Option Investor
Newsletter

Daily Newsletter, Thursday, 09/09/2004

HAVING TROUBLE PRINTING?
Printer friendly version
The Option Investor Newsletter                Thursday 09-09-2004
Copyright 2004, All rights reserved.                       1 of 3
Redistribution in any form strictly prohibited.


In Section One:

Wrap: SOX Shock
Futures Wrap: See Note
Index Wrap: MIXED BAG
Market Sentiment: A Mixed Bias


Posted online for subscribers at http://www.OptionInvestor.com
************************************************************
MARKET WRAP  (view in courier font for table alignment)
************************************************************
      09-09-2004           High     Low     Volume   Adv/Dcl
DJIA    10289.10 - 24.30 10337.33 10269.49 1.70 bln 1943/1271
NASDAQ   1869.65 + 19.00  1875.39  1849.37 1.67 bln 1985/1105
S&P 100   543.89 +  0.77   545.47   541.78   Totals 3928/2376
S&P 500  1118.38 +  2.11  1121.30  1113.62 
W5000   10879.99 - 20.17 10919.16 10827.26
SOX       370.98 + 18.90   374.10   352.06
RUS 2000  566.18 +  8.39   567.73   557.79
DJ TRANS 3193.81 +  5.00  3207.11  3181.10
VIX        14.01 -  0.05    14.41    13.70
VXO (VIX-O)13.75 +  0.05    14.39    13.34
VXN        20.58 -  0.07    21.36    20.29 
Total Volume 3,662M
Total UpVol  2,560M
Total DnVol  1,015M
Total Adv  4429
Total Dcl  2747
52wk Highs  229
52wk Lows    74
TRIN       0.94
NAZTRIN    0.45
PUT/CALL   0.91
************************************************************

SOX Shock
by Jim Brown

Semiconductor bears woke up to an unpleasant surprise as
bad news from Texas Instruments sent chip stocks soaring.
The reversal of fortunes sent the Nasdaq higher but mixed
economic news failed to impress the Dow and the decline
continued. 

Dow Chart – Daily

 
Nasdaq Chart – Daily

 

Jobless Claims dropped a much larger than expected -44K
to 319,000 for last week. The huge drop was likely due
to holiday and weather related delays in filing for 
claims and the number will probably rise again next week.
The July-4th week saw a comparable -40K drop to 309,000
and those claims rebounded right back with the next report.
The -44K drop was the largest one-week drop since Dec-2001
but as an anomaly it is not relative. The market celebrated
with an opening spike but it was short lived. 

Import and Export Prices soared in August by +1.7% but
the majority of the increase was related to oil prices.
A +9.6% jump in oil prices pushed import prices higher
while export prices fell -0.5% due to a decline in 
agricultural prices. Import prices ex-oil only rose 
+0.4% in August and have increased only +3.2% over the
past year. If you don't use energy, inflation is still 
tame but for the rest of us the cost of living is still
rising. 

Wholesale Inventories also soared +1.3% and almost twice
the expected rate. Wholesale Sales only rose +0.5% and
this pushed the inventory to sales ratio to 1.16. Still
not high but the third consecutive month of growth. The 
bottom line here with the sharp rise in inventory is a
lack of equivalent demand. We are in the traditional
holiday build phase and we should see some inventory
building but there should also be sales as well or 
companies are going to be stuck holding this excess.

Also impacting the market was an unexpected draw down
in gasoline stocks of -2.5 million barrels for the week
ended Sept-3rd. Traders were expecting a gain, not a
loss. Oil also saw a loss of -1.5 million barrels. This
sent crude oil prices soaring +1.80 to $44.57 and the
short covering was heavy. This could have had some
impact on the Dow but the Nasdaq was unfazed. 

The biggest shock for the day was not oil but chips. 
Texas Instruments warned last night that Q3 revenue
would be below expectations due to weaker than expected
demand and excess inventory at customer locations. They
also said earnings would be slightly higher but not 
because of new manufacturing processes, cheaper 
components or higher prices to its customers. Earnings
would be better because its tax rate would be less 
and TXN would not have to put as much money into the
employee profit sharing plan. Neither of those factors
should have influenced chip buyers. They had nothing 
to do with the ongoing business. 

Today TXN soared +2 (+10%) to $20.75 on the news. It
appears the news was not as bad as traders had expected.
With the gloom and doom in the semi sector over the last
month the whisper number must have been much lower. One
analyst said the news from TXN was good except for the
reduction in sales and the aggressive inventory reduction
currently underway at its customer locations. Duh! That
is like saying I had a wreck on the way to work this
morning but at least I hit a police car and not a school
bus. 

Helping the TXN rebound was positive news out of Nokia,
TXN's largest customer. Nokia said it saw strong volume
in mobile devices. Also helping was a similar earnings
report from National Semi. NSM met previously lowered
results and warned that revenue for the current quarter
would fall between -8% to -10% due to excess inventory
levels at customer locations. NSM said the current 
inventory correction was very aggressive and sharper
than in previous cycles. NSM gained +1.38 to $13.47
on the news. 

SOX Chart - 60 min

 

You would expect the SOX reaction to both of these
chip warnings to be negative. If you did you were wrong.
Welcome to the club. The SOX jumped +19 points, +5.4%,
on the negative announcements. The conventional wisdom
tonight was a tremendous short squeeze in progress. Just
yesterday JPM said there was still 25% to 30% risk in
the sector and the SOX closed right at the 350 support
level. Chip bears saw the TXN jump with Nokia's help and
then the NSM earnings added fuel to the fire. Shorts
were run out of town by a lynch mob of buyers based on
the concept that the worst of the correction was almost
over. That is a big leap of faith but one many made 
on Thursday. It just proves that once the spring is 
compressed to the breaking point the resulting rebound
can and does surprise everyone on a routine basis. 

