Option Investor

Daily Newsletter, Thursday, 03/08/2001

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The Option Investor Newsletter                 Thursday 03-08-2001
Copyright 2001, All rights reserved.                        1 of 2
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MARKET WRAP  (view in courier font for table alignment)
        03-08-2001        High      Low     Volume Advance/Decline
DJIA    10858.30 +128.70 10859.50 10711.30 1.12 bln   1683/1386
NASDAQ   2168.73 - 55.19  2219.87  2161.41 1.75 bln   1438/2179
S&P 100   651.46 +  0.74   653.44   647.04   totals   3121/3565
S&P 500  1264.74 +  2.85  1266.50  1257.60           46.7%/53.3%
RUS 2000  481.49 -  3.35   484.84   481.44
DJ TRANS 3017.29 + 26.86  3019.07  2981.43
VIX        26.46 +  0.01    27.36    26.25
Put/Call Ratio      0.74

More Confessions: Will The Market Forgive?

In an already tough trading environment, tonight brings us another
high-profile warning that will cause further gyrations tomorrow.
Intel (NASDAQ:INTC) warned that its 1st quarter revenue would fall
25% from the previous quarter, attributing the shortfall to PC
weakness.  It is this same PC weakness that is infiltrating not
only the Semiconductor sector(SOX.X) but also Networking(NWX.X),
Communications and Server sectors, according to the semi giant.
With the last night's YHOO warning dragging the NASDAQ lower,
INTC's announcement will weigh upon both the tech index and the
rallying Dow(INDU).

Today's session brought divergence to the market as the INDU
traded higher for the fifth consecutive day, powering through
key resistance at 10800.  Since last Thursday, the INDU has
successfully tested 10300, establishing a bottom, and soared
550 points to its current level of 10858.  What was incredible
about the INDU's performance today was the it did so without the
the leadership from the broader finance sector, namely the KBW
Bank Sector Index(BKX.X) and the Securities Broker/Dealer
Index(XBD.X).  The weakness in the financial issues is a bit
disconcerting, and without strength in that group of stocks, it
will difficult for the broader market to continue higher.  And by
the broader market, we mean the S&P 500 (SPX.X).  The SPX did
manage to edge higher during Thursday's session, but would have
finished much higher with strength in finance, as well as tech
(another complex that remains a cause for concern).

The S&P 500 finished at 1264, up 2.85 points, or 0.22 percent.
Although the SPX has bounced from its recent lows, it remains
in a relatively oversold condition relative to the INDU.  We'd
like to see some strength in the finance sector, which would
aid the S&P 500 in its rebound.

As I previously mentioned, the tech sector remains a place of
peril in the forms of deteriorating fundamentals and lack of
visibility.  This was exemplified in INTC's revenue warning and
news that they would be cutting 5000 jobs through attrition.
More interestingly, INTC decided NOT to change its capital
spending number, currently $75 bln, which is a sign that they are
willing to ramp up spending when the business cycle turns the
corner.  However, it remains to be seen whether INTC CEO Andy
Grove sticks to that figure as 2001 unfolds.  In addition to
INTC's comments, four other Semi stocks warned after the bell, all
with similar confessions and woes:  RF Micro Devices (NASDAQ:RFMD),
TranSwitch (NASDAQ:TXCC), ON Semi (NASDAQ:ONNN), and Integrated
Circuit Systems (NASDAQ:ICST).  Warnings have become commonplace
during the after-hours and everyday it's a question of who's next.

This warning from Intel was the last thing that the COMPX and
the broader tech sector needed.  After the NASDAQ was pinned
between 2200 and 2250 on Tuesday and Wednesday, Yahoo's
(NASDAQ:YHOO) warning brought supply to the market today and
the tech index broke down below the 2200 level.  As we have
mentioned in the past, the Semiconductor Sector(SOX.X) plays a
crucial role in the direction of the Nasdaq.  The SOX was the
first index to fall last summer when the downturn in tech began,
and it will most likely be the first sector to up-tick once the
correction in tech ultimately ends.  But with another warning
from Intel this evening, we're likely to witness collateral
damage in the SOX and subsequent damage in the Nasdaq.  And
we're reminded that the SOX may, in fact, have not yet reached
its trough.

The SOX has been holding up relatively well since tracing a
double-bottom near the 515 level.  We'll be watching closely
Friday morning to see how the Intel warning, among other chip-
related warnings Thursday evening, is absorbed by the SOX.
Although its down about 39 points from Thursday's close, we'll
be watching to see if the 600 level holds, which coincides with
the SOX's 10-dma.

We're likely to see pressure in the tech sector tomorrow, but the
question remains if the INDU, and the blue chips, can put together
a sixth consecutive day of higher prices.  Much of the action in
the INDU tomorrow will be predicated on the jobs report.  This is
the wild card that will dictate the direction of the broader
markets.  What's important about this announcement tomorrow is
not necessarily the actual figures, but rather the market's
reaction.  The job report will be released at 8:30am ET.

There was some chatter among market participants, along with
a Fed-head, about the possibility of the FOMC only cutting by
25 basis points on March 20th, as opposed to the expectations
for 50 basis points.  That talk today may be a prelude to a
favorable jobs report tomorrow morning, which could lead the
Fed to not cutting rates as aggressively as the market would

Add on this high-profile warning from INTC and we have a market
with visibility as unclear as many of these tech companies.  We
continually are getting convoluted signals that are making the
tape increasingly tough to read.  Once the jobs report is known,
the question will be, will the NASDAQ forgive INTC's confession?
The stock trader $2.25 lower in after-hours last night.  Whatever
positions you may be taking tomorrow, be sure to employ discipline,
stop losses, and quickness.

