Option Investor
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Daily Newsletter, Wednesday, 01/24/2001

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The Option Investor Newsletter                Wednesday 01-24-2001
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************************************************************
MARKET WRAP  (view in courier font for table alignment)
************************************************************
        01-24-2001        High      Low     Volume Advance/Decline
DJIA    10647.00 -  2.80 10680.30 10619.70 1.29 bln   1439/1407
NASDAQ   2859.15 + 18.76  2892.36  2828.32 2.57 bln   2072/1742
S&P 100   714.33 +  2.29   717.20   710.71   totals   3511/3149
S&P 500  1364.30 +  3.90  1369.75  1357.28           52.7%/47.3%
RUS 2000  502.25 +  0.19   505.15   501.34
DJ TRANS 2942.18 - 59.82  3003.01  2935.33
VIX        24.56 +  0.70    25.54    24.33
Put/Call Ratio      0.53
*************************************************************

Waiting for Greenspeak?

Investors spent the day running in place while waiting for the
green light from the Fed chief. The markets got mixed news from
the various earnings reports but with the Employment Cost Index
and with words coming down from the mountain expected tomorrow
there was no rush to buy. The good news? There was no rush to
sell either. Just another sign in a long line of bullish signs.







Unfortunately the news after the bell was not as bullish as we
would have hoped. The earnings monster rose from its slumber
and took a bite out of the fiber optic sector. Corning (NYSE:GLW)
announced earnings that beat the street by a whopping six cents
but then warned that sales going forward would be weaker due to
slowing telecom spending. The slow down in orders was expected
to pickup in the fall but that did not pick up the stock. GLW
was down -$5 in after hours.

SDLI also announced earnings that beat the street by four cents.
They also announced that they were delaying the JDSU merger due
to anti-trust scrutiny. After the merger the combined company
would control up to 80% of the pump laser market. This would
not pass the trust concerns and they are expected to sell that
business to Furukawa Electric Co from Japan. The merger is still
expected to take place by the end of February but investors did
not like the news and dropped Nasdaq:SDLI for a -$13 loss in after
hours trading.

Nasdaq:AMGN also announced earnings and missed street estimates
by one to three cents depending on how analysts decide to apply
a one time $25 million contribution. AMGN dropped -$2 in after
hours trading and analysts came to their rescue quickly. They
said you don't want to own AMGN for their current products but
for the products in the pipeline which should increase earnings
considerably in the future. Some products were weaker however as
some customers are switching to other cheaper drugs.

Etrade (Nasdaq:EGRP), announced earnings that doubled the analysts
expectations of a penny. The bright side was account growth. With
over 3.6 million accounts Etrade is now the second largest online
broker. They added +244,000 accounts last quarter which was more
accounts than most online brokers have in total. They have almost
doubled their accounts since the two million reported last year
at this time.

Lucent, failed again. What is a quarter without a Lucent warning
and earnings miss? Nyse:LU posted a larger than expected -$.30
loss and announced they are laying off 10,000 employees or 8%
of their work force. They are planning to reduce costs by $2
billion for 2001 by contracting their products instead of doing
their own manufacturing. This is a plus for companies like
NYSE:CLS and NYSE:JBL which already have contracts with Lucent
to produce a wide range of products.

NYSE:MCD suffered from mad cow disease and for the first time in
its 34 year history posted lower earnings than the prior period.
McDonalds said that fear of Europe's mad cow disease had slowed
hamburger consumption and raised the cost of beef. In reality it
is the greasy French fries you die from not the hamburger! Bypass
anyone?

Nasdaq:SNDK also reported earnings that missed street estimates
and SNDK got hammered with a -$11 loss in after hours. Claiming
higher inventory and slower sales could impact the next two
quarters investors were not happy. NYSE:AOL gained +1.60 after
announcing another 2000 job cuts in an effort to streamline
the merged AOL/TWX companies.

All the earnings listed above are nothing more than market noise
and the real event is still the Greenspan Humphrey-Hawkins
testimony on Thursday and the ECI report. The markets are slowly
backing off the 50 basis point cut theory and they will be
dissecting every word and inflection of Thursday's Greenspeak
to decide if even a 25 point cut is still in the cards. It is
a proven fact that Greenspan wants to continue using the huge
budget surplus to pay down the national debt instead of a tax
cut. Manufacturing is in a recession and other sectors are close
but a tax cut would help stimulate a new expansion by giving
investors a reason to spend. With existing housing sales expected
to come in at -2.3%, a number protected by lower interest rates,
the slow down is apparent but still not critical. The market
rebound from Jan lows may have already doomed another rate cut
and with the junk bond market thriving again Greenspan may
decide to take a more passive policy instead of the aggressive
moves everyone wants.

Tune in tomorrow and read between the lines for hints, clues,
guesses or even out right obfusca-speak. (Art Cashin for plain
English, structured in such a way to confuse and misdirect the
listener.) The Employment Cost Index will be announced before
the Greenspan speech and is expected to be up +1.1%. A higher
number could raise fears of inflation from a too tight job
market and temper his "all is well" direction.

As you can tell by the markets lack of direction today, nobody
wanted to take any serious positions before the Greenspeak event
and the ECI. If Greenspan accidentally says something that
analysts take as confirmation of another 50 basis point cut
then expect the market to react positively for the next three
days. Conversely, if he creates a feeling of "the economy is
okay but we will keep watching" then the market is likely to
retreat and regroup until after the meeting. Plan accordingly!

On Monday the NYSE makes a major change. All 3,522 stocks will
be going decimal. Currently there are only 159 stocks trading
in the test group but with no major problems the exchange has
decided to go all the way. Do you even remember the CNBC ticker
in fractions? How quickly we adapt to change.

Enter passively, exit aggressively!

