The Option Investor Newsletter Wednesday 4-12-2000 Copyright 2000, All rights reserved. Redistribution in any form strictly prohibited. Posted online for subscribers at http://www.OptionInvestor.com Also provided as a service to The Online Investor Advantage ****************************************************************** MARKET WRAP (view in courier font for table alignment) ****************************************************************** 4-12-2000 High Low Volume Advance Decline DOW 11125.10 - 162.00 11425.40 11116.80 1,154,738k 1,495 1,453 Nasdaq 3,769.63 - 286.27 4077.92 3769.17 1,920,444k 1,003 3,337 S&P-100 792.90 - 0.38 821.42 792.27 Totals 2,498 4,790 S&P-500 1467.17 - 3.87 1509.10 1466.15 34.3% 65.7% $RUT 493.44 - 16.69 513.02 493.44 $TRAN 2952.63 + 30.82 2979.25 2905.58 VIX 31.88 + 2.93 32.44 29.06 Put/Call Ratio .51 ****************************************************************** It's getting worse The NASDAQ continued its losing ways for the third day in a row. After Wednesday's meltdown, the NASDAQ is officially in bear market territory, 20% off its high set just a month ago. The action was pretty ugly from the get-go Wednesday morning as the index fell to 3850, shedding 200 points in the first two hours of trading. Traders stepped in mid-day to carry the NASDAQ back above 3900, only to see those gains erased as the index plunged through support of 3800 in the last hour of trading. Today was the second largest point drop for the NASDAQ, placing the index below 3800 for the first time since January 6th. The DOW managed to extend its gains from earlier in the week as the divergence between blue chips and the tech sector continued through Wednesday morning. The industrials managed to climb higher throughout the day, reaching an intra-day high of 11,143. The divergence we've come to know ended sharply in the last hour of trading as the DOW sank to 11,125, losing 275 points from its day high. It was a case of traders selling the blue chips to cover any possible margin calls tomorrow induced from the losses in the tech stocks. The DOW was carried lower by four stocks, HWP, IBM, INTC, and MSFT. The four tech components in the DOW accounted for -160 points. Yesterday it was the Motorola meltdown and today it was the Microsoft debacle. Just what the tech sector didn't need was a negative outlook for the personal computer market. The influential Goldman Sachs analyst, Rick Sherlund, warned clients Wednesday of sluggish growth in PC sales from November through February. He cut his revenue estimates for MSFT for the third quarter ending March from $5.9 bln to $5.7 bln which would translate into 2-cents per share in earnings. However, the 2 cent loss in operations may be offset by gains in MSFT's investment gains. Sherlund's comments caused MSFT to gap down by $2 this morning, positioning it just above its 52-week low of $75.50. The negative news for MSFT rippled through the tech sector, sending hardware and software makers running. ORCL lost $4.25 and ADBE shed $7.44 as the CBOE Computer Software Index ($CWX) was lower by 7.9%. The hardware makers also suffered from the Microsoft meltdown, INTC, DELL, IBM, HWP, and SUNW all ended the day the sharply lower. SUNW was especially hard hit Wednesday as some analysts were cautious ahead of their earnings announcement on Thursday. Prudential analyst Steve Milanovich warned clients Wednesday of a shortfall in some of SUNW's products. Last month SUNW and IBM engaged in a server price war in hopes to lure e-commerce companies. In light of the cost cutting plans and the apparent weakness in the PC sector, some analysts feel that SUNW may fall short Thursday. While others feel that SUNW will meet or possibly exceed estimates. The uncertainty surrounding SUNW is not isolated, as many of the leading tech names are hovering around key technical levels. SUNW finished the day lower by 9%, closing at $80. In addition to the Microsoft sell-off, Compuware (CPWR) added to the market's problems with an earnings warning. The company said it expects a profit from operations of 13 to 15 cents per share in the fourth quarter. The revised estimates are well below the First Call estimate of 35 cents per share. CPWR cited revenue weakness from its