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Daily Newsletter, Sunday, 10/24/2004

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The Option Investor Newsletter                   Sunday 10-24-2004
Copyright 2004, All rights reserved.                        1 of 5
Redistribution in any form strictly prohibited.

In Section One:

Wrap: New Low
Futures Wrap: See Note
Index Trader Wrap: Solitary walk of the Dow? 
Editor's Plays:  Still Loaded and Waiting
Market Sentiment: One Week To Go
Ask the Analyst: Who's in the index?
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 10-22        WE 10-15        WE 10-08        WE 10-01
DOW     9757.81 -175.57 9933.38 -121.82 10055.2 -137.45 +145.41 
Nasdaq  1915.14 +  3.64 1911.50 -  8.47 1919.97 - 22.23 + 62.72 
S&P-100  525.16 -  6.64  531.80 -  6.67  538.47 -  4.64 +  8.74 
S&P-500 1095.74 - 12.46 1108.20 - 13.94 1122.14 -  9.36 + 21.39 
W5000  10748.04 - 90.63 10838.7 -125.85 10964.5 - 94.18 +220.40 
SOX      395.16 + 13.79  381.37 -  8.15  389.52 - 12.39 + 19.36 
RUT      567.77 -  0.65  569.42 -  6.23  575.65 -  9.38 + 19.06 
TRAN    3371.94 + 19.26 3352.68 + 16.68 3336.00 + 37.20 + 96.69 
VXO       16.09           15.89           14.95           12.55 
VXN       21.36           21.80           20.69           18.91
******************************************************************


New Low
by Jim Brown

It is official! The Dow closed at the low for the year on
Friday at 9757. The gains for the year have been erased
and we are only 157 points away from erasing all the gains
from the Nov/Dec rally last year. That rally saw a low of
9600 in November and ended in February at 10656. A +1056
point gain on the verge of being completely erased. Please
pinch me, I want to wake up from this nightmare. 

Wilshire 5000 Chart


Dow Chart


Nasdaq Chart


There were no economic reports to sway trader's feelings
on Friday and there were little in the way of stock events.
Earnings slowed and there were no high profile earnings
misses. Some blamed oil as it traded over $55 for most 
of the day but I believe it was more of the scapegoat
rather than the reason. 

The main story of the day was the Google explosion and
a +$25 gain in the stock price. Nearly 37 million shares
traded and there are only 31 million or so available to
trade. Short interest was obscenely high and it appears
they all tried to cover on the same day with many shares
trading hands several times before the day was out. The
press could not decide to praise Google or crucify them
given the ramp to $180 intraday. Brokers were tripping
over themselves raising price targets to between $180
and $200 now that their original targets in the $125-145
range were badly missed. Valuation was discussed over
and over with comparisons to other Internet stocks the
norm. This is the way they stack up. 

Amazon @ $34.50 2005 PE is 29
Yahoo @ $35.00 2005 PE is 72 
Ebay @ $96.00 2005 PE is 62  
Google @ $175 2005 PE is 45

Should Google rise to $250 it would be a 2005 PE of 66.
The gains on Friday were not related to valuation as
much as they were related to the monster short squeeze.
Many traders had expected them to produce disappointing
earnings and plummet from the lofty levels of last week.
Long call options generated even more short covering
activity. Option volume was huge. The Nov-170 call had
open interest of only 4682 but volume Friday was 8930.
The 180 call had open interest of 1556 but volume of
7964. Multiply this for all the months/strikes and you
can see how the panic developed. Traders trying to use
normal logic in trading the stock were creamed. For
instance, traders long the stock but expecting the
bounce to fail could have sold covered calls at the
$165 open expecting to collect the premiums and laugh
when the stock rolled over. As the stock shot up to
$175-180 and people started talking about $200-250
they raced to buy the calls back thereby adding to the
volatility they were trying to avoid. It was a crazy
day that brought back memories of the Nasdaq bubble. 
GOOG increased its market cap by $7 billion by the
close. 

Unfortunately investors may have found Google's legs 
but they could not find any coattails. The Google 
windfall did not help the market or even the other
stocks in its sector. AMZN dropped -4.87 to $34.50
after warning that earnings were slowing. YHOO fell
-$2 off its high and closed down -75 cents as traders
ran to the new kid on the block. EBAY fell -$6.16 off
its Google induced opening high of $102.12 to close 
-3.68 for the day at $95 despite great earnings earlier
in the week. Traders took profits on the old timers
and I a sure a few dollars were thrown at Google in
hopes of another $400 Amazon replay.

Spitzer took aim at another sector on Friday in an
effort to be an equal opportunity prosecutor. Music
companies came under fire for investigation into schemes
that could be seen as pay for play which is illegal. 
EMI said Spitzer was investigating how music companies
influence what songs are played on the radio. They
indicated they along with other music companies were
cooperating fully in the investigation. The investigation
centers on how they hire and compensate middlemen to
promote their music in an effort to sidestep U.S. laws
against pay for play or bribing of broadcasters and
DJs. One industry source said the investigation would
be a good thing if it eliminated the practice because
companies pay hundreds of millions of dollars per year
to these middlemen. 

In a news release that will be bad for consumers INTC
cancelled its plans to produce its liquid crystal chip
for big screen TVs. This new process was going to cut
production costs of wide screen TVs much like their
processor chips did for personal computers over the
last two decades. Intel had delayed it twice and finally
cancelled it saying the investment and time would be
better used in other areas. Intel just recently dropped
plans to produce a 4ghz chip scheduled to ship early in
2005. They said they could produce better throughput
gains using other processes rather than concentrate on
the faster chip. Experts have pointed out recently that
the current generation of 3+ghz chips are not being used
to full capacity due to limitations in other hardware
and software on current PCs. 

I mentioned on Thursday night that the SOX had resisted
the broad market sell off and was holding near resistance
at 410 in what could be a potential breakout ahead. After
Friday's chip wreck that seems less of an option than
before. The SOX failed at that 410 resistance and fell
back to 395 after the flood of warnings on Thursday night.
The sector had been bullet proof since the Monday low
but the combination of the BRCM, XLNX, KLAC, LSCC, MCHP,
IDTI and TQNT warnings all on the same day was too much
for chip buyers to bear. The SOX fell -14 points BUT that
was less than it gained on Thursday before the warnings.
Chips may have been weak on Friday but weak is relative
and the index closed up +14 for the week and well off
its 375 lows from Monday. 

So what did cause the market decline? I have several 
suggestions that may have contributed to the decline. 
First there was the SOX decline on the chip warnings. 
No big deal and it appeared to be simply normal profit
taking from the weeks pre earnings gains. Another 
contributing reason was the high oil prices and heating
oil hitting record highs at $1.586. Government data this
week showed home heating oil inventory levels to be -12%
below normal and analysts fear a cold snap as we near 
Halloween could push those levels even lower. Lately 
equities have been ignoring oil prices but the new 
warnings may have been a minor contributing factor. 

Earnings are not coming in as strong as expected. With
52% of the S&P already reported the most optimistic 
calculation shows average earnings at +15.2% growth but
there are firms publishing numbers at +10.8% as well.
The average earnings beat is only +2.2% compared to 
+3.0% on a normal basis. We currently have a 2:1 ratio
of guidance warnings compared to a normal 3:1 ratio of
companies raising estimates. While this was not expected
to be an exciting quarter most expected it to be better
than what we are getting. With most companies guiding
lower the earnings deceleration is coming a quarter
earlier than most expected. Most analysts expected Q4
to be decent and the decline to +3% growth to begin in
Q1. 

Bonds hit a seven month high on Thursday and ten year
yields have been under 4.0% for three days now. The
bond rally is creating uneasiness in equities when 
you realize we are 12 days away from another Fed rate
hike. What do bonds know that we don't is the worry
among equity traders? Are bonds predicting an economic
decline? If so then the gains are from traders shifting
out of equities and into the safety of bonds until the
future brightens. 

The cloudy future could have a lot to do with the current
election predictions. RealClearPolitics.com averages the
various surveys on a weekly basis and they are showing
a very scant 2% lead for Bush. 
http://realclearpolitics.com/bush_vs_kerry.html 
Since the Dow has fallen the two months before the 
election 9 of the last 10 elections where the incumbent
lost we could be seeing a higher level of caution enter
the markets as we near the election. The market could be
predicting a change in administration ahead. With only a
week to go and no clear leader the various market factors
specific to each candidate cannot be brought into play.
Nobody knows which way to play. Are taxes going up or 
down? Will spending increase or decrease? Will drug 
companies be forced to sell drugs cheaper? What will
happen to social security, health care, etc? Nobody 
knows and hedge funds don't know where to invest their
$1.2 trillion in cash currently under management. Mutual 
funds who have thinned their portfolios heading into
their October year end don't know if they should invest
in health care, energy, financials or homebuilders. With
the economic outlook cloudy there is no clear sector 
other than commodities that suggest a reasonable return.
With China still growing at a +9.1% clip based on this 
week's data the commodity sector is not likely to slow.
That leaves equities starving for dollars. 

Historically the end of October sees a ramp into the
election when there is an obvious leader. No leader
equals no ramp. We are getting to the point where the
undecided voters will have to get off the fence and
make a commitment. The surveys will intensify next
week and hopefully that commitment will be reflected
because left on our own next week could get ugly. 

The Dow closed at the lows for the year and the fourth
major new low for the current down trend pattern. The
general consensus expected the Dow to hold at the 9800
level and Friday's close was a wake up call for traders.
The Dow now has potential to trade down to 9700 or
even 9600 to complete the current pattern. With all
the indecision about oil, economy, earnings and election
it could easily hit 9600 by Tuesday. I am not saying it
will because there are other circumstances at work here.
Once a rebound begins, if it begins, there is strong 
resistance at every 50 point increment from 9900 to 
the top of the pattern at 10350. Despite the -107 drop
on Friday there were only two Dow components that lost
more than $1. AIG -1.75 and MMM -1.72. 28 of the Dow
components ended negative but the majority were only
down 50 cents or so. It was not a washout or a landslide
regardless of the final numbers.

The Nasdaq is still in much better shape and holding
over strong support at 1900. The -38 point Friday drop
still left it +13 for the week. It appeared to be chip
led profit taking more than tech dumping. The SOX and
the Russell continue to provide support and until that
changes we will continue to see bullish divergence. The
Nasdaq has multiple supports all converging between
1885-1915. The 100dma at 1907, 50dma at 1885, uptrend
support at 1915 and horizontal support at 1900. This
congestion range should withstand any casual selling
and only be broken with a serious market downdraft.

SOX Chart


Russell Chart


I mentioned the external circumstances I believe were
at work on Friday. Many mutual funds have October year
ends and they shuffle their portfolios in October and
sell some winners to offset the losers also sold. A
fund holding EBAY for instance has a 100% gain from
the $50 price this time last year. How much higher
can EBAY be expected to rise? Probably not another
+100%. For funds that found themselves with a bunch 
of MRK, MMC, AIG or tech stocks that imploded rather
than exploded then EBAY, RIMM, SYMC, etc, become cash
machines to fill those potholes. They certainly do not
want to sell all their winners because they want to 
show how smart they were by having winners on their
year end statements. But nothing prevents them from
paring those positions to smooth out the rough spots.
Thus the big losses in EBAY, SYMC and RIMM to name a
few. Even energy stocks lost ground despite a new 
high for oil over $55. This could be just normal 
October portfolio adjusting. 

If they are going to make adjustments before their
year end they only have five days left. Last week 
probably represented this pruning process and the 
Thursday earnings flood of nearly 400 companies
gave them plenty of guidance on which stocks to
dump. Hopefully that dumping process has been 
completed and funds will be shopping again next 
week.   

We need to also keep in mind that there has not been
any terrorist event designed to impact the election
as they had in Spain. If they are going to try to
sway the election this is the week. Personally I
think any event would only help Bush and that may
be what is holding them back. This could also have
been a factor in our market weakness this week. Fear
of the unknown is always market negative. 

Speculating on daily market direction in October is
a fools errand. Historically bottoms are made in Oct
and Nov/Dec are usually up. Without a crystal ball
picking that October bottom is best done in November
when hindsight is the best. I would love to say 
Friday was a final flush job but there are far too 
many factors to make that call. I still believe the
market will rally after the election but with no 
clear leader the rest of October will be a tossup. 
However, if you are a fund manager with cash to 
invest the Dow represents the most depressed big 
caps in the market. Hunting for bargains in the
Dow is like trying to find the last edible piece of
popcorn among the scorched kernels in the bottom of
the bag. With the exception of HD, VZ, JNJ and XOM 
the rest of the roster offers risk/reward profiles
only Mother Teresa could love.  

That poses a problem for the rest of the year. Any
Dow rally could be weak and divergence from the other
indexes is almost guaranteed. While prior analyst
estimates suggested 10750-11000 would be the year end
range I would be happy to just see four positive days
out of every five so as not to be a major drag on the
rest of the indexes. Triple digit days are not required
and probably will not be seen. Just let the Dow stay 
positive and disaster free leave the long distance 
driving to the Russell. 

Just keep repeating this to yourself. Just one more
week, just one more week. Just let this torture pass
and get the election behind us so investors can 
concentrate on the future. If next week ends positive
then consider it a gift from the market and a sign
of better times ahead. Should we close lower than
Friday's 9750 you can consider that a sign as well.
A sign the party may be over. 

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

Solitary walk of the Dow?
By Leigh Stevens

THE BOTTOM LINE – 
The Dow, which has been the weakest of the widely followed 
indices, was HEADLINED on Friday as having a new low close for 
the year. It used to said, when the Dow 30 (INDU) would go its 
own way, such as to ever new highs, to reflect a "solitary walk 
of the Dow". INDU is not reflective of the rest of the market, at 
least not yet -  



The Dow has been working lower in a well-defined downtrend 
channel - - option traders, take note of these regular price 
swings, back and forth within this channel! It looks like INDU 
may be headed to the low end of this channel as I've highlighted 
above, around the green up arrow, around 9630 currently. 

The other indices will be covered in detail in my "Index 
Outlooks" section further along.  

FRIDAY'S CLOSING NUMBERS – 
The S&P 500 Index (SPX) lost 10.7 points (-1%) to close at 
1,095.7, off 1.1% for the week. The Dow 30 (INDU) fell 108 points 
(-1.1%), to finish at 9,757.8 and was down 1.8% for the week. 

The Nasdaq Composite (COMP) gave back 38.5 points (-2%) to wind 
up at 1,915.1, but did manage to close up a hairs-breath for the 
week (+0.2%).  

FRIDAY'S TRADING ACTIVITY – 
The Dow Industrial average, representing the bluest of the Blue 
Chips ended at a new low for the year Friday, and the tech-heavy 
Nasdaq (Composite) got nicked a couple percentage points.  This 
after a week that saw crude hit a new high, closing above $55 for 
the first time ever. Also, mixed earnings reports in tech stocks, 
undermined investor confidence in the outlook for the economy.

Google rallied strongly on a strong Q3 performance, while 
Microsoft and Amazon fell back as their results disappointed 
investors. 

Google rallied strongly as investors took cheer from their first 
quarterly results as a public company. The company indicated that 
its Q3 earnings and revenue both doubled, boosted by a strong 
income stream derived from the expanding business of sponsored 
search advertising on the Web. The stock shot up more than 15% to 
end at $172.4. 

Google went public (mid-August) at $85 a share. Hey, who didn't 
buy the stock cause they thought it was too pricy then - that 
would be ME - WRONG! 

It was a different story for Amazon. Shares of the giant Web 
retailer fell sharply after its Q3 earnings and its '05 sales 
outlook missed expectations. Strength in international sales was 
offset by lower operating profit at its North American business 
as free shipping ate into its bottom line. Love that free 
shipping! Not so the market, as the stock fell some 12%, to 
$34.60.

Microsoft (MSFT) fell 3% on some reported concern about its Q2 
outlook. Late Thursday, the company said their fiscal Q1 net 
income rose 11% from a year earlier as client software sales, 
server revenue and X-box sales all rose. 