After the bell chip makers ISIL and ATML warned that
revenues would miss estimates and both dropped sharply
after the news. I guess the rebound is over. 

Also after the bell today EDS announced it was cutting 
20,000 more jobs over the next two years in an effort 
to cut another $3 billion in costs. Currently EDS has 
138,000 employees after cutting 5,000 in the prior 
round of layoffs. 

Alcoa also warned that they would miss estimates for
the quarter by a mile. Analysts had expected 52 cents
and Alcoa is now guiding to 30 to 35 cents. Alcoa said
they were plagued by labor problems and they were going
to close some plants rather than deal with the problems.
Alcoa also said they were closing plants due to over 
capacity, softness in automotive, packaging and overseas
markets as well as higher expenses in energy and ore. 

Probably the most significant news after the bell was
a court ruling in the ORCL/PSFT battle. A judge ruled
that government could not block the Oracle bid to buy
PSFT. Oracle was quick to issue a call for PeopleSoft
to meet with Oracle, redeem their poison pill and
accept the Oracle offer. Oracle claims their $21 offer
is a premium of +17% over Thursday's closing price of
$17.95. The battle is not yet over as the EU still has
to rule on the deal and PSFT is adamant that their
poison pill defense will stand. ORCL jumped about 30
cents in after hours but PSFT jumped to $20.40, a gain
of +2.45. 

The hurricane excuse is now official. Companies are
racing to warn faster than leaves in a hurricane 
claiming that the Florida storms have hurt their 
earnings. We all know that many of these are very 
valid comments but you can bet the farm there will
be those companies trying to use the storm clouds 
as cover would have warned anyway. Some valid 
companies that used the hurricane excuse today were
Brinkers, Ruby Tuesday, Royal Caribbean, many retailers
and several airlines have already warned.   

Friday is the last trading day before the 9/11 three
year anniversary. Homeland Security has been very quiet
as well as the press. However, there was a new video
from Al Qaeda today with Zawahri ridiculing the U.S.
and claiming continued attacks will end our age of
security. Officials point out that this is a pattern
for Al Qaeda of releasing videos just before 9/11 to
remind everyone of their accomplishments. In the past
the release of tapes also came immediately before some
other attacks and have been claimed to be trigger 
signals for those attacks. For me this puts additional
risk on the market for Friday and Monday. 

Tomorrow we also have the PPI and International Trade
but I would be surprised if either told us anything
we did not already know. 

For Friday we could start out with a negative bias 
due to the Alcoa warning and the two semi warnings
after the bell. The Dow pulled back on Thursday to
rest on intraday support from last Friday at 10275.
The end of day rebound was only successful in moving
the Dow off the lows but was unsuccessful in moving
very far off those lows. We are slowly ticking days 
off of the September calendar and so far we are 
following the script very closely. I would think the
Alcoa warning and nearly -2 point drop in after hours
could begin a break of that 200 dma support at 10275.
Should that support break the next support level is 
about 10150-10175. This would be a retracement of the
Sept-2nd pre Jobs report bounce. 

Dow Chart - 15 min

 

The Nasdaq was successful in rebounding off support
at 1850 solely on the back of the short covering in
the SOX. It closed the day right at the same overhead
resistance that has held all week. This was a very
strong bounce considering the Dow was negative all day.
The SOX rebound was helped by a day long series of buy 
programs in the Russell that kept the Russell over
560 until 12:45 then spiked it well over resistance
at 565. This was a very strong set of market supporting
programs. I am sure some of this was prompted by
institutional shorts in the SOX but there was a lot
of broad based buying in the Russell. The breadth of
the Russell rally pushed the volume across all the 
indexes to the highest level since August 11th. 

Russell Chart - 2 min

 

The volume ran dry about 3:PM and the indexes began
to crumble. The Russell held firm and managed to hold 
most of its gains despite the Dow moving back to near
its lows. This is a very strong show of conviction 
and turns tomorrow back into a coin flip with the SOX
doing the flip. It will all boil down to whether the
SOX can hold its gains. If the SOX rolls over then
you can bet the rest of the market will fall as well. 
The SOX rebounded to resistance just under 375 and
held 370 into the close. With ISIL and ATML warning
tonight we will get to see if the bounce was just 
short covering or do the chip buyers have some real
conviction. 

The way I see it Friday could be a pivotal day for the
September market. If we can overcome the warnings and
the 9/11 anniversary event risk then we will have a
major milestone in place. If we lose traction at the
open and it turns into a skid then the September
roadmap will come back into play and we could see 
some cautionary selling. The put/call ratio has been
high for the last couple weeks and that indicates 
there is a lot of hedging activity and probably a lot
of speculative put buying. The VIX hit a low of 13.70
today and is at the same levels seen on July-14th and
June-23rd, both cycle highs in the Dow. It sure looks
like to me we are setting up for the perfect storm
but events like the SOX rebound today and the Russell
buy programs tend to throw a kink in that outlook. I 
would continue to suggest caution as we ease farther
out on that September limb. 

In an effort to improve our service to you, we would
like your help in answering a few questions. Please 
take a minute and answer these ten questions.  
http://www.surveymonkey.com/s.asp?u=61018620429

Enter Passively, Exit Aggressively. 

Jim Brown
Editor


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


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

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

********************
INDEX TRADER SUMMARY
********************

MIXED BAG
By Leigh Stevens
lstevens@OptionInvestor.com 

THE BOTTOM LINE – 
The market this week continues to present a mixed picture.  
Momentum is still slightly up by some measures, but the market is 
overbought in the S&P - a bit less so in Nasdaq. Sentiment is 
neither at a bullish or bearish extreme. The S&P 500 (SPX) 200-
day moving average is acting as support, but the same average is 
acting like a resistance lid on the S&P 100 (OEX) and the Dow 30 
(INDU) is bumping against its (resistance) down trendline. The 
Oil index (OIX) just went to a new rally high but the Dow 
Transportation Average (TRAN) is poised to either break out to a 
new high or achieve a double top. 