On a side note, many of you may be interested in this piece of
news regarding the SEC tightening the equity-margin rule for
day traders.  It will require day traders to keep a minimum of
$25,000 of equity in their accounts if they use margin to trade
NYSE or NASDAQ stocks.  The previous minimum was $2000.  For
more information and the SEC technical definition of "day trader,"
click here:


Trade smart.

Matt Russ

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Whiplash Again
By Austin Passamonte

News flash: 2001 Q2 earnings season has officially been cancelled
due to lack of participation. All were invited but few have turned
a profit and none within the chip sector the way things seem

Speaking of tonight, unless our eyes deceive us post-market ND01M
futures are down -39 and ES01M are down -11 as we speak. Either
our chart service is lying or the next market crash will not
happen tomorrow without much worse readings tomorrow. Drop at the
open? Yes. New market lows? We don't think so but that would be
welcome if it does. Just break this week's sideways inaction and
let's trade from there. Please pick a direction and go!

Friday will be an excellent test of market emotion going forward.
Plenty of pre-open orders will be staged to enter and exit plays
and market makers will widen bid/ask spreads to cavernous
proportions. Not a good time to take either side but that's
precisely what the masses will do.

The past two Fridays behind us offered incredible entry points for
day trades from early reversals until price action closed flat for
each session. Can we please go three for three? There might be at
least one short-term trader we know who will sleep restlessly
tonight waiting to test any such dip tomorrow once again.

Technical analysis is the measure of all market sentiment with
every dollar invested by all persons involved. This is done so
with all news, rumor and wild guesses factored in as well. Chart
action plainly tells us how this cumulative vote measures up at
any moment in time. A change in fundamental news naturally skews
the vote and forces all participants to immediately recast their

That is what we will see tomorrow in the early going. A mad
scramble to recast market direction votes using real dollars. The
herd may elect to pull anything left of their straws and run.
Nimble & fleet of mouse traders may elect to dance in and out for
what can be significant intra-session gains. Longer-term traders
may choose to write credit spreads, buy LEAPS, beaten-down shares
or various other strategies as well. Action promises to be hot &
heavy with equal chance for profit and loss.

New and part-time traders may be best served to merely watch the
market world go by. It is a fast & furious place right now with
directional conviction of a water bug. Profit and loss come and go
so fast it can be impossible to keep up. Tumultuous action cannot
and will not last forever but it may continue for awhile.

One thing is for sure: Friday's open will be weak. Fearless
forecast of the month. Where we end up hours or even minutes
beyond there remains anyone's guess and how it's played from there
is strictly up to them. One of our mom's greatest superstitions
was that "everything happens in threes." We may not have always
listened when we should have, but for once in our lives this
Friday we pray our mommy is right!


Thursday 03/08 close: 26.46

Thursday 03/08 close: 67.63

30-yr Bonds
Thursday 03/08 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)
690 - 675               12,411        4,218         2.94
670 - 655               13,744        5,279         1.66

OEX close: 651.47

645 - 630                5,755       12,906         2.24
625 - 610                  169        8,435        49.91

Maximum calls: 700/6,713
Maximum puts : 560/9,346

Moving Averages
 10 DMA  645
 20 DMA  660
 50 DMA  683
200 DMA  745

NASDAQ 100 Index (NDX/QQQ)
 58 - 56                85,283        25,417         3.36
 55 - 53                97,702        29,260         3.34
 52 - 50               140,614        59,499         2.36

QQQ(NDX)close: 48.50

 47 - 45                39,716        45,466          1.14
 44 - 42                 3,368        13,543          4.02
 41 - 39                 1,812        20,865         11.51

Maximum calls: 50/87,374
Maximum puts : 48/43,167

Moving Averages
 10 DMA 49
 20 DMA 52
 50 DMA 58
200 DMA 79

S&P 500 (SPX)
1325                   47,226        42,512          1.11
1300                   12,313        16,967           .73
1275                   17,643        23,831           .74

SPX close: 1264.76

1250                   16,466        22,950          1.39
1225                    5,498        13,975          2.54
1200                    3,045        17,258          5.67

Maximum calls: 1350/47,536
Maximum puts : 1325/42,512

Moving Averages
 10 DMA 1250
 20 DMA 1276
 50 DMA 1313
200 DMA 1399


CBOT Commitment Of Traders Report: Friday 03/02
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         -1831      -2538         -4538     -4571
Total Open
interest %      (-20.19%)   (-26.63%)    (-16.02%)  (-18.48%)
                net-short   net-short    net-short  net-short

Open Interest
Net Value         +3985      +2988         -8594     -8493
Total Open
Interest %      (+18.58%)   (+15.44%)    (-12.24%)  (-13.44%)
                net-long    net-long     net-short  net-short

S&P 500
Open Interest
Net Value        +84749      +77015       -101746    -96492
Total Open
Interest %      (+41.67%)  (+40.10%)     (-13.36%)  (-12.70%)
                net-long   net-long      net-short  net-short

What COT Data Tells Us
Indices: This week saw an increase in divergence on the NASDAQ
100 and S&P 500 with the Commercials adding to their net-short
positions and the Small Specs increasing their net-long
positions.  The DJIA had both sides moving in synch as they
lightened their net-short holdings.

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 02/27 by the CFTC.


Please visit this link for Market Posture:



Day Trading The SPX, Part II
By Austin Passamonte

Not so very long ago, buy & hold distant month calls or LEAPS was
in vogue and certainly for all the right reasons. Trending
markets are a joy to trade and eventually we will see them again.
"Eventually" being key word for this great unknown.

Short-term trading is one method that currently offers better
than equal odds to succeed. It also appeals to the natural human
emotions that make us feel all warm & fuzzy inside. Fast profits
& immediate gratification are the inward desire of every trader
with no exceptions.

