The Option Investor Newsletter Wednesday 4-19-2000 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) ****************************************************************** 4-19-2000 High Low Volume Advance Decline DOW 10675.00 - 92.40 10789.40 10632.10 1,004,728k 1,469 1,472 Nasdaq 3,706.41 - 87.16 3851.56 3698.33 1,758,154k 2,361 1,858 S&P-100 771.62 + 23.43 786.33 769.63 Totals 3,830 3,330 S&P-500 1427.47 + 40.17 1447.69 1424.26 53.5% 46.5% $RUT 486.24 + 0.15 493.79 483.11 $TRAN 2805.43 + 35.90 2826.67 2767.58 VIX 30.24 + 0.87 30.39 28.52 Put/Call Ratio .50 ****************************************************************** Lack of Conviction Makes For A Sleepy Day Today can be summed up with one phrase: lack of conviction. That's the way it felt from the minute the markets opened this morning. After two of the biggest point gains in history for the NASDAQ, it seemed that all sights were set on the index to give us an indication of the market's next big move. It opened at 3832 and within an hour slid down to 3720. With the echoes of "suckers rally" in the back on many minds, a healthy retest looked underway. Yet, we wouldn't be so lucky. Instead, we got a sleeper of a day as both the NASDAQ and the DOW flatlined. The DOW fell 92.46 to 10680 in a relatively uneventful session. The NASDAQ slowly climbed from 3720 toward 3800 where resistance was thwarted. Shortly thereafter, it made its high for the day and rolled over for the day, off 87.16 to 3706. Not very exciting. Looking at the NASDAQ's broader trend on a daily chart, we can see that trading has been bound in the regression channel. Today, it traded right up to the upper limit and backed off. There were a handful of standouts for the NASDAQ. INKT decided to break the trend and beat First Call estimates by $0.03 with a $0.01 profit, their first profitable quarter ever. This prompted a strong rally as INKT rose to $132.13, up $16.13. The rest of the Internet sector pullbacked for the day. Also beating estimates was ITWO with earnings of $0.07 vs. $0.05 per share. Their stock soared $11.88 to $108.19. Another B2B company that had good upside today was CMRC, which ran up $16 to $95.50. The company reported after the bell today a loss of $0.09 per share, better than the expected loss of $0.22. In after-hours, CMRC traded $98.50. QCOM beat the Street by $0.02 and traded up $2.75 to $115.13, coming off a high of $125.88. CSCO was in the news today. As if Cisco wasn't big enough, they signed a multi-billion dollar marketing and sales alliance with SBC communications today. The deal will allow Cisco to become the preferred provider of networking gear for SBC's infrastructure. Despite the agreement, both stocks remained relatively calm. CSCO ended down $2.75 to $66.50 and SBC finished at $42, up $0.50. With one of the biggest days for earnings behind us (Super Tech Tuesday), let's look at how some of the big names faired. INTC beat the street by a similar two cents, only to be punished with a $10 loss to $119. Oh, the irony of the markets. Other notables included AOL beating the street by...you guessed it, two cents and traded up $1.38 to $62.13. Does this convince you that Wall Street CEOs know how to do enough to please the Street and save some profits for a rainy day? We can't forget IBM. Big Blue exceeded expectations and reported profits of $0.83 a share, but revenues were 5% lower than their fiscal first quarter. As a result, investors sold shares of IBM which ell to $105, down $6.50. This is just a small sampling of companies that have reported in the past two days. We haven't seen a sell the news attitude which is typical of this time of year because of the markets massive decline. It appears that companies with good earnings are being rewarded with a rising share price while others like IBM are being taken down for weak results. Finally, the system working the way it should! One last earnings note, First Call reports that out of the S&P 500 that 187 companies have beaten earnings, 29 missed and 2 were even-Steven with their estimates. It was a rocky day overall as many investors took some money off the table. Financials were sold today as preemptive interest rate fears may be creeping up on the market: C down $2.50 to $59.63, LEH down $3.13 to $83.06, and CMB down $2.50 to $78. Like IBM, other NYSE big cap tech stocks felt the pain as well as HWP(-3.25), EMC(-2.13), and TXN(-7.00) were all lower. One blue chip that felt the pain in a big way was BMY. Bristol-Myers was a disaster today when the company announced they were withdrawing their application to market the hypertension drug Vanlev