Option Investor
Newsletter

Daily Newsletter, Thursday, 09/23/2004

HAVING TROUBLE PRINTING?
Printer friendly version
The Option Investor Newsletter                Thursday 09-23-2004
Copyright 2004, All rights reserved.                       1 of 3
Redistribution in any form strictly prohibited.


In Section One:

Wrap: Chips In Charge
Futures Wrap: See Note
Index Wrap: See note
Market Sentiment: Follow through


Posted online for subscribers at http://www.OptionInvestor.com
************************************************************
MARKET WRAP  (view in courier font for table alignment)
************************************************************
      09-23-2004           High     Low     Volume   Adv/Dcl
DJIA    10038.90 - 70.30 10108.74 10031.16 1.59 bln 1441/1746
NASDAQ   1886.43 +  0.72  1894.67  1883.32 1.39 bln 1409/1614
S&P 100   534.20 -  2.64   536.84   534.12   Totals 2850/3360
S&P 500  1108.36 -  5.20  1113.61  1108.05 
W5000   10820.90 - 40.73 10863.33 10816.24
SOX       383.79 +  2.10   397.03   387.80
RUS 2000  565.80 -  0.09   567.76   564.91
DJ TRANS 3173.97 - 20.70  3197.82  3173.75
VIX        14.80 +  0.06    15.08    14.61
VXO (VIX-O)14.87 +  0.30    15.47    14.62
VXN        21.17 +  0.11    21.35    20.90 
Total Volume 3,280M
Total UpVol  1,307M
Total DnVol  1,891M
Total Adv  3262
Total Dcl  3807
52wk Highs  134
52wk Lows    84
TRIN       1.52
NAZTRIN    0.75
PUT/CALL   0.92
************************************************************

Chips In Charge
by Jim Brown

After only one day of declines the chip sector fought
to move back higher and single handedly kept the entire
market from a serious disaster. The SOX finished up 
+2.05 and that kept the Nasdaq in positive territory 
and the Russell only fractionally negative. The dog 
was the Dow once again as traders fled from big cap 
internationals in fear of potential warnings. 

Dow Chart

 
Nasdaq Chart

 
SOX Chart

 

Economic reports started off bearish and continued to 
disappoint as the morning progressed. Jobless Claims
jumped back to 350,000 after a couple weeks at lower
levels but the jump was blamed on timing related to 
the hurricanes. Those busy doing cleanup work put off
filing until the home chores were done. For future 
weeks we could see a pickup in temporary hires to do
longer term rebuilding but also a pickup in layoffs
as those in buildings seriously damaged will have to
cut workers until new quarters can be acquired or 
rebuilt.

Evidence of economic weakness came from the Chicago
Fed National Activity Index, which fell from 0.53 in
July to only 0.19 in August. Production growth slowed
as it appeared the July rebound was short lived and 
another decline is approaching. Remember June's drop
to -0.16 from 0.63 in May and analysts were hanging 
their hat on the July rebound and that rebound has 
already lost traction. With energy prices rising along
with interest rates the economy is facing an uphill 
battle.

The Conference Board Leading Indicators fell for the
third consecutive month and the -0.3% decline was 
larger than expected. The index is now up only +0.7%
for the last six months and very close to losing that
ground. The index has not lost ground for three months
in a row in over 18 months. With oil prices rising, 
housing permits slowing and Fed rates moving higher 
the odds are good this indicator trends lower for the
rest of the year. 

The best news of the day came from the Monthly Mass
Layoffs which showed only 69,033 worker layoffs were
announced in August compared to 253,929 in July. This
is definitely moving in the right direction. The sector
hardest hit was still manufacturing with a loss of
-17,698 jobs. Four states, California, Florida, New
York and Pennsylvania accounted for 56% of the total
layoffs. With the holiday season just ahead we should
not see any material increase until December. 

The most negative report for the day actually occurred
back in August. The FOMC minutes for the August meeting
were released today and the tone was positively bearish
toward rates. They believed the economic weakness was
short lived and inflation would remain abnormally low.
The hawkish rate statement killed all the bullishness
about the positive economic comments. 

"Given the current quite low level of short-term rates,
especially when judged against the recent level of 
inflation, members noted that significant cumulative 
policy tightening likely would be needed to foster 
conditions consistent with the Committee's objective
for price stability and sustainable economic growth."

Bonds immediately sold off and yield on the ten-year
jumped +39 basis points to 4.029%. The time spent 
under 4% this week could be measured in hours not days
and the prospect of falling rates was seriously dashed.
If the Fed is planning on a "significant cumulative
tightening" that could be a long period of measured
pace hikes. Back in 1994 the Fed raised from 3% to 6%
to blunt the economic boom and inflation chances. They
have assured us repeatedly over the last few months 
they were NOT going to repeat the 1994 scenario that
sent real rates back to 8%. Watch their lips move but
read the minutes to see the real story. We can kiss
lower mortgage rates goodbye based on these minutes.

Oil soared again today as reports hit the wire that 
there was more damage than previously expected in the
gulf and oil would not be back up to speed for days or
even weeks. Oil hit $49 intraday but sold off into the
close after the Department of Energy said they were
considering opening the strategic petroleum reserve
and loaning oil to several refineries to offset the
hurricane loss. This may have slowed the jump in oil
prices but it really heated up the political war. The
democrats immediately called the move politically
motivated despite Kerry severely deriding Bush for 
not doing it as late as yesterday. So, if Bush didn't
open it he was a bad guy and if he did open it he was
a bad guy. Only in politics. 

