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Daily Newsletter, Sunday, 09/19/2004

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The Option Investor Newsletter                   Sunday 09-19-2004
Copyright 2004, All rights reserved.                        1 of 5
Redistribution in any form strictly prohibited.

Entire newsletter best viewed in COURIER 10 font for alignment

In Section One:

Wrap: The Stage Is Set
Futures Wrap: See Note
Index Trader Wrap: EVERY WITCH WAY
Editor's Plays: Busted!
Market Sentiment: September: To Dip or Not to Dip?
Ask the Analyst: Low volatility will try your patience
Coming Events: Earnings, Splits, Economic Events 


Posted online for subscribers at http://www.OptionInvestor.com
******************************************************************
MARKET WRAP  (view in courier font for table alignment)
******************************************************************
        WE 9-17         WE 9-10         WE 9-03         WE 8-27 
DOW    10284.46 - 28.61   10313 + 52.87   10260 + 65.19 + 84.91 
Nasdaq  1910.09 + 15.78 1894.31 + 49.83 1844.48 - 17.61 + 31.07 
S&P-100  545.80 +  2.45  546.25 +  5.19  541.06 +  0.18 +  4.84 
S&P-500 1128.58 +  4.66 1123.92 + 10.29 1113.63 +  5.86 +  9.42 
W5000  10993.32 + 57.00   10936 +115.44   10820 + 65.86 +106.22 
SOX      388.50 +  4.89  383.61 + 25.77  357.84 - 24.50 -  3.66 
RUT      573.17 +  3.26  569.91 + 13.67  556.24 +  4.57 +  3.75 
TRAN    3257.39 + 24.00 3224.38 + 82.53 3141.85 + 33.05 + 17.93 
VXO       13.55           13.49           13.91           14.79
VXN       20.13           19.56           21.06           21.27
******************************************************************

The Stage Is Set
by Jim Brown

The indexes clung to the levels reached last week with the
tenacity of a rock climber 200 feet up a cliff. The Dow
managed to fight off several attempts to break 10250 and
closed the week with only a minor loss. The Nasdaq fought
off several attempts to break 1900 and posted a gain for 
the week. This is a very strong performance given the 
numerous market factors. 

Dow Chart - 60 min

Nasdaq Chart - 30 min

SPX Chart - 30 min


The only economic report on Friday was the first look at
the Michigan Consumer Sentiment and it offered no clues
as to the current trend. The headline number at 95.8 was
barely below the August reading of 95.9. The current 
conditions component fell slightly and the expectations
component rose slightly. All the changes were technically
insignificant. The last four months have flat lined at
the 96 level and it suggests consumers are in a wait and
see mode as we approach the elections. 

The bad news did not come from government economics but
from private research groups. ISI reported on Friday that
retail softness was increasing and may be weaker than
previously thought. The International Council of Shopping
Centers reported that same store sales increases have 
slowed in the past two months on a year over year basis.
This corresponds with the 2003 tax rebate and the surge
in buying in late 2003. This rising tide of negativity
toward retailers and the consumer could come back to
haunt us as the holiday season approaches. There are 
conflicting opinions at present on the expected strength
of the holiday buying season and the strongest opinions
are leaning to a weak holiday. This would lead to weak
earnings and missed comps with a long spring and summer
ahead.

On the earnings front the numbers are starting to appear.
The numbers of warnings that is. So far we have had 583
warnings for Q3 compared to only 362 this time last year.
305 companies have given positive or inline guidance
compared to 495 at this point in 2003. In just the first
12 days of September we have seen 94 warnings with 30 of
those supposedly related to the hurricanes. The current
tally of expected earnings growth is rough with an 
estimate wide enough for Ivan to blow through. Analysts
are quoting earnings increases of +13% to +17% for Q3. 
I think they are afraid to publish the real numbers and
inciting a panic. This will be the first time in five 
quarters that earnings will be under 20% and several of
those quarters were well over 20%. Reuters is now quoting
only +8.5% revenue growth for the quarter compared to 
more than +10% last quarter. Hurting earnings are tough
comparisons with 2003, lost income due to the hurricanes
and higher energy prices.

Oil prices jumped +1.71 on Friday to $45.63 and showed
no indications of weakening at the close. Those energy
prices are not expected to drop back to prior levels 
any time soon. Andrew Clark, an analyst with Lipper, 
went public with their oil price forecast on Friday.
He said we could see a return to sub $40 oil AFTER the
election with the low maybe in the $36-$37 range. Once
that post election dip has arrived they expect oil 
prices to rise to $67 per barrel over the next couple
of years. The problem as I have been discussing in this
column recently is rising global demand and decreasing
global reserves. He noted that the UK had returned to 
a net importer and rising demand in India, China and 
Japan would outstrip production increases. We know from 
commentary last week on OPEC that they are powerless 
to produce enough oil on demand to lower prices. They
can talk a good game but there are no actions to back 
it up. For the short term most analysts expect terrorist
attacks on various OPEC suppliers between now and the
elections as a way of putting pressure on the U.S. This
should continue to keep the prices high until November. 

Following that thought Germany issued an "urgent" 
warning for all German citizens to leave Iraq. When
a country uses the word urgent in its warnings it is
because they have information suggesting an imminent
danger. With the election only six weeks away there is
sure to be further escalation of the kidnappings, car
bombs, rocket/mortar attacks, pipeline destruction
and attacks on American troops.  

Downgrades replaced earnings warnings on Friday as
EBAY was cut to a hold at Leg Mason with a price target
of $100. They said recent gains have fully valued EBAY.
Cisco was downgraded by Lehman on the basis of uninspiring
sales in recent weeks. Lehman cut Cisco to a hold and they
said the stock should remain trapped in the $18-$20 range.
According to Lehman recent comments from executives of
communications chip suppliers like ALTR, BRCM and XLNX
suggest that large equipment manufacturers like Cisco
are actively rebalancing their inventory. In English 
that means they are suddenly buying fewer chips from
those vendors. Lehman also said that Cisco's increasingly
cautious commentary could also be a negative sign. 
 
Despite all these negative factors all the major indexes
closed in positive territory with the exception of the
Russell-2000. Even the lower book to bill could not
keep the SOX from closing higher and it added +7 points,
nearly +2%. The Dow may have closed negative for the
week but it was only slightly negative. Actually the
Dow closed almost exactly where it opened on Sept-3rd.
We have tried multiple times to crack the long term
downtrend at 10350 with no success. We have also held
current support at 10250 despite multiple attempts to
break it. For three weeks we have traded in this 100 
point range despite earnings warnings, high oil prices
and the calendar. 

The Nasdaq did manage to tack on +16 points for the 
week but that was due mostly to the Monday spike more
than the performance for the rest of the week. The
Nasdaq has traded in a narrow 20 point range for the 
week and ended right in the middle at 1909. Considering
the negative factors and the heavy tech warnings this
should also be considered bullish. 

The Dow has what appears to be forming a bullish flag
as it consolidates its three weeks of gains. The Nasdaq
is showing a bullish pennant. The SPX has a solid 
ascending triangle with 1130 as the upper resistance.
This is the same resistance as the downtrend from
March. All three indexes are showing bullish patterns
in a market that has far more negatives than positives.
Traders can't hardly help but be bullish with confirmation
on multiple indexes. If there is such a thing as too many
positive charts then we are in trouble.

The challenge is still the calendar. Next week we will
enter the most active period of the warning cycle and
the last two weeks of the quarter. Those companies
hoping for a miracle to avoid missing estimates are
watching the calendar tick away and they will have to
make some decisions quick. The next two weeks normally
contain the most warnings. 

Much of that bad news is already baked into the cake. 
We saw the SOX rise today despite the BTB numbers. One
brokerage went public saying they thought the worst
was over for chips. They still expect more warnings
and slower sales but they felt the majority of the
price punishment was over. This gave the chips a 
bounce but the rebound foundation is still very shaky.

While I see traders turning bullish all around me I
would still urge caution. I would gladly go long on
any SPX move over 1130 but all indexes would have to
be firing on better volume than we had this week to 
make it successful. 

The closing setup on Friday had the SPX closing at a
three day high at 1128.58. The Russell, which I had
mentioned as the key for Friday experienced several 
bouts of expiration related weakness but it still 
managed to cling to the high ground near 575 resistance.
This keeps it in range of a break of that 575 level and
a short covering romp to 590. Sounds bullish but that
is exactly the way it is setting up. The Russell has 
joined the big cap party with the identical  bullish
formation.

Russell Chart


The cautionary points are still the same. The earnings
warnings are likely to increase and the volatility is
extremely low. Volume was higher on Friday due to the
OpEx but it was evenly matched. The A/D numbers were
almost an identical tie across all markets. It is 
almost scary to have all the positive factors lining
up at the same time the negative factors are increasing.

With no material economics due out early in the week
and the Nikkei closed on Monday we could start out the
week in positive territory. Tuesday is the FOMC meeting
and the conventional wisdom is for another rate hike.
There is a growing thought that the Fed could give 
some neutral guidance along the lines that they were
going to watch the economy for signs of growth before
making any more hikes after Tuesday. While I think this
is wishful thinking there is a growing contingent of 
analysts that think there is an outside chance of this
happening. This could provide a stronger bullish bid 
on Monday in hopes of a Fed blessing on Tuesday. 

This bullish bid could be offset by the normal post
OpEx settlement process. Traders who wake up on Monday
with stock in their account they did not expect or
stock missing they really wanted will scramble to 
square those positions. This typically provides
volume but no direction. Bulls need to get a solid
spike over the 10350/1920/1130/575 resistance to start
a wave of short covering and have a chance of offsetting
the OpEx confusion. Bears are hoping for resistance to
hold and some big name company to warn. We all know 
there are some big name confessions in our future and
a Monday warning could set the tone for the week. 

I think it is important not to lose sight of the big
picture regardless of your bias. The indexes are at
strong resistance with more negative factors than
positive. The bulls have chosen to climb this wall of
worry and that is great as long as they don't slip. 
The strongest rallies appear when bulls power over 
the strong ranks of protesting bears. It produces a
short wave similar to Ivan's storm surge that powers
over everything in its path. While that may be overly
graphic we have all seen those vertical moon shots in
the past when conditions combine to produce the perfect
squeeze. TrimTabs.com said equity funds saw the strongest
inflows of cash since July for the week ended Sept-15th.
$2.6B poured into funds and that was on top of the $1.7B
from the first week of September. That cash has to go
somewhere and the end of the quarter is only two weeks
away. Money is coming to market in anticipation of a
either a buying opportunity or a rally. 
  
About the only guarantee we have for next week is that
we probably will not trade in the same 100 point range 
on the Dow. We are poised to go directional and the
only question is which direction. Logic suggests the
negative factors will come to a breaking point when
some currently unforeseen event appears to tilt the
scales in the favor of profit taking. However, logic
is very overrated when determining market direction.
Investing is a team sport and the crowd always favors
the bulls even more when they are the underdogs. That
sentiment has been clearly evident over the last three
weeks. The SOX rebounded +10% when chip companies were
warning daily. The Dow is within 75 points of its three
month high. 

The stage is set, the props are in place and the 
audience is ready. Will the next act be reminiscent 
of a WWF tag team smack down with opposing forces running
in circles and going nowhere? Or maybe a replay of the
Alamo with a few bulls holding the high ground while
waves of bears mount an assault? I think traders would
rather see Rocky appear and lead the charge up the wall
of worry with his Gonna Fly Now music playing in the 
background. Trying hard now, Gonna fly now, Flying high
now. Is that music I hear? 

Enter Very Passively, Exit Very Aggressively!

Jim Brown


************
FUTURES WRAP
************

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


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

EVERY WITCH WAY 
By Leigh Stevens
lstevens@OptionInvestor.com 

THE BOTTOM LINE – 
With the Dow Transportation Index (TRAN) going to a new high in a
 a "what, me worry" about higher costs attitude, keeping strange 
company with a new high for the Oil stock Index (OIX), as crude 
prices shot up at week's end - the market seemed a bit be-witched 
by expiration Friday. A low VIX (CBOE Market Volatility Index) 
has often accompanied tops this year, but the market still chugs 
higher.  

I anticipated two things going into the past week - the Sept. S&P 
100 Index options would go out with OEX at between 445 and 450 - 
enough to rain on the bears parade, at least those holding 445 
puts AND that the market would continue to work at least modestly 
higher as long as traders weren't too bullish - they aren't yet.   

With bellwether Dow (and S&P) stock GE breaking out, these 
Indices seem now more likely to at least challenge if not break 
out above, key overhead technical resistance. The S&P 500 
continues to creep further above its 200-day average but also is 
nearing its downtrend line. An interesting week ahead.  Specifics 
are with the charts below.
  
THE NUMBERS - 
The S&P 500 Index (SPX) was up 5 points to 1,128.55. SPX tacked 
on 0.4% for the week. The Dow 30 stock average (INDU) ended up 
39.9 points (+ 0.4%) to close at 10,284. For the week, INDU broke 
a sting of weekly gains by slipping 0.3%.

The Nasdaq Composite Index (COMP) rose 6 points (+ 0.3%) to 
1,910.09, helped by some gains in semiconductor shares (SOX) even 
after some negative news on chip orders - for the week, the 
Nasdaq was up 0.8%. The Russell 2000 (RUT) small-cap index ended 
0.2% lower.

FRIDAY'S TRADING ACTIVITY – 
Even with the craziness of quadruple witching (it rolled off the 
tongue better when it was merely 'triple'), it was hard to figure 
the Transports (TRAN) going to a new high along with the CBOE Oil 
Index (OIX), as crude oil prices spiked up sharply on Friday. 
Stocks in general would have done even better without the jump in 
oil prices.

Nearby crude futures rallied to above $45 a barrel as many oil 
and gas operations in the Gulf of Mexico were halted and with a 
few days ahead to ascertain and fix hurricane damage. With much 
of our imports coming into the U.S. via the Gulf coast states, 
the heavy storms are making it difficult to ship, produce and 
refine crude oil.
 
Stocks also dipped some after the University of Michigan reported 
a drop in its consumer sentiment survey number. U of M's consumer 
sentiment index dipped slightly, to 95.8, from 95.9 in August, 
below an improvement to 96.5 that had been anticipated.  

Never underestimate the power of the blue chips and some positive 
take on earnings in a market that is trying to find direction - 

General Electric (GE) shares rallied in early trading after 
Prudential said it was time to buy the company's stock. Pru's 
analyst said GE's energy business, which represents nearly one-
fifth of sales, is expected to start rebounding in the fourth 
quarter and continue accelerating throughout 2005.

Ford (F) rallied nearly 2% after the company lifted its earnings 
forecasts for the year, citing financial services and improved 
costs. 

Circuit City climbed over 4% after the consumer electronics giant 
reported a fiscal Q2 loss that was less than expected. The 
company said average customer spending was higher than last year.

On the other hand, there's tech - 

Qualcomm (QCOM), the 2nd most heavily weighted stock in the 
Nasdaq 100 (NDX) Index, dropped nearly 4% after the maker of 
mobile-phone equipment maker warned that accounting errors would 
result in lowered earnings - opps!

The latest survey on orders for chip equipment confirmed a 
slowdown in the semiconductor industry, which has been hit by 
earnings warnings from key chip companies like Intel (INTC), 
National Semi (NSM) and LSI Logic (LSI). However, with all that 
probably priced into the Semiconductor Index (SOX) and more, SOX 
rallied some and looks like it might even challenge its key 400 
resistance area again. The market "discounts" and OVER-discounts.

OTHER MARKETS –
Bonds ended lower after a rally this past week had investors 
taking some profits ahead of the weekend and ahead of next week's 
widely-anticipated rate hike by the Fed. The 10-year Treasury 
note closed out the day down 16/32 at 101 to yield 4.13% (up from 
4.05% Thursday, the lowest since early-April. 

The dollar gained slightly against the Euro and Yen - however, 
sharp gains were seen against the Canadian dollar after inflation 
data there raised doubts about the extent of further interest-
rate hikes in Canada. 

MY INDEX OUTLOOKS – 

S&P 500 Index (SPX) – Daily chart:

Key near resistance comes in at the down trendline as noted by 
the first down (red) arrow intersecting around 1133. Based on the 
still-bullish chart pattern, there could be a move through this 
area, toward prior highs in the 1146 area. If this kind of 
advance develops it would also put the S&P 500 (SPX) in the area 
of my upper trading envelope line. SPX looks like it wants to go 
a bit higher still. 

Near support is in the 1115 area down to around 1110.  A close 
under 1112-1110 breaks the current uptrend.



I figure that the price move is going to be to whatever it takes 
to get my sentiment indicator more toward a bearish level - that 
is, at least a one-day reading at the upper extreme.   

S&P 100 Index (OEX) – Daily chart:

OEX is at a key juncture here, with the Index struggling so to 
speak to break out above technical resistance implied by the down 
trendline on the daily chart, which is also the intersection of 
the 200-day moving average. A move to new highs here, above 548, 
especially on a closing basis, would set up a target to around 
558 as a maximum next and maybe final objective. 

