Option Investor

Daily Newsletter, Wednesday, 02/28/2001

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The Option Investor Newsletter                Wednesday 02-28-2001
Copyright 2001, All rights reserved.                        1 of 1
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MARKET WRAP  (view in courier font for table alignment)
        02-28-2001        High      Low     Volume Advance/Decline
DJIA    10495.30 -141.60 10684.80 10423.50 1.18 bln   1392/1660
NASDAQ   2151.83 - 55.99  2238.06  2127.50 2.08 bln   1425/2292
S&P 100   640.71 - 10.26   653.96   635.04   totals   2817/3952
S&P 500  1239.94 - 18.00  1263.47  1229.65           41.6%/58.4%
RUS 2000  474.37 -  4.38   479.58   471.28
DJ TRANS 2925.04 - 45.97  2969.04  2913.95
VIX        31.00 +  1.97    32.43    28.64
Put/Call Ratio      0.81

Shake Down On Wall

Like the 7.0 earthquake hitting Seattle, Greenspan rocked the
market.  In a big disappointment to the market, the Fed Chairman's
much awaited testimony provided little relief to a market that
began to fade yesterday as the 2 o'clock hour came and went.
Investors were looking for signs of an inter meeting cut, as
predicted by Wayne Angell of Bear Stearns, but instead were
greeted with a calm and eerily confident Fed head.  While Greenspan
noted that he was concerned with the dropping level of consumer
confidence, the rapid slowing of the economy seen in December was
less evident in January and February.  The market's response was
at first muted to his comments, but as the Q and A progressed, it
became clear that the Fed was going to wait on the sidelines until
the regularly scheduled meeting.  The result was a continued
unwinding of blue chips, especially in the technology sector as
many stocks hit fresh 52-week lows.  The financial sector was also
hit hard, as the play on falling interest rates boosting interest
rate sensitive stocks reversed.

In the end, the Dow finished off 141 points, or 1.33% to end at
10495, with cyclicals, interest rate sensitive banks and brokers
falling sharply.  Safe haven stocks were unable to lift the index
into positive territory with just slightly higher moves in the
drugs, beverages and house ware sectors.  The S&P, closing at a
52-week low, dropped 1.4% under performing the small cap Russell
2000 which only fell 1% on the day.  The Nasdaq, which is now at
2-year lows finished with a loss of over 55 points, recovering
only slightly from the lows on the day to finish at 2151, a drop
of 2.54%.  15% of the stocks in the Nasdaq 100 are now trading at
52-week lows.  Among the carnage in the index, big cap leaders
such as Oracle fell over 10.4 percent and JDSU fell over 4%.

Volume was brisk, but not overwhelming considering that Greenspan
was hitting the tape today with the NYSE printing over 1 billion
trades, and the Nasdaq logging in volume at 1.85 billion.  Market
breadth was deadly negative with losers overwhelming winners by a
margin of 17 to 13 on the NYSE and over 2 to 1 on the Nasdaq.

The market continues to trade with the complete absence of any
leadership.  The biotech index, chock full of companies with little
earnings and high multiples, however, was able to pop over the
unchanged line in the afternoon despite the sell off in the Nasdaq
to record a 9-point gain.  The index still failed to breach the
610 level, which was again tested in the morning.  MLNM trading as
high as $37 in the early morning finished the day with only a 0.75
point gain to close at $33.75.  The SOX.X, under pressure for the
last three sessions, was slammed again for almost 5%.  Led by a
warning from Altera on Tuesday, the company guided revenues
expectations to $294 million vs. $368 million in fourth quarter.
As early as mid-January, despite heckling from Dan Niles at Lehman,
Altera was expecting first quarter revenue to decline by only 5%
to $350 million.  In the communications chip sector, once
highflying stocks such as BRCM and AMCC again hit 52-week lows.
DSL chip supplier, GSPN, lost almost 19% or 4.5 points to close at

Treasury rose only slightly as the stock market began to sink
deeper into the red as a flight to quality found a home in the
bond market.  The 10-year Treasury note moved up an 1/8 to yield
a 4.935%, while the longer end of the curve lost just 6/32's to
yield 5.365%.  Fourth quarter GDP was revised lower to 1.1 percent
from the previously reported 1.4 percent gain.

The February Chicago Purchasing Managers Index rose to 43.2 percent
in February from a previous reading of 40.2 percent.  The market
took the reading less then rate cut friendly as the report
foreshadowed a possible up-tick in the more closely watched
National Purchase Managers report due out Thursday.

