Option Investor

Daily Newsletter, Sunday, 02/18/2001

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The Option Investor Newsletter                   Sunday 02-18-2001
Copyright 2001, All rights reserved.                        1 of 5
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        WE 2-16           WE 2-9           WE 2-2          WE 1-26
DOW    10799.82 + 18.37 10781.45 - 99.10 10864.10 +204.12  + 72.39
Nasdaq  2425.38 - 45.59  2470.97 - 91.09  2660.50 -120.80  + 10.92
S&P-100  675.42 -  6.93   682.35 - 11.97   705.48 -  3.58  +  3.83
S&P-500 1301.53 - 13.23  1314.76 - 17.77  1349.47 -  5.48  + 12.40
W5000  12029.60 - 94.71 12124.31 -169.65 12450.10 - 77.20  +143.40
RUT      499.28 +  2.23   497.05 -  5.84   501.50 +  2.82  + 10.59
TRAN    2994.78 - 18.64  3013.42 - 11.82  3092.76 +136.57  +  2.90
VIX       25.08 -   .07    25.15 +  1.06    24.75 -   .39  -  1.15
Put/Call    .89              .73              .60              .59

Was that a dead stop at 2400 again?
By Jim Brown

What a difference a day makes! From apparent rampant buying
on Thursday to obvious rampant selling on Friday. The bipolar
Nasdaq screeched to a stop right on major support at 2400 again.
The good news of course is the volume on each day. On Thursday
the volume was a strong 2.1 billion but Friday the volume was
only 1.8 billion on a down day. Did we get capitulation and a
successful retest of support at 2400? Was the downdraft simply
a reaction to Nortel and traders going flat before the weekend
or are we looking at another leg down next week. Stay tuned!

What a confusing day for traders! The Nyse:NT and Nyse:SGP
warnings the night before and a massive miss in the economic
reports. Traders already on the run from the severity of the
NT warning were blindsided by a PPI report that came in much
higher than expected. At +1.1% the PPI posted the largest gain
since September of 1990 when we were last in a recession. The
estimates were only +0.3%. The core rate estimated to be +0.1%
also posted the biggest gain since 1998 at +0.7%. All of a
sudden the fear of inflation has surged back into the forefront
of investor sentiment. Many analysts brushed off the report
as a fluke brought on by higher energy prices and companies
raising prices to offset slowing sales. The flaw in this theory
is the tendency of manufacturers to lower prices in times of
soft demand to induce buyers off the sidelines instead of
raising prices when buyers are watching costs closely. Still
the warning light is back on and now all eyes are focused on
the CPI report next Wednesday. A tame CPI will ease the
tensions slow heart rates among bond traders again.

Other economic reports included a drop in Industrial Production
by -0.3% for the fourth monthly drop in a row. The -0.3% was
slightly stronger than the -0.5% in December which could mean
the pace of the decline is slowing. The estimates were for
an unchanged report but analysts feel the cold December and
warm January skewed the figures. Capacity utilization fell to
80.2% and is now nearly 200 basis points below its 1967-1999
average. The reduced utilization should actually be helping
reduce inflation as supply bottlenecks have gone away.

Housing starts soared to 1.65 million which was the strongest
month since last April. This was due to the warmer weather and
the falling interest rates. This is a positive signal because
of the impact on the broader economy. It also shows consumer
confidence may have bottomed even in the light of continued
job cuts. This could work against us as the Fed could see this
as evidence of a rebound. One of the most damaging indicators
is consumer confidence which fell to 87.8 in February from 94.7
in January. This is the lowest point since 1993. Greenspan
specifically singled out consumer confidence in his recent
testimony and reasoning for the recent rate cuts. Historically
downturns tend to feed on themselves as falling confidence
turns into a death spiral unless some outside influence stops
it. Aggressive Fed rate cuts function as an antibiotic to the
confidence plague. By cutting rates aggressively consumers
relax with confidence that uncle Greenspan will save them
again. The Fed fund futures predicting a -50 basis point
cut in March jumped from a 35% chance to a 70% chance after
the economic reports on Friday.

NT was dropped for a huge loss with a -$10 drop to $20 on a
volume of over 120 million shares and a loss of $30 billion
in total market cap. One third of the company's value just
evaporated overnight. The dire outlook for NT rippled through
the fiber/networking sectors. Corning, Nyse:GLW, dropped -9
or -21% to $32.88 and Nasdaq:JDSU dropped -9 or -21% to $35.88.
Nasdaq:JNPR dropped -12 or -13% to $80. Nasdaq:CIEN, which
just announced earnings and guided analysts higher, was also
dropped for a -$6 or -7% loss to $82. The tremendous Ciena
news had provided the huge rally on Thursday and CIEN had
jumped from Wednesday's low of $69 to Thursday's high of $94.
The pull back to $82 at the close is a clear entry point on
very light profit taking in my opinion. (I own it) For those
of us who were looking for a fast mover with excellent earnings
and prospects, this was a gift. When the market rallies this
stock will be a favorite. CSCO also fell on the NT news back
to its 52-week low of $28 which has been a base since Feb-9th.

Nasdaq:DELL held up rather well considering the lack of
guidance going forward and lost only -1.50. Nyse:HWP also
did well only losing -2.85 after warning about future growth.
Nasdaq:SUNW suffered as much as Dell and HWP as analysts
downgraded estimates for SUNW after the negative forecasts.
SUNW will host its quarterly update meeting on Thursday and
the stock is likely to drift lower as investors fear the same
kind of warning from them.

It is clear now that the bump on Thursday was short covering
after the CIEN earnings surprise. There was no follow through
and there was no bad news bounce like we saw with AMAT earlier
in the week. This does not mean I am negative on the markets.
At least I wasn't negative on Friday night. News was out on
Saturday that CSCO CEO John Chambers is on the talk circuit
again stirring up trouble. In Stockholm Sweden Chambers said
"It makes no difference what the Federal Reserve or the latest
statistics say. What we see now is absolutely NOT a soft
landing. Ask anyone in American manufacturing industry and
they will say we are in a recession. If the situation does
not change before the half year stage there is a risk of a
domino effect whereby the rest of the world will be imminently
affected." Add that statement to the NT/DELL/HWP warning from
last week and we have some really negative sentiment.

According to First Call there have been 294 warnings for the
next quarter compared to only 37 for this time last year. The
outlook as reported by the financial world is bleak. Now here
is where I wonder about reality versus hype. Several economic
indicators are already showing a bounce. The Weekly Leading
Index (WLI), which was developed by Greenspan's former economics
teacher, Geoffrey More, is sending recovery signals. This
indicator which dates back to the late 1980s gives a real time
snapshot of the economy, not what happened a month ago. It has
correctly highlighted the turning points since forecasting the
1990 recession in real time. It is now up four weeks in a row
and at 124.0 actually higher than the peak in the economy in
June 2000. My point here is companies are making increasingly
bearish statements while the actual indicators are already
showing new life. Is it possible that we are seeing executives
taking the opportunity to talk down future earnings and
lowering the bar they have to reach for several future
quarters? Am I smoking something funny here or is it really
possible that leading indicators and leading companies are
moving in different directions? At $28 how much does CSCO
and Chambers have to lose? The bad news is priced in and the
stock is not likely to drop much more. Does this mean Chambers
can take a free shot at trying to get Greenspan to lower rates
again and also make earnings targets easier to hit? I would
probably do it. He has nothing to lose and everything to gain.

Next week we have two big Dow components, Nyse:HD and Nyse:WMT
announcing earnings. Home Depot is already expected to post
terrible results and the bad news is already priced in the
stock. However Home Depot is seen as a leading indicator for
the health of the building industry and guidance will be
critical. Wal-Mart however could be a major event. Seen as a
major indicator of the health of the retail sector WMT could
impact the markets recovery views going forward. If they meet
estimates and more importantly margins then we could see another
sigh of relief. If margins dropped materially due to dumping of
retail merchandise in the holiday quarter then their guidance
will be critical. If they have a positive outlook then maybe
we have seen the bottom of the economy. They already have said
that higher energy prices have impacted customer counts to the
downside and with energy prices falling investors could be
expecting a better forecast.

Are you confused yet? Don't worry, one of our best contrarian
indicators just changed direction. Barton Biggs, or "Always
Wrong Biggs" with MSDW, changed from a rare bullish stance to
bearish again on Friday. After predicting a strong rally several
weeks ago that never appeared he is now calling for new lows on
the Nasdaq, Dow and S&P before moving up again. Must be a rally

In real life however there is no clear indicator. According
to market forecast expert, Dick Arms, the Nasdaq is the most
oversold it has been since the October 1998 crash. Using the
indicator he developed, the Arms Index (TRIN), and various
moving averages for that indicator he is predicting at least
a short term 1-2 week rally and a good possibility of a longer
term rally of several months. Dick was on CNBC Friday saying
we are at or very near a bottom. The Premier Investor Network,
which OIN is a part, was joined by Dick Arms and his new website
just last week. (ArmsInsider.com) We welcome him to the network!
Dick will also be teaching at the April Trading Expo in Denver.

Back to next week, I agree with the extreme oversold context.
I went long on Friday afternoon based on the dead stop at 2400
again. After the John Chambers comments on Saturday I wish now
that I had entered the weekend flat. I think the reason we did
not see a bigger bounce at the close on Friday was the bombing
of IRAQ and traders deciding that the unknown was more dangerous
than missing a gap open on Monday. Little did they know that it
was not Saddam Hussein we should have feared but John Chambers.

There is still no catalyst to make buyers return to the market.
The CPI on Wednesday could help if it comes in at a much lower
level than the PPI but I think the WMT/HD earnings will cause
a bigger reaction. We are in that trading limbo area again. At
2400 we should be bouncing. The keyword there is "should." If
buyers are still on strike then we could see the Nasdaq drift
even lower based on the Chambers comments. How low? 2300 has
strong support and 2251 was the intraday low back on Jan-3rd.
Either of those levels are so close that we are at the bottom
for all practical purposes. Can you buy lower than our 2425
close on Friday? There is a good possibility after the Chambers
comments but I just don't think it will be much lower. While
there is no catalyst on the earnings/economic front to cause
buyers to return, the lure of a sub 2400 Nasdaq is a siren call
to bargain hunters. The biggest problem I see is not when we
bounce from here but how long will the bounce last. We are back
in that pattern of bear traps and until traders quit selling the
bounces we are doomed to keep repeating the pattern. That is
also our clue for a trading plan. Aggressive traders should
buy any rebound and look to close those positions on any
weakness 24-48hrs later. For conservative traders I am going
to lower my 2700 entry point. Resistance is now at 2550-2600
so a rally over 2600 ON STRONG VOLUME would be a buy signal.

I recognize that there is a lot of room between 2425 and 2600
and conservative investors will be frustrated watching stocks
rally several dollars before reaching that area. The same
thing happened this week. We saw the Nasdaq rally from 2400
to 2600 on the CIEN news and several readers emailed me with
complaints that they had missed the boat and 2700 was too high.
Don't look now but we are at 2400 again. 2700 was picked for
a reason and I picked it when we were in the 2500-2600 range.
Resistance at that point was 2650-2700 and until resistance
is broken why do you want to take a long position? Aggressive
traders can play with these 200 points swings but they must
always be aware that the trend was still down. Until that trend
changes those with a more conservative risk profile will do
better to wait for that resistance to be broken. Once broken
it becomes support and provides a base for future moves.
For longer term investors, waiting costs nothing. Buying too
soon can be expensive. Those high profile stocks you may have
bought when you thought the market was running away from you
this week are as much as $15-$20 cheaper now. (BRCM, JNPR, JDSU)
Still, I know how human emotions work and these are only
suggestions not commandments. I bought the dip but my risk
profile may be different than yours. Whatever your profile,
conservative or aggressive, we are at key support levels with
major support at 2251 and 2300. The last bounce from 2251 on
Jan-3rd was +700 points. Will it happen again? Nobody knows
for sure but with the Fed on our side there will be plenty of
traders betting on it! Dick Arms and I are betting on it too!

Trade smart, enter passively, exit aggressively!

Jim Brown

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

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

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!

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can invest less money one time to learn how to do it right.

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Play updates!

In my last column here I picked AMCC as a put candidate at
$65.75. This chart below was what it looked like then. It
had broken the existing up trend line that had held for two
months and looked like it was about to retest the old lows.

As you can see by the second chart the Feb-$60 put I had
picked at $2.69 was very profitable. It traded over $16 all
last week. I think we are looking at a very good entry point
for a call play or a naked put. The MACD and STO are both
looking up and the retest of the November low is complete.
It has traded in the $45 area for over a week and failed
to dip any farther. I would play the Mar-$45 call @ $4.88
or the Mar-$80 put at $36. Your choice!


CSCO - $35 Straddle

The $35 CSCO straddle was profitable due to CSCO missing
earnings. It dropped to support at $28 and the put side
of the play rose to $7.25 for a better than $2 profit.
The call side dropped to worthless the morning after the
announcement and never recovered but we knew going in
that one side would die.


QQQ - Straddle

The QQQ straddle was not as profitable as the CSCO trade.
The Qs did not move as far and the premiums were higher.
Still it would have been easy to capture a $1-$1.50 because
the put option traded between $6-$7.50 several times.


CIEN - $85 call

As the strongest competitor in the optical networking sector
and obviously taking business away from Nortel, CIEN, with
their strong earnings makes them a likely target for money
flowing into the tech sector. The pull back on Friday provided
an entry point into the play. Support is at $80 and we should
set our stops at about $78. The three day dip below $80 was
on the JDSU warning and not likely to happen again. (I own
this one)


MUSE - $70 call

MUSE is simply a momentum play. It pulled back to long term
support on profit taking and appeared to gain new life almost
immediately. I would play either calls or naked puts and set
my stops about $58.  (I own this one)


QQQ - Calls

This is a pure speculation play based on the Nasdaq dead
stop on 2400. If the Nasdaq rallies then we could hit $60-$62
easily and a double on the call. (I own this)


My market view when I started these plays was for a bounce
next week. That was before the Chambers remarks on Saturday.
I am still looking for a bounce only it may be from a slightly
lower number.

Good Luck!

Jim Brown

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

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market updates, plays, education and daily commentaries by
those who know.

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The Tenth Dog Died
By Austin Passamonte

The 2001 Trader's Almanac reports that the last nine Fridays
prior to President's Day were all negative sessions. Make that
ten of ten, and thank you Jeff Bailey for pointing this out to us
in your invaluable Intraday Alerts.

There was little hope for a positive market open and any
smattering of such was dashed when the PPI came out stronger than
expected. Those who feel the possibility of inflation is dead
can't rest easy just yet. While M-3 (money supply) has been
flowing forth like hot springs in February, consumer spending is
not. Money circulation makes the economy go round and right now
that wheel is flat. Stagflation anyone?

Our little flare up near Iraq did nothing to help any rally
attempts with threat of precious crude oil being jeopardized or
at the very least inconvenienced. Oil interest groups are
clamoring for drilling rights in every nature sanctuary that
still exists. Would alternative energy sources be a bad idea
instead of or in addition to?

We've seen, read and heard all the fundamentals - let's list
where technical study measures all news, rumors and events
currently known to mankind:

SPX: Found closing support at 1301, site of a few recent
open/close sessions as well. Plenty of overhead resistance to
fight through once again, but all D/60/30 minute chart-signal
oscillators are buried in oversold and a bounce is immediately
due. (Near-term Bullish)

Dow: Bounced clean off its 50-DMA and came to rest right on the
20-DMA and ascending trendline from mid-December lows. A break
and close below today's session lows near 10,720 would not be
good for bulls. Daily chart stochastic signals are still in mid-
decline but 60/30 minute signals are emerging from oversold.

NDX: All signals buried in oversold. Next piece of resistance is
2335 or 100+ points above at the 10-DMA. "Spinning Top" doji
candle on the daily chart is a bullish reversal signal down here
as well. (Near-Term Bullish)

OEX: Next overhead resistance 688 - 691 area. All chart signals
buried in oversold as well. (Near-Term Bullish)

COMPX: 2,530 area might be formidable resistance. It combines 62%
Fibanocci Retracement with long-term descending trendline dating
from September 4th. Could easily rally 100 points, but struggle
to close beyond that. (Near-Term Bullish)

Our overall sentiment is bullish for at least the next session or
two. Thickets of overhead congestion have layered above and will
offer the usual struggles to break. We know how market action
goes: work hard to post gains and erase it all in one or two
sessions flat.

We remain in a trader's market and expect to be there for some
time in the future. Buy & hold isn't working but nimble day-
trading is. Buying dips near support for small profits and
selling rallies for bigger gain is still in vogue.

Buying extra time premium on calls does not help right now; it is
a bull trap. June call options purchased mid-session yesterday
are worth too little today by percentage of loss. Better to play
cheap options at careful entries for quick gains at this time.

Bad idea? We know a large number of index option swing traders
who bought QQQ Feb 60 puts for 0.90 and OEX 680 puts for 0.95
Thursday at 2:00pm EST. They sold these plays for 4.00 on the QQQ
and 5.50 on the OEX before 9:40am on Friday. Two hours ten
minutes actual market time. Unusual? Rather. Lucky? Not even
close... chart signals clearly predicted a decline all the way,
though not nearly to that extent. Similar trades for fast doubles
took place all week

Sitting in cash, biding time before buying the recent excessive
dip and then selling the next failed rally beyond may be the best
approach to high-odds profit the markets have to offer us right
now. Rest assured, we cannot name our price from them; the
markets always dictate to us.

Trade the daily trend with care!


Friday 02/16 close: 25.08

Friday 02/16 close: 64.41

30-yr Bonds
Friday 02/16 close: 5.46%

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.