because of concern about side effects. They should have been concerned about the side effects this announcement would have on BMY's share price. The stock was halted this afternoon and when it reopened, BMY had lost $30 bln, or 28% of their market value. BMY last traded at $50.50, down $14.50. They said they're doing this in response to questions raised recently by the U.S. Food & Drug Administration regarding the incidence and severity of an infrequent side effect known as angioedema. Vanlev had been projected as an $800 million dollar revenue generator in the next two year. BMY did say they plan to resubmit the application next year. It appeared that money went into those old economy stocks in a move to safety. Airlines were strong as both UAL(+1.38) and AMR(+0.63) beat their earnings estimates. Also on the upside were the Pharmaceuticals. They did well throughout the day as investors sought out safehavens. WLA(+7.00), MRK(+2.75), AHP(+2.75), LLY(+2.38), and PFE(+1.75) had strong buying. This rotation that we have seen recently, reminiscent of this time last year, may be a telling sign of what's to come in May, after this earnings season passes. With such a rapid recovery on Monday and Tuesday, today's lack of conviction to the upside concerns me for the next couple of trading days. Tomorrow is option expiration and the last trading day before the long holiday weekend. Volume should be light as many professionals will be beginning their vacations early. As a result of thin trading, there may be more volatility. Monday will be an important day as everyone has that "NASDAQ retest" in the back of their minds. Matt Russ Research Analyst ********** STOCK NEWS ********** Global Crossing Files to Launch Tracking Stock By Cindy Christ Global Crossing Ltd. filed a registration statement Wednesday with the Securities and Exchange Commission to spin-off its GlobalCenter Web hosting unit in an Initial Public Offering. The No. 5 U.S. long-distance provider, Global Crossing is in a race to complete the first international, land-based and undersea fiber optic network. The offering will represent about 15 to 25 percent of Global Center's stock. Bermuda-based Global Crossing said it would divest its remaining interest in GlobalCenter at some time in the future. The company said a portion of the disposal would include a stock dividend to Global Crossing shareowners. The company said GlobalCenter would use proceeds from the sale to finance domestic and international expansion and for corporate purposes and working capital. A portion of proceeds also may be used to make strategic investments or acquisitions. Shares in GlobalCenter stock will be offered by an underwriting group led by Morgan Stanley Dean Witter, Credit Suisse First Boston and Chase H&Q, and co-managed by Bear, Stearns & Co., Donaldson Lufkin & Jenrette, Goldman Sachs and Salomon Smith Barney. Shares in Global Crossing Ltd. (GBLX) traded up on the news intraday, but backed off in late trading to close down $0.12, or 0.42 percent, at $29.88. **** Broadcom Posts Record Earnings and Profits By Cindy Christ An upbeat profit report from Broadcom Corp. failed to stir investor enthusiasm for the high-flying maker of semiconductors used in broadband communications. Broadcom (BRCM) shares fell nearly 10 percent to $142.25 Wednesday after the Irvine, Calif.-based company posted record revenues and profits on soaring demand for its core products, including chips used in networking gear, cable modems and digital set-top boxes. For first quarter 2000, Broadcom booked revenues of $191.3 million, up 91 percent from $100 million a year ago. Net income including a one-time, $2.9 million acquisition charge, totaled $41.8 million, or 17 cents per share, compared to $15.7 million, or 7 cents per share, last year. Results reflect Broadcom's 2-for-1 stock split on Feb. 11. The consensus estimate among analysts polled by First Call/Thomson Financial was 16 cents per share. Market watchers said investors were disappointed the company didn't match unofficial "whisper" numbers projecting higher earnings of 18 cents per share. During the quarter, Broadcom completed acquisitions of BlueSteel Networks, Digital Furnace Corp. and Stellar Semiconductor, accounting for each under the pooling of interests accounting method. The three companies' financial results were consolidated with Broadcom's. "The quarter demonstrated that we are solidly on strategic course, realizing very healthy revenues and profits from our suite of core products, while aggressively preparing for and pursuing new areas of growth," said Dr. Henry T. Nicholas