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Daily Newsletter, Tuesday, 01/11/2005

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The Option Investor Newsletter                 Tuesday 01-11-2005
Copyright 2005, All rights reserved.                       1 of 3
Redistribution in any form strictly prohibited.


In Section One:

Wrap: Intel Beats, UPS Warns
Futures Markets: See Note
Index Trader Wrap: Chippers and shippers
Market Sentiment: Not Looking Good 


Posted online for subscribers at http://www.OptionInvestor.com
************************************************************
MARKET WRAP  (view in courier font for table alignment)
************************************************************
      01-11-2005           High     Low     Volume   Adv/Dcl
DJIA    10556.22 - 64.80 10619.77 10531.54 1.88 bln 1168/2050
NASDAQ   2079.62 - 17.40  2090.62  2072.62 2.25 bln  947/2151
S&P 100   564.68 -  3.59   568.27   563.49   Totals 3115/4201
S&P 500  1182.99 -  7.26  1190.25  1180.43 
SOX       396.19 - 10.10   406.09   393.73
RUS 2000  611.53 -  6.21   617.74   609.91
DJ TRANS 3644.26 - 19.00  3662.90  3639.50
VIX        13.19 -  0.04    13.68    13.05
VXO (VIX-O)13.03 -  0.14    13.92    12.90
VXN        19.67 +  0.06    20.30    19.55  
Total Volume 4,413M
Total UpVol  1,004M
Total DnVol  3,368M
Total Adv  2457
Total Dcl  4787
52wk Highs  126
52wk Lows    64
TRIN       1.72
NAZTRIN    1.34
PUT/CALL   0.82
************************************************************

Intel Beats, UPS Warns
by Jim Brown

Tech holders are breathing a little better tonight after
Intel beat street estimates slightly. However, the broader
market may focus on dropping package volume at UPS as real
evidence the economy is slowing. It is still too early to
form any opinions about this earnings cycle from the mix
of warnings and guidance but that info is coming soon. 

Dow Charts

 
Nasdaq Chart

 
SOX Chart

 


The cautiously awaited Intel earnings beat the street by 
two cents with the highest ever quarterly revenue at $9.6B.
Intel projected a slight rise in CapEx spending for Q1 to
around $5.1B. Inventory levels had dropped slightly to 
$2.6B from $3.2B last quarter. They projected slightly 
lower grow margins around 55% in Q1 as they continue to
markdown inventory. Their 2005 margin estimate remains 
58% and Intel expects the inventory problem to be reduced
over the next several quarters. CEO, Craig Barrett, said
they ended the quarter with robust demand across all
geographies. Records were set in sales of Microprocessors,
Chipsets, Motherboards and WiFi units. 

There were mixed feelings about the $600 million drop in
inventory. Many analysts were hoping for more. This is 
inventory that in many cases is already 6-12 months old
and is becoming more obsolete as each day passes. If Intel
could not dump more of it during the Q4 consumer feeding
frenzy then they may have to mark down selling prices even 
more in 2005 or even take a charge to blow it out and get
rid of the problem. 

Intel said the new 64bit Xeon processors had surpassed
one million units in the first two quarters of shipments.
Intel also announced it was hiring the HP Itanium design
team and HP announced it was going to spend $3 billion to
drive the development and sales of its Itanium based server
systems. Itanium processors now power 83 of the top 500
of the worlds fastest supercomputers with Intel branded
processors in 64% of the top 500. 

The positive Intel earnings came only a day after AMD 
warned that earnings would be below expectations. The
company said that weaker sales of flash memory would
cause earnings to be down significantly from the Q3
level of $68.4 million. They claimed that processor 
sales had continued higher and would be over Q3 levels.
AMD did not give a new earnings estimate and analysts
had expected a +19 cent profit. 

On the downside tonight UPS warned after the bell that
slower than expected package volume and higher costs
would cause it to miss estimates by a dime for Q4. The
prior estimate was 85 cents. They said late December 
shipments dropped significantly more than they previously
expected and were only about half the prior rate for 
the quarter. UPS said that international shipments grew
at a double digit rate compared to a +2.5% growth for
domestic shipments. The market did not react strongly 
to the warning with UPS only losing about -$2 in after
hours to $81. They maintained their positive outlook 
for all of 2005 expecting earnings to increase +13% to
+17%. All of 2004 UPS grew earnings by +19%. 

One stock that continues to shock investors is TASR which
has finally run out of energy. Problems are now appearing
almost daily including SEC investigations, suits by their
competitors and now an earnings warning from Taser itself. 
Taser said it is expecting delays in orders from law
enforcement agencies as those agencies test and evaluate 
products from their competitors. It was also announced that
the top insiders sold $105.8 million in stock recently and
there were some questionable financial arrangements to
insiders. It was disclosed that the company paid $205K
in 2004 to lease airplanes from the family that runs the
company and entered a 15 year lease to use another plane
that is owned by Thomas Smith, the president. In one 
week in November three family members sold $54 million
in stock only days after it was announced the federal
government had approved Taser for use on airlines.  While
all of this dirt being spread by detractors is not illegal
activities it does pose questions about the long term
prospects if insiders are dumping the stock. With positive
news breaking out all over in Q4 the insiders sold stock
worth more than 10% of the market cap of the company
receiving the equivalent of twice the companies annual
sales in proceeds. Those recent buyers who believed the 
spin were rewarded with a drop from $33 to $14 over the
last two weeks of trading. Competitors to Taser claiming
to have better products are Stinger Systems (STIY) and
Law Enforcement Associates (LENF). LENF claims their 
guns shoot twice as far and use 1/16th the power making
them less dangerous. They have also been around much 
longer than Taser in the law enforcement community. 

TASR Chart

 


Economically today was a non-event with Chain Store Sales
falling -0.6% but that should be no surprise given the post
holiday letdown. The December Richmond Fed Manufacturing 
Survey rose to zero from a -3 in November. There was no
real change in components with shipments and new orders
flat. The backlog of orders also returned to nearly flat
at -4. The bottom line was no change and no excitement as
the year came to a close. Capacity utilization decreased
and the only positive was a continued rise in optimism by
manufacturers for the next six months. The Richmond district
has been lagging the rest of the company in its recovery. 

The next day for material economic reports is Friday when
we get PPI, Industrial Production, Consumer Sentiment and
Business Inventories. 

Oil prices continue to creep higher and closed just shy
of $46 today on fears of increasing Iraqi attacks, work
stoppages in Nigeria, well problems in the North Sea and
the coming OPEC meeting on Jan-30th. $46 has been a new
resistance level since Dec-1st but the pressure is building.
Traders fear OPEC will ratchet down production again at
the coming meeting to offset the potential drop in demand
as cold weather ends. During the spring there is less
demand for heating oil and the summer gasoline demand has
not yet increased. Rumors are that OPEC has decided to 
support a $45 price now instead of $40. Once addicted to
an increasing supply of dollars it is tough to break the
habit if you control half the worlds supply of a limited
commodity. They have found that the sticker shock has
passed and we have become more or less immune to the 
current $42 bottom. 

PeopleSoft employees got the bad news today. Oracle said
today they would be announcing the first round of layoffs
at PSFT as a result of the Oracle takeover. This should 
come as no shock as rumor has it employees are already 
leaving in droves on their own accord. The layoff 
announcement is scheduled for Friday.

The SOX was the index of the day with a drop below 400 on
the AMD news and in fear that Intel could stumble after the
close. The index held 396 all afternoon despite selling in
several chip stocks. After Intel's earnings report the chip
sector saw a muted bounce but nothing earth shaking. The
analysts community had been making positive comments about
expectations for Intel for the last week so much of the
good news may have been priced into the market. That news
was shaken yesterday with the AMD announcement but support
at 22.40 on Intel continued to hold. 

