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Daily Newsletter, Thursday, 12/02/2004

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The Option Investor Newsletter                Thursday 12-02-2004
Copyright 2004, All rights reserved.                       1 of 3
Redistribution in any form strictly prohibited.


In Section One:

Wrap: Hedge the News
Futures Wrap: See Note
Index Wrap: Intel gives tech bulls late session optimism
Market Sentiment: Mixed Blessing


Posted online for subscribers at http://www.OptionInvestor.com
************************************************************
MARKET WRAP  (view in courier font for table alignment)
************************************************************
      12-02-2004           High     Low     Volume   Adv/Dcl
DJIA    10585.12 -  5.10 10629.16 10544.77 2.23 bln 1219/2021
NASDAQ   2143.57 +  5.30  2156.14  2131.65 2.43 bln 1648/1482
S&P 100   566.45 +  0.24   568.93   564.57   Totals 2867/3503
S&P 500  1190.33 -  1.04  1194.81  1186.66 
SOX       438.71 -  1.40   446.96   437.26
RUS 2000  642.51 -  1.17   644.57   639.72
DJ TRANS 3729.94 -  6.90  3748.05  3717.31
VIX        12.98 +  0.01    13.04    12.72
VXO (VIX-O)13.91 +  0.45    14.21    13.58
VXN        18.64 +  0.40    18.65    17.85 
Total Volume 4,960M
Total UpVol  2,474M
Total DnVol  2,420M
Total Adv  3272
Total Dcl  4003
52wk Highs  663
52wk Lows    41
TRIN       0.78
NAZTRIN    0.42
PUT/CALL   0.84
************************************************************

Hedge the News
by Jim Brown

After a blowout on Wednesday the markets traded sideways 
on Thursday as dividend cash began to hit traders accounts.
On a day that most analysts expected to see a rising market
it did make some new highs but closed almost exactly flat.
The reason according to chatter on the floor was unwinding
futures trades. It appears some funds hedged against the 
dividend bounce by going long futures on Wednesday. With
the leverage futures provides they were able to capture
the initial bounce with cash on hand and not have to wait
for today's dividend deposit. Once the Microsoft cash begin
to hit accounts those trades were unwound and stocks bought
to replace them. This produced a huge volume spike with 
nearly the Dow, Nasdaq, SPX, RUT and SOX all closing within 
five points of the flat line.

Dow Chart

 
Nasdaq Chart

 


The flat day came on another session of imploding oil and
ahead of the Intel update and the Jobs report. I had not
expected any major moves until Friday or even Monday and
the Wednesday bounce had me scratching my head. The futures
swap explains it completely and puts us back to the Fri/Mon
bullish scenario assuming Intel and Jobs were positive.

After the bell Intel surprised the street and upgraded
guidance to $9.3B to $9.5B compared to prior estimates of
$8.6B to $9.2B. Intel soared to $24.72 and a +2 point gain
from the close and trading was heavy in after hours. The
initial bounce has not faded appreciably with the price
still holding $24.35 as I type this. S&P futures jumped
+5 to 1196 and a new high for the year. Nasdaq futures
jumped +17 points to 1631 on strength in the entire chip
sector in late trading. This appears to be good news for
tomorrow but we still do not know how many more futures
trades need to be flattened by funds. We also have the
Jobs report still hovering over our head tonight. We are
not out of the woods yet. 

Economically it was another day of mixed blessings with
Jobless Claims spiking again to 349,000 and a gain of
+25,000 over last week. Most analysts quickly discounted
the jump in claims as a seasonal adjustment problem for
Thanksgiving week. However, even though this weeks Jobless
Claims have no bearing on the Jobs Report tomorrow there
was some initial caution when it was announced. We will
see tomorrow if the Jobs paints the same picture or will
continue in creation mode. 

According to the Monster Employment Index released this
morning the Jobs report will be strong. The index hit an
all time high at 117 compared to 88 one year ago today. 
50% of the sectors tracked posted gains for the month with
the majority of the gains going to high paying jobs in the
Professional, Scientific, Technical Services and Utilities
sectors. Jobs increased in all nine regions.

The Chain Store Sales for November came in at +1.7% compared
to the estimates for +4.0%. We already knew they were going
to be weak but the depth of the weakness was astounding.
60% of retail stores posted sales below prior estimates.
This is a major blow to the retail sector and suggests
the discounts are going to be heavy over the next four
weeks. Online sales soared and according to some analysts
it took nearly 3% out of store sales. This seems extreme
to me but there are a lot of people not heading to the
mall this year. Analysts claim retail trends have changed
after the last three years and shoppers are going to wait
until the last minute to take advantage of the deep cuts
in prices. With Wal-Mart barely over the flat line for
November it suggests just how competitive those discounts
will be for the rest of the season. Wal-Mart announced
today that they were going to blast consumers with a very
strong advertising campaign beginning this weekend. High
gasoline prices and record heating oil prices have also 
combined to keep consumers out of stores. 

Factory Orders increased significantly over last month 
with a headline number at +0.5% and well over estimates
of +0.2%. Last months number was also revised higher.
The strongest component was nondurable goods which rose
+2.4% for the month. New orders for Computers and 
electronics fell -6.5% after blowouts the prior two 
months at +13.2% and +6.0%. Orders for computers alone
fell -16.1% for the month. 

The horrible drop in computer orders and shipments in 
the Factory Order report was probably one of the biggest
weights on the market today. With the Intel update coming
after the close this order flow report was seen as a
strong potential for an Intel warning instead of higher
guidance. This could have helped produce a lot of the
after hours bounce as shorts expecting the worst were
clobbered. 