professional services and products division. Banc of America, Robertson Stephens and J.P. Morgan downgraded CPWR to a market perform from a buy rating. CPWR lost a whopping 40% Wednesday, closing at $11.94. Jim mentioned Tuesday night that he expected selling pressure to continue in part of the upcoming tax deadline. Rumors circulated trading desks again Wednesday that traders were cashing in positions to pay taxes on last year's gains. So many traders made a ton of money in 1999 and are now selling positions to pay their taxes. This presents a problem for any rally as traders try to squeeze out the last dollar before paying the tax man. So where do we go from here? NASDAQ closed today just above its next critical support level of 3750, should the index fall below that level we could see 3650, the bottom hit last week during Terrible Tuesday. What is worrying investors today is the lack of fear in the market. While the VIX continues its ascent towards its 52-week high of 35 (currently 31.88), the CBOE put/ call ratio remains modestly low at 0.49. The low put open interest reflects a lack of fear in the market, possibly pointing to further downside. Unlike the recent debacles in the NASDAQ, today the big name tech stocks were hammered. In the past week we saw the high-flying dot coms stumble, but today we saw the likes of MSFT, CSCO, INTC, and DELL have serious problems. There were a few signs of life today in the broader market. The bank stocks saw heavy buying interest thanks to a positive earnings report from J.P. Morgan. Oil service, utility, and paper stocks were also higher on Wednesday. Remarkably, the market internals for the NYSE remain intact. Advancing issues squeaked past declining issues 1,495 to 1,453. And new highs of 43 far outpaced the new lows of 28 on the Big Board. The internals on the NASDAQ are a mess. Traders continue to find some solace in the old blue chips and avoid the tech sector like the plague. So what's going to turn this market around? The blowout earnings we have been looking for in the semi's came to light Wednesday evening as AMD and ALTR announced stellar earnings. AMD blew away estimates of 0.58 cents, earning a massive $1.15 per share. ALTR posted 0.36 cents per share vs a 0.34 cent estimate. Also of note, ALTR will be added to the S&P 500, replacing Atlantic Richfield. Both AMD and ALTR were higher in after hours trading. The mecca of economic indicators will be released in the coming days. The PPI will be released Thursday morning, Wall Street's consensus estimate is 0.5%, and the CPI will follow on Friday, also expected to be a 0.5% increase. Combined with the blowout numbers from AMD tonight and any positive surprise in either the PPI or CPI the market could rebound substantially. We also have a host of earnings reports tomorrow coming from CREE, FTU, GTW, GM, KLAC, PMCS, and SUNW among others. We'll be watching closely to see if the earnings selling Jim mentioned yesterday will transpire, or if AMD is a sign of things to come, we could see the tech stocks rebound. Eventually the NASDAQ is going to make a stand and rally. If the rebound has any clout, we'll see volume substantially increase along with a significant percentage increase. The leading stocks like CSCO, INTC, and SUNW have lost substantial ground. We'll watch for that group of stocks to bottom and emerge before the rest of the NASDAQ follows. Traders should also keep an eye on the put/call ratio as a sign that bearishness has peaked. The market is going to face several hurdles before finding a bottom and moving higher. The IPO list continues to bring more supply to a market with little demand to meet the new issues. Institutions will eventually stop selling and start accumulating the market leaders. There is also a lot of cash sitting on the sidelines, noting the balance of money markets surpassed $1 trln this month. The bottom line, it's impossible to pick the exact bottom in any market, be patient and let the NASDAQ form a base and look for opportunities in the broader market. I know last night Jim said he was going to buy today's dip, and he did. Fortunately, he was stopped out on the afternoon roll over before any real pain was inflicted. He told me it was painful