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[Weekend Summary]

Dear Member,

A modestly profitable week. I bought some Jan '06 $25 Leaps (WMJAE) on Lam Research (LRCX) for $3.80 on Tuesday and sold them on Wednesday for $4.20. A 10.5% RETURN IN A SINGLE DAY -- not too shabby. I entered the trade based on a technical signal (coming off a double bottom) when the options were relatively inexpensive as measured by the percentile of implied volatility.

The HDI straddle is still in place and doing little at the moment which can be typical for straddles. I am awaiting a kick in implied volatility from the currently low levels and/or a strong move in either direction. Unlike the LEAPS trade in the first paragraph, straddles take a little time ordinarily.

I entered another straddle play this morning buying the Jan 32.50 calls (COXAZ) and the Jan 32.50 puts (COXMZ) on Cox Communications for a net debit of $2.80. The options were relatively inexpensive since implied volatility is in the first percentile. There was a high statistical probability of the stock price touching either breakeven during the life of the contract. Cox just had made a large move up and is sitting at a resistance near the 32.50 strike.

The markets showed a change toward bullish this past week. The DOW industrials bounced off a double bottom in the 9825 area. On Thursday's down day, the volume was also down so there wasn't as much support for the bears. The next resistance is 10,200 and then 10,486. I'll be looking at the diamonds (DIA) early next week. The NASDAQ also bounced off support around 1742 (a support dating back to July of 2003). Next resistance is around 1900. I'll be checking out the QQQ's next week as well. SP-500 also looking more bullish. Next resistance approximately 1106.

I like to play markets and sectors because they don't have the same risk as individual equities. An individual equity can soar or tank with large gaps depending upon news. Usually, the whole market is less likely to jump around with big gaps as some individual stocks do. Of course, catastrophic news or market panic can result in large market gaps. For that reason, I usually have some LEAPS puts in position on the QQQ's and sometimes the DIA's to hedge against a big drop in the markets.

I'm teaching a volatility trading seminar this weekend. Straddles, strangles, calendar spreads, ratio backspreads, delta neutral trading -- should be fun.

Hope your trading is going well. I certainly appreciate the kind emails many of you have sent. Good trading, and have a wonderful weekend.

Bill

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