That being said, trade-off between short and long-term trades is
the reality that big returns are usually had by holding plays
over time rather than quick in and out. Short-term trading can be
lucrative (done properly) but is by far the most demanding of
time, energy, focus and discipline of all. We must monitor market
action on a micro-basis, our entries & exits have to be precise
and there is no time for hesitation or indecision. Nothing
replaces plenty of actual experience watching a chosen market
through all sorts of market direction and behavior.

Before outlining exactly how we play, the first step is to cover
some rules.

1. We need a liquid, volatile market. The SPX and to a slightly
lesser extent OEX fits this bill perfectly. The QQQs would be my
ideal choice due to tiny bid/ask spreads now that they're traded
on the Pacific and CBOE exchanges in addition to the AMEX.

However, the QQQs merely track the Nasdaq 100 and that's a dead
market these days. Most of the time it doesn't move much at all.
Yes, all our tech addicts "know" & love the components but that
doesn't make it a viable day-trade market. I love all my long-
lost ancestors too, but the cemetery where they now reside is a
quiet place indeed.

The OEX is a mirror of the SPX and is also a fine trading vehicle
but except for busy sessions it sometimes lacks the liquidity to
enter & exit crisply. Many times I've tried to exit blocks of 10
- 30 contracts only to get partially filled before price action
moved away from my sell target. This almost never happens in the
SPX due to more volume and larger blocks clearing as well.

So for those who asked, the OEX is fine but a bit thinner market
that misses some entries & exits during tight market turns. It is
a bit more methodical, which is certainly a plus for traders new
to life in the short-term lane.

2. We need an exit plan before we enter. Assuming our selected
strike-price contract and entry price is in mind, we need an exit
target for profit and also one for maximum acceptable loss.

Sometimes I use stop-loss orders while other times just 100%
risk-loss capital instead. For example, if my acceptable loss for
a single play would be 5% of my total high-risk trading account,
I would use that amount and not one penny more to buy all the
contracts it will afford.

Keep in mind that we already chose to risk that exact amount for
total loss on a stopped-out play, so our downside risk is
therefore quantified while staying power remains until 4:00pm EST
on expiration day. The downside is less leverage from our total
account using such a small overall percentage for buying power on
smaller returns. In my opinion this is the best way for new
traders to learn the ropes while limiting overall risk.

If you haven't guessed by now, I am emphatic about limiting
downside risk. Capital preservation is paramount to survival and
long-term trading success.

Ideally, we would be able to place a stop-loss order and a sell-
limit order on either side of our open plays for a "One-Cancels-
Other" or OCO order. To my knowledge there is no online broker
that allows such an order to be placed. Traders with naked
writing clearance can place two such orders, but one is
considered uncovered at all times and that trader is responsible
for canceling one if the other is triggered.

Live brokers sometimes allow stops on either side of a trade, and
my personal preference is PreferredTrade Live, separate division
of PreferredTrade Inc. I have an account with Alan & Andrew and
couldn't be happier with execution of my trades when it isn't
possible to monitor live market action. For many who have asked
about OCO orders and other advanced services not offered through
online brokers, their contact information is listed below:

PREFERRED TRADE Toll Free 1-888-281-9569

Alan Knuckman and Andrew Aronson
Licensed Options Principals
PreferredTrade. Inc.
Member NYSE, SIPC, MSRB and other principal exchanges

If interested, please direct all questions to them for answers
straight from the source.

3. We need the proper setup to function. Live charts configured
with chosen technical tools and REAL-TIME quote feeds, speedy
computer & internet access, brokerage that executes crisply with
no recurring "hitches" are mandatory. Traders who think they can
get by with delayed quotes, free chart services and sub-standard
setups face certain demise. The hope for early profits on a small
account to earn enough for such upgrades will not happen: the
small account will invariably become smaller yet.

We need enough risk capital and option trading experience to
actually take trades, or a notebook, calculator and live chart
feeds to train. There should be no rush to enter the fray with
actual cash and little live experience. That is a fatal mix with
little chance for a happy ending. The challenging part is that
this type of trading appeals to exactly the type-A personalities
who commonly shun things like patience, study, education and
trading within their ability. Heck, let's just wade right on in
there and make piles of cash while we learn! Sound familiar? It
certainly rings true in my distant memory.

I learned this method of high-risk/high-reward type trading by
playing one - three little contracts until I learned the nuances
of inside details impossible to discover anywhere else except
right down here in the trenches.

Want to hear one of many? It's almost always easier to enter &
exit call options than puts except when markets are diving down.
Why? Because normal call/put volume is a two/one ratio and calls
are normally more liquid than puts. It is tougher to scalp the
downside during dull markets but pure gold and easy as pie when
they really roll over. Knowing the difference as it happens will
make all the difference as we get familiar with our chosen

Which brings us to the end of this article. We didn't cover all
the nuts & bolts on how to actually trade, nor could we. Space
limitations within this section make that impossible to do in one
fell swoop. For each person ready to delve into details there are
dozens that needed tonight's groundwork first. We could probably
write a small book instead of article series on how to survive
and prosper trading short-term, but let's work with the medium we

Next Monday within IndexSkybox and Thursday in OptionInvestor (as
respective time & allotted space permits) we'll cover exact
details about trade execution & management with actual examples
of wins and loss. I expect it may take another visit together
beyond that for most of the details to be clear. There will be
plenty of time to actually implement our approach far into the
future. Equity markets will always be ready & waiting for us:
let's be well-prepared for them as well!

Best Trading Wishes,

Contact Support

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

When we drop a pick it doesn't mean we are recommending a sell
on that play. Many dropped picks go on to be very profitable.
We drop a pick because something happened to change its
profile. News, price, direction, etc. We drop it because we
don't want anyone else starting a new play at that time.
We have hundreds of new readers with each issue who are
unfamiliar with the previous history for that pick and we
want them to look at any current pick as a valid play.


