The Option Investor Newsletter Sunday 09-12-2004 Copyright 2004, All rights reserved. 1 of 5 Redistribution in any form strictly prohibited. Entire newsletter best viewed in COURIER 10 font for alignment In Section One: Wrap: Bush Wins! Futures Wrap: See Note Index Trader Wrap: TECH LIVES (some)! Editor's Plays: Hit Me! Market Sentiment: Grab Those Seatbelts Ask the Analyst: See Note Coming Events: Earnings, Splits, Economic Events Posted online for subscribers at http://www.OptionInvestor.com ****************************************************************** MARKET WRAP (view in courier font for table alignment) ***************************************************************** WE 9-10 WE 9-03 WE 8-27 WE 8-20 DOW 10313.07 + 52.87 10260.2 + 65.19 10195.0 + 84.91 +284.79 Nasdaq 1894.31 + 49.83 1844.48 - 17.61 1862.09 + 31.07 + 73.80 S&P-100 546.25 + 5.19 541.06 + 0.18 540.88 + 4.84 + 15.32 S&P-500 1123.92 + 10.29 1113.63 + 5.86 1107.77 + 9.42 + 33.55 W5000 10936.32 +115.44 10820.9 + 65.86 10755.0 +106.22 +344.09 SOX 383.61 + 25.77 357.84 - 24.50 382.34 - 3.66 + 19.35 RUT 569.91 + 13.67 556.24 + 4.57 551.67 + 3.75 + 30.53 TRAN 3224.38 + 82.53 3141.85 + 33.05 3108.80 + 17.93 +123.95 ****************************************************************** Bush Wins! by Jim Brown No, there are no newspaper headlines claiming a win before the final ballots are cast but the markets appear to already be trading on the news. With the polls showing a widening gap between Kerry and Bush the Republican market was celebrating early on Friday. At least that is what the talking heads on CNBC would have you believe. Dow Chart - Daily Nasdaq Chart - Daily SOX Chart - 60 min The economics were positive on Friday with the PPI at -0.1% well below the expected +0.2% level. Don't let that lower inflation number surprise you because falling prices on new cars was primarily the reason. The auto manufacturers are literally giving away cars to keep the production lines busy. Food prices also continued to fall with a -0.2% drop for the month. The core rate continued to rise at +1.0% and stretched the string of gains to thirteen consecutive months. This will keep the Fed on track for a continued rate hike program. International Trade reversed half of last months $8.9 billion deficit increase with a drop of -$4.9 billion in the current July report. Exports increased and imports fell with exports increasing +7.8%. Imports decreased -1.5%. Obviously falling oil prices accounted for the majority of the decrease in imports. The recent soft patch in the economy should continue to undermine imports and that should continue to help the ratios for the next several months. China is still growing at a +8% clip and we are supplying much of their raw materials and basic components which should keep our export numbers at the present level or higher. Market sentiment was also positive on Friday despite an earnings warning by Alcoa and several chip stocks. The Alcoa warning knocked the Dow back under support at 10250 with a -2.50 drop in the Dow component. The Dow rebounded and held just over 10250 until 2:15 despite several attempts to push it lower. At 2:15 a major buy program hit and pushed the index back into positive territory and back over 10300 resistance. The SOX roared out of the gate with barely even a token dip from the three chip warnings since yesterday's close. The SOX tacked on another +12 points, +3.4% to Thursday's +5% gain. The SOX closed at 383 and well above the 351 low on Wednesday. Chip analysts are scratching their heads on the rebound and wondering about the validity of their mass downgrades three days earlier. The Russell has exploded from the 520 low back on August 19th to close at 570 on Friday. Volume in the small caps has been growing daily and there appears to be no end in sight. The volume on the Nasdaq where most R2K stocks trade has risen to over 1.6B shares for the last two days and levels not seen in nearly a month. The Nasdaq has rebounded from its August low of 1751 to close just below 1900 on Friday. Much of the Nasdaq bounce this week has been related to the SOX rebound. The SOX rebound helped the Russell, which in turn helped the Nasdaq. They are all interrelated and one does not move far without the others. After the smoke cleared on Friday I sat there looking at the charts in amazement. We had expected a post Labor Day rally but not the way it was delivered. The beginning of the week was weak at best with the SOX dragging down all the techs. The Nasdaq traded in a very narrow 1850-1865 range up until noon on Thursday when the buy programs began their rapid fire launch. The Dow gapped open on Tuesday and then declined to Friday's low in an exact reversal of the Nasdaq move. Remember this chart I posted on Thursday night? Dow Chart - 15 min I explained that a break of the support at 10275 could put the Dow at risk to 10150. That support broke and the Dow traded in negative territory all day until 2:15. At 2:15 a buy program hit that added +1100 issues to the A/D line and lifted all markets. You can clearly see from the chart above that the buying was not retail activity. It was clearly a very strong buy program very similar to the one on Sept-2nd. Ok, here is the million-dollar question. Why buy? What overriding reason was there to launch a program covering 1000 different stocks on Friday afternoon before the 9/11 anniversary? There were many reasons mentioned on the various services I monitor. Oil was initially given as the primary reason. Positive comments from OPEC knocked oil off it's $44.95 high for the day and into a -$2.50 freefall. It closed at $42.65 and gave back all the gains from Thursday. That may have induced some portfolio managers to add to positions but I doubt it was reason for that major buy program. You only have to look at the oil volatility for the week to realize the gyrations in oil prices did not translate into stock prices. Oil Chart - 15 min Another reason given was Bush gains in the opinion polls. According to one major survey Bush now has a +9 point lead over Kerry. While the market is commonly thought of as Republican I have a hard time seeing this as a death bed conversion sort of thing. With the Dow teetering on the edge of a major drop all day why would the poll news which had been out all day suddenly prompt a major buy program? I doubt some fund manager just walked into his office from a golf outing to hear the news and then shout buy stocks into his intercom. I agree with the various surveys showing the market tracking with the ebb and flow of Bush's chances but not on an intraday basis. Other analysts suggested that the bad news for the third quarter was already priced in and traders had decided the worst was over. If this is the case then it would be contrary to most Septembers in recent memory as most late September declines come on the exact earnings weakness we are seeing now. If this was the case then why was the buying not broader and longer throughout the day? It would have been a more general sentiment and not something that could be exactly measured to the minute on the charts. Look at the chart above. It was not widespread market sentiment but only a single event. Let me repeat the question. Why would a major buy program appear late on a Friday afternoon the day before the 9/11 anniversary? I think the key to the answer is in the question. Why would Al Qaeda release a new video tape two days before the 9/11 anniversary? It is simple. They wanted to remind the world of the attack and try to exert some terrorist pressure on the world scene. They would have liked nothing better than to see our markets sell off in fear of an anniversary attack. I believe there was a market support program running on Thursday and Friday that was planned to prevent any pre-9/11 decline. Call it anything you want and put any entity you want behind it but I believe it existed. You can choose to believe or not but it does not change the facts. We saw underlying support on Thursday and every dip was met with just enough volume to prevent a Dow meltdown. The Alcoa news broke that deadlock on Friday morning. The Dow and SPX were weak all morning but every dip was met with strong order flow in the futures market. It was constantly lurking just under the bid and prevented a continuation drop from the morning gap down. For the two hours before the buy program appeared volume slowed to a crawl. The internals weakened several times but each time just enough volume appeared to prevent a dip. As the clock ticked down the selling pressure increased and a huge battle began at support. Volume increased on both sides but regardless of the amount of selling pressure the volume at bid was always just enough to maintain the status quo. I don't care how long you have been trading it does not take an Einstein to realize this was not normal activity for a September Friday. I believe the 2:15 buy program was insurance to prevent an end of day volume surge on the sell side. Instead of waiting for everybody else to pull the trigger on the sell side the best defense is a strong offense. A sharply rising market is a strong offensive move against those that might be scared to hold over the weekend. Once the massive program triggered, those already short and waiting for the end of day decline, were forced to cover and the spike became self perpetuating. An excellent chess move by whomever was orchestrating the event. Again, believe me or not, it does not matter. What matters is how we react to it for Monday. "IF" it was an artificial bounce and done for market support reasons prior to 9/11 then what happens when that support is withdrawn? Even if it was just a valid buy program from some large fund or a large asset allocation program it is just history now. Each day we get to start over with a clean slate. The excesses of the prior day are forgotten as new strategies are implemented based on millions of different variables by millions of investors. The only things constant are the long term historical trends and the current market sentiment. There are few market trends more constant than the relationship of the VIX to the markets. When the VIX is low it is time to go. When the VIX is high it is time to buy. This adage has survived years of market cycles and while it should not be used as an instant indicator of market direction it is a very valuable tool in a traders toolkit. Extreme swings normally produce the expected reaction within a very short period of time. Friday was an extreme swing day and the VXO (old VIX) set a new 52-week low. This was a climax low after four weeks of declines from the August-13th high of 20.03, which corresponded EXACTLY with the SPX low of 1060 and the Dow low of 9783. Had you been watching the VXO then and acted upon it your results over the last four weeks would have been very strong. The challenge is knowing when a high is a high and a low is a low. Those things are not normally known until several days later. The touch of a new 52-week low on Friday is a major warning signal for the bulls. In the following chart I have highlighted each time the VXO neared 14.0 over the last year. I contrasted it with the SPX. Obviously the more dramatic the move from the VXO highs to the lows the more dramatic the reversal in the SPX. VXO:SPX Chart - Daily The next chart compares the VXO to the Dow and adds the downtrend resistance since February. By comparing the VXO levels to the resistance levels on the Dow we are able to narrow our focus and predict a higher correlation of expected events. VXO:DOW Chart Adding in the VXN in comparison to the NDX chart gives us a broader view and another correlation of the same event. The VXN has only broken below 20 three times in the past year. In late June it stayed below 20 for nine consecutive days before the July-1st correction began that knocked over -200 points off the NDX and -300 points off the Nasdaq Composite. During those nine days the NDX added points but the strain was beginning to show. VXN-NDX Chart What I want to get across today is the warning signal. I am not suggesting that Monday will begin an implosion that takes us back to new lows. I am only suggesting that next week could be dangerous. Consider the facts. September is the worst month of the year followed by October which is the second worst. The majority of earnings guidance we have been seeing has been negative. The economy is going to lose billions in Q3 earnings, wages and GDP as a result of the hurricanes. It will eventually add billions more in GDP as the rebuilding effort gets underway but that will not be seen until Q4. The SOX has rebounded well above reasonable expectations and to strong resistance at 385-390. The next ten points will be more difficult. The Russell is way overextended from its +50 point rebound and at resistance at 570. The SPX has resistance dating back to January at 1125 and it closed at 1124. The Dow has resistance at 10315 and exactly where it closed on Friday. The Nasdaq has strong resistance at 1900-1925 and closed at 1894. Moving higher from here will not be easy. Not impossible but not easy. The scenario as I see it can go two ways. The Friday buy program was just another of many real efforts to get invested before the election and funds are going to disregard the historical Sep/Oct weakness. If this scenario is correct a move over 1125 on Monday will attract a lot of short covering and buyers wanting to be long before fall will have to race to chase prices. This is a very valid scenario and would result in new lows on the volatility indexes and increasing pressure in the marketplace. Eventually the volatility spring must release and it is only a question of when not if. Still we could be 100 points higher by then and buyers can't risk standing idly by and watching the train leave the station. The second scenario assumes the Friday buy program was a unique event and not something that will be repeated on Monday. The rebound on the SOX will lose traction at 385-390 and resume its decline or at least see some profit taking from the short covering bounce. This will pressure the Nasdaq and the Russell and the bubble will burst into a normal September decline. This decline will be bought aggressively once the profits are harvested. We definitely want to be long before mid October and with everyone having the same game plan that could mean early October. How much investors will ignore