The Option Investor Newsletter Wednesday 03-07-2001 Copyright 2001, All rights reserved. 1 of 1 Redistribution in any form strictly prohibited. To view this email newsletter in HTML format with embedded charts and graphs, click here: http://www.OptionInvestor.com/htmlemail/030701_1.asp Posted online for subscribers at http://www.OptionInvestor.com ****************************************************************** MARKET WRAP (view in courier font for table alignment) ****************************************************************** 03-07-2001 High Low Volume Advance/Decline DJIA 10729.60 +138.40 10731.50 10591.90 1.13 bln 1925/1164 NASDAQ 2223.92 + 19.49 2243.75 2201.41 1.77 bln 1971/1680 S&P 100 650.72 + 5.27 652.04 645.45 totals 3896/2844 S&P 500 1261.89 + 8.09 1263.86 1253.80 57.8%/42.2% RUS 2000 484.84 + 3.71 485.50 481.13 DJ TRANS 2990.43 + 10.00 3004.77 2978.93 VIX 26.45 - 0.99 28.17 26.32 Put/Call Ratio 0.56 ****************************************************************** Dear Abbey Keeps the Rally Rolling Abbey Joseph Cohen gave her two-cents on the state of the stock market today, and traders liked what they heard. Before the opening bell, Goldman Sachs' doyenne of stocks gave credence to the perception stocks have bottomed, saying "we believe that attractive equity valuation has been restored." With that pleasant thought in mind, Cohen raised her portfolio equity weighting to 70 percent from 65 percent, which was the first time in nearly a year she has changed her portfolio weightings. Then, to add fuel to the bullish tinders, Cohen reiterated her year-end target of 1,650 for the S&P 500 Index (SPX) and 13,000 for the Dow Jones Industrial Average (INDU). Not surprisingly, Cohen's perceived prognostication powers did wonders for the broader and blue-chip markets. The SPX closed up 8.09 points, or 0.65 percent, to 1,261.89. With today's advance, the SPX posted its longest winning streak in nearly six weeks. What's more, the index is firmly removed from bear-market territory now that its trading at only a 17 percent discount to its March 2000 closing high of 1,527. Doing the SPX one better, though, was the INDU. The blue-chip average advanced 138.38 points, or 1.31 percent, to 10,729.60, marking the fourth consecutive advance for this Methuselah-laden market barometer. The INDU was propelled higher today by retailing stalwarts Home Depot (NYSE:HD) and Walmart (NYSE:WMT) rose $2.34 and $1.15, respectively. Also, helping the cause were Nasdaq carpetbaggers Intel (Nasdaq:INTC) and Microsoft (Nasdaq:MSFT), each added more than a $1.00 apiece to their respective share price. Of course, as we all know, Intel and Microsoft pull double-duty, meaning this dynamic duo has a say in the new economy as well as the old. To that end, the Intel and Microsoft advance helped the Nasdaq Composite Index (COMPX) to overcome a free-fall in communications chip maker Broadcom Corp. (Nasdaq:BRCM), which tanked $7.63 to $40.25 after cutting its quarterly earnings and sales outlook. Nevertheless, the COMPX finished the day up 19.49 points, or 0.88 percent, to 2,223.92 -- its third consecutive winning session. Technically, the picture is finally starting to improve (improve being a relative term, of course) on the COMPX. For the second day in a row, the tech-heavy index was able to trade above its downward trend started in early February. Whether this means anything or not is still open to interpretation. The last time the COMPX had such an outliner it reversed course the next day. As for stock news, WorldCom (Nasdaq:WCOM) rose $0.50 to $17.19 after the Wall Street Journal reported the second-largest U.S. long-distance company may be a takeover candidate. According to the latest scuttlebutt, WorldCom CEO Bernard Ebbers might be interested in selling the company for the right price, which is reportedly $35 a share -- a 100 percent premium to Wednesday's closing price. Poor Bernie might have become a little jaded with the telephony long-distance business after having to pony up millions of dollars in a margin call on WorldCom stock a few months back. Still, this financial setback does not excuse him for suffering from a delusion known in economic parlance as the "endowment effect," which means the propensity to believe something is worth more than it actually is because you own it. If Bernie is waiting for someone to pay $35 a share, or $100 billion, for this commodity business, he's certainly in no hurry to sell. Another stock making noise today was Yahoo (Nasdaq:YHOO). The Internet portal king traded all of seven minutes during regular hours on Wednesday before its stock was halted after the company announced it had backed out of an appearance at an Internet conference. At the time Yahoo said it would issue a post-close press release, which it did, and the news wasn't good. According to the press release, Yahoo has initiated an external search for a new CEO to replace Tim Koogle, who will