Option Investor

Daily Newsletter, Wednesday, 12/27/2000

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The Option Investor Newsletter                Wednesday 12-27-2000
Copyright 2000, All rights reserved.                        1 of 1
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MARKET WRAP  (view in courier font for table alignment)
        12-27-2000        High      Low     Volume Advance/Decline
DJIA    10803.20 +110.80 10828.90 10645.00 1.06 bln   2121/ 849
NASDAQ   2539.35 + 45.83  2539.52  2450.22 2.00 bln   2195/1817
S&P 100   691.18 +  4.18   693.38   683.78   totals   4316/2666
S&P 500  1328.92 + 13.73  1332.03  1310.96           61.8%/38.2%
RUS 2000  479.30 + 12.67   479.30   463.42
DJ TRANS 2899.61 + 60.02  2899.83  2828.08
VIX        32.31 -  0.23    33.41    31.95
Put/Call Ratio      0.72

The Battle Between Window Dressing and Tax-Loss Selling

These two year-end phenomena have been in full effect the past
two weeks as institutions and retail investors reflect on a
difficult year.  Window dressing involves mutual funds and hedge
funds purchasing strong performing stocks to make the books look
better and generally creates an upside bias.  Its counterpart is
tax-loss selling in which investors dump some of their losers to
take the loss against taxable gains for the year 2000.  Put both
of these market activities together and you have yourself a
recipe for volatility.

If you look at the tape today, all indicators point to a lack of
selling and accumulation in many issues.  The INDU has been
hitting on all cylinders for the past four sessions, covering an
amazing 500 points in that time.  Technically speaking, the INDU
is much healthier than the NASDAQ after putting in a convincing
bottom on October 18th.  On that day, the INDU broke below 10000
and briefly touched 9654.  Since then, it has consolidated and
many components were sought after as defensive plays, including
drug stocks and cyclicals.  BA, DD, KO, JNJ, MMM, MRK, PG, MO, IP
and UTX have had fantastic runs as investor fled the tech sector.
Naturally, fund managers will chase these names into the end of
the year to "dress" their books.  Notice there's no four lettered
symbols.  In fact, a year ago most investors wouldn't have even
thought about adding these issues to their portfolios.  What a
year it has been.

As a result of these INDU components performance and their
attractiveness, the index has sustained a 12% rally since bottoming
in October.  Looking at the chart below, we can see that the INDU
has rallied itself right into resistance at 10800.  Yet, today the
INDU broke the trend of lower highs in December.  In addition,
last Thursday's bounce from 10300 establishes a solid double
bottom support for the INDU.  It may very well be due for some
profit taking but with these aforementioned forces in the market,
strong performing issues may continue to have momentum into the
end of the year(this Friday).  This will likely drive the INDU in
the customary Santa Claus rally, and it may test resistance at
11000.  Watch some of these stocks for possible trading
opportunities in the next two days;  MO, C, and UTX are current
call plays.

Just as the window dressing enhances the winners for the year,
tax-loss selling perpetuates downward momentum in many of the
fallen angels of the NASDAQ.  It certainly has been a rough year
for the tech sector, and much technical damage has been inflicted.
Tax-loss selling creates volatility in the market because of the
downside pressure.  An example of this can be seen in the VIX.X,
the CBOE Volatility Index, which spiked up to 37.72 last Thursday
when the NASDAQ dipped below 2300 briefly.  Strong selling like
this causes investors' fears to increase, as well as demand for
downside protection, i.e. buying puts.  Market makers don't want
to sell a ton of puts to the public if the market is going to tank,
but as their job title states, they must make markets.  The result
is higher volatility priced into those puts.  Higher premium in
return for taking a higher risk.

If you look at the NASDAQ chart since that encounter with sub-2300
levels, it has managed a 250 point rally, albeit over the holiday
season.  This time of year is typically characterized by lighter
volume, but volume has been nothing to scoff at.  Last Friday was
a strong 2+ bln share day and today was just shy of 2 bln.  So
don't discount this week's action.  But, don't forget that those
short players had a heck of a year and are probably enjoying
extended vacations.  Looking at the technical picture below, the
NASDAQ has sold off considerably since hitting 3000 in the second
week of December.  Given the recovery in the NASDAQ over the
past three sessions, much of the tax-loss selling appears to have
been done already by institutions.  The NASDAQ will find a
challenge with 2600, yet it has some room to recover with the
downtrend line near 2800.  On an intraday basis, the NASDAQ bounced
nicely from support at 2450 this morning and staged a rally to
close at the day high.  Tomorrow's bias is positive.  Set up for
entries on pullbacks to support and watch for continued buying
interest.  Technically oversold, the NASDAQ could be setting up for
a nice move in early January with expectations of a rate cut and
money market funds becoming flush with IRA contributions and
Holiday bonuses.