However, the Credit Suisse/First Boston analyst following the 
company said that MSFT "appears to be struggling to hold global 
PC market share due to piracy and competition from Linux, notably 
in Asia". The company's Q2 revenue forecast was also slightly 
below current Street estimates, although the upper end of its 
fiscal '05 revenue estimate was above expectations.

OIL JITTERS - 
Obviously the big concern in the market is that if oil prices 
stay so high, say above $50, this is going to be a substantial 
drag on economic growth, the way it has been historically. And, 
investors would like to know the Fed will back off from raising 
interest rates any further because of such a likely slowdown. 

OTHER MARKETS –
In the Forex Market, the dollar was at a 4-month low against the 
yen and fell further in the past week versus the euro, based on 
concern that the enormous U.S. trade gap could also dampen U.S. 
economic growth. Having just arrived in Spain, I can attest to 
Euro shock as my dollars are buying many fewer euros this trip. 

A major risk is also that this downward spiral in the greenback 
will make it less attractive to foreigners to continue to finance 
our huge government deficit by buying U.S. government bonds) - we 
remain quite dependent on the world given the low U.S. domestic 
savings rate. 

T-bonds rallied as the surge in oil prices offered some hope the 
Federal Reserve may suspend any further rate hikes as at least 
pending what the impact will be of such high energy prices on 
economic growth. The 10-year T-note ended up 5/32 at 102 5/32, to 
yield 3.98%.


MY INDEX OUTLOOKS – 

S&P 500 Index (SPX) – Daily chart:
The S&P 500 (SPX) has been doing its "technical thing" pretty 
reliably also as, at the last top it got to its resistance (down) 
trendline also and promptly reversed lower.  When it pierced the 
21-day moving average and couldn't rebound back above it, further 
more weakness was suggested.  

This broader measure of the market however, is far from going to 
a new closing low however, unlike the Dow Industrials. It rather 
appears to be just continuing to meander back and forth in a 
trading range.  



SPX looks like it might be headed back toward near support at 
1090 again, and perhaps to its lower trend channel boundary 
again, currently set at 2.5% under its 21-day average, suggesting 
a target of around 1080.  For sure a close over 1110 is needed to 
turn the chart picture bullish again near-term. Play the S&P for 
lower unless this happens. 

No bullish "sentiment" reading yet - that is, when a lot of 
options traders get active in puts, relative to calls and result 
in a reading of around 1; i.e., equities put volume equals call 
volume on any one day.  

S&P 100 Index (OEX) – Daily chart:
I continue to see a target to around 520 in the S&p 100 (OEX) in 
a re-test of the prior lows and at the lower trend channel line – 
when the OEX gets to about 3% under its 21-day closing moving 
average, it's been "oversold" – 



520 looks to be an place to puts.  This index is getting oversold 
on the RSI too and this is another way of looking at the risk of 
being in puts after that.   

I usually look at the OEX up, down and sideways in terms of 
different chart pattern patterns and different indicators, so it 
might be interesting to look at the S&P 100 in some different 
ways also. It too has been trading in a fairly well-defined 
downtrend price channel as we'll see in the next chart -  

S&P 100 Index (OEX) – Daily chart:
The last rally stopped and reversed right at resistance implied 
by its 200-day moving average (at the red down arrow), which also 
happened to be at its resistance down-trendline.  OEX then failed 
to hold its prior 530 low, showing more technical weakness - not 
before it formed a little upward sloping "flag" pattern 
highlighted by the two lines in light blue.  



In a downtrend and after prices rebound a bit with higher highs 
and daily lows for a few days, a resumption of the prior (down) 
trend tends to occur.  For those interested in reading something 
about this kind of chart pattern, which happens in both advances 
and decline - "flag" patterns, see -     
http://www.OptionInvestor.com/traderscorner/tc_100704_1.asp

Going on - don't forget to look at the hourly index charts also, 
as it will show you the picture in a different way - 

S&P 100 Index (OEX) – Hourly chart:

Sometimes, a rally will achieve a slight, but fleeting, upside 
penetration of a down trendline, as was the case below when OEX 
rebounded to around 537-538 but where TWO consecutive hourly 
closes fail to get above this line; and the prior trend resumes -  




Nasdaq Composite (COMP) Index  – Daily chart:
Making the case for market sectors that are holding up better 
than just the narrow Dow average, tech was holding up better last 
week as reflected in the Nas Composite (COMP), which was closer 
to the top end of its recent trading range than not (and also 
approaching resistance implied by ITS resistance down-trendline 
as can be seen below - 

1900-1910 continues to look like key near support, with next 
technical support assumed to be around 1870, a the minor up 
trendline at the green (up) arrow.    

 



It doesn't seem likely that tech will buck the trend of the NYSE 
indices if they continue to fall. Stay tuned, my crystal ball is 
a big hazy on this, but if I had to pick my direction, I would 
say COMP is going lower.   

Nasdaq 100 (NDX) Index  – Daily chart:
I thought the Nas 100 would not re-test the old high before it 
headed still lower, but it did and formed a minor double top 
before reversing to the downside.

I continue to emphasize keeping an eye on the 21-day moving 
average, as a good trading direction indicator - staying above it 
suggests rally potential; staying below it, the reverse 
situation.

I would peg near support at 1440, then around 1415, with more 
major support expected at 1370.

 

A significant technical negative is the bearish price/RSI 
divergence, as the last high was accompanied by an RSI reading 
well under ITS prior high, as I've highlighted on the RSI chart 
above.  That and the double top, suggests that NDX is headed 
still lower. 

Nasdaq 100 tracking Stock (QQQ) Daily chart:

The recent rally in QQQ seems to have failed or reversed at its 
upper trend channel line, but the Q's has not pierced its minor 
up trendline that has been traced out on the advance over this 
month's advance.

If QQQ can't hold above 35.75, I anticipate lower prices will be 
seen for the Nas 100 tracking stock. 35 is minor support, but key 
support really looks like 34-34.25

My view of QQQ being in a 34 to 37 trading range near-term is 
maintained. A close over 37 would suggest a bullish technical 
breakout.  A close under the prior low around 34.25, would 
suggest that prices were headed still lower.    



Nothing much shows up with the volume, as its just been holding 
steady, but the same bearish price/RSI divergence as with NDX 
shows up of course. I'm also watching whether the cluster of 
recent lows around 35.50 hold or not as a clue to the next move. 

Good Trading Success!
 

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

Still Loaded and Waiting

Glad I put a trigger on that XLE put from last week. 
The initial trigger was $34.25 and we traded down to 
$34.41 on Tuesday before rebounding to close at $35.49
on Friday. 

This is definitely not a problem. We did not want to 
enter the play on Monday if not forced because of high
option premiums from the expiration roll over. We also
did not want to enter if the price was going higher in
front of the election. 

The trailing buy stop is currently at 35.16 based on
the -75 cent trail from the Friday high of $35.91. Let's
make it simple for next week. Let's start with the entry
trigger at $35.00 and move it higher in 50 cent jumps
with an XLE move over $36. The October high is $36.83.

XLE $36.00 entry $35.00
XLE $36.50 entry $35.50
XLE $37.00 entry $36.00 etc.

This keeps us about $1 below the price of the XLE but
makes it easier to set the buy stops. 

The odds are good we will continue to see oil rise 
until next weekend so don't get nervous if it continues
higher. Our patience will be rewarded once the election
is over and the terrorist speculation ends. 

Because this is a short-term trade I am using December
options with the Dec-$35 PUT XLE-XI currently $1.00.

Buy DEC $35 Put XLE-XI with an XLE trade at $35.00.
Trail the entry price as specified above on any XLE 
move higher. 
 
If we are triggered then the stop is $1.50 over our
trigger price.

Profit target is $32.00

Initial recommendation: 
http://members.OptionInvestor.com/editorplays/edply_101704_1.asp

XLE Chart


************  
Open plays:
************  

MRK Put $30.57   

** Stop $35.00 **
** Target $25.00 **

Jan-2006 $25 LEAP Put WMR-ME 

http://members.OptionInvestor.com/editorplays/edply_101004_1.asp


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

XMSR Call $32.07   

** Stop $28.00 **
** Target $35.00 **

XMSR is expected to announce a wearable device similar
to a Walkman or Ipod in the coming week. This will
broaden the appeal of the service and set XMSR apart
from Sirius. 

The Spitzer investigation is seen as positive for the
satellite radio companies and XMSR surged +1.13 on
Friday when it was announced. If the payoffs to regular
radio are cancelled then advertisements will increase
making satellite radio more desirable. 

Earnings are Nov-4th

JAN-$30 Call QSY-AF cost 2.75 currently $4.10
JAN-$32 Call QSY-AZ cost 1.75 currently $2.55

http://members.OptionInvestor.com/editorplays/edply_100304_1.asp

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

MSO Put $19.03     ** Stopped $17.50 **

March $15 Put MSO-OC @ $2.00 stopped at $1.50

MSO has rocketed higher as the appeal hits the airwaves.
Several analysts suggest the chances are growing that
Martha could get off. Wouldn't that be a change of fate.
We were stopped for a loss on Monday with the first 
announcement. 

http://members.OptionInvestor.com/editorplays/edply_092604_1.asp




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


One Week To Go
- J. Brown

Friday should have been no surprise.  The disappointing earnings 
reports from AMZN, MSFT, BRCM and others was more than enough to 
spark a pre-weekend, post-earnings sell-off.  Adding to the list 
of why investors both big and small are hesitating to buy stocks 
was another record high for crude oil.  The December contract 
broke through the $55 level for the first time ever.  The markets 
were also caught off guard by a 20 percent, five-day rally in 
natural gas prices.  

The market internals are on Friday were very negative.  Losing 
stocks outnumbered advancers by 2-to-1 on both the NYSE and the 
NASDAQ.  Down volume overshadowed up volume by more than 2-to-1 
on the NYSE and by almost 4-to-1 on the NASDAQ.  The Dow 
Industrials sank to a new 11-month low while the S&P 500 closed 
back under the 1100 level.  This week has shown that for the most 
part the descending channel trading pattern is still very much in 
place for the major indices.

Jim brings up a good point regarding the bond market.  The ten-
year bonds are trading near five-month highs.  Bonds are normally 
seen as a "safety" play.  If money has been moving into bonds for 
the last few months that doesn't say much for the market's 
expectation on how stocks will perform.  

Looking ahead to next week investors will have to deal with four 
things. First will be economic data.  We have a number of 
economic reports out this week.  Wall Street will be curious to 
see what the Fed's Beige book will say and where the GDP number 
will fall.  The recent trend has been for the numbers to be 
positive but they will continue to show a slow down the rate of 
growth.

Second will be energy prices.  The rising price of crude doesn't 
have a direct affect on the market, except the airlines, and for 
the most part the Dow Transportation index has ignored the rise 
in oil.  However, rising oil means rising costs for both 
businesses and consumers.  

The third issue the markets will be digesting this week are more 
third quarter earnings.  Over 130 of the S&P 500 will be 
reporting and six Dow-components will release their numbers.  
Plus, there will be dozens and dozens of smaller companies 
releasing their Q3 results.  This week will also bring a number 
of earnings reports from the energy sector with AHC, APC, COP, 
CVX, HAL, MRO and XOM all reporting.

The fourth and probably biggest factor is of course the Nov. 2nd 
election.  The mud slinging will get dirtier.  The media buzz 
will reach a deafening tone and the polling data will hit a 
fevered pitch.  This alone and the fact that there is no clear 
winner could keep stocks flat to down this week.  The markets 
hate uncertainty but the biggest thing this election has 
generated has been just that - uncertainty.  Unfortunately, the 
threat of a terrorist event near or during the election still 
lingers in the air like a faint odor you can't get rid of. 

I'd like to say we only have one more week (7 trading days) to 
suffer through this election miasma.  Unfortunately, we have to 
consider the possibility that with the race this close and with 
both sides drumming up their army of lawyers to contest every 
twist and turn in the voting process we may not escape on 
November 3rd because we may not have a winner.  



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

Market Averages

DJIA ($INDU)

52-week High: 10753
52-week Low :  9497
Current     :  9757

Moving Averages:
(Simple)

 10-dma:  9935
 50-dma: 10113 
200-dma: 10271



S&P 500 ($SPX)

52-week High: 1163
52-week Low : 1018
Current     : 1095

Moving Averages:
(Simple)

 10-dma: 1118
 50-dma: 1109
200-dma: 1119



Nasdaq-100 ($NDX)

52-week High: 1559
52-week Low : 1301
Current     : 1438

Moving Averages:
(Simple)

 10-dma: 1442
 50-dma: 1407
200-dma: 1440



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

CBOE Market Volatility Index (VIX) = 15.39 +0.74
CBOE Mkt Volatility old VIX  (VXO) = 16.09 +1.10
Nasdaq Volatility Index (VXN)      = 21.36 +1.00 


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

          Put/Call Ratio  Call Volume   Put Volume

Total          0.74        721,848       536,881
Equity Only    0.67        549,506       365,979
OEX            0.37         47,568        17,872
QQQ            1.89         14,678        27,811


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

Bullish Percent Data

           Current   Change   Status
NYSE          62.7    - 0     Bear Correction
NASDAQ-100    47.0    - 2     Bull Alert      
Dow Indust.   50.0    - 0     Bear Confirmed
S&P 500       59.6    - 0.4   Bear Correction
S&P 100       58.0    - 1     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: 1.09
21-dma: 1.09
55-dma: 1.10


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     952       959
Decliners    1821      2001

New Highs      67        53
New Lows       33        42

Up Volume    522M      363M
Down Vol.   1202M     1345M

Total Vol.  1815M     1720M
M = millions


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

Commitments Of Traders Report: 10/19/04

Weekly COT report discloses positions held by small specs
and commercial traders of index futures contracts at the 
Chicago Mercantile Exchange and Chicago Board of Trade. COT data 
can be found at www.cftc.gov.

Small specs are the general trading public with commercials being 
financial institutions. Commercials are historically on the 
correct side of future trend changes while small specs tend 
to be wrong.  

S&P 500

Commercial traders continue to hedge their bets in the big
S&P contacts and are nearing a dead heat between longs and
shorts.  Small traders remain mostly net bullish but have
pared back their enthusiasm a bit.

Commercials   Long      Short      Net     % Of OI
09/28/04      404,773   434,441   (29,668)   (3.5%)
10/05/04      421,217   435,736   (14,519)   (1.7%)
10/12/04      423,472   436,780   (13,308)   (1.5%)
10/19/04      432,945   441,041   ( 8,096)   (0.1%)

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
09/28/04      135,317   107,173    28,144    11.6%
10/05/04      137,210   114,489    22,721     9.0%
10/12/04      139,175   113,903    25,272     9.9%
10/19/04      147,148   124,827    22,321     8.2%

Most bearish reading of the year:  (1,657)- 5/27/03
Most bullish reading of the year: 114,510 - 3/26/02


E-MINI S&P 500

We see a similar picture in the e-minis.  Commercial traders
aren't making any changes.  They remain net bearish and we
have the same reading as last week.  Meanwhile small traders
have slowly grown more net bullish, which of course is a
bearish contrarian indicator.

Commercials   Long      Short      Net     % Of OI 
09/28/04      226,020   420,714   (194,694)  (30.1%)
10/05/04      248,190   476,608   (228,418)  (31.5%)
10/12/04      258,457   517,805   (259,348)  (33.4%)
10/19/04      264,860   531,541   (266,681)  (33.4%)

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
09/28/04      262,501     68,255   194,246    58.7%
10/05/04      308,021     80,373   227,648    58.6%
10/12/04      309,720     62,502   247,218    66.4%
10/19/04      353,903     66,027   287,876    68.5%

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


NASDAQ-100

Commercial trades have not moved much.  They remain net 
bullish on the NASDAQ 100.  Small traders upped both their
longs and shorts and reduced their bearish posture a tad but
remain strongly net bearish.

