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Daily Newsletter, Tuesday, 01/18/2005

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The Option Investor Newsletter                 Tuesday 01-18-2005
Copyright 2005, All rights reserved.                       1 of 3
Redistribution in any form strictly prohibited.


In Section One:

Wrap: Two Days Not a Trend
Futures Markets: See Note
Index Trader Wrap: See Note
Market Sentiment: Back to Back


Posted online for subscribers at http://www.OptionInvestor.com
************************************************************
MARKET WRAP  (view in courier font for table alignment)
************************************************************
      01-18-2005           High     Low     Volume   Adv/Dcl
DJIA    10628.79 + 70.79 10628.94 10500.58 2.01 bln 2212/1057
NASDAQ   2106.04 + 18.10  2106.19  2078.04 2.01 bln 1994/1188
S&P 100   569.53 +  5.09   569.53   562.01   Totals 4206/2245
S&P 500  1195.98 + 11.46  1195.98  1180.10 
SOX       406.55 +  3.40   406.99   399.90
RUS 2000  624.87 +  7.39   625.81   615.29
DJ TRANS 3589.22 + 20.06  3594.07  3559.33
VIX        12.47 +  0.04    13.15    12.30
VXO (VIX-O)12.67 -  0.18    13.66    12.56
VXN        18.75 +  0.18    19.74    18.72  
Total Volume 4,281M
Total UpVol  2,998M
Total DnVol  1,128M
Total Adv  4817
Total Dcl  2560
52wk Highs  318
52wk Lows    62
TRIN       0.66
NAZTRIN    0.81
PUT/CALL   0.72
************************************************************

Two Days Not a Trend
by Jim Brown

For the first time in 2005 the S&P has posted back to back 
gains. Bulls are backslapping each other and high fives 
are evident everywhere. Has the bull returned to 2005? It
is too soon to really tell for sure but traders are now 
breathing easier as the indexes pull back from the brink
once again. Two days does not make a trend but it could be
a good start. 

Dow Chart

 
Nasdaq Chart

 

The day started off with a shock as oil prices soared to 
$49.50 and the NY Empire State Manufacturing Survey fell
back to 20.1 from 27.1 for January. The manufacturing
activity dropped sharply in New York state in January and
the December number was revised down from 29.9 to 27.1. The
NY Survey has been volatile of late with activity jumping
very erratically between 14-30 over the last eight months.
While the headline number was bad the internal components
were worse. New Orders dropped from 36.1 to only 20.1 and
Shipments backed off to 26.2 from 35.6. Inventories fell
into negative territory at -10.9 and Employment fell to 
12.7 from 15.7. This was not a positive report but it has
been very volatile. Unless a trend develops to the downside 
it will likely be just watched carefully as a potentially 
bearish economic indicator forming and a reason for the
Fed to not get to aggressive in future rate hikes. 

The NAHB Housing Index dropped only slightly to 70 from 71
and the recent cycle high made in December. We have been
hovering around 70 since August and this continues to 
indicate that the housing market remains strong. However
all three components did pull back slightly but home buying
over the holidays is not normally strong. We are heading
into the spring buying season and these numbers should 
continue to be strong. The downside will be higher rates
ahead and higher energy prices taking money out of buyers
pockets. We are hearing more about speculative excesses in
several major markets and that suggests we are nearing a
top but buyers continue to appear. 

The negative Empire survey and the high oil sent the indexes
lower at the open but that dip was short lived. Oil prices
had risen on worries the current cold front could last up
to two weeks and the weather man has now rescinded that  
outlook. Funds that had speculated on that event causing
further shortages took profits on the new announcement. The
high for the day at $49.50 was quickly sold and stops were
hit taking the price back to $47.72, nearly -$2 off the high
before buyers stepped back into the market. Oil closed at
$48.45 and up only slightly for the day. Tomorrow's oil
inventory report will cause that volatility to continue. 

Complicating this short-term play was comments from the IEA
that demand could increase +500,000 bpd in Q1. The EIA also
said they expected demand to increase and their number was
+1.4 mbpd or more. The IEA said supply dropped -50K bpd in
December even before OPEC said they would cut production by
one million bbls. In reality that cut has only seen a drop of
-600K bpd and supplies are already running tight. With the
OPEC meeting coming on Jan-30th the expectations for a new
cutback in production are slipping. With demand increasing
and prices hovering near $50 there is no need for OPEC to 
support prices any further. Support is already priced into 
the market with the increased demand. Demand from China 
spiked again in Nov/Dec and could continue to grow +8% to
+13% according to IEA analysis today. There should be a drop
in price after the inauguration and the Iraq elections as
we enter spring and a period where demand temporarily slows.
This should be seen as a buying opportunity for oil stocks
when it occurs. 

The Fed has something in the works and their team of speakers
hit the road today and will continue to do so this week. Two
Fed heads made comments on the economy today and there are
seven more speeches later this week. Philly Fed president,
Santomero, said inflation risks were balanced but the Fed
needed to remain vigilant as the economy continued to expand.
Minnesota Fed president, Stern, said the economy was solid
and inflation would remain low. If the rest of the speeches
continue this train of thought it could be seen as the Fed
giving us the all clear signal that rate hikes were going to
pause. Very seldom do they mount a strong speaking campaign
with the same thread unless they are trying to warn the bond
markets of changes ahead. The next Fed meeting is Feb-1st
so the timing is right for a message. 

The inauguration is only a day away and the $40 million
extravaganza is going to be a huge target. Besides the actual
event there are dozens of sideshows attracting huge crowds.
There will be a parade with over 11,000 people just in the
parade itself and is expected to attract several hundred
thousand in attendees. There are nine formal balls where 
the rich and want to be rich will mingle and trade business
cards in hopes of future dealings. Each of these poses another
chance for potential problems. This could weigh on today's
rally as we get closer to Thursday. 

Earnings are breaking out all over and the majority have
been very good. IBM was the biggest name after the close
and beat the street by a nickel. IBM earned a profit of
over $3 billion for the quarter on sales of more than $27B.
This huge cash windfall is due mostly to their services
division which ended the quarter with an $111 billion 
backlog of orders. IBM said it was comfortable with 
analysts estimates of $5.55 per share for the year and 
$102 billion in revenue. IBM also said they might beat 
that revenue target. IBM rose only slightly in after 
hours trading. 

Yahoo also reported earnings that beat the street by +2
cents and gave guidance only slightly better than analysts
had expected. YHOO jumped less than +$1 on the news. YHOO
could see some pullback on Wednesday because traders 
typically expect a really strong outlook from Yahoo and
the slightly better guidance may not hold the stock at
these levels. 

AMD announced earnings that missed estimates by -3 cents 
but that should come as no surprise after last weeks 
warning. Better chip news came from Motorola, which beat
the street by +3 cents and from Freescale (FSL) the MOT
spin off which beat the street by a penny. Juniper beat
the street by a penny and succeeded in lifting the 
networkers in after hours. Seagate Technology (STX) 
beat by a nickel and guided higher. 

Not all the earnings news was good. JDSU warned that it
would miss street estimates because of a $13 million
revenue drop associated with one customer and litigation
expenses. KKD said they had ousted their CEO of seven 
years and hired a turnaround expert to rescue the donut
maker from its problems. KKD warned that persistent sales
declines in the current quarter may lead to its third
quarterly loss for the year. Stephen Cooper, the new guy
at the top has 30 years of experience in troubled companies
like Enron, Polaroid, TWA, Pegasus Gold and most importantly
Boston Chicken. KKD stockholders should be especially aware
that BOST shareholders were left out in the cold when it 
was reorganized. I personally would not want to be a holder
with Cooper at the helm. The easiest fix for him is a 
bankruptcy, close non performing stores and issue new 
shares to debt holders. He has done it before and as a
hatchet man he is not really concerned about being nice
and once KKD is back in shape he will move on leaving 
lots of bodies in his wake. All three of the officers 
blamed for the KKD problem, CEO, COO and CFO have now 
departed. 