The Dow opened up in the red and stayed there all day
due in part to the $49 oil. However the biggest problem
for the Dow is fear more Dow components will warn. 
MMM has fallen from $85 to $79 over the last two weeks
on warning fears. UTX, JNJ, BA, CAT, IBM, etc have all
fallen from their highs on earnings worries. For those
invested in big caps this is frustrating but for those
who are looking for entry points for any end of year
rally this is a long awaited event. The Dow traded as
low as 10031 today and right on the verge of breaking
the 10K level once again. It closed near the low of
the day at 10039 as proof bargain hunters are not yet
ready to rush into the dip. 

The Nasdaq struggled to keep its head above water all
day but it managed to keep afloat by standing on the
SOX. The lack of a drop may only be temporary as the
Nasdaq is facing very strong overhead resistance.
Should the Nasdaq cave in the next stop could be in
the 1850 range. Remember the Nasdaq dropped -35 points
on Wednesday tech bulls picked up some chips on the
dip. The SOX is the amazing sector with a gain despite
the broader market weakness. The SOX bounced off 390
on Wednesday and again today and while it did not 
manage to mount a serious rebound just holding the
high ground was admirable. According to my count over
the last week we have had two sector upgrades for chips
and one for techs in general. This is definitely a
change in trend and there are obviously a few buyers
who think we are not going lower. 

Over the last 10 months the Nasdaq has seen four major
rallies. The December rally gained +12%, March rally
+9.5%, May +9.7% and August +9.0%. Each rally eventually
failed and the Nasdaq made a lower low. Eventually this
trend will break but that is not the point I want to
make. Each time we saw a consolidation period at the
top and then a sharp break to the downside once it
became obvious we were not going higher. The Nasdaq
may be setting up for this trend to break. A clear
signal would have to be a higher low on whatever 
profit taking pullback is ahead. 

TrimTabs.com said cash inflows slowed for the week 
ended on Wednesday to $1.7B from the $2.6B the prior
week. The positive cash flow is nice but it is not
enough to really keep the markets afloat at the highs.
Granted there are a lot of funds with massive cash
hoards at present but inflows are still the key to
forward progress. 

Oil companies did not benefit from the oil bounce
today because Deutsche Bank downgraded XOM and Shell
citing high valuations across the group. Yes, we know
oil companies are high but so is oil and the prospects
of it being cheap again soon are very slim. Oil seems
headed for $50 despite the SPR oil release and the 
reason is the current event risk. There are 40 days 
left before the election and the terrorist window for
influencing our election is slowly closing.

Another window not yet closing is the earnings warning
window and it is doing a thriving business. I won't
bore you with all the individual details but the odds
are the numbers will increase before the quarter is
over. Major companies across all sectors are quoting
various reasons for the shortfall but the key point 
is they are all warning. This is not good for the 
bull's case but the bulls have the election trend on
their side. It is going to be a volatile next two weeks
as we close the quarter. Given the lack of a material
drop in September there could be some funds sitting on
cash they will need to invest before the end of the
quarter. This also complicates the outlook.

For Friday the only material reports are Durable Goods
and Existing Home Sales and neither are expected to be
market movers. Oil, earnings and event risk are the
prime movers and volatility should continue. It is
built into the calendar and I do not believe we can
count on the pre election bounce. We have never had an
election in a post 9/11 terror environment and we do 
not know what the next 40 days will hold. In reality
we could be treading on very thin ice and anything is 
possible. For Friday we could see further weakness 
but there is nothing we can point to for confirmation.
The SPX closed under its 100dma at 1109 but futures
are trading up as I type this. I suspect Friday would
be a good day to watch instead of play in traffic. 

Enter Passively, Exit Aggressively. 

Jim Brown
Editor

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


************************Advertisement*************************

No time to follow the Market Monitor? Tired of missing good Trades
because you stepped away from your computer?

OneStopOption Group can follow the Market Monitor for you. You
choose the number of contracts, we take care of the rest!!

Trade Stock Options, Stocks and ALL Futures with the same Group.
Call us 888 281-9569 to see if you qualify to have us rebate your
subscription cost.

http://www.OneStopOption.com

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

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

Check the Site Later Tonight For Jeff's Index Trader Article
http://members.OptionInvestor.com/itrader/marketwrap/iw_092304_1.asp


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

Follow through
- J. Brown

Thursday proved to be a mixed day on Wall Street.  Bears were 
undoubtedly disappointed in the lack of follow through from 
Wednesday's steep decline.  The Dow Industrials did slip another 
70 points but this was lead by ExxonMobil who received a 
downgrade as Deutsche Bank lowered their outlook on the entire 
oil sector. 

Overall the tone of the market remained slightly negative but 
technology stocks, retail and gold all closed higher.  Declining 
issues outnumbered advancers 15 to 13 on the NYSE and 16 to 14 on 
the NASDAQ.  Down volume outweighed up volume 2 to 1 on the NYSE 
but up volume narrowly surpassed down volume on the NASDAQ.  