I give the slight benefit of the doubt to a move through this 
overhanging resistance and for another 10 point upside. I 
wouldn't overstay in calls however as downside risk is probably 
equal to the further upside potential at this point.  

The low VIX or CBOE Volatility Index number has most often this 
year occurred in the same time frame as when rallies have reached 
their peaks. High VIX numbers have tended to occur at bottoms, 
per the red and green arrows on the Volatility Index chart 
(middle) below.  



There may be a bearish RSI divergence shaping up but it's too 
soon to tell on this - there is not yet a new closing high where 
we can then see if RSI confirms by also going to a new peak. RSI 
has not quite gotten up yet to what is typically a high extreme 
either, which is another use of this indicator.  

NOTE: I wrote a response to a Subscriber question in my most 
recent Trader's Corner article on the possible significance of 
the recent low VIX levels.  See - 
http://www.OptionInvestor.com/traderscorner/tc_091604_1.asp

Dow 30 (INDU) – Daily chart:

I'm not trying to be redundant, but this next chart looks like a 
duplicate of the S&P 100.  The Dow Industrials (INDU) is holding 
in what looks to be a tight consolidation just under the top end 
of its well-defined downtrend channel. If a move higher happens 
soon and there is a decisive upside penetration of the top end of 
its 10,230 - 10,350 range, a move to the 10,500 area is possible.

After a relatively tight consolidation and back and forth narrow 
trading range, I usually anticipate a breakout type move, as long 
as it doesn't take TOO long for it to happen - the longer it goes 
sideways, the more it looks like a top. It's time for INDU to 
make its move.  Or NOT, in which case the Dow is likely to trend 
back down toward support in the 10,100 area.   

If near technical support implied by the low end of the recent 
price range around 10,230 gives way, then I look to important 
support coming in at 10,100.   



The momentum is down now according to the Stochastic process 
model or indicator - the one above has length set to 21. Based on 
this indicator, look for prices to break soon. 

Nasdaq Composite (COMP) Index  – Daily:

It's looking like the Nasdaq Composite can climb further based on 
its pattern here - looking at a bull flag measurement, the top 
end of the uptrend channel and my upper trading envelope, 1950 
looks like an upside objective.  

Near support is at 1890, then in the 1865 area.  A close under 
1890 would suggest the lower support as an objective rather than 
the upper target. 



Based on the upside momentum we're seeing in the daily total 
Nasdaq up volume, as measured on a 10-day moving average, I would 
have to judge the Composite as capable of going still higher.  
  
Nasdaq 100 (NDX) Index  – Hourly:

I've taken another look and assessment of upside potential for 
the Nasdaq 100 (NDX) based on the well-defined uptrend channel 
being traced out on the hourly chart.  While 1440 is resistance 
that must be overcome - with a move to there and not further 
would set up a double top - another rally to touch the top of the 
channel at the down (red) arrow would take NDX to around 1460.

I suggested on Thursday that 1420 looked like the area to exit 
calls and look at put positions – this is now looking like too 
low for an upside objective as NDX could get to 1440.

The 1410 area is support implied by the low end of the uptrend 
channel, per the up (green) arrow on the chart below.  A break of 
this area, would suggest downside potential back to support in 
the 1380 area.  



The sideways move has put the RSI back down out of the overbought 
territory.  Note that the last price peak was both a double top 
and was accompanied by a lower RSI reading - sure enough, a 
pullback followed, although just enough so far to "throw off" the 
overbought reading.  Another rally seems likely - stay tuned!   

Nasdaq 100 tracking Stock (QQQ) Daily:

Based on the pattern I'm seeing, I now think there is some 
potential for QQQ to break out above its resistance overhang at 
36 and advance to around 37.  Support at 35 needs to hold 
however.  A close under 35 would suggest that the Q's were 
heading back to 34 support. 

The stock in the past week approached an overbought extreme in 
the RSI, but there is tendency for a couple or multiple readings 
like this before prices break. Stay tuned on this.   



The On Balance Indicator (OBV) continues to trend steadily 
higher, suggesting some accumulation of QQQ and provides an 
ancillary clue for a move still higher also.  

Good Trading Success!



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**************
Editor's Plays
**************

Busted!

The market gapped open on Monday and the low volatility
QQQ lottery play I diagrammed last week was busted before
we finished our first cup of coffee. The 25-cent QQQ
Sept Put turned into 20 cents at the open and went
downhill from there. Hopefully as experienced traders
you saw the gap open on the Nasdaq buy program and 
never placed your bet. But that was last week and no
good crying over spilled milk money.


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

DJX Put Update 

9/12/04 I would suggest closing the play on Monday 
on any Dow strength. 

Dow strength was what we got right out of the gate
and our 37 cent puts dropped to 15 cents at the open.
Busted again! That buy program on Friday the 10th
carried over into Monday's open and it was all over
but the whining. 


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


GOOG Put Update $117.40

Jeepers Batman, did you see that rocket? 

Last Friday papers filed with the SEC showed Fidelity had
a 15% stake in Google and the shorts got killed. The stock
ran from $102 to $106 in about five candles. The gap up on
Monday continued the pain and the short squeeze never stopped.
With 25 million shares available to trade and Fidelity with
5 million the float and shares available to short suddenly
got a lot tighter. 

To make matters worse search firm Heidrick & Struggles 
said it exercised the warrants it held for net proceeds
of $128.8 million. The recruitment firm obtained warrants
for services in 2001 to purchase 1.2 million shares of
Google for the whopping sum of 30 CENTS per share. I don't
know how many employees it supplied Google for that sweet
deal but the commission was definitely a home run. That
$360,000 bill won the lotto at $128.8 million.

All this activity is punishing the shorts and the jump
in the price is making the valuation question less of an
issue on a daily basis. Willing buyers are not finding 
any willing sellers and everybody has dollar signs in
their eyes. 

Personally I don't think anything has changed and once
those lockups begin to expire there will be more than
10 times the current shares available to trade. Once
Google has to face the earnings gauntlet in October
traders ay be a lot less excited about their prospects.

Nov-16th 39,081,106 new shares for sale
Dec-15th 24,875,091 new shares for sale
Jan-16th 24,874,091 new shares for sale
Feb-14th 176,784,389 new shares for sale

While I am still positive on the trade I do not want to
be stupid. If you feel like it is running away from you
then by all means bail now. The March $100 puts closed
at $7.00 on Friday. I still think we will see sub $100
levels before the big lockup expires in February. 
Possibly well below $100 if their earnings fail to 
impress. 

Google Chart


http://members.OptionInvestor.com/editorplays/edply_082904_1.asp
http://members.OptionInvestor.com/editorplays/edply_090504_1.asp

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


Terrorist Insurance

Everybody expects some terrorist activity between now 
and the elections in an effort to stop oil flow and put
pressure on the administration. With oil prices already
on the fast track higher the energy companies are all
making new highs. 

I have been trying to wait for a pullback for several
weeks to get an entry point for a long play on oil but
each week just brings higher prices on every oil stock.

My time is running out. If we are going to play a
potential jump in oil prices before the election we
are going to have to bite the bullet and buy something. 

There are so many companies that have vertical charts
that it is tough finding something not already overpriced
in the options. 

I chose Marathon (MRO) because they just broke resistance
on Friday at $38 but are still far enough under $40 for
the options to be reasonable. 

Another reason is their name popping up in almost every
oil article I read. They are getting back into Libya. 
They are involved in Canadian oil sands. Their 250,000
BPD refinery north west of New Orleans was not hit by
Ivan and returned to full operation on Friday. They
are everywhere and apparently doing great. 

MRO closed at $38.70 and the January $40 call MRO-AH
is only $1.45. The stock has added nearly +6 in the
last four weeks and with the breakout over resistance
at $38 is poised to run higher on short covering. If
we do get a severe terrorist event we could easily 
see $45.

I toyed with the OCT $40 Call for 45 cents but there
is just not enough time for any election problem. The
January call should retain time premium and weather
any dips without losing much value.

I am planning on closing the play the day after the 
election depending on events. If something happens 
that puts a serious crimp in production we may just
ride it. 

BUY Call Jan-$40 MRO-AH currently $1.45

Oil spiked at the close on Friday so we may get a drop
at Monday's open. If so look for a bottom to form before
entering the play. I would love to buy it back around
support at $36 but that may be wishful thinking. 


Marathon Chart


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

September: To Dip or Not to Dip?
- J. Brown

Considering September's historical track record as the worst 
month of the year this one has been pretty mild.  Dare we say 
even bullish?  We're more than half way through the month and the 
S&P 500 index just notched its sixth weekly gain in a row.  The 
NASDAQ has been up four out of the last five weeks while the 
Industrials just ended a five-week winning streak.  That 
certainly doesn't sound very bearish to us.  

To be honest I don't trust the market's show of strength these 
last few weeks.  There are plenty of reasons to not be bullish.  
Crude oil has risen 7 percent in the last week to close over $45 
a barrel.  The recent semi book-to-bill numbers confirmed a slow 
down in the semiconductor sector that has unleashed a parade of 
revenue warnings.  The recent rash of earnings warnings are not 
just coming from tech stocks.  Dow-component Coca-Cola (KO) 
issued an earnings warning this week.  There have also been a 
number of downgrades this week.  Economic data shows that growth, 
while still there, is slowing significantly.  Corporate earnings 
growth is slowing and this upcoming October earnings season is 
supposed to be the first quarter in five that profit growth will 
slow to less than 20 percent.  Momentum indicators are fading and 
most are at or near new bearish reversal signals as the major 
indices and sector indices enter their fourth, fifth and sixth 
week of the current up trend.  The volatility indices are all at 
or near bearish reversal levels and have been for days.  Plus, we 
have the threat of a terrorist event on home soil as we near the 
November elections.  The markets have been able to shrug off all 
of this on top of what is typically a weak period in the markets.  

On the flip side if you're feeling optimistic there are a few 
things investors can be positive about.  Earnings growth is still 
relatively strong at 15-17 percent.  The U.S. is certainly 
expanding faster than its European counterparts.  Our economic 
growth is still there and we are still growing despite a summer 
slump.  The Dow Transportation average is hitting new five-year 
highs.  Dow Theory suggests that you can't have a sustained 
market rally without the transports and right now transports are 
leading the way higher while completely ignoring the rise in oil.  
The markets have not succumbed to the traditional September 
weakness (yet).  The most recent surveys suggest that business 
will begin hiring employees at a faster rate.  Wall Street 
appears to be pricing in a win for the incumbent President.  
Since the markets hate uncertainty just knowing who they think 
will win gives money managers, politics aside, a stronger sense 
of confidence.  Inflation is under control as evidenced by the 
recent PPI and CPI indices.  Plus, the threat of a terrorist 
attack may still be there in our collective consciousness but the 
impending dark cloud seems to have lightened up a bit.  Then 
again that last variable has probably been affected by the lack 
of media attention.  News outlets have been distracted by four 
weeks of non-stop hurricane reporting.  Yes it certainly seems 
that investors are employing some selective hearing to hear only 
what they want to.  TrimTabs just reported that inflows to equity 
funds for last week ending September 15th were $2.8 billion.  
That's the biggest week since early July.  

The better question is will the market strength last?  Consumer 
confidence numbers were lower than expected on Friday morning.  
While one report is not alarming if the consumer pulls back then 
the traditionally stronger fourth-quarter could be disappointing.  
Fortunately, I don't believe that will be an issue.  Historically 
the markets charge higher after a Presidential election and 
that's a trend I'd bank on assuming we don't have a terrorist 
event.  Most market pundits are bullish on stocks throughout the 
rest of this year.  I agree.  The second half of October through 
November and December should be positive for stocks.  What I'm 
worried about is the next four weeks.  If we can get a decent 
consolidation now then stocks would be poised for a strong post-
earnings season rally.  

Next week will be somewhat busy.  The earnings-warning period 
should come into full swing as corporations confess before the 
October reporting season.  We'll also hear from several early 
announcers.  Monday brings earnings reports from technology 
stocks ADBE, PLMO and RHAT in addition to homebuilders KBH and 
LEN.  Tuesday brings earnings from AZO and GIS in addition to 
brokers GS and LEH.  Wednesday we'll hear earnings from BBBY, 
BSC, DRI and FRX.  Thursday has AGE and RAD.  Yet the main event 
next week is Tuesday's FOMC meeting and the expected 1/4-point 
rise in interest rates to 1.5 percent.  



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

Market Averages



DJIA ($INDU)

52-week High: 10753
52-week Low :  9230
Current     : 10284

Moving Averages:
(Simple)

 10-dma: 10291
 50-dma: 10120
200-dma: 10289



S&P 500 ($SPX)

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

Moving Averages:
(Simple)

 10-dma: 1122
 50-dma: 1100
200-dma: 1115



Nasdaq-100 ($NDX)

52-week High: 1559
52-week Low : 1301
Current     : 1426

Moving Averages:
(Simple)

 10-dma: 1405
 50-dma: 1382
200-dma: 1440



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

CBOE Market Volatility Index (VIX) = 14.03 -0.36
CBOE Mkt Volatility old VIX  (VXO) = 13.55 -0.89
Nasdaq Volatility Index (VXN)      = 20.13 +0.21


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

          Put/Call Ratio  Call Volume   Put Volume

Total          0.83        905,929       753,552
Equity Only    0.66        742,190       487,054
OEX            1.92         28,118        54,233
QQQ            1.65         42,973        70,976


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

Bullish Percent Data

           Current   Change   Status
NYSE          61.6    + 0.5   Bear Correction
NASDAQ-100    43.0    + 0     Bull Alert      
Dow Indust.   56.6    + 0     Bear Correction
S&P 500       60.0    + 1     Bear Correction
S&P 100       56.0    + 0     Bear Correction


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

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


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

 5-dma: 1.00
10-dma: 1.01
21-dma: 1.06
55-dma: 1.28


Extreme readings above 1.5 are bullish, and readings below .85
are bearish.  These signals don't occur often and tend be early,
but when they do, they can signal significant market turning
points.


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

Market Internals

            -NYSE-   -NASDAQ-
Advancers    1447      1522
Decliners    1341      1485

New Highs     125        60
New Lows       14        20

Up Volume   1019M     1008M
Down Vol.    697M      589M

Total Vol.  1732M     1631M
M = millions


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

Commitments Of Traders Report: 09/14/04

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

After the last few weeks of just minor changes we're seeing
some heavy volume in the commercials' positions.  They added
27K contracts to their longs and 43K contracts to their shorts.
This is the most bearish the "smart money" has been in weeks.
Small traders also added to positions with a net gain in 
their bullish bias, naturally.

Commercials   Long      Short      Net     % Of OI
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%)
09/14/04      442,049   469,982   (27,933)   (3.0%)

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
08/24/04      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%
09/14/04      167,310   126,513    40,797    13.9%

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

Hmm... it looks like commercials have pulled back a bit
on their e-mini short positions but they remain net bearish
on the market.  Small traders didn't make any big changes
and remain strongly net bullish.

Commercials   Long      Short      Net     % Of OI 
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%)
09/14/04      377,643   586,139   (208,496)  (21.6%)

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
08/24/04      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%
09/14/04      289,155     81,314   207,841    56.1%

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


NASDAQ-100

There is where it gets interesting.  The NDX futures witnessed
some huge surges in volume.  Commercial traders' long positions
rose 25 percent.  Yet their short positions rose 34 percent.
The overall change was a sharp reduction in their net bullish
bias.  Small traders also opened their wallets this past report.
Long positions more than doubled and short positions surged
125 percent.  Yet small traders remain net bullish.  

Commercials   Long      Short      Net     % of OI 
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%
09/14/04       64,282     59,808     4,474    3.6%

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
08/24/04       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%
09/14/04       36,372    28,584     7,788    12.0%

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

Wow!  After weeks of very little action the DJ futures are 
finally seeing some volume.  Long and short positions for
commercial traders' both rose 41 percent.  Thus their overall
bias didn't change.  Small traders also raised their bets
and remain strongly net bearish.  

Commercials   Long      Short      Net     % of OI
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%
09/14/04       41,951    34,486    7,465       9.7%
 
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
08/24/04        5,052     7,214   (2,162)   (17.6%)
08/31/04        4,929     7,122   (2,193)   (18.2%)
09/07/04        5,041     8,656   (3,615)   (26.4%)
09/14/04        8,121    14,425   (6,304)   (27.9%)

Most bearish reading of the year: (12,106) -  3/09/04
Most bullish reading of the year:   8,523  -  8/26/03


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***************
ASK THE ANALYST
***************

Low volatility will try your patience

I'm an OptionInvestor.com subscriber and follow the market 
monitor daily.  Can you explain why the FFH Oct $120 put I bought 
at $4.40 when the stock was trading at $129 is bidding at $4.30
with the stock down almost $7.00 from when I purchased the put?  
Do I need to get out of these contracts?  Please respond in 
either the Market Monitor or through email. 

