Option Investor
Newsletter

Daily Newsletter, Wednesday, 02/14/2001

HAVING TROUBLE PRINTING?
Printer friendly version
The Option Investor Newsletter                Wednesday 02-14-2001
Copyright 2001, All rights reserved.                        1 of 1
Redistribution in any form strictly prohibited.

To view this email newsletter in HTML format with embedded
charts and graphs, click here:
http://www.OptionInvestor.com/htmlemail/021401_1.asp

Posted online for subscribers at http://www.OptionInvestor.com
******************************************************************
MARKET WRAP  (view in courier font for table alignment)
******************************************************************
        02-14-2001        High      Low     Volume Advance/Decline
DJIA    10795.40 -107.90 10917.90 10780.40 1.12 bln   1383/1709
NASDAQ   2491.40 + 63.68  2493.11  2388.40 1.99 bln   1770/1966
S&P 100   682.68 -  2.07   685.62   676.28   totals   3153/3675
S&P 500  1315.92 -  2.88  1320.73  1304.72           46.2%/53.8%
RUS 2000  503.49 +  0.92   503.49   497.74
DJ TRANS 2999.49 - 46.97  3050.27  2991.07
VIX        24.22 - 93.00    25.53    24.06
Put/Call Ratio      0.73
******************************************************************

Techs Feel The Love

The NASDAQ got a shot of adrenaline from cupid's bow as the long
awaited oversold rally got underway this morning.  With the verdict
in from Greenspan's Senate testimony, the market is not pricing in
any intermeeting rate cut, which now appears to be a long shot.
So what did happen today?  A downward revision of guidance from
Applied Materials(NASDAQ:AMAT) and a warning from JDS Uniphase
(NASDAQ:JDSU), and the NASDAQ charges on.  What that tells me is
that many of these beaten down NASDAQ stocks have worst case
scenarios discounted in their share prices.  When a company
confesses, the market learns just how bad it is and can readjust
valuation.  Just look at Nortel(NYSE:NT), Corning(NYSE:GLW), and
Lucent(NYSE:LU), all at 52-week lows.  Lower expectations and
naturally odds increase for an upside surprise.  It's all in the
way we look at it.

As I said in Sunday's Wrap, the NASDAQ was due for an oversold
rally, possibly stimulated by the Greenspan's comments during
his semi-annual testimony to the Senate.  We didn't get the
explicit statement that the Fed will vigilantly cut rates for
the weakening U.S. economy.  Pipe dreams!  Greenspan is far too
linguistically talented to ever be clear!  His commentary more
or less shot down the hope that an intermeeting rate cut was
in the cards.  But just because we didn't hear what we wanted
doesn't mean that what was said was undesirable.  G-man feels
that the U.S. economy has seen the worst and is bottoming out.
That's great news for earnings going forward.  All we need
now is for all the companies to 'fess up and lower their
guidance from these unsustainable growth rates.  Then, we can
learn to expect less.

That's exactly what happened today for AMAT.  After listening in
on their conference call last night, I would say that it was
less-than-favorable.  Same themes:  CFO lowers revenue
guidance, limited visibility in the next quarter, etc.  But, AMAT
made a fantastic recovery today and the Semi sector(SOX.X) led
the NASDAQ to close at the day high.  Is it time to buy with
reckless abandon?  No.  Is it time to trade this oversold relief
rally?  Yes, but know that it can and will turn on a dime at
some resistance level.  This AMAT action was indicative of bad
news already priced into the stock and then short-covering on the
news.  It's hard to believe that this type of news would ignite
a rally in the SOX.X.  Remember, the market always overdoes it on
both sides.  Novellus(NASDAQ:NVLS) and KLA-Tencor(NASDAQ:KLAC)
both posted strong gains in the Semi sector.

Continuing with another theme from last week, rotation into the
SOX.X kick started the NASDAQ rally.  Money came out of the Insurance
sector(IUX.X), the Brokers(XBD.X), and the Drugs(DRG.X).  The
Networking sector(NWX.X) was looking very weak this morning after
the JDSU 3rd quarter earnings warning last night.  This was
followed by some downgrades and revisions from brokerage houses,
but the stock rallied into the close as index fund managers bought
to match the S&P 500's reweighting(after closing the SDLI deal).
Helping bring the NWX.X into positive territory was a 10% rally
in Ciena(NASDAQ:CIEN) which is expected to post earnings tomorrow
BEFORE the bell.  This announcement will most certainly set the
tone for NASDAQ trading tomorrow.  Dell(NASDAQ:DELL) also posts
earnings tomorrow, but after the bell.  As I covered last week,
there were rumors that Dell may be laying off some 10000 employees,
which has not been confirmed, so tomorrow may prove to be the day.

