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Daily Newsletter, Tuesday, 09/14/2004

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The Option Investor Newsletter                 Tuesday 09-14-2004
Copyright 2004, All rights reserved.                       1 of 3
Redistribution in any form strictly prohibited.


In Section One:

Wrap: Quad Witching Approaching
Futures Markets: See Note
Index Trader Wrap: Gold and Internets were leaders in 2003 
Market Sentiment: Momentum is Stalling


Posted online for subscribers at http://www.OptionInvestor.com
************************************************************
MARKET WRAP  (view in courier font for table alignment)
************************************************************
      09-14-2004           High     Low     Volume   Adv/Dcl
DJIA    10318.16 +  3.40 10340.13 10303.41 1.53 bln 1549/1677
NASDAQ   1915.40 +  5.00  1917.74  1901.77 1.51 bln 1430/1645
S&P 100   546.93 +  0.82   547.82   545.83   Totals 2979/3322
S&P 500  1128.33 +  2.51  1129.46  1124.72 
SOX       393.50 +  0.40   393.97   387.75
RUS 2000  570.96 -  2.14   573.10   567.74
DJ TRANS 3225.00 +  1.80  3227.05  3219.58
VIX        13.56 +  0.39    13.89    13.50
VXO (VIX-O)13.55 +  0.15    14.01    13.29
VXN        19.49 +  0.35    19.85    19.13 
Total Volume 3,273M
Total UpVol  1,767M
Total DnVol  1,450M
Total Adv  3440
Total Dcl  3726
52wk Highs  191
52wk Lows    49
TRIN       0.86
NAZTRIN    0.73
PUT/CALL   0.93
************************************************************

Quad Witching Approaching
by Jim Brown

For a quadruple witching week the volatility has been
very calm. The Dow traded in a very narrow 37 point
range and continued to hold right below significant 
resistance. The market is slowly digesting the last 
four weeks of gains and passing time as pages tick 
off the calendar.

Dow Chart – Daily

 
Nasdaq Chart – Daily

 


The markets started off negative after Retail Sales 
for August came in lower than expected at -0.3%. The
consensus estimate was for a drop of -0.2%. This was
another case of sticker shock and a lack of internal
understanding. Ex-autos Retail Sales actually rose
+0.2%. The auto-manufacturing sector is throwing
money at incentives to attract buyers but the number
of consumers left who don't already own a late model
car are slowly dwindling. Sales also fell at furniture
and department stores and restaurants. The challenge
facing retailers is the very high comparisons from
this period last year. The tax rebate plan was in
full swing and products were flying off dealers 
shelves. 

The U.S. Current Account balance fell to another new
record low at -$166.2 billion. High oil prices and
a slowing in exports produced the large deficit. This
was the largest deficit relative to GDP on record.
Foreign purchases of both debt and equities fell
and purchases of foreign equities by U.S. residents
increased. Net foreign portfolio outflows increased 
+$13.8 billion to $30.3 billion for the quarter. Net 
purchases of foreign equities almost doubled to $40.2B.
This should be a clue to many that our budget deficit
could eventually be a serious problem if money flow
continues to be negative.

The Richmond Fed Survey saw a strong jump with the
headline number hitting +18 after a dip to only +6
in July. The only material component that slipped
was employment along with a small drop in the six-month
outlook. Backlogs hit the highest level in four months
but that level is only +1. Backlogs dipped to -12 in
June and have been rising since. 

The SOX gave up some ground at the open on the LSI
warning from last night and then struggled to return
to positive territory for the rest of the day. In the
end the SOX ended in the green by a miniscule +0.40
but a warning by XLNX after the close could apply
more pressure tomorrow. XLNX is in the same sector
as ALTR but their warning was much stronger than the
ALTR warning last week. XLNX said revenue would drop
-5% to -7% for the quarter and ALTR warned only that
sales would be flat. XLNX echoed the same sector 
refrain that there was a serious inventory correction
in progress and orders from the Asia Pacific region
were weaker than expected. XLNX had initially given
guidance for +2% to +4% revenue growth. Margins were
also expected to erode. XLNX lost over a dollar in
after hours trading. 

Celestica (CLS) also warned that Q3 revenue would be
light because of "order reductions from some of its
largest communications and IT customers." They said
revenue would drop to $2.05B to $2.15B down from
prior estimates of $2.25B to $2.4B. Earnings are
expected to drop to 7-11 cents from 11-17 cents in
the prior forecast. This double hit from XLNX and CLS
pushed the SMH lower in after hours but not materially.
The Nasdaq futures were trading down only -3.50 points.
This could change by morning but it appears the bad
news is already priced into the sector. 

The Gartner Group said today that the chip sector 
was still very over rated and far too many companies
were competing for the available business. They said
they expected a 40% consolidation in the sector over
the next ten years as the little fish were either
consumed by the sharks or driven out of the market. 

Oracle announced earnings after the bell and beat 
the street by a penny on slightly less than expected
revenue. They said they were comfortable with the
13 cents analysts expected for next quarter. However,
the analysts consensus estimates were for 14 cents.
Revenue was also quoted slightly below the consensus.
It did not appear to impact the stock as ORCL rose
slightly but some cautious statements at the end of
the conference call pushed it back down to just 
barely positive. I doubt we will see any market 
impact from Oracle earnings. You are likely to see 
more impact from Larry Ellison's continued dumping
of the stock. Since March-1st he has sold nearly 
$1 billion at the rate of a couple million shares 
per week. http://finance.yahoo.com/q/it?s=orcl

Oil continued to make headlines as prices hovered
near $45. The various challenges included pipeline
sabotage in Iraq and the shutdown of hundreds of
wells in the Gulf of Mexico as Ivan rumbled towards
land. About 25% of our oil comes from the gulf and 
a week long shutdown could pressure already weak
supplies. The storm surge in the oil fields is
expected to be between 13-18ft on the eastern side
of the fields. This could cause significant damage
not only to wells but distribution facilities on
the coast. Many of these storms fail to live up to
their advance billing but this one does appear to
be on target to disrupt the oil patch. 