Jim Brown forwarded this trader's question to me, and I thought 
I'd use it in this weekend's column, as it ties in with some 
other questions I've had in recent weeks regarding "what's going 
on with these options (not FFH but others)?

This year has been a tougher year for options traders than in 
years past, where options volatility has been at low levels, and 
volatility "spikes" aren't what options traders have been 
accustomed to seeing in years, and I mean more than just the past 
5-years.

I tried to e-mail the trader back, asking him/her WHEN they 
purchased the options.  I didn't receive a response back at the 
time of this writing, but I do see where the Fairfax Financial 
Holding (NYSE:FFH) $122.31 -1.52% did see trade action at $4.40 
on Wednesday, September 15, 2004, when FFH's stock was trading 
just under $129.00 per share.

Let's take a quick look at FFH's October Option's chain, where 
notes will be taken that these options are not actively traded on 
a daily basis, spreads between the bid and ask are wide, and open 
interest is low.  

FFH Option Chain for October strikes



I'm assuming that the trader bought the Oct. $120 puts (FFH-VD) 
on 09/15/04, and with the stock having falling from near the $129 
level, but the option "not moving" that the buyer of these puts 
bought them at the ask/offer.  This is normal when a stock you're 
trading options on, does not trade a lot of volume in the option 
contracts.  If the trader did indeed pay the ask/offer when the 
stock was higher, then the option has moved as we'd be paying 
$5.60 at Friday's close.

OK.  One rule for ACTIVE and SHORT-TERM options traders is to NOT 
try and trade in options contracts, that don't trade a lot of 
VOLUME, or have LOW amounts of open interest.  Options with low 
volume and low open interest usually have wider spreads and if 
you're intention is to get in and out quickly, then this can 
become a when you want to close the trade out quickly.  

SPECIAL NOTE:  I did NOT say that low volume and low open 
interest options can't be VERY profitable, but if you're looking 
for a quick "in and out" trade, then it is oftentimes best to 
look elsewhere, or plan on having to "work the trade" to get 
filled in between the bid/ask.

This is ONE reason (wide bid/ask) the trader might have thought 
his/her put option in FFH wasn't moving.  

OK.  Let's quickly cover a way a trader CAN try and "work and 
order" to get filled in between.  Get the options market maker to 
fill your order, if you decide you want out of the trade.

As of tonight's writing, the option trader has roughly one month 
until the October $120 puts expire.  

One "trick" I'll use from time to time is a technique I've taught 
traders before.  It's called "flashing."  Now, the options market 
maker has just 58 contracts open at this point, and he/she could 
probably care less if YOU get filled at $5.00.  The options 
market maker would just as soon you sell them at the bid of 
$4.20.

So..... get under his/her skin!  Try to get him/her mad.  

Let's assume I (Jeff Bailey) bought 10 contracts at $4.40 on 
09/15 and now want to close them out, but I would like to get 
$5.00, instead of the lower $4.20 bid.

One way to try and do this, which can also give an options trader 
a "sense of direction" on the stock is to do this.

Place a LIMIT order to sell just 4 of the contracts at $5.00.  
And let that order sit out there for 5 minutes or so.  You should 
see the ask/offer fall from $5.60 to $5.00.

Boom!  Did you get filled immediately?  If so, you sense that 
either the market maker, or another market participant is 
thinking the stock might still be headed lower.  Oh good!  I've 
got 6 put options left, I've made a little money, so I'll sit 
another day or so and see what shakes out.  If I still want to 
sell the remaining 6 options, I might then place a limit order to 
sell them at $5.20, see if I don't get a taker.

What I DO NOT want to do is stick all 10 of them out there at 
once!  REMEMBER, this option has a LOW open interest, and 
sometimes the options market maker will match YOUR 10 to what 
he/she sold you at the offer a couple of days ago and think to 
himself.... "sucker..... you can wait and sell them to me at the 
bid."

Back to "flashing."  Let's say I stuck my sell limit order for 4 
of the puts out there, and nobody bought them at $5.00.  The 
options market maker knows you're there, as you're now below 
his/her original offer of $5.60.  "Flashing" as it is called is 
when you don't get filled, cancel your order (the offer should go 
back to $5.60), then enter a NEW sell 4 contracts limit order, 
but maybe this time, enter it for a lime of $5.30 (offer now 
shows $5.30).  Sometimes this will start to wear on a market 
maker's nerves, and he/she will fill your order, so you'll leave 
him/her alone.  If you don't get a fill at $5.30, cancel it, 
change it to $5.40, try to make the options market maker mad.  If 
no fill at $5.40, go lower, this time to $5.20.  Sometimes when 
you work an order from $5.30 up to $5.40, then back lower the 
$5.20, the options market maker has had enough of you, figures 
its worth $5.20 per contract so you'll leave him/her alone.

Do you see what you're trying to do here?  You're working an 
order.  The market maker isn't CERTAIN that you're the trader 
that bought them at $4.40, or the trader that bought them at 
$10.50 back on August 25.

This "flashing" technique is up to you, if you want to take the 
time during a day, but if you've got 10 contracts and the spread 
is $1.40, that's $1,400 worth of spread, where if you can get 
half of the spread, that's $700 worth of work.

What can be further informative, ESPECIALLY on thinner traded 
options and the underlying stock is this.

If you get filled on 4 contracts "in between" at watch your Level 
II quotes on the UNDERLYING STOCK, or time and sales.  If the 
MARKET MAKER of the option fills you in between when you're 
selling a put, what to see if a BID for the stock suddenly 
appears for 400 shares.  If so, this might be hint that the 
options market maker is BUYING back stock he/she shorted days ago 
when you BOUGHT the puts from him/her.  Remember when the options 
market maker SELLS you puts, the market maker is OBLIGATING 
himself/herself to BUY stock you may decide to PUT on them at the 
specified strike.  

Volatility has been LOW.  Do I hold the trade?

Since I think we know why the option doesn't appear to be moving 
(the spread), I'm going to try and work through this trade, but 
also cover the Market Volatility Index (VIX.X) so we can try and 
understand why it is that option trading has been tougher this 
year, but also combine the VIX.X with the FFH put trade.

I like the trader's position as it stands right now, but with 
October expiration, I'd have an exit plan ready, especially with 
low volume/open interest options.  

I checked FFH's point and figure chart, and it currently has a 
bearish vertical count of $72 associated with its chart.  
According to Dorsey/Wright and Associates, they've classified the 
stock as belonging to the FINANCE sector, and here may be a 
slight problem for a bear as this sector is "BULL CONFIRMED" at 
56% bullish.  With the SECTOR bull confirmed, a bear needs to be 
somewhat careful.

Let's take a look at the WEEKLY interval chart of both FFH and 
the VIX.X.

Fairfax Financial Holdings (FFH) - WEEKLY Intervals



A nice head and shoulder pattern for FFH is apparent, where I've 
placed a retracement on the FFH chart with 0% at the 52-week 
high, and then placed the 50% retracement at what would appear 
the be the neckline at $141.  

Some observations are that this week, the stock finds suspicious 
resistance at the resulting 61.8% retracement.  That's good for a 
bear, as it appears market participants are treating that level 
as resistance, where the recent low of 4-weeks ago, looks to be 
in play again.

Now, what I've done in GREEN is quickly calculated out a "break-
even" point of $115.50, where should FFH close at $115.60 on 
October 15, then the Oct. $120 puts should be trading close to 
$4.40 per contract.

Now.... why FFH seemed to find this derived "break even" point of 
$115.60 as a recent low 4-week ago, right at/near the $115.60, we 
can not be sure, but perhaps that's where the MARKET feels a 
near-term bottom should be found.  It could well be the strength 
of the SECTOR has some bulls willing to try and catch what 
appears to be a "falling knife," or old bears have started to buy 
back some of their shorts.  

According to Yahoo! Finance, FFH has 12.9 million shares in the 
public float, 1.87 million are short (14.53%) and short ratio as 
of August 9 was 35.3 days to cover.  That's a lot of stock short 
with average daily volume over the past 3 months of just 66,171.  
I have not checked to see if FFH has any convertible offerings, 
but it may considering such high short interest.

Again, while I don't know when the trader bought puts on FFH, we 
can see that for the better part of 2004, the VIX.X has spent a 
lot of time below some PEAK lows dating clear back to 1998.  In 
fact, I have been using the BLUE retracement shown on the VIX.X 
to disect levels where the VIX.X has tended to fluctuate over the 
last NINE years, where EXTREME troughs and peaks have actually 
come BELOW 20 and ABOVE 40.  This year (2004) a SPIKE in 
volatility has been 20!

Just over a month ago, I had noted in an Index Trader Wrap for 
options traders to be alert that we might see volatility drop as 
the pattern had been for options market makers to start selling 
premium given a chance.  Obviously, they, or market participants 
did.

What has made option trading difficult this year, is that with 
volatility so low (premiums low) a move in VIX.X up to 18, from 
15, is a 20% move, and that can rake havoc on an options trade, 
that isn't almost perfectly timed.  ESPECIALLY if you're a SHORT-
TERM trader of options.

In a way, the current technical in FFH, look somewhat similar to 
two very good put trades traders may have experienced in July and 
August, in OSI Pharmaceuticals (NASDAQ:OSIP) $62.60 +0.69%, as 
the stock traded its 52-week low around $51.00 on July 26, and 
Whole Foods Market (NASDAQ:WFMI) $86.24 +1.10%, as it plunged to 
lows below $75?  Both trades were trades where the stock fell 
sharply, then "rebounded" a bit, to then juuuust undercut the 
prior low.  We were trading OUT THE MONEY near-month contracts in 
both of those trades and didn't question things when a new low 
was found.  Good thing too, as I think those options would have 
expired worthless at expiration.

In both of those trades, we didn't sell all the originally bought 
put options at once either.  We sold parts of the position first, 
then the remaining position.  In a way, we were booking some 
profit just in case a sudden rebound took place, but one pattern 
for the success was to close out some of the options for a profit 
as we approached the relative low after the failed rebound.

With these FFH puts being LOW volume and LOW open interest, think 
to yourself.... "when might there be some volume interest?"

I (Jeff Bailey) might think.... when the stock looks like it's 
going to break the recent low.

Remember, an options market maker may still have to offset 
his/her exposure to being NAKED the Oct. $120 puts a trader 
BOUGHT from him/her.  If the stock looks like it may break the 
recent lows, the market maker may become a more eager buyer of 
the puts he/she sold the trader.

What about other market participants that bought the UNDERLYING 
STOCK of FFH from $116 to $130.  What are they looking at?  What 
are they thinking right now?  To answer this, put YOURSELF in 
their shoes.

I (Jeff Bailey) would have to think THEY are either looking form 
some insurance (a protective put), or cutting out.  Unless they 
know FOR SURE the stock is about to reverse course and move 
higher.  However, that trade action this week, where FFH didn't 
see the light of day above $130 doesn't depict a market 
participant that is CERTAIN of a higher price right now.

Where do you think a bunch of LONGS/BULLS that did buy from $116 
to $130 might have their stop losses at?

I'd think they might have some lined up UNDER $116.

Maybe this week, the FFH specialist is going to try and find out.

Additional notes:

Fairfax Financial Holding's "Max Pain" Theory level for September 
expiration (Friday, Sept. 17) was $130.  FFH closed BEARISH, or 
below that level on Friday's expiration.

October's "Max Pain" Theory level currently calculated at $140 
($5 increments).  Is that the gravitational point into next 
month's expiration?  Look at your chart.  It ($140) might have 
been the big "hedge the loss point."  Don't immediately think 
that the open interest at the October $135 and $140 strikes was 
BOUGHT by a bull.  Let's face it.  Right now, those calls are the
 LOSING trade.  Those may have been COVERED CALLS that 
were SOLD by an institution that couldn't either get liquidity to sell the 
underlying stock without crushing it and turned to the options 
market and sold the Oct. $140 and $135 calls, took what premium 
they got and bought some protective puts.

Look at the $130 level on your chart again.  The FFH Sep $130 
puts (FFHUF) had open interest of 383 contracts.  You want it at 
$130?  Here... take 38,300 shares off my hands.  The FFH Sep $125 
puts (FFHUE) had open interest of 128 contracts.  Here, you take 
another 12,800 shares down to $122.31.

I can't say this is exactly what is happening, but might be as it 
relates to the chart and this week's expiration.

Jeff Bailey



*************
COMING EVENTS
*************

-----------------
Earnings Calendar
-----------------

Symbol  Co               Date           Comment      EPS Est

------------------------- MONDAY -------------------------------

ADBE Adobe Systems        Mon, Sep 20  After the close    0.39
KMX  CarMax Inc           Mon, Sep 20  Before the bell    0.28
KBH  KB Home              Mon, Sep 20  After the close    2.73
LEN  Lennar Corp          Mon, Sep 20  Before the bell    1.34
NKE  Nike                 Mon, Sep 20  Before the bell    1.11
PLMO PalmOne              Mon, Sep 20  After the close    0.20
RHAT Red Hat, Inc.        Mon, Sep 20  After the close    0.05
SMSC SMSC                 Mon, Sep 20  Before the bell    0.04


------------------------- TUESDAY ------------------------------

AZO  AutoZone Inc.        Tue, Sep 21  After the close    2.55
CBK  Christopher & Banks  Tue, Sep 21  After the close    0.15
FDS  FactSet Research     Tue, Sep 21  ---- N/A ----      0.46
GIS  General Mills        Tue, Sep 21  Before the bell    0.60
GS   Goldman Sachs        Tue, Sep 21  Before the bell    1.46
GTK  GTech Holdings       Tue, Sep 21  Before the bell    0.37
JBL  Jabil Circuit        Tue, Sep 21  After the close    0.26
LEH  Lehman Brothers      Tue, Sep 21  ---- N/A ----      1.55
TIBX TIBCO Software       Tue, Sep 21  After the close    0.05


------------------------ WEDNESDAY -----------------------------

BSC  Bear Stearns         Wed, Sep 22  Before the bell    1.98
BBBY Bed Bath & Beyond    Wed, Sep 22  After the close    0.38
COGN Cognos               Wed, Sep 22  After the close    0.26
CAG  ConAgra Foods Inc    Wed, Sep 22  Before the bell    0.27
DRI  Darden Restaurants   Wed, Sep 22  After the close    0.43
DBRN Dress Barn           Wed, Sep 22  ---- N/A ----      0.37
FDX  Fedex                Wed, Sep 22  Before the bell    1.08
PAYX Paychex              Wed, Sep 22  Before the bell    0.23
WOR  Worthington Ind.     Wed, Sep 22  ---- N/A ----      0.44


------------------------- THUSDAY -----------------------------

AGE  A.G.Edwards          Thr, Sep 23  Before the bell    0.55
MANU Manugistics Inc      Thr, Sep 23  After the close   -0.04
PSRC PalmSource Inc       Thr, Sep 23  After the close   -0.02
RAD  Rite Aid Corp        Thr, Sep 23  ---- N/A ----     -0.02
TOPP Topps                Thr, Sep 23  ---- N/A ----      0.12

------------------------- FRIDAY -------------------------------

- No Major Earnings Announcements -



----------------------------------------------
Upcoming Stock Splits In The Next Two Weeks...
----------------------------------------------

Symbol  Company Name              Ratio    Payable     Executable


AMWD    American Woodmark         2:1      Sep  24th   Sep  27th
LM      Legg Mason Inc            3:2      Sep  24th   Sep  27th
CATY    Cathay General Bancorp    2:1      Sep  28th   Sep  29th
WST     West Pharma               2:1      Sep  29th   Sep  30th
NPBC    National Penn             5:4      Sep  30th   Oct   1st
WBNK    Waccamaw Bank             2:1      Sep  30th   Oct   1st

--------------------------
Economic Reports This Week
--------------------------

It's another busy week.  Not only will Wall Street be wading 
through more corporate earnings warnings but we get to hear from
some early announcers as well.  Tuesday will be a big but probably
anticlimatic day with the FOMC meeting on interest rates.

==============================================================
                       -For-           
----------------
Monday, 09/20/04
----------------
Treasury Secretary Snow speaks at the National Press Club
NAHB Housing market index for September

-----------------
Tuesday, 09/21/04
-----------------
FOMC meeting and decision on Interest Rates (2:15 pm ET)
Housing Starts for August  (last reading 1,978K)
Building Permits for August (last reading 2,066K)

-------------------
Wednesday, 09/22/04
-------------------
MBA Refinancing index
Crude oil inventories
Gasoline inventories

------------------
Thursday, 09/23/04
------------------
FOMC minutes from the August 10th meeting
Fed governor Gramlich speaks on monetary policy in Michigan
Weekly initial jobless claims (last reading 333,000)
Leading Economic Indicators for August (last reading -0.3%)
Money Supply numbers
Natural Gas inventories

----------------
Friday, 09/24/04
----------------
Durable Goods orders for August (last reading +1.6%)
Existing Home Sales for August (last reading 6.72 mln)

Definitions:
DM=  During the Market
BB=  Before the Bell
AB=  After the Bell
NA=  Not Available


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The Option Investor Newsletter                   Sunday 09-19-2004
Sunday                                                      2 of 5


In Section Two:

Watch List: ITT, FO, DD, UPS
Dropped Calls: BOL
Dropped Puts: None


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**********
Watch List
**********

A Mixed Bag of Candidates

___________________________________________________________________

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.
___________________________________________________________________

ITT Industries - ITT - close: 80.91 change: +0.90

WHAT TO WATCH: We came very close to adding ITT to the play list 
this weekend as a new call.  The stock has bounced strongly from 
the $75.00 level and its rising 200-dma.  Traders bought the 
recent dip and ITT is challenging resistance at the gap down near 
$81.50.  Plus, if you squint your eyes a bit it looks like ITT 
has formed an inverse (bullish) head & shoulders pattern.  The 
P&F chart is bullish and points to a $92 target.  We watch for 
the bullish breakout over $81.50.