Meanwhile the Nasdaq Composite (COMP) and 100 (NDX) are drifting 
sideways, buoyed by a rebounding (and very oversold) chip sector/ 
Semiconductor Index (SOX – close: 370.9 +18.9) after reaching my 
objective in the 350 area and with snapback/rebound potential to 
400.  The overall Nasdaq pattern could be read as building a 
minor top or consolidating for a next rally.  

What's a poor trader to do given this mixed picture?  Don't risk 
much until the trend resolves itself! No heavy positions seem 
warranted except, if you crave action, for smaller short-term 
trades. 

FRIDAY'S TRADING ACTIVITY – 

Tech stocks finished higher on an improved outlook from Nokia and 
a better than expected report from National Semiconductor, while 
a big 1-week decline in jobless claims lent support to the NYSE 
market.

THE NUMBERS – 

The S&P 500 (SPX) gained 2.1 points to 1,118.38. The Dow 
Industrials (INDU) was down however and off 24 points to 
10,289.10.

The Nasdaq Composite Index (COMP) rallied a substantial 19 points 
(+1%) to 1,869.65.  

REPORTS, ECONOMIC & STOCK NEWS – 

The Labor Department reported that the number of workers filing 
for state unemployment benefits plunged by 44,000, to 319,000 in 
the week ending Sept. 4th. and offered the biggest decline in 
initial claims since December 2001. 

The drop however seemed mostly attributable to the impact of 
storms that have hit Florida in the past month and to adjusting 
for seasonal factors. 

Also reported was that prices paid for imports into the United 
States jumped 1.7% in August, due to a surge in petroleum by 9.6% 
and the biggest increase in 20 months. 

The Commerce Department also came out with an estimate that 
inventories at U.S. wholesale dealers increased a seasonally 
adjusted 1.3% in July


Tech stocks rallied after National Semi (NSM) Q1 net income of 31 
cents per share on sales of $548 million, beating expectations 
for earnings of 26 cents a share and sales of $545 million. The 
company said however that Q2 sales might fall 8-10 percent from 
Q1 levels. NSM rallied 12%.

An improved third-quarter outlook from Nokia (NOK) was from 
strong volume growth in mobile phones. The cell-phone maker said 
it sees earnings per share from 11 cents (euro) to 13 cents euro, 
up from an earlier outlook.

OTHER MARKETS –

There was a surge in oil prices back above $44 a barrel but it 
did not appear to be a major negative for stock investors, at 
least today – stay tuned for tomorrow! 

The benchmark 10-year note closed lower on the jobless claims 
data and a weaker than expected government auction. The 10-year 
ended down 10/32 to 100 12/32.

The dollar was up 0.4% against the Yen and was also up slightly 
against the Euro, which closed at $1.2188.

MY INDEX OUTLOOKS – 

S&P 500 Index (SPX) – Daily chart:

1120 and a bit above has continued to be a resistance area, but 
it looks like the S&P 500 (SPX) could still attempt a rebound 
into the more significance technical resistance at the top end of 
its downtrend channel around 1130.  At that juncture we'll see if 
there might be a retest of that prior high back in June. Doubtful 
in my mind for a breakout, certainly not above the prior top, at 
least without more backing and filling. 

There may be a rally to around 1130, another pullback of 15 
points and then another rally before SPX comes down more 
substantially – selling pressure recently hasn't increased enough 
yet to create a larger pullback. 

I hope to play the bigger ranges, like buying calls in the 1100 
area, or perhaps back to 1080 and buying puts on a challenge to 
the prior tops in the 1140-1145 area.  I keep reminding myself 
that waiting will bring higher potential trading opportunities 
and right in here I am just "meat" for the floor traders who can 
sell to me and make money on little scalping type trades every 
day.  


 

My "sentiment" indicator is maybe heading back down toward a 1 or 
more day bullish reading.  It's somewhat unusual for this 
indicator to be falling when stocks are still holding up and with 
SPX looking like it could rally again. In fact the decline in 
this indicator is a minor bullish aspect, along with the still 
bullish chart pattern.     

S&P 100 Index (OEX) – Hourly chart:

The S&P 100 (OEX) is still locked in a tight range but the action 
looks more like consolidation then building a top.  This is so as 
long as the dips hold above 540-541.  Give the benefit of the 
doubt to the trend and the short to intermediate trend reminds 
up. The sideways move also has the effect of "throwing off" the 
short-term overbought condition.  546 is near resistance, then 
comes in at 549-550, at the low end of a significant June top.  

I would caution against buying a "breakout" move above 546 as it 
may be short-lived and the premiums will be jacked up sooner than 
you can say sooner.  Any such rally to follow may be short lived 
as I think the 550 area will prove to offer tough resistance.  
Better to buy puts with OEX around 550 and risk to a close of 3 
points higher (553).  


 

I'm also assessing the possible attempt to take OEX to around 550 
for September expiration. The index is holding up pretty well and 
bullish sentiment is not rising – the kind of situation that can 
set up a short squeeze and work against Sept puts held at lower 
strikes.  

Dow 30 (INDU) – Daily chart:

Keeping the downtrend channel highlighted is interesting as the 
Dow 30 Industrials (INDU) looks stuck at the down trendline - 

I last suggested that a move to around 10,350, without much 
upside follow through, as offering a put play. I'm still keying 
off a close at 10,350 as being significant, with a close above 
this level as at least suggesting that the prior highs in the 
10,450 area could be re-tested.  The weakest technical picture is 
presented if INDU can't break out at all above its current down 
trendline.  Failure to take out a prior high is also showing an 
overall bear trend, dating back to the peak made in February.  

Near support is at 10,200, with next lower support at around 
9950. 


 

The Stochastic on the daily Dow chart above is hanging up at an 
overbought extreme – it could hang in up in this area for a while 
like the June top.  Eventually their will be at least a sideways 
move to bring this back down again, if not another downswing. 

