try and answer some of those questions in a later
article.

I've also received questions regarding point and figure chart
comments I made this week.  I need to address those too.

If you've got a question, shoot me an e-mail.  I can't promise
that I can respond to all, or use YOUR specific question in an
Ask the Analyst column, but I might be able to incorporate it
with another trader/investor's question.

Have a great weekend and with Jim Brown coming back from some
seminar (i.e. vacation) we can probably look for the major
indices to fall after a rather bullish week.  I've got to get my
jabs in on Jim from time to time.

Jeff Bailey


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

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

Symbol  Co               Date           Comment      EPS Est

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

TOY    Toys R Us           Mon, Aug 23  Before the Bell     -0.04


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

BMO    Bank Of Montreal    Tue, Aug 24  During the Market     N/A
HRB    H&R Block, Inc.     Tue, Aug 24  After the Bell      -0.05
HNZ    H.J. Heinz Company  Tue, Aug 24  Before the Bell      0.55
HUG    Hughes Supply       Tue, Aug 24  After the Bell       1.16
MRX    Medicis             Tue, Aug 24  After the Bell       0.36
RGS    Regis Corporation   Tue, Aug 24  Before the Bell      0.59
STOSY  Santos Ltd.         Tue, Aug 24  -----N/A-----         N/A
SMTC   Semtech             Tue, Aug 24  After the Bell       0.21
TKA    Telekom Austria AG  Tue, Aug 24  Before the Bell       N/A
TTC    Toro                Tue, Aug 24  Before the Bell      1.28


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

ADCT   ADC                 Wed, Aug 25  After the Bell      0.01
BTH    Blyth Inc.          Wed, Aug 25  -----N/A-----       0.23
BCM    Can Imp Bank CmmerceWed, Aug 25  -----N/A-----        N/A
DLTR   Dollar Tree Stores  Wed, Aug 25  After the Bell      0.26
SJM    J. M. Smucker Co    Wed, Aug 25  Before the Bell     0.56
MIK    Michaels Stores     Wed, Aug 25  -----N/A-----       0.40
NDSN   Nordson             Wed, Aug 25  -----N/A-----       0.47
REXMY  REXAM PLC           Wed, Aug 25  -----N/A-----        N/A
TOL    Sulzer              Wed, Aug 25  -----N/A-----        N/A
WSM    Wi-Lan Inc          Wed, Aug 25  After the Bell     -0.05


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

BFb    Brown-Forman Corp   Thu, Aug 26  Before the Bell     0.38
CHS    Chico's FAS         Thu, Aug 26  After the Bell      0.38
DG     Dollar General Corp.Thu, Aug 26  Before the Bell     0.20
OTE    Hellenic Telecomm   Thu, Aug 26  Before the Bell      N/A
JOYG   Joy Global Inc.     Thu, Aug 26  Before the Bell     0.32
KWD    Kellwood Company    Thu, Aug 26  After the Bell      0.35
AHO    Koninklijke Ahold NVThu, Aug 26  -----N/A-----        N/A
PDCO   Patterson Dental    Thu, Aug 26  -----N/A-----       0.59
SCO    Scor                Thu, Aug 26  Before the Bell      N/A
SFD    Smithfield Foods    Thu, Aug 26  Before the Bell     0.47
TECD   Tech Data Corp      Thu, Aug 26  After the Bell      0.49
TKS    Tomkins PLC         Thu, Aug 26  -----N/A-----        N/A
TD     Toronto Dominion BnkThu, Aug 26  -----N/A-----        N/A
VIP    Vimpel Comm         Thu, Aug 26  -----N/A-----        N/A


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

PNY    Piedmont Natural GasFri, Aug 27  -----N/A-----       -0.40
RY     Royal Bank Of CanadaFri, Aug 27  -----N/A-----         N/A


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

Symbol  Co Name              Ratio    Payable     Executable

HTLD    Heartland Express         3:2      Aug  20th   Aug  23rd
TOX     MEDTOX Scientific, Inc    3:2      Aug  20th   Aug  23rd
IVX     IVAX Corporation          5:4      Aug  24th   Aug  25th
ZBRA    Zebra Tech Corp           3:2      Aug  25th   Aug  26th
WOOF    VCA Antech, Inc           2:1      Aug  25th   Aug  26th
PGTV    Pegasus Comm Corp         2:1      Aug  26th   Aug  27th
BAC     Bank of America           2:1      Aug  27th   Aug  28th
CFC     Countrywide Financial Corp2:1      Aug  30th   Aug  31st
VNBC    Vineyard National Bancorp 2:1      Aug  30th   Aug  31st
HOC     Holly Corp                2:1      Aug  30th   Aug  31st
TRBS    Texas Regional Bancshares 3:2      Aug  30th   Aug  31st
ENSI    EnergySouth, Inc          3:2      Sep   1st   Sep   2nd
CHD     Church & Dwight Co. Inc   3:2      Sep   1st   Sep   2nd
TCB     TCF Financial Corp        2:1      Sep   3rd   Sep   6th


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

The Olympics will move into its second week but Wall Street will
look with wary eyes on the upcoming Republican National Convention
that starts a week from Monday.  This week we'll see new and used
home sales, the preliminary GDP numbers and revised sentiment figure.

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

----------------
Monday, 08/23/04
----------------
None


-----------------
Tuesday, 08/24/04
-----------------
Existing Home Sales (DM)   Jul  Forecast:   6.80M  Previous:    6.95M


-------------------
Wednesday, 08/25/04
-------------------
Durable Orders (BB)        Jul  Forecast:    1.0%  Previous:     0.9%
New Home Sales (DM)        Jul  Forecast:   1292K  Previous:    1326K
Federal Reserve Governor Guynn speaks on U.S. Economy

------------------
Thursday, 08/26/04
------------------
Initial Claims (BB)      08/21  Forecast:     N/A  Previous:     331K
Help-Wanted Index (DM)     Jul  Forecast:      38  Previous:       38


----------------
Friday, 08/27/04
----------------
GDP-Prel. (BB)              Q2  Forecast:    2.8%  Previous:     3.0%
Chain Deflator-Prel. (BB)   Q2  Forecast:    3.2%  Previous:     3.2%
Mich Sentiment-Rev. (DM)   Aug  Forecast:    94.0  Previous:     94.0



Definitions:
DM=  During the Market
BB=  Before the Bell
AB=  After the Bell
NA=  Not Available


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 The Option Investor Newsletter                   Sunday 08-22-2004
 Sunday                                                      2 of 5
  
 In Section Two:
 
 Watch List: Credit Cards to Cruises and more!
 Dropped Calls: None
 Dropped Puts: None
 
 
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 **********
 Watch List
 **********
 
 Credit Cards to Cruises and more!
 
 ___________________________________________________________________
 
 How to use this watch list:
   Readers can use the candidates below as a springboard for their
   own research.  Many are in the process of breaking support or
   resistance or in the process of starting new trends or
   extending old ones.  With your own due diligence these could be
   strong potential plays.
 ___________________________________________________________________
 
 
 Capital One Financial - COF - close: 70.85 change: +0.90
 
 WHAT TO WATCH: We came very close to adding COF to the play list
 as a call this weekend.  The we like the double bottom at its
 exponential 200-dma.  We like the bullish breakout over all its
 moving averages and the $70.00 mark.  Plus, we really like the
 bullish triangle breakout on its P&F chart with a target of
 $82.00.  However, we chose to wait and see if COF can climb past
 its June highs and resistance near $72.50.
 
 Chart=
 
 
 ---
 
 Royal Caribbean Cruises - RCL - close: 39.30 change: -0.80
 
 WHAT TO WATCH: It wasn't easy to find a bearish candidate this
 weekend but we did.  The stock has been sinking for the last
 several weeks and failed to participate in the market's rally the
 past couple of days.  RCL has been slipping on rising volume and
 Friday's 2% decline broke through its simple 200-dma.  There is
 still more support near the $38.00 level but this one could be
 worth watching for a put play.  A move under $39.00 should
 produce a new sell signal on its P&F chart.
 
 Chart=
 
 
 ---
 
 Nucor Corp - NUE - close: 84.21 change: +0.94
 
 WHAT TO WATCH: There were a lot of bullish moves in the metals
 and mining stocks this past week.  We like the bullish trend of
 higher lows in NUE.  The stock is consolidating under resistance
 at $85.00 and looks ready to breakout.  Technicals are positive
 and its MACD is very close to a new buy signal.  Consider a move
 over $85 as an entry point and target a run to $90.
 
 Chart=
 
 
 ---
 
 Fastenal Co - FAST - close: 61.89 change: +1.93
 
 WHAT TO WATCH: A careful look at FAST's chart and you'll see that
 the stock has been consolidating sideways for the past four
 weeks.  FAST has been building a neutral pennant-type formation
 with higher lows and lower highs.  You can see a similar
 consolidation in its short-term oscillators like the RSI and
 stochastics.  While normally a pennant is neutral in its
 technical bias we believe FAST is going to breakout to the
 upside.  Look for a move over $62.65 or $64.00 as potential entry
 point for bullish positions.  The P&F chart is currently bullish
 with an $81 target.
 
 Chart=
 
 
 
 -----------------------------------
 RADAR SCREEN - more stocks to watch
 -----------------------------------
 
 FMC $43.94 +0.92 - We're still watching FMC for a breakout over
 $45.00.
 
 UNH $65.57 +0.67 - Keep an eye on UNH for a breakout over $66.00.
 
 OSIP $60.30 +1.10 - The push past $60.00 is impressive but OSIP
 still has resistance at its 50 and 100-dma's as well as its July
 high.  Look for a move over $62.00 as a bullish entry point.
 