Chart=


---

Fortune Brands - FO - close: 74.85 change: +0.80 

WHAT TO WATCH: We recently had FO on the play list as a call but 
pulled it because momentum was fading and the stock couldn't 
breakout over resistance at the $75.00 mark.  Well now FO is back 
for another try.  Shares have coiled up under the $75 mark and 
look ready to explode higher.  Traders can use a breakout as an 
entry point and we'd target the $78-80 range.  Right now our main 
concern is the MACD indicator, which is really close to a new 
sell signal.

Chart=


---

Du Pont - DD - close: 42.66 change: -0.33

WHAT TO WATCH: Dow-component DD has been suffering under a long-
term trend of lower highs for months.  The stock has a tendency 
for these big swings but each new high is lower than the last.  
It would appear that DD has topped out again and its technical 
oscillators are suggesting new bearish positions.  Its MACD is 
super close to a new sell signal.  Traders could target a drop to 
$40 or look for a new relative low.  The P&F chart is bearish and 
points to a $35 target.

Chart=


---

United Parcel Service - UPS - close: 75.04 change: +1.02

WHAT TO WATCH: Keep an eye on UPS.  The stock's rebound just got 
a big boost on Friday with a huge flood of volume.  The rally 
could continue next week of rival FDX turns out a good earnings 
report on Wednesday.  Currently the P&F chart for UPS points to a 
$90 target but more aggressive players could go long now with a 
stop under support at $74.  We're not that excited about the 
technical oscillators since they look a bit overbought.  Don't 
forget if FDX disappoints on Wednesday UPS could react 
negatively.

Chart=



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

NEM $41.55 -1.23 - NEM just broke down through support at $42 and 
its simple 200-dma on big volume.  

NUE $89.67 +1.57 - NUE still show plenty of relative strength but 
we'd be careful here.  It remains extended. 

POT $60.05 +0.82 - POT is another relative strength candidate but 
we wouldn't want to chase it here.

CME $143.30 +2.50 - Traders have bought the dip back to $140 
again.  This looks like an entry point.

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

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


CALLS
^^^^^

Bausch Lomb - BOL - close: 67.80 change: -0.76 stop: 66.99     

Danger! We have a reversal alert on BOL.  Shares gapped higher on 
Friday and then proceeded to trade lower the rest of the session.  
Volume was very strong while BOL produced a bearish engulfing 
candlestick.  Now it's not a huge bearish pattern but the 
combination of the strong volume and the bearish sell signals in 
the fading momentum indicators is enough to have us looking for 
the exits.  Longer-term looking at the weekly and P&F charts of 
BOL we're still optimistic.  However, we'd rather watch for the 
sidelines and consider buying another bounce from $65.00 than see 
BOL fade and potentially break $65.  We've been cautious on BOL 
for days and we're going to exit here.  

Picked on September 01 at $66.51
Change since picked:      + 1.29
Earnings Date           07/29/04 (confirmed)
Average Daily Volume =       397 thousand
Chart =


PUTS
^^^^

None

***********
DEFINITIONS
***********


OI  = Open Interest - the number of open contracts outstanding.
Last Trade @ = Indicates where the option traded last.
ITM = In the money
ATM = At the money
OTM = Out of the money
ADV = Average Daily Volume

The options with a "*" by the strike price are our choices from the
group. If the stock moves as expected we feel they have the best
chance to substantially increase or double in price with the best
risk/reward ratio compared to the other options for the same stock.
You must determine if they fit your risk profile for time and price.

RISKS of SELLING PUTS:
The risk of selling naked puts is always the possibility
of a catastrophic event that drops the stock below the
strike price and could result in the stock being PUT to you.
Always protect yourself with a "buy to cover" limit order
to take you out before this can happen.


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The Option Investor Newsletter                   Sunday 09-19-2004
Sunday                                                      3 of 5


In Section Three:

Current Calls: AHC, PD, TDS
New Calls: CMI
Current Puts: APOL, FFH, KRI, KSS, LXK, MMM
New Puts: None

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******************
CURRENT CALL PLAYS
******************

Amerada Hess - AHC - close: 83.99 chg: +1.97 stop: 81.00           

Company Description:
Amerada Hess Corporation is a leading global independent energy 
company, engaged in the exploration and production of crude oil 
and natural gas, as well as in refining and in marketing refined 
petroleum products, natural gas, and electricity.
(source: company website)

Why We Like It:
We have good news to report on AHC.  After more than two weeks of 
churning sideways in a tight range AHC has finally broken out to 
the upside.  Friday's surge in crude oil and the OIX and OSX oil-
related indices helped inspire a 2.4 percent rally in AHC.  This 
has stalled and partially reversed the impending sell signal in 
the stock's MACD indicator.  The next challenge is the $85.00 
mark.  We would suggest that short-term traders prepare to exit 
for a profit as AHC moves into the $84.50-85.00 range.  The 
$85.00 level is overhead resistance and it could be a major 
challenge for AHC.  Yet if the stock can breakout here it would 
produce a new triple-top breakout by signal on its P&F chart.

Suggested Options:
We like the October and November strikes.  Our favorites would be 
the 80s and 85s.  We would not suggest new positions at this time
unless AHC broke through the $85.00 level.

BUY CALL OCT 80 AHC-JP OI=337 current ask $5.10
BUY CALL OCT 85 AHC-JQ OI=413 current ask $1.90

BUY CALL NOV 80 AHC-KP OI=1293 current ask $6.30
BUY CALL NOV 85 AHC-KQ OI= 827 current ask $3.30

Annotated Chart:



Picked on August 31st at $80.50
Change since picked:     + 3.49
Earnings Date          07/28/04 (confirmed)
Average Daily Volume =      1.0 million 
Chart =




---


Phelps Dodge - PD - close: 83.15 chg: -0.63 stop: 81.99      

Company Description:
Phelps Dodge Corp. is the world's second-largest producer of 
copper, a world leader in the production of molybdenum, the 
largest producer of molybdenum-based chemicals and continuous-
cast copper rod, and among the leading producers of magnet wire 
and carbon black. The company and its two divisions, Phelps Dodge 
Mining Co. and Phelps Dodge Industries, employ more than 13,500 
people in 27 countries. (source: company press release)

Why We Like It:
Uh-oh!  Traders need to be ready to act here.  PD did not follow 
the price of copper higher in the last couple of sessions.  
Instead we're seeing what looks like a short-term bearish 
reversal after more than a week of trying to breakout over the 
$85-86 level.  PD's momentum oscillators have all turned negative 
and its MACD has produced a new sell signal.  That's not an 
environment to be considering new bullish positions.  We strongly 
considered closing the play here but with our stop loss 
essentially at breakeven we're going to give PD one last chance 
to bounce from the $82.00 level.  As we have suggested earlier 
more aggressive traders willing to handle the volatility can keep 
their stop under stronger support at $80.00.  We do think PD can 
bounce from the $80 level and if we're stopped out near $82.00 we 
may consider new positions if PD does rebound.  More conservative 
traders may want to exit now.

Suggested Options:
We are not suggesting new positions at this time.

Annotated Chart:


Picked on August 26th at $82.10
Change since picked:     + 1.05
Earnings Date          07/27/04 (confirmed)
Average Daily Volume =      2.1 million 
Chart =



---



Telephone & Data Sys - TDS - cls: 82.48 chg: -0.62 stop: 79.50     

Company Description:
TDS Telecom is a growing communications company serving more than 
1 million residential and business customers in small rural and 
suburban communities in 30 states. The company's goal is to 
provide the most effective communication technology and high-
quality services in its chosen markets. TDS Telecom is a 
subsidiary of Telephone and Data Systems, Inc., a diversified 
telecommunications corporation founded in 1969 and a FORTUNE 500 
company, that operates primarily by providing wireless and local 
telephone service through its strategic business units, U.S. 
Cellular and TDS Telecom. (source: company press release)

Why We Like It:
The Monday-Tuesday rally from $80 to $84 is starting to fade a 
bit but we're encouraged that the profit taking hasn't been 
stronger.  Our profit target/exit point has been the $85.00 
region but it's okay for traders to consider taking profits now 
or on another bounce back toward $84.  This close to our target 
and with TDS looking a little over bought we would not suggest 
new bullish positions at this time.  We would keep TDS on our 
personal watch list for a potential dip back toward $80.00 and 
then re-evaluate buying a bounce.  We're going to leave our stop 
loss under $80.00 but if TDS breaks $81.00 we might close the 
play early.  

Suggested Options:
We are not suggesting new bullish entries at this time.

Annotated Chart:



Picked on August 24th at $78.05
Change since picked:     + 4.43
Earnings Date          07/21/04 (confirmed)
Average Daily Volume =      195 thousand
Chart =



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

Cummins Inc - CMI - close: 70.99 change: +0.73 stop: 69.40

Company Description:
Cummins Inc., a global power leader, is a corporation of 
complementary business units that design, manufacture, distribute 
and service engines and related technologies, including fuel 
systems, controls, air handling, filtration, emission solutions 
and electrical power generation systems. Headquartered in 
Columbus, Indiana, (USA) Cummins serves its customers through 
more than 680 company-owned and independent distributor locations 
in 137 countries and territories. Cummins also provides service 
through a dealer network of more than 5,000 facilities in 197 
countries and territories. With more than 24,000 employees 
worldwide, Cummins reported sales of $6.3 billion in 2003.
(source: company press release)

Why We Like It:
Business is booming at diesel engine maker CMI.  This company's 
fortunes ride high and low on the economic cycles and right now 
they are hitting them out of the ballpark.  Earnings back in July 
beat estimates by 45 cents.  Management then guided higher for 
the third quarter and the whole year.  Investors sent shares of 
CMI soaring back in July.  Now that it's seen some consolidation 
the stock looks ready to march higher again.  The steady economic 
growth coupled by strong business in the transport sector appears 
to be driving a lot of the interest in CMI.  Considering that the 
Dow Transports are at new five-year highs we shouldn't be too 
surprised.  We like how traders bought the recent dip toward 
$70.00-69.50 and we're willing to buy the bounce.  However, 
considering the current market environment we're going to use a 
tight stop at $69.40.  The P&F chart for CMI shows an ascending 
triple-top buy signal and an $85 target.  We're going to set an 
immediate target of $75.00 and a secondary target of $77.50.

Suggested Options:
Short-term traders can choose from the October and December
strikes.  We like the Octobers.  Our favorites are the 70s 
although the 75s have more open interest.

BUY CALL OCT 65 CMI-JM OI=  7 current ask $6.70 
BUY CALL OCT 70 CMI-JN OI= 68 current ask $2.95
BUY CALL OCT 75 CMI-JO OI=188 current ask $0.75


Annotated chart:


Picked on September 19 at $70.99
Change since picked:      + 0.00
Earnings Date           07/23/04 (confirmed)
Average Daily Volume =       724 thousand
Chart =


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*****************
CURRENT PUT PLAYS
*****************

Apollo Group - APOL - close: 78.35 change: -0.47 stop: 82.67

Company Description
Apollo Group Inc. has been providing higher education programs to 
working adults for over 25 years. Apollo Group Inc. operates 
through its subsidiaries The University of Phoenix Inc., 
Institute for Professional Development, The College for Financial 
Planning Institutes Corp., and Western International University 
Inc. The consolidated enrollment in its educational programs 
makes it the largest private institution of higher education in 
the United States. It offers educational programs and services at 
78 campuses and 133 learning centers in 38 states, Puerto Rico 
and Vancouver, British Columbia. Combined degree enrollment was 
239,300 students as of May 31, 2004.
(source: company press release)

Why We Like It:
If you consider the bullish action in the major indices the past 
couple of weeks then bears should feel comfortable with APOL's 
relative weakness.  The stock's failure at $85.00 in early 
September has lead to the drop under support at $80.00.  Now APOL 
has spent the last few days attempting to break back above $80 
and failing every time.  The $80 level is tough resistance 
because it's bolstered by the exponential 200-dma.  The MACD 
indicator on APOL is extremely close to a new "sell" signal and 
its P&F chart continues to show a potential bearish reversal.  We 
were encouraged to see a new two-week low on Friday but be 
warned.  The last hour of trading saw a small spike higher with 
decent volume but it could have been related to option 
expiration.

Suggested Options:
We're going to suggest the October and November puts.  Our 
favorites will be the $80 and $75 strikes.  DOUBLE-CHECK
your option symbols with your broker!

BUY PUT OCT 80 OAQ-VP OI=1249 current ask $4.70
BUY PUT OCT 75 OAQ-VO OI=1121 current ask $2.35

BUY PUT NOV 80 OAQ-WP OI=1600 current ask $5.90
BUY PUT NOV 75 OAQ-WO OI=2274 current ask $3.70

Annotated Chart:



Picked on September 14 at $78.88
Change since picked:      - 0.53
Earnings Date           10/05/04 (unconfirmed)
Average Daily Volume =       3.3 million 
Chart =


---


FairFax Financial - FFH - cls: 122.30 chg: -1.91 stop: 131.00*new*

Company Description
Fairfax Financial Holdings Limited is a financial services 
holding company which, through its subsidiaries, is engaged in 
property and casualty insurance and reinsurance, investment 
management and insurance claims management.
(source: company press release)

Why We Like It:
If you've been doing your homework on FFH then you'd know that 
not everyone believes the rumors that the company could be facing 
a liquidity crisis.  Yet a quick look at the stock certainly 
shows how investors are betting.  After a couple of quickly 
failing attempts to break back above the $130 level FFH has 
fallen three sessions in a row.  Volume remains above average, 
even if still abysmally low.  We want to reiterate that this is a 
higher-risk speculative play.  The extremely low volume on the 
stock and the options makes this more dangerous to play.  Shares 
are subject to big swings and the options are experiencing wide 
spreads.  Fortunately, FFH is moving our direction and if it can 
break round-number support at the $120 level we should be in good 
shape.  The P&F chart continues to look very bearish with its $72 
target.  Our target remains the $110-100 range.  We're lowering 
our stop loss to $131.  

Suggested Options:
We're going to suggest the October options but Januarys are 
available for the longer-term trader.

BUY PUT OCT 130.00 FFH-VF OI= 14 current ask $11.40
BUY PUT OCT 125.00 FFH-VE OI= 12 current ask $ 8.10
BUY PUT OCT 120.00 FFH-VD OI= 50 current ask $ 5.60
BUY PUT OCT 115.00 FFH-VC OI= 21 current ask $ 3.80
BUY PUT OCT 110.00 FFH-VB OI=104 current ask $ 2.55
BUY PUT OCT 100.00 FFH-VT OI=456 current ask $ 1.15

Annotated Chart:



Picked on September 12 at $126.50
Change since picked:       - 4.20
Earnings Date            00/00/00 (confirmed)
Average Daily Volume =         59 thousand
Chart =


---

Knight-Ridder - KRI - close: 63.50 change: -0.09 stop: 65.51

Company Description:
Knight Ridder is the nation's second-largest newspaper publisher, 
with products in print and online. The company publishes 32 daily 
newspapers in 28 U.S. markets, with a readership of 8.7 million 
daily and 12.6 million Sunday. Knight Ridder also has investments 
in a variety of Internet and technology companies and two 
newsprint companies. The company's Internet operation, Knight 
Ridder Digital, develops and manages the company's online 
properties. It is the founder and operator of Real Cities 
(www.RealCities.com), the largest national network of city and 
regional Web sites in more than 100 U.S. markets. Knight Ridder 
and Knight Ridder Digital are headquartered in San Jose, Calif.
(source: company press release)

Why We Like It:
Hmm... we have both good news and bad news on the KRI put play.  
The good news is that KRI issued an earnings warning on Thursday 
night.  Wall Street is looking for 90 cents a share for the third 
quarter and KRI says it will come in under expectations.  The 
company is blaming lost ad revenue in Florida due to the 
hurricanes.  The bad news is that while shares gapped higher and 
immediately sank the end result was a 9-cent loss.  Normally we 
would expect a bigger reaction to an earnings warning.  
Fortunately KRI is still sinking under a trend of lower highs and 
volume was pretty big on the failed rally.  Technical oscillators 
remain bearish and its MACD has finally produced a new "sell" 
signal.  

