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Daily Newsletter, Sunday, 11/21/2004

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The Option Investor Newsletter                   Sunday 11-21-2004
Copyright 2004, All rights reserved.                        1 of 5
Redistribution in any form strictly prohibited.

Entire newsletter best viewed in COURIER 10 font for alignment

In Section One:

Wrap:  Lame Duck Drop
Futures Wrap: See Note
Index Trader Wrap:  WHAT ME WORRY
Editor's Plays:  Time to Roll the Dice
Market Sentiment: Finally!
Ask the Analyst: Is heating oil the leading indicator?
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 11-19        WE 11-12        WE 11-05        WE 10-29 
DOW    10456.91 - 82.10 10539.0 +151.47 10387.5 +360.07 +269.66 
Nasdaq  2070.63 - 14.71 2085.34 + 46.40 2038.94 + 63.95 + 59.85 
S&P-100  559.69 -  6.53  566.22 +  8.32  557.90 + 17.25 + 15.49 
S&P-500 1170.34 - 13.83 1184.17 + 18.00 1166.17 + 35.97 + 34.46 
W5000  11480.63 -129.04 11609.7 +200.13 11409.6 +340.64 +320.91 
SOX      431.88 +  8.07  423.81 +  5.98  417.83 +  5.58 + 17.09 
RUT      613.44 -  8.54  621.98 + 17.69  604.29 + 20.50 + 16.02 
TRAN    3567.65 - 60.55 3628.20 + 55.70 3572.50 + 75.08 +125.48 
VXO       14.60           14.05           14.36           16.57 
VXN       19.72           18.82           19.47           21.90
******************************************************************

Lame Duck Drop
by Jim Brown

Lame duck Alan Greenspan took his market-crashing act on
the road on Friday and comments made in Germany dropped
our markets for the first weekly loss in four weeks. Alan
is in his last term as Fed head and has recently been 
taking shots at the current status quo and generally 
rocking the economic boat. As a short timer he has adopted
a Chicken Little attitude about things as diverse as Social
Security, trade imbalances, deficits and hedge funds. As 
his term fades he is setting up his "I told you so" points
for future use. Friday was a prime example. 

Dow Chart


Nasdaq Chart


SPX Chart - Weekly


Friday morning Greenspan warned during a speech in Germany
that the size of the U.S. current-account deficit should
produce a diminished appetite for buying U.S. debt. While
this is not news the strong warning while out of the U.S.
and just in front of the G20 meeting in Berlin set off
alarms for traders. With China and Japan currently holding
the largest amount of all U.S. debt at 39% and another 10%
liberally dispersed among other nations the blunt warning
to those holders was a serious shock. That is like telling
a potential house buyer that your house is over valued at
the current price. Odds are good he will offer you less 
than he would have or immediately walk away. The fear is
that those countries who fund our spending by buying our
debt may rethink that concept if the chief banker thinks
it is over priced and high risk. 

Should the demand for our debt decline then interest rates
would have to rise in order to convince them to take the
risk. Higher rates cost the U.S. more money and we are
not talking chump change. With the deficit reportedly
near $1 trillion for 2005 just a +1% rise in rates will
cost a lot of money over the life of the notes. The House
voted Thursday to raise the debt ceiling by +$800 billion
to $8.2 trillion for 2005. Rates could easily rise much 
more than 1% given the Fed policy at present and no relief
in sight to balance the budget. An even worse scenario 
would appear should those foreign holders of 50% of our
debt decide to reduce positions and begin dumping that 
debt on the open market. Rates would not just rise but
immediately skyrocket and the impact on the economy 
would be very severe. 

The falling dollar is worrisome at best and while it 
will help our trade balance it needs to come down at a
controlled rate not a free fall. These comments by Alan
shocked traders and a few raced to the exits. Currency
fluctuations and implosions can appear out of nowhere
and tank markets at will. Because 99% of equity traders
have no clue how currencies affect equities or economies
the retail traders are always caught off guard. Just
when the sunshine seems brightest a lightning bolt from
the blue shocks markets into cardiac arrest. 

The comments from Greenspan went on to suggest that the
Fed may have to escalate their rate hike process to adjust
to the continued dollar drop. That was just what markets 
on the verge of a breakout needed to hear. Faster rate 
hikes ahead could mean multiple tightenings, larger hikes
and a rate parity around 6% instead of the current 3% 
target.
    
With the Euro holding above 1.30 to the dollar and just
fractions below the all time high set on Thursday the
G20 meeting is not expected to fix the problem. In fact
it could escalate the problem depending on the mood of
the attendees in light of the Greenspan comments. The
dollar index hit another multiyear low on Friday and 
Gold hit another 16 year high at $448.50. The concern
about the dollar drop as well as some minor supply
disruptions sent oil soaring back to close just under
$49 and a +2.60 gain for the day. The 100-day average
at 45.75 never broke as support and we could be at the
beginning of another oil price cycle but it will take
more than a one day spike to confirm.

Dollar Index Chart


Crude Oil Chart


The twin deficits of budget and trade are keeping our
rates artificially low according to some but others are
more concerned. Doug Kass of Seabreeze Partners pointed
out that the Leading Indicators this week have fallen
for the fifth consecutive month and this is the first
time in 45 years that it has happened outside of a
recession. He pointed to the strong signs of a slowing
consumer and corporate earnings still being met more 
on cost savings than revenue increases.

The bulls view that slowdown as due to the weight of
a highly contentious election and the record high oil
prices. There will always be a difference of opinion 
between stock bulls and economic bears but having Alan
weigh in on the side of the bears is not good for stocks.
Greenspan's speech turned into a tirade against the U.S.
where he verbally questioned the wisdom of other countries
in allowing the U.S. to finance such a large deficit at
more than 5% of GDP. He went so far as to caution that
payments on large debt balances would eventually become
burdensome to the U.S. and countries concentrating their
assets in U.S. debt could be at risk. 

Can you believe this? Sounds like a dad lecturing a
teenager about the evils of high car payments and their
inability to pay in front of the loan officer deciding
whether or not to make the loan. Later he literally
told them that they should be demanding higher interest
rates to offset the increasing risk. He basically said
if they would buy less debt and demand higher rates the
U.S. would be forced to import less and live on a budget.
While I agree with the long term concept of balancing
trade and living on a budget I don't believe Greenspan
should go to the G20 and tell them to cut off our life
support. 

While it is too early to tell if foreign banks will cut
our allowance the impact of Greenspan's verbal tongue
lashing was immediate. The markets imploded at the open
and never looked back. None of the major indexes ever
made a higher high for the entire day. It started out
as an express elevator to the basement from the 100th
floor and ended up pausing to let a few passengers off
on the last several levels. The end result was a Dow
that failed at support at 10550, 10500 and 10475 to 
slide to a stop at 10450 with only a minimal bout of
short covering at the close. Should the slide continue
on Monday there is substantial support from 10375 to
10400 and the likely bottom of any further selling. 
As much as everybody wanted the Dow to break 10600 it
was exactly the right spot for a failure to occur. The
Greenspan comments were just the extra push the bulls
needed to take profits. By pausing to rest at 10600
the Dow will be stronger if it decides to tackle
10750 and the highs for the year. 

The Nasdaq gave up 2100 after only two days at that 
altitude and spent most of the afternoon fighting to
cling to 2075. That battle was lost just before the
close with the index going out at 2071. The equivalent
support to Dow 10400 is Nasdaq 2040 and well below our
closing level. 

The Nasdaq drop was accelerated by a chip downgrade by
Goldman Sachs. The broker said there was more pain ahead
for chips due to over capacity and lack of demand. Smith
Barney immediately fired back that the worst was over 
and chips should be bought on weakness ahead of a 
rebound in 2005. Intel CEO Craig Barrett again said 
he sees chip demand increasing in 2005 and defended 
his planned capacity increases. Ultimately the markets
listened to Goldman Sachs and sold chips faster than a
peanut vendor at a ball game. The SOX had closed at a
breakout high of 445 on Thursday and that move was
completely erased with a drop to 432 by the close. It
is still above downtrend resistance but it was a nasty
retracement given the recent recovery talk.

SOX Chart


Russell Chart


The Russell was hit especially hard with a drop from 
622 to 613 but it was not as clear intraday. The morning
drop was vertical but was over by 10:00. The Russell held
615 for the next five hours with a minor upward bias but
a sell program just before the close completed the drop.
The Russell has rebounded +22% from the low for the year
at 516 set on August 13th. +12% of that bounce had been
from the 562 low made on Oct-20th to the 628 high on
Wednesday. The Russell was definitely due for a rest and
the sudden appearance of Darth Greenspan Vader shook up
those investors and they fled the scene. Considering the
amount of profit on the table a -15 point drop from the
Wednesday highs to the Friday close was only a hiccup.

The SPX traded in a range from 1175-1185 for most of the
week with the intraday spike on Wednesday the only real
deviation. On Friday the opening drop knocked us back 
below 1175 and we never recovered. You might remember
the 1175 level was critical on the advance as the 2002
resistance high that held for all of 2002. Due to the
strength of the rally it only took two days to squeeze
by on the way up. Now that it is five points above
us again and the race to catch the rally train has
slowed it might be a little harder to move back over
that level. The SPX held 1170 at the close. That level 
did not have any significance on the way up and I think
the sellers just ran out of stock on Friday. Remember
we have had a complete lack of sellers for three weeks.
There is nothing to suggest that conditions have changed.
The really strong support is waiting at 1165 and it is 
strong enough to blunt anything but a concentrated bout
of real selling on high volume. 

The most accurate measure of the market is the Wilshire
5000 and it lost -127 on Friday to close at 11483. The
Wilshire has very strong support at 10375 and very strong
resistance at 10620. This suggests we could see continued
selling on Monday to retest the 10400 level but that
retest should hold. 

Wilshire Chart
 

For next week the historical trend is normally bullish.
Of course that assumes the Grinch that stole Christmas
is not running around Germany passing out business cards
for collection agents in case of payment default by the
U.S. When asked later if his position meant the Fed might
raise rates more than the market expected he replied,
"rising rates has been advertised for so long that anyone
not currently hedged is desirous of losing money." In
English, yes, you can bet we are going to continue to 
raise rates. The Fed fund futures are predicting a 91%
chance of a hike in December and an 80+% chance of a 
hike in February. 
 
What happens next week is going to be dictated by 
what happens at the open on Monday. The odds are very
good there are quite a few traders and mutual funds 
that are celebrating this weekend. The Friday drop 
took a lot of excitement out of prices without a
material drop in the indexes. Biggest hit were the
financials, home builders and any interest sensitive
stock. Some of that money rotated back into oil and
energy stocks despite any material reason for the
price spike. Iraq production was slowed by weather 
and some terrorist attacks but nothing new there. 
The strike in Nigeria was cancelled again. That has
been on and off so many times it resembles the Three
Stooges caught in a perpetually revolving door. Russia
says it will auction off assets of Yukos over the next
30 days to pay for back taxes but there is not expected
to be any disruption in production. Oil production has
mostly returned to normal from the Gulf and there has
been a steady build in supplies to a more normal level.
I see the smoke in the price hike but I don't see the
fire that caused it. I suspect more than anything it
was related to option expiration and short covering.

That brings us back to equities once again and while
there is economic unrest in the financial community
from Greenspan's comments I see no real reason for the
selling in equities to continue. I believe the knee
jerk reaction triggered additional profit taking sell 
stops. Add in option expiration and mass confusion was
the result.

There are no material economic reports on Monday and 
volume may start to slow for the holiday week. Money
is still flowing into the markets at an average of 
$1.2B per day since Nov-1st. $8.5B flowed in over the
last eight days. Sucking up that $8.5 billion was over
$6.5 billion in new offerings over just the last three
days as well as money pouring into the new ETF for Gold.
Over $500 million poured into the GLD shares on Friday.
The very strong new offering calendar may have blunted
the dip buying on Friday. PLAY priced 6.25 million 
shares at $17 Thursday night and the stock soared to
$26.25 in its first day of trading on Friday. Over
ten million shares traded with only six million priced.
Who says day trading died?

Google insiders filed with the SEC late Friday to sell
16.6 million shares. 7.2 million each for Larry Page
and Sergey Brin and 2.2 million shares for CEO Eric
Schmidt. Separately Kleiner Perkins, a venture capital
firm that helped Google raise capital filed to sell 5.78
million shares. Kleiner Perkins bought the shares for 
49 cents each in the early stages of Google financing. 
Definitely a windfall and I definitely don't fault them
for selling. It is not real money until it is converted
to cash. 

We are just over a week away from a massive injection
of liquidity into the market and everybody should be
planning for the bounce. On December 2nd Microsoft will
pay out $32 billion in the form of a $3 per share dividend.
According to the pencil pushers who analyze these things
at least 40% will be put back into the market within a
week. That 40% ($12.8 billion) is the portion owned by
funds that automatically reinvest all dividends. Another
20% will hit the market over the next week from those
funds that are discretionary in reinvestment. $3 billion
will go to Gates and he is giving it to charity. That
leaves $9 billion that will be paid to individual 
shareholders. Much of that will already be spent at the
mall on plastic the weekend after Thanksgiving. Some 
will be reinvested in stock but estimates are for less
than 50%. Using just the fund numbers at $19 billion 
going back into stocks over a two week period between 
Dec-2nd and 17th the market should be floating on some
major liquidity. That $19 billion is in addition to the
normal cash inflows during December. It should be a 
merry Christmas for everyone. 

Unfortunately we still have to get past Monday. If the
Friday drop was just knee jerk reaction, sell stops and
option expiration then Monday should be a consolidation
day. Bulls will stagger to their feet, look cautiously
around and start to move back up the hill before the
close of business. Remember, funds will want to be in
the market before that big liquidity balloon hits on
Dec-2nd. This should cause them to buy the dip as well
but I am sure there will be a lot of consternation at
the open on Monday. Was the drop on real worry or just
an imagined problem? Each fund will want somebody else
to make the first buy and everybody will be looking for
confirmation we are not going lower. There will be 
opening volatility from option settlement and we need
those ripples to fade before wading back into the water.
Those traders waking up with a hole in their account
from being called away or suddenly finding stock in
their account they did not expect will rush to adjust
positions back to level. If a trader sold 10 contracts
of the $55 puts on TASR thinking he would capture the
$4 premium from out of the money options last week then
you may be surprised to find 1000 shares of TASR in your
account on Monday. That would set you back about $52,000
and crimp your trading style until you unloaded that 
stock. TASR dropped -$6 on Friday. Moral to that story 
is always have stops in place. That is the kind of option
settlement adjustment that normally keeps OpEx Mondays 
from being too directional.

If next week does not finish higher I would be surprised.
The last five years have seen some major moves before
and after Thanksgiving with Friday having the better
chance of a positive finish than the beginning of the
week. In 2002 the Tuesday before saw a -173 point drop
and Wednesday saw a +255 point gain. Volatility has been
strong and we are coming out of a string of negative days
early in the week that started in 1998. With the bear
market behind us we are due for a positive bounce. Last
year the week before Thanksgiving was terrible with the
Dow losing about -250 points to a Friday close at 9628.
Beginning on Monday with a +125 point gain the holiday
week was bullish and it was also the beginning of the
strongest eight weeks of the year with the Dow topping
out at 10701 on Jan-26th. The +1000 point romp was the
finishing sprint to a market that had already rebounded
from the March lows at 7416. After tacking on +2200 points
in the prior eight months the November dip set the stage
for another +1000 points with hardly a down day for the 
rest of the year. Will that happen in 2004? Nobody knows
but the Friday drop came at exactly the right time to 
clear the profit stops and let new money back into the 
game. 

Dow Chart - Thanksgiving 2003



Personally I am looking forward to the next six weeks
and I hope we see a repeat of 2003. All the bad news is
behind us and according to most analysts there are good
times ahead. Maybe not boom times but a good environment
for good stocks to prosper. I believe this lure of a
promising future will continue to attract money into 
the market until year end. Once past the year-end is
where the mystery begins again. Until then continue to 
buy the dips above Dow 10350, SPX 1160. If those levels
break then all bets are off and Santa may not be coming
to the markets this year. 

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Sell Too Soon!

Jim Brown


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

WHAT ME WORRY
By Leigh Stevens
lstevens@OptionInvestor.com 

THE BOTTOM LINE – 
Except for a few voices crying in the wilderness, the powers that 
seemed to have had a "what me worry" or at least silent attitude 
to our ballooning trade deficits, with its risk of an ever 
falling dollar. Voices in the wilderness no more when Chairman 
Greenspan spoke in his authoritative voice Friday, that our 
monster trade deficits risk cutting foreign demand for dollars – 
or, better to say dollar denominated assets. Namely, all those 
government IOU's (bonds) financing our burgeoning debt. 

Greenspan's comments started the inevitable reversal on Friday to 
a market that had gotten overheated. Sentiment had also gotten to 
the bullish extremes associated with market corrections.  

When the Chinese and the like see that their U.S. dollar assets 
are steadily loosing value, they can increase euro and yen 
buying. The falling dollar is inflationary as what we pay for 
imports rises. The danger then becomes the Fed having to tighten 
more and raise rates to choke off inflation and to make it more 
worthwhile for foreigners to keep buying U.S. T-bills and Bonds. 

The U.S. trade deficit is closing in on 6% of GDP, the most ever. 
So far, the U.S. has financed that gap by attracting foreign 
investment into its assets. Some $3-5 billion is needed each day 
to offset our current accounts deficit. Any abrupt reversal of 
these flows risks significant damage to the dollar and the U.S. 
economy. 

What does all this mean to opportunities in index options? Not 
much as long as there are trends to trade. But these conditions 
may make the current market advance shorter-lived (e.g., months, 
not years) than would otherwise be the case and start another 
bear market at some point.     

FRIDAY'S CLOSING NUMBERS – 
The S&P 500 Index (SPX) closed down 13.2 points to 1,170.3 and 
posted a weekly loss of 1.2%. The Dow 30 Average (INDU) had it 
biggest daily loss in a couple of months, ending down 115.6 
points (-1.1%) to 10,456.9. INDU was off 0.8% for the week.