As we approach option expiration this Friday the market 
has put together two days of back to back gains. The S&P
closed at 1195 and +20 points off the critical 1175 area
we were watching for a breakdown signal last week. With
earnings and guidance mostly positive we could continue
to see gains although OpEx and the inauguration could now
combine to keep us range bound until next week. With the
futures barely positive at 7:30 tonight it appears there
is some concern already creeping into the market. The
earnings were good but the guidance was not good enough
for traders to throw caution to the wind and go on a
buying spree. 

There are about 100 companies announcing earnings on 
Wednesday with EBAY, QLGC, QCOM, SYMC, LU, GM, CIT, COF
and CIT leading the list. There has not been any real
pre earnings ramp on any of the majors as caution ahead
of earnings seems to be the game plan. This is good in
the sense that we do not have a lot of expectations built
into the market and we remain oversold despite today's
bounce. The potential is there for a continued move up
next week if the earnings continue to be solid and there
are no negative inauguration events. 

With today's bounce we are in the neutral zone for the
Dow. We are just over last weeks congestion range but
just under the 10650 resistance and the congestion range 
from the prior week. This is the nearly perfect place 
to ride out the rest of the week with a Friday/Monday
move over 10650. The Nasdaq is only slightly better off
with a close just under the 2010 resistance high for the
last two weeks. With positive tech earnings we should
continue to press that level and a breakout could setup
a new move back to the highs. 

SOX Chart

 

The SOX stretched its gains for two days now and posted
the second consecutive close over 400 and a five day
closing high at 406. The 410-resistance level is just
above and from the after hours trades in the SMH it 
appears the positive earnings from MOT/FSL offset the
earnings miss by Rambus and there is no bias for the
open. 

The strongest move was by the Russell with a breakout to
a two week high at the close at 625. Only the slimmest 
thread is holding it back from a new move back towards
the highs at 660. That would be a big leap of faith and
we are far from seeing any confirmation. However, if the
Russell is leading the pack it suggests the funds are
putting money back to work and maybe the fund flows have
finally appeared. 

For the rest of the week I would be cautiously optimistic
ahead of potential event risk and option expiration. We
typically see OpEx activity late in the week before and
early of OpEx week with the last three days relatively
tame. There are probably lots of option hedges in place
for the inauguration event risk and Friday could be a
major unwind day if nothing happens. 

While writing this article I was struck with the different
world Bush faces over the next four years compared to what
he thought he was facing when he took his last oath in Jan
2001. The world as we new it came to an end eight months 
after his last oath and he is facing an even bigger crisis
over the next four years as he attempts to extract the U.S.
from Iraq and face the coming energy crisis. Hopefully the
war on terror has seen its biggest battle as we continue to
mop up the remaining cells still trying to cause trouble.
It will never be over but hopefully the lack of funding
and the lack of a centralized backbone has weakened the
resolve of those Al Qaeda members still in the system. If
we get past Thursday without a terror event the country 
will probably relax even further and we can get back to 
contemplating the potential for a new bull market. 

Jim Brown
Editor

"Men who try something and fail are infinitely better
off than those who try nothing and succeed."

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

Check the Site Later Tonight For Jeff's Index Trader Article
http://members.OptionInvestor.com/itrader/marketwrap/iw_011805_1.asp

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

Back to Back
- J. Brown

The bulls are trying to make a comeback and the S&P 500 index put 
together its first set of back-to-back gains for 2005.  Some of 
the trader talk today discussed how stocks were short-term 
oversold after two weeks of profit taking and investors were 
doing some shopping.  

Stocks actually opened lower as crude oil gapped higher this 
morning but equities turned around as oil faded.  Market watchers 
might be surprised that oil did not hold its gains given the new 
report from the IEA who raised their forecast on global demand 
for oil in 2005.  Plus, oil traders are focused on the upcoming 
OPEC meeting and how any violence surrounding the Iraqi elections 
could pressure supplies.  

The markets also shrugged off some disappointing economic data.  
The NY Empire State manufacturing index fell from 27.1 in 
December to 20.1 in January, which was less than expected.  

Overall the market internals were pretty positive with advancing 
stocks outnumbering decliners 19 to 9 on the NYSE and 19 to 11 on 
the NASDAQ.  Up volume was about three times down volume on the 
NYSE and more than double down volume on the NASDAQ.  

The rally in the financial stocks is very good news overall as 
some market theorists suggest we can't have a prolonged rally 
without the banking sector on the up swing. The BIX and BKX 
indices turned in some impressive gains and the brokers outshined 
the banks with a 1.8 percent rally in the XBD index.  

A numbered of positive earnings reports helped set the tone today 
and the good news kept on coming after the bell.  IBM beat 
estimates.  JNPR beat estimates.  YHOO beat estimates.  Overall 
the mood seems up beat and stocks should have the wind at their 
backs tomorrow.  


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

Market Averages

DJIA ($INDU)

52-week High: 10868
52-week Low :  9708
Current     : 10628

Moving Averages:
(Simple)

 10-dma: 10594
 50-dma: 10591 
200-dma: 10280 



S&P 500 ($SPX)

52-week High: 1217
52-week Low : 1060
Current     : 1195

Moving Averages:
(Simple)

 10-dma: 1186
 50-dma: 1188
200-dma: 1133



Nasdaq-100 ($NDX)

52-week High: 1635
52-week Low : 1301
Current     : 1573

Moving Averages:
(Simple)

 10-dma: 1562
 50-dma: 1582
200-dma: 1467 



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

CBOE Market Volatility Index (VIX) = 12.47 +0.04	
CBOE Mkt Volatility old VIX  (VXO) = 12.67 -0.18
Nasdaq Volatility Index (VXN)      = 18.75 +0.18 


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

          Put/Call Ratio  Call Volume   Put Volume

Total          0.86      1,095,150       946,447
Equity Only    0.67        748,462       503,007
OEX            1.19         39,292        47,001
QQQQ           3.00         29,480        88,686


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

Bullish Percent Data

           Current   Change   Status
NYSE          73.3    + 0     Bear Correction
NASDAQ-100    73.0    + 0     Bull Correction***
Dow Indust.   73.3    + 0     Bull Confirmed
S&P 500       74.6    + 0     Bull Confirmed
S&P 100       76.0    + 0     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: 0.96
10-dma: 1.15 
21-dma: 1.06
55-dma: 1.00


Extreme readings above 1.5 are bullish, and readings below .85
are bearish.  These signals don't occur often and tend be early,
but when they do, they can signal significant market turning
points.


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

Market Internals

            -NYSE-   -NASDAQ-
Advancers    1936      1929
Decliners     910      1119

New Highs     131        78
New Lows       20        10

Up Volume   1480M     1263M
Down Vol.    458M      594M

Total Vol.  1968M     1966M
M = millions


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

Commitments Of Traders Report: 01/11/05


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

There was very little movement in the latest data leaving
commercials slightly bearish and small traders bullish on the
large S&P futures contracts.


Commercials   Long      Short      Net     % Of OI
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%)
01/11/05      457,383   509,892   (52,509)   (5.4%)

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

Small Traders Long      Short      Net     % of OI
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%
01/11/05      157,131   110,174    46,957    17.5%

Most bearish reading of the year:  (1,657)- 5/27/03
Most bullish reading of the year: 114,510 - 3/26/02


E-MINI S&P 500

Commercial traders slightly increased their bullish positions
but everything else remained pretty much flat with the new data.

Commercials   Long      Short      Net     % Of OI 
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%)
01/11/05      322,800   622,509   (299,709)  (31.7%)

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
12/14/04      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%
01/11/05      277,808     73,288   204,520    58.2%

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


NASDAQ-100

Commercials upped both their longs and shorts for a minor 
decrease in bearishness.  Small traders upped their longs 
for a bump in bullishness.