Suggested Options:
We only have October and January puts to choose from at this 
time.  We're going to suggest the October's.  Our favorites would 
be the 65s and 60s.  If you'd like more open interest try the
Januarys.

BUY PUT OCT 65 KRI-VM OI= 48 current ask $2.15
BUY PUT OCT 60 KRI-VL OI= 37 current ask $0.50

Annotated Chart:



Picked on September 15 at $63.85
Change since picked:      - 0.35
Earnings Date           07/22/04 (confirmed)
Average Daily Volume =       491 thousand
Chart =



---

Kohl's - KSS - close: 49.48 change: -0.00 stop: 52.01

Company Description:
The Menomonee Falls, Wisconsin-based department store was a 
strong growth play a few years ago.  Stores provide shoes, 
apparel, and home products all targeted at middle-income 
families.  KSS currently runs over 560 stores.

Why We Like It: (Thursday's original play update)
We like KSS as a short-term put play with an emphasis on short-
term.  For months anyone following the stock already knows that 
investors and analysts alike have been calling for the stock 
price to improve based on the stores upcoming Q3 and Q4 results.  
KSS' results last year were terrible but now that gives them easy 
same-store and year over year sales comparisons.  It is this 
belief that sales will drastically improve and the six-week rally 
in the retail sector that has powered KSS through multiple layers 
of heavy resistance.  Now we're starting to see some weakness.  

The RLX retail index has rallied for six weeks and just touched 
resistance at its all time highs from June before slipping 
backward this afternoon.  We feel it could be time for some 
profit taking.  The weakness has already begun in KSS.   Shares 
of KSS peaked at $52 on Tuesday and now shares have fallen 
through the bottom if its narrow channel and its simple 10-dma.  
Please note - this is somewhat aggressive.  Even though the daily 
and weekly oscillators confirm that KSS is overbought and that 
the momentum is fading we're still calling a top here.  That's a 
bad habit to get into.  Fortunately, we do see a new "sell" 
signal in the MACD.  Our plan is to catch any drop toward the 
$46.00 level, which looks like support.  It would also represent 
a 50 percent retracement of its July to September rally.

If KSS achieves our target we may actually switch to calls to 
play the bounce since we do expect the stock to out perform over 
the next few months.

WEEKEND UPDATE:
The action in KSS was a bit peculiar on Friday.  Earlier in the 
session the stock was trading lower in what looked like a follow 
through to Thursday's breakdown of the narrow rising channel.  
Yet as Friday wore on the stock consolidated into a tighter and 
tighter range.  We suspect this was due to option expiration and 
market makers were trying to pin KSS as close to the $50.00 
strike price as possible.  We will remain bearish if KSS stays 
under $50.


Suggested Options:
We're only expecting this to be a short-term play so we're 
suggesting the October puts.  Our favorites are the 50s.

BUY PUT OCT 50 KSS-VJ OI=4888 current ask $1.95
BUY PUT OCT 45 KSS-VI OI=5490 current ask $0.35

Annotated chart:


Picked on September 16 at $49.48
Change since picked:      - 0.00
Earnings Date           08/12/04 (confirmed)
Average Daily Volume =       3.1 million 
Chart =




---

Lexmark Intl - LXK - close: 83.70 chg: +0.08 stop: 86.01     

Company Description:
Lexmark International, Inc. is a leading developer, manufacturer 
and supplier of printing solutions -- including laser and inkjet 
printers, multifunction products, associated supplies and 
services -- for offices and homes in more than 150 countries. 
Founded in 1991, Lexmark reported more than $4.8 billion in 
revenue in 2003. (source: company press release)

Why We Like It:
We're not making a lot of progress on our LXK put.  The initial 
reaction to the printer recall has faded and LXK is still 
bouncing from its long-term trendline of support.  If you're not 
sure which trendline we're referring to look at last Sunday's 
update and view the weekly chart.  The good news here is that LXK 
has not been able to mount a decent rebound from this long-term 
support line.  As a matter of fact LXK is still suffering under a 
trend of lower highs that would suggest a possible bearish 
breakdown.  That's good news for us considering the strength in 
tech stocks and the market these past two weeks.  The P&F chart 
is bearish with a sell signal that points to a $70 target.  We'd 
still be happy with a drop to $80.00 but if LXK breaks its long-
term support it could easily sink lower and more aggressive 
traders might want to target the $75-76 region.

Editor's note: if you take a step back it would seem like LXK is 
almost coiling for a big move.  The challenge is that with LXK
right at long-term support that big move could be either 
direction.  Make sure you're comfortable with your stops.

Suggested Options:
Right now traders can choose from the October or January puts.
We believe November strikes will be added eventually.  
We're going to suggest the October's.

BUY PUT OCT 90 LXK-VR OI=1244 current ask $7.20
BUY PUT OCT 85 LXK-VQ OI=4902 current ask $3.90
BUY PUT OCT 80 LXK-VP OI=4585 current ask $1.85

Annotated Chart:



Picked on September 5th at $86.10
Change since picked:       - 2.40
Earnings Date            07/19/04 (confirmed)
Average Daily Volume =        1.2 million 
Chart =



---

3M Co - MMM - close: 82.32 change: +0.27 stop: 84.51

Company Description:
Every day, 3M people find new ways to make amazing things happen. 
Wherever they are, whatever they do, the company's customers know 
they can rely on 3M to help make their lives better. 3M's brands 
include Scotch, Post-it, Scotchgard, Thinsulate, Scotch-Brite, 
Filtrete, Command and Vikuiti. Serving customers in more than 200 
countries around the world, the company's 67,000 people use their 
expertise, technologies and global strength to lead in major 
markets including consumer and office; display and graphics; 
electronics and telecommunications; safety, security and 
protection services; health care; industrial and transportation.
(source: company press release)

Why We Like It:
Our MMM put play is not off to a roaring start.  There's been no 
follow through on Wednesday's bearish drop through the 50 and 
200-dma's.  Yet on the other hand there has been no bounce either 
and MMM has not been able to trade back above the simple 200-dma.  
The MACD remains in a sell signal and the next move still looks 
like it should be down.  Remember that this is a short-term 
technical play with an immediate target of $77.50.  If we're 
lucky MMM could hit $75.00.  The P&F chart is much more bearish 
with a $65 target.

Suggested Options:
Short-term traders can choose from the October and January puts.
We like the Octobers and would probably play the 85s or 80s.

BUY PUT OCT 85 MNZ-VQ OI=4988 current ask $3.40
BUY PUT OCT 80 MMM-VP OI=6132 current ask $0.95
BUY PUT OCT 75 MMM-VO OI=3426 current ask $0.25

Annotated chart:



Picked on September 15 at $82.00
Change since picked:      + 0.32
Earnings Date           07/19/04 (confirmed)
Average Daily Volume =       2.5 million 
Chart =


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

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The Option Investor Newsletter                   Sunday 09-19-2004
Sunday                                                      4 of 5

In Section Four:

Leaps: Patience Hell, Let's Buy Something
Option Spreads: Open The Vault, We're On Our Way!

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*****
LEAPS
*****

Patience Hell, Let's Buy Something

After several weeks of watching the companies on
our watch list rocket higher I am running out of
patience. MMM fell back to our initial entry point
of $82 on the Alcoa and KO warnings as traders tried
to decide who the next Dow confessor was going to be.
This gave us our first entry and we are going to 
double up if we get to $78. 

Citigroup fell to 46.76 on the news from Japan that
their private banking division had acted improperly.
Our entry point was $46.50 and I am going to call
that a leaner and enter the position this weekend. 

I tried very hard to find an energy stock to add to
the portfolio to accompany COP higher but they are
all at 52-week highs or even all time highs and I
just could not bring myself to do it with a single
stock. 

I tried to find a chip stock that looked healthy
but the majority of them were either over extended
already or had not made the trip higher with the
SOX. 

There are so many stocks charging higher right now
I was becoming more frustrated as each day passed
and our watch list continued without a pullback. 

I believe it is very critical NOT to buy leaps after
a market bounce. Leaps should be bought at bottoms.
Unfortunately this is a weekly column and telling
everyone to come back next May would probably not
go over too well. 

I finally settled on QLGC and XLE as a new entries.
Love it or hate it QLGC did have the best qualities
of a semi stock for the current market. XLE is the
Energy Spdr and represents 8% of the SPX.   

I am going to list some of the other stocks I looked
at and passed on for various reasons. The list is not
a suggestion but maybe something to spark your memory
and interest level. Put them on your personal watch
list and who knows maybe one of them will work for
you. 

UNH, DHR, LEN, SNDK, ADI, OVTI, MRO, PTEN, SLB, HAL,
ESST, LRCX, MRVL, KLAC, BDK, BA, LLL, DVN, PDS, TXU  

 

*******************   
New Plays
*******************   


XLE - S&P Energy SPDR $33.92

The XLE SPDR is composed of 27 energy stocks and
represents about 8% of the SPX. This is the 8% 
that has been holding the SPX at the current levels. 
In fact the XLE has far exceeded the SPX in performance
over the past year. The question is whether it will
continue to outperform. 

The price of oil is not expected to decline materially
until after the election and then Lipper says only to
about $36-$37. Lipper is targeting $67 per bbl over
the next two years. This is +22 over the $45 closing
price on Friday. 

This is a simple play. Go LONG with a stop at $32.25. 

The 2006 $32 LEAP Call WHA-AF is $4.00 and is nearly
$2.00 in the money. The 2006 $35 LEAP Call WHA-AI is
$2.40. That is about the same premium as you would
pay for the $32 call after the ITM portion is removed.
For my money I would go with the $32 LEAP.

Buy 2006 $32 LEAP Call WHA-AF currently at $4.00
Buy 2006 $35 LEAP Call WHA-AI currently at $2.40

Stop 32.25

XLE/SPX Comparison chart


Components of the XLE



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


QLGC - Qlogic Corp - $30.33 

QLGC designs chips for high performance interfaces
between computer systems and data storage subsystems.
Earnings are growing at about +20% per year with a
historical growth rate of +51% over the last five
years. 

QLGC fell on hard times back in March when it warned
that earnings were going to miss estimates. Up until
then it had been the darling of the storage sector.
Since then the road has been rough and it was not 
until mid August before QLGC quit falling. Much of
the problem was the result of soft sales by HPQ of
their top line products. ELX, BRCD, QLGC, OVRL and
MCDT all suffered the same fate. Of the group QLGC
has rebounded the most and has the best prospects. 

Over the last year QLGC has had its PE cut in half
from 43 to 21 yet it retains the highest level rating
from the mechanical stock screen programs based on
growth, earnings and relative strength. 

I like QLGC because it barely even blinked when the
SOX paused for profit taking this week. There is a
long way to go for QLGC to retrace its former glory
and while it probably will not get there on this
option it could easily see $40-$45. 

If we get a post election bounce there is ample 
opportunity to move even higher. It is obvious QLGC
has found some buyers and there is no selling pressure.
The pause at 30.50 this week corresponds with the
resistance from early June but a break over that
level could move quickly. 

Unfortunately LEAPs are not cheap. The upside potential
has ramped the prices and we will have to pay up for
this opportunity. 

The $30 LEAP is $4.10 and the $30 LEAP is $6.10. With
QLGC at 30.50 that represents about an equal risk
reward ratio. For the extra $2 bucks I would go for
the $30 entry. Once QLGC hits $35 you would already 
be $5 ITM and $1 away from fully intrinsic. 

BUY 2006 $30 LEAP YIO-AF currently $6.10
BUY 2006 $35 LEAP YIO-AG currently $4.10

Stop $27.50

QLGC Chart


****************************     
Current Portfolio: 
****************************    

Position Summary Graph


****************************     
Play Updates 
****************************    


MMM - 3M Company - $82.32, Stop $76.00

Entry at $82 on 9/15, add to position at $78. 

MMM took a serious header off the high board and 
plunged right back to $82 from the sprint to $85
last week. This enabled us to finally get an entry
at the September low. $81.00 is decent support but
should we see a continued drop we would be happy
to add to the position at $78 and just above even
stronger support.     

2006 $80 LEAP Call WMU-AP @ $10.40
2006 $85 LEAP Call WMU-AQ @ $ 6.80

http://members.OptionInvestor.com/leaps/Lp_080804_1.asp

MMM Chart


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


C - Citigroup $46.95 LEAP Call  **Stop $43.00**
Entry 46.95 9/17
 
We are close enough on Citigroup to the $46.50 entry
point that I am going to initiate the position today.
Citigroup paused its advance at $47.50 and we may be
setting up for another test of support at the 100dma
at $46. There is strong support at $44 and I am placing
the stop at $43.00. News from Japan knocked the bloom
off its rebound right at $47 resistance. 

Enter 1/2 position at $46.50 ($46.95 on 9.17)
Enter 1/2 position at $45.00

2006 $50 LEAP Call WRV-AJ @ $2.45

http://members.OptionInvestor.com/leaps/Lp_080804_1.asp

Citigroup Chart


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

INTC - Intel Corp $20.60  **Stop $17.00**
Entry $20.00 Sept 3rd

Intel rebounded all the way back to $21.15 last Monday
before continued chip warnings and profit taking on
the SOX in general pushed it back to $20 once again. 
This is a long-term position and we really do not
expect it to post any material gains until Q1-2005.
$20 is very strong support.    

Current position:
2006 $22 LEAP Call WNL-AX at $2.20 currently $2.20
2006 $25 LEAP Call WNL-AE at $1.45 currently $1.40

Initial play description:
http://members.OptionInvestor.com/leaps/Lp_071804_1.asp

Intel Chart


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


TYC - Tyco Intl. $30.50  **Stop $28.00**
Entry 5/18 $28.32

Tyco is still holding just above support at $30.50
after the news last week about a big debt buyback.
No challenge here with the 200dma at 29.18 and the
100dma at 30.78. The 100dma has provided support
since last April.   


2005 $30 LEAP Call TYC-AF cost $2.15 current $2.15 
2006 $30 LEAP Call WPA-AF cost $4.00 current $4.30 
July $25 insurance put - expired - cost $.55

Tyco Chart


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


JNPR - Juniper Networks $24.14 **Stop $20.00**
Entry $20.19 (8/16)

Juniper is still holding the high ground just under
$25 and has traded in the $24-$25 range all week.
The chip warnings are dragging on the network
stocks and a downgrade on Cisco on Friday blunted
a JNPR recovery. We have a nice cushion on JNPR
from our $20 entry and we just need to get past
any further Sep/Oct weakness. 


2006 $25 LEAP Call WBW-AE cost $3.50 current $5.60 
Insurance = Sept-$17.50 Put (expired) cost 50 cents.  

http://members.OptionInvestor.com/leaps/Lp_081504_1.asp

JNPR Chart


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


COP - Conoco Phillips $79.13 **Stop 75.50**
Entry $73.30 August 30th   

Raise stop to $75.50

COP continues to power ahead as news from Libya and
Russia is favorable to the big oil company. COP was
one of only two oil companies Prudential is keeping
at "overweight" after the strong recent gains. PRU
reiterated a "neutral" rating on the major oil and
refining companies with the exception of COP and TSO.

Libya said this week that COP, MRO and AHC could return
to their oil fields next month. They were shut out
when the U.S. imposed sanctions in 1982. This is a
very positive event for COP and the stock neared 
an all time high at $80 on the news. 

COP is expected to win a 7.6% stake in Lukoil when
the share is auctioned off on Sept-29th. This will
give COP a huge increase in proven reserves.  

We need to break resistance at $80 and it is blue
sky above that. 


Current position:
Jan-2006 $75 LEAP Call YRO-AO at $6.70 currently $9.30


Initial play description:
http://members.OptionInvestor.com/leaps/Lp_082904_1.asp

COP Chart

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


NWS - News Corp $33.71 **Stop 29.00**

Finally the NWS move to the U.S. is beginning to take
shape. News Corp said on Wednesday that the Australian
Federal Court clear objections for NWS to put the move
to a vote. The shareholder vote is now scheduled for
Oct-26th and is expected to pass. NWS would reincorporate
in the U.S. and move its primary listing to the NYSE.
It could continue to retain secondary listings on the
Australian and London exchanges. This move would allow
inclusion in the various U.S. indexes and could produce
a strong move higher in the stock as fund managers
begin entering positions. If the move is approved by
shareholders NWS will seek formal approval from the
regulators and the move is expected to be completed
in November. NWS owns FOX as well as many other 
networks around the globe. 

 
Current position: 
2006 $40 LEAP Call WLN-AH at $3.83 currently $1.85

Initial play description:
http://members.OptionInvestor.com/editorplays/edply_041104_1.asp
http://members.OptionInvestor.com/editorplays/edply_041804_1.asp


NWS Chart


****************************    
LEAPS Watch List
****************************    

No new entries this week. 

We are building up a strong portfolio and I do not
want to get too crowded. We still have some good
companies on the watch list and any market dip 
should hit several. 

We are reaching the point where we do not want a
dip as it would stop us out on some existing plays.
We are in that neutral zone between wanting a buying
opportunity and a rally.  

