Option Investor

Daily Newsletter, Thursday, 03/01/2001

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The Option Investor Newsletter                 Thursday 03-01-2001
Copyright 2001, All rights reserved.                        1 of 2
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MARKET WRAP  (view in courier font for table alignment)
        03-01-2001        High      Low     Volume Advance/Decline
DJIA    10450.10 - 45.20 10493.30 10302.90 1.28 bln   1474/1559
NASDAQ   2183.37 + 31.54  2184.41  2071.03 2.25 bln   1607/2175
S&P 100   641.38 +  0.67   641.48   625.64   totals   3081/3734
S&P 500  1241.23 +  1.29  1241.36  1214.50           45.2%/54.8%
RUS 2000  473.30 -  1.07   474.38   465.19
DJ TRANS 2868.36 - 56.68  2925.04  2841.77
VIX        31.03 +  0.03    34.22    31.03
Put/Call Ratio      0.69

International Rumor Machine

International Business Machines (NYSE:IBM) sparked a sharp
late session rally on swirling rumors that an analyst was
reiterating his positive 2001 outlook for the computer giant
and that the company had supposedly given optimistic comments
at an investor meeting.  At precisely 2:30 p.m. EST, IBM
started to "boot-up" and within an hour and a half, had
rocketed over 7.5%, closing up $6.15 to $106.05.

Before the gunpowder smell from the rumor gun had settled out
of the air, the rest of tech land was off and running.  And
run they did.  Sun Microsystems (NASDAQ:SUNW) popped from
$29.50 at 2:30 p.m. to close at $32.25, EMC Corp. (NYSE:EMC)
went from $37.50 at 2:30 p.m. to close at $42.90 and Applied
Micro Circuits (NASDAQ:AMCC) bounced from $23 to close at

AMCC actually was halted midday on what turned out to be an
on-air, live profit warning on CNBC earlier in the day.  The
company's CEO, Dave Rickey, read a prepared statement in an
interview with Maria Bartiromo, which indicated that the
company was lowering fourth-quarter revenue estimates to $125-
$135 million from previous estimates of $175 million due to
warnings from its largest customers.  The fact that investors
were able to brush this off and take the stock higher as soon
as it was reopened for trading is suspect, but I'll have to
admit, slightly encouraging.

The fact that the market is still reacting to rumors like a
giddy schoolgirl, however, is not good news.  But being
rational traders, we can look at this in two ways.  I will let
you be the judge as to what scenario is closer to the truth.

Number one, we are in a market that is thirsty to believe any
good news that comes along, whether it's true or not.  This
probably means that once the Fed cuts, earnings improve and
the market stabilizes, the optimistic investors will come out
of the woodwork in droves, tipping their money market accounts
(which are bursting at the seems) into tech and the rest of
the market and we will be off and running again.

Number two, we are in a schizoid market that doesn't know
which way is up and that is hanging on any piece of news that
may give it direction to the upside.  In this scenario, the
market swings violently and emotionally; in part because there
are so many people on the short side that cover-buy with a
vengeance anytime a hint of positive news hits the market.

Suffice it to say that I believe number one and a half.  I
believe that yes, we are in a market that is acting irrational
and desperate but that behind the scenes, there is a pile of
money that belongs to folks that are willing to forgive and
forget, given more clarity in profit outlooks.

In addition, I believe that number one is driving number two.
By this I mean that investors (in general) are still too
optimistic.  The banner year of 1999-2000 is still in the back
of investors' minds causing most to hold on to high hopes.  We
therefore have still not seen the now clichi, "capitulation
bottom" that marks the beginning of a new bull market.

One indicator that tracks investor sentiment is the CBOE
Volatility Index (VIX.X).  When we bottomed in October 1998,
during the "Asian Crisis" the VIX.X was hovering around 50,
signifying high levels of fear and put/call buying.  But
throughout this whole NASDAQ drubbing, the VIX has not closed
above 40.

Today’s Markets

Up until the IBM induced rally, the markets acted as if they
were content to do a slow burn lower for the whole session.
There was no real sector rotation, but rather general weakness
across all areas of the market.

The NASDAQ (COMPX) gained 31.54 today, closing at 2183.37
after briefly venturing below the 2100 level.  Volume was
impressive, with 2.25 billion shares crossing the tape, a
large portion of that occurring in the volatile afternoon

The DOW (INDU) closed off 45.14 to 10450.14 after having been
down almost 200 points earlier in the day.  NYSE volume was
1.2 billion and market breadth continued lower with decliners
beating advancers 1562 to 1469.

Treasuries continued higher today despite the late day flow of
capital back into stocks.  The 10-year note finished up 6/32
to yield 4.88% and the 30-year bond closed higher by 9/32 to
yield 5.30%.

Turning to economic news, the National Association of
Purchasing Management Index (NAPM) came out at 41.9%, just
slightly above January's figure of 41.2% but lower than
economists' expectations of 42.4%.  But lest you think this is
actually good news, any reading below 50 still indicates a
contracting manufacturing sector.

Stocks and Sectors on the Move

While quite a few tech stocks rebounded in the afternoon, 3Com
(NASDAQ:COMS) had dug too large a hole in the morning to
benefit by the exuberance.  COMS came out late Wednesday and
said that it would miss its current third quarter revenue
bogey.  It now expects to lose $135-$145 million on revenues
of $625-$640 million.  COMS closed down $1.63, or 17.81%, to

Other losers on the day included the brokerage sector, as
measured by the AMEX Broker/Dealer Index (XBX.X).  It fell
1.64 on the day, after being down close to 30 points in the
early going.  The sector came under continued pressure after
J.P. Morgan (NYSE:JPM) downgraded two of its own, Goldman
Sach's (NYSE:GS) and Morgan Stanley Dean Witter (NYSE:MWD) to
"market perform" from "long-term buy".  The stocks finished
down $0.14 and $1.53 respectively.

Airline stocks were also grounded today, as US Airways
(NYSE:U) indicated that its first-quarter loss would be wider
than expected.  Goldman Sach's also go in on the action and
proceeded to downgrade a slew of the winged wonders.  These
included Northwest (NASDAQ:NWAC), which finished down $0.69 to
$21.31, Southwest (NYSE:LUV) down $0.60 to $18.00, Delta
(NYSE:DAL) down $1.77 to $40.35 and AMR Corp. (NYSE:AMR) down
$1.93 to $31.32.

Accomplishing a complete 180-degree turnaround and avoiding a
new 52-week low in the process was the PHLX Semiconductor
Index (SOX.X).  On the heels of the aforementioned IBM and
AMCC about face, the SOX.X added 29.53 to close at 570.76.
Earlier in the day, the SOX.X had taken out previous intraday
lows at 516.64.  Winners included Texas Instruments (NYSE:TXN)
up $2.85 to $32.40, Xilinx (NASDAQ:XLNX) up $2.63 to $41.5 and
Linear Technology (NASDAQ:LLTC) up $3.50 to $43.13.