For Friday we have the Jobs Report at 8:30 and the ISM
Services Index at 10:00. The key is the Jobs report and
estimates were climbing all day. The official consensus
is still +200,000 but the whisper numbers are hovering
around +300K. Last month showed a gain of +337,000 jobs.
I am leaning toward last month being an anomaly that was
skewed by the hurricanes. I would love to see another big
jobs gain but I would be just as happy with hitting the
consensus at 200K. Anything over 100K will probably be
met with market relief in light of the Intel guidance. 

The big story today was not really the Microsoft dividend
but the falling oil prices. For three consecutive days we
have seen major selling in crude and the low for the day
at $42.50 was -8.00 below Tuesday's high at $50.45. This
is nearly -16% off the Tuesday high and a -23% drop from
the October highs. For a stock this would be a huge move.
For a commodity like oil it is the 100-year flood. Better
yet it is the collapse of a bubble not seen in a decade.
Everyone knew it would end and could end badly and it
could hardly have ended worse. The drop today took us
back to September levels and very near support at $42.00.

With the flush of speculators in the oil futures it should
have pushed even more money back into equities but it may
not appear until tomorrow or Monday. Like any equity long
play that suddenly fell out of the sky we are at levels
where bulls have appeared before. While some cash may have
been pushed into equities there is likely another contingent
that see the oil drop as a buying opportunity. 

Another problem caused by the oil drop could be an aggressive
Fed. Yes, high oil was a depressant for the economy and could
have kept the Fed on relative hold. With the bottom falling
out of the dollar and oil at the same time the stimulus to
the economy could be huge if it holds. The Fed could actually
be forced to raise rates at a faster pace to constrain the
inflation monster. Interest rates on the Ten-year Treasury
have soared to the highest level in four months at 4.4% on
fears the Fed will charge ahead. This also kept traders on
the sideline trying to decide what the future holds. Should
oil bounce on Friday it could actually be positive for the
equity market. It is a crazy world of conflicting factors 
for the market this week. Add to that the potential for 
Japan/Europe joint currency interventions to hold up our 
dollar and it gets even more crazy. 

Crude Oil

 
SPX Chart – daily

 
SPX Chart - 60 min

 


Before the impact of unwinding futures trades hit the market
the Dow managed to hit a new eight month high at 10629. The
retracement selling only managed to push the index back to 
close at 10585 and left the Dow in prime launch pad territory.
The high for the year is 10753 and that could easily be hit
again over the next two trading days if the current sentiment
holds. Rising support is currently 10560 and +20 points 
higher than Wednesday. There is an underlying bid despite
how the indexes finished the day. 

The Nasdaq is even stronger and while it closed only a 
little higher it did make a strong intraday break to higher
ground. The Compx hit 2156 and +3 points over the high for
the year at 2153 set back in January. Unfortunately this is
also very strong resistance and for the first test we simply 
did not have the power to push through today. The overnight
futures suggest we will get another chance at tomorrows open.

The SPX broke out to nearly 1195 but over 1190 it ran into
major selling pressure and returned to that level at the 
close. Overnight the S&P futures are trading back at 1196
and it appears we could test 1200 on the SPX at the open.
There is strong round number resistance at 1200 as well as
two different uptrend resistance lines converging. Earlier
in the week I was expecting a break of that 1200 level with
a positive Intel/Jobs combination but tonight I am not so
sure. I still believe we will break it but maybe not until
next week. 

For Friday it is all about Jobs and then it depends on 
how funds decide to spend their dividend money. Despite
the nearly five billion shares traded today there is still
a lot of cash that has not made it back into the market. 
Friday could be a disappointment or a major explosion but
I would doubt we will see a big drop. Watch SPX 1200 for 
a directional clue and try not to buy the top. 
  
Sell too soon! 

Jim Brown
Editor


************
FUTURES WRAP
************

Futures wrap is not emailed due to the excessive number of charts.
It may be read on the website at this address.
http://www.OptionInvestor.com/indexes/futureswrap.asp


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

Intel gives tech bulls late session optimism

Shares of chip-giant Intel (NASDAQ:INTC) $22.71 -1.68% fell 39 
cents during Thursday's regular session, then catapulted higher 
at $24.50 in the extended session after the company guided 
quarterly revenues higher.

Intel said it now sees quarterly revenues between $9.3 and $9.5 
billion, which was well above the company's October 12 guidance 
of $8.6 to $9.2 billion.  Intel added that it sees gross margins 
between 55-57%, which surrounded the company's 10/12 guidance of 
about 56%.  

I (Jeff Bailey) think raising of revenue guidance, with gross 
margins holding at the 10/12 guidance was a positive surprise.

We've discussed Intel's inventory issues in recent commentary, 
and I would have thought that price reductions, in order to get 
the inventory issue back under control, would have had a more 
negative impact on gross margins.  

Something I've forgotten about, and perhaps others have to, was a 
new tax law.  Intel said that the new tax law, which allows U.S. 
companies to repatriate overseas profits at a temporarily low 
rate of 5.25%, rather than reinvest those profits overseas, may 
add up to $6 billion of earnings.  Intel said it was not certain 
at this time if, or when a decision would be made to take 
advantage of the temporary rate.

I (Jeff Bailey) would have to think that Wall Street analysts 
have been accounting for these tax laws in earnings estimates for 
US-based companies that do business overseas.  

Remember, technology company's as a whole derive more than 50% of 
their revenue outside the U.S. and Intel's "reminder" did draw 
did draw some commentary from analysts as a positive near-term 
catalyst.