 WFMI $78.87 +1.51 - This continues to look like a potential
 bottom in WFMI with the MACD in a new buy signal.
 
 EBAY $81.37 +1.69 - EBAY has been very strong the past two weeks
 and broken out over the $80.00 level.  Now look for it to push
 past its 50 and 100-dma's.
 
 
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 **************************
 PICKS WE DROPPED THIS WEEK
 **************************
 
 Remember that historically, when we drop a pick it will go up
 10 to 15% the very next week. It is part of Murphy's Law.
 Just because we drop a stock as a pick does not mean we are
 advocating a "sell" on any position you have. We are simply
 dropping our recommendation as a new play. Existing plays
 can and do continue on and are usually profitable.
 
 
 CALLS
 ^^^^^
 
 None
 
 
 PUTS
 ^^^^
 
 None
 
 
 ***********
 DEFINITIONS
 ***********
 
 
 OI  = Open Interest - the number of open contracts outstanding.
 Last Trade @ = Indicates where the option traded last.
 ITM = In the money
 ATM = At the money
 OTM = Out of the money
 ADV = Average Daily Volume
 
 The options with a "*" by the strike price are our choices from the
 group. If the stock moves as expected we feel they have the best
 chance to substantially increase or double in price with the best
 risk/reward ratio compared to the other options for the same stock.
 You must determine if they fit your risk profile for time and price.
 
 RISKS of SELLING PUTS:
 The risk of selling naked puts is always the possibility
 of a catastrophic event that drops the stock below the
 strike price and could result in the stock being PUT to you.
 Always protect yourself with a "buy to cover" limit order
 to take you out before this can happen.
 
 
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 DISCLAIMER
 **********
 
 Please read our disclaimer at:
 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 08-22-2004
 Sunday                                                      3 of 5

 In Section Three:

 Current Calls: AET, MHK, POT, RAI, TDS, TXT, ZBRA
 New Calls: BOL, INSP
 Current Puts: HIG, SPW
 New Puts: None

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

 Aetna - AET - close: 94.23 change: +1.78 stop: 89.95*new*

 Company Description:
 As one of the nation's leading providers of health care, dental,
 pharmacy, group life, disability and long-term care benefits,
 Aetna puts information and helpful resources to work for its
 approximately 13.4 million medical members, 11.4 million dental
 members, 8.1 million pharmacy members and 12.6 million group
 insurance members to help them make better informed decisions
 about their health care and protect their finances against
 health-related risks. Aetna provides easy access to cost-
 effective health care through a nationwide network of more than
 633,000 health care professionals, including over 377,000 primary
 care and specialist doctors and 3,866 hospitals.
 (source: company press release)

 Why We Like It:
 Up, up and away!  Shares of AET have been very strong the past
 two weeks pushing past resistance near $88 and $90.  We've been
 very encouraged by the results this past week and now that AET is
 nearing its first hurdle with overhead resistance at $95.00
 short-term traders may want to scalp their profits now.  AET is
 overdue for a pull back so interested readers looking for an
 entry point will probably want to be patient and look for a dip.
 Point & Figure chart readers will notice that AET has extended
 its upside target to $115.  That's good news but we're going to
 keep our target at $100 for now.  We are going to raise our stop
 loss to $89.95.  In the news AET announced on Friday that it was
 buying privately held Strategic Resource Co. for $250 million.
 The announcement did not affect the stock price and it probably
 shouldn't since the purchase is relatively small for a company
 like AET with almost $19 billion in annual revenues.

 Suggested Options:
 We like the September calls.  Our favorites are the $90 strikes
 although the $95s work well too.

 BUY CALL SEP  90 AET-IR OI=4319 current ask $5.60
 BUY CALL SEP  95 AET-IS OI=7052 current ask $2.35
 BUY CALL SEP 100 AET-IT OI= 488 current ask $0.75

 Annotated Chart:
 


 Picked on August 15th at $90.72
 Change since picked:     + 3.51
 Earnings Date          07/29/04 (confirmed)
 Average Daily Volume =      1.4 million
 Chart =
 

 ---

 Mohawk Industries - MHK - close: 73.42 change: +0.16 stop: 72.45

 Company Description:
 Mohawk is a leading supplier of flooring for both residential and
 commercial applications. Mohawk offers a complete selection of
 broadloom carpet, ceramic tile, wood, stone, laminate, vinyl,
 rugs and other home products. These products are marketed under
 the premier brands in the industry, which include Mohawk,
 Karastan, Ralph Lauren, Lees, Bigelow, Dal- Tile and American
 Olean. Mohawk's unique merchandising and marketing assist our
 customers in creating the consumers' dream. Mohawk provides a
 premium level of service with its own trucking fleet and over 250
 local distribution locations. (source: company press release)

 Why We Like It:
 Looking at MHK's chart and you can see why we choose to use a
 trigger.  The rally to resistance at $75.00 looked good but we
 wanted confirmation.  Shares of MHK have pulled back and slipped
 under its simple 100-dma again.  However, we have good news.  MHK
 did test the exponential 200-dma as support twice in the last two
 days.  We are looking for MHK to rally again but we're not going
 to open the play until MHK can trade at or above our TRIGGER of
 $75.51.

 If you missed the original play description's details, we added
 MHK to the call list last Wednesday.  Fortunately, MHK's P&F
 chart remains bullish with an $84 target.


 Suggested Options:
 Traders need to be careful here.  We're not suggesting any big
 positions.  The September calls are our favorites but volume is
 very light.  Novembers are available but that's two extra months
 we don't think we need.

 BUY CALL SEP 70 MHK-IN OI=  2 current ask $4.50
 BUY CALL SEP 75 MHK-IO OI= 19 current ask $1.35
 BUY CALL SEP 80 MHK-IP OI=  3 current ask $0.30

 BUY CALL NOV 75 MHK-KO OI=1122 current ask $3.00
 BUY CALL NOV 80 MHK-KP OI=  70 current ask $1.30

 Annotated Chart:
 


 Picked on August xxth at $xx.xx <-- See TRIGGER
 Change since picked:     + 0.00
 Earnings Date          07/21/04 (confirmed)
 Average Daily Volume =      397 thousand
 Chart =
 

 ---

 Potash - POT - close: 51.12 change: +0.35 stop: 48.75

 Company Description:
 Potash Corporation of Saskatchewan Inc. is the world's largest
 fertilizer enterprise producing the three primary plant nutrients
 and a leading supplier to three distinct market categories:
 agriculture, with the largest capacity in the world in potash,
 fourth largest in phosphate and third largest in nitrogen; animal
 nutrition, with the world's largest capacity in phosphate feed
 ingredients; and industrial chemicals, as the largest global
 producer of industrial nitrogen products and one of only three
 North American suppliers of industrial phosphates.
 (source: company press release)

 Why We Like It:
 POT is holding up pretty well.  We haven't seen any post-split
 depression.  The technical picture is looking a little muddy with
 most of the oscillators churning sideways and the MACD actually
 producing a weak sell signal but the price action is still
 bullish. POT is still building on its short-term trend of higher
 lows.  The bounce from $50.00 is looking like a bullish entry
 point just like we suggested.

 Remember, if you opened a position prior to the split you should
 double check your option symbols with your broker because they
 have changed.  Our post-split stop loss is now $48.75 and our
 post-split profit target is $55.00.  If you're feeling a little
 iffy about buying the bounce from fifty then look for a new high
 over $51.50 instead.   We are still recommending that you confirm
 the broader market direction first before considering new bullish
 positions in POT or anything else for that matter.

 Suggested Option:
 We're going to suggest the September calls.
 We like the September 50s.

 BUY CALL SEP 47.50 POT-IW OI=146 current ask $4.30
 BUY CALL SEP 50.00 POT-IJ OI=132 current ask $2.35
 BUY CALL SEP 52.50 POT-IX OI=205 current ask $1.15

 Annotated Chart:
 


 Picked on August 10th at $ 51.08
 Change since picked:      + 0.04
 Earnings Date           07/29/04 (confirmed)
 Average Daily Volume =       180 thousand
 Chart =
 

 ---

 Reynolds American - RAI - close: 72.95 change: +0.07 stop: 69.36

 Company Description:
 Reynolds American Inc. is the parent company of R.J. Reynolds
 Tobacco Company, Santa Fe Natural Tobacco Company, Inc., Lane
 Limited and R.J. Reynolds Global Products, Inc. R.J. Reynolds
 Tobacco Company, the second- largest U.S. tobacco company,
 manufactures about one of every three cigarettes sold in the
 United States, including five of the nation's 10 best-selling
 brands: Camel, Winston, KOOL, Salem and Doral. Santa Fe Natural
 Tobacco Company, Inc. manufactures Natural American Spirit
 cigarettes and other tobacco products, and markets them both
 nationally and internationally. Lane Limited manufactures several
 roll-your-own, pipe tobacco and little cigar brands, and
 distributes Dunhill tobacco products. R.J. Reynolds Global
 Products, Inc. manufactures, sells and distributes American-blend
 cigarettes and other tobacco products to a variety of customers
 worldwide. (source: company press release)

 Why We Like It: (Original Play from Thursday)
 Up on a down day.  That's what caught our attention in shares of
 Reynolds American, the newly combined RJR Reynolds and Brown &
 Williamson Tobacco.  Shares hit a new high in early August and
 have slowly faded back toward support near $70.00.  Now we're
 seeing investors buy the dip.  The company recently said its on
 its way toward reaching its goal of $1 billion in cost savings by
 the end of the year and it should also save an additional $500
 million or so in merger-related savings.  The newly combined
 entity is supposed to be a leaner, meaner fighting machine to
 compete with larger rival Phillip Morris (a.k.a. Altria Group).
 Investors are also attracted to RAI for its dividend yield.  With
 the market going south to sideways a 5.2% yield is pretty
 attractive.  RAI just recently announced that its next quarterly
 cash dividend payment will be delivered on October 1st to
 shareholders on record as of September 10th.