  (Open Interest)       Calls        Puts          Ratio
S&P 100 Index (OEX)
715 - 700                5,813        2,440         2.38
695 - 680                2,859        3,647          .78

OEX close: 675.35

670 - 655                   76        3,379        44.46
650 - 630                   13        7,764       597.23

Maximum calls: 700/4,387
Maximum puts : 640/5,627

Moving Averages
 10 DMA  691
 20 DMA  701
 50 DMA  698
200 DMA  753

NASDAQ 100 Index (NDX/QQQ)
 64 - 62                39,658         8,247         4.81
 61 - 59                43,696        26,491         1.65
 58 - 56                29,658        26,858         1.10

QQQ(NDX)close: 55.13

 54 - 52                 2,210        11,879         5.38
 51 - 49                 3,770        19,630         5.21
 48 - 46                   107         3,997        37.36

Maximum calls: 70/29,945
Maximum puts : 60/18,883

Moving Averages
 10 DMA 58
 20 DMA 61
 50 DMA 62
200 DMA 81

S&P 500 (SPX)
1375                    7,480         9,954           .75
1350                   45,000        40,903          1.10
1325                   38,620        44,758           .86

SPX close: 1301.55

1275                    3,493        16,063          4.60
1250                    2,986        11,325          3.79
1225                      123        11,837         96.24

Maximum calls: 1350/45,000
Maximum puts : 1350/40,903

Moving Averages
 10 DMA 1328
 20 DMA 1344
 50 DMA 1333
200 DMA 1410


CBOT Commitment Of Traders Report: Friday 02/16
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         -2625      -2903         -4782     -4001
Total Open
interest %      (-24.98%)  (-29.87%)     (-18.90%)  (-16.84%)
                net-short  net-short     net-short  net-short

Open Interest
Net Value         +4104      +3292         -8143     -6615
Total Open
Interest %      (+18.73%)  (+20.96%)     (-12.85%)  (-10.93%)
                net-long   net-long      net-short  net-short

S&P 500
Open Interest
Net Value        +73789     +74142         -92910    -94766
Total Open
Interest %      (+40.21%)  (+41.81%)     (-12.12%)  (-12.52%)
                net-long   net-long      net-short  net-short

What COT Data Tells Us
Indices:  Overall, positions of both the Small specs and Commercials
have not varied significantly from last week, as Commercials continue
to hold large net-short positions on the S&P 500, DJIA, and NASDAQ 100
while the Small specs are on the long side in the S&P 500 and NASDAQ

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 02/13 by the CFTC.


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Behind The Curve	
By Eric Utley

Fundamentals are precipitously deteriorating in technology.  Just
ask Nortel (NYSE:NT).

The maker of networking equipment revealed Thursday evening that
it would fall well short of previously lowered estimates.  Nortel
was expected to earn about 16 cents per share for the current
quarter, but revised those estimates lower to expect a loss of 4
cents from operations.  That was a HUGE revision lower.  In
addition, the firm said it would cut what amounted to 10,000 jobs.
There are two significant takeaways from this Nortel warning.
The first was the severity, and the second was the timeliness.  It
seems awful early into the quarter for the company to be warning.

Along with the bust in the tech business, we saw the University of
Michigan Consumer Sentiment Index plunge to 87.8 last week.

While I normally don't like to report in this column, the two
aforementioned events were fairly disturbing last week, and
indicated, to me, that the Federal Reserve is behind the curve.
While the 100 basis point cut in rates thus far in 2001 has helped,
it's not been enough.  Having said that, I wouldn't be surprised
to see the Fed cut rates before the end of March.  While I'm only
speculating, it's something to think about.

Send your opinions of this column along with stock requests to
Contact Support.  Please put the symbol of your
requests in the subject line of the e-mail.


Sector Components

You have in the past provided excellent advice to my various
questions on various stocks.  Now I request you to name 10 best
companies over the wide spectrum of stocks from Dow and Nasdaq.
I am asking for the companies which according to you have good
standing and ideal ones to follow on one's watchlist.  Please
also advise to which sectors these companies belong which will
make possible investing with some knowledge and knowing some
background of the company.  I look forward to your advice. -
Thanks and Regards, Sunil

Sunil, I think you've touched upon something important with
your request.  While I'm not smart enough to pick the "10 best
companies" across the broad market, I can, however, provide my
readers with a breakdown of several key industry groups and
the leading stocks within the sectors.

Last week, I tried to make it clear that I attempt to discern
the direction in the market/sector/stock before entering a
trade.  And by knowing of a handful of leading stocks in each
industry group, I can get a better grasp on which sectors
capital is flowing in and out of.

Additionally, as I've become familiar with a handful of stocks
in select sectors, I've observed nuances and unique trading
patterns in each of the stocks I religiously follow.  For
example, certain stocks tend to lead their sectors, while
others lag when their sectors are moving.  By knowing how
certain stocks "behave" in relation to their sectors, I've been
able to make some good money in trades I might have otherwise

However, I'm not going to tell my readers how the stocks I
follow "behave" for fear of establishing a potentially
detrimental bias towards a certain stock.  Knowing how a stock
trades in relation to its sector can only come from experience!
But, I would like to reinforce that by understanding how a
certain stock trades in relation to its sector can often times
lead to very profitable trades.

The list below will provide a couple of stocks in several of
the bigger sectors of the market.  There are obviously many
more industry groups and sub-sectors in the market than I've
listed below, but the following group of stocks represents
a decent representation of the market.


Amgen (AMGN)
Biogen (BGEN)
Genzyme General (GENZ)
IDEC Pharmaceuticals (IDPH)
Millennium Pharmaceuticals (MLNM)


Nortel (NT)
Corning (GLW)
Cisco Systems (CSCO)
Juniper Networks (JNPR)


Micron (MU)
Intel (INTC)
Xilinx (XLNX)
Broadcom (BRCM)
PMC Sierra (PMCS)
KLA - Tencor (KLAC)
Texas Instruments (TXN)
Applied Materials (AMAT)

Energy - Oil:

Chevron (CHV)
Slumberger (SLB)
Haliburton (HAL)
Exxon Mobil (XOM)


Merck (MRK)
Pfizer (PFE)
Schering Plough (SGP)
Johnson & Johnson (JNJ)


Citigroup (C)
Bank One (ONE)
J.P. Morgan (JPM)
Wells Fargo (WFC)
Bank of America (BAC)


Schwab (SCH)
Goldman Sachs (GS)
Merrill Lynch (MER)
Lehman Brothers (LEH)


Gap (GPS)
Target (TGT)
Costco (COST)
Wal Mart (WMT)
Home Depot (HD)
American Eagle Outfitters (AEOS)


CIEN Day Trade

I received several requests over the past two weeks for setting
up potential trades in my column.  I've decided against putting
up trades in my column because my risk profile and trading
strategy varies too much, and I don't want to be a possible
detriment to my readers.

I also had several requests from my readers to put up past
trades from the previous week that I had made.  And I've decided
to do that exact thing in an attempt to add more value.

Before I reveal how I traded CIENA (NASDAQ:CIEN) last week, I
want to point out something I found rather amusing.  About two
months ago, Nortel (NYSE:NT) put out a report that detailed how
the company was stealing market share from CIENA in European
and North American markets.  In short, Nortel was trying to
talk down CIENA.  However, as we discovered Thursday, CIENA
beat its estimates and actually raised guidance, while later in
the day Nortel warned in a huge way.  My point is not to blast
Nortel, because I'm sure some of my readers own the stock and
its blowup was a very, very bad thing.  But, the Nortel report
two months ago, which attempted to downplay CIENA, proved to
be no more than noise, which is a variable that traders and
investors are often confronted with when making decisions with
their money.  In short, let the market dictate!

I put on two trades in CIENA last Wednesday, ahead of the
company's earnings announcement Thursday morning.  Both trades
were bullish in nature - I bought front-month calls.  The
Nasdaq was weak following the Applied Materials (NASDAQ:AMAT)
earnings report the prior evening.  And although I preach to
confirm market/sector/stock direction before entering a trade,
I noticed that CIENA was acting very well and didn't want to
go lower.  It may sound contradictory, but one's trading
strategy has to be as dynamic as the market, or else many
opportunities slip by.

Additionally, because I was day trading front-month calls during
expiration week, the calls in CIENA were very, very cheap.  I
only paid $350 per contract with a 40 delta - the risk was pretty
small.  The trading behavior in CIENA Wednesday morning was
very indicative of higher prices.  The stock opened the morning
with an open test drive.  That is, it rallied right from the
opening, and then pulled back to test the conviction of the
sellers.  As it turned out, the sellers were not strong enough
to push CIENA below the $69 level - a level where I was looking
to buy puts.  CIENA bounced around $69 and began to lift as
buyers stepped into the broader tech sector, which I had noticed
by monitoring the SOX.X and the NWX.X.  I bought calls right
when CIENA lifted above the $72 level, which appeared to be a
somewhat significant resistance level.  It never looked back
and proceeded to advance up to almost $75.  As it became
apparent that CIEN was pulling back from the $75 level, I blasted
the calls for a nice and quick profit.

As trading wore on through midday, it looked as if CIENA was
setting up for a classic double distribution day.  That is,
the stock was bought in the morning, spent the afternoon
consolidating, and would rally into the close of trading.  The
second trade I put on was rather easy, as I simply waited for
CIENA to breakout from its midday consolidation, and above its
day high at $74.88.  As soon as CIENA broke above $75, I made
my second purchase of FEB 75 calls, and then watched the stock
go higher into the final hour of trading.  I blasted my second
position as the stock churned around the $76.50 level.  While
making only $1.50 on the underlying may sound trivial, by
leveraging the trade with options one can make A LOT of money
from these small types of trades.


Broadcom - BRCM

I wanted to say your top-down article last week was great and I
gleaned some great information to help in setting up plays.  Last
week you reported on a possible reverse head and shoulders
pattern forming on BRCM chart.  Could you follow up and confirm
that it is still intact or has it been violated and we should stay
away.  Thank you and good trading. - Sincerely, Scott

Scott, I greatly appreciate your kind comments.

It is true that I had suggested shares of Broadcom (NASDAQ:BRCM)
were setting up to form an inverse head-and-shoulders about two
weeks ago.  If the pattern were to be completed, the stock needed
to bounce somewhere around the $85 level in order to trace the
right shoulder.  Here's the chart I published two weeks ago:

As you probably saw two weeks ago, Scott, shares of Broadcom fell
right through the $85 level without much hesitation.  I'd say
that the head-and-shoulders bottom has failed and I would now
avoid the stock from the long side.  Maybe Broadcom can be
traded on a quick move back above the $80 level for a quick pop,
but I'd be careful.  There's nothing wrong with Broadcom the
company, I think they'll do very well over the next several years.
However, Broadcom the stock may have some trouble in the short-term
given its technical weakness and the troubles in tech.


Cisco Systems - CSCO

Is now a good time to buy CSCO?

Very good question!

I consulted my esteemed colleague, Jeff Bailey, for a bearish
price objective on Cisco Systems (NASDAQ:CSCO).  Jeff is a top
dog with point and figure charts, which measure supply and
demand in stocks.  He informed me that the recent bearish price
objective in shares of Cisco was $28, which is the level that
the stock bounced off of last week.  Whether that level is the
bottom for Cisco remains to be seen.

Judging by historical valuations, Cisco could shed another $5,
or so.  As hard as it may be to believe, Cisco is still
relatively expensive when considering its historical valuations,
as measured by price to sales and price to earnings.

The bottom-line in the tech sector is that fundamentals are still
deteriorating.  Within Cisco's realm of business, we've heard
that PMC Sierra (NASDAQ:PMCS) is having problems and the
aforementioned Nortel is clearly facing severe problems, along
with the lowly Lucent (NYSE:LU).  And Cisco itself missed
estimates.  So, one could buy Cisco at current levels with the
understanding that business in the Networking sector has not
yet up-ticked in an attempt to get ahead of the curve when
fundamentals begin to improve.  However, the risk in doing so
is that you might have to suffer some pain in the near-term
or wait a long time for fundamentals to improve and see the
stock advance.  The best strategy in Cisco right now, and
the broader tech sector, is to wait for fundamentals to improve,
which could take some time.


This column is an information service only.  The information
provided herein is not to be construed as an offer to buy or
sell securities of any kind.  The Ask the Analyst picks are not
to be considered a recommendation of any stock or option but an
information resource to aid the investor in making an informed
decision regarding trading in options.  It is possible at this
or some subsequent date, the editor and staff of The Option
Investor Newsletter may own, buy or sell securities presented.
All investors should consult a qualified professional before
trading in any security.  The information provided has been
obtained from sources deemed reliable, but is not guaranteed
as to its accuracy.


For the week of February 19, 2001

None Scheduled

Kansas City Fed Survey   Q1  Forecast:    NA   Previous:    1.0

CPI                     Jan  Forecast:  0.30%  Previous:   0.20%
Core CPI                Jan  Forecast:  0.20%  Previous:   0.10%
Trade Balance           Dec  Forecast:-$32.4B  Previous: -$33.0B
Treasury Budget         Jan  Forecast: $73.0B  Previous:  $62.2B
Oil & Gas Inventory  16-Feb  Forecast:    NA   Previous: 289.0MB
International Trade     Dec  Forecast: $32.0B  Previous:  $32.7B

Initial Claims       17-Feb  Forecast:   345K  Previous:    352K
Leading Indicators      Jan  Forecast:  0.40%  Previous:  -0.60%
Help-Wanted Index       Jan  Forecast:    NA   Previous:     79
SEMI Book-to-Bill Ratio Jan  Forecast:    NA   Previous:   1.03
Online Help Wanted Idx  Feb  Forecast:    NA   Previous:  112.2

ECRI Weekly Index    16-Feb  Forecast:    NA   Previous:   -1.7%

Week of February 26th

Feb 26  Existing Home Sales
Feb 27  Durable Orders
Feb 27  Consumer Confidence
Feb 27  New Home Sales
Feb 28  GDP-Prel.
Feb 28  Chain Deflator-Prel.
Feb 28  Chicago PMI
Mar 01  Auto Sales
Mar 01  Truck Sales
Mar 01  Initial Claims
Mar 01  Personal Income
Mar 01  PCE
Mar 01  Construction Spending
Mar 01  NAPM Index
Mar 02  Mich Sentiment- Final

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The Option Investor Newsletter                   Sunday 02-18-2001
Sunday                                                      2 of 5

To view this email newsletter in HTML format with embedded
charts and graphs, click here:


Ashes To Ashes, Dust To Dust
By Renee White

Have you ever had the feeling you don't know where to hide? If
anyone has previously been an active trader, under similar
conditions that include: air strikes in the middle east, an
energy crisis, potential economic stagflation, a major stock
market correction that sells-off after a 100 basis point rate cut
within one month, would you please step forward? As if on cue,
historically, the first year of a new presidency has never been
market friendly.

So, you think it can't get any worse. I hope you're right. I'm
beginning to think I liked it better when news programs were
less efficient with their news. More and more things seem to
keep coming out from left field. Could it be at these times,
when it's hard to see through the fog, that it's time to step up
to the plate?  That’s probably true if you are a long-term
investor, freely accepting near-term risks.  As traders, though,
short-term plays will probably stay our best bet until consistent
and discernable economic data shows up.

Unfortunately, travel and outside business kept me away from the
markets, forcing me to take profits early, exiting all plays a
week or more ago. Right trades. Right bias. But premature exits
proved painful in missed profits. Last spring, I grew careless,
leaving town with open profitable positions on the table. I
don't do that anymore. So, I exit with discipline and take
profits. Except now I get whacked because the market went the
way I expected, while my premature exits shaved off 550% of
potential profits!

I had some winning entries in January buying puts at clean
resistance levels on several plays including entering Juniper
February 125 puts (NASDAQ:JNPR) with JNPR at $134, and Lucent
February 17.5 (NYSE:LU) at $22, among others.  I exited way too
early on JNPR, on a fake-out day when it dipped and bounced back.
It closed Friday at $80, a potential 300% option profit. And darn
LU, well, I just got tired of staring at a basket of February
17.5 puts bought at 75 cents each. They barely moved in either
direction for what seemed like eternity, until I couldn't stand
it any longer and exited last week with only a eighth profit on
each contract. Of course, the next morning after exiting, bad news
surfaced and those puts saw $5.00 each these last few days, a
567% in lost painful potential profits from exiting early!
Executing the trade well is all that matters in the long run.

It was reported several times today that we have heard from 294
companies warning this quarter, compared to 37 companies this
time last year. That's enough to put a chill up one's spine. When
I heard that even Tootsie Roll Industries, Inc.(NYSE:TR) had
missed their only posted earnings estimate by 4 cents (32 versus
36 cents per share), I knew we were in for continued economic
problems. I mean, who would quit buying their favorite candies
(Junior Mints, Tootsie Rolls, and Mason Dots) just because
consumer sentiment had soured? I would think that fear and
anxiety would cause people to chew faster and more instead. To
be fair, their fourth quarter net income did rise 3.7 percent
on 14 percent sales growth. Having come from $37.81 a share on
12/19/00 to $51.93 on 1/19/01, traders of this sweet company have
been rewarded. They posted a net income of $15.5 million compared
to $15 million last year. It closed the week at $49.68.

I mentioned this to get you thinking. As option traders, we are
so demanding of volatility, hoping for premium inflation so we
can exit profitably. Our precious Techs have been slaughtered,
and everyday more blood is drained from the group. If a company is
not directly hit, either its supplier or customer probably has
or will be. The chain reaction leaves few untouched. Because of
this, I have a hard time thinking that a fast sharp rally will
appear and sustain itself for the year. I expect the near future
to be met with increased uncertainty, confusion and bad news.
Techs are bruised and need time to heal internally and on down
the chain. Damage of this type, spread amongst most business
sectors, never mends itself over night. As traders, we may need
to adjust our expectations for a while longer.

Recovery will come and we all know technology tends to lead. It
is the non-techs, though, that may be safer for the near term
through May. If the Dow(INDU) stays above water and doesn't
decide to fall off the cliff with NASDAQ, then perhaps plays like
Tootsie Roll and other consumer staples aren’t so comical after
all. Certainly, they don't rally 10-20 points on a good day but
they also don't sell-off that much either. During uncertainty,
companies that move in smaller increments may feel safer to many
traders. Here is Tootsie, who this week missed by 4 cents and they
still closed the week only 2 cents below its recent 52 week high.
The real eye-opener is that they are still holding on to a 31.4%
rally in the last 2 months! A 4-cent miss by a tech would not act
the same. To me, that is something to think about.

Trying to project when a recovery in technology will be
sustainable is hard for everyone. In January, I decided that
during the late February softness, I would begin taking positions
in Leaps for my IRA. Now though, I am having a change of heart
with that call. In the last 2 weeks, I have noticed that I am
mentally scrutinizing my 2002 Leaps, and I believe my gut is
telling me to exit on a rally before time decay proves costly
during a prolonged choppy market. Therefore, I will exit those
and hold off buying other Leaps until I see signs of life
honestly returning. Is this fear before capitulation, or a
protective trading bias that is surfacing? I'm not sure, but
I surely don’t see signs of a tech turnaround yet.

