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Stock options give investors a great tool to control risks or speculate on stocks. Call options give investors the right to buy the stock and are typically considered a bullish tool, while puts give investors the right to sell the stock and are typically considered a bearish bet on the future price movement of the stocks. I was interested in seeing what equities have the highest open interest or most outstanding options issued on them looking at all strikes and all months (excluding ETFs).

The top six stocks with most options issued are:

Citigroup (NYSE: C) has an open interest of 5,366,521 options, 2,751,255 are calls and 2,615,266 are puts. The stock has been trending down with the rest of the financials for the last year. Speculation now appears equal with about the same number of calls and puts traded.

Bank of America (NYSE: BAC) has an open interest of 5,204,313 options; 2,575,909 are calls and 2,628,404 are puts. Like Citigroup, this stock has seen its price cut in half over the last year.

General Electric (NYSE: GE) has an open interest of 3,877,635 options; 2,138,926 are calls and 1,738,709 are puts. With 23% more calls than puts outstanding, speculators look slightly bullish on GE.

We had the internet bubble and the real estate bubble and now, there is the ethanol bubble. Recently, I ran some numbers on ethanol and to my amazement realized that it is – too use a catch phrase from the environmental world -- not sustainable. Turning food into fuel is just plain silly; and when oil prices come down the ethanol bubble could pop big.

I ran did a little research and found some numbers:

• 47% of the Mexician' diet is corn
• it takes 2.4 pounds of corn a day to feed a hungry person
• it takes 22 pounds of corn to make one gallon of ethanol
• there are 42 gallons of refined gas in one barrel of oil

I ran into an interesting article in Fortune titled "Don't expect another bull market: Stock returns may never be the same -- at least for this generation of investors." The article made a bold prediction:

Barring a miracle -- or the creation of a New Math of the market variety -- there's no way we'll ever see a bull market along the lines of what so many of us grew up with.

This is very interesting from a sentiment viewpoint. A few years ago, at the height of the dot com boom, some claimed that we were creating a new economy in which the stock market could not go down. Then it crashed.

I say, don't buy into these extremes. In the long run, the market will have ups and downs, but will continue a slow long-term uptrend. We may have rough periods of adjustment -- like we are currently seeing in housing -- but that doesn't mean that the fundamentals have changed.

Articles like this can be a good contrarian sign. As writers predict the end of stock market gains, it may be a sign that we have reached the bottom.

Kevin Kersten is an Stock and Options Analyst with InvestorsObserver.com. Disclosure note: Mr. Kersten owns and/or controls a diversified portfolio of long and short positions that may include holdings in companies he writes about.

People are always looking for the perfect investment that is going to be able to beat the market. I have been intrigued recently with the Ultra EFTs. For some investors Ultra ETF's may be the magic bullet to beat the market over the very long term.

ETF's such as SPY, QQQQ and DIA have become very popular tools for investors to mirror the indexes with minimal fees. The QQQQ has a management fee of 0.40% a real bargain compared to some mutual fund fees. The ETFs do not try to beat the market they try to match the market; but for an investor who has other investments it can be a great vehicle.

Recently, I noticed the ultra ETF and I guess they have been around for a couple of years. Ultra ETFs try to exactly double the market performance. If the market goes up 2% their goal is to go up 4%. On the other hand if the market falls 3% their goal is to fall 6%. No matter what the market does; the ultra EFT is suppose to double it.

To say the least, this has been one interesting and turbulent week for the stock market. We saw international markets crash for two days, severe down action, a three-quarter point emergency interest rate cut by the Fed, a $7 billion mistake in France and work on a rebate package in Congress.

It can be a little hard to understand international markets and how they all work. But allow me to use an analogy to explain their interaction.

We all grew up in a family, and one of the most important people in the family is Mom. Mom does a lot of work -- making meals, doing laundry, cleaning the house and even working outside of the house. Families can have very complicated interpersonal dynamics in them. There is a saying that "if Mama ain't happy ... nobody's happy." And I think there is some major truth to it.

But it applies to international markets as well. The U.S. market is the "mama" and the most important player. The $13 trillion U.S. economy is bigger, stronger and more dynamic than each of the other markets, and if it has troubles, other markets have troubles as well.