Weakness in the financials is normally not a good sign of market 
health and the BIX index slipped another 1.48 percent to break 
down below its simple 40 and 50-dma's.  The BKX slipped more than 
1 percent to crack support at its simple 40 and 200-dma's.  
Airline stocks also few lower as crude oil traded near record 
highs at $49 a barrel.  

Tomorrow could be a toss up.  There aren't any major earnings and 
we've only got the durable goods for August and the existing home 
sales for August as our only economic reports for Friday.  We 
could see more weakness in the semiconductor sector tomorrow 
since AMCC came out after the bell to issue a Q3 earnings 
warning. AMCC joins a crowd of chip companies who have warned for 
the current quarter.  

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

Market Averages

DJIA ($INDU)

52-week High: 10753
52-week Low :  9230
Current     : 10038

Moving Averages:
(Simple)

 10-dma: 10250
 50-dma: 10128
200-dma: 10272




S&P 500 ($SPX)

52-week High: 1163
52-week Low :  990
Current     : 1108

Moving Averages:
(Simple)

 10-dma: 1122
 50-dma: 1100
200-dma: 1117



Nasdaq-100 ($NDX)

52-week High: 1559
52-week Low : 1301
Current     : 1405

Moving Averages:
(Simple)

 10-dma: 1420
 50-dma: 1381
200-dma: 1440



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

CBOE Market Volatility Index (VIX) = 14.80 +0.06
CBOE Mkt Volatility old VIX  (VXO) = 14.85 +0.28
Nasdaq Volatility Index (VXN)      = 21.17 +0.11


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

          Put/Call Ratio  Call Volume   Put Volume

Total          0.92        562,196       518,122
Equity Only    0.81        438,810       355,896
OEX            1.13         20,334        22,900
QQQ            3.98         22,283        88,603


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

Bullish Percent Data

           Current   Change   Status
NYSE          62.7    + 0     Bear Correction
NASDAQ-100    44.0    - 1     Bull Alert      
Dow Indust.   56.6    + 0     Bear Correction
S&P 500       61.0    + 0     Bear Correction
S&P 100       58.0    + 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: 1.03
10-dma: 0.99
21-dma: 1.07
55-dma: 1.19


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    1261      1369
Decliners    1528      1599

New Highs      61        45
New Lows       26        24

Up Volume    518M      704M
Down Vol.   1041M      644M

Total Vol.  1588M     1379M
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


************************Advertisement*************************

Full Service Brokers

Man Financial announces the formation of the OneStopOption
Brokerage Group, addressing the demand for personalized,
experienced service for both securities* and futures trading
within the same firm. Licensed Option Principals Andrew Aronson
and Alan Knuckman specialize in live assistance of stock*,
option* and futures traders. The combination of the proven Man
Financial global presence and the convenience of one group for
all trading needs provide customers with the tools needed for
success.

Live Broker and Online Trading Available     888-281-9569

http://www.OneStopOption.com

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


FREE TRIAL READERS
******************
If you like the results you have been receiving we
would welcome you as a permanent subscriber.

The monthly subscription price is $49.95. The quarterly
price is $129.95 which is $20 off the monthly rate.

We would like to have you as a subscriber. You may
subscribe at any time but your subscription will not
start until your free trial is over.

To subscribe you may go to our website at

www.OptionInvestor.com

and click on "subscribe" to use our secure credit
card server or you may simply send an email to

 "Contact Support"

with your credit card information,(number, exp date, name)
or you may call us at 303-797-0200 and give us the
information over the phone.

You may also fax the information to: 303-797-1333


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

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


**************************************************************
ADVERTISING INFORMATION

For more information on advertising in OptionInvestor Newsletter,
or any Premier Investor Network newsletter please contact:

Contact Support




The Option Investor Newsletter                 Thursday 09-23-2004
Copyright 2004, All rights reserved.                        2 of 3
Redistribution in any form strictly prohibited.


In Section Two:

Dropped Calls: AHC
Dropped Puts: None
Call Play Updates: CMI, PD, TDS
New Calls Plays: See note
Put Play Updates: BIIB, LLY, FAST, FFH, KSS, LXK, MMM, PRX, SEPR
New Put Plays: See note


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

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


CALLS:
*****

Amerada Hess - AHC - close: 85.84 chg: -0.67 stop: 85.95           

AHC held up reasonably well on Wednesday as the broader market 
sold off.  AHC did see some profit taking but it never broke the 
$86.00 level.  The same can not be said for Thursday.  A minor 
drop in crude oil and more profit taking in the OIX index sent 
AHC under the $86 mark and we were stopped out at $85.95.  

Picked on August 31st at $80.50
Change since picked:     + 5.34
Earnings Date          07/28/04 (confirmed)
Average Daily Volume =      1.0 million 
Chart =



PUTS:
*****

None


************************Advertisement*************************

Full Service Brokers

Man Financial announces the formation of the OneStopOption
Brokerage Group, addressing the demand for personalized,
experienced service for both securities* and futures trading
within the same firm. Licensed Option Principals Andrew Aronson
and Alan Knuckman specialize in live assistance of stock*,
option* and futures traders. The combination of the proven Man
Financial global presence and the convenience of one group for
all trading needs provide customers with the tools needed for
success.