I know that I can always add to positions later, and buy another
year out once the fog begins to clear. When recovery begins, time
will once again be on my side. I don't know anyone expecting a
good April earnings period this year, and then there is May, one
of the worst trading months of the year. July is also looking
bad on the earnings front, which is on top of a typically slow
summer period anyway. Need I really mention October? So why risk
buying Leaps now with huge overhead resistance and a choppy

It is important to realize that when companies start fretting
that recovery by 3rd quarter is starting to feel speculative,
the sentiment alone can kill your portfolio. There is a diamond
in the rough though. It will be found months in the future
unexpectedly when everyone is still expecting bad news and
blowout numbers suddenly appear. Question is, which quarter will
that be and in which year? Until that is known, taking profits
quickly, trading support and resistance levels and not being too
eager to bet on a sustained reversal are probably the safest
bets. These past 6 months have been a great time for traders to
practice their bearish strategies. Don't lose this opportunity
to develop strong trading skills in this area.

I have collected a batch of companies that I will trade in both
directions come April earnings season. Most likely, my bigger
plays will be with a bearish bias, although I may participate
with non-tech plays on the bullish side. I always plan ahead for
earnings. Start listening and searching now for some sleepy
non-tech winners to position into, in a month. We'll discuss
some of these in future articles.

For the time being, stay alert and cautious, while waiting for
the next big surprise to come out of left field. Remember,
when techs are looking like dust in an ashtray, your favorite
brand of candy may do more than just soothe your sweet tooth.

Tired of waiting on trades to execute?
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Stop Losses based on the option price or the stock price.
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Anything else is too slow!



Money Management
By Lynda Schuepp

I'd like to thank the readers for the feedback last week.  It is
difficult to gauge my writing to the "average" reader.  One reader
wrote, "Congratulations on what I consider an excellent article
on the butterfly spread.  I'm sure I have read articles on this
and other spreads many times on OI but they just seemed too
complicated..."  Another reader wrote that my descriptions were
so difficult to understand that they were thinking of canceling OIN.
This tells me we have a very wide range of reader experience, which
makes my job quite difficult.  It's like sticking your head in the
oven and your feet in a bucket of ice water and concluding that
you are comfortable "on average."  From the extremes in the
comments, I am going to try to write a very basic article one
week and a more advanced article the next week.  Trouble is you're
going to have to read the article to determine which one it is.
Who knows you might pick up something, even if it is basic and
you also might pick up something if it is more complicated.  Now
that we've cleared the decks, onto the topic - money management.

This is a subject that should be near and dear to your hearts if
you've been trading for the last year.  Last week I touched on
the subject with regard to risk versus reward, and this week
I'd like to share some additional ideas that could help your
decision-making going forward.

Many of us, myself included, look at a chart and want to jump in,
not really knowing our risk to reward, as discussed last week.
However, I'd like to share a new twist that might prevent you from
getting into more risky trades.

First, you need to determine an average amount you are willing to
risk with each trade.  William O'Neil of Investor's Business
Daily recommends no more than 8% per trade, which is a good place
to start.  Let's assume you are starting with $40,000 to trade
with - then no trade should exceed $3200.  This allows you to
have about 12 positions at any one time, although, I for one have
a hard time managing that many.

Next, you need to go back and look at the last 10 trades.  Add up
the total profit and divide by the number of trades, that will give
you your average profit per trade.  Now go back to the last 10
trades and do the same with your losses.  Finally, divide your
average profit by your average loss.  Hopefully, this number will
be greater than 1 (which means you made money).  If not, then you
need to seriously evaluate those last 10 trades and change the way
you are trading.  Are your stops tight enough and do you let your
profits run, or do you let your losses run and sell too soon on
the profit side after having a string of losses?  Go back and
study each chart and your point of entry, was it a good place to
enter, what were the signals, did you know when earnings were due,
or did you enter after a CEO lunch on CNBC?  You will learn a lot
about yourself if you go back and really spend some time on each

Let's create a reasonable scenario of a profitable trader:
10 trades with 4 winners, and 6 losers.

You probably will be winning less times but with bigger wins and
losing more times with a smaller amount of money with each loss.

Trade 1  +6400
Trade 2  -3000
Trade 3  -2400
Trade 4  -4000
Trade 5  +9600
Trade 6  -3800
Trade 7  +3200
Trade 8  -2000
Trade 9  -1600
Trade 10 +3200

In this scenario, there were 4 profitable trades with profits
totaling $22,400, for an average win of $5600 per trade on an
investment of $3,200 per trade and 6 losing trades with losses
totaling $16,800 for an average of $2,800 per loss.  The average
win was $5600 was calculated by dividing the total win money by 4
and the total losses by 6.  This is a reasonable scenario for a
short-term trader.

Next, we calculate our risk to reward history, average win, divided
by average loss which in this scenario would be $5,600 by $2,800
or 2 to 1.  To interpret how to use this information, you simply
need to find trades that have the potential to deliver 2 times the
win versus the potential loss, which would be your stop.  Some
traders simply blindly put on stops and say, if I lose $1000 on
the trade, I’m out.  Stops should be well thought out and should
have some strong technical basis such as below strong support,
break of an upward trendline or cross of some moving average or a
Fibonacci retracement (topic of a later article).  The projection
of how high the stock can go should also be based on technical
analysis such as a previous area of resistance, an earlier gap, a
nice round number like 100 or some other such trigger.

Now let's look at a stock and see whether a particular trade that
we would like to make, fits our profile.

Daily chart of ADM up to February 14th:

Looking at the chart above with only a couple of signals that can
be used to enter trades, ADM closed below the 5 and 10-day moving
averages and there is a divergence between the moving average
oscillator and prices.  Let's say we wanted to short here at
$15.13, we could either short the stock or buy March puts with a
strike price of 15, allocating no more than $3200 in the trade as
outlined above.  Now let's calculate whether this trade fits the
profile we defined above.  My stop would be placed at the high of
February 8th ($16) and my target would be the low of January 22nd
($13.38). Let's assume we shorted the stock (because I don't have
option prices going back to create the scenario), the risk would
be 7/8 of a point if the stock reversed and I got stopped out at
$16.  My potential reward would be reached if the stock continued
down to test the previous low at $13.88, which would be $1.75 gain.
Reward to risk is 2 to 1, which meets the criteria.  This looks
like it would make a nice trade with minimal risk.  Do 10 of these,
win on 4 and lose on 6 with similar profiles and you consistently
make money.  Don't be afraid to walk away from a trade that doesn't
fit your criteria, no matter how good you "think" it might be.
Traders who have been around for a long time will all tell you the
say thing, money management is key to longevity in the market.


Call Play of the Day:

IBM - Intl Business Machines Corp $115.00 (+3.00 last week)

See details in sector list

Put Play of the Day:

NETE - Netegrity, Inc. $57.00 (+1.69 last week)

See details in sector list

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


Remember that historically, when we drop a pick it will go up
10 to 15% the very next week. It is part of Murphy's Law.
Just because we drop a stock as a pick does not mean we are
advocating a "sell" on any position you have. We are simply
dropping our recommendation as a new play. Existing plays
can and do continue on and are usually profitable.


No dropped calls this weekend


GLW $33.00 (-7.96) We're taking our profits!  GLW gave
us a grand run down to $33, lining many traders' pockets with
wads of cash.  At this point in the play, however, we believe
it's time to pack up and find other lucrative opportunities.
It's not wise to be greedy.  Therefore, we're exiting on a
profitable note this weekend.  The sharp 21.5%, or $9.00 decline
in Friday's session may very well attract some buyers next week.
If by chance you have any open positions, keep the stops tight
and sell into any weakness.

FCEL $58.69 (-0.81) Receiving a shot of energy from the NASDAQ
rally on Thursday, FCEL rose sharply before running into
resistance at the converged 10-dma and 30-dma, and falling back
at the close.  The drop brought our play just fractionally below
our stop, so it started out Friday's session on probation.
Although it turned out to be a negative day, the sellers just
couldn't make any headway against the $58 support level that
has been in place for the past week.  On a day where the NASDAQ
posted another triple-digit loss, FCEL should have shown more
weakness, and this is a good indication that the decline has
just about played itself out.  Use any weakness on Tuesday to
get a better exit, but don't open any new positions, as we feel
it is better to move on than force a bad play.


SL  = Suggested stop loss. Sell if bid breaks this price.
OI  = Open Interest - the number of open contracts outstanding.
ITM = In the money
ATM = At the money
OTM = Out of the money
ADV = Average Daily Volume

The options with a "*" by the strike price are our choices from the
group. If the stock moves as expected we feel they have the best
chance to substantially increase or double in price with the best
risk/reward ratio compared to the other options for the same stock.
You must determine if they fit your risk profile for time and price.

Analysts ratings: 1-2-3-4-5
Analysts who follow each stock rate it and these rating are
accumulated and displayed as follows;

Position 1 = number of analysts recommending "strong buy"
Position 2 = number of analysts recommending "moderate buy"
Position 3 = number of analysts recommending "hold" or "neutral"
Position 4 = number of analysts recommending "moderate sell"
Position 5 = number of analysts recommending "strong sell"

Example rating 5-3-1-0-0 would be 5 "strong buys", 3 "moderate buys",
1 "hold" recommendation.

The risk of selling naked puts is always the possibility
of a catastrophic event that drops the stock below the
strike price and could result in the stock being PUT to you.
Always protect yourself with a "buy to cover" limit order
to take you out before this can happen.


LH - Laboratory Corp. of America $145.25 (+10.75 last week)

Laboratory Corporation of America Holdings (LabCorp) is the #2
clinical laboratory service in the world, behind Quest
Diagnostics.  LH performs 2000 types of tests for more than
100,000 clients, including health care providers, pharmaceutical
firms, physicians, government agencies and employers.  With 25
major laboratories and some 1200 service sites nationwide, the
company emphasizes specialty and niche testing such as allergy
tests, HIV tests, blood analyses, and substance abuse

In its post-New Year slide, LH gave up a cool 33% of its market
capitalization as money flowed back into technology during the
month of January.  Realization that tech was still in trouble
shifted the tides once again, and investors have been gradually
coming back to LH, as they recall the stock's stellar
performance throughout the majority of 2000.  To what do we owe
the stock's revival while the economy is still in trouble?
Recall that LH is the #2 clinical laboratory service in the
world.  Do you think that people stop going to the doctor and
having tests performed, just because the economy is soft?  Me
neither, and that goes a long ways towards explaining why the
stock is once again posting higher highs and higher lows.  And
if you need another catalyst for our new play, look no further
than the company's recently released earnings.  LH gave
investors a wonderful Valentine's Day present, reporting
earnings $0.08 ahead of consensus estimates and yet another
quarter of accelerating revenue growth.  Investors seemed to
like the company's statement, "Gains were again made in all
segments of our business".  When was the last time we heard that
from a company with a PE north of 50?  Technically, LH may have
a bit of a struggle in the near term though, with the upper
Bollinger band looming just overhead at $146.86.  Daily
stochastics are approaching the overbought region, and finishing
their journey is likely to take the price right into the upper
band, causing it to expand upwards.  But in the process, the
stretching of the band is likely to produce some profit taking
in the near term.  Consider new entries either on a bounce from
intraday support at $141 or $144, so long as it is accompanied
by solid volume.  More conservative traders will want to wait
for a move through the $146 resistance level, but be on the
lookout for profit taking as the stock approaches that upper
Bollinger band.  Place stops at $140, right at the ascending

BUY CALL MAR-140 LH-CH OI=522 at $13.20 SL=10.00
BUY CALL MAR-145*LH-CI OI= 15 at $10.50 SL= 7.50
BUY CALL MAR-150 LH-CJ OI= 35 at $ 8.20 SL= 5.75
BUY CALL MAY-150 LH-EJ OI= 23 at $17.10 SL=12.25
BUY CALL MAY-155 LH-EK OI=102 at $15.10 SL=11.00

SELL PUT MAR-140 LH-OF OI=505 at $ 6.90 SL=10.00
(See risks of selling puts in play legend)


MUSE - Micromuse $64.06 (+0.00 last week)

Micromuse, Inc. is the leading provider of realtime fault
management and service assurance software.  Micromuse was
recently named on of the Top 25 Best Performers in the Wall
Street Journal's Shareholder Scoreboard, and was recognized in
the Forbes 500, Business Week's InfoTech 100, and Barron's 500.
Micromuse customers include AT&T, BT, Cable & Wireless,
Cellular One, Charles Schwab, Deutsche Telecom, Global Crossing,
MCI Worldcom, and a number of financial investment concerns.
Headquarters are in San Francisco, California.

If a technology stock can close higher on a day like Friday,
think what it might do if the Nasdaq rallies.  While other
techs stocks emerged bloody and battered from Friday's carnage,
MUSE emerged undaunted and poised to continue its ascent from
a strong pattern of higher lows which began in November.  This
trend is not surprising, considering that it seems MUSE has
released nothing but good news in the last several weeks. On
January 18, MUSE reported earnings of ten cents per share, which
was 25% higher than the consensus of analyst expectations.
Revenues increased 123% from the year ago quarter, and management
did not reduce guidance going forward.  Since then, several
Wall Street firms have issued positive reports.  WR Hambrecht
itiated coverage with a buy rating and a 12 month price target
of $90, stating that MUSE stands to benefit from the possible
shifting of IT dollars from expensive hardware upgrades to the
less expensive software solutions offered by MUSE.  Since
capital spending on new carrier equipment has slowed dramatically,
and is expected to slow further this quarter, MUSE may
be positioned to profit as companies use their software to
squeeze additional utility from existing hardware infrastructure.
In addition, MUSE is benefiting from the shift of investors
interest to small and mid cap technology and software stocks.
MUSE is just a few points under its 200 dma of $65.68, and its
50 dma of $67.15.  A move above the 200 dma on strong volume
could be an excellent entry point for call players, if it
is accompanied by strength in the software sector.  Watch others
like RATL and SEBL for an indication of sector strength, and
set stops at $58.

BUY CALL MAR-60 UZQ-CL OI= 54 at $10.75 SL= 8.25
BUY CALL MAR-65*UZQ-CM OI= 45 at $ 8.38 SL= 5.75
BUY CALL APR-60 UZQ-DL OI=253 at $14.63 SL=11.00
BUY CALL APR-65 UZQ-DM OI=624 at $11.88 SL= 9.00


CIEN - Ciena Corp $82.63 (+2.75 last week)

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

Jim's commentary in Thursday's newsletter with respect to CIEN's
stellar earnings' report sets the groundwork for our play.
Shunning the slowdown on the optical networking highway, CIEN
dazzled the Street and ignited a market eruption; thus,
validating itself as a market mover.  The company beat estimates
by $0.03 with a 500% increase in revenue over the same period
last year.  In particular, Ciena's raised its guidance for the
next quarter by over +10%, and by a dime, $0.66 to $0.76 for the
full year.  Essentially they achieved the most important feat -
they heightened investors' confidence.  This fact became
apparent in Friday's trading session.  The broad markets were
chaotic as the result of stronger-than-expected PPI and traders
once again sought shelter from the uncertainty.  But despite the
aversion to many technology stocks, CIEN was a beacon of light.
The share price found stability in the higher trading ranges of
$82-$84 and is now poised to take off again.  Although we can't
make any guarantees, we have confidence that CIEN can pilot its
way back through the $90 level in a cooperating market
environment.  CIEN can be a volatile mover, which in one sense
adds risk to the play, but on the flip side, the volatility
offers a wider range of entry choices and the opportunity to
target shoot.  As it is, the 5-dma (which is just a fraction
above our $78 stop) traces an aggressive line to take positions
during a deep pullback, while the 10-dma ($80.33) provides a
more conservative approach on intraday dips.  Still, it may be
best to buy into the momentum as CIEN breaks to the upside;
although be aware of the psychologically governing century mark.
Consider locking in gains early to protect profits and capital.

BUY CALL MAR-80 UEE-CP OI=2422 at $12.13 SL=9.00
BUY CALL MAR-85*UEE-CQ OI=6434 at $ 7.88 SL=5.75
BUY CALL MAR-90 UEE-CR OI=2044 at $ 5.88 SL=4.00
BUY CALL APR-85 UEE-DQ OI= 700 at $12.13 SL=9.00
BUY CALL APR-90 UEE-DR OI= 672 at $ 9.75 SL=6.75


IBM - Intl Business Machines Corp $115.00 (+3.00 last week)

IBM develops, manufactures, and sells advanced technology
processing products.  They are the world's top provider of
computer hardware including PCs, mainframes, and network
servers. IBM is also an industry leader in software and
peripherals, second only to Microsoft.  The company owns
software pioneer Lotus development, maker of Lotus Notes.

Big Blue exemplifies the meaning of technological
diversification.  Not only is IBM an industry leader in both the
software and hardware sectors, but also, the company forges
influential alliances and establishes standards effecting other
aspects of leading-edge technology.  IBM's respectable and lofty
position within its industry manifests itself in the
marketplace.  We're expecting IBM to usher in the rally and lead
the charge when the bulls regain control of the technology
stocks.  Therefore, look for a major breakout to occur during a
NASDAQ rally.  An upside move through the immediate resistance
at $118 and the $120 level would signal traders to take call
positions either by buying into the strength at hand or target
shooting for lower entries near the support levels.  Last week,
a nice show of support developed at $114 and $115.  You might
consider using that as a base going forward; especially
considering the strength of that price level in the face of
strong PPI numbers on Friday.  We currently have a stop loss set
just under the 10-dma ($114.50), at $113, and will exit if IBM
fails to rise to the occasion.  Recently, there's been a slew of
earnings' reports burning ears on the Street, with some of the
big boys like Ciena (CIEN) effectively rocking the market, but
IBM's numbers shouldn't come into play over the near-term.  The
company isn't scheduled to announce until mid-April.

BUY CALL MAR-110 IBM-CB OI= 3848 at $8.40 SL=6.00
BUY CALL MAR-115*IBM-CC OI= 4152 at $5.20 SL=3.25
BUY CALL MAR-120 IBM-CD OI= 8739 at $2.95 SL=1.50
BUY CALL APR-115 IBM-DC OI=10454 at $8.40 SL=6.00
BUY CALL APR-120 IBM-EC OI=10780 at $6.00 SL=4.00



CPN - Calpine Corporation $47.24 (-0.28 last week)

Calpine is an innovative, fully integrated power company.  They
are committed to providing their customers with low-cost and
reliable electricity.  They also provide thermal energy for
industrial customers, such as Sunsweet Growers and Phillips
Petroleum Company.  Their entrepreneurial staff of energy
professionals is experienced in every aspect of power generation.
From engineering, construction and fuel supply through
financing, operations and power marketing, they strive to add
value at every phase, while lowering costs.  Calpine is focused
on two key technologies: combined-cycle natural gas-fired and
geothermal power generation.