today, but it was his own fault for not waiting for support on the NASDAQ at 3800. Jim said he is back in cash and ready to take another shot tomorrow morning on the heels of a positive PPI. Jim also said we will probably complete the retest of the recent lows in the morning which could provide a great entry point. But he warned to watch for those falling knives! Trade smart, and sell too soon! Eric K. Utley ***************** STOCK NEWS 1 of 2 ***************** Harley-Davidson Goes Hog Wild By S.P. Brown Due to the recent surge in the Dow Jones Industrial Average (INDU), investor interest in old-economy stocks has grown noticeably over the past month. However, many of these old- economy converts are noticing a definite dearth of growth among these dinosaur issues. If that weren't bad enough, they're also noticing most of these stocks make for poor water-cooler fodder - no one brags about owning Procter & Gamble (PG), DuPont (DD) and General Motors (GM). But not all old-economy stocks are saddled with a fuddy-duddy Grampa Simpson image. In fact, one of the "coolest" companies in the world is an old-economy stock, and that's Harley- Davidson (HDI). For that rare person who has never heard of the company, Harley-Davidson manufactures and sells a broad-line of heavyweight touring and custom motorcycles, ranging in price from $5,350 to $18,500. In addition to motorcycles, the company also sells related products, such as motorcycle parts, accessories, riding apparel and collectibles. Contrary to popular belief, the typical Harley-Davidson buyer isn't some beer-bellied, menacing Hell's Angel-type. Studies by the company indicate that the typical U.S. Harley-Davidson owner is a married male in his mid-forties, with household income of about $73,000, which means there is plenty of money in the kitty for upgrades and extras. Arguably, Harley-Davidson is one of the most recognizable brands in the world. Unarguably, Harley-Davidson commands a mystique that no other company can match. After all, how many companies can boast of a clientele that regularly tattoos itself with the corporate logo? I defy anyone to find one person with the word "Cisco" tattooed across his forearm. More importantly, though, Harley-Davidson has been able to parlay this near slavish customer devotion to outstanding financial performance. Late Tuesday, the company reported first-quarter earnings that easily beat the consensus estimate. For the quarter, net income climbed to $80.2 million, or $0.26 a share, from $59.04 million, or $0.19 a share, in the year-ago period. The First Call consensus estimate was for $0.24. Revenue was also strong for the quarter, rising 21.9 percent to $681.1 million. Of total revenue, $535.3 was attributable directly to motorcycles, which was a 22.6 percent increase from the same quarter in 1999. Furthermore, overall shipments of motorcycles rose 19.1 percent to 49,057, while parts and accessories rose 26.4 percent and general merchandise sales rose 13.7 percent. Such strong growth prompted Jeffrey Bleustein, company chairman and chief executive, to boast in a statement released with the earnings, "During the first quarter, we achieved double-digit growth in each of our product lines and business segments." Also in the release, Bluestein stated the company raised its 2000 production target for motorcycles to 198,500 units, up from its previous target of 196,000, which should help the company's capacity utilization ratio. Last year, Harley- Davidson had to increase production capacity in response to robust demand for its motorcycles. Still, despite the increase in capacity, U.S. consumers often have to wait months to take delivery of their motorcycle. Needless to say, discounting isn't a problem for Harley- Davidson - there isn't any. Looking ahead, analysts expect year 2000 sales to increase at least another 14 percent over 1999 levels. Furthermore, operating margins are expected to widen as sales grow to utilize the new capacity, which should lower the fixed cost portion of cost-of-goods-sold (COGS). The consensus projection is for net income to grow 19 percent to $318 million, or $1.03 a split-adjusted share. However, these figures aren't cut in stone. While Harley- Davidson has its hands