Most of today's high profile movers indeed were tech stocks.  AOL
and TWX came under selling pressure as news circulated that the FCC
is still reviewing the merger, basically delaying the closing of
the deal until next year.  The company and investors were hoping
the merger was completed in 2000 for tax and accounting purposes.
As a result, traders sold both stocks with conviction:  AOL(-2.75),

The disaster du jour was Network Associates(NETA).  The company
warned last night that it will report a loss compared to
expectations of a 31 cent per share profit.  They also expect a
dramatic shortfall in revenues from $250 mln to only $55-65 mln
in the 4th quarter.  To make matters worse, the CEO and COO will
step down effective Friday, and the CFO will also step down once a
new one is appointed.  The company attributes the poor performance
to the slowing economy and not the general competitiveness of its
products.  NETA, an antivirus and internet security company, lost
61% today to close at $4.50.

Strength today was find in the SOX.X, which added almost 5%.
Having been sold off dramatically with the NASDAQ, the Semi stocks
showed some life today, indicating some buyers nibbling on the
beaten down sector.  AMCC led the charge with a 12% gain of $8.
RFMD, an OI call play picked last Friday, also had a 12% gain
today, adding $3.25 to $29.  Watch for continued interest in the
Semi sector to help buoy the NASDAQ.

Looking forward, the markets look poised to finish the week
relatively well, all things considered.  The INDU looks very strong
as window dressing bids hot stocks higher.  While the heaviest of
tax-loss selling appears to be over, be aware that Friday will
likely be a busy day for year-end positioning.  Don't write off
the possibility of both retail and institutional investors dumping
some of those losers at the last minute.  Or adding to those
winners.  There will be plenty of trading opportunities in the next
two days so take a look at the OI play lists and narrow down your
choices.  Tomorrow morning is Consumer Confidence, expected to be
128.  This could move the market early on.  So choose your entry
points well and best of luck in 2001.

Matt Russ

Why put all your risk into one stock when you can play the
index instead?

Learn how to invest in the OEX, QQQ, and SPX.  Get intraday
market updates, plays, education and daily commentaries by
those who know.

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UTX - United Technologies Corp $79.75 +2.06 (+3.75 this week)

United Technologies Corporation provides high-technology
products and support services to customers in the aerospace and
building industries worldwide. The Company's business segments
include Pratt & Whitney aircraft engines, Otis elevators and
escalators, Carrier heating and air conditioning, Sikorsky
helicopters, Hamilton Sundstrand aerospace systems, and
International Fuel Cell systems.  United Technologies, which
failed in a bid for Honeywell International, is however
acquiring Specialty Equipment Companies.

The UTX conglomerate made significant headway last week as the
DOW resurfaced from testing its lows at 10,300.  The
strengthening marketplace and company-specific news, delivered
after-hours on Friday, were catalysts for UTX to move through
the tough resistance line at $76 and $77 this week.  On Friday
evening, Metrologic Instruments, a maker of bar-code scanners,
agreed to pay a total of $19 million in a stock purchase
agreement to acquire 100% of the common stock of Adaptive Optics
Associates, a unit of United Technologies that produces laser
vision systems used by shippers and semiconductor-equipment
makers.  The acquisition is expected to close on 12-29.  Company
officials couldn't immediately be reached to comment; although
there's no question the deal pleased the Street.  Shares of UTX
were set in motion on Tuesday and bullishly moved off the
developing near-term support at $76.  UTX made a strong show at
$78.25 before settling to $77.69 at the close.  Today's action
was also promising.  The $76 mark served as a launching platform
following amateur hour and UTX saw an impressive 4.9% advance in
active trading.  Today's peak of $79.75 established the stock's
second consecutive 52-week high, after almost a month of
steadfast consolidation.  We're anticipating a breakout above
the next level of opposition at $80 as UTX gains momentum in an
advancing market and approaches its earnings' release this
month.  Mark your calendars.  United Technologies Corp is
confirmed to announce in just a few weeks on January 18th,
BEFORE the opening bell.  The more enterprising entries can be
found on strong bounces off the rising 5-dma ($76.35), which is
just above our $76 stop loss.  If you take this course of
action, be sure there's enough buyers to drive UTX through the
$80 resistance.  Others may want to wait for another breakout
and buy into strength as UTX shatters its recent 52-week
records.  Keep your eye on other conglomerates such as EMR, TYC,
HON, and GY, who are also currently moving higher with the DOW.

BUY CALL JAN-70 UTX-AN OI=1125 at $10.50 SL=7.50
BUY CALL JAN-75*UTX-AO OI=1767 at $ 6.38 SL=4.25
BUY CALL JAN-80 UTX-AP OI=1967 at $ 3.00 SL=1.50
BUY CALL FEB-75 UTX-BO OI= 735 at $ 7.75 SL=5.50
BUY CALL FEB-80 UTX-BP OI= 273 at $ 4.88 SL=3.00



No new puts today.


