Option Investor
Newsletter

Daily Newsletter, Tuesday, 08/31/2004

HAVING TROUBLE PRINTING?
Printer friendly version

The Option Investor Newsletter                 Tuesday 08-31-2004
Copyright 2004, All rights reserved.                       1 of 3
Redistribution in any form strictly prohibited.

In Section One:

Wrap: Brought to You By the Letter "E"
Futures Markets: See Note
Index Trader Wrap: Dow, SPX, OEX finish month with gains, while NDX
                   finds losses
Market Sentiment: September Looms Large


Posted online for subscribers at http://www.OptionInvestor.com
************************************************************
MARKET WRAP  (view in courier font for table alignment)
************************************************************
      08-31-2004           High     Low     Volume   Adv/Dcl
DJIA    10173.92 + 51.40 10173.92 10074.22 1.38 bln 2257/ 992
NASDAQ   1838.10 +  1.60  1842.15  1819.62 1.31 bln 1782/1240
S&P 100   538.77 +  2.22   538.79   533.79   Totals 4039/2232
S&P 500  11-4.24 +  5.09  1104.24  1094.72
SOX       371.02 -  2.60   373.66   363.61
RUS 2000  547.93 +  3.37   548.45   541.96
DJ TRANS 3105.46 + 20.10  3108.80  3084.50
VIX        15.29 -  0.15    15.85    15.28
VXO (VIX-O)14.98 -  0.13    16.09    14.92
VXN        22.92 -  0.22    23.66    22.91
Total Volume 2,945M
Total UpVol  1,734M
Total DnVol  1,182M
Total Adv  4556
Total Dcl  2567
52wk Highs  146
52wk Lows   106
TRIN       1.14
NAZTRIN    1.89
PUT/CALL   0.71
************************************************************

Brought to You By the Letter "E"
by Jim Brown

Today's market action was brought to you by the letter
"E". Elections, earnings, extremists, energy, economy,
employment and events all seem to have played a part in
the early negativity and the ending rebound. Add in the
"E"nd of month window dressing and play list was complete.

Dow Chart


Nasdaq Chart


SPX Chart


SOX Chart



It was a busy day economically and that is as good a
place to start as any. The Chain Store Sales fell again
by -0.2% for the week and that theme was carried over
in the later reports as well. The Consumer Confidence
for August fell a whopping -7.5 points to 98.2 from
the 105.7 multi year high for the year in July. Consumers
continue to flip flop on sentiment and confidence but
the pattern is clear. They are not supporting the
economy by buying more goods and services. We know
this is based on future election unknowns and a drag
on spending due to higher gas prices.

The biggest decline was in the expectations component
which dropped from 105.3 to 96.6 for August. This nearly
-10 point drop was the biggest decline since February's
drop to 91.9 from 105.3. After that drop we struggled
back to the triple digit level for June and July but
the bottom fell out again last month. The present
situation component also fell from 106.4 to 100.7.
Those consumers planning on making major purchases
of an appliance, car or home declined sharply. Jobs
appeared to not be a concern as the numbers reflecting
jobs were nearly unchanged. The Sentiment numbers today
were much worse than the Confidence numbers last Friday
which were slightly better than expected but still
down for the month at 95.9.

Monthly Mass Layoffs rose to 2,094 events that impacted
253,929 workers, an +88% increase. This was the second
consecutive major increase from the low of 988 events
and only 87,501 workers laid off in May. Today's number
was a +12% jump over July of last year. This is the
first month that was higher than the 2003 levels since
Jan-2004. For the year the number of workers laid off
is -11% fewer than at this point in 2003. Manufacturing
was again the leader with 42% of all the layoffs. This
jump in announced layoffs does not bode well for the
Jobs report on Friday. They are not directly connected
but there is always some trending in play.

The Chicago PMI came in at 57.3 and was significantly
less than the expected 60.5. This has been a volatile
number of late after posting a high for the year at
68.0 in May. It has been trending down for the last
three months despite a spike in July. Production fell
to 61.8 from 69.5 and New Orders fell more than -10
points to 58.0. Backorders fell -8.6 to 51.6. The most
serious challenge was the nearly +10 point jump in the
prices paid component to 86.6 and a 15 year high. This
suggests that inflation is beginning to appear on a
broader basis as high energy prices filter through the
order flow pipeline. Inventory rose to the highest
level for the year at 61.3 and when coupled with the
huge drop in backorders suggests a further slowdown
ahead.

The PMI is important but its biggest claim to fame
this week is as a leading indicator for the ISM due
out tomorrow morning. If the ISM fell off as badly
as the PMI then any future rally would have as much
chance as a snowflake in August. The only upside to
the PMI and possibly ISM slide is the potential for
the Fed to back off their current rate hike program.
Bonds have risen for the last several days on concerns
that the economy is continuing to slow. Futures are
now pricing in only one more hike before year end.

The NY-NAPM posted another gain to 307.1 and although
the gain was a minor +4.6 points it was another new
high for the year. NYC continues to pull out of its
9/11 slump and conditions are still strong. However,
the same problems are beginning to show in the NAPM
as in the other manufacturing indexes. The current
conditions component fell to 59.3 from 73.2 in July.
The six-month outlook fell a whopping -18.5 points
from 78.5 to only 60. While the headline number did
post a minor gain the internals suggest this could
be the last month for this index to set a new high.
Odds are good we are about to see conditions in NYC
follow the rest of the country into a pre election
slump.

We are quickly counting down the days until Intel
updates its quarter on Thursday night. The dog pile
continued today with multiple brokers downgrading
not only Intel but semis in general. SG Cowen told
investors to AVOID Intel and semis as a sector. They
said slowing demand and increased supply in 2005 would
depress earnings for the sector. According to SGC
channel checks with Taiwan component makers suggests
notebook sales were especially weak over the last
month. Merrill Lynch told customers to avoid Intel
despite the sharp dip in price. They think the current
margin estimate of 60% is too high based on softness
in multiple chip components. Flash memory, cell phone
chips and processors are seeing some aggressive price
cuts as suppliers fight for market share. In Intel's
case AMD is still fighting the good fight and becoming
a stronger competitor in the current price conscious
markets. Morgan Stanley cut Intel saying current
sluggish demand was going to result in "negative
gross margin surprises" in the coming quarters. JPM
cut Intel's revenue by -$100 million for the current
quarter. Prudential said channel checks were showing
the back to school bounce was later than normal and
the inference was a weaker bounce as well. With all
this negativity it is no wonder Intel dropped to a
new 52-week low just under $21 before rebounding
slightly to $21.28 at the bell.

Surprisingly the SOX only lost -2.62 points or -0.7%
to 370. This is only +10 points above the low for the
year and could be very close to a double bottom forming.
If the SOX can hold 360 and Intel does not trip on its
announcement then year end relief may begin to appear.
With all the analysts coming out publicly this close
to the report Intel could surprise everyone by pulling
a rabbit out of its hat. While I am not expecting it
this would be very good for tech stocks struggling to
hold over Nasdaq 1800.

September is the weakest month of the year and many
Labor Day rallies turn into jumping off points for
the October lows. This has apparently attracted new
cash into the market with $2.3 billion flowing into
equity funds for the last two weeks according to
TrimTabs.com. Considering the very light volume prior
to today that cash was still setting on the sidelines
in hopes of a real pullback to enter.

We got the drop I was hoping for over the last two
days and those hoping for an entry at the SPX 1095
I targeted in Sunday's commentary should be feeling
better tonight. Low today was SPX 1094.72. The
challenge with today's rebound is the way it transpired.
Several buy programs hit back to back in the last 90
min of trading that helped the Dow rebound 90 points.
This was clearly some month end window dressing by
funds in an attempt to show less cash and more stocks
on the books. Will it hold tomorrow? Obviously nobody
knows but the general consensus of opinion was expecting
a post convention bounce. Today's rebound could have
stimulated buying interest but extreme anti-"Semi"tic
(I know that means something else but it would work
so well here) revulsion against chip stocks could
impede any continued rally.

The bearish case is the easiest to paint today. The
PMI and NAPM suggest the ISM tomorrow could be ugly.
There is also another possible nail in the semi coffin
with semiconductor billings scheduled to be reported.
Add that to the fear of Intel on Thursday and the
next two days have far more negative potential than
upside potential.

