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 ************************Advertisement************************* Live Securities Brokerage Service with Licensed Option Principals OCO Stop & Profit Orders OneStopOption All types of Spreads and Buy Writes 888-281-9569 Auto-Trade Market Monitor Signals Personal Service and Education **Services available for Foreign Traders including Canada** http://www.OneStopOption.com ************************************************************** ***************** INDEX TRADER WRAP ***************** 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 ************************Advertisement************************* Full Service Brokers Man Financial announces the formation of the OneStopOption Brokerage Group, addressing the demand for personalized, experienced service for both securities* and futures trading within the same firm. Licensed Option Principals Andrew Aronson and Alan Knuckman specialize in live assistance of stock*, option* and futures traders. 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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 ************************Advertisement************************* Full Service Brokers Man Financial announces the formation of the OneStopOption Brokerage Group, addressing the demand for personalized, experienced service for both securities* and futures trading within the same firm. Licensed Option Principals Andrew Aronson and Alan Knuckman specialize in live assistance of stock*, option* and futures traders. The combination of the proven Man Financial global presence and the convenience of one group for all trading needs provide customers with the tools needed for success. Live Broker and Online Trading Available 888-281-9569 http://www.OneStopOption.com ************************************************************** ******************** PLAY UPDATES - CALLS ******************** Amerada Hess - AHC - close: 82.63 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 ************************Advertisement************************* Live Securities Brokerage Service with Licensed Option Principals OCO Stop & Profit Orders OneStopOption All types of Spreads and Buy Writes 888-281-9569 Auto-Trade Market Monitor Signals Personal Service and Education **Services available for Foreign Traders including Canada** http://www.OneStopOption.com ************************************************************** ******************* PLAY UPDATES - PUTS ******************* 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 ************************Advertisement************************* No time to follow the Market Monitor? Tired of missing good Trades because you stepped away from your computer? OneStopOption Group can follow the Market Monitor for you. You choose the number of contracts, we take care of the rest!! Trade Stock Options, Stocks and ALL Futures with the same Group. Call us 888 281-9569 to see if you qualify to have us rebate your subscription cost. http://www.OneStopOption.com ************************************************************** ********** DISCLAIMER ********** Please read our disclaimer at: http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html ************************************************************** ADVERTISING INFORMATION For more information on advertising in OptionInvestor Newsletter, or any Premier Investor Network newsletter please contact: Contact Support
The Option Investor Newsletter Tuesday 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. ************************Advertisement************************* Live Securities Brokerage Service with Licensed Option Principals OCO Stop & Profit Orders OneStopOption All types of Spreads and Buy Writes 888-281-9569 Auto-Trade Market Monitor Signals Personal Service and Education **Services available for Foreign Traders including Canada** http://www.OneStopOption.com ************************************************************** ******************* SPREADS & STRADDLES ******************* 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% ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ SEE DISCLAIMER - SECTION 1 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ************************Advertisement************************* Full Service Brokers Man Financial announces the formation of the OneStopOption Brokerage Group, addressing the demand for personalized, experienced service for both securities* and futures trading within the same firm. 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