USB - call play
Adjust from $27.50 up to $29

NKE - call play
Adjust from $50 up to $53

JNJ - call play
Adjust from $100 up to $102

CIEN - call play
Adjust from $65 up to $70

LVLT - call play
Adjust from $27 up to $30

COST - call play
Adjust from $34 up to $35

IVGN - call play
Adjust from $75 up to $79

TXN - call play
Adjust from $42 up to $46

RFMD - call play
Adjust from $22 up to $25

LH - call play
Adjust from $163 up to $168

COF - call play
Adjust from $59 up to $60


No dropped calls today.


PMCS $84.50 +9.50 (+7.50)  The Philadelphia semiconductor sector
staged a dramatic rally today of over 4%, or 24.77 points.
Whether this is the start of a new recovery in the sector, or
simply an oversold bounce remains to be seen.  Our PMCS put has
provided us with excellent profits since we picked it at $87.50,
however, today the stock exhibited bullish behavior, and closed
above our stop level of $79.  The stock has a long way to go
before it establishes a true up trend, however, at this time, we
want to take our profits and continue to reassess the situation
before taking additional positions in puts.

INTU $37.94 +3.00 (+2.44) Following Monday's intraday low of
$33.25, our decision to set a lower protective stop at $37
turned out to be a wise move.  Today the PC and software sector
did, in fact, trade lower across the board; but unfortunately,
INTU was an exception.  A Strong Buy recommendation from analyst
Michael Wallace at UBS Warburg and the stock's attractive price
set off a robust buying spree.  INTU quickly surged to the $37
and $38 levels by late morning.  The steadfast trading activity
through the day kept the share price above the 5-dma ($37.26),
kicking put players to the curb.  The violation of our stop loss
and the 8.6% bullish upswing clearly warrants an exit from INTU
this evening.

AFCI $18.19 +1.31 (+0.69) While the NASDAQ volatility has subsided
a bit with the holiday season, it appears that AFCI has found itself
a temporary bottom.  The day after we added this put play, the stock
spiked down to $12.75 and rebounded.  This low volatility put play
very well may have rolled over, but selling in AFCI and the broader
market has slowed.  Today's close above our stop of $18 is causing
us to drop it tonight.

VZ $50.56 +0.81 (+2.44)  This put play was short lived as the stock
has made a low volume advance during the past two sessions.  If the
sellers return to the market, VZ very well may retreat to test lows
of last Friday.  Although VZ did not close above our stop of $51,
the trading this week has dictated that we drop this low volatility
put in favor of better plays.

CELG $30.56 -1.50 (-5.69) We are dropping this top-performing put
play tonight and taking our profits.  Capitalizing on $14 points of
downside, or 46%, in two weeks isn't bad at all.  Today, volume was
stronger than average and CELG recovered throughout the day to close
near the high.  Buyers stepped in around $27.50 - $28 and accumulated
the stock into the afternoon.  If the sellers return, CELG may retest
that area, however, we will gladly book our profits and close this

HAND $41.63 +5.75 (+5.63) Unfortunately, today's light volume rally
in HAND stopped us out of this put play.  HAND put in a higher low
today from yesterday as buyers showed up a bit earlier.  They stepped
in at the $30 level yesterday and held $33 today.  HAND could end up
rolling over if sellers return to the market, but given our $40 stop,
we're out.  Look for HAND to rollover from its 10-dma at $43.66 if
still in the position.  Otherwise, use stops.

DGX $137.13 +6.25 (-0.88) Buyers piled into this issue from the start
of trading on Wednesday.  Opening at $128, the stock never looked
back.  The premise of this aggressive put was to take advantage of
the profit taking pullback after Friday's huge gains.  After
yesterday's flatlining at $130, we lowered our stop to $138.
Although DGX closed fractionally below that, the fact that buyers
showed up from the get-go has resulted in closing this play.
Resistance will remain at $142 with support at $133 and $130.


Watching Market Capitalization And Liquidity Trends
By Mary Redmond

Market capitalization and liquidity trends are two one of the most
important factors to consider when evaluating stock and option
trading candidates.  At this juncture, we need to pay attention to
the specific sectors, and market capitalization of the stocks
which are likely to outperform the markets, if the Federal Reserve
lowers interest rates, as they are expected to.

Market capitalization is a measure of the total size of the
company.  It is calculated by multiplying the number of shares
outstanding by the price per share.  Market cap is important
to traders for a number of reasons.