OPEC meets tomorrow in Vienna and the pre meeting
press claims they will approve a one million barrel
increase in production to 27 million per day. The
price of oil barely blipped on the announcement 
because OPEC countries are already producing over
30 million barrels per day. The production quotas
mean nothing when oil is $45. Everyone that can
pump more is doing so to capture the economic 
windfall. As news comes out of damage from Ivan 
we can expect the price to rise accordingly. 

The markets continue to hold near their recent highs
and according to TrimTabs.com it is due to new cash
coming into the market. In the first seven trading
days of September equity funds saw inflows of $2.9B.
According to TrimTabs this is nearly as much as the
+$3.5B of inflows for all of August. 

The markets are doing amazingly well consolidating
the last four weeks of gains without losing any 
ground. Bad news abounds but the levels continue
to hold over 10300 for the Dow and over 1900 for
the Nasdaq. The SPX has broken above 1125 and that
prior resistance is now support. 

While the current consolidation is turning many
traders bullish there are still challenges ahead. 
The election fix appears to be in and the Bush 
expanding lead has prevented any September decline
from appearing. Hopefully this euphoria will continue
but there are some critical technical levels still
ahead. The NYSE Composite ($NYA.X) is approaching
the critical 6600-6625 level that restrained the 
markets back in June for the entire month. 

NYSE Composite Chart – Daily

 
 

The SPX has similar resistance just overhead at 1130 
that stretches all the way to 1145. Just getting over
1130 will not mean there is a breakout in progress. 
It will require more conviction on the part of the
bulls than we have seen recently. 

SPX Chart – Daily

 
 

The markets are facing a quadruple expiration on Friday.
Most of the volatility normally associated with this
event has been noticeably absent with recent lows in
the various volatility indexes. Volume has been rising
and the majority of it has been on the buy side. The
complete lack of any material attempt to sell stocks
since Sept-3rd is a very bullish point in itself. 
There appears to be no real effort on the part of the
bears to stop this rally. 

Of course the rally itself has been staggering forward
more than surging ahead. Since the Sept-2nd buy program
powered the SPX from 1110 to 1120 the index has gained
only +8 points in seven trading days. Seven of those
points were the direct result of the Friday afternoon
buy program ahead of 9/11. Since that program pushed
us out of our prior range we have traded in another 
narrow range between 1125 and 1130. Definitely not a 
bullish stampede. 

SPX Chart - 30 min

  
 


For the rest of the week volume should slow as we near
expiration Friday and enter the Jewish holiday period.
Rosh Hashanah begins at sunset on Wednesday and ends
Friday night. Many traders will be absent during this
period. Add in the landfall of Ivan and the widespread
uncertainties associated with a direct hit of a category
five storm on the gulf coast and the rest of the week
could be very slow. We also have a Fed meeting next
Tuesday and the futures are showing a rate hike on two
of the next three meetings. The hike is priced in but
there is always some market instability ahead of the
event. Nothing has changed since Sunday. Volatility is
still low and the indexes have not moved. We are poised
for a big move but the direction is still up for grabs.
That could be the epitaph for the week. 

Enter Passively, Exit Aggressively. 

Jim Brown
Editor


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

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


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

Gold and Internets were leaders in 2003

Gold, and metals stocks as well as Internet stocks were BIG 
percentage gainers as the major average lifted from their 2002 
lows, and for those bulls reminiscing of a very bullish 2003, a 
renewed bullish interest from some deeply oversold longer-term 
levels of bullish percent in precious metals and Internet stocks, 
as well as the major averages relatively unchanged on the year, 
and showing some bullish life, may well have bulls licking their 
chops as the third quarter of 2004 draws near.

While the AMEX Gold Bugs Index ($HUI.X) 208.74 +2.3% remains well 
off its December 2003 and early January 2004 highs of 258.60, the 
gold bugs have been resilient in recent months and were pressing 
some of their favorites higher to it HUI's 200-day SMA (210.28) 
again today, where after reaching a deeply oversold bullish % 
reading of 12% in May, 41.67% of the stocks followed by 
Dorsey/Wright and Associates now show point and figure buy 
signals associated with their supply/demand charts as sector 
strength resumes from some deeply oversold levels.

Just yesterday, Dorsey's Internet Bullish % (BPINET) reversed up 
to "bull alert" status at 24.7% after falling to 18% in early 
August.  Bellwether's Yahoo! Inc. (NASDAQ:YHOO) $33.18 +4.11% and 
eBay (NASDAQ:EBAY) $94.41 +2.50% lead the CBOE Internet Index 
(INX.X) 178.17 +1.61% higher in today's session, with the INX.X 
closing just above its flat-to-rising 200-day SMA (178.13) at 
session's end.

U.S. Market Watch - 09/14/04 Close

 

When I left on vacation it made sense that with the VIX.X below 
14.00 we might look for a pullback in the major indices, but that 
hasn't happened and the VIX.X is close to its April 23, 52-week 
low reading of 12.89.  

I've marked several of this week's quarterly expiration "Max 
Pain" Theory levels, where one would have to think current levels 
of trade and the lower VIX.X may well be indicative of covered 
call writers, if not naked call writers buying back some calls as 
the markets have snapped back strong from their early August 
lows.

In the past 5-session the Semiconductor Index (SOX.X) 393.50 
+0.10%, which has been the WEAKEST of sectors in recent months is 
suddenly a percentage gainer.  Here too Dorsey/Wright and 
Associates' Semiconductor Bullish % (BPSEMI) which fell to a 
multi-year low reading of 6% has just recently reversed up to 
"bull alert" status at 14%, with Monday evenings reading further 
improved to 18% as some bearish risk becomes realized.

Tuesday's official settlement for October Crude Oil futures 
(cl04v) was $44.39, where oil bid as Hurricane Ivan enters the 
Gulf of Mexico where traders are uncertain of what type of 
damage, if any, Ivan's impact may have on offshore oil and gas 
producing platforms and pipelines.

Market Snapshot / Internals - 09/14/04 Close

 

Internals at the A/D line were negative the entire session, and 
while a late session dip below 0.76 and the TRIN's DAILY Pivot 
did see some improvement in the A/D line, the major indices were 
little changed.