I was going to title this part tonight as "Danger Will
Robinson" after the Dow, Nasdaq and S&P all closed at a
new low for the year. After hearing the various spins on
the Intel earnings as well as Andy Bryant bubbling over
with excitement it is possible the market losses are 
almost over. Those three key indexes are still well above
my critical levels I mentioned on Sunday and are still
technically bullish despite closing at the lows for the
year. 

The Dow closed just above its 50-day average at 10556
with the S&P closing drop putting it about -2 points under
its 50-day at 1185. The Nasdaq is well under the 50 at 
2106 and tested support at 2075 today for the second time
this year. For tomorrow that 2075 level would be my key.
As long as we stay over that level the market could attract
buyers. The SOX should rally back over 400 at the open and
it MUST hold that level from now on to avoid a tech meltdown.

S&P-500 Chart

 

We have already sold off more than I initially expected
but as I stated above the charts are still bullish with
only a normal correction at this point. Until the Dow 
moves under 10425 and the Nasdaq 2000 that bullish bias
will remain. Obviously that is a lot lower than our current
levels and it would require some serious pain to make that
trip. With the Intel news tonight and the potential for
further retirement cash to flow into the market I would
look for SPX 1175 to be the more critical line on the 
charts. Nasdaq 2075 for techs and S&P 1175 for the broader
market. I would not be a dip buyer under 1175. I would wait
for the market to come back to us at that level if you are
determined to be long. 

We are reaching a critical turning point in the markets. 
There needs to be some attempt to rally very soon or the
market sentiment will begin to change rapidly. Bulls are
beginning to get nervous and bears are getting bolder. It
is time for the 2005 bull market to assert itself and make
a stand or it is going to be a long year for investors. 

Jim Brown
Editor

"One reason it is so hard to save money is that our
neighbors are always buying something we can't afford"



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***************
FUTURES MARKETS
***************

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 WRAP
*****************

Chippers and shippers

With a market capitalization of $5.45 billion and annual revenues 
of $4.94 billion, you would have thought Advanced Micro Devices 
(NYSE:AMD) $14.86 -26.17% had suddenly become the bellwether 
stock for the semiconductor industry, where the Semiconductor 
Index (SOX.X) 396.19 -2.47% closed below the psychological 400 
level for the first time since late October after AMD warned 
quarterly results would be "down significantly" from the third quarter.

Tomorrow, chip stocks will be active once again after AMD's chief 
rival Intel (NASDAQ:INTC) $22.54 -1.48%, with a market 
capitalization of $142.5 billion and annual revenues that totaled 
just over $33.3 billion, reported quarterly earnings and sales 
that exceeded Wall Street's estimates.  

But the market's reaction to AMD's warning, and Intel's quarterly 
results would depict that the 500-lb gorilla, Intel, has been 
cutting prices to clear out inventory, and it wasn't sharing much 
of the banana cream pie with AMD in the most recent quarter.

After the closing bell, shares of Intel (INTC) rose to $23.22, a 
3% gain from their closing price, after the company said earnings 
in the fourth quarter that ended December 25 fell to $2.12 
billion, or 33 cents a share, compared to a year-earlier profit 
of $2.17 billion, or 33 cents a share, as profit margins eroded 
in part due to heightened competition.  Sales rose to $9.6 
billion from a previous record of $8.74 billion. 

The results topped analysts' forecast of earnings for 31 cents a 
share and sales of $9.42 billion.  "It's a terrific report.  
Intel is clearly the bellwether, and this report could easily 
turn the tech sector," said Stephen Leeb, president of Leeb 
Capital Management in New York.

But turn the market and reverse a losing streak that has had some 
hibernating bears thinking spring came on January 1?  

Not so fast.....

In after-hours trade, shares of United Parcel Service (NYSE:UPS) 
$83.30 -0.38% fell to $80.90 after the shipper warned that an 
"unexpected drop" in shipping activity between Christmas and New 
Years, as well as severe storms in the Midwest, which raised 
costs and hurt delivery volume, would negatively impact quarterly 
results.  While UPS backed its 2005 outlook, the news gave 
thought to economic slowing.

Fellow shipper Fedex (NYSE:FDX) $95.41 -0.18% saw its shares sink 
$1.31 to $94.10 as investors mulled thought over asking "what can 
brown do for you?"

U.S. Market Watch - 01/11/05 Close

 

And just as Jim Brown stated in this evening's Market Monitor, " 
With UPS warning that package volumes were less than expected in 
December this would be economically negative.  If Intel's 
guidance is just average or cautious this balloon could quickly 
deflate even further," Jim's comments will most likely be on the 
mind of many investors in coming session, where the transports 
are often looked to as a key sector for economic activity.

For those interested in viewing the recent (as of 01/10/05 close) 
sector bell curve from wwww.dorseywright.com, I posted a 12/31/04 
to 01/10/05 comparison in this morning's Market Monitor at 
09:26:27 AM EST (see tonight's archive), where I would note that 
the Semiconductor Bullish % (BPSEMI) had reversed back lower to 
"bull correction" status from "bull confirmed."  As of the 
01/10/05 close, the Transportation/Non Air (BPTRAN) was still at 
"bull confirmed" status at 70.59%, but would turn "bear 
confirmed" from a high level of bullish risk with a reading of 
68%.

While there was little "good news" in today's session, the 
bullish side of me, which begets more bearish profiles in my 
Market Monitor profiles, the continued flattening of the yield 
curve begins to feel, and perhaps look like a python constricting 
around a bull's neck.   

Each day, the yield curve flattens, stocks sink a little lower.

Market Snapshot / Internals - 01/11/05 Close

 

And the "python" may be squeezing harder at the NASDAQ, where new 
highs and new lows, at times, were almost break even as buyers 
would appear less willing to press higher, while sellers get 
aggressive with annual disappointments that are nearing 52-week 
lows.

Traders can perhaps sense some "capitulation" taking place, but 
its not the bullish "I can't stand the pain anymore," type of 
capitulation.  Its the "I can't stand the erosion of profits 
anymore," type of capitulation, where a January effect rally 
begins to fade with each passing day.  

I struggle with this too, as I know it can happen.  Do I lock in 
gains on 3M (MMM) $84.71 +0.91% as it suddenly becomes a salmon 
swimming against the other 29 in the school?  

A falling 10-year and 30-year treasury yield shouldn't hurt the 
homebuilders, but here too there are gains that could be washed 
out to sea if the tide of selling gains further momentum.

A put trade I profiled on Adobe Systems (NASDAQ:ADBE) $58.12 
-1.19% wasn't because I viewed something overly wrong with the 
stock, or the software group, but largely on some technical 
weakness, where HUGE BULLISH gains may have bulls more willing to 
sell than risk some very handsome profits.

In this morning's 09:00 AM EST, you may have noted that the 
NASDAQ-100 Bullish % ($BPNDX) reversed back lower to "bull 
correction" status.  Let's quickly review the NDX.X point and 
figure chart (conventional 25-point box), to put things in 
perspective.

On the following chart, I've also added some inflection point
NASDAQ-100 Bullish % ($BPNDX) readings from the stockcharts.com 
bullish % chart, and our own NASDAQ 10-day NH/NL ratio readings.  
You an I can wonder all we want as to "what is going on?"  But 
one thing that should be obvious is that some bullish risk is 
being removed, at a higher level of bullish risk.  

NASDAQ-100 Index (NDX.X) Chart - 25-point box

 

Technical support should be strong above 1,500, where in early 
November, the NDX.X triggered a triple-top buy signal at 1,525.

