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Daily Newsletter, Sunday, 09/12/2004

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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!
 

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


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




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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


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**********
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=


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**************************
PICKS WE DROPPED THIS WEEK
**************************

Remember that historically, when we drop a pick it will go up
10 to 15% the very next week. It is part of Murphy's Law.
Just because we drop a stock as a pick does not mean we are
advocating a "sell" on any position you have. We are simply
dropping our recommendation as a new play. Existing plays
can and do continue on and are usually profitable.


CALLS
^^^^^

None

PUTS
^^^^

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.


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DISCLAIMER
**********

Please read our disclaimer at:
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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

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******************
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
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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 =



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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


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*****
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






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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
**********

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http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html


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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

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





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*****************************************
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%




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