Jim Brown
Editor
www.OptionInvestor.com


************************************
Spring Options Workshop and Bootcamp
April 5th-9th, Denver Colorado
************************************

OptionInvestor is proud to announce our third annual Spring
option workshop in Denver Colorado. This power packed five-day
event is structured to fully educate you on advanced option
strategies and will make you a better and more profitable trader.

If you attended the March Denver Expo last year and thought it
was the best function you had ever attended... You haven't seen
anything yet! Great food, entertainment, education and just
plain fun in sunny Denver. The biggest complaint in March was
the massive weight gain experienced by the attendees from the
gourmet menu. We know how to put on a function. Ask anyone who
came last March!

We guarantee the speaker lineup to be second to none. In the
October seminar not only did we have Jim Brown and over 15 of
the OIN staff but Steve Nison, the father of modern candlestick
charting. Also, Dick Arms, creator of the Arms Index or the Trin
Indicator, Gregory Spear, author of the Spear Report, Stan Kim,
founder of the Snail Trader System and Jim Crimmins, president
of TradersAcounting.com. We promise the lineup this April will
exceed your expectations again!

This is not a beginner seminar but if you feel the need to brush
up on the basic trading strategies then we have an optional boot
camp the day before the four day seminar begins. If you have
traded options before and you are comfortable with the basic
strategies then this seminar will take you to a new trading
level. If you have been trading options for sometime and are
ready to broaden your knowledge and improve your trading results
in all kinds of markets then this is for you. Meet and interact
in a small group setting with the writers you have seen in
OptionInvestor for the last four years.

We are starting the seminar with an optional one day boot camp
which will cover all the basic strategies, calls, puts, leaps,
covered calls, naked puts, spreads, straddles, etc. This will
help investors not familiar with all the basic strategies get
up to speed before the intensive education and the advanced
material in the main seminar. The boot camp will be 8 hrs of
personal instruction by the OIN staff.

The main seminar will begin with a reception, dinner and
entertainment on Thursday night and continue non-stop until
noon on Monday. We mean non-stop. We don't quit until you do
and many optional sessions last until 10:PM or later.

The detailed schedule will be posted in about two weeks. There
will not be individual breakout sessions during the day. Each
topic will be covered in 1-2 hr general sessions taught by one
or more OptionInvestor staff and presented on three giant screens.
In the evening we will offer five of our popular chalk talk
sessions for that personal question and answer interaction.

The list of instructors is led by Jim Brown and will include
many OIN staff with outstanding guest speakers during lunch
and dinner each day. The Spring Denver Expo seminars fill up
fast and seating is limited! SIGN UP NOW or risk missing out
on this opportunity.

Unlike other seminars with only two or three instructors, you
will get in-depth knowledge from many different instructors
who are experts in their field.

The cost for the four-day workshop, April 6th to 9th is only
$2995 (spouse only $1495). This includes breakfast, lunch and
supper each day. All course materials, a CD of all the
presentations and a professional video package of the entire
seminar so you can review the material at home in the comfort
of your living room.  There is also a $500 discount if you
have attended a prior OIN seminar.

This is not a prepackaged presentation that gets repeated over
and over with stale information. This is a one-time production
and everything is fresh, live and as current as we can make it.
The videos will have your real time questions and answers and
not some from a prior class. Where else can you get intensive
yet personalized options education like this?

Do not delay as seating is very limited.
We guarantee you will not be disappointed!

You can pay for your education one bad trade at a time or you
can invest less money one time to learn how to do it right.

Click here for more info:

https://secure.sungrp.com/workshop/april01/index.asp


If you have not been to one of our Denver Expo seminars before
here are some comments from previous attendees:


The words herein are totally inadequate to express what I am
feeling about you and all the OptionInvestor organization. But
this medium is all I have. Thank you more than these few simple
words can say.

Wow, what a seminar! In my 25 years of investing I have attended
many instructional conferences, but I have never, never experienced
one like your Options Expo. The instructors were absolutely tops.
Subjects, generally were on target. Especially for me, the Skybox,
index funds/options and the early morning strategies and trading
were particularly great. The attention to the many details and
nuances were especially evident, and I guess most of the credit
that area goes to your great support team.

Now, the real challenge is to apply and implement the powerful
knowledge I was exposed to.

Sincerely and warmly,
Kevin Hughes, Denver

************

Jim & Staff,

I am sitting in the hotel room after a great 3 days in your
seminar. I can't tell you how pleased I am and want to thank
each of you for a job well done. Having been responsible for
events like this, albeit on a much smaller scale, I can recognize
all the hard work that went into the seminar. Each member of the
staff is to be congratulated!! The seminar confirmed my belief
that the OIN staff really cares about the success of their
subscribers. Jim, you all should be proud of the work you do to
enrich the lives of so many people. It is one thing to amass a
personal wealth. It is a much higher calling to help others meet
their goals in life. I was very impressed that you were emotional
in your closing remarks. You have so much to be proud of -- helping
people fish all over the world! Thanks again and I look forward
to attending another seminar in the future.

My best regards,
Jim Boettcher
Austin, Texas

**************

I must say, that your seminar was outstanding!!! Sign me up for
next year. It is rare that a person of your position would share
so generously your knowledge of his trade. I hope that I will be
able to put into place much of what you taught. Every aspect of
the seminar was first class, from the hotel, to the food, the
instructors and the luncheon speakers. One of the biggest
surprises was your generosity in handing out material, and gifts.

Two weeks ago I attended a competing option seminar in Chicago
and all I got from the was coffee at the morning break, No
handouts, no food and half of the final day was promoting their
web site and additional classes. I must say your seminar far
exceeds what I got from them.