Most stocks tend to trade in tandem with their industry sector,
and many trade in tandem with stocks with a similar market cap.
For example, within the technology sector, large cap software,
networking,  and semiconductor stocks usually rally or decline
as sectors.  Within the financial sector, the major regional banks
tend to trade in tandem, often separately from the brokerage and
investment banking sector, and the small regional banking sector.
It is best to be as specific as possible when monitoring sectors.
For example, there have been times in the last few months when
the small regional savings and loan bank stocks rallied, while the
large commercial and money center banks did not.

The most blatant example of this type of sector and market cap
movement occurred during late 1999 and early 2000, when the
Nasdaq 100 outperformed every other index by a huge margin.
The Nasdaq 100 is the index of the 100 largest technology stocks
on the Nasdaq, measured in market capitalization.  This phenomena
was driven by both earnings and liquidity trends.

Last January, February, and March the Investment Company
Institute reported that, large cap technology growth stock funds
received between $20 to $40 billion per month in new cash. At
the same time, non tech equity funds actually experienced net
redemption.  The impact of this was seen in the performance of
the Nasdaq, and the large cap growth stocks, like CSCO, MSFT, and
INTC, which rallied beyond their shareholders' dreams, while the
Dow simultaneously fell to 9800, and small cap stocks performed
poorly as a sector.

This became a self perpetuating trend, in which investors
continued to send money only to the large cap technology growth
stock funds, because they were the only ones which showed
consistent performance.

One lesson to glean from this is the fact that company earnings
and valuations drive growth in stock prices over the long term,
but it is very difficult to fight liquidity trends over the short

Despite the tumultuous year we have had in 2000, investors
continued to deposit cash into equity funds.  During August,
September and October, equity funds received between $17 and
$24 billion per month, with about half of the money going to
growth funds and half to aggressive growth funds.  However,
in the last six months, the average weekly cash flow to
technology funds has declined significantly.  Technology
funds are now taking in an average of $500 million per week,
which is down from a peak average of $2.5 billion per week
last winter.

In a way, there may be a silver lining to the cloud of market
despair we experienced this year.  Investors seem to be starting
to deposit money to a wide range of sector funds, including
financials, health care, and others.  In order to see a healthy,
sustainable long term market rally, we need to see all of the
major sectors rallying.

In addition, the level of cash deposited to money market funds
was almost as high as that deposited to equity funds, which
indicates that there is plenty of money left over to enter the
market.  The Investment Company Institute has reported that
money market funds have over $1.86 trillion in deposits, and
have been receiving between $20 to $50 billion per month.  People
are flush with cash, but it may take a little time before they
feel safe committing money to the market the way they have in
the past.

Another important point to consider when evaluating market
capitalization is the type of stocks which funds tend to buy.
Some popular funds receive millions of dollars a day in deposits.
Some mutual fund companies have reported that certain funds
have taken in over $20 million per day during very active
months.  A fund, which receives this much cash is somewhat
restricted in the type of stocks it can buy and sell.  It is
not very realistic for large funds to buy micro cap or
small cap stocks, with market values of $500 million or less.
A very large buy or sell order could cause distortion in the
company's stock price.  For example, if a fund purchased $10
million of a $200 million company, it could distort the price
of the stock to such a large degree that the purchase would be
impractical.  In addition, it is difficult to execute block trades
in very small stocks.

This is one of the reasons it is generally best to stick with
large cap or very large cap stocks when performing fast trading.
Stocks with a market cap in the range of $5 billion or more are
usually very liquid, which gives short term traders better

However, keep in mind that stocks which have a very large market
capitalization usually tend to move more slowly than smaller
stocks. For example, GE is the largest stock traded on the
exchanges at present.  GE has a market cap of over $488 billion.
It takes a much larger amount of money to move GE up 2 or 3 points
than it does to move a company like TQNT, with a market cap of just
over $3 billion.  A slower moving stock may have lower volatility,
which is an advantage for option buyers, however, GE traders need
more patience, as it can take weeks for the stock to move up 5 to
10 points.  GE is not usually a good day trading candidate.

It is worth noting that the week ending December 20th showed the
largest net redemption of cash from equity funds on record,
according to AMG Data Services.  Including capital gains
distributions, equity funds experienced a net outflow of over
$19 billion.  The four week moving average of cash out of
equity funds is in the range of $8 billion.  The significance of
this is the fact that investors are showing a higher level of
fear than they have in an entire decade.  People seem to be
terrified of a recession, which may mean that any economic
situation other than a recession might cause a massive rally.
Not surprisingly, the net redemption corresponded to a very
high VIX.X.