This may just work in the bulls favor instead. All
the bad news is already priced in with the two day
pullback to strong support at SPX 985, Dow 10075 today.
This profit taking deflated all the bullishness built
into the market as of Friday and gave us a nice strong
launch point for a potential post convention rally.
They could not have scripted a better entry for the
rest of the week. Stops have been cleared and sellers
have exited the building. Of course a nasty ISM number
could ripen a new crop of sellers in a heartbeat.

The election factor appears to be working in the
markets favor with Bush pulling slightly ahead in the
polls but it is still anybody's race. Regardless of
your party the markets have a history of gaining
ground once the final gavel is heard at the Republican
convention. That expectation could prompt some bargain
hunting over the next two days were it not for the ISM,
Intel and Jobs report hurdles.

Just getting past the convention does not eliminate
our event risk. Just ten hours after Bush speaks on
Thursday night to close the convention the administration
speaks on the state of employment with the August Jobs
report. The consensus estimate is currently 150,000,
up from 132,000 last week and the whisper numbers are
starting to rise to challenge the 200K level. While a
150-200K number would be very positive for the market
we are facing a greater potential for a monster
disappointment. Should Intel warn and jobs disappoint
we could go from the potential for a post convention,
post Labor Day rally straight to new lows for the year.

We have a very tense market situation just ahead. The
next three days could set the tone for the next month.
With Septembers historical trend as the worst month
of the year the only thing for sure is it will not be
a boring month. We will either see a bear-b-que as a
contrarian rally emerges or we will head south at a
high rate of speed in a dip that will produce the best
buying opportunity for the year.

Should a post convention rally miraculously appear
amid the smoke and debris clouding our path it will
run headlong into warning season in about two weeks.
With Q3-2003 comps very tough the potential for a
strong warning calendar is very high. According to
those that track these things the number of positive
announcements for Q3 are running well below the norm.
We have not reached the point where we will start to
see the stats on a daily basis but those days are
coming.

The only sure thing is a solid wall of worry ahead
and a very rocky road to November. The general
consensus from the stream of analysts parading by
on CNBC is to be fully invested before Halloween.
The post election rally is one of the most recognized
trends, regardless of who wins although republican
victories tend to produce the best results. Even without
the election November is the best month of the year for
the S&P and the second best for the Dow since 1950, 3rd
for Nasdaq since 1971.

This makes our road map very clear. We should be wary
of any post convention bounce and keep looking for
the normal end of September weakness when earnings
warnings begin to appear. We should then use any Sept-
Oct dip to establish longer-term positions. That may
be far too much forward thinking for most traders just
trying to find an entry/exit point for tomorrow but
we need to always keep the long term roadmap in focus
to help us plan our short term strategies. Right now
I am just happy to see the dip to support at 1095/10075
and the strong rebound to clear the cobwebs. This
provided the perfect setup for me and now all we
need is a positive ISM to keep it alive. Did I mention
that today's rebound failed to break the 100dma on the
Dow at 10195? Nobody ever said the uphill road would
be easy.

Enter Passively, Exit Aggressively.

Jim Brown
Editor


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

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


************************Advertisement*************************

Live Securities Brokerage Service with Licensed Option Principals

OCO Stop & Profit Orders                        OneStopOption
All types of Spreads and Buy Writes             888-281-9569
Auto-Trade Market Monitor Signals
Personal Service and Education


**Services available for Foreign Traders including Canada**

http://www.OneStopOption.com

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


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

Dow, SPX, OEX finish month with gains, while NDX finds losses

A late session lift had the Dow Industrials (INDU) 10,173.92
+0.50% posting a 51-point gain and that was good enough to have
the world's most recognizable stock market benchmark finishing
the month of August with a fractional 34-point gain.

An ending session spat of buying, which had the look of some end
of month painting of the ticker tap, also had the broader S&P 500
Index (SPX.X) 1,104.24 +0.46% posting a 2.5-point gain for the
month, while its narrower brethren and the S&P 100 Index (OEX.X)
538.77 +0.41% managed to eek out a 1.10-point gain for August.

While technology sectors reversed the bulk of their losses in today's
session, the Semiconductor Index (SOX.X) 371.02 -0.7% finished down 2.6
points as brokers continued to caution ahead of
Thursday's mid-quarter update from Intel (NASDAQ:INTC) $21.28
-1.48%, which did trade a new 52-week low.  The SOX.X fell an
additional 45 points, or 10.9% in August, adding to July's 68-
point decline (-14.15%).

The continued battering in the chips had the tech-heavy NASDAQ-
100 Index (NDX.X) 1,368.68 +0.05% falling 31 points in August, or
2.26%, after falling a more substantial 116 points, or 7.66% in
July.

U.S. Market Watch - 08/31/04 Close



In tonight's U.S. Market Watch, I jotted down some of the
conventional simple moving averages I and a lot of traders will
use with PINK=21-day, BLUE=50-day and RED=200-day.

Good gravy!  The very broad NYSE Composite ($NYA.X) is
challenging its 200-day SMA by today's close and while closing
above this longer-term and still trending higher 200-day SMA on
Friday, buyers have not yet been able to get a meaningful move
back above.  When we review tonight's Market Snapshot/Internals,
my one thought here is that the bullish leadership may be getting
a little over-extended and while new highs are growing and new
lows are abating, buyers may be hesitant to push the envelope
further.

Remember the S&P Retail Index (RLX.X) 388.92 -0.13% and
observations made as it has been battling with its 200-day SMA,
where despite today's release of consumer confidence figures,
held steady above all three simple moving average.

I tell you what.  The more I reflect on the rebound the major
indices had from the 2002 lows and look at the AMEX Gold Bugs
Index ($HUI.X) which has been showing some life of late, I can't
help but think the hints of bullishness returning to this sector
might not also be a "heads up" from the MARKET that some type of
"reflation" for the economy is in the making.

Since hitting a yield high of 4.904% in mid-May, the benchmark
10-year YIELD ($TNX.X) has fallen to a suspicious 4.132% yield.
What's suspicious about this level is it is right where the
benchmark bond's yield closed on April 2, 2004.  That was the day
the bond market was sent into a tail spin and Treasuries saw
sharp selling when the March nonfarm payroll figures surged to a
surprising 353,000.

Market Snapshot / Internals - 08/31/04 Close



The very broad NYSE hung tough for the bulk of the session with
its A/D line never dipping into negative territory, and while
volumes remained light, a little energy burst in the final hour
of trade did have volume breaching the 1 billion-share mark,
after two consecutive sessions of sub 1 billion volume.

NASDAQ struggled throughout but after turning just over 100
million shares per hour, four and five-lettered stocks also got
some buy side volume.

Other than the first 30-minutes of today's trade, TRIN spent the
bulk of today's session above 1.0.  This makes two consecutive
sessions above 1.0.  Shorter-term traders might want to keep this
in mind as TRIN gravitated back toward 1.0 from about 12:00 PM.

Pivot Analysis Matrix - (New MONTHLY Pivot Levels)



Today we update the MONTHLY Pivot matrix with new MONTHLY levels,
where all equity-based indices close ABOVE their MONTHLY Pivot,
which the Semiconductor Index (SOX.X) being the lone exception.

We can really see the stagger in the WEEKLY Matrix where the
SOX.X now lingers just BELOW its WEEKLY S1, the NDX/QQQ close
right on their WEEKLY S1, with the majors (INDU, SPX, OEX) right
around their weekly Pivots, as if positioned "neutral" into
Friday's nonfarm payroll numbers.

The S&P Banks Index (BIX.X) 362.28 +0.81% came within fractions
of its March 5 all-time high of 362.64, but is first among the
equity-based indices to get a trade at WEEKLY R1.

S&P 500 Index (SPX.X) Chart - Daily Intervals



With MONTHLY Pivot retracement redrawn, there's really little
change at MONTHLY S2 and MONTHLY R1, but lowering of MONTHLY R2
has the MONTHLY Pivot (1,091.55) for September moving lower,
where last month's (August) 61.8% retracement of 1,092.77 had
been.  I take note of this as a key level of near-term support.