Technically, 2388 was the level that saved the NASDAQ.  Notice in
the second chart below that the bounce occurred near the longer
term downtrend line from September.  Coincidence?  The rally
that ensued was the oversold rally we had been waiting for.  There
are so many NASDAQ stocks that have been beaten down without any
relief.  The problem, however, continues to be that they remain
in strong downtrends.  This is the reason that an oversold rally
from this point needs to be navigated cautiously.  I can't stress
that enough.  We are not in a market that you can buy and forget.
We must be vigilant on monitoring positions with stop losses and
quick profit-taking.  Today's action in the NASDAQ gives a good
reason to trade, but a bad reason to invest.  Simply put, it's a
trading rally.  There will be resistance overhead at the 2550
level, and at 2700.  Buying into the close brought the NASDAQ
above the recent downtrend line that was established after failing
at 2900.  It would be encouraging to break the trendline, if only
to bring the NASDAQ to a slightly higher trading range.







On the Dow(INDU), yesterday's failure at 11000 certainly indicated
further weakness.  This was the third failure in February at this
critical level, strengthening resistance there and giving the
shorts more momentum.  That is exactly what happened today as
investors sold just about everything non-tech: Financials,
Cyclicals, Drugs and Healthcare.  Support at 10850 was quickly
overtaken and the index settled slightly below 10800.  Yesterday's
failure keyed on Greenspan's testimony.  It rallied throughout
the meeting but given his comments on the economic recovery and
the odds of not getting that intermeeting cut, investors did not
have what they needed to move the INDU higher.  At this point,
the INDU could very well experience further weakness, settling
back near stronger support at 10600.




Looking ahead, the NASDAQ appears poised for an oversold relief
rally.  However, we must be very skeptical of its longevity.
Short-covering added to today's rally quite a bit.  As Jim recently
suggested, call buyers may want to stay out until the NASDAQ trades
above 2700.  If you do want to trade the relief rallies, exercise
caution by closely monitoring positions and using stop losses.  We
have seen how quickly this tech index can retrace its gains.  CIEN's
earnings tomorrow morning certainly will dictate NASDAQ sentiment
for the day.  Watch for their guidance going forward, that will be
the driver.  Friday will be a good old volatile expiration being
double-witching, plus the PPI number due out in the morning.
Earnings from DELL after the bell tomorrow will weigh on the NASDAQ
Friday.  On this Valentine's Day, this is no time, nor market, to
fall in love with any stock.  Trade smart.

Matt Russ
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!

Current speakers include:

Tom DeMark, author of "Day Trading Options", "Science of
Technical Analysis" and "New Market Timing Techniques" and
manager of a $4 billion hedge fund.

John Najarian, "Doctor J" as he is known on the CBOE

Mark Leibovit, Chief Market Strategist of VRTrader.com

Richard Arms, inventor of the TRIN, or Arms Index, Equivolume
charting and author of "Trading Without Fear."

Mark Skousen, Editor of Forecasts and Strategies for over 20
years.

Steve Nison, the worlds foremost expert on Candlestick charting.
Author of "Japanese Candlestick Charting Techniques" and "Beyond
Candlesticks."

Jim Crimmins, President of TradersAccounting.com

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.

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


************************Advertisement*************************
Tired of waiting on trades to execute?
Does your broker offer Stop Losses on Options?

Trade instantly with Stop Losses at PreferredTrade Inc.
Stop Losses based on the option price or the stock price.
Move your trading into the next millennium with PreferredTrade.

Anything else is too slow!

http://www.sungrp.com/tracking.asp?campaignid=1641
**************************************************************


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

SEBL - Siebel Systems Inc. $63.38 +7.44 (+6.26 this week)

Siebel Systems Inc. is the world's leading provider of ebusiness
applications software.  Siebel Systems provides an integrated
family of ebusiness applications software enabling multichannel
sales, marketing and customer service systems to be deployed
over the Web, call centers, field, reseller channels, retail and
dealer networks.  Siebel Systems' sales and service facilities
are located in more than 37 countries.

