The Option Investor Newsletter Sunday 11-07-2004 Copyright 2004, All rights reserved. 1 of 5 Redistribution in any form strictly prohibited. In Section One: Wrap: Breakout in Progress Futures Wrap: See Note Index Trader Wrap: SKY SHOOT Editor's Plays: Triple the Float Market Sentiment: Fourth Quarter Rally Ask the Analyst: Both sides (bullish/bearish) of the Semiconductor HOLDRs 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 11-05 WE 10-29 WE 10-22 WE 10-15 DOW 10387.54 +360.07 10027.5 +269.66 9757.81 -175.57 -121.82 Nasdaq 2038.94 + 63.95 1974.99 + 59.85 1915.14 + 3.64 - 8.47 S&P-100 557.90 + 17.25 540.65 + 15.49 525.16 - 6.64 - 6.67 S&P-500 1166.17 + 35.97 1130.20 + 34.46 1095.74 - 12.46 - 13.94 W5000 11049.59 +340.64 11068.9 +320.91 10748.0 - 90.63 -125.85 SOX 417.83 + 5.58 412.25 + 17.09 395.16 + 13.79 - 8.15 RUT 604.29 + 20.50 583.79 + 16.02 567.77 - 0.65 - 6.23 TRAN 3572.50 + 75.08 3497.42 +125.48 3371.94 + 19.26 + 16.68 VXO 14.36 16.57 16.09 15.89 VXN 19.47 21.90 21.36 21.80 ****************************************************************** Breakout in Progress by Jim Brown If investors had realized how strong the post election Bush bounce was going to be the margin of victory may have been a lot wider. The markets are in breakout mode and a sudden burst of jobs activity should guarantee they stay that way. Dow Chart Nasdaq Chart SPX Chart What a week! The Dow was up +3.6% and the SPX stretched its streak of consecutive daily gains to nine days. The SPX has not posted a streak like that since 1997. New multiyear highs are popping up everywhere. Bulls have broken out of the channel and new individual 52-week highs were seen on 722 stocks on Friday. For the third consecutive day up volume has been nearly 3:1 over down volume and that volume has been strong with four consecutive days in the 4.5 billion share range. The markets exploded out of the gate on Friday and the incentive was a blowout jobs report. The headline Jobs number showed a gain of +337,000 jobs and nearly twice the official estimates of +160k-175K and nearly three times the whisper number at 125,000. It was a monster number and there was improvement in almost every area. Even September's gains were revised up +43,000 from the prior 96,000 estimate. August gains were revised up by +70,000 to 198,000 from 128,000. This was a simply incredible report given the persistent weakness in the various economic reports over the last month. The first conclusion analysts jumped to was a strong bounce in temporary jobs due to the hurricane rebuild effort. There was an increase in construction of +71K jobs and the BLS said many of these were hurricane related. More important was an increase of +272,000 jobs in the service sector. Temporary employment jumped +48,000 and suggests there could be a continued increase in permanent jobs ahead. Total Household employment, a completely different survey, jumped +298,000 for the month. Adding it all together we saw a +337K headline, +43K increase for Sept, +70K increase in Aug and a gain in household jobs of +272k for a grand total of +722,000 jobs. It does not get any better than this and it erased the "Bush Jobs Deficit" completely. How ironic that the Jobs release in October was well below estimates and allowed Bush to be verbally abused at even a higher intensity level for the last month of the campaign. All during that time the actual numbers were exploding. Hindsight is always 20:20. The markets could not have been more excited. A monster increase in jobs for the October period suggests Nov and Dec could also be strong. Holiday retailers should be ecstatic as jobs produce happy consumers. That allows for profits in the entire retail food chain and a ripple effect that will be felt by manufacturers. The downside of the jobs numbers was a sharp increase in the expectations for continued rate hikes. On Thursday the expectations were only slightly over 50% for a hike in December and that jumped to 81% on Friday. There is some talk now that a 50 point hike could be in the cards for November. Obviously this would not be received well by traders but with oil falling it might be a minimal impact. Oil hit a low near $48 on Friday and well below the $55.65 high we saw last week. Unfortunately the rate of decline is slowing and we saw a rebound at the close to $49.65. As I pointed out on Thursday night the price of oil has always rebounded from the 50 day average since October of last year and that average is $48.72 tonight. Oil has hovered between $49-$51 for a week and a break back over $51 could start the cycle all over again. Gas is back over $2 again and a survey taken last week showed 69% of consumers were planning on spending less this holiday as a result of higher energy prices on already tight budgets. The Dow posted another strong gain of +73 points and after a late morning break from the highs at 10400 it returned to test them again right at the close. The morning jump pushed it over the 10350 resistance and then used that same level as support on the intraday dip. The long term down trend may be over but there is still a rough road ahead. The 10450-10550 resistance range that has held since March is probably not going to fall easily. I believe it will fall and with the current momentum it could easily fall soon. However I have some concerns I will point out in a minute. The Nasdaq managed to post another gain despite a lack of excitement in techs. Without help from the SOX the Nasdaq is clawing its way higher but well below the ramp speed of the other indexes. With very strong resistance just ahead at 2050 there could be some hesitance to join a party that is out of chips. I believe this will change also but even if it didn't a Nasdaq adding +15 points a day consistently is not really a bad thing from an investor point of view. Next week we have Dell and Cisco earnings and while they are not expected to move the market higher with blowout earnings they could confirm increased growth in the tech sector. SOX Chart Russell Chart Wilshire Chart The Russell was the index I felt might be indicating that the rally may slow next week. The opening spike shot up to over 607 but it declined most of the day with only a small bounce into the close. The Russell has very strong resistance at 606 and it is knocking on the door but the energy seems to be slowing. The Russell is up +7% over the last two weeks and while there was some consolidation just before the election it still needs to rest. The concerns I mentioned earlier are the strongly overbought conditions and the very strong overhead resistance. Couple those with the Fed meeting next Wednesday and a strong economic calendar and there is ample reason for a pause. I do not believe the rally will fail and return to the prior trend but I do believe we could see some consolidation at or below the current levels. I would look at any dip as a buying opportunity. The market positives are far too many for the bears to ignore. The missing piece of the economic puzzle was the weak labor market and Friday's report completes that bullish puzzle. Oil has lost its luster and while it may turn higher again most investors have now become immune to the constant sound bites about the price of oil. Economic prosperity can withstand high oil prices better than a stagnant economy and we could be on the verge of a turnaround. The terrorist threat appears to be dwindling and dozens of analysts have said the Bin Laden tape could be a sign they are losing their credibility around the globe. We had dozens of high profile public events in the U.S. and the Olympics in Greece and despite high profile threats that they would decimate us nothing happened. The Bush election is being proclaimed the best thing for the markets short of abolishing the IRS and the odds are good he might pull that off as well. Add in the potential for privatizing social security and market analysts are positively giddy. Analysts don't create a bull market by calling their brokers to place orders. They create a bull market by energizing millions of investors with excitement that prompts them to call their brokers or click a mouse. The hysterical frenzy on stock TV this week is bordering on unbelievable. Headliners are actually yelling at each other and physically pounding the table screaming buy. Yes, I am talking about Cramer. The man was just getting over a weeklong bout of hoarseness and yelled himself into a stuttering fit on Friday telling a guest real estate analyst who was recommending real estate as an investment that he was crazy and he was going to short him and use the money to buy more stocks. Granted Cramer is not your ordinary talking head but he is a high profile symbol of the bullishness in the market. With the markets at new highs and no sellers in sight it should make technical analysts more cautious about the impending resistance levels. Instead most analyst panels look more like the hear no evil, see no evil, speak no evil monkeys. Everybody is afraid to say anything negative. The negatives I see are the current escalation of aggression in Iraq, the impending death of Arafat and growing tensions over Iran and North Korea. Second term presidents are dangerous. They are not known for restraint because they have run their last election campaign. I just found out today that there is a growing wave of boycotts in Europe against US products to protest the election. Games are being played in the currency markets that could eventually topple not only the rally but the economy as well. The dollar has been crushed since the middle of October and it was especially bad over the last three days. Analysts suspect government intervention from overseas in an effort to warn Bush he better think twice before making any major policy changes that impact them. The current account deficit must be addressed or the dollar will become the next "oil" and one that could actually tank the current economic boom. On Friday bonds sold off, gold hit a 16 year high and the dollar hit an all time low against the Euro. Definitely some economic problems ahead as evidenced by those events. Dollar Chart - Five Year lows For next week we have a strong economic calendar but after the jobs numbers there should be nothing that can trip up the rally. The markets may pause ahead of the Fed meeting on Wednesday on fears of a 50 point hike instead of just a 25 but the outlook statement can only be positive. I would look to buy any dip above Dow 10250 and the 200 day average. The SPX closed at a new 32 month high at 1166 and should be in breakout mode. The official analyst target is 1250 for the year end. The impending death of Arafat on November 15th could cause some market ripples but they should be minimal. The latest rumor suggests that Arafat will not be allowed to officially die until after Ramadan ends which is Nov-13th in Palestine. This also gives them time to find a burial location. Opposing forces are currently locked into a fierce battle over the prospective location. Sharon has vowed he will not be buried in Jerusalem as long as he is Prime Minster. It is traditional for Muslims to be buried within 24 hours of death and the arrangements need to be in place before he dies such a long way from home. His death would trigger 40 days of mourning and many say some serious Fatah infighting, the potential for a new series of suicide bombings and Israeli reprisals. This could be a very serious event. The historical trend for a post election rally is still intact. However several other trends have gone down in flames. The Redskin loss the weekend before the election has predicted the defeat of the incumbent correctly since 1933. It obviously failed this year. The Stock Traders Almanac claims that since 1904 any time the Dow has lost more than -0.5% in October the incumbent has lost. This year broke that 100-year trend with the Dow loss and the Bush win. There were several others but you get the picture. Hey, the SOX came back from a 0-3 deficit to win the playoffs and the series. This is a year for historical trend breaks. Let's hope the trend for November and December to be the top two market months of the year is not the next trend to break. Sell Too Soon! 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 ******************** SKY SHOOT By Leigh Stevens lstevens@OptionInvestor.com THE BOTTOM LINE - If the market was happy about the present pro-business/markets Administration, it was propelled into the stratosphere by the big jump in new jobs. It was not too hard to see that we were in a decent rally off the last bottom, led by tech sectors, but the last burst to the upside was a bit more then I anticipated, not in Nas 100 (NDX) but the S&P 100 (OEX) gained about 10 more points than I anticipated. Market momentum has a tendency to feed on itself, due to how much stock money is under the control of professional money managers. They have to follow the tape so to speak and can't risk being left behind in portfolio gains at the end of the quarter. However, the market is now "overbought" by most measures, reminding me that getting into index calls is riskier as the chance of a correction is greater than usual. This is not to say that this market will necessarily pull back a lot - bullish sentiment barely touched an extreme last week and there may not be any easy (long) put plays. Corrections need not be deep price-wise. The other kind of "correction" is when the market goes more or less sideways for a while - consolidates in this way by time - then takes off again. Buying puts has risk that prices don't move more than the amount that premiums flatten some in a shallow consolidation. Buying new calls has risk - maybe right on slightly more upside, but difficult to make money when premiums stay high and favor sellers. If not in this thing such as long index calls from significantly lower levels, price neutral strategies are preferred. Otherwise, wait for a while to see how the indexes fare as they approach various yearly highs. We are not out of the woods on one outstanding jobs number, until we see that numbers like Friday's come round again. FRIDAY'S CLOSING NUMBERS - The S&P 500 Index (SPX) rose for the ninth session in a row to end the week at a new yearly high. SPX closed 4.50 points higher, to 1,166.17, for a 3.2% gain on the week. The Dow (INDU) advanced 72.8 points to 10,387.54, for a 3.6% gain for the week - not bad indeed! This was the best weekly gain in over 12 months. The Nasdaq Composite (COMP) closed out 15.3 points higher than Thursday, over 2000 at 2,038.9. COMP gained 3.2% for the week. Hey, a little bit here, a little bit there and soon you got real wealth coming back to long-term stock investors. FRIDAY'S TRADING - Coming into Friday of course, bullish sentiment was fueled by the clear cut election result, with President George W. Bush winning a second term as well as a decline in oil prices. The catalyst that kept the rally going was a quite bullish October employment report. Stocks gained early after the U.S. Labor Department reported that U.S. non-farm payrolls increased by 337,000 in October, which was fully double Wall Street expectations and was the biggest surge in payrolls since early in the year. These numbers beat even the most optimistic estimates and suggests most likely - I'm still a bit cautious - the long awaited recovery is picking up steam in terms of putting people to work, which should fuel a second stage rally in stocks. The Labor Department report did also indicate that a large part of the job creation stemmed from rebuilding and cleanup activities in the Southeast following the August/September hurricanes. Some analysts were saying, that for this reason, this particular report may not be indicative of the start of a prolonged and smoothly accelerating period of economic growth. It's going to take a couple of more months to tell the story on this. U.S. unemployment for October climbed a tenth of a percent to 5.5%, whereas economists were expecting the number to remain unchanged from September. The rise may have been due to people coming back into the job market, but not immediately finding new jobs. In other economic data, the Federal Reserve said U.S. consumer credit grew by $9.8 billion, or at a 5.8% annual rate in September. This rise was well above the increase of $6.6 billion forecasted. Borrowing is a growth market in the U.S. of A! Not so good long-term, but currently the market is not focusing on any longer-term negative like debt heavy consumers. OTHER MARKETS - The strong employment report raised questions for bond investors and traders as to whether the Fed will raise interest rates at both its November and December meetings, due to the prospect of the economy overheating. Expectations seem to be that the Fed will raise the Fed Funds rate by a quarter percent next Wednesday - to 2%. In the wake of the payroll data, its anticipated that the Federal Reserve will go to a 2.25% level in December. The 10-year T-note fell 27/32 to 100 18/32, to yield nearly 4.2%. What's good for stocks, not always being great for bonds. Feeling very good about a personal Euro conversion into dollars a week ago Friday at 1.26, only to see the euro touch a high of $1.296 by this past Friday, which took out the prior all-time high of $1.293 in February. I was happy to exit at 1.26 but this sharply falling dollar is not so good otherwise. Despite Friday's bullish October employment report, foreign exchange traders barely paused in selling more dollars, versus a good reason for the greenback to rally on the strong payroll number and the prospect of higher interest rates in the U.S. This contrary result reflects a lack of a lack of confidence in U.S. assets. A lower dollar helps U.S. exporters, but hurts multinationals as their profits in dollars fall and weakens foreign interest in our bond market. If U.S. investors and institutions had to buy the ongoing flood of government bond debt, it couldn't be done - our savings are far too low. Asian central banks are said to be substantial Euro buyers as worries over our record U.S. deficits are increasing, but mostly abroad so far. Well, as my dear ol pappy used to say, chickens do come home to roost - eventually. MY INDEX OUTLOOKS - S&P 500 Index (SPX) - Daily chart: Prices shot through where I thought was the significant overhead resistance at 1140 in the S&P 500 (SPX), setting up higher upside targets. I raised my percentage bands or trading envelopes back to the historical 3%-3.5% above its 21-day moving average as an indicator, when reached, of a price area that was on the "overbought" and extended side. Friday's close was about at the maximum upside in terms of what is likely in terms of the historical tendency or average in this model. This suggests a dip, but probably only shallow, sideways to slightly lower. The deepest correction I'm anticipating right now is back to prior resistance around 1140 - what was resistance "becoming" new support - at the old resistance trendline. 