full satisfying customer demand, analysts have their hands full trying to estimate the maximum capacity the company's plants can produce each quarter. They usually fall short, as the Harley-Davidson invariably finds ways to outpace its own projections, which is one reason the company often has positive earning surprises. Year-to-date, many high-tech stocks have fallen 50 to 75 percent in value, while Harley-Davidson has risen more than 50 percent in value. Admittedly, part of the pop in the company's stock price was due to it being added to the S&P 500 Index (SPX) in January. Nevertheless, the appreciation is backed by the numbers, which declare Harley-Davidson to be a blue-chip company that regularly generates analyst-beating earnings and double-digit returns on equity. ***************** STOCK NEWS 2 of 2 ***************** Credit Suisse Updates Focus List By Cindy Christ Credit Suisse First Boston released an update of its U.S. Focus list Tuesday, which comprises the investment bank's top stock picks for the next 12 months. Here are the issues that made the cut: Company Ticker Target Price AXA Financial AXF $45 Baker Hughes BHI $40 Best Buy BBY $110 Broadcom Corp. BRCM NA Cisco Systems CSCO $80 Cox Communications COX $60 General Electric GE $180 Home Depot HD $70 Intel INTC $150 Intuit INTU $82 Kansas City Southern KSU $105 Lucent Technologies LU $90 Merck & Co. MRK $90 Microsoft MSFT NA Nokia NOK $225 Nortel Networks NT $150 Progressive PGR $94 RF Micro Devices RFMD $160 Tyco International TYC $65 Union Pacific UNP $55 Viacom VIA.B $70 *************** PLAY OF THE DAY *************** CALL **** WLA - Warner-Lambert Co. $108.13 +0.63 (+4.19) Warner-Lambert has undergone a dramatic business transformation during the last decade, a transformation marked by dynamic sales and profit growth. The introduction of breakthrough health care and consumer products has helped lead the company's rise in prominence. To foster future growth WLA is expanding its role in medical care by developing innovative pharmaceuticals. They also are striving to further bolster their position as a leader in over-the-counter health care products. WLA finds its top competition coming from Bristol-Myers Squibb, Gillette and Merck. After a tough start, through no fault of its own, WLA began the week making a new high in each of the past two sessions. The moves this week have at least given us some breathing room. Whether WLA can continue the momentum seen so far this week remains to be seen. WLA shot up to its high right out of the gate this morning, and traded in a narrow range for the balance of the day. A look at intraday charts shows that WLA continued to make higher lows on each pullback during the session today, which is a definite plus. ABN AMRO said Tuesday it was maintaining its hold rating on merger partner and Viagra manufacturer, Pfizer, after U.S regulators yesterday recommended marketing approval of Uprima, a rival impotence treatment. They believe the competition may continue to heat up in key therapeutical areas in the industry. If profit taking sets in, we would look for the $106 or $104 to bring fresh buyers to the market. WLA is also scheduled to report first-quarter results on April 19th, so we could still have time for a run into earnings. Indications are for a nice increase over last year, with estimates of $0.56 per share. It was a wild day in the market and predicting the next move has become more and more difficult. WLA was up slightly today and represents a safehaven of sorts in a volatile market. Target shoot based on personal risk profiles and look for WLA to move toward its 52-week high which it set today at $109.88. ***April contracts expire in two weeks*** BUY CALL APR-100 WLA-DV OI=4760 at $ 8.75 SL=6.75 BUY CALL APR-105 WLA-DA OI=1041 at $ 4.38 SL=2.75 BUY CALL MAY-105*WLA-EA OI= 470 at $ 7.38 SL=5.75 BUY CALL MAY-110 WLA-EB OI= 480 at $ 4.38 SL=2.75 Picked on Apr 04th at $105.50 PE = 53 Change since picked +2.63 52 week high=$109.88 Analysts Ratings 12-4-8-0-0 52 week low =$ 60.81 Last earnings 01/00 est= 0.52 actual= 0.55 Next earnings 04-19 est= 0.56 versus= 0.45 Average daily volume = 3.73 mln /charts/charts.asp?symbol=WLA ***************************************** BIG CAP