Commercials   Long      Short      Net     % of OI 
09/28/04       55,045     32,319    22,726   26.0%
10/05/04       55,640     32,872    22,768   25.7%
10/12/04       52,572     32,775    19,797   23.2%
10/19/04       52,630     31,940    20,690   24.4%

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
09/28/04       10,078    22,917   (12,839)  (38.9%)
10/05/04       12,254    30,693   (18,439)  (42.9%)
10/12/04        8,756    24,400   (15,644)  (47.2%)
10/19/04       10,462    25,243   (14,781)  (41.3%)

Most bearish reading of the year: (20,270) - 06/01/04
Most bullish reading of the year:  19,088  - 01/21/02

DOW JONES INDUSTRIAL

Commercial traders seem content to sit on the sidelines with
out any big directional bets on the Industrials.  Longs and
shorts have remain pretty close to one another for a few weeks
now.  That's not so with the small traders.  The latest data
shows a big drop in short positions and the bias has turned
bullish for the first time in weeks.


Commercials   Long      Short      Net     % of OI
09/28/04       29,714    26,877    2,837       5.0%
10/05/04       27,498    25,772    1,726       3.2%
10/12/04       24,150    22,849    1,301       2.7%
10/19/04       25,385    24,213    1,172       2.3%
 
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
09/28/04        5,143     5,988   (  845)   ( 7.6%)
10/05/04        5,531     5,539   (    8)   ( 0.0%)
10/12/04        8,814     9,167   (  353)   ( 1.9%)
10/19/04        8,327     6,015    2,312     16.1% 

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

Who's in the index?

Where does a person look to determine the makeup of various 
indexes?

There are several resources a trader/investor can turn to in 
order to find what stocks make up various indices.  

There have been quite a few indices created the past couple of 
years, and with the indices listed on various exchanges like the 
Chicago Board Options Exchange (CBOE), NASDAQ, AMEX and 
Philadelphia (PHLX), it can be helpful to know your way around, 
and have an idea where to look.

The CBOE has been working on their website and some things have 
changed, for the better I think.  This is usually the first place 
I'll go when I'm interested in trying to find the various 
components of indices.

The MAIN REASON a trader/investor would be interested in knowing 
what's inside an index, is somewhat similar to buying a car or 
truck.  You want to know "what's under the hood."  In essence, 
what stocks are driving that engine higher or lower?  

Here's a link to the CBOE "products," which is a good starting 
point! http://www.cboe.com/Products/Cash-SettledIndexOptions.aspx

CBOE Products page 



The CBOE Products page is a good starting point.  You don't have 
to be an index trader to utilize this information.  But if an 
index is on the move, it can be helpful to know what stocks are 
under the hood.

I'm going to click on the Russell Index Options link, where there 
are 12 different indices.  Is "growth" or "value" stocks in 
favor?  Are mid-caps out/under performing the larger-caps of the 
S&P 500?

Russell Index Options



The CBOE site will have COMPONENT information for various 
indices.  Traders and investors will utilize their relative 
strength tool to try and determine if one "type" of stock is in 
favor or out of favor with the market.  

CBOE Sector Index - Component resource



Here's a nice resource to various sector components.  I keep 
track of several indices listed above in my U.S. Market Watch 
during the intra-day updates.  Even though I don't track the CBOE 
Gold Index (GOX), the CBOE site and its components will also be 
found the in the AMEX Gold Bugs Index ($HUI.X), which I do track 
in the U.S. Market Watch.

From time to time, there will be changes to various CBOE indices.  
Traders can keep up to date on any changes at this 
http://www.cboe.com/Products/IndexComponentChanges.aspx

So, there's a couple of examples of where to find components of 
various CBOE-listed indices.

Here's a link to the NASDAQ Equity Index Options, where here too 
a list of components can be found.  
http://quotes.nasdaq.com/asp/option_info.asp

NASDAQ Equity & Index Options Page - Component resource



Pink arrows point to various indices I track in the U.S. Market 
Watch.  When you left-click your mouse on Biotechnology Index, a 
window pops up with just about everything a trader/investor would 
want to know about this index.  It's an equal weighted index.

The American Stock Exchange (AMEX) also has a list of various 
indices.  Since the AMEX and NASDAQ merged, there is some 
duplication, but a list of components for the various indices can 
be found.  

AMEX Index Page - Component resource



You have to know where to look to find the various indices at the 
AMEX page.  First you go to http://www.amex.com , once you're 
there, click on Options, then Product Information, then Index 
Options.  There's the AMEX Gold Bugs Index ($HUI.X) and if you 
left-click your mouse on it, you'll see a line chart of the HUI.  
To get the list of components, select the "Show Index Components" 
button.  You'll follow these procedures for all of the AMEX-
listed indices.

There's more!  The Philadelphia Stock Exchange (PHLX) also has a 
sector index page.  That's where you'll find the components of 
the KBW Bank Index (BKX.X), Defense Index (DFX.X), Oil Service 
Index (OSX.X), Semiconductor Index (SOX.X) and Utility Index 
(UTY.X) that I list in the U.S. Market Watch.

Here's a link to the Philadelphia Stock Exchange (PHLX) sector 
index page.  http://www.phlx.com/products/sectors/sectors.html

PHLX Sector Page - Component resource



Whew!  There are a lot of sectors out there aren't there?  
Hopefully this gives us a good resource for discovering what 
stocks make up a specific index/sector.

Knowing what stocks comprise various sectors is a good way to 
generate trading/investment ideas, and if we know where to look 
for index/sector components, it makes the work a little easier.

Jeff Bailey


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

Symbol  Co               Date           Comment          EPS Est

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

ACEC Ace Comm             Mon, Oct 25  After the market     n/a
AFCI Advanced Fibre Com.  Mon, Oct 25  After the market     0.02
AFC  Allmerica Financial  Mon, Oct 25  After the market    -0.23
AMX  America Movil S.A.   Mon, Oct 25  After the market     0.65
AXP  American Express     Mon, Oct 25  After the market     0.69
ASH  Ashland              Mon, Oct 25  Before the bell      1.62
ADP  Automatic Data Proc. Mon, Oct 25  Before the bell      0.33
BOH  Bank of Hawaii       Mon, Oct 25  ----- n/a -----      0.74
BLS  BellSouth Corp       Mon, Oct 25  Before the bell      0.51
BWA  BorgWarner Inc       Mon, Oct 25  Before the bell      0.75
CEGE Cell Genesys         Mon, Oct 25  Before the bell     -0.53
CRS  Carpenter Tech.      Mon, Oct 25  Before the bell      0.53
CNC  Centene Corp         Mon, Oct 25  After the market     0.51
CNF  CNF Inc.             Mon, Oct 25  Before the bell      0.77
CCBI Commercial Cap. Ban  Mon, Oct 25  ----- n/a -----      0.31
CBU  Community Bank       Mon, Oct 25  Before the bell      0.43
EXBD Corp. Executive Brd  Mon, Oct 25  After the market     0.37
CSGS CSG Systems Inc.     Mon, Oct 25  After the market     0.21
EDS  Electronic Data Sys  Mon, Oct 25  After the market     0.08
EC   Engelhard Corp       Mon, Oct 25  Before the bell      0.46
FLEX Flextronics          Mon, Oct 25  After the market     0.17
GNSS Genesis Microchip    Mon, Oct 25  After the market     0.04
HMY  Harmony Gold Mining  Mon, Oct 25  During the market   -0.14
HTLF Heartland Financial  Mon, Oct 25  Before the bell      0.26
HLT  Hilton Hotels        Mon, Oct 25  Before the bell      0.13
INSP InfoSpace            Mon, Oct 25  After the market     0.25
ISSX Internet Security    Mon, Oct 25  After the market     0.16
K    Kellogg Co.          Mon, Oct 25  Before the bell      0.55
KMB  Kimberly Clark       Mon, Oct 25  Before the bell      0.90
LAB  LaBranche & Co Inc.  Mon, Oct 25  Before the bell      0.02
MDCI Medical Action Ind.  Mon, Oct 25  Before the bell      0.24
MTH  Meritage             Mon, Oct 25  After the market     2.20
MOBE Mobility Electronics Mon, Oct 25  ----- n/a -----      0.01
NWRE Neoware System       Mon, Oct 25  After the market     0.09
OVNT Overnight Corp       Mon, Oct 25  After the market     0.77
PBI  Pitney Bowes Inc.    Mon, Oct 25  After the market     0.63
PCL  Plum Creek Timber    Mon, Oct 25  After the market     0.33
PPD  PrePaid Legal        Mon, Oct 25  After the market     n/a
PHM  Pulte Homes Inc.     Mon, Oct 25  After the market     2.00
DGX  Quest Diagnostics    Mon, Oct 25  Before the bell      1.27
RAI  Reynolds American    Mon, Oct 25  ----- n/a -----      1.53
R    Ryder System, Inc.   Mon, Oct 25  Before the bell      0.79
SLAB Silicon Labs         Mon, Oct 25  After the market     0.36
SII  Smith Intl Inc.      Mon, Oct 25  Before the bell      0.51
TIN  Temple-Inland Inc.   Mon, Oct 25  After the market     1.15
UNTD United Online Inc.   Mon, Oct 25  Before the bell      0.25
VISG Viisage Technology   Mon, Oct 25  After the market     0.00
WLP  Wellpoint Hlth Ntwk  Mon, Oct 25  After the market     1.91
WDC  Western Digital      Mon, Oct 25  After the market     0.11
ZMH  Zimmer Holdings Inc. Mon, Oct 25  After the market     0.53


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

ABGX Abgenix              Tue, Oct 26  After the market    -0.52
ACE  ACE Limited          Tue, Oct 26  After the market     0.00
ATVI Activision           Tue, Oct 26  After the market     0.09
AFL  AFLAC Inc            Tue, Oct 26  After the market     0.57
AW   Allied Waste Ind.    Tue, Oct 26  ----- n/a -----      0.14
AMH  AmerUs Group Co.     Tue, Oct 26  After the market     1.03
AMSG AmSurg               Tue, Oct 26  After the market     0.29
ABI  Applied Biosystems   Tue, Oct 26  Before the bell      0.17
ATML Atmel Corp           Tue, Oct 26  After the market    -0.02
AV   Avaya                Tue, Oct 26  After the market     0.18
AVID Avid Technology Inc. Tue, Oct 26  After the market     0.52
BN   Banta Corp           Tue, Oct 26  After the market     0.75
ABX  Barrick Gold         Tue, Oct 26  ----- n/a -----      0.04
BSTE Biosite Inc.         Tue, Oct 26  After the market     0.54
BBOX Black Box Network    Tue, Oct 26  After the market     0.60
BLUE Blue Martini Softw.  Tue, Oct 26  After the market     n/a
NILE Blue Nile Inc.       Tue, Oct 26  After the market     0.07
BYD  Boyd Gaming          Tue, Oct 26  After the market     0.37
BTI  British Amer. Tobac. Tue, Oct 26  During the market    n/a
BMHC Building Materials   Tue, Oct 26  Before the bell      0.95
BNI  Burlington Northern  Tue, Oct 26  Before the bell      0.75
CP   Canadian Pacific     Tue, Oct 26  Before the bell      0.50
CECO Career Education     Tue, Oct 26  After the market     0.39
CRA  Celera Genomics      Tue, Oct 26  Before the bell     -0.30
CTX  Centex Corp          Tue, Oct 26  After the market     1.59
CKP  Checkpoint Systems   Tue, Oct 26  Before the bell      0.28
CME  Chicago Merc Exchge  Tue, Oct 26  Before the bell      1.67
CB   Chubb Corp.          Tue, Oct 26  After the market     1.63
COH  Coach Inc.           Tue, Oct 26  Before the bell      0.33
CTSH Cognizant Tech.      Tue, Oct 26  ----- n/a -----      0.18
CFB  Commercial Federal   Tue, Oct 26  Before the bell      0.50
CVTX CV Therapeutics      Tue, Oct 26  After the market    -1.18
XRAY DENTSPLY Intl Inc.   Tue, Oct 26  After the market     0.55
RDY  Dr. Reddy's Lab      Tue, Oct 26  ----- n/a -----      n/a
DSCM Drugstore.com        Tue, Oct 26  After the market    -0.06
DD   DuPont               Tue, Oct 26  Before the bell      0.24
EPIQ EPIQ Systems         Tue, Oct 26  After the market     0.28
FFIV F5 Networks          Tue, Oct 26  After the market     0.21
FMC  FMC Corp.            Tue, Oct 26  After the market     0.81
FDP  Fresh Del Monte      Tue, Oct 26  Before the bell      0.08
FBR  Friedman Billings    Tue, Oct 26  Before the bell      0.56
GISX Global Imaging Sys.  Tue, Oct 26  Before the bell      0.58
GTRC Guitar Center        Tue, Oct 26  ----- n/a -----      0.42
HAL  Halliburton Co       Tue, Oct 26  Before the bell      0.36
HSIC Henry Schein         Tue, Oct 26  Before the bell      0.70
ICST Integrated Circuit   Tue, Oct 26  Before the bell      0.23
IP   Intl Paper Co.       Tue, Oct 26  Before the bell      0.45
JCI  Johnson Controls     Tue, Oct 26  Before the bell      1.32
KIM  Kimco Realty Corp    Tue, Oct 26  Before the bell      0.88
LLL  L-3 Comm. Holdings   Tue, Oct 26  Before the bell      0.88
LPNT LifePoint Hospitals  Tue, Oct 26  After the market     0.46
LMT  Lockheed Martin      Tue, Oct 26  Before the bell      0.65
FLSH M-Systems Flash      Tue, Oct 26  Before the bell      0.15
MSTR MicroStrategy Inc.   Tue, Oct 26  After the market     0.51
MUR  Murphy Oil Corp.     Tue, Oct 26  After the market     1.05
ORLY O'Reilly Automotive  Tue, Oct 26  After the market     0.60
OMC  Omnicom Group        Tue, Oct 26  Before the bell      0.75
OVRL Overland Storage     Tue, Oct 26  Before the bell      0.06
PENN Penn National Gaming Tue, Oct 26  Before the bell      0.57
PNR  Pentair Inc.         Tue, Oct 26  Before the bell      0.32
RGC  Regal Entertainment  Tue, Oct 26  Before the bell      0.24
RCII Rent-A-Center        Tue, Oct 26  ----- n/a -----      0.47
RFMD RF Micro Devices Inc Tue, Oct 26  After the market    -0.02
SLE  Sara Lee             Tue, Oct 26  Before the bell      0.43
SEPR Sepracor             Tue, Oct 26  Before the bell     -1.04
SINA Sina Corp            Tue, Oct 26  After the market     0.28
SSCC Smurfit-Stone        Tue, Oct 26  Before the bell      0.13
SAH  Sonic Automotive     Tue, Oct 26  Before the bell      0.53
SBL  Symbol Technologies  Tue, Oct 26  After the market     0.11
TLAB Tellabs              Tue, Oct 26  Before the bell      0.12
RIG  Transocean Inc.      Tue, Oct 26  Before the bell      0.05
TRI  Triad Hospitals      Tue, Oct 26  After the market     0.54
TRMB Trimble Navigation   Tue, Oct 26  ----- n/a -----      0.24
X    United States Steel  Tue, Oct 26  Before the bell      2.05
UTSI UTStarcom            Tue, Oct 26  After the market     0.03
VLO  Valero Energy        Tue, Oct 26  ----- n/a -----      1.54
VSEA Varian Semiconductor Tue, Oct 26  After the market     0.62
VRTS VERITAS Software     Tue, Oct 26  After the market     0.21
BER  W.R.Berkley          Tue, Oct 26  After the market     1.01
WAT  Waters Corp.         Tue, Oct 26  Before the bell      0.42
WBSN Websense             Tue, Oct 26  After the market     0.26
WWY  WM Wrigley Jr. Co.   Tue, Oct 26  ----- n/a -----      0.55