1120, at the 21-day moving average is key support - "key" meaning that if there was a close under, that's some significant damage to the bull case. A way I measure trader "sentiment" is with the above model - daily equity call volume to put volume. At tops, call volume typically hits one or more days when it is double put volume. Hasn't happened, not yet. Even when this happens, a meaningfully (read deep) correction can be a few days off. NOTE: the last new low was not accompanied by a bullish reading. Sentiment extremes are not seen at every market turning point, which is why I match this against other indicators, especially my up volume indicator which did hit a low when prices did. S&P 100 Index (OEX) - Hourly chart: The hourly chart was telling in the S&P 100 (OEX) as prices got pulled back up another time to the resistance trendline highlighted on the chart below. I suggested last week, that the June rally peak implied significant or major resistance at 558. I would still hold to what I said then, that a close over this area is still needed to break the bearish pattern year to date of lower rally highs. Up trends are defined by the ability of rally attempts to exceed the prior peak. Stay tuned. Implied trendline resistance is just over 560, then the April high comes in at 562 and I would be watching these areas for any signs of reversals. Near support is at 550-549, then more major technical support is assumed to be at 540-539. Yes, on an hourly chart basis, the OEX is about as oversold as it gets, but its also true that a sideway move taking the Index down just a few scant points, causes this indicator to fall back to a more neutral reading. Dow 30 Average (INDU) - Daily chart: Even the Dow came roaring back and broke out above its downtrend channel of many months. Significant overhead resistance now comes in at the 10500 area - the prior peak of significance was 10487. Above this, 10570 looms large as a pivotal point. Support is in the 10200 area and I anticipate this area holding if the next correction is shallow. The RSI is a useful gauge of how "extreme" is extreme and when rallies get going due to major bullish developments, the market can get to areas closer to 80 (in the 14-day RSI), rather than the usual 70 level demarcation. I keep this indicator on my index charts as much as anything to remind me that its always the same - eventually, powerful big moves in either direction run their course and the market has a substantial countertrend move. Nasdaq Composite (COMP) Index - Daily chart: Well I thought the 2000 level would slow down any rally - wrong! But the prior top in the 2050 area, at the red down arrow, may. Look for near support in the 1990-2000 area, then around 1950. I've also noted the trendline that has been associated with the lows on pullbacks - Getting overbought, but I am keying off what happens at the prior highs and the (chart) pattern trumps this indicator as when markets run, they get extreme on the technical studies that are mostly useful in trading range markets as far as being a more precise key to when an index might reverse. Nasdaq 100 (NDX) Index - Daily chart: I thought last week that 1530 was a possible upside target and the Nas 100 (NDX) overshot that even. Happy days for those who bought into the cluster of prior lows in the 1430 area - hey, a hundred points is not bad. If you got it, take the money and run! 1475 is support, then 1440. Upside potential is hard to measure, but I have focus on the year's high for a possible key test of whether we're in a new up leg and 1560 is the yearly high. There's more room on the upside for the RSI before it's screaming overbought. Nasdaq 100 tracking Stock (QQQ) Daily chart: 39 is my maximum current upside objective on QQQ. Support is at 36.75-36.90, then around 36.25, which is key for a continued bullish looking (chart) pattern. I anticipate shorting the stock in the 39 area if reached, but not risking much on the trade. Buying back my shorts 2 points lower would be my objective. Meanwhile, I'm staying with the bullish trend. The On-Balance Volume (OBV) indicator has mostly kept moving in an up direction and has tended to support a bullish bias. When it starts making a reverse pattern, it will suggest that momentum is slowing - that and any break of the up trendline. Good Trading Success! ************************Advertisement************************* Insiders are Buying these 6 Rocket Stocks. In the last few weeks, we have pinpointed insider buying on six stocks that have the potential to deliver stratospheric gains. Click here for our SPECIAL REPORT on these 6 stocks insiders are buying and why you should too. http://www.insidermoves.com/default.asp?aid=618 ************************************************************** ************** Editor's Plays ************** Triple the Float In one week Google's IPO lockup expires for another 39.1 million shares of stock. Brokers are cutting estimates and lowering price targets. Has Google seen its high for 2004? We tried buying puts on GOOG a couple months ago and the end of the quiet period had all five brokers who sponsored the IPO issue positive comments on the stock. We should have expected that seeing as how they have a relationship with Google and worked on the IPO. Cutting them to a sell at the end of the quiet period and before the ink was dry on the check would have taken a strong death wish by the company analyst. Needless to say it did not work out for us. Well time has passed and the stock has run up to ring the $200 bell and suddenly got dizzy from the altitude. UBS cut the stock to a sell and lowered their price targets to $160. Other brokers and independent analysts have been less than flattering. The impending release of 39.1 million shares from lockup on Nov-15th prompted CNBC's David Faber to do an expose on the stock on Thursday. CNBC liked it so much they ran it three times in one day. That night UBS committed the cardinal sin of cutting them to a sell. Never fear Google lovers because Jim Cramer is still pounding the table, literally, with a $250 price target. The 39.1 million share release next Monday will triple the float. That should liven things up since the daily volume now sometimes is higher than the entire 19 million shares available to trade. Fidelity holds 5 million and I doubt they trade them. This has become the favorite traders stock due to the volatility and low float. The last Google put play created a cult of Google readers who took it personal to lose money on what appeared to be such a black and white play. I trade emails with about a dozen readers who buy/short this stock several times a day. Lately they have begun to load up on puts once again with double digit target prices in mind. If you were holding your retirement money in GOOG shares from some job you performed at Google over the last five years, and I know many people are, then watching it fall from $200 to $170 was painful. Several high profile stories have emerged where early contractors took stock instead of payment for services. Some exchange rates as low as $1 per share. Now that the rocket has blasted off and could be falling back to earth you might be counting the hours until you can press the sell button. Once the 39.1 million is released on Nov-15th there is another 25 mil on Dec-15th and 25 mil on Jan-15th. The whopper release is the 177 million on Feb-15th. Because of that monster release on Feb-15th I am recommending March options. I am not recommending you trade these options but we will keep a stop in place and a reentry level in place from this point forward. The previously profiled March $100 put fell as low as $1.25 on Oct-22nd and has risen back to trade at $3.50 on Friday. While I believe we will see double digits in the stock price this is not the option I am suggesting today. The stock is $50 higher now than when we took our first shot on this strategy. I believe that premium will decline along with the stock price as the volatility eases with triple the number of shares. The range of movement on Google has been so wide there are dozens of choices and you are free to spend as much or as little as you desire for the option of your choice. The March $140 fits my pain threshold but it is expensive at $12.60. The $130 edges in just under $10 at $9.60. Each of those options jumped more than $2.50 in price on Friday alone. Google fell -$16 on Friday as the rats deserted the ship. You could play the December $140 options at only $4.70 and they would not expire until two days after the December lockup expires. Pocket any profits and move out to the next month and do it again. Here are the obvious choices: Dec $140 GOQ-XH $4.70 Dec $150 GOQ-XJ $7.30 Jan not available yet Mar $100 GOQ-OT $3.30 Mar $110 GOQ-OB $4.80 Mar $120 GOQ-OD $6.80 Mar $130 GOQ-OF $9.30 Mar $140 GOQ-OH $12.60 I view $170 as support and that is where GOOG closed on Friday. I know there is a strong contingent of traders that want to buy the dip so Monday could see a bounce. If you see the bounce in progress please wait for the roll over. I am going to suggest the following strategy. Buy the puts at $170 or below. Set your stop at $180. If stopped then reenter at $170 and repeat the process until the final drop appears. Depending on your strike price the difference in premium price should be .75 to 1.50 if stopped. Basically you are risking $100 or so per contract to potentially make a bunch. I believe that once the final swan dive begins we will not see $180 again for a very long time. There are currently 19 million shares available to trade. As of Feb-15th, barely 90 days away, there will be 289 million shares available to trade. You do the math. Consider this. GOOG has a market cap of $52 billion based on the monster ramp in the stock and Friday's closing price. Earnings are great and they should get better but the competition is heating up. Compare Google's market cap with some other well known companies. Is it worth more than McDonalds, Disney, GM or Boeing? We know what the risks are for those mature companies. Google is still an unknown and everybody is betting on an uncertain future. Market Caps EK $9B AA $29B GM $22B DD $44B BA $42B CAT $29B FDX $29B HON $30B MCD $38B UTX $49B DIS $54B MRK $58B HPQ $59B MMM $60B TASR $1B TZOO $1B AMZN $15B YHOO $52B GOOG $52B GOOG Chart ************ Open plays: ************ XLE - Put $35.73 That did not work out as expected! Oil prices fell to $48 a barrel but the XLE rocketed higher on the Bush win. Energy stocks found buyers in a Bush presidency and we were stopped at XLE $35.50. The option was $1.25 at the time of entry and $0.90 when the stop was hit. I know several readers exited for a profit when they saw the bounce beginning but officially we lost our lunch money on this one. Initial recommendation: http://members.OptionInvestor.com/editorplays/edply_101704_1.asp XLE Chart *********************** MRK Put $26.21 ** Stop $29.00 ** (lowered) ** Target $20.00 ** (lowered) Jan-2006 $25 LEAP Put WMR-ME cost $1.70, currently $3.10 Initial recommendation: http://members.OptionInvestor.com/editorplays/edply_101004_1.asp MRK Chart *********************** XMSR Call $33.93 ** Stop $32.50 ** (raised) ** Target $35.00 ** XMSR earnings were good and we avoided the post earnings sell off that afflicts most companies. XMSR appears to be wedging up to $34 and nearing a breakout but I am getting nervous. With the strong market gains you would have expected a stronger move. I have raised the stop to $32 just in case. With the $30 option up +2.15 since inception there would be no harm in exiting early to avoid the risk. Your choice. JAN-$30 Call QSY-AF cost 2.75 currently $4.90 JAN-$32 Call QSY-AZ cost 1.75 currently $3.10 Initial recommendation: http://members.OptionInvestor.com/editorplays/edply_100304_1.asp XMSR Chart ********************* PVN Call Update $16.04 Target $20.00 New 52-week high on Friday! Jan-$15 Call PVN-AC cost 1.05, currently $1.50 Initial recommendation: http://members.OptionInvestor.com/editorplays/edply_061304_1.asp PVN Chart **************** MARKET SENTIMENT **************** Fourth Quarter Rally - J. Brown The fourth-quarter, end-of-year, post-election rally has begun. The Industrials have broken through the top of its descending channel. The NASDAQ is back above 2000 and the S&P 500 index is hitting new 2 1/2 year highs. Volume has been very strong and market internals have been bullish since the November 2nd election. Wall Street is not only happy that the election is over, that Bush won and that he was the clear winner but the markets are also excited about the super-strong jobs number on Friday. Boosting investor sentiment was the absence of terrorist events, a pull back in oil, and news that Arafat is on the way out providing an opportunity for a new leader to emerge and press forward on any peace process. We're finally seeing some selling in bonds as investors rotate money back into stocks. Plus, it would appear that bonds may have put in a double-top over the last six-weeks or so. In spite of all the bullish euphoria if you look at the sentiment indicators we have a mixed bag. Nothing goes up in a straight line and right now stocks look overbought and due for a pull back. Don't panic. It's perfectly normal for stocks to oscillator up and down in this new up trend. Currently the ARMS index short-term moving averages have fallen into bearish territory suggesting we're near a top. The volatility indices second that notion with the VIX/VXO at bearish reversal levels. In contrast what we see as a long-term positive are the bullish reversals in the bullish percent data. Yes, the fourth quarter rally appears to have started. Now we just need to get a bit of a consolidation to let off some steam and give us another entry point. You can bet that there is a crowd waiting to buy the next dip. Looking toward next week the focus will be on Wednesday's FOMC meeting and any change in interest rates. As long as they don't surprise us with a 50-point jump stocks should do okay. Plus, we'll hear from tech giants Cisco Systems (CSCO) and Dell Inc (DELL). Guidance from these two companies could have an impact on investor sentiment and the rally in techs. Welcome to November. According to the Stock Traders Almanac the months of November and December happen to be two of the strongest months of the year for stocks. ----------------------------------------------------------------- Market Averages DJIA ($INDU) 52-week High: 10753 52-week Low : 9585 Current : 10387 Moving Averages: (Simple) 10-dma: 10060 50-dma: 10114 200-dma: 10247 S&P 500 ($SPX) 52-week High: 1170 52-week Low : 1031 Current : 1166 Moving Averages: (Simple) 10-dma: 1132 50-dma: 1119 200-dma: 1119 Nasdaq-100 ($NDX) 52-week High: 1559 52-week Low : 1301 Current : 1525 Moving Averages: (Simple) 10-dma: 1485 50-dma: 1432 200-dma: 1437 ----------------------------------------------------------------- CBOE Market Volatility Index (VIX) = 13.84 -0.13 CBOE Mkt Volatility old VIX (VXO) = 14.36 +0.15 Nasdaq Volatility Index (VXN) = 19.47 -0.69 ----------------------------------------------------------------- Put/Call Ratio Call Volume Put Volume Total 0.69 1,138,538 785,612 Equity Only 0.51 879,460 444,502 OEX 0.82 65,124 53,610 QQQ 1.50 41,605 62,484 ----------------------------------------------------------------- Bullish Percent Data Current Change Status NYSE 68.0 + 1.2 Bear Correction NASDAQ-100 62.0 + 7 Bull Confirmed*** Dow Indust. 