Today's close for the SPX looks rather bullish above a new
"overlapping" level at 1,103, and overlap from last night's
review of the SPX at 1,107 has vanished.

Are computers exhausted for selling near-term?  They seemed like
it in the final hours of trade.  With the NYSE Composite ($NYA.X)
6,454 +0.61% challenging its similarly rising 200-day SMA for a
third-straight session, it has to be the technology components of
the SPX holding it back.  It certainly isn't the banks.

Jeff Bailey


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

September Looms Large
- J. Brown

That's it!  August 2004 is in the bag and if you're not the
roller-coaster type then you're happy it's gone.  Unfortunately,
September looms large ahead of us but first let's look at what's
weighing on investors' minds tonight.

The economic data today was disappointing.  The consumer
confidence numbers slipped from 105.7 in July to 98.2 in August
when economists were looking for a drop to 103.4.  This is
certainly not good news and not positive for the incumbent
president.  The Chicago PMI dropped from 64.7 in July to 57.3 in
August.  Estimates were for a drop to 60.8.  Again, this is bad
news.  However, both are actually positive numbers.  Confidence
is relatively high and the PMI number, at 57, is still at an
expanding or a growth rate.  What these numbers show is that the
economy is still growing but that growth is slowing.  Of course
you, me and everyone else paying attention already knew that.

Crude oil continues to play a part in this great game on Wall
Street.  Currently the black liquid is down about $6.00 in the
last week and a half.  However, as mentioned before (either in
this column or in the MarketMonitor) the $42 level, where oil is
trading now, could be support.  The $42 level in crude happens to
be a 50% Fibonacci retracement level of its July to August rally.
It wouldn't surprise me to see a short-term oversold bounce from
here, which of course would weigh on stocks.  Then again we could
see oil drop to the psychological, round-number support level at
$40.00 a barrel then I'd really be wary of an oversold bounce.

Investors are also worried about Intel's mid-quarter update on
Thursday night.  If you consider the weakness in the SOX and in
shares of Intel today then one can surmise that confidence is
pretty low.  This shouldn't be a surprise if you consider that
Morgan Stanley, JPMorgan, Prudential and SG Cowen all said they
expect Intel to warn and/or lower their revenue guidance.
Currently estimates are for Intel to turn in Q3 revenues at $8.88
billion.  Merrill Lynch said they expect Intel to affirm their
revenue numbers but they're wisely cautious on the stock.  If I
remember correctly most of Wall Street was bearish before Intel's
last mid-quarter update only to have Intel surprise and guide to
the upper half of their previous guidance.

Investors, whether they like it or not, also have to deal with
the Republican National Convention.  The current logic dictates
that Wall Street, besides being widely Republican, would rather
have an incumbent stay in office merely to avoid the uncertainty
factor.  The market hates uncertainty.  Considering that a number
of polls seem to have Bush making some headway against his rival
Kerry could almost be considered bullish for stocks.  As long as
the convention survives without any terrorist event this four-day
pep rally might improve investor sentiment if it can cement any
kind of lead for Bush if you follow the Wall Street loves the
incumbent logic.

This week is not without more risk.  On top of exceptionally low
trading volume, since most of Wall Street took the week off to
avoid the traffic jams and security delays due to the RNC, we
also have to deal with a parade of economic data.  Tomorrow
brings the construction spending numbers and the ISM
manufacturing index.  Economists are looking for the ISM to fall
from 62.0 in July to 60.0 in August.  Any number above 50 shows
expansion and growth.  Friday is the big non-farm payrolls (jobs)
report, which could be a major influence on stock direction.

Plus, we have to deal with seasonally weak trends in September.
Historically it is the worst month of the year for stocks.
Currently, September has been a loser for five years in a row.
That's not a good record to be trading calls against.  However,
short-term the beginning of September and the post-Labor Day week
tend to be positive.  A lot of folks have been saying there is no
reason to buy stocks until after Labor day.  Well the holiday is
almost here.  Are investors going to come back with their wallets
open or closed?

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

Market Averages

DJIA ($INDU)

52-week High: 10753
52-week Low :  9233
Current     : 10173

Moving Averages:
(Simple)

 10-dma: 10125
 50-dma: 10136
200-dma: 10257



S&P 500 ($SPX)

52-week High: 1163
52-week Low :  983
Current     : 1104

Moving Averages:
(Simple)

 10-dma: 1099
 50-dma: 1102
200-dma: 1111



Nasdaq-100 ($NDX)

52-week High: 1559
52-week Low : 1280
Current     : 1368

Moving Averages:
(Simple)

 10-dma: 1372
 50-dma: 1400
200-dma: 1440



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

CBOE Market Volatility Index (VIX) = 15.29 –0.15
CBOE Mkt Volatility old VIX  (VXO) = 14.98 -0.13
Nasdaq Volatility Index (VXN)      = 21.92 -0.22


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

          Put/Call Ratio  Call Volume   Put Volume

Total          0.71        529,841       375,877
Equity Only    0.58        376,647       221,352
OEX            1.33         14,608        19,534
QQQ            2.32         11,792        27,375


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

Bullish Percent Data

           Current   Change   Status
NYSE          55.3    + 0     Bear Confirmed
NASDAQ-100    32.0    + 0     Bear Confirmed
Dow Indust.   46.6    + 0     Bear Confirmed
S&P 500       51.4    + 0     Bear Confirmed
S&P 100       49.0    + 0     Bear Confirmed


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

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


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

 5-dma: 1.37
10-dma: 1.13
21-dma: 1.32
55-dma: 1.28


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    1950      1765
Decliners     884      1211

New Highs     106        37
New Lows       19        34

Up Volume    939M      523M
Down Vol.    443M      694M

Total Vol.  1392M     1292M
M = millions


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

Commitments Of Traders Report: 08/24/04

Weekly COT report discloses positions held by small specs
and commercial traders of index futures contracts at the
Chicago Mercantile Exchange and Chicago Board of Trade. COT data
can be found at www.cftc.gov.

Small specs are the general trading public with commercials being
financial institutions. Commercials are historically on the
correct side of future trend changes while small specs tend
to be wrong.

S&P 500

Commercials have upped both their longs and shorts but remain
net bearish. Small traders have upped their shorts and pared
back their longs a bit but remain net bullish.

Commercials   Long      Short      Net     % Of OI
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%)
08/24/04      402,599   420,478   (17,879)   (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
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%
08/24/04      135,151   100,351    34,800    14.7%

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


E-MINI S&P 500

Commercial traders have decreased their longs and increased
their shorts, which could be bad news for the S&P 500.  In
lockstep mirror-like fashion small traders are moving the
opposite direction than the "smart money".

Commercials   Long      Short      Net     % Of OI
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%)
08/24/04      392,065   473,911   ( 81,846)  ( 9.4%)

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

Small Traders Long      Short      Net     % of OI
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%
08/24/04      211,995     76,184   135,811    47.1%

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 added to both their shorts and longs
but the end result was an increase in bullish sentiment on
the NDX.  Small traders are also bullish but have cut their
enthusiasm in half.  In essence small traders are beginning
to turn bearish, which in a contrarian sense is bullish.
Confused yet?

Commercials   Long      Short      Net     % of OI
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%
08/24/04       48,624     43,222     5,402    5.8%

Most bearish reading of the year: (21,858)  - 08/26/03
Most bullish reading of the year:  25,160   - 06/01/04

Small Traders  Long     Short      Net     % of OI
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%
08/24/04       11,666    10,068     1,598     7.3%

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 remain bullish but have pared back their
longs a bit. Meanwhile small traders remain bearish but have also
hedged their enthusiasm a bit.

Commercials   Long      Short      Net     % of OI
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%
08/24/04       28,919    23,658    5,261      10.1%

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
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%)
08/24/04        5,052     7,214   (2,162)   (17.6%)

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


************************Advertisement*************************

Full Service Brokers

Man Financial announces the formation of the OneStopOption
Brokerage Group, addressing the demand for personalized,
experienced service for both securities* and futures trading
within the same firm. Licensed Option Principals Andrew Aronson
and Alan Knuckman specialize in live assistance of stock*,
option* and futures traders. The combination of the proven Man
Financial global presence and the convenience of one group for
all trading needs provide customers with the tools needed for
success.