III, Broadcom president and CEO, in a statement. The company said it reached a milestone by shipping its 250,000th Very High-Speed Digital Subscriber Line or VDSL transceiver chip. Customers including US West are using Broadcom's VDSL chips to offer consumers high-speed, integrated Internet, voice and data services. After the report, three brokerages upgraded their investment outlook on Broadcom shares. WR Hambrecht + Co. raised its rating on Broadcom to "strong buy" from "buy." e-Network Technologies analyst Jim Liang cited Broadcom's success in the Ethernet, cable modem, and cable set-top boxes markets, the company's product roadmap for emerging broadband markets, and its recent share weakness as reasons for the upgrade. "We believe the business momentum at the company is accelerating, and the recent share weakness has created an excellent opportunity for investors," Liang said. Gerard Klauer raised its view on Broadcom shares to Buy, and Credit Suisse First Boston reinstated the company with a Buy recommendation. ********************** PLAY OF THE DAY - CALL ********************** LXK - Lexmark $109.00 -9.00 (+6.69 this week) Wrapping its arms around the entire life-cycle of printers, LXK develops and manufactures a broad range of laser, inkjet and dot matrix printers for the office and home markets. The company is also the exclusive source for new print cartridges for the laser and inkjet printers it manufactures. Additionally, LXK provides supplies for IBM printers and offers after-market laser cartridges for the large installed base of a range of laser printers sold by other manufacturers. Most Recent Write-Up Continuing to vacillate all day yesterday, LXK gave us a clear buy signal this morning as the price began to surge in late- morning trading, backed up by increasing volume. This move closely coincided with the company's announcement of price reductions across their entire line of inkjet printers. This may be indicating that LXK is poised to take more market share from Hewlett Packard, or the move may be the beginning of our earnings run. With the health in the NASDAQ improving the past 2 days, and earnings less than a week away (before the open on April 24th), the printer company looks like it may be ready to run even further. Today saw a price increase of more than 17.5% on volume nearly 50% over the ADV, and we are now approaching resistance at $120. Any weakness could provide another entry near support at $110, while continued buying that breaks resistance is also buyable. For those with open positions, keep in mind that the NASDAQ has retraced almost 500 points of last week's losses, so protect those profits by moving up your stops. Comments "Hmmm, I want to play LXK as an earnings run, but it was up $17.69 on Tuesday. Sounds too spiky, better pass." If this was your thinking, you may have your chance on Thursday. LXK gave back $9.00 today and is scheduled to report Monday so this is the last chance to play. It showed a strong bottom this afternoon despite the market retreat. Look for a rebound in the broad markets first, but LXK may be poised for one final dash towards earnings. BUY CALL MAY-105 LXK-EA OI= 6 at $11.63 SL= 7.25 low OI BUY CALL MAY-110 LXK-EB OI= 21 at $ 9.13 SL= 5.75 low OI BUY CALL MAY-115*LXK-EC OI=166 at $ 7.00 SL= 4.50 BUY CALL JUL-110 LXK-GB OI= 35 at $21.75 SL=15.00 Picked on Apr 6th at $111.25 P/E = 45 Change since picked -2.25 52-week high=$135.88 Analysts Ratings 6-4-1-0-0 52-week low =$ 49.50 Last earnings 01/00 est= 0.68 actual= 0.73 Next earnings 04-24 est= 0.58 versus= 0.48 Average Daily Volume = 1.12 mln /charts/charts.asp?symbol=LXK ***************************************** BIG CAP COVERED CALLS & NAKED PUT SECTION ***************************************** Earnings Up! Market Down! While companies continued to post record earnings, concerns over future revenues and extreme valuations drove the markets lower. This week's rally was amazing but today investors took a break to reconsider the stunning recovery. Fortunately, the retreat was orderly in fashion and stability appears to have returned to the market. Our goal is to continue to take advantage of quality companies with more attractive valuations but we will also target those issues that have technically superior technical indications. With the favorable response to our recent reader inquiry, we will now list mid-cap issues along with bearish plays when they are favorable. 