60.0 + 3.4 Bear Correction*** S&P 500 68.4 + 2.4 Bull Confirmed*** S&P 100 69.0 + 4 Bull Confirmed*** Bullish percent measures the number of stocks in an index currently trading on a buy signal on their point and figure chart. Readings above 70 are considered overbought, and readings below 30 are considered oversold. Bull Confirmed - Aggressively long Bull Alert - Cautiously long Bull Correction - Pause or pullback in upward trend Bear Alert - Take defensive action if long Bear Confirmed - High risk if long, good conditions for shorting Bear Correction - Pause or rebound in downtrend ----------------------------------------------------------------- 5-dma: 0.78 10-dma: 0.81 21-dma: 1.03 55-dma: 1.03 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 1558 1812 Decliners 1318 1211 New Highs 261 137 New Lows 10 17 Up Volume 1360M 1355M Down Vol. 703M 517M Total Vol. 2123M 1892M M = millions ----------------------------------------------------------------- Commitments Of Traders Report: 11/02/04 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 Considering the fact that the latest data was taken as of election day, Nov. 2nd, it's no surprise to see both commercials and small traders hedging their bets. The next round of data should be more informative. Commercials Long Short Net % Of OI 10/12/04 423,472 436,780 (13,308) (1.5%) 10/19/04 432,945 441,041 ( 8,096) (0.9%) 10/26/04 441,263 445,992 ( 4,729) (0.4%) 11/02/04 446,192 441,676 ( 4,516) (0.4%) 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 10/12/04 139,175 113,903 25,272 9.9% 10/19/04 147,148 124,827 22,321 8.2% 10/26/04 138,201 121,275 16,926 6.5% 11/02/04 136,290 132,040 4,250 1.5% 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 E-mini traders are not as humble as the larger S&P futures traders. Commercials remain bearish and small traders have pushed their bullish bias to new multi-week levels. Just remember, this data is post-election. Commercials Long Short Net % Of OI 10/12/04 258,457 517,805 (259,348) (33.4%) 10/19/04 264,860 531,541 (266,681) (33.4%) 10/26/04 276,128 509,552 (233,424) (29.7%) 11/02/04 307,053 580,081 (273,028) (30.7%) 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 10/12/04 309,720 62,502 247,218 66.4% 10/19/04 353,903 66,027 287,876 68.5% 10/26/04 345,908 64,061 281,847 68.7% 11/02/04 395,029 63,746 331,283 72.2% Most bearish reading of the year: (77,385) - 09/02/03 Most bullish reading of the year: 449,310 - 06/10/03 NASDAQ-100 Just as small traders pushed their bullish S&P bias to multi- week extremes; they've done the opposite on the NDX with a new multi-week bearish extreme and a new low for the year. Commercials Long Short Net % of OI 10/12/04 52,572 32,775 19,797 23.2% 10/19/04 52,630 31,940 20,690 24.4% 10/26/04 53,233 31,323 21,910 26.2% 11/02/04 53,002 31,231 21,771 25.0% 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 10/12/04 8,756 24,400 (15,644) (47.2%) 10/19/04 10,462 25,243 (14,781) (41.3%) 10/26/04 10,521 25,388 (14,867) (42.8%) 11/02/04 8,886 36,621 (27,735) (61.3%) Most bearish reading of the year: (27,735) - 11/02/04 Most bullish reading of the year: 19,088 - 01/21/02 DOW JONES INDUSTRIAL Neither commercials nor small traders seem willing to place any big bets but both are somewhat bullish on the Industrials. Commercials Long Short Net % of OI 10/12/04 24,150 22,849 1,301 2.7% 10/19/04 25,385 24,213 1,172 2.3% 10/26/04 25,707 24,855 852 1.6% 11/02/04 25,319 24,261 1,058 2.0% 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 10/12/04 8,814 9,167 ( 353) ( 1.9%) 10/19/04 8,327 6,015 2,312 16.1% 10/26/04 8,405 6,336 2,069 14.3% 11/02/04 7,952 6,306 1,261 8.8% Most bearish reading of the year: (12,106) - 3/09/04 Most bullish reading of the year: 8,523 - 8/26/03 ************************Advertisement************************* SEE WARREN BUFFETT'S LATEST DISCLOSED STOCK PORTFOLIO Now you can follow the investment master's actual moves. To get a FREE report that details Warren Buffett's strategy and reveals his most recently disclosed, ACTUAL stock picks, Click HERE! http://www.bigmoneywatch.com/default.asp?aid=626 ************************************************************** *************** ASK THE ANALYST *************** Both sides (bullish/bearish) of the Semiconductor HOLDRs Hello Jeff, yesterday you noted you had 6 SMH Jan05 $32.5 calls, but had also written 5 covered calls in the Nov $32.5. I assume this is a hedge, but could you explain? Thanks, Jack Reply: Yes Jack, you are correct. This is a near-month hedge and it wasn't done all at once. In fact, to this point, four separate trades have been made to get to this point. A brief review is that I was initially bullish on the Semiconductor HOLDRs (AMEX:SMH) on October 6, 2004 and profiled a bullish trade for a partial bullish call position. On October 14, the SMH was looking weak, so I profiled a covered call (selling calls against a bullish position). On October 22, I profiled an additional bullish call trade. Then on October 27, another bullish call trade. Here. Let's take a look at the trades in chronological order. But I also want traders and investors to see if they can perhaps sense how the MARKET can dictate what a trader/investor should be doing, as it relates to ACCOUNT MANAGEMENT, and hedging. We're also going to touch on the perspective of a market maker/specialist as well as how an institutional computer would manage inventory. Friday's closing value for the SMH was $32.88 Trade history for the SMH Calls and Puts Column A is the number of option contracts purchased or sold, C is date of trade, D is option symbol, E is BULL/long/buy or Bear/short/sell, F is the price of the option at execution, G is the price the SMH was trading at execution, H is the price of the SMH plus Column F. Column J is dollar value of what would have been debited/credited to a specialist's account for each action taken as it relates to the underlying shares of the SMH. I've multiplied by 100 to account for representative shares of the option contracts. Remember, each contract represents 100 shares. For example; on 10/6/2004 I bought 2 contracts (200 shares) when the SMH was trading $31.96. My account (or the specialist's account) would have been debited $6,392.00. I totaled column J for one reason. A trader said that based on my trade profiles, where $10,000 of the underlying stock would be considered a "full position," that I had violated account management. That would be incorrect and after totaling the column at a net debit of $4,185, that would be less than one-half bullish position. If a specialist did nothing with the underlying stock (column J) between now and eternity, the most he could lose would be $4,185.00. On 10/14/2004 the SMH was falling to $29.75. This is when I profiled the selling of 5 Nov. $32.50 calls (SMH-KZ). What did that trade do? It immediately turned my account from being BULLISH (2 call options) to being BEARISH a net of 3 call option contracts. Since all of the options listed are $32.50 strikes, the account would have then turned bearish. For simplicity sake, and to try and make sure I'm staying on the right side of the market (trying to reflect what the market is doing), I pretend I'm the specialist, and record a CREDIT to my account of 14,875.00 (500 * $29.75). Column P is what I view as the specialist's inventory risk (if he was doing what I was doing). If the specialist had bought 200 shares on 10/06/2005 then his risk was 6,392.00. However, when he shorted 500 shares on 10/14/2004, risk in that ONE position was unlimited. True! He was long 200 shares, but was short 500, so net position at that point was BEARISH 300 shares. Column Q is what the specialist's inventory position would look like at Friday's close. A loss of $697.00 if only considering action price and number of underlying shares. Is the specialist on the RIGHT SIDE of the market? Based on entry points the answer is no, but you can begin to see what has taken place and how PRICE action can dictate what a specialist/trader/investor does with their account. As the SMH fell, I became more defensive (sold 5 calls thinking no way SMH would close above $32.90 = $32.50 strike + $0.40 premium received). Now think about the OPTION positions by themselves. Here we're going to have some fun, and hopefully learn something about option expiration. November expiration is coming up on November 19. While you can see from my SMH trade profiles, I BULLISH toward January expiration, but rather cautious as depicted by the selling of those 5 November $32.50 calls. The BEST thing that can happen right now is the SMH closes at $32.49 on November 19. Why? Because we can keep the $200.00 from the selling of the covered calls (500 * $0.40 = $200), and if things pan out, the Semiconductor bullish % will turn bull confirmed and chip bulls would be off to the races. The PRIMARY reason I profile trades, implement various stock and/or option strategies is to MAKE MONEY for traders/investors. Another reason I profile trades and them, is for educational and informational purposes. If I make a mistake and don't buy the bottom or sell the top, make note so you can buy the bottom and sell the top! I'm going to show a 60-minute interval chart of the SMH with the QCharts' derived WEEKLY Pivot levels, and mark my trade entry points 1-4 that we looked at in the above table. I'm also going to place a PINK horizontal line at the $32.50 level (represents the options strikes I'm trading, and a RED horizontal line which represents BREAK EVEN point for the selling of the Nov. $32.50 calls. Semiconductor HOLDRs (SMH) - Daily Intervals If you look closely, I've labeled the four trades. Of the four trades made, #1 was perhaps the worst. Relative to the WEEKLY Pivot levels, I was in no-mans land and just below the WEEKLY R1 ($32.47). Hey... I was buying January with a partial position and getting my toes wet. Trade #2 I have no apologies for as the SMH was falling below WEEKLY S1 ($29.87) support, and with the thought that there was "now way" the SMH could rally to $32.50, let alone $32.90, I sold 5 Nov. $32.50 calls. After seeing a trade as high as WEEKLY R2, I note a sudden change in how the SMH has been able to trade a WEEKLY R2 after strong buying at a WEEKLY Pivot. I need to now hedge back to the bullish side and with trade #3, which was a DAILY Pivot, decided to buy 2 more calls just in case. Trade #4 was realization that WEEKLY Pivot finds buyers again. Suddenly, $32.50 and $32.90 doesn't seem all that unlikely so I buy 2 more calls to get "net long" just in case the SMH surges higher. In the lower left corner, I make not of short interest, which has been falling the past three months. Nothing major as average daily volume for the SMH is 25.7, but its nice to know just how many shares are short. I don't see great risk of the SMH being "short squeezed." Do you notice anything "suspicious" as to how the SMH can't seem to close on a 60-minute basis above the $32.90 level? It did today, and that close came in the second hour of Friday's trade at $33.14. Darned close to the WEEKLY R1. I wonder why that is? Are options market makers also short the Nov. $32.50 calls, looking to inflict "Max Pain" on options traders with a November 19 close around this $32.50 level? To me, it doesn't make sense to be paying $0.90 today for an option that expires in two week. Why? My calculations are that paying $0.90 for a $32.50 security is equivalent to paying $33.40. My observation is that other than about 30-minutes of trade, an investor/trader could have bought all the SMH they wanted at $33.40. Now, while it looks to me like somebody is trying to peg the SMH to the $32.50 strike, it may be "wishful thinking" as I've sold 5 November $32.50 calls, and right now, those calls by themselves are running at a loss. Now turn the table and think about those traders that are long the Nov. $32.50 calls. What are they doing? They're also looking at the calendar and realize that while these options trade for $0.90 right now, $0.52 is all premium. You can start to play the game of the options market maker can't you? For the most part, options market makers are net sellers of options, as they can sell the options, but use the underlying stock to hedge. It takes a lot of money to run such an operation, but the options market maker can influence traders buy/sell the options they hold. In the upper left hand corner of the chart, I make a couple of "correlations" with next week's SMH WEEKLY pivot levels. Do you see how next week's (11/8-11/12) WEEKLY R1 would match that of the WEEKLY R2 found from 10/25-10/29. Do you also see how next week's WEEKLY S1 would come pretty close to matching this past week's (11/01-11/05) WEEKLY Pivot? We can begin to sense a range for next weeks trade can't we. Let's get back to the "hedge" position I have implemented. On Wednesday morning, we were dealing with a "hot open" after the election results. Yes, I told traders to NOT stop out of the 5 Nov. $32.50 calls that morning as I thought there was a distinct possibility that the SMH might be in the mode of pegging the $32.50 level. But the ONLY REASON I did not honor that stop was because I had gotten the position under control buy purchasing additional call options in recent weeks. I have said that I don't like to use stops with options. However, if a trader looks at the SMH option positions I have profiled, and decides "hey, Jeff is selling SMH Nov. $32.50 calls for premium, I'm going to do that," and does not understand that those sold calls are hedged with longer duration calls, where my bias is BULLISH toward January, then they MUST use a stop if they are selling NAKED the Nov. $32.50 calls. For the last part of today's exercise, I want you to do this. YOU pretend you are an options market maker. For simplicity sake, I also want you to pretend that you have a lot of money and all you do during each trading day is SELL put options and call options. Each time you SELL an option, you receive a premium, but you also assume the OBLIGATION that comes with it. For instance, if you are SELLING (or have sold) the Nov. $32.50 calls, you are OBLIGATED to deliver the SMH at $32.50 should it close above that level on November 19. At the same time, if you are selling (or have sold) the Nov. $32.50 puts, you are OBLIGATED to buy the SMH at $32.50 should it close below that level on November 19. Between now and November 19, you also want to try and INFLUENCE option traders to do close out positions for fear of losing money as expiration nears. In other words, you want to try and inflict "Max Pain!" SMH Option Chain for November strikes - 11/05/04 Close Since the SMH is right around the $32.50 level, that's the strike of interest right now. Open interest is heaviest at the call portion. While it is my assumption that the options market maker has sold all of that 133,832 open interest and it would be in his (or your best interest if you are the option market maker) to get an SMH close below $32.50, that doesn't necessarily mean it will happen. But if you're trying to influence some of that 133,832 open interest to do something, like sell those options back to you at a lower price, what would you do? You'd probably try shorting the SMH to get price lower right? But to where? What about next week's WEEKLY S1? If you can get the SMH down to $31.92, you might be able to get some of those $32.50 call holders to sell as they begin to fear a close below $32.50. Where else would a lower move benefit the options market maker? A lower move to $31.92 might also influence some of the 78,098 open interest at the $30 call strike. That might make sense to. Hey, the SMH has made a nice move higher the past three weeks, it might be time for a rest. But what about that Nov. $35 put. If I'm the options market maker, then those market participants that have BOUGHT those puts just get more profitable. YOU can't inflict pain on them if you (the options market maker) are trying to drive the SMH's price lower by shorting. Can you? Hmmmm.... that might be your task for the week of 11/15-11/19 might it not? Did anyone find it a little suspicious that the Russell 2000 Growth Index, a "growth" index gained 3.8% this week, yet the Semiconductor Index (SOX.X) 417.83 gained a more modest 1.35%? Certainly the semiconductors still have some bad news in the group, but there might be some expiration manipulation taking place after this recent little run up. Here's an SMH option screen I captured on Wednesday evening, the day after Tuesday's election. I can't draw on it, and I had sorted it by open interest so I could look and see what contracts had the most open interest, as I couldn't believe the SMH spiked higher on Wednesday morning, but gravitated so quickly back toward $32.50. Look at the Nov. $30, $32.50 and $35 call/put open interest and compare that to the option chain I showed above. 11/03/04 closing SMH Option Chain - Sort open interest I won't go through them all, but we do see that open interest in the Nov. $32.50 has fallen by 2,588 contracts. That's not a lot is it? Aren't those call BUYERS afraid of seeing that contract expire worthless? What if all that open interest is a big bull that is SELLING the calls naked saying "I'll take all you want to sell me at $32.50 less the premium received? We never know for certain if call activity is buy influenced or sell influenced unless we're sitting there watching the bid and offer on a minute by minute basis. Here's the current SMH Position as it stands at the 11/05/04 close. Due to multiple trades I've profiled in the OptionInvestor.com Market Monitor, and vertical space limitations, I did combine the three call purchases into one position, using average cost of those three trades. That's why Jack just wanted to make sure it was a hedge. SMH Position - 11/05/04 Close I placed the calls at the top of my QCharts portfolio tracker, I placed SMH security itself and the FIRST trade in the middle. This serves as my PRIMARY benchmark and serves as my INITIAL bias. While I was INITIALLY bullish on 10/06, I grew cautious and sold the Nov. $32.50 calls (SMH-KZ), but as PRICE of the SMH rose, my RISK MANAGEMENT actually "forced" me to grow further bullish. Jack was correct. As the position currently stands, it is a hedge, and with a hedge you MUST monitor the Profit/Loss of the hedge. I KNOW for certainty at this point that the MOST I COULD LOSE in this trade is the COST of $868.00. If the SMH traded $35.00 on Monday, I would be LOSING at least $1,250 on the SMH-KZ portion of the trade (500 * $2.50 = $1,250). However, I also know that by being LONG 6 of the SMH-AZ, if the SMH were to trade $35.00 on Monday, that portion of the hedge would be worth at least $1,500.00 (600 * 1,500). One trader that has the same positions in his account was worried that he might not be able to BUY back the SMH-KZ should it rise too high as the cash balance in his account might not be enough to fully buy back the SMH-KZ. The solution to this problem would be to simply sell some of the SMH-AZ to raise the cash in order to then buy back the SMH-KZ (puts). Jeff Bailey ************* COMING EVENTS ************* Earnings Calendar ----------------- *This is not a complete list. We only try and highlight the more significant earnings reports. Symbol Co Date Comment EPS Est ------------------------- MONDAY ------------------------------- ACME ACME Communications Mon, Nov 08 After the market -0.21 APL Atlas Pipeline Ptrnr Mon, Nov 08 After the market 0.42 BEV Beverly Enterprises Mon, Nov 08 After the market 0.18 BAB British Airways Mon, Nov 08 During the market n/a CYD China Yuchai Intl Mon, Nov 08 ----- n/a ----- 0.38 TCR Cornerstone Realty Mon, Nov 08 After the market 0.20 CNO Conseco Inc Mon, Nov 08 Before the bell 0.34 BAP Credicorp Mon, Nov 08 During the market 0.34 XTXI Crosstex Energy Mon, Nov 08 ----- n/a ----- n/a INVX Innovex Mon, Nov 08 After the market -0.09 JMDT Jamdat mobile Mon, Nov 08 After the market 0.09 LABS LabOne Mon, Nov 08 Before the bell 0.39 MCCC Mediacom Comm. Mon, Nov 08 Before the bell 0.01 MWY Midway Games Mon, Nov 08 After the market -0.24 MNTG MTR Gaming Group Mon, Nov 08 After the market 0.22 PSUN Pacific Sunwear Mon, Nov 08 After the market 0.40 PAX Paxson Communication Mon, Nov 08 After the market n/a PPC Pilgrim's Pride Mon, Nov 08 Before the bell 0.83 KWK Quicksilver Resrcs Mon, Nov 08 After the market 0.17 RMD ResMed Inc Mon, Nov 08 After the market 0.43 PKS Six Flags Inc. Mon, Nov 08 After the market 0.99 SMTX SMTC Corp. Mon, Nov 08 ----- n/a ----- n/a VTIV Ventiv Health Mon, Nov 08 Before the bell 0.17 WR Westar Energy Mon, Nov 08 Before the bell 0.63 WWCA Western Wireless Mon, Nov 08 ----- n/a ----- 0.53 ------------------------- TUESDAY ------------------------------ KDE 4Kids Entertainment Tue, Nov 09 After the market 0.27 ANF Abercrombie & Fitch Tue, Nov 09 After the market 0.57 AOLA America Online-Latin Tue, Nov 09 Before the bell n/a SIL Apex Silver Mines Tue, Nov 09 ----- n/a ----- -0.08 BKH Black Hills Corp. Tue, Nov 09 ----- n/a ----- 0.53 BWNG Broadwing Corp. Tue, Nov 09 Before the bell -0.60 BBW Build a bear workshp Tue, Nov 09 Before the bell n/a CVC Cablevision Systems Tue, Nov 09 Before the bell -0.35 CTIC Cell Therapeutics Tue, Nov 09 ----- n/a ----- -0.50 CNP CenterPoint Energy Tue, Nov 09 Before the bell 0.00 CSCO Cisco Systems Tue, Nov 09 After the market 0.21 CHRZ Computer Horizons Tue, Nov 09 After the market n/a CSC Computer Sciences Tue, Nov 09 After the market 0.66 DISH Echostar Tue, Nov 09 Before the bell 0.23 FOSL Fossil, Inc. Tue, Nov 09 Before the bell 0.31 GMST Gemstar-TV Guide Tue, Nov 09 After the market 0.00 HPC Hercules Tue, Nov 09 Before the bell 0.26 IPXL Impax Labs Tue, Nov 09 Before the bell 0.06 IFX Infineon Tech Tue, Nov 09 ----- n/a ----- 0.23 KANA KANA Software Tue, Nov 09 After the market -0.13 LZB La-Z-Boy Inc. Tue, Nov 09 After the market 0.21 LII Lennox Intl. Tue, Nov 09 After the market 0.47 LGF Lions Gate Ent. Tue, Nov 09 After the market 0.02 MMC Marsh & McLennan Tue, Nov 09 Before the bell -0.05 MCLD McLeodUSA, Inc. Tue, Nov 09 Before the bell n/a OLGC OrthoLogic Tue, Nov 09 Before the bell -0.18 PCTY Party City Tue, Nov 09 Before the bell -0.21 SCHS School Specialty Tue, Nov 09 Before the bell 1.50 BID Sotheby's Holdings Tue, Nov 09 Before the bell -0.38 PGR The Progressive Tue, Nov 09 ----- n/a ----- n/a TKTX Transkaryotic Ther Tue, Nov 09 ----- n/a ----- -0.56 XYBR Xybernaut Corp Tue, Nov 09 ----- n/a ----- n/a ------------------------ WEDNESDAY ----------------------------- ACAD Acadia Pharma. Wed, Nov 10 After the market -0.37 PLB American Itln Pasta Wed, Nov 10 Before the bell -0.26 ANN AnnTaylor Stores Wed, Nov 10 a8 0.28 RMK Aramark Corp. Wed, Nov 10 Before the bell 0.46 DHI D.R.Horton Wed, Nov 10 Before the bell 1.23 ENER Energy Conv. Devices Wed, Nov 10 ----- n/a ----- 0.05 FIC Fair Isaac Corp. Wed, Nov 10 After the market 0.20 FD Federated Dept. Stor Wed, Nov 10 Before the bell 0.35 REV Revlon Wed, Nov 10 Before the bell -0.09 SFP Salton Inc. Wed, Nov 10 Before the bell n/a SBUX Starbucks Wed, Nov 10 After the market 0.25 TOT Total Wed, Nov 10 Before the bell 2.29 WFMI Whole Foods Market Wed, Nov 10 After the market 0.46 ------------------------- THURSDAY ----------------------------- AEG AEGON N.V. Thr, Nov 11 ----- n/a ----- n/a A Agilent Technologies Thr, Nov 11 After the market 0.31 AEOS American Eagle Thr, Nov 11 Before the bell 0.75 BF BASF Thr, Nov 11 ----- n/a ----- n/a BEAS BEA Systems Thr, Nov 11 ----- n/a ----- 0.08 BKE Buckle Thr, Nov 11 ----- n/a ----- 0.61 DELL Dell Inc. Thr, Nov 11 After the market 0.33 DT Deutsche Telekom Thr, Nov 11 Before the bell n/a KSS Kohl's Thr, Nov 11 After the market 0.42 PBY Pep Boys Thr, Nov 11 Before the bell 0.20 PIXR Pixar Animation Thr, Nov 11 After the market 0.24 SI Siemens AG Thr, Nov 11 ----- n/a ----- n/a TGT Target Corp Thr, Nov 11 Before the bell 0.37 PLCE Children's Place Thr, Nov 11 Before the bell 0.61 TIF Tiffany & Co. Thr, Nov 11 ----- n/a ----- 0.19 URBN Urban Outfitters Thr, Nov 11 Before the bell 0.29 ZOLL Zoll Medical Thr, Nov 11 Before the bell 0.25 ------------------------- FRIDAY ------------------------------- BSY British Sky Brdcstg Fri, Nov 12 ----- n/a ----- 0.45 PSS Payless Shoesource Fri, Nov 12 Before the bell 0.04 ---------------------------------------------- Upcoming Stock Splits In The Next Two Weeks... ---------------------------------------------- Symbol Company Name Ratio Payable Executable 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 FINL The Finish Line Inc 2:1 Nov 17th Nov 18th SSD Simpson Manufacturing 2:1 Nov 18th Nov 19th STJ St. Jude Medical 2:1 Nov 22nd Nov 23rd ----------------------------------- Economic Reports & Events This Week ----------------------------------- Wednesday's FOMC meeting will take center stage this week. Wall Street will also digest more manufacturing data and retail sales figures. Q3 earnings reports are starting to wind down. ============================================================== -For- ---------------- Monday, 11/08/04 ---------------- Kansas City Fed manufacturing index ----------------- Tuesday, 11/09/04 ----------------- Wholesale Inventories for September Richmond Fed manufacturing index ------------------- Wednesday, 11/10/04 ------------------- FOMC meeting on interest rates Trade Balance numbers for September Import & Export prices for October ------------------ Thursday, 11/11/04 ------------------ Weekly initial jobless claims Last: 332K Est: 339K Veteran's Day - Bond market holiday ---------------- Friday, 11/12/04 ---------------- Retail sales for October Michigan Sentiment numbers (preliminary) for November Business Inventories FOMC minutes released for Sep. 21st meeting ************************Advertisement************************* Trade Smarter Using the latest Insider Trades Is the CEO selling off? Has a key insider loaded up on shares before a big price jump? Find out now. Get your free download of Real Time insider trades: http://www.realtimeinsider.com/default.asp?aid=637 ************************************************************** FREE TRIAL READERS ****************** If you like the results you have been receiving we would welcome you as a permanent subscriber. The monthly subscription price is $49.95. The quarterly price is $129.95 which is $20 off the monthly rate. We would like to have you as a subscriber. You may subscribe at any time but your subscription will not start until your free trial is over. To subscribe you may go to our website at www.OptionInvestor.com and click on "subscribe" to use our secure credit card server or you may simply send an email to Contact Support with your credit card information,(number, exp date, name) or you may call us at 303-797-0200 and give us the information over the phone. 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The Option Investor Newsletter Sunday 11-07-2004 Sunday 2 of 5 In Section Two: Watch List: Defense to miners and more! Dropped Calls: none Dropped Puts: none ************************Advertisement************************* Get your FREE weekly charts of the NASDAQ! Hot Stix’ stock market report reveals simple, powerful strategies for profiting from the QQQ - whether down or up! http://www.hotstix.com/public/weekly.asp?aid=755 ************************************************************** ********** Watch List ********** Defense to miners 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. ___________________________________________________________________ QUALCOMM - QCOM - close: 38.27 change: +0.20 WHAT TO WATCH: Uh-oh! This looks like a pivotal spot for QCOM. Shares produced a tight double-top under $45 in mid-October and promptly dropped lower. After flirting around the $40 region QCOM slipped under its simple 50-dma on big volume. The P&F chart has moved from overbought into a new sell signal with a $33 target. Some of our other indicators suggest QCOM is a bearish candidate as well. However, QCOM is currently resting above its simple 100-dma, a technical level of support that has not been broken in over a year. If QCOM trades under the 100-dma (near 37.50) it could be a quick drop to round-number support at $35, underpinned by its 200-dma's. While such a drop could be seen as a potential trend change now that the markets are rallying into the fourth quarter QCOM could see some dip-buying. --- General Dynamics - GD - close: 106.85 change: +1.08 WHAT TO WATCH: It's been a strong week for GD and the defense group. Investors have poured into the stock once the election was over and Bush won. The breakout over the $104 level is certainly bullish for GD. Given how the market is a bit overdone we would watch for a pullback in GD. Consider any bounce above $104 as a potential entry point with a target of $110-111. --- Temple Inland - TIN - close: 60.98 change: +1.98 WHAT TO WATCH: We strongly considered adding TIN to the play list this weekend as a call candidate. The stock has been oversold and now after four days of coiling under its simple 10-dma TIN is breaking out over resistance at the $60.00 mark. Volume was huge on Friday at about five times the average. Its MACD has crossed over into a new buy signal. Plus, the stock appears to be bouncing from its P&F support level. Unfortunately, there appears to be a lot of overhead resistance. If we went long here we'd only target a move to $64 and/or its simple 200-dma. --- Phelps Dodge - PD - close: 92.69 change: +0.14 WHAT TO WATCH: We're still watching PD for an entry point. The breakout over resistance at $90.00 was bullish and its MACD is back into a buy signal. Yet we don't want to go long right here. The major indices look a bit overbought and due for a dip. We would watch PD for a dip back toward $90.00 and buy a bounce. Our target would be the $100 region. Keep an eye on copper, which has just recently broken through short-term resistance at $1.35 a pound. ----------------------------------- RADAR SCREEN - more stocks to watch ----------------------------------- RIMM $77.75 -10.33 - Almost everything we look at: indicators, volume, price, etc suggests that RIMM has produced a bearish reversal. Yet now that the stock is down 18 points from its high we question whether or not the move has already occurred. The next levels of support are $75 and $70. RKY $70.03 +0.71 - Shares of Coors have broken through resistance at $68 and $70. There is some congestion near $72.50 but the next level of resistance could be $75.00. Alternatively consider a bounce from $68. ZMH $81.67 +1.83 - ZMH gapped above resistance at $80.00 and is poised to run toward the $85 region. Unfortunately, the stock looks more than a bit overbought. BP $59.57 -0.53 - This English oil company's stock has been consolidating sideways between $57 and $60 for weeks. Shares look ready to breakout over resistance soon. ************************Advertisement************************* Insiders are Buying these 6 Rocket Stocks. In the last few weeks, we have pinpointed insider buying on six stocks that have the potential to deliver stratospheric gains. Click here for our SPECIAL REPORT on these 6 stocks insiders are buying and why you should too. http://www.insidermoves.com/default.asp?aid=618 ************************************************************** ************************** 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 ^^^^ None *********** DEFINITIONS *********** OI = Open Interest - the number of open contracts outstanding. Last Trade @ = Indicates where the option traded last. ITM = In the money ATM = At the money OTM = Out of the money ADV = Average Daily Volume The options with a "*" by the strike price are our choices from the group. If the stock moves as expected we feel they have the best chance to substantially increase or double in price with the best risk/reward ratio compared to the other options for the same stock. You must determine if they fit your risk profile for time and price. RISKS of SELLING PUTS: The risk of selling naked puts is always the possibility of a catastrophic event that drops the stock below the strike price and could result in the stock being PUT to you. Always protect yourself with a "buy to cover" limit order to take you out before this can happen. ************************Advertisement************************* SEE WARREN BUFFETT'S LATEST DISCLOSED STOCK PORTFOLIO Now you can follow the investment master's actual moves. To get a FREE report that details Warren Buffett's strategy and reveals his most recently disclosed, ACTUAL stock picks, Click HERE! http://www.bigmoneywatch.com/default.asp?aid=626 ************************************************************** ********** DISCLAIMER ********** Please read our disclaimer at: http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html ************************************************************** ADVERTISING INFORMATION For more information on advertising in OptionInvestor Newsletter, or any Premier Investor Network newsletter please contact: Contact Support
The Option Investor Newsletter Sunday 11-07-2004 Sunday 3 of 5 In Section Three: Current Calls: COP, DHR, FDX, GS, IBM, ITT, ITW, LEH, TOT New Calls: Current Puts: APOL New Puts: None ************************Advertisement************************* Trade Smarter Using the latest Insider Trades Is the CEO selling off? Has a key insider loaded up on shares before a big price jump? Find out now. Get your free download of Real Time insider trades: http://www.realtimeinsider.com/default.asp?aid=637 ************************************************************** ****************** CURRENT CALL PLAYS ****************** ConocoPhillips - COP - close: 88.36 change: +1.01 stop: 81.99*new* Company Description: ConocoPhillips is an integrated petroleum company with interests around the world. Headquartered in Houston, the company had approximately 35,800 employees, $89 billion of assets, and $129 billion of annualized revenues as of Sept. 30, 2004. (source: company press release) Why We Like It: The oil sector managed a three-day rebound with the broader markets in spite of a strong decline in crude prices late this past week. The OIX oil index has bounced from the 385 level of new support and its simple 50-dma. The move back over the 400 mark is encouraging and the index's MACD indicator is nearing a new buy signal. Shares of COP have also turned in a strong three-day rally that appears to be out performing most of its oil-sector rivals. Technicals on COP look very bullish with an up-turn in the RSI and stochastics and a new MACD buy signal. Plus, COP's Point & Figure chart shows a fresh bullish triangle breakout buy signal with a $124 target. A bullish triangle pattern on the P&F chart is one of the most successful patterns to trade. The next level of resistance for COP is the $90 mark. Readers looking for new entry points may want to wait for a dip or a breakout over $90. If COP dips we'd watch for a bounce from the $87 region. Our year-end target is the $100 level. Short- term traders can target a quick exit at $90.00. Intermediate- term traders looking for $100 need to be ready for some ups and downs. We are raising our stop loss to $81.99. Suggested Options: We are going to suggest the December and January calls. Our favorites are the January's. BUY CALL DEC 80 COP-LP OI= 242 current ask $9.10 BUY CALL DEC 85 COP-LQ OI=1038 current ask $4.90 BUY CALL DEC 90 COP-LR OI=1054 current ask $1.85 BUY CALL JAN 85 COP-AQ OI=3148 current ask $5.80 BUY CALL JAN 90 COP-AR OI=3083 current ask $2.80 Annotated chart: Picked on November 03 at $85.50 Change since picked: + 2.86 Earnings Date 10/27/04 (confirmed) Average Daily Volume = 3.0 million --- Danaher - DHR - close: 57.55 change: +0.59 stop: 52.99 *new* Company Description: Danaher, a leading industrial company, designs, manufactures and markets innovative products, services and technologies with strong brand names and significant market positions. (source: company press release) Why We Like It: DHR continues to be a relative strength leader with a new all- time high. The MACD signal is gaining strength again but the stock may be a little overbought here. Readers looking for entry points can watch for a dip and then consider a bounce from the $55-56 levels. We are going to raise our stop loss to $52.99. Prepare to exit if DHR nears the $60 level. All of our suggested option have gained in value. The $60 strikes have doubled. It's okay to do a little profit taking now. Suggested Options: Short-term traders can choose the Novembers, Decembers or January calls. We're going to suggest the Decembers and January strikes. BUY CALL DEC 50 DHR-LJ OI= 834 current ask $7.90 BUY CALL DEC 55 DHR-LK OI=1771 current ask $3.50 BUY CALL DEC 60 DHR-LL OI= 4 current ask $0.70 BUY CALL JAN 55 DHR-AK OI=2713 current ask $4.00 BUY CALL JAN 60 DHR-AL OI= 247 current ask $1.20 Annotated chart: Picked on October 27 at $54.99 Change since picked: + 2.56 Earnings Date 10/21/04 (confirmed) Average Daily Volume = 1.3 million --- Fedex Corp - FDX - close: 91.94 change: +0.46 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: The Dow Transportation index has been a big winner this week hitting new five-year highs. A rally was driven by the post- election bounce but a slide in crude oil prices didn't hurt. Meanwhile shares of FDX managed to notch another all-time high at $92.61 on Friday. The stock continues to show relative strength but gains have been somewhat muted lately. It would appear that FDX is digesting the breakout over $90.00. Fundamentally things should be improving now that FDX announced a rate hike for express and ground packages effective January 3rd, 2005. We continue to target a move to the $100 level and suspect that FDX could announce a stock split as it nears triple-digits. Readers looking for new positions may want to wait for another dip. The Transportation index is overbought and near the top of its short- term, narrow channel. We would expect some profit taking next week and that could bring FDX back toward the $90 level. Watch for the bounce from $90. Suggested Options: Given our $100 target and mid-December time frame we would suggest the December strikes. BUY CALL DEC 85 FDX-LQ OI= 209 current ask $7.70 BUY CALL DEC 90 FDX-LR OI= 921 current ask $3.70 BUY CALL DEC 95 FDX-LS OI= 680 current ask $1.25 BUY CALL DEC 90 FDX-AR OI=3276 current ask $4.60 BUY CALL DEC 95 FDX-AS OI=2000 current ask $1.95 Annotated Chart: Picked on October 21 at $89.45 Change since picked: + 2.49 Earnings Date 09/22/04 (confirmed) Average Daily Volume = 1.5 million --- Goldman Sachs - GS - close: 100.85 change: +0.85 stop: 94.50 Company Description: Goldman Sachs is a leading global investment banking, securities and investment management firm that provides a wide range of services worldwide to a substantial and diversified client base that includes corporations, financial institutions, governments and high net worth individuals. Founded in 1869, it is one of the oldest and largest investment banking firms. The firm is headquartered in New York and maintains offices in London, Frankfurt, Tokyo, Hong Kong and other major financial centers around the world. (source: company press release) Why We Like It: The XBD broker-dealer index has been a huge winner. The group is up three strong weeks in a row. Of course that now makes the group look more than a little overbought. Shares of GS are looking a bit overbought too but we like its strength and believe the up trend will continue. We will continue to target the $105 region but we suggest the following change in strategy. Consider doing some profit taking now. Then watch GS for a dip back toward the $97-98 region and use a bounce as a new entry point. Suggested Options: Short-term traders can use the November, December or January calls. We're going to suggest the Decembers