COVERED CALLS & NAKED PUT SECTION ***************************************** After two weeks of fighting the trend, we have decided to change the name of this section. (Next Week... BIG CAP NAKED CALLS & COVERED PUT SECTION) Just kidding...but you have to admit, it is difficult to promote a bullish strategy with all of the negative indications. In any case, our past attempts at bearish techniques have always met with little enthusiasm so for now, we will continue to focus on those few conservative positions that have a better-than-average potential for success. In addition, we will also begin to list mid-cap issues and bearish plays when they become available (as the market dictates). Please feel free to submit suggestions on the future direction of this section as our goal is simply to please you, the readers. Summary of Previous Picks: Covered Calls: (Margin would double the listed Monthly Return) Stock Strike Strike Cost Current Profit Monthly Symbol Month Price Basis Price (Loss) Return SUNW APR 80 77.00 80.00 $3.00 7.4% PCLE APR 25 23.47 27.63 $1.54 6.7% Split 2 -1 AMAT APR 95 91.94 97.56 $3.06 6.3% ASYT APR 40 37.18 51.38 $2.82 6.2% CY APR 45 42.93 48.00 $2.07 4.9% PHTN APR 70 66.50 62.50 -$4.00 0.0% AFCI APR 55 49.75 45.25 -$4.50 0.0% AMD MAY 60 55.25 76.00 $4.75 5.9% IMNX MAY 50 46.56 54.94 $3.44 5.1% CSCO MAY 68 62.88 65.00 $2.12 2.3% Positions Closed: SPYG, ISSX, NXTV, PUMA, PHCM, MANU, ZIXI, DITC, YHOO, NEON, TGNT. Naked Puts: Stock Strike Strike Cost Current Profit Monthly Symbol Month Price Basis Price (Loss) Return AMAT APR 85 83.44 97.56 $1.56 12.3% ASYT APR 35 33.38 51.38 $1.63 11.5% SUNW APR 70 68.94 80.00 $1.06 10.7% AFCI APR 45 42.63 45.25 $2.38 10.1% MU APR 85 82.25 110.88 $2.75 8.9% CY APR 40 39.00 48.00 $1.00 8.7% IMNX APR 45 44.44 54.94 $0.56 8.1% IBM APR 110 108.44 113.75 $1.56 8.1% PCLE APR 22 22.03 27.63 $0.47 7.6% Split 2 -1 IMNX APR 51 49.83 54.94 $1.83 7.4% Split 3 - 1 CSCO APR 60 59.44 65.00 $0.56 6.2% AMD APR 50 49.56 76.00 $0.44 5.9% AFCI APR 45 43.81 45.25 $1.19 5.9% MNMD APR 100 99.25 115.13 $0.75 5.2% MANU APR 35 34.44 34.00 -$0.44 0.0% PHTN APR 65 63.94 62.50 -$1.44 0.0% QCOM APR 130 128.37 125.13 -$3.24 0.0% KSU APR 75 73.87 68.38 -$5.49 0.0% ISSX APR 90 86.38 79.50 -$6.87 0.0% NT APR 115 112.62 104.31 -$8.31 0.0% INKT APR 140 136.00 123.00 -$13.00 0.0% Closing YHOO APR 155 150.75 136.19 -$14.56 0.0% Closing NXTV APR 115 110.63 91.00 -$19.62 0.0% Closing Positions Closed: PHCM, SPYG, SFE, ZIXI, MFNX, IBIS, PUMA, TGNT, NEON. NEW PICKS The positions that we find favorable (and will track every week) will be marked by asterisks. Do not enter these trades unless you fully understand the strategy and various methods of manipulating the position should the stock price drop, or rise, and in the event you decide you want to keep the issue. **** AAPL - Apple Computer $109.25 *** The Sky is Falling! *** Apple designs, manufactures and markets personal computers and related personal computing and communicating solutions for sale primarily to education, creative, consumer and business customers. The majority of the company's net sales are derived from the sale of personal computers from its Apple Macintosh line of computers and related software and peripherals. Their subsidiary FileMaker makes database software. The company manages its business on a geographic basis. Geographic segments include the Americas, Europe, Japan and Asia Pacific. Each operating segment provides similar hardware and software products and similar services. Apple Computer has enjoyed a great run since last summer but the end has finally arrived. We had previously expected AAPL to put in one more earnings rally but Monday's technical failure signaled a potential change of character. In today's trading, computer companies dropped after Goldman Sachs cut its earnings estimates for Microsoft, citing slower-than-expected personal computer sales. Apple's quarterly report is due on April 19 and with lower numbers expected for the group, it's unlikely there will be a substantial rally in the issue. Note: Naked Call Recommendation! Action Month & Option Open Closing Cost Monthly Req'd Strike Symbol Interest Price Basis Return Sell Call APR 140 QAA DH 1888 0.94 140.94 13.0% *** Sell Call