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Daily Newsletter, Sunday, 11/07/2004

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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!



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




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





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

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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


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**********
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.



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

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


CALLS
^^^^^
None

PUTS
^^^^

None


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


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

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

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


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

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


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

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






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


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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 . . .

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*****
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  







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


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


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


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




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

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

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
SUMMARY OF CURRENT POSITIONS - AS OF 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%



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