Live Broker and Online Trading Available     888-281-9569

http://www.OneStopOption.com

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


******************
FREE TRIAL READERS
******************
If you like the results you have been receiving we
would welcome you as a permanent subscriber.

The monthly subscription price is $49.95. The quarterly
price is $129.95 which is $20 off the monthly rate.

We would like to have you as a subscriber. You may
subscribe at any time but your subscription will not
start until your free trial is over.

To subscribe you may go to our website at

www.OptionInvestor.com

and click on "subscribe" to use our secure credit
card server or you may simply send an email to

 "Contact Support"

with your credit card information,(number, exp date, name)
or you may call us at 303-797-0200 and give us the
information over the phone.

You may also fax the information to: 303-797-1333


**********
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                  Tuesday 08-31-2004
Copyright 2004, All rights reserved.                        2 of 3
Redistribution in any form strictly prohibited.

In Section Two:

Dropped Calls: POT
Dropped Puts: None
Call Play Updates: AET, BOL, FMC, FO, MHK, PD, RAI, TDS, ZBRA
New Calls Plays: AHC, DGX
Put Play Updates: SPW,
New Put Plays: IVGN


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

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


CALLS:
*****

Potash - POT - close: 55.52 change: +1.75 stop: 51.00

Ding!  We're done.  Shares of POT have exceeded our expectations.
Our target was $55.00 (actually $54.90) and the stock soared to
$55.85 this afternoon on rising volume.  At this point we're
willing to take the money and run.  If you're feeling more
aggressive we suggest significantly tightening your stops to
protect a majority of the recent climb (like under $54).

Picked on August 10th at $ 51.08
Change since picked:      + 4.44
Earnings Date           07/29/04 (confirmed)
Average Daily Volume =       180 thousand
Chart =



PUTS:
*****

None


************************Advertisement*************************

Full Service Brokers

Man Financial announces the formation of the OneStopOption
Brokerage Group, addressing the demand for personalized,
experienced service for both securities* and futures trading
within the same firm. Licensed Option Principals Andrew Aronson
and Alan Knuckman specialize in live assistance of stock*,
option* and futures traders. The combination of the proven Man
Financial global presence and the convenience of one group for
all trading needs provide customers with the tools needed for
success.

Live Broker and Online Trading Available     888-281-9569

http://www.OneStopOption.com

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


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

Aetna - AET - close: 92.65 change: +0.53 stop: 89.95

Insurance stock AET continues to consolidate in a tight $1.00
range.  The good news is this trading range has a slightly
bullish, higher-lows trend to it.  We're also encouraged that
yesterday's earnings warning from ACDO didn't affect shares of
AET.  We continue to suggest either a bounce from $90.00 or a
breakout over $95.00 as an entry point for our target at $100.

Picked on August 15th at $90.72
Change since picked:     + 1.93
Earnings Date          07/29/04 (confirmed)
Average Daily Volume =      1.4 million
Chart =


---

Bausch Lomb - BOL - close: 65.95 change: +0.66 stop: 62.50

We are still not triggered yet in BOL but the sideways
consolidation is holding above support at the $65.00 level and
that's good news.  Today's afternoon rebound is encouraging but
we're willing to wait on the sidelines for BOL to breakout and
hit our trigger at $66.51.

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 =


---

F M C Corp - FMC - close: 46.23 change: +0.98 stop: 42.00

Bullish traders can be encouraged that support at the $45.00
level and its simple, rising 10-dma held its first test.  Shares
of FMC churned mostly sideways on Tuesday until the afternoon
rally and that's when the stock took off.  This looks like an
entry point for new bullish positions.

Picked on August 24 at $45.87
Change since picked:   + 0.36
Earnings Date        07/27/04 (confirmed)
Average Daily Volume =    265 thousand
Chart =


---

Fortune Brands - FO - close: 73.15 change: +0.27 stop: 71.50

Our recently added call play in FO has gotten off to a slow
start.  Shares of FO backtracked on Monday and the afternoon
bounce during the Tuesday afternoon rally wasn't that inspiring.
The good news is that support at the $72.00 level and its simple
200-dma held up during yesterday's weakness and this morning's
dip.  However, we're now more inclined than before to suggest
buying a new high over $74.35 or even the $75.00 mark.

Picked on August 29th at $74.08
Change since picked:     - 0.93
Earnings Date          07/23/04 (confirmed)
Average Daily Volume =      636 thousand
Chart =


---

Mohawk Industries - MHK - close: 76.92 change: +0.40 stop: 73.00

MHK was due for some profit taking and we saw some on Monday.
Honestly, we're surprised the profit taking wasn't a little
steeper.  MHK managed a weak bounce from the $46.50 level today
on strong volume.  We're happy to report most of the volume came
in during the afternoon bounce.

Picked on August 24th at $75.51
Change since picked:     + 1.41
Earnings Date          07/21/04 (confirmed)
Average Daily Volume =      397 thousand
Chart =


---

Phelps Dodge - PD - close: 81.56 chg: -0.25 stop: 77.00

We're surprised to see PD slipping lower when gold and copper
prices are ticking higher.  It's possible that we're seeing
investor reaction to PD losing a bid for Peru's Las Bambas copper
reserves, which went to a Swiss rival.  Then again it could be
some minor profit taking and bullish traders may want to use the
dip back toward $81.00 as an entry point for new positions.

Picked on August 26th at $82.10
Change since picked:     - 0.54
Earnings Date          07/27/04 (confirmed)
Average Daily Volume =      2.1 million
Chart =


---

Reynolds American - RAI - cls: 75.50 chg: +0.72 stop: 71.95*new*

Our tobacco play is smoking!  The stock is up four days in a row
after bouncing from the $72.00 level.  More importantly to
technical players the stock has broken out above resistance at
$75.00 to hit new highs on rising, above average volume.  This is
very bullish news.  Remember that our target was the $77.50-80.00
range and we're getting close to the lower boundary.  We'll raise
our stop loss to $71.95.

Picked on August 19 at $72.88
Change since picked:   + 2.62
Earnings Date        08/02/04 (confirmed)
Average Daily Volume =    1.2 million
Chart =


--

Telephone & Data Sys - TDS - cls: 77.10 change: +0.80 stop: 74.00

TDS has been a test of patience for us and the stock is still
stuck inside its trading range.  Fortunately, the good news today
is that shares bounced from the $76.00 level on decent volume.
This could be a bullish entry point but since we're feeling
cautious we'd prefer to only consider new plays on a move over
$78.00.  If we don't see some action soon we're going to drop TDS
and move on.

Picked on August 24th at $78.05
Change since picked:     - 0.95
Earnings Date          07/21/04 (confirmed)
Average Daily Volume =      195 thousand
Chart =


---

Zebra Tech. - ZBRA - close: 57.15 chg: +0.90 stop: 53.99

ZBRA experienced some profit taking on Monday but shares held
support at the $56.00 level.  Fortunately, that level held again
this morning and when the afternoon rally began ZBRA joined in.
Coincidentally it happens to be a test of its rising, simple 10-
dma.  This could be a new bullish entry point for traders but
remember we're targeting a run to $60.00.

Picked on August 25th at $56.18
Change since picked:     + 0.97
Earnings Date          07/28/04 (confirmed)
Average Daily Volume =      419 thousand
Chart =



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

Amerada Hess - AHC - close: 80.50 chg: +1.45 stop: 77.00

Company Description:
Amerada Hess Corporation is a leading global independent energy
company, engaged in the exploration and production of crude oil
and natural gas, as well as in refining and in marketing refined
petroleum products, natural gas, and electricity.
(source: company website)

Why We Like It:
Plain and simple we like AHC for its relative strength and
bullish technical breakout over resistance.  We've had our eye on
the oil/oil service stocks the last several days as they started
to turn around and bounce from their August lows despite the drop
in crude prices.  This looks like investors jumping back in after
some early August profit taking. The technical oscillators are
bullish on AHC and its MACD has produced a new "buy" signal from
oversold.  We like the breakout over its simple 21, 40 and 50-
dma's and round-number, psychological resistance at the $80.00
mark.  Unfortunately, P&F chart traders will note that AHC is
still in a sell signal so the play is not without some risk here.
It's also interesting to note that AHC is also an oil refiner and
the industry is currently running at about 96 percent capacity.
Furthermore the industry as a whole is expected to see smaller
and shorter maintenance shut-downs this fall as they have in the
past.  Since oil is still above $40 a barrel that means hefty
profits!