A $40.00 -0.95 (+1.98) Wow!  What a boring play.  After putting
in a 20% rally in the prior 4 days, A spent the last 2 shedding
a portion of those gains, falling to the $40 support level by
early this morning.  Although our $38 stop is still intact, the
last two days' red candles point to further weakness in shares
of A.  What was really disappointing was the fact that the stock
couldn't fill the gap from late February, as it found
impenetrable resistance near $42 yesterday.  We haven't gotten
an entry point yet, so we'll take this opportunity to drop
coverage of A before it really starts to decline.


No dropped puts today

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

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The Option Investor Newsletter                 Thursday 03-08-2001
Copyright 2001, All rights reserved.                        2 of 2
Redistribution in any form strictly prohibited.

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

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UNH $61.50 +1.00 (+0.71) A strong run after this morning's bell
saw UNH shattering the $61 resistance and challenging the $62
mark on robust volume.  A respectable finish smack on the
intraday support ($61.50) indicates UNH could make a successful
charge for its 52-week high ($64.36).  Presumptuous that the
overall sentiment will remain bullish and the DOW will continue
to rally, pullbacks to the proximity of the supporting 5-dma
($61.66) line offer practical entry points.  However, let's
tighten the stops to protect existing capital.  We've raised our
protective stop from $59 to $60 to reflect the recent gains and
also, to guard against a market reversal.

PLAB $38.00 +0.13 (+5.25) Banc of America Securities initiated
coverage on the photomask supplier with a Buy rating and 12-
month price target of $45 p/s.  The brokerage firm cited the
industry's transition to sub-wave length lithography as an
explicit benefit, evidenced by PLAB's 150% increase in high-end
revenue from 1Q00 to 1Q01.  As a result of the positive coverage
and the stock's bullish disposition of late, PLAB firmed short-
term support at the $37 level.  This proximity, bolstered by the
trailing 5-dma ($36.14), offers reasonable entry points
following a demonstration of strength above the $38 resistance.
Look for upswings in the stock's volume coupled with advances in
the Semiconductor Index (SOX.X) to signal a breakout.  Whether
you take positions on intraday dips or buy into the rally,
expect some resistance at $40.  With that in mind, traders might
consider locking in gains as PLAB approaches this level and then
jumping back into subsequent momentum waves.  The 52-week record
stands at $46.50 and could easily be overtaken in an advancing
marketplace.  Nonetheless, trade smart and keep stops in place
at the $36 mark.

UBS $37.13 +2.13 (+3.75) Slow and steadily up has been the name
of the game for UBS so far this week, now sporting a 5-day
winning streak.  Yesterday, shares of the Switzerland-based
banking firm edged up $1.02 on just under 70 percent of ADV.
Today was more of the same, as the stock added another 1.72
percent to its gains on 83% of ADV.  It is interesting to note
that volume has been rising gradually, backing UBS' recent
advance.  This price/volume action is a good sign and as long as
it continues, further upside is likely.  There are however, a
number of resistance levels overhead to contend with.  A break
above $165 could find opposition at $166, with a rally past this
level leading to the 50-dma at $167.  Traders looking to enter on
strength should target breakouts above resistance to their risk
tolerances, with the more risk averse waiting for $167 to give
way before taking a position.  Support below can be found at the
5-dma at $160, but in buying a bounce, make sure the stock
continues to close above our stop price and support level of
$162.  In both cases correlate entries with peers BSC, LEH and
MWD before making a play.

EDS $65.53 +1.03 (+0.92) Our call play on EDS remained in
consolidation mode the past couple of days, holding in a range
between $63 and $67.  Yesterday the stock pulled back, closing
down fractionally on higher than average volume, but still above
the 10-dma, now at $64.11.  Today, this moving average provided
support, as a successful test of that level in early morning
trading gave way to a steady advance for the remainder of the
day.  In doing so, EDS gained 1.86 percent in sympathy with a
rising DOW.  At this point, a close above resistance at $66.50
would be a bullish sign, setting the stock up to ultimately take
out the more formidable hurdle at $67.50.  A break above overhead
resistance with conviction would be the signal for conservative
traders to jump in, confirming upward momentum with sector rivals
CEFT and SDS.  Entries on dips may be found at the 5 and 10-dma,
at $65.38 and $64.11 respectively, with horizontal support at $65
and our stop price of $64 reinforcing these levels.

IDTI $36.88 -0.38 (+3.50) After regaining the $36 level
yesterday morning, the IDTI bulls are pawing the ground, just
daring the bears to come onto their turf.  Seriously, $36 is
shaping up to be decent support as the stock consolidates its
gains from last week.  Volume has continued to lighten, coming
in barely over half of the ADV today, as there is clearly not a
rush for the exits.  It is however a critical juncture.  Both
the Semiconductor index (SOX.X) and the Networking index (NWX.X)
were showing signs of weakness today, and if the deterioration
continues, IDTI will find itself back in the bears' camp faster
than you can say "dot.com bubble".  So how do play it if the
underlying sectors hang tough?  Any solid bounce (read that
volume) at either the $35 or $36 support levels looks good for
aggressive traders, while more timid types will want to enter
on strength as our play moves up through the $38 resistance
level.  Keep stops set at $35 and watch the SOX.X for signs of

RIMM $43.00 -3.50 (-0.69 this week)  Considering the sell off on
the Nasdaq today, RIMM held up relatively well.  Since making
a strong bullish pivot point on March 1 at the $35 level, RIMM
has formed a pattern of higher lows at $40, and $43.  For the
last few days, RIMM has been stuck in a trading range between
strong support at the 10 dma of $42.20, and resistance at $45.
If conditions on the Nasdaq and in the wireless handheld
communications devices sector permit, RIMM could make a break
out above this pattern, and possibly surpass Wednesday's high
of $46.25.  Once that level is cleared, the next major
resistance level is at the $52.50 level.  Conservative traders
should wait for a break above $45 on strong volume, accompanied
with strength in others in the sector, like PALM and HAND.
Alternatively, aggressive traders could take positions at
current levels, as long as stops are kept tight at $42.50.


