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Daily Newsletter, Tuesday, 02/13/2001

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The Option Investor Newsletter                  Tuesday 02-13-2001
Copyright 2001, All rights reserved.                        1 of 2
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******************************************************************
MARKET WRAP  (view in courier font for table alignment)
******************************************************************
        02-13-2001        High      Low     Volume Advance/Decline
DJIA    10903.30 - 43.50 11012.90 10894.30 1.07 bln   1604/1463
NASDAQ   2427.72 - 61.94  2554.65  2427.47 1.73 bln   1632/2124
S&P 100   684.75 -  7.31   695.96   684.04   totals   3236/3587
S&P 500  1318.80 - 11.51  1336.62  1317.51           47.4%/52.6%
RUS 2000  502.57 -  2.78   510.94   502.15
DJ TRANS 3046.46 +  7.23  3068.29  3036.18
VIX        24.62 +  0.07    25.09    24.03
Put/Call Ratio      0.74
******************************************************************

No Valentine For Greenspan!

After gapping up +60 points at the open the Nasdaq bled points the
rest of the day after Greenspan failed to stimulate traders hopes
for another rate cut. The Dow failed to hold over 11000 for the
11th time since September. Each time the Dow has broken 11000 it
was only able to hold for a few minutes before selling off again.
Are we having fun yet?










This was a depressing day in the markets. Actually I was surprised
to see the severity of the drops over the last five days. I left
for business in London last week with the Nasdaq hovering just
under 2700 and I come back to find a -250 point drop. Now, come
on guys, I leave you alone for a week and you let Austin's bearish
stance erode what was left of our bullish market sentiment. I guess
we need to convince Wendy to start editing his articles. Of course
I am just kidding but we actually did get some hate mail about his
periodic use of her in his articles. Now back to the markets, this
was a depressing day. The bear trap rally which started yesterday
afternoon brought back nightmarish memories of the dozen or so we
suffered in the last three months. Down 3-4 days, up 1, down again.

The major reason for the rally failure was the speech by Greenspan
on TV today. Alan was optimistic the economy had bottomed and the
worst was behind us. That sounds like good news but for traders
it was actually the kiss of death. No "aggressive" Fed, no surprise
rate cuts before the end of March meeting. Statements like "not in
recession", "economy likely to rise by year end", "2000 year end
problems did not continue in 2001" all pointed to a calm Fed
chairman with no urgency in his message.

This optimistic speech was like pouring water on a struggling
campfire. With no surprise rate cut expected from the Fed there
is no catalyst to move the markets. The economy is recovering but
very slowly. Earnings are almost over. With the Fed meeting still
over a month away there is no reason to rally. Volume is wimpy
at only 1.69 billion on the Nasdaq and barely a billion on the
NYSE. Declines are beating advances and down volume was
accelerating into the close. Buyers are on strike and sellers
are increasing.

Part of the afternoon race to the exits was caused by JDSU. The
JDSU/SDLI merger was completed today and both had gapped up at
the open due to fund managers having to re-balance their portfolios
and buy more stock. Late in the afternoon JDSU said they would
issue guidance after the close and the short sellers jumped on
both stocks. The guidance turned into an earnings warning that
reduced expectations for the full year ending in June to $.74
which is less than the $.82 analysts expected. The decrease was
blamed on "continued uncertainty in carrier capital spending
prospects and customer inventory adjustments as well as a lower
level of near-term sales visibility than the company has
experienced in recent periods." Read that as sales are slowing
and previously packed channel inventories are not going away.
Part of the drop was also from the loss of income from the
assets sold to Nortel Networks in order to get the deal
approved. In after hours trading JDSU stock was slightly lower
and holding on decent volume. It remains to be seen what will
happen on Wednesday when retail trading on the combined company
commences. The buying by index fund managers could offset any
negative sentiment.

Adding to the negative sentiment today was a downgrade of INTC,
BRCM and TXN by CSFB. Saying that a substantial recovery by INTC
in 2001 was not likely they lowered their price target too only
$33 and issued a "hold" rating on all three stocks. INTC, at
a Robertson Stephens's tech conference maintained its earnings
estimates and insisted that chip demand would pickup in the
second half of the year.

AMAT announced earnings after the close and beat estimates by
four cents but then had a horrible conference call which lowered
estimates going forward. The stock rallied +$2 on the initial
news but dropped to $40.50 after the call. Citing a book to bill
ratio of less than 1 on orders going forward and an increase in
cancelled orders to $150 million, the call was anything but
positive. KLIC also announced a series of cost cutting measures
meant to deal with slowing sales. KLIC dropped to $12.56 in
after hours.

SCMR also announced earnings that beat estimates but lost their
initial gains after the conference call. See a pattern here?
Analysts see increasing competition from CIEN and Alcatel and
were surprised the conference call was not more negative. There
was doubt about earnings strength going forward. SCMR has been
beaten severely recently dropping to $22.50 after a 52-week high
of $172. The severity of the beating probably led to the lack
of a further sell off.

The pattern we see in the news events above is still a negative
forecast in earnings going forward. With earnings trending down
and the Fed on the fast track investors were induced to buy stocks.
With the Fed now saying "we are expecting 2% growth and 2% is ok"
there is no rate cut urgency. With no earnings and no rate cut
there is no reason to rally. With Moody's forecasting today that
defaults on junk bonds from telecoms are likely to double to an
11% rate there appears to be plenty of weakness left in the
economy. These are not little companies. Ratings that were cut
due to financial worries include Nextel, Global Crossing, Lucent,
AT&T. If these companies can't pay on their bonds how can they buy
more telecom equipment? That hits fiber optics, switches, routers,
chip makers as well as general equipment manufacturers. This may
explain the overall weakness in the markets. There is a pile of
money still on the sidelines but it is showing no indications of
moving into the markets. The buying urge is over and the selling
is showing signs of increasing.

There is a camp that still expects a rally soon. They are pointing
to the market's ability to discount future events well in advance
of actual results. The series of higher lows on the Dow has been
caused by cyclical stocks which are rallying far in advance of
the expected rebound. These investors will be looking for evidence
of the continued rebound in the Business Inventory report on
Wednesday, Import/Export Prices on Thursday and the PPI and
Industrial Production reports on Friday. If these reports show
a bottoming or even a slight rebound then the Dow could manage
a breakout over 11000. Whether that will cause the Nasdaq to
rally is uncertain. With tech earnings still trending down,
there is no urgency to buy the dip. Commercial traders are still
net short at historically high levels. They have been right for
months and show no signs of flinching.

What should traders do? For the last two weeks I have suggested
that call players stay out of the market under 2700. If you have
followed my advice then you are sitting comfortably in cash. If
something changes in the market then there is plenty of upside
available over 2700. If we continue down then I will revise the
number based on what the market gives us. Obviously we are only
about +175 points above the 2251 low set on Jan-3rd. There is
a possibility of us testing that low again soon. I said possibility!
There is a strong sense of denial among traders. CSCO at $28,
SUNW $25, DELL $22, GLW $39, CIEN $69, NOK $28. These are prices
that the buy and hold community feels cannot go any lower. I
caution them to only look at LU, $13.50, when making that decision.
My point here is the huge amount of sidelined money is drooling
at these prices but still waiting for the starters gun. If
something happens to cause the sentiment to swing positive again
the money could flow quickly. Until then call players should wait
and watch. Put players - you know what to do, just do it carefully!

Enter passively, exit aggressively!

Jim Brown
Editor


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****************
MARKET SENTIMENT
****************

Just Say No
By Austin Passamonte

That's the emphatic stance Dow Industrial Average is taking with
a close above 11,000 any time soon.