The Nasdaq Composite Index (COMP) fell 33.6 points (-1.6%) to 
2,071 and down 0.7% for the week. COMP of course was pressured by 
the fall in the semiconductors and pressure on the SOX index.  

FRIDAY'S TRADING  – 
The market was off sharply.  The Dow 30 (INDU) ended with a 
triple-digit loss, erasing its gain for the week, after Federal 
Reserve Chairman Alan Greenspan's remarks about the dangers of 
current account deficits sent the dollar on a renewed fall amid 
concern about higher inflation and rising interest rates. A surge 
in oil prices, sparked by renewed worries about tight supply, 
created additional bearish sentiment. Volume was heavy, and 
another influence on the market was expiration of options, index 
options and futures contracts – a triple-witching day.

As they say, the Fed (the U.S. Federal Reserve Bank) starts the 
(economic) party and keeps it going with low interest rates, then 
takes away the punchbowl at some point – opps, party over!  

The dollar had stabilized to start the global trading day on 
Friday, even rallying after the Bank of France said it would use 
proceeds from selling gold over the next five years to boost its 
currency reserves. The currency (FX) market viewed this as a 
signal reserves would be used to counter a rising euro. 

FX traders were hoping for clues on the likelihood of 
intervention to slow or stop the dollar's decline in order to 
preserve the export position of U.S. trading partners – this, 
when officials of the world's largest 20 economies converge in 
Berlin this weekend.

However, (here's goes the punchbowl!) Alan Greenspan said Friday, 
in remarks to a conference on the euro, that the impact of 
intervention is seldom long lasting. The dollar's slide 
accelerated as Greenspan spoke: "It seems persuasive that, given 
the size of the U.S. current account deficit, a diminished 
appetite for adding to dollar balances must occur at some point". 
(I can hear him saying it, in that amazing but so dry way he has 
of speaking!) But he also said it was impossible to know when, or 
at what level, the dollar would lose its luster among the global 
currencies.  Stay tuned on that. 

Hey, there's always an excuse that comes along to take some 
profits off the table.  Over the last month, the S&P 500 (SPX) 
has gained just over 8%, the Dow (INDU) about 8 and half percent 
and the Nasdaq has 10%.  Investors are usually happy to have an 
annual 10% appreciation.

STOCKS AND OTHER STORIES – 
Disney (DIS) shares were a bright spot on the Dow after the 
company reported higher income and sales for the fourth quarter. 

Pharmaceutical stocks were back in the spotlight as an internal 
spat at the Food and Drug Administration left investors unclear 
on what might grow out of a controversy over the safety of a 
number of drugs. Pfizer (PFE) was off nearly 2%, while Abbott 
Labs (ABT) 1.4%.

Oracle (ORCL) was in the news again as its hostile takeover bid 
for PeopleSoft (PSFT) gains momentum in the run-up to the 
expiration of its $9.2 billion hostile tender offer. Around 37% 
of PSFT's stock has been tendered in favor of the $24 per share 
offer, and PeopleSoft itself has warned employees a majority of 
its stockholders may well accept the deal. ORCL was off 1.7% and 
PSFT was up 1.1%. 

In other mergers/acquisition news, TheStreet.com (TSCM)'s stock 
rallied over 10% on speculation that the company may be for sale 
on the heels of the $520 million buyout of MarketWatch by Dow 
Jones & Co (DJ) and my old company. 

And, an old competitor, Reuters Group (RTRSY), denied reports 
that the company was in formal talks to sell its majority stake 
in Instinet Group (INGP).  

Semiconductor equipment makers were under selling pressure after 
Goldman Sachs moved its opinion on the sector to "cautious" from 
"neutral," reflecting expectations that the industry will have to 
correct for excess capacity built during the upturn.  The Philly 
Semiconductor Index (SOX) was off 13.7 points, closing at 431.8, 
failing I might add to hold above its 200-day moving average 
after closing above this key average on Thurday.

Goldman downgraded Applied Materials (AMAT) and Advanced Energy 
Industries (AEIS) to "underperform" from "in line" and both 
stocks were off.  Advanced Micro Devices (AMD), ATI Technologies 
(ATYT) and Volterra Semiconductor (VLTR) were also downgraded. 
Goldman cut Micron Technology (MU) rating down a notch also. 

Only National Semi (NSM) was raised in Goldman's estimation -- to 
"outperform" (from "in line") – with their analyst saying that 
job growth will lead to increased demand and some upside for 
NSM earnings. 

OTHER MARKETS –
The dollar fell on Greenspan's comments.  The euro broke out over 
1.30, to $1.3056, up 0.8%. The Pound was also up, adding 0.5% to 
$1.8581. Against the yen, the dollar fell to a 4-1/2 year low, 
down some 1%, to 103.32.

Gold futures closed at a high not seen since mid-1988, up nearly 
$9 an ounce for the week, as the falling dollar made the yellow 
metal more attractive as an investment – gold being another 
alternative to going into paper assets, whether Euro, Yen, 
Sterling or Swiss francs. 

Oil prices rallied to the highest level since earlier in the 
month on renewed threats to global supplies emerging from Russia 
and Iraq – is this ever going to end! Concern over winter heating 
oil supplies and worries over the possibility the OPEC approving 
a production cut next month contributed to the rally. 

The December crude oil contract closed up $2.22, at $48.4 a 
barrel, up $1.12 or 2% for the week. As of Friday January futures 
become the lead-month contract and was up $2.51 to $48.9.

T-bonds fell sharply after comments from Greenspan to the effect 
that investors not ready for higher interest rates are looking to 
lose money. Well, that's pretty clear! The 10-year note was off 
25/32 to 100 11/32, to yield 4.2%

MY INDEX OUTLOOKS – 

S&P 500 Index (SPX) – Daily chart:
My upper trading band or percent envelope on the S&P 500 (SPX) 
reverts back to a more "normal" 4% - on average, the S&P trades 
within 3-4% above or below its 21-day moving average (at most, 
out to 5%).

I thought that SPX could reach the 1200 area before a correction
 set in and this level is my expected major resistance, with near 
resistance at 1185. If those highs are retested, I don't think 
the index will churn through there again in the near-term, so 
will be looking to buy puts for a trade. 

As to support - buying interest is likely to develop around 1160-
1162, at the low end of the prior flag pattern or the low end of 
where prices backed and filled before the last and failed, 
breakout – a rally "failure" in the sense that the move was 
lower, not higher with the trend. Next lower support is 
anticipated around 1150, then at 1142, which is the lowest I see 
it going.  For the S&P to break out above the high end of a 
multi-month trading range and then fall back into the range is 
the least likely occurrence – could happen but it's not likely.  



My maximum objectives to the 1200-1210 area mentioned last week 
were not realized and the downside penetration of the lower end 
of the consolidation suggests an interim top or a peak for a 
while.  This past Monday's call-put, indicating a bullish 
extreme.  Such extremes usually occur 1-5 trading sessions before 
downside reversals, so that it came on Friday is in line with 
historical norms for my indicator. Moreover, the readings for the 
rest of the week (except Friday) kept pulling the 5-day average 
up about as high as this indicator gets without a correction 
setting in as seen in the lower portion of the above SPX chart.  

S&P 100 Index (OEX) – Daily chart:
So close yet so far to the cluster of prior tops (dashed line) 
from early this year. As with the S&P 500, my expectation of the 
S&P 100 (OEX) hitting a 5% (573-575) target above the 21-day 
average was too bullish of a case. However, a natural "target" in 
a move like this is always for a re-test of the prior top and 
that's likely to be ahead yet. Like the SPX already has done, I 
look for an eventual new 12-month high.  I suggest call purchases 
in the 550-547 area if reached.    

Such a retest looked possible but, as is not uncommon in very 
strong moves where the underlying earnings trends are not yet as 
strong as price action, prices got ahead of the facts on the 
ground so to speak.

I would say the same thing as the prior week about support likely 
to come in around 555, then 550, at the 21-day average, then at 
just a bit below at 547-546.



OEX got finally registered enough of an overbought extreme, at 75 
in the RSI, to signal a rest.  

Dow 30 Average (INDU) - Daily: 
The rally failed in the area of the April top in the Dow 30 
(INDU).  I previously pegged resistance as in the 10570 area and 
this was pretty close to where INDU reversed. Eventually, I 
anticipate a move to the 10700 area but after some backing and 
filling. 

I've got support identified (green arrow) around the prior top at 
10363 – resistance, once exceeded, tending to become new support.  
The 10100 area is key technical support, with some likely buying 
interest around 10200.  Somewhere in this zone (10100-10200), 
after some flip-flopping around should be come a good call buying 
opportunity.    

 

I don't call tops based on falling (NYSE) daily up volume, as 
measured by a 10-day moving average, the way bottom/buy signals 
are suggested when this average falls to a "baseline" (see the 
series of green up arrows above).  But, since volume tends to 
"precede" price, this falling average and best measure of buying 
strength, was in retrospect suggesting the rally had limited 
upside.  

Nasdaq Composite (COMP) Index  – Daily chart:
The Nasdaq Composite (COMP) hit my 2100 objective and just a bit 
over, then reversed at the point where it seemed that sellers 
would have an interest in exiting some of their stock, and 
shorting too, on the first "bad news" event. After all the run up 
was very steep and the last I looked we are not back in the 
'90's! 

I peg near support around 2030-2033 still, with more key lower 
technical support in the 1950 area at the up trendline.  A move 
back down to this area would put COMP back at the rate of change 
or ascent that it was in before the steep upside acceleration 
that started late-Oct. Steep trendlines like this are more 
characteristic of a falling trend (they slide faster than they 
glide!) than it is of a rising trend most often unless in a 
runaway bull phase. 



In a sign of the renewed upside momentum, for only the second 
time this year (the first being in early-April), COMP's 50-day 
average has achieved a bullish upside crossover of the long-term 
200 day moving average.  We'll see if this continues, but it is a 
milestone worth noting.  

Nasdaq 100 (NDX) Index  – Hourly:
The Nasdaq 100 (NDX) has been trading more or less within an 
uptrend channel in the hourly chart dating from August. Recent 
closing hourly highs reversed from resistance implied by the top 
end of this channel. I think NDX has to drop further before it 
take a further run up toward the top end of this channel.  
Whether support in the 1520 area will contain any decline is a 
further question.  

A pullback to the 1500 area currently, or to its intersection a 
bit higher (e.g., 1505-1510) over time, would test the lower end 
of this channel – assuming either or both of these expected 
support areas bring in buyers, it will offer an opportunity to 
jump into calls at that point.  

Until lower levels are seen I am no hurry for bullish plays such 
as buying calls. If long puts from the area of the double top 
around 1575-1580, I suggest staying with them. A daily close over 
1580 would be an exit (stop) point for me. 

I previously suggested exiting calls and going into December puts 
if NDX got up to the 1600 area – close but now cigar.  However, 
it there was a move that developed in the next 2-3 sessions that 
broke out above 1580 and carried up into that area – this 
suggestion still stands.  And give thanks for would be a nice  
opportunity I think – and Happy Thanksgiving too!



There's now more room on the upside for the 21-hour RSI before 
it's at an oversold extreme, which has been occurring when it got 
to the 35-30 area.   

Nasdaq 100 tracking Stock (QQQ) Daily chart:
39 was my upside objective on QQQ – then at the week wore on I 
thought it could get higher than this before coming down again.  
The move to a new high, followed by a fairly immediate downside 
reversal (a "bull trap" reversal) is bearish.  A daily close back 
above 39 would say otherwise.  

Support is anticipated first at 37.75; then, if exceeded, around 
37.25-37 at the rather steep up trendline.  If the Qs dip under 
36.75 on a closing basis, it suggests that the trend will 
moderate to a more gradual advance.  

As long as QQQ holds above the cluster of prior lows in the 
35.25-35.40 area, the uptrend is still intact. Buying on 
pullbacks that hold this area, which retraces about half of the 
prior rally, looks promising for a longer-term buy of the stock.  



QQQ got quite overbought and is often the case in very strong 
rallies, it was the second reading at 75 which was the point to 
look for shorting/put buy opportunities.    

Volume in the stock was not as strong as in the earlier phase of 
the rally, but the OBV line continues to show that the better 
volume was coming in on up days, so has kept mildly bullish.  

Good Trading Success!



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**************
Editor's Plays
**************
Time to Roll the Dice

With Thanksgiving week upon us and the Microsoft 
dividend event a little more than a week away I feel
it is time to take a little more risk. 

I believe the dividend event will provide some serious
market liquidity in a time that is normally bullish in
normal years. This extra liquidity to the tune of $19
billion in reinvestment cash could go a long way toward
pushing the Dow over its 10750 resistance high.

This is a simple play. Go long.

I am suggesting using the January DIA options for this
play. Pick the one you can afford and go long 1/2 position
on Monday. Should the Dow drop to 10400 I would go long
another 1/2 position. 

My profit target will be 10800 and above. I do not want
to set a firm exit just in case we really get a post
Thanksgiving rally. Most analysts are targeting 12000
for the end of year print but I think they are on drugs.
I would be thrilled to see anything over 11000 and 11500
would make me delirious. But an extra $19 billion in
MSFT liquidity in December could work wonders. 

Here are some sample options:

Jan-$105 call DIA-AA currently $2.10
Jan-$106 call DIA-AB currently $1.60
Jan-$107 call DIA-AC currently $1.20
Jan-$108 call DIA-AD currently $0.80

Obviously if we were really going to see something over
11,000 then any of those options would be wildly profitable.
At 11,000 this would be the approximate values. It would
depend on how quickly we reached 11K. The sooner we get
there the more they are worth. If it takes until Jan-1st
then they are only worth whatever is in the money. 

$105 = $5.70 +171%
$106 = $4.90 +206%
$107 = $3.75 +212%
$108 = $3.00 +275%

What option you choose depends on how much you can afford
and whether you want to spend $2 to make $5.70 or spend
80 cents to make $3. 

You also have to factor in the risk. Those numbers only
work if the Dow hits 11000. If it stops somewhere between
10500-10800 then the $108 option could expire worthless
while the $105 option would be worth $3.00 at 10800. 

This type of scenario always makes it tough to answer
new traders when they ask "If I buy options on XYZ how
much money will I make?" It all depends on what option
you buy and what happens to XYZ. As you can see from
the above example you could make 50% with the $105 and
lose it all with a $108 if the Dow stops at 11799. 
(numbers not exact but you get the idea) 


Go LONG 1/2 position on Monday.
Go LONG another 1/2 position with a drop to 10400.

Stop loss 10300

DIA Chart




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

Google Puts $169.40 ($168 in after hours)

Tuesday GOOG fell back through 175 and triggered our
reentry into the March puts. On Tuesday 39.1 million
new shares were available for sale and that weighed on
the stock but support just under $170 continued to hold.

Google insiders filed with the SEC late Friday to sell
16.6 million shares. 7.2 million each for Larry Page
and Sergey Brin and 2.2 million shares for CEO Eric
Schmidt. Separately Kleiner Perkins, a venture capital
firm that helped Google raise capital filed to sell 5.78
million shares. Kleiner Perkins bought the shares for 
49 cents each in the early stages of Google financing. 
Definitely a windfall and I definitely don't fault them
for selling. It is not real money until it is converted
to cash.

The stock traded down to $168 in after hours but with
the news not hitting the street until just before 6:PM
there was nobody left to read it. Monday will be the
key. If the news forces a break under $167 then we 
could begin to see that support crack. I am amazed
that only eight million shares of GOOG traded on Friday.
That is half the volume from earlier in the week. It
appears the newly released shares are still being held
in hopes of seeing a rebound. 

GOOG Chart



http://members.OptionInvestor.com/editorplays/edply_110704_1.asp
http://members.OptionInvestor.com/editorplays/edply_111404_1.asp

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

MRK Put $26.45   

** Stop $28.00 ** (lowered)
** Target $20.00 ** 

We came very close to being stopped out on Wednesday 
as the dead druggist tried to bounce. Unfortunately 
for MRK the news just keeps getting worse. I am going
to hold it one more week in hopes of getting some
downward movement but with this stock recovering in
the face of really bad news I am beginning to think
we close it and take our profits. 

Jan-2006 $25 LEAP Put WMR-ME cost $1.70, currently $2.75

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

MRK Chart


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

XMSR Call $35.01   ** Profit Target Hit **

We finally got the breakout over $34 and it blew right
through our profit target at $35. Hopefully some of my
readers did not have a hard exit and managed to capture
the extra +$1.00 in profits.  

I logged the exit at $35 on the 16th but as you can
see below the options continued much higher. Chalk this
one up a winner and a closed play. 

JAN-$30 Call QSY-AF cost 2.75 exit $5.80 high $7.10
JAN-$32 Call QSY-AZ cost 1.75 exit $4.10 high $5.00

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

XMSR Chart




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

PVN Call Update $15.59  ** Play Closed **

PVN set a new 52-week high on Monday and then imploded.
The stock fell on news of the American Express suit 
against MasterCard and Visa as well as eight other 
banks including Providian in a blanket suit against
all the major credit card issuers. While I do not
expect AXP to win and neither does MC/V or the rest
of the banks it will be a drain on efforts and expenses.

I am recommending an exit on the PVN play which as of
the close on Friday was trading exactly where we entered
at $1.05. 50% of the value was lost this week once the
suit was announced. The option was trading at $2.20 on
Monday when PVN set a new 52-week high. 

This play is closed.

Jan-$15 Call PVN-AC cost 1.05, currently $1.05

Initial recommendation:
http://members.OptionInvestor.com/editorplays/edply_061304_1.asp

PVN Chart




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

OptionInvestor.com - market sentiment –     November 21st , 2004
-----------------------------------------------------------------

Finally!
- J. Brown

Finally!  We've been waiting for a dip in the markets for days 
and it finally appears to be happening.  Stocks were down across 
the board on Friday save for energy and gold stocks.  The bounce 
in oil did not help investor sentiment.  Crude had been trading 
at four weeks lows and looked ready to breakdown under its simple 
100-dma.  Yet oil turned higher on Friday with a 4.8 percent 
rebound.  It could just be an oversold bounce.  We'll have to 
watch and see.  