Nasdaq Composite (COMP) Index  – Daily:

1873 is the prior closing high to the recent rally and the level 
to watch in the Nasdaq Composite (COMP) – then, above this close, 
the prior closing high at 1892 as resistance.

A good jump in the up volume from today suggests some renewed 
upside momentum, perhaps to the 1892-1900 area where I would want 
to own puts, such as in the Nas 100 options, say for October 
which tends to have a lot of cross currents and potential 
downdrafts.  


 

  
Nasdaq 100 (NDX) Index  – Daily:

No change here - 1410 looks to be key technical resistance, then 
1430.  It feels like NDX might, on the strength of a rebounding 
SOX index get to perhaps a midpoint 1420 where I suggest exiting 
any calls and going into puts.

1360 is key support.  I think the outlook is higher, up toward 
resistance before support is tested. 

 


Nasdaq 100 tracking Stock (QQQ) Daily:

QQQ remains bearish in its pattern if it can't get above 35.  A 
close over 35 would set up a move to possibly 36 where I would 
short the stock. 

33.7 – 34 is near support.  As with NDX, if they can't take em 
down, they will likely take em up first.


 

The On Balance Indicator (OBV) is still trending slightly higher 
and volume with it and provides a slightly bullish clue for 
another rally attempt.

Good Trading Success!


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

A Mixed Bias
- J. Brown

Thursday proved to be an interesting day, especially if you were 
following oil stocks and technology stocks.  The two sectors were 
the best performing spots in the market place.  Oil stocks rose 
as crude oil price climbed more than 4 percent to $44.15 a 
barrel.  Meanwhile the Texas Instrument (TXN) mid-quarter update 
last night ignited a bounce in the SOX that continued to climb 
throughout the session.  

The strength in the SOX helped lift the entire technology sector, 
as it usually does, but the question remains, "is this a one-day 
rebound or start of something more?"  Looking more broadly at the 
market in general it was a positive day with most sector indices 
closing in the green.  Market internals were also bullish with 
advancing stocks outnumbering decliners by 17 to 10 on the NYSE 
and almost 2 to 1 on the NASDAQ.  Up volume swamped down volume 
10 to 6 on the NYSE and 13 to 3 on the NASDAQ.  Overall volume 
was pretty decent and one of the best days we've seen in the last 
couple of weeks.  

Aside from the strength in stocks today investors were also 
encouraged by the weekly initial jobless claims.  The number 
dropped 44,000 to 319,000.  This was the largest drop since 
December 2001.  It's another clue that the economy is still 
improving, which should help cement another interest rate hike at 
the FOMC's September meeting.  Yet the Fed isn't just watching 
jobs data.  It's also watching the inflation picture and tomorrow 
brings the Producer Price Index for August.  

Tomorrow is a mixed bag.  The inability of the blue chips to turn 
around all day is certainly negative.  An earnings warning from 
Dow-component Alcoa (AA) after the bell tonight certainly won't 
help matters.  Wall Street was looking for 50 cents a share and 
AA now expects 30 to 35 cents a share.  Alcoa will likely be the 
main drag on the Industrials tomorrow.  

Meanwhile Oracle had some positive news after the bell this 
evening.  The software giant has won its lawsuit against the U.S. 
Department of Justice to purchase smaller rival PeopleSoft 
(PSFT).  A judge has declared the merger would not violate anti-
trust laws.  While the DoJ can appeal this is seen as a boon for 
ORCL and likely to spark a rally in the software sector tomorrow.  
Friday may prove to be a duplicate of today - blue chips down 
with technology stocks up.

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

Market Averages

DJIA ($INDU)

52-week High: 10753
52-week Low :  9230
Current     : 10289

Moving Averages:
(Simple)

 10-dma: 10232
 50-dma: 10120
200-dma: 10274



S&P 500 ($SPX)

52-week High: 1163
52-week Low :  990
Current     : 1118

Moving Averages:
(Simple)

 10-dma: 1111
 50-dma: 1100
200-dma: 1113



Nasdaq-100 ($NDX)

52-week High: 1559
52-week Low : 1301
Current     : 1391

Moving Averages:
(Simple)

 10-dma: 1380
 50-dma: 1387
200-dma: 1440



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

CBOE Market Volatility Index (VIX) = 14.01 -0.05
CBOE Mkt Volatility old VIX  (VXO) = 13.75 +0.05
Nasdaq Volatility Index (VXN)      = 20.58 -0.70


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

          Put/Call Ratio  Call Volume   Put Volume

Total          0.91        616,250       558,939
Equity Only    0.72        483,669       349,029
OEX            1.21         22,035        26,692
QQQ            1.09         44,880        48,879


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

Bullish Percent Data

           Current   Change   Status
NYSE          58.7    + 0     Bear Confirmed
NASDAQ-100    38.0    + 0     Bull Alert      
Dow Indust.   56.6    + 0     Bear Correction
S&P 500       56.6    + 0     Bear Correction
S&P 100       55.0    + 0     Bear Correction


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: 1.02
10-dma: 1.21
21-dma: 1.12
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    1729      1957
Decliners    1094      1051

New Highs     100        81
New Lows       11        35

Up Volume   1061M     1293M
Down Vol.    612M      299M

Total Vol.  1694M     1650M
M = millions


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

Commitments Of Traders Report: 08/31/04

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

The latest data shows commercial traders reducing their short
positions just a tad.  They remain net bearish by only by a 
small margin.  Retail traders have upped both their longs and
shorts and the net result has been a reduction in their 
bullish enthusiasm.

Commercials   Long      Short      Net     % Of OI
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%)
08/31/04      406,637   416,778   (10,141)   (1.2%)

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
08/10/04      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%
08/31/04      144,120   114,343    29,777    11.5%

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

Wow!  We're seeing some action in the e-minis.  Commercial
traders or "smart money" has really upped their shorts while
reducing their longs.  This has produced the most bearish 
reading in a long time.  Without missing a cue the retail
traders have upped their longs to produce the most bullish 
reading in a while.  