After updating last week's NH/NL indications, today would be the 
first day the more bullish, yet overbought NYSE 5-day NH/NL ratio 
would show a slight bearish cross under of its 10-day NH/NL 
ratio.

Notable new 52-week highs among NYSE and Dow Components in 
today's session were Home Depot (NYSE:HD) $38.14 +1.89%, Johnson 
& Johnson (NYSE:JNJ) $58.35 +0.34%, Verizon (NYSE:VZ) $40.81 
+0.64% and Exxon/Mobil (NYSE:XOM) $47.47 -0.06%.

General Electric (NYSE:GE) $33.82 +0.2%, which has its fingers in 
just about every piece of the global economic pie has been 
bumping the $34.00 level in recent sessions, and close to its 
January 28, 2004 52-week high of $34.57.

I'd like to thank Leigh Stevens and Jonathan Levinson for filling 
in for me last week with the Index Trader Wraps, and while I 
haven't had time to fully read their insight and analysis, my 
eyes are glued on what I've felt was the "leadership" index for 
strength and the very broad NYSE Composite ($NYA.X), which just 
before my vacation departure, was showing some technical strength 
above the 6,505 level.

NYSE Composite ($NYA.X) Chart - Daily Intervals

 

I have shown the NYSE Composite ($NYA.X) with the BLUE 
conventional retracement from its March highs to May lows, and 
the recent rally from its August lows is quite similar to that 
found in May.

Overriding trend would now be up with the break above my 
"cheater's trend."  

It would be as tough a bullish action point for many 1, 2, or 3-
lettered stocks in here based on technical observations dating 
back to June, but with the NYSE NH/NL 10-day ratio above June's 
83.4% peak, a close above my "fitted" 38.2% retracement (PINK) 
could set the course for further gains to the 6,700 level.

In late August and early September I thought further gains would 
only come if the WEAKER NASDAQ NH/NL ratios could build, giving 
some "lift from the bottom" as I like to think of it, and we've 
certainly seen that the past week with the NASDAQ's NH/NL 10-day 
ratio gaining from its September 3 reading of 55.5% to tonight's 
67.5 reading.  

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

 

A rather narrow range of trade last week leaves us with a rather 
narrow WEEKLY Pivot analysis retracement this week.  I believe 
Jonathan Levinson and Keene Little have commented that some of 
their technical indicators have shown near-term resistance from 
128-132, which would also be marked by WEEKLY R1 and WEEKLY R2, 
as well as an old "cheater's upward trend" that I continue to 
leave in place from the May relative lows.

With the NYSE Composite ($NYA.X) showing the technical ability to 
break above its DOWNWARD "cheater's trend," I'd have to use the 
stronger NYSE Composite as a leading index to still have a more 
bullish bias to the SPX.X.

Banks as depicted by both the more regional S&P Banks Index 
(BIX.X) 363.91 (unch) and super-regional and multi-national KBW 
Bank Index (BKX.X) 99.49 +0.15% have been resting the past week, 
while it has been strength from technology giving some further 
lift to the SPX.

On the SPX chart, I've marked what I'd consider to be more of a 
"psychologically round" 400 level tie in with the Semiconductor 
Index (SOX.X), where the Pivot Matrix would show some correlative 
resistance at 407.

Pivot Analysis Matrix - 

 

One of the better correlations found in the Pivot Matrix for 
tomorrow is in the S&P 100 Index (OEX.X) 546.93 +0.15%, which 
managed to eek out a 1 point gain in today's trade.  

OEX resistance is common at 548 and with some after-hour 
gyrations in the NASDAQ-100 Tracker (AMEX:QQQ) $35.63 +0.14%, 
which ticked by at $35.55 in extended hours, OEX support at 545 
and DAILY S2 and WEEKLY Pivot, which has not been traded this 
week, would be important near-term support.

Shares of Oracle (NASDAQ:ORCL) $10.55 -0.65% last ticked by at 
$10.87 after the software maker reported its quarterly earnings, 
while programmable chipmaker Xilinx (NASDAQ:XLNX) $29.04 -0.51% 
plunged to $27.90 after its mid-quarter update.

Xilinx (XLNX) said it now expects revenues to be down 5-7% 
sequentially, a decrease from original guidance of up 2-4% 
sequentially, with gross margins slipping to 64%, which was 
slightly below prior margin guidance of 65%.

The Semiconductor HOLDRs (AMEX:SMH) $31.07 +0.51%, which did bump 
up against their WEEKLY R1 of $31.37 in Monday's trade, last 
ticked by at $30.80.  According to QCharts' pivot algorithm and 
last week's high/low/close, the SMH WEEKLY S2 to R2 is $26.80, 
$28.59, P= $29.57, $31.37 and $32.36.

Jeff Bailey


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

Momentum is Stalling
- J. Brown

Bullish traders beware.  The momentum in the market's four-plus 
week rally is beginning to fade.  Adding to traders' concerns was 
another rise in crude oil prices to $44.14 a barrel.  The 
impending approach of Hurricane Ivan and more sabotage on Iraq's 
pipelines were to blame.  Meanwhile gold futures rose to $407.40 
an ounce on the weak dollar.  

Undermining the rally's strength were more earnings warnings.  
Today LCI Logic and Xilinx (after the bell) joined the growing 
ranks of semiconductor-related businesses that have warned for 
the third quarter.  Retail stocks also suffered as grocer Kroger 
and Office Depot both issued disappointing outlooks.  

Looking at the various sentiment indicators is certainly a mixed 
bag.  Market internals were mixed with declining stocks 
outnumbering advancers almost 15 to 13 on the NYSE and 16 to 14 
on the NASDAQ.  Yet up volume managed to outpace down volume, 
barely, on both exchanges.  Turning to more arcane indicators the 
ARMS index or short-term trading index is turning bearish.  The 5 
and 10-dma's on the TRIN are near or below bearish reversal 
levels.  Yet the point-and-figure chart bullish percent readings 
continue to slowly improve into a more bullish picture.  If 
you've been reading the market commentary then you already know 
about the low levels in the VIX/VXO/VXN.  