In after-hours trade, the Semiconductor HOLDRs (AMEX:SMH) $33.50 
-0.68% jumped $1.40, or 4.1%, to $34.90.  The NASDAQ-100 Tracker 
(NASDAQ:QQQQ) $40.07 +0.37% last ticked by at $40.50, a gain of 
1.07% from Thursday's close.

Shares of SanDisk (NASDAQ:SNDK) $23.92 +2.83% (see last night's 
Index Wrap and today's 11:00 AM EST update) jumped to $24.65 

U.S. Market Watch - 12/02/04 Close

 

I do not give trade recommendations regarding futures (too much 
leverage and need to be followed rather closely), and I don't 
want to step on anyone's toes, but if there's one short a futures 
traders should be looking at its gold.  Gold STOCKS, which I have 
been noting as UNDERPERFORMING got whacked today.  Late last 
year, I noted the same thing developing where the commodity 
itself (gold) was hitting new highs, but the stocks were not.  
Gold (the commodity) then took a serious drubbing in the months 
to follow.  

Be alert gold bugs!  Keep an eye on the U.S. Dollar Index 
(dx00y).  Should it break much above 83.03 and correlations in 
the Pivot Matrix, gold could see a trade similar to what oil has 
seen the past few weeks.

The dollar saw some gains today, and does show a percentage gain 
for the last 5-session, where the 5-session gain is largely 
attributed to today's rise.  What's going on?  My main thought, 
based on last several month's observation, is that ahead of 
tomorrow's nonfarm payroll numbers for November (consensus is 
+200,000) we're going to have some dollar shorts covering.

Why?  With oil prices declining, that lifts that "tax on the 
consumer/economy" that Mr. Greenspan has commented on.  The 
decline in oil by itself should bring some short-covering into 
the dollar, as a lower energy trade, probably has the Fed more 
willing/able to raise interest rates in the months to come.  That 
thought can also bring strength to the dollar.  

Does anyone question the Fed's growing comments that that it 
won't be as communicative with the public, or MARKETS, on its 
monetary policy in the future?  

I don't.  The reason I don't disagree is this.  How can the Fed 
"win" if they say, we're going to do this or that with rates, 
when OIL PRICES have been doing what they've been doing this 
year?  

Remember, oil went from $36 to $55 from July to October.  Now its 
price has fallen from $55 to $44 in just 1.5 months!

Look at your Computer Technology Index (XCI.X) 718.31 -0.26%.  It 
traded as high as 726.25 today, but still couldn't "seal the 
deal" with a close above 720.  Hesitation in front of Intel?  A 
high likelihood.  

In my opinion, if the XCI.X can't get a close above 720 after the 
Hewlett Packard (NYSE:HPQ) $20.57 +0.24% (still off its Nov. 17 
spike high of $21.32) and now Intel's mid-quarter update, then 
"big tech" bulls better be alert.

You see.  As of today's regular session close, it has to be my 
thought that as of 04:00 PM EST, the MARKET still isn't a big 
believer in "big tech."   True, 720 is just a level, but its a 
level that provides our, or my, bullish test.  The MARKET is 
never wrong, and as long as we provide BOTH bullish and bearish 
tests over time, the MARKET will eventually tell us what its 
convictions are.

Dorsey/Wright and Associates' Computers Bullish % (BPCOMP) rose 
0.97% to 55.56% and is still "bull alert" at 55.56%.  It would 
take a reversing lower reading of 48% to turn back to "bear 
confirmed" and would need to exceed January's 70% reading to 72% 
to achieve "bull confirmed."  In August, this bullish % fell to 
18%.

If this were American football, the bulls have the ball, they're 
on the bears side of the 50-year line, but the bulls are probably 
playing with their second-string quarterback.  The bulls crowd 
things they have a chance to score points (reach 70%), but 
there's that little thought in the back of their mind that the 
second string quarterback is sure to throw an interception.

What do you think?  Don't you feel, based on observation that 
tech wants to rock?  But it just seems to good to be true?

If you do, then that's good!  You're not showing any complacency.

Market Snapshot/Internals - 12/02/04 Close

 

Traders are turning up the volume at the NASDAQ, where a heavy 
2.4 billion shares traded hands.  Look at the disparity between 
the big board's a/d line and that of the NASDAQ.  I'm thinking 
its the larger number of "energy" stocks listed on the NYSE that 
has something to do with that.  The volume on the NASDAQ?  Maybe 
some dividend reinvestment from Mr. Softy (NASDAQ:MSFT) $27.09 
+0.58.

I don't really follow up/down volume indicators, other than TRIN, 
(you can only follow so much) but today's NYSE reading of up 715 
and down 1,024 versus the NASDAQ's up 1,441 and down 970 may also 
suggest some strong outflows from the energy areas and being 
redistributed in other sectors, or simply moving over to some 
four and five-lettered stock symbols at the NASDAQ. 

Please note that the up/down volumes are in millions.

QQQQ traders.  In tonight extended session, I posted a comment in 
the Market Monitor to write down $40.11.  While I was updating 
traders on some of the evenings activity in the extended session, 
I saw a late print of 2,000,000 shares being "blocked out" at 
$40.11.  What this trade most likely is, is a trade for a large 
institutions, that a trader worked all day to fill, for 2,000,000 
shares.  Now, I do NOT know if it was a buy, or sell order.  Just 
make note of $40.11, as it may become an influential level at 
some point in the future.

Pivot Matrix - 

 

The dollar has been volatile on a Friday's nonfarm payroll data.  
With the dollar having gotten smashed lower in recent weeks, 
strength levels begin at WEEKLY Pivot and DAILY R1 correlation.  
If the nonfarm number is "too hot" meaning something above 
300,000, then I'd have to think MONTHLY Pivot and WEEKLY R1 are 
upside risk levels for dollar bears.