Sincerely yours,
Mike Lillis

***************

Please pass on my thanks to the entire OIN group for a fabulous
EXPO. The seminar far surpassed any expectation that I would have
fathomed, had I attempted to! OIN has the right attitude and the
obvious ability to be a leader and I look forward to many years
of positive experiences with you folks.

Kind regards,
Gwen Richardson

****************

GREAT JOB TO EVERYONE!

I described this event to my friends as a life changing event!
(options aside) ,the quality of people, dedication, sacrifice
of their time (the second 40+ hours a week they don't have to
work but do) they do this because they care, wanting to help
others change their life dramatically (My wife thinks I was
oxygen deprived up there !) I came back a different person for
those who know me that says a lot. Now for the options side
I have to admit there was so much info to absorb, most of it
came to me on the 2000+- mile ride home it all started to fall
into place I feel Very confident (yes Jim this can be bad but
I know this now!) Notice the patience here guys! that's one
change I have a plan to stick to !

THANK YOU !!!
Allan O'Neill

**************

Need we say more? If you want to learn how to be a better trader,
making more and losing less then you should come to this seminar.
We guarantee you will not be disappointed!

For more info:

https://secure.sungrp.com/workshop/april01/index.asp


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**************************************************************


*************
NEW CALL PLAY
*************

GS - Goldman Sachs Group $117.88 +1.88 (+6.94 this week)

The Goldman Sachs Group is a global investment banking and
securities firm that provides a wide range of services worldwide
to a substantial and diversified client base that includes
corporations, financial institutions, governments and high
net-worth individuals. The company provides investment banking,
which includes financial advisory and underwriting, and trading
and principal investments, which includes fixed income, currency
and commodities, equities and principal investments.  GS
recently completed the acquisition of Spear, Leeds & Kellog,
which is engaged in securities clearing, execution and market
making, both floor-based and off-floor.

So you've been watching the Brokerage sector, looking for a way
to profit from the optimism leading up to next week's FOMC
meeting, right?  Well, look no further than GS, as it is leading
the sector higher.  After reporting solid earnings on December
19th, GS helped the Brokerage index (XBD.X) put in a higher low,
and it has been in a nice solid uptrend ever since.  Merrill
Lynch (MER) and Wit SoundView (WITC) certainly helped the bulls'
cause yesterday by posting strong earnings, beating the street
by 5 cents and 4 cents respectively.  Apparently investors liked
the news, as they helped to boost shares of GS up to touch the
upper Bollinger band again today, and the stock closed at its
highest level since mid-September.  Although stochastics have
now reached overbought territory, there is no sign of weakness,
and this is underscored by volume that more than doubled the ADV
in today's session.  No matter how you slice it GS is in a
healthy uptrend, but the question is, "How do I get on board?"
Well, if you're looking for the conservative approach, wait for
the bulls to prove they are serious about pushing the stock
higher.  If they can clear today's high ($120) on continued
robust volume, that will be your all clear signal.  For those of
you that like a little more spice in your life, aggressive
entries can be had on a bounce from intraday support between
$114-115.  Our stop at $113 is rather tight, because we are
looking for a continuation of the rally between now and the
middle of next week.  Any selling that penetrates our stop will
be a strong signal that the bulls lost control, and the bears
have been awakened from their slumber.  Keep an eye on the
XBD.X, as continued strength in the broader index will confirm
our bullish bias on GS.

BUY CALL FEB-115 GS-BC OI= 742 at $8.00 SL=5.75
BUY CALL FEB-120*GS-BD OI=2800 at $5.00 SL=3.00
BUY CALL FEB-125 GS-BE OI=1863 at $3.00 SL=1.50
BUY CALL MAR-120 GS-CD OI=  32 at $8.38 SL=6.00
BUY CALL APR-125 GS-DE OI= 569 at $9.38 SL=6.50

SELL PUT FEB-110 GS-NB OI= 530 at $2.63 SL=4.25
(See risks of selling puts in play legend)

http://www.premierinvestor.com/oi/profile.asp?ticker=GS


ITWO - I2 Technologies Inc. $60.44 +4.03 (-11.31 this week)

ITWO is a global provider of intelligent eBusiness solutions for
supply chain management and enhanced business applications.  On
June 12, 2000 ITWO merged with Aspect Development (ASDV) to
create one of the largest software providers for eBusiness and
eMarketplace solutions.  TradeMatrix, its Internet marketplace,
provides an open digital community powered by i2's advanced
optimization and execution capabilities that help manufacturers
plan production and other related operations.  Clients include
3M, Compaq, Ford and Nokia.

While still a relatively young industry, investors are becoming
more sophisticated when it comes to picking stocks in the B2B
space.  It used to be that B2B issues all moved in unison, as
traders bid up shares of any company that provided e-products and
e-services to businesses on the hope on a bright (albeit
uncertain) future.  However, over the past year, analysts and
shareholders alike have been casting a more discriminating eye
towards the sector.  Now, it appears that they are in the process
of separating the flowers from the weeds.  Former leader ARBA has
seen its stock price languish, as the perceived value in
procurement software has waned.  The intermediary model has also
taken damage, as can been seen in the stock prices of ICGE and
FMKT.  However, it seems that supply chain management has found
favor in attracting investor dollars.  This has helped shares of
ITWO to rally recently, putting the stock back above 50-dma
resistance.  A strong earnings report helped to ignite investor
interest while bullish comments from JP Morgan H&Q and a Buy
rating from Bear Stearns added fuel to the buying frenzy.
Looking ahead, moving average resistance may be encountered at
the 200-dma ($65) and the 100-dma ($70). Sustained buying
momentum, taking ITWO above today's high of $61, could allow for
an entry on strength, if Merrill Lynch's B2B HOLDR (BHH) and
rival MANU confirms upward direction.  For a more aggressive
play, entries on pullbacks could be had at $60, $58, and $56.50,
with moving average support from the 5-dma ($55.60) and the
50-dma ($53.42).  Just make sure ITWO closes above our stop price
at $55.