Commercials   Long      Short      Net     % of OI 
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%)
01/11/05       31,984     49,244   (17,260) (21.2%)

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
12/14/04       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%
01/11/05       27,186     8,470    18,716    52.4%

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

There isn't much movement in the commercials' positions but
small traders significantly reduced their short positions.

Commercials   Long      Short      Net     % of OI
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%)
01/11/05       25,254    32,568   (7,314)    (12.6%)
 
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
12/14/04       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%)
01/11/05        5,141     5,389   (  248)   ( 2.3%)

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 01-18-2005
Copyright 2005, All rights reserved.                        2 of 3
Redistribution in any form strictly prohibited.


In Section Two:

Dropped Calls: None
Dropped Puts: ZMH
Call Play Updates: AET, ARLP, AMGN, BBOX, CMI, FRO, KBH, PD, PHM, 
                   RAI, TXI
New Calls Plays: GOOG, PIXR, WFMI
Put Play Updates: ADBE, CAI, FDX
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:
*****

None


PUTS:
*****

Zimmer Holdings - ZMH - close: 80.76 chg: +1.99 stop: 80.26

Wow!  The reversal in ZMH has been pretty fast.  It looks like 
the high-volume breakdown last week was nothing but a bear trap 
and we were suckered right in.  Today's 2.5 percent rally back 
above the $80 mark and its 200-dma could cause even more short-
covering tomorrow.  We're thankful to be stopped out at $80.26. 

Picked on January 13 at $ 77.16
Change since picked:     + 3.60
Earnings Date          01/31/05 (unconfirmed)
Average Daily Volume =      1.6 million  
Chart =


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

Aetna Inc - AET - close: 126.53 change: -1.37 stop: 119.99
 
Hmm... seeing AET slip backwards on a day where the rest of the 
market is making gains and the IUX insurance index is breaking 
out is normally not a good sign.  However, AET was showing 
relative strength last week and was due for a dip.  Look for a 
bounce from the $125 region as a potential entry point. 

Picked on January 13 at $127.61
Change since picked:     - 1.08
Earnings Date          02/10/05 (confirmed)
Average Daily Volume =      2.2 million  
Chart =


---

Alliance Resource - ARLP - close: 73.35 chg: +0.87 stop: 67.49     

ARLP is getting closer to our initial target in the $74.50-75.00 
range.  The stock added another 1.2 percent and its MACD is 
nearing a new buy signal.  Short-term traders can prepare to exit 
for a gain.  We're going to hold on and see if shares can 
breakout over the $75 level.  

Picked on January 10 at $ 69.80
Change since picked:     + 3.55
Earnings Date          10/28/04 (confirmed)
Average Daily Volume =      115 thousand 
Chart =


---

Amgen Inc - AMGN - close: 64.16 change: +0.35 stop: 62.00

Strength in the markets and the BTK biotech index helped AMGN 
turned in a positive day.  Yet we're disappointed that AMGN 
didn't add more on the session, especially given the fact that 
BAC reiterated their "buy" rating on the stock this morning.  The 
lack of leadership from AMGN could be an issue.  We're suggesting 
that readers wait for shares to trade back over $65.25 before 
initiating positions.  Of course we also have to keep the 
upcoming earnings report in mind as well.  We do not want to hold 
over the event and we're running out of time.


Picked on January 13 at $ 65.05
Change since picked:     - 0.89
Earnings Date          01/26/05 (confirmed)
Average Daily Volume =      7.3 million  
Chart =


---

Black Box - BBOX - close: 46.91 change: +0.54 stop: 44.99      

Our patience in BBOX just might pay off.  Shares closed at new 
two-week highs and the technical oscillators are improving.  This 
looks like a new bullish entry point for a run toward the $50 
region.  Given the strong earnings report from rival JNPR tonight 
we could see BBOX perform well tomorrow. 

Picked on December 22 at $ 46.15 
Change since picked:      + 0.76
Earnings Date           02/01/05 (confirmed)
Average Daily Volume =       128 thousand
Chart =


---

Cummins Inc - CMI - close: 77.21 chg: +0.81 stop: 73.99

Bulls bought the early morning dip to $75.25 and CMI was positive 
the rest of the session.  We feel CMI continues to look 
attractive for a rebound play from rising technical support and 
price support at the $75 mark.  

Picked on January 16 at $ 76.40
Change since picked:     + 0.81
Earnings Date          02/01/05 (confirmed)
Average Daily Volume =      785 thousand 
Chart =


---

Frontline Ltd - FRO - close: 47.87 chg: -0.88 stop: 43.49     

Whoops!  After showing strength earlier in the session shares of 
FRO sank this afternoon in profit taking.  After two weeks of 
gains we're not too surprised, especially with FRO testing 
overhead resistance at the 100-dma and the $50.00 mark.  We 
suggested in the MarketMonitor this afternoon that short-term 
traders consider taking profits.  The question now is where will 
bulls buy the dip?  FRO could retrace back toward the $45 level 
but we hope not.  Be patient and wait for the bounce.  

Picked on January 12 at $ 46.06
Change since picked:     + 1.81
Earnings Date          02/00/05 (unconfirmed)
Average Daily Volume =      1.1 million  
Chart =


---

KB Home - KBH - close: 109.55 change: +0.14 stop: 99.50

We're surprised that KBH held up so well today.  Normally when 
the market begins to turnaround it's tempting for traders to 
rotate out of their recent winners (like homebuilders) and rotate 
into something else.  We remain bullish on the stock and its MACD 
supports us with a new buy signal from Friday.  If KBH does dip 
we'll look for support in the $105-107 region.  

Picked on January 13 at $106.00
Change since picked:     + 3.55
Earnings Date          03/17/05 (unconfirmed)
Average Daily Volume =      1.1 million  
Chart =


---

Phelps Dodge - PD - close: 101.00 change: -0.66 stop: 92.00

The action in PD was mixed.  Shares started the session lower and 
fell to $99.50 before traders bought the dip.  Unfortunately, the 
afternoon rally could not push through the $102 level.  No change 
in our strategy.  

Picked on January 09 at $ 97.65
Change since picked:     + 3.35
Earnings Date          01/27/05 (confirmed)
Average Daily Volume =      2.2 million  
Chart =


---

Pulte Homes - PHM - close: 66.01 chg: +0.02 stop: 61.00

The buying in the homebuilders took a pause today as investors 
threw money at the rest of the market. We remain bullish on PHM 
and expect to see some follow through on Friday's breakout over 
he $65 level.  

Picked on January 16 at $ 65.99
Change since picked:     + 0.00
Earnings Date          02/02/05 (confirmed)
Average Daily Volume =      1.5 million 
Chart =


---

Reynolds American - RAI - close: 80.90 change: +1.16 stop: 76.75     

Tobacco stocks were strong on Tuesday and RAI rally strong with a 
1.45 percent gain to breakout over the $80 level and the December 
highs near $80.50.  This is a new all-time high for RAI and looks 
like a new bullish entry point.  Unfortunately, we don't have 
much time left.  Keep an eye out for its earnings report near 
Jan. 24th.  

Picked on December 22 at $ 80.11
Change since picked:      + 0.79
Earnings Date           01/24/05 (unconfirmed)
Average Daily Volume =       1.0 million  
Chart =


---

Texas Industries - TXI - close: 63.91 change: +0.63 stop: 59.00     

Target achieved!  TXI has hit our initial profit target in the 
$64.50-65.00 range this afternoon.  Over the weekend we suggested 
that readers consider exiting for a gain given the rise in option 
values.  We're going to make that suggestion again today.  
However, given the turnaround in the major indices we're going to 
hold on to TXI with the expectation that shares can breakout over 
resistance at $65.00.  