BGEN $63.56 -2.44 (-6.00) BGEN fell below its 10 dma of $69.34
on Tuesday, as BTK.X dropped below an important support level at
$580.  On Wednesday, a downgrade from UBS Warburg helped our put
play as BGEN proceeded on its downward stair step pattern to the
next support level at $66, and strong support just above the
50 dma of $64.30.  On Thursday, BGEN finally broke below this
level with a gap down in the morning, and never looked back, even
when the Dow rallied toward the close.  While support is strong
at $63.63, BGEN is poised precariously near the 200 dma of $61.18,
and a drop below this level would be a very bearish indicator,
and could easily take the stock to the $55 level.  Conservative
put players might want to wait for a break below $61 on strong
volume.  Alternatively, traders could take positions at a failed
rally to $64.31, if accompanied by weakness in BTK.X.  Due to the
movement in the stock, we are moving stops down to $65.

SEBL $28.56 -3.00 (-8.32) SEBL rallied to $32.81 on Wednesday,
as the Nasdaq rallied, and the software index (GSO.X) reached
a daily high of 226.30.  However, this turned out to be a bull
trap, and an excellent put entry point, as SEBL formed a pivot
point at the $32.75 level, and closed near the low of the day.
On Thursday, SEBL struggled to keep its head above water at the
$30 level, but it was not to be.  A downgrade by Robinson
Humphrey, as well as weakness in GSO.X stifled the weak attempt
by SEBL to maintain support.  As the GSO.X dropped below $215,
SEBL fell to $29, and then formed a new 52-week low at
$28.56.  At this point, the path of least resistance for SEBL
is down.  If further weakness in the Nasdaq and the GSO.X
persist, we could see SEBL at the $20 level, which is strong
support dating back to October of 1999.  Aggressive traders
could take positions at a failed rally past $30.  Alternatively,
a break below $28 on strong volume could offer a more
conservative entry point, and would likely lead SEBL to the $26
level.  At this point, we are moving stops down to $31.

NEWP $39.75 -3.38 (-2.63) An oversold bounce on Wednesday coupled
with a report from the company confirming first quarter 2001
guidance provided traders with an opportunity to enter this
aggressive put play, as a morning gap up and attempt to rally
above the 10-dma was met with a mass of sellers, flooding out the
bulls.  Nonetheless, NEWP ended the session up about 10 percent
on almost twice the ADV.  Today the bears continued to push the
stock lower, as NEWP dropped almost 8 percent on higher than
average volume to close below support at $40.   Look for this
level to act as resistance, with additional obstacles from the
5-dma at $41.72 and our stop price, adjusted down from $46 to
$43.  Higher risk players may look for rollovers at resistance
for target entries, but confirm with volume.  Continued weakness
in AMEX's Networking Index (NWX) and Semiconductor Index (SOX)
could drag NEWP below recent lows of $38.50, providing the more
risk averse with an entry on weakness.

BRCM $40.94 +0.69 (+5.38) Our put play in Broadcom received some
help on Wednesday by a rash of analyst downgrades following the
company's announcement that first quarter 2001 earnings would
come in much lower than expected.  Adam Harkness, Goldman Sachs,
Robertson Stephens, Salomon Smith Barney, Thomas Weisel and WR
Hambrecht all lowered their ratings on the stock and with that,
BRCM lost roughly 16 percent of its value on almost twice the
ADV.  Today the stock managed to end the day up fractionally, but
in the process, made a new 52-week intra-day low and encountered
resistance at $42.  Look for failed rallies at this level as well
as the 5-dma at $44.50 and our stop price, now at $45, for
potential aggressive entry points.  For a more conservative play,
look for a bearish move back below $40 on volume before jumping
in.  Keep an eye on movement in the NASDAQ 100 (QQQ) as well as
the Philadelphia Semiconductor Index (SOX) to measure market

ADBE $27.13 -1.56 (-0.56) If you weren't watching the open this
morning, then you more than likely missed the day's best entry.
Over-enthusiastic bulls drove ADBE up to $29.75 in the first 15
minutes, before the bears lumbered over and consistently
pressured the stock for the remainder of the day.  The sellers
have had a hard time breaking through the $26-27 support level,
but the bulls aren't doing any better with resistance.  Each
time they rally the stock to the vicinity of $29, out come the
bears to sell it back down to support.  We all know that this
pattern will eventually end, but until then, aggressive
investors will enjoy the ride, buying puts each time the stock
rolls over from resistance, and closing the position when ADBE
reaches support.  More conservative players are likely champing
at the bit, waiting for ADBE to finally break below the $26
support before initiating new positions.  Keep an eye on the
movement of the broader Technology market.  Given its weakened
state, ADBE is likely to deteriorate faster than the broader
NASDAQ, and recover more slowly.  If this pattern starts to
change, it will be a sign that ADBE is regaining some of its

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index instead?

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

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No new calls today



AFFX - Affymetrix Inc $47.69 -3.19 (-9.37 this week)

Affymetrix develops and manufactures DNA chip technology.  Its
GeneChip system and related products identify, analyze, and
manage complex genetic information in an effort to improve the
diagnosis, monitoring, and treatment of disease.  Their product
is essentially DNA probe arrays that contain gene sequences on a
chip, a scanner to process the probe arrays, and software to
analyze the information.  They market their technology to
academic research centers, pharmaceutical and biotech firms, and
clinical laboratories around the world.