APR 135 QAA DG 2445 1.19 136.19 17.4% Sell Call APR 130 QAA DF 3356 1.81 131.81 25.8% Chart = /charts/charts.asp?symbol=AAPL **** AMAT - Applied Materials $97.56 *** Calling The Bottom! *** Applied Materials is the world's largest semiconductor equipment company. AMAT develops, manufactures, markets and services semiconductor wafer fabrication equipment and related spare parts for the worldwide semiconductor industry. Customers for these products include semiconductor wafer manufacturers and semiconductor integrated circuit (IC or chip) manufacturers that either use the ICs they manufacture in their own products or sell them to other companies. These ICs are the key components in most advanced electronic products such as computers, telecommunications devices, automotive engine management systems and electronic games. Applied Materials moved to an all-time high last week as analysts at Adams, Harkness & Hill raised their rating on the manufacturer of computer chip-making equipment to "accumulate" from "market perform." Unfortunately, the issue is in the Nasdaq and it has fallen along with almost every other technology stock. Now the issue is testing support at the current price and with today's solid earnings from Advanced Micro Devices (AMD), the outcome may yet be favorable. Technically this issue has performed very well given the technology markets' weakness in recent weeks and a new upgrade from Solomon Smith Barney should help the bullish momentum return. Action Month & Option Open Closing Cost Monthly Req'd Strike Symbol Interest Price Basis Return Sell Put APR 85 ANC PQ 3245 1.50 83.50 18.1% Sell Put APR 82.5 ANC PX 1530 1.13 81.38 15.2% Sell Put APR 80 ANC PP 5747 0.63 79.38 9.6% *** Chart = /charts/charts.asp?symbol=AMAT **** CGNX - Cognex $60.59 *** Bullish Outlook! *** Cognex Corporation designs, develops and markets machine vision systems that are used to replace human vision in manufacturing processes. Cognex machine vision systems consist of a computer, which serves as a machine vision engine, and software that processes and analyzes images. When connected to a video camera, the machine vision system captures images and extracts information, which determines appropriate action for other equipment in the manufacturing process. Machine vision systems are used in a variety of industries including semiconductor, electronics, automotive, consumer products, packaging, pharmaceutical, metals, plastics and paper. Cognex announced Monday it has successfully completed the acquisition of Komatsu's machine vision business, right on schedule. With this acquisition, Cognex has become the leading supplier of machine vision systems to semiconductor manufacturers in Japan, and Cognex has strengthened its existing position as a supplier to the worldwide semiconductor market. Cognex recently announced it expects revenue and net income for the first quarter of 2000 to set new quarterly records, and that both revenue and net income will significantly exceed most current estimates. Revenue for the first quarter of 2000 is estimated to be greater than $53 million, and estimated earnings for the quarter will exceed, by approximately 15%, First Call consensus estimates of $0.29 per share. Lets hope the estimates are correct! Action Month & Option Open Closing Cost Monthly Req'd Strike Symbol Interest Price Basis Return Sell Call MAY 55 QCG EK 104 9.25 51.34 5.9% *** Sell Put MAY 50 QCG QJ 4 1.75 48.25 9.3% Sell Put MAY 45 QCG QI 0 0.75 44.25 4.8% *** Chart = /charts/charts.asp?symbol=CGNX **** INSUA - Insituform Technologies $36.81 *** Technicals Only! *** Insituform Technologies is a worldwide provider of technologies and services for rehabilitating municipal sewers, water mains and industrial pipes without digging and disruption. Since 1971, Insituform has rehabilitated more than 7,500 miles of underground piping systems for cities and industrial plants throughout the world. Insituform's methods allow them to repair and rehabilitate pipelines from inside the pipe, allowing for the repair of pipeline in difficult-to-access areas, as well as saving the expense of excavation. INSUA has enjoyed record operating income for seven consecutive quarters and investors have begun to take