 We like the relative strength evident in RAI and the bounce from
 support/resistance near $70 looks like an entry point.  The P&F
 chart is bullish and points to a $103 target.  Right now we'd
 probably be happy with a run toward $77.50-80.00.  Now there are
 risks involved when trading a tobacco company.  One never knows
 when the U.S. government might announce some new legislation or
 some court decision but from the looks of RAI's stock price there
 doesn't seem to be any imminent threats.

 Weekend Update:
 RAI is more of a defense stock and it can usually take a back
 seat if the rest of the market is in rally mode.  Having said
 that we're still bullish on it and the intraday action on Friday
 looks encouraging.  If RAI does dip next week look for a bounce
 from $71.75 to $72.00 as a potential entry point.

 Suggested Options:
 We like the September and November calls although our favorites
 are probably the September 70s and 75s.

 BUY CALL SEP 70 RAI-IN OI=1252 current ask $4.10
 BUY CALL SEP 75 RAI-IO OI=1232 current ask $1.25

 BUY CALL NOV 70 RAI-KN OI=7971 current ask $5.70
 BUY CALL NOV 75 RAI-KO OI=1735 current ask $3.10

 Annotated Chart:
 


 Picked on August 19 at $72.88
 Change since picked:   + 0.07
 Earnings Date        08/02/04 (confirmed)
 Average Daily Volume =    1.2 million
 Chart =
 

 --

 Telephone & Data Sys - TDS - cls: 77.65 change: +0.45 stop: 74.00

 Company Description:
 TDS Telecom is a growing communications company serving more than
 1 million residential and business customers in small rural and
 suburban communities in 30 states. The company's goal is to
 provide the most effective communication technology and high-
 quality services in its chosen markets. TDS Telecom is a
 subsidiary of Telephone and Data Systems, Inc., a diversified
 telecommunications corporation founded in 1969 and a FORTUNE 500
 company, that operates primarily by providing wireless and local
 telephone service through its strategic business units, U.S.
 Cellular and TDS Telecom. (source: company press release)

 Why We Like It:
 TDS continues to creep higher and it's moving closer to our
 TRIGGER at $78.05 to go long.  If you missed Wednesday's
 newsletter we added TDS as an aggressive play.  The stock doesn't
 have the average trading volume we normally look for in a stock
 and its options volume is pretty low as well.  That can make for
 a volatile stock and dangerous fills on your option order.  While
 we do like the bullish consolidation between $75 and $78 we also
 felt that TDS was somewhat aggressive due to potential resistance
 near the $80.00 mark.  No change in the bullish P&F chart with
 the $94 target.  Our target is the $85.00 region.

 Suggested Options:
 We want to warn you again that option volume is very low here.
 Choose carefully.

 BUY CALL SEP 75 TDS-IO OI= 0 current ask $3.90
 BUY CALL SEP 80 TDS-IP OI=10 current ask $1.05
 BUY CALL SEP 85 TDS-IQ OI= 0 current ask $0.30

 BUY CALL NOV 75 TDS-KO OI=105 current ask $5.60
 BUY CALL NOV 80 TDS-KP OI=  0 current ask $2.95
 BUY CALL NOV 85 TDS-KQ OI=  0 current ask $1.35

 Annotated Chart:
 



 Picked on August xxth at $xx.xx <-- see TRIGGER
 Change since picked:     + 0.00
 Earnings Date          07/21/04 (confirmed)
 Average Daily Volume =      195 thousand
 Chart =
 

 ---

 Textron - TXT - close: 63.33 change: +0.46 stop: 59.99

 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:
 TXT's bullish trend higher continues as it builds on the current
 trend of higher lows.  There does seem to be some minor
 resistance near $64 but we don't expect it to last.  We've been
 targeting a move toward the $65-66 range but given the
 questionable market environment we're going to officially set our
 exit point at $64.90.  Should TXT trade there on an intraday
 basis we're going to exit.  Readers looking for new positions
 might want to consider buying a bounce from the $62.00 level.  We
 expect Monday to be somewhat bullish for TXT due to some good
 news on Friday afternoon.  Moody's Investors Service raised its
 outlook on TXT from "negative" to "stable".  The improvement,
 according to Moody's, reflects an improved market environment,
 "especially in commercial aircraft and helicopters, and the
 company's significant debt reduction over the last several
 years..." (-Reuters).

 Suggested Options:
 Our favorites are currently the September strikes.  The 60s
 look good.

 BUY CALL SEP 55 TXT-IK OI= 580 Current Ask $8.80
 BUY CALL SEP 60 TXT-IL OI= 437 Current Ask $3.90
 BUY CALL SEP 65 TXT-IM OI=1480 Current Ask $0.80

 Annotated Chart:
 


 Picked on July 26th at $60.72
 Change since picked:   + 2.61
 Earnings Date        07/22/04 (confirmed)
 Average Daily Volume =    622 thousand
 Chart =
 

 ---

 Zebra Tech. - ZBRA - close: 83.00 chg: +0.38 stop: 79.95

 Company Description:
 Zebra Technologies Corp. delivers innovative and reliable on-
 demand printing solutions for business improvement and security
 applications in 90 countries around the world. More than 90
 percent of Fortune 500 companies use Zebra-brand printers. A
 broad range of applications benefit from Zebra-brand thermal bar
 code, "smart" label, receipt, and card printers, resulting in
 enhanced security, increased productivity, improved quality,
 lower costs, and better customer service. The company has sold
 four million printers, including RFID printer/encoders and
 wireless mobile solutions, and also offers software, connectivity
 solutions and printing supplies. (source: company press release)

 Why We Like It:
 ZBRA is another bullish play we added last Wednesday.  The stock
 has rebounded strongly from its August lows near the simple 100-
 dma.  Technicals are positive and its MACD indicator is in a new
 "buy" signal.  However, we choose to use a TRIGGER over
 resistance at $84.00.  The plan is to only commit capital if ZBRA
 can generate enough momentum to run toward its highs near $90.00.
 We were expecting ZBRA's upcoming 3-for-2 split to help generate
 some of that momentum. Normally we don't like to hold over a
 split but this time we're considering it.  Keep in mind that our
 $90 target will become a $60 target on a post-split basis and the
 $84.35 trigger will become a trigger over $56.

 ZBRA begins trading at its post-split price on August 26th.

 Suggested Options:
 Our favorites are the September calls but the Novembers have more
 volume.  You might want to ask your broker now how the symbols
 will change after ZBRA splits 3-for-2 next week.

 BUY CALL SEP 80 ZBQ-IP OI= 49 current ask $4.50
 BUY CALL SEP 85 ZBQ-IQ OI=655 current ask $2.05

 BUY CALL NOV 85 ZBQ-KQ OI=409 current ask $4.60
 BUY CALL NOV 90 ZBQ-KR OI=929 current ask $2.75

 Annotated Chart:




 Picked on August xxth at $xx.xx <-- see TRIGGER
 Change since picked:     + 0.00
 Earnings Date          07/28/04 (confirmed)
 Average Daily Volume =      419 thousand
 Chart =
 


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

 Bausch Lomb - BOL - close: 65.91 change: +1.54 stop: 62.50

 Company Description:
 Bausch & Lomb is the eye health company, dedicated to perfecting
 vision and enhancing life for consumers around the world. Its
 core businesses include soft and rigid gas permeable contact
 lenses and lens care products, and ophthalmic surgical and
 pharmaceutical products. The Bausch & Lomb name is one of the
 best known and most respected healthcare brands in the world.
 Celebrating its 150th anniversary, the Company is headquartered
 in Rochester, New York. Bausch & Lomb's 2003 revenues were $2.0
 billion; it employs approximately 11,500 people worldwide and its
 products are available in more than 100 countries.
 (source: company press release)

 Why We Like It:
 In this market we're looking for relative strength and a good
 story to back it up.  BOL has both.  Business is doing pretty
 well and on July 29th the company reported earnings that beat
 estimates by 12 cents.  Management followed up by guiding the
 rest of 2004 above analysts' expectations.  Several days later
 BOL announced that the FDA had sent them an "approvable" letter
 for its experimental eye treatment Zylet.  Since then BOL has
 outpaced the market's rally and is now nearing major resistance
 near $66.00-66.50.

 We are going to suggest a bullish call play on BOL if it can
 breakout above resistance.  We will use a TRIGGER at $66.51 to
 open the play. If opened our initial stop will be $62.50 and our
 target will be very old resistance near $72.50, although we do
 expect the round-number $70 level to present a short-term
 obstacle.  The bullish P&F chart has already reversed into a new
 buy signal that currently points to an $83 target but this could
 move higher.

 Suggested Options:
 Short-term traders can choose from the September or October
 calls.  We like both months at the $65 strike.