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

APD  Air Products Chem.   Wed, Oct 27  Before the bell      0.73
AAI  AirTran Holdings     Wed, Oct 27  ----- n/a -----     -0.07
AKAM Akamai Technologies  Wed, Oct 27  After the market     0.09
AHC  Amerada Hess Corp.   Wed, Oct 27  Before the bell      2.13
AWA  America West Hldg    Wed, Oct 27  Before the bell     -0.63
BUD  Anheuser-Busch Cos.  Wed, Oct 27  ----- n/a -----      0.85
ATH  Anthem Inc.          Wed, Oct 27  Before the bell      1.65
APPB Applebee's Intl      Wed, Oct 27  After the market     0.34
AGY  Argosy Gaming        Wed, Oct 27  Before the bell      0.64
ARBA Ariba                Wed, Oct 27  After the market    -0.06
ASKJ Ask Jeeves           Wed, Oct 27  After the market     0.25
RATE Bankrate, Inc.       Wed, Oct 27  Before the bell      0.14
BGFV Big 5 Sporting Goods Wed, Oct 27  After the market     0.36
BIIB Biogen IDEC Inc.     Wed, Oct 27  After the market     0.35
BDK  Black & Decker       Wed, Oct 27  Before the bell      1.32
BBI  Blockbuster Inc.     Wed, Oct 27  Before the bell      0.12
BOW  Bowater Inc.         Wed, Oct 27  Before the bell     -0.05
CBT  Cabot                Wed, Oct 27  After the market     0.51
CNI  Canadian Ntl Railway Wed, Oct 27  Before the bell      0.84
CMCSA Comcast Corp        Wed, Oct 27  ----- n/a -----      0.11
COP  ConocoPhillips       Wed, Oct 27  Before the bell      2.58
COX  Cox Communications   Wed, Oct 27  Before the bell      0.13
CCI  Crown Castle Intl    Wed, Oct 27  ----- n/a -----     -0.18
ECA  EnCana Corp          Wed, Oct 27  Before the bell      1.01
EOG  EOG Resources        Wed, Oct 27  ----- n/a -----      1.02
FLR  Fluor Corp           Wed, Oct 27  After the market     0.57
FBN  Furniture Brands     Wed, Oct 27  After the market     0.36
ROCK Gibraltar            Wed, Oct 27  After the market     0.79
HAR  Harman Intl Indu.    Wed, Oct 27  ----- n/a -----      0.41
IMDC Inamed               Wed, Oct 27  After the market     0.45
IRF  Intl Rectifier       Wed, Oct 27  After the market     0.52
ISIS Isis Pharmaceuticals Wed, Oct 27  ----- n/a -----     -0.43
JDSU JDS Uniphase         Wed, Oct 27  After the market    -0.01
JNY  Jones Apparel Group  Wed, Oct 27  Before the bell      0.77
KMG  Kerr-McGee           Wed, Oct 27  Before the bell      0.94
LNY  Landry's Resturants  Wed, Oct 27  Before the bell      0.74
LF   LeapFrog Enterprises Wed, Oct 27  ----- n/a -----      0.32
LVLT Level 3 Comm.        Wed, Oct 27  ----- n/a -----     -0.28
LSI  LSI Logic            Wed, Oct 27  After the market    -0.05
MMC  Marsh & McLennan     Wed, Oct 27  Before the bell      0.70
MET  MetLife Inc.         Wed, Oct 27  After the market     0.79
NEM  Newmont Mining Corp. Wed, Oct 27  Before the bell      0.26
NXTP Nextel Partners      Wed, Oct 27  Before the bell      0.11
NOC  Northrop Grumman     Wed, Oct 27  ----- n/a -----      0.77
POG  Patina Oil & Gas     Wed, Oct 27  ----- n/a -----      0.51
PEET Peet's Coffee & Tea  Wed, Oct 27  After the market     0.12
PHTN Photon Dynamics      Wed, Oct 27  After the market     0.18
PDG  Placer Dome          Wed, Oct 27  After the market     0.11
PYX  Playtex Products     Wed, Oct 27  After the market     0.03
PG   Procter & Gamble     Wed, Oct 27  Before the bell      0.72
REM  Remington Oil & Gas  Wed, Oct 27  Before the bell      0.53
RNR  RenaissanceRe Hldg   Wed, Oct 27  After the market    -3.69
ROH  Rohm and Haas Co     Wed, Oct 27  Before the bell      0.53
SEE  Sealed Air           Wed, Oct 27  ----- n/a -----      0.67
SIRI Sirius Satellite     Wed, Oct 27  ----- n/a -----     -0.12
SPF  Standard Pacific     Wed, Oct 27  After the market     2.02
SRCL Stericycle           Wed, Oct 27  After the market     0.46
SRDX SuModics Inc         Wed, Oct 27  After the market     0.21
BA   The Boeing Co        Wed, Oct 27  Before the bell      0.40
THQI THQ Inc              Wed, Oct 27  After the market    -0.20
UL   Unilever PLC         Wed, Oct 27  During the market    0.77
VAR  Varian Medical Sys   Wed, Oct 27  After the market     0.35
VMC  Vulcan Materials     Wed, Oct 27  After the market     0.98
WDFC WD-40 Company        Wed, Oct 27  After the market     0.55
ZBRA Zebra Technologies   Wed, Oct 27  ----- n/a -----      0.42

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

SE   7-Eleven             Thr, Oct 28  Before the bell      0.34
RKY  Adolph Coors Co.     Thr, Oct 28  Before the bell      1.76
AET  Aetna Inc.           Thr, Oct 28  Before the bell      1.73
ACV  Alberto-Culver       Thr, Oct 28  Before the bell      0.58
ALA  Alcatel              Thr, Oct 28  Before the bell      0.12
ATK  Alliant TechSystems  Thr, Oct 28  Before the bell      0.71
AXL  Amer. Axle & Mfg     Thr, Oct 28  Before the bell      0.68
APCC American Power Conv. Thr, Oct 28  After the market     0.17
AOC  Aon Corp.            Thr, Oct 28  After the market     0.49
AZPN Aspen Technology     Thr, Oct 28  After the market    -0.03
AN   AutoNation           Thr, Oct 28  Before the bell      0.34
BLL  Ball Corp.           Thr, Oct 28  Before the bell      0.80
BDY  Bradley Pharma.      Thr, Oct 28  Before the bell      0.21
BC   Brunswick Corp       Thr, Oct 28  Before the bell      0.64
BG   Bunge Ltd            Thr, Oct 28  Before the bell      0.82
CCMP Cabot Microelectr.   Thr, Oct 28  Before the bell      0.48
CATT Catapult Comm.       Thr, Oct 28  After the market     0.22
CHRT Chartered Semicondtr Thr, Oct 28  After the market     0.03
CSK  Chesapeake           Thr, Oct 28  Before the bell      0.34
CCE  Coca-Cola Enterprise Thr, Oct 28  Before the bell      0.38
CSTR Coinstar Inc         Thr, Oct 28  After the market     0.29
COLM Columbia Sportswear  Thr, Oct 28  After the market     1.64
CAM  Cooper Cameron       Thr, Oct 28  After the market     0.53
CSX  CSX                  Thr, Oct 28  Before the bell      0.52
DCX  DaimlerChrysler      Thr, Oct 28  Before the bell      0.68
DLX  Deluxe Corp          Thr, Oct 28  Before the bell      n/a
DCLK DoubleClick          Thr, Oct 28  After the market     0.03
EMN  Eastman Chemical Co  Thr, Oct 28  After the market     0.70
XOM  ExxonMobil           Thr, Oct 28  ----- n/a -----      0.88
GTW  Gateway Inc.         Thr, Oct 28  ----- n/a -----     -0.07
GP   Georgia-Pacific      Thr, Oct 28  Before the bell      0.84
GSK  GlaxoSmithKline      Thr, Oct 28  Before the bell      0.72
GES  Guess                Thr, Oct 28  After the market     0.24
IKN  Ikon Office Solution Thr, Oct 28  Before the bell      0.16
IMCL ImClone Systems      Thr, Oct 28  ----- n/a -----      0.33
IM   Ingram Micro         Thr, Oct 28  After the market     0.18
IFF  Intl Flavor Frgrance Thr, Oct 28  ----- n/a -----      0.62
IVGN Invitrogen Corp      Thr, Oct 28  After the market     0.75
JBLU JetBlue Airways      Thr, Oct 28  Before the bell      0.10
KSU  Kansas City Southern Thr, Oct 28  Before the bell      0.14
KG   King Pharmaceuticals Thr, Oct 28  Before the bell      0.22
KYO  Kyocera Corp         Thr, Oct 28  ----- n/a -----      n/a
LTR  Loews Corp.          Thr, Oct 28  Before the bell      0.83
MSO  Martha Stewart Liv.  Thr, Oct 28  Before the bell     -0.47
MVL  Marvel Enterprises   Thr, Oct 28  ----- n/a -----      0.22
MLNM Millennium Pharma.   Thr, Oct 28  Before the bell     -0.23
MYL  Mylan Labs           Thr, Oct 28  Before the bell      0.26
NWL  Newell Rubbermaid    Thr, Oct 28  Before the bell      0.33
PNRA Panera Bread         Thr, Oct 28  Before the bell      0.28
PRX  Par Pharmaceutical   Thr, Oct 28  Before the bell      0.46
PD   Phelps Dodge         Thr, Oct 28  Before the bell      2.71
PDS  Precision Drilling   Thr, Oct 28  Before the bell      0.53
ROP  Roper Industries     Thr, Oct 28  After the market     0.72
SANM Sanmina-SCI Corp.    Thr, Oct 28  ----- n/a -----      0.09
SOHU Sohu.com             Thr, Oct 28  After the market     0.04
SNE  Sony Corp            Thr, Oct 28  ----- n/a -----      n/a
DOW  The Dow Chemical Co  Thr, Oct 28  Before the bell      0.62
G    The Gillette Co      Thr, Oct 28  Before the bell      0.43
SMG  The Scotts Co        Thr, Oct 28  Before the bell      0.02
TRB  Tribune              Thr, Oct 28  Before the bell      0.50
VZ   Verizon              Thr, Oct 28  ----- n/a -----      0.64
WMI  Waste Management     Thr, Oct 28  Before the bell      0.41


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

APC  Anadarko Petroleum   Fri, Oct 29  Before the bell      1.67
AU   Anglogold Ashanti    Fri, Oct 29  ----- n/a -----      0.14
AVP  Avon Products        Fri, Oct 29  Before the bell      0.34
CVX  ChevronTexaco        Fri, Oct 29  Before the bell      1.37
CEG  Constellation Energy Fri, Oct 29  Before the bell      1.15
FRNT Frontier Airlines    Fri, Oct 29  ----- n/a -----     -0.14
HC   Hanover Compressor   Fri, Oct 29  Before the bell     -0.08
NOI  National Oilwell     Fri, Oct 29  Before the bell      0.32
NSANY Nissan Motors       Fri, Oct 29  Before the bell      n/a
DCM  NTT DoCoMo           Fri, Oct 29  ----- n/a -----      n/a
WON  Westwood One         Fri, Oct 29  ----- n/a -----      0.29


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

Symbol  Company Name              Ratio    Payable     Executable

CELG    Celgene Corp              2:1      Oct 22nd    Oct 25th
PDCO    Patterson Companies       2:1      Oct 22nd    Oct 25th
PFSB    PennFed Financial         2:1      Oct 29th    Nov 01st
ROCK    Gibraltar                 3:2      Oct 29th    Nov 01st
PNY     Piedmont Natural Gas      2:1      Oct 29th    Nov 01st
ASGR    America Service Group     3:2      Oct 29th    Nov 01st
VIDE    Video Display Corp        2:1      Oct 31st    Nov 01st
BGG     Briggs & Stratton         2:1      Nov  9th    Nov 10th
DVN     Devon Energy              2:1      Nov 15th    Nov 16th
NFB     North Fork Banc           3:2      Nov 15th    Nov 16th
FBNC    First Bancorp             3:2      Nov 15th    Nov 16th


-----------------------------------
Economic Reports & Events This Week
-----------------------------------
Q3 earnings will continue to take center stage with another huge
week of announcements.  Yet it will be the upcoming Nov. 2nd 
election that will dominate the news.  There is economic data
out every day this week but the big reports will be the Fed's
Biege book, the GDP, ECI and PMI.


==============================================================
                       -For-           
----------------
Monday, 10/25/04
----------------
Existing Home Sales for September  Last: 6.54M  Est: 6.54M

-----------------
Tuesday, 10/26/04
-----------------
Consumer Confidence for October    Last: 96.8   Est: 93.8


-------------------
Wednesday, 10/27/04
-------------------
The Fed's Biege Book report
Durable Goods for September        Last: -0.3%  Est: +0.5%
New Home Sales for September       Last: 1,184K Est: 1,150K

------------------
Thursday, 10/28/04
------------------
Initial Jobless Claims             Last: 329K   Est: 335K
Help Wanted Index for September 

----------------
Friday, 10/29/04
----------------
GDP for the third quarter          Last: +3.3%  Est: +4.3%
Employment Cost Index (ECI) for Q3 Last: +0.9%  Est: +1.0%
Chain deflator for third quarter   Last: +3.2%  Est: +1.6%
Michigan Sentiment for October     Last: 87.5   Est: 88.0
Chicago PMI for October            Last: 61.3   Est: 59.0



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



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The Option Investor Newsletter                   Sunday 10-24-2004
Sunday                                                      2 of 5

In Section Two:

Watch List: Beer to Transports and more!
Dropped Calls: None
Dropped Puts: HSIC, TDS


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

Beer to Transports 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.
___________________________________________________________________



Adolph Coors - RKY - close: 67.19 change: +0.69

WHAT TO WATCH: Shares of RKY have been sliding slowly lower for 
the past two months but this past week has seen a significant 
rebound off round-number support at the $65 mark.  Friday's gain 
actually broke the multi-week pattern of lower highs and produced 
a new MACD buy signal.  This could be an entry point for a run 
toward the $70 level but watch out for earnings expected on Oct. 
28th.

Chart=


---

Cephalon - CEPH - close: 45.80 change: -0.84

WHAT TO WATCH: We're still watching.  Biotech stock CEPH is 
slowly melting under a trend of lower highs.  So far support near 
the $45 level has been holding up but a breakdown could be the 
sort of entry point new bears are looking for.  With the BTK 
biotech index weak the past few days and poised for more weakness 
this coming week keep an eye on CEPH.  Traders also need to be 
aware that earnings are expected on or about Nov. 3rd. 

Chart=


---

Yellow Roadway - YELL - close: 45.20 change: -2.67

WHAT TO WATCH: Ouch!  The Dow Transportation index reversed 
Thursday's gains and fell 1.74 percent on Friday.  YELL under 
performed with a 5.5 percent decline on very big volume.  The 
drop sent YELL straight to support at the $45 mark and its simple 
50-dma. One would have expected a more positive reaction to news 
that YELL beat estimates by 4 cents when they reported earnings 
on Thursday night.  Shares are trading near pivotal support at 
$45 near the bottom of its rising channel.  Whether it bounces or 
breaks down could be your entry point depending on your bias.

Chart=


---

Zimmer Holding - ZMH - close: 69.02 change: -1.14

WHAT TO WATCH: No stranger to the watch list, shares of ZMH 
continue to sink.  Now the stock has broken down under round-
number support at the $70 level with above average volume on the 
recent declines.  Technically the support level it needs to break 
is the August low near $68.75 but ZMH is certainly getting closer 
to doing just that.  The P&F chart is currently bullish but a 
drop under $69.00 would produce a new triple-bottom breakdown 
sell signal.  Plus, it would crack the P&F support.  Watch for a 
reaction after earnings on Oct. 25th.

Chart=



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


AMGN $52.70 -1.58 - Biotech stock AMGN is leading the BTK index 
lower.  If shares break the $52 level of support it could be bad 
news.  The P&F chart looks somewhat ominous.

QCOM $42.00 -2.08 - Yuck!  QCOM produced a small bearish 
engulfing candlestick, which is typically a one-day reversal 
signal.

IMCL $49.33 -1.21 - Look out below!  IMCL has been sliding lower 
for three weeks.  Now shares are nearing major support in the 
$48.00-48.75 range.  A breakdown under $48 could be bad news.  
Watch for earnings on Thursday.

SYMC $58.70 -1.49 - We're watching SYMC for a possible bounce 
from the $55 level.

EBAY $95.91 -3.68 - EBAY painted a bearish engulfing candlestick 
on Friday.  That's typically a one-day reversal pattern.


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




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

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


CALLS
^^^^^

None

PUTS
^^^^

Henry Schein - HSIC - close: 58.14 change: -0.48 stop: 60.01     

Time is up!  HSIC is due to report earnings before the opening 
bell on Tuesday morning.  That means we need to exit to avoid any 
earnings surprises that could negatively impact our position.    
Wall Street is looking for HSIC to turn in 70 cents per share.