Looking Forward, Always Forward

Tomorrow might prove to be more rough sailing for techs,
especially software stocks.  After the bell, Oracle
(NASDAQ:ORCL) issued a downward revision in its third-quarter
earnings per share figure.   They now expect to come in with
an EPS of $0.10, down from previous estimates of $0.12.  They
also announced that sales are flat to slightly lower.

Also, expect the folks who bought tech today on the IBM rumor
to unload in the early going.  We'll see if we get an
afternoon oversold bounce, but I wouldn't hold my breath.
Friday afternoons have been a tough time for the longs, as the
pros have not been willing to hold stock over the weekends

On the bright side, compared to the Nikkei, we are rocking and
rolling.  The Nikkei has just hit a 15-year low and interest
rates are at .25%.  In addition, the 50-basis point cut in
interest rates that the Fed enacted in January should just be
starting to work its magic upon the economy as we fire up the
barbeque and take to the beach in July.  Hold onto your flip-
flops, I smell a summer rally.

Trade Smart and Have a Good Weekend

Craig Seidler
Contributing Editor

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Was That A Rally?
By Austin Passamonte

We'll find out by tomorrow's close. Reminds me of the bullish
hammer day last Thursday and subsequent slide next session on
Friday, only to repeat the process. Buying the bottom of each
session as the VIX spiked above 34.00 was lucrative then if we
sold hours or even minutes later. What will this week bring?

A rocky start could begin the end. Companies continue to jockey
for position to pre-warn in staccato fashion. Lining up in
batches these days and we haven't even begun to approach
confession period. Why not simply cancel this earnings season due
to lack of interest? No one made money anyway, so they can just
get back to us later this year if/when things finally improve.

Thursday's final hour sure triggered a round of buying action the
likes of which we haven't seen in exactly four session. Blocks
and blocks of QQQ, OEX and SPX calls cleared for six and seven-
figure plays. Up-volume was brisk from the bottom to close as
well. Short covering rally? They all are at first; now let's see
what happens from here.

Just when sentiment couldn't get more bearish, IBM is rumored to
say boo and money pours into the market. Short-squeeze tinderbox?
We think so.

It all boils down to how traders digest tonight's news. Price
action between now and 11:00am EST on Friday mean little or
nothing overall. Will we retest these double-bottom bullish
hammers in the Dow, OEX and SPX from last Friday and today? Will
the VIX once again spike beyond 34.00 and give us another
excellent call-play entry at that moment in time?

All these questions and no answers yet. Less than 20 hours to go
until we find out.

It remains Market Sentiment opinion that we will trade higher at
some point during Friday's session and spark a relief rally soon
if not now. VIX/VXN readings are bullish reversals and put/call
ratios are once again highly skewed. This also reflects short
interest over in the equity markets as well.

Equity shorts are always a nervous bunch and the first hint of
market strength will force them to cover solid profits and run.
Pent-up buying anxiety will fuel the flames. Not a matter of if,
only when. We have time on our side to wait for better
confirmation of bullish bias to return, but aggressive traders
will view every VIX spike above the last high to be our next cue
to buy.

As always, trade with caution and the daily trend. It promises to
be up real soon.


Thursday 03/01 close; 31.03

Thursday 03/01 close; 74.81

30-yr Bonds
Thursday 03/01 close; 5.30%

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)
680 - 665               12,379        6,592         1.88
660 - 645                7,250        6,637         1.09

OEX close: 641.38

635 - 620                1,001       10,222        10.21
615 - 600                  224        9,147        40.83

Maximum calls: 700/6,223
Maximum puts : 600/6,862

Moving Averages
 10 DMA  655
 20 DMA  676
 50 DMA  687
200 DMA  748

NASDAQ 100 Index (NDX/QQQ)
 58 - 56                81,383        24,964         3.26
 55 - 53                86,487        29,738         3.01
 52 - 50                97,858        58,296         1.68

QQQ(NDX)close: 48.80

 47 - 45                29,318        22,520           .77
 44 - 42                 1,153         7,273          6.31
 41 - 39                 1,285         9,670          7.53

Maximum calls: 60/68,079
Maximum puts : 50/39,866

Moving Averages
 10 DMA 51
 20 DMA 55
 50 DMA 59
200 DMA 79

S&P 500 (SPX)
1300                   13,009        17,195           .76
1275                   14,768        18,764           .79
1250                    8,716        15,906           .55

SPX close: 1241.14

1225                    2,675        14,559          5.44
1200                    1,692        17,616         10.41
1175                      218         7,431         34.09

Maximum calls: 1325/48,502
Maximum puts : 1325/42,680

Moving Averages
 10 DMA 1266
 20 DMA 1302
 50 DMA 1317
200 DMA 1404


CBOT Commitment Of Traders Report: Friday 02/23
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          -2538      -2625          -4571     -4782

Total Open
interest %      (-26.63%)    (-24.98%)      (-18.48%)  (-18.90%)
                 net-short   net-short     net-short net-short

Open Interest
Net Value        +2988      +4104          -8493     -8143

Total Open
Interest %      (+15.44%)   (+18.73%)    (-13.44%)   (-12.85%)
                net-long   net-long      net-short  net-short

S&P 500
Open Interest
Net Value        +77015     +73789        -96492       -92910
Total Open
Interest %       (+40.10%)  (+40.21%)    (-12.70%) (-12.12%)
                 net-long   net-long      net-short  net-short

What COT Data Tells Us
Indices:  Once again we have the Small specs and Commercials
holding their respective positions with little change.  The
Commercialc continue to indicate that we could be in for further
downside activity.

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 02/20 by the CFTC.


Please visit this link for Market Posture:



Day Trading The SPX
By Austin Passamonte

We usually slant our conversations toward entry-level option
traders and that may include many fellow readers, but let's
share some ideas for the intermediate to advanced crowd over
the next few sessions instead.

First of all, let me state that my preferred method of option
trading was, is and always will be to buy calls or puts late
Monday morning, forget about them until Thursday afternoon when I
sell for 400% more than I paid and enjoy the long weekend that
follows. The past few weeks (and months) of volatility make this
plan dubious at best and impossible in reality. Therefore, we must
improvise or perish.

Credit spreads come close to this approach but recent wild swings
in the market make monitoring them on a daily basis mandatory as
well. Seems like anything we try other than sitting in cash
requires constant attention right now. Sitting on cash is fine for
part-time traders with jobs or careers but for full-time grunts
like me, idle is not an option (pun intended).

Numerous fellow type-A's have asked about day trading methods and
similar high-risk/high-reward methods. Much like sky diving, it
can be thrilling to enjoy continuous strings of safe jumps for an
entire career if strict attention to safety and defensive details
in the process.

Also, no sane person ever leaped out of a perfectly good airplane
without adequate study, practice and preparation. We cannot
comment on the insane, but the same principals apply to option day
traders. There is no single trading method that looks easier but
in reality (and my opinion) it is the hardest of all to do.

