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Sep 3, 2007 - Issue #074



Jones Apparel Group - JNY



Dow score card for the week ending 8/31/07.

DJ-30: 13357.74 -21.13 -0.16%. The Real World DJ-30: 54.77 -0.09 -0.16%.

UP: 10, Down: 20.

Trends (weekly): This is the subjective part.

Rising 6 (+2) 20%:

GM, +*IBM, +*INTC, KO, MMM, UTX.

Consolidating 19 (-2) 63%:

AA, AXP, BA, CAT, DD, GE, HD, HON, HPQ, JPM, MCD, MRK, MSFT, PFE, PG, T, VZ, WMT, XOM.

Declining 5 (n/c) 17%:

AIG, C, DIS, JNJ, MO.

+/- denotes change of direction.

* denotes change of category.

Jones Apparel Group - JNY

Alert: If the guys over at CNBC talk about this one, remember that you read about it here first.

One of the most intriguing looking daily charts I've seen in a long time is that of the Jones Apparel Group - JNY.

Friday 8/31 closing at 19.19, quoted at 19.21-.22 and the Feb 20p at 2.15-.35 presents a low risk buy stock/buy put strategy out to 2/15/08.

Known as a "synthetic call" strategy, adding the cost of the Feb 20 put option (2.35) to the cost of the stock (19.22) works out to a total cost of 21.57 for the position. The maximum risk of 1.57 is, basically, the time value component of the put option.

Anticipating receiving two dividends, currently .14 quarterly, further reduces the risk to 1.29. That's cheap insurance!

Any price movement above the break-even point (20.79) presents the opportunity to sell call options against the position thereby converting the position into what is known as a "collar" favored by professional traders.

Any premiums received above 1.57, the time value of the puts, turns the position into "risk free".

The stock is rising, after having successfully tested the 8/10 pivot point low (16.73), without any "news". That usually means someone knows something that the rest of us don't.

The fundamentals appear to be strong. The stock is one of the S&P 500. The relative strength ranking has been low but appears to be rising.

It just doesn't get much better than this!







Comments? Ideas? Feedback? Let me have it, right between the eyes! I'd love to hear from you. Just reply to this zine and tell me what you think!

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