the October earnings cycle is still under discussion. We think we know how bad Q3 earnings will be and we hope Q3 was the end of the soft patch. However, until we begin to get Q4 guidance from the early October earnings reports the outlook is still cloudy. There are no material economic reports next week and the Fed does not meet until the following Tuesday. There is nothing to stimulate a higher move but fear of missing the train but there could be plenty of warnings to push us lower. Regardless of your market bias next week should be an exciting week in the market. Volume is increasing and large moves are possible. I hope I have accurately painted both sides of the picture and not hopelessly confused you. We are in the best four months of the year for traders and it is time to place your bets. Enter Very Passively, Exit Very Aggressively! Jim Brown ************ FUTURES WRAP ************ Futures wrap is not emailed due to the excessive number of charts. It may be read on the website at this address. http://www.OptionInvestor.com/indexes/futureswrap.asp ******************** INDEX TRADER SUMMARY ******************** TECH LIVES (some)! By Leigh Stevens lstevens@OptionInvestor.com THE BOTTOM LINE – Modestly higher before much of a correction - the slight upward momentum and consolidation of the past week, resulted in a further strong Nasdaq rally on Friday. This could be anticipated from how the indices held firm after the gains of the prior week and by only moderate bullish sentiment. I'm not looking for this market to come down much until there's more call activity. The major indices are now getting up toward more stubborn resistance and I don't see recent strength as the start of a new up leg. The S&P 100 (OEX) could end the coming week at between 545 to 550 by index option expiration before coming back down again – various technical measures suggest increasing resistance in this zone. The Nasdaq 100 (NDX) has potential to the 1440 area before much of a pullback develops boosted by the oversold rebound in the Semiconductor stocks and upside potential to 400 in the SOX Index FRIDAY'S TRADING ACTIVITY – A strong Friday rally, especially in oversold tech sectors, came as nearby crude futures dropped steeply – you recall the sharp Thursday price spike setting up the importance of Friday's action. Oil traders were looking at the threat of Hurricane Ivan to Gulf of Mexico output, tight crude-oil inventories and the potential for an OPEC output hike. However, October crude futures wound up down $1.80 a barrel (-4%) at $42.75. THE NUMBERS – The S&P 500 (SPX) gained 6 points (+0.5%) to 1,124 and was higher for the week by nearly a percent. The Dow 30 (INDU) rallied only 24 points (+0.2%) to 10,313 and 0.5% for the week – the 5th consecutive week of Dow gains. The Nasdaq Composite Index (COMP) ran up 25 points (+1.3%), closing at 1,894 – for the week the Composite was up 2.7% REPORTS, ECONOMIC & STOCK NEWS – The U.S. Labor Dept. reported that prices of U.S. wholesale goods and services fell 0.1% in August. The core producer price index which excludes volatile food and energy costs also fell 0.1%, versus expectations of gains in both measures of inflation. Commerce Department, meanwhile, said the U.S. trade deficit narrowed 8.9 percent to $50.1 billion in July, the biggest month to month fall in our trade deficit since December '01. In tech news, U.S. District Judge Vaughn Walker found late Thursday that the Department of Justice failed to prove its antitrust case against Oracle (ORCL) related to its desired takeover of PeopleSoft (PFST) – the stock jumped 10% - and ORCL rallied 5.8%. Electronic Data Systems (EDS) said it might cut as many as 20,000 jobs over the next 2 years as part of a plan to cuts costs by some $3 billion – EDS gained 3% on this news. Keeping a lid on the Dow was a nearly 8% loss in Dow component Alcoa (AA), after the company warned on Q3 earnings as falling short of Street expectations – this due to labor strike, a fire and some restructuring costs. Another Dow component, Disney (DIS) rallied 1.3% on news that CEO Michael Eisner plans to step down when his contract expires in September 2006. Have a nice retirement Michael! I mentioned the Dow Transports (TRAN) going to a new high – airline stocks posted some big gains attributed to the fall in oil prices. OTHER MARKETS – The benchmark 10-year T-note climbed 5/32 to close at 100 18/32 and yield 4.18%. The dollar fell 0.3% against the Euro (yea! – opps sorry, I'm getting euros soon on a property sale) at a New York close of $1.267. The dollar was unchanged vs. the Japanese yen at 109.52 yen. MY INDEX OUTLOOKS – S&P 500 Index (SPX) – Daily chart: 1135 is key resistance, at the down trendline, then at the prior highs around 1147. Note how SPX found support at the 200-day moving average this past week. There is a tendency for institutional support in this area, once it appears to be holding in this area. Conversely a close below this average (currently at 1114) would be a sign of technical weakness. I had measured the top end of the downtrend channel at around 1130, but have redrawn that and it happens that this intersection also comes in the same area as my upper trading band where the S&P 500 has been oversold; i.e., 2.5 – 3% above the 21-day average. Near support is at the low end of the recent range around 1114- 1115 and key technical support looks still be in the 1100 area. My sentiment indicator took a jump on Friday indicating more call activity. However, it is far from near a bearish reading. It's common for this indicator to take have at least a 1-day bearish number before there is much of correction. You'll note how the current rally began with a, actually two, bullish readings. S&P 100 Index (OEX) – Hourly chart: The 540-541 in the S&P 100 (OEX) continues to look like near technical support – the last dips on the hourly chart of course holding above the previous low around 541. As suggested in my last Index commentary, give the benefit of the doubt to where prices are headed next (after backing and filling - a consolidation) to the direction of the trend. I would note the slightly bearish RSI divergence on the hourly chart below as the recent new high was not accompanied by a new peak in the RSI. This is only minor - these type divergences being more significant on the daily chart. However, prices could break a bit and then rebound. I think the tendency will be up into the Friday expiration. I cautioned against buying new OEX call options on a "breakout" to a new high above 546 as more significant resistance comes in not far above - at 549-550 at the trendline and more importantly at the low end of the significant June top. I continue to favor exiting calls in the 550 area if reached and looking at buying puts, risking to a 553 close only if possible for you to monitor the close. By the end of the week the top end of OEX's uptrend channel will intersect in the 550 area – a good place to trap those holding puts held from lower strikes still held at the September expiration. Dow 30 (INDU) – Daily chart: We're still looking at the same downtrend channel in the Dow 30 Industrials (INDU) chart as it has been unable to achieve a bullish breakout and has stalled at the down trendline. Sometimes one index will be a tip off for the rest. INDU action is divergent to the Dow Transports (TRAN) as this sister index went to a new high. 10,350 is looking like key technical resistance: a close above this level still suggesting that prior highs in the 10,450 area could be re-tested. A weak technical picture is presented if INDU can't break out at all above its down trendline. I don't see much potential for the a move above the February high. Near technical support is at 10,200, with key lower support in the 9950 area. The Stochastic on the daily Dow chart hangs up at an overbought extreme which could go on a while like it did at the June top. This usually doesn't go on for more than a couple of weeks. Nasdaq Composite (COMP) Index – Daily: 1873, at the prior closing high was taken out and the Composite got to the 1896 area last week, the area of the last COMP peak as can be seen on the chart below. The Friday action was bullish, but not if there is an immediate pullback such as to 1850. No, the top of the recent range, and the breakout point, was at 1875 and this area should offer support if the Index is headed still higher. On target is to the "overbought" price area suggested by the upper (red) trading envelop line, around 1927. The very last top actually came when the index was not even this far extended. However, this market has got MO (momentum) and it can continue. Again, as with the S&P, would not be surprised to see the Nasdaq indices continue a bit higher this week until they reach a fully overbought condition as suggest by the RSI. After that – well, October tends to have a lot of cross currents and potential for downdrafts, especially with election news upon us the threat of a terrorist action. Nasdaq 100 (NDX) Index – Daily: The 1410 technical resistance was taken out with the strong end of week move – next resistance is looking like 1430 and with a perhaps more key area at 1440, at the 62% retracement level, the 200-day moving average and the top end of the hourly uptrend channel (not shown). I suggested on Thursday that 1420 looked like the area to exit calls and look at put positions – this is now looking like too low for an upside objective as NDX could get to 1440. The 1400 area, down to 1388-1390, looks to be key technical support. "Key" when I use the term signifying to me a level/area where penetration of it reverses a bullish or bearish chart pattern on at least on a short-term basis. Nasdaq 100 tracking Stock (QQQ) Daily: The QQQ chart pattern got more bullish with the close over 35. This suggests potential to get to the next resistance, and an area where I would short the stock, around 36. 34 is near support. As with NDX, look for the shorts to continue to get squeezed with a move higher. When they couldn't take em down the stage was set to take em up first. Watch for when the QQQ and NDX 14-day RSI gets to 65 or higher, as the Index should then be at or near a tradable top. The On Balance Indicator (OBV) was trending slightly higher last week and total daily volume with it and gave a bullish clue for the rally by week's end. Good Trading Success! ************************Advertisement********************************** Option traders, check what PreferredTrade offers: - true direct access to each option exchange - stop and stop loss online option orders - contingent option orders based on the price of the option or stock - online spread order entry for net debit or credit - fast option executions - rates as low as $1.50 per contract ($14.95 min) PreferredTrade, Inc. Call 888-889-9178 or Click http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN Member NYSE, Other Principal Exchanges, NFA, MSRB and SIPC *********************************************************************** ************** Editor's Plays ************** Hit Me! The game is Blackjack. The dealer is down to 10 cards and there are 8 face cards left in the deck. You have an 11 showing. The odds are grossly in your favor but as we all know there is still that element of risk. That risk bit us on Friday with the DJX put but it does not mean we are going to roll over and play dead. The VXN, Nasdaq volatility index, closed Friday at 19.56 and only a couple of ticks above the all time closing low of 18.98 from June-22nd. The odds are very good we are going to drop next week but there is still that element of risk. The VXN is a measure of volatility of the NDX. The NDX is the parent index for the QQQ. Do you see where I am going? The QQQ closed at a two month high on Friday at 35.12. The September $35 put closed at 25 cents. A drop to $34 would quadruple that 25 cents into $1.00. The October $34 put was only 45 cents and a drop to $34 would nearly double it to 85 cents. The clear bet for me is the Sept $35 Put at 25 cents, maybe less on Monday morning. That gives us four days for the VXN reaction to appear. This is just a lottery play and I am not going to provide a lot of fancy reasons to play. It is a total roll of the dice based on the extreme low swing of the VXN. You pay your money and take your chances. Buy Put Sep $35 Put QQQ-UI @ 25 cents or less OR Buy Put Oct $34 Put QAV-VH @ 45 cents or less QQQ Chart VXN:QQQ Comparison Chart ********************** DJX Put Update $103.13 The play was going according to the plan until 2:15 Friday afternoon. We got the bounce on Tuesday all the way to our 103.50 trigger point for the third contract. Had you executed according to the posted schedule you would currently have three contracts at these prices. Tuesday open @ 40 cents Touch of 10300 @ 35 cents Touch of 10350 @ 35 cents Average price for 3 contracts = 37 cents. Because of the Tuesday gap open we did not get the spread I expected. The rally on Friday may have killed us. Using September options we have no room for error or time for the DJX to return to its previous levels. We need it to move quickly and short of a miracle I do not see it now. As of noon on Friday the DJV-UX put option was holding right at out entry level with the Dow at 10250. The spike to 10315 at the close cut the options in half with only a week to go. Heck of a place for a major buy program. I would suggest closing the play on Monday on any Dow strength. Resistance if strong at 10315-10350 but time is working against us. Watch for a roll over at the open and bail on any bullishness. If we do get a failure I would watch the play closely and close not later than Wednesday unless we are well into the money. We should look to cut our losses now instead of trying to make a profit. Consider anything over 30 cents a break even and exit. DJX Chart http://members.OptionInvestor.com/editorplays/edply_090504_1.asp ********************** PVN Call Update $15.16 http://members.OptionInvestor.com/editorplays/edply_061304_1.asp ********************** GOOG Put Update $105.33 There was some unusual activity in Google on Friday with a +3 point spike to $105 on heavy volume. Fidelity filed papers with the SEC showing they had a 5.2 million share stake in Google. How they got them or how much they paid is still unknown. This amounts to 15.5% of the current stock available to trade. With Fidelity showing this much confidence in Google it