There is a ton of money to be made during times like these for
skilled, experienced traders using great discipline to day trade.
If you're bored, looking for high-odds success with some
interesting profit potential and/or a valuable education in the
process, let me share some details about what we can accomplish.

Since its inception, the S&P 500 index has been choice of big money
professionals in the commodity futures and more recently the SPX
cash index market. It is the benchmark index to compare all others
and has great movement most every session. This means there is
opportunity to profit each day, a fact we cannot say about any
individual stock or equity option that exists.

The SPX also boasts high volume and open interest across several
common strikes. This liquidity is very important to us for reasons
we'll cover in a bit. High liquidity is key for day traders
anxious to move in and out of the action with profits or capital

Wendy and I were given a tour of the CBOE option pits on the floor
this past Monday, courtesy of Alan Knuckman and Andrew Aronson of
Preferred Trade Live brokerage. You can easily guess I spent most
of my time asking Nick (local floor trader & designated tour
guide) all manner of questions about the index option markets. I
learned enough in one hour to cover several articles and help us
all make a bunch of money, but first things first.

Nick told us that the SPX pit was mostly professionals backed by
big money clearing them. It was not a place for public traders to
play and I agree. Unless we are trading in harmony with the pros,
that is.

The SPX is a popular vehicle for institutions and pros to hedge
and speculate as circumstance dictates. They are European settled,
which means they cannot be exercised against the writer selling
short until the day of expiration. Price action is very volatile
and big/ask spreads can narrow or flare at a moment's notice.
Perfect conditions for the patient and astute day trader.

I day trade the SPX but not every session. Some are good for two,
three or more trips while I just can't seem to get in synch during
others. No matter; money flows every day and we must be focused on
not losing much than making some. The first is more vital than the

(10/5 minute charts: SPX)

A 10-minute and 5-minute chart setup just like you see above is
exactly what I use. The absolute key is to sit on our hands and not
make a move until several signals line up at one extreme or the
other, preferably in harmony with the day's prevailing trend. Not
always but preferably.

We impatiently wait for signals across both charts to line up in
our favor and outside influences from longer-term charts, VIX
readings, etc are useful as well. This is highly subjective with
very few hard and fast rules. It takes a period of time and effort
following the action to develop a "feel" for the nuances involved.
No substitute exists for time spent watching and paper trading in
the trenches for months and years.

A frequent check of SPX option tables tells me exactly which
contracts to play but the choice is simple. Each "25X" strike
price, i.e. 1300, 1275, 1250 and 1200 have most of the action. I
prefer to target contracts currently selling for $8 - $12 points
unless we are in expiration week itself, when I play cheaper
premiums yet. The idea is to wait for ideal entry points, buy our
targeted contracts and wait for execution.

Is that all there is too it? Not even close.

Before we buy anything at all, the exit plan must be set in stone.
If I'm playing a $10 SPX contract, my exit will be $12 or $12.50
tops. Remember, this is day trading with no major directional bias
in mind. We began with small but high-odds profit in mind and
that's exactly what we'll do. Greed will absolutely gut this
approach like a fish and our accounts in the process if we let it
creep insidiously into the equation.

Only when markets catch fire in our direction should we ever
consider holding beyond our pre-chosen targets and they are few and
far between. Missed money is far more common by asking for too
much than not enough profit in this manner.

How do I arrive at the exit? Again this is a matter of feel, but
our entry makes all the difference in the successful exit as I'll
explain. Let's walk through some actual trades taken this session
to illustrate each step.

(10/5 min: SPX puts)

In the above example, we had a clear put-play entry late Wednesday
session but I didn't have the nerve to hold over that close or any
others these days. I passed on that but kept it in mind for
Thursday morning. When the early slide began and prices
subsequently bounced, I bought a modest block of SPX March 1200
puts (SPT-OT) on a buy-limit order for 17.00 right when the 10-
minute stochastic lines made a bearish cross. I set a stop-loss at
14.00 and a sell-limit at 19.00 to protect both sides of this

At the time this contract's bid/ask spread was 16.5 - 17.8 and I
wasn't about to buy at "ask." As a matter of fact I NEVER buy at
ask, especially in the SPX. Entering a buy-limit order 50%-60%
above the "bid" price will fill nine times out of ten. I don't
care about the tenth that doesn't fill, either. I can always chase
the play a smidge or let that one pass and wait for the next, but
my fills are 75% of the approach.

Buying in blocks of ten near-month contracts assures us an exit on
the first trades that execute at our sell-limit price when our
"ask" was the first one in line. Market makers cannot fill
themselves ahead of our staged orders of this size but that's
conversation for another time. If we post the first sell-limit
"ask" at 19.00 in this example, our order gets taken out first.

And that's what happened today. Price action quickly tanked and my
order was filled within minutes. Seemed like hours but it was
merely minutes on the clock. Now I'm out and price action seems to
be hitting a near-term bottom on the tick charts.

(10/5 minute charts: SPX)

I take an adjusted amount of risk capital and buy modest blocks of
SPX March 1275 calls (SPT-CO) at 8.00 when the bid/ask was 7.5 -
8.5 and filled within minutes. Again, stops were set at 6.00 to
protect and 9.50 on a sell-limit to exit. The VIX had just opened
and spiked above 34.00 so it seemed like the early action was

Once an order is staged at the broker, I like to get up and move
about. Helps break the tension and clears the mind. By the time I
moved from my office setup to the kitchen for breakfast, the Dow
had slid considerably and my SPX call-play was trading near the
sell-limit. I no sooner got back down the stairs to check on it's
progress with cereal & egg whites in hand (no yolks...we're in
training) only to see that I'm out and modest profits booked.

Quite an active session before the first whole hour of action had
ensued and we weren't done yet.

Later in the session the indexes valiantly attempted to rally once
more. We figured that wouldn't last. Bought two small blocks of
SPX March 1225 puts at 11.50 and the second for 11.00 on buy-limits.
You know the drill: set stops at 9.00 and sell-limit at 13.50 to
exit. The bid/ask was already moving around 10.5 - 12.00 and
quickly advanced to 11.5 bid/12.9 ask whereupon the "ask" price
froze for quite some time. Market makers danced the "bid" up and
down as price action oscillated for the next hour-plus but refused
to advance that ask.

All chart signals still looked bearish so I edged up the stop-loss
to 10.00 and sat tight to see what would happen next.

While writing the above paragraphs for the second time around, I
heard CNBC breaking news that some tech company came on the air
and guided down for near-future earnings. Instantly the charts
began bleeding red and it wasn't long before my order was filled
in two parts on the downdraft.