The software sector experienced a dramatic rebound today, as
the Nasdaq bounced back from a highly oversold condition.  SEBL
made a substantial gain on slightly higher than the average
daily volume, and is poised to move out of the downward channel
which commenced in late November.  Considering the excellent
news which has been released by the company lately, this is not
surprising.  SEBL is one of the few technology stocks which
reported blow out earnings for the last quarter, and kept its
guidance going forward.  On January 24th, SEBL reported earnings
of $106 million, or 20 cents per share, up 170% from the year
ago quarter.  Analysts were expecting earnings of 15 cents per
share.  While the stock rallied slightly after earnings, it
could not overcome the overall Nasdaq weakness.  However, at this
point, we may have an aggressive entry point to a profitable
call play.  At a Goldman Sachs technology conference this week,
Siebel management reiterated that they see no slowdown for
their product demand in the foreseeable future.  Aggressive
traders could take positions at current levels, or at a bounce
from support at $61, if the SOX.X and the Nasdaq are rallying.
A move above $66 on strong volume could position the stock to
make a run to $68, and possibly strong resistance at the 50-dma
of $72.  The SOX.X is now above its 50-dma of 638.32, which
is an important level to maintain.  We reiterate that this is
an agressive play and we are setting a tight stop at $59.

BUY CALL MAR-60*SGW-CL OI= 266 at $ 8.63 SL=6.00
BUY CALL MAR-65 SGW-XM OI=2872 at $ 6.00 SL=4.00
BUY CALL MAY-60 SGW-EL OI=4993 at $12.63 SL=9.50
BUY CALL MAY-65 SGW-EM OI= 704 at $10.25 SL=7.00

www.premierinvestor.com/oi/profile.asp?ticker=SEBL


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

No new puts today


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

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

SDS - call play
Adjust from $53 up to $54

STT - put play
Adjust from $109 down to $108

BOBJ - put play
Adjust from $76 down to $74


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

No dropped calls today


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

ISSX $68.56 +6.38 (+2.88) ISSX offered put players excellent
opportunities on Monday and Tuesday, with sharp drops from
the $66 level to the $61.50 level.  However, as the Nasdaq
bulls came back to life toward the close today, ISSX moved
past our stop level of $66, and closed on a bullish trend.
The stock appears to have temporarily moved out of its downward
channel, and as such, we are dropping it tonight.

MERQ $77.06 +10.19 (+5.75)  After a sharp drop on Monday from
$72.98 to $66.25, MERQ joined many of the other technology
stocks by participating in today's oversold rally.  The stock
remains in a serious downward trend, which will require more
than a one day rally to recover from.  However, the stock
closed above our stop level of $72, and so we are dropping it
tonight.

IDTI $43.50 +5.69 (+4.82) For the last five days, IDTI was
trapped in a very narrow trading range from support at $38 to
resistance at $41.  With the rally in the Semi Sector lead by
NVLS, AMAT, and KLAC, IDTI broke to the upside.  Today's close
took IDTI above resistance at $41 on heavy volume, and above our
stop level at $42, and so we are dropping the play tonight.


********************************************
Do you like OptionInvestor? Then vote
for us as a favorite site:
http://www.investorlinks.com/vote.html

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


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

Analyzing A Put Play: ISSX
By Mary Redmond

At this point, we have many macroeconomic indicators which point
to a market that should be able to rally strongly in the next
year.  However, from an options traders perspective, the next
few weeks may be difficult.

It is important to notice that the NYSE has reported that margin
debt is way down from its high levels of the year.  In addition,
the credit balances in both cash and margin accounts are way up.

In addition, the Investment Company Institute has reported that
money market fund balances are at record highs, and show no
signs of slowing.  The level of cash in money market funds is
now over $2 trillion, which is a higher percentage of the total
value of the stock market than we have seen since 1991.  Last
week, over $47.9 billion went into money market funds, which is
a monthly average of nearly $200 billion.

The estimate for the amount of cash deposited to equity funds
for the month of January was approximately $23 billion.  This is
roughly half the level which was deposited to equity funds last
January.  However, from a historical perspective, it is still a
fairly high level of cash going into funds.