We're going to target a quick run toward the $85.00 mark but it
wouldn't surprise us to see AHC climb higher.


Suggested Options:
We like the October and November strikes.  Our favorites would be
the 75s and 80s.

BUY CALL OCT 75 AHC-JO OI=615 current ask $6.50
BUY CALL OCT 80 AHC-JP OI=238 current ask $3.20
BUY CALL OCT 85 AHC-JQ OI= 57 current ask $1.30

BUY CALL NOV 80 AHC-KP OI=1255 current ask $4.40
BUY CALL NOV 85 AHC-KQ OI= 794 current ask $2.30

Annotated Chart:



Picked on August 31st at $80.50
Change since picked:     + 0.00
Earnings Date          07/28/04 (confirmed)
Average Daily Volume =      1.0 million
Chart =


---

Quest Diagnostic - DGX - close: 85.60 chg: +2.18 stop: 82.00

Company Description:
Quest Diagnostics Incorporated is the nation's leading provider
of diagnostic testing, information and services, providing
insights that enable healthcare professionals to make decisions
that improve health. The company offers the broadest access to
diagnostic testing services through its national network of
laboratories and patient service centers, and provides
interpretive consultation through its extensive medical and
scientific staff. Quest Diagnostics is the leading provider of
esoteric testing, including gene-based medical testing, and
provides advanced information technology solutions to improve
patient care. Quest Diagnostics' healthcare information
technology subsidiary, MedPlus, is a leading developer and
integrator of clinical connectivity and data management solutions
for healthcare organizations and clinicians.
(source: company press release)

Why We Like It:
We recently had DGX on the Sunday watch list.  What we said was
watch for a bullish breakout over resistance at the $85.00 level.
Should this occur traders could target a run toward the $90.00
region.  DGX did just that today with a high-volume (well at
least above average volume) breakout over the $85.00 mark.
Short-term technicals like the RSI and stochastics are bullish
and the P&F chart is in a bullish buy signal with a $96 price
target (it was $93 on Sunday). We're willing to speculate on the
technical breakout with a short-term run toward $90.

Suggested Options:
We're going to suggest the October or November calls.  Our
favorites are the 80s and 85s.

BUY CALL OCT 80 DGX-JP OI=360 current ask $6.80
BUY CALL OCT 85 DGX-JQ OI=137 current ask $3.20
BUY CALL OCT 90 DGX-JR OI=208 current ask $1.10

BUY CALL NOV 85 DGX-KQ OI=1742 current ask $4.40
BUY CALL NOV 90 DGX-KR OI=1163 current ask $2.10

Annotated Chart:



Picked on August 31st at $85.60
Change since picked:     + 0.00
Earnings Date          07/22/04 (confirmed)
Average Daily Volume =      578 thousand
Chart =




************************Advertisement*************************

Live Securities Brokerage Service with Licensed Option Principals

OCO Stop & Profit Orders                        OneStopOption
All types of Spreads and Buy Writes             888-281-9569
Auto-Trade Market Monitor Signals
Personal Service and Education


**Services available for Foreign Traders including Canada**

http://www.OneStopOption.com

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


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

SPX Corp - SPW - close: 36.49 change: -0.28 stop: 38.26

Once more we can only report that SPW continues to consolidate
lower.  The stock has built yet another lower high under the
descending 21-dma.  We don't want to give up yet and since we're
not triggered yet it's only costing us patience.  We're
suggesting readers buy puts if SPW breaks support at $36.00 and
hits our trigger at $35.75.

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

Invitrogen - IVGN - close: 49.50 change: -0.67 stop: 51.51

Company Description:
Invitrogen Corporation provides products and services that
support academic and government research institutions and
pharmaceutical and biotech companies worldwide in their efforts
to improve the human condition. The company provides essential
life science technologies for disease research, drug discovery,
and commercial bio-production. Invitrogen's own research and
development efforts are focused on breakthrough innovation in all
major areas of biological discovery including functional
genomics, proteomics, bioinformatics and cell biology -- placing
Invitrogen's products in nearly every major laboratory in the
world. Founded in 1987, Invitrogen is headquartered in Carlsbad,
California and conducts business in more than 70 countries around
the world. The company globally employs approximately 4,000
scientists and other professionals. (source: company press
release)

Why We Like It:
This has been a relatively tough market for the bears lately.
The last two weeks of August have seen a widespread market
bounce.  Fortunately, we think we've found a decent candidate for
put buyers.  IVGN got crushed in July when it disappointed
investors in its earnings report.  There was no oversold bounce
and the stock broke through the $50.00 level in early August when
the market was dropping.  We did see some oversold back back
toward $50.00 but now after two weeks of churning mostly sideways
the trend of lower highs and lower lows has set IVGN up for
another drop.  Short-term technicals are looking weak and its
MACD is very close to a new "sell" signal.  The P&F chart is very
bearish with a $27.00 price target.  We're going to target an
initial drop to  $45.00.  However, we're going to use a TRIGGER
at $48.95 to open the play. Until IVGN trades under $49.00 and
hits our trigger we'll sit on the sidelines.  If triggered we'll
try and keep our risk to a minimum with a stop at $51.51.


Suggested Options:
We like the October and November puts.  Our favorites are the
55s, 50s, 47.50s and 45s.

BUY PUT OCT 55.00 IUV-VK OI= 5 current ask $6.40
BUY PUT OCT 50.00 IUV-VJ OI=17 current ask $3.00
BUY PUT OCT 47.50 IUV-VW OI=55 current ask $1.90
BUY PUT OCT 45.00 IUV-VI OI=53 current ask $1.20

BUY PUT NOV 50.00 IUV-WJ OI=488 current ask $3.90
BUY PUT NOV 47.50 IUV-WW OI=489 current ask $2.80
BUY PUT NOV 45.00 IUV-WI OI=104 current ask $1.95

Annotated Chart:



Picked on September xth at $xx.xx <-- see TRIGGER
Change since picked:       - 0.00
Earnings Date            07/21/04 (confirmed)
Average Daily Volume =        1.3 million
Chart =



************************Advertisement*************************

No time to follow the Market Monitor? Tired of missing good Trades
because you stepped away from your computer?

OneStopOption Group can follow the Market Monitor for you. You
choose the number of contracts, we take care of the rest!!

Trade Stock Options, Stocks and ALL Futures with the same Group.
Call us 888 281-9569 to see if you qualify to have us rebate your
subscription cost.

http://www.OneStopOption.com

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


**********
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                  Tuesday 08-31-2004
Copyright 2004, All rights reserved.                        3 of 3
Redistribution in any form strictly prohibited.

In Section Three:

Watch List: Insurance, Mortgages and more!
Spreads & Straddles: A Nice Comeback For Stocks!
Premium Selling Plays: Naked Puts & Calls


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

Insurance, Mortgages 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.
___________________________________________________________________



Ambac Financial - ABK - close: 75.50 change: +0.64

WHAT TO WATCH: ABK has produced an impressive rally in August.
The stock has run from under $70.00 to the $75.00 region.  At
that point the rally began to stall but now shares are breaking
out to new four-month highs.  Unfortunately, there's been no
volume to back up the move.  The P&F chart is bullish with a
triple-top breakout buy signal and an $86 price target. This
could be an aggressive players entry point - just use a tight
stop.

Chart=


---

New Century Financial - NCEN - close: 53.64 change: +0.67

WHAT TO WATCH: We watched mortgage lender NCEN breakout over the
$50.00 level in mid-August and run to round-number resistance at
$55.00.  Now shares have slipped back a bit in profit taking but
traders bought the dip at $52.00 today.  This also happens to be
a test of its simple 10-dma and old resistance back in January
and March.  We see this as an aggressive entry point for bullish
positions. The P&F chart shows a triple-top breakout buy signal
with a $70 target.

