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Author: Mike Celeste Editor: Tony Ponzo October Circulation: 13247

STAT SHEET WEEK ENDING Oct. 22, 2005

**************** Percent / Points
Dow Weekly Change - 0.7 % -(72)
S&P Weekly Change - 0.6 % -( 7)
Nas Weekly Change +0.8 % +18
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Highlight of this past week
SBUX nears Sell Date showing a stirring gain of 143% on the call options!

In this Issue---
SplitMaster Basic System---
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It was a rather uneventful week in the Basic System. There was a winner and a small loser (9 cents) that closed out this week. The sad part of it is that both stocks were up considerably higher during the split run, but ran out of gas in trying to compete with the aggressive selling pressure put on the general market. SBUX continues to shine, though, and is our Highlight Stock of the Week. It closes out soon and we don't want to jinx it, so enough said. There are 4 active plays going, with a new addition making the list next week. We did manage to add one more play for October to the list, and we're looking for more shortly after the earning's announcement rush is over.

Big Dipper System---
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There are 2 stocks active in the Big Dipper and both are at a profit at this point--RYN and ZNT are 3 for 2 splitters that qualified for the Big Dipper list and are more than 1/2 way thru their period of listing. GPN and DNR are two others that are on the list, but haven't hit our target buy price yet.

Options---
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SBUX, as shown above, is our Highlight of the Week. Of course, we aren't done, but we are approaching Sell Date and currently showing a profit of 143% on the call, with the written put also showing an excellent gain at this time. We added 4 new plays on Friday, so the list continues to grow. The written put on CHRWD closed out with a 100% profit, expiring worthless and raising that category to another new high in percentage return-- +472% for the year-to-date. Too good to be true? No, sir, and it is all spelled out on the web site - SplitMaster.com. Click on Past Results for the full listing of each and every option that has closed out. The surprising thing to me is that the puts are returning a greater profit than the calls (with no cash out of pocket, just margin) and yet few are playing this category. It's not glamorous, but it sure is returning $'s. Also, it is not a fluke, in our opinion, as it has done the same thing in years past. There are three things in a traders favor in this play: 1. The put is entered in on a stock split in the SplitMaster strategy. That means the stock most likely is going up making the writing of the put a winner. 2. Time premium in an option always dwindles, so when you sell the put, that time premium dwindle works in your favor. You want the price of the put to go down so you can buy it back much cheaper. 3. Even if the stock goes down, as long as the price of the stock is still above the strike, it will win and in fact, it would have to go down below the strike by the amount you received for selling the put before it would be a loss. So you see, the put strategy increases your odds of winning. Of course, like all option plays, there are certain risks and traders should be aware of the risks before entering such a play and have an exit strategy.

S+P 500 Options---
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Finally !!! We received the signal we were looking for and jumped into writing the Index puts on 2 strike prices. This is the system that has never lost and it felt good to see us back into it. That is not to say it will never lose, as no one correctly predicts the future, but needless to say, we are confident. Those that have followed this system know that we are actually very conservative in our approach to this system. I feel that we are riding on the backs of institutional hedging and that provides us with an opportunity to join in. In addition, we have the new program chugging along at full steam in this area. We had said earlier that on 9/16 we had an S+P 500 sell signal at 1237. This reversed a buy signal from June--and went back to the first indicator in Dec. 2004. It has been correct again, with the change coming while the SP was at 1180 at the open on Friday. That means it was a 57 point winner. Now we will see if 1180 can win to the upside in the coming days.

The Quest---
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I'm really getting antsy to get another play going here. With November coming up very soon, and believing that we are going into a period of gain, as history has suggested, I want to be in during these next month's when the Nas has done 10 times better than the rest of the year. We could all use some sunny days, I'm sure.

Chart Indicator---
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The Indicator is still in a negative position, but it has improved this past week, even tho Nas was down a bit. Our break line between Negative and Positive edges lower as we go along, so if we can get some up days strung out here, it can happen.

Stock Split Comments---
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If history repeats itself, November will start an up move in the Nas. When the SP 500 signal is combined with improving results in the Indicator, I am very encouraged. We have had a good year thus far, and don't see any reason to doubt the future. If those doggone hurricanes will dry up and stay away, maybe we can get on with an improving market. An improving market will bring more stock splits, and I'd bet a lot on that statement. The naysayers can whine all they want about stock splits not being a positive, all in themselves, but any follower of SplitMaster knows different. Companies that announce stock splits are doing well for the most part--there are exceptions to every rule, of course. History is on our side, folks, and I defy anyone to prove it isn't, when it comes to splits. I think we analyze stock splits more thoroughly than anyone in the financial business. The results back us up, too.

New Option Testing---
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Another positive. We were getting down on our new option system, as it had turned against us, but we kept persevering and believe we knocked out the bug that was infesting our results. Again, to be thorough, we are continuing to test with the new criteria, but it does look very, very promising. I will say this, though, it is based on being conservative with the options. The dollar amounts on the profit side might not seem spectacular but decent--and in its own way---is spectacular to me. The play brings consistency in gains and drastically reduces the chance of losing, so we'll take the somewhat limited upside. Here is what we are thinking about the upside. As we gain more confidence, and I believe strongly that we will, we can increase the number of contracts to increase our dollar profits. Again, a bit too early to make it official, but this play has the possibilities of being a nice steady winner. We are excited! Definitely more to come on this one.

Tip of the Week---
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If you are into options, remember to check the month past the month you are most interested in. More than once I have seen the next month's prices on the strike price I like at practically no difference from the month before. It's always better when it doesn't cost much to pick up an extra month's time.(Especially for those that don't sell on the Sell Date posted on Splitmaster---come on, I know you are out there.)

The Economy---
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Inflation poked its head a bit higher this past week, with the reports that many companies are passing on their higher costs to consumers. We expected that this was going to happen, and we lay the blame, by far, on soaring energy prices. The oil inventory report showed another increase and oil prices dropped some more. The inventory remains well ahead of last year at this time, yet gasoline prices, even tho dropping some (reluctantly, I say) are still 69 cents above this time last year. Demand for gasoline, this week compared to last year's week, is down, too. Earnings continue to be mixed, and the great example of that is seen when looking at Friday's stock market results. The Dow was down 66 points, while Nas was up 14 points. That was credited to the difference in earnings from Caterpillar and Google, old line vs. new tech. The mix is again seen in looking at the stock market action this week. No major indicator was down or up over 1%, but on a daily basis we saw the Dow up 129 ( a record for that date, 10/19), but down 133 the next day. Nas was up 34 and down 23 the next day (multiply the Nas by 5 to get the Dow comparison). These volatile days leave the investor confused, to say the least. Of course, the "experts" had an answer for these moves----always for the results of the day before. After the markets closed they can tell you why the market moved up so much on Wed., and after the market closed on Thurs., they can tell you why it went down. Does anyone ever question them about why it can change so quickly---in one day? We like to study historical results, and I believe that is why we have been so successful in our programs. Year after year after year, when looking at the beginning of the year to the end of the year, stock splits, on a net basis, have made profits after setting a small set of criteria---AND--looking at the periods of time before and after the splits. We lay the reason for this directly on the fact that the very large majority of stock splits come from companies that are doing well.

Today's Thought---
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Remember: Today is a gift. That is why it's called the present............Thanks, Marilyn


Mike

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