Meanwhile comments over the U.S. dollar also promoted more profit 
taking in stocks.  If the dollar continues to weaken then 
commodity prices in the U.S. will continue to rise, which will 
promote inflation throughout the economy.  

One could easily argue that the two big picture pressures 
mentioned above are just excuses to sell.  Stocks have been so 
overbought and extended it was past time that equities did some 
consolidating.  Yet the brokers were not helping matters.  
Goldman Sachs downgraded the semiconductor sector and BAC started 
coverage on Amazon.com (AMZN) with a "sell" rating.  Plus, there 
was talk in Washington surrounding the FDA and speculation over 
its recent failures and how it could be more effective.  This put 
pressure on biotech and drug stocks again.

Market internals were naturally very bearish with decliners 
outpacing advancers 5-to-2 on the NYSE and 2-to-1 on the NASDAQ.  
Down volume was more than 3 times up volume on the NYSE and over 
twice the up volume on the NASDAQ.  

Overall I'm not concerned.  We've been waiting for this pull back 
for days.  There are a lot of investors out there just looking to 
buy the dip.  The real question is how deep will the dip go?  
Keep your eyes and ears open this week it should provide the sort 
of bullish entry point we're looking for into the rest of the 
fourth quarter.

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

Market Averages

DJIA ($INDU)

52-week High: 10753
52-week Low :  9585
Current     : 10456

Moving Averages:
(Simple)

 10-dma: 10478
 50-dma: 10161 
200-dma: 10244 



S&P 500 ($SPX)

52-week High: 1188
52-week Low : 1031
Current     : 1170

Moving Averages:
(Simple)

 10-dma: 1174
 50-dma: 1132
200-dma: 1121



Nasdaq-100 ($NDX)

52-week High: 1581
52-week Low : 1301
Current     : 1552

Moving Averages:
(Simple)

 10-dma: 1548
 50-dma: 1465
200-dma: 1440



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

CBOE Market Volatility Index (VIX) = 13.50 +0.52
CBOE Mkt Volatility old VIX  (VXO) = 14.60 +0.65
Nasdaq Volatility Index (VXN)      = 19.72 +0.93 


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

          Put/Call Ratio  Call Volume   Put Volume

Total          0.81      1,356,899     1,098,849
Equity Only    0.52      1,161,274       603,669
OEX            1.33         55,717        74,080
QQQ            1.07         59,286        63,654


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

Bullish Percent Data

           Current   Change   Status
NYSE          72.5    + 0.3   Bear Correction
NASDAQ-100    75.0    - 1     Bull Confirmed
Dow Indust.   63.3    + 0     Bull Confirmed
S&P 500       72.8    - 0.2   Bull Confirmed
S&P 100       70.0    - 1     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: 0.89
10-dma: 0.95
21-dma: 0.92
55-dma: 1.00


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     817       967
Decliners    2011      2061

New Highs      88        69
New Lows       12        14

Up Volume    448M      628M
Down Vol.   1432M     1353M

Total Vol.  1891M     2005M
M = millions


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

Commitments Of Traders Report: 11/16/04


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

For the first time in weeks the commercials are making a move.  
They upped their short positions days before the recent decline.
Meanwhile small traders remain marginally net bullish.

Commercials   Long      Short      Net     % Of OI
10/26/04      441,263   445,992   ( 4,729)   (0.4%)
11/02/04      446,192   441,676   ( 4,516)   (0.4%)
11/09/04      447,779   449,171   ( 1,392)   (0.1%)
11/16/04      452,149   468,048   (15,899)   (1.7%)

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
10/26/04      138,201   121,275    16,926     6.5%
11/02/04      136,290   132,040     4,250     1.5%
11/09/04      148,415   136,325    12,090     4.2%
11/16/04      166,862   156,751    10,111     3.1%

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

Commercials traders also piled on the shorts in the e-minis
to produce the most bearish reading in weeks.  Small traders
also put more money to work but remained strongly net bullish.


Commercials   Long      Short      Net     % Of OI 
10/26/04      276,128   509,552   (233,424)  (29.7%)
11/02/04      307,053   580,081   (273,028)  (30.7%)
11/09/04      337,164   672,903   (335,739)  (33.2%)
11/16/04      371,282   796,279   (424,997)  (36.4%)

Most bearish reading of the year: (354,835)  - 06/17/03
Most bullish reading of the year:  133,299   - 09/02/03

Small Traders Long      Short      Net     % of OI
10/26/04      345,908     64,061   281,847    68.7%
11/02/04      395,029     63,746   331,283    72.2%
11/09/04      392,253     58,999   333,254    73.8%
11/16/04      445,737     70,169   375,568    72.8%

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


NASDAQ-100

Commercials added to both their longs and their shorts but
saw no change in their bullish bias for the NDX.  Small traders
pared back some of their shorts but remained strong net bearish.


Commercials   Long      Short      Net     % of OI 
10/26/04       53,233     31,323    21,910   26.2%
11/02/04       53,002     31,231    21,771   25.0%
11/09/04       54,509     33,016    21,493   24.5%
11/16/04       55,737     33,683    22,054   24.6%

Most bearish reading of the year: (21,858)  - 08/26/03
Most bullish reading of the year:  25,160   - 06/01/04

Small Traders  Long     Short      Net     % of OI
10/26/04       10,521    25,388   (14,867)  (42.8%)
11/02/04        8,886    36,621   (27,735)  (61.3%)
11/09/04       10,213    38,251   (28,038)  (57.8%)
11/16/04       10,533    37,660   (27,127)  (56.2%)

Most bearish reading of the year: (28,038) - 11/09/04
Most bullish reading of the year:  19,088  - 01/21/02

DOW JONES INDUSTRIAL

Given the latest data as of 11/16/04 it looks like commercials
were beginning to bet on a pull back.  There was a reduction
in longs and an increase in shorts to create the first bearish
reading in weeks.  Small traders also increased their bearish
bias.

Commercials   Long      Short      Net     % of OI
10/26/04       25,707    24,855      852       1.6%
11/02/04       25,319    24,261    1,058       2.0%
11/09/04       22,863    22,463      400       0.8%
11/16/04       22,004    23,744   (1,740)     (3.8%)
 
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
10/26/04        8,405     6,336    2,069     14.3%
11/02/04        7,952     6,306    1,261      8.8%
11/09/04        6,165     6,483    ( 318)   ( 2.5%)
11/16/04        5,937     6,533    ( 596)   ( 4.7%)

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

Is heating oil the leading indicator?

Fantastic work this week Jeff!  I learned a lot and profited from  
your comments regarding the divergence you thought you saw 
between heating oil and oil this week.  I trade crude oil futures 
long and short, as well as the major equity indices call and put.  

I have two questions.  Is QCharts the only charting package with 
daily and weekly pivot levels?  My second question is why would 
heating oil be a leading indicator for a higher or lower trade in 
crude oil.

Also, I really like the way you tied in the point and figure 
chart of crude oil.  I hope you'll keep including them in your 
updates.  

Reply:

I don't know if other charting packages offer the same feature of 
calculating and displaying the daily and weekly pivot analysis 
levels.  I'll ask other traders that are reading today's column 
to respond if you (the reader) know of other charting packages 
that offer this powerful tool as part of their service.  

If a trader does respond, I'll update traders in future updates.

Why may heating oil be a "leading indicator" for crude oil price 
direction?  

I'm not quoting a futures trader that was interviewed on CNBC 
exactly, but his comments, which I further researched, was that 
as long as distillate inventories were low (heating oil is 
derived from distillates) it would most likely have oil holding 
up.  The trader stated that roughly 25% of a barrel of oil is 
used for distillate production and since you had to produce, or 
draw down crude oil inventories in order to produce heating oil, 
then with winter approaching in the northern hemisphere, oil 
prices would likely remain high.

Consumers, especially in the northeastern U.S. will probably not 
be out driving as much as they might in the warmer months of 
spring and summer, and this will allow refiners to concentrate 
some of their refining toward heating oil, than unleaded gas, but 
I would still think that the difference in a refining shift from 
unleaded gas to heating oil wouldn't be all that much.

The trader was correct that 25% of a barrel of oil is used in the 
refining process to produce distillates.  Where we as traders 
become clueless is what "mix" of various distillates refiners 
decide to produce with that 1/4 barrel of oil.

As you know.  I always like to test against what I hear or read.  
I like to know that what I'm being told is true, and not just 
some idea that can't at least be tested against.

Here's a top/bottom comparison of December Heating Oil futures 
(ho04z) and December Crude Oil futures (cl04z).  While I used the 
weekly pivots to alert traders that oil might be due for a 
bounce, traders will also be able to pick up on some of the 
DIVERGENCE that had heating oil rising, while crude oil seemed 
relatively unchanged.

Boom!  On Friday 11/19/2004, December Crude Oil futures (cl04z) 
$48.44 +4.8% jumped more than $2.00.  The S&P 500 Index (SPX.X) 
fell 1.11%.  

December Heating Oil/Crude Oil Comparison - 30-min. intervals



In late October, I was focused more on the point and figure chart 
of crude oil as well as weekly inventory figures from the EIA.  
But as I study the relationship between the Heating Oil (top) and 
Crude Oil (bottom), I can see some very subtle differences.

At the top of each bar chart, I make the note "very subtle" as 
upon further study, I do see how a very similar spike higher on 
October 27 (a Wednesday, when the EIA reports inventory data) the 
heating oil chart traded a slightly lower high.  See how the 
Crude Oil (bottom chart) traded an equal high?  That is a VERY 
subtle bit of divergence.  If heating oil is a leading indicator, 
then perhaps I should have picked up on that back then.

There are some great similarities as to how heating oil and crude 
oil have traded relative to their simple moving averages.  See 
how heating oil did spike above its 50-pd (blue) SMA to test its 
WEEKLY Pivot of 1.404 on November 10?  The Crude Oil chart shows 
a kiss of its 50-day SMA, turned lower the next morning.

It wasn't until late Wednesday evening that I really started 
looking at the relationship between the Heating Oil and Crude Oil 
charts, where it was their trade relative to the WEEKLY Pivot 
levels that really caught my attention.

See how Crude Oil seemed to double bottom right at its WEEKLY S2 
on Monday and Wednesday morning?  That was also right where the 
Crude Oil point and figure chart had its rising bullish support 
trend at.

Hmmmm..... that's when I pulled up the heating oil chart and 
noticed that heating oil had settled up at its WEEKLY R1, while 
Crude Oil was still just above its WEEKLY S1 and still well below 
its WEEKLY Pivot of $47.98.  

More important perhaps is that this trade observation what AFTER 
the weekly EIA inventory figures had been released, and market 
participants were now digesting that information, and making 
their buy/sell decisions on a forward basis.

One can perhaps begin to understand how the WEEKLY Pivot levels 
had help a trader.  But only if you believe that institutional 
computers may be trading these levels.

The focal point would be where Heating Oil breached its 50-day 
SMA, but most likely found too many sellers outnumbering buyers 
at its WEEKLY Pivot of 1.404.

Final analysis at this point is that a DECLINE in Crude Oil is 
probably only going to be found from a VERY subtle amount of 
DIVERGENCE from heating oil, but a RISE in Crude Oil will find a 
more NOTABLE sign of strength.

Now.  I would have to think that as winter sets in, refiners are 
really going to be pumping out the heating oil.  Be aware of this 
in future EIA weekly inventory reports.  

I (you and I) may then want to also begin monitoring unleaded gas 
inventory figures, as well as their futures charts.

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

BRCD Brocade Commun.      Mon, Nov 22  After the market     0.06
CPB  Campbell Soup        Mon, Nov 22  ----- n/a -----      0.52
FRK  Florida Rock Ind.    Mon, Nov 22  Before the bell      0.65
KKD  Krispy Kreme         Mon, Nov 22  Before the bell      0.13
TIVO TIVO Inc             Mon, Nov 22  ----- n/a -----     -0.44
TOY  Toys R Us            Mon, Nov 22  Before the bell     -0.15
VAL  Valspar              Mon, Nov 22  Before the bell      0.76

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

ADI  Analog Devices Inc   Tue, Nov 23  After the market     0.33
BMO  Bank of Montreal     Tue, Nov 23  ----- n/a -----      0.89
DE   Deere & Co           Tue, Nov 23  Before the bell      0.99
DLTR Dollar Tree Stores   Tue, Nov 23  Before the bell      0.28
EV   Eaton Vance          Tue, Nov 23  Before the bell      0.52
FRED Fred's               Tue, Nov 23  Before the bell      0.19
HRB  H&R Block            Tue, Nov 23  After the market    -0.16
HNZ  H.J.Heinz            Tue, Nov 23  Before the bell      0.59
MIK  Michaels Stores      Tue, Nov 23  After the market     0.30
MBT  Mobile Teleys        Tue, Nov 23  Before the bell      3.17
POSS Possis Medical       Tue, Nov 23  After the market     0.11
SEAC SeaChange Intl       Tue, Nov 23  After the market     0.12
TSA  The Sports Authority Tue, Nov 23  ----- n/a -----      0.02
TECD Tech Data Corp       Tue, Nov 23  After the market     0.55
JWL  Whitehall Jewellers  Tue, Nov 23  Before the bell     -0.53
WIND Wind River Systems   Tue, Nov 23  Before the bell      0.03
WWE  World Wresting Ent.  Tue, Nov 23  ----- n/a -----      0.13


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

HRL  Hormel Foods Corp    Wed, Nov 24  Before the bell      0.49
AHO  Koninklijke Ahold    Wed, Nov 24  Before the bell      n/a
PDCO Patterson Dental     Wed, Nov 24  Before the bell      0.32


------------------------- THURSDAY -----------------------------

BAY  Bayer                Thr, Nov 25  ----- n/a -----      n/a


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

no major earnings


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

Symbol  Company Name              Ratio    Payable     Executable

STJ     St. Jude Medical          2:1      Nov 22nd    Nov 23rd
TASR    TASER Intl. Inc           2:1      Nov 29th    Nov 30th
MSL     MidSouth Bancorp          5:4      Nov 30th    Dec 01th
SYMC    Symantec                  2:1      Nov 30th    Dec 01th
RYL     Ryland Group Inc.         2:1      Nov 30th    Dec 01th
ANNB    Annapolis Bancorp         4:3      Dec  3rd    Dec  6th
CAKE    Cheesecake Factory        3:2      Dec  8th    Dec  9th

-----------------------------------
Economic Reports & Events This Week
-----------------------------------

The Thanksgiving holiday week looks like a quiet one.  Q3 earnings
really taper off and most of the economic reports come out on
Wednesday before the holiday.


==============================================================
                       -For-           
----------------
Monday, 11/22/04
----------------
None


-----------------
Tuesday, 11/23/04
-----------------
Existing Home Sales for October


-------------------
Wednesday, 11/24/04
-------------------
Durable Orders for October
Weekly Initial Jobless Claims
Michigan Sentiment for November (revised)
Help Wanted Index for October
New Home Sales for October

------------------
Thursday, 11/25/04
------------------
U.S. Markets Closed - Thanksgiving Holiday


----------------
Friday, 11/26/04
----------------
U.S. Markets - Shortened Trading Day




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The Option Investor Newsletter                   Sunday 11-21-2004
Sunday                                                      2 of 5

In Section Two:

Watch List: Biotech to Semis and more!
Dropped Calls: LEH
Dropped Puts: None


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

Biotech to Semis 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.
___________________________________________________________________


Biogen IDEC - BIIB - close: 55.34 change: -2.18

WHAT TO WATCH: The market just started to show weakness on Friday 
but the BTK biotech index has been sliding for over a week now.  
The BTK has produced a double-top at the 540 level and the group 
looks prone to more selling.  BIIB, a biotech stock, has caught 
our eye because shares have fallen back to its trendline of 
support dating back to March.  If BIIB breaks down under the 
$55.00 level it could be a bearish entry point for a move to $50 
or lower. 



---

Maxim Integrated - MXIM - close: 42.58 change: -1.77

WHAT TO WATCH: Looks like we chickened too soon.  Goldman Sachs 
downgraded the semiconductor sector on Friday and the SOX lost 
more than three percent.  MXIM immediately turned south, which 
produced another failed rally at its simple 100-dma.  This looks 
like a new bearish entry point.  Yet we'd be careful and look for 
some follow through.  A drop under $42.00 or $41.50 might work as 
a new bearish entry point.  A move under $41 should produce a new 
P&F sell signal. 



---

Amazon.com - AMZN - close: 38.55 change: -1.82

WHAT TO WATCH: Bank of America does not have much positive to say 
over AMZN and the expected surge of online holiday sales.  The 
firm started coverage on AMZN with a "sell" rating and the stock 
dropped 4.5 percent on heavy volume.  Technicals are rolling over 
and its MACD is nearing another sell signal.  The P&F chart is 
already bearish and points to a $15 long-term target.  We could 
see AMZN sliding toward its October lows near $34.



---

Legg Mason - LM - close: 64.47 change: -2.18 

WHAT TO WATCH: The XBD broker-dealer index has been exceptionally 
strong but it looks like the pull back has begun.  With the group 
so overbought and extended the profit taking could be sharp.  
We're watching LM for a pull back to $62 or $60.  At $62 it's a 
38.2 percent Fibonnaci retracement of the October-November rally.  
At $60 it's a 50 percent retracement.  Nimble traders could short 
this stock. The P&F target at $68 has effectively been reached.




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

MCO $80.20 -0.99 - MCO is looking vulnerable to more profit 
taking.  Watch for the breakdown under $80 and a retracement 
toward the $76 level that's where we'd look for a bounce.

TTC $68.88 -1.66 - The market pull back has TTC slipping toward 
its trendline of support.  Watch for a bounce from $66-67.

