Option Investor

Daily Newsletter, Saturday, 06/03/2006

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Table of Contents

  1. Market Wrap
  2. New Option Plays
  3. In Play Updates and Reviews
  4. Trader's Corner

Market Wrap

Bad News, No Bull

The Nonfarm Payroll report contained a dose of bad news with a headline number that was less than half what analysts had expected. When the April number came in at -37% below consensus on May 5th we had a blowout short covering rally that powered the Dow for +230 points before the FOMC meeting burst the balloon a couple days later. If a -37% miss was good for the bad news bulls then a -56% miss should have been even better. Evidently something has changed in the bullish mindset and changed for the worse.

Dow Chart - Daily

Nasdaq Chart - Daily

The payroll report showed that only 75,000 jobs were created in May and far less than the consensus estimate of 173,000. To make maters worse they revised down the reports for the prior two months by -39,000. Including the revision this report showed net creation impact of only +36,000 jobs. This is the lowest level of job creation since Oct-2005. Despite the low job creation rate the unemployment rate sank to 4.6% and a level not seen since Dec-2004.

Job Creation Table

On the surface it would appear the economy is slowing faster than expected. It takes a minimum of 150,000 new jobs per month to absorb all the new workers that enter the workplace each month. New nonfarm payroll additions barely maintained that level from December to March and has declined sharply over the last two months.

On the surface you would have expected this report to be Fed friendly and market positive because it slammed the door on any June rate hike. The Fed funds futures were showing an 80% chance of a June hike on Thursday night and that plummeted to only 44% by Friday's close. You may have also noticed that the markets struggled all day and only barely managed to hold near the flat line at the close. It was hardly a show of bullish enthusiasm for a pause in the rate hike cycle.


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Obviously there were some extenuating circumstances. The unexpected drop in consumer confidence/sentiment, slowing retail sales, imploding housing market, rising inflation and now a sharply declining job market suddenly became a strong dose of reality. Everyone has been talking about a slowing economy in the second half but up until now there was no real evidence. The second half slowdown has suddenly leaped forward into Q2 with GDP estimates falling to something in the +2.0% to +2.5% range or only half the 5.3% rate we saw in Q1.

Now the fear is not that the Fed will raise rates again but that they may have already gone too far. With the economy plunging back to earth like a spent booster rocket there is substantial fear that the post Katrina rebound only provided an artificial economic bounce for an economy that was already slowing. Now that the bounce is over there are rising fears of a hard landing. Remember, we have at least 9-12 months of further impact from rate hikes already in the system.

Over the last two years investors have been conditioned to buy bad news as Fed friendly but there was another piece of the jobs picture that helped spoil the party. The Household Jobs Survey, which is the self employment jobs and non payroll jobs, jumped +288,000 for May. There should have been cheering in the streets but this survey is not widely reported. For those paying attention it caused them to question the new expectations for the Fed to pause. Payroll jobs creation is shrinking but entrepreneurs are springing up under every roof. This is very positive since many will grow and begin adding employees very quickly. On the surface it appeared the Fed would be forced to pause but there was just enough confusion added to the slower economic signals to cause investors to scratch their heads rather than click their mouse.

Factory Orders for April were also released on Friday and fell -1.8% compared to a gain of +4.0% in March. It was the weakest number in three months. This was actually a smaller drop than the -2.3% analysts had expected but still a drop. The durable goods component fell -4.4% while non-durable goods rose slightly at +1.2%. We saw similar evidence of economic slowing in the ISM drop to 54.4 from 57.3 on Thursday. This is even more confirmation that the economy is slowing more quickly than anticipated and evidence suggesting the Fed should pause in June.

Pulte Home added to the economic gloom and doom on Friday when it warned that orders had fallen -29% in April and May. Pulte operates in 27 states and reported that orders fell from 9,128 units to 6,447 units. Toll Brothers (TOL) also reported a -29% drop in orders for the quarter and Hovnanian (HOV) reported a -19% drop. Pulte said buyer demand had been weak and cancellation rates for the two-month period jumped to 27.4% from 14.8%. While this information makes sensational headlines it is important to realize the context. 2005 was the best year ever for new homes. One analyst said on Friday that despite the drops 2006 could still be the second best year ever. Yes, all things really are relative.

Meanwhile the National Association of Realtors pending home sales index fell -3.7% in April following a decline of -1.3% in March. The April number is -11.7% below last years levels. This index is captured from signed contracts and leads the existing home sales index by about two months. This suggests June existing home sales will be down sharply. Should the Fed actually take a pass at the June meeting it would stimulate a new buy cycle.

Chicago Fed President Michael Moskow was quick to down play the payroll report and the sudden switch by analysts to a pause in June. He said, "We look at dozens and dozens of indicators and take them all into consideration, you can't take one report and say the result will be no hike." His hawkish comments earlier in the week on CNBC had roiled the market and Friday's comments helped to confuse the issue again. Moskow played his energy card again saying the full impact of high energy prices had not filtered through the economy and that impact could push inflation higher over the next several months. He is an inflation hawk and never misses a sound bite to lobby for a 1.5% inflation target. The current inflation rate is 2.1%.

The FOMC minutes on Wednesday had already confused traders with the revelation that the Fed discussed everything from a pass to a +50 point hike at the May meeting. It does not build up confidence in the markets bias for a pause knowing that the Fed even discussed a +50 point hike. The FOMC members were openly dismayed that inflation had risen more than expected. Most had expected it to remain tame or ease. The market does not like it when the Fed is confused and the committee admitted it was uncertain bout "how much, if any, further tightening was needed."

The bond groupies needed no help in making their decision. Bonds were bought heavily pushing the yield on the ten-year note down to 4.994% from Thursday's high of 5.143%. In bond terms this is an extremely large move and one that has bearing on the June Fed decision. The close at 4.9% puts the yield under the current 5.0% Fed funds rate. If this yield remains under 5.0% it would make it very hard for the Fed to raise rates at the June meeting. By raising rates they would be inverting the yield curve even further and that would produce additional economic worry. The Fed box is getting tighter and the heat is rising.