In the currency markets, the dollar/yen picked up 1.3% to 117.44
while the euro/dollar rate rose .4 percent to .9215.  The Bank of
Japan, in attempt to slow the free fall in its equity markets once
again lower its discount rate by 10 bps to .25 percent, after a
rate cut just 19 days ago.

The ARM's index registered a reading over 2.0 today as the selling
accelerated following Greenspan's testimony.  Closing with a
reading of over 1.5 an increase of .4 from yesterday's closing
level, the index is suggesting the market is still in dramatically
oversold territory.

In after hour's news, 3COM warned for Q3 seeing revenues coming in
below estimate of negative 14 cents a share.  Economic conditions
were sited as well as the continued slowdown in the telecom sector,
which is reducing demand for products across a number of the
company's business segments.  PC maker Gateway also warned for Q1,
which was little surprise to investors cutting earnings to about
breakeven from current estimates of 17 cents.

As the market continues to slice through support levels, investor
sentiment continues to weaken in the market.  The market has yet
to experience much of a whoosh higher as few signs of catalyst
appear to be seen on the horizon.  There is an obvious
disconnection between what corporations and the market feel about
the future direction of the economy and how Greenspan is
interpreting the latest data.  The bears are in complete control
as the market sink lower and will probably use any relief rally
as an opportunity to set new shorts.  With the March 20th meeting
approaching, the window for an inter-meeting cut is closing fast,
and with it, the only near term relief for a market sinking lower.
Despite the bargain looking levels of many of the blue chip
technology leaders, attempts at stepping in front of a runaway
train south seem foolish at this point.  Continue to trade
lightly as the market is clearly oversold on the downside.
Remember, however, that you putting on a trade to simply have one
on usually ends with a loser.

Gregory J. Casals
Staff Writer

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DORL - Doral Financial Corp. - $28.56 +0.56 (+1.69 this week)

Doral Financial Corporation is a financial holding company that,
together with its wholly-owned subsidiaries, is engaged in
mortgage banking, banking, investment banking, and broker dealer
activities.  It is primarily engaged in a wide range of mortgage
banking activities, including the origination, purchase, sale
and servicing of mortgage loans on single family residences.
The company is the leading originator of mortgage loans on single
family homes in Puerto Rico.

Doral reported excellent year end earnings on January 17.  For
the fiscal year 2000, total interest income rose 54% to $325
million.  Net income rose 24% to $77.9 million.  This prompted
an upgrade from a buy to a strong buy by UBS Warburg on February
7.  DORL's chart shows an enticingly smooth upward trend, which
faltered only briefly with the overall market weakness over
the last several months.  DORL crossed its then converged 50
and 200 dma last September, and has since then stayed solidly
above both major averages as investors became increasingly
attracted to the stock's attractive valuations and strength in
its sector.  Pullbacks occurred during the severe selloffs in
December, and more recently in February, and were excellent
buying opportunities.  Despite today's overall weak market,
DORL managed to sustain a small gain.  At this point, market
conditions permitting, DORL may just be able to power through
resistance at the 52-week high of $29, to reach a possible new
all time high since going public in 1997.  Traders could take
positions at current levels, or at a pullback to support at
$28.  A break above $29 with heavy volume might be a more
conservative entry point.  Watch other stocks in the consumer
finance sector, as well as savings and loan institutions like
GPT and DME for an indication of sector strength, and set stops
at $27.

BUY CALL MAR-25*QDL-CE OI=166 at $3.75 SL=1.75
BUY CALL MAR-30 QDL-CF OI= 43 at $0.56 SL=0.00



EBAY - eBay Inc $38.31 -3.81 (-6.13 this week)

eBay is the world's largest online trading community.  Founded in
September 1995, eBay is a powerful marketplace for the sale of
goods and services by a passionate community of individuals and
small businesses.  The sellers pay a fee to have their items
placed on the company's Web site and the buyers get to browse and
make bids on the merchandise.  If an item sells, eBay charges the
seller a percentage of the closing price.  The company's rivals
in the auctioning arena are Yahoo! and Amazon.com.