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 88.75 $3.00 7.4% ASYT APR 40 37.18 44.00 $2.82 6.2% PCLE APR 25 23.47 24.63 $1.17 5.1% Split 2 -1 CY APR 45 42.93 49.69 $2.07 4.9% AFCI APR 55 49.75 49.56 -$0.19 0.0% AMAT APR 95 91.94 91.50 -$0.44 0.0% PHTN APR 70 66.50 64.50 -$2.00 0.0% INSUA MAY 35 32.19 35.06 $2.81 7.2% AMD MAY 60 55.25 75.25 $4.75 5.9% PVN MAY 85 80.38 85.00 $4.63 4.7% CGNX MAY 55 51.34 54.06 $2.72 4.4% CSCO MAY 68 62.88 66.13 $3.25 3.6% IMNX MAY 50 46.56 40.75 -$5.81 0.0% 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 91.50 $1.56 12.3% ASYT APR 35 33.38 44.00 $1.63 11.5% SUNW APR 70 68.94 88.75 $1.06 10.7% AFCI APR 45 42.63 49.56 $2.38 10.1% MU APR 85 82.25 117.00 $2.75 8.9% CY APR 40 39.00 49.69 $1.00 8.7% PCLE APR 22 22.03 24.63 $0.47 7.6% Split 2 -1 CSCO APR 60 59.44 66.13 $0.56 6.2% MANU APR 35 34.44 36.00 $0.56 6.0% AMD APR 50 49.56 75.25 $0.44 5.9% AFCI APR 45 43.81 49.56 $1.19 5.9% MNMD APR 100 99.25 117.75 $0.75 5.2% PHTN APR 65 63.94 64.50 $0.56 3.0% AMAT APR 80 79.38 91.50 $0.63 2.3% IBM APR 110 108.44 105.00 -$3.44 0.0% IMNX APR 45 44.44 40.75 -$3.69 0.0% ISSX APR 90 86.38 80.75 -$5.62 0.0% NT APR 115 112.62 106.44 -$6.18 0.0% IMNX APR 51 49.83 40.75 -$8.42 0.0% Split 3 - 1 KSU APR 75 73.87 64.69 -$9.18 0.0% QCOM APR 130 128.37 114.75 -$13.62 0.0% INSUA MAY 30 29.06 35.06 $0.94 8.7% PVN MAY 70 68.75 85.00 $1.25 5.2% CGNX MAY 45 44.25 54.06 $0.75 4.8% Positions Closed: PHCM, SPYG, SFE, ZIXI, MFNX, IBIS, PUMA, TGNT, NEON. Naked Calls: Stock Strike Strike Cost Current Profit Monthly Symbol Month Price Basis Price (Loss) Return MERQ APR 110 110.94 70.63 $0.94 22.1% AAPL APR 140 140.94 121.13 $0.94 13.0% NEW PICKS We list favorable "in-the-money" covered write and "out-of-the- money" naked put candidates that offer conservative entry points into technically bullish charts, with reasonable monthly returns. 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. **** AHP - American Home Products $59.12 *** New Trading Range! *** AHP is engaged in the discovery, development, manufacture, distribution and sale of a diversified line of products in three business segments: Pharmaceuticals,Consumer Health Care and Agricultural products. AHP's product line includes Advil, Robitussin, Dimetapp, and Centrum, as well as vaccines and oncology therapies. Principal agricultural products are herbicides, insecticides,fungicides and plant growth regulators. Today American Home Products reported higher first-quarter profit, boosted by sales of drugs such as the hormone-replacement Premarin and the antidepressant Effexor. Revenue rose 17% to $3.33 billion and the growth stemmed from their pharmaceutical business, new biotechnology products and existing women's health care and neuroscience products. Investors took notice and the break above a recent resistance area on increasing volume suggests the bullish trend has further upside. Our cost basis near the bottom of the March-April consolidation should provide a reasonable margin for any near-term decline. American Home Products (AHP) $91.94 Action Month & Option Open Closing Cost Monthly Req'd Strike Symbol Interest Price Basis Return Sell Call MAY 55 AHP EK 3387 6.38 52.75 4.3% *** Sell Put MAY 50 AHP QJ 325 0.88 49.12 5.8% *** Sell Put MAY 55 AHP QK 186 2.19 52.81 10.2% Chart = /charts/charts.asp?symbol=AHP **** BRKS - Brooks Automation $85.83 *** Earnings Rally! *** Brooks Automation is a supplier of tool and factory hardware and software automation solutions for the global semiconductor, data storage and flat panel display manufacturing industries. Brooks has developed comprehensive product lines that encompass automation modules, complete handling systems and integrated software and controls for its targeted markets. Brooks has also developed a suite of factory automation software solutions, which they market in conjunction with factory automation hardware to customers in the United States, Japan, South Korea, Taiwan, Singapore, and Europe. Their automation solutions are designed to optimize equipment and factory productivity. Brooks Automation began to rally back in early January and this week the stock broke to a new high on anticipation of the upcoming earnings report. Brooks will announce quarterly results on or about next Wednesday and Credit Suisse First Boston believes the company will outperform expectations. They have recently changed their recommendation to "strong buy". Our outlook is much the same from a technical point of view and the conservative cost basis offers a favorable entry point on this bullish issue. Brooks Automation (BRKS) $91.94 Action Month & Option Open Closing Cost Monthly Req'd Strike Symbol Interest Price Basis Return Sell Call MAY 70 BQE EN 19 18.50 66.88 4.7% *** Sell Put MAY 60 BQE QL 0 1.06 58.94 