Global market volatility has been extreme over the last three weeks and many have wondered about the underlying cause. On the front page of Friday's Financial Times a headline read, "ECB Warns of Hedge Fund Threat to Stability." The comments from ECB VP Lucas Papademos suggested that hedge funds operating from highly leveraged positions were a risk to global financial security. The dumping of positions in May across several continents could have been the initial stages of an asset shift in response to a global liquidity drain. This liquidity crunch may have started a risk repricing cycle that was long overdue. Large hedge funds borrow at the lowest possible rate and use the funds to leverage their positions. All works well as long as those positions are rising and the borrowing rate remains the same. Once loan rates begin to rise or commodity prices begin to fall the damage can be quick and deadly. He theorized a continuation of the May dumping could trigger an even steeper decline as funds were forced to sell to remain liquid. What we saw over the last two weeks could have been the beginning of a global margin call with commodity investments as collateral.

If Moskow was concerned about energy prices producing inflation early Friday morning he must be in a panic this weekend. Oil prices soared to $72.80 in after hours trading after gaining +2.36 during the regular session. Geopolitical problems were cropping up everywhere and Iran was at the top of the list. In case you had not heard Iran refused to even consider halting its enrichment program and took several verbal shots at the U.S. and UN council for even suggesting such an impossibility. Did anybody even remotely believe that Iran would rush to shutdown its program so it could sit across the table from the great satan and discuss politics? If you did suffer from that delusion have yourself committed at once. As I wrote to the LEAPS Trader subscribers Wednesday night there was no chance in hell of that proposal being accepted. It was pure propaganda and very well played by Condi Rice. The U.S. gave Iran a seat at the world table but that seat was an electric chair for all the good it would do them. It would be the equivalent of putting out an open invitation for Osama to speak at the UN on human rights. It would be suicide for him to show up just like it would be political suicide for Iran's president to suddenly close up his nuclear shop after preaching its benefits almost daily for the last six months. He would lose what little credibility he has and could find himself out of office and his appendages cut off very quickly.

The quick and adamant refusal to even consider the terms of the proposal helped fuel speculation that the door was closing on a peaceful conclusion to the problem. The US warned Iran that their available time to make a decision was only weeks not months. Oil prices shot up on fears that any escalation of the situation could bring about some use of oil as a political weapon. Whether Iran played the oil card in response to sanctions or started mining the Strait of Hormuz the results would be the same. $100 oil would result in a matter of days. Also pushing prices higher was news of eight foreigners kidnapped from an offshore rig in Nigeria. 500,000 bpd is already offline in Nigeria and rebels are continuing their assault. This came just days after Nigeria said production of the 500,000 bpd would resume over the next several weeks. It appears that date will be delayed again. There were also additional refinery problems with Valero cutting gasoline production -50,000 bpd and distillates -20,000 bpd as a result of a fire earlier in the week. Valero had thought the problem would be resolved quickly but it appears it could take an additional ten days or more. Corpus Christi harbor was closed to shipping traffic after a lightning related oil spill at the Valero refinery dock. Lightning also hit Valero's Delaware City refinery causing several units to go offline. These units are expected back up shortly. The Flint Hills refinery and a Citgo refinery also suffered some outages due to mechanical problems and power outages. Dropping power to a refinery kills production for several days because all the processes have to be restarted. The refining process is continuous. Kill one process and everything stops. Each must then be restarted in the proper sequence before production can be resumed.

The OPEC meeting ended with no production cuts but some very angry OPEC ministers. Hugo Chavez went out of his way to make numerous political speeches, some criticizing the other OPEC members, and calling them slaves to western greed and consumption. OPEC goes out of its way to remain politically neutral and a friend to all. They are the shopkeepers for the oil market and angry buyers don't make good customers. OPEC just wants to sell oil and collect the money where Chavez just wants to put the screws to the US. I doubt OPEC will be meeting in Venezuela again in my lifetime.

Crude Oil Chart - Daily

The oil inventory levels on Thursday showed a smaller than expected build in gasoline in the EIA report and a -1.1 mb drop in the API report. Crude rose about +1.6 mb in both reports. The smaller than expected build in gasoline put the levels at -2.7% lower than this time last year. Gasoline demand over the last week spiked ahead of the holiday buying to near the levels seen last year when gasoline was 70 cents cheaper. Those warnings of demand destruction due to price appear to be fading. The inventory levels and demand numbers reported next Wednesday will be critical. If demand remains as high as I expect it should continue to provide support for crude as we enter hurricane season. A quick check of www.nhc.noaa.gov shows storms have not yet begun to form but we are only four days into the season. The NHC is predicting 13-16 named storms with 4-6 major hurricanes. In 2005 a record 28 named storms including 15 hurricanes were reported.

Gasoline Demand Table

I am sure you have heard all the descriptors for the monthly results for May but I will repeat some here. It was the worst May in six years for the Dow and Nasdaq. It was the worst May for the S&P-500 in the last 22 years. You have to go back to 1984 for a worse performance. The good news is that May is over. The bad news is the economy is crashing and the summer doldrums are just ahead. I have to admit my bearish bias is growing but the contrarian result would be a major rally ahead to embarrass me in public. It is no secret I am not bullish and so far the markets are doing about what I expected. The S&P is still wandering in its expected range between 1250-1295. If anything I would have to say there are some bullish signs returning to the NYSE Composite and maybe the Russell. Those positive internals and minor gains could be just the influx of month end cash so we will look forward to next week for additional directional signs. At this point I don't want to have a bias. I need to be neutral. This is the point on the calendar where sudden false summer rallies can breakout BUT the negative economic climate could be an anchor that prevents it this year.

The key for me is still the S&P as the indicator of market strength. On Tuesday night I suggested buying any further dips to 1250-1255 for a trading bounce. We did not quite get to 1255 with only a 1259 low on Wednesday morning. That was close enough for me to reverse to longs in anticipation of a month end bounce. We got the bounce and a nice run back to the 1290 range where we stalled on Friday. 1275 was a potential failure point but after holding just over that level for four hours on Thursday a closing buy program gave us enough lift to cause shorts to cover. Friday's action saw only a +2 point gain after a decent two-attempt failure at 1290 at the open. After struggling all day the index returned to try again at the close. I believe we are poised to make another attempt on Monday, possibly to even stronger resistance at 1295. I would short any failure in the 1290-1295 range.