Over the past couple weeks we've heard more about the Dow's
imminent close over 11,000 being a green light to buy than we did
about Nasdaq 5,000 exactly one year ago. Well, maybe not quite
but there is a similarity; each has taken turns exhausting
themselves to break a key mental barrier. The COMPX managed to
hold such lofty ground for exactly one session's close and
promptly rolled over and died from that pinnacle. Should the Dow
manage to close above the vaunted 11,000 it promises to do the
same.

Market bulls best catalyst to rally between now and who knows
when happened to be today, and momentum players were out in full
force. The very moment Greenspan's speech was posted to the web a
number of exuberant buyers bid the market to session highs before
its aged writer ever reached a microphone. These eager players
had the dubious distinction of buying the highest tick of the day
and most likely the entire February expiration cycle to boot.

Al said nothing about cutting rates again by the closing bell, he
also mentioned we weren't headed for a recession and that's all
she wrote for the rally. Game, set, match and red clay courts
instead of green grass were instantly visible on all charts.

Red is likely to be the featured color of the week for broad
markets but we expect webs of support layered below current
levels. Huge disparity ratios of OTM puts against calls are open
below us as depicted in the S/R sections and continued decline
would inflate their value, cause some holders to sell and prop
price levels up. There is further room to run from here, however.

The critical test for these markets will begin next week when O/I
disparity is cleared and we enter post-expiration sessions
historically bearish for at least the first day or two. With
earnings season all but over, less hope for a surprise rate-cut
and pre-warning season (what did we call this earning's season?)
only weeks away the possibility of posting new recent lows is
higher now than ever before.

Technically Speaking:
The Dow sits precariously on its 10-DMA. Next stop is 10,840 and
eventually 10,700. A break below there falls to 10,400 before
strong arms may possibly be found.

The COMPX and NDX are in free-fall with 2,248 and 2,084 being the
next points of respective support below. This would represent a
100% retracement of mid-December highs to January lows for each.

The SPX and OEX each sit squarely on their long-term descending
trendlines dating back from early September 2000. A break and
close below today's here leaves them susceptible to 1286 for the
SPX and 660 for the OEX in the next week or two.
Lest tech bulls feel the urge to slash their hooves and end it
all, we also see daily-chart signals buried in oversold and
threatening to reverse. A few more sessions of decline would have
financial medias all lined heavily to the bearish side. Market
Sentiment will be salivating over the prospects of loading the
truck once again with QQQ and tech-sector HOLDR calls, distant
month contracts of course.

The next rally will likely emerge from considerably lower levels
than we trade at now and could occur within one dramatic session
as we've often seen before. Now is not the time to buy calls (we
suggest eyeing puts) but that day will arrive in the not-too-far
future when all the world believes no hope to the upside exists.

Let's keep our collective eyes on daily charts peeled for just
such an event, and trade the daily trend until then.

******

VIX
Tuesday 02/13 close: 24.62

VXN
Tuesday 02/13 close: 66.36

30-yr Bonds
Tuesday 02/13 close: 5.42%

Support/Resistance Indicator
The Index Support/Resistance(S/R)Ratio is a formula used to
gauge possible support or resistance based on open-interest
disparity. Ratio listed is percentage of calls to puts or
puts to calls respectively.

Support is factored from dividing puts by calls at strike
levels beneath index closing price. Resistance is factored
from dividing calls by puts at strike levels above current
closing price.

                                   Tuesday
                                 (02/13/2001)
  (Open Interest)       Calls        Puts          Ratio
S&P 100 Index (OEX)
Resistance:
725 - 710               12,675        4,532         2.80
705 - 690               14,136        8,835         1.60

OEX close: 684.75

Support:
680 - 665                1,761       13,522         7.68
660 - 645                   36       12,791       355.31

Maximum calls: 700/6,549
Maximum puts : 675/5,066

Moving Averages
 10 DMA  701
 20 DMA  704
 50 DMA  699
200 DMA  754


NASDAQ 100 Index (NDX/QQQ)
Resistance:
 65 - 63                66,975        45,066         1.49
 62 - 60                90,846        54,537         1.67
 59 - 57                42,140        44,917          .94

QQQ(NDX)close: 55.25
Support:

 54 - 52                 4,034        25,479         6.32
 51 - 49                 3,041        20,201         6.64
 48 - 46                   172         4,604        26.77

Maximum calls: 70/61,056
Maximum puts : 60/32,877

Moving Averages
 10 DMA 60
 20 DMA 63
 50 DMA 62
200 DMA 81


S&P 500 (SPX)
Resistance:
1375                    8,438         5,825          1.45
1350                   15,411        14,496          1.06
1325                   10,662        12,910           .83

SPX close: 1318.79

Support:
1300                    3,789        11,791          3.11
1275                      587        10,339         17.61
1250                      924         8,421          9.11

Maximum calls: 1400/15,907
Maximum puts : 1350/14,496

Moving Averages
 10 DMA 1343
 20 DMA 1348
 50 DMA 1334
200 DMA 1412

******

CBOT Commitment Of Traders Report: Friday 02/09
Weekly COT report discloses positions held by small specs
and commercial traders of index futures contracts on the
Chicago Board Of Trade.

Small specs are the general trading public with commercials being
financial institutions. Commercials are historically on the
correct side of future trend changes while small specs are not.
Extreme divergence between each signals a possible market turn in
favor of the commercial trader's direction.


                     Small Specs             Commercials
DJIA futures     (Current) (Previous)    (Current) (Previous)
Open Interest
Net Value          -2903     -467          -4001     -5599

Total Open
interest %       (-29.87%)  (-6.18%)     (-16.84%)  (-22.99%)
                 net-short  net-short    net-short  net-short


NASDAQ 100
Open Interest
Net Value          +3292     +1810         -6615     -6642
Total Open
Interest %       (+20.96%)  (+11.61%)    (-10.93%)  (-10.94%)
                 net-long   net-long     net-short  net-short


S&P 500
Open Interest
Net Value          +74142    +73434        -94766    -93215
Total Open
Interest %       (+41.81%)  (+39.86%)    (-12.52%)  (-12.53%)
                 net-long   net-long     net-short  net-short


What COT Data Tells Us
**********************
Indices: The disparity between Commercials and Small Specs
remains intact on the S&P 500.  Small Specs have greatly
increased their net-short positions on the DJIA while Commercials
have reduced their net-short positions.

Interest Rates: Commercials are short 10-year T-Note futures to a
five-year extreme. (Bearish)

Currencies: Commercials continue to build heavily short Euro
dollar futures while small specs build net long. (Bearish)

Metals: Commercials are moving to net-long in Gold, Silver and
Copper from short positions. Small specs are at five-year net
short positions in silver. (Bullish)

COT/CRB: This commodity index measures the entire spectrum of
commodities in overall bullish or bearish outlook. It is now at a
one-year high for commercial bullishness, meaning the outlook for
commodities is long-term positive while equities as a mirror are
considered long-term negative.

Data compiled as of Tuesday 02/06 by the CFTC.


**************
MARKET POSTURE
**************

Please visit this link for Market Posture:

http://www.OptionInvestor.com/marketposture/021301_1.asp


***********
OPTIONS 101
***********

Loyalty To A Stock Or To A Strategy
By David Popper

Read any message board and you will find a lot of banter about
the merits of particular stocks.  The bulls claim undying love,
while bears will talk about excessive PE ratios and other reasons
why the stock will go down.  Of course, over time both are right.
Stocks will go up and down.  Traders welcome the natural rhythm
of the market because that is where the money is made.  As a
matter of fact, almost every article appearing in OIN is
specifically designed to assist you in interpreting where your
stock or the market should go in the short-term.

The tacit understanding is that forecasts aren't always precise
because the market is not logical.  Because forecasts are not
always precise, it is foolish to put too much of your equity into
any one play.  Because forecasts aren't always precise, buying
options are risky.  Because business is always changing, there is
no guarantee that the Wall Street darling of today will still be
sought after tomorrow.  Remember Priceline(NASDAQ: PCLN)?  Loyalty
to a stock has its risks.  Long-term holding has its risks.  There
is another way.

