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[Weekend Summary]

Dear Member,

One of my favorite trades is a credit spread where the stock moves in the desired direction fairly quickly and I have the chance to close the short leg at a price that makes the whole trade profitable. That takes away the risk and leaves me with a position that I own for "free." This past week presented two such opportunities! I had initially sold the June 35 Puts on Apple Computer (AAPL) and bought the June 32.50 Puts for a net credit before commissions of $0.70 a share. On Monday, I was able to buy back (or buy to close) the June 35 Puts for only 25 cents. In other words, I gave back 25 cents of the 70 cents I took in initially. That meant the overall trade made a profit of 45 cents a share and there was no longer any risk if the stock dropped. In fact, if the stock dropped, I would only make more money. Better yet, I still owned the June 32.50 Puts at no cost!!! Later in the week, it looked like AAPL was going to go up some more so I sold the remaining 32.50 Puts and brought in another nickel a share. Overall, before commissions, these trades returned 27.7% on the initial risk in only 24 days.

A similar scenario played out in the 3 M (MMM) spread. Originally, on May 16th, I sold the Jun 75 Puts and bought the Jun 70 Puts for a net credit of 95 cents a share before commissions. Only SEVEN DAYS LATER, I was able to close the short leg (the 75 Puts I had sold) for $0.40. I gave back 40 cents of the original 95 cent credit, but that means there was no way the trade could lose AND I got to keep a 55 cent profit. Before commissions, that worked out to a be a 13.5% return on the initial risk in only a week. Better yet, I still own the Jun 70 Puts. If the stock goes up, I still have made the 55 cent profit; if the stock goes down, the value of the 70 Puts (that I now own at no cost) goes up and I can add to the profit!!! Those are the kind of trades I love. A captured profit and still own a position that can make even more money at no cost except commissions.

Micron (MU) made a nice 5% gain this week helping my '07 $10 LEAPS calls. It did stop at a resistance and there is a Japanese Candlestick indication that it may turn down. If it does, that will provide the opportunity to sell some calls, bring in some income against the position and reduce risk.

I did sell the Jun 121 calls against my Dec '07 115 and 120 LEAPS calls on SPY for 45 cents a share. SPY is at a resistance and if it turns down, I'll keep the 45 cents. If it breaks up through resistance, I'll want to buy back the Jun 121 calls so I don't get called out of my LEAPS. Generally, when that happens, I lose a bit on buying back the shorter term calls, but that is more than offset by the upward move in the LEAPS. A similar situation exists with my Yahoo (YHOO) position. There I own the '07 35 LEAPS calls and sold the Jun 37.50 calls for 45 cents. Selling the shorter term calls brings in income and reduces risk, but since I do not want to be called out of the LEAPS position, I will watch to see if I need to buy back the Jun 37.50's.

Nextel (NXTL) broke the downtrend line this week and that is a positive for the Aug 30 calls.

EBAY had a strong week and broke through a resistance. I'll be watching as it approaches another resistance around 38.60. I own the '07 40 LEAPS calls.

AMD is hovering just above 16 so I am not doing anything with my condor position except waiting and watching. So far, it is fine. A move up may require an adjustment.

The one position of greatest concern is my Jun 12.50 calls on Nanometrics (NANO). NANO is right at a support/resistance line. If it doesn't break up, I'll probably have to bit the bullet, close the position and take a loss.

Siebel Systems (SEBL) is in the middle of a trading range and there is nothing that I see to do at the moment. Same for Briggs & Stratton (BGG) where I am naked the Jul 40 Puts. BGG could be put to me, but as long as there is any time value in the puts, that is unlikely. If it is, I'll just start selling calls against the position.

The Memorial Day weekend traditionally marks the time of the trading year when many of the big players begin summer in the Hamptons. Volume is usually thinner and that makes for more volatility. Increased volatility can provide some very nice trading opportunities so I don't mind the so-called summer doldrums.

Not only did the market treat me pretty well this past week, but also, life delivered a marvelous thrill in the form of my first grandchild!!!!

Have a super holiday.


Bill

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