(10/5 min: SPX 1275 calls)

That should have done it for the day except later in the session
all of our chart signals & other indicators flashed rally, so I'm
almost ashamed to report we entered the action again. Bought a
block SPX 1275 calls (STP-CO) at 7.00 and placed a sell-limit at
9.00 with all signs looking favorable for a quick pop. Well, we
got one alright. Prices struggled there for awhile before the
markets took off and my sell-limit was hit as prices roared off
to 11.50 and higher. Ouch!

If this sounds like easy money to you, well it is. At this stage
in my career I almost feel like moving markets are a license to
print money. However, I paid a considerable tuition of time,
effort, and lost capital. Perhaps better traders might be able
to waltz right into a new market and start smacking out the
profits left and right, but I for one couldn't do it before or now.

That's just enough information to make you dangerous. Promise me
you won't go day trading the SPX until we cover specific, CRITICAL
details next week and beyond. Jumping out of airplanes without
packing your chute? I can't help you with that one!

See you next Thursday & best trading wishes,
Austin P

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unfamiliar with the previous history for that pick and we
want them to look at any current pick as a valid play.


LH $153.94 -6.55 (+6.94) After another strong day yesterday,
driven by positive analyst comments, investors took profits on
our play this morning, allowing LH to fall from an early high
of $161.75 to a low of $151.45 before buyers came back into the
stock.  Although volume was a bit on the light side, the
magnitude of the drop was too much for us.  Even with the
late-day rebound, our play couldn't reclaim the level of our
stop at $155, leaving us no choice but to take our accumulated
profits and move on.


NOK $23.54 +1.54 (+1.04) QCOM led a rebound in the wireless
communications sector today, when QCOM's CEO Irwin Jacobs
announced that future enhanced cell phones should incorporate
both WCDMA and cdma-2000 technologies.  This announcement
seemed to contradict investor's previous dismay with QCOM's
announced delay in the rollout of their third generation
products, and served to buoy a sinking cellular equipment
sector.   While NOK has a long way to go before re establishing
a true upward trend, the stock closed above our stop level in
the afternoon market rebound.  At this point, we feel it is
wise to take our profits and move on, so we are dropping the
play tonight.

ADI $41.20 +3.90 (-3.30) ADI offered the opportunity for put
players to profit on Wednesday, with a drop to $37.35.  However,
a number of factors lead us to believe it is not wise to
continue this play.  AMCC announced today that the management
had lowered their guidance for the coming quarter.  Despite this
news, AMCC actually closed up $2.81 for the day.  In addition
the rebound in the semiconductor sector toward the close was
impressive, as SOX.X gained 5%.  While ADI is below our stop
level of $43, caution dictates that we end this play tonight.

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The Option Investor Newsletter                 Thursday 03-01-2001
Copyright 2001, All rights reserved.                        2 of 2
Redistribution in any form strictly prohibited.

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BOL $54.47 +0.75 (+3.67) Continuing to charge the upper
Bollinger band, BOL bulls have now driven the stock within
spitting distance of the $56 resistance level.  Profit taking
dropped the stock to $53 in the morning before the stock
recovered, and once again, it posted a gain on strong volume.
Nestled up against the upper Bollinger band at $54.63, BOL is
still solidly in overbought territory, and is ripe for some
serious profit taking.  So we are shifting our stop level up to
$52, the location of the ascending trendline, to protect our
profits while we look for the bulls to challenge resistance at
$56 in the days ahead.  Any dip that produces a bounce above $52
looks good for an aggressive entry point.  Keep an eye on the
Stochastics oscillator, because if it weakens, it will be an
early sign that the bulls are losing traction.  As long as
buyers continue to propel the stock higher, conservative traders
can consider new entries as BOL pushes through $55.

VRTS $70.69 +5.75 (+8.31) It appears that the hammer candlestick
formations last Thursday and Friday may have signaled a bottoming
for shares of Storage software maker VRTS, as the stock as since
bounced strongly off support at $55.  Having spent the past
couple of days in consolidation mode, as bulls and bears battled
it out, the stock has held up better than sector peers such as
BRCD and EMC.  Yesterday, despite a down Tech market, VRTS
managed to gain $2.63 or 4.21 percent on over 1.57 times the ADV.
This relative strength was rewarded today, as a turnaround in
the NASDAQ found VRTS as one of the leaders, with the stock
rallying 8.85 percent on 140% of ADV.  Now above both its 5 and
10-dma (at $65.85 and $69.81), look for these two levels to
provide support going forward, reinforced by $65 and $70.  We are
moving our stop up from $60 to the support level of $63.  Make
sure VRTS continues to close above this level.  An entry on
strength could be had if the stock can make it above $73
resistance with conviction.

MSFT $59.34 +0.34 (+2.59) A nice comeback on the NASDAQ coupled
with the DOW finishing off its lows, incited MSFT traders to
return the share price above its $58 support level.  The
impressive upward bounce drove MSFT through the 5-dma ($58.73)
and 10-dma ($57.70) and offered aggressive entries into this
pure momentum play.  However, the conservatives should be more
inclined to wait for another rally through the $60 level and the
correlating 30-dma before jumping in headfirst; albeit, consider
locking in gains as MSFT approaches the governing resistance at
the $64 level.  Overall, shares of MSFT have been faring quite
well despite the declining consumer confidence that is creating
havoc across the markets.  It's also notable that whilst many
blue chips continue to blunder and hit fresh 52-week lows, MSFT
is maintaining an impressive disposition.  However, let's keep a
tight lease on our current plays going into tomorrow's session.
In after-hours news, the world's second-largest software maker,
Oracle (ORCL), announced an expected 3Q shortfall, shocking
investors and analysts alike.

FPL $65.35 +0.30 (+1.22) Two days of steadfast trading found
FPL firming up at $65 and $65.50, which is currently bolstered
by the 5 & 10 DMAs.  These technical lines can provide a
practical measurement device to gauge conservative entries in
an advancing market climate.  With that in mind, look for FPL
to rally through the $66 resistance; and hence, either target
shoot the intraday dips or buy into the momentum on the climb.
Across the sector, other energy stocks like DYN and CPM also
managed to hold recent gains in the midst of a turbulent
marketplace.  On the newswire, Florida Power & Light Company
now ranks among the top 20% of US utilities.  More positive
coverage like that combined with some upside action on the DOW
and FPL could see $73 before long!  Keep stops in place at $64
to safeguard capital.


PWAV $15.88 +0.23 (+1.87) While the cellular communications
equipment sector stocks rallied toward the close today, PWAV
only managed to eke out a weak gain of .23.  A convincing
rally in PWAV might have taken the stock above our stop level
at $18, but at this point further downside appears likely.
The downward stair step pattern remains intact, and if market
conditions begin to deteriorate, PWAV is poised to drop
from current levels to its 52-week low at $14.06.  Conservative
traders might want to wait for weakness in the cellular
communications equipment sector before initiating positions.
A break below $15.50 on heavy volume would be a possible entry
point.  Alternatively, aggressive traders could take positions
on a roll over from $16 level with sector weakness.  We are
changing stops to $17 to preserve profits.