I cannot say that the dollar weakness is directly tied with 
broader market equity gains.  There are some that do believe this 
to be a direct correlation.  I do believe there is a more direct 
tie with dollar gold.  

Banks will be a good sector to monitor, judge for a market 
response, which might not be as knee-jerk as technology stocks, 
or even the SPX, where futures traders (also highly reactionary 
on an intra-day basis) can be quick to rush to judgment.  

Let's pretend the jobs number is much stronger than the 200,000 
forecast.  

The initial thought from the market might be.... "Good gravy!  
The economy is on fire, its too hot, the Fed has been to easy 
with interest rates, rapid inflation will follow, the sky is 
falling the sky is falling."

Now, it has been my observation, that corporations tend to not 
hire as many workers in DECEMBER (next nonfarm number).  

With that in mind, be ready for dollar and Treasury yield 
volatility.  But use the BIX.X, and all that you have benefited 
from with how this sector trades, and can give you insight to, to 
bring some reasoning into tomorrow trade.

As it stands tonight, I think the BIX.X is saying, everything is 
under control.

This thought process might be proved incorrect should the BIX.X 
fall below its DAILY S2 and WEEKLY R1 correlations.

If the nonfarm payroll number is "too hot" expect the immediate 
worries/thought about inflation to be present.

Keep an eye on gold.  At $450, it has to have some type of 
"inflation" alert added to it.

Remember!  The U.S. Dollar Index (dx00y) is similar levels as 
found in April/May of 1995.  As I review the 08/31/2003 Ask the 
Analyst column titled "Gold and the Fed. Too loose, too tight, or 
just right?"; gold was trading in the $385 area.

Jeff Bailey

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

Mixed Blessing
- J. Brown

Thursday proved to be a day of mixed blessings.  There was no 
follow through on Wednesday's big rally even as oil lost another 
4.3 percent to break down under the $45 a barrel level and its 
simple 100-dma.  The weekly initial jobless claims were higher 
than expected but the monster job numbers were positive.  Overall 
the market seems cautiously optimistic for tomorrow's November 
non-farm payrolls (jobs) report.  

You wouldn't know it from the closing numbers but the NASDAQ 
managed to hit new three-year highs.  The S&P 500 tagged another 
three-year high and the Dow Transports hit another five-year high 
- at least on an intraday basis.  The market was mixed with 
technology out performing followed by biotech, drugs and defense.  
The real winners today were the airlines as traders snapped up 
shares in the face of oil's weakness.  

Technically the market is still very overbought.  The volatility 
indices remain in bearish reversal territory and the ARMS index 
or TRIN moving averages are in bearish reversal range as well.  
Yet Intel's positive mid-quarter update tonight after the bell is 
expected to give the semiconductor stocks a boost tomorrow.  This 
in turn should give techs in general a lift.  That is assuming we 
don't have any massively negative economic numbers or job misses.  

The trend is still your friend but it may be time to rotate out 
of oil stocks at least short term.  

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

Market Averages

DJIA ($INDU)

52-week High: 10753
52-week Low :  9585
Current     : 10585

Moving Averages:
(Simple)

 10-dma: 10513
 50-dma: 10204 
200-dma: 10239 



S&P 500 ($SPX)

52-week High: 1188
52-week Low : 1031
Current     : 1190

Moving Averages:
(Simple)

 10-dma: 1180
 50-dma: 1141
200-dma: 1122



Nasdaq-100 ($NDX)

52-week High: 1581
52-week Low : 1301
Current     : 1613

Moving Averages:
(Simple)

 10-dma: 1579
 50-dma: 1491
200-dma: 1443



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

CBOE Market Volatility Index (VIX) = 12.98 +0.01
CBOE Mkt Volatility old VIX  (VXO) = 13.91 +0.45
Nasdaq Volatility Index (VXN)      = 18.64 +0.40 


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

          Put/Call Ratio  Call Volume   Put Volume

Total          0.84      1,043,161       872,938
Equity Only    0.69        882,049       611,484
OEX            0.71         19,801        30,427
QQQ*            --             --            -- 

*Symbol changed to QQQQ today and the CBOE has not updated their
 systems yet.

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

Bullish Percent Data

           Current   Change   Status
NYSE          75.6    + 1.4   Bear Correction
NASDAQ-100    76.0    + 2     Bull Confirmed
Dow Indust.   66.6    + 0     Bull Confirmed
S&P 500       73.8    + 1.4   Bull Confirmed
S&P 100       74.0    + 2     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: 0.87
10-dma: 0.87 
21-dma: 0.90
55-dma: 1.07


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    1094      1592
Decliners    1715      1437

New Highs     215       162
New Lows       10        13

Up Volume    921M     1435M
Down Vol.   1276M      963M

Total Vol.  2240M     2418M
M = millions


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

Commitments Of Traders Report: 11/23/04


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

Commercials are growing more bearish despite upping both their
long and short positions.  As usual the small traders are headed
the opposite direction by growing more bullish.

Commercials   Long      Short      Net     % Of OI
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%)
11/23/04      462,408   491,384   (28,976)   (3.0%)

Most bearish reading of the year: (111,956) -  3/06/02
Most bullish reading of the year:   23,977  - 12/09/03

Small Traders Long      Short      Net     % of OI
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%
11/23/04      171,192   150,606    20,586     6.4%

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 have been consistently bearish on the e-minis
but they've reached a new yearly high in their bearish bias.
Small traders remain staunchly net bullish.

