NOTES ON Merrill Lynch (MER)
Collar

1) During this viewing period, Merrill trades in an uptrend from
late June 2003 at a price of about $45.00 through January 2004
with a high around $60.00.

2) This is a wide trend with some intra-month ranges as much as
$5.00 and $6.00 wide, indicating a volatile trend.

3) There were a few gap openings early on in the uptrend during
July, but we also want to look at the large intra-day ranges,
displayed by the length of the daily candles.

4) The stock also deviates frequently from the mid-line of the
trend and although it stays within the trading channel nicely,
this still is a volatile trading pattern.

Conclusion: With volatility high, option premiums will probably
be expensive. In Merrills case, the investors should look to
obtain maximum protection, but the protective put would not be
the best choice.

Although the stock is very volatile, the uptrend is not a steep
one. During the observed period of 6 months, the trends mid-line
capital appreciation is only a little more than $6.00, not much
compared to many other stocks during this period. With the high
volatility, the price of a protective put for any length of time
would quickly eat away any profits from the stocks rise.

A collar would allow the investor the protection needed, at a
reasonable and warranted cost, to justify the potential reward
of the capital appreciation.