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CIEN - Ciena Corp $79.88 +5.69 (+2.88 this week)

CIENA Corporation's market-leading optical networking systems
form the core for the new era of networks and services
worldwide. CIENA's LightWork architecture enables next-
generation optical services to transmit signals simultaneously
over the same circuit.  This multiplexing system changes the
fundamental economics of service-provider networks by
simplifying the network and reducing the cost to operate it.
About 45% of sales come from outside the US markets.

Most Recent Write-Up

Any one interested in high-risk recovery potential?  Last week
CIEN fell a whopping 38% after announcing its agreement to buy
closely held Cyras Systems for $2.13 bln in stock and assumed
debt.  CIEN hit a lower bottom of $59.56 while taking its
beating amid the resigning NASDAQ.  Not even new BUY coverage
from ING Barings could keep CIEN afloat.  But then Santa Claus
came to town on Friday.  This large equipment stock rocketed
$17.13, or 28.6% to $77 on the heels of a rallying marketplace.
The momentum was solid and CIEN traded on 1.4 times its normal
volume.  The dynamic breakout pushed the stock through the 5-dma
($69.63) resistance ceiling.  Today the share price consolidated
at $70-$71 and then broke to the upside for a strong showing in
the $72 and $74 range.  Near-term support is established at $70,
but firmer support is near the $65 level.  If CIEN retraces to
$65 for a weak close, we'll the exit the play that evening, so
consider setting stops.  Aggressive traders might consider
taking entries off the supportive $70 mark on strong bounces, or
better yet, buy into strength as CIEN moves above the next level
of opposition at $80.  Look for other optical stocks like JDSU,
GLW, and SCMR to help move the sector higher over the short-


CIEN performed well today as buyers jumped into the stock from the
opening bell, albeit on light volume.  Support appears to be solid
at $70 with resistance overhead at $80.  With buyers typically
waiting in the wings for CIEN, it makes CIEN a very tradable stock.
Look to enter this call play on any bounces from intraday support
at $73, or on a high volume breakout from $80.

BUY CALL JAN-75 UEE-AO OI=2236 at $12.63 SL= 6.25
BUY CALL JAN-80*UEE-AP OI=2968 at $10.00 SL= 5.00
BUY CALL JAN-85 UEE-AQ OI=2438 at $ 8.00 SL= 8.75
BUY CALL FEB-75 UEE-BO OI= 624 at $16.75 SL=10.25
BUY CALL FEB-80 UEE-BP OI= 138 at $14.50 SL= 8.50



A Christmas solar eclipse and now a market rally...coincidence?

Stocks moved higher today as bargain-hunting investors emerged in
a number of recently downtrodden sectors.  Industrial issues were
the driving force behind the rally and the top performers on the
blue-chip barometer included Wal-Mart (WMT), Hewlett-Packard (HWP),
Home Depot (HD), Procter & Gamble (PG), Walt Disney (DIS) and 3M
(MMM).  Retail companies was particularly active as analysts began
reviewing new sales reports from the holiday season.  UBS Warburg
said retail sales during the fourth week of December showed mixed
results.  In fact, despite a pickup in demand, they weren't strong
enough to offset the poor results that occurred in the second and
third week of December.  At the same time, Goldman Sachs lowered
its 2000 and 2001 earnings estimates on many of the major issues
in the group based on continued top-line margin pressure.  Among
technology issues, traders quickly shrugged off news that computer
security products maker Network Associates will post a substantial
fourth quarter loss, instead of a profit.  After the short-lived
slump, the Nasdaq managed respectable gains on strength in chip,
hardware and networking issues.  Internet shares were also popular
after SG Cowen reported that it's bullish on business-to-business
stocks for 2001 as the sector should continue to see strong growth
despite the economic backdrop.  More importantly, the B2B segment
will be less affected by the IT spending slowdown and that bodes
well for the battered group.  Among broader market sectors, major
drugs, transportation and consumer products shares advanced while
biotechnology, precious metals, paper, banking and utility stocks
retreated.  Energy and oil service issues also consolidated after
Tuesday's rally.  Analysts say that investors can now take comfort
in the fact that although there may be additional downside in the
future, public sentiment has swung from a positive extreme, moving
well into negative territory.  For those who view the market from
a contrarian perspective, that's the best Christmas present we
could hope to receive.