Already having lost two-thirds of its value in the past 12 months,
Affymetrix ran into another "glitch".  Yesterday, AFFX fell a
whopping 9.2%, or $5.13 after the company acknowledged it found
flaws in one line of its gene-research products and would be
offering replacements at a potential cost of $4 mln.  Although
Affymetic has dominated the gene-chip industry since the pioneer
day of the 1980's, it continually faces stiff competition from
the larger technology companies, like Corning (GLW) for instance;
and a while this $4 mln "glitch" may not effect future earnings,
the news shook investors' confidence.  In a reassuring note to
clients, Michael King at Robertson Stephens stated that the
errors didn't " involve gene chips used to analyze human tissues,
which make up about 80% of the company's sales".  Nonetheless, it
couldn't be ignored either, that from a broader perspective,
AFFX is exceeding the 39% decline in the Nasdaq's Biotechnology
Index (NBI.X).  Then in yesterday's market, AFFX led the biotech
decliners; and to add more salt to the wound, AFFX extended its
losses in today's session with a devastating 6.3%, or $3.19 cut.
 You might find entries on high-volume rollovers from today's
intraday resistance at $48 and $49; especially if AFFX cycles and
makes a dent in last October's $45 support level.  Other
strategies may include buying into the immediate downward
momentum, but if you take that approach, consider taking quick
profits!  We have a tight stop in place at $50 and will exit on a
strong close above that mark.  While we don't want to take
unnecessary risks with this play, particularly on the heels of
broad market rallies, the biotech sector is rather weak across
the board.  Take a look at a chart of the NBI.K or the Amex
Biotechnology Index (BTK.X) for visual confirmation.  It'd be
wise to track these sectors as you plan your entries and exits.

***March contracts expire next week***

BUY PUT MAR-50*FIQ-OJ OI=1153 at $4.00 SL=2.50
BUY PUT MAR-45 FIQ-OI OI=  87 at $1.38 SL=0.50  High Risk!
BUY PUT APR-50 FIQ-PJ OI= 277 at $7.00 SL=5.00
BUY PUT APR-45 FIQ-PI OI=  26 at $4.63 SL=2.75



SEBL - Siebel Systems Inc. $28.56 -3.00 (-7.57 this week)

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

Most Recent Write-Up

SEBL rallied to $32.81 on Wednesday, as the Nasdaq rallied, and
the software index (GSO.X) reached a daily high of 226.30.
However, this turned out to be a bull trap, and an excellent put
entry point, as SEBL formed a pivot point at the $32.75 level,
and closed near the low of the day.  On Thursday, SEBL struggled
to keep its head above water at the $30 level, but it was not to
be.  A downgrade by Robinson Humphrey, as well as weakness in
GSO.X stifled the weak attempt by SEBL to maintain support.  As
the GSO.X dropped below $215, SEBL fell to $29, and then formed
a new 52-week low at $28.56.  At this point, the path of least
resistance for SEBL is down.  If further weakness in the Nasdaq
and the GSO.X  persist, we could see SEBL at the $20 level, which
is strong support dating back to October of 1999.  Aggressive
traders  could take positions at a failed rally past $30.
Alternatively, a break below $28 on strong volume could offer a
more conservative entry point, and would likely lead SEBL to the
$26 level.  At this point, we are moving stops down to $31.


The rollover we'd been waiting for in SEBL transpired Thursday
as the stock set a new 52-week low.  Another round of warnings
from the tech sector after the bell could set SEBL to slide in
Friday's session.  Watch for a break below its intraday low at
$28.38 for new put entries, in conjunction with weakness in the
Nasdaq Composite (COMPX).  A more aggressive entry might be
had following a short covering rally and subsequent rollover
at the $30 level.

***March contracts expire next week***

BUY PUT MAR-30*SGQ-OF OI=1452 at $3.25 SL=1.75
BUY PUT MAR-25 SGQ-OE OI=2625 at $0.94 SL=0.00  High Risk!
BUY PUT MAR-30 SGQ-PF OI=1678 at $5.25 SL=3.25
BUY PUT MAR-25 SGQ-PE OI=1272 at $2.88 SL=1.50


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The Technology Rally Comes To An End...

The NASDAQ slumped today after a string of bullish sessions but
the Dow maintained an upside bias as investors rotated into
industrial issues.

Wednesday, March 7

Stocks moved higher today as investors continued to search for
bargains in the wake of bullish comments from market analyst Abby
Joseph Cohen.  The NASDAQ closed up 19 points at 2,223 and the
Dow was up 138 points at 10,729.  The S&P 500 index was 8 points
higher at 1,261.  Trading volume on the NYSE reached 1.12 billion
shares, with advances beating declines 1,940 to 1,154.  Activity
on the NASDAQ was light at 1.77 billion shares exchanged, with
advances beating declines 1,970 to 1,680.  In the bond market,
the 30-year Treasury rose 1 1/32, pushing its yield down to 5.31%.

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

Amerada       (NYSE:AHC)     APR65P/70P  $0.50  credit  bull-put
Patterson     (NASDAQ:PTEN)  APR30P/35P  $0.81  credit  bull put
Weatherford   (NYSE:WFT)     APR65C/50P  $0.25  debit   synthetic

All of our new positions moved higher during the bullish session.
Unfortunately, the upside activity did not help our entry prices
and with the current bias, it is unlikely there will be another
favorable opportunity in the near-term.