Commercials   Long      Short      Net     % Of OI 
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%)
11/23/04      412,724   849,091   (436,367)  (34.6%)

Most bearish reading of the year: (436,367)  - 11/23/04
Most bullish reading of the year:  133,299   - 09/02/03

Small Traders Long      Short      Net     % of OI
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%
11/23/04      400,995     62,080   338,915    73.1%

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


NASDAQ-100

No change here.  Commercials remain net bullish.  Small
traders remain net bearish, although they've reached a new 
yearly high in their bearish attitudes. 

Commercials   Long      Short      Net     % of OI 
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%
11/23/04       58,159     34,104    24,055   26.0%

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

Small Traders  Long     Short      Net     % of OI
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%)
11/23/04       11,153    39,712   (28,559)  (56.1%)

Most bearish reading of the year: (28,559) - 11/23/04
Most bullish reading of the year:  19,088  - 01/21/02

DOW JONES INDUSTRIAL

Both professional traders and small traders are growing
more bearish on the Industrials.

Commercials   Long      Short      Net     % of OI
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%)
11/23/04       22,527    25,537   (3,010)     (6.2%)
 
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
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%)
11/23/04        5,833     8,299   (2,466)   (17.4%)

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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The Option Investor Newsletter                 Thursday 12-02-2004
Copyright 2004, All rights reserved.                        2 of 3
Redistribution in any form strictly prohibited.


In Section Two:

Dropped Calls: COP, EOG, MUR, PTR, SLB, SUN
Dropped Puts: None
Call Play Updates: ABK, DHR, EBAY, FDX, FLR, IBM, ITT, OSK, QCOM, 
                   UTX
New Calls Plays: None
Put Play Updates: FRX
New Put Plays: None


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

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


CALLS:
*****

ConocoPhillips - COP - close: 85.95 change: -3.33 stop: 84.99

No, we haven't been stopped out yet but we don't want to stick 
around.  We had been expecting a dip in oil and the oil sector 
but not a complete sell-off.  Crude prices have fallen more than 
12 percent in the last three sessions.  This has sparked a run on 
oil stocks.  Traders who have big profits in the group over the 
past year are quickly doing some profit taking.  While we remain 
long-term bullish on oil stocks there appears to be more short-
term weakness ahead.  Crude oil's drop under $45 a barrel and its 
simple 100-dma does not bode well.  We're exiting COP now and 
will watch for a potential reversal near its rising 100-dma. 

Picked on November 03 at $85.50
Change since picked:     + 0.45
Earnings Date          10/27/04 (confirmed)
Average Daily Volume =      3.0 million 
Chart =



---

EOG Resources - EOG - close: 70.48 change: -2.62 stop: 69.85  

We've been suggesting readers do some profit taking as EOG looked 
prone for a pull back.  Unfortunately, the pull back has been a 
lot sharper than expected and the sell-off in oil stocks doesn't 
appear to be over yet.  We will continue to watch EOG for a 
potential bounce from its 100-dma near the $65 level.  We are 
stopped out at $69.85.   

Picked on November 14 at $ 68.37
Change since picked:      + 2.11
Earnings Date           10/26/04 (confirmed)
Average Daily Volume =       1.1 million    
Chart =



---

Murphy Oil - MUR - close: 78.90 change: -3.80 stop: 79.85

Ouch!  The reversal in oil has been a lot sharper and faster than 
expected.  The OIX oil index and the OSX oil services index have 
both erased their late November gains in just two days.  MUR has 
not been immune and shares fell 4.5 percent today breaking 
support at the $82 and $80 levels.  There is still hope that MUR 
could bounce from support in the $78.00-77.50 range but we have 
been stopped out at $79.85.

Picked on November 22 at $ 82.25
Change since picked:      - 3.35
Earnings Date           10/26/04 (confirmed)
Average Daily Volume =       500 thousand   
Chart =



---

PetroChina Co - PTR - close: 54.79 change: -1.41 stop: 52.49

No, we have not been stopped out of PTR but given the reversal in 
oil and oil stocks we going to make a clean sweep and exit all 
our energy plays.  Once we see where and when the selling begins 
to dry up we may make another foray into the group.  Brave 
traders who want to hold on to PTR can watch the simple 50-dma, 
which has been support in the past.  Currently the 50-dma is at 
$54.15.

Picked on November 17 at $55.18
Change since picked:     - 0.39
Earnings Date          00/00/04 (confirmed)
Average Daily Volume =      288 thousand
Chart =



---


Schlumberger - SLB - close: 62.05 change: -1.58 stop: 61.99

Same story different stock.  SLB, part of the oil services 
sector, has fallen backwards as the group gives back all of its 
late November gains.  SLB has broken its simple 200-dma and is 
clinging to its exponential 200-dma, which has been support these 
past several months.  We are stopped out at $61.99. 

Picked on November 12 at $ 65.05
Change since picked:      - 3.00
Earnings Date           10/22/04 (confirmed)
Average Daily Volume =       3.9 million    
Chart =


---

Sunoco Inc - SUN - close: 78.33 change: -1.79 stop: 75.95     

No, we have not been stopped out in SUN but given the bearish 
reversal in crude oil and oil stocks we're going to exit SUN 
before the selling gets any worse.  

Picked on November 18 at $78.25
Change since picked:     + 0.08
Earnings Date          10/21/04 (confirmed)
Average Daily Volume =      1.2 million 
Chart =



PUTS:
*****

None


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

Ambac Fincl Group - ABK - close: 82.01 chg: -0.61 stop: 77.99

Yesterday's big market rally was enough to spark a new high in 
shares of ABK.  The stock broke through resistance at $82.00 and 
hit our trigger to go long at $82.26.  This looks like an entry 
point but if you expect another dip watch for a bounce from $80-
81.