SYMC $60.75 -1.06 - We're still watching SYMC for a breakout over 
$62.00 but it could be awhile if the market has to dip first.

AHC $82.79 +1.34 - The rally continues for AHC.  We'd consider 
longs here or on a dip above $80.00.  We'd add this to the play 
list but we already have too many oil stocks on the list.

APC $68.45 +0.32 - Here's another bullish oil stock worth 
checking out.


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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
^^^^^

Lehman Brothers - LEH - close: 81.64 chg: -1.70 stop: 79.95  

We knew the XBD broker-dealer index was overbought and extended 
so we expected the pull back would hit sooner or later.  Yet we 
didn't expect LEH to react quite so violently.  Round-number 
support at $80.00 and the simple 50-dma held up as support but we 
question LEH's relative strength.  Volume was very high on 
Friday's decline.  We believe that LEH will trade higher before 
the year's out but it could be a rocky road between now and then.  
We're electing to exit now and keep an eye on it for future entry 
points. 

Picked on October 26 at $80.60 
Change since picked:    + 1.04 
Earnings Date         09/21/04 (confirmed)
Average Daily Volume =     2.0 million 



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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**********

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The Option Investor Newsletter                   Sunday 11-21-2004
Sunday                                                      3 of 5

In Section Three:

Current Calls: SUN, SLB, QCOM, PTR, OSK, MUR, IBM, GDW, FDX, EOG,
		   EBAY, DHR, COP
New Calls: None
Current Puts: FRX
New Puts: None

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

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

ConocoPhillips - COP - close: 87.43 change: +1.17 stop: 81.99

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:
We were starting to wonder about COP lately.  The OIX oil index 
has been consistently suggesting it was ready to produce a 
bullish breakout the last few days but COP was slowly slipping 
lower.  Now the OIX index has broken out from its six-week 
consolidation and the OIX's MACD indicator has produced a new buy 
signal.  Over the last few months Jim has been discussing the 
future of oil and oil prices in his market wraps.  We feel that 
the oil sector is ready for another move up and its relative 
strength has been very encouraging if you're bullish on the 
group.  The oil group got a boost from crude oil prices on 
Friday, which surged 4.8 percent after testing support at the 
simple 100-dma the previous couple of days.  On Thursday Morgan 
Stanley reiterated their "buy" rating on COP following COP's 
analyst day on Wednesday.  On Friday Bank of America started 
coverage on COP with a "buy" rating with their belief that the 
integrated oil sector is undervalued.  Technical traders can also 
point to COP's point and figure chart with the bullish triangle 
breakout pattern and its $125 price target.  We are targeting a 
move toward $100 by year-end or the January options expiration.

Editor's note: We have a lot of energy and oil-related stocks
on the play list as bullish candidates.  We are not suggesting
you play all of them.  Individual traders should make sure 
they're not over exposed to any one sector.  Find which stocks 
you like best and make your pick.

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= 228 current ask $7.90
BUY CALL DEC 85 COP-LQ OI=1319 current ask $3.60
BUY CALL DEC 90 COP-LR OI=1255 current ask $0.95

BUY CALL JAN 85 COP-AQ OI=3289 current ask $4.70
BUY CALL JAN 90 COP-AR OI=3601 current ask $1.95
BUY CALL JAN 95 COP-AS OI= 715 current ask $0.60

Annotated chart:



Picked on November 03 at $85.50
Change since picked:     + 1.93
Earnings Date          10/27/04 (confirmed)
Average Daily Volume =      3.0 million 




---

Danaher - DHR - close: 57.67 change: -0.97 stop: 55.95 

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 got a boost on Wednesday after the Sears-Kmart deal was 
announced.  Sears is a big customer for DHR and the combined 
company of Sears-Kmart would provide a lot more stores for DHR to 
offer their product in.  While the news is encouraging and shares 
traded higher on Wednesday DHR looks susceptible to profit taking 
like the rest of the market.  Readers may want to do some profit 
taking of their own.  The $56.25-56.50 level should be support 
but a breakdown under $57.00 could suggest a retest to round-
number support at $55.00.  In essence, our stop loss may be too 
tight if you're going to ride out what we suspect is a dip next 
week.  

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

Annotated chart:
 

Picked on October 27 at $54.99
Change since picked:    + 2.66
Earnings Date         10/21/04 (confirmed)
Average Daily Volume =     1.3 million 



---

eBay Inc. - EBAY - close: 108.34 chg: -2.16 stop: 102.49      

Company Description:
eBay is The World's Online Marketplace®. Founded in 1995, eBay 
created a powerful platform for the sale of goods and services by 
a passionate community of individuals and businesses. On any 
given day, there are millions of items across thousands of 
categories for sale on eBay. eBay enables trade on a local, 
national and international basis with customized sites in markets 
around the world. Through an array of services, such as its 
payment solution provider PayPal, eBay is enabling global e-
commerce for an ever- growing online community.
(source: company press release)

Why We Like It:
Tighten those seatbelts!  We've been expecting a pull back in the 
market for days.  Now the dip appears to have begun.  If readers 
haven't done any profit taking yet in EBAY now might be a good 
time.  We're expecting EBAY to pull back toward the $105 region 
before finding support.  We remain very bullish on EBAY through 
now and the end of the year and a dip to $105 would be the next 
bullish entry point - just watch for signs of a bounce.  

Suggested Options:
We are going to suggest the December or January calls.
Watch for a dip before considering new positions.

Remember, these values should all fall as EBAY dips toward $105.

BUY CALL DEC 100 XBA-LT OI= 6671 current ask $10.30
BUY CALL DEC 105 XBA-LA OI=11217 current ask $ 6.70
BUY CALL DEC 110 XBA-LB OI=17630 current ask $ 3.90
BUY CALL DEC 115 XBA-LC OI=10115 current ask $ 2.10

BUY CALL JAN 100 XBA-AT OI=21884 current ask $12.40
BUY CALL JAN 105 XBA-AA OI= 8215 current ask $ 9.10
BUY CALL JAN 110 XBA-AB OI=12980 current ask $ 6.40
BUY CALL JAN 115 XBA-AC OI= 9868 current ask $ 4.40
BUY CALL JAN 120 XBA-AD OI= 4766 current ask $ 2.85

Annotated chart
  

Picked on November 80 at $103.69 
Change since picked:      + 4.65
Earnings Date           10/20/04 (confirmed)
Average Daily Volume =      10.4 million 



---

EOG Resources - EOG - close: 71.34 change: +2.05 stop: 64.99*new*

Company Description:
EOG Resources, Inc. is one of the largest independent (non-
integrated) oil and natural gas companies in the United States 
with substantial proved reserves in the United States, Canada, 
offshore Trinidad and, to a lesser extent, the U.K. North Sea
(source: company press release)

Why We Like It:
Looks like EOG is auditioning for "leader of the pack".  The XNG 
natural gas index broke out over resistance to hit new all-time 
highs on Friday.  The XNG's daily MACD indicator also reinforced 
its new buy signal.  EOG is seeing a very similar move.  Shares 
of EOG have broken their short-term downtrend of lower highs, 
broken resistance at $70.00 and closed at new all-time highs.  
EOG still has an intraday high at $72.48 but we expect shares to 
surpass it soon.  Chart readers will also note that volume was 
above average on Friday's gain, suggesting more strength ahead. 
The P&F chart continues to look very strong with the bullish 
breakout and $105 target.  Remember, our short-term target is 
$75.00 and our year-end target is $80.00. We are going to raise
our stop loss to $64.99.  Watch for a dip back to $70.00 or a
new high over $71.50 as a new entry point.

Suggested Options:
We are going to suggest the December and January calls. Between
the two we'd pick the Januarys.

BUY CALL DEC 65 EOG-LM OI= 430 current ask $7.10
BUY CALL DEC 70 EOG-LN OI=4600 current ask $3.30
BUY CALL DEC 75 EOG-LO OI=1662 current ask $1.15

BUY CALL JAN 65 EOG-AM OI=2964 current ask $8.10
BUY CALL JAN 70 EOG-AN OI=4668 current ask $4.90
BUY CALL JAN 75 EOG-AO OI=1390 current ask $2.40

Annotated Chart:


Picked on November 14 at $ 68.37
Change since picked:      + 2.97
Earnings Date           10/26/04 (confirmed)
Average Daily Volume =       1.1 million    




---

Fedex Corp - FDX - close: 94.05 change: -0.73 stop: 89.99    

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:
Hang on tight!  FDX looks ready to turn lower.  Fortunately, 
it's not too late to do some profit taking.  Shares of FDX, like the 
Dow Transports, have been exceptionally strong lately but both 
are extended and overdue for a pull back.  It would appear that 
the pull back is about to begin.  We are going to look for a dip 
to $92 but FDX could easily slip to $90.  That's why we're 
suggesting readers take some money off the table.  Traders 
looking for new entry points can sit back and wait for the dip to 
exhaust itself.  FYI: for the trivia fans out there FDX just 
released a statement that the company is celebrating its 10th 
anniversary of its website Fedex.com. 

Suggested Options:
We are not suggesting new positions at this time.  Wait for the
dip.

Annotated Chart:


Picked on October 21 at $89.45 
Change since picked:    + 4.60
Earnings Date         09/22/04 (confirmed)
Average Daily Volume =     1.5 million 



---

Golden West Fncl - GDW - cls: 115.60 chg: -3.06 stop: 114.99    

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:
Ouch!  What happened to GDW?  Yesterday shares fell under the 
$120 level but held at support near $118.00.  On Friday the 
sell-off continued with GDW falling more than three points on 
heavy volume.  Yet we can't find any news to support the decline 
other than sharp declines in the BKX and BIX banking indices.  
The $115 level should be support but we're not feeling optimistic 
here.  We would not consider new positions at this time.

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

Annotated Chart:


Picked on November 10 at $118.15
Change since picked:      - 2.55
Earnings Date           10/21/04 (confirmed)
Average Daily Volume =       583 thousand   



---

Intl Business Mach. - IBM - close: 94.45 chg: -0.65 stop: 89.99 

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:
Here we go!  We've been expecting IBM to roll over and 
consolidate its gains for days.  Over the last few days we've 
suggested readers take profits as IBM clearly painted a short-
term top.  Now the pull back has begun.  We're going to look for 
IBM to slip toward the $92-93 region before watching for a 
bounce.  When IBM does bounce it will be our new bullish entry 
point.  

Suggested Options:
We are not suggesting bullish positions at this time.  Readers
may consider doing some profit taking as we wait for the dip
to finish.

Annotated chart:


Picked on October 27 at $90.00
Change since picked:    + 4.45
Earnings Date         10/18/04 (confirmed)
Average Daily Volume =     4.7 million 



---

Murphy Oil - MUR - close: 80.91 change: +0.80 stop: 77.49

Company Description:
The Company, headquartered in El Dorado, Arkansas, was originally 
incorporated in Louisiana in 1950 as Murphy Corporation. It was 
reincorporated in Delaware in 1964, at which time it adopted the 
name Murphy Oil Corporation. But, the Company's roots go back to 
a lumber and banking business in South Arkansas and, more 
directly, to 1907, when the first oil production was established 
in the Caddo Field in North Louisiana. Thereafter, oil and gas 
were important phases of the business. 
(source: company website)

Why We Like It:
Is it over yet?  Last week we thought MUR was done consolidating 
and ready to begin its new leg up.  Looks like we were a little 
off on our timing but had the foresight to use a trigger to open 
the play.  Currently MUR is still untriggered and we're still 
sitting on our hands waiting for shares to breakout over minor 
resistance at $82.00 to hit our entry point at $82.25.  More 
adventuresome traders could have taken the alternative entry we 
suggested on the bounce from $77.50-78.00.  The good news here is 
that the OIX oil index has broken out and looks ready to start a 
new leg higher.  Meanwhile MUR's MACD indicator has produced a 
new buy signal.  

Suggested Options:
We are going to suggest the January calls.

BUY CALL JAN 75 MUR-AO OI=1480 current ask $7.90
BUY CALL JAN 80 MUR-AP OI= 480 current ask $4.50
BUY CALL JAN 85 MUR-AQ OI= 349 current ask $2.30
BUY CALL JAN 90 MUR-AR OI= 705 current ask $1.05

Annotated Chart:


Picked on November xx at $ xx.xx <-- see TRIGGER
Change since picked:      + 0.00
Earnings Date           10/26/04 (confirmed)
Average Daily Volume =       500 thousand   




---

Oshkosh Truck - OSK - close: 62.44 change: -0.54 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:
We're impressed.  OSK is showing some relative strength with a 
minor 54-cent loss on Friday and holding within its $62-64 
trading range.  Lending shares a boost was probably word out from 
Wall Street firm CSFB who reiterated their buy rating on OSK.  We 
remain bullish on the stock but still expect shares to retrace 
back to the $60 level of support.  Readers can wait and watch for 
OSK to pull back to the $60 level as a new entry point. 

Suggested Options:
We are not suggesting new bullish positions at this time.  Wait
for the pull back.

Annotated Chart:




Picked on November 07 at $ 62.16
Change since picked:      + 0.28
Earnings Date           10/28/04 (confirmed)
Average Daily Volume =       205 thousand   



---

PetroChina Co - PTR - close: 54.95 change: -0.15 stop: 52.49

Company Description:
Based in Beijing, the PetroChina Company Limited is a wide 
reaching oil company involved in the exploration, production and 
sale of oil and natural gas. 

Why We Like It:
We don't have much more to report on for PTR.  The Chinese oil-
stock (actually an ADR) continues to look bullish.  Granted we're 
not excited about the pull back under $55.00 but more aggressive 
traders may want to consider new bullish positions on a bounce 
from $54.50.  More conservative traders can wait and look for a 
move over $55.50 before initiating positions.  No change in our 
strategy. 

Suggested Options:
The December strikes have the most open interest and they should
work but we're going to suggest the March calls.

BUY CALL MAR 50 PTR-CJ OI=1227 current ask $6.60
BUY CALL MAR 55 PTR-CK OI=1277 current ask $3.20
BUY CALL MAR 60 PTR-CL OI= 993 current ask $1.15

Annotated Chart:

Picked on November 17 at $55.18
Change since picked:     - 0.23
Earnings Date          00/00/04 (confirmed)
Average Daily Volume =      288 thousand
Chart =



---

Qualcomm - QCOM - close: 40.12 change: -1.12 stop: 37.50

Company Description:
QUALCOMM Incorporated (www.qualcomm.com) is a leader in 
developing and delivering innovative digital wireless 
communications products and services based on the Company's CDMA 
digital technology. Headquartered in San Diego, Calif., QUALCOMM 
is included in the S&P 500 Index and is a 2003 FORTUNE 500® 
company. (source: company press release)

Why We Like It:
For the most part it was a positive week for shares of QCOM.  The 
stock continued its rebound from support near $38.00 and its 
simple 100-dma.  QCOM managed to breakout over round-number, 
psychological resistance at $40.00 and all of its moving 
averages.  At least that was the case through Thursday.  On 
Friday QCOM fell backwards some 2.7 percent as the NASDAQ finally 
saw some profit taking.  A little bit of profit taking doesn't 
concern us.  The NASDAQ needs it.  Unfortunately, the action on 
Friday produced a bearish engulfing candlestick reversal pattern 
in QCOM.  We would now expect shares of QCOM to retest support at 
the 100-dma currently $38.25.  Readers can wait and watch for the 
dip.  Once a bounce begins we can use it as a new bullish entry 
point.

Suggested Options:
We are not suggesting bullish positions at this time.
Wait for the dip.

Annotated Chart:


Picked on November 15 at $ 40.51
Change since picked:      - 0.39
Earnings Date           11/03/04 (confirmed)
Average Daily Volume =      13.9 million    



---


Schlumberger - SLB - close: 66.10 change: +0.82 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:
Oil stocks were one of the few standouts on Friday to avoid the 
sell-off.  The OIX oil index broke out from its consolidation 
pattern but the OSX oil services index out performed with a 1.8 
percent rally.  We also like the bullish MACD buy signal on the 
OSX index.  The pattern resembles the bullish turnaround in 
shares of SLB.  Astute chart readers will note that the 
turnaround began sooner in SLB.  The move over the $65 and $66 
levels is very encouraging and the stock has cleared all of its 
significant moving averages.  Technicals look positive and SLB 
looks poised to make a run for the $70 level.  This looks like a 
bullish entry point in SLB.  Our short-term target remains the 
$70 level. 

Suggested Options:
We are going to suggest the December and/or January calls.

BUY CALL DEC 60 SLB-LL OI=2660 current ask $6.60
BUY CALL DEC 65 SLB-LM OI=5717 current ask $2.60
BUY CALL DEC 70 SLB-LN OI=1796 current ask $0.55

BUY CALL JAN 60 SLB-AL OI=6896 current ask $7.20
BUY CALL JAN 65 SLB-AM OI=18153 current ask $3.60
BUY CALL JAN 70 SLB-AN OI=12473 current ask $1.40

Annotated Chart:


Picked on November 12 at $ 65.05
Change since picked:      + 1.05
Earnings Date           10/22/04 (confirmed)
Average Daily Volume =       3.9 million    



---

Sunoco Inc - SUN - close: 78.57 change: +0.13 stop: 72.99     

Company Description:
Sunoco, Inc., headquartered in Philadelphia, PA, is a leading 
manufacturer and marketer of petroleum and petrochemical 
products. With 890,000 barrels per day of refining capacity, over 
4,800 retail sites selling gasoline and convenience items, over 
4,500 miles of crude oil and refined product owned and operated 
pipelines and 37 product terminals, Sunoco is one of the largest 
independent refiner-marketers in the United States. Sunoco is a 
significant manufacturer of petrochemicals with annual sales of 
approximately five billion pounds, largely chemical intermediates 
used to make fibers, plastics, film and resins. Utilizing a 
unique, patented technology, Sunoco also manufactures two million 
tons annually of high-quality metallurgical-grade coke for use in 
the steel industry. (source: company press release)

Why We Like It:
SUN is yet another way traders can play the next leg up in oil 
and energy stocks.  The recent consolidation is over and shares 
broke out to new all-time highs on Thursday.  Technicals are 
positive and its MACD has produced a new buy signal.  The P&F 
chart is very bullish with a $117 target.  Right now we'd be 
happy with a move to $85.00.  This looks like an entry point to 
us but a bounce from $77 will work just as well.  