Picked on October 14 at $58.35
Change since picked:    - 0.21
Earnings Date         10/26/04 (confirmed)
Average Daily Volume =     655 thousand
Chart =



---


Telephone Data Sys - TDS - close: 73.75 chg: -2.10 stop: 79.01     

Don't you wish every play was as cooperative as TDS?  The stock 
experienced very strong follow through on Wednesday's breakdown 
under support at the $80 mark.  Volume has been very strong on 
the sell-off and shares have broken through the simple 100-dma 
and the $75 level.  Now TDS is nearing potential technical 
support at the simple and exponential 200-dma's.  The stock has 
more than fulfilled our profit target so we're closing the play 
before it bounces. 

Picked on October 20 at $79.75
Change since picked:    - 6.00
Earnings Date         10/20/04 (confirmed)
Average Daily Volume =     155 thousand
Chart =




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


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

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

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


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




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

Please read our disclaimer at:
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The Option Investor Newsletter                   Sunday 10-24-2004
Sunday                                                      3 of 5

In Section Three:

Current Calls: APC, FDX, OSIP, PGR, SBUX
New Calls: None
Current Puts: APOL, 
New Puts: GCI

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before a big price jump? 
 
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**************************************************************



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

Anadarko Petroleum - APC - close: 70.11 chg: +0.44 stop: 66.99

Company Description:
Anadarko Petroleum Corporation's mission is to deliver a 
competitive and sustainable rate of return to shareholders by 
developing, acquiring and exploring for oil and gas resources 
vital to the world's health and welfare. As of year-end 2003, 
Anadarko had 2.5 billion barrels of oil equivalent of reserves, 
making it one of the world's largest independent exploration and 
production companies. Anadarko's operational focus extends from 
the deepwater Gulf of Mexico, up through Texas, Louisiana, the 
Mid-Continent, western U.S. and Canadian Rockies and onto the 
North Slope of Alaska. Anadarko also has significant production 
in Algeria, Venezuela and Qatar.
(source: company press release)

Why We Like It:
This should be an interesting week for energy and oil stocks.  
The December contract for crude oil just broke out and closed 
over the $55 a barrel mark for the first time ever.  Plus, 
natural gas jumped more than 20 percent in the last five 
sessions.  While oil is hitting new highs many of the major oil 
stocks are flirting with new highs.  A crowd of major oil 
companies are also due to report Q3 earnings this week.  How 
investors respond to these reports and management's guidance 
going forward will affect APC's performance.  Don't forget that 
APC is due to report its own earnings on Friday and we plan to 
close this play on Thursday afternoon at the closing bell.  
Speaking of Friday, this past Friday saw APC trade to a new high 
at $70.81, which was enough to trigger us at $70.40.  Remember, 
this is an aggressive momentum play.

Suggested Options:
We're going to use November options.  Remember this is a one-week 
play.  We like the 65s and 70s. 

BUY CALL NOV 65 APC-KM OI=2730 current ask $5.70
BUY CALL NOV 70 APC-KN OI=2839 current ask $2.10

Annotated chart:



Picked on October 22 at $70.40
Change since picked:    - 0.29
Earnings Date         10/29/04 (confirmed)
Average Daily Volume =     1.6 million 
Chart =


---

Fedex Corp - FDX - close: 87.78 change: -1.67 stop: 84.99

Company Description:
FedEx Corp. provides customers and businesses worldwide with a 
broad portfolio of transportation, e-commerce and business 
services. With annual revenues of $26 billion, the company offers 
integrated business applications through operating companies 
competing collectively and managed collaboratively, under the 
respected FedEx brand. Consistently ranked among the world's most 
admired and trusted employers, FedEx inspires its more than 
240,000 employees and contractors to remain "absolutely, 
positively" focused on safety, the highest ethical and 
professional standards and the needs of their customers and 
communities. (source: company press release)

Why We Like It: (Original play from Thursday)
Investors are obviously not worried about the impact of record 
oil prices and the costs of higher fuel on the transportation 
sector.  If they were the Dow Jones Transportation average would 
not be breaking out over the 3400 level and hitting new five-year 
highs.  Neither would Fedex Corp be breaking out to new all-time 
highs.  Right now it's a stock pickers market.  Momentum and 
relative strength traders are reinforcing the maxim that the 
trend is your friend.  We like the momentum in FDX and the 
bullish breakout over resistance at $88 and $89 on Thursday was 
fueled by very strong volume.  The move actually produced a new 
triple-top breakout buy signal on its P&F chart.  Short-term 
technicals are strong and its MACD just produced a new buy 
signal.  We're willing to speculate on a run toward the $100 
level.  The stock last split 2-for-1 in May of 1999 near the $120 
level and shares are approaching levels where the company can 
announce a new stock split at any time.

WEEKEND UPDATE:
Ouch!  The Dow Transports took a 1.74 percent drop and shares of 
FDX outpaced the decline with a 1.8 percent reversal.  This is 
not a strong start.  Readers may want to consider a bounce from 
$87 as a potential entry point but more conservative traders can 
wait for a new high over round-number resistance at $90.

Suggested Options:
Traders can choose from the Novembers, Decembers and January 
calls.  Currently the Novembers have a lot of open interest and
volume but we'd suggest the Decembers too.  Both months will 
work.

BUY CALL NOV 85 FDX-KQ OI=1736 current ask $3.80
BUY CALL NOV 90 FDX-KR OI=3062 current ask $1.00
BUY CALL NOV 95 FDX-KS OI= 345 current ask $0.20

BUY CALL DEC 85 FDX-LQ OI=  41 current ask $4.50
BUY CALL DEC 90 FDX-LR OI= 693 current ask $1.75
BUY CALL DEC 95 FDX-LS OI= 140 current ask $0.55

Annotated Chart:


Picked on October 21 at $89.45 
Change since picked:    - 1.67
Earnings Date         09/22/04 (confirmed)
Average Daily Volume =     1.5 million 
Chart =



---

OSI Pharma - OSIP - close: 62.91 change: -0.56 stop: 61.99

Company Description:
OSI Pharmaceuticals is a leading biotechnology company focused on 
the discovery, development, and commercialization of high-
quality, next-generation oncology products that both extend life 
and improve the quality of life for cancer patients worldwide. 
OSI has a balanced pipeline of oncology drug candidates that 
includes both novel mechanism-based, gene-targeted therapies 
focused in the areas of signal transduction and apoptosis and a 
next-generation cytotoxic chemotherapy agent.
(source: company press release)

Why We Like It:
Uh-oh!  The BTK biotech index is now down three out of the last 
four sessions and is testing support at the 490 level. Sharp 
losses in biotech giants like AMGN have not helped the sector.  
Meanwhile the DRG drug index is slipping to new one-year lows.  
Together they are undermining any buying interest in OSIP.  The 
stock is consolidating mostly sideways but the trend this past 
week has been bearish.  Shares of OSIP seem dangerously close to 
our stop loss at $61.99.  Given the bearish enviornment with the 
BTK and DRG we would probably suggest that conservative traders 
exit now just to keep losses at a minimum.  We would not suggest 
new positions at this time.  Look for a move back over the $64.75 
region before considering new bullish plays.

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

Annotated Chart:



Picked on October 03 at $63.45
Change since picked:    - 0.54
Earnings Date         08/10/04 (confirmed)
Average Daily Volume =     1.6 million 
Chart =


---

Progressive - PGR - close: 88.72 chg: +0.18 stop: 85.75 *new*

Company Description:
The Progressive group of insurance companies ranks third in the 
nation for auto insurance based on premiums written, offering its 
products by phone at 1-800-PROGRESSIVE, online at progressive.com 
and through more than 30,000 independent agencies and insurance 
brokers.  (source: company press release)

Why We Like It:
PGR continues to bounce after effectively "filling the gap" on 
Wednesday's dip.  You may recall that PGR gapped higher on Monday 
after news hit that it had successfully plan to bid for 16.9 
million shares of its own stock at $88 a share in a Dutch 
auction.  We encouraged that the current insurance scandal has 
not influenced PGR.  Thus far there seems to be no indication 
that the current insurance investigation by Elliott Spitzer will 
spread to the car insurance industry.  PGR is pretty close to our 
initial profit target at the $90.00 level.  We are planning to 
close the play if PGR trades within a few cents of $90.00.  We're 
going to raise our stop loss to $85.75.

Suggested Options:
We are not going to suggest new bullish positions this close to 
our profit target at $90

Annotated Chart:


Picked on October 13 at $85.65 
Change since picked:    + 3.07
Earnings Date         10/13/04 (confirmed)
Average Daily Volume =     700 thousand
Chart =


---

Starbucks - SBUX - close: 50.14 chg: -0.62 stop: 46.95     

Company Description:
Starbucks Corporation is the leading retailer, roaster and brand 
of specialty coffee in the world, with more than 8,500 retail 
locations in North America, Latin America, Europe, the Middle 
East and the Pacific Rim. The Company is committed to offering 
the highest quality coffee and the Starbucks Experience while 
conducting its business in ways that produce social, 
environmental and economic benefits for communities in which it 
does business. In addition to its retail operations, the Company 
produces and sells bottled Frappuccino® coffee drinks, Starbucks 
DoubleShot® coffee drink, and a line of superpremium ice creams 
through its joint venture partnerships. The Company's brand 
portfolio provides a wide variety of consumer products. Tazo 
Tea's line of innovative superpremium teas and Hear Music's 
exceptional compact discs enhance the Starbucks Experience 
through best-of-class products. The Seattle's Best Coffee® and 
Torrefazione Italia® Coffee brands enable Starbucks to appeal to 
a broader consumer base by offering an alternative variety of 
coffee flavor profiles. (source: company press release)

Why We Like It:
So far so good.  SBUX has managed to churn sideways above the $50 
level in spite of a bearish performance in the broader indices 
this week.  Overall we can't complain and suspect that SBUX is 
only catching its breath.  If shares dip we could consider a 
bounce from $49.25-49.00 as a new entry point.  Remember, this is 
an old-fashioned momentum play so buying the dips should still 
work.  Just keep an eye on the broader market indices.  If the 
S&P continues to sink or the Industrials go into full retreat 
mode then everything, including SBUX, will be a target for profit 
taking.  

Suggested Options:
We are going to suggest the November calls.  Our favorites are
the 45s, 47.50s and 50s.

BUY CALL NOV 45.00 SQX-KI OI= 902 current ask $5.60
BUY CALL NOV 47.50 SQX-KT OI=3163 current ask $3.40
BUY CALL NOV 50.00 SQX-KJ OI=4644 current ask $1.60

Annotated Chart:



Picked on October 17 at $49.47 
Change since picked:    + 0.67
Earnings Date         11/10/04 (confirmed)
Average Daily Volume =     3.3 million 
Chart =



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

None

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

Apollo Group - APOL - close: 70.16 chg: +0.17 stop: 73.01     

Company Description:
Apollo Group Inc. has been providing higher education programs to 
working adults for more than 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 
82 campuses and 137 learning centers in 39 states, Puerto Rico 
and Vancouver, British Columbia.
(source: company press release)

Why We Like It:
Hmmm... we've turned cautious on APOL ever since the stock broke 
out to the upside and closed above the $70.00 mark last Monday.  
Since then APOL has churned mostly sideways above and below the 
$70 level.  Thus far shares continue to trade in a pattern of 
lower highs and APOL has not pierced resistance near $71.75-
72.00.  The P&F chart remains in a very bearish pattern pointing 
to the $58 region.  We're going to keep the play open but only 
suggest new bearish positions if APOL trades under $68.50.

Suggested Options:
We are going to suggest the November and January options with a 
preference for Januarys even though Novembers have most of the
open interest.

!Warning - there are ULG- options available but the prices 
don't seem to match up.  They could be the result of APOL's
most recent stock split.  Double-check your symbols with
your broker.

BUY PUT NOV 75 OAQ-WO OI=3430 current ask $5.70
BUY PUT NOV 70 OAQ-WN OI=6722 current ask $2.45
BUY PUT NOV 65 OAQ-WM OI=4889 current ask $0.90

BUY PUT JAN 75 OAQ-MO OI=2161 current ask $7.50
BUY PUT JAN 70 OAQ-MN OI=3685 current ask $4.70
BUY PUT JAN 65 OAQ-MM OI= 881 current ask $2.75
BUY PUT JAN 60 OAQ-ML OI=1501 current ask $1.50

Annotated Chart:


Picked on October 10 at $69.81
Change since picked:    + 0.35
Earnings Date         10/05/04 (confirmed)
Average Daily Volume =     3.3 million 
Chart =



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

Gannett Co - GCI - close: 80.20 change: -0.25 stop: 82.01

Company Description:
Gannett Co., Inc. is a leading international news and information 
company that publishes 101 daily newspapers in the USA, including 
USA TODAY, the nation's largest-selling daily newspaper. The 
company also owns more than 600 non-daily publications in the USA 
and USA WEEKEND, a weekly newspaper magazine. Gannett subsidiary 
Newsquest is the United Kingdom's second largest regional 
newspaper company. Newsquest publishes more than 300 titles, 
including 17 daily newspapers, and a network of prize-winning Web 
sites. Gannett also operates 21 television stations in the United 
States and is an Internet leader with sites sponsored by its TV 
stations and newspapers including USATODAY.com, one of the most 
popular news sites on the Web. (source: company press release)

Why We Like It:
It has been a very tough couple of weeks for GCI.  the stock 
rebounded in early October only to fail at the $86 mark and its 
simple 200-dma.  It's been a straight shot down ever since.  The 
newspaper industry was already in trouble as the SEC investigates 
several major papers who inflated their circulation counts. 
Concerns have arisen that the fraud was industry-wide.  Not only 
have advertisers canceled contracts but some are suing.  A few 
analysts are acknowledging that the scandal will make future 
revenue growth tougher to achieve.  

Looking at the daily chart for GCI it would appear that we may 
have missed this move.  However, GCI is currently consolidating 
above round-number support at the $80.00 mark. The short-term 
trend is one of lower highs suggesting that the selling pressure 
is building and GCI will eventually break lower.  The P&F chart 
is already bearish with a $72 target but if GCI trades under the 
$79 level it will be a new spread triple-bottom breakdown sell 
signal.  We want to use a TRIGGER to open this play. We'll sit on 
the sidelines until GCI trades at $79.40.  The low in July was 
$79.43.  One triggered we'll use a stop loss at $82.01 and target 
a drop to $75.

Suggested Options:
We will suggest the Novembers, Decembers of January puts.  The 
January's have the most open interest so these would be our
choice.

BUY PUT JAN 85 GCI-MQ OI= 683 current ask $5.90
BUY PUT JAN 80 GCI-MP OI=1498 current ask $2.85
BUY PUT JAN 75 GCI-MO OI= 390 current ask $1.20

Annotated chart:

_1

Picked on October xx at $xx.xx <-- see TRIGGER
Change since picked:    - 0.00
Earnings Date         10/12/04 (confirmed)
Average Daily Volume =     876 thousand
Chart =



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The Option Investor Newsletter                   Sunday 10-24-2004
Sunday                                                      4 of 5

In Section Four:

Leaps:  Buying Opportunity, Part Two
Spreads and Straddles: I'll Show You Mine If You Show Me Yours

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*****
LEAPS
*****

Buying Opportunity, Part Two

Traders are grabbing for the Maalox and hoping to 
out last and out smart the market for at least one
more week. Between the election volatility, rising
oil and slowing earnings the October bears have 
been feasting before their winter nap. 

October is a very good month for buying leaps and
if you have not taken advantage of some of these
plays now is the time to act. 

The earnings have peaked and those companies who
failed to impress have been weeded out. Those
remaining have solid futures and should benefit
from any post election bounce. 

Oil continues to rise although not at the fevered
pitch of September. We seem to be in the spike and
rest, spike and rest phase while we wait for the
next supply disruption. 

Tech stocks like EBAY, RIMM and SYMC have soared
on positive earnings and so far have resisted any
efforts for real profit taking. That potential 
still exists and should be used as a buying 
opportunity if it does appear. 