Picked on December 01 at $82.26
Change since picked:     - 0.25
Earnings Date          10/20/04 (confirmed)
Average Daily Volume =      490 thousand
Chart =


---

Danaher - DHR - close: 57.94 change: -0.16 stop: 55.95 

DHR continues to be a lot more resilient than we expected.  
Momentum continues to wane and we are no longer suggesting 
bullish positions.  The $56 level remains the first level of 
support.  We'll be happy to exit in the $59.50-60.00 range.

Picked on October 27 at $54.99
Change since picked:    + 2.94
Earnings Date         10/21/04 (confirmed)
Average Daily Volume =     1.3 million 
Chart =


---

eBay Inc. - EBAY - close: 116.98 chg: +3.19 stop: 109.00*new*

Thursday proved to be another big day for shares of EBAY.  The 
stock added another 2.8 percent on decent volume following 
positive comments made at a CSFB conference.  We're very 
encouraged as this puts EBAY within striking distance of our 
$120.00 target.  This can be a tough spot.  EBAY is up more than 
13 points from our entry point.  The urge to do some profit 
taking can be overwhelming.  We never think it's a bad idea to 
take some money off the table so if you're so inclined take 
advantage of EBAY's strength.  We're really not suggesting new 
bullish positions here but if EBAY does dip we'll look for a 
bounce above the $110 mark.  We are raising our stop loss to 
$109.00. We will officially exit this play if EBAY can trade 
within 50 cents of the $120 level. 
 
Picked on November 80 at $103.69 
Change since picked:      +13.29
Earnings Date           10/20/04 (confirmed)
Average Daily Volume =      10.4 million 
Chart =


---

Fedex Corp - FDX - close: 96.91 change: +0.97 stop: 93.95     

FDX is showing some strength with a two-day rally and a new all-
time high.  The breakout over resistance at the $96 level is 
impressive as is today's gain compared to a minor pull back in 
the Transportation index.  Remember, we've been targeting a move 
into the $99-100 range and FDX is within striking distance.  
Readers can prepare to exit.  Of course it's totally acceptable
to do some profit taking right here.

Picked on October 21 at $89.45 
Change since picked:    + 7.46
Earnings Date         09/22/04 (confirmed)
Average Daily Volume =     1.5 million 
Chart =


---

Fluor Corp - FLR - close: 52.26 change: +0.06 stop: 48.51    

FLR isn't making much headway but if you're an optimist then we 
can be impressed by its relative strength.  The lack of any 
profit taking following last week's gains is certainly bullish.  
We are going to raise our stop loss to $49.95 placing it under 
round-number support at $50.00 and technical support at its 
rising 10-dma.  More conservative traders can probably get away 
with a tighter stop.  Our target remains the $55 region. In
the news FLR said it would present at the First Albany conference
next Tuesday. 
 
Picked on November 22 at $48.51
Change since picked:     + 3.75
Earnings Date          10/27/04 (confirmed)
Average Daily Volume =      521 thousand   
Chart =



---

Intl Business Mach. - IBM - close: 95.76 chg: -0.12 stop: 93.95*new*

Once again IBM is trying to breakout from its current three-week 
trading range between $94.00 and $96.70.  The stock almost made 
it out today with a move to $96.78 but it failed to hold those 
gains.  When you consider that IBM's P&F chart only points to a 
$97 price target it makes sense to evaluate a little profit 
taking of your own.  We are holding out for a move into the $99-
100 range but traders may want to take some of their money off 
the table.  We're really not suggesting new bullish positions at 
this time but another bounce from the $94.00-94.50 level might be 
an alternative entry.  We're going to break form here and raise 
our stop loss to $93.95.   

Picked on October 27 at $90.00
Change since picked:    + 5.76
Earnings Date         10/18/04 (confirmed)
Average Daily Volume =     4.7 million 
Chart =


---

ITT Industries - ITT - close: 84.86 change: -0.88 stop: 83.70

ITT has seen some profit taking the last couple of days but 
traders bought the dip this morning near $84.00 where we believed 
support would be.  This could be an alternative entry point for 
more aggressive traders but we'd prefer to wait and see ITT trade 
back above the $86.00 or $86.50 levels before initiating new 
bullish positions.  In the news the company said it would provide 
its full-year 2005 outlook on Tuesday, December 14th. 

Picked on November 29 at $86.40 
Change since picked:     - 1.54
Earnings Date          10/21/04 (confirmed)
Average Daily Volume =      502 thousand 
Chart =



---

Oshkosh Truck - OSK - close: 63.56 change: +0.11 stop: 59.00 

There isn't much new to report on for OSK.  The stock continues 
to consolidate sideways with a slight bullish bias.  Technicals 
look mixed while its P&F chart continues to point toward an $83 
target.  We knew this would be somewhat of a slower moving stock 
and continue to target a run into the $67.50-70.00 range. 

Picked on November 07 at $ 62.16
Change since picked:      + 1.40
Earnings Date           10/28/04 (confirmed)
Average Daily Volume =       205 thousand   
Chart =


---

Qualcomm - QCOM - close: 43.62 change: +0.56 stop: 38.75*new*

The rally continues for QCOM.  The stock took off on Wednesday.  
Given the broad-market rise QCOM burst through resistance near 
$42.00 to hit new four-week highs.  Today's gain was a nice 
follow through on the move and puts the stock within striking 
distance of our initial profit target at $44.50.  The $44.50 
level is resistance dating back to its October highs.  Yesterday 
in the news the S&P equity research division reiterated their 
"strong buy" rating on QCOM and raised their price target from 
$45 to $50.  Their press release said QCOM deserves a premium 
valuation.  We will strongly consider exiting in the $44.50-45.00 
range, which would put QCOM near the top of its rising channel.  
We are going to raise our stop loss to $38.75 at its 100-dma.