Suggested Options:
We are going to suggest the January options since we plan to 
hold SUN through the end of the year.

BUY CALL JAN 75 SUN-AO OI= 737 current ask $6.40
BUY CALL JAN 80 SUN-AP OI= 446 current ask $3.50
BUY CALL JAN 85 SUN-AQ OI= 103 current ask $1.65

Annotated Chart:


Picked on November 18 at $78.25
Change since picked:     + 0.32
Earnings Date          10/21/04 (confirmed)
Average Daily Volume =      1.2 million 




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

Editor's note:
The market appears to be at a short-term top.  This is good
news.  We've been waiting for a pull back for days.  Actually
there is probably a horde of investors who are waiting for
the same dip to use as an entry point to ride out the rest
of the fourth quarter.  The question now is how long and how
deep will the dip be, especially with so many looking to it
as an entry point.  We elected not to add any new plays
today. We'll review our candidates after Monday's session
has shed more light on the market's strength or weakness.



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

Forest Labs - FRX - close: 40.29 change: -0.64 stop: 44.01

Company Description:
Forest has well-established franchises in therapeutic areas of 
the central nervous, cardiovascular and respiratory systems, and 
we are always exploring new product opportunities that address a 
range of health conditions. Our principal brands include 
Lexapro®(escitalopram oxalate), Namenda®(memantine HCl) and 
Benicar®(olmesartan medoxomil). (source: company press release)

Why We Like It:
Hmm.. so much for yesterday's high-volume bounce.  It didn't last 
very long.  Both the BTK biotech index and the DRG drug index 
traded sharply lower on Friday as talk swirled in Washington over 
the FDA and whether or not changes should be made to make the 
agency more successful in evaluating new drug candidates.  FRX 
continues to look weak and the stock looks poised to breakdown 
through round-number, psychological support at $40.00.  We are 
waiting for the breakdown since our TRIGGER to buy puts is at 
$39.95.  

Suggested Options:
We are going to suggest the January puts.  

BUY PUT JAN 35 FRX-MG OI=2645 current ask $0.80
BUY PUT JAN 40 FRX-MH OI=4377 current ask $2.50
BUY PUT JAN 45 FRX-MI OI=8345 current ask $5.70

Annotated Chart:


Picked on November xx at $xx.xx <-- see TRIGGER
Change since picked:     + 0.00
Earnings Date          10/18/04 (confirmed)
Average Daily Volume =      2.8 million 



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

None


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**********

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The Option Investor Newsletter                   Sunday 11-21-2004
Sunday                                                      4 of 5

In Section Four:

Leaps: Oil Greases the Skids
Spreads and Straddles:  Putting November Behind Us -- Far Behind Us

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*****
LEAPS
*****

Oil Greases the Skids

After more than a week of moderating oil prices and a
drop back to the 100 day average to rest traders were
shocked back to reality on Friday as oil spiked back
to near $49. While that was good for our oil stocks
it was bad for equities. With Greenspan bad mouthing
the U.S. all we needed was some higher oil prices to
grease the skids for profit taking. 

Personally I believe the markets will recover. I think
the oil spike had more to do with short covering and
option expiration than global events. There was nothing
on the wires that would have justified the spike in 
prices. I believe prices will go higher but I was not
expecting it until December or even late spring. 

The Greenspan remarks pressured all interest sensitive
issues like banks and home builders. Fortunately we
don't have any of those in the portfolio. I did look
at several today for inclusion but I think the timing
is still not right. Winter is the off-season for
home builders and I would like to pick up a couple
once we exit some current positions in January. I 
am going to put DR Horton on the watch list despite
the comments above. It has a great trend, low price
and a PE of 8. I would like to get in a couple dollars
lower but that may be wishful thinking. 

There are several drug stocks I want to add but on
Thursday an FDA doctor slandered five well-known drugs
and the Vioxx cloud began to spread. Even a positive
event for OSIP and DNA had negative results on Friday.
Medtronic got clobbered on Thursday after missing on
earnings and being undulated by a flurry of downgrades.
The most optimistic outlook is for Sanofi (SNY) and 
their new weight loss drug that lowers cholesterol and
helps patients quit smoking. Unfortunately SNY has
already run up on the news and needs to pull back a
little more before we take a position. 

RIMM continues to intrigue me and I can't believe it 
has not pulled back any further than $85. With the 
court case still pending and the potential for a loss
of the blackberry franchise you would think traders
would be shorting it heavily. The price of the LEAPS
has moved even higher and I can't justify keeping it
on the watch list any longer. The best way to play it
would be to sell the Jan-2007 $120 put at $45.50 and
buy a Jan-2005 $80 put at $7.50. You would get 100%
of the stock appreciation to $120 and be protected 
for any move under the current price of $85 by the
long $80 put. There is still several dollars of risk
but not near as much as just buying call leaps. I
suspect that even if the case goes against RIMM they
will settle with the other side in some form that
allows them to continue selling Blackberry products.
I am dropping it from the watch list today. 

I am adding two stocks to the active play list, STM
and ETR. Both have eased from strong runs and we
should take advantage of any further weakness on
Monday to add these positions. 

I have to tell you I looked at well over 500 charts
Friday night and there were a lot more ugly charts
than decent. I would bet less than 5% still had any
momentum and the majority had started rolling over
early last week. It was not what I had expected to
see when I started the research. This leads me to
suspect Monday may not be a positive day and it
could bleed into Tuesday. I hope I am wrong but
there was a lot of topping patterns among the prior
leaders. 

There will not be a LEAPs column next weekend due 
to the holiday but I will post any changes. Have a
great Thanksgiving!

If you have any comments or suggestions about the
leaps section please email them to:

leaps @ OptionInvestor.com  


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

ETR - Entergy Corp. $65.50 

STM - STMicroelectronics $20.42


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

NWS - News Corp  $18.48 (post split)

UPL - Ultra Petroleum $50.20

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


None 


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

Position Summary Table

No table this week. Quote server was down when this was
produced. 


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

STM - STMicroelectronics $20.42 

STM is a global independent semiconductor company that 
designs, develops, manufactures and markets a broad range
of semiconductor integrated circuits and discrete devices
used in a wide variety of microelectronic applications. 
For the 9 months ended 9/04, revenues rose 26% to $6.43B.
Net income totaled $414M, up from $109M, +279%. Results 
reflect higher sales of Discrete and Standard ICs & Memory
Products and lower restructuring and impairment charges.

STM has rebounded from three months of consolidation at
multiyear lows and was enjoying one of the strongest
upward moves in the semi sector until Friday. The semi
dip may give us a better entry in the $20 range but 
we want an entry whichever way it goes.

BUY 2007 $22.50 LEAP Call OMB-AF currently $3.30

Target $20 for dip entry
Target $21.50 for breakout entry 

STM Chart




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

ETR - Entergy Corp. $65.50

Entergy Corporation is an integrated company engaged 
primarily in electric power production, retail 
distribution operations, energy marketing and trading
and gas transportation.

ETR also manages nuclear power plants and with the 
current and coming energy crisis they will be hired
to run/manage any new plants coming online. This is 
a long term play and one that could be a strong
performer. 

The current up trend shows no signs of slowing and
the LEAPs are very cheap. 

BUY 2007 $70 LEAP Call ODF-AN currently $5.20

ETR Chart




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


FDX - Federal Express $94.01  **Stop $89.00**
Entry $91.93 (11/5)

Federal Express announced it was going to expand Kinkos
across Asia and said it could be worth $1.5 billion on
an annual basis. That is a huge shot in the arm for
FedEx and shows they are on the right track with their
acquisition. China shipping volume grew +52% last quarter
and the addition of the Kinkos stores could increase
that as well.  

FDX stalled at $95 last week despite oil prices falling
early in the week. It is still poised to move higher and 
Friday's -73 cent drop was meaningless. 

2006 $ 95 LEAP Call WFX-AS @ $8.00
2007 $100 LEAP Call VFX-AT @ $10.60 
SELL 2005 Jan $95 Put FDX-MS @ $4.60
(selling the put offsets the price of the call)

FDX Chart





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

XLE - S&P Energy SPDR $36.43  ** Stop 33.90 **

The XLE is nearing the all time high set back in Oct
at $36.83 after a month of consolidation. Oil prices
are helping push the XLE higher but it is only through
the price gains in the individual stocks in the index.
They were moving up earlier in the week before oil 
itself actually made a move.  

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 $24.15  **Stop $22.00**

Intel continued to move higher but ran into resistance
at $25 and the downgrade for the sector by Goldman
Sachs on Thursday. I expect the sector to regain its
footing next week and hopefully Intel can break that
$25 level.   

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. $33.71  **Stop $32.00**

Tyco stalled at $34.50 and traded sideways with the Dow.
TYC is very high beta with the Dow and any continued 
gains will benefit Tyco. Unfortunately any Dow losses
will also impact TYC. 

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 $27.93 **Stop $25.50**

Juniper broke out to near $30 but failed as the week 
wore down. JNPR has had a good run and needs to rest.
Strong support at 27-28 should hold. 

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 $87.43    **Stop 84.50**

COP is trying to move higher despite the fall in oil
early in the week. The Friday spike helped to put some
green back on the board but I raised the stop just in
case. We have far too much profit in COP to let it
slip away.   

COP remains in the top three recommended investments
in the energy sector and it is racing to acquire new
properties. Go oil!

Current position:
Jan-2006 $75 LEAP Call YRO-AO at $6.70 now $15.80

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

COP Chart




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


NWS - News Corp $18.49   ** Dropped **

S&P announced News Corp was going to be added to the
S&P in mid December but did not announce what stock
was going to come out. We have not seen any material
bounce because index fund managers don't know how much 
of NWS they will have to buy and how much of other 
stocks they will have to sell. 

Secondly, we have the potential hostile suitor in
Liberty Media and NWS adopted a poison pill to ward
off the attacker. 

Thirdly, there is extreme confusion about the options.
The old symbol is trading at two times the price of
the stock and there are 200 shares per contract now
instead of 100. 

In addition to these problems S&P is removing the
stock from the international indexes along with the
inclusion into the S&P. It should be a net add but
instead it is just another confusion factor.

Because of the confusion I am recommending we close
this position on Monday and put our money to work
somewhere else. There is no quote on the option on
most quote screens. The last quote I received this 
week was $3.40. Contact your broker for instructions
on clearing this position. 

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

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


NWS Chart




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

UPL - Ultra Petroleum $50.15  ** Dropped **

UPL fell on Friday after spiking to $52 at the open. 
It finished -$2 off its highs and given the +$2 jump
in oil prices I fear UPL may have run its course.

I am dropping it today out of caution while it is
still profitable. It has made three lower highs 
since the all time high at $53.60 back in October.    

JAN-2006 $45 LEAP Call WSS-AI @ $11.30 exit $13.70
JAN-2006 $50 LEAP Call WSS-AJ @ $ 9.20 exit $11.20

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

UPL Chart


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

EBAY - EBAY $108.42      ** Stop $105.00 **

EBAY is starting to worry me. For six days we have
not made any progress but it is still holding the 
high ground. With the market starting to look weak
I raised the stop to $105 and we will take profits
if further weakness develops.

The $90 option is trading at $30 and it was $14.70
when we started this play. The $100 option is $22.40
and it was $10.40 when we entered. I hate to give up
a 100% profit when the numbers are this big so caution
is the keyword this week.       

We are well into 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 @ $14.70
2006 $100 LEAP Call YRL-AT @ $10.40

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

EBAY Chart



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

MER - Merrill Lynch $56.35   ** Stop $54.50 **
               
Merrill was knocked for a loss on Friday on the 
Greenspan comments after failing to reach resistance
at $58. I raised the stop to $54.50 just in case the
market weakness continues.   

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




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

SYMC - Symantec - $60.75   ** Stop $58.00 **

SYMC continues to slow its upward progress but at least
it is still trying to move higher. Unfortunately 25 cents
a day won't help if the next drop if in dollars. $62.45
is the all time high set back in October and we traded
over $62 on Friday before giving up some ground. I am 
not writing SYMC off yet but I did raise the stop to $58. 

2:1 Split announced Oct-20th is payable on Dec-1st. 
That puts us at risk for post split depression the
week after the split. Next Sunday I will raise the
stop to protect any split run gains. 

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 $35.01  ** Stop $33.00 **

XMSR finally broke over the $34 ceiling to nearly $37
but immediately failed back to $35. The news about the
new SIRI CEO from Viacom and the potential for Stern
to move to satellite early gave SIRI a bounce and XMSR
tagged along for the ride but the joy ride was brief.

I raise the stop to $33 just in case the SIRI news
turns ugly for XMSR. 

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



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

ADBE $57.85 Adobe Systems   ** Stop $56.00 **
Entry $57.00 (11/10)

ADBE set a new 52-week high on Friday and then dropped
like a rock as the day progressed. Support at $57.50
held but only barely. You can't complain about a new
high on a bad market day but our entry point was $57
so we don't have a lot of room. Keep your fingers 
crossed Monday is positive. 

ADBE predicted +25% growth to continue and said 
better than expected sales growth in multiple
product lines was helping performance. 

Buy 2007 $65 LEAP Call VAE-AM @ $8.90
Sell APR $60 Put AEQ-PL @ $5.50 to offset
the price of the leap. 

Entry $57.00 (11/10)
http://members.OptionInvestor.com/leaps/Lp_110704_1.asp

ADBE Chart



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


DIA  $104.59 Dow Diamonds Trust **Stop 102.50**

The Dow climbed to just over 10600 before retracing
on the Greenspan comments. We are strongly profitable
in the DIA calls and I left the stop at 102.50 in hopes
the Dow will recover and move higher. This is strictly
a market play and one of the bullish weeks of the year
is ahead with the Microsoft dividend event the following
week. We just need to stay out of trouble until that
appears.  


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  $33.77 Semiconductor Holders ** Stop $31.50 **

We had a great chip rally in progress with the SMH
moving to nearly $35 before the Goldman downgrade
and the Greenspan comments knocked the legs out from
under the sector. I raised the stop to $31.50 and 
with any luck the bad news bulls will be back in 
force next week. 

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  $38.70 Nasdaq 100   **Stop $37.00**

We saw a strong move by the QQQ to $39.25 but we
lost momentum on Friday. I raised the stop slightly
but I am really hoping Monday will be at least
marginally positive to keep us out of harms way.  
 
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
****************************    

Time for Rotation? 

With oil stocks mixed and oil prices acting more volatile
it may be time to reduce our exposure to oil. I dropped
UPL this week because of instability and the lack of
forward motion. 

I spent a long time trying to find some new candidates
this weekend and stocks not in sectors we are already
playing. Materials, trucking, steel, financials, health
services and home building rose to the top of the list. 

Financials were generally weak with the exception of
insurance stocks. Hartford, Aetna, etc, were strong
but several are simply too high to buy. Leaps on a
$100 stock at $20 are just too expensive.

Materials stocks like Nucor, Vulcan Materials, Dow,
Emerson, Phelps Dodge, Alcoa, etc are doing well but 
I hate to buy a pure play like copper after the strong
gains in the commodity but short of a new ice age I
don't see demand easing any time soon. 

Chip stocks have a rocky foundation for most candidates
and the mixed messages from analysts leave a lot to be
desired. However, we have to buy some stocks when out
of favor in order to get them cheap for the long haul.

The biggest challenge is finding good stocks in strong
sectors that have not already moved too far that have
leaps. I found quite a few stocks this weekend I would
have played but no leaps. 

The new entries below represented the best mix of
price, performance and sectors I could find. I looked
at over 500 charts and several hundred option montages
and came up with seven stocks. 



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

RIMM - Too much indecision, options too high.


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

HIG - Hartford Financial Services $63.65

NUE - Nucor Corp $49.50

EMN - Eastman Chemical $51.42

DHI - DR Horton $34.33


************************   
 
LLL $69.50 L-3 Communications 

I am moving the entry on L3 to $68. We saw a drop
to just under $70 and I think we can get $68 on any
further weakness. LLL is being added to the S&P
but the date has not been announced. The initial 
bounce has faded because S&P has not given a date.
Index funds can't buy it until the WLP acquisition
is complete and WLP is removed from the index. This
gives us a chance to still get in at a reasonable 
level.

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 an entry at $68.00 on a breakdown
Target an entry at $71.00 on a breakout

Buy 2007 $75 LEAP Call OOY-AO 

LLL Chart



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

HIG - Hartford Financial Services $63.65

The Hartford Financial Services Group, Inc. is a diversified
insurance co. that provides property & casualty insurance 
and life insurance. For the 9 months ended 9/30/04, revenues
rose 19% to $16.59B. Net income totaled $1.52B.

Hartford took a serious hit when Elliott Spitzer started
attacking insurance companies but it has rebounded to 
resistance at $64 once again. This strength in the face
of several obstacles and the market suggests we could
see a breakout soon. 

Target $65 for a breakout entry
Target $60 for a breakdown entry

BUY 2007 $70 LEAP Call OZJ-AN currently $6.20

HIG Chart



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


NUE - Nucor Corp $49.50

Nucor Corporation and its subsidiaries are engaged in 
the manufacture and sale of steel products, including 
hot-rolled, cold-rolled sheet, galvanized sheet, cold 
finished and more. For the 9 months ended 10/2/04, 
revenues increased 80% to $8.29B. Net income totaled 
$780.1M, up from $42.2M. Revenues reflect increased 
steel production and higher demand.

Nucor is literally exploding and the increased global
demand for steel is providing strong gains in revenue
and profits. 

I want to try and buy this one on a dip but looking
at the chart it could be a while. 