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

IMPH    JAN    45    42.69  64.81    $2.31   5.5%

Naked Puts:

Stock  Strike Strike Cost   Current Profit  Monthly
Symbol Month  Price  Basis  Price   (Loss)  Return

IMPH    JAN    40    38.87  64.81    $1.13   9.2%
IVGN    JAN    60    58.50  80.63    $1.50   7.0%
DCTM    JAN    40    38.94  49.00    $1.06   6.8%
IDPH    JAN   120   117.50 199.94    $2.50   6.4%
EMLX    JAN    45    43.69  81.63    $1.32   6.3% Adj 2-1 Split
NOK     JAN    40    39.25  44.00    $0.75   4.7%

Sell Strangles:

Stock  Strike Strike Cost   Current Profit  Monthly
Symbol Month  Price  Basis  Price   (Loss)  Return

IMPH    JAN    35p   33.25  64.81    $1.75  11.7%
IMPH    JAN    80c   82.75  64.81    $2.75  17.0%

CEPH    JAN    40p   39.06  56.94    $0.94   8.2%
CEPH    JAN    70c   71.19  56.94    $1.19  10.1%

GMST    JAN    25p   24.37  46.50    $0.63   5.8%
GMST    JAN    65c   65.75  46.50    $0.75   6.8%

Naked Calls:

Stock  Strike Strike Cost   Current Profit  Monthly
Symbol Month  Price  Basis  Price   (Loss)  Return

QLGC    JAN   130   131.50  78.81    $1.50  10.1%
BEAS    JAN    85    86.25  74.63    $1.25  10.1%
ADBE    JAN    80    81.00  65.50    $1.00   8.1%
VRTS    JAN   160   161.69  93.00    $1.69   6.1%

Credit Spreads:

Stock  Pick    Last     Position   Credit    C/B    G/L   Status

ESRX  $88.88 $104.50   JAN65p/70p  $0.50   $69.50  $0.50   Open
AFFX  $63.63  $75.75   JAN40p/45p  $0.69   $44.31  $0.69   Open
VAR   $62.00  $66.50   JAN50p/55p  $0.50   $54.50  $0.50   Open

New Candidates:

This following group of plays is simply a list of candidates to
supplement your search for profitable trading positions.  As
with any investment, you must decide if the selections meet your
criteria for potential plays.  Only you can know what strategies
are suitable for your skill level, risk-reward tolerance and
portfolio outlook.  In addition, we recommend that you avoid any
strategy or technique in which you are not completely comfortable
with the potential loss, the necessary adjustments and the common
entry-exit strategies.  (We monitor the positions marked with ***).


BULLISH PLAYS - Covered Calls, Naked Puts, & Combinations

AFFX - Affymetrix  $75.75  *** Rally Underway! ***

Affymetrix is engaged in the field of DNA chip technology.  The
company has developed and intends to establish its GeneChip system
as the platform of choice for acquiring, analyzing and managing
complex genetic information in order to improve the diagnosis,
monitoring and treatment of disease.  The GeneChip system consists
of disposable DNA probe arrays containing gene sequences on a chip,
certain reagents for use with the probe arrays, a scanner and other
instruments to process the probe arrays, and software to analyze
and manage genetic information from the probe arrays.

Affymetrix is one of the leaders in the field of Genomics and
investors, as well as industry experts, are bullish on the
company's outlook.  Analysts say that Affymetrixs' GeneChip probe
arrays could significantly reduce the cost and time required for
high-volume polymorphism analysis, which is currently performed
through more labor intensive sequencing techniques. The GeneChip
probe array technology and systems integrate chip fabrication
techniques, solid phase chemistry, molecular biology, software and
robotics.  Affymetrix currently is selling a portfolio of custom
and standard expression monitoring GeneChip arrays including some
unique products that monitor the expression of the majority of full
length and partial gene sequences contained in publicly available
sequence databases that correspond to human, mouse, rat and yeast

The current pattern of consolidation has produced a relatively
stable trading range and today's move above a recent resistance
area suggests there is excellent potential for further upside

AFFX - Affymetrix  $75.75

Action    Month &  Option  Open     Closing  Cost     Monthly
Req'd     Strike   Symbol  Interest Price    Basis    Return

Sell Put  JAN 55   FIQ MK  122       1.19    53.81     9.6% ***
Sell Put  JAN 60   FIQ ML  205       2.13    57.87    16.3%


BGEN - Biogen  $62.50  *** Entry Point! ***

Biogen is a biopharmaceutical company principally engaged in the
business of developing, manufacturing and marketing drugs for
human health care.  Biogen currently derives revenues from sales
of its AVONEX product for the treatment of relapsing forms of
multiple sclerosis, and from royalties on worldwide sales by the
company's licensees of several products covered under patents
controlled by Biogen.  Such products include certain forms of
alpha interferon, hepatitis B vaccines and hepatitis B diagnostic
test kits, among others. In addition, through collaborations, the
company is involved in the clinical developments of the other
products, including AMEVIVE, adenosine antagonists, ANTOVA, the
LT-Beta Receptor, VLA-4 Inhibitors, Hedgehog Proteins, and gene
therapy products as well as other programs.