SPX Chart - Daily

Now, here is where it gets fun. If by chance the bad news bulls return, emboldened by some analysis they read in the weekend paper, we could see a breakout attempt towards 1300. I would be a BUYER on any beak over 1300. This could setup a flood of short covering and produce a bear-b-que. I would be extremely surprised if this occurs but that is the fun part. The bears would be more surprised than me and that could produce a race to higher ground. This is the reason I want to maintain a neutral bias for next week. We are approaching strong resistance but there was just enough positive signs on Thr/Fri to suggest the bulls are trying to sneak into the greener pastures under cover of bad economic news. Fortunately there are no major economic reports next week. The calendar is sparse and those reports scheduled are mostly filler. There is a heavy calendar of Fedspeak next week so be prepared to endure countless mind numbing dissections of every phrase.

The reports we should be worried about next week are earnings warnings. While it is still a little early in the cycle we are approaching the initial window for Q2 warnings. Since most of the stock news recently has not been especially positive I am expecting a strong warning cycle for Q2. Summer warnings are never fun since news is thin and volume thinner. A couple stinkers and we can get some acceleration to the downside pretty quickly.

Friday Market Internals

A quick recap of the major indexes shows the Dow stalled under strong resistance at 11275 after two tests two days apart. A break over 11275 targets 11425-11450 but I would not hold my breath. It would be a nice trade but a better setup for the next summer decline. Current support is 11200 followed by 11100. The Nasdaq closed right on strong resistance at 2220 but has just enough bullish tilt to make me think we could see another leg up to 2250. Tech stocks seem to have found favor with summer investors and we saw a slow but steady rise back to 2220 beginning at noon on Friday. Initial support is 2200 followed by 2165.

The Russell screeched to a dead stop at strong resistance at 742 Friday morning and it could not repeat the attempt the rest of the day. I was trading the Russell futures and it was crazy. There were spurts of large volume but it was equally split on both sides of the market. It turned out to be chop city and a day I should have been fishing instead of trading. I did notice several times that the Russell was weaker than the S&P and that suggests fund managers were not throwing month end cash at small caps. This should not surprise anyone since blue chips are considered safe havens in times of economic distress whereas small caps are considered a minefield.

NYSE Composite Chart - Daily

The most bullish index was the NYSE Composite, which moved slightly above prior resistance at 8285 to close over 8300. This was probably due to the influence of the energy sector, which is well represented in the NYSE. I ran charts on a couple hundred energy stocks with oil exploding and it appears quite a few are completing a saucer bottom and have risen right to resistance with many signaling an impending breakout. With the potential for oil to hit $75 soon as Iran heats up we could see another sprint higher for some of these beaten up stocks. The global margin call or spring correction, whatever you want to call it, saw profits being extracted from many of these positions. Pain at the pump would have been highly preferable to the pain at the broker many of us were experiencing. It may be buying time again for this group.

The transports also posted some gains and broke over resistance at 4735 despite oil at $72.75. If the transports have come back into favor the Dow may not be far behind. I nibbled at CSX again and noticed BNI, CNW, R, LSTR and NSC were leading the sector.

Dow Transport Chart - Daily

SOX Chart - Weekly

The least bullish of the indexes was the SOX with only a minor +15 point rebound off the correction lows. After a -75 point drop a +15 point rebound is positively anemic. I was surprised to see AMD on the verge of collapse at $30. After beating the gigahertz out of Intel in the server chip market I was surprised to see their gains evaporate. I saw some speed comparisons between AMD and Intel chips last week and I was shocked to see such an imbalance in AMD's favor. After a -$5 drop (-14%) in only 10 days it appears their 15 min of fame has faded.

Okay, a quick refresher. There will be a test on Monday from 9:30 to 4:PM. Short a SPX failure in the 1290-1295 range but be ready to go long on any breakout over 1300. Check the oil service sector and oil drillers for potential breakouts from saucer bottoms if oil prices continue to rise. After a +$2.80 gain in oil on Friday I would normally expect some profit taking so be ready to buy a dip if it appears. Support is $70. The ISM Services Index is the lone economic report due on Monday at 10:AM with an expected drop to 60 from 63. Be prepared for endless economic chatter and a new round of sound bites on Iran. Try to keep your market bias neutral and follow the trend regardless of direction.

New Plays

New Option Plays

Call Options Plays
Put Options Plays
Strangle Options Plays

New Calls

Play Editor's note: We are adding a lot of plays to the newsletter this weekend. Most of them are bullish. Yet if you read the wrap you'll see that Jim has a bearish bias. We understand his bias and tend to agree with him. This market rebound could be nothing more than an oversold bounce on the way down. However, most of the candidates we found were bullish. We can only play what we see not what we believe. The market is always right and right now it's moving higher. It is crucial that you monitor your stop losses to minimize risk should the market reverse course lower again. You may want to play with a stop tighter than our own suggested stops.


Carpenter Tech - CRS - close: 121.40 chg: +3.58 stop: 114.45

Company Description:
Carpenter Technology, based in Wyomissing, PA, produces and distributes specialty alloys, including stainless steels, titanium alloys and superalloys, and various engineered products. (source: company press release or website)

Why We Like It:
The high-flying iron and steel stocks are trying to bounce. Some of them are struggling, like NUE (a current put play), while others like CRS are breaking out. CRS looks like a tempting bullish candidate given the positive turnaround in the technical oscillators, the breakout from its sideways trading range, and the new Point & Figure chart buy signal. Friday's move over $120.00 produced a new triple-top breakout buy signal with a $142 target on the P&F chart. We are going to suggest calls on CRS with the stock over $120 but you may want to wait and watch to see if shares consolidate any of last week's gains. The $115 level looks like potential support. A 10% stop loss would be under recent support at $110 but we're going to try and reduce our risk with a stop at $114.45. The next level of resistance is the $125.00 mark but we're going to aim for the $129.00-130.00 range. Please note that this would qualify as a high-risk, aggressive play given the stock's volatility.

Suggested Options:
We are suggesting the July calls. We do not want to hold over the late July earnings report.