You can view stock as a trading vehicle within a complete trading
system.  There may be different systems which fare better in
directional markets and others in markets that do not have
direction.  Loyalty to a system or systems has advantages because
when you operate within a sound system, you will not make as many
emotional mistakes.  I make two common mistakes.  First, I have
tried to force trades where the odds of success simply were not
there.  Second, I have expected too much of a return from the
markets where the return was not available given my level of
expertise.

Trading within a system involves a plan.  This plan includes a
reasonable return expectation in light of current market
conditions.  For example, when we are in a 1999 type market, your
expectations may be justifiably high and you may achieve these
lofty goals simply by being a call buyer.  On the other hand, in
a March 2000 market, simply stepping aside, or a naked call
strategy, put butterflies, etc may have been your choice.  Yet,
given the wide swings in the market within the downtrend, it
may have been prudent to limit the amount of money at risk.
Of course, limited risk means limited reward.  However, if this
is all that is reasonably available from the market at that
time, so be it.  Better a small gain or loss rather than a
major hit.  In football, they call this taking what the defense
will give them.

Trading within a system involves a plan.  This plan should
include the notion of trading only the very best stocks which
are the gorillas in the industry.  This is necessary because if
for some reason your play explodes and you did not bail out
soon enough, you will be in a stock that eventually will rise
again.  Trading a stock that has no earnings and no chance of
earnings will eventually leave you owning a two dollar stock.
One avenue that I have chosen lately is trading the Nasdaq 100
(AMEX: QQQ).  QQQ is the proxy for the Nasdaq 100, which is a
weighted index of the top 100 companies in the index, excluding
financial institutions.  I like to trade this vehicle because it
represents many companies, so no one company's surprise bad news
can fatally kill you, including the gorillas.  It still has
reasonable volatility so ATM call or put premiums still are in
the 7% to 8% range.  It also has tremendous liquidity so exits
are easy.  Finally, if you are inclined to short the market
during a downtrend, you can do so immediately because the
down tick rule does not apply.

Trading within a system involves a plan.  This plan should be
implemented in light of at least basic technical analysis and
market sentiment analysis.  Sometimes I think that limiting
myself to a basic analysis works every bit as well because
when I get too technical, without the requisite years under
my belt, it is easy to begin over analyzing a situation.
Most of the time, I have found that sticking to the basics
has served me well.

Lynda Schuepp's Option 101 article last Sunday provide a good
start in the technical analysis area.  Austin Passamonte's market
sentiment section provides great information on how the commercial
traders are reacting.  When there is a strong correlation between
the technical and sentiment trends, you have a head start in
understanding which direction the market will probably move unless
changed by new information.  When you have a general understanding
of the market's probable direction, it is easier to decide which
strategy would be potentially profitable.  The technical and
sentiment analysis are the tools that give us the potential to beat
the returns of the mutual funds.  Imposing a strategy without
regard to these factors is simply employing a hope game that will
lose as often as it wins.

By understanding the times, and adjusting your strategies and
expectations within that framework, you will be exercising the
discipline necessary to make reasonable and steady returns.  It
will also reduce the chances of your account suffering any severe
shocks.


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

Is This Any Way To Start The Next Bull?
By Scott Martindale

Darn, that green on my screen sure looked good for awhile this
morning.  After the usual pre-Greenspan hype, we still ended up
with the all too familiar late-day slide.  Hmmm.  I suppose it
means that he said nothing to foreshadow any change from what the
market already has priced in.  But despite the modest selloff,
there was no big crash today.

Encouragingly, the market also didn't crash on the uninspiring
Cisco(NASDAQ: CSCO) news last week, so perhaps it won't crash
again at all.  In fact, the Nasdaq might not retreat back to the
downtrend line of lower highs that it burst through during last
month's rally.




That trendline sits at about 2300, and it has turned into a key
level of support. If the index goes through it strongly, it's a
bad sign.  But it appears to me that even with today's
disappointment, the Nasdaq probably won't pierce the trendline.
With the Dow, the November and December lows may be tested, but
it also might decide to crash right through the formidable
resistance at 11,000, never to return.  Hey, a guy can dream,
can't he?

Mr. Greenspan said in his testimony today that, "The exceptional
weakness so evident in a number of economic indicators toward the
end of last year (perhaps in part the consequence of adverse
weather) apparently did not continue in January."  This suggests
that he is not so worried about the economy as he was a few weeks
ago. This doesn't mean there won't be more rate cuts, but the Fed
may not be as aggressive as investors had hoped -- thus today's
slide.

But overall, there are more reasons at this point for the markets
to begin to strengthen than for them to weaken further.

Because of strong commodity and service sector inflation (running
at nearly 4%), we might be facing an inflationary economy.  But
it's apparent that the Fed Chairman has decided to overlook any
inflation problem that may arise from the huge monetary stimulus
coupled with the imminent tax cut. Although his longstanding
position has been that paying down the debt is a greater priority
than cutting taxes, recently he has publicly backed the Bush tax
cut in fear that monetary policy alone won't be sufficient.
Nonetheless, he reiterated today that paying down the national
debt to zero is still the best thing for the economy in the long
term.

Certainly, the "January Effect" points to market strength this
year.  All major averages advanced, but the performance of small
cap stocks is especially encouraging, as evidenced by the
strength in the Russell 2000 since early January.




Even technology issues seem to be in a position to gain a little
footing.  Former high-flying tech leaders like CSCO still aren't
cheap, but they're no longer wildly valued.  As the techs
strengthen, so will the big cap averages.

Perhaps the most bullish indicator for stocks is the sharp
decline in Treasury bill yields resulting from the recent cuts in
the federal funds rate.  The likelihood of another near-term cut
suggests even lower T-bill rates, which is always bullish for
stocks.  Over the past 20 years, short-term rates have been
radically slashed eight times.  With the exception of December
1981 (in which stocks failed to advance due to a quick reversal
of rates), the average gain in stocks over the ensuing five
months was 14%, and the lowest gain was 8%.  Also, money supply
has been accelerating, which has historically pointed to a
recovering economy.  And today, companies are more leveraged
(high debt load) than ever.  Although many investors fret over
the prevalence of highly leveraged balance sheets, in fact it's
logical to expect a leveraged economy will respond more quickly
to monetary stimulus.

As a result, recession fears should subside.  So prepare to start
putting cash to work in mid- and long-term plays like LEAPS and
equities for writing OTM covered calls.  Good inflation plays can
be found in energy, utilities, alternative energy, REITs, and
natural resources -- particularly producers of platinum group
elements (PGEs) like palladium.  In fact, if it weren't for these
sectors, along with regular cash injections from covered call
writes across all my holdings, my long-term portfolio would be
looking pretty grim right now.

But even as the economy begins to strengthen, it is likely that
only reasonably valued stocks will outperform over the long-term.
The big problem with owning highly valued stocks is that there is
no tolerance in the market for any disappointments.  Although
they will continue to provide good short-term option plays,
stocks with high valuations may show lesser gains compared with
those having more modest valuations relative to earnings and
growth (P/E and PEG). For example, we might see a slower ascent
this time among the networking darlings, including Juniper
(NASDAQ: JNPR), Sycamore(NASDAQ: SCMR), Extreme(NASDAQ: EXTR),
Redback(NASDAQ: RBAK), Ciena(NASDAQ: CIEN), JDS Uniphase
(NASDAQ: JDSU), and even CSCO.  One of these days I'll give you
my two cents about valuations in this important sector.


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PICKS WE DROPPED
****************
When we drop a pick it doesn't mean we are recommending a sell
on that play. Many dropped picks go on to be very profitable.
We drop a pick because something happened to change its
profile. News, price, direction, etc. We drop it because we
don't want anyone else starting a new play at that time.
We have hundreds of new readers with each issue who are
unfamiliar with the previous history for that pick and we
want them to look at any current pick as a valid play.