ADBE $28.06 -1.00 (-4.56) ADBE just can't get any respect as it
continues to languish just above the $27 support level.  After
bouncing from here twice in the past 2 days, our play managed a
mild recovery in the afternoon on the back of the broad market
recovery.  The NASDAQ actually managed to eke out a gain for the
day, but ADBE was still underwater at the closing bell, losing
$1 on the day.  Resistance is solidifying at the $30 level, so
we are adjusting our stop downwards to that level in order to
protect our profits.  Aggressive traders can still consider new
positions if the rally fails to break through resistance, but
watch out for the broader Technology market.  An extension on
today's afternoon rally could drag ADBE along for the ride,
bringing our play to an end.  Conservative traders are still
waiting for the stock to fall through the $27 support level
before opening new positions.  When it does, feel free to jump
aboard for the next leg down.

AMCC $29.56 +2.81 (-7.50) What's this, a rally on bad news?
Believe it or not that is what we got today as our AMCC play
moved strongly upwards (+10% on nearly triple the ADV) today.
Trading was halted at 1:30pm ET in advance of words from AMCC's
CEO.  Apparently what he had to say was better than what
investors expected.  Even though he reduced revenue forecasts
for the fourth quarter, as soon as trading resumed, the stock
started moving strongly into positive territory, briefly
cresting our $31 stop level before settling slightly lower at
the close.  Aggressive traders took the opportunity to enter
the play as AMCC rolled over in the final 30 minutes of trading,
but need to keep this one on a short leash.  The Semiconductor
index (SOX.X) led the NASDAQ rally this afternoon, recovering
from 52-week low territory, and if it continues tomorrow, could
help to push AMCC higher.  Aggressive traders can still step
onboard on a rollover near our stop, but only if the SOX shows
weakness as well.  More conservative entry points will
materialize as AMCC falls through either the $28 or $26
intraday support levels.

EBAY $37.69 -0.63 (-6.75) When we started our put play on EBAY
yesterday, the stock had fallen below all its major moving
averages on strong selling volume.  What's more, the Internet
sector has been weak.  So with sector sympathy on our side,
shares of the online auction giant fell $3.81 or over 9 percent
yesterday on 1.25 times the ADV.  Today, despite a rebounding
NASDAQ, the stock was unable to make it back into the green,
closing down fractionally or 1.63 percent on over 170% of ADV,
showing less relative strength than its sector, as tracked by
Merrill Lynch's Internet HOLDR (HHH).  Moving average resistance
is heavy overhead, with the 5, 10, 50 and 100-dma at $41.58,
$44.20, $42.60 and $44.64 all likely to exert downward pressure
on EBAY, allowing higher risk players to make a play on failed
rallies.  Horizontal resistance can also be found in increments
of $1 from $38 to $42.  Sellers returning to take the stock back
below $36 on volume could be the signal for conservative traders
to take a position.  Already a profitable play, we are moving our
stop down, from $42 to $40.

NEWP $50.47 +1.59 (-6.78) As mentioned on Tuesday, sentiment in
NEWP can be tracked using AMEX's Networking Index (NWX) and
Semiconductor Index (SOX).  With both indices at or near their
52-week lows, it's no wonder that the Chip and Fiber Optic
machine manufacturer has also followed suit.  Yesterday NEWP was
able to buck the trend of a falling NASDAQ to close up
fractionally on 3.1 times the ADV.  The reason for the high
volume activity was most likely because the company's stock was
added today to the S&P MidCap 400 Index.  Along with a bouncing
NADSAQ, this helped NEWP to close up 3.26 percent on over 150% of
ADV.  Despite the apparent strength in the past couple of days,
the 5 and 10-dma (at $51.61 and $55.39 respectively) continue to
act as formidable resistance.  Failed rallies above those levels,
as well as our stop price of $55, may provide targets of entry
for aggressive players.  Selling volume that takes NEWP below
today's low of $44.75 may allow the more risk averse to jump in.

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VRSN - VeriSign Inc. $54.00 +5.31 (+3.50 this week)

VeriSign Inc. is the leading provider of trusted infrastructure
services to web sites, enterprises, electronic commerce service
providers and individuals.  The company's domain name, digital
certificate and payment services provide the critical web
identity, authentication and transaction infrastructure that
online businesses require to conduct secure e-commerce and
communications.  VeriSign's services are available through its
web sites or through its direct sales force and reseller
partners throughout the world.

There were a handful of elite technology stocks which beat
analysts expectations and revised forward guidance upward
last quarter, and VRSN was among this group.  On January 24,
VRSN reported earnings of .13 cents per share on a fully taxed
basis, vs. expectations of .11 per share.  In addition, VRSN's
CEO revised the company's expectations for the full year 2001
upward, to .60 cents per share from the.56 previously stated.
This news was unfortunately not enough to overcome severe
weakness in the Nasdaq, and last Friday, VRSN hit a new 52-week
low of $45.88.  However, VRSN promptly rebounded from this
level, and formed a higher low yesterday of $46.75 during the
severe selloff on the Nasdaq.  Today, news was released which
may just be the catalyst necessary to propel VRSN to stronger
levels, market conditions permitting.  VRSN reached a deal with
the Internet Corporation for Assigned Names and Numbers, a non
profit corporation, which controls many of the internet's core
functions regarding registration of domain web names.  According
to the terms of the new deal, VRSN is no longer required to spin
off the part of its business which sells web addresses to
customers.  VRSN is permitted to retain control of the sites
which end in ".com", while forsaking control over "org" and "net"
suffixes.  Since ".com" names comprise nearly 80% of the web
this is perceived as an excellent deal for VRSN, and the deal
is expected to be approved by the Commerce Dept around April 1.
The issue of potential loss of control of an integral part of
VRSN's business was a weight on the stock, and now that it is
removed, we may see VRSN soar.  The stock held strong at $50
today, even when the Nasdaq was down over $70, and when the
rebound came, VRSN's shackles were removed and it popped up
$54.  A true market recovery may be months away, so trader should
continue to be cautious when playing tech stocks.  A break over
resistance at $55 with strong volume could be a possible entry
point.  Aggressive traders could take positions on a pullback to
$52 with market and sector strength.  Monitor the software index
as well as security stocks like CHKP, and set stops at $50.

BUY CALL MAR-55*QVR-CK OI=1375 at $5.00 SL=3.00
BUY CALL MAR-60 QVR-CL OI= 985 at $3.00 SL=1.50
BUY CALL APR-55 QVR-DK OI= 163 at $8.88 SL=6.25
BUY CALL APR-60 QVR-DL OI=  73 at $6.75 SL=5.00


SEBL - Siebel Systems $44.63 +6.38 (-3.44 this week)

Providing sales automation and customer service software through
its main product, Siebel Sales Enterprise, SEBL offers its
customers the ability to access client information and decision-
making support across a corporation's global computer network.
The company's e-commerce applications deliver the first entirely
Web-based, enterprise class family of sales, marketing and
customer service applications.  Among the company's heavyweight
clientele are Lucent Technologies, Glaxo Wellcome, and
Prudential Insurance.