BUY CALL JUL 115.00 CRS-GC open interest=153 current ask $13.70
BUY CALL JUL 120.00 CRS-GD open interest= 37 current ask $10.90
BUY CALL JUL 125.00 CRS-GE open interest= 18 current ask $ 8.40
BUY CALL JUL 130.00 CRS-GF open interest= 60 current ask $ 6.40

Picked on June 04 at $121.40
Change since picked: + 0.00
Earnings Date 07/24/06 (unconfirmed)
Average Daily Volume = 540 thousand


CSX Corp. - CSX - close: 68.60 chg: +1.56 stop: 65.90

Company Description:
CSX Corporation, based in Jacksonville, Fla., is one of the leading transportation companies, providing rail, intermodal and rail-to-truck transload services. The Company's transportation network spans 21,000 miles with service to 23 eastern states and the District of Columbia, and connects to more than 70 ocean, river and lake ports. (source: company press release or website)

Why We Like It:
The Dow Jones Transportation index has rebounded back above technical resistance at its 50-dma in spite of the strength in crude oil futures. This strength in the transport sector is evident in shares of CSX, a railroad stock, that added 2.3% on Friday to breakout from its two-week consolidation. Volume o Friday's rally in CSX was above average and its MACD indicator is nearing a new buy signal. We are suggesting call options as long as the stock is above $68.00-67.50 range. More conservative traders might want to wait for a move over $70.00, which could be potential resistance. Our target is the $74.00-74.50 range, near the May highs.

Suggested Options:
We are suggesting the July calls.

BUY CALL JUL 65.00 CSX-GM open interest=244 current ask $5.30
BUY CALL JUL 70.00 CSX-GN open interest=143 current ask $2.25

Picked on June 04 at $ 68.60
Change since picked: + 0.00
Earnings Date 07/27/06 (unconfirmed)
Average Daily Volume = 2.1 million


Deere Co - DE - close: 87.75 change: +1.44 stop: 84.45

Company Description:
Deere & Company is the world's leading manufacturer of agricultural and forestry equipment; a major manufacturer of construction equipment; and a leading supplier of equipment used in lawn, grounds and turf care. The company was founded in 1837. John Deere agriculture, construction and forestry equipment is distributed through a network of more than 1800 independent dealers worldwide. (source: company press release or website)

Why We Like It:
Shares of DE have rebounded back into their rising channel. The stock's technicals have turned positive again and its MACD indicator is nearing a new buy signal. Plus the P&F chart has reversed into a new buy signal with a $101 target. We are suggesting calls at current levels. If you're a nimble trader then consider looking for a dip back toward $86.50-86.00 as a potential entry point. If you're more conservative then you may want to wait for a move over $88 to confirm the bounce. We are suggesting that readers sell half their positions at $91.90, since the $92.00 level was resistance in May, and then sell the remainder of their positions at $94.75.

Suggested Options:
We are suggesting the July calls.

BUY CALL JUL 85.00 DE-GQ open interest= 804 current ask $4.90
BUY CALL JUL 90.00 DE-GR open interest=3078 current ask $2.20

Picked on June 04 at $ 87.75
Change since picked: + 0.00
Earnings Date 08/15/06 (unconfirmed)
Average Daily Volume = 2.1 million


Play Editor's note: We have been and remain long-term bullish on the oil sector. More importantly we've grown short-term bullish on oil stocks. The rising tensions with Iran, the violence in Nigeria against the oil workers and structures there and the upcoming summer driving season have all helped push crude oil back above $72.00 a barrel. The technicals on crude oil has turned bullish too after a four-week consolidation. Meanwhile many of the oil stocks, that were punished hard in the month of May, are rebounding strongly. We are not suggesting that readers buy positions in each oil stock profiled this weekend. Find the one or two that you like best or consider something like the IXC ishares.


Hydril - HYDL - close: 77.65 change: +1.15 stop: 71.75

Company Description:
Hydril, headquartered in Houston, Texas, is engaged worldwide in engineering, manufacturing and marketing premium connections and pressure control products used for oil and gas drilling and production. (source: company press release or website)

Why We Like It:
HYDL has a history of bouncing near its rising 200-dma, which can also be seen as a bounce from the bottom of its long-term rising channel on its weekly chart. Shares are bouncing from this technical support again and the MACD indicator has produced a new buy signal. You'll probably notice that we have a relatively wide stop loss because HYDL has been so volatile lately. We'd like to use a tighter stop but HYDL needs room to move. We are targeting a rally into the $84.50-85.00 range. If HYDL can trade over $78.00 it will produce a new triple-top breakout buy signal. FYI: More aggressive traders may want to aim higher ($89-90).

Suggested Options:
We are suggesting the July calls. Currently there is nothing available above $80 for Julys.

BUY CALL JUL 75.00 HBQ-GO open interest= 29 current ask $6.50
BUY CALL JUL 80.00 HBQ-GP open interest= 51 current ask $4.00

Picked on June 04 at $ 77.65
Change since picked: + 0.00
Earnings Date 07/24/06 (unconfirmed)
Average Daily Volume = 328 thousand


Kerr Mcgee - KMG - close: 110.86 chg: +3.56 stop: 104.85

Company Description:
Kerr-McGee is an Oklahoma City-based oil and natural gas exploration and production company focused in the U.S. onshore, deepwater Gulf of Mexico and select proven world-class hydrocarbon basins. (source: company press release or website)

Why We Like It:
KMG is another oil stock that has broken out from its recent consolidation. The stock wasn't hit as hard as many of its peers
and its P&F chart did not produce any bearish signals during the May sell-off. Now that the oil sector is bouncing KMG is on the move. The stock has broken out over resistance near $108 and $110 in the last couple of days. Readers should note that KMG is due to split 2-for-1 on June 15th. Our target is the $119.00-120 range (or $59.50-60.00 post-split). More conservative traders may want to lock in some profits near $115.00, which was resistance in May. You don't have to chase KMG right here. Odds are decent that shares will see a pull back toward $110 and maybe $108.

Suggested Options:
We are suggesting the July calls. Confirm your option symbols. There are some odds symbols available with a KMO root. We are suggesting the KMG root series.