Furthermore, the corporate debt market is starting to recuperate
from the crippling credit crunch which took place last fall.
The spread between low yield and high yield debt has narrowed
considerably since the Fed cut rates, and may have further to go.

We also have to consider mortgage refinancing, which puts
money into people's pockets.  The levels of mortgage refinancing
are up 500% from last year.  Considering the fact that most
Americans hold a larger percentage of their wealth in the equity
of their homes than in the stock market, this can be a significant
boost to the cash levels of most families.

While all of these factors are bullish, none of them mean anything
if people decide not to commit funds to the market.  We may need
to wait until companies start giving more optimistic projections
for their earnings before investors start bullish buying.

In the meantime, the fastest profits may still be found in put
options.  While there have been opportunities for call option
traders, it has been difficult to find really big profits in
short-term calls.  However, many sectors have provided the
opportunity for big short-term put profits, including the
networking and biotech sectors.

As an example, let's retrace one of our put plays from this week,
ISSX.  We always want to think: market, sector, stock.  Ideally,
put candidates should be weak stocks in weak sectors which are
just about to fall below a critical support level.  Generally, it
is best to buy puts when the market is falling and the stock’s
sector is falling.

A long-term chart can give an indication of the stock's strength,
and the important support levels to monitor.  You can see in the
chart of ISSX that it has been in a serious downtrend for months.
A head and shoulders formation developed in January, with the right
shoulder coinciding with a fall below the 50-dma.  This is a
warning that a further drop is likely to follow.




The Internet Sector has been very weak for a long time, and only
briefly cleared the 50-dma in January, before falling below it.
In addition, the Software Index tried to rally after the initial
Fed rate cut, but started to fall right around the time ISSX fell
below its 50-dma.  Put players could have watched for the Nasdaq
to fall below its 50-dma of 2643, which occurred on February 8th.

Now, we can zero in and try to identify an ideal entry point.
Ideally, a put entry point would occur when a stock has just
fallen below an important support level, when the major indexes
and the stock's sector are falling, and when either the VIX.X or
the VXN.X has just spiked to the low side of its daily trading
range.  Entry points like this do not often occur, however, it is
best to use as many technical indicators as possible.

One of these points occurred on Feb 8th, when ISSX fell below its
50-dma, followed by the Nasdaq dropping below its 50-dma of 2643.
On top of that, the Internet Sector (HHH) had fallen below its
50-dma and was trending lower.  Also, the VXN was at the low end
of its daily trading range at 62.




You can see how the MACD moved to an oversold position and stayed
there, as the stock failed at repeated attempts to rally.







Another good put entry point occurred after the Humphrey-Hawkins
testimony ended on Tuesday.  At this point, the morning rally in
both the Dow and the Nasdaq started to collapse, ISSX started to
roll over after a failed attempt to clear $66, and the VIX spiked
out of its Bollinger bands to the downside.


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

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

Sign up for a two week free trial and see for yourself at
IndexSkybox.com:
http://www.sungrp.com/tracking.asp?campaignid=1627
************************************************************


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

BRCM - Broadcom Corporation $81.19 +6.25 (+3.00 this week)

Broadcom Corporation is a provider of highly integrated silicon
solutions that enable broadband digital transmission of voice,
video and data to and throughout the home and within the business
enterprise.  These integrated circuits permit the cost-effective
delivery of high-speed, high-bandwidth networking using existing
communications infrastructures that were not originally designed
for the transmission of broadband digital content.

Most Recent Write-Up

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.

Comments

Looking to capitalize on the late-session NASDAQ rally, BRCM is a
perfect call candidate.  Be sure to see how CIEN's earnings tomorrow
morning affect the sentiment for the market.  If BRCM pulls back,
look for bounces from intraday support near $77, or $75.  If BRCM
clears $83 along with positive NASDAQ sentiment, resistance is slim
until $90.

BUY CALL MAR-75 RDZ-CO OI=981 at $13.13 SL=10.50
BUY CALL MAR-80*RDZ-CP OI=799 at $10.25 SL= 7.75
BUY CALL MAR-85 RDZ-CQ OI=567 at $ 7.88 SL= 6.25
BUY CALL MAY-80 RDZ-EP OI=269 at $16.50 SL=12.00
BUY CALL MAY-85 RDZ-EQ OI=135 at $14.25 SL=10.75

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


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

Money rotates into the hi-tech sector, at least for today...