Anybody interested in an aggressive bottom fishing play on a
Technology stock?  If so, we've got just the play for you.
Catching the NASDAQ flu, shares of SEBL have been under pressure
since late January, as the company has felt the effects of
valuation compression.  Down 65% from its highs near $120, the
stock still boasts a PE ratio of 240.  Even bullish comments
from the company's CEO two weeks ago only managed to stop the
decline for a couple days before the bears returned.  This
morning, SEBL fell early, bouncing at the $36 support level
before rallying strongly for the rest of the session.  Volume
nearly doubled the ADV, and we saw buying volume increase
sharply in the final 90 minutes of trading.  Over the past 2
days, intraday resistance has been forming near $40, and the
stock's rally through this level today, allows us to use it to
define support for the days ahead.  Accordingly, our stop will
be placed at $40, and aggressive traders will want to step into
the play should we get another dip and bounce above this level.
More conservative investors will want to wait for the stock to
crest the $47 resistance level before initiating new positions.
With the stock, the broader Software sector (GSO.X), and the
NASDAQ still sporting Stochastics oscillators in oversold
territory, there is plenty of damage to repair if the stock is
going to break out of its recent bearish trend.  The first major
obstacle for SEBL to overcome will be the 4-week descending
trendline, which is also sitting at the $52 resistance level.
If buyers continue to queue up in large numbers, then this could
be the beginning of the long recovery for SEBL bulls.  Look for
confirmation of the stock's strength in a bullish move on the
GSO.X, as the sector movement will likely have a pronounced
effect on our play.

BUY CALL MAR-40 SGW-CH OI=1886 at $7.00 SL=5.00
BUY CALL MAR-45*SGW-CI OI=2438 at $4.25 SL=2.75
BUY CALL MAR-50 SGW-CJ OI=3344 at $2.50 SL=1.25
BUY CALL APR-40 SGW-DH OI= 571 at $9.75 SL=6.75
BUY CALL APR-45 SGW-DI OI= 559 at $7.25 SL=5.25
BUY CALL APR-50 SGW-DJ OI=1220 at $5.25 SL=3.25



DJ - Dow Jones & Company Inc $62.86 +1.26 (+3.36 this week)

Dow Jones & Company is a global provider of business news and
information with operations in print and electronic publishing
and general-interest community newspapers.  The company's renown
publications include "The Wall Street Journal" and "Barron's"
periodicals as well as "Dow Jones Newswires" and "Dow Jones
Indexes" electronic news wires.

In a move that many analysts believe will protect the global
publisher from a slowdown in the advertising market, Dow Jones &
Co will raise the price of its flagship newspaper, the Wall
Street Journal.  As of April 2nd, the cover price will increase
to $1.00 from $0.75 a copy; although, the Journal's subscription
price will remain unchanged at $175.00 per year.  Dow Jones & Co
hasn't raised the Journal's cover price in more than a decade,
but it January their advertising lineage (volume) fell 24.2%,
raising the red flags.  According to UBS Warburg, "in a soft
advertising environment, the time is right to reap the value of
the Wall Street Journal through a cover price increase" and
thus, protect revenues for the long-term.  On the news, shares
shot up $1.80, or 2.9% on respectable volume.  The clean break
through the $62 resistance prompted our immediate coverage.
Prudential Securities also took notice of the stock's relative
strength.  The firm reiterated a Strong Buy recommendation and
issued a lofty 12-month price target of $79 per share.  Near-
term support should develop at $62 and $62.50, going forward.
If there's a return to sub-$62 trading accompanied by a weak
close below $61.50, we'll exit the play.  If you're adventurous
and quick to the keyboard, an aggressive strategy might be found
during a lively day of trading.  Traders might consider lower
entries on convincing bounces off the intersecting 5 & 10 DMAs
at $61.33 and $61.23, respectively.  A more conservative
approach is to buy into an explosive rally and quickly lock in
gains to safeguard existing profits.  Notwithstanding the
typically low volatility of DJ and its current strength, keep
stops tight while the broad markets continue to quiver with
economic uncertainty.

BUY CALL MAR-55 DJ-CK OI= 87 at $7.90 SL=5.75
BUY CALL MAR-60*DJ-CL OI=445 at $3.50 SL=1.75
BUY CALL MAR-65 DJ-CM OI=500 at $0.65 SL=0.00  High Risk!
BUY CALL APR-60 DJ-DL OI=  0 at $4.80 SL=3.00  Wait for OI!
BUY CALL APR-65 DJ-DM OI=  3 at $2.05 SL=1.00




MERQ - Mercury Interactive Corp $59.00 -3.94 (-11.06 this week)

Mercury Interactive is the exterminator of the software
industry.  The company offers a comprehensive line of automated
testing tools that address the full range of quality needs for
testing complex applications throughout the business enterprise.
Essentially the tools help companies build better applications,
from Internet/e-business transaction systems to informational
Web sites.  All of its research and development is conducted in
Israel, however the company is based in California.

With a lack of material news from the company recently, shares of
MERQ have been moving lower in sympathy with the NASDAQ, despite
analyst coverage, which has been largely positive.  Pacific Crest
initiated coverage with a Buy rating, as did WR Hambrecht, along
with a price target of $80.  This was based on the expectation of
continued growth in the top and bottom line, the signing of new
customers and anticipated announcements of key strategic
partnerships with other hardware and software vendors.  These
were high expectations for MERQ indeed, and so far, these
positive developments have not been forthcoming.  With Tech
companies lowering estimates across the board in a slowing
economy, it appears that those expectations are in danger of not
being met.  This has led to an extended earnings multiple
compression event in MERQ for the month of February.  Now below
all its major moving averages, the possibility for further
downside is likely.  Today, the stock dropped 6.26 percent on
over three times the average daily volume in the face of a
rebounding NASDSAQ.  If MERQ attempts to rally, look for
resistance at $60, our stop price of $63 and $65 as possible
targets for aggressive entries, making sure to confirm the
rollover with volume before making a play.  A break below $58 on
further selling may allow the more risk averse to take a
position, but make sure that industry peers CPWR and RATL confirm
downward momentum.

BUY PUT MAR-60*RQB-OL OI=252 at $7.88 SL=5.75
BUY PUT MAR-55 RQB-OK OI=156 at $5.25 SL=3.00



AMCC - Applied Micro Circuits $29.56 +2.81 (-7.50 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.