I continue to feel that a buying opportunity is coming
and we will take full advantage of it when it comes.
Until then the pickings are still hard to find. Most
good stocks are up strongly and the ones still down
we don't want.  


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


UPL - Ultra Petroleum $44.32 

**Target $43.00 or $45.50**

I would like to get a small dip to $43 as an entry but
I do not want to miss a take off opportunity should
we break resistance at 44.50. 

We will make the entry on a breakout or pullback and
take whatever the market gives us. UPL has a strong
ascending triangle at $44.50 and we could explode out
any day now.  

JAN-2006 $45 LEAP Call WSS-AI $10.80 
JAN-2006 $50 LEAP Call WSS-AJ $9.00 

http://members.OptionInvestor.com/leaps/Lp_091904_1.asp

UPL Chart


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


OXY - Occidental Petroleum $54.68  Target $53.50

I thought with the weakness last week we might have
a chance at an OXY entry but after the gap open on
Monday it never looked back. Friday alone saw a jump
of nearly +$1. 

Instead of seeing oil prices drop after the hurricane
missed most oil installations we saw prices soar +1.71
on Friday. This is making oil stocks like chasing wind
and very hard to enter. 

I do NOT want to enter OXY at the highs and will keep
raising the entry point in hopes of an entry on the
next oil price drop. We know it will not go straight
up and any dip could fill us. Uptrend support is $53.50.

2006 $50 LEAP Calls WXY-AJ currently $8.40
2006 $55 LEAP Calls WXY-AK currently $5.60
2006 $60 LEAP Calls WXY-AL currently $3.60

http://members.OptionInvestor.com/leaps/Lp_082904_1.asp

OXY Chart


EBAY - EBAY $93.00 target entry $90.00 and $94.00

EBAY was the victim of a downgrade on Thursday and it
crashed from $96 back to $91 and I thought for a few
minutes we could see some profit taking take hold. No
such luck. EBAY rebounded to 93.00 on Friday. 

I should probably take the entry and count myself lucky
but I keep thinking we could see some weakness ahead. 
The indexes are not setting up that way and are showing
a strong bullish breakout ahead. We do know that most 
pullbacks come without warning and it is too soon to 
tell if the EBAY rebound was a dead cat bounce or the
first signs of some profit taking. 

I changed the entry to $90 on the hopes we do see some
light selling on Monday before any rally begins. I also
put on a $94 entry just in case we explode out of the
gate Monday morning. 

Enter on breakdown to $90.00
Enter on breakout to $94.00 

2006 $90 LEAP Call YRL-AR
2006 $100 LEAP Call YRL-AP 

http://members.OptionInvestor.com/leaps/Lp_072504_1.asp

EBAY Chart


MER - Merrill Lynch $51.45 target entry $51.00 
               
MER pulled back again to close the week just above our
target entry price at $51. I think we have a good chance
of filling on this stock next week. 

$51 is decent support and could be where Merrill will
try and form a bottom.   

2006 $50 LEAP Call WZM-AJ currently $7.30
2006 $55 LEAP Call WZM-AK currently $4.90

http://members.OptionInvestor.com/leaps/Lp_071804_1.asp

MER Chart


SYMC - Symantec - $52.05   
Target $49.00 on breakdown
Target $53.00 on breakout

We have chased SYMC for about +8 points and I am tired
of running. I would love to see a pullback but it does
not appear to be in the cards. I am going to leave a
breakdown entry at $49 just in case weakness appears
but I am putting a $53 breakout entry on it as well.

We could be very close to a strong year end rally and
I do not want to miss this top performer.  

2006 $50 LEAP Call YAG-AJ current $10.30
2006 $55 LEAP Call YAG-AK current $7.90
2006 $60 LEAP Call YAG-AL current $6.00

http://members.OptionInvestor.com/leaps/Lp_080804_1.asp

SYMC Chart


GE $34.16 LEAP Call   Target $32.50

GE trended down all week from its $34 high last Friday.
Just when it appeared it would crack support and move
closer to our $32.50 entry point there was a huge spike
on Friday to a new seven month high at $34.10. This 
was in result to positive comments made by Prudential
about the prospects for their energy businesses. With 
plenty of September ahead I am still willing to stick
with our target.  

2006 $30 LEAP Call WGE-AF 
2006 $35 LEAP Call WGE-AG 

I am not suggesting insurance on GE but the
December $27.50 put is only 40 cents. We would
need a serious national disaster to see GE break
$30 and I think it would only be temporary. 

GE Chart



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Option Spread Strategies
************************

Open The Vault, We're On Our Way!
By Mike Parnos

Unquestionably my favorite time of the month.  The path to 
profits has become a familiar road for CPTI students.  This month 
(September) we kept our profit streak going (so what else is 
new?).  It was another impressive month, second only to May when 
we made $8,430 hypothetical, but deliciously spendable dollars.  
Even with the market was trending in different directions for the 
last two months, we've come out smelling like fresh printed 
currency.
____________________________________________________________

September CPTI Portfolio Results 
The September option cycle was the eleventh cycle in the second 
year of tracking our Couch Potato Trading Institute portfolio. 
With our $8,030 of profits, we've now accumulated a total of 
$54,400 in only eleven months - on a trading account size of 
about $40-45,000. 

Trade Summary
SPX - Iron Condor - Profit: $2,500
RUT - Iron Condor - Profit: $2,000
OEX - Iron Condor - Profit: $1,400
SPX - Sure Thing  - Profit: $2,130
TOTAL AUGUST PROFITS: $8,030
(See position summary below)

Happy Returns Of The Day (Month) Report -
Once again, I calculated our hypothetical return on risk for this 
month's portfolio trades. The total amount of maintenance in the 
above three closed trades was $57,500. If we subtract the $8,030 
of premium we originally took in, our real risk was only $49,470. 
When we divide $49,470 into our $8,030 profit, we show a return 
on our risk of 16.2%

_________________________________________________________________

SEPTEMBER QUICKIE RESULTS
OEX Iron Condor - 
Finished comfortably within our range.  Profit:  $1,650
SPX Iron Condor - 
Finished comfortably within our range.  Profit:  $2,650
RUT Siamese Condor - 
Settled at 578.83.  That would make our trade a wash.  However, 
on Thursday, RUT closed at about $574.  The prudent move would 
have been to close it out for about $5-6 and lock in a $3+ 
profit.  Remember, playing that Friday opening is a real 
crapshoot.  Three dollars of profit in hand is worth locking in.  
Don't be greedy.  Pigs get slaughtered -- and then all you may 
have to show for your trade is a ham sandwich and another story 
about the profit that got away.
____________________________________________________________

OCTOBER CPTI HYPOTHETICAL POSITIONS
October Position #1 - SPX Iron Condor - 1128.55
We sold 10 SPX October 1160 calls and bought 10 SPX October 1175 
calls for a net credit of about $1.75 ($1,750).  Then we sold 10 
SPX October 1075 puts and bought 10 SPX October 1060 puts for a 
credit of about $1.30 ($1,300).  Total net credit of appx. $3.05 
($3,050).  Maximum profit range is 1075 to 1160.  Maintenance is 
$15,000.
 
Position #2 -- RUT Iron Condor - 573.17
We sold 10 RUT Oct. 610 calls and bought 10 RUT Oct. 620 calls 
for a credit of about $.65 ($650).  Then we sold 10 RUT Oct 530 
puts and bought 10 RUT Oct 520 puts for a credit of about $.55 
($550).  Total net credit of about $1.20 ($1,200).  Maximum 
profit range is 530 to 610.  Maintenance is $10,000.  

Position #3 - OEX Iron Condor - 545.80
We sold 10 OEX October 520 puts and bought 10 OEX October 510 
puts for a credit of about $.70 ($700).  Then we sold 10 OEX 
October 565 calls and bought 10 OEX October 575 calls for a 
credit of about $.50 ($500).   Total net credit of about $1.20 
($1,200).  Maximum profit range is 520 to 565.  Maintenance is 
$10,000.  

Position #4 - BBH Iron Condor - $145.68
We sold 10 BBH October $150 calls and bought 10 BBH October $160 
calls for a credit of about $.95 ($950).  Then we sold 10 BBH 
October $135 puts and bought 10 BBH October $125 puts for a 
credit of about $.55 ($550).  Total net credit of about $1.50 
($1,500).  Maximum profit range is $135 to $150.  Maintenance is 
$10,000.  Be careful.

Position #5 -- SPX "Sure Thing" Strategy - 1128.55
Formerly called the "Credit Spread Boogie."  The market seems to 
be in an uptrend since mid-August.  Let's go with the flow until 
the market tells us otherwise.  

We sold 3 SPX 1120 October puts and bought 3 SPX 1095 October 
puts for a net credit of about $6.50 ($1,950).  The initial 
maintenance is $7,500.  Before trying this, make sure you have a 
large brokerage account that will accommodate a lot more 
maintenance -- just in case.  Remember, the "Sure Thing" strategy 
involves the possibility of doubling the number of contracts and 
going in the opposite direction, if the trend does not continue.
____________________________________________________________

SEPTEMBER CPTI POSITIONS
September Position #1 - SPX Iron Condor - 1128.55
We sold 10 Sept. SPX 1015 puts and bought 10 September SPX 995 
puts for a credit of about: $1.10 ($1,100).  Then we sold 10 
September SPX 1140 calls and bought 10 September SPX 1160 calls 
for a credit of about $1.40 ($1,400).  Total credit and potential 
profit of $2,500.   Profit:  $2,500.

September Position #2 - RUT Iron Condor - 573.17
We sold 10 RUT September 500 puts and bought 10 RUT September 490 
puts for a credit of about: $1.00 ($1,000).  Then we sold 10 RUT 
September 580 calls and bought 10 RUT September 590 puts Credit 
of about $1.00 ($1,150).   Total credit and profit potential of 
$2,000.  Profit:  $2,000.

September Position #3 - SPX "Sure Thing" - 1128.55
We sold 3 September SPX 1105 calls and bought 3 September SPX 
1130 calls for a credit of about $7.00 ($2,100).  When the market 
moved up quickly, we closed out our Sept. 1105/1130 bear call 
spread at a cost of $13.90 ($4,170).  We then put on 7 contracts 
a bull put spread (1110/1085) at $6, taking in $4,200.  Our new 
maintenance requirement is $17,500.  Potential profit: $2,130.  
Profit:  $2,130.

September Position #4 - OEX Iron Condor - 545.80
We sold 10 September OEX 505 puts and bought 10 September OEX 495 
puts for a credit of about: $.65 ($650).  Then we sold 10 
September OEX 555 calls and bought 10 September OEX 565 calls for 
a credit of about $.75 ($750). Total net credit of about $1.40 
($1,400).  Profit: $1,400.  

ONGOING POSITIONS
QQQ ITM Strangle - Ongoing Long Term -- $35.43
We bought 10 contracts of the 2005 QQQ $39 puts and 10 contracts 
of the 2005 QQQ $29 calls for a total debit of $14,300.   We make 
money by selling near term puts and calls every month.  Here's 
what we've done so far:  Oct. $33 puts and Oct. $34 calls - 
credit of $1,900. Nov. $34 puts and calls - credit of $1,150. 
Dec. $34 puts and calls - credit of $1,500.  Jan. $34 puts and 
calls - credit of $850.  Feb. $34 calls and $36 puts - credit of 
$750. Mar. $34 calls and $37 puts - credit of $1,150. Apr. $34 
calls and $37 puts - credit of $750.  May $34 calls and $37 puts 
- credit of $800.  

June $34 calls and $37 puts -- total net credit of $750.  We 
rolled out to the July $34 calls ($.20 credit) and $37 puts ($.60 
credit) and took in a credit of $.80 ($800).  We rolled to the 
August $34 calls and $37 puts, taking in a credit of $900.  We 
rolled to the Sept. $34 calls and $37 puts, yielding $.45 or $450 
for the cycle. For October we were again limited to a $.45 ($450) 
rollout.  Our new total credit is now $12,200.

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

ZERO-PLUS Strategy.  OEX - 545.80
In my Feb. 8th column, I outlined a strategy based on an initial 
investment of $100,000.  $74,000 was spent on zero coupon bonds 
maturing in seven years at a value of $100,000.  The principal 
$100,000 investment is guaranteed.  We're trading the remaining 
$26,000 to generate a "risk free" return on the original 
investment.
Our current position:  We own 3 OEX December 2006 540 calls @ $81 
(x 300 = $24,300).  Our cash position as of August expiration was 
$8,390.  In September we added another $975 for a new total of 
$9,365.

New Zero Plus Positions For October  
Not a lot of credit available this month.  October bull put 
spread 520/510 for credit of $.65 x 5 contracts = $325.  October 
bear call spread 565/575 for another credit of $.65 x 5 contracts 
= $325.  If all goes well, we'll be able to add $650 to our cash 
position.
__________________________________________________________

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

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


**********
DISCLAIMER
**********

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


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The Option Investor Newsletter                   Sunday 09-19-2004
Sunday                                                      5 of 5

In Section Five:

Covered Calls:  Conservative Stock Ownership
Spreads and Straddles:  Stocks Rise Despite Economic Concerns
Premium-Selling Plays: Naked Puts and Calls


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**************
COVERED CALLS
**************

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
CONSERVATIVE STOCK OWNERSHIP: COVERED-CALLS
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Many investors find that writing "in-the-money" covered-calls
fits their criteria for a conservative, easy-to-manage options
strategy.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
NEW COVERED-CALL CANDIDATES
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

The following group of issues is a list of potential candidates
to supplement your search for profitable trading positions.  As
with any investment, you must decide if the selections meet your
criteria for potential plays.  Only you can know what strategies
and positions are suitable for your experience level, risk-reward
tolerance and portfolio outlook.  They will not be included in
the weekly portfolio summary.

_________________________________________________________________

Sequenced by Target Yield (monthly basis/no margin)

Stock   Last   Option    Option  Last  Open  Cost  Days Target
Symbol Price   Series    Symbol  Bid   Int.  Basis Exp. Yield

IDEV    7.73  OCT  7.50  QUF-JU  0.60  1824   7.13  26   6.1%
PSRC   26.63  OCT 25.00  MQS-JE  2.70   196  23.93  26   5.2%
PTIE    7.99  OCT  7.50   UQ-JU  0.80   570   7.19  26   5.0%
NTMD   22.39  OCT 20.00  QNR-JD  3.20     7  19.19  26   4.9%
WTZ     8.25  OCT  7.50  WTZ-JU  1.05   178   7.20  26   4.9%
SNDA   24.03  OCT 22.50  QKU-JX  2.40    84  21.63  26   4.7%
MICU   16.49  OCT 15.00  UMO-JC  2.05    43  14.44  26   4.5%
IFLO   15.90  OCT 15.00  QIF-JC  1.40    15  14.50  26   4.0%
ENZN   15.76  OCT 15.00  QYZ-JC  1.25  4733  14.51  26   4.0%
ULCM   13.26  OCT 12.50  UUL-JV  1.15   105  12.11  26   3.8%

Company Descriptions

LB-Last Bid price, OI-Open Interest, CB-Cost Basis or break-even
point, DE-Days to Expiry, TY-Target Yield (monthly basis).

_________________________________________________________________

IDEV - Indevus Pharmaceuticals  $7.73

Indevus Pharmaceuticals (NASDAQ:IDEV) is a biopharmaceutical
company engaged in the development and commercialization of a
diversified portfolio of product candidates, including multiple
compounds in late-stage clinical development.  The company has
six compounds in development: trospium for overactive bladder,
pagoclone for panic/anxiety disorders, citicoline for ischemic
stroke, IP 751 for pain and inflammatory disorders, PRO 2000
for the prevention of infection by the human immunodeficiency
virus and other sexually transmitted pathogens and aminocandin
for treatment of systemic fungal infections.

IDEV - Indevus Pharmaceuticals  $7.73

OCT  7.50 QUF-JU LB=0.60 OI=1824 CB=7.13 DE=26 TY=6.1%


_________________________________________________________________

PSRC - PalmSource  $26.63

PalmSource (NASDAQ:PSRC) is a developer and licensor of software
that enables mobile information devices.  The company's software
platform consists of the Palm operating system and software
development tools that mobile information device manufacturers
use to develop products from PalmSource's platform.  PalmSource
also extended its platform with applications including personal
information management software, Web browsers and e-mail.  The
platform enables manufacturers to rapidly and efficiently create
mobile information devices.

PSRC - PalmSource  $26.63

OCT 25.00 MQS-JE LB=2.70 OI=196 CB=23.93 DE=26 TY=5.2%


_________________________________________________________________

PTIE - Pain Therapeutics  $7.99

Pain Therapeutics (NASDAQ:PTIE) is a biopharmaceutical company
engaged in the development of drugs that target severe chronic
pain, such as pain associated with advanced osteoarthritis,
low-back pain or irritable bowel syndrome.  The company has
three proprietary drug candidates in clinical development:
Oxytrex, Remoxy and PTI-901.  Its two most advanced drugs,
Oxytrex and PTI-901, are in Phase III clinical trials.  Remoxy
is in Phase I clinical trials in the United Kingdom.