stay on as chairman of the company. Yahoo also cut its first-quarter earnings, lowering its EPS to break-even from the $0.05 expected from First Call. Not surprisingly, Yahoo shares were down sharply in after-hours trading, falling $4.38 to $18. In more upbeat news, Royal Dutch Petroleum (NYSE:RD), 60 percent owner of the Royal Dutch/Shell Group, submitted a $2.2 billion cash bid (ironically, Royal Dutch is one of the few companies these days that can get away with offering stock) for Denver- based oil and gas exploration firm Barrett Resources (NYSE:BRR). Barrett finished the day up $15.69 to $61.11 while Royal Dutch finished up $0.51 to $60.46. As for economic news, U.S. consumer borrowing increased to $16 billion in January, more than twice the increase of $7.2 billion reported in December, thanks to the biggest increase in credit card charges since August. In other news, the Federal Reserve said that the U.S. economy continues to expand, but at a "sluggish to modest" pace, at least that's what the Fed said in its "Beige Book" report on regional business activity. Looking ahead, the next significant economic data set will be released on Friday with the government's unemployment rate, which is expected to come in at 4.2 percent. As for trading tomorrow, the Yahoo brouhaha could weigh heavily on traders minds at the open. However, I think the impact on trading will be short lived. The fact is, traders have become calloused to earnings warnings (with so many delivered over the past two months, how could they not?). That's not to say, though, they are ready to jump back into tech issues with reckless abandon, because they are not. Yes, the chip makers, particularly the communication chip makers, have rallied nicely this week (sans Broadcom, of course). Comverse Technology (Nasdaq:CMVT), PMC-Sierra (Nasdaq:PMCS) and Vitesse Semiconductor (Nasdaq:VTSS) are all trading higher from where the begin the week. But I wouldn't get to excited; I think this has been a trading rally based on short covering, so I would be leery about jumping in at this points (My apologies to you traders looking for the chips to lead us out of the doldrums). With that said, I would remain conservative in my long picks. In other words, don't be too surprised if tobacco and energy stocks continue to lead the way into the March 20th FOMC meeting. So for the time being, don't get too speculative with those long picks and keep those stop-losses tight. S.P. Brown Contributing Editor www.OptionInvestor.com ************************************ Spring Options Workshop and Bootcamp April 5th-9th, Denver Colorado ************************************ OptionInvestor is proud to announce our third annual Spring option workshop in Denver Colorado. This power packed five-day event is structured to fully educate you on advanced option strategies and will make you a better and more profitable trader. If you attended the March Denver Expo last year and thought it was the best function you had ever attended.. You haven't seen anything yet! Great food, entertainment, education and just plain fun in sunny Denver. The biggest complaint in March was the massive weight gain experienced by the attendees from the gourmet menu. We know how to put on a function. Ask anyone who came last March! Current speakers include: Tom DeMark, Author of "Day Trading Options", "Science of Technical Analysis" and "New Market Timing Techniques" and manager of a $4 billion hedge fund. John Najarian, "Doctor J" as he is known on the CBOE Richard Arms, Inventor of the TRIN, or Arms Index, Equivolume charting and author of "Trading Without Fear." Mark Skousen, Editor of Forecasts and Strategies for over 20 years. Steve Nison, the worlds foremost expert on Candlestick charting. Author of "Japanese Candlestick Charting Techniques" and "Beyond Candlesticks." Harry Brown, Author of seven investment books. Jim Crimmins, President of TradersAccounting.com Austin Passamonte, Editor of IndexSkybox.com Jeff Bailey, Editor of PremierBriefing.com Jim Brown, President of the Premier Investor Network. The detailed schedule will be posted in about two weeks. There will not be individual breakout sessions during the day. Each topic will be covered in 1-2 hr general sessions taught by one or more OptionInvestor staff and presented on three giant screens. In the evening we will offer five of our popular chalk talk sessions for that personal question and answer interaction. Unlike other seminars with only two or three instructors, you will get in-depth knowledge from many different instructors who are experts in their field. The cost for the four-day workshop, April 6th to 9th is only $2995 (spouse only $1495). This includes breakfast, lunch and supper each day. All course materials, a CD of all the presentations and a professional video package of the entire seminar so you can review the material at home in the comfort of your living room. There is also a $500 discount