Most Recent Write-Up

What's this, a rally on bad news?  Believe it or not that is what
we got today as our AMCC play moved strongly upwards (+10% on
nearly triple the ADV) today.  Trading was halted at 1:30pm ET in
advance of words from AMCC's CEO.  Apparently what he had to say
was better than what investors expected.  Even though he reduced
revenue forecasts for the fourth quarter, as soon as trading
resumed, the stock started moving strongly into positive territory,
briefly cresting our $31 stop level before settling slightly lower
at the close.  Aggressive traders took the opportunity to enter
the play as AMCC rolled over in the final 30 minutes of trading,
but need to keep this one on a short leash.  The Semiconductor
index (SOX.X) led the NASDAQ rally this afternoon, recovering
from 52-week low territory, and if it continues tomorrow, could
help to push AMCC higher.  Aggressive traders can still step
onboard on a rollover near our stop, but only if the SOX shows
weakness as well.  More conservative entry points will
materialize as AMCC falls through either the $28 or $26
intraday support levels.


After a warning and a halt today, AMCC had a short covering rally
that attracted huge volume.  It was further fueled by rumors of
positive reports out of IBM.  That rally ran into trouble right
near our stop in the $31 level, where AMCC rolled over.  In light
of ORCL's warning after the bell today, we would look to gain
entry into this put play on a break below $28, or a rollover from
our stop level at $31.

BUY PUT MAR-30*AEX-OF OI=1216 at $3.75 SL=2.25
BUY PUT MAR-25 AEX-OE OI= 484 at $1.63 SL=0.75


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Signs of a bottom?

Technology stocks rebounded today as bargain-hunting investors
decided it was time to shop for discounted issues.

Wednesday, February 28

Technology stocks fell to lows not seen since 1998 after Federal
Reserve Chairman Alan Greenspan ended hopes for interim interest
rate cut.  The NASDAQ closed 55 points lower at 2,151.  The Dow
industrials posted triple-digit losses ending at 10,495.  The S&P
500 index finished down 18 points at 1,239.  Trading volume on
the NYSE reached 1.18 billion shares, with losers beating winners
1,656 to 1,403.  Activity on the NASDAQ was moderate with over 2
billion shares exchanged.  Technology declines outpaced advances
2,312 to 1,402.  In the U.S. bond market, the 30-year Treasury
rose 15/32, pushing its yield down to 5.32%.

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

Advanta    (NASDAQ:ADVNB)  APR12C/MAR12C  $0.38  debit   calendar
Insignia   (NYSE:IFS)      JUN12C/MAR12C  $1.20  debit   calendar
TW Telecom (NASDAQ:TWTC)   MAR80C/MAR40P  $1.88  credit  strangle

All of our new positions were active in today's session.  Opening
prices in Time Warner Telecom and Insignia Financial were based
on actual trades while the Advanta spread debit was observed in
the first few minutes of trading.

Portfolio Activity:

The stock market moved lower today after Fed Chief Alan Greenspan
said the economy appears to be slowing sharply, but said nothing
about lowering interest rates in the near-term.  Greenspan also
noted that the economic slowdown was less evident in January and
February and that the decline in consumer confidence has yet to
limit sales of big-ticket items.  The Fed Chairman's optimistic
comments frustrated investors who had been expecting an interim
reduction in interest rates and they showed their disappointment
by dumping stocks in a variety of sectors.  Among NASDAQ shares,
chip stocks led the sell-off after a new batch of profit warnings
and Internet and computer hardware issues also retreated.  On the
Dow, shares of International Business Machines (NYSE:IBM), Home
Depot (NYSE:HD) and SBC Communications (NYSE:SBC) led the losers.
Safety issues were among the few bullish shares on the blue-chip
average and Johnson & Johnson (NYSE:JNJ), Coca-Cola (NYSE:KO) and
Merck (NYSE:MRK) topped that category.  In the broader market,
investors rotated into companies viewed as providing more stable
earnings growth in a slowing economic environment.  At the same
time, interest-rate-sensitive issues were hammered by the chief's
comments and financial shares suffered most from the sell-off.
Looking forward, analysts say the short-term outlook for the U.S.
economy is very downbeat and that certainly is discouraging for
the future performance of equities.

The Spreads Portfolio experienced little bullish activity during
the session, however there were a few favorable moves by stocks
in defensive groups.  Cardinal Health (NYSE:CAH) was among the
stronger issues, rising over $3 after some optimistic analysts'
comments on the industry.  Experts at Lehman Brothers said they
are convinced that the group is in the early stages of multi-year
growth cycle that may potentially benefit from a slowing economy.
Stryker (NYSE:SYK) was another popular company in the health
services sector, climbing $1 to $56.  Our bullish position at $50
appears to be safe for now.  Issues in the pharmaceutical segment
also moved higher and Polymedica (NASDAQ:PLMD) was among the best
performers in the group.  Drug giant Johnson & Johnson (NYSE:JNJ)
enjoyed the bullish momentum in the sector, rallying over a $1 to
$97.33.  Since our current spread in the issue is bearish with a
sold (short) call at $100, any move through the recent resistance
area near $98 (on heavy volume) should be considered a signal to
exit or adjust the position.  Chiron (NASDAQ:CHIR), one of our
premium-selling candidates, has moved higher over the past few
days but for now it continues to remain in a comfortable trading
channel near $42-$48.  Some of our other credit strangles have not
performed as expected and due to the broad market selling pressure,
a number of the previously range-bound stocks have fallen through
technical support areas.  Plays in Alexander & Baldwin (NYSE:ALEX),
Aphton (NASDAQ:APHT) and Continental Airlines (NYSE:CAL) are good
examples.  On the bright side, all of the bearish positions are
profitable and only a few stocks appear to have upside potential
in the current market.  Issues we are monitoring for technical
reversals include Investment Technology (NYSE:ITG) and also Avery
Dennison (NYSE:AVY).

Thursday, March 1

Technology stocks rebounded today as bargain-hunting investors
decided it was time to shop for discounted issues.  The NASDAQ
closed up 31 points at 2,183.  Industrial stocks continued to
slump, with the Dow falling 45 points to 10,450.  The broader
market trimmed early losses to finish almost unchanged at 1,241.
Trading volume on the NYSE hit 1.28 billion shares, with losers
beating winners 1,556 to 1,483.  Activity on the NASDAQ was heavy
at 2.24 billion shares exchanged.  Despite the late recovery,
technology declines outpaced advances 2,178 to 1,611.  In the
bond market, the 30-year Treasury rose 9/32, pushing its yield
down to 5.23%.