As one of the few profitable dotcoms in the Internet space,
e-auction leader eBay finds itself in a fairly unique position.
This has allowed the company's stock price to fare somewhat
better than industry peers such as AMZN and PCLN in the recent
Tech downturn.  However, its triple-digit price/earnings ratio
has made the stock a visible target for bears while keeping away
the value players and bargain hunters.  Analysts have been mixed
in rating the company.  While Prudential Securities and WR
Hambrecht have blessed EBAY with a Strong Buy, CS First Boston
and US Bancorp Piper Jaffray recently cut estimates on earnings
going forward.  EBAY has been on the acquisition trail as of
late, buying up European online-auctioneer iBazar, and is now
looking to enter the Asian market.  While the fundamentals have
been generally positive, technically, the stock has hit a wall.
A failed attempt to break above the 200-dma (now at $52.50) in
mid-February has since led to a retreat on increasing volume.
Today's drop of over 9 percent on 125% of ADV put the stock below
both its 100 and 50-dma (at $44.91 and $42.60 respectively).
Failed rallies above these two major moving averages could allow
higher risk players to take a position, provided that volume
confirms the rollover.  The 5 and 10-dma (at $46.61 and $48.61)
should also provide formidable resistance.  Just make sure EBAY
continues to close below our stop price of $42.  A plunge through
support at $37 on heavy selling pressure could allow the more
risk averse to enter on weakness.  Track sentiment in the
Internet sector using Merrill Lynch's Internet HOLDR (HHH).

BUY PUT MAR-40*QXB-OH OI=2579 at $4.38 SL=2.75
BUY PUT MAR-35 QXB-OG OI= 908 at $2.31 SL=1.25


AMCC - Applied Micro Circuits $26.75 -3.56 (-10.31 this week)

Fulfilling the need for speed, AMCC is a global provider of
high-performance, high-bandwidth integrated circuits used to
control the high-speed flow of transmissions through fiber-optic
telephone networks.  Communications products, used in LANs and
WANs, account for 55% of the company's sales.  The company's
chips are also used in automated test equipment, high-speed
computing, HDTV, and military applications.  The company which
is growing through acquisitions, has a top-flite client list,
including Nortel, Raytheon, Alcatel, Cisco, 3Com and Lucent.

Apparently ignoring comments from the company's CFO a week ago
that AMCC is on track to meet its growth targets despite the
Telecom slowdown, investors have continued to sell the stock
down to new yearly lows.  In fact, the downtrend that began
towards the end of January is showing no signs of letting up as
the Communication sector finds itself firmly in the bears'
grasp.  Even though the stock is down nearly 70% in the past
month, bearish comments about the entire sector from Goldman
Sachs yesterday just heaped more misery on the bulls as they
watched all their precious Technology stocks suffer another day
of pain.  Of course Alan Greenspan didn't help the situation
today when he refused to be bullied into an interim interest
rate cut, and the broader markets declined steadily throughout
the day.  Underscoring the stock's weakness is the fact that the
bulls couldn't even stage a meaningful relief rally today
despite its deeply oversold condition.  As one of the few
remaining stocks with a triple-digit PE ratio, AMCC was ripe
for the picking and with its PE still north of 100, it could
have more room to fall as investors' irrational exuberance has
been replaced by panic.  Despite the fact that the daily
Stochastics is buried deep in oversold territory, the selling
volume was heavy today, coming in 50% above the ADV.  The only
possible support for the bulls to focus on is at $25.50, the
lows seen last January.  Conservative investors can use a
violation of this level as their trigger to initiate new
positions, as the bears take aim on support in the $21-22
area, followed by the lower Bollinger band (currently at
$20.46).  More aggressive traders will want to look for an
oversold bounce to provide a better entry point and can consider
new positions on a failed rally that rolls over before taking
out our stop at $31.  Gauge sentiment in the sector by watching
the Networking index (NWX.X).  As long as it remains weak, AMCC
will have a hard time staging any kind of sustainable rally.

BUY PUT MAR-30*AEX-OF OI=917 at $5.50 SL=3.50
BUY PUT MAR-25 AEX-OE OI=304 at $2.56 SL=1.25



PSS - call play
Adjust from $73 up to $74.50

BOL - call play
Adjust from $50 up to $51

LH - call play
Adjust from $154 up to $155

ADI - put play
Adjust from $43 down to $40


MER $59.90 -2.80 (-3.1)  MER offered only a short lived bullish
opportunity on Tuesday morning, with a move to $65.
Unfortunately, bulls got bad news this morning when former Fed
governor Wayne Angell retracted his forecast of an intra
meeting rate cut during Chairman Greenspan's testimony before
Congress.  Since Mr. Greenspan did not give a clear indication
of near term policy moves (i.e. a rate cut this week) the brokerage
index sold off on the disappointment.  While an intermeeting
rate cut may still happen, MER closed below our stop level of
$60, and we are thus dropping it tonight.