notice. Technically, the stock has been climbing in a classic stage II pattern since early 1999 and the chart shows no indications of stopping soon. This play offers a reasonable entry point on a bullish issue for those with a long-term portfolio outlook. Action Month & Option Open Closing Cost Monthly Req'd Strike Symbol Interest Price Basis Return Sell Call MAY 35 ISQ EG 17 4.62 32.19 7.2% *** Sell Put MAY 30 ISQ QF 0 0.94 29.06 8.7% *** Chart = /charts/charts.asp?symbol=INSUA **** MERQ - Mercury Interactive $67.25 *** Going Down! *** Mercury Interactive is a provider of integrated performance management solutions that enable businesses to test and monitor their Internet applications. Their software products and hosted services help e-businesses enhance the user experience by improving the performance, availability, reliability and scalability of their Web sites. By using Mercury Interactive's solutions to identify and assess performance problems, e-businesses can increase their ability to attract and retain customers, and improve their competitive advantage. Customers represent a wide range of industries including companies such as Amazon.com, America Online, Ameritrade, E*Trade, Healtheon/WebMD, Cisco Systems, Ford Motor Co. and Walmart. Mercury Interactive recently announced the release of a new set of Web performance monitors. These additions to its Loadrunner load testing product allows for performance monitoring and optimization of Web sites, and they are designed specifically to test and monitor a wide range of servers such as; BroadVision, Microsoft IIS, Netscape, Apache, and others. Last week Mercury started a joint effort with IBM to deliver an new solution for ensuring performance and reliability of applications developed using key technologies of IBM's unique Application Framework for e-Business: WebSphere Application Server and VisualAge for Java. Mercury Interactive is also working with IBM to enable the smooth integration of these development environments with their Web application performance management products. Unfortunately, the recent technical pattern is common to a number of technology stocks and with the current outlook for the group, this position offers an excellent risk/reward ratio for those who are bearish on the issue. Note: Naked Call Recommendation! Action Month & Option Open Closing Cost Monthly Req'd Strike Symbol Interest Price Basis Return Sell Call APR 110 RBF DB 284 0.94 110.94 22.07% *** Sell Call APR 105 RBF DA 383 1.25 106.25 28.73% Sell Call APR 100 RBF DT 487 1.69 101.69 37.72% Chart = /charts/charts.asp?symbol=MERQ **** PVN - Providian Financial $92.25 *** On The Move! *** Providian Financial provides consumer lending products such as unsecured credit cards, revolving lines of credit, home loans, secured credit cards and fee-based products. They also offer various deposit products. Lending activities are conducted primarily through Providian's subsidiaries, Providian National Bank, Providian Bank and Providian Credit Corporation. Providian Financial originates, maintains and services unsecured consumer loans generated primarily through Visa and MasterCard credit cards. Providian is a solid company in a recently slumping group that is now expected to outperform much of the market in the coming months. Last year Providian's total interest income rose 93% to $1.62 billion, nearly tripling the previous years annual revenue of $582 million. Net interest income after loan loss provisions also rose 54% to $76.1 million and basic net income rose 86% to $550.3 million. That's a very profitable company and today's break-out to a yearly high suggests the issue is ready to resume trading in the $90 range. With any support, the stock may even continue to last summer's highs near $100. Action Month & Option Open Closing Cost Monthly Req'd Strike Symbol Interest Price Basis Return Sell Call MAY 85 PVN EQ 178 11.88 80.38 4.7% *** Sell Put MAY 80 PVN QP 380 2.31 77.69 7.1% Sell Put MAY 70 PVN QO 75 1.25 68.75 5.2% *** Chart = /charts/charts.asp?symbol=PVN ************************Advertisement************************* Tired of waiting on trades to execute? Does your broker offer Stop Losses on Options? 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