Chart=


---

Vimpel Communications - VIP - close: 98.10 change: +2.45

WHAT TO WATCH: Russian telecom stock VIP once again makes the
watch list.  The stock has rallied strongly in August to breakout
above all its moving averages.  Shares are now challenging round-
number, psychological resistance at the $100.00 mark.  If VIP can
breakout over $100 aggressive traders can target a run toward
$110. The bullish P&F chart points to a $120 price target.

Chart=



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

KO $44.71 +0.36 - We like the bullish trend of higher lows but it
also looks like a bearish wedge-pattern.  Consider longs over
$45.00 or shorts under $44.00.

CCU $33.51 -0.69 - Uh-oh, CCU has broken support at $34.00 on big
volume.  The next stop could be $30.00 but approach cautiously.
The P&F target has already been achieved.


************************Advertisement*************************

Live Securities Brokerage Service with Licensed Option Principals

OCO Stop & Profit Orders                        OneStopOption
All types of Spreads and Buy Writes             888-281-9569
Auto-Trade Market Monitor Signals
Personal Service and Education


**Services available for Foreign Traders including Canada**

http://www.OneStopOption.com

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


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

A Nice Comeback For Stocks!
By Ray Cummins

The major equity averages rebounded in late-session trading
Tuesday, closing higher despite a sharp decline in consumer
confidence.

The Dow Jones Industrial Average finished 51 points higher at
10,173, recovering nearly 100 points from its intraday low on
solid performances by oil, drug and financial components.  The
NASDAQ Composite clawed its way back from a 17 point deficit to
end slightly in the green at 1,838.  The S&P 500 Index closed
up 5 points at 1,104, on strength in oil & gas drilling, gold,
housing, utility, and health stocks.  Volume was 1.14 billion
shares on the New York Stock Exchange while 1.2 billion shares
crossed on the NASDAQ.  Winners outnumbered losers more than 2
to 1 on the Big Board, but the ratio was slightly less bullish
on the technology exchange at 3 to 2.  Treasury prices climbed,
driving yields to four-month lows.  The benchmark 10-year note
closed up 12/32 at 100 30/32 to yield 4.13%, a level not seen
since early April.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
SUMMARY OF CURRENT POSITIONS - AS OF 08/29/04
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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    65.04  66.37  SEP  55.0  60.0  0.40   59.60   0.40   Open
FPL    67.73  68.55  SEP  60.0  65.0  0.45   64.55   0.45   Open
MCO    67.33  68.52  SEP  60.0  65.0  0.65   64.35   0.65   Open
BSTE   44.14  46.94  SEP  35.0  40.0  0.55   39.45   0.55   Open
ISCA   53.40  52.98  SEP  45.0  50.0  0.55   49.45   0.55   Open
LEND   33.89  38.36  SEP  25.0  30.0  0.60   29.40   0.60   Open
PIXR   69.93  76.00  SEP  60.0  65.0  0.45   64.55   0.45   Open
PD     80.77  82.89  SEP  65.0  70.0  0.40   69.60   0.40   Open
RYL    86.01  88.25  SEP  75.0  80.0  0.65   79.35   0.65   Open
FRO    40.05  38.00  SEP  30.0  35.0  0.60   34.40   0.60   Open
NIHD   37.59  36.52  SEP  33.4  35.0  0.20   34.80   0.20   Open
NCEN   53.10  54.13  SEP  45.0  50.0  0.60   49.40   0.60   Open
SEPR   49.35  50.99  SEP  42.5  45.0  0.30   44.70   0.30   Open

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


CALL-CREDIT SPREADS

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

PDCO   73.40  74.90  SEP  85.0  80.0  0.55   80.55  0.55   Open
CDWC   59.25  60.09  SEP  65.0  60.0  0.45   60.45  0.36   Open
BGG    69.80  75.96  SEP  80.0  75.0  0.45   75.45 (0.51)  Open?
DNA    44.23  49.90  SEP  52.5  50.0  0.35   50.35  0.35   Open?
EASI   43.53  42.79  SEP  55.0  50.0  0.40   50.40  0.40   Open
VLO    64.36  66.04  SEP  75.0  70.0  0.60   70.60  0.60   Open
FD     44.60  45.00  SEP  50.0  47.5  0.30   47.80  0.30   Open
PHS    32.42  32.47  SEP  37.5  35.0  0.30   35.30  0.30   Open
GDT    56.26  60.40  SEP  65.0  60.0  0.60   60.60  0.20   Open?
OSTK   31.03  32.58  SEP  40.0  35.0  0.60   35.60  0.60   Open

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

Briggs & Stratton (NYSE:BGG), Guidant (NYSE:GDT) and Genentech
(NYSE:DNA) are on the early-exit list.  Kmart (NASDAQ:KMRT) and
Vimple Communications (NYSE:VIP) were previously closed 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

DITC    17.97  21.84   SEP   17.5	  17.5    3.00    5.50    Open?

Our new straddle in Ditech (NASDAQ:DITC) was a "big winner" last
week as the issue jumped over $4 on a strong earnings report and
the announcement of two additional customers in Asia.

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

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

MUR - Murphy Oil  $75.51  *** Sector Rally! ***

Murphy Oil Corporation (NYSE:MUR) is a worldwide oil and gas
exploration and production company with refining and marketing
operations in the United States and the United Kingdom.  The
firm's operations are classified into two business activities:
Exploration and Production; and Refining and Marketing.  Murphy's
principal exploration and production activities are conducted in
the United States, Ecuador and Malaysia by wholly owned Murphy
Exploration & Production Company and its subsidiaries; in western
Canada and offshore eastern Canada by wholly owned Murphy Oil and
its subsidiaries; and in the U.K. North Sea and Atlantic Margin
by wholly owned Murphy Petroleum Limited.  Murphy Oil USA, Inc.,
a wholly owned subsidiary, owns and operates refineries in the
United States.

MUR - Murphy Oil  $75.51

PLAY (conservative - bullish/credit spread):

BUY  PUT  OCT-65.00  MUR-VM  OI=937  ASK=$0.45
SELL PUT  OCT-70.00  MUR-VN  OI=335  BID=$1.10
INITIAL NET-CREDIT TARGET=$0.70-$0.75
POTENTIAL PROFIT(max)=16% B/E=$69.30


__________________________________________________________________

RYL - The Ryland Group  $88.15  *** Homebuilder Extraordinaire! ***

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

RYL - The Ryland Group  $88.15

PLAY (conservative - bullish/credit spread):

BUY  PUT  OCT-75.00  RYL-VO  OI=13  ASK=$1.00
SELL PUT  OCT-80.00  RYL-VP  OI=42  BID=$1.65
INITIAL NET-CREDIT TARGET=$0.75-$0.80
POTENTIAL PROFIT(max)=17% B/E=$79.25



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

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.

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

AZO - Autozone  $74.06  *** Downtrend Intact! ***

AutoZone (NYSE:AZO) is a specialty retailer of automotive parts
and accessories primarily to do-it-yourself customers.  The
company operates auto parts stores in the United States and in
Mexico and sells parts and accessories online at autozone.com.
Each store carries an extensive product line for cars, vans and
light trucks, including new and remanufactured automotive parts,
maintenance items and various accessories.  AutoZone also has a
commercial sales program in the United States, AZ Commercial,
which provides commercial credit and prompt delivery of parts to
local, regional and national repair garages, dealers and service
stations.  In addition, the company sells automotive diagnostic
and repair software through ALLDATA and through alldatadiy.com.

AZO - Autozone  $74.06

PLAY (more conservative - bearish/credit spread):

BUY  CALL  OCT-85.00  AZO-JQ  OI=91   ASK=$0.20
SELL CALL  OCT-80.00  AZO-JP  OI=101  BID=$0.70
INITIAL NET-CREDIT TARGET=$0.55-$0.65
POTENTIAL PROFIT(max)=12% B/E=$80.55


__________________________________________________________________

RIMM	- Research In Motion  $60.22  *** Premium-Selling Only! ***

Research In Motion (NASDAQ:RIMM) is a designer, manufacturer and
seller of wide area wireless solutions for the worldwide mobile
communications market.  Through the development of integrated
hardware, software and services that support multiple wireless
network standards, the firm provides platforms and solutions for
seamless access to time-sensitive information including e-mail,
phone, short message service messaging, as well as Internet and
intranet-based corporate data applications.