Last week Bank of America (NYSE: BAC) bought Countrywide Financial (NYSE: CFC). The deal benefits Bank of America in that it gets a big chunk of the US mortgage market and a nice tax write-off, while Countrywide gets saved from a deep mortgage mess and pending liquidity crisis.

What is interesting to options traders though is the option activity that happened in the days before the deal. The deal was widely reported on Friday 1/11/08. But the stock options tell a slightly different story. It appears as if there are some who got wind of this deal a little early.

Call options allow an investor to take on a levered position in the stock and make huge gains if the stock appreciates. In the days before the buyout the call options were extremely active and this is typical of insider trading on the news. If you look at the number of options trading on the day before the announcement and the number that were trading several days earlier, it is very apparent that some traders had wind that something was up. On 1/10/08, the day before the announcement 195,000 January call contracts traded hands. If you compare that to the volume of three days earlier there were only 13,000 January calls traded. That is a 14 fold increase in the daily number of January contracts trading.

Kevin Kersten is an Options Analyst with InvestorsObserver.com. Disclosure note: Mr. Kersten owns and/or controls a diversified portfolio of long and short positions that may include holdings in companies he writes about. Mr Kersten does not own or control BAC or CFC positions at the time of this writing.

Due to the losses on mortgages, Merrill Lynch (NYSE: MER) is expected to take a big hit to earnings this quarter when it reports on Thursday. Analysts estimate the company may lose $4.57 per share, and the stock could face some more rough weather before it gets through all the financial subprime loan turbulence on its books.

Looking back at past earnings, the stock is not headed in a good direction right now. The stock beat estimates for 11 quarters in a row, but that record turned around last quarter when it reported a 45 cent loss and dropped 9% on the earnings release. With Merrill Lynch looking at a $4.57 earnings hit this quarter, things could get worse before they get better.

While the race for Democratic nomination for president seems to be 67% wrapped up with Hillary Clinton getting the nomination, the Republican nomination is far from settled. According to Intrade.com, a betting site where you can bet on the outcome of the elections, Mike Huckabee has been gaining a lot of ground recently.

As a stock analyst, I can recognize a healthy, up-trending chart, and support for Huckabee has taken off in the last two months, from a 3% chance of the Republican nomination to a 12% chance of the nomination.

Over the weekend there was a referendum in Venezuela that would have scrapped constitutional the term limits for president Hugo Chavez. He has been president of Venezuela since 1998 and constitutional term limits will not allow him to run again in for reelection in 2012. The left- leaning Chavez has been following in the steps of Fidel Castro and turning Venezuela into a communist state. He has enacted emergency powers, nationalized oil infrastructure, expelled foreign missionaries and allowed crime to run rampant. In order for him to constitutionally stay in office though he needed to get rid of the presidential term limits. That referendum this weekend failed, which is good news for democracy.

Venezuela is the forth largest oil exporter to America after Canada, Saudi Arabia, and Mexico. About one half of its 2.3 million exported barrels a day come to the US representing about 9% of all US oil imports. Like Iranian President Mahmoud Ahmadinejad, Chavez likes to talk and can move oil prices higher with off handed remarks and his railing against US foreign policies.

The Venezuelan people led by Chavez have headed down the road to socialism and almost a Cuban style dictatorship. While by no means the end of the story, this referendum is a win for democracy and should help the long term stability in the region which is important for US oil prices. Exxon Mobil (NYSE: XOM) and ConocoPhillips (NYSE: COP) have both been had investments in the country in past years.

Kevin Kersten is an Options Analyst with InvestorsObserver.com. Disclosure note: Mr. Kersten owns and or controls a diversified portfolio of long and short positions that may include holdings in companies he writes about.

AutoZone (NYSE: AZO) is scheduled to report earnings before the market opens on Tuesday, December 4, 2007 with analysts estimating it will report $1.91 per share. Last time AZO analysts estimated that AutoZone would report $3.25 and just missed analyst's expectations with earnings of $3.23.

Beating estimates is not a given with AutoZone as it has missed five of the last 12 times is reported. But just because it misses does not mean those stock will go down; most of those misses were small and four of the last five times the stock missed it actually went up after earnings. In fact, the stock has rose 9 of the last 12 times it reported earnings.

It seems that there is a lot of concern over the economy, the credit crunch, the falling US dollar, rising oil prices and unemployment. How much worse can things get? A lot.