Overall it feels like the markets are in transition.  September 
is traditionally the worst month of the year for stocks.  That 
much we've heard several times now.  Election year Septembers 
tend to do a little bit better but not much.  We're moving into 
earnings warning season and investors are going to find less and 
less reasons to own stocks now, especially if they think they can 
buy them for less four or five weeks from now.  

As we reported earlier the Stock Trader's Almanac said odds of 
Monday (yesterday) being up ahead of this Friday's quadruple-
witching options and futures expiration was pretty good.  As 
usually the Almanac was on target. Keeping that in mind the 
Almanac records that this coming Friday is usually down and the 
rest of the month tends to grow fur and claws (those are my 
words, not theirs).  

Looking ahead we have an OPEC meeting tomorrow. Plus, we'll have 
investor reaction to Oracle's earnings that came out tonight.  
Tomorrow also brings the NY Empire State manufacturing index, 
business inventories for July, and the industrial production and 
capacity numbers for August.  Thursday will bring the CPI report.



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

Market Averages

DJIA ($INDU)

52-week High: 10753
52-week Low :  9230
Current     : 10318

Moving Averages:
(Simple)

 10-dma: 10278
 50-dma: 10118
200-dma: 10283



S&P 500 ($SPX)

52-week High: 1163
52-week Low :  990
Current     : 1128

Moving Averages:
(Simple)

 10-dma: 1117
 50-dma: 1099
200-dma: 1115



Nasdaq-100 ($NDX)

52-week High: 1559
52-week Low : 1301
Current     : 1434

Moving Averages:
(Simple)

 10-dma: 1394
 50-dma: 1383
200-dma: 1440



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

CBOE Market Volatility Index (VIX) = 13.56 +0.39
CBOE Mkt Volatility old VIX  (VXO) = 13.55 +0.15
Nasdaq Volatility Index (VXN)      = 19.49 +0.35


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

          Put/Call Ratio  Call Volume   Put Volume

Total          0.93        741,513       692,059
Equity Only    0.67        532,990       355,116
OEX            0.44         68,260        30,397
QQQ            1.75         27,148        47,618


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

Bullish Percent Data

           Current   Change   Status
NYSE          60.3    + 1.0   Bear Correction
NASDAQ-100    44.0    + 5.0   Bull Alert      
Dow Indust.   56.6    + 0     Bear Correction
S&P 500       59.0    + 2.0   Bear Correction
S&P 100       55.0    + 0     Bear Correction


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

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


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

 5-dma: 0.72
10-dma: 0.89
21-dma: 0.95
55-dma: 1.26


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    1333      1395
Decliners    1485      1583

New Highs      90        47
New Lows       18        20

Up Volume    773M      807M
Down Vol.    720M      668M

Total Vol.  1514M     1505M
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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The Option Investor Newsletter                  Tuesday 09-14-2004
Copyright 2004, All rights reserved.                        2 of 3
Redistribution in any form strictly prohibited.


In Section Two:

Dropped Calls: FMC
Dropped Puts: None
Call Play Updates: AHC, BOL, PD, RAI, TDS
New Calls Plays: See Note
Put Play Updates: APOL, FFH, LXK, SPW
New Put Plays: None


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

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


CALLS:
*****

F M C Corp - FMC - close: 46.33 change: -0.59 stop: 44.90     

When we take into account how low the VIX/VXO volatility indices 
are we don't want to take too many chances when it comes to 
bullish plays.  While FMC has bounced from its intraday lows 
today the MACD indicator produced a new sell signal on the 
weakness.  Sharp-eyed chart readers will note that FMC's MACD 
produced a false sell signal in mid-August.  Thus more aggressive 
traders may want to keep the play open and leave their stop under 
support/resistance at $45.00.  

Picked on August 24 at $45.87
Change since picked:   + 0.46
Earnings Date        07/27/04 (confirmed)
Average Daily Volume =    265 thousand
Chart =



PUTS:
*****

None

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


Amerada Hess - AHC - close: 82.63 chg: +0.88 stop: 81.00*new*      

Gains in the oil and oil services sectors were muted today 
despite another 1.5 percent rally in crude prices.  It could be 
that investors are seeing the current bounce in crude as 
temporary that will blow over as soon as Hurricane Ivan turns 
into a tropical storm.  Of course there has been new sabotage on 
the oil pipelines in Iraq and the OPEC ministers are expected to 
meet shortly.  We're encouraged to see AHC bouncing somewhat from 
its rising simple 10-dma but shares remain stuck in a tight 
trading range.  Because of AHC's lack of progress we're turning 
even more cautious.  Our new stop loss will be $81.00.  More 
aggressive traders may want to leave their stop under round-
number support at $80.00 and its simple 40 and 50-dma's.  More 
conservative traders may want to up their stop to $81.40 since 
AHC hasn't traded under $81.40 since September 2nd.  We're not 
suggesting new calls here at this time and we are suggesting 
readers consider exiting if AHC trades within $84.50-85.00.

Picked on August 31st at $80.50
Change since picked:     + 2.13
Earnings Date          07/28/04 (confirmed)
Average Daily Volume =      1.0 million 
Chart =




---

Bausch Lomb - BOL - close: 68.05 change: +0.15 stop: 66.99*new*

In the MarketMonitor today we said that BOL might be dropped 
tonight due to waning momentum.  It's true.  BOL's rising 
momentum is quickly losing steam.  However, today's sharp bounce 
from the $67 level and its simple 10-dma was enough for us to 
give BOL a couple more days of life.  Optimistically we're 
positive on BOL's relative strength.  What concerns us is that 
BOL's gains are slowing and its MACD indicator is looking pretty 
overbought.  If you're sitting on the sidelines it might pay to 
keep BOL on your personal watch list and wait for a dip and 
bounce from the $65.00 level.  We don't want to give BOL that 
much room and we're raising the stop loss to $66.99.  We're not 
suggesting new longs at this time.