Biogen is one of the oldest blue-chip issues in the biotechnology
group and it has enjoyed consistent growth and sound fundamental
management.  The company has an impressive $659 million of cash on
its balance sheet and they recently announced plans to repurchase
4 billion of its outstanding shares, in a move intended to boost
BGEN's slumping share value.  Biogen also intends to use the extra
funds to expand manufacturing and research & development plans, to
bolster its pipeline of new products.  In addition, the company
has announced several deals in the past few months, including a
research-development agreement with targeted Genetics (TGEN) to
develop five potential gene therapy products, and a deal with Elan
to jointly develop Elan's MS drug, Antegren.  Biogen's earnings
are due in mid-January.

Traders who favor the outlook for the company can use one of these
positions to establish a favorable cost basis in the issue.

BGEN - Biogen  $62.50

Action    Month &  Option  Open     Closing  Cost     Monthly
Req'd     Strike   Symbol  Interest Price    Basis    Return

Sell Put  JAN 50   BGQ MJ  3094      0.63    49.37     6.3% ***
Sell Put  JAN 52.5 BGQ MX  1245      1.00    51.50     8.3%
Sell Put  JAN 55   BGQ MK  3528      1.56    53.44    10.8%


FCEL - FuelCell Energy  $72.25  *** Bracing For A Rally? ***

FuelCell Energy is a developer of electrochemical technologies
for electric power generation and has developed a proprietary
patented fuel cell known as the Direct FuelCell.  A fuel cell is
a device that electrochemically converts the chemical energy of
a fossil fuel into electricity without the combustion of fuel.
The fuel cell system feeds a fuel, such as natural gas, into the
fuel cell where the fuel and air undergo an electrochemical
reaction to produce electricity.  The company manufactures
carbonate fuel cells, generally on a contract basis.

With the rising costs of energy and the increasing demand for
pollution control, investors have begun to look at companies
offering renewable energy sources and environmental services.
FuelCell Energy is a leader in this segment and because of the
non-combustion, non-mechanical power generation process, their
fuel cell is much more efficient than the conventional power
plants.  Emissions of sulfur and nitrogen oxides are minimal,
and other pollutants are almost non-existent.  With the only
moving parts being the air blower, as opposed to large rotating
turbines, fuel cells are extremely quiet.  In addition, fuel
cells achieve high efficiency at extremely small sizes, allowing
fuel cells to satisfy market needs for distributed generation,
such as providing electrical power to a residential community
or small business district.

For traders who agree with a bullish outlook for the company,
this conservative position offers a method to participate in
the future movement of the underlying issue with relatively low
risk and favorable reward potential.

FCEL - FuelCell Energy  $72.25

PLAY (conservative - bullish/credit spread):

BUY  PUT  JAN-45  FQG-MI  OI=26   A=0.81
SELL PUT  JAN-50  FQG-MJ  OI=181  B=1.25
INITIAL NET CREDIT TARGET=$0.50-$0.56  ROI(max)=11%


LEH - Lehman Bros.  $70.19   *** On The Move! ***

Lehman Brothers Holdings is a global investment bank that serves
institutional, corporate, government and high-net-worth individual
clients and customers.  Lehman is engaged primarily in providing
financial services and the company's business includes capital
raising for clients through securities underwriting and direct
placements, corporate finance and strategic advisory services,
private equity investments, securities sales and trading, research
and the trading of foreign exchange, derivative products and other
commodities.  The company acts as a primary market maker in all
major equity and fixed income products in both the domestic and
international markets.

A recent search for bullish issues in the Investment Brokerage
group yielded a number of candidates.  On Tuesday, we offered a
play on Goldman Sachs (GS), but Lehman Brothers (LEH) is another
excellent stock in the sector.  Analysts say that these financial
issues are going to benefit from any future reductions in interest
rates and since LEH is considered one of the best in the banking
business, their shares will likely see exponential gains when the
rally finally occurs.  In addition, Lehman Brothers is one of the
few mid-size independent firms that has yet to be acquired by an
industry giant, and the company would be the most likely candidate
to be swallowed up by a larger rival in the coming year.

LEH - Lehman Bros.  $70.19

Action    Month &  Option  Open     Closing  Cost     Monthly
Req'd     Strike   Symbol  Interest Price    Basis    Return

Sell Put  JAN 55   LEH MK  925       0.88    54.12     7.8% ***
Sell Put  JAN 57.5 LEH MY  983       1.25    56.25     9.9%
Sell Put  JAN 60   LEH ML  1593      1.63    58.37    11.0%


QCOM - Qualcomm  $89.88  *** Still An OIN Favorite! ***

Qualcomm is a leader in developing and delivering innovative
digital wireless communications products and services based on
the company's CDMA digital technology.  The company's business
areas include integrated CDMA chipsets and system software;
technology licensing; Eudora email software for Windows and
Macintosh computing platforms; satellite-based systems including
portions of the Globalstar system and wireless fleet management
systems, OmniTRACS and OmniExpress.  Qualcomm owns patents which
are essential to all of the CDMA wireless telecommunications
standards that have been adopted or proposed for adoption by
standards-setting bodies worldwide.  Qualcomm has licensed its
essential patent portfolio to a number of telecommunications
equipment manufacturers worldwide.