obviously attracted some of those previously too cautious to participate. We have to expect some volatility in the stock as a new issue and especially one with such low float. Our March $100 put should weather the test of time. Google Chart http://members.OptionInvestor.com/editorplays/edply_082904_1.asp http://members.OptionInvestor.com/editorplays/edply_090504_1.asp ********************** **************** MARKET SENTIMENT **************** Grab Those Seatbelts! - J. Brown Hold on to your hats! September 2004 is ready to move. The question is which way? Will the markets ignore September's historical weakness based on falling oil prices, improving economic data and new confidence that the incumbent will win the White House? Or will historical trends reassert themselves thus proving this past week to be nothing but a big bull trap? Therein lies the true question. Unfortunately, we have a lot of conflicting data points. If you're feeling bullish, and many of you are, then the recent breakouts this past week are pretty exciting. Check out some of these moves: The SOX semiconductor index has led the pack with an 8.8 percent rally in the last two days. Most believe this is panicked short covering that won't last but we'll see. The chips have inspired the rest of the tech sector to new relative highs. The NWX networking index has climbed through resistance at 220 and its simple 50-dma. The GHA hardware index has bust through resistance at 240 and its simple 200-dma. The INX Internet index has pushed through resistance at 170 and its simple 50-dma. Last and certainly not least the GSO Software index has soared through resistance at 135 and its simple 50-dma. Want more? The OIX oil index and OSX oil service indices are at new all-time highs and new three-year highs respectively, despite the drop in crude oil Friday. The UTY utility index and XNG natural gas index are not far behind with both near new two-year highs. Plus, the DFI defense index is resting near new all-time highs. Yes, it has definitely been a bullish week. But it's been bullish for several weeks in a row. Many of these sectors are now moving into their third, fourth even fifth week of gains. That's usually when the rallies start to fade and we can encounter some steep profit taking. Even the S&P 500 index is in its fourth (actually fifth) week of consecutive gains. Should we really be planning new bullish positions now or should we be looking to lock in gains? This would be a good spot to discuss the volatility indices, investor sentiment and spotting market tops and bottoms. However, Jim has down such a great job in this weekend's market wrap I'll just point you to his commentary. http://members.OptionInvestor.com/MarketWrap/mw_091204_1.ASP I will admit that with all the bullish breakouts and the market's ability to shrug off the Alcoa earnings warning and several chip stock warnings that it would be easy to feel more enthusiastic here. Plus, the recent round of economic news was positive and lifts investor sentiment toward a more stable economy. However, and you knew there was a however, I am not at all convinced that we'll avoid the traditional September weakness. With the amount of earnings warnings we've already seen we'll certainly hear more. Plus, the volatility indices are seriously suggesting we're at a new top. Plus, the COT data below shows that commercial traders or so called "smart money" have been steadily growing more bearish on the S&P 500 (check the e-mini data). Looking ahead we can remain bullish short-term. The Stock Trader's Almanac reports that the Monday before September's triple-witching option expiration Friday (actually it's quadruple witching now with single stock futures) has been up 9 out of the last 13 years. That's the good news. Yet by Friday history turns bearish with the markets down on expiration Friday 8 out of the last 13 years. ----------------------------------------------------------------- Market Averages DJIA ($INDU) 52-week High: 10753 52-week Low : 9230 Current : 10313 Moving Averages: (Simple) 10-dma: 10232 50-dma: 10120 200-dma: 10274 S&P 500 ($SPX) 52-week High: 1163 52-week Low : 990 Current : 1123 Moving Averages: (Simple) 10-dma: 1112 50-dma: 1099 200-dma: 1114 Nasdaq-100 ($NDX) 52-week High: 1559 52-week Low : 1301 Current : 1413 Moving Averages: (Simple) 10-dma: 1383 50-dma: 1385 200-dma: 1440 ----------------------------------------------------------------- CBOE Market Volatility Index (VIX) = 13.76 -0.25 CBOE Mkt Volatility old VIX (VXO) = 13.48 -0.27 Nasdaq Volatility Index (VXN) = 19.56 -1.02 ----------------------------------------------------------------- Put/Call Ratio Call Volume Put Volume Total 0.89 688,108 609,139 Equity Only 0.61 573,043 351,284 OEX 1.43 22,576 32,353 QQQ 1.09 44,880 48,879 ----------------------------------------------------------------- Bullish Percent Data Current Change Status NYSE 59.1 + 0.4 Bear Confirmed NASDAQ-100 39.0 + 1.0 Bull Alert Dow Indust. 56.6 + 0 Bear Correction S&P 500 57.0 + 0.4 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: 1.12 21-dma: 1.05 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 1613 1891 Decliners 1178 1084 New Highs 128 94 New Lows 13 35 Up Volume 1024M 1326M Down Vol. 502M 259M Total Vol. 1535M 1602M M = millions ----------------------------------------------------------------- Commitments Of Traders Report: 09/07/04 Weekly COT report discloses positions held by small specs and commercial traders of index futures contracts at the Chicago Mercantile Exchange and Chicago Board of Trade. COT data can be found at www.cftc.gov. Small specs are the general trading public with commercials being financial institutions. Commercials are historically on the correct side of future trend changes while small specs tend to be wrong. S&P 500 Commercial traders did add to positions during the most recent week of data but there was zero change in their slightly bearish bias. Meanwhile small traders also added to both their longs and shorts and scaled back their bullish attitude just a bit. Commercials Long Short Net % Of OI 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%) 09/07/04 415,952 426,342 (10,390) (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 08/17/04 138,550 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% 09/07/04 157,732 130,817 26,915 9.3% Most bearish reading of the year: (1,657)- 5/27/03 Most bullish reading of the year: 114,510 - 3/26/02 E-MINI S&P 500 We're starting to see some big numbers line up on the short side from the commercial traders. This is not good news for the S&P 500 as the "smart money" grow more bearish on the market. Naturally small traders are walking the opposite direction by increasing their longs and bullish stance. This sort of tug-o-war usually ends up with the small trader losing. Commercials Long Short Net % Of OI 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%) 09/07/04 371,111 600,593 (229,482) (23.6%) 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 08/17/04 192,939 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% 09/07/04 286,194 80,075 206,119 56.2% Most bearish reading of the year: (77,385) - 09/02/03 Most bullish reading of the year: 449,310 - 06/10/03 NASDAQ-100 Surprisingly the commercial trader added to his or her long positions and increased their bullish bias a tad. Small traders also added to their longs but the jump in short positions decreased the overall bullishness. Commercials Long Short Net % of OI 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% 09/07/04 51,814 44,179 7,635 7.9% 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 08/17/04 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% 09/07/04 16,817 12,561 4,256 14.5% Most bearish reading of the year: (20,270) - 06/01/04 Most bullish reading of the year: 19,088 - 01/21/02 DOW JONES INDUSTRIAL Commercial traders are still asleep here for the Industrials with very little movement. Meanwhile small traders are growing more bearish on the average. Commercials Long Short Net % of OI 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% 09/07/04 29,128 24,011 5,117 9.6% 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 08/17/04 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%) 09/07/07 5,041 8,656 (3,615) (26.4%) Most bearish reading of the year: (12,106) - 3/09/04 Most bullish reading of the year: 8,523 - 8/26/03 ************************Advertisement********************************* Option Traders: Pay Attention Use the online options trading system built by option traders for options traders. Featuring direct access to each option exchange, stop and stop loss option orders, contingent option orders, online spreads, fast executions, and rates as low as $1.50 per contract ($14.95 min.). PreferredTrade, Inc. Call 888-889-9178 or Click http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN Member NYSE, Other Principal Exchanges, NFA, MSRB and SIPC ******************************************************************** *************** ASK THE ANALYST *************** Editor's note: Sorry but there is no "Ask the Analyst" column this weekend. Jeff Bailey is on a much needed vacation and will return Tuesday. Thank you. ************* COMING EVENTS ************* ----------------- Earnings Calendar ----------------- Symbol Co Date Comment EPS Est ------------------------- MONDAY ------------------------------- CBP Campbell Soup Mon, Sep 13 ---- N/A ---- 0.18 CKR CKE Restaurants Mon, Sep 13 Before the bell 0.20 SKY Skyline Mon, Sep 13 ---- N/A ---- n/a ------------------------- TUESDAY ------------------------------ IDR Intrawest Tue, Sep 14 ---- N/A ---- -0.21 ORCL Oracle Tue, Sep 14 After the close 0.09 PIR Pier 1 Imports Inc. Tue, Sep 14 Before the bell 0.11 POSS Possis Medical Tue, Sep 14 After the close 0.18 KR The Kroger Co. Tue, Sep 14 Before the bell 0.27 V Vivendi Universal Tue, Sep 14 ---- N/A ---- n/a ------------------------ WEDNESDAY ----------------------------- AXA AXA Wed, Sep 15 ---- N/A ---- n/a BBY Best Buy Co. Wed, Sep 15 Before the bell 0.51 BRC Brady Corp Wed, Sep 15 Before the bell 0.53 CLC CLARCOR Inc Wed, Sep 15 Before the bell 0.63 MLHR Herman Miller Wed, Sep 15 After the close 0.20 SKYE SkyePharma Wed, Sep 15 During the market n/a ------------------------- THUSDAY ----------------------------- COMS 3Com Corp Thr, Sep 16 After the close -0.07 CHTT Chattem Inc Thr, Sep 16 After the close 0.45 CTAS Cinas Inc Thr, Sep 16 After the close 0.42 PRGS Progress Software Thr, Sep 16 ---- N/A ---- 0.24 TEK Tektronix Inc Thr, Sep 16 After the close 0.30 VRTY Verity Thr, Sep 16 After the close 0.07 ------------------------- FRIDAY ------------------------------- BMET Biomet Fri, Sep 17 Before the bell 0.35 CC Circuit City Fri, Sep 17 Before the bell -0.11 VE Veolia Environment Fri, Sep 17 ---- N/A ---- n/a ---------------------------------------------- Upcoming Stock Splits In The Next Two Weeks... ---------------------------------------------- Symbol Company Name Ratio Payable Executable BLL Ball Corp 2:1 Sep 15th Sep 16th SF Stifel Financial 4:3 Sep 15th Sep 16th AMWD American Woodmark 2:1 Sep 24th Sep 27th LM Legg Mason Inc 3:2 Sep 24th Sep 27th CATY Cathay General Bancorp 2:1 Sep 28th Sep 29th WST West Pharma 2:1 Sep 29th Sep 30th NPBC National Penn 5:4 Sep 30th Oct 1st -------------------------- Economic Reports This Week -------------------------- We're just a little over a week away from the FOMC's next meeting. Economic data will continue to play an important role. We'll see three Fed manufacturing survey's this week plus the CPI report on Friday. Look for earnings from ORCL, V, and BBY this week. ============================================================== -For- ---------------- Monday, 09/13/04 ---------------- Kansas City Fed Mfg Index for August Monthly Treasury Budget statement for August ----------------- Tuesday, 09/14/04 ----------------- Richmond Fed Mfg Index for August Retail Sales for August ------------------- Wednesday, 09/15/04 ------------------- NY Empire State Mfg Index for Sep. Business Inventories for July Industrial Production for August Capacity Utilization for August ------------------ Thursday, 09/16/04 ------------------ Consumer Price Index (CPI) for August Core CPI (minus food & energy) for August Philly Fed Index for September Weekly Initial Jobless Claims - last reading was 319,000 SEMI Book-to-Bill numbers. ---------------- Friday, 09/17/04 ---------------- Michigan Sentiment/Consumer confidence (preliminary) September Option Expiration Friday Definitions: DM= During the Market BB= Before the Bell AB= After the Bell NA= Not Available ************************Advertisement************************* Full Service Brokers Man Financial announces the formation of the OneStopOption Brokerage Group, addressing the demand for personalized, experienced service for both securities* and futures trading within the same firm. 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 Sunday 09-12-2004 Sunday 2 of 5 In Section Two: Watch List: SYMC, GIVN, MGA, KMB Dropped Calls: None Dropped Puts: IVGN, MERQ, MSTR ************************Advertisement************************* Live Securities Brokerage Service with Licensed Option Principals OCO Stop & Profit Orders OneStopOption All types of Spreads and Buy Writes 888-281-9569 Auto-Trade Market Monitor Signals Personal Service and Education **Services available for Foreign Traders including Canada** http://www.OneStopOption.com ************************************************************** ********** Watch List ********** Paper products to Auto Parts 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. ___________________________________________________________________ Kimberly Clark - KMB - close: 67.03 change: -0.04 WHAT TO WATCH: If you're looking for a defensive play in this market KMB might be it. The paper-products maker recently broke out over major resistance in the $66-67 range to hit new four- year highs. The pull back looks like normal profit taking. Granted the technical oscillators don't look to hot here so we'd watch for a bounce back over $67.50 or $68.00. The P&F chart is bullish with a triple-top breakout buy signal and an $84 target. Chart= --- Magna Intl - MGA - close: 70.67 change: -2.99 WHAT TO WATCH: Ouch! MGA fell more than four percent on very big volume this Friday. It looks like the stock was trading lower in sympathy with fell auto parts producer Visteon (VC). VC dropped more than 11 percent after warning that earnings would be hit because they overestimated how many cars Ford would produce. Looks like investors are worried that MGA may have also made the same mistake. The breakdown under $74.00 is bad news but the stock is nearing major support at $70.00. This is round-number, psychological support on the daily chart and rising support on the P&F chart. It wouldn't surprise us to see a bounce at $70 but a breakdown would be very bearish. Chart= --- Given Imaging Ltd - GIVN - close: 36.80 change: -1.24 WHAT TO WATCH: Makers of the PillCam(r), GIVN appears to be in the process of producing a bearish reversal. The stock tried to breakout through the top of its trading range and resistance at $40.00 several days ago and failed. GIVN briefly traded over the $40 mark today and was immediately hit with selling, lots of it. The stock ended under short-term support at $38.00 and its simple 10-dma. This looks like a great failed-rally entry point for bearish plays. We'd target the bottom of the trading range near $31-30. The only thing holding us back was the bullish P&F chart. Chart= --- Symantec - SYMC - close: 50.84 change: +1.53 WHAT TO WATCH: The ORCL-PSFT news sent the GSO software index soaring for a 3.7 percent gain. This helped lift SYMC through tough resistance at the round-number, psychological $50.00 mark. There was an intraday dip and bulls rushed in to buy SYMC at $50 again. The P&F chart is bullish with a $72.00 target. We'd be more realistic with a $55.00 target but consider a relatively tight stop. 