if you have attended a prior OIN seminar. This is not a prepackaged presentation that gets repeated over and over with stale information. This is a one-time production and everything is fresh, live and as current as we can make it. The videos will have your real time questions and answers and not some from a prior class. Where else can you get intensive yet personalized options education like this? Do not delay as seating is very limited. We guarantee you will not be disappointed! You can pay for your education one bad trade at a time or you can invest less money one time to learn how to do it right. Click here for more info: https://secure.sungrp.com/workshop/april01/index.asp ************************Advertisement************************* What will your strategy be for 2001? The VRTrader.com Annual Forecast Model Your road map to the 2001 market! Forecast is prepared by Mark Leibovit, the #1 market timer in the nation. Mark is Chief Market Strategist for VRTrader.com, a Premier Investor Network website, a technical consultant and former 'Elf' on Louis Rukeyser's Wall Street Week for 7 years. His Annual Forecast Model has been subscribed to by Wall Street's most elite. Mark is presently ranked #1 timer in the nation by TIMER DIGEST and #2 on AmericasBestTimers.com. Order your today! click here: http://www.sungrp.com/tracking.asp?campaignid=1779 ************************************************************** ************* NEW CALL PLAY ************* RIMM - Research in Motion $46.50 +4.00 (+3.25 this week) Research in Motion Limited is a leading designer, manufacturer, and marketer of innovative wireless solutions for the mobile communications market. Through development and integration of hardware, software and services, RIMM provides solutions for seamless access to time sensitive information including email, messaging, and internet and intranet based applications. RIMM's portfolio of award winning products includes the wireless handheld product line, the wireless email solution, and wireless computer card adapters. RIMM was taken down from a high of over $120 in October to a low of $34.75 last week. However, RIMM's chart indicates that this week may have been an important turning point for RIMM, as well as other companies in the handheld mobile communications devices market, like PALM and HAND. Last December, RIMM reported earnings which exceeded analyst's expectations, as well as a 160% increase in revenues from the year ago quarter. The company received a round of applause and upgrades from many Wall Street firms, including US Bancorp Piper Jaffray and CE Unterberg Towbin. Since then, additional excellent news has been released. RIMM recently announced a contract with the US military for providing secure wireless access to the government's defense message system. This follows a strategic alliance between QCOM and RIMM, as well as several other contracts. In addition, the market research firm Gartner Dataquest cited a study which indicates that, while the PC and wireless markets may be slowing, the market for handheld broadband devices is growing by leaps and bounds. This week, Vaultus closed an additional round of financing, raising $32 million in a private deal with RIMM, China Industrial Development Partners and @ventures. Investors interpreted this as additional indication of the handheld communication devices market opportunity. RIMM's chart shows a very strong pivot point at the $35 level on March 1. After vaulting to $45 on March 2, RIMM consolidated to a new higher low at $40 on Monday. RIMM held up beautifully in today's market, and closed with a very bullish candlestick pattern. RIMM is now poised to clear $47.50, which could be a possible entry level, if it coincides with overall market strength and sector strength. Aggressive traders could consider taking a position on a pullback to support at $45. Watch others in the market like PALM for an indication of sector strength, and set stops at $42.50. ***March contracts expire next week*** BUY CALL MAR-45*RUL-CI OI=586 at $4.38 SL=2.50 BUY CALL MAR-50 RUL-CJ OI=795 at $2.06 SL=1.00 BUY CALL APR-45 RUL-DI OI=137 at $8.13 SL=5.75 BUY CALL APR-50 RUL-DJ OI=196 at $5.88 SL=4.00 www.premierinvestor.com/oi/profile.asp?ticker=RIMM **************************** NEW LOW VOLATILITY CALL PLAY **************************** HI - Household International, Inc. $61.50 +1.63 (+2.09 last week) Headquartered in Prospect Heights, Illinois, a suburb of Chicago, through its subsidiaries, Household International is a leading provider of consumer finance, credit card, auto finance and credit insurance products in the United States, United Kingdom and Canada. In the United States, Household operates under the two oldest and most recognized names in consumer finance - HFC and Beneficial. Household is also one of the nation's largest issuers of private-label and general purpose credit cards, including the The GM Card and the AFL-CIO's Union