Live Broker and Online Trading Available     888-281-9569

http://www.OneStopOption.com

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


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


Cummins Inc - CMI - close: 72.19 change: -0.68 stop: 69.40

We remain impressed with CMI's relative strength.  The stock 
climbed to another new all-time high yesterday in the face of a 
very broad market sell-off.  The stock experienced a little bit 
of profit taking today.  We remain bullish and any dips toward 
$70.00 look like entry points to us although we'd prefer to see 
CMI bounce from the $71.00 level.  

Picked on September 19 at $70.99
Change since picked:      + 1.20
Earnings Date           07/23/04 (confirmed)
Average Daily Volume =       724 thousand
Chart =


---

Phelps Dodge - PD - close: 86.98 chg: -0.22 stop: 82.99*new* 

Yesterday we were happy to report that PD not only climbed in the 
face of the market decline but broke out over two-week old 
resistance at the $86.00 level.  Shares maintained much of their 
gains today and remain within striking distance of hitting our 
profit target/exit point at $90.00.  The recent upside breakout 
in copper prices is likely to blame with the metal rising above 
resistance to hit new multi-year highs.  Driving the rise is 
probably concern over supply disruptions.  Both the Southern Peru 
Copper mining company and the Chilean-state owned Codelco are 
both facing labor strikes if they don't cough up pay raises in 
the next month.  We are going to raise our stop loss to $82.99.

Picked on August 26th at $82.10
Change since picked:     + 4.88
Earnings Date          07/27/04 (confirmed)
Average Daily Volume =      2.1 million 
Chart =


---

Telephone & Data Sys - TDS - cls: 82.58 chg: +0.55 stop: 81.25*new*     

Did you exit on the spike to $83.67?  If you did then we offer 
our congratulations.  The afternoon rally towards $84.00 looked 
promising but was abruptly reversed in the last 90 minutes.  We 
still have hope that TDS might trade back to $84 and even 
breakout to hit $85 but today's action actually looks like a 
bearish failed-rally reversal.  We're going to play it safe and 
raise our stop loss to $81.25.  We are not suggesting new entries 
at this time.

Picked on August 24th at $78.05
Change since picked:     + 4.53
Earnings Date          07/21/04 (confirmed)
Average Daily Volume =      195 thousand
Chart =




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

* No new plays tonight.  Look for more in this weekend's newsletter.
   Please see tonight's watch list for possible candidates



************************Advertisement*************************

Live Securities Brokerage Service with Licensed Option Principals

OCO Stop & Profit Orders                        OneStopOption
All types of Spreads and Buy Writes             888-281-9569
Auto-Trade Market Monitor Signals
Personal Service and Education


**Services available for Foreign Traders including Canada**

http://www.OneStopOption.com

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


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

Biogen Idec - BIIB - close: 59.35 change: -0.22 stop: 62.51

We added BIIB yesterday on the breakdown below support at $60.00 
and several of its key moving averages.  Technicals are bearish 
but its P&F chart is still bullish making this a bit aggressive.  
BIIB saw a little bit of follow through today and the intraday 
chart suggests more weakness tomorrow.  No change in our stop.

Picked on September 22 at $59.57
Change since picked:      - 0.22
Earnings Date           07/28/04 (confirmed)
Average Daily Volume =       3.0 million 
Chart =


---

Eli Lilly & Co - LLY - close: 63.50 change: -0.42 stop: 67.01

Bears should be happy to see some follow through in shares of 
LLY.  The stock continued to sink after yesterday's breakdown 
under the $64 level and its simple 40 and 50-dma's.  The MACD is 
strengthening its new sell signal and LLY closed near its low for 
the session suggesting more weakness tomorrow.

Picked on September 22 at $63.92
Change since picked:      - 0.42
Earnings Date           07/22/04 (confirmed)
Average Daily Volume =       3.1 million 
Chart =


---

Fastenal Co - FAST - close: 57.52 chg: +0.16 stop: 60.01

We were triggered on Wednesday at $56.95 when FAST dipped under 
support at $57.00 and its simple 100-dma.  Unfortunately, the 
stock bounced back above this pivotal level.  Shares did tried to 
push through the $58 level this morning and failed but bears 
didn't have any better luck pushing FAST through the $57 mark.  
We're encouraged by the trend of lower highs but we're frustrated 
with the lack of follow through.  Be careful.  I know some 
technical traders out there flinch when they see how close the 
200-dma is, which is traditionally support, but we're counting on 
the new P&F sell signal to help generate some momentum. 

Picked on September 22 at $56.95
Change since picked:      + 0.57
Earnings Date           07/13/04 (confirmed)
Average Daily Volume =       676 thousand
Chart =


---

FairFax Financial - FFH - cls: 125.86 chg: +1.91 stop: 130.01*new*

Tuesday's stock-buyback-inspired bounce failed in the $128-129 
level, which was exactly where we expected resistance.  
Wednesday's action painted a nice "dark cloud cover" pattern.  
Unfortunately, we're not seeing any follow through today.  If FFH 
continues to bounce tomorrow we would look for more resistance at 
$128 again.  If FFH trades above $128.50 we'll grow concerned.  
Acting our on concern we are going to lower our stop loss to 
$130.01.