RIMM	- Research In Motion  $60.22

PLAY (less conservative - bearish/credit spread):

BUY  CALL  SEP-70.00  RUP-IN  OI=5744  ASK=$0.20
SELL CALL  SEP-67.50  RUP-IU  OI=7130  BID=$0.40
INITIAL NET-CREDIT TARGET=$0.25-$0.30
POTENTIAL PROFIT(max)=11% B/E=$67.75



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

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

No straddles or strangles today...

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

SEE DISCLAIMER - SECTION 1

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


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

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

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
SUMMARY OF CURRENT POSITIONS - AS OF 08/29/04
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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

IVX      SEP    16.00   15.64   19.69    0.36   5.52%   2.30%
MCIP     SEP    15.00   14.30   17.71    0.70   8.50%   4.90%
PAAS     SEP    12.50   12.05   14.73    0.45   6.87%   3.73%
UTHR     SEP    25.00   24.70   31.99    0.30   3.01%   1.21%
AMED     SEP    25.00   24.25   25.92    0.75   6.54%   3.09%
PHM      SEP    50.00   49.25   59.30    0.75   3.32%   1.52%
KOSP     SEP    30.00   29.25   37.72    0.75   5.48%   2.56%
GLBCE    SEP    12.50   11.90   16.45    0.60  11.90%   5.04%
ECLP     SEP    12.50   12.10   14.37    0.40   6.90%   3.31%
OMM      SEP    12.50   12.10   13.30    0.40   6.51%   3.31%
CNCT     SEP    25.00   24.10   26.05    0.90   7.11%   3.73%
TOY      SEP    15.00   14.45   16.38    0.55   7.51%   3.81%
ACF      SEP    20.00   19.25   21.15    0.75   7.16%   3.90%
PLMO     SEP    30.00   29.45   38.25    0.55   5.05%   1.87%
ION      SEP    25.00   24.50   26.48    0.50   4.17%   2.04%
ESLT     SEP    20.00   19.20   21.70    0.80   7.95%   4.17%
WBSN     SEP    35.00   33.75   39.56    1.25   8.46%   3.70%
NTMD     SEP    12.50   12.15   18.28    0.35   8.12%   2.88%
UTHR     SEP    25.00   24.30   31.99    0.70   7.30%   2.88%
CNCT     SEP    25.00   24.30   26.05    0.70   6.65%   2.88%
DDS      SEP    20.00   19.50   20.20    0.50   6.31%   2.56%
MEE      SEP    22.50   22.00   27.94    0.50   5.93%   2.27%
FOSL     SEP    25.00   24.35   28.75    0.65   5.95%   2.67%
HUM      SEP    17.50   17.10   18.99    0.40   5.34%   2.34%
SCSC     SEP    50.00   49.40   61.51    0.60   3.30%   1.21%
JOSB     SEP    24.00   23.52   28.06    0.48   5.27%   2.04%
ECLP     SEP    12.50   12.20   14.37    0.30   6.57%   2.46%
WBSN     SEP    35.00   34.05   39.56    0.95   7.44%   2.79%
ARO      SEP    30.00   29.05   33.75    0.95   7.67%   3.27%
MW       SEP    25.00   24.60   28.74    0.40   4.22%   1.63%
TOL      SEP    40.00   39.05   44.38    0.95   6.19%   2.43%
SEAC     SEP    15.00   14.40   15.75    0.60  12.11%   4.17%
CLHB     SEP    10.00    9.60   11.62    0.40  10.87%   4.17%
NTMD     SEP    15.00   14.65   18.28    0.35   8.62%   2.39%
ESLT     SEP    20.00   19.20   21.70    0.80  10.61%   4.17%
MYGN     SEP    15.00   14.55   16.01    0.45   8.06%   3.09%
NAVR     SEP    12.50   12.15   15.07    0.35   9.14%   2.88%
IVX      SEP    18.00   17.56   19.69    0.44   7.02%   2.51%
UTHR     SEP    25.00   24.40   31.99    0.60   8.89%   2.46%
AAPL     SEP    30.00   29.50   34.35    0.50   5.37%   1.69%
ARO      SEP    30.00   29.50   33.75    0.50   5.51%   1.69%
SONO     SEP    22.50   22.05   24.66    0.45   6.40%   2.04%
ESLT     SEP    20.00   19.30   21.70    0.70  10.92%   3.63%
MEE      SEP    25.00   24.45   27.94    0.55   7.13%   2.25%
SRDX     SEP    22.50   21.90   24.10    0.60   8.40%   2.74%
IVX      SEP    18.00   17.52   19.69    0.48   8.94%   2.74%
BSTE     SEP    45.00   44.45   46.94    0.55   4.16%   1.24%
FCN      SEP    17.50   17.05   17.75    0.45   7.56%   2.64%

Special Tuesday Note: PalmOne (NASDAQ:PLMO) shares plunged
10% Tuesday, possibly reacting to speculation that Nokia may
unveil a competitive device to palmOne's Treo 600 smart phone
in the coming weeks.  Regardless of the reason, conservative
traders should consider closing the play to limit potential
losses.  Positions in Possis Medical (NASDAQ:POSS) and Kyphon
(NASDAQ:KYPH) have previously been closed to limit losses.


NAKED CALLS

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

CRDN     SEP    40.00   40.50   39.10    0.50   5.29%   1.23%
SWIR     SEP    35.00   35.60   23.05    0.60   7.40%   1.69%
AVID     SEP    50.00   50.50   43.70    0.50   3.56%   0.99%
USPI     SEP    37.50   38.05   36.45    0.55   3.90%   1.45%
BDY      SEP    25.00   25.75   24.29    0.75   7.42%   2.91%
DRIV     SEP    30.00   30.30   25.03    0.30   4.51%   0.99%
SINA     SEP    30.00   30.35   21.40    0.35   5.84%   1.15%
ERES     SEP    22.50   22.80   20.82    0.30   6.66%   1.32%
MRVL     SEP    25.00   25.40   23.71    0.40   8.22%   1.57%
ICUI     SEP    30.00   30.65   26.54    0.65   7.56%   2.12%
SWIR     SEP    30.00   30.30   23.05    0.30   5.90%   0.99%
UPL      SEP    45.00   45.40   38.70    0.40   4.90%   0.88%
MCHP     SEP    30.00   30.65   26.76    0.65   6.97%   2.12%
EYET     SEP    45.00   45.75   37.46    0.75  10.85%   1.64%
CMX      SEP    30.00   30.45   28.23    0.45   4.86%   1.48%
IDXC     SEP    30.00   30.30   28.75    0.30   3.95%   0.99%
BRCM     SEP    32.50   32.90   28.31    0.40   5.76%   1.22%
ELAB     SEP    30.00   30.55   26.83    0.55   8.34%   1.80%
MRVL     SEP    25.00   25.35   23.71    0.35   5.80%   1.38%

Dick's Sporting Goods (NYSE:DKS) has previously been closed to
limit potential losses.  Bradley Pharmaceuticals (NYSE:BDY),
Ceradyne (NASDAQ:CRDN), and United Surgical (NASDAQ:USPI) are
on the "watch" list.

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

SHFL   33.14  SEP 30.00  SFQ-UF 0.65 1306 29.35  18   3.7% 10.2%
DITC   21.52  SEP 20.00  QZD-UD 0.45  397 19.55  18   3.9% 10.1%
SONO   24.13  SEP 22.50  UZS-UX 0.40   20 22.10  18   3.1%  8.0%
ATI    18.81  SEP 17.50  ATI-UW 0.30  148 17.20  18   2.9%  7.8%
SNDA   22.50  SEP 20.00  QKU-UD 0.30   21 19.70  18   2.6%  7.5%
GMR    27.28  SEP 25.00  GMR-UE 0.35 1055 24.65  18   2.4%  6.6%
AAPL   34.49  SEP 32.50  AAQ-UZ 0.45 3679 32.05  18   2.4%  6.2%

Abbreviations:

LB-Last Bid price, OI-Open Interest, CB-Cost Basis or break-even
point, DE-Days to Expiry, SY-Simple Yield (monthly basis without
margin), MY-Maximum Yield (monthly basis with margin), TS-Target
Shoot.
__________________________________________________________________

SHFL - Shuffle Master  $33.14  *** On The Rebound! ***

Shuffle Master (NASDAQ:SHFL) develops, manufactures and markets
automatic card shufflers for use with card-based table games.
The company also develops and markets table games and licenses
these products to casinos.  Shuffle Master develops and markets
slot games and slot game operating systems for slot machines.