CALLS:
*****

RE $61.00 -2.65 (-1.73) After bouncing down from the upper
Bollinger band last week, shares of RE have been trading
sideways leading up to today's Greenspan testimony.  When
the Fed Chairman neglected to wave the "Rate Cut" flag early
and often during his testimony, the stock followed the broader
Insurance sector lower.  Although the volume was light again,
the fact that the stock fell through our $62 stop and closed
at the low of the day, leaves us no choice but to eject RE
from the playlist tonight.


PUTS:
*****

No dropped puts tonight


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The Option Investor Newsletter                  Tuesday 02-13-2001
Copyright 2001, All rights reserved.                        2 of 2
Redistribution in any form strictly prohibited.

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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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********************
PLAY UPDATES - CALLS
********************

IFIN $83.88 -2.13 (-3.12) After consolidating on Monday at the
$86 level, IFIN cleared $87 on Tuesday morning as the BIX.X moved
up to its high point of the day.  After the Humphrey-Hawkins
testimony ended, the banking index and many of the financials
sagged amid profit taking, but IFIN held onto its gains in a show
of technical strength, until the last hour of the day when heavy
selling occurred.  However, today’s volume was approximately half
of the average daily volume, and the stock is still in its upward
channel, and above its major moving averages.  Aggressive traders
could take positions at current levels if accompanied by strength
in the financial sector.  More conservative traders might want
to wait for IFIN to move above $86 again, which could lead to a
move above the next major resistance level at $87.50.  If IFIN
could clear $90, the stock might be on its way to the 52-week
high at $95.25.  Monitor the financial sector vigilantly for
the continued post Humphrey Hawkins reaction, and keep stops
set at $80.

AES $57.19 +0.44 (-2.39) Despite a rough start to the week,
AES is still in its ascending channel, which began in December.
After a sharp dip to $55.68 on Monday afternoon, AES has
recovered, and held up well during the post Humphrey Hawkins
sell off Tuesday afternoon to close slightly under the nearly
converged 5 and 10 dmas at $57.60 and $57.25.  In the news
today, AES announced that Thermo Electron Corp would sell a power
generating unit to AES for $195 million in cash.  Aggressive
traders could take positions at current levels, or at a move
above $58, if it is accompanied by strength in the power
producer sector, and others like CPN.  Once heavy resistance
at $59.25, and then $60 is cleared, AES could be on its way
to a high of $65 reached back in November.  Continue to set
stops at $56.

BRCM $75.00 -5.44 (-2.19) We initiated our aggressive call play
on BRCM yesterday based on the stock holding key support at $75
and the assumption that the worst has been factored into the
stock price.  Shares of the broadband chipmaker have been riding
down the 5-dma line for the past month.  Now at $78.86, a rally
above this moving average resistance on volume, ideally backed by
buyers pushing up the Philadelphia Semiconductor Index (SOX) and
the NASDAQ 100 (QQQ), would allow for an entry on strength.  We
are keeping our stop price at $75.  A close below this level will
result in us dropping this play.  Today BRCM closed right on its
key support price, down 6.76 percent on average volume as CD
First Boston downgraded the stock from a Buy to a Hold.  An entry
at current levels could be an attractive play for high-risk
players.  As with the conservative entry, wait for sentiment and
volume to pick up before jumping in.

FDC $62.00 +1.09 (+1.70) Relative strength continues to be the
key so far in our successful call play on FDC.  When we initiated
coverage last week, we mentioned that the stock appeared poised
to break out and make a new all time high.  With the boarder
markets lower on average volume today, shares of the transaction
processing giant broke out into blue-sky territory on over 135
percent of ADV.  Jolson MP helped in the cause, starting coverage
of FDC with a Long Term Buy rating on Monday, while Lehman
Brothers came forth today and issued a Buy rating.  In order to
protect our gains, we are upping our stop price from $58 to $59.
Bounces off $61.50, where the 5 and 10-dma are currently
converged, as well as $60 and $59 support could allow aggressive
traders to enter this play but as always confirm with volume.
Continued buying strength carrying FDC above $62.50 would allow
for a more conservative play, but make sure sector sisters FISV
and PAYX are also moving higher.

SDS $56.49 -1.46 (+1.50) Our call play in SDS started the week on
the right foot, as an announcement of a new customer in Cessna
Finance helped in igniting investor interest, with the stock
shooting up 5.38 percent on almost 2.7 times the ADV.  Today SDS
gave back 2.52 percent on 180% of ADV but considering the
dramatic run-up over the course of the last five trading
sessions, a pause to refresh is probably a healthy move.  Higher
risk players looking to enter on pullbacks may find support in
increments of $1 at $56, the 5-dma near $55, $54, and our stop
price of $53.  Volume to the upside recently has been
accelerating and if this continues to be the case, look for a
break above today's high of $58.50 with conviction for an entry
on strength, provided that competitors EDS and KEA confirm upward
momentum.


*******************
PLAY UPDATES - PUTS
*******************

GLW $39.55 -2.15 (-1.41) GLW held the course under the $42 level
in yesterday's session with trading activity at just above the
norm.  But today, traders were given a prime entry.  After
peaking at $43.37 during amateur hour, the 5-dma ($42.35) failed
to keep GLW afloat and the stock rolled over.  The increasing
volume levels indicated the downward momentum was building.  GLW
went down for the count and saw the underside of $40 by the
close.  The bearish close at just a fraction from the intraday
low indicates the selling may not be over, but be on the look
out for interested buyers.  GLW saw this level early in Monday's
session and the attractive price level enticed the bulls.  To
err on the side of caution, we've tightened our stop to $43 from
$46.  From a broader perspective, other fiber-optic stocks like
JDSU, SDLI, LU, and NT are still in a negative trend, which is
certainly bodes well going forward.

MERQ $66.88 -0.13 (-5.06) A multitude of lucrative opportunities
presented themselves during the past two sessions!  On Monday
morning, the charging bulls took MERQ to $74 only to see the
gains quickly disappear.  The third test of the supportive $72
level, bolstered by the 5-dma, failed to hold.  The bears
successfully took MERQ to $66.19 by the time all was said and
done.  Today was another superb day of trading.  After amateur
hour, the previous support at $72 acted as upper resistance on
attempted rallies.  Aggressive entries became viable once again;
especially after MERQ slid back under the $70 mark on strong
volume.  At this point, be patient for further weakness to
develop below the $67 level if you're interested in buying into
downward momentum; there is support below at $60.  Otherwise,
consider playing the spread if GLW cycles again.  If you choose
the latter approach, take note we've lowered our stop to $72
from $74 in an effort to protect existing profits and guard
against a strong rebound.  For those traders who like to keep
track of analysts' comments, SSB recently started MERQ with an
Outperform rating.

GSPN $25.88 +0.00 (-1.50) With a lack of news to drive the stock
price recently, shares of GSPN have been buffeted by the twin
forces of technicals and sector sympathy.   Volume has been
drying up recently, suggesting the lack of buying interest.  The
5-dma has provided formidable overhead resistance since late
January and so far, this trend has held firmly.  Yesterday the
stock fell 5.38 percent on 57% of ADV while today, GSPN closed
unchanged on less than half the ADV.  Failed rallies above the
5-dma (now at $28.06), $28.50 and our stop price of $29 could
allow aggressive traders to take a position while a break below
support at $25.50 on renewed selling volume would make for a
safer play.  In both cases, make sure that the technicals and
sector sentiment are both moving in your favor before taking a
position, gauging the latter using Merrill Lynch's Semiconductor
HOLDR (SMH).