Portfolio Activity:

The major averages rose again today after Goldman Sachs' chief
investment strategist issued an upbeat outlook for equities
following weeks of declines.  Analyst Abby Cohen increased her
recommended equity allocation to 70% from 65%, based on the
belief that attractive stock valuations have been restored.  In
a research note, Cohen also reiterated her year-end forecast of
1650 for the S&P 500 and 13,000 for the Dow, a notable increase
for both indices.  Analysts from Morgan Stanley Dean Witter and
Merrill Lynch added to the optimism, advising investors to buy
stocks now as there is little downside risk from current levels.
On the Dow, Home Depot (NYSE:HD), Caterpillar (NYSE:CAT) and J.P.
Morgan (NYSE:JPM) led blue-chips higher while Merck (NYSE:MRK),
SBC Communications (NYSE:SBC) and Johnson & Johnson (NYSE:JNJ)
limited the industrial average's gains.  Among NASDAQ issues,
Intel (NASDAQ:INTC) rallied to $33 after company officials said
the revenue outlook for the first quarter has not changed despite
comments from Chairman Andrew Grove that suggested tepid demand
for PC processors may continue for some time.  Chip manufacturer
Broadcom (NASDAQ:BRCM) slid to $40 after slashing its quarterly
earnings and sales outlook, due to a slowdown in customer orders.
JDS Uniphase (NASDAQ:JDSU), the world's #1 fiber-optic supplier,
also offered a disappointing outlook based on a weakening economy
and waning demand.  Trading in shares of Internet portal Yahoo!
(NASDAQ:YHOO) was halted for much of the session for pending news.
After the close, the firm said earnings would fall well short of
expectations due to lower ad spending by customers.  In broader
market trading, oil service, financial, retail and basic materials
stocks advanced while most defensive shares consolidated.

Industrial issues led the Spreads Portfolio today and a number of
stocks enjoyed excellent upside activity during the session.  Our
selections in the chemicals group, Olin Chemicals (NYSE:OLN) and
Dupont (NYSE:DD) rallied and the synthetic positions in both of
those issues offered favorable early-exit profits.  Among stocks
in the conglomerate segment, Minnesota Mining (NYSE:MMM) was a
solid performer, climbing to the top of its recent trading range
near $113.  Our selection in the health services sector, Cardinal
Health (NYSE:CAH) tested short-term resistance near $100 and held
that level throughout the day.  In the blue chip technology group,
Intel (NASDAQ:INTC) and Microsoft (MSFT) both rallied and Hewlett
Packard (NYSE:HWP) also ended the session higher.  Among premium
plays, Cima Labs (NASDAQ:CIMA), PolyMedica (NASDAQ:PLMD) and Time
Warner Telecom (NASDAQ:PLMD) moved back into the middle of their
respective profit envelopes.  Continental Airlines (CAL) was "in
the black" and the bullish portion of the credit strangle may yet
end positive.  In the bearish category, Honeywell (NYSE:HON) and
Avery Dennison (NYSE:AVY) closed higher, but they are still below
the maximum profit areas.  Johnson & Johnson (NYSE:JNJ), American
Home Products (NYSE:AHP), Shire Pharmaceuticals (NASDAQ:SHPGY),
PerkinElmer (NYSE:PKI) and Pfizer (NYSE:PFE) all moved lower and
positions in those issues are expected to finish profitable.

Thursday, March 8

The NASDAQ slumped today after a string of bullish sessions but
the Dow maintained an upside bias as investors rotated into
industrial issues.  An earnings warning from Internet bellwether
Yahoo! (NASDAQ:YHOO) took its toll on the technology segment,
driving the NASDAQ 55 points lower to 2,168.  The Dow closed up
128 points at 10,858 on strength in cyclical companies.  The S&P
500 index was relatively unchanged at 1,264.  Trading volume on
the NYSE hit 1.11 billion shares, with advances beating declines
1,692 to 1,384.  Activity on the NASDAQ remained light with only
1.74 billion shares exchanged.  Technology declines beat advances
2,181 to 1,437.  In the bond market, the U.S. 30-year Treasury
rose 1/32, pushing its yield down to 5.30%

Portfolio Activity:

Technology stocks retreated today, driving the NASDAQ lower and
briefly ending the recent recovery rally.  In contrast, the Dow
industrials moved higher, boosted by interest in its old-economy
components.  Leading the blue-chip barometer on the upside were
SBC Communications (NYSE:SBC), Wal-Mart (NYSE:WMT), Procter &
Gamble (NYSE:PG), Caterpillar (NYSE:CAT), Home Depot (NYSE:HD)
and Minnesota Mining (NYSE:MMM).  A number of issues limited the
blue-chip barometer's rise including Hewlett-Packard (NYSE:HWP),
Microsoft (NASDAQ:MSFT), Honeywell (NYSE:HON), General Electric
(NYSE:GE) and International Business Machines (NYSE:IBM).  Among
technology issues, all sectors slumped with Internet, software,
data storage and computer manufactures leading the slide.  Web
shares took their cue from Yahoo (NASDAQ:YHOO), which plummeted
to $17 after the company informed investors late Wednesday that
it expects no profit in the first quarter.  The slowing economy
and the ensuing shortfall in marketing spending by customers were
identified as the causes of the decline in revenues.  Yahoo also
said it has initiated a search for a new chief executive officer
and the news prompted downgrades from SG Cowen and Merrill Lynch.
In broader market sectors, retail, natural gas, consumer products,
major drugs, precious metals and utility issues enjoyed bullish
activity while paper, chemical, banking and biotechnology shares
generally consolidated.

The Combos section saw gains in a number of industrial groups and
the upside momentum boosted many of our bullish combination plays
to maximum profit.  Minnesota Mining (NYSE:MMM) was a surprise
winner, up over $4 after Merrill Lynch offered positive comments
on the company.  The broker continues to recommend the stock and
an optimistic presentation at Merrill's consumer conference last
week gave analysts confidence in their recent estimates of 10%
earnings growth for the coming year.  Cardinal Health (NYSE:CAH)
led the Health Services sector, rallying over $3 after breaking
through a month-long resistance area near $100.  Now the issue is
poised to shoot for a record high and despite today's low volume,
the event may soon occur.  Another health services issue, Stryker
(NYSE:SYK) rebounded almost $2 after a recent consolidation and
we now have some additional breathing room above the sold option
(Put) at $50.  Calendar Spreads in Navistar (NYSE:NAV) and Clorox
(NYSE:CLX) also benefited from the bullish activity in industrial
stocks and both of these positions have offered favorable returns.
The current issue on the watch-list is Avery Dennison (NYSE:AVY),
which moved to the extreme top of its year-2001 trading range at
$55.  Our bearish spread is short at $55 and any rally above that
price (on heavy volume) should be a signal to exit or cover the
sold call.  With a cost basis near $55.50, we have a relatively
small margin for error, however there is no reason to let the play
turn into a loser.