Privilege card. A rock-solid earnings history, analyst support and strong technicals have landed HI on our low volatility call play list. While the Banking sector has had to contend with commercial loan defaults, both real and imagined, analysts have been more bullish in the consumer credit space for diversification reasons. While large banks make fewer loans of greater amounts, commercial creditors make many small loans, which not only add up to large numbers, but at a much lower level of risk. HI's record of stable returns and consistent growth has made this stock attractive, with some analysts calling the stock undervalued relative to its peers. Today's advance of 2.72 percent on 150% of ADV resulted in a break through resistance at $60, putting the stock at a new all-time high. A bullish surge above today's intra-day high of $62 could provide an entry on strength for conservative traders while aggressive dip buyers may target support at $60, the 5-dma at $59.65 and our stop price of $59. Correlate entries with movement in competitors BAC and CMB before making a play. ***March contracts expire next week*** BUY CALL MAR-55 HI-CK OI= 456 at $6.90 SL=5.00 BUY CALL MAR-60*HI-CL OI= 813 at $2.70 SL=1.25 BUY CALL MAR-65 HI-CM OI= 527 at $0.50 SL=0.00 BUY CALL APR-60 HI-DL OI=3423 at $4.70 SL=3.00 BUY CALL APR-65 HI-DM OI= 678 at $2.50 SL=1.25 http://www.premierinvestor.com/oi/profile.asp?ticker=HI ***************** STOP-LOSS UPDATES ***************** WM - call play Adjust from $50 up to $51.75 DORL - call play Adjust from $27 up to $28 PPG - call play Adjust from $52 up to $53.50 ELY - call play Adjust from $23.75 up to $25.50 PLAB - call play Adjust from $34 up to $35 UBS - call play Adjust from $153 up to $158 BRCM - put play Adjust from $52 down to $46 *********** DROPPED PUT *********** MERQ $50.48 +2.11 (+1.98) Brokerage firm CE Unterberg lowered their 12-month price target on MERQ from $100 to $50 today, citing that macro concerns, a slowdown in information technology spending and company-specific issues were putting pressure on the stock, while maintaining their Buy rating. But shares of the network management software maker moved higher in sympathy with the NASDAQ and the Software sector, as tracked by Merrill Lynch's Software HOLDR (SWH). In doing so, MERQ gained 4.36 percent on 1.4 times the ADV and in doing so, close above its 5-dma near the psychological $50 level. This move caused our stop price of $49 to be tripped, thereby taking MERQ off our put play list. *************************ADVERTISEMENT********************* Why put all your risk into one stock when you can play the index instead? Learn how to invest in the OEX, QQQ, and SPX. Get intraday market updates, plays, education and daily commentaries by those who know. Sign up for a two week free trial and see for yourself at IndexSkybox.com: http://www.sungrp.com/tracking.asp?campaignid=1799 ************************************************************ ********************* PLAY OF THE DAY - PUT ********************* BRCM - Broadcom Corporation $40.25 -7.63 (-6.06 this week) Broadcom Corporation is a provider of highly integrated silicon solutions that enable broadband digital transmission of voice, video and data to and throughout the home and within the business enterprise. These integrated circuits permit the cost-effective delivery of high-speed, high-bandwidth networking using existing communications infrastructures that were not originally designed for the transmission of broadband digital content. Most Recent Write-Up Strength in the Chip sector recently has helped to lift the NASDAQ higher. A rash of earnings warnings yesterday from Semiconductor companies across the board did not cause the customary sell-offs and in fact, stocks such as XLNX, CY, LSI, VTSS, and TQNT advanced in the face of their warnings. This rallying on bad news was enough for bring out the bulls, who were more than happy to assume that the worst has been priced into the Semiconductor stocks. Earnings shortfalls, falling sales and inventory build-ups all add up to a negative picture. While it can be argued that the market looks ahead, these problems added to an uncertain economy mean the lack of visibility ahead. That being said, BRCM has been weak relative to its peers, even in the recent bounce. Every time the stock has reached a level of support, it has fallen below on increased selling volume. Negative comments and ratings by Banc of America Securities, Merrill Lynch, Solomon Smith Barney, WR Hambrecht and most recently SG Cowen have also provided a drag on the stock price. What's more, the company has been under legal pressure, as a Wall Street Journal article published last week questioned the legitimacy of recent insider stock sales. Failed rallies above resistance at $50 and our stop price of $52 could allow aggressive traders to take a position while a break below the 5-dma at $47.71 would allow the more risk averse to