Target a breakdown entry at $45.00

Buy 2007 $55 LEAP Call VUB-AK currently $8.00

NUE Chart



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

EMN - Eastman Chemical $51.42

EMN manufactures and sells polyester plastics such as 
polyethylene terephthalate (PET); coatings and paint 
raw materials; industrial and fine chemicals, and 
acetate tow. For the 9 months ended 9/30/04, revenues
rose 13% to $4.92B. Net income before acct. change 
totaled $116M vs. a loss of $283M. Revenues reflect 
higher volume and selling prices and favorable foreign
currency exchange rates.

Eastman is on track to have its best year since 2000
and increasing global demand is turning the company 
around. EMN was on track to oblivion several years
ago and we played it as a put candidate several times.
The turnaround has been remarkable. 

Target a dip to $48 for an entry.

BUY 2007 $50 Call LEAP VFJ-AJ currently $6.60

EMN Chart



*************************    
   
DHI - DR Horton $34.33

DHI is a national home builder that constructs and sells
single-family homes in metropolitan areas of the Mid-
Atlantic, Midwest, Southeast, Southwest and West regions
of the U.S. DHI also provides title agency and mortgage 
brokerage services. For the FY ended 9/30/04, revenues 
rose 24% to $10.84B. Net income rose 56% to $975.1M. 
Revenues reflect an increase in prices. Higher income
also reflects improved gross margins.

In earnings for the 3Q Horton had net income of $349.6
million, or $1.47 a share, vs. $230.7 million, or 98 
cents a share, for the same quarter of fiscal 2003. 
Analysts were expecting $1.22, according to Thomson 
First Call. Revenue increased 23% to $3.5 billion. 
Horton's sales backlog of homes under contract was a 
year-end record $4.6 billion, or 17,184 homes, up 25%
from a year ago. Horton, which builds homes for the 
entry-level and first-time move-up markets, had strong
sales in all of its regions

DHI is selling for a PE of 8 (eight!) 

Target dip entry at $32.00
Target breakout entry at $37.00

Buy 2007 $40 LEAP Call VEI-AH currently $5.20

DHI Chart



 


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

Putting November Behind Us -- Far Behind Us
By Mike Parnos

It could have been worse -- a lot worse.  We used reasonable 
self-discipline and closed the positions.  It wasn't easy.  It 
never is, but, in the market, it's the survival of the fittest.   
And you do what you have to in order to survive.  

In "Castaway," Tom Hanks turned a volleyball (Wilson) into his 
best friend on the desert island.  In "Lord Of The Flies," the 
kids made an entree out of one their own.  It wasn't personal.  
It was survival.

Who would have thunk the market would have rocketed 90 SPX points 
in less than four weeks?   A trending market isn't ideal for our 
Iron Condor strategy.  So, we must be very selective, watch for 
opportunities and improvise when necessary.
___________________________________________________________

Giving Thanks That The November Cycle Is Over
The November option cycle was the first cycle in the third year 
of tracking our Couch Potato Trading Institute portfolio. Our 
$4,665 loss was not the greatest way to begin our third year, but 
I never promised you a rose garden.   The challenge is to keep 
the loss in a longer term perspective.

When we take losses, there is anger and frustration -- it's 
understandable.  But, you can't allow those emotions to get in 
the way of your plan of action.  Many readers stayed in the 
November trades much too long -- hoping.   It was all the king's 
horses and all the king's men couldn't put Humpty Dumpty back 
together again.  But wasn't it Humpty Dumpty that decided to stay 
on that precarious ledge when he could have climbed down much earlier?     

Unfortunately, we live in a "what have you done for me lately" 
world.  It's amazing how quickly some forget about two years of 
profits when facing a little bit of adversity.  Clicking the 
mouse button, and taking losses, is a sign of growth in one's 
maturation as a trader.  It's a process.  You weren't potty 
trained in a week either.  But, once you grasped the concept, you 
could put those Pampers away forever (hopefully).   For some the 
process takes longer than others.  The sooner you learn to clean 
up after yourself, the smaller messes you'll make.
___________________________________________________________

November Trade Summary
SPX - Iron Condor #1 - Profit: $2,985
SPX - Iron Condor - #2 - Loss: $3,840
RUT - Iron Condor - Loss: $2,800
OEX - Iron Condor - Loss: $4,000
SPX - Sure Thing - Profit: $2,990
TOTAL OCTOBER RESULTS: LOSS: $4,665

Settlement numbers:  SPX ($SET) -- 1184.42, RUT ($RLS) -- 619.38, 
& OEX -- 559.69.
____________________________________________________________

DECEMBER CPTI POSITIONS
When, on Friday, the SPX opened much lower and continued down 
without hesitation, it negated the levels of our new December 
positions.  As I've said often over the last few years, if 
there's a big move the next morning, wait and watch and adapt.  
That's part of the education process.

I received a few emails on Friday from CPTI students who placed 
orders at the open for the published hypothetical trades and, 
after the market tanked, they were filled.  Not wise (see, I can 
be tactful).  The original 1145/1140 bull-put spread may very 
well work out.  However, there is now only a 25-point cushion 
from where the SPX is trading -- too close for my taste.  We 
don't want to place orders and then wait for the market to come 
to us.  We can get into big trouble that way.  We have to be 
aware, flexible, and proactive.  

December Position #1 -- SPX Iron Condor (Part 1) - 1170.34
We believe the market is taking a well-deserved rest and will 
continue up.  Our new bull-put spread still gives us about a 45-
point cushion on the downside with the short strike near a 
support level.  

When the market tanked in the morning, we waited for an 
opportunity to lower the level of our bull put spread and we 
found it at 1125/1120.  We had to settle for less premium, but 
that extra 20 points of safety feels a lot better.

We sold 20 December SPX 1125 puts and bought 20 December SPX 1120 
puts for a credit of $.50 ($1,000).   When you're looking for 
your new position, the concept of getting much your profit from 
negotiating the bid/ask spread still applies.  See Thursday's 
column for an explanation of the concept of negotiating the 
bid/ask.  Check out Friday's option chain and adjust your strikes 
accordingly.

This is just the bull-put portion of a potential Iron Condor.  
We're going to wait until the smoke clears a little before 
looking for bear-call spread possibilities.  Besides, Monday, the 
SPX should open up a lot more strike prices to select from.  It 
will give us a lot more flexibility.  

December Position #2 -- SPX Sure Thing (Almost) Credit Spread - 1170.34
Here we go again.  When the market tanked Friday, we had to 
adjust our strikes and our expectations.  Towards the end of the 
session, we saw an opportunity to sell the 1165 puts and buy the 
1140 puts for a credit of $6.90.  We believe we're still in a 
bullish trend and want to position ourselves to take advantage of 
it.  A quick reminder -- only do this strategy if you have a LOT 
(a mierde-load) of maintenance available.  You might need it.

We sold two SPX December 1165 puts and bought two SPX December 
1140 puts for a $6.90 credit ($1,380).  Let the games begin!
____________________________________________________________

REVIEW OF NOVEMBER CPTI POSITIONS
November Position #1 - SPX Iron Condor - 1170.34
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 of about $2,985.  
All expired worthless.  Profit:  $2,985

November Position #2 - SPX Iron Condor - 1170.34
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. 

November Position #3 - OEX Iron Condor - 565.97
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 of $1.30 ($1,300).  We closed the trade 
for a $4,000 loss.

November Position #4 - RUT - Iron Condor - 613.44
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). 
Closed for $2,800 loss.

SPX "Sure Thing" Strategy - 1170.34
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. 

Over the last two months we were whipsawed -- until a trend took 
hold. 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. 

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 $2,990 in premium and our maintenance is now $150,000.  
The SPX settled at 1184.41.  Profit: $2,990. FINALLY!
___________________________________________________________
ONGOING POSITIONS
QQQ ITM Strangle - Ongoing Long Term -- $39.29
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 took in $.45 ($450) 
rollout. We rolled to the November. $34 calls and $37 puts for 
$.70 ($700).  Last week we rolled in the December $34 calls and 
$37 puts for a total of $.50 ($500).  New total: $13,400.
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 - 565.97
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 about 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 $10,675. 

Zero-Plus Position For December
Prior to expiration, we bought back our Nov. 555 calls and rolled 
it to six contracts of the January 580 calls for a credit of 
about $100.  We also put on five contracts of a December 540/530 
bull-put spread for an $.80 credit ($400). 
 
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
**********

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http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html


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The Option Investor Newsletter                   Sunday 11-21-2004
Sunday                                                      5 of 5

In Section Five:

Covered Calls:  CONSERVATIVE STOCK OWNERSHIP: COVERED-CALLS
Spreads and Straddles:  
Premium-Selling Plays: Naked Puts and Calls


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

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

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

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

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

_________________________________________________________________

Sequenced by Target Yield (monthly basis/no margin)

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

FXEN    8.44  DEC  7.50  IWQ-LU 1.35  866  7.09  27    6.5%
CAMP    8.26  DEC  7.50  CQI-LU 1.10  580  7.16  27    5.3%
ROXI    8.24  DEC  7.50  RXY-LU 1.05 3990  7.19  27    4.9%
DHB    19.24  DEC 17.50  DHB-LW 2.45 2109 16.79  27    4.8%
NFLD   15.75  DEC 15.00  DHQ-JC 1.35 1055 14.40  27    4.7%
CRXL   11.58  DEC 10.00  JXU-LB 1.95   51  9.63  27    4.3%
IDCC   19.21  DEC 17.50  DAQ-LW 2.35 3658 16.86  27    4.3%
ENER   19.42  DEC 17.50  EQI-LW 2.50  660 16.92  27    3.9%
TKTX   21.13  DEC 20.00  UFT-LD 1.75 1019 19.38  27    3.6%
NSTK   14.16  DEC 12.50  QUH-LV 2.05  434 12.11  27    3.6%
RAE     8.57  DEC  7.50  RAE-LU 1.30  824  7.27  27    3.6%
IFLO   18.69  DEC 17.50  QIF-LW 1.70 2075 16.99  27    3.4%
FCS    15.86  DEC 15.00  FCS-LC 1.30 1422 14.56  27    3.4%


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).

__________________________________________________________________

FXEN - FX Energy  $8.44

FX Energy (NASDAQ:FXEN) is an independent oil and gas company
focused on exploration, development and production opportunities
in the Republic of Poland, in association with the Polish Oil
and Gas Company and others.  The company's ongoing activities
in Poland are conducted in five project areas: Fences I, II and
III, Pomeranian and Wilga.  It is working almost exclusively on
these project areas, where the gas-bearing Rotliegendes sandstone
reservoir rock in Poland's Permian Basin may be a direct analog
to the Southern North Sea gas basin, offshore England.

FXEN - FX Energy  $8.44

DEC  7.50 IWQ-LU LB=1.35 OI=866 CB=7.09 DE=27 TY=6.5%


__________________________________________________________________

CAMP - CalAmp  $8.26

CalAmp (NASDAQ:CAMP) designs, manufactures and markets microwave
equipment for the reception of television programming transmitted
from satellites and wireless terrestrial transmission sites and
two-way transceivers used for wireless Internet-broadband service.
The firm's satellite business unit designs and markets reception
products for the Direct Broadcast Satellite television market in
the United States and line of consumer and commercial products
for video and data reception.  The Wireless Access business unit
designs and markets integrated reception and two-way transmission
equipment for broadband data and video applications.

CAMP - CalAmp  $8.26

DEC  7.50 CQI-LU LB=1.10 OI=580 CB=7.16 DE=27 TY=5.3%


__________________________________________________________________

ROXI - Roxio  $8.24

Roxio (NASDAQ:ROXI) is a provider of digital media software
and services for the consumer market.  It provides software
that enables individuals to record digital content onto
compact disc (CDs) and digital video discs (DVDs) and offers
photo and video editing products.  The company's products and
services allow customers to access, archive, create, customize
and share digital materials in formats compatible with a number
of digital entertainment devices, such as personal computers,
CD and DVD players, compressed audio players and personal
digital assistants.

ROXI - Roxio  $8.24

DEC  7.50 RXY-LU LB=1.05 OI=3990 CB=7.19 DE=27 TY=4.9%


__________________________________________________________________

DHB - DHB Industries  $19.24

DHB Industries (NYSE:DHB) is a holding company with two major
divisions: DHB Armor Group and DHB Sports Group.  The Armor
Group includes Point Blank Body Armor and Protective Apparel
Corporation of America and they manufacture various types of
body armor.  The Sports Group, which consists of NDL Products,
manufactures and distributes protective athletic apparel and
equipment, including elbow, breast, hip, groin, knee, shin and
ankle supports and braces, as well as a line of therapy products.

DHB - DHB Industries  $19.24

DEC 17.50 DHB-LW LB=2.45 OI=2109 CB=16.79 DE=27 TY=4.8%


__________________________________________________________________

NFLD - Northfield Labs  $15.75

Northfield Laboratories (NASDAQ:NFLD) is engaged in the production
of a safe and effective alternative to transfused blood for use in
the treatment of acute blood loss.  Its PolyHeme blood substitute
product is a solution of chemically modified hemoglobin derived
from human blood.  PolyHeme simultaneously restores lost blood 
volume and hemoglobin levels and is designed for rapid, massive 
infusion.  PolyHeme requires no cross-matching and is therefore
immediately available and compatible with all blood types.  It
has an extended shelf life compared to blood.  Northfield Labs
purchases indated and outdated blood from The American Red Cross 
and Blood Centers of America for use as the starting material for
PolyHeme.  It uses a proprietary process of separation, filtration
and chemical modification to produce PolyHeme.

NFLD - Northfield Labs  $15.75

DEC 15.00 DHQ-JC LB=1.35 OI=1055 CB=14.40 DE=27 TY=4.7%


__________________________________________________________________

CRXL - Crucell N.V.  $11.58

Crucell N.V. (NASDAQ:CRXL) serves as the holding company for
Crucell Holland N.V.  The company is a biotechnology firm that
combines technologies to discover, develop and produce a wide
variety of biopharmaceutical products for the prevention and
treatment of infectious diseases.  Crucell's PER.C6 technology
encompasses a human cell line production system that is used to
develop biopharmaceutical products.  Their AdVac technology is
a recombinant vector technology used to develop adenoviral-based
products.

CRXL - Crucell N.V.  $11.58

DEC 10.00 JXU-LB LB=1.95 OI=51 CB=9.63 DE=27 TY=4.3%


__________________________________________________________________

IDCC - InterDigital Comm.  $19.21
 
InterDigital Communications (NASDAQ:IDCC) designs, develops and
places into operation a range of advanced wireless technologies,
systems and products.  IDCC, through its involvement in the
standards bodies and incubation efforts, monitors emerging
technologies being developed to deliver voice and data in a
wireless environment.  It focuses on its technology and product
development on the air interface technology, referred as wideband
code division multiple access, is comprised of two duplexing
methods, frequency division duplex and time division duplexing.

IDCC - InterDigital Comm.  $19.21

DEC 17.50 DAQ-LW LB=2.35 OI=3658 CB=16.86 DE=27 TY=4.3%


__________________________________________________________________

ENER - Energy Conversion Devices  $19.42

Energy Conversion Devices (NASDAQ:ENER) is a technology, product
development and manufacturing company engaged in the invention,
engineering, development and commercialization of new materials,
products and production technology in the fields of alternative
energy technology and information technology.  The company has
developed materials that permit them to design and commercialize
products, such as thin-film solar cell (photovoltaic) products,
nickel metal hydride (NiMH) batteries, and phase-change memory
devices.

ENER - Energy Conversion Devices  $19.42

DEC 17.50 EQI-LW LB=2.50 OI=660 CB=16.92 DE=27 TY=3.9%


__________________________________________________________________

TKTX - Transkaryotic Therapies  $21.13

Transkaryotic Therapies (NASDAQ:TKTX) is a biopharmaceutical
company researching, developing and commercializing therapeutics
primarily for the treatment of genetic diseases caused by protein
deficiencies.  TKT has received approval to market Replagal, an
enzyme replacement therapy for long-term treatment of patients
with Fabry disease, in 28 countries outside of the United States.
The company is also developing iduronate-2-sulfatase (I2S), an
enzyme replacement therapy for the treatment of Hunter syndrome,
and gene-activated glucocerebrosidase (GA-GCB) for the treatment
of Gaucher disease.

TKTX - Transkaryotic Therapies  $21.13

DEC 20.00 UFT-LD LB=1.75 OI=1019 CB=19.38 DE=27 TY=3.6%


__________________________________________________________________

NSTK - Nastech Pharmaceutical  $14.16

Nastech Pharmaceutical Company (NSTK) is a pharmaceutical firm
developing products based on applying drug delivery technologies,
with approximately 195 patents and applications filed.  Nastech
is developing molecular biology-based technologies for delivering
both small and large molecule drugs by nasal administration,
along with an extended release oral delivery technology.  It is
also developing a diverse product portfolio across multiple
therapeutic areas, including products targeted for the treatment
of sexual dysfunction, obesity, pain management, osteoporosis and
multiple sclerosis.

NSTK - Nastech Pharmaceutical  $14.16

DEC 12.50 QUH-LV LB=2.05 OI=434 CB=12.11 DE=27 TY=3.6%


__________________________________________________________________

RAE - RAE Systems  $8.57

RAE Systems (NYSE:RAE) is a global developer and manufacturer of
rapidly deployable, multi-sensor chemical detection monitors,
networks for homeland security and industrial applications.  In
addition, RAE offers a line of portable single-sensor chemical
and radiation detection products.  The company's products are
based on technology and include portable, wireless and fixed
atmospheric monitors and photo-ionization detectors and gamma
and neutron detectors.  These products enable the military and
first responders, such as firefighters, law enforcement and other
emergency management personnel to detect and provide warning of
weapons of mass destruction and other hazardous materials.