ISSX $62.19 +1.06 (-0.19) Even yesterday's appearance of a new
email virus could not get shares of ISSX or the rest of the
Internet Security sector to rally and as such, the stock headed
lower, surrendering 6.11 percent of its value in Monday trading.
While volume was light, less than 85% of ADV, the majority of it
was to the downside, reflecting a state of sellers outnumbering
the buyers.  Today ISSX took a breather, ending the day down
fractionally on 62 percent of ADV, allowing time for its moving
averages to catch up to catch up with the stock price.  Already a
profitable play, we are adjusting our stop price down from $69 to
$66.  A failed rally at this level as well as the 5-dma at $66.76
could allow higher risk players to make a play while a break
below $61 on volume would give the more risk averse the green
light to enter, but only if rivals CHKP and VRSN are also showing
weakness.

BOBJ $72.13 -1.94 (-1.38) Traders that were hoping for some help
from Greenspan's testimony today were sorely disappointed, as he
gave them no new information.  While BOBJ didn't rally leading
up to the testimony, it seemed to be held up by the moderate
strength across the markets.  Once the disappointment hit, the
NASDAQ gave up its early gains and headed back down to close
right at the low of the day.  BOBJ got dragged lower when the
buoyant effect of the broader market was gone, and itself closed
at the low of the day for a nearly $2 loss.  While there may be
some mild support near $70-71, the more likely level where the
stock could find some help is near $65, also the site of the
converged 30-dma ($65.40) and 50-dma ($65.64).  After dropping
through the 10-dma (now at $76.33), the daily Stochastics has
steepened its dive, and BOBJ hasn't been able to mount any kind
of recovery, prompting us to move our stop down to $76.  Use any
bounce near this level as an opportunity to open new positions,
or if you prefer, enter on continued weakness that pushes our
play below $72.

FCEL $58.69 +2.38 (-0.81) Even the early market strength
couldn't give FCEL a lift, as the stock failed to even penetrate
the $61 level on its first day on our playlist.  Sure, the stock
gapped up, but very quickly ran out of steam, allowing
aggressive traders an opportunity to jump onboard.  As the stock
rolled over in the middle of the day, the bears had to exercise
patience, with support appearing near $57 again.  This support
is looking tenuous, and like the broader Technology sector, FCEL
is looking vulnerable to further downside, now that Greenspan
has refused to give an early Valentine's Day present to the
markets.  Traders were hoping for an indication that the Fed
would be more aggressive cutting rates in the near future, and
when that wasn't forthcoming, the bears had their way through
most of the rest of the day.  The buying towards the close
solidified the $57 support level, and we would wait for a break
below this level before initiating new positions, unless we get
another spike near the $61-62 level with a lack of follow
through.  Other fuel cell stocks (BLDP and PLUG) are looking
weak as well; monitor these stocks for an indication of
investor sentiment before initiating new positions.

IDTI $37.81 -1.69 (-0.25) Persistent weakness in the
Semiconductor (SOX.X) and Networking (NWX.X) sectors IDTI has
been unable to break out of its dominant downtrend.  The stock
moved up yesterday and then gapped up above our $40 stop this
morning, likely on anticipation that Greenspan would give some
indication that he would take a more aggressive approach
towards cutting interest rates.  Alas, it wasn't to be, and
once investors figured out that their hopes were not to be
realized, they sold the stock right into the close.  Aggressive
traders that jumped into the play as it rolled over this
afternoon are smiling this evening, as the stock fell more than
$3 from its intraday high to close very near the low of the day.
Now sitting right on support at $37-38, IDTI looks poised to
give conservative traders an attractive entry as it falls below
$37.  Support may materialize near $35, but once this level is
breached, it is looking like the stock will have a quick trip to
the $30 level.  Even though the daily Stochastics are flattening
out in oversold territory, there doesn't seem to be any sign of
a catalyst that can lift the stock through the $40 level on a
closing basis, and aggressive traders can continue to use failed
rallies to this level as an opportunity to jump into the play.

STT $106.80 -1.62 (-1.20) While continuing to take its sweet
time about it, STT is gradually heading lower, finally falling
below $107 after it became clear that Greenspan wasn't going to
give any indication of a more aggressive interest rate cutting
strategy.  The weak rally yesterday gave aggressive traders a
chance to get into the play before the expected selloff after
Greenspan's testimony today.  Once the expected became known,
STT dropped sharply and tested $106 for the first time in over
3 weeks.  The declining 10-dma (now at 109.68) is continuing to
pressure the stock and further weakness in Financial stocks in
the next few days could be just the ticket to get this play
headed downhill at a higher rate of speed.  Daily stochastics
are just entering oversold, but if significant weakness emerges
in the Brokerage (XBD.X) sector, it is likely to accelerate
STT's decline.  Watch this index for an indication of investor
sentiment before opening new positions.  We have moved our stop
down to $109, and aggressive traders can continue to add to
positions on failed rallies to this level.  More conservative
players will want to wait for a drop through $105 before
playing.  As STT adds to its losses, watch for support to
materialize near $98-100, the level where the stock found
support in mid-January.


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**************
NEW CALL PLAYS
**************

AGGRESSIVE:

MLTX - Multex.com, Inc. $20.00 +0.75 (+1.13 this week)

Operating in the Financial Information Services industry,
Multex.com provides investment information and technology
solutions to over 500 information and distribution partners,
including Yahoo!, Quicken.com, AOL, and CBS MarketWatch.  The
company's products include MultexNET (an online source of
real-time investment research and financial information),
MultexEXPRESS (the Web-development, site hosting, and ASP
business), BuzzPower (a collaborative commerce, messaging and
e-community solution).  Rounding out MLTX's offerings is Multex
Investor properties (Multex Investor, Market Guide and Sage
Online - providers of qualified retail and high net worth
individual leads for the brokerage, banking and institutional
clients).

Taken apart with the rest of the dot.com stocks last year, MLTX
fell from $39 at its peak to a low in early December near $8.
Since then the stock has more than doubled, climbing briskly
above the 20-dma (now at $17.71), and bouncing there to confirm
that level as support last week.  While it is likely to find
overhead resistance near current levels, we are looking for the
bulls to continue charging ahead.  Today the stock rallied
nearly 4% on more than double the ADV of 207k shares.  This is
particularly encouraging in light of the weakness seen across
the broader markets and raises the possibility that the bulls
will attempt to push through the $20.50 resistance level in the
next few sessions.  So what is driving this stock higher, you
ask?  The move got started on December 5th, when the company
signed a multi-million dollar deal with Merrill Lynch HSBC.
That announcement was the first of a string of new products and
service agreements over the past few months, with a sprinkling
of analyst upgrades thrown in for good measure.  JP Morgan
upgraded the stock to Buy on January 26th, and LaSalle Street
Securities began coverage today with a Long-Term Buy rating.
Not only that, but the company impressed the street with its
earnings report on January 25th, beating estimates by a penny
and maintaining its triple-digit revenue growth rate.  We are
placing our stop at $18, just above the 200-dma, and aggressive
investors can target shoot intraday dips above this level for
new entries.  More conservative investors may get their entry
first though, as MLTX pushes through near-term resistance at
$20.50.

BUY CALL MAR-17.5 UXM-CW OI= 51 at $3.75 SL=2.25
BUY CALL MAR-20  *UXM-CD OI= 27 at $2.19 SL=1.00
BUY CALL MAR-22.5 UXM-CX OI=  0 at $1.25 SL=0.50  Wait for OI!
BUY CALL MAY-17.5 UXM-EW OI= 13 at $4.88 SL=3.00
BUY CALL MAY-20   UXM-ED OI=625 at $3.63 SL=2.00
BUY CALL MAY-22.5 UXM-EX OI=124 at $2.63 SL=1.25

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


ESRX - Express Scripts, Inc. $99.66 +1.66 (+1.41 this week)

Express Scripts provides progressive health care management by
leveraging their expertise in pharmacy benefit management (PBM)
to positively impact their clients' total health care benefit.
They combine pharmacy and medical claims data to develop new
strategies for decreasing total health care spending and
improving health outcomes.  In addition, they apply managed care
principles through diverse health care businesses.  Using a
managed-care focus, their businesses deliver cost-effective,
quality programs.  They combine proven fundamentals with advanced
capabilities, resulting in value-added products and services for
their clients.