make a play. As always, correlate entries with movement in the Philadelphia Semiconductor Index (SOX) as well as the NASDSAQ 100 (QQQ). Comments In a late Tuesday night warning, BRCM stated that it expects a revenue shortfall in the coming quarter. COMS, one of BRCM's largest customer, terminated a contract and it has caused some trouble for the communication chip company. Quick to follow were a slew of downgrades from the Street and the stock gapped down, sliding throughout the day. We are looking for the selling to continue. A break below $40 on good volume would warrant an entry into this put play. Any short-lived bounces to resistance at $42.50 or $45, accompanied by a rollover, would also provide entry opportunities. ***March contracts expire next week*** BUY PUT MAR-45 RCQ-OI OI=2463 at $6.50 SL=4.75 BUY PUT MAR-40*RCQ-OH OI=1867 at $3.63 SL=1.75 BUY PUT APR-45 RCQ-PI OI= 345 at $9.88 SL=7.50 BUY PUT APR-40 RCQ-PH OI= 687 at $7.00 SL=5.25 http://www.premierinvestor.com/oi/profile.asp?ticker=BRCM ***************************************** BIG CAP COVERED CALLS & NAKED PUT SECTION ***************************************** Abby talks the talk, will the market walk the walk? Stocks moved higher again today amid optimism over new economic data and positive comments from a well-known analyst. Industrial issues rallied on strength in energy shares while the NASDAQ saw unexpected buying pressure in the software group. The enthusiasm began with a report from the Federal Reserve that suggested the recent economic expansion in the U.S. remains intact though it has obviously lost much of the momentum it once displayed. The latest Beige Book summary of national economic activity reported there was no sign of widespread pricing pressures, except among energy sectors, and it also reflected some signs of easing in the labor market. Goldman Sachs strategist Abby Joseph Cohen added to the spirited sentiment, announcing a revised "bullish" outlook for equities in her model portfolio. The popular stock market guru raised her recommended equity exposure to 70%, saying she's increasingly confident that a "too-gloomy" consensus scenario is priced into equities. Cohen went on to suggest that many of the imbalances identified during the past year have now been largely redressed and "attractive" equity valuations have been restored. Her year-end (2001) target price levels for the S&P 500 Index and the Dow Industrials were 1,650 and 13,000 respectively, roughly a 31% increase for the broad market and a 22% gain for the Dow from current levels. The upbeat comments were widely celebrated and a number of industrial sectors moved higher after Cohen said she favored energy-related stocks, some economically sensitive issues and those offering "good value," including blue-chip technology, consumer cyclicals and basic materials. The analyst also advised clients to slightly overweight financial service stocks, as the sector accounts for a significant portion of the S&P 500 Index. In closing, Abby noted that our economy still benefits from a number of favorable long-term trends; the world's most productive work force, well-managed companies, mild inflation and a large federal surplus. From an investor's viewpoint, we can only hope those attributes translate to higher stock prices in the future. Good Luck! 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 46.44 $1.75 7.0% ERTS MAR 45 42.88 54.63 $2.12 5.0% UHS MAR 85 83.15 86.45 $1.85 4.2% Testing support Positions closed: CCMP - Murphy's Law candidate? Naked Puts: Stock Strike Strike Cost Current Profit Monthly Symbol Month Price Basis Price (Loss) Return INTU MAR 30 29.38 46.44 $0.62 10.0% NVDA MAR 40 39.25 52.13 $0.75 8.3% BRKS MAR 30 29.31 38.31 $0.69 8.3% ERTS MAR 40 39.12 54.63 $0.88 8.0% CCMP MAR 60 58.87 71.47 $1.13 7.7% Exit on rally! HGSI MAR 40 39.56 51.94 $0.44 7.3% UHS MAR 80 79.15 86.45 $0.85 6.0% SEIC MAR 38 36.97 41.00 $0.53 5.3% Adj 2-1 split AEOS MAR 30 29.29 27.69 -$1.60 0.0% Adj 3-2 split AEOS shares sold-off after a downgrade by J.P. Morgan on concerns about near-term business trends. In a research note, the analyst blamed slow mall traffic due to the sluggish U.S. economy and unseasonable weather, as well as a late catalog mailing. However, other analysts say the company is on track and we don't believe the near term profit-taking should necessarily prohibit traders from rolling down and out to a lower, post-split strike or, in the event of assignment, recovering losses (and possibly profiting) from a future covered-call position. Of course, if your long-term outlook is negative, exiting the position now may be prudent. Positions closed: DIGL Sell Strangles: Stock Strike Strike Cost Current Profit Monthly Symbol Month Price Basis Price (Loss) Return CEPH MAR 50 48.56 56.00 $1.44 14.9% CEPH MAR 60 61.75 56.00 $1.75 17.7% CERN MAR 45 44.19 45.56 $0.81 8.9% Key moment! CERN MAR 65 66.19 45.56 $1.19 10.5% MUSE MAR 40 38.94 43.19 $1.06 