BUY CALL JUL 105.00 KMG-GA open interest= 583 current ask $ 8.90
BUY CALL JUL 110.00 KMG-GB open interest=1221 current ask $ 5.70
BUY CALL JUL 115.00 KMG-GC open interest= 387 current ask $ 3.40

Picked on June 04 at $110.86
Change since picked: + 0.00
Earnings Date 07/26/06 (unconfirmed)
Average Daily Volume = 1.6 million


Marathon Oil - MRO - close: 78.39 chg: +1.58 stop: 72.95

Company Description:
Marathon is the fourth-largest U.S.-based fully integrated international energy company engaged in exploration and production; integrated gas; and refining, marketing and transportation operations. The Company has exploration and production activities in the United States, the United Kingdom, Angola, Canada, Equatorial Guinea, Gabon, Ireland, Libya and Norway. Marathon also is developing integrated gas projects that are linking stranded natural gas resources with key demand areas where domestic production is declining and demand is growing, particularly in North America. Marathon is the fifth largest refiner in the U.S. The Company's retail marketing system comprises approximately 5,500 locations in 17 states. (source: company press release or website)

Why We Like It:
MRO is offering a new entry point to buy calls. The stock consolidated from $86 to almost $70 in a six-week descending channel. Now it looks like the consolidation is over. The MACD has produced a new buy signal and the P&F chart has produced a new buy signal that points to an $88.00 target. Friday's move, while not on strong volume, was a breakout over short-term resistance at $78.00. We are suggesting calls with MRO above $78.00. If you want more confirmation then consider waiting for a move over the 50-dma (78.81) or the $80.00 level. If you prefer to buy a dip then look for a pull back toward the $77-76 region. Our target is the $85.00-86.00 range.

Suggested Options:
We are suggesting the July calls.

BUY CALL JUL 75.00 MRO-GO open interest=2187 current ask $6.10
BUY CALL JUL 80.00 MRO-GP open interest=6706 current ask $3.30
BUY CALL JUL 85.00 MRO-GQ open interest=3286 current ask $1.50

Picked on June 04 at $ 78.39
Change since picked: + 0.00
Earnings Date 07/27/06 (unconfirmed)
Average Daily Volume = 3.1 million


Transocean Inc. - RIG - close: 83.15 chg: +1.90 stop: 77.99

Company Description:
Transocean Inc. is the world's largest offshore drilling contractor with a fleet of 88 mobile offshore drilling units. The company's mobile offshore drilling fleet, consisting of a large number of high-specification deepwater and harsh environment drilling units, is considered one of the most modern and versatile in the world due to its emphasis on technically demanding segments of the offshore drilling business. The company's fleet consists of 33 High-Specification Floaters (semisubmersibles and drillships), 21 Other Floaters, 25 Jackups and other assets utilized in the support of offshore drilling activities worldwide. (source: company press release or website)

Why We Like It:
RIG is rebounding from its May sell-off. The stock has a short-term bullish pattern of higher lows and a breakout over minor resistance near $82.00-82.50 and its 50-dma (82.84). The MACD has a new buy signal and the P&F chart is bullish with a $98 target. We are suggesting calls with RIG above $80.00. You can choose to initiate positions now or look for a dip. Our target is the $89.00-90.00 range.

Suggested Options:
We are suggesting the July and August calls. We do not want to hold over the August earnings report.

BUY CALL JUL 80.00 RIG-GP open interest=5885 current ask $6.20
BUY CALL JUL 85.00 RIG-GQ open interest=3721 current ask $3.60
BUY CALL JUL 90.00 RIG-GR open interest=1819 current ask $1.90

BUY CALL AUG 80.00 RIG-HP open interest=6474 current ask $7.70
BUY CALL AUG 85.00 RIG-HQ open interest=13557 current ask $5.20
BUY CALL AUG 90.00 RIG-HR open interest=7165 current ask $3.30

Picked on June 04 at $ 83.15
Change since picked: + 0.00
Earnings Date 08/03/06 (unconfirmed)
Average Daily Volume = 5.7 million


Valero Energy - VLO - close: 63.05 chg: +1.55 stop: 59.85

Company Description:
Valero Energy Corporation is a Fortune 500 company based in San Antonio, with approximately 22,000 employees and annual revenue of more than $80 billion. The company owns and operates 18 refineries throughout the United States, Canada and the Caribbean with a combined throughput capacity of approximately 3.3 million barrels per day, making it the largest refiner in North America. Valero is also one of the nation's largest retail operators with approximately 5,000 retail and branded wholesale outlets in the United States, Canada and the Caribbean under various brand names including Valero, Diamond Shamrock, Shamrock, Ultramar, and Beacon. (source: company press release or website)

Why We Like It:
News of a refinery shutdown did nothing to stop the rebound in shares of VLO. The stock has spent the last six weeks consolidating lower in a descending channel but Friday's 2.5% gain was a breakout over the top of the channel and resistance near $62.00 and resistance at its 50-dma. The move helped confirm a fresh MACD buy signal from Thursday. We are suggesting bullish positions with VLO above $60.00. We'd like to see the $62 level act as new support but a dip toward $60.00 (more likely 61.50) can be used as a new entry point. Our target is the $69.50-70.00 range.

Suggested Options:
We are suggesting the July calls.

BUY CALL JUL 60.00 VLO-GL open interest=4741 current ask $5.50
BUY CALL JUL 62.50 VLO-GZ open interest=4052 current ask $3.90
BUY CALL JUL 65.00 VLO-GM open interest=3942 current ask $2.70
BUY CALL JUL 67.50 VLO-GR open interest=1268 current ask $1.80

Picked on June 04 at $ 63.05
Change since picked: + 0.00
Earnings Date 07/25/06 (unconfirmed)
Average Daily Volume = 9.8 million

New Puts

Digital River - DRIV - close: 43.56 chg: -1.45 stop: 45.55

Company Description:
Digital River, Inc., a global leader in e-commerce outsourcing, builds and manages online businesses for more than 40,000 software publishers, manufacturers, distributors and online retailers. Its multi-channel e-commerce solution, which supports both direct and indirect sales, is designed to help companies of all sizes maximize online revenues as well as reduce the costs and risks of running an e-commerce operation. The company's comprehensive platform offers site development and hosting, order management, fraud prevention, export controls, tax management, physical and digital product fulfillment, multi-lingual customer service, advanced reporting and strategic marketing services. (source: company press release or website)

Why We Like It:
After an amazing five-month rally the bulls have finally run out of steam in DRIV. Shares have been struggling to breakout over resistance near $48.00 for about five weeks. Now the stock is breaking down. The recent weakness has produced a triple-bottom breakdown sell signal on its P&F chart with a $38 target. Friday's session produced a failed rally/bearish engulfing candlestick pattern. We are suggesting puts with DRIV under $45.00. We're going to suggest two targets. Consider selling half your position at $40.20 and then sell the remainder at $37.65. We are concerned that the $37.50 region might be support with its slowly rising 200-dma. FYI: if you're a technical trader the 38.2% Fibonacci retracement of DRIV's rally would be about $38.65.