 BUY CALL SEP 65 BOL-IM OI=195 current ask $2.40
 BUY CALL SEP 70 BOL-IN OI=  0 current ask $0.60

 BUY CALL OCT 65 BOL-JM OI=186 current ask $3.35
 BUY CALL OCT 70 BOL-JN OI= 58 current ask $1.15

 Annotated Chart:
 


 Picked on August xxth at $xx.xx <-- see TRIGGER
 Change since picked:     + 0.00
 Earnings Date          07/29/04 (confirmed)
 Average Daily Volume =      397 thousand
 Chart =
 

 ---

 InfoSpace - INSP - close: 39.41 change: +2.14 stop: 36.50

 Company Description:
 InfoSpace, Inc. is a diversified technology and services company
 that develops Internet and wireless solutions for a wide range of
 customers. InfoSpace Search & Directory provides Web search and
 online directory products that help users find the information
 they need while creating opportunities for merchants. InfoSpace
 Mobile develops infrastructure, tools and applications that
 enable carriers and content providers to efficiently develop and
 deliver mobile data services across multiple devices.
 (source: company press release)

 Why We Like It:
 INSP is offering us a bullish earnings forecast and technicals so
 it's no surprise that shares rallied more than 5% on above
 average volume this past Friday.  Near the end of July the
 company reported earnings that beat estimates by 13 cents.
 Management then guided higher and the stock gapped up on the
 news.  Since then INSP has endured a brief consolidation followed
 by a surge to a new 2 1/2 month high.  More importantly Friday's
 rally broke through the neckline of a bullish reverse Head-and-
 shoulders pattern.

 The bullish inverse H&S pattern points to a $49 price target.  We
 suspect the $46 level, which was the April highs, could be a
 tough hurdle but we're willing to target the $47.50 region.  The
 bullish P&F chart points to a $61 target.

 INSP may have all these factors in its favor but we're still
 going to use a trigger to open the play.  We want to see INSP
 breakout over round-number resistance at $40.00.  We'll use a
 TRIGGER at $40.10 to open the play.  More aggressive traders can
 look for a bounce from $38.

 Suggested Options:
 Short-term traders can choose from the September or October
 strikes.  We like the $35s and $40s.  It may be noteworthy
 that the September 45s have a lot of open interest (relatively
 speaking).

 BUY CALL SEP 35 IOU-IG OI= 334 current ask $5.50
 BUY CALL SEP 40 IOU-IH OI= 725 current ask $2.55

 BUY CALL OCT 40 IOU-JH OI= 853 current ask $3.50
 BUY CALL OCT 45 IOU-JI OI= 386 current ask $1.70


 Annotated Chart:




 Picked on August xxth at $xx.xx <-- see TRIGGER
 Change since picked:     + 0.00
 Earnings Date          07/28/04 (confirmed)
 Average Daily Volume =      1.1 million
 Chart =
 


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 Hartford - HIG - close: 60.60 change: +0.77 stop: 61.26*new*

 Company Description:
 The Hartford is one of the nation's largest financial services
 and insurance companies, with 2003 revenues of $18.7 billion. The
 company is a leading provider of investment products, life
 insurance and group benefits; automobile and homeowners products;
 and business property-casualty insurance.
 (source: company press release)

 Why We Like It:
 Danger!  Property and casualty insurance stocks aren't not seeing
 much of a bearish follow through even through hurricane Charley
 may prove to be the second most expensive storm in our history.
 Part of the bullishness is due to speculation that insurance
 companies will be able to raise rates next year due to the storm.
 We really weren't worried about HIG because most of the week the
 stock was struggling to break above the $60 level.
 Unfortunately, that changed on Friday.  Volume was low but the
 technicals have certainly turned positive and the close over its
 simple 10-dma is bullish as well.  We're not willing to give up
 just yet as HIG does have significant resistance at the $61.00
 level. Yet we will try and protect ourselves by lowering the stop
 to $61.26.  It's perfectly reasonable to exit now and we would
 suggest doing so for more conservative traders.


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

 Annotated Chart:


 Picked on August 12 at $59.17
 Change since picked:   + 1.43
 Earnings Date        07/21/04 (confirmed)
 Average Daily Volume =    1.4 million
 Chart =
 

 --

 SPX Corp - SPW - close: 37.17 change: +0.25 stop: 38.26

 Company Description:
 SPX Corporation is a global provider of technical products and
 systems, industrial products and services, flow technology,
 cooling technologies and services, and service solutions.
 (source: company press release)

 Why We Like It:
 We're still in wait-mode for SPW.  The stock has been
 consolidating in a neutral pennant-type pattern with higher lows
 and lower highs.  This may be a neutral pattern but we're still
 betting on the prevailing, bearish trend to dictate the next
 breakout.  The P&F chart is very bearish with a $32 target.  We
 believe that SPW, if it breaks down, can actually fall toward the
 $31-30 range.  Our trigger to buy puts is at $35.75.

 Suggested Options:
 We like the September puts.  Our favorites are the $37.50s
 and $35s.

 !Alert - August options EXPIRE this Friday, Aug. 20th!

 BUY PUT SEP 37.50 SPW-UU OI=4371 current ask $1.90
 BUY PUT SEP 35.00 SPW-UG OI=1573 current ask $0.95
 BUY PUT SEP 32.50 SPW-UZ OI=  28 current ask $0.40

 Annotated Chart:
 


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

 None


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 **********
 DISCLAIMER
 **********

 Please read our disclaimer at:
 http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html


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 Contact Support




 The Option Investor Newsletter                   Sunday 08-22-2004
 Sunday                                                      4 of 5
 
 In Section Four:
 
 Leaps: Now What?
 
 
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 *****
 LEAPS
 *****
 
 Now What?
 
 For those leap buyers wanting to get in on the bottom
 floor we suffered a severe setback with the market rally.
 This rebound before the end of the Olympics and before
 the Republican convention in New York is questionable
 at best. The rebound has sent prices back to levels
 where we do not want to be buyers and well above levels
 we where expecting.
 
 While I am glad to see some bullishness return to the
 market I feel like we were left at the station waiting
 for the bus that never came. But, we should not be
 discouraged because there are still two rough months
 ahead and we are better off in cash than spending more
 than is reasonable for our entries.
 
 
 New Plays
 
 I am not suggesting any new plays this week. We
 are at the top of a week long bounce and at strong
 resistance. I want to wait until we see what next
 week brings as we near the Republican convention.
 I do not like buying at the top of a rally. We need
 the call premiums to deflate first and once we see
 if the rally will continue or the downtrend return
 we can make better entry decisions.
 
 
 Portfolio Update
 
 RHAT $12.45  ** Stopped out **
 
 Red Hat announced on Wednesday that the SEC had
 approved registration of its $600 million in Senior
 Convertible Debentures and the stock plummeted on
 both Thursday and Friday. Since this was an event
 that occurred in January I fail to see the relevance
 but evidently there were traders that saw it as a
 future negative to price. Since the debentures can
 only be converted prior to their 2024 maturity only
 under specifically limited circumstances there is
 little near term risk.
 
 We were stopped out on the play at $12.50 after
 seeing the stock drop on the Cisco news the week
 before. Our entry in the 2006-$20 LEAP Call was
 $2.75 and the exit should have been in the $1.75
 range. The Sept $12.50 insurance put is currently
 worth $1.05 and +50 cents over the price at entry.
 This represents a combined -50 cent loss on the
 play if both were exited on Friday. If you are
 still in the insurance put I would continue to
 hold it until RHAT begins to bounce. Who knows,
 you may recover that 50 cents. This is a prime
 example of why we use those puts on leap plays.
 
 
 TYC - Tyco Intl. $31.29  **Stop $28.00**
 
 Tyco recovered with the broader market and rebounded
 to $31.29 from the $29.73 low the prior week. I had
 lowered the stop thinking the market weakness dragging
 it down would continue. We are now back into the
 recent trading range and out of danger for the
 immediate future. I really like Tyco and would view
 any further dips in Sep/Oct as buying opportunities.
 
 
 JNPR - Juniper Networks $21.98 **Stop $19.00**
 
 Juniper rallied out of the tech disaster with only
 one more attempt at selling that took it down to
 $20.01 on Monday. The rebound took us out of
 immediate danger and I am going to place the stop
 at $19.00. We have really strong support at $20
 and want to allow the play a little room under
 that $20 level for buyers to appear. The 2006
 $25 LEAP call WBW-AE is currently $4.20 and up
 from the $3.50 entry from the prior Friday.
 
 
 SMH - Semiconductor Holders $30.29 **Stop 31.25**
 
 The SOX rebounded with the rest of the market but
 the rebound was weak. The SMH came within 28 cents
 of out profit target of $28 before rebounding.
 Hopefully many readers thought that was close
 enough and exited.
 
 For those that didn't I am going to continue the
 play. I originally profiled this as an insurance
 play against further tech weakness. I believe the
 rebound may have run its course and a new leg
 down will begin next week. The profit target is
 still $28 but should we get a real washout I
 would want to follow the SOX down to 350 for an
 expected bounce.
 
 
 
 ****************************
 
 Current Portfolio:
 
 SMH - Semiconductor Holders $30.29 **Stop $31.25**
 Entry $32.50 August 2nd
 Profit Target = SMH $28  ($28.30 low hit 8/13)
 
 Current position:
 Nov-$30 Put SMH-WF cost $1.40 current $1.90
 Nov-$35 Put SMH-WG cost $3.80 current $5.10
 
 Initial play description:
 http://members.OptionInvestor.com/leaps/Lp_080104_1.asp
 
 SMH Chart
 
 
 
 
 TYC Tyco $31.29   **Stop $28.00**
 Entry $28.32
 
 2005 $30 LEAP Call TYC-AF cost $2.15 current $3.00
 2006 $30 LEAP Call WPA-AF cost $4.00 current $5.10
 July $25 insurance put - expired - cost $.55
 
 Tyco Chart
 
 
 
 
 JNPR - Juniper Networks $21.98 **Stop $19.00**
 Entry $20.19
 
 2006 $25 LEAP Call WBW-AE cost $3.50 current $4.20
 Insurance = Sept-$17.50 Put JUX-UW cost 50 cents.
 
 http://members.OptionInvestor.com/leaps/Lp_081504_1.asp
 
 JNPR 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:
 
 The rebound took many of our watch list candidates out
 of range from the target entry points. I am not convinced
 the rally will stick so I am not changing them today.
 