Since bottoming out last Spring, shares of ESRX have been
rallying strongly.  Investors last year looking for a defensive
play found the stock an attractive place to put their money.
Sector sentiment was also on the company's side, as the
Healthcare sector had a banner year 2000.  On a more
company-specific note, strong earnings growth and the trend
towards customer demand for prescriptions sent through the mail
has helped the company to grow at a higher than expected level.
Last week ESRX reported record earnings, beating Street estimates
by a penny, with 47 percent revenue growth year-over-year.
What's more, the company greatly improved its financial position
through early debt retirement.  This led to a number of positive
analyst comments following the report.  Banc of America
Securities re-iterated their Buy rating and $120 price target on
the stock while UBS Warburg re-iterated their Buy rating and
their price target of $114.  CIBC also re-iterated their Buy
rating and Goldman Sachs maintained their position on the stock,
which is on their Recommended list, a step above a Market
Outperform rating. Today, ESRX gained 1.69 percent on over 1.5
times the ADV following a well-received conference call.
Continued buying pressure launching the stock above resistance at
$101 would allow for a conservative entry, if peers AET and UNH
are also moving higher. Higher risk players looking to enter on a
dip may find support from the 5 and 10-dma at $98.09 and $96.25.
The $95 level could also be a target to shoot for but make sure
ESRX closes above our stop price of $96.

BUY CALL MAR- 95 XTQ-CS OI= 563 at $ 8.63 SL=6.00
BUY CALL MAR-100*XTQ-CT OI=1135 at $ 5.75 SL=4.00
BUY CALL MAR-105 XTQ-CA OI=  63 at $ 3.50 SL=1.75
BUY CALL MAY-100 XTQ-ET OI=   8 at $10.88 SL=8.25
BUY CALL MAY-105 XTQ-EA OI=  10 at $ 8.50 SL=6.00

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


LOTTERY:

LOW - Lowe's Cos Inc $56.25 +2.25 (+2.74 this week)

Lowe's Companies are retail distributors of building materials
and supplies through its stores in the US.  They trail behind
the king of the industry, Home Depot (HD) in stores and sales.
Their products include lumber, home decoration and lights,
kitchen, bath, and laundry items, yard tools, patio accessories,
garden tools, and heating, cooling, and water systems.  They
recently announced plans to sell $500 mln in zero-coupon
convertible notes to help fund expansion plans, which include
building 75 home-improvement stores in the northeastern US
within the next five years.

The Lowe's Companies announced last Friday that it'd meet the
lowered forecasts of $0.37 notwithstanding its unexpected profit
shortfall of about $0.04 cents due to its four-day 10% holiday
sale it held to match a similar program offered by its fierce
competitor, Home Depot (HD).  The announcement provided much
needed relief to nervous investors.  The judicious outlook also
endorses little downside risk for the stock price over the near-
term.  And that's precisely why we added LOW to our call list!
Friday's $3.51, or 7% jump combined with the extended gains into
this week provide the upward confirmation going forward.  The
company will report its final earnings' results on February
26th, BEFORE the opening bell, so be aware of the time frame.
We'll exit the play prior to the announcement or if LOW violates
our $54 protective stop, whichever comes first.  We're
optimistic, however, that LOW will continue making steady gains
in a cooperating market environment.  To enter more on the side
of caution, consider buying into subsequent momentum above the
$56 level versus buying the dip on a pullback.

BUY CALL MAR-50 LOW-CJ OI= 283 at $7.20 SL=5.00
BUY CALL MAR-55*LOW-CK OI= 815 at $3.50 SL=1.75
BUY CALL APR-50 LOW-DJ OI=1857 at $8.20 SL=5.75
BUY CALL APR-55 LOW-DK OI=1449 at $4.90 SL=3.00

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


*************
NEW PUT PLAYS
*************

AGGRESSIVE:

ABGX - Abgenix - $33.94 -3.25 (-1.62 this week)

Abgenix is a biopharmaceutical company focused on the
development and commercialization of fully human monoclonal
antibody therapies for a variety of diseases.  The company's
antibody technology platform, which includes XenoMouse (TM)
technology enables the rapid generation and selection of high
affinity, fully human antibody product candidates to essentially
any disease target appropriate for antibody therapy.  Abgenix
leverages its leadership position in human antibody technology
by building a large and diversified product portfolio through
the establishment of licensing arrangements with multiple
pharmaceutical, biotechnology and genomics companies and
through the development of its own internal proprietary
products.

The biotechnology sector is in the midst of a correction, and
many companies in this sector are experiencing heavy selling,
as bloated valuations come back to reality.  The biotech
sector (BTK.X) fell below its 200 dma of 643.43 and its 50
dma of 611.43 early in February, and since then, many stocks
such as HGSI have offered the opportunity for profitable put
plays.  ABGX made a head start on the sector's correction by
falling below its 200 dma of $60.16 in late December, and
since that time, has lost nearly half its value.  After a
weak failed attempt to reach the 50 dma of $53.70 late in
January, ABGX suffered a serious blow when Robertson Stephens
issued a recommendation which stated that they had dramatically
increased their estimated expenses and losses for 2001 and
beyond due to ABGX's increased expenditures to fund further
clinical development.  A weekly chart of ABGX shows a long
term bearish wedge pattern with strong support at the $35
level, which has just been broken.  The next major support
levels are $30, and the 52-week low at $25.88.  On Tuesday,
ABGX struggled to clear $38, but rolled over in the afternoon
just as the BTK.X fell below its 50 dma of $611.43.  Aggressive
traders might take positions on a roll over from $35 if the
BTK.X stays below its 50 dma.  Conservative traders might
want to wait for a break below $33 on high volume, accompanied
by weakness in the overall market and BTK.X.  Watch others like
HGSI, and MEDX and set stops at $37.

BUY PUT MAR-35*AZG-OG OI=38 at $5.13 SL=3.00
BUY PUT MAR-30 AZG-OF OI=20 at $2.56 SL=1.25

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


A - Agilent Technologies Inc $47.37 -3.75 (-5.13 this week)

Agilent is a diversified technology company that provides
solutions to high growth markets within the communications,
electronics, healthcare and life sciences industries.  They're a
leading maker of analysis equipment with 51% of sales deriving
from its Test and Measurement Unit.  Recently Philips
Electronics agreed to buy Agilent's Healthcare Solutions for
$1.7 bln.  Customers include AT&T, Cisco, and Pharmacia.

Agilent Technologies defied the NASDAQ's slump last Thursday and
spiked a whopping 8.1%, or $4.07, on news of its success with
a powerful visualization software package, AVS/Express,
developed by Advanced Visual Systems.  The rally was short-lived
and the stock succumbed to the negative pressure of the market
and more specifically, its sector the next day.  Related stocks
such as BLDP, SANM, PLXS, and SLR are all trading near their
respective lows, too.  Although Agilent (A) is confirmed to
report earnings next Tuesday, February 20th, we decided to add
it to our put list as a quick in-and-out type play.  Today the
share price suffered a technical breakdown notwithstanding a
recent Strong Buy recommendation and $130 price target from
Lehman Brothers.  Following Greenspan's Congressional Address
today, the support at the $50 and $51 levels, which was also
bolstered by the converged 5 and 10 DMAs, faltered.  A panicky
5.3% sell-off ensued, leaving the stock in a precarious
position.  We're looking for the losses to extend into the
earnings' announcement scheduled for next week.  It'll be
important to confirm the downtrend before taking positions -
we've set a tight stop at the $50 mark.  Also, be prepared for
quick exits in light of the narrow time frame.  Aggressive
traders might consider beginning a play if A continues it
downtrend line amid a declining market or fails to break through
old support ($51) and rolls over on strong volume.