Picked on January 09 at $ 60.18
Change since picked:     + 3.73
Earnings Date          12/16/04 (confirmed)
Average Daily Volume =      238 thousand 
Chart =
 


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

Google Inc - GOOG - close: 203.90 change: +3.93 stop: 190.00

Company Description:
Google's innovative search technologies connect millions of 
people around the world with information every day. Founded in 
1998 by Stanford Ph.D. students Larry Page and Sergey Brin, 
Google today is a top web property in all major global markets. 
Google's targeted advertising program, which is the largest and 
fastest growing in the industry, provides businesses of all sizes 
with measurable results, while enhancing the overall web 
experience for users. Google is headquartered in Silicon Valley 
with offices throughout North America, Europe, and Asia.
(source: company press release)

Why We Like It:
Buckle your seat belt.  We're going to try trading GOOG again.  
Last time we successfully caught a wave from the $180 region 
toward resistance at $200. Now it looks like GOOG is poised to 
breakout.  Shares actually hit a new all-time high today at $205 
with volume coming in above average.  We like GOOG for multiple 
reasons.  First is the technical pattern.  GOOG has painted a 
cup-and-handle formation.  We just need to see shares break 
through the $205 level.  Technical oscillators are positive and 
its MACD has produced a new buy signal.  GOOG's P&F chart is very 
bullish as well with a bullish triangle breakout - one of the 
most successful patterns to play in an up trending market.  
Secondly, we like GOOG because shares are likely to trend higher 
as investors anticipate a strong earnings report.  Rival Yahoo 
(YHOO) beat estimates tonight with profits soaring on a new 
online-advertising boom.  GOOG will benefit from the rise in 
online advertising too so momentum traders will likely bid up 
shares before its February 1st earnings report.  We are going to 
use a TRIGGER at $205.51.  Once GOOG trades at this level or 
above we'll go long and target a run into the $215-220 range 
before its earnings report.  We don't have much time and that 
makes this a higher-risk play than normal.  

Suggested Options:
This is a short-term play and we're only suggesting the February
calls.  We would suggest the 200's or 210's.

BUY CALL FEB 200 GOU-BT OI=4701 current ask $14.00
BUY CALL FEB 210 GOU-BB OI=2262 current ask $ 9.00
BUY CALL FEB 220 GOU-BD OI=9233 current ask $ 8.00

Annotated chart:


Picked on January xx at $ xx.xx <-- see TRIGGER
Change since picked:     + 0.00
Earnings Date          02/01/05 (confirmed)
Average Daily Volume =     11.3 million 
Chart =


---


Pixar - PIXR - close: 88.24 change: +2.25 stop: 84.00

Company Description:
Pixar Animation Studios  combines creative and technical artistry 
to create original stories in the medium of computer animation. 
Pixar has created and produced six of the most successful and 
beloved animated films of all time: Academy Award®-winning Toy 
Story (1995); A Bug's Life (1998); Golden Globe-winner Toy Story 
2 (1999); the Academy Award®-winning Monsters, Inc. (2001); the 
Academy Award®-winning Finding Nemo (2003); and The Incredibles 
(2004). Pixar's six films have earned more than $3 billion at the 
worldwide box office to date. The Northern California studio's 
next film release is Cars (June 9, 2006).
(source: company press release)

Why We Like It:
We like PIXR for its technical breakout on Tuesday.  Shares have 
been churning sideways between $83 and $88 for the last six 
weeks.  Today's rebound in the NASDAQ helped push PIXR through 
resistance at the $88.00 level.  This technical breakout is 
supported by a bullish RSI and stochastics oscillators and a new 
buy signal in the MACD.  Plus, the point-and-figure chart shows a 
fresh triple-top breakout buy signal point to a $97 target.  We 
do anticipate the top of the December gap down being resistance 
but PIXR looks poised to make a run back toward the $95 level.  

Suggested Options:
This is a short-term play.  We want to be out before PIXR's 
Feb. 10th earnings report.

BUY CALL FEB 85 PQJ-BQ OI= 195 current ask $5.40
BUY CALL FEB 90 PQJ-BR OI= 467 current ask $2.60

Annotated chart:


Picked on January 18 at $ 88.24
Change since picked:     + 0.00
Earnings Date          02/10/05 (confirmed)
Average Daily Volume =      934 thousand
Chart =


---


Whole Foods - WFMI - close: 97.50 change: +2.61 stop: 93.00

Company Description:
Founded in 1980 in Austin, Texas, Whole Foods Market 
(http://www.wholefoodsmarket.com) is the world's leading natural and 
organic foods supermarket and America's first national certified 
organic grocer. In fiscal year 2004, the company had sales of 
$3.9 billion and currently has 167 stores in the United States, 
Canada, and the United Kingdom. The Whole Foods Market motto, 
"Whole Foods, Whole People, Whole Planet"(TM) captures the 
company's mission to find success in customer satisfaction and 
wellness, employee excellence and happiness, enhanced shareholder 
value, community support and environmental improvement. Whole 
Foods Market, Harry's Farmers Market®, and Fresh & Wild® are 
trademarks owned by Whole Foods Market IP, LP. Whole Foods Market 
employs more than 30,000 team members and has been ranked for 
eighth consecutive years as one of the "100 Best Companies to 
Work for" in America by Fortune magazine.
(source: company press release)

Why We Like It:
Last month we tried to play a breakout in WFMI but shares never 
made it over resistance at the $97.50 level and thus never hit 
our trigger point to go long.  Now after a few more weeks of 
consolidating shares of WFMI look ready to try again and so are 
week.  The strength in the two-day bounce from the 50-dma is 
encouraging and its technical indicators have turned positive.  
Plus, the bullish P&F chart points to a $112.00 target.  We want 
to use a TRIGGER at $98.01 to catch a breakout and target a run 
into the $105-110 range before its Feb. 9th earnings report.  

Suggested Options:
This is a short-term play and we do not want to hold past 
WFMI's February earnings report.

BUY CALL FEB 95 FMQ-BS OI=3060 current ask $5.10
BUY CALL FEB100 FMQ-BT OI= 614 current ask $2.55
BUY CALL FEB105 FMQ-BA OI= 431 current ask $1.05

Annotated chart:


Picked on January xx at $ xx.xx <-- see TRIGGER
Change since picked:     + 0.00
Earnings Date          02/09/05 (unconfirmed)
Average Daily Volume =      880 thousand
Chart =



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

Adobe Systems - ADBE - close: 58.38 change: +0.15 stop: 60.11*new*    

We would be very careful here.  ADBE broke down this morning and 
fell under support to hit $56.60.  Unfortunately, with the market 
rebounding traders bought the dip in ADBE just as quickly.  While 
ADBE is still showing relative weakness today has the potential 
to be a bullish reversal.  We're going to lower our stop loss to 
$60.11.  

Picked on January 06 at $ 58.99
Change since picked:     - 0.61
Earnings Date          03/17/05 (unconfirmed)
Average Daily Volume =      2.3 million 
Chart =


---

CACI Intl - CAI - close: 60.80 change: +1.41 stop: 62.51*new*

We suggest caution on CAI too.  Our gut says that today's 2.3 
percent rally and close back above the $60 level is a good excuse 
to exit before shares rally any further.  Yet looking deeper we 
see that the early morning strength was fueled by a broker 
upgrade (to a "buy").  The rally failed under the $62 level 
producing another lower high.  We are not suggesting new 
positions and conservative traders may want to exit now.  We're 
going to hold on and lower our stop loss to $62.51. 