I am not adding any new plays this week because
of the full portfolio and the unstable market.
We should rebound after the election but next 
week could be rocky.

So far we have not seen any terrorist events 
although Homeland Security has been issuing private
warnings and cautions prior to the election. This
week should be the last opportunity if they want 
to try a Madrid like election event. 

The markets are at critical support with the Dow
failing at 9800 on Friday. The Nasdaq is still
holding the high ground but the Dow is road kill.
As long as the SOX holds 380 and the Russell 560
there is hope we can sneak out of October alive.  


**** STRONG CAUTION ***

I would strongly caution everyone that a terrorist
event in the U.S. prior to the election could 
drastically change the market outlook. Should an
event occur I would think twice before making an
entry. I believe the market would recover quickly
but it obviously depends on the severity of any
attack. Our time is ticking away with 10 days
between us an the election. The next week will 
be the most dangerous.  

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

NONE TODAY

*******************   
Dropped Plays
*******************   

MMM - Stopped out

Citigroup - Dropped

PG - Dropped

******************************     
New Watch List Plays Triggered
******************************  

SMH  $31.07 Semiconductor Holders 

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

Position Summary Table


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

XLE - S&P Energy SPDR $35.49  ** Stop 33.90 **

Oil is creeping back up again and we have one week
left until the election. There is a possibility we
could see oil fall soon but I want to keep this
play active one more week. We will make a decision
next Sunday based on this weeks results.  

2006 $32 LEAP Call WHA-AF 
2006 $35 LEAP Call WHA-AI 

Entry $33.92 on 9/20
Initial play description:
http://members.OptionInvestor.com/leaps/Lp_091904_1.asp

XLE Chart


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

MMM - 3M Company - $75.65, ** Stopped $74.00 **

MMM missed earnings estimates and was crushed back to 
$73.31 and stopped us out at $74. This play looked so
promising when we first entered on the September dip
and late September rebound. Manufacturing is tanking
due to higher oil and MMM is on the verge of breaking
to a new 52-week low. 

The stop is $74.00 to get under the March and August 
lows. 

2006 $80 LEAP Call WMU-AP cost 8.55 exit 4.50
2006 $85 LEAP Call WMU-AQ cost 5.75 exit 3.00

1/2 Entry at $82 on 9/15 
1/2 Entry at $78 on 9/27 
http://members.OptionInvestor.com/leaps/Lp_080804_1.asp

MMM Chart


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


C - Citigroup $42.56        **Dropped**
 
Citigroup is still suffering from the scandal over
the Japan division. New problems seem to surface 
daily and the stock has been highly reactive to 
the Dow weakness. Uptrend support has failed and
I am dropping the play.

2006 $50 LEAP Call WRV-AJ cost 2.00, exit 1.25

Entry 1/2 46.00 9/20 
Entry 1/2 45.00 9/22
http://members.OptionInvestor.com/leaps/Lp_080804_1.asp

Citigroup Chart



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

INTC - Intel Corp $21.30  **Stop $19.50**

Intel posted a two month high on Thursday at $21.91
and appears to be out of danger of breaking support
at $20. It weathered the storm of chip warnings last
week and held the high ground.   

Current position:
2006 $22 LEAP Call WNL-AX 
2006 $25 LEAP Call WNL-AE 

Entry $20.00 Sept 3rd
http://members.OptionInvestor.com/leaps/Lp_071804_1.asp

Intel Chart


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


TYC - Tyco Intl. $29.95  **Stop $28.00**

Tyco traded sideways after a Tuesday dip with the
market. 

Earnings are Nov-1st and Tyco is expected to perform
well. Whenever the Dow bounces Tyco is a market leader
but it has a high beta so Dow moves tend to drag on
the stock. We are just passing time until the next
rally appears in the market and Tyco moves away from
support at $30.   

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

Entry 5/18 $28.32
http://members.OptionInvestor.com/leaps/Lp_051604_1.asp

Tyco Chart


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


JNPR - Juniper Networks $24.02 **Stop $19.00**

Juniper recovered much of the $2 drop on earnings
and is passing time waiting for the market to firm.
No new news 
 
Very few companies have as strong an earnings record
as Juniper and they should find buyers once the market
decides on a direction. 

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

Entry $20.19 (8/16)
http://members.OptionInvestor.com/leaps/Lp_081504_1.asp

JNPR Chart


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


COP - Conoco Phillips $84.80    **Stop 81.00**

COP rebounded from the early week oil weakness and
returned to the $85 range at Friday's close. The
news continues to be good and oil continues to 
rise. We are still well below the reaction high
of $90 from two weeks ago but are back on the 
right track. 

Earnings are Wednesday and we should hear how the
stake in Russia's 20 billion barrel reserves is
progressing. COP is scheduled to raise its ownership
to 10% by year end and 20% over the next two years. 

I hate to exit on the potential for oil to drop only
to see COP head for $100 next week. We are highly 
profitable in COP with a 100% gain and I would strongly
urge readers who are uncomfortable to take profits and
then reenter should oil drop after the election. 

Earnings are Oct-27th.

The stop was raised to $81. 

Current position:
Jan-2006 $75 LEAP Call YRO-AO at $6.70 now $13.80

Entry $73.30 August 30th   
http://members.OptionInvestor.com/leaps/Lp_082904_1.asp

COP Chart


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


NWS - News Corp $31.13 **Stop 29.00**

News Corp fell sharply after news hit that the 
Oct-26th vote to move to the U.S. was likely to
pass. Fund managers in Australia began dumping 
shares in advance to avoid the rush. This will
eventually be offset by U.S. fund managers buying
NWS once the move to the U.S. is completed. Once
next weeks vote is approved NWS will apply to 
Australian authorities for permission and the
move is expected to be completed in mid November.  

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

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


NWS Chart



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

UPL - Ultra Petroleum $50.13  **Stop $46.00**

UPL rebounded from the dip under $46 on the rebound
in oil prices and closed near the high for the week.
Resistance is well above at $55.  

Earnings are Oct-27th. 

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

Entry $45.50 9/21
http://members.OptionInvestor.com/leaps/Lp_090504_1.asp

UPL Chart


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

EBAY - EBAY $95.95      ** Stop $89.00 **

EBAY announced a 70% increase in earnings on 
Wednesday and soared to $102 on Friday in conjunction
with the Google earnings. Profit taking appeared on
Friday along with the market weakness but support
at $95 held.   

We are nearing stock split territory. Ebay last
announced a 2:1 split in July 2003 at $100.00 and
in April 2000 near $100.


Earnings were Oct-20th

Stop raised to $89.00

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

Entry $90.00 on 9/22
http://members.OptionInvestor.com/leaps/Lp_072504_1.asp

EBAY Chart



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

MER - Merrill Lynch $52.21   ** Stop $50.50 **
               
Merrill passed the earnings test and actually moved
higher last week despite the market weakness. MER
is one of the few financials to make any progress. 

Stop was raised to $50.50

2006 $50 LEAP Call WZM-AJ 
2006 $55 LEAP Call WZM-AK 

Entry $51.00 on 9/20
http://members.OptionInvestor.com/leaps/Lp_071804_1.asp

MER Chart


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

Proctor & Gamble $53.02  ** Dropped **

Despite positive press PG continues to move sideways
and appears in danger of breaking down along with the
drug stocks.  Last weeks excitement faded and I am 
going to drop this before it turns into a serious 
loss.

Earnings are not due until Oct-27th.

Jan-2006 $55 LEAP Call WPG-AK @ $4.20 exit 3.50
Jan-2006 $57 LEAP Call WPG-AY @ $3.00 exit 2.50

Entry $54.08 (9/26)
http://members.OptionInvestor.com/leaps/Lp_092604_1.asp

PG Chart: 


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

RIMM - Research in Motion $85.91  ** Stop $81.00 **

This is really a tough call. The options are up about
+30% and they are expensive options at $18-$22. RIMM
roared to a new high at $90 on Thursday and then
dropped -3.66 on Friday. Bear Stearns downgraded
RIMM to Peer-Perform from Outperform based on price.  

I hate to just sit on RIMM if we are going to see 
more profit taking but I also hate to exit. For 
stocks that can move $4 a day setting the stop is
a science. I raised it to $81 and if we are stopped
out and RIMM rebounds I would go long again at $85.
I plan on keeping this one on the list and we may
be in and out several times. 

Stop was raised to $81.00

RIMM announced earnings on Sept-30th.

2006 $80 LEAP Call WLJ-AP @ $16.50 now $22.50
2006 $90 LEAP Call WLJ-AR @ $13.20 now $18.20
Sell 2006 $120 LEAP Put WLJ-MD @ $46.70 now $44.60

Entry $77.00 (9/28)
http://members.OptionInvestor.com/leaps/Lp_092604_1.asp

RIMM Chart  


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


OXY - Occidental Petroleum $57.80  ** Stop $55.00 **

OXY reported earnings on Thursday of $1.88 that blew
past analysts estimates of $1.73. This was a +70%
jump in earnings helped by higher oil prices. 

Production was -2% below the prior quarter and OXY
said production in the 4Q would be flat due mostly
to damage from Ivan.  

OXY is near its all time high of $59.42 set in
early October. It all depends on oil prices now. 

Earnings were Oct-21st

2006 $50 LEAP Calls WXY-AJ @ $8.60 
2006 $55 LEAP Calls WXY-AK @ $5.60 
2006 $60 LEAP Calls WXY-AL @ $3.50 

Entry $55.50 (9/28)
http://members.OptionInvestor.com/leaps/Lp_082904_1.asp

OXY Chart


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

SYMC - Symantec - $58.70   ** Stop $53.00 **

SYMC roared to a new high at $62.40 on Friday after
posting record earnings on Thursday and announcing 
a 2:1 split. Profit taking appeared with the market
weakness on Friday but we are still over the prior
October highs. 

Stop was raised to $53.00

Earnings were Oct-20th 

2:1 Split announced Oct-20th

2006 $50 LEAP Call YAG-AJ @ $10.70 
2006 $55 LEAP Call YAG-AK @ $8.00 
2006 $60 LEAP Call YAG-AL @ $5.70 

Entry $53.00 on 9/27
http://members.OptionInvestor.com/leaps/Lp_080804_1.asp

SYMC Chart


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

XMSR - XM Satellite Radio $32.05  ** Stop $28.00 **

XMSR can suddenly do no wrong. They surged forward
on the Spitzer news surrounding music pay for play
and again on news that they would announce a personal
Walkman/Ipod type receiver/player next week. The stock
roared off to near $33 on the news and held its gains.

Earnings are Nov-4th.  

Stop was raised to $28.00

Current position:
2006 JAN-$30 LEAP Call YLX-AF @ $6.60 
2006 JAN-$32 LEAP Call YLX-AZ @ $5.60
2006 JAN-$35 LEAP Call YLX-AG @ $4.60 

Entry $29.15 on 10/4
http://members.OptionInvestor.com/leaps/Lp_100304_1.asp

XMSR Chart


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

PFE - Pfizer $27.74    ** Stop $26.00 **

Pfizer had another bad week but ended up back where
it started. The continuing cloud over the Cox-2 products
is dragging on PFE as well as the potential drug rules
that may be implemented if Kerry wins. I hate to bail
on Pfizer because I believe in the company and the
products. I feel it is being painted with the same
brush as Merck. 

I lowered the stop to $26 in hopes the current support
at $27.50-$28 will hold.  

2006 JAN $30 CALL LEAP WPE-AF 
2006 JAN $32 CALL LEAP WPE-AB 

Entry $30.96 10/4 
http://members.OptionInvestor.com/leaps/Lp_100304_1.asp
 
PFE Chart


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


DIA  $97.74 Dow Diamonds Trust **Stop 95.50**

That was exciting! One week after we were filled on
an intraday dip to 99 the Dow implodes to break 98. 
In the greater scheme of things this should not be
a major problem but I did lower the stop to 95.50

A continued Dow drop should stop somewhere in the 
9600-9700 range and the bottom of the current down
trend. I believe we are trapped by the election
and no clears leader as well as October profit 
taking. Once the election is over we should do fine.

Stop was lowered to 95.50
 
2006 $100 LEAP Call YGF-AV @ $6.30
2006 $104 LEAP Call YGF-AZ @ $4.20
2006 $108 LEAP Call YGF-AD @ $2.90
2006 $112 LEAP Call YGF-AH @ $2.00

Entry 10/14 @ $99.00

DIA Chart


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

SMH  $30.98 Semiconductor Holders ** Stop $29.00 **

That entry did not work out as planned. We had a 
$29 breakdown target and a $30.50 breakout trigger.
On Monday the SMH fell to 29.25 and missed our 
entry point by a quarter. I really hope some readers
were able to jump in when we got that close. 

The official entry will be $30.50 on the 19th when
the SMH gapped higher on good chip news. It must
have been the only good news for the week. One
analyst said 20 chip stocks announced earnings and
19 lowered guidance this week. I did not check his
facts but that was the way it seemed to me as well.

Despite the six warnings on Thursday night the SMH
is still holding at $31 and the SOX over 380. Any
positive movement next week should help significantly. 


2006 $30 LEAP Call YRH-AF @ 5.20
2006 $35 LEAP Call YRH-AG @ 3.12
Sell 2006 $55 LEAP Put YRH-MK @ 24.30 

Entry $30.50 (10/19)

SMH Chart


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

Only One Left 

The insurance bomb on Thursday knocked the Dow
back to 9900 and triggered our DIA leap entry.

The QQQ came within 70 cents of the $46.50 entry
on the Tuesday drop and the SMH moved to within
62 cents of our $29.00 entry on Friday. 

The one I wanted the most, the IWM, came within
1.29 of our initial 111 entry. Not quite close
enough. However the options have risen in price
with the October surge and the index has not 
really shown any indications of failure. I am
dropping this watch list entry today as too 
expensive.

I am going to adjust the entry points one more
time in hopes of getting triggered if we do 
retest Dow 9800 next week. Most of our other
portfolio plays are holding up well during this
October madness so there is a good chance we
could get these remaining index entries and not
lose any of our other plays.  


***********************   
Dropped Entries 
***********************   

None 

***********************   
New Watch List Entries 
***********************    

No new entries 

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

QQQ  $35.63 Nasdaq 100 Tracking Stock  
Breakdown Target $35.25
Breakout Target $36.50

The Nasdaq 100 tracking stock bounced off the 100dma
at 35.25 and never came close to our $34.50 entry target.
I a changing the target to that 100dma for next week.

If the market weakness continues we may get lucky but
I also put a breakout trigger on the play at $36.50.
Over the next year the slight difference in premiums
will not be noticed but I would still like to get
the lower entry. 

The QQQ has strong resistance at 38, 42 and 49. I think
everybody reading this would be very happy to see $49 
or even $42 again over the next year. 

Buy 2006 $35 LEAP Call YWZ-AI currently $4.60
Buy 2006 $37 LEAP Call YWZ-AD currently $3.50

QQQ Chart



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

I'll Show You Mine If You Show Me Yours
By Mike Parnos

In the trading wars, early on we learned that it was going to be 
us against the market makers.  In every trade we make, we have to 
deal with a bid/ask spread -- and it's the market maker that 
calls the shots, sort of.

The posted bid/ask spread is like the invoice on the window of a 
car in the showroom.  For some car dealers, the invoice is a 
starting point for negotiations.  Other dealers adopt a "take it, 
or leave it" attitude.  The same holds true in options trading.  
Some market makers display a degree of flexibility while others 
are just plain anal.

The Bid/Ask Spread
This calls for a quick review of the components of the bid/ask 
spread.  When you look at an option chain you're likely to see 
the following:
Bid:  $3.20     Ask:  $3.80
This simply means the market makers are "bidding" $3.20 for the 
option.  That's how much they're willing to pay you for it.  They 
are "asking" $3.80 for the same options.  That's how much they 
want you to pay if you are purchasing the same option.  
(Reminder: options trading above $3.00 are traded in $.10 
increments.  Options below $3.00 can be traded in $.05 
increments.)

When you see the quote on the option chain, the "bid" price 
represents the highest bidder (to buy) and the "ask" price 
represents the lowest offer (to sell).  The market maker pays his 
mortgage with the difference between the bid price ($3.20) and 
the ask price ($3.80).  The question arises, do we want to pay 
his mortgage AND put his kids through college?  Hell, no.  We may 
have been born at night, but not LAST night.