Suggested Options:
We are suggesting the July puts.

BUY PUT JUL 45.00 DQI-SI open interest=326 current ask $3.50
BUY PUT JUL 40.00 DQI-SH open interest=426 current ask $1.35

Picked on June 04 at $ 43.56
Change since picked: + 0.00
Earnings Date 07/27/06 (unconfirmed)
Average Daily Volume = 983 thousand


Intl. Bus. Mach. - IBM - cls: 79.52 chg: -1.17 stop: 81.05

Company Description:
IBM is one of the largest information technology companies in the world with three major divisions: systems and financing, software, and information services.

Why We Like It:
IBM is struggling to rebound with the rest of the tech sector. In the middle of May IBM broke down from a neutral pattern of lower highs and higher lows. Now shares are poised to breakdown from its recent two-week sideways consolidation above support at $79.00. Giving the stock a gentle push lower was an analyst downgrade on Friday. The recent weakness looks like a failed rally on its P&F chart, which points to a $73 target. If you study the weekly chart it looks like IBM may have produced a bearish head-and-shoulders pattern. We are going to suggest a trigger to buy puts at $78.75 (under support at $79.00). If triggered then we'll target a decline into the $73.50-73.00 range.

Suggested Options:
If we are triggered at $78.75 we are suggesting the July puts. We do not want to hold over the mid July earnings report.

BUY PUT JUL 80.00 IBM-SP open interest=22905 current ask $2.35
BUY PUT JUL 75.00 IBM-SO open interest=13280 current ask $0.80

Picked on June xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 07/18/06 (unconfirmed)
Average Daily Volume = 5.2 million

New Strangles

None today.

Play Updates

In Play Updates and Reviews

Call Updates

Peabody Energy - BTU - close: 64.93 chg: +0.17 stop: 59.85

We are suggesting that bulls turn defensive here with BTU. Shares traded to $65.98 on Friday morning before giving back most of its gains. Our target is the $66.00-67.00 range. While the MACD indicator on its daily chart has essentially produced a new buy signal the more short-term oscillators are suggesting that BTU is overbought and due for a pull back. Traders may want to seriously consider exiting here to protect their profits. Otherwise we face a potential dip to $62.50 or worse. We're not suggesting new plays at this time. FYI: The P&F chart points to a $90.00 target.

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

Picked on May 28 at $ 61.00
Change since picked: + 3.93
Earnings Date 07/18/06 (unconfirmed)
Average Daily Volume = 4.0 million


Cummins Inc - CMI - close: 112.10 chg: -0.59 stop: 106.99

CMI experienced a little bit of consolidation on Friday but traders bought the dip near $110. The late day rebound probably helped the MACD finally produce a new buy signal. We don't have a lot of new comments for CMI. The trend is still upward albeit at a moderate pace. The Point & Figure chart is bullish with a $146 target. We would still buy calls with CMI above $110. The only change we would consider is that more conservative traders might want to raise their stop toward $108 or $109. Our target is the $116.00-117.00 range. FYI: for the chart readers out there we do note that CMI could be building the right shoulder to a bearish H&S pattern but it's somewhat hard to read right now.

Suggested Options:
We are suggesting the July calls.

BUY CALL JUL 110.00 CMI-GU open interest=216 current ask $6.70
BUY CALL JUL 115.00 CMI-GC open interest= 59 current ask $4.10

Picked on May 31 at $110.21
Change since picked: + 1.89
Earnings Date 07/28/06 (unconfirmed)
Average Daily Volume = 1.0 million


Halliburton - HAL - close: 76.78 chg: +1.63 stop: 69.99 *new*

Oil stocks were strong on Friday. The markets are uneasy over the defiant comments coming out of Iran in the ongoing drama regarding Iran's nuclear ambitions. Plus, new violence at a Nigerian oil structure added more cause for alarm. This helped push crude oil futures over $72 a barrel. The chart pattern for crude looks pretty bullish and we wouldn't be surprised to see it hit $75 a barrel soon as we approach the summer driving season. Meanwhile shares of HAL continued to rally with a 2.1% gain and the fresh MACD buy signal. Currently our target is the $80-82 range. We're going to adjust that to $79.50-80.00 because we see potential resistance on the P&F chart. More aggressive traders may want to aim for $82 considering the bullish moves in crude oil. We are going to adjust our stop loss to $69.99. Things to be aware of with HAL: the stock is due to split 2-for-1 on July 17th and the company has a two-day analyst meeting that begins on June 7th.

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

Picked on May 25 at $ 73.80
Change since picked: + 2.98
Earnings Date 07/20/06 (unconfirmed)
Average Daily Volume = 7.1 million


Holly Corp. - HOC - close: 44.10 chg: +1.57 stop: 39.95 *new*

HOC is another oil-stock winner given the rise in crude oil on Friday. Shares added 3.7% to breakout over potential resistance near $42.50 and close at a new all-time high. Shares split 2-for-1 on Friday so our post-split target is the $44.50-45.00 range. We're adjusting our stop loss to $39.95. We remain bullish on oil stocks so our plan is to exit at our target and then look for a pull back to consider new bullish positions again. The Point & Figure chart currently points to a $59 target. More aggressive traders may just want to let HOC run as far as it can but you'll need to follow it with a tighter stop loss to protect your gains.

Suggested Options:
HOC is nearing our target. We are not suggesting new bullish positions at this time.

Picked on May 25 at $ 40.60 *split adjusted
Change since picked: + 3.50
Earnings Date 08/07/06 (unconfirmed)
Average Daily Volume = 475 thousand


iShares Global Energy - IXC - cls: 106.35 chg: +1.56 stop: 99.49

The IXC ishares added 1.48% and closed over potential resistance at $105.00 and its simple 50-dma. Yet the ETF has not yet cleared resistance at its gap down from May 15th. Even though the MACD has produced a new buy signal we'd hesitate to open new call positions right here unless you tighten your stop loss. Our target is the $110.00-112.00 range. We are bullish on the oil sector and more aggressive traders may want to aim higher.