PTIE - Pain Therapeutics  $7.99

OCT  7.50 UQ-JU LB=0.80 OI=570 CB=7.19 DE=26 TY=5.0%


_________________________________________________________________

NTMD - NitroMed  $22.39

NitroMed (NASDAQ:NTMD) is an emerging pharmaceutical company
with substantial expertise and intellectual property in nitric
oxide-based drug development.  The firm is applying its nitric
oxide technology to develop new pharmaceuticals, as well as
safer and more effective versions of existing pharmaceuticals
to target diseases and commercial markets.  Its lead nitric
oxide-enhancing medicine, BiDil, which is being developed to
reduce mortality and hospitalization and improve the quality
of life of African Americans diagnosed with heart failure, is
the subject of a Phase III confirmatory clinical trial.

NTMD - NitroMed  $22.39

OCT 20.00 QNR-JD LB=3.20 OI=7 CB=19.19 DE=26 TY=4.9%


_________________________________________________________________

WTZ - Western Silver  $8.25

Western Silver (NYSE:WTZ) is engaged, directly and through joint
ventures and subsidiaries, in exploring and the development of
mineral properties in Mexico and Canada.  The company's primary
projects are the Penasquito Project, the El Salvador Project and
the San Nicolas Deposit in the State of Zacatecas, Mexico, and
the Carmacks Property in Yukon Territory, Canada.  The company's
Penasquito Project, Western's primary property, is a silver,
gold, lead and zinc property located in the Concepcion del Oro
district in the northeast corner of the State of Zacatecas.

WTZ - Western Silver  $8.25

OCT  7.50 WTZ-JU LB=1.05 OI=178 CB=7.20 DE=26 TY=4.9%


_________________________________________________________________

SNDA - Shanda Interactive Ent.  $24.03

Shanda Interactive Entertainment (NASDAQ:SNDA) is an operator of
online games in China.  The games, licensed from third parties,
as well as developed in-house by the company, include The Legend
of Mir II and The World of Legend.  The company's commercially
launched games have approximately 1.4 million peak concurrent
users and 931,570 average concurrent users.  Shanda also provides
multiplayer online games, including role-playing games and casual
online games, which allow thousands of users to interact in a
virtual world by assuming ongoing roles or characters with many
different features.

SNDA - Shanda Interactive Ent.  $24.03

OCT 22.50 QKU-JX LB=2.40 OI=84 CB=21.63 DE=26 TY=4.7%


_________________________________________________________________

MICU - Vicuron Pharmaceuticals  $16.49

Vicuron Pharmaceuticals (NASDAQ:MICU) is a biopharmaceutical
company focused on the discovery, development, manufacturing
and marketing of pharmaceutical products.  The company's lead
antifungal product candidate, Anidulafungin, is intended for
the intravenous treatment of fungal infections.  Dalbavancin
is a next-generation antibiotic belonging to the same class
as vancomycin, one of the widely used injectable antibiotics
for Staphylococcal infections.

MICU - Vicuron Pharmaceuticals  $16.49

OCT 15.00 UMO-JC LB=2.05 OI=43 CB=14.44 DE=26 TY=4.5%


_________________________________________________________________

IFLO - I-Flow  $15.90

I-Flow (NASDAQ:IFLO) manufactures a line of compact, portable
infusion pumps, catheters and pain kits that dose medication
directly to the wound site, as well as administer anesthetics,
chemotherapies, antibiotics, diagnostic agents, nutritional
supplements and other medications.  I-Flow sells its products
throughout the United States, Canada, Europe, Asia, Mexico,
Brazil, Australia, New Zealand and the Middle East.  Through
InfuSystem, a wholly owned subsidiary, I-Flow is also engaged
in the rental of infusion pumps on a month-to-month basis for
the treatment of cancer.

IFLO - I-Flow  $15.90

OCT 15.00 QIF-JC LB=1.40 OI=15 CB=14.50 DE=26 TY=4.0%


_________________________________________________________________

ENZN - Enzon Pharmaceuticals  $15.76

Enzon Pharmaceuticals (NASDAQ:ENZN) is a biopharmaceutical firm
that develops, manufactures and markets human therapeutics for
life-threatening diseases on its own and through strategic
partnerships.  The company markets human therapeutic products
through two specialized sales forces and also receive royalties
on sales of PEG-INTRON, an enhanced version of Schering-Plough's
alpha-interferon 2a product, INTRON A, which uses Enzon's PEG
technology, as well as a share of certain revenues received by
Nektar Therapeutics on sales of Hoffmann-La Roche's PEG-enhanced
version of alpha-interferon 2b, PEGASYS.

ENZN - Enzon Pharmaceuticals  $15.76

OCT 15.00 QYZ-JC LB=1.25 OI=4733 CB=14.51 DE=26 TY=4.0%


_________________________________________________________________

ULCM - Ulticom  $13.26

Ulticom (NASDAQ:ULCM) is a global provider of service enabling
signaling software for wireline, wireless and Internet-based
communications.  The company's signalware family of products
is used by equipment manufacturers, application developers and
communication service providers to deploy infrastructure and
services within the mobility, messaging, payment and location
markets.  Signalware products are also embedded in a range of
packet softswitching products to interoperate or converge voice
and data networks and facilitate voice-over Internet protocol,
hosted Internet Protocol telephony and virtual private networks.

ULCM - Ulticom  $13.26

OCT 12.50 UUL-JV LB=1.15 OI=105 CB=12.11 DE=26 TY=3.8%




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

Stocks Rise Despite Economic Concerns
By Ray Cummins

U.S. equity values drifted higher Friday, closing the week on a 
bullish note, even as crude prices rose and consumer sentiment
waned.

The Dow Jones industrial average added 39 points to finish at
10,284 on strength in General Electric (NYSE:GE) and Exxon-Mobil
(NYSE:XOM).  The NASDAQ composite gained 6 points to 1,910, with
semiconductor and biotechnology shares among the best performers.
The broader Standard & Poor's 500 index was up 5 points to 1,128,
despite weakness in gold, managed healthcare and paper packaging
stocks.  Advancing issues slightly outnumbered decliners on both
the New York Stock Exchange and the NASDAQ.  Big board volume was
1.44 billion shares, while 1.62 billion shares changed hands on
the technology exchange.  The bond market moved lower on renewed
expectations of a rate hike.  The 10-year note closed down 11/32,
with its yield at 4.12%.  For the week, the Dow fell 0.3%, while
the S&P 500 was up 0.4% percent and the NASDAQ rose 0.8%.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
SUMMARY OF CURRENT POSITIONS - AS OF 09/17/04
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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  68.20  SEP  55.0  60.0  0.40   59.60   0.40  Closed
FPL    67.73  67.96  SEP  60.0  65.0  0.45   64.55   0.45  Closed
MCO    67.33  71.00  SEP  60.0  65.0  0.65   64.35   0.65  Closed
BSTE   44.14  50.20  SEP  35.0  40.0  0.55   39.45   0.55  Closed
ISCA   53.40  49.53  SEP  45.0  50.0  0.55   49.45   0.08  Closed
LEND   33.89  40.54  SEP  25.0  30.0  0.60   29.40   0.60  Closed
PIXR   69.93  79.97  SEP  60.0  65.0  0.45   64.55   0.45  Closed
PD     80.77  83.15  SEP  65.0  70.0  0.40   69.60   0.40  Closed
RYL    86.01  91.73  SEP  75.0  80.0  0.65   79.35   0.65  Closed
FRO    40.05  41.26  SEP  30.0  35.0  0.60   34.40   0.60  Closed
NIHD   37.59  40.71  SEP  33.4  35.0  0.20   34.80   0.20  Closed
NCEN   53.10  58.29  SEP  45.0  50.0  0.60   49.40   0.60  Closed
SEPR   49.35  50.47  SEP  42.5  45.0  0.30   44.70   0.30  Closed
GILD   34.70  36.89  SEP  30.0  32.5  0.27   32.23   0.27  Closed
PCU    43.29  43.55  SEP  35.0  40.0  0.50   39.50   0.50  Closed
MUR    75.51  84.52  OCT  65.0  70.0  0.70   69.30   0.70   Open
RYL    88.15  91.73  OCT  75.0  80.0  0.75   79.25   0.75   Open
GIVN   38.72  38.84  OCT  30.0  35.0  0.70   34.30   0.70   Open
MBT   140.75 139.90  OCT 120.0 125.0  0.50  124.50   0.50   Open
COGN   34.58  33.56  OCT  30.0  32.5  0.30   32.20   0.30   Open
SCSC   66.22  66.46  OCT  55.0  60.0  0.50   59.50   0.50   Open
CCMP   38.29  37.12  OCT  30.0  35.0  0.75   34.25   0.75   Open
ONXX   41.99  41.14  OCT  30.0  35.0  0.50   34.50   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  74.93   SEP  85.0  80.0  0.55   80.55  0.55  Closed
CDWC   59.25  59.50   SEP  65.0  60.0  0.45   60.45  0.45  Closed
EASI   43.53  47.64   SEP  55.0  50.0  0.40   50.40  0.40  Closed
VLO    64.36  72.10   SEP  75.0  70.0  0.60   70.60 (1.50) Closed
FD     44.60  46.10   SEP  50.0  47.5  0.30   47.80  0.30  Closed
PHS    32.42  35.41   SEP  37.5  35.0  0.30   35.30 (0.11) Closed
OSTK   31.03  33.80   SEP  40.0  35.0  0.60   35.60  0.60  Closed
AMZN   39.90  42.96   SEP  45.0  42.5  0.30   42.80 (0.16) Closed
CHIR   43.41  45.30   SEP  47.5  45.0  0.30   45.30  0.00  Closed
AZO    74.06  76.05   OCT  85.0  80.0  0.55   80.55  0.55   Open
MXIM   40.94  42.40   OCT  50.0  45.0  0.50   45.50  0.50   Open
PLMO   32.30  35.65   OCT  45.0  40.0  0.55   40.55  0.55   Open
LEN    46.75  47.56   OCT  55.0  50.0  0.60   50.60  0.60   Open
NTES   35.51  38.99   OCT  45.0  40.0  0.60   40.60  0.60   Open
NBIX   50.65  50.96   OCT  60.0  55.0  0.55   55.55  0.55   Open
SSP    49.66  50.16   OCT  52.5  50.0  0.50   50.50  0.34   Open
 
L/C = Long Call S/C = Short Call CB = Cost Basis G/L = Gain/Loss

Netease.com (NASDAQ:NTES), E.W. Scripps (NYSE:SSP) and palmOne
(NASDAQ:PLMO) are on the "watch" list.  As mentioned Tuesday,
Amazon.com (NASDAQ:AMZN) and Valero (NYSE:VLO) should have been
closed earlier in the week.  Briggs & Stratton (NYSE:BGG),
Genentech (NYSE:DNA), Guidant (NYSE:GDT), Kmart (NASDAQ:KMRT),
Research In Motion (NASDAQ:RIMM) and Vimple Communications
(NYSE:VIP) have previously been closed to limit potential losses.


DEBIT STRADDLES

Stock   Pick   Last   Exp.   Long   Long  Initial   Max     Play
Symbol  Price  Price  Month  Call   Put    Debit   Value   Status

DITC    17.97  21.92   SEP   17.5   17.5    3.00    5.50   Closed
CAH     45.79  45.85   SEP   45.0   45.0    3.00    3.60   Closed
VTS     20.34  20.70   SEP   20.0   20.0    1.75    1.55   Closed
KBH     75.31  77.21   SEP   75.0   75.0    2.10    2.60   Closed

KB Home (NYSE:KBH) offered a viable short-term profit for traders
who participated in the speculative straddle.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
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.

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

AHC - Amerada Hess  $83.99  *** Oil Shares Surge! ***

Amerada Hess (NYSE:AHC) explores for, produces, purchases,
transports and sells crude oil and natural gas.  These
exploration and production activities take place around
the globe.  The company also manufactures, purchases, trades
and markets refined petroleum and other energy products through
a joint-venture refinery in the United States Virgin Islands,
and another refining facility, terminals and retail gasoline
stations located on the East Coast of the United States.

AHC - Amerada Hess  $83.99

PLAY (conservative - bullish/credit spread):

BUY  PUT  OCT-75.00  AHC-VO  OI=224  ASK=$0.30
SELL PUT  OCT-80.00  AHC-VP  OI=519  BID=$0.80
INITIAL NET-CREDIT TARGET=$0.55-$0.60
POTENTIAL PROFIT(max)=12% B/E=$79.45


__________________________________________________________________

CELG - Celgene  $59.39  *** Drug Speculation! ***

Celgene (NASDAQ:CELG) is an integrated biopharmaceutical firm
engaged in the discovery, development and commercialization of
therapies designed to treat cancer and immunological diseases
through regulation of cellular, genomic and proteomic targets.
Celgene has built a discovery, development and commercialization
platform for drug- and cell-based therapies that allows it to
both create and retain significant value within its therapeutic
franchise areas of cancer and immune/inflammatory diseases.  The
company's target-to-therapeutic platform integrates both small
molecule and cell-based therapies and spans the key functions
required to generate a pipeline of new drugs and cell therapy
candidates.

CELG - Celgene  $59.39

PLAY (conservative - bullish/credit spread):

BUY  PUT  OCT-50.00  LQH-VJ  OI=2831  ASK=$0.55
SELL PUT  OCT-55.00  LQH-VK  OI=4314  BID=$1.05
INITIAL NET-CREDIT TARGET=$0.55-$0.65
POTENTIAL PROFIT(max)=12% B/E=$54.45



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

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.

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

APOL - Apollo Group  $78.35  *** Sector Slump? ***

Apollo Group (NASDAQ:APOL) provides higher education to working
adults.  The company operates through its subsidiaries, The
University of Phoenix, University of Phoenix Online, Institute
for Professional Development, The College for Financial Planning
Institutes Corporation and Western International University.  The
company offers its programs and services at 71 campuses and 121
learning centers in 37 states, Puerto Rico and Vancouver, British
Columbia.

APOL - Apollo Group  $78.35

PLAY (less conservative - bearish/credit spread):

BUY  CALL  OCT-90.00  OAQ-JR  OI=378  ASK=$0.35
SELL CALL  OCT-85.00  OAQ-JQ  OI=645  BID=$1.00
INITIAL NET-CREDIT TARGET=$0.65-$0.75
POTENTIAL PROFIT(max)=15% B/E=$85.65


__________________________________________________________________

STJ - St. Jude Medical  $70.73  *** In A Trading Range? ***

St. Jude Medical (NYSE:STJ), together with its subsidiaries,
develops, manufactures and distributes cardiovascular medical
devices for the global cardiac rhythm management, cardiac
surgery and cardiology and vascular access therapy areas.  The
company's products include bradycardia pacemaker systems,
tachycardia implantable cardioverter defibrillator systems,
electrophysiology catheters, heart valves, and valve repair
products, vascular closure devices, angiography catheters,
guidewires and hemostasis introducers.

STJ - St. Jude Medical  $70.73

PLAY (conservative - bearish/credit spread):

BUY  CALL  OCT-80.00  STJ-JP  OI=1230  ASK=$0.25
SELL CALL  OCT-75.00  STJ-JO  OI=1377  BID=$0.75
INITIAL NET-CREDIT TARGET=$0.55-$0.60
POTENTIAL PROFIT(max)=12% B/E=$75.55



~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
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...



