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Exchange-Traded Profits

November 29, 2006

"If a trader falls into a shark tank, why don't the sharks eat him? Professional courtesy!" -- Jon Najarian

Dear Fellow Options Trader,

One of the most-frequent questions I get is, "How do I double my money?" My answer is they should fold it in half and put it back in their pocket.

I don't just say that for laughs, even though it makes me chuckle. I say it because many people want an easy answer and there is no easy answer to that question. Until now!

With everyone from my pal Jimbo Cramer (from CNBC's "Mad Money" and TheStreet.com) to the shoeshine boy touting exchanges as printing presses for legal tender, it's not surprising that this sector has gone parabolic.

Historical Reference for Exchange IPOs

* The Chicago Mercantile Exchange (CME) came public in late 2003 for $35 a share, but trades for $540 today.
* The Intercontinental Exchange (ICE) issued its initial public offering in November 2005 for $26 per share, but today trades for more than $100 per share.
* The Chicago Board of Trade (BOT) priced its IPO in October 2005 at $54 per share, but now is in the midst of a takeover by the CME for $160 per share.
* The Nymex (NMX) brought itself public just over two weeks ago at an IPO price of $59 and shares traded at $152 that same day! That made it the top performing U.S. IPO since 2000 and made a bunch of my rich trader pals in New York, stupid rich!

So I know what you're probably thinking, and I couldn't blame you one little bit, except I have a way for you to cash in on this very obvious trend! Unlike other market gurus who will blithely suggest that you pay $25 over the IPO price just to get in, I have a surefire way for you to jump on the bandwagon and, yes, double your money overnight!

Here's the dirty little secret:

Buy a seat on the exchange that is about to come public. Yup, that's it. Couldn't be easier, could it? Oh, alright not everyone has $6 million of mad money, but you've heard the phrase, "It takes money to make money," and this is one prime example.

Using the Nymex IPO as an example, we knew there was a company that was owned by the members that was about to convert to public ownership in an initial public offering for $59 per share. But since the Nymex elected to only bring 6.5 million of their 88 million shares to the public, a very strong demand was created, which ultimately drove the opening print up $61 to $120!

Now, unless you had a $20 million account at either Merrill Lynch or JP Morgan, you could forget about getting in at that $59 IPO price, but your pal Doctor J can tell you how you could have got in at that rock-bottom level: Buy a Nymex seat.

You see, every Nymex member got 90,000 shares of stock at the IPO price, or $5.31 million worth of stock, so if you had bought a Nymex seat prior to the IPO, you'd have got shares at $59, which doubled that same day!

OK Doc, what's the catch? The catch is you'd have restricted stock, meaning you could sell a third of your stock in 180 days, another third in 360 days, and a final third in 540 days. But hey, I told you I could double your money overnight, I never said you could cash the check did I?

Good luck trading and remember, pigs get fat but hogs get slaughtered!


Jon "Doctor J" Najarian
Editor
ChangeWave Options Trader