Is it possible to make huge stock profits year after year, regardless of broad market conditions? The WOLF is a daily service for stock and option traders that uses a unique method to find highly accurate short term stock trades, and option trades. In fact, one trader using The WOLF made 6 stock trades in 2001; all 6 trades were profitable despite a challenging year for most stock traders.

The theory behind The WOLF is that "smart money" often leaves clues that can be spotted and acted upon. The WOLF system looks for options with high volume and low open interest. This often can be a sign of URGENT accumulation of a particular option by "knowledgeable" investors.

For example, on December 11th, the VERITAS SOFTWARE (VRTS) January 50 calls traded 8,759 contracts with open interest of just 2,085 contracts. This high ratio of option volume to open interest flashed a WOLF buy signal. WOLF subscribers bought the stock at 43.67 or less and sold at 49 for profits of 12% to as high as 24%. Option traders who bought the calls and averaged down have scored as much as a 94% profit on the trade:

The beauty of The WOLF system is that these signals are "stock-specific". Buy signals can occur in a bear market, and sell signals can take place during a bull market.

While markets were volatile last summer, on July 30th 14,831 contracts of the PHILIP MORRIS September 45 calls traded. The open interest was just 3,718. This high ratio of volume to open interest allowed The WOLF to flash a major BUY SIGNAL to subscribers. Stock traders made a quick 9% to 18%. Option traders made a 50% profit.

When a stock that normally doesn't trade actively in the options market shows heavy option buying, you can assume that something is going to happen. On January 4th, the TELMEX (TMX) Feb 55 calls traded 18,834 contracts, an incredibly high total considering that open interest was just 3,774 contracts. WOLF stock traders bought and sold TMX for quick profits of 12% to as much as 24%. Option traders scored a 100% profit on the calls!

What is open interest? Open interest is the number of option contracts outstanding at a given time and is created when both sides of an options trade are opening a new position. Open interest decreases when both parties of a trade are closing out a position. The higher the open interest, the more option contracts are outstanding and the more liquidity or ease of trading is available in an option. An option with low open interest is not very liquid and is hard to accumulate without running up the price. Therefore, when you see high volume is a low open interest option, it could be someone who is so certain that a stock is going to move in a particular direction, that they don't mind putting the "pedal to the metal"  and loading up on an option even if the liquidity is poor. Those are the situations that The WOLF system finds.

On November 5th, the MERCURY INTERACTIVE (MERQ) January 30 calls traded 32,521 contracts with open interest of just 4,501. This high ratio of volume to open interest is often a tipoff that knowledgeable investors are URGENTLY buying an option. In this case, the "smart money" was making a huge bet that MERQ was going to rise-and they were 100% on target! Stock traders bought MERQ at 28.89 and sold for a quick profit of 12% to 24%. Option traders bought the calls and scored as much as a 100% profit on the trade:

Unlike most systems which throw 20 trades at you and ask you to find the winner, The WOLF system generates just 1 to 2 trades per month. The idea behind using The WOLF to trade stocks is to score a quick profit on a trade and then move on to the next trade. These profits add up over the course of a year to a HUGE annual profit.

You can read more about The WOLF system, past trades and testimonials, and an article I wrote for Barron's option column at The WOLF web site at http://www.thewolf.cc.