Picked on September 12 at $126.50
Change since picked:       - 0.64
Earnings Date            00/00/00 (confirmed)
Average Daily Volume =         59 thousand
Chart =


---

Kohl's - KSS - close: 49.51 change: +0.89 stop: 52.01

That's not what we want to see.  KSS turned in a nice failed 
rally at resistance on Tuesday when it rolled over under the 
$50.00 mark.  Wednesday's market weakness helped lead KSS lower 
but now the stock is bouncing again.  Fortunately, resistance at 
$50 is still holding but unfortunately there was above average 
volume on the rebound today.  Keep an eye on the RLX retail index 
as it still looks vulnerable to more selling.

Picked on September 16 at $49.48
Change since picked:      + 0.03
Earnings Date           08/12/04 (confirmed)
Average Daily Volume =       3.1 million 
Chart =


---

Lexmark Intl - LXK - close: 84.40 chg: +1.80 stop: 86.01     

The volatile consolidation in shares of LXK continues.  
Yesterday's decline looked like a strong follow through on 
Tuesday's failure to breakout over the $85 level.  Unfortunately 
traders bought the dip to $82.00.  LXK has been essentially range 
bound between 82 and 86 for the last 2 1/2 weeks.  We are not 
suggesting new bearish positions at this time as we continue to 
watch for a breakdown under $81.75-81.50.

Picked on September 5th at $86.10
Change since picked:       - 1.70
Earnings Date            07/19/04 (confirmed)
Average Daily Volume =        1.2 million 
Chart =


---

3M Co - MMM - close: 78.70 change: -1.53 stop: 82.51*new*

Heads up!  MMM fell sharply through support at $80.00 on above 
average volume.  The stock looks poised to hit our initial profit 
target at $77.50 soon.  Short-term traders can be ready to exit 
as MMM trades under $78.00.  Remember, there is potential support 
right at the $77.50 level if you stretch a trendline across the 
March low and the August low.  We are lowering our stop loss to 
$82.51.  If you believe the market is headed significantly lower 
consider holding MMM and targeting the $75 region.

Picked on September 15 at $82.00
Change since picked:      - 3.30
Earnings Date           07/19/04 (confirmed)
Average Daily Volume =       2.5 million 
Chart =


---

Par Pharma. Co - PRX - close: 36.35 chg: +0.07 stop: 40.15

So far so good.  PRX experienced some follow through on Tuesday's 
breakdown and even an FDA approval couldn't inspire a bounce 
today.  The company announced this morning that the FDA had given 
its tentative approval for PRX to make a generic version of 
Ortho-McNeil's Ultracet drug.  PRX will bounce eventually and 
right now we're expecting the stock to find overhead resistance 
in the $38.50-39.00 range around its simple 50 and 100-dma's.  
While we are going to leave our stop at $40.01 for now more 
conservative traders may want to consider tightening their stops.

Picked on September 21 at $37.80
Change since picked:      - 1.45
Earnings Date           07/19/04 (confirmed)
Average Daily Volume =       743 thousand
Chart =


---

Sepracor Inc - SEPR - close: 48.54 chg: -0.40 stop: 52.01

SEPR is another put play we added on Wednesday evening.  The 
stock is rolling over again after trading from the bottom of its 
range near $42.50 to the top of its range near $53.00.  The 
recent failed rally at $53.00 didn't really look tempting until 
SEPR broke minor support at the $49.00 level yesterday.  Now 
we're looking for SEPR to trade back toward the bottom of its 
range with the decline being accelerated by market weakness. 

Picked on September 22 at $48.94
Change since picked:      - 0.40
Earnings Date           07/13/04 (confirmed)
Average Daily Volume =       1.8 million 
Chart =



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

* No new plays tonight.  Look for more in this weekend's newsletter.
   Please see tonight's watch list for possible candidates



************************Advertisement*************************

No time to follow the Market Monitor? Tired of missing good Trades
because you stepped away from your computer?

OneStopOption Group can follow the Market Monitor for you. You
choose the number of contracts, we take care of the rest!!

Trade Stock Options, Stocks and ALL Futures with the same Group.
Call us 888 281-9569 to see if you qualify to have us rebate your
subscription cost.

http://www.OneStopOption.com

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


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

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


**************************************************************
ADVERTISING INFORMATION

For more information on advertising in OptionInvestor Newsletter,
or any Premier Investor Network newsletter please contact:

Contact Support




The Option Investor Newsletter                 Thursday 09-23-2004
Copyright 2004, All rights reserved.                        3 of 3
Redistribution in any form strictly prohibited.


In Section Three:

Watch List: Biotech to Brokers and more! 
Traders Corner: More on Trendlines 
Combos/Straddles: Pick A Strategy Like Your Money Depends On It --            
                  Because It Does! 

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

Biotech to Brokers and more!

___________________________________________________________________

How to use this watch list:
  Readers can use the candidates below as a springboard for their
  own research.  Many are in the process of breaking support or
  resistance or in the process of starting new trends or
  extending old ones.  With your own due diligence these could be
  strong potential plays.
___________________________________________________________________


Neurocrine Biosciences - NBIX - close: 48.98 change: +0.13

WHAT TO WATCH: Biotech stock NBIX appears to have peaked at 
resistance near $52.00 and has now spent the last couple of weeks 
consolidating under technical resistance at its exponential 200-
dma and the simple 100-dma.  The recent drop under $50.00 looks 
like good news but we would consider a trigger under the $48.00 
level as a potential entry point for a drop back toward the 
August lows.  Technical oscillators are bearish.  