Picked on January 05 at $ 61.95
Change since picked:     - 1.15
Earnings Date          01/24/05 (unconfirmed)
Average Daily Volume =      348 thousand
Chart =


---

Fedex Corp - FDX - close: 93.85 change: +0.53 stop: 95.51*new*

The action in FDX was interesting today.  We can't find any news 
to account for the sharp spike higher this morning but the rally 
failed under the $95 level, which should be round-number 
resistance.  Rival UPS failed to rally at all today and broke 
down under its simple 200-dma so this could be weighing on FDX.  
Meanwhile we're a little concerned about the Transportation 
index.  The $TRAN shows a similar spike higher this morning but 
while the rally failed for FDX the $TRAN held on to its gain and 
the index looks poised to break higher.  Readers need to be 
careful.  We're gong to lower our stop loss to $95.51. 

Picked on January 07 at $ 94.95
Change since picked:     - 1.10
Earnings Date          03/17/05 (unconfirmed)
Average Daily Volume =      1.6 million 
Chart =


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

None


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The Option Investor Newsletter                  Tuesday 01-18-2005
Copyright 2005, All rights reserved.                        3 of 3
Redistribution in any form strictly prohibited.


In Section Three:

Watch List: Coffee, Biotech and more
Spreads & Straddles: Buyers Save The Day!
Premium Selling Plays: Naked Puts & Calls


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

Coffee, Biotech 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.
___________________________________________________________________


Starbucks - SBUX - close: 57.95 change: +1.74

WHAT TO WATCH: Aggressive bulls may want to give this bounce in 
SBUX a second look.  Shares had retreated from $65 to $55 over 
the last four weeks and were due for a bounce.  Now short-term 
oscillators are turning positive and it wouldn't surprise us to 
see a small earnings run ahead of its Jan. 26th report.

Chart=


---

Biogen Idec - BIIB - close: 67.80 change: +1.22

WHAT TO WATCH: We continue to watch the five-week consolidation 
in shares of BIIB.  The stock has been digesting the breakout 
over the $65 level long enough and technical oscillators are 
suggesting BIIB is ready for another leg higher.  We would keep 
one eye on the BTK biotech index and the other for a breakout 
over $68.50 in BIIB as a potential entry point.  

Chart=


---

Lehman Brothers - LEH - close: 90.57 change: +0.89 

WHAT TO WATCH: The broker-dealer stocks turned in a very solid 
session with the XBD index adding 1.8 percent.  LEH helped lead 
the way with a one-percent rally through resistance at $90.00 to 
close at new all-time highs.  We will confess that the stock 
looks a little extended to us but momentum traders may want to 
consider positions here.  Use the 40 & 50-dma's for support.

Chart=



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

GS $105.00 +0.78 - GS is another broker-dealer we're watching.  A 
breakout over $106.00 could be a bullish entry point.

RE $90.80 +1.75 - The sharp rally in RE has pushed shares through 
resistance at $90.00 to hit new all-time highs.

PGR $86.73 +2.84 - We noticed the IUX insurance index broke out 
today and the sharp rally in PGR looks like a potential double-
bottom.


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

Buyers Save The Day!
By Ray Cummins

The major equity averages soared Monday as investors ignored the
potential effects of rising oil costs and focused instead on a
gaggle of positive earnings reports.

Stocks were due for a bounce after a two-week slump and analysts
noted that market momentum has likely shifted to the upside in the
near-term.  The Dow Jones Industrial Average closed up 70 points
at 10,628 on strength in American International Group (NYSE:AIG),
SBC Communications (NYSE:SBC), Hewlett-Packard (NYSE:HPQ) and JP
Morgan Chase (NYSE:JPM).  The NASDAQ Composite Index climbed 18
points, to 2,106 amid bullish activity in disk drive, telecom,
and computer hardware shares.  Among the broader market sectors,
gains in brokers, biotech, airline, health care, drugstores and
utility shares propelled the S&P 500 Index 11 points higher to
1,195.  Advancers outpaced decliners by a 2 to 1 on the New York
Stock Exchange, and by a 3 to 2 margin on the NASDAQ.  Trading
volume was around 1.6 billion on the Big Board and 2.0 billion
on the technology exchange.  In the bond market, treasury prices
ended higher after Federal Reserve members assured traders that
inflationary pressures in the U.S. economy remain under control.
The benchmark 10-year note finished up 4/32, yielding 4.19%.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
SUMMARY OF CURRENT POSITIONS - AS OF 01/14/05
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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  34.89  JAN  25.0  27.5  0.40   27.10   0.40   Open
CFC    33.21  36.75  JAN  27.5  30.0  0.30   29.70   0.30   Open
EBAY  112.20 105.20  JAN  95.0 100.0  0.60   99.40   0.60   Open?
LEND   46.85  49.06  JAN  35.0  40.0  0.50   39.50   0.50   Open
LEN    50.11  57.53  JAN  42.5  45.0  0.30   44.70   0.30   Open
PHM    59.65  65.99  JAN  50.0  55.0  0.75   54.25   0.75   Open
MRVL   34.89  34.89  JAN  27.5  30.0  0.30   29.70   0.30   Open
VRTS   27.38  26.94  JAN  22.5  25.0  0.45   24.55   0.45   Open
ERTS   61.71  59.84  JAN  55.0  57.5  0.35   57.15   0.35   Open
PENN   59.87  62.27  JAN  50.0  55.0  0.50   54.50   0.50   Open
YHOO   37.90  36.70  JAN  32.5  35.0  0.30   34.70   0.30   Open
ANF    47.28  50.33  JAN  42.5  45.0  0.35   44.65   0.35   Open
MRVL   34.50  34.89  JAN  30.0  32.5  0.30   32.20   0.30   Open
PIXR   86.36  85.99  FEB  75.0  80.0  0.70   79.30   0.70   Open
CECO   42.05  41.00  FEB  30.0  35.0  0.65   34.35   0.65   Open
CVS    47.11  47.00  FEB  42.5  45.0  0.30   44.70   0.30   Open

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

The position in Kmart Holdings (NASDAQ:KMRT), which is currently
profitable, and the Navteq (NYSE:NVT) spread, have previously been
closed to limit potential losses.  Ebay (NASDAQ:EBAY) is the most
prominent candidate on the "watch" list with its earnings report
due this week.


CALL-CREDIT SPREADS

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

SINA   37.93  30.00   JAN  50.0  45.0  0.60   45.60  0.60   Open
LLY    53.33  57.25   JAN  65.0  60.0  0.65   60.65  0.65   Open
NVLS   26.94  26.80   JAN  32.5  30.0  0.35   30.35  0.35   Open
CCU    33.15  32.00   JAN  40.0  35.0  0.50   35.50  0.50   Open
UVN    29.06  27.92   JAN  35.0  30.0  0.80   30.80  0.80   Open
ADI    36.42  35.64   JAN  45.0  40.0  0.50   40.50  0.50   Open
KOSP   35.13  33.12   JAN  45.0  40.0  0.55   40.55  0.55   Open
TTWO   33.45  34.84   JAN  40.0  37.5  0.30   37.80  0.30   Open
MSTR   56.22  58.16   JAN  70.0  65.0  0.65   65.65  0.65   Open
ABC    57.09  57.27   JAN  65.0  60.0  0.45   60.45  0.45   Open
RIMM   83.49  76.39   JAN 100.0  95.0  0.45   95.45  0.45   Open
PKZ    32.99  37.44   JAN  40.0  35.0  0.85   35.85 (1.59) Closed
UHS    44.51  44.33   JAN  50.0  45.0  0.60   45.60  0.60   Open
JNPR   25.80  26.60   JAN  30.0  27.5  0.35   27.85  0.35   Open
DNA    51.75  50.10   JAN  57.5  55.0  0.35   55.35  0.35   Open
BJS    43.09  45.71   FEB  50.0  47.5  0.30   47.80  0.30   Open
MERQ   41.25  40.68   FEB  47.5  45.0  0.50   45.50  0.50   Open
IMCL   42.70  41.16   FEB  55.0  50.0  0.45   50.45  0.45   Open
NTES   49.97  51.17   FEB  60.0  55.0  0.80   55.80  0.80   Open

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

The speculative position in PetroKazakhstan (NYSE:PKZ) has been
closed to limit potential losses.  Netease.com (NASDAQ:NTES) is
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?
IIVI    39.91   40.13  JAN    40.0   40.0   2.75    2.50    Open

Beazer Homes (NYSE:BZH) came up just short of the "break-even"
point in the position with the bearish portion of the straddle
nearly paying for the entire play during it's recent slide to
$134.  Now the issue seems destined to climb to new highs and
traders who used the sell-off to unload the JAN-$145 puts are
holding nearly "risk-free" calls.  II-VI is scheduled to post
its second quarter earnings on Thursday, January 20.