BUY CALL FEB-55 QYJ-BK OI=1691 at $ 9.63 SL=6.50
BUY CALL FEB-60*QYJ-BL OI=2631 at $ 6.50 SL=4.50
BUY CALL FEB-65 QYJ-BM OI=1932 at $ 4.50 SL=2.75
BUY CALL MAR-60 QYJ-CL OI=  43 at $10.00 SL=7.00
BUY CALL MAR-65 QYJ-CM OI= 123 at $ 8.00 SL=5.75

http://www.premierinvestor.com/oi/profile.asp?ticker=ITWO


************
NEW PUT PLAY
************

AT - Alltel Corporation $67.75 -0.50 (-0.18 this week)

Alltel, with more than 10 million communications customers,
almost $7 billion in annual revenues, and more than 26,000
employees, is a leader in the communication and information
services industries.  Alltel has communication customers in
24 states, and provides information services to
telecommunications, financial and mortgage clients in 55
countries and territories.

Alltel reached a 52-week high of $80.81 a year ago today,
on January 24, 2000, and a 52-week low of $47.75 last
September.  The last three months' trading pattern for AT
have been characterized by sharp volatile moves from the
$58 level to heavy resistance at $68.56.  An inability to
penetrate $68.56 would lead Alltel to establish a long
term pattern of lower highs dating back to impenetrable
resistance at $80.81 last January, and $70.31 last March.
It appears that this pattern is now established, as
demonstrated by AT's close today.  While Alltel was downgraded
by AG Edwards two weeks ago, and released additional news
this week regarding a new contract with Cullen/Frost Bankers,
the stock seems to be shrugging off good and bad news, as
AT struggled valiantly to close above $68 this week with no
success.  The next support level is $67, and a drop below
this would most likely lead AT to $66.38 and then to $64.75.
The 50-dma is at $63.20, and a drop below this would be a
very bearish indicator.  Conservative traders might want to
wait for a drop below $66.38 to initiate positions.  Set stops
at $70, as a close above this level would indicate a reversal of
the long term downward trend.   Keep an eye on the telecom
sector (TTH) for signs of weakness.

BUY PUT FEB-70*AT-NN OI= 4 at $4.38 SL=2.50
BUY PUT FEB-65 AT-NM OI=20 at $1.94 SL=1.00

http://www.premierinvestor.com/oi/profile.asp?ticker=AT


*****************
STOP-LOSS UPDATES
*****************

SUNW - call play
Adjust from $28 up to $30

CNC - call play
Adjust from $13 up to $15

ACF  - call play
Adjust from $31 up to $33

ASYT - call play
Adjust from $15.50 up to $17.50

EBAY - call play
Adjust from $46 up to $50

RMBS - call play
Adjust from $43 up to $48

SLR - call play
Adjust from $37 up to $39

IDTI - put play
Adjust from $51 down to $49


*************
DROPPED CALLS
*************

SCMR $46.06 -5.31 (-4.06) Sycamore disappointed us today by
selling off.  While the stock remains in an upward channel,
the after hours market's reaction to Corning's earnings report
does not bode well for the networking stocks tomorrow.  While
Sycamore may come back if the Nasdaq stays strong, to be on the
safe side, we are dropping it tonight.

A $58.00 -4.75 (-7.56) Agilent had a very rough day today as
intraday support at $62 failed.  Volume increased throughout the
day, taking A through its 10-dma at $60.58 and finishing at the
low of the day.  While there was no news driving trading in A,
it appears that today's action was pure profit taking.  With
our stop set at $60, the failure to bounce from that level has
resulted in a drop of our Agilent call tonight.


************
DROPPED PUTS
************

TEVA $56.38 +4.44 (+2.81)  Put players had several opportunities
to profit from Teva over the last few days, as the stock rolled
over from $56 and $53 to a low of $48.50 on Tuesday.  However,
today's move on heavy volume indicates that strength is returning
to Teva, and thus we are dropping the put play tonight.

CCU $61.88 +1.19 (+0.13) Conditions which made CCU a recommended
put play have now changed and with that, we are adjusting our
strategy.  When we initiated coverage, the stock had been in the
process of rolling over, breaking its uptrend line since the New
Year, after an unsuccessful rally above its 200-dma ($64.69).
Falling below the 5-dma line ($61.33), the stock managed to find
support from the 10-dma ($60.79) and since then, has put itself
back above the 5-dma.  It appears that CCU may attempt to again
test its last line of moving average resistance.  What's more,
movement in peers such as INF and ETM confirm sector strength on
news from the Radio Advertising Bureau that radio ad spending
should be strong going forward.  In light of this, we do not
recommend taking on any new positions.


********************************************
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for us as a favorite site:
http://www.investorlinks.com/vote.html

Thanks for your support!
********************************************


**************
TRADERS CORNER
**************

A New Volatility Measuring Tool For Us
By Mary Redmond

On January 23rd, the CBOE introduced a new volatility index, the
VXN.X.  I found the information while I was browsing on their
web site today, and this new tool may prove to be even more
valuable for options traders than the VIX.X.

The VXN.X tracks the volatility of options on the Nasdaq 100
index, the NDX.X.  The VXN.X will be calculated using the
implied volatility of options on the Nasdaq 100 index.  The
CBOE developed the VXN.X as it became apparent that there was
divergence between the volatility in the Nasdaq market and the
broad market.  The CBOE has calculated the historical prices
of the VXN.X dating back to January 1995.