RAE - RAE Systems  $8.57

DEC  7.50 RAE-LU LB=1.30 OI=824 CB=7.27 DE=27 TY=3.6%


__________________________________________________________________

IFLO - I-Flow  $18.69

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

IFLO - I-Flow  $19.26

DEC 17.50 QIF-LW LB=1.70 OI=2075 CB=16.99 DE=27 TY=3.4%


__________________________________________________________________

FCS - Fairchild Semiconductor  $15.86

Fairchild Semiconductor (NYSE:FCS) is a semiconductor company
that develops, manufactures and sells analog, interface,
discrete, standard logic, non-volatile memory and optoelectronic
semiconductors critical to multiple-end markets.  Its products
are used as major building-block components in a variety of
electronic applications including sophisticated computers and
Internet hardware, communications, networking and storage
equipment, industrial power supply and instrumentation equipment,
portable digital consumer cameras, displays, audio/video devices,
household appliances and automotive ignition applications.

FCS - Fairchild Semiconductor  $15.86

DEC 15.00 FCS-LC LB=1.30 OI=1422 CB=14.56 DE=27 TY=3.4%






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

A Broad Retreat!
By Ray Cummins

The major equity averages plunged Friday after Federal Reserve
chief Alan Greenspan made some distressing observations about
the nation's trade deficit.

Greenspan noted the U.S. economy was resilient thus far, but
foreign investment could wane should the deficits continue to
build and the U.S. dollar remain weak.  The Dow Jones average
slid 115 points to 10,456 -- the biggest single-session point
drop since September.  The NASDAQ composite index declined 33
points to 2,070 and Standard & Poor's 500 index ended down 13
points at 1,170.  For the week, all three indices were lower.
Declining issues outnumbered advancing stocks nearly 5 to 2 on
the New York Stock Exchange, on volume of 1.53 billion shares.
On the NASDAQ, over 2 billion shares changed hands with losers
besting winners 2 to 1.  Bond prices fell on renewed inflation
concerns.  The benchmark 10-year note slipped 21/32, while its
yield climbed to 4.19%.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
SUMMARY OF CURRENT POSITIONS - AS OF 11/19/04
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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  95.35  NOV  80.0  85.0  0.65   84.35   0.65  Closed
BTU    60.07  74.56  NOV  50.0  55.0  0.60   54.40   0.60  Closed
MRVL   28.84  30.84  NOV  22.5  25.0  0.35   24.65   0.35  Closed
COST   44.69  47.48  NOV  40.0  42.5  0.30   42.20   0.30  Closed
NEM    46.25  49.17  NOV  40.0  42.5  0.30   42.20   0.30  Closed
INSP   47.25  44.00  NOV  35.0  40.0  0.85   39.15   0.85  Closed
BG     41.96  48.98  NOV  35.0  40.0  0.50   39.50   0.50  Closed
ADBE   53.57  57.82  NOV  45.0  50.0  0.50   49.50   0.50  Closed
VRNT   37.73  39.69  NOV  30.0  35.0  0.55   34.45   0.55  Closed
OSTK   52.63  55.13  NOV  40.0  45.0  0.60   44.40   0.60  Closed
MDC    76.00  76.34  NOV  65.0  70.0  0.50   69.50   0.50  Closed
SPF    53.90  56.61  NOV  45.0  50.0  0.60   49.40   0.60  Closed
NEM    47.52  49.17  NOV  42.5  45.0  0.35   44.65   0.35  Closed
PD     87.54  94.15  NOV  75.0  80.0  0.50   79.50   0.50  Closed
EBAY  100.66 108.34  NOV  90.0  95.0  0.60   94.40   0.60  Closed
CTX    53.55  54.15  NOV  45.0  50.0  0.50   49.50   0.50  Closed
PIXR   84.45  86.60  NOV  75.0  80.0  1.00   79.00   1.00  Closed
S      45.88  52.95  NOV  40.0  42.5  0.35   42.15   0.35  Closed
VIP   121.49 122.35  DEC 105.0 110.0  0.70  109.30   0.70   Open
WLP   113.90 120.00  DEC 100.0 105.0  0.50  104.50   0.50   Open
CECO   35.00  35.01  DEC  25.0  30.0  0.60   29.40   0.60   Open
PJC    48.95  44.80  DEC  40.0  45.0  0.60   44.40   0.40   Open?
EYET   45.64  44.01  DEC  30.0  35.0  0.45   34.55   0.45   Open
XMSR   36.13  35.01  DEC  30.0  32.5  0.25   32.25   0.25   Open

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

Although currently profitable, positions in Pacificare Health
Systems (NYSE:PHS), Celgene (NASDAQ:CELG) and Guitar Center 
(NASDAQ:GTRC) have previously been closed to limit potential
losses.  Piper Jaffray Companies (NYSE:PJC) is a candidate for
early-exit after Friday's sharp decline.


CALL-CREDIT SPREADS

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

AMZN   40.47  38.55   NOV  50.0  45.0  0.65   45.65  0.65  Closed
CHIR   37.98  33.51   NOV  45.0  42.5  0.30   42.80  0.30  Closed
FLIR   54.52  58.25   NOV  65.0  60.0  0.70   60.70  0.70  Closed
BIIB   59.82  55.34   NOV  70.0  65.0  0.65   65.65  0.65  Closed
MCHP   27.56  28.53   NOV  35.0  30.0  0.60   30.60  0.60  Closed
TTWO   32.55  32.64   NOV  37.5  35.0  0.30   35.30  0.30  Closed
QCOM   39.50  40.12   NOV  45.0  42.5  0.30   42.80  0.30  Closed
INTU   43.14  43.45   NOV  47.5  45.0  0.30   45.30  0.30  Closed
RIMM   77.75  85.01   NOV  95.0  90.0  0.50   90.50  0.50  Closed
SEPR   45.44  46.17   DEC  55.0  50.0  1.00   51.00  1.00   Open
TTWO   33.24  32.64   DEC  40.0  37.5  0.30   37.80  0.30   Open
ERTS   46.97  49.15   DEC  55.0  50.0  0.65   50.65  0.65   Open?
GM     39.97  38.90   DEC  45.0  42.5  0.30   42.80  0.30   Open
BSX    34.70  34.02   DEC  40.0  37.5  0.30   37.80  0.30   Open
MXIM   42.50  42.58   DEC  50.0  45.0  0.70   45.70  0.70   Open
BIIB   58.31  55.34   DEC  70.0  65.0  0.50   65.50  0.50   Open
INSP   49.17  44.00   DEC  65.0  60.0  0.40   60.40  0.40   Open

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

Positions in Aetna (NYSE:AET), Beazer Homes (NYSE:BZH), Hartford
Insurance (NYSE:HIG), Cigna (NYSE:CI), Chubb (NYSE:CB), Express
Scripts (NASDAQ:ESRX), Investors Financial (NASDAQ:IFIN), Mercury
Interactive (NASDAQ:MERQ), Microchip (NASDAQ:MCHP), J.C. Penney
(NYSE:JCP), SPX Corp. (NYSE:SPW) and Pediatrix Medical (NYSE:PDX),
which expired profitably, have previously been closed to limit
potential losses.  Electronic Arts (NASDAQ:ERTS) is now 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  52.41   NOV   40.0   40.0    5.00   12.00   Closed
NEW     55.15  60.75   NOV   55.0   55.0    4.70    9.10   Closed
SBUX    54.51  55.21   NOV   55.0   55.0    2.50    2.25   Closed
COCO    17.75  16.00   NOV   17.5   17.5    0.85    1.40   Closed
BCSI    19.93  17.53   NOV   20.0   20.0    2.40    2.50   Closed

Speculative positions in Corinthian Colleges (NASDAQ:COCO), New
Century Finance (NYSE:NEW) and Netease.com (NASDAQ:NTES) provided
favorable straddle opportunities during the month of November.

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

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

OIH - Oil Service Holdrs Trust  $84.45  *** Oil Stocks Surge! ***

The Oil Service Holdrs Trust (AMEX:OIH) is a unique instrument
that represents an investor’s ownership in the stock of specified
companies in the oil service sector.  HOLDRS allow investors to
own a diversified group of stocks in a single investment that is
highly transparent, liquid and efficient.  Each HOLDR is a fixed
basket of 20 stocks (except the Telebras HOLDR, which holds 12
companies).  They work operate much like ADRs; American Depositary
Receipts, which allow U.S. investors to purchase foreign-owned
companies on the U.S. exchanges in dollar denominated amounts.  In
just the same way, the investor actually owns the shares of each
underlying company, receives dividends, proxies, and annual reports
from each.  The HOLDRs are not managed, and once the companies and
amounts have been determined they are fixed, no companies will be
substituted.  In this way, the HOLDRs differ somewhat from Spiders
(SPDRs), or Standard & Poor Depositary Receipts and other exchange
traded funds, which will add and delete stocks on a regular basis,
usually in conjunction with an index that they are tracking.

A complete explanation of this issue, including the companies that
make up each HOLDRS' particular industry, sector or group can be
found here:

http://www.holdrs.com/holdrs/main/index.asp?Action=Definition

OIH - Oil Service Holdrs Trust  $84.45

PLAY (conservative - bullish/credit spread):

BUY  PUT  DEC-75.00  OIH-XO  OI=6745  ASK=$0.45
SELL PUT  DEC-80.00  OIH-XP  OI=6301  BID=$1.10
INITIAL NET-CREDIT TARGET=$0.60-$0.65
POTENTIAL PROFIT(max)=14% B/E=$79.40


__________________________________________________________________

DWA - DreamWorks Animation  $39.58  *** Hot IPO! ***

DreamWorks Animation (NYSE:DWA) develops and produces computer
generated, animated feature films for a broad audience.  The
company has theatrically released a total of nine animated
feature films including one direct-to-video title.  Dreamworks
recently released Shark Tale, a CG-animated film, in the United
States.  Its three previous CG-animated feature films included
Antz, Shrek and Shrek 2.  DreamWorks Animation also developed
five non-CG animated feature films: The Prince of Egypt, The
Road to El Dorado, Chicken Run, Spirit: Stallion of the Cimarron
and Sinbad: Legend of the Seven Seas.

DWA - DreamWorks Animation  $39.58

PLAY (conservative - bullish/credit spread):

BUY  PUT  DEC-30.00  DWA-XF  OI=50   ASK=$0.20
SELL PUT  DEC-35.00  DWA-XG  OI=495  BID=$0.70
INITIAL NET-CREDIT TARGET=$0.55-$0.60
POTENTIAL PROFIT(max)=12% B/E=$34.45



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

BEARISH PLAYS - CREDIT SPREADS

All of these positions are favorable candidates for "bear-call"
credit spreads, based on the current price or trading range of
the underlying issue and its recent technical history or trend.
The probability of profit from these positions may be higher
than other plays in the same strategy, due to disparities in
option pricing.  However, current news and market sentiment will
have an effect on these issues, so review each play individually
and make your own decision about its future outcome.

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

AMZN - Amazon.com  $38.55  *** Next Leg Down? ***

Amazon.com (NASDAQ:AMZN) is a customer-centric company that
sells a range of products that it buys from manufacturers and
distributors through its six global Websites: www.amazon.com,
www.amazon.co.uk, www.amazon.de, www.amazon.fr, www.amazon.co.jp
and www.amazon.ca.  The company offers new, used, refurbished
and collectible items, in categories such as apparel, shoes and
accessories, home, garden and outdoor living products, baby care
products, jewelry and watches, books, kitchenware and housewares,
camera and photography, magazines, cellular telephones, music,
computers and computer add-ons, office products, electronics,
software, DVDs and videos, sports and outdoors, gourmet food,
tools and hardware, health and personal care and toys.

AMZN - Amazon.com  $38.55

PLAY (conservative - bearish/credit spread):

BUY  CALL  DEC-45.00  ZQN-LI  OI=6025   ASK=$0.30
SELL CALL  DEC-42.50  ZQN-LV  OI=21012  BID=$0.55
INITIAL NET-CREDIT TARGET=$0.30-$0.35
POTENTIAL PROFIT(max)=14% B/E=$42.80


__________________________________________________________________

OSIP - OSI Pharmaceuticals  $58.16  *** A Big "Down" Day! ***

OSI Pharma (NASDAQ:OSIP) is a biotechnology company focused on
the discovery, development and commercialization of oncology
products that both extend life and improve the quality of life
for cancer patients worldwide.  The company has established a
balanced pipeline of oncology drug candidates that includes both
next-generation cytotoxic chemotherapy agents and novel mechanism
based, gene-targeted therapies.  The company's most advanced drug
product, Tarceva (erlotinib HC1), is a small-molecule inhibitor
of the epidermal growth factor receptor (HER1/EGFR).  The protein
product of the HER1/EGFR gene is a receptor tyrosine kinase that
is over-expressed or mutated in many major solid tumors.

OSIP - OSI Pharmaceuticals  $58.16

PLAY (conservative - bearish/credit spread):

BUY  CALL  DEC-70.00  GHU-LN  OI=1991  ASK=$0.50
SELL CALL  DEC-65.00  GHU-LM  OI=4134  BID=$1.00
INITIAL NET-CREDIT TARGET=$0.55-$0.65
POTENTIAL PROFIT(max)=12% B/E=$65.55



~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
STRADDLES AND STRANGLES
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Based on analysis of the historical option pricing and technical
background, these positions meet the fundamental criteria for
favorable volatility-based plays.
_________________________________________________________________

DE - Deere & Company  $69.26  *** Earnings Speculation! ***

Deere & Company (NYSE:DE), together with its many subsidiaries,
manufactures and distributes a line of agricultural equipment,
a variety of commercial and consumer equipment and a range of
equipment for construction and forestry.  Through its financial
services segment, the company also finances sales and leases by
John Deere dealers of new and used agricultural, commercial and
consumer and construction and forestry equipment.  Deere also
provides wholesale financing to dealers of their equipment,
provides operating loans and finances retail revolving charge
accounts.  The company is also engaged in special technologies
operations and provides managed healthcare plans.  Earnings are
due on or about 11/23/04.

DE - Deere & Company  $69.26

PLAY (speculative - neutral/debit straddle):

BUY CALL  DEC-70.00  DE-LN  OI=6317  ASK=$2.00
BUY PUT   DEC-70.00  DE-XN  OI=1387  ASK=$2.70
INITIAL NET-DEBIT TARGET=$4.40-$4.50
INITIAL TARGET PROFIT=$1.60-$2.90