 
 
 EBAY - EBAY $81.37 target entry $72.00
 
 EBAY is one that may not have a chance of coming back to
 our entry point. I am going to maintain the target price
 at the red uptrend line currently at $72.
 
 2006 $80 LEAP Call YEU-AP
 
 http://members.OptionInvestor.com/leaps/Lp_072504_1.asp
 
 EBAY Chart
 
 
 
 
 MER - Merrill Lynch $61.87 target entry $46.00
 
 2006 $50 LEAP Call WZM-AJ
 
 http://members.OptionInvestor.com/leaps/Lp_071804_1.asp
 
 MER Chart
 
 
 
 
 
 INTC - Intel $21.62 target entry $20.00
 
 Intel definitely did not take part in the rally and I
 still think we have a good chance of hitting the $20
 target.
 
 2006 $22 LEAP Call WNL-AX
 2006 $25 LEAP Call WNL-AE
 
 http://members.OptionInvestor.com/leaps/Lp_071804_1.asp
 
 INTC Chart
 
 
 
 
 
 MMM - 3M Company - $80.27
 
 Target entry $75, add to position at $70.
 
 MMM also did not really take part in the rally. Should
 the market roll over again I think we still have a good
 chance of filling at $75.
 
 2006 $80 LEAP Call VMU-AP
 2006 $85 LEAP Call VMU-AQ
 
 http://members.OptionInvestor.com/leaps/Lp_080804_1.asp
 
 MMM Chart
 
 
 
 
 
 C - Citigroup $45.95 LEAP Call
 
 Enter 1/2 position at $42.50
 Enter 1/2 position at $40.00
 
 2006 $45 LEAP Call WRV-AI
 
 http://members.OptionInvestor.com/leaps/Lp_080804_1.asp
 
 Citigroup Chart
 
 
 
 
 SYMC - Symantec - $48.04  - Target $41
 
 SYMC may be a lost cause. the rebound took us well
 away from the $41 target but we still have two bad
 months ahead.
 
 2006 $45 LEAP Call YAG-AI current $9.20, target $6.00
 2006 $50 LEAP Call YAG-AJ current $7.10, target $5.00
 
 http://members.OptionInvestor.com/leaps/Lp_080804_1.asp
 
 SYMC Chart
 
 
 
 
 WMT - Wal-Mart $54.65 Target $51.00
 
 2006 $55 LEAP Call WW-TAK
 Insurance = Sept-$50 Put WMT-UJ
 
 http://members.OptionInvestor.com/leaps/Lp_081504_1.asp
 
 WMT Chart
 
 
 
 
 GE $32.65 LEAP Call
 
 Target GE at $30 to enter the position.
 
 2006 $30 LEAP Call WGE-AF $4.20, target $3.50
 2006 $35 LEAP Call WGE-AG $2.00, target $1.75
 
 I am not suggesting insurance on GE but the
 December $27.50 put is only 40 cents. We would
 need a serious national disaster to see GE break
 $30 and I think it would only be temporary.
 
 GE Chart
 
 
 
 
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 **********
 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 08-22-2004
 Sunday                                                      5 of 5

 In Section Five:

 Covered Calls:
 Spreads and Straddles: Stocks Climb As Oil Prices Retreat...
 Premium-Selling Plays: Naked Puts and Calls


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 **************
 COVERED CALLS
 **************

 Many investors find that writing "in-the-money" covered-calls
 fits their criteria for a conservative, easy-to-manage options
 strategy.

 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
 NEW COVERED-CALL CANDIDATES
 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

 The following group of issues is a list of potential candidates
 to supplement your search for profitable trading positions.  As
 with any investment, you must decide if the selections meet your
 criteria for potential plays.  Only you can know what strategies
 and positions are suitable for your experience level, risk-reward
 tolerance and portfolio outlook.  They will not be included in
 the weekly portfolio summary.

 __________________________________________________________________

 Sequenced by Target Yield (monthly basis)

 Stock   Last   Option    Option  Last Open Cost  Days Target
 Symbol Price   Series    Symbol  Bid  Int. Basis Exp. Yield

 IMMR    5.75  SEP  5.00  IMU-IA  1.15   64  4.60  29   9.1%
 GLBCE  15.85  SEP 15.00  GQC-IC  1.85 5367 14.00  29   7.5%
 SEAC   17.34  SEP 15.00  UEG-IC  2.90  203 14.44  29   4.1%
 CLHB   10.90  SEP 10.00  QPB-IB  1.25  135  9.65  29   3.8%
 PSSI   11.27  SEP 10.00  PYQ-IB  1.60   43  9.67  29   3.6%
 RDWR   18.38  SEP 17.50  AUD-IW  1.45  419 16.93  29   3.5%
 IDBE   11.40  SEP 10.00   QQ-IB  1.70 2934  9.70  29   3.2%


 Company Descriptions

 LB-Last Bid price, OI-Open Interest, CB-Cost Basis or break-even
 point, DE-Days to Expiry, TY-Target Yield (monthly basis).

 __________________________________________________________________

 IMMR - Immersion Corporation  $5.75

 Immersion Corporation (NASDAQ:IMMR) is a provider of haptic
 technology that brings the sense of feel/touch to markets.  The
 company develops, manufactures, licenses and supports a range of
 hardware and software technologies that let users interact with
 digital devices using their sense of touch.  It focuses on four
 major application areas: consumer, computing and entertainment;
 industrial and automotive; three-dimensional and professional
 products, and medical simulation.

 IMMR - Immersion Corporation  $5.75

 SEP  5.00 IMU-IA LB=1.15 OI=64 CB=4.60 DE=29 TY=9.1%

 
 __________________________________________________________________

 GLBCE - Global Crossing  $15.85

 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  $15.85

 SEP 15.00 GQC-IC LB=1.85 OI=5367 CB=14.00 DE=29 TY=7.5%

 
 __________________________________________________________________

 SEAC - SeaChange International  $17.34

 SeaChange International (NASDAQ:SEAC) is a developer, builder,
 and marketer of video storage systems that automate the
 management and distribution of long-form video streams, such
 as movies or other feature presentations, and short-form video
 streams, such as advertisements.  The company's digital video
 systems provide storage and retrieval capabilities, multichannel
 content delivery and highly-automated information and order
 processing.

 SEAC - SeaChange International  $17.34

 SEP 15.00 UEG-IC LB=2.90 OI=203 CB=14.44 DE=29 TY=4.1%

 
 __________________________________________________________________

 CLHB - Clean Harbors  $10.90

 Clean Harbors (NASDAQ:CLHB) provides a range of environmental
 services and solutions and is managed in two primary segments:
 Technical Services and Site Services.  Technical Services does
 treatment and disposal of industrial wastes, which includes
 physical treatment, resource recovery and fuels blending,
 incineration, landfills, wastewater treatment, lab chemical
 disposal and explosives management, collection, transportation
 and logistics management, specialized packaging, transportation
 and disposal of laboratory chemicals and household hazardous
 wastes.  Site Services provide experts using specialty equipment
 and resources to perform services such as industrial maintenance,
 surface remediation, groundwater restoration, site and facility
 decontamination, emergency response, remediation, transformer
 decommissioning and oil disposal.

 CLHB - Clean Harbors  $10.90

 SEP 10.00 QPB-IB LB=1.25 OI=135 CB=9.65 DE=29 TY=3.8%

 
 __________________________________________________________________

 PSSI - PSS World Medical  $11.27

 PSS World Medical (NASDAQ:PSSI) is a specialty marketer and
 distributor of medical products, equipment and pharmaceutical
 products to alternate-site healthcare providers, including
 physician offices, long-term care facilities and home care
 providers through 43 full-service distribution centers that
 serve all 50 states throughout the United States of America.
 The company is focused on improving business operations and
 management processes, maximizing its distribution capability
 and efficiency and developing and implementing new marketing
 strategies.

 PSSI - PSS World Medical  $11.27

 SEP 10.00 PYQ-IB LB=1.60 OI=43 CB=9.67 DE=29 TY=3.6%

 
 __________________________________________________________________

 RDWR - Radware  $18.38

 Radware (NASDAQ:RDWR) develops, manufactures and markets
 intelligent application switching solutions that enable
 continuous application availability, optimize application
 performance and provide site-wide security.  Radware offers
 a wide range of solutions to service providers, e-commerce
 businesses and corporate enterprises to optimize operations
 of Web and application servers, firewalls, virtual private
 networks, intrusion detection systems, Internet service
 providers links, anti-virus gateways and cache servers.

 RDWR - Radware  $18.38

 SEP 17.50 AUD-IW LB=1.45 OI=419 CB=16.93 DE=29 TY=3.5%

 
 __________________________________________________________________

 IDBE - ID Biomedical  $11.40

 ID Biomedical Corporation (NASDAQ:IDBE) is a biotechnology firm
 focused on the development of subunit vaccines, including those
 based on its Proteosome protein intranasal adjuvant/delivery
 technology.  The technology potentially serves as both a vaccine
 adjuvant (stimulant of immune responses) and mucosal delivery
 system that may enhance a vaccine's effectiveness and/or ease of
 use.  The company also is developing subunit vaccines for the
 prevention of a number of different diseases.  Their product
 candidates in clinical development are StreptAvax vaccine against
 group A streptococcus and FluINsure vaccine against influenza.