The fact of the matter is that unemployment in this country is super fantastic, but if you have been watching the news recently, I doubt you know that fact. Let's look at the unemployment numbers I downloaded from the US Bureau of Labor Statistics.

The market made small gains Thursday, but took time to hold on the huge gains over the previous two trading sessions. Third Quarter Gross Domestic Product was revised higher to 4.9%, up significantly from the 3.9% estimate released earlier. While it will take some time to work through all of the issues related to the credit crunch, 4.9% GDP indicates an economy that is firing on all cylinders and one nowhere near a recession.

The NYSE had volume of 3.5 billion shares with 1,472 shares advancing while 1,779 declined for a loss of 17.48 points to close at 9,773.57. On the NASDAQ, 2.1 billion shares traded, 1,376 advanced and 1,638 declined for a gain of 5.22 to 2,668.13.

Stocks moving Thursday included Sears Holdings (NASDAQ: SHLD), which fell $12.25 (-11%) to $104.09 as earnings fell. CIT Group (NYSE: CIT) lost $2.24 (-9%) to $24.00. Countrywide Financial Corp (NYSE: CFC) rose $0.58 (7%) to $9.30. Smithfield Foods (NYSE: SFD) rose $1.39 (5%) to $29.57 on earnings.

In options there were 4.9 million puts and 5.3 million calls traded for a put/call open interest ratio of 0.92. Sirius Satellite Radio (NASDAQ: SIRI) saw heavy volume on the January 4 calls (QXOAH) with over 48,300 options trading. Sirius Satellite Radio (NASDAQ: SIRI) moved 33,700 of the March 4 calls (QXOCH). E*Trade Financial (NASDAQ: ETFC) saw heavy volume on the January 7.5 calls (EUSAU) with over 36,300 options trading. E*Trade Financial Corp. (NASDAQ: ETFC) also had heavy volume on the December 5 (calls (EUSLA) with over 22,500 options trading. Mirant (NYSE: MIR) saw very heavy volume on the January 40 puts (MIRMH) with over 148,900 options trading; there was also very heavy volume on the Mirant (NYSE: MIR) March 40 puts (MIROH) with over 125,200 options crossed.

Kevin Kersten is an Options Analyst with InvestorsObserver.com. Disclosure note: Mr. Kersten owns and or controls a diversified portfolio of long and short positions that may include holdings in companies he writes about.

The markets moved significantly lower today as the dollar continued its free fall on news that China diversified its foreign currency holdings.

Over the last five years, the U.S. dollar has lost about 32% of its value compared to the euro (see chart below). What does this mean for you? Well, it means that 32% of the rise in the price of oil is due to the weak U.S. dollar. It means if you want to travel internationally, it is going to cost you about 1/3 more than it would have five years ago.

Some companies benefit from a weak U.S. dollar long term. Domestic agriculture like corn has been strong recently, and companies like Deere (NYSE: DE) that support agriculture benefit. Also, foreign tourists will find it more attractive to visit the United States as their euros will convert into more dollars. So Disney (NYSE: DIS) or Harrah's (NYSE: HAS) Las Vegas casinos could benefit. A weak U.S. dollar helps jobs domestically, as any company that is exporting will find its goods cheaper for foreigners to buy. But all foreign goods are going to be more expensive for Americans to buy.

Intel (NASDAQ: INTC) is set to report earnings after the market closes on Wednesday, October 16, 2007. Analysts expect the stock will report earnings per share of $0.30 per share for the Third Quarter of 2007.

Over the last three years the company has met or exceeded analysts' expectations 10 of 12 times. The stock moves an average of 3.4% from the day before earnings to the day after earnings.

Will eBay (NASDAQ: EBAY) swing wildly on earnings? It is a possibility looking back at some of the past moves of this stock. While I can't tell you what will happen, I can tell you what has happened the last time the company has failed to meet expectations ... it plummeted 21%!

Looking back over the last three years, the stock has moved on average of 8.1% on earnings. (That is the close of the day before earnings to the close the day after earnings.) Sometime it was up; sometimes down. In the fourth quarter of '04, the stock reported 16 cents per share against expectations of 18 cents per share and plummeted 21.7%. But don't auction off those shares just yet. In the second quarter of '05 the stock surprised with 22 cents when Wall Street was expecting 18 cents and the stock surged a whopping 19%. More recently, in the fourth quarter of 06, the stock came in with 31 cents, beating 28 cents expectations and gained 13.4%.