At any moment, the VXN.X calculates the implied volatility of
an in the money NDX.X option with thirty days left to
expiration.  The current VXN.X quote is 60.  This means that
the market thinks that one at the money NDX option will move
by plus or minus 60% of its current value prior to expiration.

It is not surprising that the VIX.X and the VXN.X have moved
roughly in tandem over the years, and that the volatility of
the Nasdaq is far greater at almost any point in time than
the volatility of the S & P 100.  The following is a chart of
the two indexes.




Options traders have used the VIX.X as a valuable tool to
gauge market sentiment in combination with other technical
tools.  We have found that a low VIX.X, of 20 or under can
indicate that the markets are dangerously overbought and likely
to correct.  In addition, a VIX.X of over 30 can indicate an
oversold market which is likely to rally on good news.

All of this depends on what the market is to you.  Is the
market the Dow, the Nasdaq or the S & P 500?  Options traders
who concentrate on high technology stocks traded on the Nasdaq
may want to track both the VIX.X and the VXN.X.

At this point, we might want to start tracking the past VNX.X
levels to ascertain what a high level is, and what a low level
is, to determine the levels at which we may consider buying
and selling.

The CBOE has prepared a text file of the VXN.X, which can be
downloaded from their web site.  It seems that, over the last
few years, the VXN.X has ranged from a low of 21.80 in 1995,
to a high of over 90 this year.  We need to consider that the
Nasdaq has been particularly volatile since 1998, and that the
last two years readings may give us more accurate interpretation.

The chart above shows that the VXN.X has oscillated from a range
of approximately 30 to 90, with the mean level somewhere between
45 and 65.  In particular, there were several key turning points
over the last few years in which the VIX.X was a particularly
accurate indicator. Let's take a look at what the VXN.X was doing
at those points.

In October of 1998, the VIX.X spiked to an all time high of
60, which correlated to a market bottom, as the Federal Reserve
cut interest rates shortly thereafter.  The VXN.X was 73 the
same week.  Similarly, last April during one of the first sharp
sell offs the VIX.X spiked to 35, and the VXN.X spiked to 70.

Last September, before the horrible fall sell off, the VIX.X
sent us a warning signal with a low reading of 19.  The VXN.X
was 47 at that point.  More recently, the VXN.X spiked to 89
last December, and 83.78 on January 8th.  Both of these would
have been good buying levels for the NDX.X, particularly
because the Fed had cut rates.

We might conclude from this that a level of 85 or higher in the
NDX.X is a very high level, and might be used as an indication
of an oversold Nasdaq, in combination with other technical
indicators.  In addition, it seems that a VXN.X of under 50
can indicate a Nasdaq that may be tending toward overbought.

Going forward, it will be interesting to watch this new
indicator, and to determine how it oscillates with the market
in order to gain a better trading advantage.

Traders need to use as many technical indicators as possible
in order to gain an advantage in the market.  The volatility
level of the indexes, as well as that of individual options,
can be used in conjunction with company earnings, expected
future Federal Reserve action, economic indicators, and
other technical tools to gain insight into the market.

www.OptionInvestor.com


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**********************
PLAY OF THE DAY - CALL
**********************

SLR - Solectron Corporation $40.65 +0.24 (-1.30 this week)

Founded in 1977, Solectron Corporation is the world's largest
electronics manufacturing services company offering a full range
of integrated supply-chain solutions for the world's leading
electronics original equipment manufacturers.  Solectron's
integrated technology solutions, materials, manufacturing and
operations, and global services offer customers competitive
outsourcing advantages, such as access to advanced manufacturing
technologies, shortened product time-to-market, reduced total
cost of ownership and more effective asset utilization.

Most Recent Write-Up

On a flat day for the market yesterday, shares of Solectron
drifted lower, retreating $1.21 or 2.88 percent on 90% of ADV.
Despite the pullback, the stock found support from its 5-dma line
though it appears that it also encountered resistance at the $42
level.  Today, the company announced that it would acquire an OEM
manufacturer Centennial Technologies for about $108 million in
stock.  This caused the stock to gap down at the open but SLR spent
the rest of the day moving higher, closing down fractionally on
average volume.  At this point, what we would like to see is
buying volume carry SLR back above its 5-dma at $40.63, allowing
conservative traders to take a position.  For higher risk players,
a bounce off the 10-dma at $38.94 could allow for an entry point
with additional support at $38 and our stop price of $37.
Considering the light volume these past couple of sessions, we
would recommend waiting for volume and sector sympathy to confirm
direction before making a play.  So keep an eye on CLS, FLEX, JBL
to gauge sector sentiment.

Comments

With the 10-, 100-, and 200-dma converging just below the $40
level, SLR has found support there the past two sessions.  Today's
trading was particularly choppy, whipping between $40 and $41.75.
Look for bounces from support at $40 on any pullbacks for entry.
On the upside, a break through $41.75 accompanied by strong volume
would warrant entry.

BUY CALL FEB-35 SLR-BG OI= 706 at $6.60 SL=4.75
BUY CALL FEB-40*SLR-BH OI=4517 at $3.20 SL=1.50
BUY CALL FEB-45 SLR-BI OI=1143 at $1.15 SL=0.00  High Risk!
BUY CALL MAR-40 SLR-CH OI=  34 at $4.50 SL=2.75
BUY CALL APR-45 SLR-DI OI=3951 at $3.50 SL=1.75

http://www.premierinvestor.com/oi/profile.asp?ticker=SLR


*****************************************
BIG CAP COVERED CALLS & NAKED PUT SECTION
*****************************************

The Markets hit a wall of worry: What will the FED do next week?