BUY PUT MAR-55 A-OK OI= 456 at $9.30 SL=6.50
BUY PUT MAR-50*A-OJ OI=1381 at $5.60 SL=3.50
BUY PUT MAR-45 A-OI OI= 188 at $1.88 SL=1.00

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


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*********************
PLAY OF THE DAY - PUT
*********************

STT - State Street Corp. $106.80 -1.62 (-1.20 last week)

State Street is a bank holding company and is one of the
world's leading specialists in serving institutional investors.
The company provides a full range of products and services for
portfolios of investment assets.  Customers include mutual funds
and other collective investment funds, corporate and public
pension funds, corporations, unions and non-profit organizations
both in and outside of the United States.

Most Recent Write-Up

While continuing to take its sweet time about it, STT is gradually
heading lower, finally falling below $107 after it became clear
that Greenspan wasn't going to give any indication of a more
aggressive interest rate cutting strategy.  The weak rally
yesterday gave aggressive traders a chance to get into the play
before the expected selloff after Greenspan's testimony today.
Once the expected became known, STT dropped sharply and tested
$106 for the first time in over 3 weeks.  The declining 10-dma
(now at 109.68) is continuing to pressure the stock and further
weakness in Financial stocks in the next few days could be just
the ticket to get this play headed downhill at a higher rate of
speed.  Daily stochastics are just entering oversold, but if
significant weakness emerges in the Brokerage (XBD.X) sector, it
is likely to accelerate STT's decline.  Watch this index for an
indication of investor sentiment before opening new positions.
We have moved our stop down to $109, and aggressive traders can
continue to add to positions on failed rallies to this level.
More conservative players will want to wait for a drop through
$105 before playing.  As STT adds to its losses, watch for support
to materialize near $98-100, the level where the stock found
support in mid-January.

Comments

Beautiful entry off of $109 this morning, from where STT sunk
steadily throughout the session.  We are looking for continued
selling pressure tomorrow.  Look to entry to this put play on
further weakness below today's low of $106.25.  Below $105, the
downward momentum may accelerate.  If the shorts let the stock
rally early tomorrow, look for rollovers at resistance at $108 to
gain entry.

***February contracts expire on Friday***

BUY PUT FEB-110 STT-NB OI=700 at $4.20 SL=2.75  High Risk!
BUY PUT FEB-105 STT-NA OI=115 at $1.55 SL=0.75  High Risk!
BUY PUT MAR-110*STT-OB OI= 88 at $7.80 SL=6.00
BUY PUT MAR-105 STT-OA OI= 24 at $5.20 SL=3.50

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


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************************
COMBOS/SPREADS/STRADDLES
************************

Greenspan's Optimism Sends Stocks Lower...

The stock market took a bearish turn today after Federal Reserve
Chief Alan Greenspan indicated that he would be much more patient
and deliberate in making future adjustments to interest rates.

Monday, February 12

Blue chip stocks rallied today in anticipation of an optimistic
speech from Fed Reserve Chairman Alan Greenspan at the upcoming
Humphrey-Hawkins testimony.  The Dow closed 165 points higher at
10,946.  At the same time, worries continued in the technology
sector, limiting the NASDAQ to an 18 point gain to 2,489.  The
S&P 500 index was up 15 points to 1,330.  Trading volume on the
Big Board was a light 1.01 billion shares, with winners beating
losers 1,956 to 868.  Activity on the NASDAQ was meager at 1.75
billion shares exchanged with advances edging declines 2,005 to
1,781.  In the bond market, the 30-year Treasury fell 16/32,
pushing its yield up to 5.47%.

Sunday's new plays (positions/opening prices/strategy):

Alza      (NYSE:AZA)    FEB37P/FEB40P  $0.60   credit  bull-put
Alza      (NYSE:AZA)    APR45C/FEB45C  $2.65   debit   calendar
Pfizer    (NYSE:PFE)    MAR50C/MAR47C  $0.55   credit  bear-call
Icos      (NASDAQ:ICOS) APR50C/MAR50P  $10.38  debit   straddle
TV Grupo  (NYSE:TV)     APR50C/MAR50P  $8.30   debit   straddle
MetroOne  (NASDAQ:MTON) MAR40C/MAR25P  $0.25   credit  synthetic

There were a number of excellent opportunities to participate in
the new combination positions.  Alza and Pfizer were active and
the target prices were available in both issues.  The straddles
in Grupo Televisa and Icos were less cooperative, but we expect
to achieve lower debits in those plays in the coming sessions.
The Reader's Request position in MetroOne was also available as
the volatile issue dropped below $30 in afternoon trading.

Portfolio Plays:

The bullish activity in industrial stocks came as a surprise to
many investors, as technology stocks were first in line for a
technical recovery.  Confidence in a future reduction in interest
rates was seen as the driving force behind the rotation into Old
Economy issues and Alan Greenspan's Humphrey-Hawkins speech is
expected to shed some light on the subject.  Analysts say lower
borrowing costs are needed to offset the effects of a slowing
economy and help corporate earnings recover from recent declines.
Among blue-chip stocks, Johnson & Johnson (NYSE:JNJ) topped the
gainers Monday, rising over $3 to a recent high near $98 after
Banc of America upgraded the issue, saying the company's new
coated stents will have a positive affect on the firm's growth.
Wal-Mart (NYSE:WMT) and International Business Machines (NYSE:IBM)
also led the Dow higher.  In technology issues, chip stocks moved
upward on strength in Intel (NASDAQ:INTC) and Applied Materials
(NASDAQ:AMAT).  On the downside, the Data Storage group slumped
after Emulex (NASDAQ:EMLX) said it could miss its third-quarter
earnings forecast because of a slowdown in fiber-channel product
orders.  Inside the broader market, biotechnology stocks added
support, with Celera Genomics (NYSE:CRA) rallying after the firm
published its findings on the assembly and sequencing of the
human genome.  A long list of retail and consumer-products shares
also boosted the S&P 500 while utility and oil service companies
consolidated from recent gains.

The Spreads Portfolio enjoyed today's upside activity and there
were a number of highs achieved during the session.  Household
International (NYSE:HI) finished above $60 for the first time in
it's history and our bullish synthetic position in the issue was
one of the best plays during the past month.  Landry's Seafood
(NYSE:LNY) jumped to a two-year high near $12 and our bullish
position in that stock has also exceeded expectations.  The debit
straddle in Jefferson Pilot (NYSE:JP) experienced some excellent
upside activity as the stock spiked above $70 but unfortunately,
the options are expiring Friday and the move did not add much to
the value of the position.  Murphy's Law continued to play a big
part in our portfolio as Lennar (NYSE:LEN) rebounded amid the
optimism for a future rate cut.  The bullish credit spread (that
we closed) will likely expire at maximum profit.  Another issue
in that category, Molex (NSADQ:MOLX) also rallied and it may yet
achieve profitability.  Qualcomm (NASDAQ:QCOM) was a big winner,
up $3.75 to $83 and other bullish issues in the technology group
included; Advanced Energy (NASDAQ:AEIS), AT&T (NYSE:T), Cabot
Microelectronics (CCMP), International Rectifier (NYSE:IRF) and
Motorola (NYSE:MOT).  The surprise of the day was the new play in
Davox (NASDAQ:DAVX), which broke-out to a recent high near $12.
Traders who managed a favorable entry in the synthetic position
will likely be rewarded in the coming sessions.