California's power crisis has served as fuel for shares of energy
generators such as CPN to rally recently.  Bouncing off support
at $29 in early January, CPN has been steadily advancing, so much
so that the stock is now above all its major moving averages.
The company has been in expansion mode, having just received
approval to build power plants in Florida as well as Wisconsin.
What's more, CPN is looking beyond US borders for long-term
growth prospects.  After breaking recently taking out resistance
at $43, CPN spent this past week basing in a narrow range with
support around $44-45 and resistance at the $48-49 area.  A break
above $48 on volume would be a bullish sign, setting the stock to
take out $49 and then the psychological $50 level.  If such a
move does indeed come to pass, with sector sisters AES and ALS
also rallying, this could be an opportunity for conservative
traders to take a position.  Support can be found below at $47,
the 5-dma at $46.25, the 10-dma at $44.60, $44 and our stop price
at $42.50.  Aggressive traders may target pullbacks to these
levels, but make sure the buyers return in force before jumping

BUY CALL MAR-45 CPN-CI OI=3983 at $4.50 SL=2.75
BUY CALL MAR-50*CPN-CJ OI=3580 at $2.00 SL=1.00
BUY CALL MAR-55 CPN-CK OI= 202 at $0.80 SL=0.00  High Risk!
BUY CALL APR-50 CPN-DJ OI=1630 at $3.70 SL=2.00
BUY CALL APR-55 CPN-DK OI= 762 at $1.85 SL=1.00


WPI - Watson Pharmaceuticals $57.00 (+4.35 last week)

Watson Pharmaceuticals develops, manufactures and markets a
comprehensive array of branded and off-patent pharmaceutical
products.  The Company's continuing proprietary pharmaceutical
strategy is to grow by identifying products within specific
therapeutic areas which provide attractive opportunities for
long-term growth and by making the investments necessary to
capitalize on these opportunities.  Watson markets its
proprietary products through four divisions: Dermatological,
Women's Health, Neuro-Psychiatric and Primary Care.  Each of the
Company's divisions focuses on offering products to statisfy the
needs of physicians who specialize in the diagnosis and treatment
of different medical conditions.

A bullish conference call on Friday provided the lift needed for
the stock to break out of a three-week base on volume.  After
trading in a narrow range, with support below at $52 and
resistance overhead at $55.50 on declining volume for quite some
time now, WPI took off on Friday trading, jumping up $3.90 or
7.34 percent on over 1.3 times the ADV.  This came on the heels
of an earnings report the previous day in which the company
posted lower operating profits.  It is interesting to note that
Friday's rally came after the company's conference call began.
It appears that investors liked what was said, which was that WPI
expected earnings to grow 91 percent in 2001 over 2000.  With
that the institutions came out and reiterated their Buy
recommendations on the stock.  Bounces off support at $56, $55.50
and our stop price of $55 could allow aggressive traders to take
a position, but as always, confirm bounces with volume.  If the
buyers continue to assert themselves on Tuesday, conservative
traders may find current levels to be an attractive entry point.
While WPI has been outperforming its sector, ideally we would
like to see Merrill Lynch's Pharmaceutical HOLDR (PPH) move
higher, giving the stock an more hospitable environment in which
to flourish.

BUY CALL MAR-55*WPI-CK OI= 613 at $4.90 SL=3.00
BUY CALL MAR-60 WPI-CL OI=  72 at $2.45 SL=1.25
BUY CALL MAY-55 WPI-EK OI=2558 at $7.50 SL=5.25
BUY CALL MAY-60 WPI-EL OI= 558 at $4.80 SL=3.00
BUY CALL MAY-65 WPI-EM OI= 297 at $3.10 SL=1.50


WAG - Walgreen Company $43.69 (+2.27 last week)

Founded in 1901, Walgreens is a national retail pharmacy chain
and considered the leader in innovative drugstore retailing.
Walgreens pioneered many store features over the last two decades
that are becoming standards in the industry.  Every corner of
Walgreens strategy is focused on convenience.  Twenty-four-hour
stores, touch-tone prescription refills, flu shots and childhood
immunizations, osteoporosis screening, cash machines, phone
cards, clerk-served cosmetics and photo departments, rebate
booklets, week-long ad prices, all are designed to give customers
back that most precious commodity: time.

It just goes to show that sometimes, the best offense really is a
good defense.  Faced with an uncertain economy, traders are
bidding up any pockets of certainly they can find.  When it comes
to matters of health, consumer confidence is nothing short of
complete.  After all, a person doesn't cut back on prescriptions
because of macroeconomic concerns.  After basing for the past
couple of weeks, shares of WAG on Friday vaulted above formidable
resistance at the $42 level to end the day up 2.56 percent on
1.24 times the ADV.  This breakout suggests that the stock may
challenge its all-time high of $45.75.  But first it must make it
above resistance at $44.  A cross over this level on volume would
give the green light for conservative traders to make a play,
provided that industry peers CVS and RAD confirm upward momentum.
Support can be found in increments of $0.50 at $43.50, $43 and
our stop price of $42.50, reinforced by the 5-dma just below at
$42.44.  Higher risk players may target these levels, confirming
bounces with volume.

BUY CALL MAR-40*WAG-CH OI= 344 at $4.40 SL=2.75
BUY CALL MAR-45 WAG-CV OI=1715 at $1.20 SL=0.50
BUY CALL APR-45 WAG-DI OI=2545 at $2.15 SL=1.00


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The Option Investor Newsletter                   Sunday 02-18-2001
Sunday                                                      3 of 5

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AES - AES Corporation $57.98 (-1.60 last week)

AES is an independent power producer headquartered in Arlington
Virginia.  The company's generating assets include interests in
one hundred and thirty four facilities totaling over 53 gigawatts
of capacity.  AES's electrical distribution network has over
920,000 km of conductor and associated rights of way and sells
over 126,000 gigawatt hours per year to over 17 million end-use
customers.  In addition, through its various retail electricity
supply businesses, the company sells electricity to over 154,000
end-use customers.

Broad based weakness in the technology sector combined with
AES’s underlying technical strength stimulated a rally in AES
on Friday, and the stock burst through the converged 5 and 10
dmas of $57.50 in a surge of momentum at the open.  While the
major market indexes sold off, AES spent the rest of Friday
consolidating, stuck at the $58 level.  Excellent news released
toward the end of the day may very well be the catalyst
AES needs to power through the next resistance level at $60.
President Bush issued an order on Friday to "expedite federal
permit reviews and decision procedures" in a memo to Cabinet
officials with jurisdiction over energy related matters.  This
follows a similar order by Governor Gray Davis of California as
part of an ongoing effort to provide energy to California
through new power plants.  There are 15 plants currently under
review, and AES is among the companies trying to obtain permits
to build plants in California.  For the last three weeks, AES
has been stuck in a tight trading range between strong support
at $55 and heavy resistance at $60. The stock is now positioned
well to break out to the upside, market conditions permitting.
Conservative traders may want to wait until such a breakout
occurs before taking positions.  Aggressive traders can take
positions at current levels, or at a pullback to $57.50.
Monitor other independent power producers like CPN for sector
strength, and set stops at $56.

BUY CALL MAR-55 AES-CK OI= 175 at $5.20 SL=3.00
BUY CALL MAR-60*AES-CL OI=1390 at $2.45 SL=1.25
BUY CALL MAY-55 AES-EK OI=  87 at $8.10 SL=5.75
BUY CALL MAY-60 AES-EL OI= 467 at $4.67 SL=2.75


FDC - First Data Corporation $63.95 (+3.65 last week)

First Data is the remarkably efficient, often invisible engine
powering today's global shift to a cashless economy.  They
process and safeguard every type of electronic payment method:
credit, debit and stored-value cards, electronic checks and
cash.  They also provide Electronic Funds Transfers to 75
percent of the world and provide card issuer services for
1,400 financial institutions and 396 million consumers
worldwide. And, through their visionary Internet Commerce
Group, they are developing advanced services and solutions
that help financial institutions, merchants, business and
consumers access the power and possibilities of the Internet.

Analyst interest this week in FDC has translated into investor
excitement, as this stock continues to flex its muscles in the
face of an uncertain market environment.  First to initiate
coverage for the week was Jolson MP, who started the stock with a
Long-Term Buy rating.  Next up was Lehman Brothers, who did one
better with a Buy rating and a price target of $75, nothing that
FDC was undervalued relative to its competitors.  It seems that
value has become quite sexy lately, and Lehman's comments were
akin to a gift-wrapped package from Victoria's Secret, allowing
the stock to take out formidable resistance at $61.50 on heavy
volume to make a new all-time high.  An Accumulate rating,
courtesy of AG Edwards, resulted in some profit-taking in the
middle of the week, but the pause only served to refresh the
stock, as FDC ended the week on a high note, closing out on
Friday with a gain of $1.05 or 1.67 percent on 120% of ADV in
contrast to a sinking market.  Already a successful play, we are
inching up our stop price, from $61 to $62 to further protect our
gains.  If the buyers pick up where they left off on Tuesday,
allowing FDC to take out its intra-day high of $64.10 with
conviction, this would allow for an entry on strength.  Higher
risk players may look for support at $63, $62.50, $62 and $61.50
for potential entry points.  In both cases, confirm upward
momentum with corresponding movement in peers FISV and PAYX.

BUY CALL MAR-60 FDC-CL OI=1024 at $5.20 SL=3.25
BUY CALL MAR-65*FDC-CM OI= 714 at $2.00 SL=1.00
BUY CALL MAY-60 FDC-EL OI=2745 at $7.50 SL=5.25
BUY CALL MAY-65 FDC-EM OI= 207 at $4.60 SL=2.75
BUY CALL MAY-70 FDC-EN OI=  76 at $2.45 SL=1.25


SDS - SunGard Data Systems Inc. $57.26 (+2.27 last week)

SunGard is a global leader in integrated IT solutions and
eProcessing for financial services.  SunGard is also the pioneer
and a leading provider of high-availability infrastructure for
business continuity. With annual revenues in excess of $1
billion, SunGard serves more than 10,000 clients in over 50
countries, including 47 of the world's 50 largest financial
services institutions.  Wherever financial assets are managed,
traded, processed or accounted for, SunGard offers an integrated
solution.  SunGard provides a wide range of modular,
best-of-breed financial software solutions that are integrated
using standard message protocols and SunGard integration
technologies to form highly scalable, web-enabled enterprise

Only a week old, our call play in SDS has already paid off
nicely.  A number of announcements of major new customer wins
helped to keep shareholders happy.  Finance company Cessna
licensed SDS' BancWare system to manage interest rate risk and to
accurately project cash flow data to aid in strategic planning.
Pension giant TIAA-CREF also hopped on board the bandwagon, as
the company scrapped its proprietary system in favor of SDS'
Invest One web-ready accounting system.  Canadian broker
Canada-iNvest Direct has adopted SDS' BrokerWare platform to
power its online trading system.  Deals like these will most
certainly add to SDS' bottom line.  Technically, the stock has
been well behaved.  After breaking out strongly on Monday, shares
of SDS have since been in digestion mode, moving sideways with
support at $55 and resistance at $58.50 on declining volume.
This range-bound trading is giving the 10-dma (at $54.30) the
time needed to catch up with the stock price.  What we would like
to see at this point is the 10-dma continue to move higher to
provide a launching point for another leg up for SDS.  In the
meantime, higher risk players looking to get in early may target
dips to support from the 5-dma near $57, $56.50 and $55, but make
sure the stock closes above our stop price, now at $56.
Risk-averse traders need only wait for the return of buying
pressure, allowing SDS to spike bullishly above $58.50 to take a
position.  But just to be safe, make sure rivals EDS and KEA are
also showing strength.

BUY CALL MAR-45 SDS-CI OI=   0 at $12.90 SL=9.75  Wait for OI!
BUY CALL MAR-50 SDS-CJ OI=  88 at $ 8.00 SL=5.75
BUY CALL MAR-55*SDS-CK OI=1424 at $ 4.00 SL=2.50
BUY CALL APR-50 SDS-DJ OI= 964 at $ 9.00 SL=6.25
BUY CALL APR-55 SDS-DK OI= 804 at $ 5.20 SL=3.25


MLTX - Multex.com, Inc. $19.88 (+1.00 last 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

Although not directly related to any of the high-profile
confessors Thursday night, MLTX couldn't dodge the selling
pressure in the Technology sector that came about as a result
of the earnings warnings from NT, DELL and HWP.  The NASDAQ
had its one-day rally cut short, and was pulled back underwater
for another losing week.  Given that dismal performance when
the Tech index is flirting with 52-week lows, it was encouraging
to see that MLTX kept its head above water for the week, eking
out a $1 gain, and staying above our $19 stop.  A glance at the
daily chart will show a nice progression of white candles that
brought the stock right up to the upper Bollinger band before
it got clocked by selling on Friday, producing a big ugly red
candle.  Technical traders should have been looking for this,
and adjusted their stops accordingly.  With the strong
statistical evidence that penetrations of the Bollinger bands
are normally followed by a pullback in the near future, and
then Stochastics in overbought, alarm bells should have been
going off left and right.  Now that we have gotten the requisite
pullback, we need to decide if it is a short-term event or an
end to the upward trend.  The volume picture is actually
encouraging, as the heavy volume that we saw as the stock
advanced earlier in the week was not present during the
pullback.  Instead of trading in the neighborhood of 4-6 times
the ADV, MLTX only say about 50% more shares than the daily
average trade hands on Friday.  Prudent investors will wait
for the market to give us our answer.  If the bulls can regain
the upper hand and bring about a solid (read volume) bounce
above the $19 level, that will make for a good aggressive entry
point.  On the other hand, more conservative traders will want
to wait for the stock to reverse and clear $21 (the bottom of
Thursday's gap up) before stepping into new positions.

BUY PUT MAR-17.5 UXM-CW OI= 53 at $3.63 SL=2.00
BUY PUT MAR-20  *UXM-CD OI=122 at $2.06 SL=1.00
BUY PUT MAR-22.5 UXM-CX OI= 36 at $1.13 SL=0.50
BUY PUT MAY-20   UXM-ED OI=646 at $3.63 SL=2.00
BUY PUT MAY-22.5 UXM-EX OI=124 at $2.69 SL=1.25


IFIN - Investors Financial Services Corp $82.00 (-5.00 last week)

Investors Financial Services Corp. provides asset administration
services for the financial services industry through its wholly-
owned subsidiary, Investors Bank and Trust Company.  The company
provides global custody, multicurrency accounting, institutional
transfer agency, performance measurement, foreign exchange,
securities lending, mutual fund administration and investment
advisory services to financial asset managers, including mutual
fund complexes, investment advisors, banks, and insurance
companies.  Offices are located in the United States, Canada,
Cayman Islands, and Ireland.

After rallying to $87 on Monday, IFIN experienced a sharp
drop on Tuesday, and spent the rest of the week in a tight
range between $81 and $84.69.  IFIN has formed a new upward
trading channel since breaking above its 50 dma of $76.89 on
January 24, and is now at the lower end of the channel.
If the pattern continues, IFIN should be able to break
above strong resistance at $86 to possibly challenge the
$90 level.  Volume has been significantly higher on the up days,
and a solid earnings report, combined with a market rotation
into small cap value stocks should bode well for IFIN going
forward.  Shares of IFIN have demonstrated excellent strength
for the last twelve months, considering the overall bear market
environment.  In fact, IFIN is one of the few stocks which has
remained above its 200 dma for the last twelve months, and
dipped only briefly below the 50 dma once in January before
recovering.  Furthermore, continued consolidation in the
financial services industry may stimulate additional interest
in IFIN.  Traders can take positions on a move above the 10
dma of $82.65, or the 5 dma of $83.77 on strong volume.
Conservative traders might want to wait for a break above heavy
resistance at $86.  Monitor the financial services sector,
particularly the investment management sector, and set stops
at $80.

BUY CALL MAR-80*FLQ-CP OI=10 at $ 8.00 SL=5.75
BUY CALL MAR-85 FLQ-CQ OI=88 at $ 5.63 SL=3.50
BUY CALL APR-80 FLQ-DP OI= 0 at $11.00 SL=8.25  Wait for OI!
BUY CALL APR-85 FLQ-DQ OI= 5 at $ 8.50 SL=6.00


AEOS - American Eagle Outfitters $58.69 (+3.44 last week)

American Eagle Outfitters is a specialty retailer of collegiate-
style casual apparel, accessories and footwear aimed at men and
women ages 16 to 34.  The company's fashion line of relaxed
clothing bears the American Eagle Outfitters and AE brand name
and are sold exclusively in their mall-based stores.  They
currently operate over 550 stores in 47 states and Washington,

AEOS' resilience and strength during the market's sluggish
period combined with its bullish spike through the $60
resistance on Thursday prompted our coverage of this retail
stock.  Near-term support is currently firming at the $58 level,
which is bolstered by the trailing 5 and 10 DMAs at $57.93 and
$56.89, respectively.  This base line provides a nice launching
pad for entries into this play.  We're anticipating a big
breakout in an advancing marketplace.  Thursday's 10% bounce,
which accompanied the NASDAQ rally, indicates we could be right
on the money; particularly with the company's earnings also
approaching in just a few short weeks.  American Eagle
Outfitters is scheduled to announce its 4Q earnings on March
15th, BEFORE the opening bell.  If there's doubt, simply keep
your coins in the piggy bank and wait for AEOS to make another
high-volume charge.  A clean break through the 52-week high, at
$60.06, may attract additional technical and momentum traders;
thus a snowballing effect.  Reasonable entries might also be
found on pullbacks near the stock's $58 support level, if a
positive bias continues to exist across the retail sector.  Keep
an eye on Walmart (WMT), the kingpin of all major retailers.
Walmart is reporting earnings this Tuesday morning and the
results could spark a flurry of activity within the sector.
More specifically, The Gap (GPS) and Abercrombie & Fitch (ABF)
are direct competitors to AEOS.  Be patient and pick your
entries carefully.  Until we see the anticipated breakout become
a reality, we're keeping a protective stop at the $54 mark to
safeguard our capital.