Picked on November 15 at $ 40.51
Change since picked:      + 3.11
Earnings Date           11/03/04 (confirmed)
Average Daily Volume =      13.9 million    
Chart =


---

United Tech. - UTX - close: 99.13 change: -1.02 stop: 95.99

UTX is a new bullish candidate we added on Wednesday.  The drop 
in oil sparked a big rally in the industrials and UTX broke 
through resistance after a very narrow three-week trading range.  
This pull back could be seen as an entry point.  As long as UTX 
bounces above the $98 level, which should be support, we're not 
going to worry.  More conservative traders can wait for a new 
high over the $100.15 mark. 

Picked on December 1 at $100.15
Change since picked:     - 1.02
Earnings Date          10/20/04 (confirmed)
Average Daily Volume =      1.8 million  
Chart =



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

None


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

Forest Labs - FRX - close: 40.18 change: +0.94 stop: 42.01

Okay, we're starting to turn a little defensive on this put 
candidate.  We expected the oversold bounce and the move up to 
"fill the gap".  We did not want to see FRX break back above the 
$40.00 mark, which should have become new round-number, 
psychological resistance.  We're not going to exit just yet but 
if FRX trades over the $41.00 level we may exit early.  The 
strength in the DRG drug index is not helping matters here.

Picked on November 22 at $39.07
Change since picked:     + 1.11
Earnings Date          10/18/04 (confirmed)
Average Daily Volume =      2.8 million 
Chart =



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

None


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for profiting from the QQQ - whether down or up!
 
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**********
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**********

Please read our disclaimer at:
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The Option Investor Newsletter                 Thursday 12-02-2004
Copyright 2004, All rights reserved.                        3 of 3
Redistribution in any form strictly prohibited.


In Section Three:

Watch List: Drugs to Credit Cards and more
Combos/Straddles: Revenge Is Sweet -- Especially If We Do It        
                  Ourselves  

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

Drugs to Credit Cards 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.
___________________________________________________________________


Merck Co - MRK - close: 28.60 change: +0.88

WHAT TO WATCH: Could it be time to consider some speculative 
positions in MRK?  The DRG drug index is on the rebound with a 
higher low in place and a potential reversal in progress.  Can 
MRK turn it around?  Some investors believe the ensuing lawsuits 
from the VIOXX debacle will topple the company or at least 
depress the stock price for years.  They may be right but short 
term MRK is looking bullish.  Today's move over $28.00 is a 
victory for the bulls.  The next level of resistance is the $30 
mark. 

Chart=


---

Capital One Financial - COF - close: 79.91 change: +0.61

WHAT TO WATCH: What's in your wallet?  Whether you think their 
commercials are corny or not COF's stock price is doing well.  
COF has been consolidating under resistance at $80.00 for the 
last three weeks and the pattern appears to be coiling for a 
bullish breakout.  Shares hit $80.29 intraday on Thursday.  
Consider using a trigger at $80.51 and targeting a move to the 
$85 region.

Chart=


---

Boeing Co - BA - close: 54.86 change: +0.16 

WHAT TO WATCH: We're still watching Dow-component BA to see if 
shares can push through resistance in the $55.00-55.50 level.  
Such a move would negate what looks like a potential double-top 
pattern.  P&F chart readers will note the bullish $62 target.  We 
would target the $60 level.

Chart=


---

Linear Technology - LLTC - close: 39.73 change: +0.43

WHAT TO WATCH: LLTC has been stuck in a trading range from $34 to 
$40 for the past nine months.  The stock tried to breakout over 
the $40 level today and made it to $40.31 before slipping 
backwards.  Now that Intel's mid-quarter update is out of the way 
and the news is positive we expect the semiconductor sector to 
rally.  Watch for LLTC to trade back over the $40 level (or maybe 
$40.50) and target a run toward $45.  The P&F chart points to 
$51.

Chart=



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

CME $209.68 +2.07 - High-flying CME is testing resistance at the 
$211 region. 

SEPR $48.28 +3.12 - SEPR has broken out above all its significant 
moving averages but remains in a trading range.

SWN $49.80 +2.89 - SWN has been a big winner this year with 
consistent bounces from its rising 40-dma.  Shares dipped to the 
40-dma this morning before bouncing.  Is it another entry point 
or will this time be different?  Shares are very overbought.


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

Revenge Is Sweet -- Especially If We Do It Ourselves

By Mike Parnos

In life, it's often the little victories that we savor the most.  
Occasionally, when the odds are against us and we manage to 
prevail, it's time for celebration.

At the CPTI, we recognize that we're trying to negotiate our way 
through a jungle of numbers over which we have virtually no 
control.  All we can control is ourselves (hopefully) and try to 
keep as many percentages as possible in our favor.  Is there ever 
really any justice?  Or is it all coincidence?  

Well, what seems like justice happens, but it rarely happens on its 
own.  Sometimes, in life, we have to orchestrate our own version of 
justice -- or at least help it along a bit.

Our "Conspiracy Theory"
The more I think about how rigid the market makers are at the RUT 
(Russell 2000 Index), the more annoyed I get.  I've come up with an 
idea on how we may exact a measure of revenge -- just a little 
payback for their consistent reluctance to negotiate the bid/ask 
spreads with nice people like us.  I call it our "conspiracy 
theory" (with apologies to Julia Roberts and Mel Gibson).