The "Show or Fill" Rule
Not wanting to pay retail (the $3.80 posted "ask" price) for the 
option, we submit a limit order to buy the option at $3.60.  
Enter the "show or fill" rule.  That simply means that the market 
maker must either fill your order at $3.60 or change his bid/ask 
spread to reflect your order.  Should he not fill your order, his 
new bid/ask spread would be:
Bid: $3.60  Ask: $3.80.  
You are now posted as the highest bidder.  With your $3.60 being 
represented (instead of the market maker's $3.20), it provides 
other owners of this option an opportunity to sell their options 
at this higher price ($3.60).

Prior to the "show or fill" rule, the market maker was not 
required to show your price.  He could leave the quote unchanged, 
and your order unfilled.  And that's not good.

Why Should You Be Filled?
Depending on the exchange, when a market maker posts a bid or ask 
price, the exchanges (at least the major ones) require that the 
newly posted price (in our case - $3.60) be good for at least 20 
contracts.

Say you placed an order for five contracts.  Does the market 
maker want to sell you that option for $3.60?  Another "hell no."  
But, if he posts that $3.60, he is risking having to sell 20 
contracts to an option seller at $3.60, rather than at the $3.20 
in the original bid/ask quote.  He doesn't want to do that.  So, 
what are his alternatives?

It is often in the market maker's best interest to fill your 
order for five contracts at $3.60 just to get you out of his 
hair.  Sometimes it pays to be a nuisance, but you have to be a 
nuisance with some class.  Also, remember, that in life you're 
not going to get anything unless you ask for it.  The skill comes 
in just "how" you ask for it.

Don't Get Greedy
As in most areas of life, especially trading, pigs tend to get 
slaughtered.  So, if you're a piggy that goes to the options 
market, you might end up as a ham sandwich.   In our example, 
when you place your order, don't put your limit order in at 
$3.40.  That would be an insult and people who are insulted will 
go out of their way to make sure you don't get what you want.  We 
don't want to piss off the market makers (too much).  We just 
don't want to pay retail.  

Imagine you're selling your house and you're asking $150,000.  
Then someone comes along and offers you $100,000.  In addition to 
thinking "GFY," you vow that this would be the last person in the 
world you would sell your house to.  Market makers are human, too 
(I think).  They may be our adversaries, but they have to live 
too.  They're entitled to make a profit (within reason, of 
course). 

Strange, But True
On occasion, and this has happened to me, you'll notice an "ask" 
price that looks like a hell-of-a-deal.  You put in your order at 
the seemingly low ask price and you get a report back that you 
were filled on one out of 10 contracts.  Meanwhile, the bid/ask 
spread has returned to reality -- with the ask price now nowhere 
near where you bought the one contract.  

Unless the market moves dramatically in your direction, you're 
going to be sitting there with one filled contract and an open 
order to sell nine other contracts.  You've used up a full 
commission to sell the one contract and, if you change your limit 
order, you're going to incur another commission charge.

How do you avoid this?  Check with your broker.  He should be 
able to tell you the size (the number of contracts) at that price 
that is waiting to be filled.  If it matches your order, great!  
If not, you can make a decision whether or not you want to 
proceed.  But, at least you'll have the information and can make 
an informed decision.  The better online brokers will have that 
real time information for you.  
____________________________________________________________

More T-Shirts I Wish I Had
"If you give up drinking, smoking, and sex, you don't live longer 
... it just seems like it."

"My imaginary friend thinks you have serious mental problems."
____________________________________________________________

NOVEMBER CPTI POSITIONS
November Position #1 - SPX Iron Condor - 1095.74
We sold 12 SPX November 1185 calls and bought 12 SPX November 
1200 calls with a credit of about $1.25 ($1,500).  Then we sold 9 
SPX November 1070 puts and bought 9 SPX November 1050 puts for a 
credit of about $1.65 ($1,485).  Total credit and potential 
profit of about $2,985.  The maximum profit range is from 1070 to 
1185.  Can this 115-point range withstand the market's emotional 
highs and lows?  Let's hope so.  The maintenance is $18,000.  The 
potential return on risk is about 20%.

New November Position #2 - SPX Iron Condor - 1095.74
Considering the downward market movement, I felt it is 
appropriate to initiate a SPX position with different parameters.  
We sold 10 SPX Nov. 1160 calls and bought 10 SPX Nov. 1180 calls 
for a credit of about $1.40 ($1,400).  Then we sold 13 SPX Nov. 
1025 puts and bought 13 SPX Nov. 1005 puts for a credit of about 
$1.20 ($1,560). Maximum profit potential of about $2,960.  Max 
profit range of 1025 - 1160.  Maintenance: $20,000.

November Position #3 - OEX Iron Condor - 525.16
We sold 10 OEX Nov. 500 puts and bought 10 OEX Nov. 490 puts for 
a credit of about $.70 ($700).  Then we sold 10 OEX Nov. 555 
calls and bought 10 OEX Nov. 565 calls for a credit of about $.60 
($600).  Total net credit and maximum profit of $1.30 ($1,300).  
Max profit trading range of 500 to 555.  Maintenance $10,000.

November Position #4 - RUT - Iron Condor - 567.77
We sold 10 RUT Nov. 520 puts and bought 10 RUT Nov. 510 puts for 
a credit of about $.70 ($700).  Then we sold 10 RUT Nov. 610 
calls and bought 10 RUT Nov. 620 calls for a credit of about $.60 
($600).  Total net credit and maximum profit of $1.30 ($1,300).  
Max profit range of 520 to 610.  Maintenance $10,000.
____________________________________________________________

ONGOING POSITIONS
QQQ ITM Strangle – Ongoing Long Term -- $35.80
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.  We rolled to the November. $34 calls and 
$37 puts for a total of $.70 ($700). Our new total credit is now 
$12,900. 

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 conservative cash flow generating strategy.  

ZERO-PLUS Strategy.  OEX – 525.16
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.  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 total of $9,365.  In 
October we added $650 for a new total of $10,015.

New Zero-Plus Position For November
November bull put spread 500/490 for credit of $.70 x 5 = $350.  
November bear call spread 555/565 for credit of $.60 x 5 = $300.  
If all goes well, we'll be able to add another $650 to our cash 
position.
__________________________________________________________

SPX "Sure Thing" Strategy - 1095.74
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 was $7,500.

When the SPX traded in the low 1100s, it was time for an 
adjustment.  We closed out the original bull put spread for 
$13.20 ($3,960).  We then opened a seven-contract position of an 
1115/1140 bear call spread, taking in $6.35 ($4,445).  That means 
we've taken in some extra premium.  Our new profit potential is 
$2,435 -- if SPX closes below 1115.  

We've been getting whipsawed.  Our most recent position was a 
November 14-contract 1120/1095 bull put spread (coincidentally, 
right back where we started) at $7.00 ($9,800).  The maintenance 
is getting pricey at $35,000.  That's why this strategy is not 
for everyone.  Our potential profit is still $2,435. 

Here we go again.  We had to close the 1120/1095 bull put spread 
and we initiated a new 1115/1140 bear call spread.  We picked up 
another $350 in premium to $2,785, but our maintenance is now 
$70,000. 
____________________________________________________________

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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or any Premier Investor Network newsletter please contact:

Contact Support




The Option Investor Newsletter                   Sunday 10-24-2004
Sunday                                                      5 of 5

In Section Five:

Spreads and Straddles:  Earnings And Oil Prices Slam Stocks!
Premium-Selling Plays: Naked Puts and Calls


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

Earnings And Oil Prices Slam Stocks!
By Ray Cummins

U.S. equity values plunged Friday amid record crude oil prices
and a pair of mediocre profit reports from blue-chip bellwethers
Microsoft (NASDAQ:MSFT) and Coca-Cola (NYSE:KO).

The Dow Jones industrial average retreated 107 points to 9,757,
hitting a new low for the year on weakness in its drug, retail,
insurance and technology components.  The NASDAQ composite index
slid 38 points to 1,915, as selling pressure emerged in computer
hardware, software, semiconductor and telecom shares.  Standard
& Poor's 500-stock index finished down 10 points at 1,095, with
only the utility segment enjoying upside activity.  On the Big
Board, volume was 1.47 billion shares with negative breadth of
nearly 2 to 1.  The technology exchange saw 1.73 billion shares
crossed with losers outpacing winners more than 2 to 1.  Bond
prices were slightly higher.  The benchmark 10-year note added
4/32 to end at 3.98%.  For the week, the Dow lost 1.77%, the S&P
dropped 1.12%, but the NASDAQ gained 0.19%.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
SUMMARY OF CURRENT POSITIONS - AS OF 10/22/04
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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

BSC    94.16  91.34  NOV  80.0  85.0  0.65   84.35   0.65   Open
PHS    37.23  33.99  NOV  30.0  32.5  0.35   32.15   0.35  Closed
BTU    60.07  65.77  NOV  50.0  55.0  0.60   54.40   0.60   Open
MRVL   28.84  28.09  NOV  22.5  25.0  0.35   24.65   0.35   Open
COST   44.69  45.73  NOV  40.0  42.5  0.30   42.20   0.30   Open
NEM    46.25  46.12  NOV  40.0  42.5  0.30   42.20   0.30   Open
INSP   47.25  51.89  NOV  35.0  40.0  0.85   39.15   0.85   Open
BG     41.96  43.72  NOV  35.0  40.0  0.50   39.50   0.50   Open
CELG   62.13  56.12  NOV  50.0  55.0  0.60   54.40   0.60  Closed
ADBE   53.57  53.74  NOV  45.0  50.0  0.50   49.50   0.50   Open
VRNT   37.73  38.37  NOV  30.0  35.0  0.55   34.45   0.55   Open

L/P = Long Put  S/P = Short Put  CB = Cost Basis  G/L = Gain/Loss

As noted Tuesday, Pacificare Health Systems (NYSE:PHS) became an
"early-exit" candidate after a sharp decline on reports of the
New York Attorney General's new probe into the health insurance
industry.  Celgene (NASDAQ:CELG) is also a candidate for early
exit after the recent slump in its share value.


CALL-CREDIT SPREADS

Stock  Pick   Last    Mon  L/C   S/C  Credit   CB    G/L   Status

AMZN   40.47  34.60   NOV  50.0  45.0  0.65   45.65  0.65   Open
PDX    55.00  54.38   NOV  65.0  60.0  0.60   60.60  0.60   Open
BZH   103.14 101.28   NOV 115.0 110.0  1.10  111.10  1.10   Open
CHIR   37.98  31.31   NOV  45.0  42.5  0.30   42.80  0.30   Open
FLIR   54.52  54.61   NOV  65.0  60.0  0.70   60.70  0.70   Open
MERQ   37.97  40.18   NOV  45.0  42.5  0.35   42.85  0.35   Open?
BIIB   59.82  56.78   NOV  70.0  65.0  0.65   65.65  0.65   Open
MCHP   27.56  28.80   NOV  35.0  30.0  0.60   30.60  0.60   Open?
CB     66.75  65.46   NOV  75.0  70.0  0.60   70.60  0.60   Open
HIG    56.30  55.03   NOV  65.0  60.0  0.80   60.80  0.80   Open
AET    87.26  83.26   NOV 100.0  95.0  0.40   95.40  0.40   Open
CI     60.65  58.85   NOV  75.0  70.0  0.75   70.75  0.75   Open

L/C = Long Call S/C = Short Call CB = Cost Basis G/L = Gain/Loss

Mercury Interactive (NASDAQ:MERQ) and Microchip (NASDAQ:MCHP) are
on the "watch" list.
 

DEBIT STRADDLES

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

JCOM    29.93  29.78   NOV   30.0   30.0    3.75    3.50   Closed

The straddle on j2 Global Communications (NASDAQ:JCOM) has been
closed in the interest of capital preservation, as the quarterly
earnings report did not produce the expected volatility in the
issue.
  
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
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.

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

GTRC - Guitar Center  $47.81  *** New "All-Time" High! ***

Guitar Center (NASDAQ:GTRC) is a retailer of guitars, amplifiers,
percussion instruments, keyboards and pro-audio and recording
equipment.  Guitar Center stores are located in 45 major United
States markets, including Los Angeles, San Francisco, Chicago,
Miami, Houston, Dallas, Detroit, Boston, Minneapolis, Seattle,
Phoenix, Atlanta, New York, Denver and Cleveland.  In addition,
Guitar Center's American Music division operates 19 family music
stores specializing in band and orchestral instruments for sale
and rental, serving teachers, band directors, college professors
and students.  The company also has a wholly owned subsidiary,
Musician's Friend, which sells through a catalog and a website;
www.musiciansfriend.com.  Quarterly earnings are due on 10/26/04.

GTRC - Guitar Center  $47.81

PLAY (conservative - bullish/credit spread):

BUY  PUT  NOV-40.00  UGR-WH  OI=244  ASK=$0.25
SELL PUT  NOV-45.00  UGR-WI  OI=108  BID=$0.60
INITIAL NET-CREDIT TARGET=$0.45-$0.50
POTENTIAL PROFIT(max)=9% B/E=$44.55


__________________________________________________________________

OSTK - Overstock.com  $52.63  *** Another "All-Time" High! ***

Overstock.com (NASDAQ:OSTK) is an online retailer offering
discount, brand-name merchandise for sale primarily over the
Internet.  Its merchandise offerings include bed-and-bath goods,
kitchenware, watches, jewelry, electronics, sporting goods and
designer accessories.  The company also sells books, magazines,
CDs, DVDs, videocassettes and video games.  Overstock offers
its customers an opportunity to shop for bargains conveniently,
while providing suppliers an alternative inventory liquidation
distribution channel.  The company also offers travel services,
including airline tickets, hotel reservations and car rentals.

OSTK - Overstock.com  $52.63

PLAY (less conservative - bullish/credit spread):

BUY  PUT  NOV-40.00  QKT-WH  OI=5473  ASK=$0.45
SELL PUT  NOV-45.00  QKT-WI  OI=849   BID=$1.05
INITIAL NET-CREDIT TARGET=$0.65-$0.70
POTENTIAL PROFIT(max)=15% B/E=$44.35



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

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.

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

IFIN - Investors Financial Svcs.  $36.50  *** Delayed Report! ***

Investors Financial Services (NASDAQ:IFIN) provides asset
administration services for the financial services industry
through its wholly owned subsidiary, Investors Bank & Trust
Company.  It provides core services and value-added services
to a variety of financial asset managers, including mutual
fund complexes, investment advisors, family offices, banks
and insurance companies.  It's core services include global
custody, multicurrency accounting and fund administration.
Value-added services include securities lending, foreign
exchange, cash management, performance measurement, lines of
credit, institutional transfer agency, investment advisory
services, middle-office outsourcing and brokerage and other
transition management services.

IFIN - Investors Financial Svcs.

PLAY (conservative - bearish/credit spread):

BUY  CALL  NOV-42.50  FLQ-KV  OI=721  ASK=$0.30
SELL CALL  NOV-40.00  FLQ-KH  OI=333  BID=$0.55
INITIAL NET-CREDIT TARGET=$0.30-$0.35
POTENTIAL PROFIT(max)=14% B/E=$40.30


__________________________________________________________________

TTWO - Take-Two Int. Software  $32.55  *** In A Trading Range? ***

Take-Two Interactive Software (NASDAQ:TTWO) is an integrated
developer, marketer, distributor and publisher of interactive
entertainment software games and accessories for the personal
computer, PlayStation, PlayStation2, Nintendo Game Boy Color,
Nintendo GameCube, Nintendo Game Boy Advance and the Xbox.  The
company publishes and develops products through various wholly
owned subsidiaries including Rockstar Games, Rockstar Studios,
Gathering of Developers, TalonSoft, Joytech, PopTop, Global Star
and under the Take-Two brand name.  The company maintains sales
and marketing offices in Cincinnati, New York, Toronto, London,
Paris, Munich, Vienna, Copenhagen, Milan, Sydney and Auckland.