Picked on September 01 at $66.51
Change since picked:      + 1.54
Earnings Date           07/29/04 (confirmed)
Average Daily Volume =       397 thousand
Chart =


---


Phelps Dodge - PD - close: 84.74 chg: +1.60 stop: 79.95      

Copper prices have slowly been ticking higher the past several 
sessions and PD has followed suit.  Today's bounce from the 
simple 10-dma is good news but shares of PD are still struggling 
to confidently breakout over the $85.00 level.  Adding to 
investor confidence this morning was news from Fitch who upgraded 
PD's credit rating.  We remain bullish on PD but this is a tough 
spot to consider new positions.  More conservative traders may 
want to up their stop to just under $82.00.  We're going to leave 
ours at $79.95 for now.

Picked on August 26th at $82.10
Change since picked:     + 2.64
Earnings Date          07/27/04 (confirmed)
Average Daily Volume =      2.1 million 
Chart =



---


Reynolds American - RAI - cls: 75.56 chg: +0.86 stop: 72.99     

News that the government plans to prove that the tobacco industry 
is still using deceptive practices in the upcoming racketeering 
case with a potential $280 billion in damages has not affected 
RAI's rally.  The stock continued its bounce from Friday and 
pushed shares back above the $75.00 mark.  The case is due to 
start on September 21st but we're not expecting anything to 
derail the current uptrend.  Remember that our exit range is the 
$77.50-80.00 region.

Picked on August 19 at $72.88
Change since picked:   + 2.68
Earnings Date        08/02/04 (confirmed)
Average Daily Volume =    1.2 million 
Chart =


--

Telephone & Data Sys - TDS - cls: 83.78 chg: +2.30 stop: 79.50*new*

Exit Alert! TDS has produced a strong follow through to Friday's 
breakout back above the $80.00 mark.  Tuesday alone added more 
than 2.8 percent on above average volume.  TDS is nearing our 
original upside target at $85.00.  We are suggesting that readers 
prepare to exit for a profit as TDS approaches the $85.00 level.  
More aggressive traders may want to sell part of their position 
and keep a small speculative position open just to see how far 
TDS can run.  We're going to raise our stop loss to $79.50. 

Picked on August 24th at $78.05
Change since picked:     + 5.73
Earnings Date          07/21/04 (confirmed)
Average Daily Volume =      195 thousand
Chart =



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

Play Editor's Note:
------------------
 
We are not adding any new plays this evening.  We agree that the
trend is your friend and right now the trend is bullish.  However,
most of the major sectors are now in their four and fifth week of
the rally.  Momentum indicators are starting to stall and some 
indicators are already producing sell signals from overbought
territory.  Considering that we're in the worst month of the year,
the volatility indices are near bearish reversal levels, the ARMS
index moving averages are at or near bearish reversal levels, and
oil is rising we don't feel comfortable adding many new bullish
plays at this time.  Yet we can't add new bearish plays just yet.
The next couple of days could still be up before stocks begin
to fade.  Please see our watch list/trading ideas section for 
extra candidates



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

Apollo Group - APOL - close: 80.09 change: -0.54 stop: 82.67

New details are emerging on APOL's recent review and audit by the 
U.S. Department of Education.  Shares of APOL gapped lower this 
morning when news surfaced that the audit of APOL and its 
subsidiary University of Phoenix involved a $9.8 million fine to 
the Dept. of Education.  This was the largest fine ever levied by 
the Department and was focused on APOL's enrollment tactics.  Yet 
by paying the fine APOL is not admitting any wrongdoing.  The 
stock gapped down to open at $78.88.  This was below our trigger 
point at $79.50 and thus becomes our new entry.  The bounce back 
to $80.00 is discouraging but APOL has now filled this morning's 
gap and is free to turn lower again.  The MACD is nearing a new 
sell signal and short-term technicals have already turned 
bearish.  We would look for a drop back under $79.50-79.00 before 
considering new positions.


Picked on September 14 at $78.88
Change since picked:      + 1.21
Earnings Date           10/05/04 (unconfirmed)
Average Daily Volume =       3.3 million 
Chart =


---


FairFax Financial - FFH - close: 127.41 chg: +0.48 stop: 136.00

Our aggressive high risk/reward put play in FFH is doing okay.  
The stock has tried twice in the last two sessions to break back 
above the $130 level and has failed both times.  Traders can use 
the bounce as an entry point for new positions.  We're going to 
keep our stop at $136.00 but more conservative traders might be 
able to get away with a tighter stop near $132.00.   Remember, 
this is a high-risk play for multiple reasons.  Please see 
Sunday's original play description.

Picked on September 12 at $126.50
Change since picked:       + 0.91
Earnings Date            00/00/00 (confirmed)
Average Daily Volume =         59 thousand
Chart =



---

Lexmark Intl - LXK - close: 83.56 chg: -1.19 stop: 86.01     

We finally see a little weakness in the hardware group with the 
GHA index down fractionally.  The move wasn't lost on LXK whose 
oversold bounce is fading under resistance at $86.00 and its 
exponential 200-dma.  This would look like an entry point for new 
bearish positions and we wouldn't object.  However, make sure 
you're comfortable with the long-term picture as evidenced in 
this weekend's newsletter and weekly chart of LXK.  A drop to 
$81.50 may be all we get.  

Picked on September 5th at $86.10
Change since picked:       - 2.54
Earnings Date            07/19/04 (confirmed)
Average Daily Volume =        1.2 million 
Chart =


---

SPX Corp - SPW - close: 35.35 change: -0.20 stop: 36.01     

Did you catch our comments in last night's newsletter about SPW?   
The bounce on Monday boggles the mind.  Barron's came out with 
very negative comments on SPW and its accounting trickery this 
Sunday and what does SPW do?  It rallies on above average volume!  
Now we don't always agree with Barron's either but this time 
they're probably right.  It could be that SPW is just filling the 
gap before turning lower but the velocity of the rebound is 
disturbing.  Plus, if SPW is going to fill the gap then we'd need 
to put our stop at $36.51 and that's not something we feel 
comfortable doing.  We are not suggesting new bearish plays in 
SPW unless shares trade back under $34.75. 