and Januarys. BUY CALL DEC 95 GS-LS OI=3863 current ask $6.90 BUY CALL DEC 100 GS-LT OI=8663 current ask $3.30 BUY CALL JAN 95 GS-AS OI=14080 current ask $7.70 BUY CALL JAN 100 GS-AT OI=26710 current ask $4.20 BUY CALL JAN 105 GS-AA OI=17360 current ask $1.80 Annotated chart: Picked on October 27 at $96.10 Change since picked: + 4.75 Earnings Date 09/21/04 (confirmed) Average Daily Volume = 3.2 million --- Intl Business Mach. - IBM - close: 93.28 chg: +0.90 stop: 87.00 Company Description: IBM is the world's largest information technology company, with 80 years of leadership in helping businesses innovate. Drawing on resources from across IBM and IBM Business partners, IBM offers a wide range of services, solutions and technologies that enable customers, large and small, to take full advantage of the new era of e-business. (source: company press release) Why We Like It: The post-election rally has sparked another wave of buying for technology stocks. As one of the largest technology companies on the planet IBM is seeing a nice surge in its stock price. Volume has been relatively strong on the move higher and IBM has cleared congestion (a.k.a. potential resistance) in the $91 region. We remain bullish on IBM and continue to target a year-end move toward $99-100. However, currently the stock looks a little overbought. Readers looking for new entry points can probably wait for a dip. We would then consider a bounce from $90 or $91 as a buying opportunity. Suggested Options: Traders can choose from the Novembers, Decembers and January strikes. We're going to suggest the December and January calls. BUY CALL DEC 85 IBM-LQ OI= 5236 current ask $8.60 BUY CALL DEC 90 IBM-LR OI= 7945 current ask $4.20 BUY CALL DEC 95 IBM-LS OI= 8392 current ask $1.15 BUY CALL DEC100 IBM-LT OI= 1447 current ask $0.20-not suggested BUY CALL JAN 85 IBM-AQ OI=12807 current ask $9.10 BUY CALL JAN 90 IBM-AR OI=39177 current ask $4.90 BUY CALL JAN 95 IBM-AS OI=27695 current ask $1.95 BUY CALL JAN100 IBM-AS OI=36452 current ask $0.55-not suggested Annotated chart: Picked on October 27 at $90.00 Change since picked: + 3.28 Earnings Date 10/18/04 (confirmed) Average Daily Volume = 4.7 million --- ITT Industries - ITT - close: 85.07 chg: +1.22 stop: 81.50*new* Company Description: ITT Industries, Inc. is a $6 billion global multi-industry company based in White Plains, NY. ITT supplies advanced technology products and services in key markets including: fluid and water management including water treatment; defense communication, opto-electronics, information technology and services; electronic interconnects and switches; and other specialty products. (source: company press release) Why We Like It: Our ITT play is working out very well. The stock broke out over resistance at $81.50 on Wednesday and the post-election rally has carried it up and through round-number resistance at $85.00. The suggested call options, the January 80 and 85s, have risen from $3.70 to $6.30 and $1.35 to $2.05, respectively. This close to our $86 target we would not suggest new bullish positions. If shares suddenly dip we would watch for a bounce from $82. We will officially exit ITT if the stock can trade to $85.90. Longer-term traders may want to weather the up's and down's given the P&F chart points to a $92 target. We are going to raise our stop loss to $81.50. Suggested Options: We are not suggesting new positions at this time. Annotated chart: Picked on November 03 at $81.51 Change since picked: + 3.56 Earnings Date 10/21/04 (confirmed) Average Daily Volume = 460 thousand --- Illinois Tool Works - ITW - close: 94.78 chg: +0.11 stop: 89.99 Company Description: ITW is a $10 billion in revenues diversified manufacturer of highly engineered components and industrial systems and consumables. The Company consists of approximately 625 decentralized operations in 44 countries and employs some 47,500 people. (source: company press release) Why We Like It: Uh-oh! We don't like the looks of Friday's candlestick. We are encouraged that ITW came within 15 cents of our target at $96.00. We are not happy that it produced a failed rally under this level. We suspect that ITW could see some additional profit taking next week. If so we'll watch for a bounce from the $93 region. This close to our target at $96.00 we would not suggest new positions. More conservative traders may want to consider taking profits now. All of our suggested options are up between 20 percent to 40 percent or more. Suggested Options: We are not suggesting new positions this close to our target. Annotated chart: Picked on October 27 at $90.89 Change since picked: + 3.89 Earnings Date 10/19/04 (confirmed) Average Daily Volume = 1.2 million --- Lehman Brothers - LEH - close: 84.68 chg: -0.29 stop: 79.95 Company Description: Lehman Brothers, an innovator in global finance, serves the financial needs of corporations, governments and municipalities, institutional clients, and high-net-worth individuals worldwide. Founded in 1850, Lehman Brothers maintains leadership positions in equity and fixed income sales, trading and research, investment banking, private equity and wealth and asset management services. The Firm is headquartered in New York, with regional headquarters in London and Tokyo and operates in a network of offices around the world. (source: company press release) Why We Like It: Considering the strength in the XBD broker-dealer index it shouldn't be a surprise to see LEH at new seven-month highs. This relative strength leader continues to march higher. Now that LEH has hit our short-term $85 target several times we raised our target toward the March 2004 highs near $89.00. Look for a dip in the $82-83 range as a buying opportunity. Suggested Options: Short-term traders can choose from Novembers, Decembers and January strikes. We're going to suggest the Decembers. BUY CALL DEC 75 LES-LO OI= 168 current ask $10.10 BUY CALL DEC 80 LES-LP OI= 907 current ask $ 5.70 BUY CALL DEC 85 LES-LQ OI=1724 current ask $ 2.30 BUY CALL DEC 90 LES-LR OI=1012 current ask $ 0.60 Annotated chart: Picked on October 26 at $80.60 Change since picked: + 4.08 Earnings Date 09/21/04 (confirmed) Average Daily Volume = 2.0 million --- Total S.A. - TOT - close: 107.37 change: -0.43 stop: 105.00*new* Company Description: As France's largest corporation and the world's fourth-ranked oil and gas company, Total is committed to meeting growing energy demand while consistently acting as a responsible corporate citizen. Total operates in more than 130 countries across the oil industry chain, from oil and gas exploration and production to the gas downstream and refining, marketing, trading and shipping. We are also a world-class chemicals player. (source: company website) Why We Like It: Uh-oh! We have bad news. We just discovered that TOT is due to report earnings on Wednesday, Nov. 10th. Regular readers know that we don't like to hold over an earnings report even if we might think it will be positive. That doesn't give us much time. We are not suggesting new bullish positions and we plan to exit at Tuesday's close. We are raising our stop loss to $105. Suggested Options: This close to earnings we are not suggesting new positions. Annotated chart: Picked on November 03 at $106.09 Change since picked: + 1.28 Earnings Date 00/00/00 (unconfirmed) Average Daily Volume = 672 thousand ************** NEW CALL PLAYS ************** Golden West Financial - GDW - cls: 117.03 chg: -0.54 stop: 113.75 Company Description: Headquartered in Oakland, California, Golden West is one of the nation's largest financial institutions with assets over $100 billion as of September 30, 2004. The Company has one of the most extensive thrift branch systems in the country, with 276 savings branches in 10 states and lending operations in 38 states. (source: company press release) Why We Like It: Now that the markets are in rally mode we need to see the financial sectors help confirm it and so far they've done just that. Both the BIX and BKX indices have put in a strong couple of weeks and both are at or near new highs. Likewise GDW has pushed its way toward new highs or at least its old highs from March 2004. We think GDW could out perform to the upside if shares can breakout over resistance near $118.00. The P&F chart is bullish with a $129 price target. Yet we don't want to go long here. The major indices look a little overbought. The banking indices look significantly overbought. We suspect that stocks may trade lower next week in profit taking. While more aggressive traders may want to consider a bounce in GDW near $115 we want to use a trigger over resistance. Our entry point will be $118.15. If triggered we'll target a move to $128-130. Potentially giving GDW an edge over its rivals is the fact that the stock is due to split 2-for-1 on December 13th. While statistically a stock split is a non-event it can still attract the momentum traders. Suggested Options: We are going to suggest the December calls. BUY CALL DEC 115 GDW-LC OI=264 current ask $4.40 BUY CALL DEC 120 GDW-LD OI= 73 current ask $1.85 BUY CALL DEC 125 GDW-LE OI= 4 current ask $0.60-not suggested Annotated Chart: Picked on November xx at $ xx.xx <-- see TRIGGER Change since picked: + 0.00 Earnings Date 10/21/04 (confirmed) Average Daily Volume = 583 thousand --- Oshkosh Truck - OSK - close: 62.16 change: +1.51 stop: 57.00 Company Description: Oshkosh Truck Corporation is a leading manufacturer of specialty trucks and truck bodies for the defense, fire and emergency, concrete placement and refuse hauling markets. Oshkosh Truck is a Fortune 1000 company with products marketed under the Oshkosh®, Pierce®, McNeilus®, Medtec®, Geesink, Norba and Jerr-Dan® brand names. The company is headquartered in Oshkosh, Wis., and had annual sales of $2.3 billion in fiscal 2004. (source: company press release) Why We Like It: Strong earnings, relative strength and new all-time highs sounds like a good combination to us. OSK spent the second half of 2003 charging from the $30 level to the $60 level. Actually it hit $60 in mid-January 2004. Yet ever since then the stock has been stuck in a wide, sideways trading range between $48 and $60. Now OSK has broken through resistance at $60.00 and its ten-month trading range to hit new highs. We mentioned the strong earnings because OSK beat estimates by more than 11 cents back in October. Given the long consolidation from January to November we really think OSK may be starting its next leg higher. Therefore we want to give it some room and let the stock run for the next couple of months. The P&F chart is bullish with an ascending triple-top breakout buy signal and an $83 target. We're going to target $70.00 by year's end but short-term traders may want to exit for a quick move to the $65 region. Currently we feel the major indices are short-term overbought and due for a dip. We would buy calls on OSK here but patient traders can watch OSK for a dip and buy any bounce above the $60 level. Keep your ears open on Wednesday for any news as OSK presents at the Robert W. Baird industrial conference. Suggested Options: There are both December and January calls available but we are going to suggest the January strikes. BUY CALL JAN 55 OSK-AK OI= 466 current ask $8.20 BUY CALL JAN 60 OSK-AL OI=2515 current ask $4.40 BUY CALL JAN 65 OSK-AM OI= 6 current ask $1.80 Annotated Chart: Picked on November 07 at $ 62.16 Change since picked: + 0.00 Earnings Date 10/28/04 (confirmed) Average Daily Volume = 205 thousand --- Schlumberger - SLB - close: 63.66 change: +0.54 stop: 61.00 Company Description: Schlumberger is the world's leading oilfield services company supplying technology, project management and information solutions that optimize performance for customers working in the oil and gas industry. The company employs more than 50,000 people of over 140 nationalities working in 100 countries, and comprises two business segments. Schlumberger supplies a wide range of products and services from formation evaluation through directional drilling, well cementing and stimulation, well completions and productivity to consulting, software, information management and IT infrastructure services that support core industry operational processes. WesternGeco, jointly owned with Baker Hughes, is the world's largest seismic company and provides advanced acquisition and data processing services. In 2003, Schlumberger operating revenue was $10.12 billion. (source: company press release) Why We Like It: If you have been reading Jim's market wraps the past couple of months then you know that high oil prices may be a permanent condition the world will have to live with going forward. We're not saying crude won't slide significantly lower but it may never see $30 a barrel again. Jim mentioned buying strong oil stocks on the dips for long-term investments. Well, we're going to buy this oil stock on a dip for a more short-term trade. We have mentioned SLB before either in the watch lists or the MarketMonitor. The stock's long-term trendline of support just happens to coincide with the daily chart's simple and exponential 200-dma's. SLB peaked near $70 in early October and is now trying to bounce from this supporting trendline and its exponential 200-dma. The bounce appears to have started and its short-term technicals like the RSI and stochastics already look bullish. However, the MACD indicator is close to producing a new buy signal and we'd like to see some confirmation. More aggressive traders may want to consider bullish positions now but we're going to use a TRIGGER over $65.00. Our entry point will be $65.05. We'll begin the play with a short-term target at $70.00 resistance. However, the P&F chart points to a $90 target and we believe SLB can trade above $70 as well. Suggested Options: We are going to suggest the December and/or January calls. BUY CALL DEC 60 SLB-LL OI=1927 current ask $4.80 BUY CALL DEC 65 SLB-LM OI=3111 current ask $1.75 BUY CALL DEC 70 SLB-LN OI=1290 current ask $0.50 BUY CALL JAN 60 SLB-AL OI=6843 current ask $5.40 BUY CALL JAN 65 SLB-AM OI=12527 current ask $2.45 BUY CALL JAN 70 SLB-AN OI=12278 current ask $0.90 Annotated Chart: Picked on November xx at $ xx.xx <-- see TRIGGER Change since picked: + 0.00 Earnings Date 10/22/04 (confirmed) Average Daily Volume = 3.9 million ************************Advertisement************************* Get your FREE weekly charts of the NASDAQ! Hot Stix’ stock market report reveals simple, powerful strategies for profiting from the QQQ - whether down or up! http://www.hotstix.com/public/weekly.asp?aid=755 ************************************************************** ***************** CURRENT PUT PLAYS ***************** Apollo Group - APOL - close: 65.13 chg: +2.17 stop: 68.51 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: Surprise! It looks like APOL may have experienced some short- covering on Friday ahead of the weekend. Shares bounced 3.4 percent to put it back above the $65 mark. Considering how oversold the stock is we shouldn't be too surprised. Nor should we be surprised by the uptick in its oscillators. Currently we are about four weeks into what we believed to be a four to six week play. Our target remains the $60 region and so far it's been a rocky ride. Conservative traders may want to do some profit taking now because APOL's bounce could reach the $66-67 range before rolling over again. Readers looking for new positions may want to watch for a failed rally under $67.50-67.00 and use it as a shorting/put buying opportunity. 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 70 OAQ-WN OI=5900 current ask $5.70 BUY PUT NOV 65 OAQ-WM OI=6218 current ask $2.45 BUY PUT NOV 60 OAQ-WL OI=8780 current ask $1.05 BUY PUT JAN 70 OAQ-MN OI=3566 current ask $ 7.50 BUY PUT JAN 65 OAQ-MM OI=1592 current ask $ 4.70 BUY PUT JAN 60 OAQ-ML OI=1502 current ask $ 2.80 Annotated Chart: Picked on October 10 at $69.81 Change since picked: - 4.68 Earnings Date 10/05/04 (confirmed) Average Daily Volume = 3.3 million ************* NEW PUT PLAYS ************* None ************************Advertisement************************* Insiders are Buying these 6 Rocket Stocks. In the last few weeks, we have pinpointed insider buying on six stocks that have the potential to deliver stratospheric gains. Click here for our SPECIAL REPORT on these 6 stocks insiders are buying and why you should too. http://www.insidermoves.com/default.asp?aid=618 ************************************************************** ********** DISCLAIMER ********** Please read our disclaimer at: http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html ************************************************************** ADVERTISING INFORMATION For more information on advertising in OptionInvestor Newsletter, or any Premier Investor Network newsletter please contact: Contact Support