Remember that the 10-day NH/NL ratios, and the bullish % can only 
go as high as 100%, and over the past two years, we can see how 
at higher levels of NH/NL ratio and bullish %, the MARKET has 
systematically removed "excessive bullish risk."  

While we can NOT equate PRICE directly to any bullish % reading, 
we can see that even as recently as this past August (red 8) and 
September (red 9) how BOTH the Bull % and the NH/NL ratios were 
signaling a resumption of strength.  

Where will the strength MOST LIKELY HAVE TO COME FROM?

My thoughts continue to be it will "have" to come from the 
Semiconductors, and or the biotechs.

According to Dorsey/Wright and Associates, their Biotech Bullish 
% (BPBIOM) is still in "bull alert" status at 50% after reversing 
up from 16% in early August (just after red 8).  It would take a 
higher reading of 58% to achieve "bull confirmed" status, or a 
reversing lower reading of 44% to turn back lower to "bear 
confirmed" status.

My thought process is this.  Money can rotate to the LOWER risk 
bullish % groups like the Semiconductors and Biotechs.  By RISK I 
mean their sector bullish % readings.  This would be a "logical" 
rotation of capital.

Now, that thought becomes challenged right now, when thinking 
about the YIELD curve flattening.  Why is capital flowing into 
Treasuries?  Low inflation?  Aversion of RISK?  Economic slowing?  
Which was suddenly realized on January 1?  

Here's the NASDAQ Composite 52-week High/Low 10-day average 
chart, so you can see the movements of both the "f"ive-day and 
10-day NH/NL readings, then tie them back with the inflection 
points I noted in the above NASDAQ-100 Index (NDX.X) chart.

Where would YOU look for the "f"ive day NH/NL ratio to show some 
type of stability?  

NASDAQ NH/NL Chart - 01/11/05

 

In last Thursday's Index Trader Wrap (01/06/05) we looked at the 
NYSE NH/NL Chart, and tonight's focus is more NASDAQ related.  

As an answer to my question of "where would YOU look for the five 
day NH/NL ratio to show some type of stability," the above chart 
would suggest 52%.  

Again, we can NOT make direct PRICE and bullish % correlations, 
but I could perhaps begin making some plans for an NDX.X trade 
at/near 1,500 should the 5-day NH/NL ratio reach 52%.  

Each day, when we post the Market Snapshot, we can measure the 
day-to-day "rate of change" in the 5-day and 10-day NH/NL ratios.  
Think of them just like you would a simple moving average.

Pivot Matrix - 

 

I thought the BIX.X hinted at some strength this afternoon when 
between 02:10-02:15 PM EST they looked to be leading a late-
afternoon comeback.  One observation I immediately made in the 
Market Monitor was that the OEX.X had rebounded from its then 
session low of 563.49 to trade up to that sliver "zone of 
resistance" from 566.60-566.79 from the WEEKLY/MONTLY Pivot 
retracement (see today's 11:00 AM EST Update). 

For me, the BIX.X has been a sector that has been a pretty good 
group to signal any type of renewed strength for the OEX/SPX and 
even the INDU.  It would really take something above 375 on a 
technical basis to have me believing that the MARKET still 
believes the December highs can be taken out to the upside.

Another item of note would be this morning's high VIX.X trade of 
13.68.  When I think back to past comments of floor traders still 
viewing VIX.X 14.00 as a low premium that they would be buying 
calls in, they were perhaps still doing that today.

Despite the weakness from AMD, we can perhaps think that SOX.X 
WEEKLY S1 and MONTHLY S1 held, as traders awaited word from 
Intel.  From here on, that has to be the line in the sand for 
support.  If broken, it could be a looooong summer for the chips.

Jeff Bailey


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

Not Looking Good
- J. Brown


January has already been a tough month for stocks.  Unfortunately 
the first day of fourth quarter earnings season did not go well 
and it does not bode well for the rest of the month either.  The 
market ended the session in widespread decline with internals 
heading south once again.  Declining stocks outnumbered advancers 
by 2-to-1 on the NYSE and 21-to-9 on the NASDAQ.  Down volume 
swallowed up volume 7-to-2 on the NYSE and 17-to-5 on the NASDAQ.  

Dow-component Alcoa (AA) started the procession with an earnings 
miss and biotech giant Genentech (DNA) followed up with an 
earnings miss of its own.  To make matters worse semiconductor 
maker AMD issued a fourth quarter earnings warning that sent its 
stock for a 26 percent loss and pushed the SOX to a 2.4 percent 
decline.  After the closing bell AMD's larger rival Intel (INTC) 
surprised the street with a better than expected earnings report 
but it remains to be seen if Intel can jump start a rally amidst 
all of this negativity.  Case in point - after Intel's report 
came out package courier UPS issued a fourth quarter earnings 
warning.  

Investors already had cautious expectations for earnings growth 
going forward but if the lead-off companies are going to turn in 
disappointing results what can we expect during the rest of 
earnings season.  Granted the real flood of earnings news doesn't 
hit until next week but we now have a reason to be spooked.  

Meanwhile oil continues to be an issue as crude prices creep 
higher amid supply concerns again and the upcoming Iraqi 
elections, which is bound to bring about even more violence in 
that part of the world. 

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

Market Averages

DJIA ($INDU)

52-week High: 10868
52-week Low :  9708
Current     : 10556

Moving Averages:
(Simple)

 10-dma: 10677
 50-dma: 10556 
200-dma: 10276 



S&P 500 ($SPX)

52-week High: 1217
52-week Low : 1060
Current     : 1183

Moving Averages:
(Simple)

 10-dma: 1200
 50-dma: 1182
200-dma: 1131



Nasdaq-100 ($NDX)

52-week High: 1635
52-week Low : 1301
Current     : 1553

Moving Averages:
(Simple)

 10-dma: 1584
 50-dma: 1578
200-dma: 1465 



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

CBOE Market Volatility Index (VIX) = 13.19 -0.04	
CBOE Mkt Volatility old VIX  (VXO) = 13.03 -0.14
Nasdaq Volatility Index (VXN)      = 19.67 +0.06 


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

          Put/Call Ratio  Call Volume   Put Volume

Total          0.86        866,571       741,247
Equity Only    0.65        710,453       464,212
OEX            0.95         28,807        27,597
QQQQ           1.29         59,201        76,830


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

Bullish Percent Data

           Current   Change   Status
NYSE          73.7    - 0.3   Bear Correction
NASDAQ-100    74.0    - 1     Bull Confirmed
Dow Indust.   73.3    + 0     Bull Confirmed
S&P 500       74.8    - 0.2   Bull Confirmed
S&P 100       76.0    + 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: 1.42
10-dma: 1.21 
21-dma: 1.05
55-dma: 1.01


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     947       922
Decliners    1862      2108

New Highs      47        44
New Lows       21        41

Up Volume    444M      493M
Down Vol.   1420M     1745M

Total Vol.  1880M     2256M
M = millions


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

Commitments Of Traders Report: 01/04/05


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

Not much change in the large S&P futures contracts.  
Professionals remain net bearish and small traders remain
net bullish.


Commercials   Long      Short      Net     % Of OI
12/07/04      450,072   498,057   (47,985)   (5.0%)
12/14/04      502,471   540,494   (38,023)   (3.6%)
12/21/04      455,238   502,538   (47,300)   (4.9%)
01/04/05      456,255   505,042   (48,787)   (5.0%)

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
12/07/04      187,707   135,776    51,931    16.0%
12/14/04      201,428   164,111    37,371    10.2%
12/21/04      157,015   106,205    50,810    19.2%
01/04/05      159,197   111,900    47,297    17.4%

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

Commercial traders have increased their bearish bias
just as small traders have increased their bullish bias.