Stocks ended mixed today as industrial shares consolidated and
technology issues rose on optimism that lower interest rates may
boost the slowing economy.  Trading volume was relatively light
and the activity was choppy as investors digested another round
of quarterly profit reports.  A number of technology analysts
were encouraged by positive news from Compaq Computer (NYSE:CPQ)
and Siebel Systems (NASDAQ:SEBL) but blue-chip stocks struggled
following some earnings disappointments.  McDonald's (NYSE:MCD)
slumped after reporting revenues that were well below consensus
estimates and Minnesota Mining (NYSE:MMM) fell after warning that
challenging conditions would continue into the first half of
2001.  Among technology groups, Internet, computer software and
semiconductor shares were the best performers while networking
issues retreated on weakness in Network Appliance (NASDAQ:NTAP).
Shares of the computer data storage provider dropped 20% after
Salomon Smith Barney and Goldman Sachs slashed their ratings on
concerns about the firm's market and valuation.  On the Dow,
blue-chip technology stocks and financial issues supported the
industrial average, helping it to recover from midday losses
despite lackluster announcements from Old Economy bellwethers.
Inside the broader market groups, utility, online brokerage and
biotechnology shares generally advanced while airline and paper
stocks consolidated.  Defensive issues such as gold, consumer
products and major drugs also retreated during the session.

As the market awaits next week's FOMC policy meeting, analysts
are scrutinizing economic data and key congressional testimony
for clues about the interest-rate outlook.  The fourth-quarter
employment cost index is due Thursday morning and Federal Reserve
Chairman Alan Greenspan will speak later that day to the Senate
Budget Committee.  A widespread belief that interest rates will
be lowered, as well as a desire not to be left behind, has fueled
the rally over the past few sessions but a continued decline in
quarterly revenues could temper investor's enthusiasm despite the
bullish long-term outlook.  In addition, another rate cut isn't
guaranteed and even if it occurs as expected, that won't end the
market's current woes.  Because stock selection is so critical
in uncertain market conditions, we will focus on top performing
issues with strong technical charts.  Our goal in this section is
simple; to achieve consistent monthly returns with relatively low
risk positions.


Summary of Previous Picks:

NOTE:  January prices as of Friday's Expiration

Covered Calls: (Margin would double the listed Monthly Return)

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

NEWP    JAN    65    62.56 105.13    $2.44   7.4%
IMPH    JAN    45    42.69  43.63    $0.94   2.2%

EMLX    FEB    70    66.94 103.06    $3.06   4.6%

Naked Puts:

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

XLNX    JAN    30    29.62  53.94    $0.38  11.9%
NEWP    JAN    55    53.88 105.13    $1.13  11.2%
JNPR    JAN    70    69.25 134.31    $0.75  10.3%
QCOM    JAN    70    68.50  70.38    $1.50  10.2%
DPMI    JAN    40    39.62  72.56    $0.38   9.7%
AFFX    JAN    55    53.81  58.63    $1.19   9.6%
IMPH    JAN    40    38.87  43.63    $1.13   9.2%
LEH     JAN    55    54.12  79.94    $0.88   7.8%
JNPR    JAN    70    68.94 134.31    $1.06   7.3%
IVGN    JAN    60    58.50  68.88    $1.50   7.0%
DCTM    JAN    40    38.94  44.88    $1.06   6.8%
IDPH    JAN    40    39.17  56.88    $0.83   6.4% Adj 3-1 Split
EMLX    JAN    45    43.69 101.13    $1.32   6.3% Adj 2-1 Split
BGEN    JAN    50    49.37  59.44    $0.63   6.3%
MWD     JAN    65    64.44  84.38    $0.56   6.2%
NOK     JAN    40    39.25  39.13   -$0.12   0.0% Own it?

EMLX    FEB    60    57.94 103.06    $2.06   9.7%
VSTR    FEB   105   102.75 122.13    $2.25   7.7%
IDTI    FEB    35    34.44  46.25    $0.56   5.1%

Sell Strangles:

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

BRCM    JAN    45p   43.75 130.06    $1.25   8.6%
BRCM    JAN   160c  161.06 130.06    $1.06   7.4%
CEPH    JAN    40p   39.06  56.00    $0.94   8.2%
CEPH    JAN    70c   71.19  56.00    $1.19  10.1%
CMVT    JAN    75p   74.37 113.69    $0.63  10.2%
CMVT    JAN   125c  125.63 113.69    $0.63  10.2%
EMLX    JAN    55p   54.44 101.13    $0.56  11.8%
EMLX    JAN    98c   98.06 101.13   -$3.07   0.0% Covered?
GMST    JAN    25p   24.37  48.81    $0.63   5.8%
GMST    JAN    65c   65.75  48.81    $0.75   6.8%
IMPH    JAN    35p   33.25  43.63    $1.75  11.7%
IMPH    JAN    80c   82.75  43.63    $2.75  17.0%
ITWO    JAN    30p   29.50  53.69    $0.50  16.7%
ITWO    JAN    70c   70.56  53.69    $0.56  18.6%
MERQ    JAN    60p   59.31  95.38    $0.69   6.7%
MERQ    JAN   140c  141.00  95.38    $1.00   9.6%
NTIQ    JAN    50p   49.44  69.94    $0.56  12.6%
NTIQ    JAN   105c  105.56  69.94    $0.56  12.6%
RIMM    JAN    50p   48.44  59.94    $1.56  12.1%
RIMM    JAN   115c  115.94  59.94    $0.94   7.6%

VECO    FEB    30p   29.06  61.59    $0.94   7.3%
VECO    FEB    95c   96.13  61.59    $1.13   8.7%

Naked Calls:

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

RIMM    JAN   110   111.06  59.94    $1.06  13.4%
QLGC    JAN   130   131.50  83.75    $1.50  10.1%
BEAS    JAN    85    86.25  63.38    $1.25  10.1%
ADBE    JAN    80    81.00  58.25    $1.00   8.1%
IVGN    JAN   100   100.63  68.88    $0.63   7.7%
VRTS    JAN   160   161.69  99.25    $1.69   6.1%