Chart=


---

Legg Mason - LM - close: 79.12 change: -1.03

WHAT TO WATCH: We strongly considered adding LM to the play list 
tonight as a put play.  Shares rode the broker-dealer rally but 
peaked under resistance at $84.00. It just so happens to coincide 
with the trendline of resistance from its highs in April and 
June.  Now the stock's technical oscillators are turning bearish 
and the MACD has produced a new sell signal.  Today's breakdown 
below the $80.00 mark and its simple 40 and 50-dma's looks like a 
decent entry point to target a decline toward support at $75.00.

Chart=


---

Potlach - PCH - close: 45.00 change: +1.55

WHAT TO WATCH: The high-volume rally to $45.00 in PCH caught our 
eye today.  The stock has been consolidating under the $44.00 
level for the last three weeks.  Longer-term we see that the $45-
46 region has been long-term resistance but if PCH can breakout 
it should be an easy climb toward the $50 mark.  PCH's P&F chart 
is bullish with a $60 target.  

Chart=


---

Cigna Corp - CI - close: 67.71 change: -1.02 

WHAT TO WATCH: Are you feeling aggressive?  CI produced a huge 
rebound from its August lows to challenge major resistance at the 
$70.00 level.  The stock failed to breakout in early September 
but managed to close above the $70.00 mark just two days ago 
before the market-wide sell-off.  Now CI has broken its narrow 
uptrend and its oscillators are all turning bearish from 
overbought.  This looks like a bearish entry point but do you 
target $65 and its simple 50-dma or do you target $62.50 and its 
simple 200-dma?  The P&F chart is bullish making this an 
aggressive move but the IUX insurance index is showing weakness 
with today's breakdown under the 200-dma and the MACD sell 
signal.

Chart=



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

OMC $71.70 0.70 - OMC is still looking strong here but it needs 
to breakout over the $72.00 level.  Short-term traders can target 
a move to $75.00.

HSIC $61.09 -0.01 - We're still watching for a breakdown under 
support at $60.00.

RESP $50.82 +0.44 - We're still watching for a breakdown under 
support at $50.00.

 

************************Advertisement*************************

Live Securities Brokerage Service with Licensed Option Principals

OCO Stop & Profit Orders                        OneStopOption
All types of Spreads and Buy Writes             888-281-9569
Auto-Trade Market Monitor Signals
Personal Service and Education


**Services available for Foreign Traders including Canada**

http://www.OneStopOption.com

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


**************
TRADERS CORNER
**************

More on Trendlines
By Leigh Stevens
lstevens@OptionInvestor.com

SUBSCRIBER QUESTION: 
"How helpful were trendlines in showing where OEX and the Dow was 
going to reversal this week? I was seeing a likely top with the 
low VIX but this alone doesn't seem to pin down the level where I 
should get into puts. You use trendlines and channels a lot but I 
still don't always trust them in risking a trade." 

RESPONSE: 
Thanks for e-mail and your question. I was going to write some 
more on trendlines anyway and someone else wrote to suggest I 
stop using trendline illustrations from some time ago (such as in 
my book!) and stick with current examples.  Your wish is my 
command.

In a my last Stock Index Wrap article I showed charts with 
trendlines, at least in the OEX (S&P 100) and the Dow 20 average 
(INDU) where the rally attempts or highs were stalled right at 
their down trendlines. How well did they show the recent top?  
Pretty darn well!  I'm used to seeing this and even I don't 
always believe that the market is going to top out right at some 
line – sometimes people ask me if it is a self-fulfilling 
prophecy so to speak.  Like, everyone is watching the same thing 
and so everyone sells because of some trendline.  

Well, I wish that I could say that technical analysis techniques 
or principles were so widely followed!  Not so.  Institutional 
fund managers who can really move the market and start a trend 
reversal by their selling, act on the basis of fundamental 
analysis; e.g., earnings trends, economy, related markets – such 
as this recent spike in oil prices to a degree that might cause 
the economy to stop expanding.  These kind of things.  Big time 
money managers, and I know or used to know some of them, by 
necessity act mostly on fundamental assumptions and analysis.  

But, I would say and always have that technical analysis 
techniques somehow is a most effective way of telling us when the 
thinking on stocks has reached a turning point – such that this 
shift will cause a reversal. 

OEX (down) Trendline – 

I haven't moved the down (red) arrow since I last ran this chart 
a while back – but that was the top.  It was the third point in 
which to establish a trendline.  Two points are enough to get us 
started, but 3 is best – that really establishes a trendline.  I 
went just slightly through the intraday high in the middle in the 
daily OEX chart below.  That was just a minor adjustment as it 
created what I thought was the "best fit" trendline when that 
third peak was reached where the down red arrow is pointing to.  

 

Trendlines are something that you have to play a bit with.  I 
adjust them from time to time but this one, this trendline, 
didn't need much of that – it's so simple that you might not 
believe that it is showing you the top – but, this is the time to 
match what the trendline is showing you with other things also, 
such as the low VIX you mentioned.