Picked on September 08 at $35.40
Change since picked:      - 0.05
Earnings Date           08/02/04 (confirmed)
Average Daily Volume =       814 thousand
Chart =



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

None


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**********

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


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The Option Investor Newsletter                  Tuesday 09-14-2004
Copyright 2004, All rights reserved.                        3 of 3
Redistribution in any form strictly prohibited.


In Section Three:

Watch List: Gourmet Coffee to the Blue Light Special
Spreads & Straddles: Bulls Remain In Control (Barely...)
Premium Selling Plays: Naked Puts & Calls


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

Gourmet Coffee to the Blue Light Special

___________________________________________________________________

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.
___________________________________________________________________


Starbucks Corp - SBUX - close: 45.97 change: +0.94

WHAT TO WATCH: SBUX may not be the fastest moving stock but it 
does tend to trend.  Shares have now filled in the gap from late 
August and broken through resistance at the $45.00 level and its 
simple 40 and 50-dma's.  Currently SBUX is challenging its late 
August high and the $46.00 mark.  A breakout here could lead 
toward a run at $50 but that may be overly optimistic.  SBUX does 
have the July high at $48.40 to hurdle.  The P&F chart, while 
bullish, looks poised for more weakness.  Something to keep in 
mind.

Chart=


---

Chicago Mercantile Exchange - CME - close: 143.89 change: +2.39

WHAT TO WATCH: We mentioned CME as a potential bullish candidate 
in the MarketMonitor today.  The stock broke out above resistance 
at $140.00 several days ago and now it has retested the level as 
support.  Today's bounce looks like an entry point but keep in 
mind that shares still have overhead resistance in the $147-148 
range.  The bullish P&F chart points to a $180 target.

Chart=


---

Kmart Holdings - KMRT - close: 89.00 change: +3.66

WHAT TO WATCH: KMRT is another high-flyer that aggressive bulls 
may want to take another look at.  The breakout over $80.00 
several days ago was positive and traders stepped in to buy the 
dip.  Now shares are testing the $90.00 level on rising volume.  
While we wouldn't buy KMRT here aggressive traders might consider 
a dip to $85.00.  The P&F chart points to a $116 target.  We 
would target $100.00.

Chart=


---

Fastenal Co - FAST - close: 58.41 change: -1.09

WHAT TO WATCH: The last few appearances of FAST on the watch list 
or in the MarketMonitor have been bearish ones.  Shares have 
broken support at $60 and its simple 50-dma three days ago.  
There was a small bounce and FAST produced another failed rally 
under $60.  This looks like an entry point for bearish positions 
with a target at $55.00 or its rising 200-dma above $53.00.  A 
drop under $58.00 would produce a new triple-bottom breakdown 
sell signal on its P&F chart.

Chart=



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

ATH $86.06 +0.89 - We are still considering ATH a potential 
bullish play.  We're watching for a breakout over its simple 100-
dma.

EBAY $94.41 +2.31 - Nothing goes up forever but EBAY is doing a 
nice job with its third gain in a row and its sixth weekly rise 
in a row.  Today's new all-time high was fueled by a broker 
upgrade. 

VLO $72.50 +1.43 - As expected VLO has broken through its simple 
50-dma.  This could be an entry point or consider looking for a 
dip back toward $70.00 and buying a bounce.



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

Bulls Remain In Control (Barely...)
By Ray Cummins

The major equity averages closed higher Tuesday, despite robust
oil prices and mediocre retail sales data.

Sluggish automotive demand resulted in a small decline in retail
sales for August, while crude futures surged on concerns over
the threat to production facilities posed by Hurricane Ivan and
reports of sabotage on Iraqi export pipelines.  The Dow Jones
industrial average ended up 3 points at 10,318, with McDonald's
(NYSE:MCD) among the blue-chip winners after announcing it will
raise its annual cash dividend to $0.55, a $690 million increase
in its payout to investors.  The NASDAQ composite index finished
up 5 points at 1,915, despite comments from chip-maker LSI Logic
(NYSE:LSI) that its financial outlook was worsening due to excess
inventory in the supply chain.  Broader stock groups also closed
narrowly higher.  The Standard & Poor's 500 index gained 2 points
to end the session at 1,128.  Declining issues outpaced advancers
by a ratio of 6 to 5 on the New York Stock Exchange, where volume
came to 1.2 billion shares.  NASDAQ breadth was slightly worse as
losers bested winners nearly 3 to 2 on volume of 1.4 billion.  In
the bond market, expectations remained high for a 25 basis-point
hike at the FOMC meeting next week.  The 10-year note added 1/32
to yield 4.13%.


~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
SUMMARY OF CURRENT POSITIONS - AS OF 09/12/04
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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?
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
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

Special Tuesday Note: The new spread in Netease.com (NASDAQ:NTES)
came under pressure Tuesday after a sharp rally in Internet stocks.
Conservative traders should consider closing the position on any
pull-back to limit potential losses.  Amazon.com (NASDAQ:AMZN) and
Valero (NYSE:VLO) are now early exit candidates.  CDW Corporation
(NASDAQ:CDWC) remains on the "watch" list.  Genentech (NYSE:DNA)
and Research In Motion (NASDAQ:RIMM) have joined Briggs & Stratton
(NYSE:BGG), Guidant (NYSE:GDT), Kmart (NASDAQ:KMRT) and Vimple
Communications (NYSE:VIP) among the previously closed positions.


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.

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

CCMP - Cabot Microelectronics  $38.29  *** Bottom-Fishing! ***

Cabot Microelectronics (NASDAQ:CCMP) is a supplier of polishing
slurries used in the manufacture of integrated circuit devices
within the semiconductor industry, in a process called chemical
mechanical planarization.  CMP is used by IC device makers to
planarize or flatten many of the multiple layers of material
that are built upon silicon wafers, and is a necessary step in
the production of advanced ICs.  The company's CMP products are
used for a number of applications, such as polishing insulating
layers, the tungsten plugs that go through the insulating layers
and connect the multiple wiring layers of IC devices and copper
wiring.