Commercials   Long      Short      Net     % Of OI 
12/07/04      470,553   805,234   (334,681)  (26.2%)
12/14/04      556,980   899,616   (342,636)  (23.5%)
12/21/04      279,694   554,818   (275,124)  (32.9%)
01/04/05      302,339   620,759   (318,420)  (34.5%)

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
12/07/04      311,838     66,496   245,342    64.8%
12/14/04      398,915    137,598   261,317    48.7%
12/21/04      227,047     66,140   160,907    54.8%
01/04/05      279,274     71,151   208,123    59.4%

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


NASDAQ-100

Commercial traders have turned significantly more bearish
on the NDX just as the small traders has turned sharply 
more bullish.

Commercials   Long      Short      Net     % of OI 
12/07/04       57,621     34,313    23,308   25.4%
12/14/04       73,554     50,286    23,268   18.7%
12/21/04       30,614     45,158   (14,544) (19.1%)
01/04/05       27,226     44,600   (17,374) (24.1%)

Most bearish reading of the year: (21,858)  - 08/26/03
Most bullish reading of the year:  26,058   - 11/30/04

Small Traders  Long     Short      Net     % of OI
12/07/04       15,489    49,064   (33,575)  (52.0%)
12/14/04       26,781    58,159   (31,378)  (36.9%)
12/21/04       20,840     9,109    11,731    39.1%
01/04/05       22,227     8,293    13,934    45.6%

Most bearish reading of the year: (34,877) - 11/30/04
Most bullish reading of the year:  19,088  - 01/21/02

DOW JONES INDUSTRIAL

Commercial traders are increasing their bearish bias on
the Dow Industrials but small traders have jumped ahead
in their bearish attitude for the index.


Commercials   Long      Short      Net     % of OI
12/07/04       25,523    27,351   (1,828)     (3.4%)
12/14/04       36,960    38,566   (1,606)     (2.1%)
12/21/04       24,850    31,920   (7,070)    (12.4%)
01/04/05       24,704    32,916   (8,212)    (14.2%)
 
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
12/07/04        5,274     9,507   (4,233)   (28.6%)
12/14/04       13,445    19,089   (5,644)   (17.3%)
12/21/04        5,637     6,961   (1,324)   (10.5%)
01/04/05        5,166     7,596   (2,430)   (19.0%)

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                  Tuesday 01-11-2005
Copyright 2005, All rights reserved.                        2 of 3
Redistribution in any form strictly prohibited.


In Section Two:

Dropped Calls: JCI
Dropped Puts: None
Call Play Updates: ARLP, BBOX, COF, FRE, PD, RAI, TXI
New Calls Plays: None
Put Play Updates: ADBE, CAI, FDX
New Put Plays: NTES


****************
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:
*****

Johnson Controls Inc - JCI - cls: 60.79 chg: -0.76 stop: 60.49

That's it!  We're calling it quits on JCI.  The failed rally on 
Monday and follow through decline today was enough to sap any 
remaining interest in the stock as a bullish candidate. Granted 
there is still a chance shares could bounce from the $60.50-60.00 
region but we don't want to stick around for when it fails.  The 
company did confirm that earnings would be announced on Jan. 
18th.

Picked on December 29 at $ 63.51
Change since picked:      - 2.72
Earnings Date           01/18/05 (confirmed)
Average Daily Volume =       669 thousand 
Chart =


PUTS:
*****

None


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

Alliance Resource - ARLP - close: 70.43 chg: +0.63 stop: 66.49

ARLP is off to a good start.  Shares of this coal producing 
company bucked the market's downtrend on Tuesday to breakout over 
the $70 level.  This still looks like a bullish entry point for 
traders to catch a ride toward our target in the $74.50-75.00 
region. 

Picked on January 10 at $ 69.80
Change since picked:     + 0.63
Earnings Date          10/28/04 (confirmed)
Average Daily Volume =      115 thousand 
Chart =


---

Black Box - BBOX - close: 46.03 change: -0.19 stop: 44.99      

Hello Peter Parker, our spider-sense is tingling!  The 1.8 
percent breakdown in the NWX networking index on Tuesday 
following its recent crack under the 200-dma does not bode well 
for networking bulls.  There is some hope that the NWX could 
bounce from the 230 level and its 100-dma but we wouldn't bet on 
it.  Together with the weakness in the NWX and the NASDAQ shares 
of BBOX didn't have much chance to build on its early morning 
strength today.  Conservative traders may want to exit now and 
look for a break out from BBOX's short-term trend of lower highs 
before considering new positions.  We're going to hold on a 
little bit longer just to see if BBOX can bounce again from the 
$45.35 region. 

Picked on December 22 at $ 46.15 
Change since picked:      - 0.12
Earnings Date           02/01/05 (confirmed)
Average Daily Volume =       128 thousand
Chart =


---

Capital One Financial - COF - cls: 82.09 chg: -0.22 stop: 79.95      

Hmm.. the action in COF still concerns us.  Actually it's the 
weakness in the banking indices that concerns us but COF is 
likely to follow the indices lower.  Conservative traders may 
want to exit now and sit out for a couple of days or at least be 
ready for some volatility and a dip back toward the $80 level.  
At this time we do expect COF will turn short-term lower and it 
is a question of whether or not investors buy the dip to $80.  In 
the news today LEH reiterated their "over weight" rating for COF.

Picked on December 12 at $ 81.12
Change since picked:      + 0.97
Earnings Date           01/19/05 (confirmed)
Average Daily Volume =       1.4 million  
Chart =


---

Freddie Mac - FRE - close: 70.99 chg: -0.51 close: 69.49     

Traders remain cautious in FRE as the stock continues to 
suffering from short-term profit taking.  The weakness in the 
broader indices doesn't help matters nor does news out yesterday 
suggesting that FRE and larger rival FNM will likely face tougher 
legislation and oversight this year.  The company (FRE) did say 
they plan to issue their 2004 earnings report in March and will 
hold a mid-quarter conference on January 18th.  Right now we 
expect FRE to continue to slip lower.  A test of round-number, 
psychological support at the $70.00 level seems almost imminent.  
We would watch for the bounce from the $70 level but we're not 
suggesting new plays at this time.  Conservative traders may want 
to exit now and wait for the bounce.  

Picked on December 21 at $ 71.80
Change since picked:      - 0.81
Earnings Date           00/00/05 (unconfirmed)
Average Daily Volume =       2.8 million  
Chart =


---

Phelps Dodge - PD - close: 95.71 change: -1.54 stop: 92.00

There is still a lot of talk about how commodities could out 
perform stocks again this year.  That may be true but we're 
betting on the consistent up trend in shares of PD.  Right now 
the stock is seeing a little bit of profit taking but not much.  
Readers can use a dip/bounce above the $92.50 level as a new 
entry point for bullish positions.  We're not going to change our 
stop loss at this time but upon closer inspection some traders 
may want to adjust theirs to $91.49. 

Picked on January 09 at $ 97.65
Change since picked:     - 1.94
Earnings Date          01/27/05 (unconfirmed)
Average Daily Volume =      2.2 million  
Chart =


---

Reynolds American - RAI - close: 78.32 change: -1.03 stop: 75.99

Tobacco stocks helped lead stocks higher on Monday with Dow-
component Altria Group (MO) breaking out over resistance at $62 
to hit new all-time highs.  This lead RAI to challenge resistance 
at the $80 level but RAI didn't have enough gas to push through 
it.  Unfortunately both MO and RAI failed to show any strength 
today and both succumbed to profit taking again. There is a 
short-term trend of higher lows for RAI but we would wait for a 
breakout over the $80 level before considering new bullish 
positions at this time. 