OSIP    FEB    85    86.13  63.38    $1.13   8.6%
MYGN    FEB   100   100.69  68.25    $0.69   6.1%

Credit Spreads:

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

ESRX  $88.88  $82.44   JAN65p/70p   $0.50   $69.50  $0.50   Final
AFFX  $63.63  $58.63   JAN40p/45p   $0.69   $44.31  $0.69   Final
VAR   $62.00  $58.50   JAN50p/55p   $0.50   $54.50  $0.50   Final
FCEL  $72.25  $77.19   JAN45p/55p   $0.56   $49.44  $0.56   Final
MRK   $89.13  $82.44   JAN100c/95c  $0.62   $95.62  $0.62   Final

A     $61.88  $58.00   FEB45p/50p   $0.56   $49.44  $0.56   Alert


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

***************
CMVT - Comverse Technology  $121.63  *** Break-out? ***

Comverse Technology (NASDAQ:CMVT) designs, develops, manufactures,
markets and supports computer and telecommunications systems and
software for multimedia communications and information processing
applications.  The company's products are used in a broad range of
applications by wireless and wireline telephone network operators,
government agencies, call centers, financial institutions and many
other public and commercial organizations worldwide.  They provide
unique enhanced services platform products, digital monitoring and
recording systems for call centers, a range of customer management
applications, public networks and government agencies, network
signaling software for wireless, wireline and web communication
services known as Signalware, and many other telecommunications
hardware and software products and services.

The recent rally in Comverse Technology started early in January
after analysts at US Bancorp Piper Jaffray initiated coverage on
the company with a "strong buy" rating and a short-term target
price of $130.  The bullish outlook propelled the stock out of an
old trading range and today the issue closed at a new all-time
high.  Our conservative position offers a method to participate in
the future movement of the issue with low risk and favorable reward.

CMVT - Comverse Technology  $121.63

PLAY (aggressive - bullish/credit spread):

BUY  PUT  FEB-95   CQZ-NS  OI=416  A=1.25
SELL PUT  FEB-100  CQZ-NT  OI=748  B=1.75
INITIAL NET CREDIT TARGET=$0.62-$0.75  ROI(max)=14%

/charts/jan01/charts.asp?symbol=CMVT

*****

EMLX - Emulex  $103.06  *** New Trading Range! ***

Emulex (NASDAQ:EMLX) is a designer and supplier of a broad line of
Fibre Channel host adapters, hubs, application-specific computer
chips (ASICs), and software products that provide connectivity
solutions for Fibre Channel storage area networks (SANs), network
attached storage (NAS), and redundant array of independent disks
(RAID) storage.  Its products are based on internally developed
ASIC technology, and are deployable across a variety of SAN
configurations, system buses and operating systems, enhancing data
flow between computers and peripherals.  Emulex's products offer
customers a combination of critical reliability, scalability, and
high performance, and can be also customized for mission-critical
server and storage system applications.

Emulex continues to be one of our favorites for long-term stock
portfolios and the demand for data storage technology has helped
the issue move up to a new trading range over the past few weeks.
The fundamental outlook for Emulex is excellent as revenues are
expected to increase exponentially in the coming year and the
company should continue to see higher share values in the future.
The current technical trend is favorable and we offer the target
position as a conservative entry point, based on the new bullish
outlook.

EMLX - Emulex  $103.06

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

Sell Put  FEB 65   UMQ NM  212       1.06    63.94     6.5% ***
Sell Put  FEB 70   UEL NN  449       1.19    68.81     7.2%
Sell Put  FEB 75   UEL NO  296       1.44    73.56     8.6%

/charts/jan01/charts.asp?symbol=EMLX

*****

ITG - Investment Technology Group  $45.81  *** Hot Sector! ***

Investment Technology Group (NYSE:ITG) provides equity trading
services and transaction research to institutional investors and
brokers, using technology to increase the effectiveness and lower
the cost of trading.  Its principal service offerings are POSIT,
an electronic stock crossing system; QuantEx, a new Unix-based
decision-support, trade management and order routing system;
SmartServers, which offers server-based implementation of trading
strategies; Electronic Trading Desk, an agency-only trading desk
offering clients the ability to efficiently process many sources
of liquidity; ITG Platform, a PC-based order routing and trade
management system; ACE and TCA, a set of unique trade tools for
systematically analyzing and lowering transaction costs; ITG/Opt,
a computer-based equity portfolio selection system; and Research,
which provides research, development, and a range of consulting
services to its clients.  The company's revenues are generated on
a per transaction basis for all orders executed.

Investment Technology Group recently announced quarterly earnings
and although fourth-quarter profits dropped due to a downturn in
the stock market, the results beat expectations and the company
predicted growth ahead.  ITG, which runs the POSIT share trading
system, said the number of shares traded on its network rose to
4.2 billion shares, up from 3.4 billion a year ago and they also
forecast a 20% to 30% increase in profits and revenues this year.
The fundamental outlook for ITG is excellent and the recent rally
has been on solid volume; both factors that lead us to a bullish
position in the issue.  The favorable option premiums also help
provide a conservative, low risk spread position with a reasonable
expectation of profit.