 IDBE - ID Biomedical  $11.40

 SEP 10.00 QQ-IB LB=1.70 OI=2934 CB=9.70 DE=29 TY=3.2%

 

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

 SEE DISCLAIMER IN SECTION ONE

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


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

 Stocks Climb As Oil Prices Retreat...
 By Ray Cummins

 The major equity averages rallied Friday as investors shopped
 for bargains amid a retreat in crude oil prices.

 The Dow Jones Industrial Average ended up 69 points at 10,110
 in a second consecutive week of gains.  The NASDAQ Composite
 advanced 18 points to finish at 1,838, bolstered by a rebound
 in internet shares.  The S&P 500 index was 7 points higher at
 1,098 as virtually every sector enjoyed some buying interest.
 Advancing issues outnumbered decliners by more than 3 to 1 on
 the New York Stock Exchange, where volume reached 1.19 billion
 shares.  NASDAQ volume was 1.39 billion with winners outpacing
 losers nearly 3 to 1.  Analysts said trading volume was anemic,
 considering that it was a monthly options expiration session.
 In the bond market, the benchmark 10-year note fell 4/32, with
 its yield climbing to 4.23%.

 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
 SUMMARY OF CURRENT POSITIONS - AS OF 08/20/04
 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

 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  66.63  AUG  55.0  60.0  0.55   59.45   0.55  Closed
 POT    49.04  51.12  AUG  42.5  45.0  0.30   44.70   0.30  Closed
 UOPX   89.09  81.00  AUG  75.0  80.0  0.60   79.40   0.60  Closed
 FAST   54.74  61.89  AUG  45.0  50.0  0.60   49.40   0.60  Closed
 PD     79.00  80.20  AUG  65.0  70.0  0.60   69.40   0.60  Closed
 FSH    58.66  56.75  AUG  50.0  55.0  0.65   54.35   0.65  Closed
 WBSN   38.19  39.84  AUG  30.0  35.0  0.45   34.55   0.45  Closed
 RTP   105.00 104.78  AUG  95.0 100.0  0.55   99.45   0.55  Closed
 FRE    65.04  66.63  SEP  55.0  60.0  0.40   59.60   0.40   Open
 FPL    67.73  67.99  SEP  60.0  65.0  0.45   64.55   0.45   Open
 MCO    67.33  68.33  SEP  60.0  65.0  0.65   64.35   0.65   Open
 BSTE   44.14  47.23  SEP  35.0  40.0  0.55   39.45   0.55   Open
 ISCA   53.40  51.82  SEP  45.0  50.0  0.55   49.45   0.55   Open
 LEND   33.89  37.41  SEP  25.0  30.0  0.60   29.40   0.60   Open
 PIXR   69.93  74.27  SEP  60.0  65.0  0.45   64.55   0.45   Open
 PD     80.77  80.20  SEP  65.0  70.0  0.40   69.60   0.40   Open
 RYL    86.01  86.55  SEP  75.0  80.0  0.65   79.35   0.65   Open

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

 Positions in Apple Computer (NASDAQ:AAPL), Anyss (NASDAQ:ANSS),
 Gilead Sciences (NASDAQ:GILD), and University of Phoenix Online
 (NASDAQ:UOPX), which ended the expiration period profitable, as
 well as Anthem (NYSE:ATH), BJ Services (NYSE:BJS), 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  37.17  AUG  42.5  40.0  0.30   40.30  0.30  Closed
 XLNX   31.53  28.08  AUG  37.5  35.0  0.25   35.25  0.25  Closed
 MERQ   46.17  36.28  AUG  55.0  50.0  0.65   50.65  0.65  Closed
 SMH    34.58  30.29  AUG  42.5  40.0  0.30   40.30  0.30  Closed
 TLB    33.04  27.55  AUG  40.0  35.0  0.60   35.60  0.60  Closed
 VAR    77.24  33.42  AUG  90.0  85.0  0.50   85.50  0.50  Closed
 KLAC   43.33  37.50  AUG  50.0  47.5  0.25   47.75  0.25  Closed
 NVLS   29.23  25.34  AUG  35.0  32.5  0.20   32.70  0.20  Closed
 BZH    90.65  99.32  AUG 105.0 100.0  0.45  100.45  0.45  Closed
 LLY    64.67  64.50  AUG  75.0  70.0  0.65   70.65  0.65  Closed
 ACS    51.80  52.79  AUG  60.0  55.0  0.45   55.45  0.45  Closed
 DIGE   33.08  26.60  AUG  40.0  35.0  0.55   35.55  0.55  Closed
 SRCL   48.00  47.21  AUG  55.0  50.0  0.30   50.30  0.30  Closed
 KMRT   64.60  76.55  SEP  80.0  75.0  0.60   75.60 (0.95) Closed
 VIP    85.00  95.65  SEP 100.0  95.0  0.45   95.45 (0.20) Closed
 PDCO   73.40  76.29  SEP  85.0  80.0  0.55   80.55  0.55   Open
 CDWC   59.25  58.97  SEP  65.0  60.0  0.45   60.45  0.45   Open
 BGG    69.80  73.33  SEP  80.0  75.0  0.45   75.45  0.45   Open
 DNA    44.23  47.87  SEP  52.5  50.0  0.35   50.35  0.35   Open
 EASI   43.53  42.35  SEP  55.0  50.0  0.40   50.40  0.40   Open
 VLO    64.36  65.69  SEP  75.0  70.0  0.60   70.60  0.60   Open

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

 Kmart Holdings (NASDAQ:KMRT) and Vimple Communications (NYSE:VIP)
 were closed early in the week in order to limit potential losses.


 DEBIT STRADDLES

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

 DVN     69.40  66.12   AUG   70.00  70.00   5.00    5.20   Closed
 TBL     60.26  57.02   AUG   60.00  60.00   4.75    6.75   Closed
 UTSI    15.00  16.48   AUG   15.00  15.00   1.00    1.50   Closed
 SHRP    17.80  17.49   AUG   17.50  17.50   1.25    1.60   Closed

 All of the straddle candidates offered for the August expiration
 period provided profitable trading opportunities.

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

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

 FRO - Frontline  $40.05  *** Testing 2004 Highs! ***

 Frontline (NYSE:FRO) is engaged in the ownership and operation
 of oil tankers, including oil/bulk/ore carriers.  The company
 operates tankers of two sizes: very-large crude carriers, which
 are between 200,000 and 320,000 deadweight tons and Suezmaxes,
 which are vessels between 120,000 and 170,000 deadweight tons.
 Frontline operates through subsidiaries and partnerships located
 in Bermuda, Isle of Man, Liberia, Norway, Panama, Singapore,
 Sweden, Cayman Islands, the United States and the Bahamas.  The
 company is also involved in the charter, purchase and sale of
 vessels.

 FRO - Frontline  $40.05

 PLAY (conservative - bullish/credit spread):

 BUY  PUT  SEP-30.00  FRO-UF  OI=64   ASK=$0.20
 SELL PUT  SEP-35.00  FRO-UG  OI=169  BID=$0.75
 INITIAL NET-CREDIT TARGET=$0.60-$0.65
 POTENTIAL PROFIT(max)=14% B/E=$34.40

 
 __________________________________________________________________

 NIHD - NII Holdings  $37.59  *** Next Leg Up? ***

 NII Holdings (NASDAQ:NIHD) offers digital wireless communication
 services targeted at meeting the needs of business customers
 located in selected Latin American markets.  The firm principal
 operations are located in major business centers and related
 transportation corridors of Mexico, Brazil, Argentina and Peru.
 Its digital mobile networks support multiple digital wireless
 services including digital mobile telephone service, including
 advanced calling features such as speakerphone, conference
 calling, voice-mail, call forwarding and additional line service.

 NIHD - NII Holdings  $37.59

 PLAY (less conservative - bullish/credit spread):

 BUY  PUT  SEP-33.37  QHQ-UQ  OI=67   ASK=$0.65
 SELL PUT  SEP-35.00  QHQ-UG  OI=400  BID=$0.85
 INITIAL NET-CREDIT TARGET=$0.25-$0.30
 POTENTIAL PROFIT(max)=17% B/E=$34.75

 

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

 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.

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

 FD - Federated Department Stores  $44.60  *** New Downtrend? ***

 Federated Department Stores (NYSE:FD) is a retail organization
 operating department stores that sell a range of merchandise,
 including men's, women's and children's apparel and accessories,
 cosmetics, home furnishings and other consumer goods.  Most of
 the company's stores are located at urban or suburban sites,
 principally in densely populated areas across the United States.

 FD - Federated Department Stores  $44.60

 PLAY (conservative - bearish/credit spread):

 BUY  CALL  SEP-50.00  FD-IJ  OI=146  ASK=$0.15
 SELL CALL  SEP-47.50  FD-IW  OI=578  BID=$0.40
 INITIAL NET-CREDIT TARGET=$0.30-$0.35
 POTENTIAL PROFIT(max)=14% B/E=$47.80

 
 __________________________________________________________________

 PHS - Pacificare Health  $32.42  *** Resistance at $35? ***

 Pacificare Health Systems (NYSE:PHS) offers managed care and
 other health insurance products to employer groups and Medicare
 beneficiaries, mainly in eight western states and Guam.  These
 programs include health maintenance organizations, preferred
 provider organizations and Medicare Supplement products.  The
 company also offers specialty managed care products and services
 that employees can buy as a supplement to its basic commercial
 and senior medical plans or as stand-alone products.  Products
 include pharmacy benefit management services, behavioral health
 services, group life and health insurance and dental and vision
 benefit plans.