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

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

CTX - Centex  $60.85  *** Homebuilding Stocks Soar! ***

Centex Corporation (NYSE:CTX) is a multi-industry company with
operates in six principal business segments.  Conventional Homes
operations involve the construction and sale of single-family
homes, town homes and low-rise condominiums, and the purchase and
development of land.  Investment Real Estate operations involve
the acquisition, development and sale of land, and the development
of industrial, office, retail and mixed-use projects.  Financial
Services operations involve the financing of homes, home equity
and sub-prime lending, and the marketing of insurance coverage.
Construction Products involves cement production and distribution,
and the production, distribution and sale of gypsum wallboard,
concrete, aggregates and recycled paperboard.  Contracting and
Construction Services involves the construction of buildings.
Centex HomeTeam Services is involved in pest and termite control,
lawn and landscape care, electronic security, alarm monitoring
and home-wiring services.

CTX - Centex  $60.85

PLAY (conservative - bullish/credit spread):

BUY  PUT  FEB-50.00  CTX-NJ  OI=547  ASK=$0.35
SELL PUT  FEB-55.00  CTX-NK  OI=587  BID=$0.80
INITIAL NET-CREDIT TARGET=$0.50-$0.55
POTENTIAL PROFIT(max)=11% B/E=$54.50


__________________________________________________________________

UPL - Ultra Petroleum  $50.61  *** Oil Sector Hedge ***

Ultra Petroleum (NYSE:UPL) is an independent oil and gas company
engaged in the development, production, operation, exploration
and acquisition of oil and gas properties.  The firm's operations
are focused mainly in the Green River Basin of southwest Wyoming
and Bohai Bay, offshore China.  Ultra Petroleum also has working
interests in Texas and Pennsylvania.

UPL - Ultra Petroleum  $50.61

PLAY (conservative - bullish/credit spread):

BUY  PUT  FEB-40.00  UPL-NH  OI=267  ASK=$0.30
SELL PUT  FEB-45.00  UPL-NI  OI=646  BID=$0.80
INITIAL NET-CREDIT TARGET=$0.55-$0.60
POTENTIAL PROFIT(max)=12% B/E=$44.45



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

BEARISH PLAYS - CREDIT SPREADS

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

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

CCMP - Cabot Microelectronics  $36.51  *** In A Trading Range? ***

Cabot Microelectronics (NASDAQ:CCMP) is a global supplier of high
performance polishing slurries used in the manufacture of advanced
integrated circuit (IC) devices, within a process called chemical
mechanical planarization (CMP).  CMP is a polishing process used
by IC device manufacturers to planarize or flatten many of the
multiple layers of material that are built upon silicon wafers
and necessary in the production of advanced ICs.  Planarization is
a polishing process that levels, smoothes, and removes the excess
material from the surfaces of these layers.  CMP slurries are
liquid formulations that facilitate and enhance this polishing
process and generally contain engineered abrasives and proprietary
chemicals.  CMP enables IC device manufacturers to produce smaller,
faster and more complex IC devices with fewer defects.

CCMP - Cabot Microelectronics  $36.51

PLAY (less conservative - bearish/credit spread):

BUY  CALL  FEB-45.00  UKR-BI  OI=222   ASK=$0.25
SELL CALL  FEB-40.00  UKR-BH  OI=1461  BID=$0.90
INITIAL NET-CREDIT TARGET=$0.70-$0.75
POTENTIAL PROFIT(max)=16% B/E=$40.70


__________________________________________________________________

MMM - 3M Company  $82.02  *** Post-Earnings Slump! ***

3M Company (NYSE:MMM) is a diversified technology company with
a global presence in markets such as: healthcare, industrial,
display and graphics, consumer and office, safety, security
services, electronics, telecommunications and electrical and
transportation.  3M has substantial inter-company cooperation
in research, manufacturing and marketing of products and sells
its products through numerous distribution channels including
wholesalers, retailers, jobbers, distributors and dealers in
a wide variety of trades in many countries.

MMM - 3M Company  $82.02

PLAY (conservative - bearish/credit spread):

BUY  CALL  FEB-90.00  MNZ-BR  OI=1247  ASK=$0.15
SELL CALL  FEB-85.00  MNZ-BQ  OI=8682  BID=$0.60
INITIAL NET-CREDIT TARGET=$0.50-$0.55
POTENTIAL PROFIT(max)=11% B/E=$85.50



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

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

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 01/14/05
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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    7.85    0.40   7.51%   5.63%
RHAT     JAN    12.50   12.05   11.83   (0.22)  0.00%   3.73%
NCRX     JAN    25.00   24.40   30.50    0.60   4.78%   2.46%
NTGR     JAN    15.00   14.65   16.06    0.35   4.58%   2.39%
RMBS     JAN    17.50   17.10   21.14    0.40   4.87%   2.34%
TLCV     JAN    10.00    9.65    9.10   (0.55)  0.00%   0.00%
WITS     JAN    15.00   14.55   16.80    0.45   5.38%   3.09%
IDCC     JAN    17.50   16.95   17.90    0.55   6.62%   3.24%
MSO      JAN    17.50   17.05   28.13    0.45   5.62%   2.64%
MSO      JAN    20.00   19.60   28.13    0.40   5.28%   2.04%
ACF      JAN    22.50   21.65   24.45    0.85   6.54%   3.93%
USNA     JAN    30.00   29.00   33.18    1.00   6.12%   3.45%
DHB      JAN    15.00   14.35   15.54    0.65  10.38%   4.53%
GTOP     JAN    12.50   12.05   15.68    0.45   8.45%   3.73%
CMVT     JAN    22.50   22.05   22.72    0.45   3.93%   2.04%
RMBS     JAN    20.00   19.35   21.14    0.65   8.12%   3.36%
IDCC     JAN    17.50   17.05   17.90    0.45   6.77%   2.64%
NFLD     JAN    17.50   17.05   21.02    0.45   6.15%   2.64%
NCRX     JAN    25.00   24.55   30.50    0.45   4.60%   1.83%
RMBS     JAN    20.00   19.45   21.14    0.55   7.18%   2.83%
NKTR     JAN    17.50   17.05   18.61    0.45   5.64%   2.66%
ALXN     JAN    20.00   19.65   22.65    0.35   4.51%   1.78%
AMLN     JAN    20.00   19.65   23.59    0.35   4.07%   1.78%
SWFT     JAN    20.00   19.65   19.84    0.19   2.50%   1.78%
NEOL     JAN    10.00    9.70   11.09    0.30  10.31%   3.09%
KFX      JAN    12.50   12.20   12.91    0.30   7.80%   2.46%
NAVR     JAN    15.00   14.50   16.76    0.50   8.94%   3.45%
IDCC     JAN    17.50   17.25   17.90    0.25   5.28%   1.45%
NTGR     JAN    15.00   14.60   16.06    0.40   7.61%   2.74%
CTIC     JAN     7.50    7.00    8.00    0.50  16.41%   7.14%
FXEN     JAN    10.00    9.30   14.88    0.70  20.65%   7.53%
NTMD     JAN    22.50   22.25   23.70    0.25   4.52%   1.12%
ELN      JAN    25.00   24.45   28.25    0.55   7.06%   2.25%
VRX      JAN    25.00   24.55   24.80    0.25   3.21%   1.83%
IDCC     JAN    20.00   19.75   17.90   (1.85)  0.00%   0.00% *
MSO      JAN    25.00   24.60   28.13    0.40   7.12%   1.63%
SONC     JAN    30.00   29.65   31.21    0.35   5.15%   1.18%
ALVR     JAN    12.50   12.15   12.69    0.35  12.44%   2.88%
NFLD     JAN    20.00   19.65   21.02    0.35   8.66%   1.78%
BCSI     JAN    17.50   17.20   19.09    0.30   8.29%   1.74%
HLEX     JAN    15.00   14.75   16.60    0.25   7.47%   1.69%
FLML     JAN    17.50   17.25   18.13    0.25   7.05%   1.45%
CTIC     JAN     7.50    7.25    8.00    0.25  22.85%   3.45%
FXEN     JAN    12.50   12.20   14.88    0.30  15.53%   2.46%
INTV     JAN    12.50   12.20   12.40    0.20   9.74%   2.46%
NTGR     JAN    15.00   14.70   16.06    0.30  13.00%   2.04%
VTIV     JAN    20.00   19.60   20.81    0.40  11.61%   2.04%
IFLO     JAN    17.50   17.25   17.91    0.25   9.03%   1.45%
PDLI     JAN    20.00   19.75   19.62   (0.13)  0.00%   0.00%
BLUD     JAN    25.00   24.70   28.07    0.30   7.20%   1.21%
GLBC     FEB    15.00   14.35   20.52    0.65   9.34%   4.53%
TSRA     FEB    30.00   29.50   38.31    0.50   4.41%   1.69%
ELN      FEB    25.00   24.50   28.25    0.50   4.59%   2.04%
ZGEN     FEB    20.00   19.60   22.10    0.40   4.31%   2.04%
NCRX     FEB    27.50   26.90   30.50    0.60   4.76%   2.23%
CVC      FEB    22.50   22.05   24.35    0.45   4.33%   2.04%
CYBX     FEB    15.00   14.50   23.44    0.50   7.53%   3.45%