Picked on December 22 at $ 80.11
Change since picked:      - 1.79
Earnings Date           01/24/05 (unconfirmed)
Average Daily Volume =       1.0 million  
Chart =


---

Texas Industries - TXI - close: 60.95 change: -0.93 stop: 58.00

TXI got off to a strong start this week wit a rally $62.76 on 
Monday afternoon.  It's too bad TXI was unable to hold much of 
those gains today with 1.5 percent decline.  The key level to 
watch is the rising simple 50-dma (currently 58.65).  This is 
support.  A dip towards $60 could be used as a new entry point 
although we'd probably wait to see that the bounce has begun 
before committing capital.  After the closing bell today TXI 
announced a cash dividend of 7.5 cents per share payable on 
February 25th, 2005 to shareholders on record as of February 4th.

Picked on January 09 at $ 60.18
Change since picked:     + 0.77
Earnings Date          12/16/04 (confirmed)
Average Daily Volume =      238 thousand 
Chart =

 


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

None


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

Adobe Systems - ADBE - close: 58.12 change: -0.70 stop: 61.51*new

Weakness in the tech sector is good news for ADBE bears.  
Monday's meager early morning rally proved to be another entry 
point to buy puts and ADBE continued to slip on Tuesday.  Some 
suspect that Google's recent introduction of their Picasa 
photograph and image-handling software could impact sales of 
ADBE's low-end products.  Picasa allows users to manage photos on 
their computer, remove red-eye from images, etc.  The package 
used to sell for about $29 but Google is now offering it for 
free, which could impact ADBE.  We are going to lower our stop 
loss on ADBE from $62.26 to $61.51. 

Picked on January 06 at $ 58.99
Change since picked:     - 0.87
Earnings Date          03/17/05 (unconfirmed)
Average Daily Volume =      2.3 million 
Chart =


---

CACI Intl - CAI - close: 60.61 change: -1.16 stop: 64.11*new*

The weakness in CAI continues as the stock falls another 1.87 
percent to test the $60.00 level.  At this point we'd probably 
expect some sort of oversold bounce and the question is where 
will the bounce fail?  The $64 level has already been established 
as new short-term resistance so we're lowering our stop loss to 
$64.11.  Readers looking for new entries might consider a failed 
rally under $62.50 or a breakdown under $60.00.  

Picked on January 05 at $ 61.95
Change since picked:     - 1.34
Earnings Date          01/19/05 (unconfirmed)
Average Daily Volume =      348 thousand
Chart =


---

Fedex Corp - FDX - close: 95.41 change: -0.18 stop: 96.01*new*

Big news for the air courier business tonight!  After the bell 
UPS issued an earnings warning for Q4 and lowered its guidance 
from 83-87 cents per share to 75-76 cents per share on slowing 
domestic package volume and higher operating costs (Reuters).  
This sent both UPS and FDX reeling in after hours session with 
FDX trading down to $92.40 at the time of this update.  FDX is 
trying to defend itself by reaffirming its own Q3 estimates 
tonight telling the wires that the company had a strong holiday 
season.  Put option values should spike higher tomorrow and 
readers may want to consider exiting near the open to capture the 
initial shock.  Our original target was the $90 level and/or the 
100-dma.  Now the 100-dma is up to $90.85.  We are going to 
officially set our target at $90.85 to capture a quick exit.  
We're not suggesting any new positions and we're lowering our 
stop loss to $96.01. 

Picked on January 07 at $ 94.95
Change since picked:     + 0.46
Earnings Date          03/17/05 (unconfirmed)
Average Daily Volume =      1.6 million 
Chart =



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

Netease.com - NTES - close: 49.97 chg: -1.88 stop: 52.65

Company Description:
Through our subsidiaries and contracts with our affiliates, 
NetEase operates a leading interactive online and wireless 
community in China and is a major provider of Chinese language 
content and services through our online games, wireless value-
added services and Internet portal businesses. As of June 30, 
2004, we had approximately 232 million accumulated registered 
accounts, and our average daily page views for the month ended 
September 30, 2004 exceeded 264 million. We generate revenues 
from fees we charge users of our online games and wireless value-
added and other fee-based premium services, as well as from 
selling online advertisements on the NetEase Web sites. Basic 
service offerings are also available on the NetEase Web sites 
without charge to our users. (source: company website)

Why We Like It:
We have been noticing the breakdown in the Internet holders (HHH) 
and the INX Internet index and wanted a way to play it.  Thus far 
NTES had held off much of this January's profit taking to the 
confines of its trading range.  Yet now that shares have broken 
its 50-dma and the $50.00 mark we're tempted to buy puts.  
Technicals are bearish and there's a big bearish divergence 
between the stock price and the MACD over the last couple of 
months.  We're willing to buy puts now with Tuesday's close under 
the $50 level and target a drop towards the $45 region.  More 
conservative traders may want to be patient and wait to see if 
NTES has any support near $48.50 before initiating positions.

Suggested Options:
This is a relatively short-term play that we hope to close in a
couple of weeks.  We're going to suggest the February puts.

BUY PUT FEB 50 NQG-NJ OI=1466 current ask $3.40
BUY PUT FEB 45 NQG-NI OI= 257 current ask $1.45

Annotated Chart:


Picked on January 11 at $ 49.97
Change since picked:     - 0.00
Earnings Date          02/15/05 (unconfirmed)
Average Daily Volume =      1.0 million 
Chart =



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

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


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The Option Investor Newsletter                  Tuesday 01-11-2005
Copyright 2005, All rights reserved.                        3 of 3
Redistribution in any form strictly prohibited.


In Section Three:

Watch List: Bullish and Bearish candidates to watch
Spreads & Straddles: The Sell-Off Continues...
Premium Selling Plays: Naked Puts & Calls


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

Bullish and Bearish candidates to watch

___________________________________________________________________

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.
___________________________________________________________________


Cummins Inc - CMI - close: 75.28 change: +0.98

WHAT TO WATCH: After a very sharp sell-off this month shares of 
CMI are trying to find support near the $74 level and its 100-
dma.  Technicals are short-term oversold and its stochastics and 
RSI are already trying to turn positive.  Aggressive traders may 
want to watch it for a rebound back toward the $80 level.  

Chart=


---

KB Home - KBH - close: 103.90 change: +0.90

WHAT TO WATCH: We are still watching KBH and the homebuilding 
sector.  KBH shrugged off the market weakness today but has yet 
to break its four-week trend of lower highs.  A move over $105 
could be a new entry point for momentum traders as the whole 
pattern is starting to look like a bull flag. 

Chart=


---

Garmin Ltd - GRMN - close: 49.26 change: -2.67

WHAT TO WATCH: The sell-off in GRMN has been very sharp this 
month with the stock breaking support at the 50-dma and the $55 
level and now the $50 level.  We are watching to see if GRMN will 
bounce from the 100-dma or continue to breakdown.  Actually a 
failed rally under the $52 level might be a potential bearish 
entry point.  

Chart=


---

MGIG Investment - MTG - close: 67.11 change: -1.89

WHAT TO WATCH: If it wasn't for MTG's earnings report due out in 
a couple of days we would consider today's failed rally at the 
$70 level and the 200-dma as a bearish entry point.  The close 
under the 50-dma today also makes today's turnaround look like a 
short.  Watch for a drop under the $67 level and wait for 
investor reaction to earnings.  

Chart=




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stocks that have the potential to deliver stratospheric gains. 
 