BRCD $38.81 -4.69 (-6.88) It appears that negative sentiment in
the Storage sector continues to weigh on shares of BRCD.  When we
started this play, we outlined a number of ways to enter this
play.  Bounces off support have been lacking in buying conviction
and the stock failed to bullishly surpass its 10-dma (now at
$47.16) for a conservative entry point.  Today the Storage Area
Networker fell almost 11 percent on 1.35 times the ADV in
sympathy with the NASDAQ.  With our entry objectives unmet and
BRCD closing below our stop price of $42, we are dropping
coverage and no longer recommend attempting to take a position.

CIEN $67.19 -2.56 (-7.31) Alan Greenspan let some more air out
of the broader markets today, as he failed to provide the
much-ballyhooed interim rate cut, and our CIEN play was once
again unable to fight the trend.  Heading lower shortly after
the open, the stock didn't see any support from buyers until it
touched the $65 level, its lowest point since January 3rd.
Although buyers attempted to rally the stock in the afternoon,
there was no follow through and CIEN fell back at the close to
end the day solidly below our $69 stop.  We never got an entry
into the play after adding it on Monday, and with its recent
deterioration, it is time to remove it from the playlist.


No dropped puts tonight.


Trading Ciena
By Mary Redmond

Ciena (NASDAQ:CIEN) can be a fun stock to trade because it moves
quickly and responds well to most technical indicators.  In
addition, Ciena has a high level of liquidity, which is conducive
to rapid execution.

However, it can be a highly tricky stock to trade in this market
environment, particularly because the Networking Index(NWX.X)
and many of Ciena's peers in the field of optical networking have
been suffering.  While the stock has been bucking the trend of
the overall index since reporting excellent earnings and
upwardly revised expectations, it is important to trade Ciena
using as many technical tools as possible.

Over the last week, there have been several opportunities to
trade Ciena on both the long and short side.  It is important
to use the movement of the major market indexes, the bond
market, the VXN and VIX as well as the stock's individual
trading pattern and short term technical indicators.

Last week, Thursday and Friday were critical days when the
VIX and VXN hit short-term spikes out of their daily trading
ranges.  In addition, the selling culminated with very heavy
volume, and a rumor of an intermeeting Fed rate cut sparked
a short lived rally.

For the last five days, Ciena has traded in a range from
strong support at the $66.50 level to short-term resistance
at the $77.50 level.  The better you know the trading pattern
of a stock, the more likely you are to be successful.   For
example, when the Nasdaq dropped from 2350 to below 2200
last week, Ciena's lowest price was $65.75, from which it
strongly rebounded.  Conversely, the stock has had serious
difficulty penetrating the $78 level over the last several
weeks.  The moves in between these two levels have been highly
profitable however.  It is one of the few stocks which
usually rallies when the Nasdaq rallies, as its earnings
and outlook were higher-than-expected.

Last week, the Dow and Nasdaq sold off heavily on February 21st,
and reached a low point on the 22nd in the morning.  This
was indicated by the sharp spike of the VXN and VIX out of their
Bollinger bands, and coincided with a good entry point for
Ciena, which offered a daily profit of nearly 6 points.  You
could also see that the NWX.X started to move upward as the
market indexes moved up.  However, under the circumstances,
prudent traders could have closed the position as the VXN and
VIX moved back into their normal trading ranges.

On Friday of last week, we had an abnormal situation with heavy
selling in the morning, followed by a sharp rebound when the rumor
of an intermeeting rate cut circulated.  Ciena languished around
$70 for most of the morning, and aggressive traders could have
bought here as the VXN spiked out of its daily trading range.
More conservative traders might have wanted to wait for the VIX
to spike up to a high of 35, which coincided with the rumor of
a rate cut.

This week was very risky for traders, as the rate cut rumors had
the potential to move the markets sharply down if this cut did not
materialize.  On Monday, Ciena demonstrated that it had the desire
to rally, but lacked the strength to clear $78, even when both the
Dow and Nasdaq rallied.  In addition, on Monday afternoon the VIX
and VXN sent warning signals, with sharp moves to the downside of
their trading ranges.  The bond market also sent traders warning
signs, as the 30-year bond yield(TYX.X) moved down sharply,
indicating that money was flowing to the safety of bonds.