Technology stocks rebounded today, led by an unexpected rally in
semiconductor issues.  The bullish activity came on the heels of
positive analysts' comments and optimism that the worst may be
over for the group.  J.P. Morgan Chase issued the most confident
outlook, upgrading of a number of companies in the chip sector
including Applied Materials (NASDAQ:AMAT), Novellus (NASDAQ:NVLS),
and KLA-Tencor (NASDAQ:KLAC).  In the networking group, Sycamore
Networks (NASDAQ:SCMR) rallied 10% to $26 after posting earnings
that beat forecasts but warned sequential growth would slow.  The
most active company on the technology exchange was JDS Uniphase
(NASDAQ:JDSU), which rebounded from earlier declines after saying
that earnings would miss consensus estimates due to the soft U.S.
economy and the recent merger with SDL Inc. (NASDAQ:SDLI).  While
the NASDAQ was recovering from its lowest close in five weeks, the
the Dow Industrials moved plummeted to a triple-digit loss after a
number of broad market companies broadcast quarterly reports that
were either below estimates or warned about slower growth in the
coming quarter.  The sell-off was a surprise to most investors,
considering the positive comments from Federal Reserve Chair Alan
Greenspan that he sees a year-end rebound in the economy.  The
slump in the blue-chip shares was led by diversified manufacturer
Minnesota Mining & Manufacturing (NYSE:MMM), drug giants Johnson &
Johnson (NYSE:JNJ) and Merck (NYSE:MRK), and pulp and paper maker
International Paper (NYSE:IP).  Among S&P 500 sectors, utility,
retail, biotechnology and consumer products issues generally moved
lower while select oil service and finance shares carved out small
gains.  Analysts said that although the market is "pricing in" the
last of the bad news, there will need to be positive guidance from
companies before a recovery can begin in earnest.  With near-term
earnings growth expected to be flat for the technology industry,
defensive areas of the market will continue to perform well in the
coming months and that will make it very difficult for traders to
choose the most productive sectors.  Considering the almost daily
rotation in popular industry groups, that's a very accurate way to
describe the current dilemma for investors in this market.


Summary of Previous Picks:

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

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

CTLM    FEB    35    34.06  37.75    $0.94   5.2%
EMLX    FEB    70    66.94  38.75  -$28.19   0.0% Closed
FTE Closed
ADI Closed

Naked Puts:

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

CTLM    FEB    35    33.94  37.75    $1.06  18.7%
UHS     FEB    80    78.95  89.01    $1.05  12.9%
CMVT    FEB    90    88.81 100.06    $1.19   9.5%
IDTI    FEB    35    34.44  43.50    $0.56   5.1%
VSTR    FEB   105   102.75 104.13    $1.38   4.7% Key Moment!
EMLX    FEB    60    57.94  38.75  -$19.19   0.0% Closed
EMLX    FEB    65    63.94  38.75  -$25.19   0.0% Closed
FTE Closed
ADI Closed

DIGL    MAR    35    33.56  41.06    $1.44  10.5%
AEOS    MAR    45    43.94  57.50    $1.06   6.9%

Sell Strangles:

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

AFFX    FEB    50p   49.19  62.50    $0.81   7.4%
AFFX    FEB    97.5c 98.31  62.50    $0.81   7.4%

AFFX    FEB    52.5p 51.81  62.50    $0.69   9.4%
AFFX    FEB    85c   85.69  62.50    $0.69   9.4%

CHKP    FEB    80p   79.25  90.19    $0.75  11.5% Adj 3-2 split
CHKP    FEB   113c  114.00  90.19    $0.67   9.4% Adj 3-2 split

VECO    FEB    30p   29.06  48.75    $0.94   7.3%
VECO    FEB    95c   96.13  48.75    $1.13   8.7%

VECO    FEB    35p   34.50  48.75    $0.50   8.0%
VECO    FEB    80c   80.63  48.75    $0.63  10.0%

Naked Calls:

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

OSIP    FEB    85    86.13  48.06    $1.13   8.6%
BRCD    FEB   135   136.25  54.25    $1.25   7.4%
CIEN    FEB   145   146.00  76.81    $1.00   6.2%
MYGN    FEB   100   100.69  65.50    $0.69   6.1%