 PHS - Pacificare Health  $32.42

 PLAY (conservative - bearish/credit spread):

 BUY  CALL  SEP-37.50  PHS-IU  OI=119  ASK=$0.25
 SELL CALL  SEP-35.00  PHS-IG  OI=166  BID=$0.55
 INITIAL NET-CREDIT TARGET=$0.30-$0.40
 POTENTIAL PROFIT(max)=14% B/E=$35.30

 

 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
 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.
 __________________________________________________________________

 DITC - Ditech Communications  $17.97  *** Earnings Play! ***

 Ditech Communications (NASDAQ:DITC) is a global telecom equipment
 supplier for voice networks.  The firm's voice-processing products
 focus on echo cancellers, used to eliminate echo, a common problem
 in existing and emerging voice networks.  The company's newest
 voice-processing products not only provide customers with the
 traditional echo cancellation features, but also can be used to
 provide voice quality assurance features that address issues, such
 as background noise and other voice quality issues in wireline and
 wireless communications.  The company's earnings report is due on
 August 24, 2004.

 DITC - Ditech Communications  $17.97

 PLAY (speculative - neutral/debit straddle):

 BUY CALL  SEP-17.50  QZD-IW  OI=898   ASK=$1.85
 BUY PUT   SEP-17.50  QZD-UW  OI=1107  ASK=$1.35
 INITIAL NET-DEBIT TARGET=$3.00-$3.10
 INITIAL TARGET PROFIT=$0.90-$1.75

 

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

 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 08/20/04
 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

 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   39.99    0.80   5.99%    2.74%
 PETD     AUG    25.00   24.35   29.98    0.65   4.86%    2.67%
 NFI      AUG    30.00   29.40   39.99    0.60   4.68%    2.04%
 SCHN     AUG    30.00   29.00   29.00    0.00   0.00%    0.00%
 FRO      AUG    30.00   29.30   40.05    0.70   4.97%    2.39%
 GIVN     AUG    30.00   29.45   34.49    0.55   4.21%    1.87%
 ATI      AUG    15.00   14.50   18.57    0.50   7.89%    3.45%
 BEIQ     AUG    25.00   24.00   27.18    1.00   7.61%    4.17%
 AMHC     AUG    25.00   24.25   26.82    0.75   5.98%    3.09%
 VTS      AUG    22.50   21.85   21.91    0.06   0.53%    2.97%
 OSTK     AUG    30.00   29.40   33.50    0.60   5.60%    2.04%
 ATI      AUG    15.00   14.75   18.57    0.25   4.68%    1.69%
 EYET     AUG    30.00   29.55   32.51    0.45   3.85%    1.52%
 CTSH     AUG    22.50   22.05   26.52    0.45   4.61%    2.04%
 STLD     AUG    30.00   29.60   31.84    0.40   3.50%    1.35%
 SRDX     AUG    20.00   19.50   23.85    0.50   7.27%    2.56%
 NFI      AUG    35.00   33.85   39.99    1.15   9.90%    3.40%
 ISG      AUG    30.00   29.05   30.81    0.95   7.59%    3.27%
 DHB      AUG    12.50   12.15   13.20    0.35   8.54%    2.88%
 MSO      AUG    10.00   9.65    11.27    0.35   9.88%    3.63%
 EENC     AUG    12.50   12.25   13.84    0.25   4.83%    2.04%
 NFI      AUG    35.00   34.25   39.99    0.75   7.63%    2.19%
 CERN     AUG    35.00   34.35   46.05    0.65   6.54%    1.89%
 VLCCF    AUG    25.00   24.35   27.20    0.65   8.65%    2.67%
 KRON     AUG    40.00   39.40   41.99    0.60   6.74%    1.52%
 UTHR     AUG    22.50   22.20   30.87    0.30   6.05%    1.35%
 CYTC     AUG    22.50   22.10   23.64    0.40   7.64%    1.81%
 TOY      AUG    15.00   14.75   15.61    0.25   7.45%    1.69%
 TOY      AUG    15.00   14.75   15.61    0.25   8.30%    1.69%
 KIND     AUG    22.50   22.10   25.46    0.40   8.57%    1.81%
 ODSY     AUG    17.50   17.25   17.70    0.25   6.78%    1.45%
 NFI      AUG    30.00   29.55   39.99    0.45   9.02%    1.52%
 AH       AUG    35.00   34.60   36.20    0.40   5.47%    1.16%
 ING      AUG    22.50   22.25   24.01    0.25   7.30%    1.12%
 IVX      SEP    20.00   19.55   24.72    0.45   5.52%    2.30%
 MCIP     SEP    15.00   14.30   17.43    0.70   8.50%    4.90%
 PAAS     SEP    12.50   12.05   14.91    0.45   6.87%    3.73%
 UTHR     SEP    25.00   24.70   30.87    0.30   3.01%    1.21%
 AMED     SEP    25.00   24.25   26.50    0.75   6.54%    3.09%
 PHM      SEP    50.00   49.25   58.76    0.75   3.32%    1.52%
 KOSP     SEP    30.00   29.25   36.55    0.75   5.48%    2.56%
 GLBCE    SEP    12.50   11.90   15.85    0.60  11.90%    5.04%
 ECLP     SEP    12.50   12.10   14.10    0.40   6.90%    3.31%
 OMM      SEP    12.50   12.10   13.66    0.40   6.51%    3.31%
 CNCT     SEP    25.00   24.10   26.70    0.90   7.11%    3.73%
 TOY      SEP    15.00   14.45   15.61    0.55   7.51%    3.81%
 ACF      SEP    20.00   19.25   21.00    0.75   7.16%    3.90%
 PLMO     SEP    30.00   29.45   38.15    0.55   5.05%    1.87%
 ION      SEP    25.00   24.50   25.75    0.50   4.17%    2.04%
 ESLT     SEP    20.00   19.20   21.49    0.80   7.95%    4.17%
 WBSN     SEP    35.00   33.75   39.84    1.25   8.46%    3.70%
 NTMD     SEP    12.50   12.15   19.55    0.35   8.12%    2.88%
 UTHR     SEP    25.00   24.30   30.87    0.70   7.30%    2.88%
 CNCT     SEP    25.00   24.30   26.70    0.70   6.65%    2.88%
 DDS      SEP    20.00   19.50   20.91    0.50   6.31%    2.56%
 MEE      SEP    22.50   22.00   27.35    0.50   5.93%    2.27%
 FOSL     SEP    25.00   24.35   29.10    0.65   5.95%    2.67%
 HUM      SEP    17.50   17.10   18.85    0.40   5.34%    2.34%
 SCSC     SEP    50.00   49.40   61.75    0.60   3.30%    1.21%
 POSS     SEP    25.00   24.20   29.68    0.80   8.82%    3.31%
 JOSB     SEP    24.00   23.52   27.27    0.48   5.27%    2.04%
 ECLP     SEP    12.50   12.20   14.10    0.30   6.57%    2.46%
 WBSN     SEP    35.00   34.05   39.84    0.95   7.44%    2.79%
 ARO      SEP    30.00   29.05   31.90    0.95   7.67%    3.27%
 MW       SEP    25.00   24.60   28.11    0.40   4.22%    1.63%
 TOL      SEP    40.00   39.05   42.72    0.95   6.19%    2.43%

 A number of positions, many of which ended the expiration period
 profitable, have previously been closed to limit potential losses.
 These include: ARXX, BLUD, BR, CRK, CACS, CBST, CRDN, ELN, ERES,
 ESIO, EYET, FARO, GPRO, KWK, KYPH, JCOM, JNPR, LCAV, MGAM, NVTL,
 OSTK, TECH, and TASR.


 NAKED CALLS

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

 SLAB     AUG    50.00   51.00   34.16    1.00   5.30%   1.96%
 SINA     AUG    40.00   40.85   20.43    0.85   7.85%   2.08%
 ATRS     AUG    30.00   30.85   24.48    0.85   6.52%   2.76%
 MRVL     AUG    27.50   27.85   23.98    0.35   3.98%   1.26%
 MACR     AUG    25.00   25.40   19.53    0.40   4.55%   1.57%
 ISIL     AUG    20.00   20.45   18.19    0.45   5.72%   2.20%
 FLML     AUG    25.00   25.50   16.49    0.50   8.15%   1.96%
 OTEX     AUG    30.00   30.65   22.53    0.65   6.12%   2.12%
 TELK     AUG    25.00   25.45   19.35    0.45   5.60%   1.77%
 ASKJ     AUG    40.00   40.50   27.74    0.50   5.97%   1.23%
 DRIV     AUG    30.00   30.85   25.59    0.85   7.92%   2.76%
 SINA     AUG    35.00   35.45   20.43    0.45   6.42%   1.27%
 BSX      AUG    40.00   40.50   34.52    0.50   3.58%   1.23%
 ICUI     AUG    30.00   30.80   25.96    0.80   8.64%   2.60%
 WMGI     AUG    35.00   35.65   25.84    0.65   5.46%   1.82%
 LSCP     AUG    30.00   30.70   19.05    0.70  11.15%   2.28%
 ERICY    AUG    30.00   30.65   26.73    0.65   8.01%   2.12%
 NTES     AUG    40.00   40.45   33.95    0.45   6.31%   1.11%
 SPW      AUG    45.00   45.40   37.17    0.40   5.03%   0.88%
 MXIM     AUG    50.00   50.45   45.70    0.45   5.06%   0.89%
 YHOO     AUG    32.50   32.70   28.61    0.20   4.20%   0.61%
 MRVL     AUG    25.00   25.30   23.98    0.30   8.23%   1.19%
 CRDN     SEP    40.00   40.50   39.30    0.50   5.29%   1.23%
 SWIR     SEP    35.00   35.60   23.88    0.60   7.40%   1.69%
 AVID     SEP    50.00   50.50   44.33    0.50   3.56%   0.99%
 USPI     SEP    37.50   38.05   36.23    0.55   3.90%   1.45%
 BDY      SEP    25.00   25.75   23.60    0.75   7.42%   2.91%
 DRIV     SEP    30.00   30.30   25.59    0.30   4.51%   0.99%
 SINA     SEP    30.00   30.35   20.43    0.35   5.84%   1.15%
 DKS      SEP    30.00   30.40   32.41   (2.01)  0.00%   0.00%
 ERES     SEP    22.50   22.80   20.18    0.30   6.66%   1.32%
 MRVL     SEP    25.00   25.40   23.98    0.40   8.22%   1.57%
 ICUI     SEP    30.00   30.65   25.96    0.65   7.56%   2.12%
 SWIR     SEP    30.00   30.30   23.88    0.30   5.90%   0.99%
 UPL      SEP    45.00   45.40   38.65    0.40   4.90%   0.88%