The Option Investor Newsletter Sunday 11-07-2004 Sunday 4 of 5 In Section Four: Leaps: Instant Replay please Spreads and Straddles: Sometime You Get The Bear, And Sometimes . . . ************************Advertisement************************* SEE WARREN BUFFETT'S LATEST DISCLOSED STOCK PORTFOLIO Now you can follow the investment master's actual moves. To get a FREE report that details Warren Buffett's strategy and reveals his most recently disclosed, ACTUAL stock picks, Click HERE! http://www.bigmoneywatch.com/default.asp?aid=626 ************************************************************** ***** LEAPS ***** Instant Replay please The election rally surprised almost everybody and technical breakouts are showing on almost every index. Tech stocks are lagging but still posting daily gains. Oil fell but oil companies didn't based on the favorable outlook of a Bush administration. It was a good week! It was not a good week if you owned RIMM. Several news events combined to knock RIMM back into last month price wise and took a huge amount of profit off our options. We were stopped out for a profit but significantly less than the dollars we were counting last week. News Corp received final approval to move to the NYSE and they halted trading in the NYSE-ADS and it will resume on Nov-12th as a real NYSE stock. They also are giving two shares of the new stock for every one share of the old stock. The options now represent 200 shares instead of 100. It will be confusing for a week until they get it all straightened out but there is huge interest in the new stock. It should be fun. With oil trying to bounce off its 50-day average once again just as it has for the last year I am really sorry we were stopped out of OXY the prior week but COP is making up for it now at a three week high. Instead of waiting for OXY to come back to us I am going to drop OXY from the watch list and add Federal Express as an active play. They raised their prices on Friday to offset the rising price of oil and they claim business is booming. I hesitate to add many new plays and would prefer to just nurse the current portfolio and keep the number manageable. If you start trying to juggle too many balls you will eventually drop them all. I will try to add one only when we drop one. I mentioned adding MMM back to the list last week based on a potential post election rally but it jumped +6 points on Thr/Fri and took itself out of consideration. I am dropping Pfizer today not because I do not believe in the stock but because of the continuing negative news about Vioxx is keeping Pfizer from rebounding. It is holding its ground on heavy volume but with Merck falling out of sight I am afraid investors will leave Pfizer out of caution. If you have any comments or suggestions about the leaps section please email them to: Contact Support ******************* New Plays ******************* FDX - Federal Express $91.93 ******************* Dropped Plays ******************* RIMM - Stopped out @ $81.00 ****************************** New Watch List Plays Triggered ****************************** None **************************** Current Portfolio: **************************** Position Summary Table ******************* New Plays ******************* FDX - Federal Express $91.93 **Stop $85.00** Entry $91.93 (11/5) Federal Express raised its rates on Friday +2.6% to offset the higher cost of oil and continued to say that business was booming. The price hike should be absorbed into the system without a blip and help to defray expenses. The entire package delivery business has been booming with UPS and YELL also bursting at the seams. FedEX just added +20% more capacity from Germany and now connects to more cities in Europe and offers a later pickup time. FedEx is also the primary carrier in the Asian region and has locks on routes and departures across the region. FedEx said Asia was one of its fastest growing route networks. If the global economy is going to continue to grow it will be led by China and Japan. Conventional shipping lanes and freighters are so overbooked and overloaded that delays of months can occur for new deliveries. FedEx is being called upon more frequently to deliver not only correspondence and critical parts but plane loads of product as well. Wal-Mart has put such a demand on the container fleet this fall that many product lines would not be able to get into the U.S. were it not for FedEX and UPS. This is a very profitable business for the carriers and not one that will be slowing soon. I hesitated to add FDX several times over the last couple months and kept thinking we could get a better entry on a drop to the 100 day average currently at $83. Unfortunately FDX has risen nearly $10 while I waited. I decided to bite the bullet and get on the train because with oil prices weakening we could see a sharp spike in shipping companies. Even if oil does not remain under $50 the rate increase on Friday will offset any increased costs. Holiday shipping is expected to take every available space and margins should be strong. Leaps are not cheap. However, the 2007 leaps are now available for FDX and the $100 strike is $10.60. FDX has been growing more than $2 a month in price and Jan-2007 is 25 months away. While I don't expect FDX to continue at this rate I do expect some growth spurts soon and the next three months could see some sharp gains and possibly a stock split. BUY 2006 $ 95 LEAP Call WFX-AS currently $8.00 BUY 2007 $100 LEAP Call VFX-AT currently $10.60 SELL 2005 Jan $95 Put FDX-MS currently $4.60 (selling the put offsets the price of the call) FDX Chart **************************** Play Updates **************************** XLE - S&P Energy SPDR $35.73 ** Stop 33.90 ** Nice rebound on the XLE despite the drop in oil. The Bush win helped energy stocks generically and a rebound in oil from the 50 day average should start the cycle over again. 2006 $32 LEAP Call WHA-AF 2006 $35 LEAP Call WHA-AI Entry $33.92 on 9/20 http://members.OptionInvestor.com/leaps/Lp_091904_1.asp XLE Chart ************************ INTC - Intel Corp $23.36 **Stop $21.00** Intel still moving higher and actually picking up speed. It is about the only chip stock gaining ground other than AMD. 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. $33.35 **Stop $30.50** Tyco posted a profit of $454 million compared to a loss of -$297 million in 2003 and investors cheered despite a cautious outlook for Q4. The stock broke resistance at $33 on Friday and appears poised to move higher if the market cooperates. 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 $27.84 **Stop $25.50** Juniper broke out over uptrend resistance and came to a stop on Friday at $28 and the resistance high from April. Once over $28 the $30 level should be our last stop before tacking on some real gains in a positive market. Cisco earnings this week could slow JNPR or kick it into overdrive depending on what they say. The LEAP is up nearly +100% from our entry and we have a year to go. 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 $88.44 **Stop 81.00** Unbelievable! COP roared off support after the election and is very close to its all time high at $89.75 once again. Evidently that $4.4 billion in free cash flow for last quarter provided some high grade rocket fuel to stimulate this explosion. COP remains in the top three recommended investments in the energy sector and it is racing to acquire new properties. Go oil! The leap is up +149% over the entry price. Current position: Jan-2006 $75 LEAP Call YRO-AO at $6.70 now $16.70 Entry $73.30 August 30th http://members.OptionInvestor.com/leaps/Lp_082904_1.asp COP Chart ********************** NWS.a* - News Corp $17.75 NewsCorp had a busy week with the approval of the move by the appropriate agencies in Australia the stock was halted for trading on the NYSE under the symbol MWS at $33.61. The new shares began trading on a when issued basis under the symbol NWS.a* or NWS_w depending on your quote/chart system. The new shares will have the old NWS symbol when they begin trading for real on November 12th. The "when issued" shares opened trading at $16.50 and rapidly rose to $17.75. All prior NWS shareholders will get TWO of the new shares for each share of the old NWS they owned. Based on Friday's close at $17.75 that equates to $35.50 on the old basis. The options contract will be for 200 shares instead of 100 shares. How they are going to handle the strike is still not understood. One broker said they would leave the strikes the same based on the 200 shares instead of the 100. On Thursday Liberty Media's CEO John Malone began an acquisition campaign to acquire 80 million NWS shares in an effort to bump his ownership to 20% of Newscorp. The acquisition is going to cost him $1.47 billion according to the SEC filing. Liberty already owns 17% of the non voting class A shares or 410 million. They also own 9.15% of the class B voting shares or 96 million shares. Liberty wants to convert his non voting shares into voting shares which means he has to buy voting shares on the market. He has structured a hedge with Merrill Lynch to accomplish this task without being at risk of losing the shares he has. Trust me, it is complicated but the bottom line is a very strong demand on the shares and they have not even opened for regular trading yet. Over 8 million when issued shares traded on Friday. This is huge volume compared to the old ADS shares which averaged about 1.2 million per day. When they open for regular trading and the index funds try to grab a position it should get exciting. 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 NWS.a* Chart **************************** UPL - Ultra Petroleum $48.50 **Stop $46.00** UPL has stagnated and did not participate in the energy bounce last week. Earnings were outstanding the week before but the excitement has left the stock. Our stop is just under the current price. UPL is holding above the 50 day average which is the same average holding up oil prices. 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 $99.68 ** Stop $92.00 ** EBAY is still holding near its all time highs but a downgrade by UBS last week took some of the bloom off the rose. I believe as long as it continues to hold over $95 it is only a matter of time before the $100 level breaks and releases its grip. 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. 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 $56.40 ** Stop $52.50 ** Merrill continuing to move higher post election as fears of stronger regulation subside and the potential for social security reform grows. The dividend tax cut appears safe and financials are moving up strongly. 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 *********************** RIMM - Research in Motion $77.70 ** Stopped $81.00 ** We were stopped out at the open on the 4th at $81 after a massive drop in RIMM on the third. There was a rebound attempt by the momentum players but Friday saw another washout. RIMM is said to be losing a patent case against NTP and the ruling could come this week. RIMM has been setting aside a reserve of 8.5% of Blackberry sales in case it lost the trial. The actual impact on RIMM of a loss will not be as material as the drop already seen in the stock price. Analysts expect a new drop but a quick rebound. Because of the massive nearly -$20 drop in three days I feel most of the damage has been done. I am going to add it back into the watch list with a potential entry at $70. Should RIMM win the case it could hit $100 in a single day. 2006 $80 LEAP Call WLJ-AP @ $16.50 exit $20.00 2006 $90 LEAP Call WLJ-AR @ $13.20 exit $17.20 Sell 2006 $120 LEAP Put WLJ-MD @ $46.70 exit $39.40 Entry $77.00 (9/28) http://members.OptionInvestor.com/leaps/Lp_092604_1.asp RIMM Chart ************************ SYMC - Symantec - $60.67 ** Stop $54.00 ** The drop caused by the AOL virus give away was short lived and SYMC is nearing its all time highs once again. No specific news this week but another variant of the Bagle worm hit email accounts on Tuesday and helped remind traders why they liked SYMC to begin with. 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 $33.93 ** Stop $30.50 ** XMSR earnings were strong and we did not get hit with a sell the news event. It appears XMSR is wedging up to $34 and could break higher at any time. Two levels of resistance converge at $34 and it is definitely holding XMSR back. Once through we should see some significant short covering. 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 $28.75 ** Dropped $28.75 ** Pfizer just can't get out of the Vioxx shadow. Daily negative news on Merck is holding PFE at support and the news just keeps getting worse. I am dropping PFE as a non performer and with so many good stocks on a roll there is no reason to let our money grow stale. 2006 JAN $30 CALL LEAP WPE-AF @ $3.70 exit $2.50 2006 JAN $32 CALL LEAP WPE-AB @ $2.50 exit $1.55 Entry $30.96 10/4 http://members.OptionInvestor.com/leaps/Lp_100304_1.asp PFE Chart **************************** DIA $104.22 Dow Diamonds Trust **Stop 100.00** A monster post election bounce has pushed the Dow out of its down trend channel and is very close to testing its strong resistance at 10450-10550. We should see a pullback first but I believe it will make the break over the next couple weeks. We are already up +50% in our leaps on the DIA. Stop was raised to 100.00 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 $32.88 Semiconductor Holders ** Stop $30.50 ** Chip stocks can't find a bid and brokers are still cutting ratings on almost a daily basis. The SOX is still trapped in its uptrend channel and the SMH cannot seem to break $33.25. Once it catches fire we should see money race back into the sector. 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 **************************** QQQ $37.96 Nasdaq 100 **Stop $36.50** The Nasdaq QQQ Tracking Stock is on the verge of a breakout at $38.65. We have already moved to a new eight month high and the uptrend is very strong. If the chip stocks would find a bid we could really get this party started. Entry $36.50 (10/27) 2006 $35 LEAP Call YWZ-AI @ $5.10 2006 $37 LEAP Call YWZ-AD @ $3.90 QQQ Chart **************************** LEAPS Watch List **************************** Get out the Magnifying Glass I am putting some new entries in the watch list but they are all so strong we will need a magnifying glass to find an entry. Trying to buy call leaps in an explosive market is very frustrating because you can't buy the tops and make any money. You need to wait for the dips. Waiting requires patience and I have very little. Fortunately we have a great portfolio at present and there is no need to rush into any new positions. *********************** Dropped Entries *********************** OXY - did not rebound with the market *********************** New Watch List Entries *********************** LLL - L-3 Communications $68.86 ADBE - Adobe Systems $58.45 RIMM - Research in Motion $77.70 ************************ LLL $68.86 L-3 Communications LLL is a maker of bomb detection systems and has a strong backlog of contracts for the airlines. They have several product lines besides these systems but explosives detection has become a worldwide market. Target the 100-day average for an entry. Buy 2007 $75 LEAP Call OOY-AO LLL Chart ************************ ADBE $58.45 Adobe announced earnings and raised guidance last week and several analysts cut their ratings on the stock. ADBE traded flat for three days then roared off into the blue sky of new all time highs once again. ADBE predicted +25% growth to continue and said better than expected sales growth in multiple product lines was helping performance. No complaints here other than how in the heck do we get an entry. ADBE has pulled back to the 100 period average on the 30 min chart several times in its recent romp. Let's target that average, currently at $56.75 for an entry. Assuming it will keep rising all week we will shoot for $57 as a round number. That may not seem like much of a pullback from the current $58.45 but ADBE is moving up pretty strongly. Don't worry, be happy if we get an entry. Buy 2007 $65 LEAP Call VAE-AM currently $10.00 Sell APR $60 Put AEQ-PL currently $5.00 to offset the price of the leap. Target $57.00 to enter $52 for a stop. ADBE Chart ************************* RIMM - Research in Motion $77.70 **Target $70.00** We were stopped out at the open on the 4th at $81 after a massive drop in RIMM on the third. There was a rebound attempt by the momentum players but Friday saw another washout. RIMM is said to be losing a patent case against NTP and the ruling could come this week. RIMM has been setting aside a reserve of 8.5% of Blackberry sales in case it lost the trial. The actual impact on RIMM of a loss will not be as material as the drop already seen in the stock price. Analysts expect a new drop but a quick rebound. Because of the massive nearly -$20 drop in three days I feel most of the damage has been done. I am going to add it back into the watch list with a potential entry at $70. Should RIMM win the case it could hit $100 in a single day. BUY 2007 $100 LEAP Call OHR-AE currently $17.40 SELL 2007 $90 LEAP Put OHR-ME currently $34.00 Selling the put gives you a net credit of $16.60 and a free ride once RIMM gets over $100. Maintain a stop on both the put and call. http://members.OptionInvestor.com/leaps/Lp_092604_1.asp RIMM Chart ************************Advertisement************************* Trade Smarter Using the latest Insider Trades Is the CEO selling off? Has a key insider loaded up on shares before a big price jump? Find out now. Get your free download of Real Time insider trades: http://www.realtimeinsider.com/default.asp?aid=637 ************************************************************** ******************* SPREADS & STRADDLES ******************* Sometime You Get The Bear, And Sometimes . . . By Mike Parnos . . . the bear gets you. Well, this week the bear started to munch on our brokerage account. We took a hit -- not a huge hit, but a hit nevertheless. We knew it might be coming so we were prepared. Gettin' Out Of Dodge On Friday morning, after a ridiculously positive job number, it became apparent our SPX position would be toast. When the market opened, we put in a spread order to close out the 1160/1180 bear call spread (in Position #2) for $6.50. That was a ballpark figure that we would have been happy (under the circumstances) to get. The reasons to put this order in were two-fold. a) as the market bounces around early in the session, it's not unheard of to get a fill, and b) having an order already in the system allows you to only make modifications to the existing order rather than having to generate a new order. That way, you can watch as the bid/ask changes and, with a few clicks, submit your new price in a matter of seconds. Prices are often only available for a few seconds, so we have to be ready to pounce. This is an instance where people, who cannot place spread orders or who have to place orders verbally, are at a disadvantage. We weren't filled at $6.50, but after raising the debit to $6.70, we were filled and the burden was lifted -- for at least one of our positions. Next, we closed the SPX 1025/1005 bull put spread for a dime. Our total expenditure was $6,800. Don't forget, we originally took in $2,960 of premium, so the damage was $3,840. You have also freed up $20,000 that was being held as maintenance. If you don't want to bother closing the bull put spread, the maintenance will still be held, but you can save the $100. During the day, the SPX raced all the way up to 1170.87 and then retraced all the way back to 1160.36 before closing at 1166.17. It's easy to start second-guessing yourself as you watch the SPX retrace, but you shouldn't. You'll rarely get out at the best level of the day and, hopefully, you won't get out at the worst either. When you finally hit that "submit" button and get your fill, you need to tell yourself that you did the right thing -- because you did. You could not have taken the chance that the SPX would continue and blow through your 1180 long call. Remember that you're exposed for 20 points. Our objective is not to roll the dice, but to preserve our trading capital. You need to put your trading business (and it is a business) in perspective. Take the macro view as opposed to the micro view. Your returns should be viewed as an average figure over a period of time. We've been very successful for a very long time. The law of averages says we would eventually have to deal with some losses. This was the first, and it certainly won't be the last. Other November Positions We still have two other positions at risk. Our OEX 555/565 bear call spread is $2.90 in the money. I'm not thrilled about it, but I decided to hang on, at least for now, because there is a lot of resistance in the 555-560 area. Let's give it a chance to work. If it doesn't, we're ready to get out. The RUT is still below our short strike. It's right at our resistance level and we're going to see if it will hold. The market is due for a rest, and hopefully the rest will translate into a pullback. We have two weeks left and a lot can happen. New Positions Under most circumstances, I would have initiated some new December positions on the SPX after closing our position. With the market behaving irrationally at the moment, I think we should sit back and watch. We may be sacrificing a little premium by not acting, but we want any new positions to make sense -- and, right now, the market doesn't make sense. Next Week As mentioned before, we are at risk. For those who can't handle the emotional discomfort, you can simply close your positions. It's nice when our short strike prices don't get threatened or violated, but it's inevitable a part of life, and part of doing business. Good luck and, once again, have your plan in place and trade smart. _________________________________________________________ NOVEMBER CPTI POSITIONS November Position #1 - SPX Iron Condor - 1166.17 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. The maintenance is $18,000. The potential return on risk 1186. is about 20%. November Position #2 - SPX Iron Condor - 1166.17 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 10 SPX Nov. 1025 puts and bought 10 SPX Nov. 1005 puts for a credit of about $1.20 ($1,560). Profit potential was about $2,960. Closed for $3,840 loss. (see article text). November Position #3 - OEX Iron Condor - 557.90 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 - 604.29 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 -- $37.96 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 - 557.90 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. 