5.9% *** Sell Put MAY 65 BQE QM 50 2.00 63.00 10.6% Sell Put MAY 70 BQE QN 56 3.00 67.00 14.0% Chart = /charts/charts.asp?symbol=BRKS **** CHKP - Check Point Software $161.00 *** Bullish Forecast! *** Check Point Software Technologies is a leader in Internet security. Their Secure Virtual Network (SVN) architecture provides the infrastructure that enables secure and reliable Internet communications. SVN secures business-to-business (B2B) communications between networks, systems, applications and users across the Internet, intranets and extranets. Check Point's Open Platform for Security (OPSEC) provides the basis for integration and interoperability with solutions from over 200 leading industry partners, icluding Dell, Microsoft, IBM, Nokia, and others. The report is in and for the past quarter, Check Point's earnings per share grew 67% to $0.40 a share on sales that jumped 79%. For the full year, the company earned $2.33 a share on revenues of $219 million. The CEO was extremely optimistic saying he expects the company to post a 45% rise in earnings per share this year and more than a 50% increase in sales. That's an incredibly bullish statement but the company certainly has future upside potential. In this case, we are simply playing to the recent volatility and the overpriced option premiums. While we consider Check Point to be one of the better companies in the industry, we don't believe it will recover to the recent valuations in just one month. Check Point Software (CHKP) $91.94 Note: Naked Call Recommendation! Action Month & Option Open Closing Cost Monthly Req'd Strike Symbol Interest Price Basis Return Sell Call MAY 270 KGE EN 45 3.25 273.25 9.3% *** Sell Call MAY 260 KGE EL 26 3.88 263.88 10.9% Sell Call MAY 250 KGE EJ 102 4.75 254.75 13.0% Chart = /charts/charts.asp?symbol=CHKP **** CMTN - Copper Mountain Networks $78.25 *** Awesome Earnings! *** Copper Mountain Networks develops and markets a comprehensive family of DSL solutions that enable high-speed networking over existing copper facilities. Their mission is to enable carriers and other service providers to offer a full range of high performance, cost-effective data and voice services over DSL that are easy to deploy, use, and manage. Copper Mountain markets its products directly to telecom service providers and, to a lesser extent, through strategic original equipment manufacturers and distributors. This is another Cinderella story based on incredible earnings. Yesterday, Copper Mountain Networks reported a 26-fold increase in first-quarter profit, as demand for high-speed Internet access soared. The company announced revenue of $60 million and earnings of $0.20 a share, compared with $0.01 a share, a year ago. First Call's survey of analysts suggested profits of only $0.12 and with the blowout, the stock went wild! Of course the question now is whether the move can be sustained. Our target is a move to the recent congestion area near $90. Breaking that level, you might consider closing the position (or buying the stock to cover). Copper Mountain Networks (CMTN) $91.94 Note: Naked Call Recommendation! Action Month & Option Open Closing Cost Monthly Req'd Strike Symbol Interest Price Basis Return Sell Call MAY 115 KUA EC 56 2.19 117.19 12.4% *** Sell Call MAY 110 KUA EB 32 2.75 112.75 15.2% Sell Call MAY 105 KUA EA 111 3.50 108.50 18.5% Chart = /charts/charts.asp?symbol=CMTN **** CY - Cypress Semiconductor $49.69 *** Own This One! *** Cypress Semiconductor designs, develops, manufactures and markets a broad line of high performance digital and mixed signal integrated circuits for a range of markets including data communications, telecommunications, computers and instrumentation systems. Cypress' memory products division offers static random access memories and multi-chip modules. The non-memory products include programmable logic products and programming software, data communication products, computer products, including clocks and Universal Serial Bus micro-controllers, and non-volatile memory products. Earlier this week, Cypress became the latest in a group of chip companies to report strong earnings for the quarter. CY topped First Call estimates by a penny Tuesday with operating profits of $0.41 per share. The company reported record sales of $264 million for the first quarter, up 20% sequentially, and up 66% from the first quarter a year ago. Cypress added that it had record bookings of $322.8 million based strong demand from the communications market and the CEO suggested the company will enjoy another excellent quarter at growth rates well in excess of the industry. Sounds