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 ************************************************************** ************************** PICKS WE DROPPED THIS WEEK ************************** Remember that historically, when we drop a pick it will go up 10 to 15% the very next week. It is part of Murphy's Law. Just because we drop a stock as a pick does not mean we are advocating a "sell" on any position you have. We are simply dropping our recommendation as a new play. Existing plays can and do continue on and are usually profitable. CALLS ^^^^^ None PUTS ^^^^ Invitrogen - IVGN - close: 51.91 change: +0.81 stop: 51.51 Evidently there wasn't any news behind the sudden rush higher on Thursday. Unless you call massive short covering news. The BTK biotech index managed a decent bounce the past two sessions despite very bearish trading in AMGN, its biggest component. IVGN has traded back up and through the $50.00 level and its descending trendline of lower highs to stop us out at $51.51. Picked on September 8th at $48.95 Change since picked: + 2.96 Earnings Date 07/21/04 (confirmed) Average Daily Volume = 1.3 million Chart = --- Mercury Interactive - MERQ - cls: 35.14 chg: +2.46 stop: 35.01 Ouch! That ORCL-PSFT news came at exactly the wrong time! MERQ had just broken down to a new low and its MACD was right at a new "sell" signal. Then suddenly the software sector explodes higher on speculation after ORCL won its lawsuit to pursue an acquisition of smaller rival PSFT. MERQ skyrocketed more than 7.5 percent and tagged our stop loss at $35.01. We don't think this is a sustainable rally but we're stopped out nonetheless. Picked on September 09 at $32.49 Change since picked: + 2.65 Earnings Date 07/21/04 (confirmed) Average Daily Volume = 2.8 million Chart = --- MicroStrategy - MSTR - close: 37.10 chg: +1.96 stop: 36.01 Double-Ouch! On Thursday we knew we were in trouble with MSTR because shares had pushed through the top of its descending channel and the $35.00 level. But the ORCL-PSFT news just poured salt in the wound as MSTR vaulted higher with a 5.5 percent gain. We've been stopped out at $36.01. Picked on September 5th at $33.30 Change since picked: + 3.80 Earnings Date 07/27/04 (confirmed) Average Daily Volume = 376 thousand Chart = *********** DEFINITIONS *********** OI = Open Interest - the number of open contracts outstanding. Last Trade @ = Indicates where the option traded last. ITM = In the money ATM = At the money OTM = Out of the money ADV = Average Daily Volume The options with a "*" by the strike price are our choices from the group. If the stock moves as expected we feel they have the best chance to substantially increase or double in price with the best risk/reward ratio compared to the other options for the same stock. You must determine if they fit your risk profile for time and price. RISKS of SELLING PUTS: The risk of selling naked puts is always the possibility of a catastrophic event that drops the stock below the strike price and could result in the stock being PUT to you. Always protect yourself with a "buy to cover" limit order to take you out before this can happen. ************************Advertisement************************* Stock Option and Futures Brokerage OneStopOption teams the best trading technology with varying levels of professional assistance at very competitive prices. Commission costs are comparable to discount brokerage and tailored to individual customer needs. The power of one brokerage group with experience and expertise in the Securities* and Futures Markets offers unprecedented convenience for traders. Access To All Futures Markets Toll Free 888-281-9569 Stock Option Principals www.OneStopOption.com ************************************************************** ********** DISCLAIMER ********** Please read our disclaimer at: http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html ************************************************************** ADVERTISING INFORMATION For more information on advertising in OptionInvestor Newsletter, or any Premier Investor Network newsletter please contact: Contact Support
The Option Investor Newsletter Sunday 09-12-2004 Sunday 3 of 5 In Section Three: Current Calls: AHC, BOL, FMC, PD, RAI, TDS New Calls: None Current Puts: IRF, LXK, SPW New Puts: APOL, FFH ************************Advertisement************************* OneStopOption.com Trade: Securities, Stock Options, Futures Contracts Service: Experienced Brokers Personal Assistance Convenience of One Brokerage Online and Live Broker Trading Experience... The Difference OneStopOption.com 888-281-9569 *************************************************************** ****************** CURRENT CALL PLAYS ****************** Amerada Hess - AHC - close: 81.98 chg: -0.68 stop: 79.00 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: Hmm... all we can say about AHC right now is that shares are acting peculiar. The oil and oil services sector both saw some gains and losses this week but both kept their bullish uptrends alive. Crude oil wasn't so lucky and has been trading sideways with a lot of volatility. That's exactly what AHC is not doing. Shares of AHC have shuffled sideways in a $1.30 range for the last six sessions. The sideways jaunt is killing any upward momentum for AHC and its technical oscillators are starting to roll over. Normally that's a warning sign. Cautious traders may indeed want to exit here. We are willing to hold on to AHC for now and should the stock see a dip we'd look for support at $80. Buying a bounce from $80 would seem like a tempting bullish entry but make sure the OIX and OSX are bouncing with you. Suggested Options: We like the October and November strikes. Our favorites would be the 80s and 85s. Keep in mind this is a tough spot to consider new positions. Look for a bounce from $80-81 as an entry. !Alert - September options EXPIRE this Friday! BUY CALL OCT 80 AHC-JP OI=261 current ask $3.80 BUY CALL OCT 85 AHC-JQ OI=361 current ask $1.40 BUY CALL NOV 80 AHC-KP OI=1316 current ask $5.00 BUY CALL NOV 85 AHC-KQ OI= 835 current ask $2.65 Annotated Chart: Picked on August 31st at $80.50 Change since picked: + 1.48 Earnings Date 07/28/04 (confirmed) Average Daily Volume = 1.0 million Chart = --- Bausch Lomb - BOL - close: 67.83 change: -0.57 stop: 64.75 Company Description: Bausch & Lomb is the eye health company, dedicated to perfecting vision and enhancing life for consumers around the world. Its core businesses include soft and rigid gas permeable contact lenses and lens care products, and ophthalmic surgical and pharmaceutical products. The Bausch & Lomb name is one of the best known and most respected healthcare brands in the world. Celebrating its 150th anniversary, the Company is headquartered in Rochester, New York. Bausch & Lomb's 2003 revenues were $2.0 billion; it employs approximately 11,500 people worldwide and its products are available in more than 100 countries. (source: company press release) Why We Like It: Our bullish technical breakout play in BOL is turning into a decent relative strength play too. BOL has avoided some of the market volatility lately and continued its steady climb higher. This of course has the chart looking a little overbought with BOL up four out of the last five weeks but volume has been strong on the rallies higher and that's encouraging for the bulls. Short- term traders can use the simple 10-dma as support and potential entry points. Right now we expect the $66.00 level to offer the first level of support with stronger support at $65.00. We're still considering a short-term exit near $70.00 but its bullish P&F chart points to an $89 target. Suggested Options: We're turning cautious on most of our bullish plays but if BOL can hold up we like the October calls. !Alert - September options EXPIRE this Friday! BUY CALL OCT 65 BOL-JM OI=595 current ask $4.10 BUY CALL OCT 70 BOL-JN OI= 97 current ask $1.25 Annotated Chart: Picked on September 01 at $66.51 Change since picked: + 1.32 Earnings Date 07/29/04 (confirmed) Average Daily Volume = 397 thousand Chart = --- F M C Corp - FMC - close: 47.00 change: -0.49 stop: 44.90 Company Description: FMC Corporation is a diversified chemical company serving agricultural, industrial and consumer markets globally for more than a century with innovative solutions, applications and quality products. The company employs approximately 5,300 people throughout the world. The company operates its businesses in three segments: Agricultural Products, Specialty Chemicals and Industrial Chemicals. (source: company press release) Why We Like It: We were pretty encouraged on Thursday as FMC rallied to new six- year highs. Unfortunately, UBS was not as enthusiastic. The Wall Street firm downgraded several of the larger chemical stocks in the sector on Friday morning. FMC was downgraded to a neutral. The analyst at UBS felt that valuations have become too high for the group. Reaction in shares of FMC was initially bearish as expected and shares gapped lower. Yet traders stepped in and bought the dip at the $46.00 level and by the close of trading had significantly reduced FMC's losses for the session. Now we've been somewhat cautious on FMC lately and the downgrade doesn't help but Friday's reaction to the news is positive. We are a little worried about FMC's technical oscillators as most of them look overbought and tired. We'd be willing to consider new positions here but a tight stop would be in order. Suggested Options: Option volume is pretty sparse except near the ATM strikes. We like the October 45s. If you're feeling daring the October 50s work but there is no current open interest. !Alert - September options EXPIRE this Friday! BUY CALL OCT 40 FMC-JH OI=400 current ask $7.40 BUY CALL OCT 45 FMC-JI OI=960 current ask $3.10 BUY CALL OCT 50 FMC-JJ OI= 81 current ask $0.75 Annotated chart: Picked on August 24 at $45.87 Change since picked: + 1.13 Earnings Date 07/27/04 (confirmed) Average Daily Volume = 265 thousand Chart = --- Phelps Dodge - PD - close: 84.49 chg: -0.44 stop: 79.95 Company Description: Phelps Dodge Corp. is the world's second-largest producer of copper, a world leader in the production of molybdenum, the largest producer of molybdenum-based chemicals and continuous- cast copper rod, and among the leading producers of magnet wire and carbon black. The company and its two divisions, Phelps Dodge Mining Co. and Phelps Dodge Industries, employ more than 13,500 people in 27 countries. (source: company press release) Why We Like It: We initially added PD to the play list both for its technical breakout over $80.00 on its daily chart and its triple-top breakout on its P&F chart and its strong fundamentals of earnings and demand for its product. Oh and a little news about a potential labor strike at one of the Peruvian mines operated by one of PD's rivals. None of the above has changed except that the strike didn't occur or was quickly appeased and its P&F bullish target has grown to $102. Since then we've seen PD slowly climb higher while retesting the $80.00 level as support. The stock has spent the last couple of days challenging resistance in the $85-86 region and we suspect that PD will continue to push higher, especially if copper prices can maintain their current bounce. We are going to suggest readers plan to exit in the $88.00-90.00 range and consider new entries on a dip toward $82.00-82.50. Suggested Options: We're going to suggest the October calls. The $80 and $85 strikes should work well. !Alert - September options EXPIRE this Friday! BUY CALL OCT 80 PD-JP OI=3114 current ask $6.50 BUY CALL OCT 85 PD-JQ OI=2478 current ask $3.30 Annotated Chart: Picked on August 26th at $82.10 Change since picked: + 2.39 Earnings Date 07/27/04 (confirmed) Average Daily Volume = 2.1 million Chart = --- Reynolds American - RAI - cls: 74.72 chg: +0.21 stop: 72.99 Company Description: Reynolds American Inc. is the parent company of R.J. Reynolds Tobacco Company, Santa Fe Natural Tobacco Company, Inc., Lane Limited and R.J. Reynolds Global Products, Inc. R.J. Reynolds Tobacco Company, the second- largest U.S. tobacco company, manufactures about one of every three cigarettes sold in the United States, including five of the nation's 10 best-selling brands: Camel, Winston, KOOL, Salem and Doral. Santa Fe Natural Tobacco Company, Inc. manufactures Natural American Spirit cigarettes and other tobacco products, and markets them both nationally and internationally. Lane Limited manufactures several roll-your-own, pipe tobacco and little cigar brands, and distributes Dunhill tobacco products. R.J. Reynolds Global Products, Inc. manufactures, sells and distributes American-blend cigarettes and other tobacco products to a variety of customers worldwide. (source: company press release) Why We Like It: Our relative strength-defensive play is looking a bit better today. RAI had run strongly for