In early December, Qualcomm was listed in almost every bullish
play category on the OIN's home page, but over the past few
weeks, the issue has suffered from profit-taking and the overall
downtrend in technology issues.  With today's recovery above a
short-term resistance area near $85, the issue appears poised
for further gains.  Traders who missed the run-up earlier in the
month can participate in the future movement of the stock with
these conservative positions.

QCOM - Qualcomm  $89.88

Action    Month &  Option  Open     Closing  Cost     Monthly
Req'd     Strike   Symbol  Interest Price    Basis    Return

Sell Put  JAN 67.5 AAO MU  2004      1.19    66.31     8.2%
Sell Put  JAN 70   AAO MN  7840      1.50    68.50    10.2% ***
Sell Put  JAN 72.5 AAF MF  4066      1.88    70.62    12.2%
Sell Put  JAN 75   AAF MO  6194      2.38    72.62    13.4%


Neutral Plays - Straddles & Strangles

BRCM - Broadcom  $90.00  *** Volatility Shrinking! ***

Broadcom Corporation is a provider of highly integrated silicon
solutions that enable broadband digital transmission of voice,
video and data throughout the home and within the business
enterprise.  These integrated circuits permit the cost-effective
delivery of high-speed, high-bandwidth networking using existing
communications infrastructures that were not originally designed
for the transmission of broadband digital content.  Using their
proprietary technologies and advanced design methodologies, the
company designs, develops and supplies integrated circuits for a
number of the most significant broadband communications markets,
including the markets for digital set-top boxes, cable modems,
high-speed office networks, home networking, direct broadcast
satellite and terrestrial digital broadcast, and DSL (digital
subscriber lines).

The last two months have seen a substantial drop in Broadcom's
shares as the technology sector fell to yearly lows.  However,
the recent volatility has begun to diminish and the technical
indications suggest the issue is finally starting to establish
a more docile pattern with a reasonable limit to its movements.
In this conservative premium-selling position, we will use the
recent volatility and the inflated option prices to initiate a
neutral play with a favorable premium.  The probability of the
share value reaching our sold strikes is rather low, but there
is always the possibility of a significant change in character,
so monitor the position on a regular basis.

BRCM - Broadcom  $90.00

PLAY (conservative - neutral/credit strangle):

Action    Month &  Option  Open     Closing  Cost     Monthly
Req'd     Strike   Symbol  Interest Price    Basis    Return

Sell Put  JAN 45   RCQ MI  363       1.25    43.75     8.6% ***
Sell Call JAN 160  RDU AL  877       1.06   161.06     7.4% ***


Sell Put  JAN 50   RCQ MJ  848       1.88    48.12    12.5%
Sell Call JAN 155  RDU AK  740       1.31   156.31     9.0%


RIMM - Research In Motion  $77.19  *** Trading Range? ***

Research In Motion is a designer, manufacturer and marketer of
wireless solutions for the mobile communications market.  With
the development and integration of hardware, software and other
ervices, RIM provides solutions for seamless access to valuable
information including e-mail, messaging, Internet and Intranet
applications.  RIMM's technology also enables an array of third
party developers and manufacturers in North America and around
the world to enhance their products and services with wireless
connectivity.  RIMM's portfolio of products includes the RIM
Wireless Handheld product line, the BlackBerry wireless email
solution, wireless personal computer card adapters, embedded
radio modems and software development tools.

This play is simply based on the current price or trading range
of the underlying stock and its recent technical history.  The
recent downward movement in RIMM's share value was halted near
$50 in late November and after an ensuing recovery rally, the
second sell-off found support near $65; a bullish indication.
However, the issue has also achieved lower lows in each of its
three attempts to reverse the bearish trend; a negative trait
that will affect its upward movement in the near-future.  With
regard to the near-term outlook for technology issues and the
relatively well-established trading range for RIMM, these plays
offer excellent speculation for traders who participate in
premium-selling strategies.

RIMM - Research In Motion  $77.19

PLAY (conservative - neutral/credit strangle):

Action    Month &  Option  Open     Closing  Cost     Monthly
Req'd     Strike   Symbol  Interest Price    Basis    Return

Sell Put  JAN 50   RUL MJ  734       1.56    48.44    12.1%
Sell Call JAN 115  RUL AC  517       0.94   115.94     7.6%


Sell Put  JAN 55   RUL MK  514       2.25    52.75    16.8%
Sell Call JAN 110  RUL AB  218       1.31   111.31    10.3%

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