Suggested Options:
We are not suggesting new call positions on the IXC at this time although a move over $108 would be a breakout over the next level of significant resistance and we'd aim for the $112 region.

Picked on May 25 at $103.67
Change since picked: + 2.68
Earnings Date 00/00/00 (unconfirmed)
Average Daily Volume = 47 thousand


Omnicom - OMC - close: 96.06 chg: -0.58 stop: 91.75

OMC pulled back on Friday but the consolidation was mild and shares traded sideways all session. The stock continues to show a lot of relative strength but OMC is short-term overbought and near our target so we're not suggesting new positions. Our target is the $97.50-98.00 range. More conservative traders may want to exit now to lock in a profit. Should OMC pull back we'd look for a dip to the 10-dma (93.75) or the 93.00 region. The P&F chart points to a $125.00 target.

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

Picked on May 15 at $ 92.05
Change since picked: + 4.01
Earnings Date 07/25/06 (unconfirmed)
Average Daily Volume = 1.1 million


Priceline.com - PCLN - close: 32.22 chg: +0.22 stop: 29.85 *new*

PCLN is still creeping higher and the stock looks bullish given the breakout over $30.00 but we're worried about a breakdown in the INX Internet index. Currently the INX index appears to be consolidating sideways in a trend of lower highs and higher lows (pennant). The INX's MACD is suggesting the next move will be higher. That would be supportive for PCLN. We are not going to suggest new bullish positions in PCLN at the moment although another bounce in the $30-31 range could be used as a new entry point. Our target is the $34.50 level but we're thinking about adjusting it lower toward $33.50. More conservative traders may want to consider the earlier exit (33.50). The Point & Figure chart points to a $53 target. Please note we are raising the stop loss to $29.85.

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

Picked on May 25 at $ 30.67
Change since picked: + 1.55
Earnings Date 08/02/06 (unconfirmed)
Average Daily Volume = 432 thousand


Terex Corp. - TEX - close: 93.85 chg: +0.78 stop: 88.99

TEX posted another gain on Friday adding 0.8% and setting a new three-week high. The MACD indicator has produced a new buy signal. We would be careful here about initiating new plays. The stock is nearing what could be resistance at the $95.00 level. We'd watch for a dip and bounce near the $91.75-92.50 region as the next entry point to buy calls. Our target is the $99.50-100.00 range. More aggressive traders may want to target the highs near $103. The Point & Figure chart points to a $113.00 target.

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

Picked on June 1 at $ 92.65
Change since picked: + 1.20
Earnings Date 08/02/06 (unconfirmed)
Average Daily Volume = 719 thousand


VF Corp. - VFC - close: 64.44 change: -0.28 stop: 61.84

Last week was pretty bullish for VFC. The stock finally broke out over resistance near $63.00 and the stock's MACD indicator has produced a new buy signal. The P&F chart is bullish and currently points to an $84 target. We would consider new positions with VFC above $63.50 but bear in mind that the $65 level might be resistance (the high on Friday was 64.90) and patient traders might get a opportunity to buy a dip back toward $63.00-63.50. Our target is the $68.00-70.00 range.

Suggested Options:
We are suggesting the July calls.

BUY CALL JUL 60.00 VFC-GL open interest= 45 current ask $5.20
BUY CALL JUL 65.00 VFC-GM open interest= 71 current ask $1.90

Picked on June 01 at $ 63.51
Change since picked: + 0.93
Earnings Date 07/25/06 (unconfirmed)
Average Daily Volume = 545 thousand

Put Updates

Apollo Group - APOL - close: 53.62 chg: +1.31 stop: 53.85 *new*

APOL has produced another failed rally at its descending 100-dma. This is the third time in the last six weeks. Technically this would make a low-risk entry point with a stop loss just above the 100-dma and we're going to adjust our stop loss to $53.85, which is about 5-cents above the 100-dma. More conservative traders may want to wait for a move back under $52.00 before considering new bearish positions. Our target is the $47.75-47.50 range. The $50.00 level is APOL's next level of support and we expect another bounce near $50.

Suggested Options:
We are suggesting the July puts but we plan to exit ahead of the late June earnings report.

BUY PUT JUL 55.00 OAQ-SK open interest= 46 current ask $3.60
BUY PUT JUL 50.00 OAQ-SJ open interest=574 current ask $1.25

Picked on May 17 at $ 51.75
Change since picked: + 1.87
Earnings Date 06/20/06 (unconfirmed)
Average Daily Volume = 2.1 million


Franklin Res. - BEN - close: 90.69 chg: +0.04 close: 92.55

The bounce appears to have stalled in the broker-dealer and investment-related stocks in spite of all the positive analyst comments recently. The XBD broker-dealer index's rally on Friday reversed course producing a short-term bearish reversal. Meanwhile shares of BEN, while back above the $90 level, are not seeing much follow through higher. We would wait for another move under $89.50 or even $89.00 before considering new put positions. An alternative entry point would be a failed rally near technical resistance at its 50-dma and 200-dma near 92.00-92.50. Our target is the $85.25-85.00 range, which is a slight adjustment from our initial target.

Suggested Options:
We are not suggesting new put positions at this time. See play for details.

Picked on May 14 at $ 89.30
Change since picked: + 1.39
Earnings Date 07/27/06 (unconfirmed)
Average Daily Volume = 1.1 million


Monster Worldwide - MNST - cls: 47.59 chg: -1.36 stop: 51.05*new*

MNST is showing a lot of relative weakness right now. The stock has failed to bounce with the rest of the market and is instead breaking down under support in the $49-50 region and its 100-dma. Volume on the sell-off has been above average. Volume on Friday's 2.7% decline was more than double the average. We are going to adjust our stop loss to $51.05. Our target remains unchanged at $45.25-45.00. More aggressive traders may want to aim lower. The P&F chart points to a $36 target.

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

Picked on May 31 at $ 48.87
Change since picked: - 1.28
Earnings Date 07/26/06 (unconfirmed)
Average Daily Volume = 1.2 million


Nucor - NUE - close: 53.90 chg: +0.52 stop: 56.05 *new*

We warned readers that NUE has been volatile and the stock continues to jump around even post-stock split. Shares spiked to $55.00 and its 50-dma on Friday morning before paring its gains. This is a high-risk, speculative put play for us and we might get stopped out next week. Several of NUE's peers are starting to look bullish. A sector rally next week will probably push NUE back into the $57-60 region. We're going to tighten our stop loss to $56.05. We're not suggesting new positions at this time.