In the S&P 500 (SPX) chart below, the CBOE Volatility Index (VIX) 
has tended to move, at least this year, inversely with the 
indices. Highs have tended to occur with low volatility and vice 
versa.  The SPX chart down trendline is a good example of a 
couple of trendline principles: the use of internal or "best fit" 
trendlines and the fact that the trendline sometimes shows us 
best with a close-only "line" chart and sometimes with a bar 
chart that shows the intraday highs and lows.  

The progression of drawing, and then adjusting (re-drawing) the 
trendline shown here was as follows.

1. The first two highs established a tentative down trendline on 
the SPX line chart.  2.) The third peak caused me to re-draw the 
line slight and I figured points 1 & 2 (above the black arrows) 
were the two tentative points to a down trendline – this was 
"verified" so to speak, by the third point. 3.) Point 4, as it 
was above the line, caused me to wonder if a new up leg was 
starting, but the market fairly quickly reversed and I didn't re-
draw my trendline.  4.) The next closing high reversed right at 
the trendline this time.  5.) The final highs were on or in the 
area of the trendline.  
 

 

The series of lower relative highs, with the one exception ("4") 
are what makes for a downtrend.  The low VIX tended to also 
"confirm" the likelihood that the market was making yet another 
(lower) high.  

There were some other ways that the use of trendlines could have 
highlighted the recent top, by switching to an intraday time 
frame, especially the hourly chart as of the S&P 500 below. Here 
also, a related technical indicator – an oscillator type, the 
stochastic – set up a bearish divergence from price action – 

We often see in stocks or indices, where prior support "becomes" 
resistance later on. It's the same with trendlines.  When the 
lower most trendline of the hourly uptrend channel below, was 
penetrated, support was broken.  When prices rebounded back to 
the trendline, what has been a line of "support" became a new 
resistance – I call this situation the "kiss of death" trendline. 
Back to it and then bye-bye although there was another move to 
the same area and even a bit above.   


  

However, that final hourly high was accompanied by a definite 
down trend in the hourly stochastic with "length" set to 21.  The 
hourly chart was building a top with multiple highs in the same 
area – meanwhile the stochastic model was seeing declining peaks 
such that – guess what! – you could draw a down trendline through 
them.  

This now brings me to channel lines and how they are constructed.
As in the daily Dow (INDU) chart below – 

At the first peak (1), the first down trendline (lowest gray 
line) was drawn at a steeper angle after the next lower top was 
seen.  When that top was exceeded weeks later, the new trendline 
(second dashed gray line) was drawn using that price peak and 
that seemed to "work" for a while – until June at top "2" – top 1 
and 2 then became the next (and final) down trendline.  However, 
it was not until peak "3" that this line was established more 
definitely as the down trendline.  

After peaks 1 & 2, a parallel (lowermost dashed gray) line from  
a single lowest May intraday low was drawn as the possible lower 
line composing INDU's downtrend channel.  Once there is a 
trendline, a hypothetical channel line can be drawn by use of a 
parallel line that touches any ONE extreme point.  

Later, with the third, early-August, low the internal lower 
channel line that touches the approximate MOST number of lows and 
going through the middle cluster of lows, could be drawn (lower 
dashed BLUE line) and gave a good idea that a tradable bottom was 
made.      


 

If this all seems a bit complicated it's not really – per the 
point made in my prior Trader's Corner articles on this subject – 
trendlines show the dominant trend and are not done always done 
by a strictly mechanical method. And, the lower trendline of a 
downtrend channel like the one above might well cut through a 
cluster of lows.  The downtrend is defined by the where the HIGHS 
are; i.e., by the UPPER trendline. However, the lower channel 
line is useful to as we can trade off from it.    

By the way, the uptrend that formed in early-August by the daily 
Stochastic during a time when INDU was making multiple lows in 
the same price area. This was a bullish Oscillator/Price 
divergence developed.  
 

****************
Combos/Straddles
****************

Pick A Strategy Like Your Money Depends On It -- Because It Does!

By Mike Parnos

CPTI students love to learn new positions.  Today we'll analyze how 
to select a new position.  It’s not like "Love Potion #9."  You 
can't just mix it up right here in the sink.  It doesn't smell like 
turpentine and look like India ink.  This is serious.  Will your 
new position be vertical or horizontal?  Do you like being on the 
top or the bottom?  There is much research to do, questions to 
answer . . . and "miles to go before I sleep."

Step #1:  What kind of equity/index do you want to trade?
If your favorite strategies involve selling options, and you prefer 
some degree of stability, you should choose an index.  Because 
indexes consist of multiple stocks, there is less likelihood that 
it will move dramatically if one CEO is caught coming out of a 
motel with Michael Jackson and a chimpanzee.  The diversification 
of an index will go a long way towards neutralizing these 
disturbing albeit not unusual occurrences.

If you like playing straddles and strangles, you're looking for 
large movements.  Individual stocks, that have a history of big 
moves, might be your best bet.  Upcoming earnings announcements 
and/or stock splits often result in major moves.  Look at 
industries like biotech that are always at the mercy of FDA 
approvals or rejections.  That's when the mierde is going to hit 
the fan -- and that's when you want to be there.  