Credit Spreads:

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

CMVT  $121.63 $100.06 FEB95p/100p  $0.75   $99.25  $0.75   Alert
ITG   $45.81   $52.10 FEB35p/40p   $0.69   $39.31  $0.69   Open
CEPH  $58.50   $61.00 FEB75c/70c   $0.38   $70.38  $0.38   Open
IMPH  $55.94   $55.56 FEB45p/50p   $0.75   $49.25  $0.75   Open

NBR   $62.30   $59.95 MAR50p/55p   $0.60   $54.40  $0.60   Open

A    FEB45p/50p   Closed
NUFO FEB40p/45p   Closed

Debit Straddles:

Stock  Pick    Last     Position   Debit    G/L    Status

ASFC  $55.91  $56.69   MAR55c/55p  $4.38   $-0.76   Open

Alliance Capital(NYSE:AC) Profit target met - closed on 1/30 for
$0.75 (30%) gain.


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

***************
BRKS - Brooks Automation  $38.88   *** On The Rebound! ***

Brooks Automation (NASDAQ) is a leading supplier of integrated
tool and factory automation solutions for the global semiconductor
and related industries such as the data storage and flat panel
display manufacturing industries.  Brooks has distinguished itself
as a technology and market leader, particularly in the demanding
cluster-tool vacuum-processing environment and in integrated
factory automation software applications.  The company's offerings
have grown from individual robots used to transfer semiconductor
wafers in advanced production equipment to fully integrated
automation solutions that control the flow of resources in the
factory from process tools to factory scheduling and dispatching.
By the close of fiscal 2000, Brooks had emerged as one of the
leading suppliers of factory and tool automation solutions for
semiconductor and original equipment manufacturers.

Technology stocks came back to life today, with the NASDAQ
rebounding from a test of its yearly lows amid strength in the
semiconductor group.  Brooks Automation was one of the gainers,
moving higher on recent buying support after Standard & Poors
announced that BRKS will replace Bindley Western (NYSE:BDY) in
the S&P SmallCap 600 Index after the close of trading today.
Now the question is whether the recovery rally will continue and
traders who are bullish on the technology sector can speculate on
that outcome with these conservative positions.

BRKS - Brooks Automation  $38.88

PLAY (sell naked put):

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

Sell Put  MAR 30   BQE OF  50        0.69    29.31     8.3% ***
Sell Put  MAR 35   BQE OG  1         1.94    33.06    14.5%

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

******

ERTS - Electronic Arts  $51.13  *** Opposing The Trend! ***

Electronic Arts (NASDAQ:ERTS) operates in two principal business
segments: EA Core and EA.com.  Through EA Core, the company makes,
markets and distributes interactive entertainment software for a
variety of hardware platforms.  EA.com represents Electronic Arts'
online and e-Commerce business.  EA.com's online business includes
subscription revenues collected for Internet game play on their
web-sites, sales of Internet-based games and sales of Electronic
Arts products sold through EA.com websites.

In late January, Electronic Arts reported quarterly earnings that
were less than outstanding, but investors chose instead to focus
on the company's future outlook.  Electronic Arts said its profits
fell short of consensus estimates and analysts also slashed their
revenue targets for the fiscal fourth quarter, yet the stock began
to rally.  Traders say the recent move is based on the company's
commanding position in the industry, including the Play-Station
software market and new platforms such as the Xbox from Microsoft.
Our target position offers a high probability of a reasonable
profit with limited potential for loss.

ERTS - Electronic Arts  $51.13

PLAY (sell covered call or naked put):

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

Sell Call MAR 45   EZQ CI  89        8.25    42.88     5.0% ***
Sell Call MAR 47.5 EZQ CW  139       6.50    44.63     6.5%

Sell Put  MAR 40   EZQ OH  355       0.88    39.12     8.0% ***
Sell Put  MAR 42.5 EZQ OV  227       1.31    41.19    10.1%
Sell Put  MAR 45   EZQ OI  140       2.00    43.00    12.4%
Sell Put  MAR 47.5 EZQ OW  55        2.81    44.69    14.5%

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

******

SEIC - SEI Investments  $93.06  *** Split Rally? ***

SEI Investments (NASDAQ:SEIC) provides global investment solutions
to institutions and individuals and business solutions to a number
of investment advisors and financial intermediaries.  Serving
corporations, banks, insurance companies, unions, foundations,
endowments and individuals with an array of investment products
and administration services, the company manages and administers
more than $255 billion of investable assets and processes over
$1.5 trillion of assets.  From its startup as a simple investment
technology company, SEI Investments has evolved into a diversified
investment services firm dedicated to helping its clients; banks,
investment advisors and institutional investors, grow their assets
and their businesses.