Suggested Options:
We're not suggesting new put positions in NUE at this time.

Picked on May 31 at $ 52.64 *split adjusted
Change since picked: + 1.26
Earnings Date 07/20/06 (unconfirmed)
Average Daily Volume = 2.8 million


SanDisk - SNDK - close: 55.13 chg: -0.10 stop: 60.26 *new*

SNDK continues to under perform the broader markets but the stock is short-term oversold and trying to bounce from its exponential 200-dma. If SNDK does bounce next week look for the 10-dma to offer immediate resistance near $58.00. Our target remains in the $53.00-52.50 range. We're not suggesting new positions at this time and more conservative traders may just want to lock in some profits right now. Please note that we are adjusting our stop loss to $60.26.

Suggested Options:
We are not suggesting new put positions on SNDK at this time.

Picked on May 23 at $ 58.98
Change since picked: - 3.85
Earnings Date 07/20/06 (unconfirmed)
Average Daily Volume = 11.1 million

Strangle Updates


Dropped Calls

Bear Stearns - BSC - close: 137.28 chg: +1.28 stop: 131.49

Target achieved. Before the opening bell Prudential raised their estimates on BSC and the positive analyst comments helped shares of BSC gap higher this morning. Shares opened at $137.20 and spiked to $138.95. The stock tested overhead resistance near its 50-dma before paring its gains. Our target was the $137.25-138.50 range. We would be very careful if you're still long any call options as BSC is testing its trendline of resistance in addition to its 50-dma. You could also argue that BSC is short-term overbought from its May lows.

Picked on May 31 at $133.75
Change since picked: + 3.53
Earnings Date 06/15/06 (unconfirmed)
Average Daily Volume = 1.3 million

Dropped Puts


Dropped Strangles


Trader's Corner

Preparing for the Unthinkable

Every few days, I do something strange. I practice closing out a position for a loss.

For example, earlier this week, the SOX was moving toward the sold strike on eight contracts of a bull put spread I had purchased just before the April option expiration. I'd taken in $0.50 in credit for each of those contracts. The SOX was still about twenty-five points above my sold strike that day, although it had made a closer approach earlier in the June option expiration cycle.

My broker, brokersXpress, allows me to move to the "Positions" page and then choose from a listing of choices that include "Trade/Roll/Sprd/Chain/Notes." Clicking on "Sprd" (Spread) on either of the two options in my bull put spread pulled up the following page about noon on May 31.

Order Page to Close Out Bull Put Spread

A sidebar to the left of the order form showed the bid and ask for each contract, as well as for the spread, on that date.

Bid/Ask Information

Obviously, the position would be a losing one if I had closed it out on that day, but to estimate how much I really would have lost, I would have had to estimate how much the 430/440 spread would have been worth if the SOX had been nearer 440. With the SOX about twenty-five points above my sold strike at the time, the quote seen above would not have been accurate. With the SOX at 465.30, I decided to pull up an option chain to look at the 455/465 spread. I could better estimate what it might cost to close out a spread with an ATM sold strike.

Option Chain for the SOX

That tells me that the ask to close out my spread would be closer to $4.20 (selling the proxy long 455 strike at the bid and buying the proxy short 465 strike at the ask) than the $1.70 that was currently being shown to close out my actual spread. Notice that the individual 455 and 465 strikes don't have a lot of spread between their bids and asks, either. Those who trade these SOX spreads know that it's not easy to reduce the price you're going to pay, so I'd probably be paying somewhere near that $4.20 to close out the spread, when I'd taken in only $0.50 to open it. Ouch.

I wasn't planning to close the play that day, taking a hefty loss, when the SOX was twenty five points above my sold strike. If I am lucky, the SOX is going to stay above my sold strike until option expiration, and time is going to evaporate premium from that out-of-the-money strike, and I'll keep all the credit that I'd collected when I initiated the spread.

So, why was I going through that practice exercise on May 31?

I go through that exercise every few days because I'm not always going to be so lucky as to have an index or equity hold above my sold strike. There have been times when I've had to close out a play when the sold strike was hit, and times when I've closed one after the sold strike was almost hit and then price temporarily bounced away, because I was fairly sure that price was going to come back and violate my sold strike. It's always a judgment call, but times exist when I might prefer a smaller loss to a possible larger one.

When I do have to exit when a spread is in trouble, and the exit is going to hurt, I want the decision to be almost automatic. More than that, I want the execution of it to be almost automatic. Practicing such exits every few days accomplishes several goals. First, I know I can do it quickly. For someone whose coordination isn't always the best and whose hands are sometimes stiffened by arthritis, physically practicing the play assures me that I can do it quickly. That removes some stress.

More importantly, however, it trains me to do this almost automatically. Each time I go through the exercise, I estimate, as quickly as possible, whether I should place a market order or a limit order, depending on how the market is moving. A limit order almost always is best, but if you've never chased an exit in a thinly traded security when prices are moving fast, you might not know that it's sometimes difficult to get out even if you're placing orders that indicate your willingness to pay the full quoted price. Prices are just moving too quickly. That doesn't usually happen if you're trading an index, but it certainly does on occasion when you've got a spread on a thinly traded equity. (That's why I don't do those any longer, but that's a topic for another article.) In addition to determining whether I'd place a market or limit order, then, I estimate what limit I'd place on that order.

I've found that, since practicing my exits in this way, I'm much calmer when prices approach my sold strikes. I trust myself to do what's needed for sound account management. Of course, this would work just as well if you were planning exits on single options positions, such as a long call or put, but I'm just not doing those these days so am drawing examples from spreads.

My broker requires a separate "Preview Order" selection before the order is placed, so I'm not fearful of inadvertently placing an order, although there have been times when visiting grandchildren have come close to sending a pre-staged order! If your broker allows "one-click" type trading, you obviously can't set this up and practice in the same way I do, but you still can call up an options chain and practice estimating your exit price.

Make it automatic, or as automatic as is possible. Some inevitable day, you'll be glad you did.

Today's Newsletter Notes: Market Wrap by Jim Brown, Trader's Corner by Linda Piazza


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.

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