Questions & comments on spreads/combos to Contact Support
                          - NEW PLAYS -

This week, I received two additional requests for conservative
credit spreads.  Here are three favorable candidates, based on
the current price or trading range of the underlying issue and
the recent technical history or trend.  Please review each play
individually and make your own decision about the outcome of
the position.

SGR - The Shaw Group  $53.62  *** Energy Sector ***

The Shaw Group (NYSE:SGR) is a vertically integrated provider of
piping systems and comprehensive engineering, procurement and
construction services.  The company operates primarily in the
United States, the Far East/Pacific Rim, Europe, South America
and the Middle East for customers in the power generation,
process (including petrochemical, chemical and refining) and
other industries and the environmental and infrastructure sector.
The company offers comprehensive design and engineering services,
piping system fabrication, industrial construction and equipment
maintenance services, manufacturing and sale of specialty pipe
fittings and design and fabrication of pipe support systems.  The
company's operations are conducted primarily through wholly owned
subsidiaries and joint ventures.

The Energy sector is "hot" and companies that provide equipment
for the production and delivery of fuel and energy products are
also performing well.  The Shaw Group is one of the world leaders
in this unique segment, providing a range of services to major
multi-national industrial corporations, independent and merchant
power providers, governmental agencies and individual equipment
manufacturers.  In addition to being fundamentally successful in
a fast-growing industry, the company's stock is also performing
well in the midst of a long-term upward trend.  Traders who favor
the outlook for the industrial equipment industry can speculate
on the future movement of SGR with this conservative position.

PLAY (moderately aggressive - bullish/credit spread):

BUY  PUT  APR-42.50  SGR-PV  OI=18  A=$1.00
SELL PUT  APR-45.00  SGR-PI  OI=33  B=$1.35
INITIAL NET CREDIT TARGET=$0.45-$0.50  ROI(max)=22% B/E=$44.55

LIZ - Liz Claiborne  $50.80  *** Retail Sector! ***

Liz Claiborne (NYSE:LIZ) designs and markets branded women's and
men's fashion apparel and accessories, appropriate for occasions
ranging from casual to dressy.  The company markets fragrances
for women and men.  The company's brands include Claiborne, Crazy
Horse, Curve, Dana Buchman, Elisabeth, Emma James, First Issue,
Laundry By Shelli Segal, Liz Claiborne, Lucky Brand, Russ, Sigrid
Olsen and Villager.  In addition, Liz Claiborne holds exclusive
licenses to design, produce, market and sell DKNY Jeans and DKNY
men's, junior's and women's sportswear, jeanswear and activewear;
women's apparel under the Kenneth Cole New York, Unlisted.Com and
Reaction Kenneth Cole trademarks, along with Candie's fragrance,
cosmetic and beauty products.  The company also licenses to third
parties the right to manufacture, market and sell at wholesale
selected products bearing the company's trademarks.

The retail sector has managed to avoid most of the broad-market
selling pressure in recent weeks and LIZ is one of the leaders in
the group.  The company's stellar fourth quarter results, posted
last month, represent the twentieth consecutive quarter of sales
growth and the twenty-fourth consecutive quarter of growth in EPS.
The unique approach that LIZ uses, a multi-brand, multi-channel
diversification strategy, has proven successful over time and in
light of the challenging macroeconomic environments that exist in
industry, the company's performance is all the more outstanding.
Going forward, the company expects to take a prudent approach to
business planning and the CEO is optimistic that LIZ can achieve
a 5%-7% sales increase and an 11%-13% increase in EPS during the
coming year.  That's certainly an optimistic target, but those of
you who agree with a positive outlook for the company's shares
can profit from continued upside movement with this conservative
combination position.

PLAY (conservative - bullish/credit spread):

BUY  PUT  APR-40  LIZ-PH  OI=40   A=$0.35
SELL PUT  APR-45  LIZ-PI  OI=166  B=$0.85
INITIAL NET CREDIT TARGET=$0.60-$0.70  ROI(max)=14% B/E=$44.40

IBM - International Business Machines  $106.30  *** Big Blue! ***

International Business Machines (NYSE:IBM) utilizes information
technology to provide unique customer solutions.  The company
operates primarily in a single industry using several segments
that create value by offering a variety of solutions including,
either singularly or in some combination, technologies, systems,
products, services, software and financing.  Organizationally,
the company's major operations comprise three hardware product
groups, Technology, Personal Systems and Server; Global Services;
a Software segment; a Global Financing segment and an Enterprise
Investment segment.

IBM is an old favorite of spread traders, offering hardy option
premiums with excellent liquidity and a relatively predictable
technical pattern.  From a fundamental viewpoint, we don't see
any major problems in the company, but the general outlook for
technology stocks remains suspect and the performance of the
group will certainly affect "Big Blue."  Traders who foresee a
continued consolidation in Computer Hardware issues may use this
position to speculate on that outcome and with the well-defined
trading-range top near $117, the bearish spread offers an easy
adjustment in the event of a future rally.

PLAY (conservative - bearish/credit spread):

BUY  CALL  APR-125  IBM-DE  OI=9209   A=$1.35
SELL CALL  APR-120  IBM-DD  OI=19049  B=$2.00
INITIAL NET CREDIT TARGET=$0.75-$0.85  ROI(max)=17% B/E=$120.75


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

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