Wednesday gave the opportunities for traders to profit from some
short-term moves in Ciena as well as the Nasdaq, as there were
indications that the markets were heavily oversold during and after
Chairman Greenspan's testimony before the Congress.  While the day
started on a somewhat positive note in the markets, selling
occurred during the testimony.  It is generally a good idea to
wait until the market starts to digest testimony from the Fed
Chairman before taking risky positions.  The markets may have
started to realize that his testimony was more positive than
perhaps previously believed, and buyers started to enter.  (After
all, we couldn't expect him to just say, "I'm going to go home
after lunch and cut rates today").  When the TYX.X showed positive
movement, in combination with a highly oversold market, the odds
favored a rally, albeit a small one.

It is interesting to note that one of the points mentioned
by the Fed Chairman is the fact that individual investors have
not been depositing money to equity funds as much as they have
in the past, but have instead been favoring money market funds
and other safe vehicles.  This may be responsible for some of
the reported numbers of increases in the money supply.  In
addition, the risk averse behavior currently exhibited by
banks and lending institutions is not conducive to a healthy
economy.  It seems highly likely that the Federal Reserve will
take further action to help stimulate lending practices by
banks and other creditors, particularly in the high yield debt

It looks like traders may have to be nimble and quick to take
profits in these market conditions, as there is little liquidity
to move the markets.  Equity fund flows are anemic compared to
previous periods, and technology funds have been suffering from
redemption.  However, we might want to consider something.  Last
year around this time, everyone seemed to be saying "This time
it's different. The market will go up indefinitely because we are
in a new paradigm of growth and productivity."  Now the attitude
seems to be, "This time it's different. The market will go down
and not come back up again."  Does either extreme sound right?

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
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ADBE - Adobe Systems $29.06 -1.44 (-3.56 this week)

A long-time leader in desktop publishing software, ADBE
provides graphic design, publishing, and imaging software
for Web and print production.  Offering a line of application
software products for creating, distributing, and managing
information of all types, the company generates nearly 75% of
sales through publishing software products such as Photoshop,
Illustrator, and PageMaker.  Its Acrobat Reader, which uses
portable document format (PDF) is popping up all over the
Internet, as businesses shift from print to digital
communications.  In addition, ADBE licenses its industry
standard technologies to major hardware manufacturers,
software developers, and service providers, as well as
offering integrated software solutions to businesses of all

Most Recent Write-Up

Aggressive traders that were quick on the trigger, got a great
entry into our ADBE play at the open yesterday.  The stock gapped
up to $33.50 and then promptly rolled over and began its slow
descent again.  Market weakness again today just confirmed that
the bears are still in control, and ADBE went along for the ride,
closing very near its lows from last week.  The battle lines have
been drawn near the $30 level and this is likely where we will see
if there is enough selling volume to drag the stock to new lows.
Last week's intraday low was $28.44, and if the Fed fails to prop
up the equity markets, this looks like a strong possibility given
today's market weakness.  We have moved our stop down to $32,
and aggressive traders can consider new positions on any failed
rally near this level.  Otherwise, look for the conservative
approach to get you safely into the play, initiating new
positions on a volume-backed move below $28.50.


Despite the late session buying spike, ADBE has violated the key
level of $30.  Much of the buying that went on in the market into
today's close appeared to be short covering.  We believe that the
shorts will reassert themselves now that ADBE under $30 is setting
off alerts.  Look for entry into this put on any rollovers from
$30, which should provide resistance.  A break below $28 with
strong selling volume would also warrant entry.  Today's low was
$26.50, so watch that level to see if buyers support it again on
a retest.  NASDAQ sentiment will set the tone for this play.

BUY PUT MAR-35 AEQ-OG OI=1891 at $6.88 SL=5.25
BUY PUT MAR-30*AEQ-OF OI=1960 at $3.38 SL=1.75
BUY PUT MAR-25 AEQ-OE OI= 622 at $1.19 SL=0.50



Greenspan speaks, Seattle rocks, and stocks all fall down...