CCMP - Cabot Microelectronics  $38.29

PLAY (less conservative - bullish/credit spread):

BUY  PUT  OCT-30.00  UKR-VF  OI=1210  ASK=$0.30
SELL PUT  OCT-35.00  UKR-VG  OI=2368  BID=$1.00
INITIAL NET-CREDIT TARGET=$0.75-$0.80
POTENTIAL PROFIT(max)=17% B/E=$34.25


__________________________________________________________________

ONXX - Onyx Pharmaceuticals  $41.99  *** Pure Premium-Selling! ***

Onyx Pharmaceuticals (NASDAQ:ONXX) is a biopharmaceutical company
developing therapies that target the molecular mechanisms that
cause cancer.  With its collaborators, the company is developing
small-molecule, orally available drugs with the goal of changing
the way cancer is treated.  The company's goal is to design oral
anticancer therapies to prevent cancer cell proliferation and
angiogenesis by inhibiting proteins that signal or support tumor
growth.  By exploiting the genetic differences between cancer
cells and normal cells, the company aims to create anti-cancer
agents that minimize damage to healthy tissue.

ONXX - Onyx Pharmaceuticals  $41.99

PLAY (conservative - bullish/credit spread):

BUY  PUT  OCT-30.00  OIQ-VF  OI=7    ASK=$0.25
SELL PUT  OCT-35.00  OIQ-VG  OI=805  BID=$0.70
INITIAL NET-CREDIT TARGET=$0.50-$0.55
POTENTIAL PROFIT(max)=11% B/E=$34.50



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

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.

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

NBIX - Neurocrine Biosciences  $50.65  *** Great Expectations? ***

Neurocrine Biosciences (NASDAQ:NBIX) discovers, develops and
intends to commercialize drugs for the treatment of neurological
and endocrine-related diseases and disorders.  Neurocrine has a
number of programs in various stages of research and development.
Indiplon, for the treatment of insomnia, is its most well-known
product but is also has products for other disorders and the
treatment of endometriosis and fibroids, sexual dysfunction,
anxiety, depression, gastrointestinal problems, solid tumors
and malignant glioma.

NBIX - Neurocrine Biosciences  $50.65

PLAY (less conservative - bearish/credit spread):

BUY  CALL  OCT-60.00  UOT-JL  OI=1    ASK=$0.35
SELL CALL  OCT-55.00  UOT-JK  OI=831  BID=$1.00
INITIAL NET-CREDIT TARGET=$0.65-$0.75
POTENTIAL PROFIT(max)=15% B/E=$55.65


__________________________________________________________________

SSP - E. W. Scripps  $49.66  *** Downgrade = Sell-Off! ***

The E. W. Scripps Company (NYSE:SSP) is a diversified media firm
with interests in newspapers, television networks, and television
retailing.  It operates daily newspapers, along with cable and
satellite programming services.  In addition, the firm operates
United Media, which owns and licenses copyrights relating to
Peanuts, Dilbert and other properties.

SSP - E. W. Scripps  $49.66

PLAY (aggressive - bearish/credit spread):

BUY  CALL  OCT-52.50  SSP-JX  OI=50  ASK=$0.30
SELL CALL  OCT-50.00  SSP-JJ  OI=52  BID=$0.80
INITIAL NET-CREDIT TARGET=$0.50-$0.60
POTENTIAL PROFIT(max)=25% B/E=$50.50



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

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

No straddles or strangles today...

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

SEE DISCLAIMER - SECTION 1

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


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

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

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
SUMMARY OF CURRENT POSITIONS - AS OF 09/12/04
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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%
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%
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%
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%
ESIO     OCT    22.50   23.00   21.54    0.50   6.99%   2.17%

Special Tuesday Note: Ask Jeeves (NASDAQ:ASKJ) became an exit
candidate Tuesday on the heavy-volume rally and the watch-list
position in Resources Connection (NASDAQ:RECN) should also be
closed by conservative traders.  ASTE, ESIO, and PSFT are the
issues to monitor for additional upside activity.  IDX Systems
(NASDAQ:IDXC), Ceradyne (NASDAQ:CRDN), Dick's Sporting Goods
(NYSE:DKS), and Marvell Electronics (NASDAQ:MRVL) 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

CELL   15.96  OCT 15.00  ULN-VC 0.50   67 14.50  31   3.4%   8.3%
CLHB   11.96  OCT 10.00  QPB-VB 0.25   30  9.75  31   2.5%   8.0%
ASKJ   30.46  OCT 25.00  AUK-VE 0.55  717 24.45  31   2.2%   7.4%
CREE   28.10  OCT 25.00  CQR-VE 0.65  637 24.35  31   2.6%   7.3%
USNA   32.40  OCT 30.00  UNX-VF 0.70  438 29.30  31   2.3%   6.1%
YHOO   33.20  OCT 30.00  YHQ-VF 0.60 16k+ 29.40  31   2.0%   5.5%
AMZN   42.67  OCT 37.50  ZQN-VU 0.50 14k+ 37.00  31   1.3%   4.0%

Abbreviations:

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

CELL - Brightpoint  $15.96  *** On The Rebound? ***

Brightpoint (NASDAQ:CELL) is engaged in the distribution of
wireless devices and accessories, as well as the provision of
integrated logistics services to wireless network operators,
resellers, retailers and wireless equipment manufacturers.
Brightpoint handles wireless products manufactured by firms
such as Nokia, Motorola, Kyocera, Audiovox, Sony Ericsson,
Siemens, Samsung, Panasonic and PalmOne.  Its integrated
logistics services are intended to provide outsourcing
solutions for mission-critical requirements of wireless
network operators.