Now, this may sound a little complicated, but, once you grasp the 
concept, it should be relatively simple.

Normally, when we put on a bull put or bear call spread, we enter 
the orders as a spread for a specific credit limit.  We try to 
negotiate a little between the bid/ask spreads to enhance our 
return.  Then, the market makers will either fill the orders or 
not.  If they don't fill the order, it just sits there.  The market 
maker is not obligated to show or represent the spread order in any 
way.  The only chance we have of getting filled is if the market 
moves sufficiently in one direction -- until the spread order 
becomes the natural.  The market maker then gladly fills the order 
and he hasn't had to compromise at all.   That's not being nice at 
all.

The Plan
Let's look at a typical option chain on RUT.  For our example, 
we'll focus on the put side.  Let's say the RUT is trading at 610 
with about a month to go until expiration.

Strike      Bid      Ask
550          .50         .90     ($.40 bid/ask spread)
560        1.20       1.70     ($.50 bid/ask spread)
570        2.20       2.70     ($.50 bid/ask spread)
580        3.30       3.90     ($.60 bid/ask spread)

Here We Go . . . The Smash & Grab Plan
What if Trader A puts in a 10 contract order to purchase the RUT 
570 put at $2.45 ($.25 below the posted $2.70 ask)?  We know the 
RUT market maker is just going to snicker at it.  However, he is 
obligated to represent our offer to buy by showing it as the new 
"bid" price.   The new 570 bid/ask will now be posted at $2.45 x 
$2.70.

As soon as the $2.45 shows up on the "bid," Trader B submits an 
order to sell 10 contracts of the 570 put at $2.45.  The market 
maker is then obligated to fill the 10-contract order.

Trader B is now short the 570 put at $2.45.  He can then put in an 
order to buy the 560 put at the posted ask of $1.70.  It should be 
filled immediately, creating a 560/570 bull put spread with a 
credit limit of $.75 (instead of $.50).

Trader A is now long 10 contracts of the 570 put at $2.45.  He can 
now sell the 580 put for the posted price of $3.30, thereby 
creating his 580/570 bull put spread with a credit of $.85 (instead 
of $.60).  How sweet it is!!

Two separate traders can coordinate their efforts to accomplish 
this (hence the "conspiracy").  Ideally, they would have the orders 
up on the computer, ready to submit, and would be on the phone 
together watching real time streaming bid/ask quotes.  They would 
have to each be comfortable with the strike prices and the likely 
ultimate results.

Perhaps, a single trader (with two separate accounts) would be 
comfortable with both bull put spreads.  That being the case, the 
proper sequence of placing the orders would be critical.  

You would also want the RUT to be basically flat for the five 
minutes it would take to execute the plan.  Lunchtime comes to 
mind, while many traders are stuffing their faces, you can be 
stuffing your wallet.

You've probably seen police shows where the bandits come into a 
jewelry stores, smash the glass counter, grab the jewelry, and are 
in and out in five minutes or less (sounds like my sex life -- on a 
good day).  This "smash and grab" premium strategy would probably 
work just as well on other indexes that aren't moving rapidly.  
It's just that much sweeter thinking about doing it on the RUT.

I don't know if this kind of manipulation is even legal, but it 
sure paints an appealing image, doesn't it?
____________________________________________________________

DECEMBER CPTI POSITIONS
December Position #1 -- SPX Iron Condor (Part 1) - 1190.33
This bull-put spread still gives us about a 45-point cushion on the 
downside with the short strike near a support level.  

We sold 20 December SPX 1125 puts and bought 20 December SPX 1120 
puts for a credit of $.50 ($1,000).   Maintenance: $10,000.  When 
you're looking for your new position, the concept of getting much 
your profit from negotiating the bid/ask spread still applies. (see 
the Thursday, Nov. 18 column).

This position 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.  When the time comes to 
put on the bear call spread, as long as we create a 5-point spread, 
there will be no additional maintenance requirement.

December Position #2 -- SPX Sure Thing (Almost) Credit Spread – 
1190.33

We sold two SPX December 1165 puts and bought two SPX December 1140 
puts for a $6.90 credit ($1,380).

Here we go again.  We saw an opportunity to sell the 1165 puts and 
buy the 1140 puts for a credit of $6.90.  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 of 
maintenance available.  You might need it.

December/January Position #3 -- SPX Iron Condor  (Part 1) - 1190.33
I've become very conservative -- even more so after our unpleasant 
experience in the November cycle.  I saw an opportunity to put some 
serious distance between a bull put spread and where the SPX was 
trading.   With the SPX at 1179, I noticed the January 1100/1090 
bull put spread would yield about $.70.  Being still somewhat 
bullish for the next few months, I was willing to go out to 
January.  I like that almost 80-point cushion and I'm willing to 
wait the eight weeks.  When the opportunity presents itself, we can 
always add the other side of the condor.

We sold 15 SPX January 1100 puts and bought 15 SPX January 1090 
puts
for a credit of about $.70 ($1,050).  Maintenance: $15,000

December Position #4 - SPX Iron Condor (Part I) - 1190.33
We wold 20 SPX December 1135 puts and bought 20 SPX December 1130 
puts for a credit of about $.35 ($700).  Maintenance: $10,000.  
Compared to the profit we're used to making, this doesn't seem like 
a lot.  But, we're going to work our way back into the black a 
little at a time -- with a large degree of safety.  
___________________________________________________________
ONGOING POSITIONS
QQQ ITM Strangle - Ongoing Long Term -- $39.12
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 - 557.47
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. 
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