Stocks tumbled today after comments from Federal Reserve Chairman
Alan Greenspan dimmed investor's hopes for an interim reduction in
interest rates.  The Fed Chief said the U.S. economy appears to be
slowing sharply, but he left open the question of whether the FOMC
might lower rates again before its next scheduled meeting in March.
The Fed has reduced rates a total of 100 basis points so far this
year and rumors that Greenspan had recently revised his speech for
the Congressional testimony had raised speculation of another rate
cut between the regularly scheduled meetings.  Traders expressed
their disappointment in the news, driving the broad market S&P 500
index to lows not seen in two years.  The decline also marked a 20%
drop from the index's all-time highs achieved less than a year ago;
a move widely seen as an indication of a true "bear market."  The
Dow's endured inordinate selling pressure in a number of bellwether
companies including: J.P. Morgan Chase (NYSE:JPM), General Electric
(NYSE:GE), Honeywell (NYSE:HON), American Express (NYSE:AXP), Home
Depot (NYSE:HD), United Technologies (NYSE:UTX) and also Citigroup
(NYSE:C).  The technology-dominated NASDAQ had to contend with big
losses in the semiconductor and Internet segments while networking
and computer shares also experienced severe declines.  Inside the
broader market, financial, retail and select gold issues sold off
while scant buying surfaced in major drug, biotechnology and paper

Summary of Previous Picks:

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

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

INTU    MAR    35    33.25  41.13    $1.75   7.0%
ERTS    MAR    45    42.88  50.00    $2.12   5.0%
CCMP    MAR    70    67.19  60.56   -$6.63   0.0% Closed

Naked Puts:

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

INTU    MAR    30    29.38  41.13    $0.62  10.0%
NVDA    MAR    40    39.25  44.69    $0.75   8.3% Key moment
BRKS    MAR    30    29.31  34.50    $0.69   8.3% 50 dma test
ERTS    MAR    40    39.12  50.00    $0.88   8.0%
CCMP    MAR    60    58.87  60.56    $1.13   7.7% Close?
AEOS    MAR    30    29.29  34.81    $0.71   6.9% Adj 3-2 split
SEIC    MAR    75    73.94  85.44    $1.06   5.3% splits 2-1 3/1

Positions closed: DIGL

Sell Strangles:

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

CERN    MAR    45    44.19  51.19    $0.81   8.9% testing support
CERN    MAR    65    66.19  51.19    $1.19  10.5%

MUSE    MAR    40    38.94  41.06    $1.06   7.8% ready to cover?
MUSE    MAR    95    96.06  41.06    $1.06   7.8%

Naked Calls:

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

BEAS    MAR    80    80.94  38.38    $0.94   8.3%

Credit Spreads:

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

NBR   $62.30   $56.70  MAR50p/55p  $0.60   $54.40  $0.60   Alert
NOC   $94.82   $93.95  MAR85p/90p  $0.75   $89.25  $0.75   Open
WPI   $55.98   $55.50  MAR45p/50p  $0.60   $49.40  $0.60   Open

Debit Straddles:

Stock  Pick    Last     Position   Debit    G/L    Status

ASFC  $55.91  $54.69   MAR55c/55p  $4.38   $-2.00  Closed?
FAST  $57.69  $60.00   MAR60c/60p  $5.50   $-1.25  Open?
SDS   $59.03  $55.20   MAR60c/60p  $4.75   $ 1.25  Closed 2/22

SDS reached the profit target in just one day; a $1.25 return on
$4.75 invested.  The position traded as high as $7.00 overall.
The "rolling stock" position in FAST reached the downside break-
even on Friday (2/23) as the stock fell to $55.31.  Now the issue
is moving to a test of the upper range limits and any failure at
$62 will be a signal to exit the call option.  A target of $3 for
the MAR-$60 call would bring the maximum value of both options to
$8; a 45% return for those who traded the cycle.  ASFC slumped to
a support area near $52 on Friday (2/23) and the value of the
bearish portion of the straddle climbed to $3.  A timely exit of
the Put would have made the overall position profitable.  However,
the combined straddle value has since reached the cut-loss point
of $2.62 (60%) and traders who have not exited the play should
consider that alternative to preserve capital.

New Candidates:

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


BULLISH PLAYS - Covered Calls, Naked Puts, & Combinations

HGSI - Human Genome Sciences  $54.94  *** New Discovery! ***

Human Genome Sciences (NASDAQ:HGSI) researches and develops novel
compounds for treating and diagnosing human diseases based on the
discovery and understanding of the medical usefulness of genes.
The company has used automated, high-speed technology to discover
the sequences of chemicals in genes and generate a collection of
partial human gene sequences.  The company possesses one of the
largest databases of the genes of humans and microbes, and it has
created a broad base of products based on its genomic database.