The "watch-list" position in Interdigital (NASDAQ:IDCC) should
have been closed Thursday when the stock plunged after Nokia
(NYSE:NOK) filed a lawsuit to invalidate some of IDCC's 3G
mobile phone patents.  A number of other issues are potential
"early-exit" candidates.  Redhat (NASDAQ:RHAT) and TLC Vision
(NASDAQ:TLCV) are among the most obvious, however Comverse
Technology (NASDAQ:CMVT), DHB Industries (NYSE:DHB), KFX Inc.
(NYSE:KFX) and Swift Transportation (NASDAQ:SWFT) remain on
the "watch" list with a slew of newcomers.  Positions in Ariba
(NASDAQ:ARBA), Adolor (NASDAQ:ADLR), Jupitermedia (NASDAQ:JUPM),
MGI Pharma (NASDAQ:MOGN), and Novatel Wireless (NASDAQ:NVTL)
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   26.52    0.50   3.96%   1.52%
PLAY     JAN    35.00   36.05   24.51    1.05  12.22%   2.91%
AFCO     JAN    22.50   22.80   20.26    0.30   3.92%   1.32%
SYMC     JAN    32.50   33.00   24.51    0.50   6.06%   1.52%
PDII     JAN    30.00   30.30   19.09    0.30   4.64%   0.99%
AGIX     JAN    30.00   30.30   20.14    0.30   5.80%   0.99%
EPIX     JAN    20.00   20.45   10.67    0.45   8.03%   2.20%
SWIR     JAN    20.00   20.50   15.47    0.50   8.74%   2.44%
CTAS     JAN    45.00   45.45   43.33    0.45   3.30%   0.99%
SPW      JAN    42.50   42.90   38.67    0.40   3.47%   0.93%
FHRX     JAN    22.50   22.75   19.10    0.25   5.97%   1.10%
MACR     JAN    30.00   30.35   27.73    0.35   6.71%   1.15%
NOI      JAN    35.00   35.25   35.96   (0.71)  0.00%   0.00%
TASR     JAN    25.00   25.75   19.64    0.75  23.22%   2.91%
SINA     JAN    30.00   30.50   30.00    0.50  15.11%   1.64%
X        JAN    50.00   50.30   50.45   (0.15)  0.00%   0.00%
RIGL     JAN    40.00   40.35   21.77    0.35  12.22%   0.87%
ASKJ     FEB    30.00   30.60   30.04    0.56   7.27%   1.96%

Ask Jeeves (NASDAQ:ASKJ) quickly became an exit candidate when
the issue rallied Wednesday afternoon despite a lack of public
news.  National Oilwell (NYSE:NOI) and U.S. Steel (NYSE:X) were
also closed in the wake of unexpected bullish activity.  Select
Comfort (NASDAQ:SCSS) and Celgene (NASDAQ:CELG) have previously
been closed to limit potential losses.

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

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

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

WARNING: THE RISK IN SELLING UNCOVERED OPTIONS IS SUBSTANTIAL!

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

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

NEW NAKED-PUT CANDIDATES

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

GERN   9.17   FEB  7.50  GQD-NU 0.40  532  7.10  32   5.4%  15.9%
FXEN   15.98  FEB 12.50  IWQ-NV 0.30  285 12.20  32   2.3%   8.2%
BCSI   21.69  FEB 17.50  IYU-NW 0.40  145 17.10  32   2.2%   7.8%
CREAF  16.89  FEB 15.00  RFQ-NC 0.40  273 14.60  32   2.6%   7.2%
MYGN   25.88  FEB 22.50  GSQ-NX 0.45  160 22.05  32   1.9%   5.8%
MAY    32.31  FEB 30.00  MAY-NF 0.50   50 29.50  32   1.6%   4.3%
TRMB   32.82  FEB 30.00  TUH-NF 0.40   47 29.60  32   1.3%   3.6%

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.
_________________________________________________________________

GERN - Geron  $9.17  *** Speculation Only! ***

Geron (NASDAQ:GERN) is a biopharmaceutical company focused on
developing and commercializing therapeutic and diagnostic
products for cancer.  The company's products are based on its
telomerase technology and cell-based therapeutics using its
human embryonic stem cell technology.  Geron is working to
create anti-cancer therapies based on telomerase inhibitors,
telomerase therapeutic vaccines and, through its collaborators,
telomerase-based oncolytic (cancer-killing) viruses.  It also
intends to continue the development and commercialization of
its products using telomerase as a marker for cancer diagnosis,
prognosis, patient monitoring and screening.

GERN - Geron  $9.17

FEB  7.50 GQD-NU LB=0.40 OI=532 CB=7.10 DE=32 TY=5.4% MY=15.9%


_________________________________________________________________

FXEN - FX Energy  $15.98  *** Rally Mode! ***

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

FXEN - FX Energy  $15.98

FEB 12.50 IWQ-NV LB=0.30 OI=285 CB=12.20 DE=32 TY=2.3% MY=8.2%


_________________________________________________________________

BCSI - Blue Coat Systems  $21.69  *** Bottom-Fishing Only! ***

Blue Coat Systems (NASDAQ:BCSI) designs, develops, markets
and supports proxy appliances.  Based on Blue Coat SGOS, a
custom, object-based operating system with integrated caching,
these proxy appliances leverage existing authentication
systems to enable flexible policy enforcement down to the
individual user.  The Blue Coat ProxySG appliances combine
proxy support of most Web protocols with integrated uniform
resource locator (URL) filtering, content security, Web-virus
scanning, instant messaging control, peer-to-peer control and
streaming control.