three weeks straight and broken out to new highs before finally hitting some profit taking this week. On Thursday we suggested watching the $74 level as important support and sure enough traders bought the dip near $74 on Friday. RAI has almost completed a 38.2 percent Fibonacci retracement of its three-week run and we suspect the low on Friday was close enough. While we were only targeting a move toward the $77.50-80.00 range this could be an entry point if you expect RAI to hit the higher boundary of our target. Be sure to keep an ear open for news. RAI is expected to give its mid- quarter update on September 15th and there is bound to be more commentary and analysis as we approach the September 21st start date for the government's racketeering case against the tobacco industry. Suggested Options: We like the October and November calls although our favorites are probably the November 70s and 75s. !Alert - September options EXPIRE this Friday! BUY CALL OCT 70 RAI-JN OI= 232 current ask $5.80 BUY CALL OCT 75 RAI-JO OI= 748 current ask $2.30 BUY CALL NOV 70 RAI-KN OI=7997 current ask $6.80 BUY CALL NOV 75 RAI-KO OI=1914 current ask $3.60 BUY CALL NOV 80 RAI-KP OI=2311 current ask $1.50 Annotated Chart: Picked on August 19 at $72.88 Change since picked: + 1.84 Earnings Date 08/02/04 (confirmed) Average Daily Volume = 1.2 million Chart = -- Telephone & Data Sys - TDS - cls: 80.25 chg: +0.94 stop: 76.90 Company Description: TDS Telecom is a growing communications company serving more than 1 million residential and business customers in small rural and suburban communities in 30 states. The company's goal is to provide the most effective communication technology and high- quality services in its chosen markets. TDS Telecom is a subsidiary of Telephone and Data Systems, Inc., a diversified telecommunications corporation founded in 1969 and a FORTUNE 500 company, that operates primarily by providing wireless and local telephone service through its strategic business units, U.S. Cellular and TDS Telecom. (source: company press release) Why We Like It: We have good news for TDS bulls. The ominous bearish reversal from Wednesday lacked any follow through and traders bought the dip under $79 on Thursday afternoon. This allowed TDS to continue to bounce higher on Friday and shares closed back above long-term resistance at the $80.00 mark. It's probably no coincidence that the low on Thursday happened just above its rising simple 10-dma. Conservative traders (who probably shouldn't be in this high risk play to begin with) may want to use the 10-dma as a guide for stops. We're going to keep our stop loss at $76.90 for now. The bounce back above the $80.00 level can be seen as a new bullish entry point but remember we are cautious on bullish plays given September's history for being a weak month in the markets. Suggested Options: The October strikes have pretty low volume so we'd suggest the Novembers but even these are low. !Alert - September options EXPIRE this Friday! BUY CALL OCT-75 TDS-JO OI= 0 current ask $6.00 BUY CALL OCT-80 TDS-JP OI=37 current ask $2.55 BUY CALL NOV-75 TDS-KO OI=105 current ask $6.80 BUY CALL NOV-80 TDS-KP OI= 40 current ask $3.50 BUY CALL NOV-85 TDS-KQ OI= 5 current ask $1.60 Annotated Chart: Picked on August 24th at $78.05 Change since picked: + 2.20 Earnings Date 07/21/04 (confirmed) Average Daily Volume = 195 thousand Chart = ************** NEW CALL PLAYS ************** ************************Advertisement********************************* Option Traders: Pay Attention Use the online options trading system built by option traders for options traders. Featuring direct access to each option exchange, stop and stop loss option orders, contingent option orders, online spreads, fast executions, and rates as low as $1.50 per contract ($14.95 min.). PreferredTrade, Inc. Call 888-889-9178 or Click http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN Member NYSE, Other Principal Exchanges, NFA, MSRB and SIPC ******************************************************************** ***************** CURRENT PUT PLAYS ***************** Intl Rectifier - IRF - close: 34.84 chg: +1.70 stop: 35.01 Company Description: International Rectifier is a world leader in power management technology. IR's analog and mixed signal ICs, advanced circuit devices, integrated power systems and components enable high performance computing and reduce energy waste from motors, the world's single largest consumer of electricity. Leading manufacturers of computers, energy efficient appliances, lighting, automobiles, satellites, aircraft and defense systems rely on IR's power management benchmarks to power their next generation products. (source: company press release) Why We Like It: This has been a very painful week for semiconductor bears. TXN's lackluster mid-quarter update somehow sparked a short covering rally that has lasted for two stinging sessions. Fortunately or unfortunately, depending on your perspective, our put play in IRF is still alive but just barely. Friday's 5 percent rally pushed IRF back above the $34.00 level and its simple 40 and 50-dma's. Yet IRF remains under the $35.00 mark and our stop loss. We don't believe this is a true bullish reversal but we've heard some suggest that the SOX has produced a bullish inverse H&S pattern with a very slanted neckline. It's tough to see it and we're not convinced the rally will last. However, we have to take what the market gives us. We'll keep our stop in place but we're going to be on the lookout for new shorts in the chip sector if stocks begin to roll over. We would not suggest new puts on IRF until shares traded back under $33.50. Suggested Options: Short-term traders can choose from October or December options. We like the October 35s and 30s. !Alert - September options EXPIRE this Friday! BUY PUT OCT 35 IRF-VG OI=365 current ask $1.95 BUY PUT OCT 30 IRF-VF OI=415 current ask $0.50 Annotated Chart: Picked on September 5th at $32.18 Change since picked: + 2.66 Earnings Date 07/29/04 (confirmed) Average Daily Volume = 1.3 million Chart = --- Lexmark Intl - LXK - close: 84.88 chg: +0.22 stop: 86.01 Company Description: Lexmark International, Inc. is a leading developer, manufacturer and supplier of printing solutions -- including laser and inkjet printers, multifunction products, associated supplies and services -- for offices and homes in more than 150 countries. Founded in 1991, Lexmark reported more than $4.8 billion in revenue in 2003. (source: company press release) Why We Like It: It was an active week for LXK. The stock crashed through support at its simple and exponential 200-dma's and the $85.00 mark on big volume after announcing a 40,000 printer recall. We new there was going to be an oversold bounce but instead of this being a one-day event the bounce has last three days due to the rebound in technology in the latter half of the week. Currently LXK is consolidating under its exponential 200-dma near the $85.00 level. We would consider this a new entry point to buy puts but we'd like to see more weakness first. Consider waiting for a drop under the $84.00 mark. Before you proceed we do want to urge caution and that you look at LXK's weekly chart. Our initial target was the $80.00 mark. We may need to change that. The weekly chart shows a long-term trendline of support and LXK bounced off it perfectly. More conservative traders may just want to step back and wait for LXK to break this trendline and then target a deeper decline. Suggested Options: Right now traders can choose from the October or January puts. We believe November strikes will be added eventually. We're going to suggest the October's. !Alert - September options EXPIRE this Friday! BUY PUT OCT 90 LXK-VR OI= 832 current ask $6.20 BUY PUT OCT 85 LXK-VQ OI=1210 current ask $3.10 BUY PUT OCT 80 LXK-VP OI=2282 current ask $1.50 Annotated Chart: Picked on September 5th at $86.10 Change since picked: - 1.22 Earnings Date 07/19/04 (confirmed) Average Daily Volume = 1.2 million Chart = --- SPX Corp - SPW - close: 33.88 change: +0.23 stop: 36.01 Company Description: SPX Corporation is a global provider of technical products and systems, industrial products and services, flow technology, cooling technologies and services, and service solutions. (source: company press release) Why We Like It: If you've been following this play then you know that SPW finally broke support at $36.00, surpassed our planned entry point at $35.75 and dropped to $32.45 on news that its chief accounting officer was suddenly resigning. Volume was huge and suggested more weakness to follow. It's common to see a small oversold bounce after such a steep drop and that's what SPW has produced Thursday and Friday. Bank of America chimed in on Thursday and reiterated their "sell" rating on SPW while also lowering their price target to $30. We happen to agree with them. The P&F chart only points to a $32 target but our original target has been the $31-30 range. We'd like to see SPW roll over under the $33.00 level. Readers should wait for more weakness before considering new positions. In the news SPW announced that one of its business units had acquired Medical Air Technology Ltd for an undisclosed sum. Suggested Options: We like the October puts. Our favorites are the $37.50s and $35s. !Alert - September options EXPIRE this Friday! BUY PUT OCT 37.50 SPW-VU OI= 125 current ask $4.10 BUY PUT OCT 35.00 SPW-VG OI=2302 current ask $2.25 BUY PUT OCT 32.50 SPW-VZ OI= 876 current ask $1.15 BUY PUT OCT 30.00 SPW-VF OI=3093 current ask $0.50 Annotated Chart: Picked on September 08 at $35.40 Change since picked: - 1.52 Earnings Date 08/02/04 (confirmed) Average Daily Volume = 814 thousand Chart = ************* NEW PUT PLAYS ************* Apollo Group - APOL - close: 80.43 change: -0.07 stop: 82.67 Company Description Apollo Group Inc. has been providing higher education programs to working adults for over 25 years. Apollo Group Inc. operates through its subsidiaries The University of Phoenix Inc., Institute for Professional Development, The College for Financial Planning Institutes Corp., and Western International University Inc. The consolidated enrollment in its educational programs makes it the largest private institution of higher education in the United States. It offers educational programs and services at 78 campuses and 133 learning centers in 38 states, Puerto Rico and Vancouver, British Columbia. Combined degree enrollment was 239,300 students as of May 31, 2004. (source: company press release) Why We Like It: Secondary education has been a tough spot to be bullish this past quarter. With scandal-induced implosions in shares of CECO and COCO the group has been hit hard with investors rotating out from these early 2004 winners. APOL is probably the most secure and best play in the group but it's not immune to investors' fears and profit taking. Over the last couple of months a few analysts covering the industry believe that business conditions have indeed taking a turn for the worst and earnings will suffer sector wide through the next few quarters. APOL was able to rebound strongly on its recent mid-quarter update because enrollment numbers look positive. Yet even now with its recent audit and review from the Dept. of Education completed and its planned expansion into Mexico, both being seen as positive events, there appears to be a lingering atmosphere of caution. We feel that APOL's recent rally is fading and now that it has closed the gap from late July it is vulnerable to more profit taking. We've already commented on its failed rally under $85.00 and its drop below the simple 50 and 200-dma's in our nightly watch lists and the MarketMonitor. We also want to note that APOL's P&F chart, while currently bullish, has produced a new lower high and is rolling over under P&F resistance. Now with its daily oscillators turning bearish and its MACD getting closer to a new "sell" signal we're going to suggest buying puts. Our plan is to use a TRIGGER at $79.50. We want APOL to break support at $80.00 and its exponential 200-dma before we open bearish plays. By waiting for APOL to hit $79.50 we should be able to accomplish this. Once triggered we'll use a stop loss at $82.67, just over Thursday's high. Our initial target will be the mid-August highs near $73.50. Suggested Options: We're going to suggest the October and November puts. Our favorites will be the $80 and $75 strikes. DOUBLE-CHECK your option symbols with your broker! BUY PUT OCT 80 OAQ-VP OI=1014 current ask $3.40 BUY PUT OCT 75 OAQ-VO OI= 829 current ask $1.70 BUY PUT NOV 80 OAQ-WP OI=1603 current ask $4.70 BUY PUT NOV 75 OAQ-WO OI=2271 current ask $2.80 Annotated Chart: Picked on September xx at $xx.xx <-- see TRIGGER Change since picked: - 0.00 Earnings Date 10/05/04 (unconfirmed) Average Daily Volume = 3.3 million Chart = FairFax Financial - FFH - close: 126.50 chg: -5.87 stop: 136.00 Company Description Fairfax Financial Holdings Limited is a financial services holding company which, through its subsidiaries, is engaged in property and casualty insurance and reinsurance, investment management and insurance claims management. (source: company press release) Why We Like It: Right off the bat we have to warn you that this is a high-risk speculative play. Volume on FFH is normally way too low for us to ever consider playing it and volume in the options isn't much better. It's also a speculative play because investors and analysts are starting to consider the "b" word as in bankruptcy. They may be premature in suggesting FFH's demise but that's never a good atmosphere for stocks to trade in, especially a high- dollar one like FFH. This of course creates headline risk should FFH come out with some convincing news that they are indeed not at risk of bankruptcy. Now the better question is why are investors and analysts worried about FFH? It would seem that the growing consensus is that the insurer is running low on cash and doesn't have enough reserves to satisfy claims. Having three hurricanes hit Florida in the last month certainly doesn't help. Now we don't believe FFH has a lot of exposure in Florida but Charley, Frances and now Ivan are affecting the whole industry. Technically FFH looks very bearish. The stock is a pillar of relative weakness and has been melting under a steady stream of lower highs as investors rotate out of the stock. Volume has been very strong the past month and its bearish P&F chart points to a $72.00 target. The other side of this coin would say that FFH is very oversold and we're too late but we suspect this is a special case and we'll continue to see FFH sink lower. Our plan is to open positions at current levels with a target in the $110- $100 range. Yet shares have been somewhat volatile so we have to use a wide stop. You will need to set your own stop according to your risk tolerance. Suggested Options: We're going to suggest the October options but Januarys are available for the longer-term trader. BUY PUT OCT 130.00 FFH-VF OI= 18 current ask $10.10 BUY PUT OCT 125.00 FFH-VE OI= 2 current ask $ 7.80 BUY PUT OCT 120.00 FFH-VD OI= 10 current ask $ 6.30 BUY PUT OCT 115.00 FFH-VC OI= 21 current ask $ 4.60 BUY PUT OCT 110.00 FFH-VB OI= 10 current ask $ 3.60 BUY PUT OCT 100.00 FFH-VT OI=378 current ask $ 2.15 Annotated Chart: Picked on September 12 at $126.50 Change since picked: - 0.00 Earnings Date 00/00/00 (confirmed) Average Daily Volume = 59 thousand Chart = ************************Advertisement********************************** Option traders, check what PreferredTrade offers: - true direct access to each option exchange - stop and stop loss online option orders - contingent option orders based on the price of the option or stock - online spread order entry for net debit or credit - fast option executions - rates as low as $1.50 per contract ($14.95 min) PreferredTrade, Inc. 