BUY CALL MAR-55 AQU-BK OI= 187 at $8.00 SL=5.75
BUY CALL MAR-60*AQU-BL OI= 440 at $5.00 SL=3.00
BUY CALL MAR-65 AQU-BM OI=1219 at $2.69 SL=1.50
BUY CALL MAY-60 AQU-EL OI= 565 at $8.38 SL=6.00
BUY CALL MAY-65 AQU-EM OI= 979 at $6.13 SL=4.00


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The Option Investor Newsletter                   Sunday 02-18-2001
Sunday                                                      4 of 5

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NOK - Nokia $26.50 (-1.78 last week)

Nokia is the world leader in mobile communications.  Backed by
its experience, innovation, user-friendliness and secure
solutions, the company has become the leading supplier of mobile
phones, and a leading supplier of mobile, fixed and IP networks.
By adding mobility to the internet, Nokia creates new
opportunities for companies, and further enriches the daily
lives of people.

NOK's shares have been suffering since the first week in
January, when the stock fell below its then-converged 200
and 50 dmas of $43.44.  While the Federal Reserve's initial
rate cut on January 3 gave a boost to many technology
companies, NOK's shares showed no positive response to the
cuts, and continued their gradual descent.  After reporting
in-line earnings with reduced expectations for 2001 on
January 30, NOK has formed a downward channel with a series
of roll overs from lower highs.  The real catalyst for heavy
selling may have been the warning from NT which occurred on
February 15.  While NT reduced estimates for their revenues
going forward among each segment of its business, the
wireless segment may be among the hardest hit.  NT's management
stated that that recovery in the wireless segment is anticipated
to be pushed out to Q1:02 from Q4:01.  While analysts deluged
NT with downgrades, NOK suffered along side, as CIBC and Gerard
Klauer Mattison cut earnings expectations and ratings for NOK.
GKM analyst Charles DiSanza stated that NOK's rivals ERICY and
MOT may very well dump handsets on the market, which could
erode NOK's market share further.  The near term horizon looks
very bleak for NOK, as the stock is now poised one quarter
point above the 52-week low of $26.25, and big institutional
sell orders took place on Friday afternoon.  Aggressive traders
could take positions on a roll over from the 5 dma of $28, if
accompanied by weakness in the wireless equipment sector.
Otherwise, a break below $25.25 on strong volume could lead
NOK to a new 52-week low.  Watch others like ERICY and MOT for
sector weakness, and set stops at $29.

BUY PUT MAR-30*NAY-OF OI=8508 at $4.30 SL=2.75
BUY PUT MAR-25 NAY-OE OI=1228 at $1.25 SL=0.75


BBOX - Black Box Corp $51.88 (-6.63 last week)

Black Box Corporation provides technical network services and
related products to businesses across the globe via its catalog
and Web site.  The company's technical support services include
a 24-hour phone support line and on-site design, installation,
and maintenance.  Customers outside of  North America account
for about a third of sales.

This reseller of its own branded networking products and
services are effectively driven by the telecommunications
market. Some say its ever-expanding on-site network services,
augmented by numerous acquisitions, could be the company's
eventual downfall; others remain diehard loyalists.  Tucker
Anthony Sutro Capital Markets, for instance, continues to
post Strong Buy recommendations on BBOX and recently issued
a $95 price target.  But take a look at a daily chart.  It
becomes quite evident that the stock can't walk the talk.
After a promising New Year recovery, BBOX once again exploded
and fell from grace.  A gradual, but steady, decline ensued
in conjunction with the NASDAQ's own muddied downturn.
However, this week was a critical turning point for the
share price.  Questions of the company's "real" value and
future outlook resurfaced.  There's much to say about the
power of the pen (or keyboard for that matter!).  Traders
blind-sided BBOX and took it down to the mat with a $7.75,
or 13.1% blow on Tuesday.  The price level came back up to
$56 and $57 during Thursday's rally, but soon lost
consciousness again.  The feeble open, at $49.50, pretty
much set the pace for Friday's trading; although volume was
at almost double the ADV.  The active trading hints that
sellers could take BBOX lower next week.  There's light
support at $45, with a better foundation at the $40 level.
We currently have a stop in place at $55, which correlates
with the 50-dma ($55.93) ceiling.  This measurement device
might also serve as an entry gauge for the more aggressive
types, if the market offers the means for BBOX to cycle
upward and then rollover on volume.  Otherwise, look for
intraday surges to provide entries near $52 and $53 or buy
into the weakness as BBOX challenges the $50 support.

BUY PUT MAR-55*QBX-OK OI=80 at $6.88 SL=5.00
BUY PUT MAR-50 QBX-OJ OI=55 at $4.25 SL=2.50
BUY PUT MAR-45 QBX-OI OI=20 at $2.44 SL=1.25



ABGX - Abgenix $33.69 (-1.87 last 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

Now positioned firmly below its 200 dma of $60.34 and its
50 dma of $47.46, ABGX spent this week rolling over to a
pattern of failed rallies from lower highs.  Until the biotech
sector can rally above its own major moving averages, ABGX
may continue to sell off.  With earnings over, and little
news released in the last week, there is no momentum to rally
the shares of ABGX, and plenty of selling among nervous
investors.   New competition from Cambridge Antibody Technology
has taken some attention away from ABGX and its primary rival
in the field of antibody research, MEDX, as the UK's CAT plans
to list its shares on the Nasdaq by the end of next month.
Viewed on a weekly chart, ABGX is now in a long term bearish
wedge pattern with support just under the current level at
$33.44, and stronger support at $30, which was tested this
week.  If $30 fails, there is little support left until the
$20 level is reached.  ABGX is now poised to roll over from
the current level, which would be an excellent put entry
points, if BTK.X continues to demonstrate weakness.  More
conservative traders might want to wait for a break under
$30 with strong volume, which could lead the stock to a new
52-week low.  Pay close attention to BTK.X, as the index
is under the 50 dma of 611.08, and is rolling over.
Watch MEDX, as well, as it tends to trade in a very
similar pattern to ABGX.  Move stops to $36.

BUY PUT MAR-35*AZG-OG OI=39 at $4.75 SL=3.00
BUY PUT MAR-30 AZG-OF OI=31 at $2.44 SL=1.25


BRCD - Brocade Communications $53.25 (-20.88 last week)

Brocade Communications is a provider of Fibre Channel switching
solutions for Storage Area Networks (SANs), which apply the
benefits of a networked approach to the connection of computer
storage systems and servers.  The company's family of SilkWorm
switches enables companies to cost-effectively manage growth in
their storage capacity requirements and improve the performance
between their servers and storage systems.  This provides the
ability of increasing the size and scope of a company's SAN,
while allowing them to operate data-intensive applications,
such as data backup and restore, and disaster recovery on the

The NT earnings warning Thursday night after the close, was
almost surely to blame for the carnage in the Technology market
on Friday, with the damage in the Networking and Telecom
stocks extending even to the vaunted Storage sector.  The bears
were not picky, scoring direct hits on EMC, EMLX, NTAP, and our
play BRCD.  Having recently had its wings clipped from north of
$100 just 3 short weeks ago, this once high-flying stock is
still suffering from the after-effects of the devastating
warning from EMLX a week ago.  While the bulls are trying to
hold the line near current levels, there is little to motivate
buyers at this time, except for BRCD's earnings announcement,
which is set for next Wednesday, after the close.  This clearly
puts a short fuse on our play, as we want to have all positions
closed before the company releases its numbers.  To protect
against a possible rally into the numbers, we have set a tight
stop at $56, and aggressive traders can use any downward bounce
from this level (also the top of the gap down on Friday) as a
trigger for initiating new positions.  More conservative traders
will want to wait for strong selling volume to persist and push
BRCD below the $52 level before jumping into the play.  Keep an
eye on the overall Networking sector (NWX.X) so as to gauge
investor sentiment before playing; as long as the sector
continues to weaken, BRCD will likely deteriorate as well.

BUY PUT MAR-55*UBZ-OK OI=1240 at $8.38 SL=6.00
BUY PUT MAR-50 UBF-OJ OI= 883 at $5.88 SL=3.75
BUY PUT MAR-45 UBF-OI OI= 776 at $4.00 SL=2.50


NETE - Netegrity, Inc. $57.00 (+1.69 last week)

Netegrity is a provider of software and services that manage
and control user access to Web-based e-commerce applications.
The company's SiteMinder product is part of the software
infrastructure that is used to build and manage an e-commerce
Web site, commonly known as a portal.  SiteMinder manages the
complex process of identifying users and assigning entitlements
to each, which determines what information that user can see
and what transactions the user can perform on that Web site.

After the series of earnings warnings and negative news items
issued after the close on Thursday, it was a foregone conclusion
that the NASDAQ would gap down at the open on Friday, and pretty
close to a sure thing that our new play, NETE, would follow
suit.  Sure enough, NETE gapped lower by more than $4, and after
an anemic recovery attempt throughout the morning, it succumbed
to the bears and headed lower, tagging $53 at the low of the
day.  Then, like Don Quixote tilting at windmills, the bulls
came rushing back in the final 30 minutes, driving the stock up
by more than 5% on rapidly increasing volume.  With no apparent
news to drive the stock higher, this looks like a clear
beneficiary of options expiration, an effect that will be gone
when the opening bell rings on Tuesday.  The months-long
descending trendline is sitting right at $60 (also the location
of our new stop), and barring a miracle of Greenspanian
proportions, this level should contain any attempted rallies
next week, now that the upward (?) catalyst of earnings season
is effectively behind us.  Conservative investors will want to
see NETE drop through the 200-dma (currently $53.63) before
taking a position for the next leg down, and preferably on
increasing volume.  A more aggressive approach will be to enter
on any failed rally near the $60 level, so as to catch a few
more dollars worth of the move.  Keep an eye on the Internet
index (INX.X), as weakness in that area of the market will
likely spill over into shares of NETE, while a surprise rally
could have an unexpected positive effect.

BUY PUT MAR-60*UPN-OL OI=103 at $8.25 SL=5.25
BUY PUT MAR-55 UPN-OK OI= 64 at $6.13 SL=4.00
BUY PUT MAR-50 UPN-OJ OI=292 at $3.63 SL=2.00


STT - State Street Corp. $104.90 (-3.10 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.

Market up or market down, it doesn't seem to matter to STT
shareholders.  While it certainly isn't as exciting as watching
the Networking stocks soar and then crater on consecutive days,
the consistent movement on our play is making money.  After
closing below the $110 resistance level on February 6th, has
been gradually walking lower.  Once the $105 support level gives
way, it looks like a quick trip to $100 (and possibly lower)
will be in the cards.  Of course, we have the pesky technical
indicators to deal with, and in this case, it is the daily
Stochastics that are threatening to gum up the works.  The fast
line has bottomed out in the oversold region, and is threatening
to turn up through the slow line.  Should it do so before the
stock falls below $98, it will paint a clear picture of bullish
divergence and it will very quickly be the end of our play.
Until then, we will continue to ride the downward trendline,
which currently sits at $107, just below our $108 stop.  The
5-dma ($106.21) and the 10-dma ($107.81) are also exerting
downward pressure, and the bulls are going to have to mount an
all out assault to clear these impediments.  Given the current
tone of the markets, that doesn't seem like a high probability
event, but we must still play with caution.  Entering new
positions on a failed rally near resistance ($107-108) seems
the best course of action at this point, and if confirmed by
weakness in the Brokerage index (XBD.X), then so much the

BUY PUT MAR-105*STT-OA OI= 55 at $5.60 SL=3.50
BUY PUT MAR-100 STT-OT OI= 71 at $3.70 SL=2.25
BUY PUT MAR- 95 STT-OS OI=190 at $2.50 SL=1.25




GE $47.00 -0.98 (+1.34 last week)  GE last week began making an
ever so slight climb from the $45 level.  Since the beginning of
the year, the stock has be putting in a series of higher lows,
albeit in a tight range.  Last week's high was $48.10 and GE
encountered resistance at the 50-dma, which remains overhead at
$47.92.  This will definitely pose as resistance, yet a break
above and GE could begin to attract new buyers.  GE traded to
lows of $45.50 last week and would be a good support level from
which to gain entry.  The stop remains at $45.

BUY CALL MAR-45 GE-CI OI=15739 at $3.20 SL=1.75
BUY CALL JUN-50*GE-FJ OI=15569 at $2.95 SL=1.50
BUY CALL SEP-50 GE-IJ OI= 6574 at $4.60 SL=2.75


USB $29.43 -0.02 (-0.59 last week)  Monday's move to an intraday
high of $30.75 was an attempt to spring from the wedge at $30.
Profit taking held the stock down throughout the week, possibly
over concerns of future interest rates and the economic environment.
The stock started its minor slide on Tuesday after USB and Firstar,
FSR, approved the planned purchase of USB by FSR. The deal is
expected to close February 27th.  During this trading, USB
touched $29.08, just above our stop at $29.  This is about where
the uptrending 50-dma now resides, $28.96, and reasonable support
can be expected.  Bounces from this level should provide good
entry points.  Watch trading in FSR since it is the acquiring

BUY CALL MAR-25 USB-CE OI=3438 at $4.70 SL=3.00
BUY CALL MAR-30*USB-CF OI= 914 at $1.15 SL=0.50

CTX $44.50 +0.31 (+2.31 last week)  The 10-dma proved to be good
support for CTX on Monday as the stock launched, preparing for a
break above $44.  After Tuesday's breakout on this Low Volatility
call play, CTX settled into a tight range between $44 and $45,
consolidating its recent gains.  With the 10-dma at $43.83 and
trending higher, it may provide the necessary support to surge
CTX toward $46.  Given this week's move, we upped our stop to $43.

BUY CALL MAR-40 CTX-CH OI=  6 at $5.80 SL=4.00
BUY CALL MAR-45*CTX-CI OI= 57 at $2.60 SL=1.25
BUY CALL APR-45 CTX-DI OI=321 at $4.20 SL=2.50

DYN $51.50 -0.51 (-1.65 last week) After a pullback on Monday,
DYN traded in a tight range from $50.50 to $52.  Friday's move
above $52 was short-lived as sellers showed up at $53 and remained
throughout the day.  The stock slipped below $52.  Bounces from
the current levels would provide entry, yet be cognizant of the
challenges at $53.  The stop remains at $50.

BUY CALL MAR-50*DYN-CJ OI= 333 at $4.80 SL=3.00
BUY CALL MAR-55 DYN-CK OI=1635 at $2.45 SL=1.25

MO $46.53 +0.54 (-1.47 last week)  A rocky start for old MO last
week as the stock pulled back to consolidate.  The long-term
uptrend is strong and certainly intact for MO.  Buyers showed up
at $45.50 and the stock should be preparing for another run at
$48, current overhead resistance.  To play this Low Volatility
call, look for bounces from intraday support at $46, or a
sustained move through $47 to gain entry.  The 10-dma is just
above Friday's close at $46.77.  The stop remains at $45.  Also,
notice the huge open interest on the March 50 calls, indicating
numerous bets on the stock making it to $50.  This will further
solidify resistance at this level.  Yet, a move through $50
could bring about strong upside momentum as positions are

BUY CALL MAR-45*MO-CI OI= 9983 at $2.95 SL=1.50
BUY CALL MAR-50 MO-CJ OI=12239 at $0.75 SL=0.00  High Risk!

WM $50.54 -0.06 (-0.46 last week)  After consolidating last week
and pulling back to the $50 level, WM may be readying itself to
take the next leg up in its long-term uptrend.  Support at $50
looks to be holding well, shored up by the 50-dma slightly below
at $49.74.  The $50 level is also our stop for the play.  Look for
any high volume bounces from current levels to enter.  A move
through $51 with buying conviction will likely take WM to
challenge resistance at $52.50.  If the buyers show up again, a
break through $53 would carry the stock to challenge its all-time
highs near $56.  Goldman Sachs initiated coverage of WM on Friday
with a Market Outperform rating.

BUY CALL MAR-45 WM-CI OI=   2 at $6.30 SL=4.50
BUY CALL MAR-50*WM-CJ OI= 898 at $2.50 SL=1.25
BUY CALL MAR-55 WM-CK OI=1150 at $0.60 SL=0.00

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NT Dashes Bullish Dreams...Again!
By Mark Phillips
Contact Support

Just when I think things can't get any worse, that's when they
usually do.  Remember the disappointing earnings report from NT
back in October?  Coming in just shy of revenue growth
expectations, the stock got whacked for a 28% one-day loss,
which began a slow downward trend that looked like it would stop
and reverse from the $30 support level.  More important than the
damage to the share price of NT was the carnage this inflicted
on sentiment in the Optical Networking sector.  High-flying
stocks were taken out and shot enmasse with JNPR losing more
than 50% of its value in the succeeding month due to the
valuation compression that was taking place in the Networking
sector.  Even the continuing rapid revenue and earnings growth
of the company was insufficient to support the stock price as
it deteriorated throughout the end of the year.

Which brings us up to last week, when NT let the other shoe
drop, indicating that instead of a gain of $0.16, the company
would post a loss of $0.04.  That's right, a loss!  And to make
matters worse, they were gloomy about their prospects right into
the 4th quarter due to the Telecom slowdown.  That's just
downright unpleasant, but maybe it is one of the last major
market-sinking announcements before health begins to return to
the Technology sector.  Hey, I can dream, can't I?

Seriously though, the damage in the NASDAQ from the NT warning,
coming less than a week after the shockingly grim revelations
from EMLX, had surprisingly little effect.  Sure, the NASDAQ
gave up -127 points on the day, but this just brought it back to
where it ended the day on Wednesday.  So, how about the
Networking index (NWX.X)?  Now there the picture gets somewhat
uglier.  Friday's selling action took the index sharply lower to
set a new 52-week low of $605.11, where it may be about to find
solid support between $585-600.

The Networkers were one of the last sectors to come crashing
down as the NASDAQ came off of its euphoric high.  The big
question is whether there is another bomb lurking out there in
Tech-land or if we are now just waiting for Greenspan to give us
the green light with another 50 basis point rate cut -
preferably ahead of the March Fed meeting.  I wish I had an
answer for you, but based on the continued bearish tilt of
Commercial traders across all the major indices, I would bet
on more broad-based weakness before we see the beginning of an
invest-able rally.

Lest you think I only look at the Technology sector, let's take
a few minutes to talk about the "old economy" index, the DJIA.
Although still flirting with the 11,000 resistance level, we
are witnessing the build out of another cycle in the developing
bullish wedge.  The bears tried to sell it off through the
ascending trendline (now at 10,800) on Friday, but buyers were
waiting, and this helped the index to recover back above the
trendline by the close, but just barely.