GlaxoSmithKline recently announced it has begun human trials of a
new compound that may reduce risk in atherosclerotic plaque and
cardiovascular disease using a unique drug target derived from its
collaboration with HGSI.  Human Genome will benefit from milestone
payments related to its clinical progress and if the product is
commercialized, the company will receive substantial royalties.
In addition, U.S. regulators announced they have granted exclusive
marketing rights to the drug company for one of its human trial
immunodeficiency products; BLyS, allowing the company to apply for
research funding, tax credits for certain research expenses and a
waiver from the FDA's application user fee.  Investors cheered the
news and HGSI continued to rally today, even as the broader market
moved lower.  The current technical outlook is excellent and our
target position offers an excellent reward potential at the risk
of owning this issue at a favorable cost basis.

HGSI - Human Genome Sciences  $54.94

PLAY (sell naked put):

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

Sell Put  MAR 40   HHA OH  428       0.44    39.56     7.3% ***
Sell Put  MAR 45   HHA OI  237       1.19    43.81    17.1%
Sell Put  MAR 50   HHA OJ  1153      2.63    47.37    25.4%



IVGN - Invitrogen  $75.00  *** Biotech Bubble? ***

Invitrogen (NASDAQ:IVGN) develops and markets research tools in
kit form and provides other research products and services to
corporate, academic and government entities.  The company's
research kits simplify and improve gene cloning, gene expression
and gene analysis techniques as well as other molecular biology
activities.  These techniques and activities are used to study
how cells are regulated by genetic material, known as functional
genomics, and to search for drugs that can treat diseases.  The
company currently offers approximately 700 gene-identification,
cloning, expression and analysis services.  Since the merger with
Life Technologies and Dexter Corporation, Invitrogen announced
that it intends to reorganize the company into two primary lines
of business, a Molecular Biology division and a Cell Culture

Invitrogen announced solid earnings today, reporting that fourth
quarter results beat the consensus analyst expectations.  The
company posted income of $18 million, or $0.35 per share, versus
$4.7 million, or $0.19 a year earlier.  Wall Street analysts, on
average, expected $0.32 a share and revenues were the reason for
the disparity as the company achieved a record $143 million, well
above the $23 million in the year-ago period.  Investors reacted
favorably to the news and the issue continues to trade above its
150 dma, establishing a strong support area near $70.  Traders
who are bullish on the issue can speculate on its future movement
with this conservative position.

IVGN - Invitrogen  $75.00

PLAY (aggressive - bullish/credit spread):

BUY  PUT  MAR-65  IUV-OM  OI=147  A=0.69
SELL PUT  MAR-70  IUV-ON  OI=131  B=1.19
INITIAL NET CREDIT TARGET=$0.62-$0.75  ROI(max)=12%



UHS - Universal Health Services  $89.75  *** On The Rebound? ***

Universal Health Services (NYSE:UNH) owns and operates acute care
hospitals, behavioral health centers, ambulatory surgery centers,
radiation oncology centers and women's centers.  UNH operates 47
hospitals, consisting of 21 acute care hospitals, 23 behavioral
health centers, and two women's centers in the US and Puerto Rico.
The company, as part of its Ambulatory Treatment Centers Division,
owns outright, or in partnership with physicians, and operates or
manages 23 surgery and radiation oncology centers located in 12
states and the District of Columbia.  Services provided by the
company's hospitals include general surgery, internal medicine,
obstetrics, emergency room care, radiology, oncology, diagnostic
care, coronary care, pediatric services and behavioral health

UHS shares rallied again today, along with other issues in the
Health Services sector after the company was rated a "new buy"
by analysts at Robertson Stephens.  The upgrade comes on the
heels of bullish industry comments by Lehman Brothers, which is
optimistic that the sector is in the early stages of multi-year
growth cycle that may potentially benefit from a slowing economy.
Analyst Adam Feinstein noted that UHS has savvy managers and is
known for buying assets when they are out of favor.  He also said
that the company has continually surprised on the upside (in its
quarterly earnings reports) and the trend is likely to continue.

Today, the positive outlook on Universal Health improved with the
recent volume supported rally off support at $82.  A near-term
test of resistance near $95 is likely, which if successful would
complete the bullish case by taking out the early February high.