Commercials   Long      Short      Net     % Of OI 
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%)
08/31/04      372,071   543,100   (171,029)  (18.7%)

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
08/10/04      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%
08/31/04      258,624     77,036   181,588    54.0%

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


NASDAQ-100

Commercial traders appear to be happy to sit still in the
NDX futures but small traders have increased their long 
positions.

Commercials   Long      Short      Net     % of OI 
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%
08/31/04       48,167     43,411     4,756    5.2%

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
08/10/04       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%
08/31/04       14,635    10,572     4,063    16.1%

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

Traders don't seem very willing to change their bets on 
the Industrials.  Neither the commercials or the small traders
are shifting any money around.

Commercials   Long      Short      Net     % of OI
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%
08/31/04       29,143    24,147    4,996       9.3%

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
08/10/04        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%)
08/31/04        4,929     7,122   (2,193)   (18.2%)

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                 Thursday 09-09-2004
Copyright 2004, All rights reserved.                        2 of 3
Redistribution in any form strictly prohibited.


In Section Two:

Dropped Calls: DGX, FO, ZBRA
Dropped Puts: None
Call Play Updates: AHC, BOL, FMC, PD, RAI, TDS, 
New Calls Plays: See note
Put Play Updates: IRF, IVGN, LXK, MERQ, MSTR, SPW
New Put Plays: None


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

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


CALLS:
*****

None


PUTS:
*****

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


Amerada Hess - AHC - close: 82.66 chg: +1.00 stop: 79.00      

Oil stocks were some of today's best performers as crude oil 
prices gained more than four percent to close at $44.33 a barrel.  
The OIX index climbed to new all-time highs and the OSX services 
index hit new three-year highs.  Thus it's easy to under why 
we're a little disappointed that AHC isn't hitting new highs as 
well.  Many of its peers are doing just that so we question what 
is holding shares of AHC back?  We're certainly happy with the 
1.22 percent gain today and its new four-week high but traders 
should keep a careful eye on AHC.  Feel free to consider other
stocks in the group as bullish candidates.

Picked on August 31st at $80.50
Change since picked:     + 2.16
Earnings Date          07/28/04 (confirmed)
Average Daily Volume =      1.0 million 
Chart =


---

Bausch Lomb - BOL - close: 68.40 change: +0.97 stop: 64.75     

That's more like it! BOL has continued to produce a string of 
higher lows and now shares have broken through minor resistance 
at the $68.00 level.  Volume was well above average and that's 
bullish for BOL's upward momentum.  The P&F chart, already 
showing a spread triple-top breakout buy signal, now points to an 
$89 target.  Short-term traders may want to consider exiting near 
$70.  We believe BOL has more upside than that.

Picked on September 01 at $66.51
Change since picked:      + 1.89
Earnings Date           07/29/04 (confirmed)
Average Daily Volume =       397 thousand
Chart =


---

F M C Corp - FMC - close: 47.49 change: +0.73 stop: 44.90     

FMC relative strength continues to shine.  The stock's trend of 
higher lows has pushed FMC to another new multi-year high.  Bear 
in mind that FMC is nearing its all-time highs near $48 so a push 
to $49 would be very bullish.  This is a tough spot to consider 
new positions.  Traders who already have positions should be sure 
they're comfortable with their stops.  Conservative traders could 
use the simple 10-dma as a guide for stop placement.

Picked on August 24 at $45.87
Change since picked:   + 1.62
Earnings Date        07/27/04 (confirmed)
Average Daily Volume =    265 thousand
Chart =


---

Phelps Dodge - PD - close: 84.93 chg: +1.18 stop: 79.95      

Our bullish play in PD is working out pretty well.  Shares have 
broken through the $84 level in the past few sessions and PD 
tagged a high of $85.50 this afternoon.  The $85.00 level is the 
main obstacle between here and the $90.00 region so we'd like to 
see the momentum hold.  We're not expecting one but if PD dips 
look for support near $84 and again at $82.00.  

Picked on August 26th at $82.10
Change since picked:     + 2.83
Earnings Date          07/27/04 (confirmed)
Average Daily Volume =      2.1 million 
Chart =


---

Reynolds American - RAI - cls: 74.51 chg: -0.49 stop: 72.99*new*

We hate it when that happens.  Our hypothetical profits have been 
cut in half by profit taking after RAI's three-week run.  What 
really concerns us is the close under the $75.00 level and its 
simple 10-dma.  Plus, the MACD is starting to falter and is 
hinting at a new "sell" signal.  Shares need to bounce from the 
$74.00 level or bulls may be in trouble.  The catalyst for 
today's weakness is a less than inspiring comments from larger 
rival Altria Group (MO).  MO did guide to the upper end of their 
earnings range but said its Phillip Morris (tobacco unit) would 
see lower volumes in the second half of 2004.  RAI has announced 
it will hold a guidance call on September 15th.  We're going to 
raise our stop to $72.99, which is just above breakeven.

Picked on August 19 at $72.88
Change since picked:   + 1.63
Earnings Date        08/02/04 (confirmed)
Average Daily Volume =    1.2 million 
Chart =


--

Telephone & Data Sys - TDS - cls: 79.31 chg: +0.01 stop: 76.90*new*

If you've been following our comments on TDS in the nightly 
newsletters then you already know we're very cautious on the 
stock right here.  Yesterday's action looks like a bearish 
reversal pattern.  We can be encouraged that there was no follow 
through on the move today but TDS is still in jeopardy of trading 
lower.  We do expect the $77.00-78.00 level to act as support so 
we're going to raise our stop loss to $76.90. 