Next week will be critical as the NASDAQ will likely face a test
of its lows, while the DJIA will either rally through the 11,000
level or fall below the ascending trendline.  A successful test
of NASDAQ support will likely produce attractive entry points on
many of our Technology-related plays, while a break below the
January lows will be a clear sign to move to the sidelines until
a clear bottom forms.

You will notice that we are starting to add more plays that are
outside of the Technology sector.  Whether because their
underlying sector is strong or we expect them to benefit from
the easing interest rate environment, these plays are definitely
worth your attention.  They won't be rocket-ships to the moon,
but the risk is lower, as the options are amazingly inexpensive.
This week's new play has 2003 LEAPS for the incredible bargain
of $4.10.

It almost seems a waste of space to even mention the VIX, as it
continues to meander in the middle of its range, closing out the
week at 25.08.  Hopefully, with options expiration behind us
again, we will see some significant movement again, taking us
into either the buy zone (mid-30's) or sell zone (20 or below),
depending on market action.

Despite the uncertain broader markets, there are plays to be
found that can produce solid returns.  A good example is our
energy play on CPN.  Although only a month old, the play is up
sharply at a time that the overall markets are continuing to
languish.  Our two newest plays, CLX and JWN hold the promise
of solid returns in the near-term as well, but we need to
observe proper entry techniques as always.  No matter what
plays you decide on, make sure to think out your entry strategy
before hand and don't deviate from it based on emotions when
the markets are open.  If you are like me, you will make far
more rational decisions about plays and entry points while the
markets are closed.

Happy Hunting!

Current Plays


EMC    11/07/99  JAN-2002 $ 45  WUE-AI   $ 9.50   $18.70    96.84%
       09/17/00  JAN-2003 $100  VUE-AT   $32.75   $13.10   -60.00%
CSCO   11/14/99  JAN-2002 $ 45  WIV-AI   $11.00   $ 2.19   -80.11%
       11/26/00  JAN-2003 $ 60  VYC-AL   $16.63   $ 2.88   -82.71%
NT     11/28/99  JAN-2002 $37.5 WNT-AU   $15.13   $ 1.55   -89.76%
       09/10/00  JAN-2003 $ 75  ODT-AO   $27.50   $ 0.85   -96.91%
AOL    03/12/00  JAN-2002 $ 65  WAN-AM   $18.63   $ 4.00   -78.53%
       08/13/00  JAN-2003 $ 55  VAN-AK   $17.50   $11.60   -33.71%
AXP    03/12/00  JAN-2002 $46.6 WXP-AQ   $ 9.33   $ 9.10   - 2.47%
WM     03/19/00  JAN-2002 $ 30  WWI-AF   $ 5.38   $22.30   314.50%
       10/22/00  JAN-2003 $ 45  VWI-AI   $ 7.88   $14.00    77.78%
C      06/18/00  JAN-2002 $48.8 YSV-AW   $10.31   $11.90    15.42%
       10/01/00  JAN-2003 $ 60  VRN-AL   $12.25   $10.30   -15.92%
GENZ   07/16/00  JAN-2002 $ 70  YGZ-AN   $17.13   $28.25    64.92%
                 JAN-2003 $ 70  OZG-AN   $23.13   $36.88    59.42%
QCOM   09/17/00  JAN-2002 $ 70  WBI-AN   $22.50   $27.50    22.22%
                 JAN-2003 $ 70  VLM-AN   $29.63   $35.88    21.08%
BGEN   11/05/00  JAN-2002 $ 70  WGN-AN   $17.25   $18.88     9.42%
                 JAN-2003 $ 70  VNG-AN   $25.00   $27.13     8.50%
MU     11/26/00  JAN-2002 $ 45  WGY-AI   $13.13   $11.90   - 9.33%
                 JAN-2003 $ 45  VGY-AI   $17.25   $17.40     0.87%
A      12/03/00  JAN-2002 $ 55  YA -AK   $16.88   $12.70   -24.74%
                 JAN-2003 $ 60  OAE-AL   $19.88   $16.20   -18.49%
QQQ    12/10/00  JAN-2002 $ 70  WNQ-AR   $15.13   $ 5.50   -63.65%
                 JAN-2003 $ 75  VZQ-AW   $19.25   $ 8.80   -54.29%
WMT    12/24/00  JAN-2002 $ 55  WWT-AK   $ 9.63   $ 8.30   -13.77%
                 JAN-2003 $ 55  VWT-AK   $14.00   $12.70   - 9.29%
DELL   01/07/01  JAN-2002 $ 20  WDQ-AD   $ 5.25   $ 7.50    42.86%
                 JAN-2003 $ 25  VDL-AE   $ 5.63   $ 7.50    33.21%
WCOM   01/14/01  JAN-2002 $ 25  WQM-AE   $ 5.00   $ 1.63   -67.50%
                 JAN-2003 $ 25  VQM-AE   $ 7.38   $ 3.25   -55.93%
CPN    01/21/01  JAN-2002 $ 40  YLN-AH   $10.50   $15.60    48.57%
                 JAN-2003 $ 40  OLB-AH   $15.38   $20.50    33.33%
CLX    02/11/01  JAN-2002 $ 40  WUT-AH   $ 5.20   $ 5.30     1.92%
                 JAN-2003 $ 40  VUT-AH   $ 8.10   $ 7.90   - 2.47%
JWN    02/18/01  JAN-2002 $22.5 WNZ-AX   $ 3.30   $ 3.30     0.00%
                 JAN-2003 $ 25  VNZ-AE   $ 4.10   $ 4.10     0.00%

Spotlight Play

QQQ - NASDAQ-100 Trust $55.13

It seems like the NASDAQ has been caught in an endless
downtrend, but truth be told, it really only commenced in
early September.  Since then, the bulls have been repeatedly
humiliated every time they have stepped in to buy while there
is more bad news waiting for the market to digest.  Last Friday
there was the EMLX earnings warning, and we closed out this week
with a triple threat from NT, DELL and HWP.  The warnings from
EMLX and NT have had the most severe effect, and the nagging
question now is whether or not there is still more bad news out
there for the Technology index to absorb.  With weakness being
felt in virtually every area of the NASDAQ 100, we have seen a
decline to the highs of early 1999, but the low on the QQQ of
$52.06 may be an invitation to the bears to make one more great
downward push towards the 1999 lows near $48.50.  Technically
the QQQ looks very close to a solid bottom with the daily
Stochastics attempting to break out of oversold territory,
accompanied by similar behavior in the hourly timeframe.
Looking at the weekly chart, we see the Stochastics just about
to drop back into the oversold zone.  When we start to see
signs of health in the economy (likely with more help from Mr.
Greenspan), we could just be fortunate enough to have the
convergence of weekly, daily, and hourly stochastics turning
up and giving us the green light.  Of course, that would be
the ideal situation, and for now we have to play the market we
are given.  Consider new entries on any solid bounce above the
January lows, but don't jump the gun.  If the $52 level can't
hold, then the most prudent course of action will be to stand

BUY LEAP JAN-2002 $60.00 WD -AH at $ 9.00
BUY LEAP JAN-2003 $60.00 VZQ-AH at $14.30

New Plays

JWN - Nordstrom, Inc. $20.51

What's this?  A retailer (and a high-end one, at that) on the
LEAPS playlist in the middle of an economic downturn?  Well,
lest you think I have completely taken leave of my senses, I'll
point you towards the daily chart, which is looking downright
attractive.  As of January, 2000, the company operated 77 large
specialty stores in more than 20 states, and that doesn't
include the 37 Nordstrom Rack outlet stores.  Specializing in
the retail distribution of apparel, shoes and accessories for
men, women, and children, JWN has made the move into the new
millennium with its new subsidiary, Nordstrom.com.  This arm
of the company is being used to promote the rapid expansion of
its Internet commerce and catalog business.  Since bottoming
near $14 in the middle of October, JWN has been posting a
series of higher lows and higher highs, and on Thursday/Friday
the stock broke through and held above the 200-dma ($19.52) for
the first time since last March.  We need to be cautious at this
point though.  With the sharp rally over the past week, JWN
kissed the upper Bollinger band on Friday and pulled back,
confirming that the $21 resistance level is still intact.  With
earnings set to be released on February 22nd after the close,
there is likely to be some more upside ahead of the numbers, but
quite possibly some weakness afterwards.  So given the way JWN
has been trading over the past few months, it looks like the
best entry point will be to wait for the post-earnings weakness
to give us a bounce at either the 200-dma or the ascending
trendline ($18.50) before taking a position.

BUY LEAP JAN-2002 $22.50 WNZ-AX at $3.30
BUY LEAP JAN-2003 $25.00 VNZ-AE at $4.10


NT $20.00 The other shoe hit the floor with a thud on Thursday
night, and NT got slammed as a result of their own dismal
earnings warning for the remainder of the year.  Revising
estimates for the current quarter from earnings of $0.16 per
share to a loss of -$0.04, was far more severe than investors
were expecting, and they knocked the Networking stock back for
a nearly $10 loss on Friday.  We had placed NT on probation
recently pending its ability to hold above the critical $30
support level and disciplined traders should have been out of
any remaining positions when the stock closed fractionally below
this level on Tuesday.  While the downside appears limited from
where the stock closed out the week, given the severity of the
warning, it seems unlikely that NT will mount anything
approaching a decent recovery until they get their financial
house in order.

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The Option Investor Newsletter                   Sunday 02-18-2001
Sunday                                                      5 of 5

To view this email newsletter in HTML format with embedded
charts and graphs, click here:


Trading the Trend: A Beginners Approach
By Mark Wnetrzak

There is one easy way to consistently profit from trading; form
the correct outlook for the future movement of the market and
position yourself to benefit from that activity.  In fact, that
is the premise of the technical trader; that past price behavior
can be used to forecast future trends, thus providing a means to
profit from a successful forecast.

There are a number of advantages to this type of approach but most
importantly, it eliminates the need to understand the infinite
components of fundamental valuation that market analysts find so
intriguing.  In addition, trading strategies based on historical
price analysis provide precise entry and exit signals, a benefit
to investors who participate in short-term strategies.  Technical
analysis makes three basic assumptions.  First, simple market data
such as price and volume can indicate the true value of a specific
security or financial instrument.  Second, prices historically
exhibit trends or patterns and third, history eventually repeats
itself.  These assumptions can be combined with the study of price
and volume to provide traders the basic information they need to
initiate profitable trading strategies.  The technical indicators
that identify buy or sell signals are contained in various chart
formations and patterns.  Of course, the goal of any trader is to
profit from their predictions and most experts suggest that the
best place to begin is with proven practices such as evaluating an
issue's price history or trend.

The most common technical patterns are the trend and trading
range.  Trends are categorized as "uptrends" or "downtrends" while
trading ranges are defined by support and resistance levels.  It
is important for an investor to be able to identify these trends
or trading ranges and recognize the historical chart patterns that
signal major turning points or reversals.  Since two points define
a line, the basic requirement for all trend-lines is that there be
at least two points connected, but most analysts require a minimum
of three points to confirm and justify a primary trend.  After the
trend-line is established, its character can be determined and the
boundaries of the recent price activity can be used to establish
the simplest form of buy and sell signals.

The second general classification of prices is the trading range.
It is defined as a series of prices that move between a clearly
established high and low value.  The upper boundary is known as
"resistance" while the lower is termed "support."  A resistance
level is established when there are more investors who are willing
to sell (supply) rather than buy (demand) at a specific price,
because they believe the security is overvalued at that level.  A
support level will occur when investors feel the stock is cheap or
undervalued at a given price and they can't afford not to own it.
Trading ranges can also occur as part of an uptrend or downtrend.
These patterns are often called "continuations" since the general
direction of the prices is not changed.  Another type of trading
range can exist as part of a transition, or "reversal" from an
uptrend to a downtrend.  A daily price range with a high that is
above the previous day's high and a low that is below the previous
day's low is a good example of this type of indication.  It would
be nice if all of the changing trends were illustrated by sharp,
well-defined signals but stocks rarely behave in such a benevolent

Next week, we will discuss some of the most common patterns used
to forecast changes in the trend (or character) of an issue.

Good Luck!

NOTE: Using Margin doubles the listed Monthly Return!

Stock  Price  Last   Call  Strike Price   Profit  Monthly
Symbol Picked Price  Month Sold   Picked  /Loss   Return

SFAM    8.63   8.06   FEB   7.50  1.88  *$  0.75  16.1%
ONNN    8.00   7.00   FEB   7.50  1.56   $  0.56  12.6%
ANTC   11.25  10.19   FEB  10.00  2.25  *$  1.00   9.9%
XLA     8.38   6.59   FEB   5.00  3.88  *$  0.50   9.9%
CLRS    7.88   7.88   FEB   5.00  3.25  *$  0.37   8.7%
RDRT    7.56   8.75   FEB   5.00  2.88  *$  0.32   7.4%
HOTT   22.13  25.31   FEB  17.50  5.88  *$  1.25   6.9%
ESCM   16.00  16.84   FEB  15.00  1.44  *$  0.44   6.6%
VPHM   22.13  22.13   FEB  17.50  5.38  *$  0.75   6.5%
ELON   24.44  20.50   FEB  20.00  5.00  *$  0.56   6.3%
SCON    7.13   7.94   FEB   5.00  2.44  *$  0.31   5.9%
ASTSF  16.31  15.81   FEB  12.50  4.38  *$  0.57   5.2%
CPST   34.19  26.81   FEB  25.00 10.50  *$  1.31   4.9%
MCCC   20.00  18.50   FEB  17.50  3.25  *$  0.75   4.9%
ISLD    6.13   4.25   FEB   5.00  1.50   $ -0.38   0.0%
ENTU   20.31  11.00   FEB  15.00  6.00   $ -3.31   0.0%
FNSR   36.38  20.00   FEB  30.00  7.50   $ -8.88   0.0%

NERX   10.06   8.88   MAR   7.50  3.62  *$  1.06  11.9%
NXCD   11.38   9.81   MAR  10.00  2.31   $  0.74   5.9%
URBN   10.44  12.06   MAR  10.00  1.06  *$  0.62   5.7%
LGTO   17.88  15.50   MAR  15.00  3.88  *$  1.00   5.2%
PRGN   28.63  29.00   MAR  25.00  5.00  *$  1.37   5.0%
ROAD   25.06  25.06   MAR  25.00  1.25  *$  1.19   4.3%
CSTR   16.75  18.13   MAR  15.00  2.44  *$  0.69   4.2%
ATRX   23.00  22.25   MAR  20.00  4.00  *$  1.00   3.8%
WGR    28.00  27.27   MAR  25.00  4.00  *$  1.00   3.6%
CSTR   17.06  18.13   MAR  15.00  2.75  *$  0.69   3.5%
MNTR   23.56  23.75   MAR  22.50  1.88  *$  0.82   3.3%
SGI     5.00   4.60   MAR   5.00  0.40   $  0.00   0.0%

*$ = Stock price is above the sold striking price.


Friday's activity was not a good way to end the expiration period.
Now we must regroup and evaluate the long-term potential of any
issues remaining in the portfolio.  On Semiconductor (NASDAQ:ONNN)
looks weak near-term, though rolling down to a March $5 call will
provide a new cost basis around $4.19.  There is a good chance you
will own Antec (NASDAQ:ANTC) stock on Tuesday.  A new test of the
December low could be forthcoming though a March $7.50 call would
provide a cost basis near $6.  Closing the play in Capstone Turbine
(NASDAQ:CPST) mid-week would have been a stress reliever, although
the issue did manage to stay above the sold strike.  Digital Island
(NASDAQ:ISLD) is nearing a key moment as it tests the December lows.
The March $5 call offers little protection, however the May $5 call
would provide a new cost basis near $3.69.  Entrust Technologies'
(NASDAQ: ENTU) CEO resigned this week, rarely a good sign in the
near-term.  The technicals have weakened and a decline below the
December low would be quite bearish.   Finisar (NASDAQ:FNSR) just
couldn't wait until next week to announce its agreement with ONI
Systems.  Obviously, investors were not thrilled.

Keep an eye on Nextcard (NASDAQ:NXCD) as it moves toward its 50
dma - the next technical support area is near $8.  Legato Systems
(NASDAQ:LGTO) is at a key moment - evaluate your long-term outlook.
We will see how bullish Silicon Graphics (NYSE:SGI) really is by
how far it descends into its support area.

Positions Closed:

Bookham Tech (NASDAQ:BKHM), At Home Corp. (NASDAQ:ATHM), GenRad
(NYSE:GEN), Progenics Pharmaceuticals (NASDAQ:PGNX)


Sequenced by Return
Stock  Last  Call  Strike Option  Last  Open Cost  Days to Monthly
Symbol Price Month Price  Symbol  Bid   Intr Basis Expiry  Return

ANSR    8.09  MAR   7.50  QRA CU  1.44  3808  6.65   28    13.9%
ACPW   20.38  MAR  17.50  ACQ CW  4.38  0    16.00   28    10.2%
ACLS   11.13  MAR  10.00  ULS CB  1.88  2100  9.25   28     8.8%
ESCM   16.84  MAR  15.00  QFC CC  2.88  36   13.96   28     8.1%
GLGC   23.94  MAR  20.00  CYV CD  4.88  3    19.06   28     5.4%
AMSY   22.88  MAR  20.00  YAQ CD  3.63  0    19.25   28     4.2%
UTEK   38.00  MAR  35.00  UQT CG  4.25  120  33.75   28     4.0%

Company Descriptions

LB-Last Bid price, OI-Open Interest, CB-Cost Basis or break-even
point, DE-Days to Expiry, MR-Monthly Return.

ACLS - Axcelis Technologies  $11.13  *** Favorable Ruling? ***

Axcelis Technologies (NASDAQ:ACLS) provides innovative, high-
productivity manufacturing solutions for the semiconductor
industry.  The company is dedicated to the design and manufacture
of high current, medium current and high energy ion implantation
equipment; rapid thermal processing systems; photostabilization
and photoresist stripping equipment.  Axcelis beat estimates in
January, announcing record net sales and earnings for its Fourth
quarter.  Net sales were $189.0 million, up 45% from last year
and net income was $30.2 million, an increase of 239%.  The
company did caution about the future and semiconductor equipment
capital spending.  Most recently, the United States Patent and
Trademark Office again rejected a challenge by Applied Materials
(NASDAQ:AMAT) on Axcelis' patent for the use of radio frequency
linear accelerator technology in high energy ion implantation.
The technicals remain favorable and Axcelis offers a reasonable
entry point for speculation in the chip sector.