UHS - Universal Health Services  $89.75

PLAY (sell covered call or naked put):

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

Sell Call MAR 85   UHS CQ  375       6.60    83.15     4.2% ***

Sell Put  MAR 80   UHS OP  11        0.85    79.15     6.0% ***
Sell Put  MAR 85   UHS OQ  412       1.75    83.25    10.1%


Neutral Plays - Straddles & Strangles

CEPH - Cephalon  $55.06  *** Speculation Only! ***

Cephalon (NASDAQ:CEPH) markets Provogil (modafinil) tablets for
treating excessive daytime sleepiness associated with narcolepsy.
The company has completed studies using Provogil in patients
suffering from fatigue associated with multiple sclerosis, and
excessive daytime sleepiness due to obstructive sleep apnea, as
well as a study to demonstrate improvement in performance and
alertness in a simulated shift-work environment.  The company
has initiated a study to investigate Provogil's use in treating
attention deficit hyperactivity disorder in adults and a second
study in obstructive sleep apnea.  In addition to its clinical
program focused on Provogil, the company has other significant
research programs that seek to discover and develop treatments
for neurological and oncological disorders.  Their subsidiary,
Anesta Corporation, develops and commercializes products for the
management of cancer pain and other therapeutic applications.

Cephalon is a great candidate for a premium-selling position
because it has relatively well-defined support and resistance
areas ($45-$62) and no apparent news that will substantially
change its character prior to the March options expiration.
The company announced favorable earnings earlier this month and
now the issue appears to be comfortable near the middle of our
profit envelope.  Using an "out-of-the-money" Credit Strangle,
aggressive traders who participate in this type of option trading
can speculate on the future volatility of CEPH with a favorable
risk/reward outlook.

CEPH - Cephalon  $55.06

PLAY (very aggressive - neutral/credit strangle):

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

Sell Put  MAR 50   CQE OJ  111       1.44    48.56    14.9% ***
Sell Call MAR 60   CQE CL  1612      1.75    61.75    17.7% ***



PLMD - PolyMedica  $38.75  *** 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.

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

PLMD - PolyMedica  $38.75

PLAY (aggressive - neutral/credit strangle):

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

Sell Put  MAR 30    PM OF  5208      0.75    29.25    16.8% ***
Sell Call MAR 50    PM CJ  192       0.69    50.69    15.5% ***

- or -

Sell Put  MAR 35    PM OG  518       2.38    32.62    32.0%
Sell Call MAR 45    PM CI  94        1.63    46.63    28.5%



CIEN - Ciena  $67.19  *** Testing The Lows! ***

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

While we believe that Ciena is one of the top companies in its
industry, its share value may not be able to oppose the near-term
selling pressure that will likely occur if the technology group
continues to slump.  CIEN's recent downward movement has been on
increasing volume and today a short-term support level near $70
was violated.  Now that range, along with the February high near
$88 becomes resistance and it appears the share value has little
chance of reaching our target position in two weeks.  Consider
covering the sold (short) position on any future rally above $90,
accompanied by strong volume; a very unlikely occurrence.

CIEN - Ciena  $67.19

PLAY (aggressive - sell naked call):

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

Sell Call MAR 90   UEE CR  3847      0.94    90.94    12.4%
Sell Call MAR 95   UEE CS  2082      0.63    95.63     8.5%
Sell Call MAR 100  UEE CT  9330      0.44   100.44     6.0% ***



CMVT - Comverse Technology  74.94  *** Technical Collapse! ***

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

We favor this issue for a bearish-outlook position because the
bottom of the previous trading range defines a clear resistance
area near our target strike price.  In addition, the company's
quarterly earnings announcement is not expected until early
March and with most of the sector leaders reporting mediocre
results, it is unlikely that speculation of a positive report
will significantly alter the current trend.  However, if the
price of the stock rebounds through the recent resistance area
near $95 on a heavy-volume rally, we will close the play at a
small loss or buy the stock to cover our sold options.

CMVT - Comverse Technology  74.94

PLAY (aggressive - sell naked call):

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

Sell Call MAR 100  CQZ CT  701       1.44   101.44    16.7%
Sell Call MAR 105  CQZ CA  569       1.06   106.06    12.6%
Sell Call MAR 110  CQZ CB  580       0.56   110.56     6.8% ***


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