Picked on August 24th at $78.05
Change since picked:     + 1.26
Earnings Date          07/21/04 (confirmed)
Average Daily Volume =      195 thousand
Chart =



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

There are no new plays this evening.  Currently our bias is for blue
chips to trade lower on the Alcoa earnings warning.  Meanwhile the
rally in chips stocks was impressive but we don't have a lot of faith
in it.  Tonight after the bell two more semiconductor companies 
warned that revenues would be lower than expected.  While we 
would normally expect this chip news to drag on technology issues 
tomorrow the positive news from Oracle that it has won its lawsuit 
to pursue its bid for rival PeopleSoft could instead put a bid under
technology or at least the software sector.  We encouraged you to 
view our watch list tonight and look for new plays in this weekend's 
newsletter.


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

Intl Rectifier - IRF - close: 33.14 chg: +1.75 stop: 35.01

Ouch!  Yesterday TXN gave their mid-quarter update and if 
anything it was bearish and at best mixed but investors found 
something they liked and TXN lead the SOX semiconductor index 
into a major bounce.  As the day wore on it appeared more and 
more to be short covering after the SOX's ten-week decline.  So 
now the question is will there be any follow through on the 
bounce or is this just a one-day spike?  We're certainly not 
happy with the five percent surge in shares of IRF but the 
overall trend is still very bearish.  We'd watch the $34.00 level 
for resistance.  Aggressive traders can use a failed rally under 
$34.00 as a new entry point to buy puts.  

Picked on September 5th at $32.18 
Change since picked:       + 0.96
Earnings Date            07/29/04 (confirmed)
Average Daily Volume =        1.3 million 
Chart =


---

Invitrogen - IVGN - close: 51.10 change: +2.23 stop: 51.51

IVGN is practicing its whipsaws!  Tuesday and Wednesday performed 
a nice little failed rally near $51.00 and a follow through under 
the $50 and $49 levels to trigger us at $48.95.  Today the stock 
has completely reversed itself.  The morning bounce was 
acceptable because the market itself was bullish.  However, 
shares of IVGN began to soar in the last 45 minutes of trading on 
strong volume.  If we didn't know better there looks like some 
piece of news may be out but we cant' find it.  Needless to say 
we are not suggesting new put plays at this time and expect to be 
stopped out at $51.51 if shares don't reverse soon.

Picked on September 8th at $48.95
Change since picked:       + 2.15
Earnings Date            07/21/04 (confirmed)
Average Daily Volume =        1.3 million 
Chart =


---

Lexmark Intl - LXK - close: 84.66 chg: +0.92 stop: 86.01     

Ugh!  Options live by volatility and die by volatility.  LXK is 
still climbing in its oversold bounce but today shares were given 
a little boost from Merrill Lynch.  The firm believes LXK may be 
a defensive play inside the tech sector.  Fortunately for the 
bears the $85.00 level and its exponential 200-dma held as 
overhead resistance.  This may prove to be a new entry point for 
puts but be very careful and watch the GHA hardware index.  Right 
now LXK is in the process of building a higher-low and we want to 
see a new relative low.

Picked on September 5th at $86.10
Change since picked:       - 1.44
Earnings Date            07/19/04 (confirmed)
Average Daily Volume =        1.2 million 
Chart =


---

Mercury Interactive - MERQ - cls: 32.68 chg: -0.39 stop: 35.01

Well that didn't take long.  Last night we added MERQ to the play 
list as a put candidate with a trigger to buy puts if shares 
break support at $32.75 and $32.50 to hit our entry point at 
$32.49.  MERQ hit our entry pretty early in the session and when 
the afternoon bounce appeared it failed to break back above the 
$33.00 level.  The lack of participation in today's tech stock 
rally is good news for the bears.  The MACD has produce a new 
"sell" signal but only by the smallest margins.  If MERQ bounces 
look for resistance near $34.00.

Picked on September 09 at $32.49
Change since picked:      + 0.19
Earnings Date           07/21/04 (confirmed)
Average Daily Volume =       2.8 million 
Chart =


---

MicroStrategy - MSTR - close: 35.14 chg: +1.09 stop: 36.01

Uh-oh!  We may be in trouble with MSTR.  The stock is beginning 
to crack the upper boundary of its descending channel and has 
closed back above the $35.00 level.  Neither event is welcome by 
the bears. Shares still have overhead resistance at $36 and its 
40 and 50-dma's but if the tech sector rallies again tomorrow we 
may be stopped out.  We are not suggesting new put plays at this 
time.  

Picked on September 5th at $33.30
Change since picked:       + 1.84
Earnings Date            07/27/04 (confirmed)
Average Daily Volume =        376 thousand
Chart =


---

SPX Corp - SPW - close: 33.65 change: +0.35 stop: 36.01*new*

Aaahh.. now there's the drop we were looking for.  SPW crashed 
through support on Wednesday as investors reacted to the news 
Tuesday night that the company's chief accounting officer was 
suddenly resigning.  Fears of accounting problems are usually 
what run through investors' heads when an executive in this 
positions suddenly leaves.  The bounce today was expected given 
the magnitude of the drop yesterday.  Look for the $35 level to 
act as new resistance.  A failed rally under $35.00 may be a new 
entry point.  We're going to lower our stop loss to $36.01.  
Astute traders will note that SPW gapped down below our entry 
point on Wednesday forcing us to enter at $35.40. 

Picked on September 08 at $35.40
Change since picked:      - 1.75
Earnings Date           08/02/04 (confirmed)
Average Daily Volume =       814 thousand
Chart =



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

None


************************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                 Thursday 09-09-2004
Copyright 2004, All rights reserved.                        3 of 3
Redistribution in any form strictly prohibited.