7.8% Key moment! MUSE MAR 95 96.06 43.19 $1.06 7.8% PLMD MAR 30 29.25 37.63 $0.75 16.8% PLMD MAR 50 50.69 37.63 $0.69 15.5% Naked Calls: Stock Strike Strike Cost Current Profit Monthly Symbol Month Price Basis Price (Loss) Return BEAS MAR 80 80.94 36.94 $0.94 8.3% CMVT MAR 110 110.56 83.69 $0.56 6.8% CIEN MAR 100 100.44 75.31 $0.44 6.0% Credit Spreads: Stock Pick Last Position Credit C/B G/L Status NBR $62.30 $62.29 MAR50p/55p $0.60 $54.40 $0.60 Open NOC $94.82 $96.32 MAR85p/90p $0.75 $89.25 $0.75 Open WPI $55.98 $54.16 MAR45p/50p $0.60 $49.40 $0.60 Alert IVGN $75.00 $72.19 MAR65p/70p $0.75 $69.25 $0.75 Alert Debit Straddles: The "rolling stock" position in FAST reached its near term apex on Friday, March 2. The MAR-$60 call option did not achieve our closing target of $3.00, offered only as high as $2.50 on the bid side. With the downside credit of $5 for the MAR-$60 Put, the overall position has provided a potential profit of $7.50; a 35% return for adept traders. For those who chose to remain in the position, the combined straddle value has since reached the cut-loss point of $3.30 (60%) and readers who have not exited the play should consider that alternative to preserve capital. Positions closed: SDS - profit target ($1.25) met in 1 day. ASFC - stop loss. 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 *************** ERTS - Electronic Arts $54.63 *** New trading Range? *** Electronic Arts (NASDAQ:ERTS) operates in two principal business segments: EA Core and EA.com. Through EA Core, the company makes, markets and distributes interactive entertainment software for a variety of hardware platforms. EA.com represents Electronic Arts' online and e-Commerce business. EA.com's online business includes subscription revenues collected for Internet game play on their web-sites, sales of Internet-based games and sales of Electronic Arts products sold through EA.com websites. In late January, Electronic Arts reported quarterly earnings that were less than outstanding, but investors chose instead to focus on the company's future outlook. The CEO believes ERTS will be profitable next year and the recent purchase of gaming web site Pogo.com, should increase their paying subscribers to help meet that financial target. The video game Internet site earns revenue from both advertising and monthly subscription fees and analysts say that EA.com needs about 600k-700k more subscribers to meet its goals, equivalent to nearly 5% of pogo.com's registered users. That's an optimistic target, considering the recent slump in the economy but investors who want to own a great stock in the Computer Software segment can achieve a favorable cost basis in the issue with these conservative positions. ERTS - Electronic Arts $54.63 PLAY (sell covered call or naked put): Action Month & Option Open Closing Cost Monthly Req'd Strike Symbol Interest Price Basis Return Sell Call APR 45 EZQ DI 12 11.63 43.00 3.2% *** Sell Call APR 50 EZQ DJ 24 8.50 46.13 5.8% Sell Put APR 45 EZQ PI 997 2.19 42.81 10.5% *** Sell Put APR 50 EZQ PJ 99 3.75 46.25 12.4% http://www.OptionInvestor.com/charts/mar01/charts.asp?symbol=ERTS ***** HAL - Halliburton $44.88 *** Hot Sector! *** Halliburton (NYSE:HAL) provides a variety of services, equipment, maintenance, engineering and construction to energy, industrial and governmental customers. The company offers its products and services through three business segments: the Energy Services Group, which provides discrete services, products and integrated solutions to customers in the exploration, development and also production of oil and gas; the Engineering and Construction Group, which provides services to energy and industrial customers and government entities worldwide; and the Dresser Equipment Group, which designs, manufactures and markets engineered products and systems, primarily for the energy industry. The Dresser Group has recently been divested to Odyssey Investment Partners and First Reserve for $1.55 billion in cash. Stocks in the Oil Service sector are performing very well and Halliburton is one of the top companies in the industry. In late January, Halliburton posted a quarterly profit of $123 million, or $0.28 a share, which compares to $76 million, or $0.17 a share, earned a year ago. Analysts expected Halliburton to earn $0.26 a share in the December quarter. Halliburton said its quarterly profit jumped 62% amid strength in the company's energy services group operations and the outlook for additional increases in earnings for those segments remains very positive as oil field and production activity is expected to accelerate in the coming months. Traders who favor the outlook for the company and its share value can speculate on the future movement of the issue with this conservative combination position. HAL - Halliburton $44.88 PLAY (conservative - bullish/credit spread): BUY PUT APR-35 HAL-PG OI=2843 A=0.25 SELL PUT APR-40 HAL-PH OI=1993 B=0.80 INITIAL NET