Portfolio Activity:

Stocks staged an incredible comeback today with the Dow rebounding
from triple-digit losses and the NASDAQ climbing over 100 points
from the lows of the session.  The recovery came as sellers faded
and buying volume accelerated in a classic "short-covering" rally.
The move was broad-based with a number of sectors participating in
the bullish activity.  Technology buying emerged in semiconductors,
networking, software, and telecom shares while industrial groups
saw interest in natural gas, utility, oil and oil service issues.
Our portfolio continued to suffer from the recent selling pressure
but a number of positions benefited from the rebound in technology
stocks.  Surprisingly, Qualcomm (NASDAQ:QCOM) was one of the day's
big movers, up almost $7 after an upbeat analysts' meeting produced
some new brokerage upgrades.  Qualcomm used its 2001 analyst day
and mobile data briefing to present a favorable business case for
deploying CDMA 1X and CDMA 1X-EV.  The company is banking on its
primary CDMA carriers to deliver additional revenues and analysts
see the recent slump in the issue as a buying opportunity.  Chip
giants Hewlett-Packard (NYSE:HWP) and Intel (NASDAQ:INTC) also
participated in the bullish activity and even Motorola (NYSE:MOT)
saw new buying interest.  On the downside, biotechnology stocks
slumped and airline issues retreated in the wake of a US Airways
(NYSE:U) profit warning.  Financial stocks also experienced new
selling pressure following pessimistic comments from analysts in
the brokerage group.

Fortunately, the bullish activity did little to help some of the
more unfavorable issues and bearish positions in American Home
Products (NYSE:AHP), Shire Pharmaceuticals (NASDAQ:SHPGY), Pfizer
(NYSE:PFE) and PerkinElmer (NYSE:PKE) continued to perform well.
One of our older straddle positions in British Telecom (NYSE:BTY)
enjoyed some surprising volatility as the issue plummeted to $78
near midday.  The overall straddle credit approached $22 and the
position may reach the downside breakeven point for the second
time since the position was offered.  Those who traded the cycle
have certainly seen some excellent profit opportunities.  At the
same time, today's technical rebound had a negative affect on two
of our bearish positions and they are candidates for adjustments
during the coming sessions.  Investment Technology (NYSE:ITG)
rallied to a new 52-week high and the heavy volume suggests it
will move higher in the coming weeks.  Traders who are short in
the MAR-$55 call might consider buying the underlying issue to
cover any future upside movement.  Johnson & Johnson (NYSE:JNJ)
also moved higher today as traders continued to rotate into more
defensive issues and the technical indications suggest that the
momentum will continue.  However, the popular safety issue has
additional supply above $100 and another difficult obstacle at
its all-time high near $105.  With that fact in mind, we decided
to roll out and up to the APR-$105 call in our bearish position,
and the new play will profit as long as the issue remains below
that price.

Questions & comments on spreads/combos to Contact Support
                           - NEW PLAYS -
OCLR - Ocular Sciences  $17.38  *** Reader's Request! ***

Ocular Sciences (NASDAQ), manufactures a line of soft contact
lenses marketed for annual and disposable replacement regimens.
The company sells its lenses marketed for weekly disposal to
independent practitioners under the Hydron Biomedics and certain
other private label brands and to retailers under the UltraFlex
brand and private label brands.  The company's lenses marketed
for monthly replacement are sold under the Hydron ProActive 55,
Edge III ProActive, UltraFlex, SmartChoice and other brands and
labels.  The company markets its lenses for annual replacement
regimens primarily under three brand names, Edge III, UltraFlex
and Hydron.  Ocular offers daily-wear bifocal lenses under the
Echelon brand that are cast-molded by the company.  In addition,
the company produces its Versa-Scribe tinted lenses, sold in
blue, aqua and green, to enhance the color of the eye.

OCLR shares have rallied in recent sessions on momentum from the
company's earnings report earlier this month.  The outlook was
acceptable and investors have demonstrated their optimism for
the issue, driving the stock to a test of its 52-week high on
increasing volume.  However, the issue will likely endure some
consolidation in the near-term, before a continuation rally can
occur.  In addition, the premiums for the front-month options
are slightly inflated and the potential for upside movement is
significantly affected by the resistance near the sold strike
price; a perfect condition for a time-selling play.

PLAY (very aggressive - neutral/calendar spread):

BUY  CALL  JUL-17.50  QLO-GW  OI=173  A=$2.00
SELL CALL  MAR-17.50  QLO-CW  OI=67   B=$0.56

SCRI - Sicor  $12.63  *** Technicals Only! ***

Sicor (NASDAQ:SCRI) is a vertically integrated pharmaceutical
company with expertise in the development, manufacture and
marketing of injectable pharmaceuticals and the production of
specialty drug substances utilizing synthesis or fermentation.
The company's subsidiary, Gensia Sicor Pharmaceuticals, is also
engaged in the development, manufacture and marketing of unique
oncology, anesthesiology and other key multi-source injectable
pharmaceuticals for the North American market.  The company's
subsidiaries Sicor S.p.A. and Sicor de Mexico offer specialty
bulk drug substances are the United States, Canada, the European
Union and Japan.  The finished multi-source drugs manufactured
by Lemery, another subsidiary, are sold mostly to the national
health program in Mexico and to certain countries in Central
and South America, North Africa, the Middle East and Eastern

One of our technical scans for potentially "recovering" issues
identified this unique candidate.  An upbeat earnings report
appears to be the catalyst for the recent rally and since the
option prices are favorable, we are going to initiate a bullish
position in the issue.  We will target a higher premium to open
the play, in the event of any near-term consolidation.

PLAY (conservative - bullish/synthetic position):

BUY  CALL  MAY-15  UEC-EC  OI=492  A=$1.00
SELL PUT   MAY-10  UEC-QB  OI=205  B=$0.50

Note:  Using options, the position is similar to being long the
stock.  The collateral requirement for the sold (short) put is
approximately $335 per contract.

                    - STRADDLES & STRANGLES -
AC - Alliance Capital  $46.78  *** An Old Favorite! ***

Alliance Capital (NYSE:AC) is a global investment management firm
best known for its growth style of equity investing.  Assets under
management total approximately $400 billion.  Alliance Capital
manages retirement assets for many of the largest public and
private employee benefit plans (including 28 of the U.S. Fortune
100 companies), for public employee retirement funds in 31 out of
the 50 U.S. states, and for foundations, endowments, banks, an
insurance companies worldwide.  Alliance Capital is also one of
America's largest mutual fund sponsors, with approximately 5.8
million shareholder accounts and a family of diversified fund
portfolios that are distributed globally.  Alliance Holding owns
42% of Alliance Capital, the operating private partnership.  AXA
Financial owns interests in both Alliance Holding and Alliance
Capital, amounting to an approximate 57% economic interest in
Alliance Capital.

Here is another excellent candidate for speculative traders who
like to participate in low cost delta-neutral option strategies.
Based on analysis of the historical option pricing and technical
indicators, this issue meets the fundamental criteria for a
favorable debit strangle.  The probability of profit in this
position is higher than other plays in the same strategy due to
favorable option pricing.  As with any recommendation, the play
should be evaluated for portfolio suitability and reviewed with
regard to your strategic approach and trading style.  In addition,
current news and market sentiment will have an effect on the issue,
so review the play thoroughly and make your own decision about the
future outcome of the position.

PLAY (speculative - neutral/debit strangle):

BUY  CALL  APR-50  AC-DJ  OI=237  A=$1.35
BUY  PUT   APR-45  AC-PI  OI=148  A=$1.65


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