like a great company to own and the chart supports the fundamental outlook. Cypress (CY) $91.94 Action Month & Option Open Closing Cost Monthly Req'd Strike Symbol Interest Price Basis Return Sell Call MAY 45 CY EI 339 7.63 42.06 7.1% *** Sell Put MAY 40 CY QH 738 1.44 38.56 12.6% *** Sell Put MAY 45 CY QI 298 3.13 41.87 17.3% Chart = /charts/charts.asp?symbol=CY **** ITWO - i2 Technologies $108.19 *** On The Rebound! *** i2 Technologies is a leading provider of intelligent eBusiness solutions. TradeMatrix, i2's dynamic Internet marketplace, provides a digital trading network facilitated by i2's advanced optimization and execution capabilities. TradeMatrix offers a wide range of hosted services, enabling a company's customers, partners, suppliers, and service providers to conduct business together in real time, and to make more profitable decisions by effectively managing all their business processes including procurement, fulfillment, product development, and customer care. Simply another great earnings report and a big recovery rally from the recent technology drubbing. This week i2 Technologies, the leading provider of eBusiness solutions, reported record quarterly results as revenues grew to $186 million, 58% above first quarter 1999 revenues, and net income exceeded $12 million. The company earned $0.07 per share in the first quarter, compared to a loss of $0.01 a year ago. The results demonstrate the strength of the B2B market and i2's position as a leading service provider but they can't reverse the damage to the potential valuation of technology issues. In this case, we really like the issue and believe it is due for further upside movement. We will use the bullish trend to increase the premiums in the sold options at the current resistance level near $175. i2 Technologies (ITWO) $91.94 Note: Naked Call Recommendation! Action Month & Option Open Closing Cost Monthly Req'd Strike Symbol Interest Price Basis Return Sell Call MAY 185 QYI EQ 25 2.25 187.25 9.5% *** Sell Call MAY 180 QYI EP 110 2.44 182.44 10.3% Sell Call MAY 175 QYI EO 137 2.69 177.69 11.2% Sell Call MAY 170 QYI EN 240 3.00 173.00 12.3% Chart = /charts/charts.asp?symbol=ITWO **** SEPR - Sepracor $91.50 *** On The Move! *** Sepracor is a specialty pharmaceutical company that develops improved versions of widely prescribed pharmaceutical compounds. Their Improved Chemical Entities development program identifies existing, widely prescribed drugs that might be replaced by improved single-isomer or active-metabolite forms of such drugs. Sepracor then seeks to develop ICEs that offer benefits over the parent drugs, such as reduced side effects, improved therapeutic efficacy or effectiveness for new indications. Sepracor has also licensed or is developing ICEs intended to treat a broad range of indications in areas including respiratory, gastroenterology and psychiatry/neurology. Sepracor's ICEs include a large number of well known drugs such as Fexofenadine, Fluoxetine and Bupropion. Sepracor has performed well even with the recent market decline and over the past two days, the drug-developer rose $22 with other leaders in the biotechnology sector. The issue has been in recovery mode since the Federal Trade Commission approved a drug licensing deal between Eli Lilly (LLY) and Sepracor. Last week, Lilly announced the FTC has closed its investigation and given approval for the agreement between the two companies. Under the agreement, Lilly will exclusively develop and commercialize the product Fluoxetine, an improved version of the antidepressant drug Prozac. On completion of the deal, Sepracor is expected to receive an up-front payment and license fee for $20 million, and up to $70 million in additional milestone payments based on the progression of the drug through development. That's a significant revenue enhancement and the recent trading activity suggests that investors are bullish on the issue. While we favor the recent rally, our position offers a more conservative entry at a lower cost basis. Sepracor (SEPR) $91.94 Action Month & Option Open Closing Cost Monthly Req'd Strike Symbol Interest Price Basis Return Sell Call MAY 75 ERQ EO 202 20.75 70.75 6.1% *** Sell Call MAY 80 ERQ EP 58 17.38 74.12 8.0% Sell Put MAY 65 ERQ QM 331 1.75 63.25 8.8% *** Sell Put MAY 70 ERQ QN 372 2.50 67.50 12.2% Sell Put MAY 75 ERQ QO 23 3.88 71.12 16.4% Chart = /charts/charts.asp?symbol=SEPR ************************Advertisement************************* Tired of waiting on trades to execute? Does your broker offer Stop Losses on Options? 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