Tuesday, February 13

The stock market took a bearish turn today after Federal Reserve
Chief Alan Greenspan indicated that he would be much more patient
and deliberate in making future adjustments to interest rates.
The NASDAQ ended down 61 points at 2,427 and the Dow finished 43
points lower at 10,903.  The S&P 500 index was down 11 points at
1,318.  Trading volume on the NYSE hit 1.06 billion shares, with
winners outpacing losers 1,633 to 1,440.  Activity on the NASDAQ
was light at 1.72 billion exchanged, with winning issues leading
declining issues 2,131 to 1,634.  In the bond market, the 30-year
Treasury rose 4/32, pushing its yield down to 5.41%.

Portfolio Plays:

Stocks retreated today as investors showed their disappointment
with the upbeat remarks on the U.S. economy by Federal Reserve
chief Alan Greenspan.  The nation's leading economist told the
Senate Banking Committee that when the glut in capacity recedes,
earnings growth will recover.  Greenspan's bullish comments on
technology spending, which has accounted for a large part of the
domestic economic growth in the past, were very optimistic.  His
attitude implied that he expects the economy to rebound and that
suggests a less aggressive stance on interest rates going forward.
The market took the news in a bad way, with most sectors falling
into the red during the afternoon session.  Both technology and
industrial issues were affected by the sell-off and only a few
select companies in the retail, paper, chemical and natural gas
segments saw buying pressure.  Among the broader market groups,
financial, drug, biotechnology and oil shares slumped.  Our new
bearish position in Pfizer (NYSE:PFE) received some good news as
the company announced it halted a late-stage trial of patients
with neuropathic pain being treated with the firm's experimental
drug pregabalin, due to concern by U.S. regulators over tumors
in mice who had been given the drug.  The stock retreated to $45
and our call-credit spread is in good shape.  The debit straddle
in UnumProvident (NYSE:UNM) also benefited from a downward move
with the position offering a $1.60 profit as the issue dropped
to $26.  The neutral-outlook strategy provided an 80% return in
just over one week.  Navistar (NYSE:NAV) has backpedaled almost
continuously since the take-over speculation began to fade and
our calendar spread in the issue has performed as well as could
be expected.  With the front-month premiums evaporating, we have
decided to roll to March in the short option and the new spread;
APR-$30C/MAR-$30C will have a cost basis of $0.60.  Our new play
in that category, Alza (NYSE:AZA) is doing very well and today's
small rally in the issue moved the neutral calendar spread into
a profitable range.  A credit now exists in the overall position
and we will exploit that potential as we transition to the March
options later in the week.

Questions & comments on spreads/combos to Contact Support
******************************************************************
                    - STRADDLES & STRANGLES -
******************************************************************
CPN - Calpine  $45.62  *** Utility Sector Volatility! ***

Calpine Corporation (NYSE:CPN) is an independent power company
that is engaged in the development, acquisition, ownership and
operation of power generation facilities and the marketing of
electricity predominantly in the United States.  The company
owns interests in 44 power plants having an aggregate capacity
of 4,273 megawatts.  The company also has ten gas-fired projects
and two project expansions under construction having an aggregate
capacity of 5,935 megawatts, and has announced plans to develop
twelve additional gas-fired power plants.  Upon completion of
its projects it has under construction, Calpine will have major
interests in 54 power plants located in 17 states.

The Electric Utility sector has been very active recently with
the California energy crisis, the increased demand for heating
oil and mandates from the Federal Government that gas companies
will ensure adequate fuel supplies to cash-strapped electricity
producers.  Calpine, one of the nation's largest merchant power
providers based in California, has also been affected by the
recent energy crunch, as much of their production is fueled by
natural gas.  Since the volatile activity in the industry will
likely continue for the next few months, this position offers a
great way to speculate on the character of CPN's movement.  The
issue also meets our criteria for a favorable debit straddle;
cheap option premiums, a history of adequate price movement and
future events or activities that may generate volatility in its
industry.

PLAY (conservative - neutral/debit straddle):

BUY  CALL  MAR-45  CPN-CI  OI=3185  A=$3.70
BUY  PUT   MAR-45  CPN-OI  OI=346   A=$2.90
INITIAL NET DEBIT TARGET=$6.50  TARGET ROI=25%

http://www.OptionInvestor.com/charts/feb01/charts.asp?symbol=CPN
******************************************************************
CAL - Continental Airlines  $51.85  *** Range-bound? ***

Continental Airlines (NYSE:CAL) is a United States air carrier
engaged in the business of transporting passengers, cargo and
mail.  Continental, together with its wholly owned subsidiaries,
Continental Express, and Continental Micronesia, serve over 200
airports worldwide.  Continental flies to over 130 domestic and
approximately 87 international destinations and offers additional
connecting service through alliances with domestic and foreign
carriers.  Continental directly serves 16 European cities, eight
South American cities, Tel Aviv and Tokyo, and provides service
to Mexico and Central America.  Through its Guam hub, CMI offers
extensive service in the western Pacific.

One of our long-time subscribers asked why I hadn't offered any
premium-selling positions in this section during the last few
weeks.  Unfortunately, there have been very few statistically
favorable opportunities with the decline in option premiums and
today's search produced only a small number of new candidates.
However, this position offers a high probability of a profitable
outcome with its robust option premiums and relatively stable
trading range.  The likelihood of the share value moving beyond
our sold (short) strikes is rather low, but there is always the
possibility of a technical change in character, so monitor the
issue and the industry news on a daily basis.

PLAY (conservative - neutral/credit strangle):

SELL CALL  MAR-60  CAL-CL  OI=50    B=$0.65
SELL PUT   MAR-45  CAL-OI  OI=1210  B=$0.70
INITIAL NET CREDIT TARGET=$1.40-$1.50 ROI(max)=12%
UPSIDE B/E=$61.40 DOWNSIDE B/E=$43.60

http://www.OptionInvestor.com/charts/feb01/charts.asp?symbol=CA
******************************************************************
                      - Speculation Plays -

These positions are based on recent increased activity in the
stock and underlying options.  All of these plays offer favorable
risk/reward potential but they should be evaluated for portfolio
suitability and reviewed with regard to your strategic approach
and trading style.

******************************************************************
ZOLT - Zoltek  $6.16  *** Cheap Speculation! ***

Zoltek (NASDAQ:ZOLT) is a applied technology and advanced
materials company focusing on the commercialization of carbon
fiber composites.  Zoltek is engaged in the developing carbon
fibers market, manufacturing products for a diverse range of
applications based upon carbon fibers' distinctive combination
of physical and chemical properties, principally high strength,
low weight and stiffness.  Zoltek's operations consist of three
business segments: Carbon Fibers, Composite Intermediates and
Specialty Products.  The Carbon Fibers Segment manufactures and
markets carbon fibers and develops applications for carbon fibers.
The Composite Intermediates Segment develops, manufactures and
markets reinforcements, specialty resins, consumable supplies and
manufacturing equipment for the composite manufacturing industry.
The Specialty Products Segment manufactures and markets acrylic
fibers, nylon products and industrial materials.

This unique stock emerged in one of our bullish chart scans and
since we have traded the position with success in the past, we
decided to offer a speculative option play in the issue.  There
is little news to explain the recent rally, but the technical
indications suggest traders are expecting positive news and the
stock has excellent upside potential.  Since there will likely
be a pullback in the coming sessions, we will try to open the
play at a credit, establishing an overall cost basis near $5.

PLAY (speculative - bullish/synthetic position):

BUY  CALL  APR-7.50  QOT-DU  OI=29  A=$0.62
SELL PUT   APR-5.00  QOT-PA  OI=14  B=$0.43
INITIAL NET CREDIT TARGET=$0.00-$0.12  TARGET ROI=25%

Note:  Using options, the position is similar to being long the
stock.  The collateral requirement for the sold (short) put is
approximately $180 per contract.

http://www.OptionInvestor.com/charts/feb01/charts.asp?symbol=ZOLT


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