TTWO - Take-Two Int. Software  $32.55

PLAY (less conservative - bearish/credit spread):

BUY  CALL  NOV-37.50  TUO-KU  OI=944   ASK=$0.25
SELL CALL  NOV-35.00  TUO-KG  OI=895   BID=$0.55
INITIAL NET-CREDIT TARGET=$0.30-$0.35
POTENTIAL PROFIT(max)=14% B/E=$35.30



~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
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.
_________________________________________________________________

NTES - Netease.com  $40.00  *** Earnings Speculation! ***

NetEase.com (NASDAQ:NTES) is an Internet technology firm that
supports the interactive online and wireless community in China.
The company's content channels offer users a range of local,
regional and international Chinese language content, Web-based
communication services and sophisticated search capabilities and
provide a destination for Chinese Internet users to identify and
access resources, services, content and additional information
on the Internet.  In addition, the NetEase wireless value-added
services offer timely information, community interaction and
games via wireless short messaging service.  Quarterly earnings
are expected to be reported on or about 10/26/04.

NTES - Netease.com  $40.00

PLAY (very speculative - neutral/debit straddle):

BUY CALL  NOV-40.00  NQG-KH  OI=4187  ASK=$2.60
BUY PUT   NOV-40.00  NQG-WH  OI=4850  ASK=$2.50
INITIAL NET-DEBIT TARGET=$4.90-$5.00
INITIAL TARGET PROFIT=$2.10-$2.90




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

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

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
SUMMARY OF CURRENT POSITIONS - AS OF 10/22/04
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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

WRLS     NOV     7.50    7.20    9.48    0.30   7.65%   4.17%
SIMG     NOV    12.50   12.10   12.68    0.40   5.95%   3.31%
NCRX     NOV    25.00   24.30   25.01    0.70   5.52%   2.88%
ANF      NOV    32.50   32.10   36.86    0.40   2.78%   1.25%
STTX     NOV    25.00   24.60   23.59   (1.01)  0.00%   0.00% *
SNDA     NOV    22.50   21.85   29.80    0.65   7.78%   2.97%
PMTI     NOV    20.00   19.15   22.57    0.85   9.23%   4.44%
IDBE     NOV    12.50   12.15   16.16    0.35   6.44%   2.88%
BVF      NOV    17.50   17.05   19.09    0.45   5.40%   2.64%
USG      NOV    17.50   16.90   23.06    0.60   6.84%   3.55%
SNDA     NOV    25.00   24.50   29.80    0.50   5.67%   2.04%
WEBX     NOV    20.00   19.60   21.28    0.40   5.75%   2.04% *
ENER     NOV    15.00   14.40   18.90    0.60   8.11%   4.17%
DRIV     NOV    25.00   24.35   34.62    0.65   6.81%   2.67%
PLMD     NOV    30.00   29.55   33.17    0.45   3.33%   1.52%
CNCT     NOV    22.50   22.10   27.60    0.40   4.68%   1.81%
CCBI     NOV    22.50   21.90   23.25    0.60   5.51%   2.74%
EYET     NOV    35.00   34.45   41.30    0.55   5.17%   1.60%
USG      NOV    17.50   17.15   23.06    0.35   6.12%   2.04%
RIGL     NOV    22.50   21.85   25.35    0.65   8.14%   2.97%
MCD      NOV    27.50   27.15   28.52    0.35   2.99%   1.29%
FARO     NOV    20.00   19.60   23.75    0.40   5.67%   2.04%
NOVN     NOV    20.00   19.60   22.30    0.40   4.88%   2.04%
VRSN     NOV    20.00   19.65   25.01    0.35   4.40%   1.78%
ENER     NOV    17.50   17.05   18.90    0.45   6.60%   2.64%
SSNC     NOV    20.00   19.55   22.37    0.45   5.71%   2.30%
CKFR     NOV    30.00   29.40   30.30    0.60   4.91%   2.04%
OSTK     NOV    35.00   34.60   52.63    0.40   4.10%   1.16%
GBBK     NOV    30.00   29.40   29.71    0.31   2.59%   2.04%
KRON     NOV    45.00   44.50   50.25    0.50   3.10%   1.12%
DITC     NOV    20.00   19.70   24.44    0.30   5.29%   1.52%
MRVL     NOV    23.75   23.35   28.09    0.40   5.59%   1.71%
AGIX     NOV    20.00   19.70   29.37    0.30   4.50%   1.52%

As noted Tuesday, Steel Technologies (NASDAQ:STTX) became an
"early-exit" candidate after a steep decline in the stock on
news of a CIBC downgrade of the Steel sector.  The position
in Webex (NASDAQ:WEBX) has been closed due to the (bearish)
post-earnings activity in the issue.  A number of issues are
on the "watch" list after the recent broad decline in stocks.


NAKED CALLS

Stock   Strike  Strike  Break  Current   Gain    Max    Simple
Symbol  Month   Price   Even    Price   (Loss)  Yield   Yield

BRCM     NOV    35.00   35.35   26.41    0.35   4.44%   0.99%
LLTC     NOV    40.00   40.60   36.48    0.60   3.74%   1.48%
SINA     NOV    35.00   35.35   26.65    0.35   4.56%   0.99%
LRCX     NOV    25.00   25.40   23.89    0.40   5.37%   1.57% *
IVX      NOV    20.00   20.75   18.90    0.75   9.51%   3.61%
PLMO     NOV    40.00   40.45   28.20    0.45   5.62%   1.11%
SLXP     NOV    20.00   20.65   15.00    0.65   8.83%   3.15%
AOC      NOV    25.00   25.25   19.80    0.25   3.93%   0.99%
CVH      NOV    50.00   50.60   39.39    0.60   4.46%   1.19%
ACF      NOV    20.00   20.70   18.15    0.70   8.31%   3.38%
DSPG     NOV    22.50   22.85   20.07    0.35   6.23%   1.53%
HYSL     NOV    40.00   40.85   39.20    0.85   6.24%   2.08% *
RNR      NOV    50.00   50.65   48.04    0.65   3.51%   1.28%
X        NOV    40.00   40.25   33.61    0.25   3.49%   0.62%

Positions in Hyperion Solutions (NASDAQ:HYSL) and Lam Research
(NASDAQ:LRCX) are on the "watch" list.


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

LNG    22.25  NOV 20.00  LNG-WD 0.55  212 19.45  27   3.2%   8.6%
USG    23.06  NOV 20.00  USG-WD 0.50 7002 19.50  27   2.9%   8.5%
AFCO   21.44  NOV 20.00  UOF-WD 0.45   15 19.55  27   2.6%   6.7%
ENDP   21.51  NOV 20.00  IUK-WD 0.45   74 19.55  27   2.6%   6.7%
ELN    25.32  NOV 22.50  ELN-WX 0.45 5608 22.05  27   2.3%   6.5%
SRDX   26.29  NOV 25.00  UZF-WE 0.50 4248 24.50  27   2.3%   5.8%
XMSR   32.07  NOV 30.00  QSY-WF 0.55 6763 29.45  27   2.1%   5.5%
TSRA   28.69  NOV 25.00  TJQ-WE 0.30   10 24.70  27   1.4%   4.2%

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.
_________________________________________________________________

LNG - Cheniere Energy  $22.25  *** Natural Gas Demand! ***

Cheniere Energy (NYSE:LNG) is engaged in the development of
liquefied natural gas receiving and related opportunities,
centered on the United States Gulf Coast.  The LNG-receiving
terminal business consists of receiving deliveries of LNG
from LNG ships, processing such LNG to return it to a gaseous
state and delivering it to pipelines for transportation to
purchasers.  The company is also engaged in exploration for
oil and gas, as well as development and exploitation of major
reserves, in the Gulf of Mexico.

LNG - Cheniere Energy  $22.25

NOV 20.00 LNG-WD LB=0.55 OI=212 CB=19.45 DE=27 TY=3.2% MY=8.6%


_________________________________________________________________

USG - USG Corporation  $23.06  *** New 2004 High! ***

USG Corporation (NYSE:USG) is engaged in the manufacture and
distribution of building materials.  Its business operations
are organized into three operating segments: North American
Gypsum, Worldwide Ceilings and Building Products Distribution.
North American Gypsum manufactures and markets gypsum sheetrock
and related products in the United States, Canada and Mexico.
Worldwide Ceilings manufactures and markets ceiling tile in the
United States and ceiling grid in the United States, Canada,
Europe and Asia.  Building Products Distribution distributes
gypsum wallboard, drywall metal, joint compound and other
building products throughout the United States.
  
USG - USG Corporation  $23.06

NOV 20.00 USG-WD LB=0.50 OI=7002 CB=19.50 DE=27 TY=2.9% MY=8.5%


_________________________________________________________________

AFCO - Applied Films  $21.44  *** Bottom-Fishing Only! ***

Applied Films (NASDAQ:AFCO) makes thin-film deposition equipment
for the flat panel display industry, the architectural, auto and
solar glass industry and the web packaging industry.  The firm's
high-volume, large-area deposition systems are used to deposit
thin-films that enhance the material properties of the substrate.
These thin-films provide conductive, electronic, reflective,
filter, barrier and other properties that are critical elements
of the composition of its customers' products.  Additionally,
Applied Films sells coated glass substrates to the FPD industry.
These products are used by its customers as a component in the
manufacturing of liquid crystal displays.

AFCO - Applied Films  $21.44

NOV 20.00 UOF-WD LB=0.45 OI=15 CB=19.55 DE=27 TY=2.6% MY=6.7%


_________________________________________________________________

ENDP - Endo Pharmaceuticals  $21.51  *** On The Rebound? ***

Endo Pharmaceuticals (NASDAQ:ENDP) is engaged in the research,
development, sale and marketing of both branded and generic
prescription pharmaceuticals used primarily to treat and manage
pain.  Their primary area of focus within the pain management
market is in the opioid analgesics segment.  Endo currently has
a portfolio of branded products that includes established brand
names such as Lidoderm, Percocet, Percodan and Zydone.  Branded
products accounted approximately 70% of net sales in 2003, while
the company's generic portfolio accounted for 30% of net sales.

ENDP - Endo Pharmaceuticals  $21.51

NOV 20.00 IUK-WD LB=0.45 OI=74 CB=19.55 DE=27 TY=2.6% MY=6.7%


_________________________________________________________________

ELN - Elan Corporation  $25.32  *** New Drug Speculation  ***

Elan Corporation (NYSE:ELN) is a biotechnology company focusing
on discovering, developing, manufacturing and marketing advanced
therapies in neurology, autoimmune diseases and severe pain.
Elan markets two major products in the United States: AZACTAM
and MAXIPIME for Injection.  AZACTAM is a monobactam indicated
for the treatment of the infections caused by susceptible gram
negative microorganisms and is principally used by surgeons,
infectious disease specialists and internal medicine physicians
to treat pneumonia, post-surgical infections and septicemia.
MAXIPIME for Injection is a semi-synthetic, broad-spectrum,
cephalosporin antibiotic used by pulmonologists, infectious
disease specialists, internal medicine physicians, hematologists
and oncologists to treat patients with serious and/or potentially
life-threatening infections.

ELN - Elan Corporation  $25.32

NOV 22.50 ELN-WX LB=0.45 OI=5608 CB=22.05 DE=27 TY=2.3% MY=6.5%


_________________________________________________________________

SRDX - SurModics  $26.29  *** Next Leg Up? ***

SurModics (NASDAQ:SRDX) is a provider of surface-modification
solutions for medical device and biomedical applications.  Its
PhotoLink chemistry is the core technology platform on which
many of its surface-modification capabilities are based.  This
technology helps modify and enhance the surface characteristics
of medical devices and biomedical applications, thus improving
performance, and, in some cases, enabling the development of
new products.  The firm commercializes its surface-modification
technologies through licensing and royalty arrangements with
medical device manufacturers that apply coatings to their own
products.  Earnings are due Wednesday, July 21.

SRDX - SurModics  $26.29

NOV 25.00 UZF-WE LB=0.50 OI=4248 CB=24.50 DE=27 TY=2.3% MY=5.8%


_________________________________________________________________

XMSR - XM Satellite Radio  $32.07  *** New Contract = Rally! ***

XM Satellite Radio (NASDAQ:XMSR) is America's #1 satellite radio
service with over 1 million subscribers.  Broadcasting live daily
from Washington, DC, New York City and Nashville, Tennessee at the
Country Music Hall of Fame, XM provides its loyal listeners with
over 100 digital channels of choice: 70 music channels, more than
35 of them commercial-free, from hip hop to opera, classical to
country, bluegrass to blues; and 31 channels of premiere sports,
talk, comedy, kid's and entertainment programming.  Compact and
stylish XM satellite radio receivers for the home, the car, the
computer and even a "boom-box" for on the go are available from
retailers nationwide.

XMSR - XM Satellite Radio  $32.07

NOV 30.00 QSY-WF LB=0.55 OI=6763 CB=29.45 DE=27 TY=2.1% MY=5.5%


_________________________________________________________________

TSRA - Tessera Technologies  $28.69  *** Entry Point? ***

Tessera Technologies develops semiconductor-packaging technology
that meets the ongoing demand for miniaturization and increased
performance of electronic products.  It licenses its technology
to customers, enabling them to produce semiconductors that are
smaller and faster and incorporate more features.  These chips
are utilized in electronics products, including digital cameras,
MP3 players, personal computers, personal digital assistants,
video game consoles and wireless phones.  The firm's technology
enables multiple semiconductors to be stacked vertically in a
single three-dimensional, multi-chip package that occupies almost
the same circuit board area as a chip-scale package.

TSRA - Tessera Technologies  $28.69

NOV 25.00 TJQ-WE LB=0.30 OI=10 CB=24.70 DE=27 TY=1.4% MY=4.2%



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

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.

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

IIVI - II-VI  $32.57  *** Post-Earnings Slump? ***

II-VI (NASDAQ:IIVI) develops, manufactures and markets optical
and optoelectronic components used in the laser, military and
nuclear radiation detection industries.  Its laser-related
products include laser gain materials for solid-state lasers
and many of the high-precision optical elements used to focus
and direct laser beams to target or work surfaces.  Its military
infrared products include targeting and navigation systems that
utilize advanced optical materials.  Its nuclear radiation
detector products are designed for increased performance,
reduced size, ruggedness and lower-voltage requirements.  The
II-VI has also expanded to the manufacture of single crystal
silicon carbide for use in solid-state lighting, wireless
infrastructure, radio frequency electronics and power switching
industries.

IIVI - II-VI  $32.57

PLAY (sell naked call):

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

SELL CALL  NOV 35    JIU-KG     90    0.65  35.65   6.5%   1.8%


_________________________________________________________________

GIVN - Given Imaging  $34.43  *** Revenge Play! ***

Given Imaging (NASDAQ:GIVN) is an Israeli company established to
develop, produce and market a platform technology for diagnostics
and therapy of the gastrointestinal (GI) tract.  The company was 
founded to commercialize a minimally invasive, disposable imaging
capsule for diagnosing small intestine disorders and diseases. 
Given has submitted more than 20 patents worldwide for the tech-
nologies employed in the Given Diagnostic Imaging System, and for
new capsules to be developed using the basic technological plat-
form.  Future generations of the Given Diagnostic Imaging System 
will be developed to capture images of the rest of the upper GI 
tract and the large intestine.

GIVN - Given Imaging  $34.43

PLAY (sell naked call):

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

SELL CALL  NOV 40    QPG-JH    2946   0.45  40.45   5.9%   1.1%


_________________________________________________________________

UCI - UICI  $24.81  *** Industry-wide Litigation Underway! ***

UICI (NYSE:UCI) provides insurance, primarily health and life
insurance to niche consumer and institutional markets.  Through
its subsidiaries, the company issues primarily health insurance
policies, covering individuals and families, for self-employed,
association groups, voluntary employer groups and student.  UICI
conducts its insurance businesses through the following wholly
owned insurance company subsidiaries: The MEGA Life and Health
Insurance Company, Mid-West National Life Insurance Company of
Tennessee, and The Chesapeake Life Insurance Company.

UCI - UICI  $24.81

"SPECULATIVE" PLAY (sell naked call):

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

SELL CALL  NOV 30    UCI-KF    407    0.70  30.70  13.9%   2.3%





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