CREDIT TARGET=$0.65-$0.75 ROI(max)=15% http://www.OptionInvestor.com/charts/mar01/charts.asp?symbol=HAL ***** NBL - Noble Affiliates $50.11 *** New High! *** Noble Affiliates (NYSE:NBL) is principally engaged, through its subsidiaries, in the exploration, production and marketing of oil and gas. The company's wholly owned subsidiary, Samedan, directly or through various arrangements with other companies, investigates potential oil and gas properties, seeks to acquire exploration rights in areas of interest and conducts exploration activities. Exploration activities include geophysical/geological evaluation and exploratory drilling on properties for which the company has exploration rights. Samedan has exploration, exploitation and production operations both domestically and internationally. The domestic areas consist of offshore in the Gulf of Mexico and California; the Gulf Coast Region; the Mid-Continent Region; and the Rocky Mountain Region. The international areas of operations include Argentina, China, Denmark, Ecuador, Equatorial Guinea, the Mediterranean Sea, the North Sea and the United Kingdom. Among global drillers, Noble Affiliates is one of the best and with the renewed activity in the industry, stocks in the group have rallied over the past few sessions. NBL has benefited from the bullish momentum, rising to a new all-time high on increasing volume. The move provides a great example of the strength in the sector and this position offers a great way to speculate on the future share value performance of one of its leading companies. NBL - Noble Affiliates $50.11 PLAY (moderately aggressive - bullish/credit spread): BUY PUT APR-40 NBL-PH OI=10 A=0.45 SELL PUT APR-45 NBL-PI OI=20 B=1.15 INITIAL NET CREDIT TARGET=$0.80-$0.90 ROI(max)=20% http://www.OptionInvestor.com/charts/mar01/charts.asp?symbol=NBL ***** SNPS - Synopsys $61.88 *** Rally Underway! *** Synopsys (NASDAQ:SNPS) is a global supplier of electronic design automation software to the electronics industry. The company's products are used by designers of integrated circuits, including system-on-a-chip ICs, and the electronic products that use such ICs to automate significant portions of their chip design process. ICs are distinguished by the speed at which they run, their area, the amount of power they consume and the cost of production. The company's products offer its customers the opportunity to design ICs that are optimized for speed, area, power consumption and production cost, while reducing overall design time. The company also provides consulting services to assist customers with their IC designs, as well as training and support services. The recent rally in SNPS shares began after the company reported quarterly earnings in late February, and outlined its outlook for the future. The company's CEO said that orders continued to be strong, with key products gaining momentum, and their subscription license model has also started paying significant dividends. The company's next generation physical synthesis products are also performing very well and with a successful deployment across a broad range of customers, a positive affect on revenues will soon follow. Investors appear to agree with the optimism as they have pushed the issue up 25% since the earnings announcement. Traders who favor the bullish outlook for the issue can speculate on the future movement of the stock with these conservative positions. SNPS - Synopsys $61.88 PLAY (sell covered call or naked put): Action Month & Option Open Closing Cost Monthly Req'd Strike Symbol Interest Price Basis Return Sell Call APR 55 YPQ DK 73 9.25 52.63 3.1% *** Sell Put APR 50 YPQ PJ 121 1.06 48.94 5.3% *** Sell Put APR 55 YPQ PK 36 2.31 52.69 7.9% http://www.OptionInvestor.com/charts/mar01/charts.asp?symbol=SNPS *************** Neutral Plays - Straddles & Strangles *************** TWTC - Time Warner Telecom $71.31 *** Probability Play! *** Time Warner Telecom (NASDAQ:TWTC) is a fiber facilities-based integrated communications provider offering local business "last mile" broadband connections for data, high-speed Internet access, local voice and long distance services. TWTC serves customers in 21 metropolitan markets in the United States and their customers principally are telecommunications-intensive business end-users, long distance carriers, Internet service providers wireless communications companies and governmental entities. The company offers switched services in 20 of its 21 service areas and its fiber optic networks span 8,872 route miles, contain 332,263 fiber miles, and provide service to 5,566 buildings. Time Warner Telecom is an active issue with robust option prices and a reasonably stable trading pattern. Traders who participate in premium-selling positions can use the recent volatility and the inflated premiums to initiate a neutral-outlook play with an excellent credit. The probability of the stock reaching our sold option strikes in 7 trading