CELL - Brightpoint  $15.96

OCT 15.00 ULN-VC LB=0.50 OI=67 CB=14.50 DE=31 TY=3.4% MY=8.3%


_________________________________________________________________

CLHB - Clean Harbors  $11.96  *** Environmentally Friendly! ***

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

CLHB - Clean Harbors  $11.96

OCT 10.00 QPB-VB LB=0.25 OI=30 CB=9.75 DE=31 TY=2.5% MY=8.0%


_________________________________________________________________

ASKJ - Ask Jeeves  $30.46  *** A Big Day For Internet Stocks! ***

Ask Jeeves (NASDAQ:ASKJ) is a provider of Internet-wide search,
providing consumers with authoritative and fast ways to find
relevant information to their everyday searches.  Ask Jeeves
deploys its search technologies on Ask Jeeves (Ask.com and
Ask.co.uk), Teoma.com, and Ask Jeeves for Kids (AJKids.com).
In addition, to its internet sites, Ask Jeeves syndicates its
monetized search technology and advertising units to a network 
of affiliate partners.  The company is based in Emeryville,
California, with offices in New York, Boston, New Jersey, Los
Angeles, London and Dublin.
 
ASKJ - Ask Jeeves  $30.46

OCT 25.00 AUK-VE LB=0.55 OI=717 CB=24.45 DE=31 TY=2.2% MY=7.4%


_________________________________________________________________

CREE - Cree  $28.10  *** 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  $28.10

OCT 25.00 CQR-VE LB=0.65 OI=637 CB=24.35 DE=31 TY=2.6% MY=7.3%


_________________________________________________________________

USNA - USANA Health Sciences  $32.40  *** A Healthy Stock! ***

USANA Health Sciences (NASDAQ:USNA) develops and manufactures
nutritional and personal care products.  Usana distributes its
products through a network marketing system using independent
distributors that it refers to as Associates.  The company also
sells products directly to Preferred Customers who purchase
products for personal use and are not permitted to resell or
distribute the products.  Usana's primary product lines consist
of USANA Nutritionals, a line of supplements and food products,
and Sense, its line of skin and personal care products.

USNA - USANA Health Sciences  $32.40

OCT 30.00 UNX-VF LB=0.70 OI=438 CB=29.30 DE=31 TY=2.3% MY=6.1%


_________________________________________________________________

YHOO - Yahoo!  $33.20  *** Internet Shares Soar! ***

Yahoo! (NASDAQ:YHOO) is a worldwide Internet business and consumer
services company that offers a comprehensive branded network of
properties and services to more than 200 million individuals
worldwide.  The company offers an online navigational guide to the
Internet via its www.yahoo.com Website, which is a guide in terms
of traffic, advertising and household and business user reach.
Through Yahoo! Enterprise Solutions, the firm also provides many
business services designed to enhance the productivity and Web
presence of its clients.  Yahoo! has offices in the United States,
Europe, Asia, Latin America, Australia and Canada.  

YHOO - Yahoo!  $33.20

OCT 30.00 YHQ-VF LB=0.60 OI=16004 CB=29.40 DE=31 TY=2.0% MY=5.5%


_________________________________________________________________

AMZN - Amazon.com  $42.67  *** Rally Mode! ***

Amazon.com (NASDAQ:AMZN) is a website where customers can find
and discover anything they may want to buy online.  The company
lists millions of items in categories such as books, music, DVDs,
videos, consumer electronics, toys, camera and photo items, PC
software, computer and video games, tools and hardware, outdoor
living items, kitchen and house-wares products, toys, baby and
baby registry, travel services and magazine subscriptions.  At
its Amazon Marketplace, Auctions and zShops services, businesses
and individuals can sell virtually any product to millions of
customers, and with Amazon.com Payments, sellers are able to
accept credit card transactions in addition to other methods of
payment.  The company operates a U.S.-based Website: amazon.com,
and four internationally focused Websites: www.amazon.co.uk,
www.amazon.de, www.amazon.fr and www.amazon.co.jp.

AMZN - Amazon.com  $42.67

OCT 37.50 ZQN-VU LB=0.50 OI=14447 CB=37.00 DE=31 TY=1.3% MY=4.0% TS



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

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.

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

CECO - Career Education  $33.74  *** Stuck In A Range? ***

Career Education Corporation (NASDAQ:CECO) is a provider of
private, for-profit post-secondary education, with campuses
throughout the United States, Canada, France, United Kingdom
and the United Arab Emirates.  The company also offers online
programs through American InterContinental University-Online,
its e-learning division.  The company's schools have master's
degree, bachelor's degree, associate's degree and a range of
diploma programs in career-oriented disciplines.  The company's
schools offer educational programs principally in five major
career-related fields of study: visual communication and design
technologies, business studies, information technology, health
education and culinary arts.

CECO - Career Education  $33.74

PLAY (sell naked call):

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

SELL CALL  OCT 40    CU-JH     2108   0.50  40.50   6.0%   1.2%


_________________________________________________________________

CTB - Cooper Tire & Rubber  $21.59  *** Sell-Off Underway! ***

Cooper Tire & Rubber Company (NYSE:CTB) is a manufacturer of
replacement tires and original equipment automotive components.
The company is organized into two separate, reportable business
segments: Cooper Tire and Cooper-Standard Automotive.  Cooper
Tire, the segment that comprises the company's tire and related
businesses, focuses on the sale of passenger and light truck
replacement tires.  Cooper-Standard Automotive, the segment that
includes all of Cooper's automotive components business, designs
and manufactures automotive body sealing products, as well as
noise and vibration control products and fluid handling systems
for the automotive industry.

CTB - Cooper Tire & Rubber  $21.59

PLAY (sell naked call):

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

SELL CALL  OCT 22.5  CTB-JX    115    0.35  22.85   4.3%   1.5% TS


_________________________________________________________________

MDCO - The Medicines Co.  $27.59  *** Premium-Selling Only! ***

The Medicines Company (NASDAQ:MDCO) operates as a pharmaceutical
company selling and developing products for the treatment of 
hospital patients.  MDCO acquires, develops and commercializes
biopharmaceutical products that are in late stages of development
or have been approved for marketing.  The company began selling
Angiomax, its lead product, in U.S. hospitals in January 2001 as
an anticoagulant replacement for heparin.  MDCO is developing
Angiomax for additional potential hospital applications as a 
procedural anticoagulant and also for use in the treatment of
ischemic heart disease.

MDCO - The Medicines Co.  $26.17

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    MQL-JF     96    0.80  30.80   7.8%   2.6%



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