In Section Three:

Watch List: Oil to Fast Food and more!
Combos/Straddles: Trading Our Way Onto The Premium Couches

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

Oil to Fast Food 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.
___________________________________________________________________


Valero Energy - VLO - close: 69.76 change: +3.06

WHAT TO WATCH: Oil and oil service stocks were big winners on 
Thursday with crude oil rising more than four percent.  The 
recent up tick in both sectors got a big boost today and VLO 
managed to breakout over the $68.00 level and its simple 40 and 
100-dma's.  We like the move as it completes the rounded-bottom 
formation but VLO still has overhead resistance at the $70.00 
mark.  Most traders may feel better waiting for a breakout over 
$70 to consider bullish positions.  Yet P&F traders may not want 
to wait since the P&F chart displays the same rounded-bottom and 
a new ascending triple-top breakout buy signal with a $77 target.  

Chart=


---

YUM! Brands - YUM - close: 40.61 change: +1.28

WHAT TO WATCH: YUM, better known for its Taco Bell, Pizza Hut and 
KFC chains, was mentioned in the MarketMonitor today.  The stock 
has broken out to new all-time highs over resistance at the 
$40.00-40.50 levels.  Volume was more than double the average and 
that is a bullish sign for traders.  We'd look for a dip back to 
$40.00 and buy a bounce but be patient.  YUM doesn't usually move 
that quickly.  This may be a better covered call play.

Chart=


---

EOG Resources - EOG - close: 59.70 change: +0.80

WHAT TO WATCH: EOG is another oil/gas stock that has turned in a 
pretty strong rebound over the past two weeks.  Currently the 
stock is challenging resistance at its 40 and 50-dma's and the 
$60.00 mark.  Readers can watch EOG for a breakout over $60.00 
and target a run toward $65-66 near its highs.  However, keep in 
mind that the P&F chart is bearish but could be on its way toward 
producing a low-pole reversal.  

Chart=


---

Aetna - AET - close: 94.80 change: -0.09

WHAT TO WATCH: We've mentioned AET before.  The stock was a call 
play a few weeks ago as it broke out over the $87-88 level.  Now 
the stock has finished its recent consolidation between $92-93 
and is trying to breakout over resistance at the $95.00 level.  
We would watch for a new high over $95.50 and use it as a 
potential entry point for long plays.  Our short-term target 
would be the round-number, psychological $100 mark.  The bullish 
P&F chart is very optimistic with a $118 target.

Chart=



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

EBAY $87.91 -1.19 - We've had our eye on EBAY for a while.  
Shares have spent the last four sessions trying to breakout over 
the $90 level.  Now we're starting to see some profit taking.  
Oscillators are starting to fade and the lack of participation in 
the tech rally today could be a clue.

WFMI $82.95 +0.53 - We're still watching WFMI too.  Shares are 
nearing major resistance at $83.00 and its simple 50 and 100-
dma's directly overhead.

WMT $52.57 -0.51 - WMT is looking weak with a new trend of lower 
highs.  Shares could be headed toward support at the $50.00 
level.  This will weigh on the RLX retail index.

WWY $63.56 +0.59 - WWY is consolidating under resistance at the 
$64.00 mark.  Shares look ready to breakout.  Coincidentally the 
$64 level looks like the neckline on an inverse H&S pattern.  



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

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


****************
Combos/Straddles
****************

Trading Our Way Onto The Premium Couches

By Mike Parnos

People have a tendency to sneer at couch potatoes.  Little do they 
know.   They have no appreciation for what is fast becoming an art 
form.  CPTI students, over the last few years, have learned how to make 
their money work for them instead of them working for their money.  
It's a beautiful thing.  The word is spreading in the option trading 
community about the continued success of the Couch Potato Trading 
Institute.  

I don't know that we've set any records -- yet, but some fellow couch 
potatoes have gotten the attention of the folks at Guinness World 
Records.  Two teenage couch potatoes, in Grand Rapids, MI, have watched 
into the record books as they logged 52 consecutive hours of TV viewing 
time – easily beating the previous record of 50 hours.  (Yes, they were 
allowed bathroom breaks.  But, no sleeping was allowed).

Guinness may have been impressed, but I'm not.  I know CPTI students 
that can put on Iron Condors and not budge from the couch for a week.  
With a few months intensive training, we can turn a directional trader 
(with a modicum of common sense, of course) into a couch potato 
qualified to compete in the couch potato event in the 2008 Olympics.  
We couldn't do any worse than the US basketball team.

In the meantime, our CPTI portfolio looks to be in pretty good shape.  
Thus far, we've been able to withstand a market run-up.  It seems that 
the market is settling into a range with the SPX trading between 1110 
and 1125.  That would be a nice place for it to stay.  

The next few columns will be devoted to Quickies and October positions.  
We will pick up our discussion on the QQQ ITM Strangle when the smoke 
has cleared -- and after our next trip to the bank!
___________________________________________________________

Mike,
Can you please explain the QQQ? How is it calculated? What is its 
relationship to the NASDAQ?  What are the strike prices equal to on the 
index? Thank you. – Josh

Dear Josh,
I looked it up. You know me.  I'm a researching fool. The Internet is a 
beautiful thing.  This is as good an explanation as I could find.   The 
Nasdaq-100 Index Tracking Stock (QQQ) began trading in March 1999 on 
the American Stock Exchange (AMEX).  It represents a share in the 100 
companies that make up the Nasdaq 100 Index (NDX). Actually, the QQQs 
represent an investment in the Nasdaq-100 Trust, a unit investment 
trust that holds shares of the companies in the NDX.   It is priced to 
be approximately 1/40th of the NDX.  As you know, the QQQs are traded 
just like any stock and have options just like normal stocks. 

The QQQs are popular amongst stock traders because they have an 
exemption when it comes to shorting the stock.   Equities, in general, 
cannot be shorted on a downtick. A downtick is a downward price 
movement for a security transaction compared to the preceding 
transaction on the same security. However, traders are permitted to 
short the Nasdaq-100 Trust (QQQ) on downticks.   