SHFL - Shuffle Master  $33.14

SEP 30.00 SFQ-UF LB=0.65 OI=1306 CB=29.35 DE=18 TY=3.7% MY=10.2%


__________________________________________________________________

DITC - Ditech Communications  $21.52  *** Solid Earnings! ***

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.

DITC - Ditech Communications  $21.52

SEP 20.00 QZD-UD LB=0.45 OI=397 CB=19.55 DE=18 TY=3.9% MY=10.1%


__________________________________________________________________

SONO - SonoSite  $24.13  *** Testing Recent Highs! ***

SonoSite (NASDAQ:SONO) is global developer of high-performance,
hand-carried ultrasound imaging systems for use in a variety
of clinical applications and settings.  The company's products
include the SonoSite TITAN system, for general imaging and
cardiology applications, the SonoSite 180PLUS system, for
general ultrasound imaging, and the SonoHeart ELITE, configured
for cardiovascular applications.  The iLook 25 imaging tool is
designed to provide visual guidance for physicians and nurses
while performing vascular access procedures and the iLook 15
imaging tool is designed to provide visual imaging of the chest
and abdomen for physicians and nurses while performing other
procedures and examinations.

SONO - SonoSite  $24.13

SEP 22.50 UZS-UX LB=0.40 OI=20 CB=22.10 DE=18 TY=3.1% MY=8.0%


__________________________________________________________________

ATI - Allegheny Tech.  $18.81  *** Basic Materials Demand! ***

Allegheny Technologies (NYSE:ATI) is a diversified producer of
specialty materials.  The company operates in three business
segments: flat-rolled products, high-performance metals and
industrial products.  Their products include stainless steel,
nickel-based alloys and super-alloys and titanium and other
specialty materials.  The industrial products segment's focus
is producing tungsten powder, tungsten carbide materials and
carbide cutting tools.

ATI - Allegheny Tech.  $18.81

SEP 17.50 ATI-UW LB=0.30 OI=148 CB=17.20 DE=18 TY=2.9% MY=7.8%


__________________________________________________________________

SNDA - Shanda Interactive Ent.  $22.50  *** China Internet ***

Shanda Interactive Entertainment (NASDAQ:SNDA) is an operator of
online games in China.  The games, licensed from third parties,
as well as developed in-house by the company, include The Legend
of Mir II and The World of Legend.  The company's commercially
launched games have approximately 1.4 million peak concurrent
users and 931,570 average concurrent users.  Shanda also provides
multiplayer online games, including role-playing games and casual
online games, which allow thousands of users to interact in a
virtual world by assuming ongoing roles or characters with many
different features.

SNDA - Shanda Interactive Ent.  $22.50

SEP 20.00 QKU-UD LB=0.30 OI=21 CB=19.70 DE=18 TY=2.6% MY=7.5%


__________________________________________________________________

GMR - General Maritime  $27.28  *** Strong Sector ***

General Maritime (NYSE:GMR) provides international seaborne crude
oil transportation services.  The company's fleet is made up of
Aframax and Suezmax tankers, which utilize ports in the Caribbean,
South and Central America, the United States, Western Africa, the
Mediterranean, Europe and the North Sea.  Although the majority
of General Maritime's tankers operate in the Atlantic basin, the
company also operates its tankers in the Black Sea, the Far East
and in other regions.  The firm's customers include international
oil companies such as ChevronTexaco Corporation, CITGO Petroleum,
Shell Oil Company, BPAmoco, Exxon Mobil, ConocoPhillips and Sun
International.

GMR - General Maritime  $27.28

SEP 25.00 GMR-UE LB=0.35 OI=1055 CB=24.65 DE=18 TY=2.4% MY=6.6%


__________________________________________________________________

AAPL - Apple Computer  $34.49  *** An Apple A Day... ***

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

AAPL - Apple Computer  $34.49

SEP 32.50 AAQ-UZ LB=0.45 OI=3679 CB=32.05 DE=18 TY=2.4% MY=6.2%



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

BEARISH PLAYS - NAKED CALLS

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

WARNING: THE RISK IN SELLING UNCOVERED OPTIONS IS SUBSTANTIAL!

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

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

ASTE - Astec Industries  $16.53  *** In A Trading Range? ***

Astec Industries (NASDAQ:ASTE) designs, engineers, manufactures
and markets equipment and components used in road building and
related construction activities.  The company's products are
used in each major phase of road building, from quarrying and
crushing the aggregate to testing the mix for application of
the road surface.  Astec also makes equipment and components
unrelated to road construction, such as trenching, auger boring,
directional drilling, environmental remediation and industrial
heat transfer equipment.

ASTE - Astec Industries  $16.53

PLAY (sell naked call):

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

SELL CALL  SEP 17.5  QYA-IW     84    0.45  17.95  12.5%   2.5%


_________________________________________________________________

PLMO - palmOne  $32.65  *** Nokia Competition = Sell-Off! ***

palmOne (NASDAQ:PLMO), formerly Palm, develops, designs and sells
Palm-branded, hand-held devices, accessories and the operating
system Palm OS.  The company was historically organized into two
operating segments: the Solutions Group and PalmSource.  Now the
Solutions Group develops and markets hand-held devices and other
accessories to provide the user with a simple, elegant and useful
productivity tool.  PalmSource developed and licensed the Palm OS
and related software, which is referred to as the Palm platform.
The Palm platform is the foundation for Palm devices, as well as
for devices manufactured by other third-party licensees.

PLMO - palmOne  $32.65

PLAY (sell naked call):

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

SELL CALL  SEP 40    UPY-IH    4387   0.25  40.25   6.2%   0.6%


_________________________________________________________________

RECN - Resources Connection  $32.78  *** Next Leg Down? ***

Resources Connection (NASDAQ:RECN) is a worldwide professional
services firm that provides accounting, risk management and
internal audit, information technology, human resources and
supply chain management professionals to clients on a project
basis.  The company assists its clients with discrete projects
requiring specialized expertise in accounting and finance, such
as mergers and acquisitions due diligence, financial analyses,
corporate reorganizations and tax-related projects.

RECN - Resources Connection  $32.78

PLAY (sell naked call):

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

SELL CALL  SEP 35    JUJ-IG     85    0.50  35.50   7.4%   1.4%



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

SEE DISCLAIMER - SECTION 1

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


************************Advertisement*************************

Full Service Brokers

Man Financial announces the formation of the OneStopOption
Brokerage Group, addressing the demand for personalized,
experienced service for both securities* and futures trading
within the same firm. Licensed Option Principals Andrew Aronson
and Alan Knuckman specialize in live assistance of stock*,
option* and futures traders. The combination of the proven Man
Financial global presence and the convenience of one group for
all trading needs provide customers with the tools needed for
success.

Live Broker and Online Trading Available     888-281-9569

http://www.OneStopOption.com

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


**********
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







DISCLAIMER

Option Investor Inc is neither a registered Investment Advisor nor a Broker/Dealer. Readers are advised that all information is issued solely for informational purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy, nor is it to be construed as a recommendation to buy, hold or sell (short or otherwise) any security. All opinions, analyses and information included herein are based on sources believed to be reliable and written in good faith, but no representation or warranty of any kind, expressed or implied, is made including but not limited to any representation or warranty concerning accuracy, completeness, correctness, timeliness or appropriateness. In addition, we do not necessarily update such opinions, analysis or information. Owners, employees and writers may have long or short positions in the securities that are discussed.

Readers are urged to consult with their own independent financial advisors with respect to any investment. All information contained in this report and website should be independently verified.

To ensure you continue to receive email from Option Investor please add "support@optioninvestor.com"

Option Investor Inc
PO Box 630350
Littleton, CO 80163

E-Mail Format Newsletter Archives