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**************************************************************


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

The Sell-Off Continues...
By Ray Cummins

Stocks retreated Tuesday as mediocre earnings from Alcoa (NYSE:AA)
combined with a slew of profit warnings in the technology sector
to start another round of selling in the equities.

The Dow Jones Industrial Average fell 64 points to 10,556, with
only 3M Company (NYSE:MMM) and United Technologies (NYSE:UTX)
ending the session in positive territory.  The NASDAQ Composite
Index slid 17 points to 2,079 as investors sold for profits in
the wake of a disappointing sales forecast from Advanced Micro
Devices (NYSE:AMD) earnings.  The S&P 500 Index fell 7 points to
1,182 amid losses in steel, brokerage, chemical and drug shares.
Decliners led advancers 2 to 1 on the New York Stock Exchange
more than 5 to 2 on the NASDAQ.  Big Board volume was about 1.5
billion shares while some 2.2 billion shares changed hands on
the technology exchange.  Treasuries were nearly unchanged with
the benchmark 10-year note closing up 3/32nds, yielding 4.25%.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
SUMMARY OF CURRENT POSITIONS - AS OF 01/09/05
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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

MRVL   31.53  34.50  JAN  25.0  27.5  0.40   27.10   0.40   Open
CFC    33.21  35.32  JAN  27.5  30.0  0.30   29.70   0.30   Open
EBAY  112.20 106.58  JAN  95.0 100.0  0.60   99.40   0.60   Open
LEND   46.85  46.14  JAN  35.0  40.0  0.50   39.50   0.50   Open
LEN    50.11  53.87  JAN  42.5  45.0  0.30   44.70   0.30   Open
PHM    59.65  61.40  JAN  50.0  55.0  0.75   54.25   0.75   Open
MRVL   34.89  34.50  JAN  27.5  30.0  0.30   29.70   0.30   Open
VRTS   27.38  26.23  JAN  22.5  25.0  0.45   24.55   0.45   Open
ERTS   61.71  58.94  JAN  55.0  57.5  0.35   57.15   0.35   Open
PENN   59.87  59.81  JAN  50.0  55.0  0.50   54.50   0.50   Open
YHOO   37.90  35.96  JAN  32.5  35.0  0.30   34.70   0.30   Open
ANF    47.28  49.50  JAN  42.5  45.0  0.35   44.65   0.35   Open
KMRT  101.35  93.71  JAN  90.0  95.0  0.55   94.45  (0.74) Closed

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

Kmart Holdings (NASDAQ:KMRT) plunged Wednesday due to widespread
selling pressure and weakness in retail issues.  Traders who used
the move as an entry opportunity were likely out of the position
by Friday afternoon, when the stock closed below the break-even
point near $94.50.  The bullish position in Navteq (NYSE:NVT) has
previously been closed to limit potential losses.


CALL-CREDIT SPREADS

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

SINA   37.93  30.45   JAN  50.0  45.0  0.60   45.60  0.60   Open
LLY    53.33  56.26   JAN  65.0  60.0  0.65   60.65  0.65   Open
NVLS   26.94  25.88   JAN  32.5  30.0  0.35   30.35  0.35   Open
CCU    33.15  31.89   JAN  40.0  35.0  0.50   35.50  0.50   Open
UVN    29.06  27.37   JAN  35.0  30.0  0.80   30.80  0.80   Open
ADI    36.42  35.55   JAN  45.0  40.0  0.50   40.50  0.50   Open
KOSP   35.13  33.52   JAN  45.0  40.0  0.55   40.55  0.55   Open
TTWO   33.45  32.25   JAN  40.0  37.5  0.30   37.80  0.30   Open
MSTR   56.22  56.31   JAN  70.0  65.0  0.65   65.65  0.65   Open
ABC    57.09  57.90   JAN  65.0  60.0  0.45   60.45  0.45   Open
RIMM   83.49  74.30   JAN 100.0  95.0  0.45   95.45  0.45   Open
PKZ    32.99  35.30   JAN  40.0  35.0  0.85   35.85  0.85   Open?
UHS    44.51  44.00   JAN  50.0  45.0  0.60   45.60  0.85   Open
JNPR   25.80  25.46   JAN  30.0  27.5  0.35   27.85  0.85   Open
DNA    51.75  54.25   JAN  57.5  55.0  0.35   55.35  0.85   Open?

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

Genetech (NYSE:DNA) and the speculative spread in PetroKazakhstan
(NYSE:PKZ) are on the "watch" list.


DEBIT STRADDLES

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

BZH    144.85  137.20  JAN   145.0  145.0  12.00   11.25    Open

Beazer Homes (NYSE:BZH) approached the "break-even" point during
Wednesday's slide to $134, however the straddle has yet to earn
a profit on a simultaneous order basis.

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

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

CECO - Career Education  $42.05  *** Next Leg Up? ***

Career Education (NASDAQ:CECO) is a provider of private,
for-profit, post-secondary education, with 82 campuses
throughout the United States, Canada, France, the United
Kingdom and the United Arab Emirates.  The company also
offers online education through its Online Education Group,
which includes American InterContinental University Online
and Colorado Technical University Online.  The company's
schools offer degree and diploma programs within its core
curricula of business studies, culinary arts, information
technology, visual communication and health education.

CECO - Career Education  $42.05

PLAY (conservative - bullish/credit spread):

BUY  PUT  FEB-30.00  CUY-NF  OI=1451  ASK=$0.35
SELL PUT  FEB-35.00  CUY-NG  OI=1342  BID=$0.95
INITIAL NET-CREDIT TARGET=$0.65-$0.75
POTENTIAL PROFIT(max)=15% B/E=$34.35


__________________________________________________________________

CVS - CVS Corporation  $47.11  *** New "All-Time" High! ***

CVS Corporation (NYSE:CVS) sells prescription drugs and a wide
variety of general merchandise, including over-the-counter
drugs, greeting cards, film and photo finishing services,
beauty products and cosmetics, seasonal merchandise and
convenience foods through its CVS/pharmacy retail stores and
online through CVS.com.  The company also provides a range of
prescription benefit management services to managed care and
other organizations.  In addition, CVS has a Specialty Pharmacy
unit, which operates as a retail and mail provider of specialty
pharmacy services in the United States.

CVS - CVS Corporation  $47.11

PLAY (conservative - bullish/credit spread):

BUY  PUT  FEB-42.50  CVS-NV  OI=721   ASK=$0.20
SELL PUT  FEB-45.00  CVS-NI  OI=3859  BID=$0.45
INITIAL NET-CREDIT TARGET=$0.30-$0.35
POTENTIAL PROFIT(max)=14% B/E=$44.70



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

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.

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

IMCL - ImClone Systems  $42.70  *** Downtrend Intact! ***

ImClone Systems (NASDAQ:IMCL) is a unique biopharmaceutical firm
involved in advance oncology care by developing a portfolio of
targeted biologic treatments designed to address the needs of
patients with cancer.  It focuses on three major strategies for
treating cancer: growth factor blockers, angiogenesis inhibitors
and cancer vaccines.  Their lead product, ERBITUX (Cetuximab), is
an antibody which has been approved by the United States Food and
Drug Administration for use in combination with irinotecan in the
treatment of patients with a specific type of colorectal cancer.

IMCL - ImClone Systems  $42.70

PLAY (very conservative - bearish/credit spread):

BUY  CALL  FEB-55.00  QCI-BK  OI=4946  ASK=$0.40
SELL CALL  FEB-50.00  QCI-BJ  OI=9447  BID=$0.80
INITIAL NET-CREDIT TARGET=$0.45-$0.55
POTENTIAL PROFIT(max)=9% B/E=$50.45


__________________________________________________________________

NTES - Netease.com  $49.97  *** Premium-Selling Only! ***

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

NTES - Netease.com  $49.97

PLAY (less conservative - bearish/credit spread):

BUY  CALL  FEB-60.00  NQG-BL  OI=100   ASK=$0.65
SELL CALL  FEB-55.00  NQG-BK  OI=1469  BID=$1.40
INITIAL NET-CREDIT TARGET=$0.80-$0.85
POTENTIAL PROFIT(max)=19% B/E=$55.80



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

No straddles or strangles today...