SEIC shares are "on the move" and traders say the upcoming stock
split is driving the rally.  SEI Investments recently reported that
its stockholders have approved a 2-for-1 stock split, increasing
the number of authorized shares of common stock to 750 million from
100 million.  The stock-only dividend is payable to shareholders of
record on February 19, 2001, and will be paid on February 28, 2001.
Based on today's activity, the stock has demonstrated excellent
upside potential and those who agree with a bullish outlook for
the future can use the slightly inflated premiums to establish an
excellent cost basis in the underlying issue.

SEIC - SEI Investments  $93.06

PLAY (sell naked put):

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

Sell Put  MAR 75   QEI OO  62        1.06    73.94     5.3% ***
Sell Put  MAR 80   QEI OP  32        1.75    78.25     6.8%
Sell Put  MAR 85   QEI OQ  34        3.00    82.00     9.5%

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

Neutral Plays - Straddles & Strangles

***************
FAST - Fastenal  $57.69  *** Rolling Stock! ***

Fastenal Company (NYSE:FAST) sells and distributes industrial
supplies from over 765 stores in 48 states, Puerto Rico and
Canada.  Fastenal's product lines include the Fastenal, FastTool,
SharpCut, PowerFlow, EquipRite, CleanChoice, FastArc, and
PowerPhase lines.  The Fastenal product line provides threaded
fasteners and accessories for use throughout all industrial and
commercial facilities and construction areas.  FastTool offers
industrial and construction power tools, safety supplies and
accessories.  SharpCut specializes in metal removal tooling,
custom design tooling and re-sharpening services using Computer
Numeric Control equipment.  The PowerFlow product line includes
fluid transfer components and accessories for hydraulic and
pneumatic power.  EquipRite offers material handling and storage
products.  CleanChoice provides industrial, janitorial and paper
products.  FastArc specializes in welding-related products and
services.  PowerPhase is a line of electrical products and
supplies.

Traders are always asking for "rolling stock" candidates and
this issue appears to be a good candidate in that category.
In addition, the options are favorably priced and the issue
has a proven history of adequate movement to make the straddle
profitable.  Those of you who participate in conservative
strategies will also like this play as it has a statistically
high probability of a successful outcome.  As always, review
the current news and sector outlook before making your own
decision about the future outcome of the position.

FAST - Fastenal  $57.69

PLAY (conservative - neutral/debit straddle):

BUY  CALL  FQA-CL  MAR-60  OI=155  A=$2.50
BUY  PUT   FQA-OL  MAR-60  OI=10   A=$3.25
INITIAL NET DEBIT TARGET=$5.50  TARGET ROI=20%

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

******

MUSE - Micromuse  $63.38  *** Premium Selling! ***

Micromuse (NASDAQ:MUSE) and its subsidiaries develop and support
a family of scalable, highly configurable, rapidly deployable
software solutions for the effective monitoring and management
of multiple elements underlying an enterprise's information
technology infrastructure including network devices, computing
systems and other managed environments.  The company's Netcool
product suite is designed to monitor large-scale networks in
realtime, allowing network operators to quickly identify and
address problems before they lead to trouble.  Netcool helps
telecom firms, Internet service providers and business-oriented
enterprises maintain network-based customer services and other
applications.  The company markets and distributes to customers
through its own sales force, OEMs, value-added resellers and
systems integrators.

We like this issue for a premium-selling position because it has
a relatively well-defined trading range and no apparent news or
events that will substantially change its character prior to the
January options expiration.  The company's earnings announcement
is not expected until early in April and our profit envelope is
outside the most recent trading range at $40-$90.  Our plan is
to sell the OTM options for credit and use the earned income to
offset any losses on the downside.  If the price of the stock
moves through the resistance area near $85 on heavy volume, we
will close the sold (short) call or buy the stock to cover the
position.