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

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

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
SUMMARY OF CURRENT POSITIONS - AS OF 11/19/04
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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   16.01    0.40   5.95%   3.31%
NCRX     NOV    25.00   24.30   28.05    0.70   5.52%   2.88%
ANF      NOV    32.50   32.10   43.31    0.40   2.78%   1.25%
STTX     NOV    25.00   24.60   27.02    0.40   3.89%   1.63%
SNDA     NOV    22.50   21.85   35.14    0.65   7.78%   2.97%
IDBE     NOV    12.50   12.15   15.40    0.35   6.44%   2.88%
BVF      NOV    17.50   17.05   14.85   (2.20)  0.00%   0.00%
USG      NOV    17.50   16.90   29.33    0.60   6.84%   3.55%
SNDA     NOV    25.00   24.50   35.14    0.50   5.67%   2.04%
WEBX     NOV    20.00   19.60   23.67    0.40   5.75%   2.04%
ENER     NOV    15.00   14.40   19.42    0.60   8.11%   4.17%
DRIV     NOV    25.00   24.35   36.75    0.65   6.81%   2.67%
PLMD     NOV    30.00   29.55   33.96    0.45   3.33%   1.52%
CNCT     NOV    22.50   22.10   34.20    0.40   4.68%   1.81%
CCBI     NOV    22.50   21.90   24.08    0.60   5.51%   2.74%
EYET     NOV    35.00   34.45   44.01    0.55   5.17%   1.60%
USG      NOV    17.50   17.15   29.33    0.35   6.12%   2.04%
RIGL     NOV    22.50   21.85   25.39    0.65   8.14%   2.97%
MCD      NOV    27.50   27.15   29.30    0.35   2.99%   1.29%
FARO     NOV    20.00   19.60   25.17    0.40   5.67%   2.04%
NOVN     NOV    20.00   19.60   19.87    0.27   3.29%   2.04%
VRSN     NOV    20.00   19.65   31.12    0.35   4.40%   1.78%
SSNC     NOV    20.00   19.55   21.85    0.45   5.71%   2.30%
CKFR     NOV    30.00   29.40   34.87    0.60   4.91%   2.04%
OSTK     NOV    35.00   34.60   55.13    0.40   4.10%   1.16%
GBBK     NOV    30.00   29.40   29.94    0.54   4.51%   2.04%
KRON     NOV    45.00   44.50   48.21    0.50   3.10%   1.12%
MRVL     NOV    23.75   23.35   30.84    0.40   5.59%   1.71%
AGIX     NOV    20.00   19.70   31.37    0.30   4.50%   1.52%
AFCO     NOV    20.00   19.55   22.72    0.45   6.68%   2.30%
TSRA     NOV    25.00   24.70   37.00    0.30   4.18%   1.21%
SRDX     NOV    25.00   24.50   28.60    0.50   5.79%   2.04%
ELN      NOV    22.50   22.05   27.83    0.45   6.53%   2.04%
XMSR     NOV    30.00   29.45   35.01    0.55   5.48%   1.87%
ENDP     NOV    20.00   19.55   20.98    0.45   6.72%   2.30%
LNG      NOV    20.00   19.45   49.23    0.55   8.61%   2.83%
USG      NOV    20.00   19.50   29.33    0.50   8.45%   2.56%
EDS      NOV    20.00   19.65   22.30    0.35   5.49%   1.78%
MANT     NOV    17.50   17.05   24.86    0.45   9.65%   2.64%
NTMD     NOV    17.50   17.25   20.14    0.25   6.12%   1.45%
A        NOV    22.50   22.10   23.13    0.40   5.86%   1.81%
SCHN     NOV    26.60   26.15   34.99    0.45   5.81%   1.72%
CYTC     NOV    25.00   24.60   26.02    0.40   5.27%   1.63%
USG      NOV    20.00   19.70   29.33    0.30   6.65%   1.52%
TSRA     NOV    22.50   22.30   37.00    0.20   5.12%   0.90%
FARO     NOV    22.50   22.10   25.17    0.40   7.61%   1.81%
NTAP     NOV    22.50   22.15   28.93    0.35   6.52%   1.58%
VAR      NOV    37.50   37.15   39.55    0.35   3.87%   0.94%
DOX      NOV    22.50   22.25   25.73    0.25   5.00%   1.12%
ROST     NOV    25.00   24.70   27.24    0.30   4.78%   1.21%
JNPR     NOV    25.00   24.70   27.93    0.30   4.89%   1.21%
LNG      NOV    22.50   22.15   49.23    0.35   8.04%   1.58%
SFNT     NOV    30.00   29.60   35.18    0.40   6.06%   1.35%
ELN      NOV    22.50   22.25   27.83    0.25   5.96%   1.12%
YHOO     NOV    35.00   34.60   36.15    0.40   5.30%   1.16%
XMSR     NOV    30.00   29.65   35.01    0.35   5.65%   1.18%
SHPGY    NOV    27.50   27.15   29.46    0.35   5.67%   1.29%
MRVL     NOV    25.00   24.65   30.84    0.35   7.34%   1.42%
ANF      NOV    35.00   34.55   43.31    0.45   6.35%   1.30%
USG      NOV    25.00   24.70   29.33    0.30   8.75%   1.21%
DDS      NOV    22.50   22.00   26.35    0.50  14.05%   2.27%
RDEN     NOV    22.50   22.25   23.12    0.25   7.08%   1.12%
USPI     NOV    35.00   34.60   37.08    0.40   7.21%   1.16%
RIGL     NOV    22.50   22.20   25.39    0.30   9.75%   1.35%
ELN      NOV    22.50   22.15   27.83    0.35  13.38%   1.58%
VTIV     NOV    17.50   17.00   16.70   (0.30)  0.00%   0.00%
NTMD     NOV    20.00   19.60   20.14    0.40  16.91%   2.04%
MYGN     DEC    17.50   17.05   18.66    0.45   5.52%   2.64%
VTIV     DEC    17.50   17.05   16.70   (0.35)  0.00%   0.00%
IFLO     DEC    15.00   14.55   18.69    0.45   6.89%   3.09%
SEAC     DEC    17.50   16.95   17.55    0.55   7.02%   3.24%
ADLR     DEC    12.50   12.10   14.01    0.40   6.88%   3.31%
UTHR     DEC    25.00   24.05   35.11    0.95   9.03%   3.95%
RIGL     DEC    20.00   19.70   25.39    0.30   4.02%   1.52%
NFLD     DEC    15.00   14.45   15.75    0.55   8.24%   3.81%
RMBS     DEC    17.50   16.75   20.68    0.75   9.88%   4.48%
AGIX     DEC    20.00   19.60   31.37    0.40   4.83%   2.04%
ATI      DEC    20.00   19.35   20.56    0.65   7.37%   3.36%
MRVL     DEC    25.00   24.60   30.84    0.40   5.17%   1.63%
ELN      DEC    22.50   22.15   27.83    0.35   4.93%   1.58%
TSRA     DEC    25.00   24.35   37.00    0.65   7.97%   2.67%
VTS      DEC    20.00   19.65   22.68    0.35   4.84%   1.78%
ERICY    DEC    30.00   29.60   32.89    0.40   3.44%   1.35%
RMBS     DEC    17.50   16.95   20.68    0.55  10.12%   3.24%
TSRA     DEC    30.00   29.65   37.00    0.35   4.12%   1.18%
NCRX     DEC    25.00   24.25   28.05    0.75   8.18%   3.09%
IFLO     DEC    17.50   17.00   18.69    0.50   7.38%   2.94%
NTGR     DEC    15.00   14.60   15.62    0.40   6.54%   2.74%
ENZ      DEC    17.50   17.05   17.90    0.45   6.32%   2.64%
CECO     DEC    30.00   29.30   35.01    0.70   7.67%   2.39%
CRA      DEC    12.50   12.20   13.32    0.30   6.11%   2.46%
  
Although currently profitable, positions in Palomar Medical
(NASDAQ:PMTI) and Energy Conversion Devices (NASDAQ:ENER); at
$17.50, as well as Ditech Communications (NASDAQ:DITC) 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   30.60    0.35   4.44%   0.99%
LLTC     NOV    40.00   40.60   38.78    0.60   3.74%   1.48%
IVX      NOV    20.00   20.75   14.83    0.75   9.51%   3.61%
PLMO     NOV    40.00   40.45   39.01    0.45   5.62%   1.11%
SLXP     NOV    20.00   20.65   15.51    0.65   8.83%   3.15%
AOC      NOV    25.00   25.25   20.45    0.25   3.93%   0.99%
CVH      NOV    50.00   50.60   48.10    0.60   4.46%   1.19%
DSPG     NOV    22.50   22.85   22.30    0.35   6.23%   1.53%
RNR      NOV    50.00   50.65   50.23    0.42   2.26%   1.28%
GIVN     NOV    40.00   40.45   29.72    0.45   5.86%   1.11%
ARW      NOV    25.00   25.40   24.15    0.40   5.82%   1.57%
TACT     NOV    30.00   30.50   22.83    0.50  10.16%   1.64%
NVTL     NOV    25.00   25.20   20.63    0.20   6.99%   0.79%
ASKJ     NOV    30.00   30.35   23.74    0.35   8.26%   1.15%
LSS      NOV    30.00   30.20   29.39    0.20   6.51%   0.66%
DITC     NOV    25.00   25.25   15.96    0.25   8.20%   0.99%
DISH     NOV    32.50   32.90   32.65    0.25   3.94%   1.22%
PTP      NOV    30.00   30.60   29.50    0.60  13.28%   1.96%
LEND     NOV    40.00   40.55   37.71    0.55   9.31%   1.36%
UVN      NOV    30.00   30.25   29.95    0.25   5.54%   0.83%
MNST     DEC    30.00   30.60   27.36    0.60   4.91%   1.96%
FOSL     DEC    30.00   30.50   27.20    0.50   4.16%   1.64%
SLAB     DEC    35.00   35.55   30.82    0.55   4.84%   1.55%
APPX     DEC    35.00   35.60   29.02    0.60   7.73%   1.69%
DIGE     DEC    25.00   25.30   22.38    0.30   6.05%   1.19%
MDCO     DEC    30.00   30.35   24.85    0.35   5.01%   1.15%
BOBJ     DEC    25.00   25.40   22.92    0.40   5.96%   1.57%
ENZN     DEC    20.00   20.55   14.76    0.55  14.84%   2.68%
TACT     DEC    25.00   25.40   22.83    0.40   8.50%   1.57%

Positions in Americredit (NYSE:ACF), Cabot (NYSE:CBT), Ii-Vi
(NASDAQ:IIVI), Lam Research (NASDAQ:LRCX), Hyperion Solutions
(NASDAQ:HYSL), Sina Corp (NASDAQ:SINA), UCI Inc. (NASDAQ:UICI),
U.S. Steel (NYSE:X), and United Surgical (NASDAQ:USPI) have
previously been closed to limit potential losses.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
NEW POSITIONS
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

This following group of plays is simply a list of candidates to
supplement your search for profitable trading positions.  As with
any new investment, you must decide if the selections meet your
criteria for potential plays.  Only you can know what strategies
are suitable for your personal skill level, risk-reward tolerance
and portfolio outlook.  In addition, we recommend that you avoid
any trading techniques in which you are not completely comfortable
with the potential capital loss, the necessary adjustments, and
the common entry-exit strategies.

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

WARNING: THE RISK IN SELLING UNCOVERED OPTIONS IS SUBSTANTIAL!

The sale of uncovered puts entails considerable financial risk,
far more than the initial margin or collateral required to open
a position.  The maximum financial obligation for the sale of a
naked put is the strike price (of the underlying stock) that is
sold.  Although this obligation is reduced by the premium from
the sale of the option, a writer of puts should have the cash or
collateral equivalent of the sold strike price in reserve at all
times.  In addition, there is one very important rule when using
this strategy: Don't sell puts on stocks that you don't want to
own!  Why?  Because stocks occasionally experience catastrophic
declines, exponentially increasing the margin maintenance and
possibly causing a devastating shortfall in your portfolio.  It
is also important that you consider using trading stops on naked
option positions to help limit losses when a stock's price falls.
Many professional traders suggest closing the position when the
underlying share value moves below the sold strike, or using a
"buy-to-close" stop order at a price that is no more than twice
the original premium received from the sold option.

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

NEW NAKED-PUT CANDIDATES

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

FXEN   8.44   DEC  7.50  IWQ-XU 0.45   33  7.05  27   7.2%  17.6%
IDCC   19.21  DEC 17.50  DAQ-XW 0.65 1157 16.85  27   4.3%  11.1%
RAE    8.57   DEC  7.50  RAE-XU 0.25  729  7.25  27   3.9%  10.8%
MCIP   18.95  DEC 17.50  MQI-XW 0.45 7223 17.05  27   3.0%   7.7%
NVDA   18.96  DEC 17.50  UVA-XW 0.40 4977 17.10  27   2.6%   6.9%
SRNA   21.20  DEC 20.00  NHU-XD 0.40    0 19.60  27   2.3%   5.9%
PLMO   39.01  DEC 30.00  UPY-XF 0.40 3543 29.60  27   1.5%   5.5%
DDS    26.35  DEC 22.50  DDS-XX 0.25  155 22.25  27   1.3%   4.1%

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.
_________________________________________________________________

FXEN - FX Energy  $8.44  *** Energy Sector ***

FX Energy (NASDAQ:FXEN) is an independent oil and gas company
focused on exploration, development and production opportunities
in the Republic of Poland, in association with the Polish Oil
and Gas Company and others.  The company's ongoing activities
in Poland are conducted in five project areas: Fences I, II and
III, Pomeranian and Wilga.  It is working almost exclusively on
these project areas, where the gas-bearing Rotliegendes sandstone
reservoir rock in Poland's Permian Basin may be a direct analog
to the Southern North Sea gas basin, offshore England.

FXEN - FX Energy  $8.44

DEC  7.50 IWQ-XU LB=0.45 OI=33 CB=7.05 DE=27 TY=7.2% MY=17.6%


__________________________________________________________________

IDCC - InterDigital Comm.  $19.21  *** On The Rebound? ***

InterDigital Communications (NASDAQ:IDCC) designs, develops and
places into operation a range of advanced wireless technologies,
systems and products.  IDCC, through its involvement in the
standards bodies and incubation efforts, monitors emerging
technologies being developed to deliver voice and data in a
wireless environment.  It focuses on its technology and product
development on the air interface technology, referred as wideband
code division multiple access, is comprised of two duplexing
methods, frequency division duplex and time division duplexing.

IDCC - InterDigital Comm.  $19.21

DEC 17.50 DAQ-XW LB=0.65 OI=1157 CB=16.85 DE=27 TY=4.3% MY=11.1%


__________________________________________________________________

RAE - RAE Systems  $8.57  ***  Defense Sector  ***

RAE Systems (NYSE:RAE) is a global developer and manufacturer of
rapidly deployable, multi-sensor chemical detection monitors,
networks for homeland security and industrial applications.  In
addition, RAE offers a line of portable single-sensor chemical
and radiation detection products.  The company's products are
based on technology and include portable, wireless and fixed
atmospheric monitors and photo-ionization detectors and gamma
and neutron detectors.  These products enable the military and
first responders, such as firefighters, law enforcement and other
emergency management personnel to detect and provide warning of
weapons of mass destruction and other hazardous materials.

RAE - RAE Systems  $8.57

DEC  7.50 RAE-XU LB=0.25 OI=729 CB=7.25 DE=27 TY=3.9% MY=10.8%


__________________________________________________________________

MCIP - MCI Inc.  $18.95  *** Entry Point? ***

MCI, Inc. (NASDAQ:MCIP) whose predecessor was WorldCom, is a
global communication company, providing a range of communication
services in over 200 countries on six continents.  It operates
a communications network that is composed of over 100,000 route
miles of network connections linking metropolitan centers and
various regions across North America, Europe, Asia, Latin America,
the Middle East, Africa and Australia.  The company also owns an
Internet protocol backbone and is a carrier of international voice
traffic.  The company operates primarily through three business
units: Business Markets, Mass Markets and International.

MCIP - MCI Inc.  $18.95

DEC 17.50 MQI-XW LB=0.45 OI=7223 CB=17.05 DE=27 TY=3.0% MY=7.7%


__________________________________________________________________

NVDA - Nvidia  $18.96  *** New Pact With Intel! ***

Nvidia Corporation (NASDAQ:NVDA) designs, develops and markets
graphic processing units, media and communications processors,
ultra-low-power media processors and related software that are
an integral part of a variety of visual computing platforms
such as enterprise and consumer personal computers, professional
workstations, notebook PCs, personal digital assistants, cellular
phones, game consoles and digital media centers.  The original
equipment manufacturers, original design manufacturers, system
builders and consumer electronics firms utilize NVIDIA digital
media processors as a core component of the entertainment and
business solutions.

NVDA - Nvidia  $18.96

DEC 17.50 UVA-XW LB=0.40 OI=4977 CB=17.10 DE=27 TY=2.6% MY=6.9%


__________________________________________________________________

SRNA - Serena Software  $21.20  *** Optimistic Forecast! ***

Serena Software (NASDAQA:SRNA) is a provider of infrastructure
software to manage change to enterprise applications.  The firm
has developed a full suite of mainframe products, including its
flagship product ChangeMan ZMF, which was introduced in 1988.
Since then, the company has introduced ChangeMan DS, which is a
distributed systems product providing an end-to-end solution to
software change management.  Its newest offering, TeamTrack6, is
a distributed systems product based on the SAFE Framework, which
is expected to revolutionize enterprise operations by allowing
cross-process integration.

SRNA - Serena Software  $21.20

DEC 20.00 NHU-XD LB=0.40 OI=0 CB=19.60 DE=27 TY=2.3% MY=5.9%


__________________________________________________________________

PLMO - palmOne  $39.01  *** Premium-Selling Only! ***

palmOne (NASDAQ:PLMO) is a global provider of handheld computing
and communications devices.  The firm targets consumer, business,
education and government users around the world.  palmOne sells
products under three sub-brands: the Zire, Tungsten and Treo.
The Zire family is primarily designed for, and targeted at,
consumers such as entry-level and digital media enthusiasts.
The Treo and Tungsten lines are primarily designed for and
targeted at business professionals and enterprise users.  These
product families span the handheld computing and communications
device market.

PLMO - palmOne  $39.01

DEC 30.00 UPY-XF LB=0.40 OI=3543 CB=29.60 DE=27 TY=1.5% MY=5.5%


__________________________________________________________________

DDS - Dillard's  $26.35  *** Bullish Retailer! ***

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.  The
company markets its 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  $26.35

DEC 22.50 DDS-XX LB=0.25 OI=155 CB=22.25 DE=27 TY=1.3% MY=4.1% TS



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

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.

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

AMLN - Amylin Pharmaceuticals  $21.44  *** Premium Selling! ***

Amylin Pharmaceuticals (NASDAQ:AMLN) is a biopharmaceutical
company engaged primarily in the discovery, development and
commercialization of drug candidates for the treatment of
diabetes, obesity and cardiovascular disease.  The company
has two lead drug candidates in late stage development for
the treatment of diabetes, SYMLIN (pramlintide acetate) and
Exenatide.  Amylin is hoping for tentative FDA approvals for
Symlin and Exenatide in March or April 2005.

AMLN - Amylin Pharmaceuticals  $21.44

PLAY (sell naked call):

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

SELL CALL  DEC 25    AQM-LE    436    0.25  25.25   5.3%   1.0%


_________________________________________________________________

ATMI - ATMI Incorporated  $23.18  *** In A Trading Range? ***

ATMI (NASDAQ:ATMI) is a global supplier of materials, materials
delivery systems and high-purity materials packaging products
used in the manufacture of semiconductor devices.  ATMI's SDS
product line uses a gas cylinder with an adsorbent material.
Its CVD products that are used for thin films in semiconductor
manufacturing are sold under the UltraPur brand for pre-metal
dielectric, dielectric and barrier applications.  The company
also manufactures three different types of NOWPak container
assemblies: Bag-in-a-Bottle, Bag-in-a-Can and Bag-in-a-Drum,
each with its own companion dispense connection system.

ATMI - ATMI Incorporated  $23.18

PLAY (sell naked call):

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

SELL CALL  DEC 25    ASQ-LE    370    0.40  25.40   5.7%   1.6%


_________________________________________________________________

CELG - Celgene  $26.85  *** Profit-Taking In Progress! ***

Celgene (NASDAQ:CELG) is an integrated biopharmaceutical firm
engaged in the discovery, development and commercialization of
therapies designed to treat cancer and immunological diseases
through regulation of cellular, genomic and proteomic targets.
Celgene has built a discovery, development and commercialization
platform for drug- and cell-based therapies that allows it to
both create and retain significant value within its therapeutic
franchise areas of cancer and immune/inflammatory diseases.

CELG - Celgene  $26.85

PLAY (sell naked call):

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

SELL CALL  DEC 30    LQH-LF    5587   0.45  30.45   6.3%   1.5%


_________________________________________________________________

JBLU - JetBlue Airways  $22.48  *** Downtrend Resumes? ***

JetBlue Airways (NASDAQ:JBLU) is a low-fare, low-cost passenger
airline that serves point-to-point routes between 22 destinations
in 11 states and Puerto Rico.  The company focuses on serving
underserved markets and/or large metropolitan areas that have
high average fares.  It has a geographically diversified flight
schedule that includes both short-haul and long-haul routes.
JetBlue operates over 200 weekday flights between the Northeast
and Florida, the East Coast and western United States, and other
short-haul flights.

JBLU - JetBlue Airways  $22.48

PLAY (sell naked call):

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

SELL CALL  DEC 25    JGQ-LE    8561   0.30  25.30   5.0%   1.2%



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