The QQQs trade about 100,000,000 shares every trading day.  The options 
also trade a huge volume of contracts.  Why?   The QQQs tends to 
attract bearish (or pessimistic) investors – also investors (individual 
and institutional) that want to hedge other long or short positions – 
using either QQQ stock or QQQ options.
____________________________________________________________

SEPTEMBER CPTI POSITIONS
September Position #1 – SPX Iron Condor – 1118.38
The SPX has become our favorite index.  The premiums are respectable.  
The spreads are wide enough to do a little shaving, and we can create 
some huge trading ranges for safety purposes.

We sold 10 Sept. SPX 1015 puts and bought 10 September SPX 995 puts for 
a credit of about: $1.10 ($1,100).  Then we sold 10 September SPX 1140 
calls and bought 10 September SPX 1160 calls for a credit of about 
$1.40 ($1,400).  Total credit and potential profit of $2,500.  Maximum 
profit range: 1015 to 1140.  That’s a 125-point range.  It is going to 
require $20,000 in maintenance.  The return on risk will be about 
14.3%.

September Position #2 – RUT Iron Condor – 566.18
We sold 10 RUT September 500 puts and bought 10 RUT September 490 puts 
for a credit of about: $1.00 ($1,000).  Then we sold 10 RUT September 
580 calls and bought 10 RUT September 590 puts
Credit of about $1.00 ($1,150).   Total credit and profit potential of 
$2,000.  It’s a nice size maximum profit range of 500 to 580.  The 
maintenance requirement is only $10,000.  The return on risk will 
depend on what premium you take in.  If you take in $2,000, the return 
on risk will be 25%.

September Position #3 – SPX “Sure Thing” – 1118.38
In this August cycle, our Credit Spread Boogie play is going to be 100% 
profitable.  It may have taken two months to make this money, but it 
was well worth it.  So, let's do it again.

We sold 3 September SPX 1105 calls and bought 3 September SPX 1130 
calls for a credit of about $7.00 ($2,100).  When the market moved up 
quickly, we closed out our Sept. 1105/1130 bear call spread at a cost 
of $13.90 ($4,170).  We then put on 7 contracts a bull put spread 
(1110/1085) at $6, taking in $4,200.  Our new maintenance requirement 
is $17,500.

September Position #4 – OEX Iron Condor – 543.89
This position is in response to some requests for an OEX play.

We sold 10 September OEX 505 puts and bought 10 September OEX 495 puts 
for a credit of about: $.65 ($650).  Then we sold 10 September OEX 555 
calls and bought 10 September OEX 565 calls for a credit of about $.75 
($750).

Total net credit of about $1.40 ($1,400).  Maximum profit range: 505 to 
555.  Potential return on risk of about 16%.  

ONGOING POSITIONS
QQQ ITM Strangle – Ongoing Long Term -- $34.59
We bought 10 contracts of the 2005 QQQ $39 puts and 10 contracts of the 
2005 QQQ $29 calls for a total debit of $14,300.   We make money by 
selling near term puts and calls every month.  Here’s what we’ve done 
so far:  Oct. $33 puts and Oct. $34 calls – credit of $1,900. Nov. $34 
puts and calls – credit of $1,150. Dec. $34 puts and calls – credit of 
$1,500.  Jan. $34 puts and calls – credit of $850.  Feb. $34 calls and 
$36 puts – credit of $750. Mar. $34 calls and $37 puts – credit of 
$1,150. Apr. $34 calls and $37 puts – credit of $750.  May $34 calls 
and $37 puts – credit of $800.  June $34 calls and $37 puts -- total 
net credit of $750.  We rolled out to the July $34 calls ($.20 credit) 
and $37 puts ($.60 credit) and took in a credit of $.80 ($800).  We 
rolled to the August $34 calls and $37 puts, taking in a credit of 
$900.  For the September cycle, we rolled to the Sept. $34 calls and 
$37 puts, only yielding $.45 or $450 for the cycle. Our new total 
credit is now $11,750.

Note:  We haven't included the proceeds from this long term QQQ ITM 
Strangle in our profit calculations.  It's a bonus!  And it's a great 
cash flow generating strategy.

ZERO-PLUS Strategy.  OEX – 543.89
In my Feb. 8th column, I outlined a strategy based on an initial 
investment of $100,000.  $74,000 was spent on zero coupon bonds 
maturing in seven years at a value of $100,000.  The principal $100,000 
investment is guaranteed.  We’re trading the remaining $26,000 to 
generate a "risk free" return on the original investment.
Our current position:  We own 3 OEX December 2006 540 calls @ $81 (x 
300 = $24,300).  Our cash position as of May expiration was $4,390 plus 
unused $1,700 = $6,090.  From the June option cycle, we are able to 
officially add $1,175 to our cash position – that now stands at $6,265 
As of July expiration we had a total of $7,440.  We now add the $950 
for the August expiration for a new total of $8,390.

New Zero Plus Positions For September  
September bull put spread 505/495 for credit of $.75 x 5 contracts = 
$375.  Short 555 call for credit of $1.20 x 5 = $600.  If all goes 
well, we'll be able to add $975 to our cash position as we wait for the 
market to move up – hopefully in this lifetime.
__________________________________________________________

Happy Trading! 
Remember the CPTI credo: May our remote batteries and self-discipline 
last forever, but mierde happens. Be prepared! In trading, as in life, 
it's not the cards we're dealt. It's how we play them.
   
Mike Parnos, Options Therapist and CPTI Master Strategist

 

Couch Potato Trading Institute Disclaimer
All results reported in this section are hypothetical. While the 
numbers represented here may have been achieved or beaten by our 
readers, we make no representation that any individual investor 
achieved these exact results. The tracking for the plays listed in this 
section uses closing prices for the day the newsletter is published and 
it is not meant to imply that any reader actually received those prices 
or participated in these recommendations. The portfolio represented 
here is hypothetical and for investment education purposes only. It is 
only an illustration of what type of gains a knowledgeable investor 
might receive utilizing these strategies.


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