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

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
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 09/17/04
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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   20.08    0.36   5.52%   2.30%
MCIP     SEP    15.00   14.30   17.20    0.70   8.50%   4.90%
PAAS     SEP    12.50   12.05   14.35    0.45   6.87%   3.73%
UTHR     SEP    25.00   24.70   33.02    0.30   3.01%   1.21%
AMED     SEP    25.00   24.25   28.20    0.75   6.54%   3.09%
PHM      SEP    50.00   49.25   62.71    0.75   3.32%   1.52%
KOSP     SEP    30.00   29.25   36.47    0.75   5.48%   2.56%
GLBCE    SEP    12.50   11.90   15.03    0.60  11.90%   5.04%
ECLP     SEP    12.50   12.10   15.30    0.40   6.90%   3.31%
OMM      SEP    12.50   12.10   14.85    0.40   6.51%   3.31%
CNCT     SEP    25.00   24.10   26.63    0.90   7.11%   3.73%
TOY      SEP    15.00   14.45   17.14    0.55   7.51%   3.81%
ACF      SEP    20.00   19.25   20.97    0.75   7.16%   3.90%
ION      SEP    25.00   24.50   27.24    0.50   4.17%   2.04%
ESLT     SEP    20.00   19.20   20.09    0.80   7.95%   4.17%
WBSN     SEP    35.00   33.75   42.54    1.25   8.46%   3.70%
NTMD     SEP    12.50   12.15   22.39    0.35   8.12%   2.88%
UTHR     SEP    25.00   24.30   33.02    0.70   7.30%   2.88%
CNCT     SEP    25.00   24.30   26.63    0.70   6.65%   2.88%
DDS      SEP    20.00   19.50   20.26    0.50   6.31%   2.56%
MEE      SEP    22.50   22.00   27.52    0.50   5.93%   2.27%
FOSL     SEP    25.00   24.35   28.83    0.65   5.95%   2.67%
HUM      SEP    17.50   17.10   19.45    0.40   5.34%   2.34%
SCSC     SEP    50.00   49.40   66.46    0.60   3.30%   1.21%
JOSB     SEP    24.00   23.52   30.65    0.48   5.27%   2.04%
ECLP     SEP    12.50   12.20   15.30    0.30   6.57%   2.46%
WBSN     SEP    35.00   34.05   42.54    0.95   7.44%   2.79%
ARO      SEP    30.00   29.05   30.07    0.95   7.67%   3.27%
MW       SEP    25.00   24.60   29.33    0.40   4.22%   1.63%
TOL      SEP    40.00   39.05   47.27    0.95   6.19%   2.43%
SEAC     SEP    15.00   14.40   16.57    0.60  12.11%   4.17%
CLHB     SEP    10.00    9.60   12.08    0.40  10.87%   4.17%
NTMD     SEP    15.00   14.65   22.39    0.35   8.62%   2.39%
ESLT     SEP    20.00   19.20   20.09    0.80  10.61%   4.17%
MYGN     SEP    15.00   14.55   17.50    0.45   8.06%   3.09%
NAVR     SEP    12.50   12.15   14.98    0.35   9.14%   2.88%
IVX      SEP    18.00   17.56   20.08    0.44   7.02%   2.51%
UTHR     SEP    25.00   24.40   33.02    0.60   8.89%   2.46%
AAPL     SEP    30.00   29.50   37.14    0.50   5.37%   1.69%
ARO      SEP    30.00   29.50   30.07    0.50   5.51%   1.69%
SONO     SEP    22.50   22.05   27.13    0.45   6.40%   2.04%
ESLT     SEP    20.00   19.30   20.09    0.70  10.92%   3.63%
MEE      SEP    25.00   24.45   27.52    0.55   7.13%   2.25%
SRDX     SEP    22.50   21.90   24.50    0.60   8.40%   2.74%
IVX      SEP    18.00   17.52   20.08    0.48   8.94%   2.74%
BSTE     SEP    45.00   44.45   50.20    0.55   4.16%   1.24%
FCN      SEP    17.50   17.05   19.34    0.45   7.56%   2.64%
PSRC     SEP    20.00   19.35   26.63    0.65  16.45%   3.36%
MYGN     SEP    15.00   14.70   17.50    0.30   8.01%   2.04%
LCAV     SEP    22.50   21.95   26.84    0.55  10.09%   2.51%
ATI      SEP    17.50   17.10   19.64    0.40   9.15%   2.34%
LNG      SEP    15.00   14.70   19.12    0.30   9.15%   2.04%
DITC     SEP    20.00   19.55   21.92    0.45   9.32%   2.30%
ICOS     SEP    25.00   24.60   24.69    0.09   1.45%   1.63%
WNC      SEP    25.00   24.60   30.06    0.40   6.62%   1.63%
BEIQ     SEP    25.00   24.70   27.02    0.30   5.32%   1.21%
DITC     SEP    20.00   19.55   21.92    0.45  10.09%   2.30%
SHFL     SEP    30.00   29.35   35.69    0.65  10.20%   2.21%
ATI      SEP    17.50   17.20   19.64    0.30   7.78%   1.74%
SNDA     SEP    20.00   19.70   24.03    0.30   7.46%   1.52%
GMR      SEP    25.00   24.65   31.40    0.35   6.58%   1.42%
AAPL     SEP    32.50   32.05   37.14    0.45   6.20%   1.40%
SONO     SEP    22.50   22.10   27.13    0.40   8.03%   1.81%
BLUD     SEP    20.00   19.50   22.11    0.50   5.28%   2.56%
MOGN     SEP    25.00   24.60   27.38    0.40   3.98%   1.63%
EPIX     SEP    20.00   19.75   20.98    0.25   8.64%   1.27%
SSYS     SEP    22.50   22.10   29.32    0.40   4.66%   1.81%
MDCC     SEP    22.50   21.75   24.14    0.75   6.60%   3.45%
NIHD     SEP    35.00   34.75   40.71    0.25   5.07%   0.72%
FLE      SEP    12.50   12.25   14.72    0.25  13.35%   2.04%
CC       SEP    12.50   12.15   14.72    0.35   5.85%   2.88%
OS       OCT    15.00   14.60   15.64    0.40   7.19%   2.74%
FHRX     OCT    17.50   17.05   19.43    0.45   6.31%   2.64%
SNDK     OCT    22.50   22.00   26.30    0.50   5.86%   2.27%
SSYS     OCT    25.00   24.45   29.32    0.55   5.91%   2.25%
JNPR     OCT    22.50   22.00   24.14    0.50   5.73%   2.27%
CREE     OCT    22.50   22.15   28.37    0.35   5.28%   1.58%
FFIV     OCT    22.50   22.20   30.05    0.30   4.45%   1.35%
AMZN     OCT    37.50   37.00   42.96    0.50   3.96%   1.35%
ASKJ     OCT    25.00   24.45   31.63    0.55   7.42%   2.25%
USNA     OCT    30.00   29.30   33.33    0.70   6.10%   2.39%
YHOO     OCT    30.00   29.40   33.46    0.60   5.51%   2.04%
CELL     OCT    15.00   14.50   16.79    0.50   8.28%   3.45%
CREE     OCT    25.00   24.35   28.37    0.65   7.26%   2.67%
CLHB     OCT    10.00    9.75   12.08    0.25   7.98%   2.56%

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   17.63    0.60   7.40%   1.69%
AVID     SEP    50.00   50.50   46.00    0.50   3.56%   0.99%
USPI     SEP    37.50   38.05   35.74    0.55   3.90%   1.45%
BDY      SEP    25.00   25.75   23.25    0.75   7.42%   2.91%
DRIV     SEP    30.00   30.30   28.27    0.30   4.51%   0.99%
SINA     SEP    30.00   30.35   25.31    0.35   5.84%   1.15%
ERES     SEP    22.50   22.80   18.97    0.30   6.66%   1.32%
ICUI     SEP    30.00   30.65   27.60    0.65   7.56%   2.12%
SWIR     SEP    30.00   30.30   17.63    0.30   5.90%   0.99%
UPL      SEP    45.00   45.40   44.32    0.40   4.90%   0.88%
MCHP     SEP    30.00   30.65   27.35    0.65   6.97%   2.12%
EYET     SEP    45.00   45.75   33.68    0.75  10.85%   1.64%
CMX      SEP    30.00   30.45   29.98    0.45   4.86%   1.48%
BRCM     SEP    32.50   32.90   28.86    0.40   5.76%   1.22%
ELAB     SEP    30.00   30.55   25.03    0.55   8.34%   1.80%
RSTI     SEP    30.00   30.65   29.18    0.65  10.87%   2.12%
PSFT     SEP    20.00   20.35   19.72    0.35  11.10%   1.72%
PLMO     SEP    40.00   40.25   35.65    0.25   6.23%   0.62%
ASTE     SEP    17.50   17.95   18.85   (0.90)  0.00%   0.00%
OSTK     SEP    35.00   35.30   33.80    0.30   8.17%   0.85%
ESIO     OCT    22.50   23.00   21.33    0.50   6.99%   2.17%
LNCR     OCT    32.50   33.30   30.18    0.80   7.12%   2.40%
ADTN     OCT    30.00   30.30   24.80    0.30   3.79%   0.99%
DIGE     OCT    30.00   30.35   26.45    0.35   6.05%   1.15%
CTB      OCT    22.50   22.85   20.86    0.35   4.25%   1.53%
MDCO     OCT    30.00   30.80   28.14    0.80   8.33%   2.60%
CECO     OCT    40.00   40.50   30.50    0.50   6.34%   1.23%

Electro-Scientific (NASDAQ:ESIO) remains on the "watch" list.
Ask Jeeves (NASDAQ:ASKJ), IDX Systems (NASDAQ:IDXC), Ceradyne
(NASDAQ:CRDN), Dick's Sporting Goods (NYSE:DKS), Marvell
Electronics (NASDAQ:MRVL) and Resources Connection (NASDAQ:RECN)
have previously 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

ASTE   18.85  OCT 17.50  QXA-VW 0.55   20 16.95  26   3.8%   9.5%
LCAV   26.84  OCT 25.00  JVQ-VE 0.65   20 24.35  26   3.1%   8.0%
ALO    18.95  OCT 17.50  ALO-VW 0.40   10 17.10  26   2.7%   7.2%
PDII   27.21  OCT 25.00  PKU-VE 0.55   68 24.45  26   2.6%   7.0%
BOBJ   22.00  OCT 20.00  BBQ-VD 0.35  664 19.65  26   2.1%   5.7%
APPX   32.50  OCT 27.50  AQO-VY 0.40 5125 27.10  26   1.7%   5.6%
GILD   36.84  OCT 35.00  GDQ-VG 0.65 1138 34.35  26   2.2%   5.6%

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.
_________________________________________________________________

ASTE - Astec Industries  $18.85  *** Revenge Play! ***

Astec Industries (NASDAQ:ASTE) designs, engineers, manufactures
and markets equipment and components used in road building and
related construction activities.  The company's products are
used in each major phase of road building, from quarrying and
crushing the aggregate to testing the mix for application of
the road surface.  Astec also makes equipment and components
unrelated to road construction, such as trenching, auger boring,
directional drilling, environmental remediation and industrial
heat transfer equipment.

ASTE - Astec Industries  $18.85

OCT 17.50 QXA-VW LB=0.55 OI=20 CB=16.95 DE=26 TY=3.8% MY=9.5%


_________________________________________________________________

LCAV - LCA-Vision  $26.84  *** Seeing Is Believing! ***

LCA-Vision (NASDAQ:LCAV) is a developer and operator of laser
vision correction centers under the brand name LasikPlus.  The
firm's vision centers provide the staff, facilities, equipment
and support services for performing laser vision corrections
that employ laser technologies to help correct nearsightedness,
farsightedness and astigmatism.  LCA utilizes fixed-site excimer
lasers and its vision centers are supported mainly by full-time,
board-certified ophthalmologists and optometrists, as well as
other healthcare professionals.

LCAV - LCA-Vision  $26.84

OCT 25.00 JVQ-VE LB=0.65 OI=20 CB=24.35 DE=26 TY=3.1% MY=8.0%


_________________________________________________________________

ALO - Alpharma  $18.95  *** Favorable Neurontin Ruling! ***

Alpharma (NYSE:ALO) is a global specialty pharmaceutical firm
that develops, manufactures and markets pharmaceutical products
for humans and animals.  The company offers generic human drug
products in tablet, capsule, liquid and topical formulations and
dosage forms.  Alpharma makes and markets fermentation-based
active pharmaceutical ingredients that are used primarily by
third parties in the manufacturing of generic and branded
pharmaceutical products.  The company also makes and markets
animal health products in various formulations and dosage forms.

ALO - Alpharma  $18.95

OCT 17.50 ALO-VW LB=0.40 OI=10 CB=17.10 DE=26 TY=2.7% MY=7.2%


_________________________________________________________________

PDII - PDI Inc.  $27.21  *** Rally Mode! ***

PDI Inc. (NASDAQ:PDII) is a healthcare sales and marketing
company serving the biopharmaceutical and medical devices and
diagnostics industries.  The firm creates and executes sales
and marketing campaigns intended to improve the profitability
of pharmaceutical and related products.  PDI partners with
companies that own the intellectual property rights to these
products and recognize their ability to commercialize these
products and maximize their sales performance.  PDI has a
variety of agreement types, from fee-for-service arrangements
to equity investments in a product or company.

PDII - PDI Inc.  $27.21

OCT 25.00 PKU-VE LB=0.55 OI=68 CB=24.45 DE=26 TY=2.6% MY=7.0%


_________________________________________________________________

BOBJ - Business Objects S.A.  $22.00  *** Bottom-Fishing! ***

Business Objects S.A. (NASDAQ:BOBJ) is a worldwide provider of
business intelligence solutions.  The company develops, markets
and distributes software that enables organizations to track,
understand and manage enterprise performance.  The company's
products include data integration, query, reporting, online
analytical processing, information broadcasting, business
alerts, analytical application frameworks and pre-packaged
analytic applications.  Its products also include administration
tools that enable information technology professionals to set up
and deploy its products across an enterprise.

BOBJ - Business Objects S.A.  $22.00

OCT 20.00 BBQ-VD LB=0.35 OI=664 CB=19.65 DE=26 TY=2.1% MY=5.7%


_________________________________________________________________

APPX - American Pharma Partners  $32.50  *** Entry Point? ***

American Pharmaceutical Partners (NASDAQ:APPX) is a specialty
pharmaceutical company that develops, manufactures and markets
injectable pharmaceutical products.  The company manufactures
products in each of the three basic forms, in which injectable
products are sold, including liquid, powder and lyophilized or
freeze-dried. vIts products are generally used in hospitals,
long-term care facilities, alternate care sites and clinics
within North America.  American Pharmaceutical has a number of
product candidates under development in the areas of oncology,
anti-infective and critical care.

APPX - American Pharma Partners  $32.50

OCT 27.50 AQO-VY LB=0.40 OI=5125 CB=27.10 DE=26 TY=1.7% MY=5.6%


_________________________________________________________________

GILD - Gilead Sciences  $36.84  *** Next Leg Up? ***

Gilead Sciences (NASDAQ:GILD) is a biopharmaceutical company
that discovers, develops and commercializes therapeutics to
advance the care of patients suffering from life-threatening
diseases worldwide.  Gilead has six products that are sold in
the United States, all of which are also marketed worldwide.
These products are Viread and Emtriva, for the treatment of
HIV infection; Hepsera, for the treatment of chronic hepatitis
B infection; AmBisome, an antifungal agent, and Vistide, for
the treatment of CMV retinitis.  In addition, Hoffmann-La Roche
sells Tamiflu, for the treatment of influenza, under a royalty
agreement with Gilead.

GILD - Gilead Sciences  $36.84

OCT 35.00 GDQ-VG LB=0.65 OI=1138 CB=34.35 DE=26 TY=2.2% MY=5.6%



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

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.

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

CPRT - Copart  $18.23  *** Sell-Off In Progress! ***

Copart (NASDAQ:CPRT) is a provider of salvage vehicle auction
services in the United States.  It provides vehicle suppliers,
primarily insurance companies, with a wide range of services to
process and sell salvage vehicles through auctions, principally
to licensed vehicle dismantlers, rebuilders, repair licensees
and used vehicle dealers.  The company offers vehicle suppliers
a range of services, which expedite each stage of the salvage
vehicle auction process, maximize proceeds and minimize costs.
These services are online supplier access, salvage estimation
services, transportation services, vehicle inspection stations,
on-demand reporting, DMV processing and other vehicle processing
programs.

CPRT - Copart  $18.23

PLAY (sell naked call):

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

SELL CALL  OCT 20    KQJ-JD    140    0.35  20.35   7.0%   1.7%


_________________________________________________________________

FLML - Flamel Technologies  $14.68  *** A Big "Down" Day! ***

Flamel Technologies (NASDAQ:FLML) is a biopharmaceutical company
engaged mainly in the development of two polymer-based delivery
technologies for medical applications.  The company's Micro-pump
technology is a multi-particulate technology for oral ingestion
of small molecule drugs with applications in controlled release,
tastemasking and bioavailability enhancement.  The company has
three major products based on its Micropump technology: Asacard,
a controlled-release formulation of aspirin for the treatment of
cardiovascular disease; Metformin XL, a controlled-release form
of Metformin that is in development for use for the treatment of
Type II diabetes, and Genvir, a controlled-release acyclovir for
the treatment of genital herpes.  In addition, FLML has developed
new herbicide delivery systems and has patented a biomaterial,
ColCys.

FLML - Flamel Technologies  $14.68

PLAY (sell naked call):

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

SELL CALL  OCT 17.5  FLU-JW    1989   0.30  17.80  10.5%   1.7%


_________________________________________________________________

SSNC - SS&C Technologies  $17.85  *** Downtrend Intact! ***

SS&C Technologies (NASDAQ:SSNC) provides software, business
process outsourcing services and application service provider
solutions to the financial services industry primarily in the
United States.  The company delivers a range of specialized
software products and services that provide mission-critical
processing for information management, analysis, trading,
accounting, reporting and compliance.  SS&C provides its
products and related services in seven vertical markets in
the financial services industry: insurance entities and
pension funds; institutional asset management; hedge funds
and family offices; financial institutions, such as retail
banks and credit unions; commercial lending; real estate
property management, and municipal finance.

SSNC - SS&C Technologies  $17.85

PLAY (sell naked call):

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

SELL CALL  OCT 20    QUN-JD     85    0.35  20.35   7.7%   1.7%



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