MAR 10.00 ULS CB LB=1.88 OI=2100 CB=9.25 DE=28 MR=8.8%

ACPW - Active Power  $20.38  *** Unique Energy Storage! ***

Active Power (NASDAQ:ACPW) designs, manufactures and sells power
quality products that provide the consistent, reliable electric
power required by today's digital economy.  They are the first
company to commercialize a flywheel energy storage system that
provides a highly reliable, low-cost and non-toxic replacement
for lead-acid batteries used in conventional power quality
installations.  In January, Active Power reported that revenues
for the 4th-quarter totaled $2.7 million, up 468% from the same
period last year and a 99% sequentially.  Active Power's CEO
stated that market demand for their battery-free power quality
solutions remains strong and is very optimistic about their near
and long term growth prospects.  A favorable cost basis from
which to speculate on the future success of Active Power.

MAR 17.50 ACQ CW LB=4.38 OI=0 CB=16.00 DE=28 MR=10.2%

AMSY - American Management Systems  $22.88  *** Bottom Fishing! ***

AMS (NASDAQ:AMSY) is an international business and information
technology consulting firm, one of the 20 largest such firms
worldwide.  AMS is the premier provider of next generation
enterprise business and technology solutions that dramatically
improve business performance and create value for clients.  The
company met expectations this week, reporting 4th-quarter earnings
of $16.6 million on revenues of $327.4 million.  AMS continues
to restructure and consolidate as it strives to position itself
for future growth and increased profitability.  We favor the
strong support area near our cost basis as AMS enters a Stage I
base.  A reasonable entry point for ownership of this issue.

MAR 20.00 YAQ CD LB=3.63 OI=0 CB=19.25 DE=28 MR=4.2%

ANSR - Answerthink  $8.09  *** Earnings were the Answer! ***

Answerthink (NASDAQ:ANSR) is a leading provider of technology-
enabled business transformation solutions.  The Company brings
together multi-disciplinary expertise in benchmarking and
research, business transformation, interactive marketing,
business applications and technology integration to serve the
needs of Global 2000 clients.  Investors were pleased when
Answerthink reported earnings after the close on Tuesday.  The
company reported net revenues of $311.1 million, up 19% from
last year and net income of $7.9 million, or $0.18 per diluted
share, up from $1.1 million, or $0.03 per diluted share, in 1999.
ANSR has reduced its exposure to dot-com projects, emerging
as one of the most comprehensive and profitable consulting and
systems integration providers.  The move above the January high
is encouraging and the improving technicals bode well for future
upside activity.

MAR 7.50 QRA CU LB=1.44 OI=3808 CB=6.65 DE=28 MR=13.9%

ESCM - ESC Medical Systems  $16.84  *** Growing Bigger! ***

ESC Medical Systems (NASDAQ:ESCM) develops, manufactures and
markets medical devices utilizing state-of-the-art proprietary
intense pulsed light source and laser technology.  Its systems
are used in a variety of aesthetic, surgical and medical
applications, including the non-invasive treatment of veins
and other benign vascular lesions, pigmented lesions, hair
removal and skin rejuvenation, as well as ENT, OB/GYN and
neurosurgery.  No warning here!  In early January, ESC Medical
announced that it expects to meet estimates with 4th-quarter
revenues of approximately $46 million, which would be a 15%
increase over the same quarter last year.  The stock rallied
strongly on the news and moved above the December high, ending
ESCM's downtrend.  The latest rally was sparked by speculation
that ESC Medical agreed to acquire the laser division of Coherent
(NASDAQ:COHR), which would make ESCM among the world's largest
companies in the medical laser industry, more than doubling the
company's revenues.  A reasonable cost basis for those who wish
to speculate on the potential of this unique company.

MAR 15.00 QFC CC LB=2.88 OI=36 CB=13.96 DE=28 MR=8.1%

GLGC - Gene Logic  $23.94  *** Stage I Base ***

Gene Logic (NASDAQ:GLGC) provides products and services in the
areas of gene expression information, data management and
bio-informatic software, and pharma-cogenomics.  These products
and services are all designed to improve the efficiency and
effectiveness of the drug discovery and development process.
They may also be applied to research and development in other
sectors, such as diagnostics, animal health, and agriculture.
The company's information products combine software tools with
large-scale gene expression information, which specifies the
degree to which genes are active in a broad range of normal,
diseased, and treated conditions.  This combination enables
scientists to produce new biological knowledge by integrating
this proprietary expression information with a growing array of
biological information available on the Internet.  Gene Logic
has moved back into its trading range from $20 to $26 and it
continues to forge a Stage I base.  Earnings are due Tuesday.

MAR 20.00 CYV CD LB=4.88 OI=3 CB=19.06 DE=28 MR=5.4%

UTEK - Ultratech Stepper  $38.00  *** Stepping Up! ***

Ultratech Stepper (NASDAQ:UTEK) designs, manufactures and markets
photolithography equipment used worldwide in the fabrication of
integrated circuits, microsystems devices and thin film heads for
disk drives.  The company produces products that are designed to
substantially reduce the cost of ownership for manufacturers in
the electronics industry.  Ultratech pleased investors in January,
reporting 4th-quarter net sales of $41.0 million compared to $27.6
million last year.  Ultratech's net income was $5.5 million or
$0.25 per share (diluted) compared to a net loss of $999,000 or
$0.05 per share for the same quarter last year.  Strong bookings
generated a book to bill ratio significantly greater than 1:1 for
the quarter.  Best of all, they didn't warn about 2001 and the
strong Stage II climb is showing no weakness even in the face of
a broad market consolidation.

MAR 35.00 UQT CG LB=4.25 OI=120 CB=33.75 DE=28 MR=4.0%



The following group of issues is a list of additional 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
and positions are suitable for your experience level, risk-reward
tolerance and portfolio outlook.  They will not be included in
the weekly portfolio summary.

Sequenced by Return
Stock  Last  Call  Strike Option  Last  Open Cost  Days to Monthly
Symbol Price Month Price  Symbol  Bid   Intr Basis Expiry  Return

CVD    15.15  MAR  15.00  CVD CC   1.25  95  13.90   28     8.6%
TOPP   10.13  MAR  10.00  TOQ CB   0.69  501  9.44   28     6.4%
MLTX   19.88  MAR  17.50  UXM CW   3.25  53  16.63   28     5.7%
MSCC   50.00  MAR  35.00  QMS CG  16.75  100 33.25   28     5.7%
VECO   49.44  MAR  40.00  QVC CH  11.38  8   38.06   28     5.5%
IWOV   27.00  MAR  20.00  IUW CD   7.88  701 19.12   28     5.0%
CTXS   32.13  MAR  27.50  XSQ CY   5.50  239 26.63   28     3.5%

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Put-Selling Strategies: Comments and questions from our readers
By Ray Cummins

One of our subscribers asked about the "Supplemental Picks" and
why they are not included in the regular group of listed plays.
With regard to this new addition to the section, the disclaimer
offers a general explanation: "The following group of issues is
a list of additional candidates to supplement your search for
profitable trading positions."  For one reason or another, they
simply did not make our final list, which is usually limited to
7 candidates.  However, the process of choosing the "published"
plays is highly subjective and quite often there are additional
issues that warrant individual consideration.  That is why we now
include some of the stocks that just missed our final cut (for
various reasons), so that our readers can decide if they meet
their personal criteria for favorable plays.  Our primary task
is to provide a list of potentially profitable positions, greatly
reducing the initial research for candidates in this strategy.
At the same time, we expect our subscribers to decide which plays
meet their risk/reward profile and hopefully, with examination and
analysis far beyond that which we can provide in the few hours
between Friday's market close and the publishing deadline, they
will select only those positions that are winners.

One of our new readers asked how they should approach the section
and the different selections.  Should they attempt to participate
in all of the picks or focus on one or two issues with a larger
position.  The first requirement, before initiating any new play,
is comprehensive due diligence.  There are a number of factors to
consider with the most important being the overall condition of
the market and the sector or industry in which the target issue
resides.  Traders should also clearly understand the risk/reward
ratio of this particular strategy and use the technique only when
it conforms to their portfolio outlook and personal trading style.
As far as entering the positions, our prices are based on Friday's
closing quotes, so they may not be the same on Monday, or later in
the week.  Each individual trader must decide which candidates meet
their criteria for acceptable profit potential and downside risk,
and enter those positions at the appropriate cost basis.  Most of
our readers use a "limit" order to guarantee a fill only when the
position is available at a certain price.  After the position is
open, money management becomes the key factor to success.  Since
this is a limited profit strategy, no one can afford to have many
losers and that's why it is so important to monitor the plays on a
daily basis and exit those issues that experience a significant
change in character.

Our final reader's question concerns the most difficult decision
that traders face; when to exit a position.  The one outstanding
principle that novice investors fail to adhere to is the need to
outline a basic exit strategy, before initiating any position, to
eliminate emotional decisions.  This plan must be simple enough
to recall and implement while monitoring a portfolio of plays in
a volatile market.  In addition, these early-exit rules should
apply across a range of situations and be designed to compensate
for one's weaknesses and inadequacies.  To be effective in the
long term, they must be formulated to help maintain discipline
on a general basis and at the same time, offer a timely memory
aid for difficult situations.  Utilizing this type of system
addresses a number of problems, but the most significant obstacle
it eliminates is the need for "judgment under fire."  In short,
a sound exit strategy will help you avoid exposing your portfolio
to excessive losses and that's important because the science of
successful trading is far less dependent on making profits, but
rather on avoiding undue outflows.  In fact, the need to limit
draw-downs and prevent failed plays from significantly eroding
capital should be a dominant theme in any trader's approach to
the market.  Further, not only must losses be limited, but all
positions must be reviewed regularly to ensure that the total
portfolio risk is kept to a practical minimum.

Good Luck!

                         *** WARNING ***

Occasionally a company will experience catastrophic news causing
a severe drop in the stock price. This may cause a devastatingly
large loss which may wipe out all of your smaller gains. There is
one very important rule; Don't sell naked puts on stocks that you
don't want to own! It is also important that you consider using
trading STOPS on naked option positions to help limit losses when
the stock price drops. Many professional traders suggest closing
the position when the stock price falls below the sold strike or
using a buy-to-close STOP at a price that is no more than twice
the original premium from the sold option.


Stock  Price  Last   Put   Strike Price   Profit  Monthly
Symbol Picked Price  Month Sold   Picked  /Loss   Return

MLI    26.88  28.73   FEB  25.00  0.65  *$  0.65  14.8%
ARTG   34.50  36.69   FEB  25.00  0.69  *$  0.69  13.2%
EXPE   16.25  16.88   FEB  12.50  0.31  *$  0.31  12.6%
FIBR   26.38  17.88   FEB  17.50  0.69  *$  0.69  12.6%
CHIR   45.06  45.19   FEB  42.50  0.44  *$  0.44  12.0%
SPCT   21.94  18.63   FEB  17.50  0.38  *$  0.38  11.5%
CBT    33.18  38.20   FEB  30.00  0.55  *$  0.55  11.2%
RATL   47.88  43.94   FEB  35.00  1.25  *$  1.25  10.3%
TVLY   20.69  28.00   FEB  15.00  0.38  *$  0.38   9.1%
SMTC   27.75  30.56   FEB  17.50  0.63  *$  0.63   9.1%
GMST   52.69  45.63   FEB  35.00  1.19  *$  1.19   9.1%
PLUG   19.94  19.69   FEB  12.50  0.44  *$  0.44   8.9%
GLGC   23.88  23.94   FEB  17.50  0.31  *$  0.31   8.8%
TER    39.56  39.00   FEB  32.50  0.56  *$  0.56   8.7%
ISSI   17.75  20.00   FEB  12.50  0.38  *$  0.38   8.7%
PRIA   30.19  25.94   FEB  22.50  0.38  *$  0.38   8.6%
PPRO   22.31  15.13   FEB  12.50  0.38  *$  0.38   8.5%
AVCI   37.13  20.63   FEB  20.00  0.69  *$  0.69   7.6%
BMCS   32.13  30.13   FEB  22.50  0.44  *$  0.44   7.0%
EXFO   50.44  35.44   FEB  30.00  0.69  *$  0.69   7.0%
VECO   57.50  49.44   FEB  30.00  0.56  *$  0.56   6.7%
MU     46.44  42.55   FEB  35.00  0.56  *$  0.56   6.2%

BRIO   13.38  13.69   MAR  10.00  0.63  *$  0.63  16.5%
TSN    13.55  12.89   MAR  12.50  0.65  *$  0.65  11.3%
MDR    15.29  15.80   MAR  12.50  0.60  *$  0.60  11.1%
TPTH   12.75  10.25   MAR  10.00  0.44  *$  0.44  10.7%
TSO    13.32  14.35   MAR  12.50  0.40  *$  0.40   7.1%
ABMD   25.44  26.81   MAR  15.00  0.50  *$  0.50   6.5%
NAUT   19.19  18.38   MAR  17.50  0.56  *$  0.56   6.2%
SPCT   24.75  18.63   MAR  17.50  0.44  *$  0.44   5.9%
RBK    31.20  30.31   MAR  25.00  0.45  *$  0.45   5.8%
OII    22.00  22.50   MAR  20.00  0.45  *$  0.45   5.4%
AL     38.25  37.92   MAR  35.00  0.60  *$  0.60   4.1%

*$ = Stock price is above the sold striking price.


A nice relief rally by Mueller Industries (NYSE:MLI) provided a
little breathing room!  Did you close PurchasePro.Com (NASDAQ:
PPRO) early or stress it out to expiration?  Yes, Avici Systems
(NASDAQ:AVCI) had us worried too!

Nice reversal (engulfing pattern) in Nautica Enterprises (NASDAQ:
NAUT) on Monday, and a break-even exit is available.  The failed
rallies in Brio Technology (NASDAQ:BRIO) and Tyson Foods (TSN)
could portend a change in character - monitor closely.  Tripath
Imaging (NASDAQ:TPTH) is testing support - a key moment.  What's
up with Friday's drop in Spectrian (NASDAQ:SPCT)?  Oh, that's
right...Nortel (NYSE:NT), they did it to just about everyone.

Positions Closed:

Metromedia Fiber (NASDAQ:MFNX), Jni Corp. (NASDAQ:JNIC)


Sequenced by Return
Stock  Last  Put   Strike Option  Last  Open Cost  Days to Monthly
Symbol Price Month Price  Symbol  Bid   Intr Basis Expiry  Return

HOMS   36.63  MAR  30.00  HMU OF  1.13  30   28.87   28    13.4%
MDR    15.80  MAR  12.50  MDR OV  0.40  1100 12.10   28    12.2%
KSWS   31.50  MAR  30.00  SWU OF  1.38  0    28.62   28    12.0%
UIS    18.91  MAR  17.50  UIS OW  0.65  1015 16.85   28    10.4%
SGR    52.04  MAR  45.00  SGR OI  1.30  3    43.70   28     9.4%
APWR   42.50  MAR  30.00  PUW OF  0.69  122  29.31   28     8.2%
OII    22.50  MAR  20.00  OII OD  0.40  0    19.60   28     6.3%
BPOP   27.38  MAR  25.00  BQW OE  0.50  0    24.50   28     6.0%

Company Descriptions

LB-Last Bid price, OI-Open Interest, CB-Cost Basis or break-even
point, DE-Days to Expiry, MR-Monthly Return.

APWR - Astropower  $42.50  *** Alternative Power! ***

AstroPower (NASDAQ:APWR) develops, manufactures and markets a
range of solar electric power products for the global marketplace.
The company currently sells five classes of products: solar cells,
modules, panels, systems and solar electricity.  The company's
products are used to generate electricity for users not connected
to the utility grid.  These applications include electrification
of rural homes and villages, and power supply for equipment in
the communications and transportation industries.  AstroPower's
products are also used by customers already connected to the
utility grid as a clean, renewable source of alternative or
supplemental electricity.  Additionally, the company recently
expanded a joint venture agreement with GPU International to
generate wholesale solar electric power.  APWR appears to be
bracing for a rally and as long as the company's earnings are
satisfactory, the share value will easily remain above our cost

MAR 30.00 PUW OF LB=0.69 OI=122 CB=29.31 DE=28 MR=8.2%

BPOP - Popular  $27.38  *** Technicals Only! ***

Popular (NASDAQ:BPOP) is a diversified, publicly owned bank
holding company.  The company is one of the largest financial
institutions in Puerto Rico, with consolidated assets of over
$25 billion, total deposits of approximately $14 billion and
stockholders' equity approaching $2 billion.  The company
offers a full range of financial services through offices in
Puerto Rico, the U.S. and British Virgin Islands, New York,
Illinois, New Jersey, Florida, California and Texas.  Popular
is also the principal shareholder of Banco Fiduciario in the
Dominican Republic.  The company is engaged in mortgage and
consumer finance, lease financing, investment banking/broker
activities, retail financial services and ATM processing with
its non-banking subsidiaries in Puerto Rico, the United States
and Costa Rica.  BPOP appear to be fairly stable above $25 and
traders who want a hedge in the finance sector may find this
position favorable.

MAR 25.00 BQW OE LB=0.50 OI=0 CB=24.50 DE=28 MR=6.0%

HOMS - Homsetore.com  $36.63  *** Change in Character? ***

Homestore.com (NASDAQ:HOMS) operates web-sites consisting of
REALTOR.com, Homestore.com, HomeBuilder.com, SpringStreet.com,
Remodel.com and Homefair.com, which are destinations on the
Internet for home and real estate-related information and
advertising products and services.  The company's family of
web-sites also offers a wide variety of housing information,
products, services and tools.  Federal antitrust regulators have
decided not to oppose HOMS' purchase of Internet real estate
portal move.com from franchising giant Cendant (NYSE:CD), which
will create the nation's largest Web-based real estate service.
Investors cheered the news, driving the share value to recent
highs on excellent volume.  The question is, "How will the stock
perform after the excitement fades?"