Be thorough.  You can call the companies and find out when FDA 
decisions are scheduled.  That's what their "investor relations" 
departments are for.  You may be able to find that information on 
the Internet, but confirm it with a call before you put on a trade.  

If you want to pick a direction, as they say at my favorite Chinese 
restaurant, "rotsa ruck!"  But, if you insist, you have some 
research to do.  Check the sectors.  If you're bullish, pick the 
best acting stocks in a particular sector.  If you're bearish, pick 
the worst.  It's mind-boggling to see traders buy calls on the 
worst stock in a sector and wonder why it goes down.  There's one 
born every minute -- maybe more than one when it comes to 
directional traders.

Also, don't overlook an examination of an option's volatility.  At 
this writing, there's exceptionally low volatility in the market.  
That's an option buyer's paradise.  Why?  Because, theoretically, 
when there's low volatility, the option is a bargain.  Volatility 
proponents say that the options bought at a bargain will appreciate 
in value when the volatility returns to the market.  Well, buying a 
cheaper option only means is that you will probably lose less.  We 
don't know when volatility will return to historical levels, so, 
for now, option sellers have to accept what's offered or sit on the 
sidelines.

Step #2:  What strategy should you use?
There are two schools of thought here.  What comes first, the 
chicken or the egg?  Colonel Sanders or the egg salad?  The hotdog 
or the bun?  The strategy or the stock?  

There are over 10,000 stocks, indexes etc., but there are only a 
few dozen option strategies.  It might be easier to have your 
favorite strategies and let the market come to you.  In your 
search, you may find stocks/indexes that aren't ready -- they don't 
quite fit the parameters of your favorite strategies.  Put them on 
your watch list and wait.  Resist the temptation.  Put those itchy 
mouse fingers somewhere out of harm's way. (No suggestions. I'll 
leave that to your imaginations.)

To be a consistently successful options trader, you need to play 
favorites -- have a strategy for various market conditions.  One 
that enables you to profit when you are neutral (Iron Condor), 
another for when there's anticipated high volatility (Low Risk 
Straddle), and another when you pick a direction (Sure Thing).  
With these strategies in your arsenal, you're ready to go to war.

You must know these strategies inside and out.  You can have a 
bazooka in your arsenal, but if you don't know how it works, you'll 
end up shooting yourself in the foot.  And you need your feet, just 
like you need your trading capital.

Know the strategies thoroughly.  Know when to put them on, how to 
get the best prices when entering the trade, and the appropriate 
months and strikes to use.  That's only half the battle.  You also 
have to know your target profit, your maximum risk, when you will 
get out -- both in your favor or otherwise.  Know what adjustments 
you have to make -- and how to make them.

If you don't know the ins and outs of a strategy, don't even think 
about trading.  You're not ready.  Trading is tough enough as it 
is.  Let's put this into perspective.  By trading, you are, in 
essence, making a wager on something over which you have absolutely 
no control.  It's a helpless feeling when things go against you, 
but a euphoric feeling when trades become profitable.  All we can 
do is try to increase our chance of success.   We can play 
blackjack, but if we're card counters, we improve are chances.  We 
have to find a table (strategy) that only uses one deck -- so 
there's only one deck stacked against you -- not four.
_________________________________________________________________

OCTOBER CPTI HYPOTHETICAL POSITIONS
October Position #1 - SPX Iron Condor - 1108.36
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 - 565.80
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 - $145.06
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 - 1108.36
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.
_________________________________________________________________

ONGOING POSITIONS
QQQ ITM Strangle – Ongoing Long Term -- $34.92
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 – 534.20
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.
 


************************Advertisement*************************

Full Service Brokers

Man Financial announces the formation of the OneStopOption
Brokerage Group, addressing the demand for personalized,
experienced service for both securities* and futures trading
within the same firm. Licensed Option Principals Andrew Aronson
and Alan Knuckman specialize in live assistance of stock*,
option* and futures traders. The combination of the proven Man
Financial global presence and the convenience of one group for
all trading needs provide customers with the tools needed for
success.

Live Broker and Online Trading Available     888-281-9569

http://www.OneStopOption.com

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


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

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


**************************************************************
ADVERTISING INFORMATION

For more information on advertising in OptionInvestor Newsletter,
or any Premier Investor Network newsletter please contact:

Contact Support




DISCLAIMER

Option Investor Inc is neither a registered Investment Advisor nor a Broker/Dealer. Readers are advised that all information is issued solely for informational purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy, nor is it to be construed as a recommendation to buy, hold or sell (short or otherwise) any security. All opinions, analyses and information included herein are based on sources believed to be reliable and written in good faith, but no representation or warranty of any kind, expressed or implied, is made including but not limited to any representation or warranty concerning accuracy, completeness, correctness, timeliness or appropriateness. In addition, we do not necessarily update such opinions, analysis or information. Owners, employees and writers may have long or short positions in the securities that are discussed.

Readers are urged to consult with their own independent financial advisors with respect to any investment. All information contained in this report and website should be independently verified.

To ensure you continue to receive email from Option Investor please add "support@optioninvestor.com"

Option Investor Inc
PO Box 630350
Littleton, CO 80163

E-Mail Format Newsletter Archives