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

SEE DISCLAIMER - SECTION 1

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


*****************************************
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 01/09/05
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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

VISG     JAN     7.50   7.10     8.27    0.40   7.51%   5.63%
RHAT     JAN    12.50   12.05   12.15    0.10   1.35%   3.73%
NCRX     JAN    25.00   24.40   30.35    0.60   4.78%   2.46%
NTGR     JAN    15.00   14.65   16.50    0.35   4.58%   2.39%
RMBS     JAN    17.50   17.10   21.42    0.40   4.87%   2.34%
TLCV     JAN    10.00    9.65   10.05    0.35   6.91%   3.63%
WITS     JAN    15.00   14.55   16.98    0.45   5.38%   3.09%
IDCC     JAN    17.50   16.95   20.32    0.55   6.62%   3.24%
MSO      JAN    17.50   17.05   28.75    0.45   5.62%   2.64%
MSO      JAN    20.00   19.60   28.75    0.40   5.28%   2.04%
ACF      JAN    22.50   21.65   23.58    0.85   6.54%   3.93%
USNA     JAN    30.00   29.00   33.53    1.00   6.12%   3.45%
DHB      JAN    15.00   14.35   15.96    0.65  10.38%   4.53%
MOGN     JAN    25.00   24.05   27.00    0.95   7.47%   3.95% *
GTOP     JAN    12.50   12.05   15.14    0.45   8.45%   3.73%
CMVT     JAN    22.50   22.05   23.04    0.45   3.93%   2.04%
RMBS     JAN    20.00   19.35   21.42    0.65   8.12%   3.36%
IDCC     JAN    17.50   17.05   20.32    0.45   6.77%   2.64%
NFLD     JAN    17.50   17.05   22.15    0.45   6.15%   2.64%
NCRX     JAN    25.00   24.55   30.35    0.45   4.60%   1.83%
RMBS     JAN    20.00   19.45   21.42    0.55   7.18%   2.83%
NKTR     JAN    17.50   17.05   19.19    0.45   5.64%   2.66%
ALXN     JAN    20.00   19.65   23.73    0.35   4.51%   1.78%
AMLN     JAN    20.00   19.65   23.10    0.35   4.07%   1.78%
SWFT     JAN    20.00   19.65   19.93    0.28   3.68%   1.78%
NEOL     JAN    10.00    9.70   11.90    0.30  10.31%   3.09%
ARBA     JAN    15.00   14.70   13.53   (1.17)  0.00%   0.00%
KFX      JAN    12.50   12.20   12.88    0.30   7.80%   2.46%
NAVR     JAN    15.00   14.50   18.08    0.50   8.94%   3.45%
IDCC     JAN    17.50   17.25   20.32    0.25   5.28%   1.45%
NTGR     JAN    15.00   14.60   16.50    0.40   7.61%   2.74%
CTIC     JAN     7.50    7.00    8.65    0.50  16.41%   7.14%
FXEN     JAN    10.00    9.30   13.80    0.70  20.65%   7.53%
NTMD     JAN    22.50   22.25   25.85    0.25   4.52%   1.12%
ELN      JAN    25.00   24.45   27.70    0.55   7.06%   2.25%
VRX      JAN    25.00   24.55   25.22    0.45   5.78%   1.83%
JUPM     JAN    20.00   19.65   19.65   (0.00)  0.00%   0.00%
IDCC     JAN    20.00   19.75   20.32    0.25   4.84%   1.27%
MOGN     JAN    25.00   24.75   27.00    0.25   3.59%   1.01% *
MSO      JAN    25.00   24.60   28.75    0.40   7.12%   1.63%
SONC     JAN    30.00   29.65   31.42    0.35   5.15%   1.18%
ALVR     JAN    12.50   12.15   13.33    0.35  12.44%   2.88%
NFLD     JAN    20.00   19.65   22.15    0.35   8.66%   1.78%
BCSI     JAN    17.50   17.20   18.31    0.30   8.29%   1.74%
JUPM     JAN    20.00   19.60   19.65    0.05   1.16%   2.04%
HLEX     JAN    15.00   14.75   16.24    0.25   7.47%   1.69%
FLML     JAN    17.50   17.25   19.34    0.25   7.05%   1.45%

Special Tuesday Note: The MGI Pharma (NASDAQ:MOGN) position
was closed Tuesday after shares of the cancer-products maker
slumped on a weaker-than-expected earnings forecast.

Comverse Technology (NASDAQ:CMVT), DHB Industries (NYSE:DHB), 
Interdigital (NASDAQ:IDCC), KFX Inc. (NYSE:KFX), Jupitermedia
(NASDAQ:JUPM), Redhat (NASDAQ:RHAT), Swift Transportation
(NASDAQ:SWFT), and Valeant Pharmaceuticals (NASDAQ:VLNT) are
among the most obvious issues on the "watch" list.  Positions
in Ariba (NASDAQ:ARBA), Novatel Wireless (NASDAQ:NVTL) and
Adolor (NASDAQ:ADLR) 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

XLNX     JAN    32.50   33.00   27.33    0.50   3.96%   1.52%
SCSS     JAN    17.50   18.05   17.00    0.55   7.68%   3.05% *
PLAY     JAN    35.00   36.05   22.00    1.05  12.22%   2.91%
AFCO     JAN    22.50   22.80   19.24    0.30   3.92%   1.32%
SYMC     JAN    32.50   33.00   23.79    0.50   6.06%   1.52%
PDII     JAN    30.00   30.30   20.07    0.30   4.64%   0.99%
AGIX     JAN    30.00   30.30   19.01    0.30   5.80%   0.99%
EPIX     JAN    20.00   20.45   16.30    0.45   8.03%   2.20%
SWIR     JAN    20.00   20.50   16.00    0.50   8.74%   2.44%
CTAS     JAN    45.00   45.45   43.77    0.45   3.30%   0.99%
SPW      JAN    42.50   42.90   38.75    0.40   3.47%   0.93%
FHRX     JAN    22.50   22.75   19.27    0.25   5.97%   1.10%
MACR     JAN    30.00   30.35   27.23    0.35   6.71%   1.15%
CELG     JAN    27.50   27.85   27.23    0.35   7.31%   1.26% *

Special Tuesday Note: The Select Comfort (NASDAQ:SCSS) position
was closed Tuesday after the issue rallied on news that fourth
quarter results would exceed expectations due to a rebound in
sales during December.  The "watch-list" position in Celgene
(NASDAQ:CELG) became a potential exit candidate when it moved
through the sold (call) strike at $27.50 on positive earnings
guidance.
 