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 - 1166.17 Formerly called the "Credit Spread Boogie." 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). We took 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 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. 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. Once more with feeling. I know this is getting out of hand, but we have to play out the hand. We closed out our 1115/1140 bear call spread and now have 60 contracts of a November 1125/1100 bull put spread. We've taken in a total of $2990 in premium and our maintenance is now $150,000. I hope this is the last of it. ____________________________________________________________ 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, Your 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 ************************************************************** ADVERTISING INFORMATION For more information on advertising in OptionInvestor Newsletter, or any Premier Investor Network newsletter please contact: Contact Support
The Option Investor Newsletter Sunday 11-07-2004 Sunday 5 of 5 In Section Five: Covered Calls: CONSERVATIVE STOCK OWNERSHIP: COVERED-CALLS Spreads and Straddles: Post-Election Rally Continues! Premium-Selling Plays: Naked Puts and Calls ************************Advertisement************************* Get your FREE weekly charts of the NASDAQ! Hot Stix’ stock market report reveals simple, powerful strategies for profiting from the QQQ - whether down or up! http://www.hotstix.com/public/weekly.asp?aid=755 ************************************************************** ************** COVERED CALLS ************** Many investors find that writing "in-the-money" covered-calls fits their criteria for a conservative, easy-to-manage options strategy. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ NEW COVERED-CALL CANDIDATES ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ The following group of issues is a list of potential candidates to supplement your search for profitable trading positions. As with any investment, you must decide if the selections meet your criteria for potential plays. Only you can know what strategies and positions are suitable for your experience level, risk-reward tolerance and portfolio outlook. They will not be included in the weekly portfolio summary. _________________________________________________________________ Sequenced by Target Yield (monthly basis/no margin) Stock Last Option Option Last Open Cost Days Target Symbol Price Series Symbol Bid Int. Basis Exp. Yield GRA 13.36 DEC 10.00 GRA-LB 3.80 8935 9.56 41 3.4% VCLK 10.91 DEC 10.00 QCS-LB 1.35 690 9.56 41 3.4% WTZ 11.40 DEC 10.00 WTZ-LB 1.80 146 9.60 41 3.1% DDS 24.46 DEC 22.50 DDS-LX 2.75 106 21.71 41 2.7% ALKS 13.51 DEC 12.50 QAL-LV 1.45 305 12.06 41 2.7% COSI 5.73 DEC 5.00 CQA-LA 0.90 41 4.83 41 2.6% SIMG 14.18 DEC 12.50 QSI-LV 2.10 1231 12.08 41 2.6% DNDN 12.12 DEC 10.00 UKO-LB 2.45 1547 9.67 41 2.5% SIGM 8.81 DEC 7.50 MQN-LU 1.55 0 7.26 41 2.5% ELN 27.88 DEC 20.00 ELN-LD 8.50 248 19.38 41 2.4% Company Descriptions LB-Last Bid price, OI-Open Interest, CB-Cost Basis or break-even point, DE-Days to Expiry, TY-Target Yield (monthly basis). _________________________________________________________________ GRA - W. R. Grace & Co. $13.36 W. R. Grace & Co. (NYSE:GRA), through its many subsidiaries, provides specialty chemicals and materials. Grace operates in two business segments: Davison Chemicals and Performance Chemicals. Davison Chemicals makes catalysts and silica-based products. Performance Chemicals makes specialty construction chemicals, including performance-enhancing concrete admixtures, cement additives and additives for masonry products; specialty building materials, including fireproofing and waterproofing materials and systems, and sealants and coatings for packaging that protect food and beverages from bacteria and contaminants, extend shelf life and preserve flavor. GRA - W. R. Grace & Co. $13.36 DEC 10.00 GRA-LB LB=3.80 OI=8935 CB=9.56 DE=41 TY=3.4% _________________________________________________________________ VCLK - ValueClick $10.91 ValueClick (NASDAQ:VCLK) and its subsidiaries offer a suite of products and services that enable marketers to advertise and sell their products through the following online marketing channels: display/Web advertising, search marketing, e-mail marketing and affiliate marketing. Additionally, the company provides software that assists advertising agencies with other information management regarding their financial, workflow and offline media buying and planning processes. The products and services that the firm provides enable its customers to address all aspects of the marketing process, from strategic planning through execution, including results measurement and campaign refinements. DEC 10.00 QCS-LB LB=1.35 OI=690 CB=9.56 DE=41 TY=3.4% _________________________________________________________________ WTZ - Western Silver $11.40 Western Silver (NYSE:WTZ) is engaged, directly and through joint ventures and various subsidiaries, in exploring and the future development of mineral properties in Mexico and Canada. The company's primary projects are the Penasquito Project, the El Salvador Project and the San Nicolas Deposit area in the State of Zacatecas, Mexico, and the Carmacks Property in Canada. The Penasquito Project, Western's primary property, is a silver, gold, lead and zinc property located in the Concepcion del Oro district in the northeast corner of the State of Zacatecas. WTZ - Western Silver $11.40 DEC 10.00 WTZ-LB LB=1.80 OI=146 CB=9.60 DE=41 TY=3.1% _________________________________________________________________ DDS - Dillard's $24.46 Dillard's (NYSE:DDS) operates retail department stores located primarily in the Southwest, Southeast and Midwest United States. The company's stores are located in suburban shopping malls and offer a selection of fashion apparel and home furnishings. Dillard's sells products under the following merchandising categories: cosmetics, women's and juniors' clothing, children's clothing, men's clothing and accessories, shoes, accessories and lingerie and home. DDS - Dillard's $24.46 DEC 22.50 DDS-LX LB=2.75 OI=106 CB=21.71 DE=41 TY=2.7% _________________________________________________________________ ALKS - Alkermes $13.51 Alkermes (NASDAQ:ALKS) is a pharmaceutical company that develops products based on unique drug delivery technologies to enhance therapeutic outcomes in major diseases. The company's lead commercial product, Risperdal Consta, is a long-acting atypical antipsychotic medication approved for use in schizophrenia and is marketed worldwide by Janssen-Cilag, a division of Johnson & Johnson. Alkermes' lead candidate, Vivitrex, is a once-a-month injection for the treatment of alcohol dependence. The company has a pipeline of extended-release injectable and pulmonary drug products based on its own technologies and expertise, ProLease and Medisorb for extended-release of injectable drug products and AIR technology for inhaled drug products. ALKS - Alkermes $13.51 DEC 12.50 QAL-LV LB=1.45 OI=305 CB=12.06 DE=41 TY=2.7% _________________________________________________________________ COSI - Cosi Inc. $5.73 Cosi Incorporated (NASDAQ:COSI) owns and operates 88 fast casual restaurants in 11 states and the District of Columbia. Cosi restaurants are all-day cafes that feature signature bread and coffee products. The majority of the company's restaurants offer breakfast, lunch, afternoon coffee, dinner and dessert menus. Cosi operates its restaurants in two primary formats: Cosi and Cosi Downtown. Cosi Downtown restaurants, which are located in non-residential central business districts, close for the day in the early evening, while Cosi restaurants offer dinner in a casual dining atmosphere. COSI - Cosi Inc. $5.73 DEC 5.00 CQA-LA LB=0.90 OI=41 CB=4.83 DE=41 TY=2.6% _________________________________________________________________ SIMG - Silicon Image $14.18 Silicon Image (NASDAQ:SIMG) offers multi-gigabit semiconductor solutions for the transmission, storage and display of digital media. The company broadens market adoption of the digital visual interface, high-definition multimedia interface and serial advanced technology attachment interfaces by licensing its Internet protocol cores to companies providing advanced system-on-a-chip solutions incorporating these interfaces. SIMG - Silicon Image $14.18 DEC 12.50 QSI-LV LB=2.10 OI=1231 CB=12.08 DE=41 TY=2.6% _________________________________________________________________ DNDN - Dendreon $12.12 Dendreon (NASDAQ:DNDN) is a biotechnology company focused on the discovery, development and commercialization of therapies for cancer. The company's portfolio includes product candidates to treat a range of cancers using therapeutic vaccines, monoclonal antibodies, small molecules and pro-drugs. Its most advanced product candidate is Provenge, a therapeutic vaccine for the treatment of prostate cancer. Dendreon's preclinical programs include monoclonal antibodies, therapies targeting the trp-p8 pathway and serine protease and pro-drug product candidates for the treatment of cancer. DNDN - Dendreon $12.12 DEC 10.00 UKO-LB LB=2.45 OI=1547 CB=9.67 DE=41 TY=2.5% _________________________________________________________________ SIGM - Sigma Designs $8.81 Sigma Designs (NASDAQ:SIGM) specializes in silicon-based digital media processing solutions for consumer products. Its solutions, based on its REALmagic Video Technology, provide decoding of MPEG-4, MPEG-2, MPEG-1 and Windows Media Video 9 content. The company has developed system solutions for convergence products, including DVD playback, digital television reception, video over Internet protocol, personal video recording and video-on-demand. Its business operates in one major segment, consumer electronic devices and products. SIGM - Sigma Designs $8.81 DEC 7.50 MQN-LU LB=1.55 OI=0 CB=7.26 DE=41 TY=2.5% _________________________________________________________________ ELN - Elan Corporation $27.88 Elan Corporation (NYSE:ELN) is an integrated biopharmaceutical firm engaged in research and development in Alzheimer's disease, Parkinson's disease, multiple sclerosis, pain management and autoimmune diseases. The company's objective is to discover and develop products that will fulfill the unmet medical needs of patients. Elan conducts its global business, including research, development, manufacturing and marketing, through subsidiaries incorporated in Ireland, the United States, the United Kingdom and other countries. ELN - Elan Corporation $27.88 DEC 20.00 ELN-LD LB=8.50 OI=248 CB=19.38 DE=41 TY=2.4% ******************* SPREADS & STRADDLES ******************* Post-Election Rally Continues! By Ray Cummins The major equity averages moved higher Friday as investors gained confidence in the U.S. economy after a favorable employment report. The Labor Department said 337,000 additional jobs emerged in novober and average hourly earnings also increased, suggesting the labor market was strengthening as a whole. Encouraged by the optimistic employment data, stock buyers continued their recent shopping spree, sending the broad S&P 500 index up 4 points to 1,166, its highest closing price of the year. The Dow industrial average climbed 72 points to 10,387, while the NASDAQ Composite rose 15 points to 2,038. Big Board volume was 1.73 billion, with advancers roughly equaling decliners. Trading volume on the technology exchange was 1.91 billion, with winners outpacing losers 3 to 2. In the treasury market, prices swooned after the bullish jobs report. The benchmark 10-year note fell 27/32, while its yield jumped to 4.18%. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ SUMMARY OF CURRENT POSITIONS - AS OF 11/05/04 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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 96.63 NOV 80.0 85.0 0.65 84.35 0.65 Open BTU 60.07 65.27 NOV 50.0 55.0 0.60 54.40 0.60 Open MRVL 28.84 28.22 NOV 22.5 25.0 0.35 24.65 0.35 Open COST 44.69 49.55 NOV 40.0 42.5 0.30 42.20 0.30 Open NEM 46.25 49.05 NOV 40.0 42.5 0.30 42.20 0.30 Open INSP 47.25 53.64 NOV 35.0 40.0 0.85 39.15 0.85 Open BG 41.96 49.34 NOV 35.0 40.0 0.50 39.50 0.50 Open ADBE 53.57 58.48 NOV 45.0 50.0 0.50 49.50 0.50 Open VRNT 37.73 38.62 NOV 30.0 35.0 0.55 34.45 0.55 Open GTRC 47.81 44.44 NOV 40.0 45.0 0.45 44.55 (0.11) Closed OSTK 52.63 58.40 NOV 40.0 45.0 0.60 44.40 0.60 Open MDC 76.00 76.69 NOV 65.0 70.0 0.50 69.50 0.50 Open SPF 53.90 55.75 NOV 45.0 50.0 0.60 49.40 0.60 Open NEM 47.52 49.05 NOV 42.5 45.0 0.35 44.65 0.35 Open PD 87.54 92.69 NOV 75.0 80.0 0.50 79.50 0.50 Open EBAY 100.66 99.68 NOV 90.0 95.0 0.60 94.40 0.60 Open CTX 53.55 52.65 NOV 45.0 50.0 0.50 49.50 0.50 Open L/P = Long Put S/P = Short Put CB = Cost Basis G/L = Gain/Loss Although both are currently profitable, positions in Pacificare Health Systems (NYSE:PHS) and Celgene (NASDAQ:CELG) have previously been closed to limit potential losses. Guitar Center (NASDAQ:GTRC) is also a candidate for early exit after the recent consolidation in its stock price. CALL-CREDIT SPREADS Stock Pick Last Mon L/C S/C Credit CB G/L Status AMZN 40.47 36.56 NOV 50.0 45.0 0.65 45.65 0.65 Open PDX 55.00 61.50 NOV 65.0 60.0 0.60 60.60 (0.90) Closed CHIR 37.98 32.48 NOV 45.0 42.5 0.30 42.80 0.30 Open FLIR 54.52 57.74 NOV 65.0 60.0 0.70 60.70 0.70 Open BIIB 59.82 60.86 NOV 70.0 65.0 0.65 65.65 0.65 Open IFIN 36.50 39.04 NOV 42.5 40.0 0.30 40.30 0.30 Open TTWO 32.55 34.76 NOV 37.5 35.0 0.30 35.30 0.30 Open? SPW 37.40 42.50 NOV 42.5 40.0 0.30 40.30 (2.20) Closed QCOM 39.50 38.27 NOV 45.0 42.5 0.30 42.80 0.30 Open ESRX 64.01 72.00 DEC 75.0 70.0 0.60 70.60 (1.40) Closed JCP 34.59 39.12 DEC 40.0 37.5 0.35 37.85 (1.27) Closed SEPR 45.44 48.20 DEC 55.0 50.0 1.00 51.00 1.00 Open TTWO 33.24 34.76 DEC 40.0 37.5 0.30 37.80 0.30 Open L/C = Long Call S/C = Short Call CB = Cost Basis G/L = Gain/Loss Positions in J.C. Penney (NYSE:JCP), SPX Corp. (NYSE:SPW), and Pediatrix Medical (NYSE:PDX) should have been closed earlier in the week for smaller-than-published losses. Positions in Aetna (NYSE:AET), Beazer Homes (NYSE:BZH), Hartford Insurance (NYSE:HIG), Cigna (NYSE:CI), Chubb (NYSE:CB), Mercury Interactive (NASDAQ:MERQ) and Microchip (NASDAQ:MCHP) have previously been closed. Take-Two Interactive Software (NASDAQ:TTWO) is a candidate for early-exit on any move above $35.50. Investors Financial (NASDAQ:IFIN) and Sepracor (NASDAQ:SEPR) 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 NTES 40.00 48.76 NOV 40.0 40.0 5.00 10.50 Open? NEW 55.15 59.12 NOV 55.0 55.0 4.70 5.70 Open The speculative straddle in Netease.com (NASDAQ:NTES) has easily exceeded all possible profit goals and the position should be closed to "lock-in" gains. New Century Finance (NYSE:NEW) has already provided a favorable early-exit profit for conservative traders. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ PIXR - Pixar $84.45 *** An "Incredible" Rally! *** Pixar (NASDAQ:PIXR) is a digital animation studio that uses its creative, technical and production capabilities to create animated feature films and related products, such as video products, toys, interactive games and other merchandise. The company has created and produced five full-length animated feature films: Toy Story, A Bug's Life, Toy Story 2, Monsters, Inc., and Finding Nemo, which were marketed and distributed by The Walt Disney Company. Pixar also produces short films, which allows the company to develop creative talent and computer animation technology. In addition, Pixar markets its RenderMan software to other visual effects studios. PIXR - Pixar $84.45 PLAY (very speculative - bullish/credit spread): BUY PUT NOV-75.00 PQJ-WO OI=3122 ASK=$0.55 SELL PUT NOV-80.00 PQJ-WP OI=2527 BID=$1.45 INITIAL NET-CREDIT TARGET=$1.00-$1.10 POTENTIAL PROFIT(max)=25% B/E=$79.00 __________________________________________________________________ S - Sears, Roebuck and Co. $45.88 *** Sears Stores = $$$! *** Sears, Roebuck and Co. (NYSE:S) is a multi-line retailer that offers an array of merchandise and related services. Sears operates principally in the United States, Puerto Rico and Canada. Sears is organized into three domestic segments: Retail and Related Services, Credit and Financial Products and Corporate and Other; and one international segment: Sears Canada. The core focus of the company is merchandise sales and related services, including service contracts, delivery and product installation and repair services. S - Sears, Roebuck and Co. $45.88 PLAY (speculative - bullish/credit spread): BUY PUT NOV-40.00 S-WH OI=1077 ASK=$0.20 SELL PUT NOV-42.50 S-WT OI=84 BID=$0.50 INITIAL NET-CREDIT TARGET=$0.35-$0.40 POTENTIAL PROFIT(max)=15% B/E=$42.15 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ INTU - Intuit $43.14 *** A Big "Down" Day! *** Intuit (NASDAQ:INTU) is a provider of small business, tax preparation and personal finance software products and other services that simplify complex financial tasks for small businesses, consumers and accounting professionals. The company's products and services fall into the following principal categories: QuickBooks small business accounting and business management solutions; small business products and services that include payroll, financial supplies, technical support and information technology management solutions; TurboTax consumer tax products and services; ProSeries and Lacerte professional products; Intuit-branded business management solutions designed to meet the unique requirements of businesses in selected industries, and all other businesses. INTU - Intuit $43.14 PLAY (less conservative - bearish/credit spread): BUY CALL NOV-47.50 IQU-KW OI=1794 ASK=$0.15 SELL CALL NOV-45.00 IQU-KI OI=2441 BID=$0.45 INITIAL NET-CREDIT TARGET=$0.30-$0.40 POTENTIAL PROFIT(max)=14% B/E=$45.30 __________________________________________________________________ RIMM - Research In Motion $77.75 *** NTP Lawsuit Speculation! *** Research In Motion Limited (NASDAQ:RIMM) designs, manufactures and markets wireless solutions for the mobile communications market. The company provides platforms and solutions for access to time-sensitive information, including e-mail, phone, short messaging service, organizers, Internet and intranet-based corporate data applications. RIM also licenses its technology to handset and software vendors to enable these companies to offer wireless data services using the BlackBerry Enterprise Server and BlackBerry Web Client. RIM's products, services and embedded technologies include the BlackBerry wireless platform and the RIM Wireless Handheld product line, and its additional products and services RIMM - Research In Motion $77.75 PLAY (less conservative - bearish/credit spread): BUY CALL NOV-95.00 RUP-KS OI=9255 ASK=$0.55 SELL CALL NOV-90.00 RUP-KR OI=11610 BID=$0.95 INITIAL NET-CREDIT TARGET=$0.50-$0.60 POTENTIAL PROFIT(max)=11% B/E=$90.50 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ STRADDLES AND STRANGLES ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Based on analysis of the historical option pricing and technical background, these positions meet the fundamental criteria for favorable volatility-based plays. _________________________________________________________________ SBUX - Starbucks $54.51 *** Earnings Play! *** Starbucks (NASDAQ:SBUX) purchases and roasts whole bean coffees and sells them, along with fresh, rich-brewed coffees, Italian espresso beverages, cold blended beverages, a wide variety of complementary food items, coffee-related accessories and other equipment, a selection of premium teas and a line of compact discs, primarily through company-operated retail stores. The company sells coffee and tea products through other channels, and, through certain of its equity investees, it also produces and sells bottled Frappuccino and Starbucks DoubleShot coffee drinks and a line of premium ice creams. These non-retail channels are collectively known as Specialty Operations. Earnings are due on or about Thursday, November 11, 2004. SBUX - Starbucks $54.51 PLAY (very speculative - neutral/debit straddle): BUY CALL NOV-55.00 SQX-KK OI=2592 ASK=$1.10 BUY PUT NOV-55.00 SQX-WK OI=952 ASK=$1.50 INITIAL NET-DEBIT TARGET=$2.40-$2.50 INITIAL TARGET PROFIT=$1.05-$1.60 ************************Advertisement************************* Insiders are Buying these 6 Rocket Stocks. In the last few weeks, we have pinpointed insider buying on six stocks that have the potential to deliver stratospheric gains. Click here for our SPECIAL REPORT on these 6 stocks insiders are buying and why you should too. http://www.insidermoves.com/default.asp?aid=618 ************************************************************** ***************************************** 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 11/05/04 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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 SIMG NOV 12.50 12.10 14.18 0.40 5.95% 3.31% NCRX NOV 25.00 24.30 26.26 0.70 5.52% 2.88% ANF NOV 32.50 32.10 42.67 0.40 2.78% 1.25% STTX NOV 25.00 24.60 26.18 0.40 3.89% 1.63% SNDA NOV 22.50 21.85 30.50 0.65 7.78% 2.97% IDBE NOV 12.50 12.15 17.11 0.35 6.44% 2.88% BVF NOV 17.50 17.05 17.36 0.31 3.72% 2.64% USG NOV 17.50 16.90 28.80 0.60 6.84% 3.55% SNDA NOV 25.00 24.50 30.50 0.50 5.67% 2.04% WEBX NOV 20.00 19.60 23.63 0.40 5.75% 2.04% ENER NOV 15.00 14.40 17.94 0.60 8.11% 4.17% DRIV NOV 25.00 24.35 33.48 0.65 6.81% 2.67% PLMD NOV 30.00 29.55 35.05 0.45 3.33% 1.52% CNCT NOV 22.50 22.10 27.42 0.40 4.68% 1.81% CCBI NOV 22.50 21.90 22.01 0.11 1.01% 2.74% EYET NOV 35.00 34.45 42.48 0.55 5.17% 1.60% USG NOV 17.50 17.15 28.80 0.35 6.12% 2.04% RIGL NOV 22.50 21.85 26.00 0.65 8.14% 2.97% MCD NOV 27.50 27.15 30.06 0.35 2.99% 1.29% FARO NOV 20.00 19.60 24.86 0.40 5.67% 2.04% NOVN NOV 20.00 19.60 23.87 0.40 4.88% 2.04% VRSN NOV 20.00 19.65 27.53 0.35 4.40% 1.78% SSNC NOV 20.00 19.55 22.00 0.45 5.71% 2.30% CKFR NOV 30.00 29.40 31.66 0.60 4.91% 2.04% OSTK NOV 35.00 34.60 58.40 0.40 4.10% 1.16% GBBK NOV 30.00 29.40 31.12 0.60 5.01% 2.04% KRON NOV 45.00 44.50 49.56 0.50 3.10% 1.12% DITC NOV 20.00 19.70 17.15 (2.55) 0.00% 0.00% * MRVL NOV 23.75 23.35 28.22 0.40 5.59% 1.71% AGIX NOV 20.00 19.70 32.57 0.30 4.50% 1.52% AFCO NOV 20.00 19.55 23.69 0.45 6.68% 2.30% TSRA NOV 25.00 24.70 31.00 0.30 4.18% 1.21% SRDX NOV 25.00 24.50 27.96 0.50 5.79% 2.04% ELN NOV 22.50 22.05 27.88 0.45 6.53% 2.04% XMSR NOV 30.00 29.45 33.93 0.55 5.48% 1.87% ENDP NOV 20.00 19.55 20.89 0.45 6.72% 2.30% LNG NOV 20.00 19.45 26.68 0.55 8.61% 2.83% USG NOV 20.00 19.50 28.80 0.50 8.45% 2.56% EDS NOV 20.00 19.65 20.85 0.35 5.49% 1.78% MANT NOV 17.50 17.05 22.50 0.45 9.65% 2.64% NTMD NOV 17.50 17.25 25.68 0.25 6.12% 1.45% A NOV 22.50 22.10 25.21 0.40 5.86% 1.81% SCHN NOV 26.60 26.15 31.96 0.45 5.81% 1.72% CYTC NOV 25.00 24.60 25.69 0.40 5.27% 1.63% USG NOV 20.00 19.70 28.80 0.30 6.65% 1.52% TSRA NOV 22.50 22.30 31.00 0.20 5.12% 0.90% FARO NOV 22.50 22.10 24.86 0.40 7.61% 1.81% NTAP NOV 22.50 22.15 25.69 0.35 6.52% 1.58% VAR NOV 37.50 37.15 39.98 0.35 3.87% 0.94% DOX NOV 22.50 22.25 26.00 0.25 5.00% 1.12% ROST NOV 25.00 24.70 27.25 0.30 4.78% 1.21% JNPR NOV 25.00 24.70 27.84 0.30 4.89% 1.21% LNG NOV 22.50 22.15 26.68 0.35 8.04% 1.58% SFNT NOV 30.00 29.60 33.00 0.40 6.06% 1.35% ELN NOV 22.50 22.25 27.88 0.25 5.96% 1.12% YHOO NOV 35.00 34.60 36.35 0.40 5.30% 1.16% XMSR NOV 30.00 29.65 33.93 0.35 5.65% 1.18% SHPGY NOV 27.50 27.15 28.51 0.35 5.67% 1.29% MRVL NOV 25.00 24.65 28.22 0.35 7.34% 1.42% ANF NOV 35.00 34.55 42.67 0.45 6.35% 1.30% Ditech (NASDAQ:DITC) was moved to our "bearish" candidate list on Tuesday, and conservative traders should have closed the position for a smaller than published loss. Although currently profitable, positions in Palomar Medical (NASDAQ:PMTI), Energy Conversion Devices (NASDAQ:ENER); at the $17.50 strike, and Telular (NASDAQ:WRLS) have previously been closed to limit potential losses. NAKED CALLS Stock Strike Strike Break Current Gain Max Simple Symbol Month Price Even Price (Loss) Yield Yield BRCM NOV 35.00 35.35 28.15 0.35 4.44% 0.99% LLTC NOV 40.00 40.60 38.28 0.60 3.74% 1.48% SINA NOV 35.00 35.35 32.94 0.35 4.56% 0.99% IVX NOV 20.00 20.75 14.21 0.75 9.51% 3.61% PLMO NOV 40.00 40.45 32.80 0.45 5.62% 1.11% SLXP NOV 20.00 20.65 15.88 0.65 8.83% 3.15% AOC NOV 25.00 25.25 20.60 0.25 3.93% 0.99% CVH NOV 50.00 50.60 44.01 0.60 4.46% 1.19% ACF NOV 20.00 20.70 20.02 0.68 8.07% 3.38% DSPG NOV 22.50 22.85 21.16 0.35 6.23% 1.53% RNR NOV 50.00 50.65 47.86 0.65 3.51% 1.28% X NOV 40.00 40.25 40.41 (0.16) 0.00% 0.00% GIVN NOV 40.00 40.45 30.12 0.45 5.86% 1.11% ARW NOV 25.00 25.40 24.57 0.40 5.82% 1.57% TACT NOV 30.00 30.50 24.97 0.50 10.16% 1.64% NVTL NOV 25.00 25.20 20.13 0.20 6.99% 0.79% CBT NOV 35.00 35.50 35.00 0.50 5.76% 1.41% ASKJ NOV 30.00 30.35 25.87 0.35 8.26% 1.15% LSS NOV 30.00 30.20 26.55 0.20 6.51% 0.66% DITC NOV 25.00 25.25 17.15 0.25 8.20% 0.99% DISH NOV 32.50 32.90 30.30 0.40 6.30% 1.22% Positions in Ii-Vi (NASDAQ:IIVI), Lam Research (NASDAQ:LRCX), Hyperion Solutions (NASDAQ:HYSL), UCI Inc. (NASDAQ:UICI), and United Surgical (NASDAQ:USPI) have previously been closed to limit potential losses. Among the "watch" list issues are: Arrow Electronics (NYSE:ARW), Americredit (NYSE:ACF), Cabot (NYSE:CBT), DSP Group (NASDAQ:DSPG), and U.S. Steel (NYSE:X). ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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 VTIV 18.75 NOV 17.50 QBP-WW 0.50 32 17.00 13 6.9% 17.3% NTMD 25.68 NOV 20.00 QNR-WD 0.40 2607 19.60 13 4.8% 16.9% DDS 24.46 NOV 22.50 DDS-WX 0.50 428 22.00 13 5.3% 14.1% ELN 27.88 NOV 22.50 ELN-WX 0.35 8865 22.15 13 3.7% 13.4% RIGL 26.00 NOV 22.50 QRG-WX 0.30 68 22.20 13 3.2% 9.7% USG 28.80 NOV 25.00 USG-WE 0.30 3330 24.70 13 2.8% 8.8% USPI 37.37 NOV 35.00 QPJ-WG 0.40 1045 34.60 13 2.7% 7.2% RDEN 24.15 NOV 22.50 UWO-WX 0.25 60 22.25 13 2.6% 7.1% 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. _________________________________________________________________ VTIV - Ventiv Health $18.75 *** Next Leg Up? *** Ventiv Health (NASDAQ:VTIV) is a provider of outsourced sales and marketing solutions for the pharmaceutical, biotechnology and life sciences industries. The company offers a range of services, using a consultative partnership that identifies strategic goals and applies targeted, tailored solutions. The company's portfolio of offerings includes integrated sales force recruitment, training and management; standalone sales force recruitment and regulatory compliance services; product, sample and literature fulfillment; product/brand management; brand/portfolio analytics and forecasting, and strategic and tactical planning. VTIV - Ventiv Health $18.75 NOV 17.50 QBP-WW LB=0.50 OI=32 CB=17.00 DE=13 TY=6.9% MY=17.3% _________________________________________________________________ NTMD - NitroMed $25.68 *** Premium-Selling Only! *** NitroMed (NASDAQ:NTMD) is an emerging pharmaceutical company with substantial expertise and intellectual property in nitric oxide-based drug development. The firm is applying its nitric oxide technology to develop new pharmaceuticals, as well as safer and more effective versions of existing pharmaceuticals to target diseases and commercial markets. Its lead nitric oxide-enhancing medicine, BiDil, which is being developed to reduce mortality and hospitalization and to improve quality of life for African Americans diagnosed with heart failure is the subject of a Phase III confirmatory clinical trial. NTMD - NitroMed $25.68 NOV 20.00 QNR-WD LB=0.40 OI=2607 CB=19.60 DE=13 TY=4.8% MY=16.9% _________________________________________________________________ DDS - Dillard's $24.46 *** Retailers Rally! *** Dillard's (NYSE:DDS) operates retail department stores located primarily in the Southwest, Southeast and Midwest United States. The company's stores are located in suburban shopping malls and offer a selection of fashion apparel and home furnishings. Dillard's sells products under the following merchandising categories: cosmetics, women's and juniors' clothing, children's clothing, men's clothing and accessories, shoes, accessories and lingerie and home. DDS - Dillard's $24.46 NOV 22.50 DDS-WX LB=0.50 OI=428 CB=22.00 DE=13 TY=5.3% MY=14.1% _________________________________________________________________ ELN - Elan Corporation $27.88 *** Drug Speculation! *** Elan Corporation (NYSE:ELN) is an integrated biopharmaceutical firm engaged in research and development in Alzheimer's disease, Parkinson's disease, multiple sclerosis, pain management and autoimmune diseases. The company's objective is to discover and develop products that will fulfill the unmet medical needs of patients. Elan conducts its global business, including research, development, manufacturing and marketing, through subsidiaries incorporated in Ireland, the United States, the United Kingdom and other countries. ELN - Elan Corporation $27.88 NOV 22.50 ELN-WX LB=0.35 OI=8865 CB=22.15 DE=13 TY=3.7% MY=13.4% _________________________________________________________________ RIGL - Rigel Pharmaceuticals $26.00 *** Uptrend Intact! *** Rigel Pharmaceuticals (NASDAQ:RIGL) is engaged in the discovery and development of a range of small molecule product candidates for unmet medical needs. The company is developing a portfolio of product candidates and plans to take these candidates through Phase II clinical trials, after which, it will seek partners for completion of clinical trials, regulatory approval and marketing. The company currently has three initial development programs: allergy/asthma, hepatitis C and rheumatoid arthritis. RIGL - Rigel Pharmaceuticals $26.00 NOV 22.50 QRG-WX LB=0.30 OI=68 CB=22.20 DE=13 TY=3.2% MY=9.7% _________________________________________________________________ USG - USG Corporation $28.80 *** Rally Mode! *** 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 $28.80 NOV 25.00 USG-WE LB=0.30 OI=3330 CB=24.70 DE=13 TY=2.8% MY=8.8% _________________________________________________________________ USPI - United Surgical Partners $37.37 ** Revenge Play! ** United Surgical Partners (NASDAQ:USPI) owns and operates a number of short-stay surgical facilities including surgery centers and private surgical hospitals in the United States, Spain and the United Kingdom. The firm focuses on providing surgical facilities that meet the combined needs of patients, physicians and payors better than hospital-based and other outpatient surgical facilities. USPI acquires and develops its facilities through the formation of relationships with physicians and healthcare systems to better access and serve the communities in its markets. USPI - United Surgical Partners $37.37 NOV 35.00 QPJ-WG LB=0.40 OI=1045 CB=34.60 DE=13 TY=2.7% MY=7.2% _________________________________________________________________ RDEN - Elizabeth Arden $24.15 *** Strong Sector! *** Elizabeth Arden (NASDAQ:RDEN) is a global fragrance and beauty products company with a portfolio of fragrance, skin care and cosmetics brands. The company markets approximately 50 owned or licensed prestige brands, including Elizabeth Arden's Red Door, Red Door Revealed, Fifth Avenue, Elizabeth Arden green tea, ardenbeauty, Sunflowers and Elizabeth Arden Provocative Woman; Elizabeth Taylor's White Diamonds, Passion, Forever Elizabeth and Gardenia; White Shoulders; Halston and Z-14; Geoffrey Beene's Grey Flannel; PS Fine Cologne for Men; Design, and Wings. Its skin care brands include Ceramide, Eight Hour Cream and Overnight Success. Its cosmetics products include Elizabeth Arden lipstick, foundation and other color cosmetics products. RDEN - Elizabeth Arden $24.15 NOV 22.50 UWO-WX LB=0.25 OI=60 CB=22.25 DE=13 TY=2.6% MY=7.1% ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ LEND - Accredited Home Lenders $38.05 *** Rising Rates? *** Accredited Home Lenders Holdings (NASDAQ:LEND) is a nationwide mortgage banking company that originates, finances, sells, securitizes and services non-prime mortgage loans secured by residential real estate. Accredited focuses on borrowers who may not meet conforming underwriting guidelines, because of higher loan-to-value ratios, the nature or absence of income documentation, limited credit histories, high levels of consumer debt or past credit difficulties. LEND - Accredited Home Lenders $38.05 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 QFW-KH 246 0.55 40.55 9.3% 1.4% _________________________________________________________________ PTP - Platinum Underwriters $28.55 *** Earnings Speculation *** Platinum Underwriters (NYSE:PTP) holds subsidiaries that provide property and marine, casualty and finite reinsurance coverages to a diverse clientele of insurers and select reinsurers on a worldwide basis. The company's Property and Marine operating segment includes principally property per-risk, excess-of-loss treaties, property proportional treaties and many catastrophe excess-of-loss reinsurance treaties that are written both in the United States and international markets. The Casualty operating segment includes principally reinsurance treaties that cover umbrella liability, general and products liability, professional liability, corporate directors and officers liability, workers' compensation, casualty clash and automobile liability. The Finite Risk operating segment includes principally structured reinsurance contracts with ceding companies whose needs may not be met efficiently through traditional reinsurance products. Earnings are due on or about Tuesday, November 9, 2004. PTP - Platinum Underwriters $28.55 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 PTP-KF 18 0.60 30.60 13.3% 2.0% _________________________________________________________________ UVN - Univision Communications $28.79 *** Mediocre Outlook! *** Univision Communications (NYSE:UVN) is a Spanish-language media company in the United States. The company operates in four business segments: television, radio, music and Internet. The company's principal business segment is television broadcasting, which includes the Univision, TeleFutura and Galavision networks, the Univision Television Group owned-and-operated broadcast television stations and the TeleFutura Television Group owned and operated broadcast television stations. Univision Radio operates Univision's radio business, which includes its radio network and owned and operated radio stations. UVN - Univision Communications $28.79 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 UVN-KF 982 0.25 30.25 5.5% 0.8% ************************Advertisement************************* SEE WARREN BUFFETT'S LATEST DISCLOSED STOCK PORTFOLIO Now you can follow the investment master's actual moves. 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