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The Option Investor Newsletter Sunday 09-12-2004 Sunday 4 of 5 In Section Four: Leaps: Patiently Waiting Option Spreads: Gentlemen (& Gentlewomen) Start Your Engines -- It's Quickie Time Again ************************Advertisement************************* Full Service Brokers Man Financial announces the formation of the OneStopOption Brokerage Group, addressing the demand for personalized, experienced service for both securities* and futures trading within the same firm. Licensed Option Principals Andrew Aronson and Alan Knuckman specialize in live assistance of stock*, option* and futures traders. The combination of the proven Man Financial global presence and the convenience of one group for all trading needs provide customers with the tools needed for success. Live Broker and Online Trading Available 888-281-9569 http://www.OneStopOption.com ************************************************************** ***** LEAPS ***** Patiently Waiting Sometimes waiting for an entry point is the hardest part of trading. These last four weeks have been very hard for me. Patience is not one of my virtues. Watching the markets do the opposite of their historical norm can be very frustrating. I am still clinging to my hope that we will get a decent pullback and some decent entries on our watch list plays. If the rally survives another week I will begin taking the entries the market gives us instead of the ones I want. Keep the faith. The VXO hit a new 52-week low on Friday and the VXN is only half a point away from an all time low. Not a time to be going long on a whim. New Plays No New Plays. I do not want to add anything after the strong rebound and in front of any potential September weakness. Plenty of opportunities ahead for our watch list to mature. Portfolio Update INTC - Intel Corp $20.52 **Stop $17.00** Intel is moving off the lows from last week and it is starting to look like the $20 entry was the right place at the right time. Our patience was rewarded. The chip rally this week is overdone in my opinion but I am not expecting a major pullback. I think Intel is a safe play at this point but plan on leaving the stop low until the election. ********************** TYC - Tyco Intl. $30.50 **Stop $28.00** Tyco took a hit last week when it announced it had bought back $350 million in convertible bonds and would take an eight cent charge this quarter. The move by Tyco was to strengthen its balance sheet. There was no change in the proforma earnings that Tyco has already affirmed for the quarter. Nice to have a company that affirms earnings when everyone else is warning. Tyco lost -1.30 on the news but has firmed at the 100dma at 30.50. ********************** JNPR - Juniper Networks $24.92 **Stop $20.00** Juniper is forging ahead and has reached strong resistance at $25. I am changing the stop on this play to our entry point at $20.00. Hardly a day goes by without some positive news on Juniper and they are growing market share almost daily. ********************** COP - Conoco Phillips $77.66 **Stop 72.00** Raise stop to $72.00 COP continues to break new ground and broke $78 this week. Strong resistance waits at $80 but continued oil volatility is providing strong momentum. Conoco is the only bidder for the 7.59% stake in the Russian oil company Lukoil. The price was set at $1.93 billion and a completion of the deal would increase Conoco's reserves by +1.5 billion barrels of oil or a +19% increase. Prudential Equity said is was an opportunity to make a significant investment on what appeared to be favorable terms". Conoco is also in advanced talks to reenter Libya. Conoco was forced to leave Libya in 1986 when Reagan imposed sanctions against the country. Those sanctions were lifted this year and various companies are negotiating to reenter and recover their prior assets. ********************** NWS - News Corp $31.39 **Stop 29.00** NWS is trying to put in a bottom at $31 and I am hopeful the long term up move for the last year in the stock will begin again. This has been a rocky road and not according to plan. NWS is the parent company for many commonly known networks and cable companies. Twentieth Century Fox, owned by NWS, announced last week that it sold 2.4 million DVDs of the Passion of Christ before noon on the first day of sale. This film is the highest grossing R rated film of all time and in the top ten grosser overall. The film has taken in $609 million worldwide prior to the DVD sales. Fox has delivered 15 million DVDs to retailers worth over $400 million. **************************** News Corp was transferred from the Editors Plays last week because of the long term nature of the trade. You can read the original play description here. http://members.OptionInvestor.com/editorplays/edply_041104_1.asp http://members.OptionInvestor.com/editorplays/edply_041804_1.asp The play was going according to plan until the exchanges said NWS could not dual list on both the Australian exchange and the NYSE. NWS is moving to the NYSE next year. Fund holders began selling the Australian shares when it became evident those holders would have to liquidate. The plan was to sell calls against the NWS position to average cost down but with the stock in a decline there has been no premium to sell. A -$7.85 drop in BskyB also hit NWS as a major holder of BskyB stock. Long term support is $30 and I am reluctant to close the position as long as that support holds. **************************** Current Portfolio: **************************** TYC Tyco $30.50 **Stop $28.00** Entry $28.32 2005 $30 LEAP Call TYC-AF cost $2.15 current $2.10 2006 $30 LEAP Call WPA-AF cost $4.00 current $4.30 July $25 insurance put - expired - cost $.55 Tyco Chart JNPR - Juniper Networks $24.92 **Stop $20.00** Entry $20.19 2006 $25 LEAP Call WBW-AE cost $3.50 current $5.60 Insurance = Sept-$17.50 Put JUX-UW cost 50 cents. http://members.OptionInvestor.com/leaps/Lp_081504_1.asp JNPR Chart COP - Conoco Phillips $77.68 **Stop 72.00** Entry $73.30 August 30th Current position: Jan-2006 $75 LEAP Call YRO-AO at $6.70 currently $8.80 Initial play description: http://members.OptionInvestor.com/leaps/Lp_082904_1.asp COP Chart INTC - Intel Corp $20.57 **Stop $17.00** Entry $20.00 Sept 3rd Current position: 2006 $22 LEAP Call WNL-AX at $2.20 currently $2.30 2006 $25 LEAP Call WNL-AE at $1.45 currently $1.50 Initial play description: http://members.OptionInvestor.com/leaps/Lp_071804_1.asp Intel Chart NWS - News Corp $30.76 ** Stop 29.00 ** Current position: 2006 $40 LEAP Call WLN-AH at $3.83 currently $1.30 Initial play description: http://members.OptionInvestor.com/editorplays/edply_041104_1.asp http://members.OptionInvestor.com/editorplays/edply_041804_1.asp NWS Chart Position Summary Graph LEAPS Watch List ************************* No new entries this week. I looked at several hundred stocks this weekend and could not find anything worthy of playing. There were plenty of strong stocks, too strong in fact. The two days of chip rally had tacked on +10-15% gains on almost every chip related stock. Networking stocks were up but we are already playing Juniper. Oil stocks had pulled back slightly but we already have OXY and COP. Everything I wanted to play was out of sight after 2-3 days in rally mode. RIMM has got an excellent future based on the new product reports I heard on Friday. Unfortunately we are about a week too late and leaps are grossly overpriced. EBAY just will not slow down and we already have two bank stocks on the watch list. I looked at drugs, new technology, transportation, biotech, indexes, metals, construction, etc. Everything was either up strongly for the last couple days or in the tank. Neither extreme I wanted to buy. With the VXO at a new 52-week low the outlook for buying any kind of call is dim. I continue to feel that a buying opportunity is coming and we will take full advantage of it when it comes. Until then the pickings are sparse and risky. *********************** UPL - Ultra Petroleum $42.96 **Target $38.00** No change on UPL. The stock held its gains for the last three weeks but failed to advance on the higher oil prices. This stock could stand some more profit taking before the next oil binge starts. JAN-2006 $45 LEAP Call WSS-AI $9.70 JAN-2006 $50 LEAP Call WSS-AJ $8.60 http://members.OptionInvestor.com/leaps/Lp_090504_1.asp UPL Chart *********************** OXY - Occidental Petroleum $52.59 Target $51.00 If we get one more dip in oil prices we might get a fill in OXY. The stock pulled back from its highs on the oil volatility despite the strong reserves and active exploration. 2006 $50 JAN LEAP Calls WXY-AJ currently $6.80 2006 $55 JAN LEAP Calls WXY-AK currently $4.30 http://members.OptionInvestor.com/leaps/Lp_082904_1.asp OXY Chart EBAY - EBAY $90.07 target entry $84.00 Raised the entry again to $84 and the 100dma. We saw some weakness begin to appear on Thursday but the end of day buy program on Friday pushed it back to $90 from Thursday's low of $86.75. 2006 $90 LEAP Call YRL-AR 2006 $100 LEAP Call YRL-AP http://members.OptionInvestor.com/leaps/Lp_072504_1.asp EBAY Chart MER - Merrill Lynch $52.98 target entry $51.00 MER pulled back slightly midweek but found new life on Friday. I raised the entry point to $51 in hopes of a profit taking fill. 2006 $50 LEAP Call WZM-AJ http://members.OptionInvestor.com/leaps/Lp_071804_1.asp MER Chart MMM - 3M Company - $84.69 Target entry $82, add to position at $78. MMM failed to rally all week but vaulted over the 100 dma resistance at 84.50 at the close on Friday. I was hoping we would see a profit taking pullback from its spring from $78 to $84 but that has yet to appear. 2006 $80 LEAP Call VMU-AP 2006 $85 LEAP Call VMU-AQ http://members.OptionInvestor.com/leaps/Lp_080804_1.asp MMM Chart C - Citigroup $47.26 LEAP Call I raised the entry points again. Citigroup failed to rally with the rest of the market and is holding at $47.25 resistance. Any material market weakness should at least fill half our position. Enter 1/2 position at $46.50 Enter 1/2 position at $45.00 2006 $50 LEAP Call WRV-AJ http://members.OptionInvestor.com/leaps/Lp_080804_1.asp Citigroup Chart SYMC - Symantec - $50.83 - Target $47.25 I raised the entry point to $47.25 from $45. I hesitate to get too close with three weeks of September left. I would really like to see an entry point on SYMC but with a break over resistance at $50 it is looking like a lost cause. The 100dma is 45.50 and any decent September dip should hit it but I am beginning to doubt it will happen. 2006 $50 LEAP Call YAG-AJ current $9.40 http://members.OptionInvestor.com/leaps/Lp_080804_1.asp SYMC Chart GE $33.88 LEAP Call Target $32.50 GE had a good week and tacked on a buck to its price. Now at $34 and strong resistance we are poised to either breakout or breakdown. I am raising the target price to $32.50 and strong support for this last bounce. 2006 $30 LEAP Call WGE-AF $5.30, target $4.00 2006 $35 LEAP Call WGE-AG $2.45, target $1.75 I am not suggesting insurance on GE but the December $27.50 put is only 40 cents. We would need a serious national disaster to see GE break $30 and I think it would only be temporary. GE Chart ************************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 ************************************************************** ************************ Option Spread Strategies ************************ Gentlemen (& Gentlewomen) Start Your Engines -- It's Quickie Time Again By Mike Parnos Our "hypothetical" CPTI quickie positions didn't fare very well last month. But, that's what averages are made of. As long as you got out at the designated level, you didn't get hurt too badly. We're still way ahead of the game. Our Monthly Reminders Quickie positions are not for the feint of heart -- and are definitely not for those who can't closely monitor their positions. As we've seen recently (particularly last month), the market can move dramatically for no good reason whatsoever. Also, the maintenance requirements are usually quite high. Adjust your position size to match your account size and your risk tolerance. Also, remember that the figures below are based on Friday's closing numbers. It is likely that you will be able to take in somewhat less. That doesn't mean the trades aren't still valid. It just means you shouldn't waste your time waiting for orders to fill at unrealistic prices. Quickie Position #1 -- RUT Siamese Condor - 569.91 Sell 10 Sept. RUT 570 calls @ $5.10 ($5,100) Sell 10 Sept. OEX 570 puts @ $5.20 ($5,200) Total credit of: $10.30 ($10,300) Buy 10 Sept. RUT 590 calls @ $.35 ($350) Buy 10 Sept. RUT 5250 puts @ $1.00 ($1,000) Total debit of: $1.35 ($1,350) Our net credit is $8.95 ($8,950). We will profit if the RUT closes anywhere between 561.05 and 578.95. The closer RUT finishes to 540, the more money we will make. The 561.05 and 578.95 profit parameters are also our suggested bailout points. The maintenance for this position is about $20,000. Quickie Position #2 -- SPX Iron Condor - 1123.92 Sell 10 Sept. SPX 1135 calls Buy 10 Sept. SPX 1145 calls Credit of about $1.60 ($1,600) Sell 10 Sept. SPX 1115 puts Buy 10 Sept. SPX 1105 puts Credit of about $1.05 ($1,050) Total net credit of $2.65 ($2,650). We will make our maximum profit if SPX closes between 1115 and 1135. Maintenance for this position is $10,000. Quickie Position #3 -- OEX Iron Condor - 546.25 Sell 10 Sept. OEX 550 calls Buy 10 Sept. OEX 560 calls Credit of about $.90 ($900) Sell 10 Sept. OEX 540 puts Buy 10 Sept. OEX 530 puts Credit of about $.75 ($750) Total net credit of $1.65 ($1,650). We will make our maximum profit if OEX closes between 540 and 550. Maintenance for this position is $10,000. ____________________________________________________________ CPTI Sept. Hypothetical Position Update The market is at an interesting point -- especially the SPX. The 1125 level is a resistance level. We'll see if it holds. We still have a 15-point cushion before it gets to our short 1140 call. The RUT and the OEX are inching up towards our short strikes. Remember, to keep an eye on these positions. We'll probably be OK. However, as you know, the market is irrational, but we can't afford to be. We rolled out our QQQ ITM Strangle this week. It was another small rollout of $.45 ($450). Our $37 puts and $34 puts are far from the ideal place to be with our short options. During the life of this position, I should have rolled to other strikes that would have put us into a better position for the long term. Those who are initiating a new ITM Strangle position should try to establish the short puts and the calls slightly out of the money. We'll go into this in more detail when we continue our discussion of this strategy. ____________________________________________________________ NEW CPTI PORTFOLIO POSITION -- OCTOBER I was looking at the SPX option chain and found a hypothetical position with which I'm comfortable for the October cycle. 