MUSE - Micromuse  $63.38

PLAY (aggressive - neutral/credit strangle):

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

Sell Put  MAR 40   QVM OH  24        1.06    38.94     7.8% ***
Sell Call MAR 95   UZQ CS  260       1.06    96.06     7.8% ***

- or -

Sell Put  MAR 45   QVM OI  262       2.00    43.00    13.8%
Sell Call MAR 90   UZQ CR  141       1.56    91.56    11.1%

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

BEARISH PLAYS - Naked Calls

***************
BEAS - Bea Systems  $53.00  *** A Rough Road Ahead! ***

BEA Systems (NASDAQ:BEAS) is a provider of unique e-commerce
infrastructure software that helps companies of all sizes build
e-commerce systems that extend investments in existing computer
systems and provide the foundation for running a successful
integrated e-business.  The company's products have been adopted
in a wide variety of industries, including commercial and other
investment banking, securities trading, telecommunications,
airlines, retail, manufacturing, package delivery, insurance and
government, in many cases using the web as a system component.
The company's products serve as a platform or integration tool
for applications such as billing, provisioning, customer service,
electronic funds transfers, ATM networks, securities trading,
Web-based banking, Internet sales, supply chain management,
scheduling and logistics, and hotel, airline and rental car
reservations.  The company's earnings are due on 2/22/01.

This play is simply based on the current price or trading range
of the underlying stock and its recent technical history.  The
downward movement in Bea System's share value was halted today
by the oversold rally in NASDAQ shares and after a short-term
recovery, we expect the issue to continue to struggle in the
$60-$70 range.  The issue has also achieved lower lows in each
of its past attempts (OCT00-JAN01) to reverse the bearish trend;
a negative trait that will affect its upward movement in the
near future.  Any ensuing rally will have to propel the issue
successfully beyond its short-term (30-day) moving average near
$60 and with the heavy overhead supply from $65-$75, the share
value has little chance of reaching our target strikes in the
next month.

BEAS - Bea Systems  $53.00

PLAY (aggressive - sell naked call):

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

Sell Call MAR 75   BUC CO  3060      1.50    76.50    12.6%
Sell Call MAR 80   BUC CP  3704      0.94    80.94     8.3% ***
Sell Call MAR 85   BUC CQ  6851      0.56    85.56     5.1%

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


************************Advertisement*************************
Get 10 FREE Issues of Investor's Business Daily. No obligation.
Nothing to cancel.
http://www.sungrp.com/tracking.asp?campaignid=1607
**************************************************************


*******************
FREE TRIAL READERS
*******************

If you like the results you have been receiving we
would welcome you as a permanent subscriber.

The monthly subscription price is 39.95. The quarterly
price is 99.95 which is $20 off the monthly rate.


We would like to have you as a subscriber. You may
subscribe at any time but your subscription will not
start until your free trial is over.

To subscribe you may go to our website at

www.OptionInvestor.com

and click on "subscribe" to use our secure credit
card server or you may simply send an email to

 "subscribe@OptionInvestor.com"

with your credit card information,(number, exp date, name)
or you may call us at 303-797-0200 and give us the
information over the phone.

You may also fax the information to: 303-797-1333


**********
DISCLAIMER
**********

Please read our disclaimer at:
http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html

DISCLAIMER

Option Investor Inc is neither a registered Investment Advisor nor a Broker/Dealer. Readers are advised that all information is issued solely for informational purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy, nor is it to be construed as a recommendation to buy, hold or sell (short or otherwise) any security. All opinions, analyses and information included herein are based on sources believed to be reliable and written in good faith, but no representation or warranty of any kind, expressed or implied, is made including but not limited to any representation or warranty concerning accuracy, completeness, correctness, timeliness or appropriateness. In addition, we do not necessarily update such opinions, analysis or information. Owners, employees and writers may have long or short positions in the securities that are discussed.

Readers are urged to consult with their own independent financial advisors with respect to any investment. All information contained in this report and website should be independently verified.

To ensure you continue to receive email from Option Investor please add "support@optioninvestor.com"

Option Investor Inc
PO Box 630350
Littleton, CO 80163

E-Mail Format Newsletter Archives