days is an acceptable risk, based on the favorable reward. Of course, there is always the possibility of a significant change in the technical outlook, so monitor the play on a regular basis. TWTC - Time Warner Telecom $71.31 PLAY (aggressive - neutral/credit strangle): Action Month & Option Open Closing Cost Monthly Req'd Strike Symbol Interest Price Basis Return Sell Put MAR 60 TTU OL 2570 0.75 59.25 14.1% *** Sell Call MAR 80 TTU CP 898 0.69 80.69 11.4% *** http://www.OptionInvestor.com/charts/mar01/charts.asp?symbol=TWTC *************** BEARISH PLAYS - Naked Calls *************** CHKP - Check Point Software $70.00 *** Trading Range! *** Check Point Software Technologies (NASDAQ:CHKP) develops, markets and supports Internet security solutions for enterprise networks and service providers including Virtual Private Networks (VPNs), firewalls, intranet and extranet security and Managed Service Providers. The company delivers solutions that enable secure, reliable and manageable business-to-business communications over any Internet Protocol network-including the Internet, intranets and extranets. Check Point products also include traffic control and quality of service along with IP address management. Check Point products are fully integrated as a part of the company's Secure Virtual Network architecture and provide centralized management, distributed deployment, and comprehensive policy administration. The capabilities of Check Point's products can be also extended with the Open Platform for Security, enabling integration with best of breed hardware, security applications and enterprise software applications. We like this issue for a bearish, premium-selling play because it has a relatively well-defined trading range and excellent option premiums. In addition, the recent selling pressure has come on heavy volume and any ensuing rally will have to propel the issue beyond resistance at its short-term (30-day) moving average near $80. With the heavy overhead supply near $100, the share value has little chance of reaching our target strikes in the next month. CHKP - Check Point Software $70.00 PLAY (aggressive - sell naked call): Action Month & Option Open Closing Cost Monthly Req'd Strike Symbol Interest Price Basis Return Sell Call APR 100 EXK DT 819 2.31 102.31 9.8% Sell Call APR 103 EXK DO 121 1.94 104.94 8.4% Sell Call APR 106 EXK DU 469 1.62 107.62 7.2% Sell Call APR 110 EXK DB 436 1.25 111.25 5.7% *** http://www.OptionInvestor.com/charts/mar01/charts.asp?symbol=CHKP ***** VSTR - VoiceStream Wireless $99.50 *** Technicals Only! *** VoiceStream Wireless Corp. (VoiceStream) is a national provider of personal communications service in the United States using GSM wireless technology. VoiceStream, together with joint ventures in which it holds interests, has licenses to provide service to over 220 million people and operating systems from New York to Hawaii, serving approximately 3.3 million subscribers. VoiceStream also has licenses in 23 of the 25 largest markets in the United States. In addition, VoiceStream holds 49% minority interests in two joint ventures controlled by Cook Inlet Region, Cook Inlet/VS GSM IV PCS Holdings, and Cook Inlet/VS GSM V PCS Holdings. Subsidiaries of these joint ventures are qualified to obtain block licenses that VoiceStream cannot obtain directly. This play is simply based on the current price or trading range of the underlying stock and its recent technical history. The near-term movement in VSTR has formed a "V" bottom and is showing signs of failing as it nears resistance at $105. The 30-dma will be the first test (near $103) with the 50-dma at $107 proving to be a tougher challenge. The top of the current price channel suggests $110 would be the maximum upside potential. If the stock moves through the resistance area near $118 on heavy volume, we will close the sold (short) call or buy the stock to cover the position. VSTR - VoiceStream Wireless $99.50 PLAY (aggressive - sell naked call): Action Month & Option Open Closing Cost Monthly Req'd Strike Symbol Interest Price Basis Return Sell Call MAR 105 UVT CA 1181 1.50 106.50 14.2% Sell Call MAR 110 UVT CB 221 0.50 110.50 5.7% *** Sell Call APR 115 UVT DC 984 2.75 117.75 7.0% Sell Call APR 120 UVT DD 88 1.56 121.56 5.0% http://www.OptionInvestor.com/charts/mar01/charts.asp?symbol=VSTR ************************Advertisement************************* Get 10 FREE Issues of Investor's Business Daily. No obligation. Nothing to cancel. http://www.sungrp.com/tracking.asp?campaignid=1783 ************************************************************** ******************* FREE TRIAL READERS ******************* If you like the results you have been receiving we would welcome you as a permanent subscriber. The monthly subscription price is 39.95. The quarterly price is 99.95 which is $20 off the monthly rate. We would like to have you as a subscriber. 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