1160 is a solid resistance level and the market seems to be slowly trending up, so 1075 is an acceptable short position. October Position #1 - SPX Iron Condor - 1123.92 Sell 10 SPX October 1160 calls Buy 10 SPX October 1175 calls Credit of about $1.75 ($1,750) Sell 10 SPX October 1075 puts Buy 10 SPX October 1060 puts Credit of about $1.30 ($1,300) Total net credit of appx. $3.05 ($3,050). By putting on the position now, we will be exposed for five weeks, but it enables us to take in a little more premium. Maximum profit range is 1075 to 1160. Maintenance is $15,000. Watch Thursday's column for our regular preview of other new October positions. ____________________________________________________________ SEPTEMBER CPTI POSITIONS September Position #1 – SPX Iron Condor – 1123.92 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 – 569.91 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” – 1123.92 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 – 546.25 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 -- $35.12 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 – 546.25 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. ********** DISCLAIMER ********** Please read our disclaimer at: http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html ************************************************************** ADVERTISING INFORMATION For more information on advertising in OptionInvestor Newsletter, or any Premier Investor Network newsletter please contact: Contact Support
The Option Investor Newsletter Sunday 09-12-2004 Sunday 5 of 5 In Section Five: Spreads and Straddles: Buyers Emerge As Volatile Week Comes To A Close! Premium-Selling Plays: Naked Puts and Calls ************************Advertisement************************* Stock Option and Futures Brokerage OneStopOption teams the best trading technology with varying levels of professional assistance at very competitive prices. Commission costs are comparable to discount brokerage and tailored to individual customer needs. The power of one brokerage group with experience and expertise in the Securities* and Futures Markets offers unprecedented convenience for traders. Access To All Futures Markets Toll Free 888-281-9569 Stock Option Principals www.OneStopOption.com ************************************************************** ******************* SPREADS & STRADDLES ******************* Buyers Emerge As Volatile Week Comes To A Close! By Ray Cummins Favorable economic data and falling oil prices conspired to lure investors back into the stock market on Friday afternoon. The NASDAQ composite index led the late-session rally, rising 24 points to 1,894 amid bargain hunting in the oversold technology sector. The blue-chip Dow industrial average was hampered by a negative outlook from Alcoa (NYSE:AA), but managed a positive finish, up 23 points at 10,313. Despite ongoing concerns over jobs, energy costs, and corporate profits, the broader S&P 500 index closed up 5 points at 1,123. Trading volume on the NYSE came to 1.26 billion shares, with advancing issues outnumbering decliners by more than 4 to 3. Trading activity on the NASDAQ was upbeat with winners pacing losers 3 to 2 on volume of 1.59 billion shares. In the U.S. bond market, the 10-year note ended almost unchanged with its yield at 4.18%. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ SUMMARY OF CURRENT POSITIONS - AS OF 09/10/04 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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 68.77 SEP 55.0 60.0 0.40 59.60 0.40 Open FPL 67.73 68.90 SEP 60.0 65.0 0.45 64.55 0.45 Open MCO 67.33 69.44 SEP 60.0 65.0 0.65 64.35 0.65 Open BSTE 44.14 48.85 SEP 35.0 40.0 0.55 39.45 0.55 Open ISCA 53.40 51.85 SEP 45.0 50.0 0.55 49.45 0.55 Open LEND 33.89 39.16 SEP 25.0 30.0 0.60 29.40 0.60 Open PIXR 69.93 78.20 SEP 60.0 65.0 0.45 64.55 0.45 Open PD 80.77 84.49 SEP 65.0 70.0 0.40 69.60 0.40 Open RYL 86.01 90.30 SEP 75.0 80.0 0.65 79.35 0.65 Open FRO 40.05 38.99 SEP 30.0 35.0 0.60 34.40 0.60 Open NIHD 37.59 38.80 SEP 33.4 35.0 0.20 34.80 0.20 Open NCEN 53.10 54.14 SEP 45.0 50.0 0.60 49.40 0.60 Open SEPR 49.35 50.72 SEP 42.5 45.0 0.30 44.70 0.30 Open GILD 34.70 35.49 SEP 30.0 32.5 0.27 32.23 0.27 Open PCU 43.29 45.16 SEP 35.0 40.0 0.50 39.50 0.50 Open MUR 75.51 79.76 OCT 65.0 70.0 0.70 69.30 0.70 Open RYL 88.15 90.30 OCT 75.0 80.0 0.75 79.25 0.75 Open GIVN 38.72 36.80 OCT 30.0 35.0 0.70 34.30 0.70 Open MBT 140.75 143.35 OCT 120.0 125.0 0.50 24.50 0.50 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 74.19 SEP 85.0 80.0 0.55 80.55 0.55 Open CDWC 59.25 60.23 SEP 65.0 60.0 0.45 60.45 0.22 Open? DNA 44.23 49.85 SEP 52.5 50.0 0.35 50.35 0.35 Open? EASI 43.53 47.50 SEP 55.0 50.0 0.40 50.40 0.40 Open VLO 64.36 68.69 SEP 75.0 70.0 0.60 70.60 0.60 Open FD 44.60 44.97 SEP 50.0 47.5 0.30 47.80 0.30 Open PHS 32.42 33.26 SEP 37.5 35.0 0.30 35.30 0.30 Open OSTK 31.03 30.98 SEP 40.0 35.0 0.60 35.60 0.60 Open AMZN 39.90 38.57 SEP 45.0 42.5 0.30 42.80 0.30 Open CHIR 43.41 44.16 SEP 47.5 45.0 0.30 45.30 0.30 Open RIMM 60.22 68.09 SEP 70.0 67.5 0.20 67.70 (0.39) Open? AZO 74.06 75.48 OCT 85.0 80.0 0.55 80.55 0.55 Open MXIM 40.94 42.02 OCT 50.0 45.0 0.50 45.50 0.50 Open PLMO 32.30 31.25 OCT 45.0 40.0 0.55 40.55 0.55 Open L/C = Long Call S/C = Short Call CB = Cost Basis G/L = Gain/Loss Genentech (NYSE:DNA) is joined by Research In Motion (NASDAQ:RIMM) and CDW Corporation (NASDAQ:CDWC) on the early-exit list. Briggs & Stratton (NYSE:BGG), Guidant (NYSE:GDT), Kmart (NASDAQ:KMRT) and Vimple Communications (NYSE:VIP) have previously been 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 22.20 SEP 17.5 17.5 3.00 5.50 Open? CAH 45.79 45.85 SEP 45.0 45.0 3.00 3.50 Open VTS 20.34 20.70 SEP 20.0 20.0 1.75 1.55 Open Our recent straddle in Ditech (NASDAQ:DITC) was the "big winner" in August as the issue jumped over $4 on a strong earnings report and the announcement of two additional customers in Asia. There has been no "public" news regarding the earnings reporting date for Cardinal Health (NYSE:CAH), however the issue retreated after rival drug wholesaler McKesson (NYSE:MCK) announced it will miss consensus earnings estimates in the current quarter. Traders in the position could have sold the bullish portion (calls) of the straddle for a profit early last week, leaving the bearish (put) options "risk-free" for any future downside activity. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ COGN - Cognos $34.58 *** Merger/Takeover Target? *** Cognos (NASDAQ:COGN) is a provider of business intelligence software. The company's solution helps improve business performance by enabling planned performance management, supported by effective decision-making at all levels of the organization through the consistent reporting and analysis of data derived from various sources. Using its software, customers can plan and manage the performance of all aspects of their business and gain valuable insights to help improve operational effectiveness, enhance customer satisfaction and accelerate corporate response times. Its integrated solution consists of a suite of business intelligence components, and analytical and performance management applications. Earnings are due 9/22/04. COGN - Cognos $34.58 PLAY (less conservative - bullish/credit spread): BUY PUT OCT-30.00 CRQ-VF OI=505 ASK=$0.40 SELL PUT OCT-32.50 CRQ-VZ OI=317 BID=$0.65 INITIAL NET-CREDIT TARGET=$0.30-$0.35 POTENTIAL PROFIT(max)=14% B/E=$32.20 __________________________________________________________________ SCSC - ScanSource $66.22 *** New All-Time High! *** ScanSource (NASDAQ:SCSC) is a wholesale provider of specialty technology products, providing both value-added distribution sales to technology resellers and e-logistics services to specialty technology markets. The company markets automatic identification and data capture and point-of-sale products through its ScanSource sales unit; voice, data and converged communications equipment through its CatalystTelecom sales unit, and converged communications products through its Paracon sales unit. In addition to the basic order fulfillment and credit services that conventional wholesale distributors typically provide to resellers, the company differentiates itself by providing an array of value-added services and business tools that assist resellers to provide more complete solutions and improve customer service. SCSC - ScanSource $66.22 PLAY (conservative - bullish/credit spread): BUY PUT OCT-55.00 UHI-VK OI=5 ASK=$0.40 SELL PUT OCT-60.00 UHI-VL OI=21 BID=$0.85 INITIAL NET-CREDIT TARGET=$0.50-$0.55 POTENTIAL PROFIT(max)=11% B/E=$59.50 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ LEN - Lennar $46.75 *** Consolidation In Progress! *** Lennar (NYSE:LEN) operates as a homebuilder and a provider of financial services in the United States. Its homebuilding operations include the sale and construction of single-family homes, as well as the purchase, development and sale of land directly and through unconsolidated partnerships. Lennar's financial services subsidiaries provide mortgage financing, title insurance, closing services and insurance agency services for home buyers. These subsidiaries also provide high-speed Internet access, cable television and alarm installation and monitoring services to residents of communities the company develops and other communities. Earnings are due on 9/20/04. LEN - Lennar $46.75 PLAY (conservative - bearish/credit spread): BUY CALL OCT-55.00 LEN-JK OI=0 ASK=$0.15 SELL CALL OCT-50.00 LEN-JJ OI=623 BID=$0.70 INITIAL NET-CREDIT TARGET=$0.60-$0.70 POTENTIAL PROFIT(max)=14% B/E=$50.60 __________________________________________________________________ NTES - Netease.com $35.51 *** Sector Slump? *** NetEase.com (NASDAQ:NTES), through subsidiaries and contracts with affiliates; Guangzhou NetEase, Guangyitong Advertising, Ling Yi and their respective shareholders, operates an online and wireless community in China and is a provider of Chinese language content and services through its online games, wireless value-added services and Internet portal businesses. Netease generates revenues from fees it charges users of the online games and wireless value-added and other fee-based premium services, as well as from selling advertisements on the NetEase web-sites. NTES - Netease.com $35.51 PLAY (conservative - bearish/credit spread): BUY CALL OCT-45.00 NQG-JI OI=272 ASK=$0.35 SELL CALL OCT-40.00 NQG-JH OI=988 BID=$0.90 INITIAL NET-CREDIT TARGET=$0.60-$0.70 POTENTIAL PROFIT(max)=14% B/E=$40.60 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ STRADDLES AND STRANGLES ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Based on analysis of the historical option pricing and technical background, these positions meet the fundamental criteria for favorable volatility-based plays. __________________________________________________________________ KBH - KB Home $75.31 *** Expiration-Week Volatility? *** KB Home (NYSE:KBH) is a homebuilder based in the United States with operations in California, Arizona, Nevada, New Mexico, Colorado, Illinois, Texas, Florida, Georgia and North Carolina. In addition, Kaufman & Broad S.A., the Company's majority-owned subsidiary, is a homebuilder with operations primarily in France. KB Home also provides mortgage banking services to the majority of its domestic homebuyers through its wholly owned subsidiary, KB Home Mortgage Company. KBH - KB Home $75.31 PLAY (very speculative - neutral/debit straddle): BUY CALL SEP-75.00 KBH-IO OI=822 ASK=$1.25 BUY PUT SEP-75.00 KBH-UO OI=298 ASK=$1.00 INITIAL NET-DEBIT TARGET=$2.00-$2.15 INITIAL TARGET PROFIT=$0.55-$0.90 ************************Advertisement************************* OneStopOption.com Trade: Securities, Stock Options, Futures Contracts Service: Experienced Brokers Personal Assistance Convenience of One Brokerage Online and Live Broker Trading Experience... The Difference OneStopOption.com 888-281-9569 *************************************************************** ***************************************** PREMIUM-SELLING PLAYS: NAKED PUTS & CALLS ***************************************** All of these issues have robust option premiums and favorable technical indications. However, current news and events, as well as market sentiment, will have an effect on these stocks so review each position thoroughly and make your own decision about its outcome. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ SUMMARY OF CURRENT POSITIONS - AS OF 09/10/04 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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 20.23 0.36 5.52% 2.30% MCIP SEP 15.00 14.30 16.69 0.70 8.50% 4.90% PAAS SEP 12.50 12.05 14.52 0.45 6.87% 3.73% UTHR SEP 25.00 24.70 31.54 0.30 3.01% 1.21% AMED SEP 25.00 24.25 26.80 0.75 6.54% 3.09% PHM SEP 50.00 49.25 61.78 0.75 3.32% 1.52% KOSP SEP 30.00 29.25 36.96 0.75 5.48% 2.56% GLBCE SEP 12.50 11.90 14.83 0.60 11.90% 5.04% ECLP SEP 12.50 12.10 15.20 0.40 6.90% 3.31% OMM SEP 12.50 12.10 14.00 0.40 6.51% 3.31% CNCT SEP 25.00 24.10 27.24 0.90 7.11% 3.73% TOY SEP 15.00 14.45 17.04 0.55 7.51% 3.81% ACF SEP 20.00 19.25 21.15 0.75 7.16% 3.90% ION SEP 25.00 24.50 27.38 0.50 4.17% 2.04% ESLT SEP 20.00 19.20 20.03 0.80 7.95% 4.17% WBSN SEP 35.00 33.75 39.95 1.25 8.46% 3.70% NTMD SEP 12.50 12.15 20.27 0.35 8.12% 2.88% UTHR SEP 25.00 24.30 31.54 0.70 7.30% 2.88% CNCT SEP 25.00 24.30 27.24 0.70 6.65% 2.88% DDS SEP 20.00 19.50 19.94 0.44 5.55% 2.56% MEE SEP 22.50 22.00 27.63 0.50 5.93% 2.27% FOSL SEP 25.00 24.35 28.27 0.65 5.95% 2.67% HUM SEP 17.50 17.10 19.50 0.40 5.34% 2.34% SCSC SEP 50.00 49.40 66.22 0.60 3.30% 1.21% JOSB SEP 24.00 23.52 29.50 0.48 5.27% 2.04% ECLP SEP 12.50 12.20 15.20 0.30 6.57% 2.46% WBSN SEP 35.00 34.05 39.95 0.95 7.44% 2.79% ARO SEP 30.00 29.05 30.95 0.95 7.67% 3.27% MW SEP 25.00 24.60 29.49 0.40 4.22% 1.63% TOL SEP 40.00 39.05 45.50 0.95 6.19% 2.43% SEAC SEP 15.00 14.40 15.70 0.60 12.11% 4.17% CLHB SEP 10.00 9.60 11.67 0.40 10.87% 4.17% NTMD SEP 15.00 14.65 20.27 0.35 8.62% 2.39% ESLT SEP 20.00 19.20 20.03 0.80 10.61% 4.17% MYGN SEP 15.00 14.55 16.97 0.45 8.06% 3.09% NAVR SEP 12.50 12.15 14.76 0.35 9.14% 2.88% IVX SEP 18.00 17.56 20.23 0.44 7.02% 2.51% UTHR SEP 25.00 24.40 31.54 0.60 8.89% 2.46% AAPL SEP 30.00 29.50 35.87 0.50 5.37% 1.69% ARO SEP 30.00 29.50 30.95 0.50 5.51% 1.69% SONO SEP 22.50 22.05 26.50 0.45 6.40% 2.04% ESLT SEP 20.00 19.30 20.03 0.70 10.92% 3.63% MEE SEP 25.00 24.45 27.63 0.55 7.13% 2.25% SRDX SEP 22.50 21.90 23.90 0.60 8.40% 2.74% IVX SEP 18.00 17.52 20.23 0.48 8.94% 2.74% BSTE SEP 45.00 44.45 48.85 0.55 4.16% 1.24% FCN SEP 17.50 17.05 18.03 0.45 7.56% 2.64% PSRC SEP 20.00 19.35 24.35 0.65 16.45% 3.36% MYGN SEP 15.00 14.70 16.97 0.30 8.01% 2.04% LCAV SEP 22.50 21.95 24.90 0.55 10.09% 2.51% ATI SEP 17.50 17.10 19.88 0.40 9.15% 2.34% LNG SEP 15.00 14.70 19.90 0.30 9.15% 2.04% DITC SEP 20.00 19.55 22.10 0.45 9.32% 2.30% ICOS SEP 25.00 24.60 24.25 (0.35) 0.00% 0.00% WNC SEP 25.00 24.60 29.45 0.40 6.62% 1.63% BEIQ SEP 25.00 24.70 27.55 0.30 5.32% 1.21% DITC SEP 20.00 19.55 22.10 0.45 10.09% 2.30% SHFL SEP 30.00 29.35 33.11 0.65 10.20% 2.21% ATI SEP 17.50 17.20 19.88 0.30 7.78% 1.74% SNDA SEP 20.00 19.70 24.19 0.30 7.46% 1.52% GMR SEP 25.00 24.65 30.52 0.35 6.58% 1.42% AAPL SEP 32.50 32.05 35.87 0.45 6.20% 1.40% SONO SEP 22.50 22.10 26.50 0.40 8.03% 1.81% BLUD SEP 20.00 19.50 22.15 0.50 5.28% 2.56% MOGN SEP 25.00 24.60 28.18 0.40 3.98% 1.63% EPIX SEP 20.00 19.75 21.87 0.25 8.64% 1.27% SSYS SEP 22.50 22.10 28.28 0.40 4.66% 1.81% MDCC SEP 22.50 21.75 23.85 0.75 6.60% 3.45% NIHD SEP 35.00 34.75 38.80 0.25 5.07% 0.72% FLE SEP 12.50 12.25 14.91 0.25 13.35% 2.04% CC SEP 12.50 12.15 13.88 0.35 5.85% 2.88% PalmOne (NASDAQ:PLMO), which is currently profitable, 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 SWIR SEP 35.00 35.60 18.51 0.60 7.40% 1.69% AVID SEP 50.00 50.50 44.32 0.50 3.56% 0.99% USPI SEP 37.50 38.05 36.15 0.55 3.90% 1.45% BDY SEP 25.00 25.75 24.50 0.75 7.42% 2.91% DRIV SEP 30.00 30.30 24.81 0.30 4.51% 0.99% SINA SEP 30.00 30.35 22.23 0.35 5.84% 1.15% ERES SEP 22.50 22.80 16.76 0.30 6.66% 1.32% MRVL SEP 25.00 25.40 26.24 (0.84) 0.00% 0.00% ICUI SEP 30.00 30.65 27.49 0.65 7.56% 2.12% SWIR SEP 30.00 30.30 18.51 0.30 5.90% 0.99% UPL SEP 45.00 45.40 42.92 0.40 4.90% 0.88% MCHP SEP 30.00 30.65 27.59 0.65 6.97% 2.12% EYET SEP 45.00 45.75 32.92 0.75 10.85% 1.64% CMX SEP 30.00 30.45 29.44 0.45 4.86% 1.48% IDXC SEP 30.00 30.30 31.51 (1.21) 0.00% 0.00% BRCM SEP 32.50 32.90 27.70 0.40 5.76% 1.22% ELAB SEP 30.00 30.55 24.25 0.55 8.34% 1.80% MRVL SEP 25.00 25.35 26.24 (0.89) 0.00% 0.00% RSTI SEP 30.00 30.65 29.37 0.65 10.87% 2.12% ASKJ SEP 30.00 30.35 25.38 0.35 7.04% 1.15% PSFT SEP 20.00 20.35 19.79 0.35 11.10% 1.72% PLMO SEP 40.00 40.25 31.25 0.25 6.23% 0.62% RECN SEP 35.00 35.50 34.97 0.50 7.42% 1.41% ASTE SEP 17.50 17.95 18.39 (0.44) 0.00% 0.00% OSTK SEP 35.00 35.30 30.98 0.30 8.17% 0.85% MRVL OCT 25.00 25.65 26.24 (0.59) 0.00% 0.00% ESIO OCT 22.50 23.00 21.54 0.50 6.99% 2.17% Marvell Electronics (NASDAQ:MRVL) was an "early-exit" candidate after Thursday's rally and the "watch-list" position in IDX Systems (NASDAQ:IDXC) should have been closed by conservative traders. Currently, ASTE, BDY, ESIO, PSFT, RCEN and USPI are the issues to monitor for additional upside activity. Dick's Sporting Goods (NYSE:DKS) and Ceradyne (NASDAQ:CRDN) have been closed to limit potential losses. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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 OS 17.12 OCT 15.00 OS-VC 0.40 14 14.60 33 2.5% 7.2% FHRX 18.96 OCT 17.50 FUF-VW 0.45 234 17.05 33 2.4% 6.3% SNDK 25.23 OCT 22.50 SWQ-VX 0.50 7613 22.00 33 2.1% 5.9% SSYS 28.28 OCT 25.00 QQG-VE 0.55 87 24.45 33 2.1% 5.9% JNPR 24.92 OCT 22.50 JUX-VX 0.50 6209 22.00 33 2.1% 5.7% CREE 27.90 OCT 22.50 CQR-VX 0.35 2461 22.15 33 1.5% 5.3% FFIV 27.65 OCT 22.50 FLK-VX 0.30 1202 22.20 33 1.2% 4.5% 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. _________________________________________________________________ OS - Oregon Steel Mills $17.12 *** New 2004 High! *** Oregon Steel Mills (NYSE:OS), together with its subsidiaries, operates two steel mills and nine finishing facilities in the western United States and Canada. The company manufactures and markets specialty and commodity steel products of any domestic steel mill company. Its products are targeted at customers in western Canada and west of the Mississippi River. The company's two business units are Oregon Steel Division, which supplies steel for its steel plate, structural tubing and large-diameter pipe finishing facilities. It also produces large-diameter pipe and electric resistance welded pipe at its 60%-owned pipe mill in Camrose, Alberta, Canada. OS - Oregon Steel Mills $17.12 OCT 15.00 OS-VC LB=0.40 OI=14 CB=14.60 DE=33 TY=2.5% MY=7.2% _________________________________________________________________ FHRX - First Horizon Pharmaceutical $18.96 *** Entry Point? *** First Horizon Pharmaceutical (NASDAQ:FHRX) markets brand name prescription products. The company sells 14 products, six of which are actively promoted and accounted for approximately 92% of its total sales in 2003. Its primary products are Sular, Nitrolingual, the Prenate line, the Tanafed line, the Robinul line and Ponstel. Most of these products treat recurring or chronic conditions or disorders, which results in repeated use over an extended period of time. They focus on two therapeutic categories, which are cardiology and women's health/pediatric. FHRX - First Horizon Pharmaceutical $18.96 OCT 17.50 FUF-VW LB=0.45 OI=234 CB=17.05 DE=33 TY=2.4% MY=6.3% _________________________________________________________________ SNDK - SanDisk $25.23 *** Bottom Fishing Only! *** *** SanDisk (NASDAQ:SNDK) designs, develops, manufactures and sells flash storage card products used in a variety of electronic systems. The company's storage products are high capacity, solid-state, non-volatile flash memory devices that comply with common industry standards, including the PC Card ATA and/or IDE, MultiMediaCard, SD cards, miniSD cards and Memory Stick standards. SanDisk's product families include removable CompactFlash cards, Ultra CompactFlash cards, Wi-Fi CompactFlash cards, Secure Digital cards, SD Ultra cards, Wi-Fi SD cards, the Memory Stick product line, SmartMedia cards, xD-Picture cards, FlashDisk cards, the Cruzer USB Flash Drive product line, MultiMediaCards and embedded Flash ChipSets, embedded TriFlash and the semi-removable T-Flash module. SNDK - SanDisk $25.23 OCT 22.50 SWQ-VX LB=0.50 OI=7613 CB=22.00 DE=33 TY=2.1% MY=5.9% _________________________________________________________________ SSYS - Stratasys $28.28 *** Testing 2004 Highs! *** Stratasys (NASDAQ:SSYS) develops, builds, sells and services a family of three-dimensional printers and other rapid prototyping systems that enable engineers and designers to create physical models, tooling and prototypes out of plastic and various other materials, directly from a computer-aided design workstation. The company's computerized modeling systems use its technology to quickly make models and prototypes from a designer's 3D CAD. Stratasys' offerings include Dimension, Prodigy Plus, FDM Titan and Vantage. SSYS - Stratasys $28.28 OCT 25.00 QQG-VE LB=0.55 OI=87 CB=24.45 DE=33 TY=2.1% MY=5.9% _________________________________________________________________ JNPR - Juniper Networks $24.92 *** Networking Favorite! *** Juniper Networks (NASDAQ:JNPR) designs and sells products and services that together provide its customers with Internet protocol network infrastructure solutions. Juniper's solutions are incorporated into the global web of interconnected public and private networks across which a variety of media, including voice, video and data, travel to and from end users around the world. The company's network infrastructure solutions enable service providers and other network-intensive businesses to support and deliver services and applications on an integrated network. JNPR - Juniper Networks $24.92 OCT 22.50 JUX-VX LB=0.50 OI=6209 CB=22.00 DE=33 TY=2.1% MY=5.7% _________________________________________________________________ CREE - Cree $27.90 *** Sector Rally! *** Cree (NASDAQ:CREE) develops and makes semiconductor materials and devices based on silicon carbide, Group III nitrides, silicon and related compounds. The company's SiC and GaN materials technology is the basis for many of the devices that it develops and produces. Cree focuses its expertise in SiC and GaN materials on four product areas: light emitting diodes, including blue, green and near ultraviolet LED chips and high-power packaged LEDs; power switching products; radio frequency and microwave devices, and near UV lasers. It has products commercially available in each of these categories except for near UV lasers. CREE - Cree $27.90 OCT 22.50 CQR-VX LB=0.35 OI=2461 CB=22.15 DE=33 TY=1.5% MY=5.3% _________________________________________________________________ FFIV - F5 Networks $27.65 *** Trend Reversal? *** F5 Networks (NASDAQ:FFIV) develops, manufactures and markets products and services to help companies manage their Internet traffic, as well as the access and use of their intranet-based software applications. Its application products help manage Internet traffic to servers and network devices in a way that maximizes the availability, scalability and throughput of those network components and the applications that run on them. The company's FirePass family of network server appliances provides secure user access to networks and individual applications with any standard Web browser. FFIV - F5 Networks $27.65 OCT 22.50 FLK-VX LB=0.30 OI=1202 CB=22.20 DE=33 TY=1.2% MY=4.5% ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ADTN - Adtran $26.43 *** Stuck In A Trading Range? *** Adtran (NASDAQ:ADTN) offers products and services that simplify access to telecommunications networks. The company classifies its products into three categories: Systems, High bit-rate Digital Subscriber Line, and Digital Business Transport. The Systems category includes a range of products that deliver network access from the service provider's central office to the desktop of the user; the HDSL/T1 category includes a wide variety of Time Division Multiplex products used to deploy T1/E1, fractional T1/E1 and Symmetrical HDSL services over dedicated, leased-line copper, and the DBT category includes legacy products used to deploy Integrated Services Digital Network, Digital Data Service and Frame Relay services. ADTN - Adtran $26.43 PLAY (sell naked call): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL CALL OCT 30 RQA-JF 142 0.30 30.30 3.8% 1.0% TS _________________________________________________________________ DIGE - Digene $24.90 *** Premium-Selling Only! *** Digene (NASDAQ:DIGE) develops, manufactures and sells gene-based testing systems for the screening, monitoring and diagnosis of human diseases. Digene's primary focus is in women's cancers and infectious diseases. The company has applied its technology to develop a successful diagnostic test for human papillomavirus, which is the primary cause of cervical cancer and is found in greater than 99% of all cervical cancer cases. In addition to the HPV Test, Digene's product portfolio includes gene-based tests for the detection of chlamydia, gonorrhea, hepatitis B virus and cytomegalovirus. Digene also provides instrumentation systems and proprietary consumables for specimen collection, detection and analysis. DIGE - Digene $24.90 PLAY (sell naked call): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL CALL OCT 30 QGD-JF 35 0.35 30.35 6.1% 1.2% _________________________________________________________________ LNCR - Lincare Holdings $30.04 *** Next Leg Down? *** Lincare Holdings (NASDAQ:LNCR), together with its subsidiaries, is a provider of oxygen and other respiratory therapy services to patients in the home. The company's customers suffer from chronic obstructive pulmonary disease, chronic bronchitis or asthma and require supplemental oxygen or other respiratory therapy services in order to alleviate common symptoms and discomfort of respiratory dysfunction. Lincare also supplies home medical equipment, such as hospital beds, wheelchairs and other supplies that may be required by its customers. LNCR - Lincare Holdings $30.04 PLAY (sell naked call): Action Month & Option Open Last Cost Max. Simple Req'd Strike Symbol Int. Price Basis Yield Yield SELL CALL OCT 32.5 LQN-JZ 262 0.80 33.30 7.1% 2.4% ************************Advertisement************************* OneStopOption.com Trade: Securities, Stock Options, Futures Contracts Service: Experienced Brokers Personal Assistance Convenience of One Brokerage Online and Live Broker Trading Experience... The Difference OneStopOption.com 888-281-9569 *************************************************************** ********** 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
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