MAR 30.00 HMU OF LB=1.13 OI=30 CB=28.87 DE=28 MR=13.4%

KSWS - K-Swiss  $31.50  *** Momentum Play! ***

K-Swiss (NASDAQ:KSWS) designs, develops and markets an array of
athletic footwear for performance sports use, fitness activities
and casual wear.  The company's original leather tennis shoe, the
K-Swiss "Classic," has evolved from a high-performance shoe into
a casual lifestyle shoe.  It has remained relatively unchanged
from its original design and continues to account for a major
portion of the company's sales.  The company sells its products in
the U.S. through independent sales representatives, primarily to
specialty athletic footwear stores, pro shops, sports equipment
stores, department stores and to a number of foreign distributors.
This stock has rallied on strength in the apparel group and we
are going to participate in the bullish activity with a short Put.
If the upside movement continues, we may close the position early
to lock-in a favorable profit.

MAR 30.00 SWU OF LB=1.38 OI=0 CB=28.62 DE=28 MR=12.0%

MDR - McDermott Intl.  $15.80  *** Oil Service Hedge ***

McDermott International (NYSE:MDR) operates in four business
segments: Marine Construction, Power Generation, Government
Operations and Industrial Operations.  Marine Construction
provides services to customers in the offshore oil and gas
exploration and production and hydrocarbon processing and to
other marine construction companies.  Power Generation provides
services, equipment and systems to generate steam and electric
power at energy facilities worldwide.  Government Operations is
the sole supplier of nuclear fuel assemblies and major nuclear
reactor components to the U.S. Navy for the Reactors Program.
The Industrial Operations segment provides unique services to
customers in a wide range of industries.  MDR's earnings are
expected next week and since most company's in the group are
experiencing outstanding profits, the report should be favorable.

MAR 12.50 MDR OV LB=0.40 OI=1100 CB=12.10 DE=28 MR=12.2%

OII - Oceaneering International  $22.50  *** Solid Earnings! ***

Oceaneering International (NYSE:OII) is an applied technology
company that provides a range of integrated technical services
and hardware to customers operating in marine, space and other
harsh environments.  The company concentrates on the development
and marketing of underwater services and products requiring the
use of advanced deepwater technology and most of its services are
provided to the oil and gas industry.  These products and services
include drilling support, sub-sea construction, design, lease and
operation of production systems, facilities maintenance and repair,
specialty sub-sea hardware and specialized onshore and offshore
engineering and inspection.  Oil service shares are performing
well and this issue vaulted to new highs in anticipation of its
earnings report.  The announcement was favorable and based on the
post-earnings buying activity, the stock should continue higher
in the coming weeks.

MAR 20.00 OII OD LB=0.40 OI=0 CB=19.60 DE=28 MR=6.3%

SGR - Shaw Group  $52.04  *** New High! ***

The Shaw Group (NYSE:SGR) is a vertically integrated provider
of complete piping systems and comprehensive engineering,
procurement and construction services.  The company operates
primarily in the United States, the Far East/Pacific Rim, Europe,
South America and the Middle East for customers in the power
generation, process (petrochemical, chemical and refining) and
other industries and the environmental and infrastructure sector.
The company offers comprehensive design and engineering services,
piping system fabrication, construction and maintenance services,
manufacturing and sale of specialty pipe-fittings and design and
fabrication of pipe support systems.  SGR is a solid company in
a favorable sector and the move to an all-time high is a bullish
indication.  However, traders should wait for a brief pullback in
the issue before initiating a position.

MAR 45.00 SGR OI LB=1.30 OI=3 CB=43.70 DE=28 MR=9.4%

UIS - Unisys  $18.91  *** Speculation Only! ***

Unisys (NYSE:UIS) is a global information services and technology
company.  The company provides services, systems and solutions,
and its Unisys e-@ction Solutions, that help customers apply
information technology to seize the opportunities and overcome
the challenges of the internet economy.  Unisys has two business
segments: Services and Technology.  The company's Services segment
integrates and delivers solutions and network infrastructure to a
wide range of business and government entities to transform their
organizations to the Internet economy.  In its Technology segment,
the company develops servers and related products, which operate
in high-volume, mission-critical environments.  Unisys has been
the subject of takeover rumors in recent weeks and traders who
want to speculate on a potential merger or buyout can do so in a
conservative manner with this position.

MAR 17.50 UIS OW LB=0.65 OI=1015 CB=16.85 DE=28 MR=10.4%



The following group of issues is a list of additional 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
and positions are suitable for your experience level, risk-reward
tolerance and portfolio outlook.  They will not be included in
the weekly portfolio summary.

Sequenced by Return
Stock  Last  Put   Strike Option  Last  Open Cost  Days to Monthly
Symbol Price Month Price  Symbol  Bid   Intr Basis Expiry  Return

IWOV   27.00  MAR  17.50  IUW OW  0.75  84   16.75   28    13.2%
ABMD   26.81  MAR  20.00  IBU OD  0.69  173  19.31   28    12.4%
ILUM   27.00  MAR  22.50  ILU OX  0.81  0    21.69   28    12.4%
PRGN   29.00  MAR  22.50  GQP OX  0.62  91   21.88   28    10.5%
VECO   49.44  MAR  35.00  QVC OG  0.81  600  34.19   28     8.2%
AMAT   48.22  MAR  40.00  ANQ OH  0.88  4018 39.12   28     8.0%
DS     36.75  MAR  30.00   DS OF  0.55  162  29.45   28     7.0%
YUM    37.00  MAR  35.00  YUM OG  0.80  266  34.20   28     6.4%

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


Another Day In Paradise...

Technology stocks plunged today, sending the broader market lower
amid concerns of declining profits in the computer industry.

Friday, February 16

Technology stocks plunged today, sending the broader market lower
amid concerns of declining profits in the computer industry.  A
stronger-than-expected producer price index also weighed heavily
on investors, and the negative sentiment helped drive the NASDAQ
down 127 points to 2,425.  The Dow was not far behind, losing 91
points to close at 10,799.  The S&P 500 index finished 25 points
lower at 1,301.  In the bond market, the 30-year Treasury rose
18/32, pushing its yield down to 5.45%.

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

Amer. Home   (NYSE:AHP)    MAR70C/MAR65C  $0.55  credit  bear-call
Johnson & J. (NYSE:JNJ)    MAR105C/M100C  $0.60  credit  bear-call
Eli Lilly    (NYSE:LLY)    MAR85C/MAR65P  $0.10  debit   synthetic
Answerthink  (NASDAQ:ANSR) JUN10C/FEB10C  $1.50  debit   calendar

Today's broad market sell-off did not help our opening prices in
the bearish combination positions.  While American Home Products
and Johnson & Johnson offered reasonable entry opportunities, the
synthetic position in Eli Lilly was not available at a credit, due
to the downward movement in the stock.  Hopefully, there will be a
better opportunity in the coming sessions.  The brief pullback in
Answerthink shares was favorable for both of the suggested plays
and we will track the bullish calendar spread based on an initial
debit of $1.50.

Portfolio Activity:

A barrage of bad news from bellwether technology issues combined
with an unexpected surge in the PPI was simply too much for the
market to bear today.  Nortel (NYSE:NT) shocked investors with a
forecast that first quarter revenues will be much lower than it
projected less than a month ago.  Lucent (NYSE:LU), which remains
in turmoil amid a regulatory probe into accounting practices said
it is having trouble raising the $6 billion debt payment it needs
by next week and is considering the sale of its fiber-cable unit
to foot the bill.  Dell Computer (NASDAQ:DELL) reported quarterly
earnings that missed downward-revised analysts' projections by a
penny and said that first-quarter profits will be at least $0.02
below consensus estimates.  In the conference call, Michael Dell
added to investor's concerns by avoiding questions regarding the
long-term revenue growth for the company.  The final nail in the
coffin was Hewlett-Packard (NYSE:HWP), which posted earnings that
met lowered first-quarter expectations but said it doesn't expect
to return to double-digit revenue growth this year.  The dearth
of corporate profits was exacerbated by unfavorable economic data
as the Producer Price Index rose an unexpected 1.1%, confounding
predictions for a 0.2% gain.  The core gauge jumped 0.7%, which
exceeded expectations and a few analysts cautioned that the PPI,
as well as other recent signs of a stronger economy, may prompt
the Fed to reduce the size of future interest rate cuts.  Overall,
it was simply a terrible day in the market and select defensive
sectors such as oil, gold, and some tobacco issues were the only
groups that moved higher.

Despite the poor performance of the major indices, the Spreads
Portfolio ended the expiration period on an upbeat note with a
number of profitable positions in various market segments.  As
usual, the top strategy for the month of February was the Credit
Spread and we enjoyed a perfect record in that category.  Of the
14 positions expiring today, Atlantic Coast Air (NASDAQ:ACAI)
and Advanced Energy (NASDAQ:AEIS) offered the highest returns,
both with a 25% monthly profit.  Other successful positions in
that section included Cabot Micro (NASDAQ:CCMP), Forest Labs
(NYSE:FRX), Digex (NASDAQ:DIGX), HSBC Holdings (NYSE:HBC), Union
Carbide (NYSE:UK), Varian (NASDAQ:VARI), Weatherford (NYSE:WFT)
and Qualcomm (NASDAQ:QCOM), which was a recovery from last month.
Our Murphy's Law plays; Lennar (NYSE:LEN) and Molex (NASDAQ:MOLX),
which we closed early in the interest of sound money management,
also finished at maximum profit.  Among Debit Spreads and Collars,
Adelphia Business Systems (NASDAQ:ABIZ), Speedfam (NASDAQ:SFAM),
and Portal Software (NASDAQ:PRSF) offered favorable profits.  In
the Diagonal Spread section, only two positions; Pactiv (NYSE:PTV)
and Boston Scientific (NYSE:BSX) remained open after the January
option expiration and both were profitable.  The Calendar Spread
section did not have any plays expiring this month, but positions
in Atrix (NASDAQ:ATRX), Alza (NYSE:AZA) and Navistar (NYSE:NAV)
offered early-exit profits.

The Synthetic Position has become a very popular strategy among
readers of the Spreads/Combos section and this month provided
some excellent opportunities for traders using that technique.
Conseco (NYSE:CNC), Bell Microproducts (NASDAQ:BELM), Landry's
Seafood (NYSE:LNY), Household International (NYSE:HI), Timken
(NYSE:TKR) and NS Group (NYSE:NSS) were the top performers in
the group and other potentially profitable plays were available
in AES Corp. (NYSE:AES), Steven Madden (NASDAQ:SHOO), and Davox
(NASDAQ:DAVX).  The "Delta-neutral" category was less productive
this month, due to a range-bound market and the relative decline
in options premiums.  Cytec (NASDAQ:CYT), Southwest Securities
(NYSE:SWS), Unumprovident (NYSE:UNM) and Equity Resident Property
(NYSE:EQR) achieved the target returns while Lyondell Chemical
(NYSE:LYO), British Telecommunications (NYSE:BTY), and Triad
Hospitals (NASDAQ:TRIH) also offered profitable opportunities.
The solitary Credit Strangle was Newport (NASDAQ:NEWP) and that
position finished at maximum profit.  The Reader's Request plays
ended with mixed results but a standout performance was seen in
the AOL Time Warner straddle (NYSE:AOL) and we congratulate the
subscriber who contributed that candidate.  In the LEAPS with
Covered-calls category, Microsoft (NASDAQ:MSFT) and AT&T (NYSE:T)
achieved profitability during the month and now we will focus on
Motorola (NYSE:MOT) and Hewlett Packard (NYSE:HWP).  Questions
and comments concerning any active positions can be submitted to:

Contact Support

                           - NEW PLAYS -
INTC - Intel  $34.38  *** Reader's Request! ***

Intel (NASDAQ:INTC), the world's largest semiconductor producer
supplies the computing and communications industries with chips,
boards, systems and software that are integral in computers,
servers and networking and communications products.  Intel's many
products include microprocessors, chipsets, flash memory, unique
networking and communications products, embedded processors and
microcontrollers, and digital imaging and other PC-peripheral
products.  Intel's component-level products consist of integrated
circuits used to process information.  Intel markets its products
to original equipment manufacturers, PC and computing appliance
users, industrial and communications equipment manufacturers, and
businesses, schools and state and local governments.  Intel also
provides a data center to businesses needing e-Commerce services.

One of our readers suggested that we offer another conservative
play in the technology group for traders who sell Covered-calls
on LEAPS.  Intel is very popular issue in this segment and with
the recent buying surge in semiconductor shares, the near-term
options have favorable premiums.  In addition, Intel is planning
to launch a $300 million Pentium. 4 processor worldwide marketing
campaign next week and that may bring additional interest to the
front-month positions.  Technically, the issue is building a new
base near $30 and the potential for upside activity appears to be
limited by resistance near the sold strike, a perfect condition
for this time-selling strategy.  Traders who favor the long-term
outlook for Intel can benefit from a slow and steady return to
past valuations with this conservative calendar spread.

PLAY (conservative - bullish/calendar spread):

BUY  CALL  JAN02-40  WNL-AH  OI=57227  A=$5.25
SELL CALL  MAR01-40  INQ-CH  OI=36628  B=$0.38

                       - TECHNICALS ONLY -

These plays are based on the current price or trading range of
the underlying issue and the recent technical history or trend.
The probability of profit from these positions is also higher
than other plays in the same strategy based on disparities in
option pricing.  Current news and market sentiment will have an
effect on these issues.  Review each play individually and make
your own decision about the future outcome of the position.
PKI - PerkinElmer  $87.88  *** Rolling Over? ***

PerkinElmer (NYSE:PKI) is a worldwide technology company which
provides products and systems to the telecom, medical, drug,
chemical, semiconductor and photographic markets.  Their Life
Sciences unit provides chemical reagents, sample handling and
measuring instruments, and computer software to bio-screening
and population screening laboratories.  Their Optoelectronics
unit produces optoelectronic products, including high volume
and high performance specialty lighting sources, detectors,
optical fiber communications components, and imaging devices.
The company's Instruments unit produces sophisticated analytical
instruments and imaging detection systems.  The Fluid Sciences
unit produces static and dynamic seals, sealing systems, solenoid
valves, and bellows devices.

Fundamentally, PerkinElmer is performing very well, considering
the recent slowdown in the U.S. economy.  At the same time, the
technical outlook is less than outstanding, and with the new
resistance area forming near $95, this position offers favorable
speculation for traders who are bearish on the issue.  We will
target a higher premium in the play initially, to allow for an
oversold bounce from Friday's broad market sell-off.  After the
play is open, we will monitor the stock for a move through the
supply area at $97, to signal a potential exit or adjustment.

PLAY (conservative - bearish/credit spread):

BUY  CALL  MAR-105  PKI-CA  OI=47    A=$1.25
SELL CALL  MAR-100  PKI-CT  OI=1197  B=$1.95
INITIAL NET CREDIT TARGET=$0.90-$1.00  ROI(max)=23%

                       - CREDIT STRANGLES -
QCOM - QUALCOMM  $80.63  *** Big Premiums! ***

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

Traders have been asking for more premium-selling positions, so we
decided to look for a popular issue with inflated option prices
and a reasonably stable trading pattern.  Qualcomm fits the bill
perfectly and since we wouldn't mind having the stock in our long
term portfolio, we will sell OTM options for credit and use the
earned income to lower our cost basis in the issue; in the event
of assignment.  If the price of the issue rallies above the recent
resistance area near $90 on heavy volume, we will simply buy the
stock to cover our sold options.

PLAY (conservative - neutral/credit strangle):

SELL CALL  MAR-100  AAF-CT  OI=8647  B=$1.00
SELL PUT   MAR-60   AAO-OL  OI=523   B=$0.81
UPSIDE B/E=$102.00 DOWNSIDE B/E=$58.00

MANU - Manugistics  $48.13  *** Trading Range? ***

Manugistics (NASDAQ:MANU) is a global provider of intelligent
supply chain optimization solutions for enterprises and evolving
eBusiness trading networks.  Its solutions, which include client
assessment, software, consulting services for implementation and
solution support, can be easily optimized to the supply chain
requirements of companies.  The company's solutions provide its
clients with the business intelligence to participate in various
forms of trading relationships, from traditional linear supply
chains to eBusiness trading networks.  MANU's newest generation
of proven solutions help enable businesses to work in concert
with their trading partners via the Internet, expanding their
supply chains to eBusiness trading networks.  The solutions
assist customers in anticipating trading requirements in both
fixed and dynamic environments to anticipate and meet the needs
of customers, thereby maximizing client satisfaction.

Manugustics is another popular stock with robust option premiums
and a relatively steady share value.  The company is expected to
report earnings on 3/15/01, a day before the March options expire.
If you plan to remain in the position through the announcement,
the outcome may be less certain, but it wouldn't be unacceptable
to own the issue at a deeply discounted price.  In the interim,
the option premiums will be decaying and you can choose to exit
when the play offers a reasonable return on investment.  If the
issue moves beyond the recent trading range ($40-$55) in the next
few sessions, consider closing or offsetting the at-risk position
to avoid a potential loss.

PLAY (moderately aggressive - neutral/credit strangle):

SELL CALL  MAR-60.00  ZUQ-CL  OI=1153  B=$1.50
SELL PUT   MAR-35.00  ZUQ-OG  OI=105   B=$1.25
INITIAL NET CREDIT TARGET=$2.88-$3.00  ROI(max)=20%
UPSIDE B/E=$62.88 DOWNSIDE B/E=$32.12

PLMD - PolyMedica  $35.19  *** Probability Play! ***

PolyMedica (NASDAQ:PLMD) is a nationwide provider of consumer
specialty medical products and services.  The company is best
known through its Liberty brand name and it serves primarily the
senior chronic disease marketplace.  PolyMedica also focuses on
Compliance Management using its unique Technology Platform to
help seniors manage their disease more effectively.  Liberty
pioneered National Direct to Consumer Advertising to seniors
with chronic diseases.

PolyMedica is a good candidate for a premium-selling position
because it has relatively well-defined support and resistance
areas ($25-$55) and no apparent news that will substantially
change its character prior to the March options expiration.  The
company announced favorable earnings in January and now the issue
appears to be comfortable near the middle of our profit envelope.
In this case, we will use the recent volatility and the inflated
option prices to open a neutral play with a favorable premium.
The probability of the share value reaching our sold strikes is
rather low, but there is always the possibility of a significant
change in the technical outlook, so monitor the position on a
regular basis.

PLAY (conservative - neutral/credit strangle):

SELL CALL  MAR-50.00  PM-CJ  OI=81   B=$0.68
SELL PUT   MAR-22.50  PM-OX  OI=100  B=$0.43
INITIAL NET CREDIT TARGET=$1.12-$1.25 ROI(max)=13%
UPSIDE B/E=$51.12 DOWNSIDE B/E=$21.38


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