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
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

GLBC   17.04  FEB 15.00  GQC-NC 0.65   51 14.35  39   3.5%   9.3%
CYBX   23.41  FEB 15.00  QAJ-NC 0.50  517 14.50  39   2.7%   7.5%
NCRX   30.46  FEB 27.50  QNY-SE 0.60  505 26.90  39   1.7%   4.8%
ELN    28.35  FEB 25.00  ELN-NE 0.50 2080 24.50  39   1.6%   4.6%
TSRA   36.09  FEB 30.00  TJQ-NF 0.50   35 29.50  39   1.3%   4.4%
CVC    24.75  FEB 22.50  CVC-NX 0.45 1209 22.05  39   1.6%   4.3%
ZGEN   21.93  FEB 20.00  GZU-ND 0.40    0 19.60  39   1.6%   4.3%

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.
_________________________________________________________________

GLBC - Global Crossing  $17.04  *** In A Trading Range? ***

Global Crossing (NASDAQ:GLBC) is a provider of telecom services
to carriers and commercial enterprises around the world.  The
principal services the company offers to its customers include
voice, data and conferencing services.  Global Crossing offers
these services using a global Internet protocol-based network
that directly connects more than 300 cities in over 30 countries
and delivers services to more than 500 major cities in over 50
countries around the world.  The firm also provides installation
and maintenance services for subsea telecommunications systems
through its subsidiary, Global Marine Systems Limited.

GLBC - Global Crossing  $17.04

FEB 15.00 GQC-NC LB=0.65 OI=51 CB=14.35 DE=39 TY=3.5% MY=9.3%


_________________________________________________________________

CYBX - Cyberonics  $23.41  *** Speculation Only! ***

Cyberonics (NASDAQ:ANSI) designs, develops, manufactures and
markets the Cyberonics VNS (Vagus Nerve Stimulation) Therapy
System, an implantable medical device for the treatment of
epilepsy and other debilitating chronic disorders.  The VNS
Therapy System consists of the VNS Therapy Pulse Generator,
the Bipolar Lead, the programming wand and software and the
tunneling tool.  The company has been approved by the FDA to
market the VNS Therapy System in the United States, as an
adjunctive therapy for reducing the frequency of seizures in
patients over 12 years of age with partial onset seizures that
are refractory or resistant to drugs.

CYBX - Cyberonics  $23.41

FEB 15.00 QAJ-NC LB=0.50 OI=517 CB=14.50 DE=39 TY=2.7% MY=7.5%


_________________________________________________________________

NCRX - Neighborcare  $30.46  *** A Healthy Stock! ***

NeighborCare (NASDAQ:NCRX), formerly Genesis Health Ventures,
is a provider of institutional pharmacy services in the United
States.  The company provides pharmacy services for beds in
long-term care facilities in the U.S. and the District of
Columbia.  Its pharmacy operations consist of 62 institutional
pharmacies, 32 community-based professional retail pharmacies
and 20 on-site pharmacies, which are located in customers'
facilities and serve only customers of that facility.  In
addition, NeighborCare operates 16 home infusion, respiratory
and medical equipment distribution centers.

NCRX - NeighborCare  $30.46

FEB 27.50 QNY-SE LB=0.60 OI=505 CB=26.90 DE=39 TY=1.7% MY=4.8%


_________________________________________________________________

ELN - Elan Corporation  $28.35  *** Consolidation Complete? ***

Elan Corporation (NYSE:ELN) is an integrated biopharmaceutical
firm engaged in research and development in Alzheimer's disease,
Parkinson's disease, multiple sclerosis, pain management and
autoimmune diseases.  The company's objective is to discover and
develop products that will fulfill the unmet medical needs of
patients.  Elan conducts its global business, including research,
development, manufacturing and marketing, through subsidiaries
incorporated in Ireland, the United States, the United Kingdom
and other countries.

ELN - Elan Corporation  $28.35

FEB 25.00 ELN-NE LB=0.50 OI=2080 CB=24.50 DE=39 TY=1.6% MY=4.6%


_________________________________________________________________

TSRA - Tessera Technologies  $36.09  *** Uptrend Resumes? ***

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

TSRA - Tessera Technologies  $36.09

FEB 30.00 TJQ-NF LB=0.50 OI=35 CB=29.50 DE=39 TY=1.3% MY=4.4%


_________________________________________________________________

CVC - Cablevision Systems  $24.75  *** New Trading Range? ***

Cablevision Systems (NYSE:CVC) is a cable operator in the U.S.
The company also has investments in cable programming networks,
entertainment businesses and telecommunications companies.
Through its wholly owned subsidiary, Rainbow Media Holdings,
the company owns interests in, and manages, numerous national
and regional programming networks, the Madison Square Garden
sports and entertainment business and cable tv advertising
sales companies.  Through Cablevision Lightpath, CSC provides
switched telephone services and high-speed Internet access to
the business market.  The company also owns or has interests
in a number of other businesses.

CVC - Cablevision Systems  $24.75

FEB 22.50 CVC-NX LB=0.45 OI=1209 CB=22.05 DE=39 TY=1.6% MY=4.3%


_________________________________________________________________

ZGEN - ZymoGenetics  $21.93  *** Own This One! ***

ZymoGenetics (NASDAQ:ZYGN) focuses on the discovery, development
and commercialization of therapeutic proteins for the treatment
of human disease.  Two of the firm's advanced internal products,
rhThrombin & rFactor XIII, are recombinant versions of proteins
that are marketed in forms derived from human or cow blood.
ZymoGenetics has also participated in the development of five
recombinant protein products marketed by other companies for the
treatment of various diseases, including diabetes, hemophilia,
diabetic ulcer, gastrointestinal motility and hypoglycemia in
diabetic patients treated with insulin and myocardial infarction
or heart attacks.

ZGEN - ZymoGenetics  $21.93

FEB 20.00 GZU-ND LB=0.40 OI=0 CB=19.60 DE=39 TY=1.6% MY=4.3%



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

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.

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

ASKJ - Ask Jeeves  $25.29  *** Next Leg Down? ***

Ask Jeeves (NASDAQ:ASKJ) is a provider of Internet-wide search,
providing consumers with authoritative and fast ways to find
relevant information to their everyday searches.  Ask Jeeves
deploys its search technologies on Ask Jeeves (Ask.com and
Ask.co.uk), Teoma.com, and Ask Jeeves for Kids (AJKids.com).
In addition, to its internet sites, Ask Jeeves syndicates its
monetized search technology and advertising units to a network 
of affiliate partners.  The company is based in Emeryville,
California, with offices in New York, Boston, New Jersey, Los
Angeles, London and Dublin.
 
ASKJ - Ask Jeeves  $25.29

PLAY (sell naked call):

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

SELL CALL  FEB 30    AUK-BF    2022   0.60  30.60   7.8%   2.0%


_________________________________________________________________

RIGL - Rigel Pharmaceuticals  $22.99  *** Trading Range? ***

Rigel Pharmaceuticals (NASDAQ:RIGL) is engaged in the discovery
and development of a range of small molecule product candidates
for unmet medical needs.  The company develops a portfolio of
product candidates and takes these product candidates through
Phase II clinical trials, after which, it seeks partners for
completion of clinical trials, regulatory approval and sale.
The company is conducting research efforts that are focused
primarily in the areas of immunology/inflammation, virology
and oncology.

RIGL - Rigel Pharmaceuticals  $22.99

"SPECULATIVE" PLAY (sell naked call):

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

SELL CALL  JAN 40    QRG-AE     853   0.35  40.35  12.2%   0.9%


_________________________________________________________________

X - United States Steel  $46.34  *** Sector Sell-Off! ***

United States Steel (NYSE:X) is an integrated steel producer
with major production operations in the United States and
central Europe.  An integrated producer uses iron ore and coke
as primary raw materials for steel production.  U. S. Steel is
also engaged in several other businesses, most of which are
related to steel manufacturing.  These include the production
of iron-bearing taconite pellets in the United States and coke
in both the United States and central Europe; transportation
services; real estate operations, and engineering and consulting
services.

X - United States Steel  $46.34

PLAY (sell naked call):

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

SELL CALL  JAN 50     X-AJ     12K+   0.30  50.30   5.5%   0.6%



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

SEE DISCLAIMER - SECTION 1

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


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