BCSI - Blue Coat Systems  $21.69

FEB 17.50 IYU-NW LB=0.40 OI=145 CB=17.10 DE=32 TY=2.2% MY=7.8%


_________________________________________________________________

CREAF - Creative Technology  $16.89  *** Multi-Year High! ***

Creative Technology (NASDAQ:CREAF) is a provider of personal
digital entertainment products and products for personal
computers.  Its products include digital media players and
other products used in a wide array of solutions for PC
entertainment, education, music, Internet applications and
services, and productivity tools markets.  Creative's product
line includes a wide array of PDE products, such as the MuVo
and Zen line of portable digital media players, DC-CAM/PC-CAM
and Webcam digital cameras, and PC upgrades, such as Sound
Blaster audio cards, multi-channel speakers and a mix of other
products, including three-dimensional graphics cards, modems,
software, musical instruments, computer mice and keyboards.

CREAF - Creative Technology  $16.89

FEB 15.00 RFQ-NC LB=0.40 OI=273 CB=14.60 DE=32 TY=2.6% MY=7.2%


_________________________________________________________________

MYGN - Myriad Genetics 25.88  *** "Hot" Drug Stock! ***

Myriad Genetics (NASDAQ:MYGN) is a biopharmaceutical company
focused on the development of novel therapeutic products and
the development and marketing of predictive medicine products.
The company's researchers have made important discoveries in
the fields of cancer, Alzheimer's disease, viral diseases (such
as HIV), depression and obesity.  Myriad is conducting a human
clinical trial for the evaluation of Flurizan for the treatment
of Alzheimer's disease.

MYGN - Myriad Genetics  $25.88

FEB 22.50 GSQ-NX LB=0.45 OI=160 CB=22.05 DE=32 TY=1.9% MY=5.8%


_________________________________________________________________

MAY - May Department Stores  $32.31  *** CEO Down - Stock Up! ***

May Department Stores (NYSE:MAY operates six department stores
divisions in the United States.  The department store divisions
are Lord & Taylor; Filene's and Kaufmann's; Robinsons-May and
Meier & Frank; Foley's, and Famous-Barr, L.S. Ayres and The
Jones Store; and Hecht's and Strawbridge's.  May National Bank
of Ohio, an indirect subsidiary, extends credit to customers
of May's six department store divisions.  May Merchandising
Company, an indirect subsidiary, works closely with its six
department store divisions and merchandise vendors to identify
emerging fashion trends and to develop merchandise assortments.

MAY - May Department Stores  $32.31

FEB 30.00 MAY-NF LB=0.50 OI=50 CB=29.50 DE=32 TY=1.6% MY=4.3%


_________________________________________________________________

TRMB - Trimble Navigation  $32.82  *** Target An Entry Point! ***

Trimble Navigation (NASDAQ:TRMB) provides positioning product
solutions to commercial and government users in a large number
of markets.  These markets include surveying, construction,
agriculture, urban and resource management, transportation
and telecommunications.  The company is organized into four
segments encompassing its various applications and product
lines: Engineering and Construction, Field Solutions, Component
Technologies and Mobile Solutions.  Trimble also operates in
other business areas such as military and inertial integration
technologies.

TRMB - Trimble Navigation  $32.82

FEB 30.00 TUH-NF LB=0.40 OI=47 CB=29.60 DE=32 TY=1.3% MY=3.6% TS



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

BEARISH PLAYS - NAKED CALLS

Based on analysis of option pricing and the underlying stock's
technical background, these positions meet our fundamental
criteria for bearish "premium-selling" strategies.  Each issue
has robust option premiums, a well-defined resistance area and
a high probability of remaining below the target strike prices.
As with any recommendations, these positions should be carefully
evaluated for portfolio suitability and reviewed with regard to
your strategic approach and personal trading style.

WARNING: THE RISK IN SELLING UNCOVERED OPTIONS IS SUBSTANTIAL!

The sale of uncovered calls entails considerable financial risk,
far more than the initial margin or collateral required to open
the position.  The maximum financial obligation for the sale of a
naked option is the strike price (of the underlying stock) that
is sold.  Although this obligation is reduced by the premium from
the sale of the option, a writer of options must have the cash or
collateral equivalent of the sold strike price in reserve at all
times.  The simple fact is: stocks often experience large price
swings, exponentially increasing the margin maintenance and very
possibly causing a devastating shortfall in your portfolio.  It
is also important that you consider using trading stops on naked
option positions to help limit losses when a stock price moves in
a volatile manner.  Many professional traders suggest closing the
position when the underlying share value moves beyond the sold
strike, or using a "buy-to-close" stop order at a price that is
no more than twice the original premium received from the sold
option.

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

GP - Georgia-Pacific  $33.99  *** Mediocre Profit Outlook! ***

Georgia-Pacific (NYSE:GP) has been engaged in the manufacture
of four principal products: tissue products, including bath
tissue, paper towels and napkins, and disposable tabletop
products, including cups, plates, cutlery and containers;
containerboard and packaging, bleached pulp and paper, and
the manufacture and distribution of building products such
as plywood, oriented strand board, various industrial wood
products and softwood and hardwood lumber, as well as some
non-wood products, including gypsum board, chemicals and
other products.

GP - Georgia-Pacific  $33.99

PLAY (sell naked call):

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

SELL CALL  FEB 35    GP-BG     176    0.75  35.75   5.3%   2.1%


_________________________________________________________________

MBT - Mobile TeleSystems  $33.42  *** Consolidation Underway ***

Mobile TeleSystems (NYSE:MBT) is a provider of mobile cellular
communications services in the Russian Federation and Ukraine,
employing technology based primarily on Global System for Mobile
Communications.  In addition to standard voice services, the
company offers its subscribers value-added services, including
voice mail, short message service, general packet radio service,
various other information and entertainment services (including
multimedia messaging service), and data and fax transmission.
It also offers its subscribers the ability to roam automatically
throughout Europe and in much of the rest of the world.

MBT - Mobile TeleSystems  $33.42

PLAY (sell naked call):

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

SELL CALL  FEB 36.25 MBT-BR    316    0.60  36.85   5.1%   1.6%


_________________________________________________________________

TTWO - Take-Two Int. Software  $33.84  *** ERTS Wins Again! ***

Take-Two Interactive Software (NASDAQ:TTWO) is an integrated
developer, marketer, distributor and publisher of interactive
entertainment software games and accessories for the personal
computer, PlayStation, PlayStation2, Nintendo Game Boy Color,
Nintendo GameCube, Nintendo Game Boy Advance and the Xbox.  The
company publishes and develops products through various wholly
owned subsidiaries including Rockstar Games, Rockstar Studios,
Gathering of Developers, TalonSoft, Joytech, PopTop, Global Star
and under the Take-Two brand name.  The company maintains sales
and marketing offices in Cincinnati, New York, Toronto, London,
Paris, Munich, Vienna, Copenhagen, Milan, Sydney and Auckland.

TTWO - Take-Two Int. Software  $33.84

PLAY (sell naked call):

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

SELL CALL  FEB 35    TUO-BG    2056   0.90  35.90   6.4%   2.5%



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

SEE DISCLAIMER - SECTION 1

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

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Option Investor Inc is neither a registered Investment Advisor nor a Broker/Dealer. Readers are advised that all information is issued solely for informational purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy, nor is it to be construed as a recommendation to buy, hold or sell (short or otherwise) any security. All opinions, analyses and information included herein are based on sources believed to be reliable and written in good faith, but no representation or warranty of any kind, expressed or implied, is made including but not limited to any representation or warranty concerning accuracy, completeness, correctness, timeliness or appropriateness. In addition, we do not necessarily update such opinions, analysis or information. Owners, employees and writers may have long or short positions in the securities that are discussed.

Readers are urged to consult with their own independent financial advisors with respect to any investment. All information contained in this report and website should be independently verified.

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Option Investor Inc
PO Box 630350
Littleton, CO 80163

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