 Dick's Sporting Goods (NYSE:DKS) became an early-exit candidate
 after the company posted favorable earnings on Tuesday.  Other
 issues on the "watch" list are: Ceradyne (NASDAQ:CRDN), United
 Surgical (NASDAQ:USPI), and Marvell Electronics (NASDAQ:MRVL).
 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

 SEAC   17.34  SEP 15.00  UEG-UC 0.60 3129 14.40  29   4.4% 12.1%
 CLHB   10.90  SEP 10.00  QPB-UB 0.40    0  9.60  29   4.4% 10.9%
 ESLT   21.49  SEP 20.00  EQX-UD 0.80   13 19.20  29   4.4% 10.6%
 NAVR   14.72  SEP 12.50  QIG-UV 0.35  568 12.15  29   3.0%  9.1%
 UTHR   30.87  SEP 25.00  FUH-UE 0.60 1215 24.40  29   2.6%  8.9%
 NTMD   19.55  SEP 15.00  QNR-UC 0.35  116 14.65  29   2.5%  8.6%
 MYGN   15.99  SEP 15.00  GSQ-UC 0.45   20 14.55  29   3.2%  8.1%
 IVX    24.72  SEP 22.50  IVX-UX 0.55   40 21.95  29   2.6%  7.0%

 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.

 __________________________________________________________________

 SEAC - SeaChange International  $17.34  *** Rally Mode! ***

 SeaChange International (NASDAQ:SEAC) is a developer, builder,
 and marketer of video storage systems that automate the
 management and distribution of long-form video streams, such
 as movies or other feature presentations, and short-form video
 streams, such as advertisements.  The company's digital video
 systems provide storage and retrieval capabilities, multichannel
 content delivery and highly-automated information and order
 processing.

 SEAC - SeaChange International  $17.34

 SEP 15.00 UEG-UC LB=0.60 OI=3129 CB=14.40 DE=29 TY=4.4% MY=12.1%

 
 __________________________________________________________________

 CLHB - Clean Harbors  $10.90  *** Environmentally Friendly! ***

 Clean Harbors (NASDAQ:CLHB) provides a range of environmental
 services and solutions and is managed in two primary segments:
 Technical Services and Site Services.  Technical Services does
 treatment and disposal of industrial wastes, which includes
 physical treatment, resource recovery and fuels blending,
 incineration, landfills, wastewater treatment, lab chemical
 disposal and explosives management, collection, transportation
 and logistics management, specialized packaging, transportation
 and disposal of laboratory chemicals and household hazardous
 wastes.  Site Services provide experts using specialty equipment
 and resources to perform services such as industrial maintenance,
 surface remediation, groundwater restoration, site and facility
 decontamination, emergency response, remediation, transformer
 decommissioning and oil disposal.

 CLHB - Clean Harbors  $10.90

 SEP 10.00 QPB-UB LB=0.40 OI=0 CB=9.60 DE=29 TY=4.4% MY=10.9%

 
 __________________________________________________________________

 ESLT - Elbit Systems  $21.49  *** Volatility = Premium! ***

 Elbit Systems (NASDAQ:ESLT) develops, manufactures and integrates
 defense electronic and electro-optic systems for customers around
 the world.  The company focuses on designing, developing, making
 and integrating command and control, communication, computer,
 intelligence, surveillance and reconnaissance systems for defense
 and homeland security applications.  The company also performs
 upgrade programs for airborne, land and naval defense platforms,
 often as a prime contractor.

 ESLT - Elbit Systems  $21.49

 SEP 20.00 EQX-UD LB=0.80 OI=13 CB=19.20 DE=29 TY=4.4% MY=10.6%

 
 __________________________________________________________________

 NAVR - Navarre  $14.72  *** An Entertaining Stock! ***

 Navarre Corporation (NASDAQ:NAVR) publishes and distributes a
 range of home entertainment and multimedia products, including
 computer software, audio & video titles and interactive games.
 The company's business is divided into two primary segments:
 Distribution, which it operates, and Publishing, operated by
 Encore Software and BCI Eclipse.  The company also performs
 fulfillment and distribution services including the sale of PC
 software, prerecorded music and digital video disc/video home
 system videos and video games.

 NAVR - Navarre  $14.72

 SEP 12.50 QIG-UV LB=0.35 OI=568 CB=12.15 DE=29 TY=3.0% MY=9.1%

 
 __________________________________________________________________

 UTHR - United Therapeutics  $30.87  *** Another Entry Point? ***

 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  $30.87

 SEP 25.00 FUH-UE LB=0.60 OI=1215 CB=24.40 DE=29 TY=2.6% MY=8.9%

 
 __________________________________________________________________

 NTMD - NitroMed  $19.55  *** Premium-Selling Only! ***

 NitroMed (NASDAQ:NTMD) is an emerging pharmaceutical company
 with substantial expertise and intellectual property in nitric
 oxide-based drug development.  The firm is applying its nitric
 oxide technology to develop new pharmaceuticals, as well as
 safer and more effective versions of existing pharmaceuticals
 to target diseases and commercial markets.  Its lead nitric
 oxide-enhancing medicine, BiDil, which is being developed to
 reduce mortality and hospitalization and to improve quality of
 life for African Americans diagnosed with heart failure is the
 subject of a Phase III confirmatory clinical trial.

 NTMD - NitroMed  $19.55

 SEP 15.00 QNR-UC LB=0.35 OI=116 CB=14.65 DE=29 TY=2.5% MY=8.6%

 
 __________________________________________________________________

 MYGN - Myriad Genetics  $15.99  *** Flurizan Speculation ***

 Myriad Genetics (NASDAQ:MYGN) is a biopharmaceutical company
 focused on the development of novel therapeutic products and
 the development and marketing of predictive medicine products.
 The company's researchers have made important discoveries in
 the fields of cancer, Alzheimer's disease, viral diseases (such
 as HIV), depression and obesity.  Flurizan, the company's lead
 therapeutic candidate for the treatment of prostate cancer, is
 in a large, multi-center human clinical trial.  Myriad is also
 conducting a Phase I human clinical trial for the evaluation of
 Flurizan for the treatment of Alzheimer's disease.

 MYGN - Myriad Genetics  $15.99

 SEP 15.00 GSQ-UC LB=0.45 OI=20 CB=14.55 DE=29 TY=3.2% MY=8.1%

 
 __________________________________________________________________

 IVX - IVAX Corporation  $24.72  *** More 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  $24.72

 SEP 22.50 IVX-UX LB=0.55 OI=40 CB=21.95 DE=29 TY=2.6% MY=7.0%

 

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

 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.

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

 CMX - Caremark Rx  $28.05  *** Business Practices Probe! ***

 Caremark Rx (NYSE:CMX) is a pharmaceutical services company
 that provides pharmacy benefit management involving the design
 and administration of programs for reducing costs and improving
 the safety, effectiveness and convenience of prescription drug
 use.  The company's customers are primarily sponsors of health
 benefit plans and individuals located throughout the U.S.  The
 company dispenses pharmaceuticals to eligible participants in
 benefit plans maintained by its customers and utilizes its
 information systems to perform safety checks, drug interaction
 screening and generic substitution.

 CMX - Caremark Rx  $28.05

 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    CMX-IF    5199   0.45  30.45   4.9%   1.5%

 
 _________________________________________________________________

 EYET - Eyetech Pharmaceuticals  $32.51  *** Premium-Selling! ***

 Eyetech Pharmaceuticals (NASDAQ:EYET) is a biopharmaceutical firm
 that specializes in the development and commercialization of novel
 therapeutics to treat diseases of the eye.  Its initial focus is
 on diseases affecting the back of the eye, particularly the retina.
 The company's most advanced product candidate is Macugen, which it
 is developing for wet age-related macular degeneration (AMD) and
 diabetic macular degeneration (DME).

 EYET - Eyetech Pharmaceuticals  $32.51

 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    QUJ-II    4932   0.75  45.75  10.8%   1.6%

 
 _________________________________________________________________

 MCHP - Microchip Technology  $27.95  *** In A Trading Range? ***

 Microchip Technology (NASDAQ:MCHP) develops and manufactures
 specialized semiconductor products used by its customers for
 embedded control applications.  The company's product portfolio
 consists of the PIC micro field-reprogrammable (Flash) reduced
 instruction set computer microcontrollers that serve embedded
 control applications, along with linear and mixed-signal, power
 management and thermal management devices.  The firm also offers
 microperipheral products, including interface devices, serial
 electrically erasable programmable read only memory and its
 application-specific standard products.

 MCHP - Microchip Technology  $27.95

 PLAY (sell naked call):

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

 SELL CALL  SEP 30    QMT-IF    1144   0.65  30.65   7.0%   2.1%

 

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

 SEE DISCLAIMER - SECTION 1

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


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




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