ITG - Investment Technology Group  $45.81

PLAY (conservative - bullish/credit spread):

BUY  PUT  FEB-35  ITG-NG  OI=0   A=0.31
SELL PUT  FEB-40  ITG-NH  OI=20  B=0.81
INITIAL NET CREDIT TARGET=$0.62-$0.69  ROI(max)=14%

/charts/jan01/charts.asp?symbol=ITG
***************

Neutral Plays - Straddles & Strangles

***************
AC - Alliance Capital  $55.44  *** An Old Favorite! ***

Alliance Capital (NYSE:AC) is a global investment management firm
best known for its growth style of equity investing.  AC's assets
under management are more than $400 billion including retirement
accounts for many of the largest public and private employee
benefit plans along with 28 of the U.S. Fortune 100 companies.
Alliance Capital also manages accounts for employee retirement
funds across the United States, and for foundations, endowments,
banks, an insurance companies worldwide.  Alliance Capital is one
of America's largest mutual fund sponsors, with approximately 6
million shareholder accounts and a family of diversified mutual
fund portfolios that are distributed globally.  Alliance Holding
owns approximately 42% of Alliance Capital, the operating private
partnership.  In addition, AXA Financial owns interests in both
Alliance Holding and Alliance Capital, amounting to an almost 57%
economic interest in Alliance Capital.

Alliance has been one of our favorite straddle stocks over the
past few months and today the issue made the candidate list as
option premiums dropped to historical lows.  Based on AC's recent
movement and the upcoming earnings report (due February 2), there
is excellent potential for future volatility.  In addition, the
upcoming meeting of the FOMC should have some affect on financial
stocks and the issue has a history of more than adequate price
movements necessary to make the position profitable.

AC - Alliance Capital  $55.44

PLAY (conservative - neutral/debit straddle):

BUY  CALL  FEB-55  AC-BK  OI=193  A=$1.88
BUY  PUT   FEB-55  AC-NK  OI=90   A=$1.81
INITIAL NET DEBIT TARGET=$3.50 TARGET ROI=15%

/charts/jan01/charts.asp?symbol=AC

*****

AFFX - Affymetrix  $68.56  *** Range-Bound! ***

Affymetrix (NASDAQ:AFFX) 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 probe arrays,
and software to analyze and manage genetic information from the
probe arrays.  The company's earnings are due on

This play is based on the current price of the underlying stock
and its recent technical history.  The pattern of consolidation
started early last year and the issue has spent very little time
outside the target profit range.  The probability of profit in
this position is higher than other plays in the same strategy
based on inflated option premiums.  In addition, the prospect
of the share value reaching our sold strikes is rather low, but
there is always the possibility of a break-out from the recent
trading range, so monitor the position for changes in technical
character.

AFFX - Affymetrix  $68.56

PLAY (aggressive - neutral/credit strangle):

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

Sell Put  FEB 50   FIQ NJ  498       0.81    49.19     7.4% ***
Sell Call FEB 97.5 FUE BU  59        0.81    98.31     7.4% ***

- or -

Sell Put  FEB 55   FIQ NK  408       1.75    53.25    14.8%
Sell Call FEB 95   FUE BS  123       1.00    96.00     9.0%

/charts/jan01/charts.asp?symbol=AFFX
***************

BEARISH PLAYS - Naked Calls

***************
BRCD - Brocade  $105.44  *** Technicals Only! ***

Brocade Communications Systems (NASDAQ:BRCD) is a provider of
Fibre Channel switching solutions for Storage Area Networks which
apply the benefits of a networked approach to the connection of
computer storage systems and servers.  The company's family of
SilkWorm switches enables companies to cost-effectively manage
growth in their storage capacity requirements, improve the
performance between their servers and storage systems and
increase the size and scope of their SAN, while allowing them to
operate data-intensive applications, such as data backup and
restore, and disaster recovery, on the SAN.  Brocade sells its SAN
switching solutions through leading storage systems and server
original equipment manufacturers and through system integrators.
These OEMs and system integrators combine the company's switching
solutions with other system elements and services for companies'
data processing centers.

Technically, the BRCD price trend has improved significantly over
the past few sessions and the recent rally has pushed the issue
back into a previous trading range near $110.  However, overhead
supply at this price is substantial and the stock will have to
work through a number of resistance levels to undergo a complete
change in character.  Based on analysis of option pricing and the
underlying stock's technical history, the issue meets our basic
criteria for a favorable naked-call position and those who agree
with a neutral outlook can use this play to profit from further
range-bound movement.  Brocade's earnings are due on February 8
and in the event of a rally, traders should consider covering the
sold (short) position on any future move above $130, accompanied
by heavy volume.

BRCD - Brocade  $105.44

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

Sell Call FEB 125  GUF BE  563       3.00   128.00    15.5%
Sell Call FEB 130  ULF BF  609       2.25   132.25    12.7%
Sell Call FEB 135  ULF BG  338       1.25   136.25     7.4% ***

/charts/jan01/charts.asp?symbol=BRCD

*****

CIEN - Ciena  $102.00  *** Premium Selling! ***

Ciena (NASDAQ:CIEN) is engaged in providing intelligent optical
networking equipment.  The company offers a portfolio of products
for communications service providers worldwide.  Their customers
include long-distance carriers, competitive and incumbent local
exchange carriers, Internet service providers and other wholesale
carriers.  Ciena offers optical transport and intelligent optical
switching systems that enable service providers to provision,
manage and deliver high-bandwidth services to their customers.

Ciena is an excellent candidate for a bearish "premium-selling"
strategy.  The issue has robust option premiums, a well defined
resistance area and a high statistical probability of remaining
below the target strike prices.  However, current news and market
sentiment will have an effect on the issue and, as with any of
our recommendations, these positions should be evaluated for
portfolio suitability and reviewed with regard to your strategic
approach and personal trading style.  Ciena's earnings are due on
February 8.

CIEN - Ciena  $102.00

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

Sell Call FEB 135  UEZ BG  441       1.94   136.94    11.5%
Sell Call FEB 140  UEZ BH  452       1.44   141.44     8.7%
Sell Call FEB 145  UEZ BI  162       1.00   146.00     6.2% ***

/charts/jan01/charts.asp?symbol=CIEN


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